TIDMAIRC
RNS Number : 3523J
Air China Ld
26 April 2022
(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 innovation and excelling
efforts.
Air China was listed on The Stock Exchange of Hong Kong Limited
(stock code: 00753) and the London Stock Exchange (stock code:
AIRC) on 15 December 2004, and was listed on the Shanghai Stock
Exchange (stock code: 601111) on 18 August 2006.
Headquartered in Beijing, Air China has set up branches in
Southwest China, Zhejiang, Chongqing, Tianjin, Shanghai, Hubei,
Xinjiang, Guangdong, Guizhou, Tibet and Wenzhou. As at the end of
the Reporting Period, the major subsidiaries of Air China are
Shenzhen Airlines Company Limited (including Kunming Airlines
Company Limited), Air Macau Company Limited, Beijing Airlines
Company Limited, Dalian Airlines Company Limited, Air China Inner
Mongolia Co., Ltd., Aircraft Maintenance and Engineering
Corporation, Air China Import and Export Co., Ltd., Chengdu Falcon
Aircraft Engineering Service Co., Ltd., Air China Shantou
Industrial Development Company; and its joint ventures mainly
include GA Innovation China Co., Ltd. and Sichuan Services
Aero-Engine Maintenance Co., Ltd. Moreover, the associates of Air
China are Cathay Pacific Airways Limited, Shandong Airlines Co.,
Ltd. and Tibet Airlines Co., Ltd.. Air China is also the largest
shareholder of Shandong Aviation Group Co., Ltd.
With the goal of becoming "the world's leading airline", Air
China adheres to the four strategic directions of "hub network,
balanced development of cargo and passenger services, cost
leadership and brand strategy" and remains dedicated to serving
passengers with credibility, convenience, comfort and choice. "Air
China Miles" is the oldest frequent flier programme in China, under
which all members of the frequent flier programmes under various
brands of its subsidiaries and associates have been consolidated
into the brand of "Phoenix Miles".
C ontents
3 Corporate Information Financial Statements Prepared under
International
Financial Reporting Standards
4 Chairman's Statement 76 Independent Auditor's Report
Consolidated Statement of Profit
6 Summary of Financial Information 82 or Loss
Consolidated Statement of Profit
or Loss and Other Comprehensive
7 Summary of Operating Data 83 Income
9 Fleet Information
Consolidated Statement of Financial
10 Business Overview 84 Position
Management's Discussion and
Analysis of
2 Financial Position and Operating Consolidated Statement of Changes
1 Results 86 in Equity
87 Consolidated Statement of Cash Flows
Notes to the Consolidated Financial
28 Corporate Governance Report 89 Statements
44 Report of the Directors 193 Supplementary Information
Profile of Directors, Supervisors
and
68 Senior Management 194 Glossary of Technical Terms
195 Definitions
Corporate Information
REGISTERED CHINESE NAME:
ENGLISH NAME:
Air China Limited
REGISTERED OFFICE:
1st Floor-9th Floor 101
Building 1
30 Tianzhu Road
Shunyi District
Beijing, the PRC
PRINCIPAL PLACE OF BUSINESS IN HONG KONG:
5th Floor
CNAC House
12 Tung Fai Road
Hong Kong International Airport
Hong Kong
WEBSITE:
www.airchina.com.cn
DIRECTORS:(1)
Song Zhiyong
Ma Chongxian
Feng Gang
Patrick Healy
Li Fushen
He Yun
Xu Junxin
Winnie Tam Wan-chi
SUPERVISORS:(2)
He Chaofan
Wang Jie
Qin Hao
Lyu Yanfang
Guo Lina
LEGAL REPRESENTATIVE OF THE COMPANY:
Song Zhiyong
JOINT COMPANY SECRETARIES:
Huang Bin
Huen Ho Yin
AUTHORISED REPRESENTATIVES:
Song Zhiyong
Huang Bin
LEGAL ADVISERS TO THE COMPANY:
DeHeng Law Offices (as to PRC Law)
DLA Piper Hong Kong (as to Hong Kong and English Law)
INTERNATIONAL AUDITOR:
Deloitte Touche Tohmatsu
Registered Public Interest Entity Auditors
H SHARE REGISTRAR AND TRANSFER OFFICE:
Computershare Hong Kong Investor Services Limited
Rooms 1712-1716, 17th Floor, Hopewell Centre
183 Queen's Road East
Wanchai
Hong Kong
LISTING VENUES:
Hong Kong, London and Shanghai
1 For details of changes in Directors of the Company during the
Reporting Period and up to the date of this annual report, please
refer to page 49 of this annual report.
2 For details of changes in Supervisors of the Company during
the Reporting Period and up to the date of this annual report,
please refer to page 50 of this annual report.
Chairman's Statement
2021 REVIEW
In 2021, the Chinese Communist Party embraced the 100th
anniversary of its founding. Under the strong leadership of the
Central Committee of the Party with Comrade Xi Jinping at its core,
China has completed the building of a moderately prosperous society
in all respects, and is now setting off the new journey towards its
second centenary goals. During the year, the Group has thoroughly
implemented the decisions and deployments of the Central Committee
of the Party and the State Council by having a keen grasp of the
new development stage, implementing the new development philosophy
and serving to foster the new development paradigm. The Group
maintained a stable and safe development, put in great efforts to
respond to the impact of the pandemic, strived to maximize the
operating performance, accelerated and deepened the reform,
continuously improved the quality of services, coordinated the
promotion of strategic priorities, continuously enhanced the level
of compliance operation and continuously strengthened the
leadership and building of the Party, thereby entering a new stage
of high-quality development.
Ensuring flight safety and smooth and orderly operation and
management. The Group makes safety the top priority and has
maintained a stable and safe operation in the face of a complex and
challenging operating environment while holding fast to the bottom
line of safe development. The Group strengthened the management and
leadership of operation safety, strictly implemented safety
responsibilities, and integrated the concept of safe development
into the front line of operation. The Group strengthened the
concept of systematic safety management, intensively implemented
the Three-year Action Plan for Specific Safety Rectification, and
improved the long-term mechanism of safety management. Highlighting
the process control of safe operation and accurately grasping the
characteristics of safe operation, the Group has made efforts in
conducting normalized safety management and control of key links.
During the year, the Group successfully accomplished important air
transportation safeguard missions such as a series of celebration
events for the 100th anniversary of the Founding of the Party, the
Tokyo Olympics and the Beijing Winter Olympics, demonstrating the
commitment and positive image as the national flag carrier and an
aviation central enterprise.
Implementing own responsibility and continuously improving
pandemic prevention and control mechanism. The Group is determined
to abide by the national pandemic prevention and control policy,
and makes every effort to carry out the work of "guarding against
the importation of cases and the resurgence of domestic infections,
and preventing infections from both people and contaminated
objects". The Group strengthened the management and leadership,
improved the regular control mechanism for pandemic prevention and
control, and continuously improved the pandemic prevention and
control system. Sticking to precise control, the Group used its
best endeavours to prevent the risk of transmission on
international flights and responded quickly to domestic sporadic
cases. The Group made contributions for the economic and social
development and strived to safeguard our external flight routes, or
the "bridge in the sky ( ) ", against any disruptions, thereby
securing a stable international supply chain. In 2021, the Group
operated 16 thousand cargo flights with passenger aircraft. Through
its cold chain transportation service system, the Group transported
641 tons of COVID-19 vaccines.
Striving for maximizing the operating performance and ensuring
stable operations with multiple measures. The Group has always
adhered to the underlying principle of pursuing progress while
ensuring stability. It strengthened market research and evaluation,
taken proactive actions, and made every effort to maximize the
operating performance to maintain a solid foundation for the main
business operation. The Group has also strengthened the market
position of its main bases by leveraging its advantages of hub
network and brand, enhancing marketing control, and seizing
opportunities in the passenger transportation market. The Group
strengthened the conversion of passenger aircraft for cargo
operations, coordinated the resources and market demand, and
increased the input of air cargo flights operated by using the
passenger aircraft to improve operational efficiency. The Group
strictly controlled costs, optimized cost and operation matching.
The Group optimized debt structure and strengthened cash flow
control to prevent risks.
Improving service quality and continuously enhancing brand
value. The Group adheres to the people-oriented development
philosophy and strives to provide passengers with better and unique
travel experience. The Group optimized its operation management,
continued to enhance flight regularity and improved the service
level of irregular flights. It also innovated and upgraded its
services and products by promoting digital transformation. The
Group has fully implemented remote self-service check-in at
domestic terminals and operated a fleet that provides in-cabin
Wi-Fi services on all of its aircraft. To enhance brand value and
deepen the integrated brand management mechanism, the Group
launched a series of "Dual Olympics" brand promotion activities to
shape the brand image and build up brand value.
Promoting the implementation of strategies and serving to foster
the new development paradigm. The Group deeply grasped its
responsibility and mission in building the new development
paradigm, actively practiced and served the country's fundamental
interests, took the initiative to set strategy and pursue
development in the context of the overall environment,
systematically aligned with the national and industry development
plans, scientifically formulated the Group's "14th Five-Year Plan",
clearly defined the overall development concept of "one goal, four
strategic directions, and enhancement of five capabilities" and
eight key areas, established a planning index system, and
consciously implemented the new development philosophy into safe
operation and all areas of operation and development. The Group
improved its aviation market layout, promoted the upgrading of the
hub function of Beijing Capital International Airport, and smoothly
achieved the operation of "One Airport, Two Terminals" at Beijing
Capital International Airport and "One City, Two Airports" in
Chengdu. The Group steadily promoted green and low-carbon
development, continued to improve fuel efficiency and reduce carbon
emission intensity, and successfully passed the ISO14001
environmental management system certification.
Strengthening the leadership of the Party and systematically
promoting Party building work. The Group put political construction
in the first place and established a sound mechanism for "top
agenda ( ) " work. The Group focused on key tasks and carried out
in-depth education on Party's history and "I do practical things
for the public ( )" activities, helped the designated areas to
achieve effective transition from consolidating the achievements of
poverty alleviation to rural revitalization. The Group has been
promoting the full and strict self-governance of the Party,
implementing its own responsibility and supervisory responsibility
for the full and strict self-governance of the Party from a
detailed perspective, and continuously promoting the development of
the Party's culture and integrity system and anti-corruption work
to a deeper level.
In 2022, the Group will adhere to the guidance of Xi Jinping
Thought on Socialism with Chinese Characteristics for a New Era,
adhere to the underlying principle of pursuing progress while
ensuring stability, fully, accurately and comprehensively implement
the new development philosophy, accelerate its integration with,
and participation in fostering the new development paradigm,
thereby promoting high-quality development. The Group will unite
and lead its cadres and staff to overcome difficulties with
perseverance and dedication, focus on safe operation, pandemic
prevention and control, serving the operating performance and risk
prevention, solidly implement the three-year reform action plan,
and greet the successful convening of the 20th National Congress of
the Party with excellent results.
Chairman
Beijing, China
30 March 2022
Summary of Financial Information
(RMB'000)
2021 2020 2019 2018 2017
Revenue 74,531,670 69,503,749 136,180,690 136,774,403 121,362,899
(Loss)/profit from operations (16,862,176) (11,168,820) 14,641,918 14,346,331 11,755,712
(Loss)/profit before taxation (21,825,530) (18,466,406) 9,120,263 9,977,017 11,486,232
(Loss)/profit after taxation
(including (loss)/profit
attributable to
non-controlling interests) (18,822,238) (15,816,131) 7,263,764 8,214,871 8,641,449
(Loss)/profit attributable
to
non-controlling interests (2,187,060) (1,412,788) 843,470 864,210 1,397,128
(Loss)/profit attributable
to equity shareholders
of the Company (16,635,178) (14,403,343) 6,420,294 7,350,661 7,244,321
EBITDA(1) 4,072,326 9,239,497 35,921,002 28,850,007 25,352,031
EBITDAR(2) 4,981,874 9,925,796 37,452,389 37,133,039 33,740,737
(Loss)/earnings per share
attributable to equity
shareholders of the Company
(RMB) (1.21) (1.05) 0.47 0.54 0.54
(Loss)/return on equity
attributable to equity
shareholders of the Company
(%) (27.11) (18.58) 6.87 7.89 8.42
Notes:
(1) EBITDA represents earnings before finance income and finance
costs, exchange gains/losses, income tax expense, share of results
of associates and joint ventures, depreciation and amortisation as
computed under IFRSs.
(2) EBITDAR represents EBITDA before deducting lease expenses on
aircraft as well as other lease expenses.
(RMB'000)
31 December 31 December 31 December 31 December 31 December
2021 2020 2019 2018 2017
Total assets 298,381,190 284,029,616 294,206,373 243,657,108 235,644,584
Total liabilities 232,550,079 200,256,580 192,876,910 143,159,074 140,785,986
Non-controlling interests 4,462,554 6,231,709 7,870,786 7,340,693 8,811,036
Equity attributable to
equity shareholders of
the Company 61,368,557 77,541,327 93,458,677 93,157,341 86,047,562
Equity attributable to
equity shareholders of
the Company per share (RMB) 4.23 5.34 6.43 6.41 5.92
Summary of Operating Data
The following is the operating data summary of the Company,
Shenzhen Airlines (including Kunming Airlines), Air Macau, Beijing
Airlines, Dalian Airlines and Air China Inner Mongolia.
Previous
Current period period Increase/(decrease)
Capacity
ASK (million) 152,444.53 156,060.66 (2.32%)
International 4,152.23 18,639.58 (77.72%)
Mainland China 145,939.38 135,554.18 7.66%
Hong Kong SAR, Macau SAR and Taiwan,
China 2,352.93 1,866.90 26.03%
AFTK (million) 10,760.61 9,634.66 11.69%
International 6,715.58 6,163.23 8.96%
Mainland China 3,937.54 3,375.26 16.66%
Hong Kong SAR, Macau SAR and Taiwan,
China 107.49 96.17 11.77%
ATK (million) 24,490.45 23,685.73 3.40%
Traffic
RPK (million) 104,625.58 109,830.07 (4.74%)
International 1,880.33 11,753.53 (84.00%)
Mainland China 101,494.42 97,117.80 4.51%
Hong Kong SAR, Macau SAR and Taiwan,
China 1,250.83 958.75 30.47%
RFTK (million) 4,302.85 3,558.06 20.93%
International 2,981.52 2,300.49 29.60%
Mainland China 1,281.20 1,229.44 4.21%
Hong Kong SAR, Macau SAR and Taiwan,
China 40.13 28.13 42.63%
Passengers carried (thousand) 69,045.17 68,687.07 0.52%
International 301.31 2,241.20 (86.56%)
Mainland China 67,995.09 65,834.70 3.28%
Hong Kong SAR, Macau SAR and Taiwan,
China 748.78 611.18 22.51%
Cargo and mail carried (tonnes) 1,186,701.55 1,113,676.51 6.56%
Kilometres flown (million) 994.20 973.01 2.18%
Block hours (thousand) 1,590.15 1,552.86 2.40%
Number of flights 572,264 551,373 3.79%
International 18,179 29,703 (38.80%)
Mainland China 545,724 513,747 6.22%
Hong Kong SAR, Macau SAR and Taiwan,
China 8,361 7,923 5.53%
RTK (million) 13,598.95 13,285.14 2.36%
Load factor
Passenger load factor (RPK/ASK) 68.63% 70.38% (1.75 ppt)
International 45.28% 63.06% (17.78 ppt)
Mainland China 69.55% 71.65% (2.10 ppt)
Hong Kong SAR, Macau SAR and Taiwan,
China 53.16% 51.36% 1.80 ppt
Cargo and mail load factor (RFTK/AFTK) 39.99% 36.93% 3.06 ppt
International 44.40% 37.33% 7.07 ppt
Mainland China 32.54% 36.42% (3.88 ppt)
Hong Kong SAR, Macau SAR and Taiwan,
China 37.33% 29.25% 8.08 ppt
Overall load factor (RTK/ATK) 55.53% 56.09% (0.56 ppt)
Utilisation
Daily utilisation of aircraft (block
hours per day per aircraft) 6.28 6.34 (0.06 hours)
Yield
Yield per RPK (RMB) 0.5574 0.5074 9.85%
International 1.8523 0.8204 125.78%
Mainland China 0.5318 0.4665 14.00%
Hong Kong SAR, Macau SAR and Taiwan,
China 0.6872 0.8109 (15.25%)
Yield per RFTK (RMB) 2.5828 2.4040 7.44%
International 3.0329 2.9885 1.49%
Mainland China 1.3722 1.1574 18.56%
Hong Kong SAR, Macau SAR and Taiwan,
China 7.7885 9.0770 (14.20%)
Unit cost
Operating expense per ASK (RMB) 0.6262 0.5448 14.94%
Operating expense per ATK (RMB) 3.8980 3.5899 8.58%
Fleet Information
During the year of 2021, the Group introduced a total of 43
aircraft, including four A350, 23 A320NEO, 11 A321NEO, four
ARJ21-700 and one business jet, among which 29 were introduced
under finance leases and 14 were introduced under operating leases.
On the other hand, the Group phased out four aircraft, including
one A330-200, two A321 and one business jet.
As at the end of the Reporting Period, the Group had a total of
746 passenger aircraft including business jets, with an average age
of 8.23 years. Among the aircraft set out above, the Company
operated a fleet of 467 aircraft in total, with an average age of
8.39 years. The Company introduced 37 aircraft, including five
aircraft under the wet lease agreement with Air Macau, and phased
out one aircraft.
Details of the fleet of the Group as at 31 December 2021 are set
out in the table below:
Finance Operating Average
Sub-total Self-owned leases leases age (year)
Airbus 408 155 135 118 7.94
A319 41 32 6 3 14.18
A320/A321 287 96 105 86 7.00
A330 64 27 8 29 9.56
A350 16 - 16 - 2.17
Boeing 326 143 97 86 8.76
B737 274 119 77 78 8.93
B747 10 8 2 - 12.47
B777 28 4 18 6 7.71
B787 14 12 - 2 4.86
COMAC 7 1 6 - 0.81
ARJ21 7 1 6 - 0.81
Business jets 5 1 - 4 8.52
Total 746 300 238 208 8.23
Introduction Plan Phase-out Plan
2022 2023 2024 2022 2023 2024
Airbus 36 6 - 10 10 10
A319 - - - 4 2 8
A320/A321 27 1 - - 3 2
A330 - - - 6 5 -
A350 9 5 - - - -
Boeing - - - 12 5 1
B737 - - - 12 5 1
COMAC 10 9 9 - - -
ARJ21 10 9 9 - - -
Total 46 15 9 22 15 11
Note: Please refer to the actual operation for the introduction
and phase-out of the Group's fleet in the future.
Business Overview
Safe Operation
The Group enhanced its safety management capabilities and
maintained a stable and safe operation. During the Reporting
Period, the Group firmly established the concept of safe
development and grasped the extreme importance of safety from a
comprehensive perspective. The Group continued to implement
specific measures for safe development, and solidly promoted the
development of the safe operation system from four aspects: safety
management, flight training, aircraft maintenance and operation
management. The Group carried out operation management under the
regular pandemic prevention and control, strengthened the
capability of integrated operation control, and effectively ensured
safe operation under the adjusted operation mode. The Group
released the revised Air China's Overall Contingency Plan to
enhance the Company's contingency response capability. The Group
strengthened process management, enhanced supervision and
inspection of key operational support units (e.g., flight and
aircraft maintenance management), and carried out timely risk
identification, control and warning alerts. The Group successfully
commenced the operation of its Xinjiang and Guangdong branches,
completed the transition to Chengdu Tianfu International Airport,
and operated "One airport, Two terminals" at Beijing Capital
International Airport.
The Group further implemented the Three-year Action Plan for
Specific Safety Rectification, launched the investigation of hidden
safety hazards and special load balancing management, strengthened
the development of working style and professional management, drew
up a list of typical negative behaviors and quantitative assessment
indicators for each professional team to improve the system. The
Group enhanced the operational support capacity for fleets of new
aircraft model, so as to maintain safe, steady and smooth
operation.
During the Reporting Period, the Group recorded 1.59 million
safe flight hours and transported 69.05 million passengers safely.
There was no transportation and aviation incident for which the
Group was liable and the overall stable and safe operation was
continuously maintained. The Group successfully accomplished
important air transportation safeguard missions such as a series of
celebration events for the 100th anniversary of the Founding of the
Party, the Tokyo Olympic and Paralympics and the Beijing Winter
Olympics and Paralympics.
Containing the Pandemic
The Group optimized the pandemic prevention mechanism while
coordinating and maintaining effective pandemic prevention and safe
operation. During the Reporting Period, in the face of continuous
spread of COVID-19 abroad and the occurrence of sporadic cases at
home, the Group always focused on the overall development of the
Party and the country, insisted on making the pandemic containment
the top priority, and carefully and consistently carried out the
work of "guarding against the importation of cases and the
resurgence of domestic infections, and preventing infections from
both people and contaminated objects", fulfilling its political and
social responsibility as the national flag carrier.
The Group continued to strengthen management and leadership,
improved the control mechanism under the regular pandemic
prevention and control, and continuously improve the containment
system. The Group strengthened the management of pandemic
prevention and control and established the Office of Pandemic
Prevention and Control Leading Team as a dedicated office
responsible for the overall coordination of the Company's pandemic
containment work. The Group coordinated and directed the pandemic
containment work with stricter requirements, better mechanisms,
more effective organizations and efficient measures, embedding
pandemic prevention and control into all aspects of operation.
The Group continued to focus on precise prevention and control
and adjusted its response strategy in a timely manner to ensure its
pandemic prevention and control measures were legal, scientific,
relevant and timely. The Group made every effort to prevent the
importation of cases from international flights and implemented the
quarantine policy for international flight crew. Meanwhile, it
responded quickly to domestic sporadic cases through flexible
adjustment of operation arrangement. The Group continued to improve
its informatization level of pandemic prevention and promoted the
construction of "one person, one file, one aircraft, one file"
information sharing platform for pandemic prevention and
control.
The Group facilitated the economic and social development
continuously by keeping the connection with other countries via air
traffic, which helped sustain a steady global supply chain. During
the Reporting Period, the Group operated 16 thousand cargo flights
with passenger aircraft. Through its cold chain transportation
service system, the Group transported 641 tons of COVID-19
vaccines.
Maximising Operating Performance
Focusing on the main air traffic business, the Group spared no
efforts to maximise operating performance. During the Reporting
Period, to maximise its operating performance at full throttle, the
Group continued to strengthen operation management dynamically and
took initiatives to cope with operating pressure. With the major
goal of optimising the operation of the entire fleet, the Group
strived to maximise income and performance through more effective
market analysis and assessment, operation arrangement, resources
coordination, conversion of passenger aircraft for cargo
operations, strict control of costs and risks, and consolidation of
operating competitiveness of main business.
The Group seized market opportunities and adapted to changes of
demand by establishing six domestic express routes, which connected
Beijing Capital International Airport with Shanghai Hongqiao
Airport, Guangzhou Airport, Shenzhen Airport, Chengdu Shuangliu
Airport, Chongqing Airport and Hangzhou Airport. At the same time,
the Group rolled out more innovative products and carried out
targeted marketing. Seizing on the opportunities arising from the
promotion of high-quality red tourism, the Group launched red
tourism products to increase demand and revenue significantly. It
also released more products to meet tourists' safe travel demands
during the pandemic. The Group enhanced internal resources
coordination and optimised operation arrangement to make the best
use of aircrew resources. Furthermore, the Group pushed forward the
conversion of passenger aircraft for cargo operations and optimised
its deployment by seizing market opportunities, which brought a
revenue of RMB8,720 million during the Reporting Period.
The Group raised awareness of stringent cost control. With the
exception of investment in operation safety assurance and pandemic
prevention and control, the Group exercised strict control over
expenditures that were unnecessary and unrelated to production.
Under the principle of "operation safety, structure stability and
cost control", the Group continued to strengthen the prevention and
control of financial risks to ensure healthy cash flows.
Enhancing Services
The Group was dedicated to the people-oriented development
philosophy. On the premise of the implementation of various
pandemic prevention and control policies, it improved service
quality on all fronts, strived to enhance customer experience and
made an all-out effort to establish brand and services.
Focusing on the investment of hardware and service upgrade, the
Group renovated and built 10 new self-operated lounges while
updating the design standards for lounges to incorporate oriental
cultural features into passengers' rest spaces. To create an
exclusive cabin environment, the Group developed new airline seat
products and rolled out the new blanket design called "Phoenix
Feathers ( )" and the limited edition of headrest covers in the
Beijing Winter Olympics series. Apart from upgrading the in-flight
entertainment system, the Group provided in-cabin WiFi on 359
aircraft and air-ground connection on sixteen A350 aircraft.
The Group also attached importance to strengthen its services
and products. For example, it raised the quality standard of
various services systematically by issuing new sets of conditions
for passenger and luggage transportation and optimizing the
interface of the self-service ticket return system. With a focus on
elderly passengers, it set up dedicated service counters, offered
ground service guidance and launched an APP specially designed for
elderly passengers to improve their travel experience. In response
to passengers' needs, the Group introduced the "Dainifei ( )"
pocket meal, designed the special and exclusive "Red Trip ( )"
in-flight meal, and served the new "Henishuo ( )" meal boxes at 50
domestic airports.
With a focus on service innovation, the Group diversified the
applications for self-service and intelligent technology, keeping
the self-service check-in rate at its main base and branches steady
at 75%. In addition, it began to offer full-process baggage
tracking and enquiry services at seven airline destinations such as
the airports in Beijing and Chongqing. By optimising the
intelligent FAQ database, its online customer service maintained a
high accuracy rate of 80%. The Group developed and upgraded several
system platforms including the service quality management system
and the passenger service payment system, so as to enhance the
level of service digitalization and innovation capability.
Safeguarding Mission For Winter Olympics
As the official air transportation service partner of the 2022
Beijing Winter Olympics and Paralympics, Air China thoroughly
studied and implemented the important instructions and spirit
proposed by General Secretary Xi Jinping for hosting the Winter
Olympics, pursuant to which the Company strictly implemented the
requirements for staging "simple, safe and splendid" competitions
and made solid progress in the relevant works to accomplish various
transportation safeguard mission for the Winter Olympics
successfully.
To strengthen its management and leadership, the Company has
established dedicated departments and reinforced the specific
responsibilities, thereby forming a working system with centralized
commands and actions. Each of the safeguard supporting unit
designated their elite members and coordinated the resources
allocation and hence amplified the synergy effect from the
collaboration and accomplish major safeguard missions of
transportation services such as the test events of the Winter
Olympics and the charter flight services for the Winter Olympics
Flame successfully. The Company also refined its flight schedules
with highly efficient flight plans, and established a comprehensive
ticketing support system and launched the Beijing-Frankfurt
"Demonstration Route" for Winter Olympics. Meanwhile, the Company
insisted on safe operation. It strengthened the monitoring of
flight operation and information transmission, and improved its
contingency plans. More security staff with enhanced capabilities
to handle exceptional situations have been arranged. The Company
formulated and strictly implemented various proposals for
safeguarding pandemic prevention and control in relation to the
transportation services of the Winter Olympics with an aim to
reinforcing the requirements on "preventing infections from people,
contaminated objects and environment" with high standards.
Furthermore, by staying committed to the "athlete-oriented"
approach, the Company provided quality services, improved the whole
process of service safeguarding plan and continued to carry out
service training. It also put in place new service standards for
various special types of sports equipment used in the Winter
Olympics and Paralympics, including in-flight wheelchairs for its
fleet, as well as ticketing counters and early check-in services in
the Winter Olympic Villages.
Risk Prevention and Control
The Group has been upgrading the risk management system while
reinforcing the risk assessment and reporting mechanism. It
performed material risk monitoring and established a multi-tiered
information-sharing mechanism. The Group strengthened its
foreign-related compliance management, focusing on enhancing its
compliance management capabilities in key areas such as anti-trust,
export control and sanctions. The Group strengthened its legal
management capability and implemented the requirements that all the
major decisions, business contracts and rules and regulations of
the Company should be subject to legal review, and that risks
relating to the "three major and one significant issues" of the
Company should be evaluated to the fullest extent. The Group
strengthened the life-cycle management of contracts, continued to
improve the Group's contract templates and enhanced the monitoring
of contract performance. The Group organized more than 20
compliance, risk control and legal training sessions with
approximately 1,200 participants, covering topics such as export
control and data protection and other compliance management or risk
control practice, and legal training related to entry-exit
inspection and quarantine. Based on the new starting point of the
14th Five-Year Plan and driven by the deepening of the rule of law
in Air China, the Company has achieved positive results in
supporting reform and development, supporting business decisions
and comprehensive risk management.
CORE COMPETENCE ANALYSIS
Strong brand advantage
Air China positioned its brand as "professional and reliable
with both international quality and Chinese temperament". By virtue
of the immense historical heritage, Air China strives to create
perfect travel experience and help passengers to stay safe by
upholding the spirit of phoenix of being a practitioner, promoter
and leader for the high-quality development of the aviation
industry in the PRC. The Company is also committed to leading the
industrial development by establishing itself as a "National
Brand", while pursuing outstanding performance through innovation
and excelling efforts. By maintaining its world-class safety
operation performance and leading comprehensive operating strengths
in Mainland China, the Group has extensive brand recognition and
excellent brand reputation among consumers.
During 2021, Air China focused on brand communication
activities, including the Winter Olympic Games in Beijing and
commencement of operation of Chengdu Tianfu International Airport.
As the strategic partner of "both the Summer Olympic Games and the
Winter Olympic Games", Air China hosted a series of events in
respect of the Winter Olympic Games in Beijing, including the
Winter Olympics campaign for the first voyage of the colour-painted
"Winter Olympic Sportsmanship ( )" themed aircraft and the one-year
countdown campaign for Paralympic Winter Games in Beijing under the
theme of "Embark on a New Journey in Beijing! ( )", so as to
demonstrate the good brand image of the aviation company
representing "both the Summer Olympic Games and the Winter Olympic
Games". With respect to the commencement of operation of Chengdu
Tianfu International Airport, a series of brand promotional
campaigns themed "Connect with the World ( ' ')" were kicked off to
support the promotion of Tianfu International Airport and
continuously enhance the brand influence. The Company leveraged
large-scale fairs as the platform to exhibit its operational
strength and brand image, with a view to promoting external
collaboration and exchanges, boosting confidence of passengers and
contributing to local economic and social development.
Market leader of the Beijing hub
The Company's principal base is located at Beijing Capital
International Airport, also known as "the first gateway to China".
Beijing has a unique and prime location advantage for establishing
itself into a large international aviation hub in the Northeast
Asia. Beijing is also a place with the best business customer and
traveller bases. The advantages of Beijing in terms of both
geographical location and customer structure are favourable to the
Company for maintaining a stronger position for market
competition.
In 2021, under the prolonged impact of the COVID-19 pandemic,
the Group has actively recovered its transport capacity in Beijing
while taking into account the benefits of route operation and
striving to sustain flights in important international aviation
markets. In January 2021, the Company started to operate domestic
flights in both Terminal 2 and Terminal 3 of Beijing Capital
International Airport. With the commencement of the operation model
of "one airport and two terminals", the Company will gradually
increase transport capacity, continue to enhance its operation
efficiency and optimize the travel experience of passengers with a
view to accelerating the development into a world-class hub. To
support the safeguarding services for the 2022 Winter Olympics
Games and Paralympic Winter Games, the Company efficiently
completed the transfer of international flights to T2 in only 27
days, while following the pandemic containment requirements. In an
effort to optimize hub functions and improve operation quality, Air
China cooperated with Capital Airport to roll out the "Rebuilding
the National Gateway ( )" initiative. The renovation plan was
submitted to the Civil Aviation Administration and obtained
preliminary approval. In addition, the renovation and maintenance
project in respect of the lounge on the second floor of T3C at
Capital Airport was completed to better fulfil the demand of
passengers.
Upon the commencement of operation of Beijing Daxing
International Airport in 2019, the operation pattern of "one city,
two airports" in Beijing was formed. As the principal base airline
that currently operates in both airports and generates the largest
business volume, the Company will fully grasp the historic
opportunities arising from the establishment of the Beijing Hub to
continuously focus its resources and efforts on accelerating the
optimization of hub functions, enhancing the operation efficiency
and quality assurance of services, constantly improving its route
network, so as to establish Beijing Capital International Airport
into a world- class aviation hub, and at the same time facilitating
Beijing Daxing International Airport to become a "new source of
momentum for national development".
Balanced and complementary route network
Adhering to the long-established principle for the market layout
of "balanced development between domestic and overseas routes and
support international routes with domestic routes", the Company
comprehensively reinforced the global network and implemented
national development strategies with consistent efforts made in
building a world-class hub in Beijing and an international hub in
Chengdu. Through the experience accumulated in its operation over
the years, the Company formed an extensive and balanced domestic
and international route network, covering the most
economically-developed and densely-populated regions in China.
After years of development, the Company has taken the lead in
market share in respect of mainstream international routes from
domestic cities to Europe and North America.
Against the backdrop of anti-pandemic work worldwide, the
Company made full use of the resources of route network. According
to the conditions of the pandemic and market recovery progress, the
Company reasonably allocated the transport capacity of each base
and sustain flights in major international aviation markets. Air
China adjusted the structure of transport capacity on the account
of domestic macro-circulation and grasped market opportunities to
expand domestic capacity. As a result, the domestic capacity
measured by seat kilometres for 2021 increased by 7.66%
year-on-year.
During the Reporting Period, the Company's Beijing newly
launched domestic routes such as Beijing Capital-Aksu-Tumushuke and
Beijing Daxing-Quzhou; the Chengdu newly launched domestic routes
such as Chengdu Shuangliu-Fuyang and Chengdu Tianfu-Beihai; and the
Shanghai newly launched domestic routes such as Shanghai Pudong-
Zhengzhou and Shanghai Pudong-Zhanjiang. The Company also newly
launched international and domestic routes such as
Changchun-Frankfurt, Tianjin-Nanning, Wuhan-Ningbo and
Hangzhou-Zhongwei.
High quality customer base
In line with the Company's strategy for hub network, the Company
targeted the mainstream market of mid-to-high- end government and
corporate passengers, which is currently the most valuable
passenger group in China. As at the end of the Reporting Period,
the number of "Phoenix Miles" members has exceeded 72.0656 million.
For the purpose of maintaining the stable premium membership base
under the regular pandemic, the Company timely launched an adaptive
membership protection scheme in stages. Revenue contributed by
frequent fliers accounted for 56.8% of the Company's air passenger
revenue, representing a year-on-year increase of 4.5 percentage
points. The number of registered users of Air China APP has
exceeded 14.2 million, recorded a stable yet rapid growth. In 2021,
the Company newly acquired 407 major customers, which brought the
total number of effective major customers to 3,861.
Leading cost control mechanism
In 2021, in face of the lingering impact of the COVID-19
pandemic, the Group formulated and resolutely implemented the
overall work approach based on the principle of maximizing revenue
and efficiency. Apart from investment in safety assurance and
pandemic prevention, the Group put emphasis on cost control at
source, enhanced the integrated use of its existing assets
effectively, exercised strict control on new investment and gave
due consideration to the cost-effectiveness and financial security.
The Group also devoted strenuous efforts in allocation and
coordination of aircraft introduction, investment in infrastructure
and aircraft materials so as to control asset-related costs at
source. In addition to continuously improving the matching of cost
and production under abnormal situation, the Group innovated its
business management model to better control major expenses and
enhance cost efficiency, provided that investment in safety
operation is secured. It also refined the management of rigid costs
and vigorously curbed controllable expenses. allocation of funds
was conducted to prioritize the security of liquidity, coordinate
efficiency and cost and implement the requirements for maximizing
the marginal contribution.
Continuous innovation of management mechanism
Staying committed to the strategic deployments of the Central
Committee of the Party on technological self-reliance and
self-improvement as well as enhancing the entity position of
enterprises through innovation, the Company strengthened its
strategic planning of technological innovation and formulated a
Technological Innovation Development Plan for the "14th Five Year
Plan" Period. This plan established the development goal of
shifting from the system development stage to the effectiveness
upgrading stage for technology innovation for the "14th Five Year
Plan".
Striving to develop an innovative development base in the civil
aviation industry, the Company not only secured the operation of
"3+8" innovation laboratories, but also established and implemented
a range of technological innovation projects in relation to digital
transformation, aircraft maintenance and in-flight network. A
number of achievements of the Company have won industry
recognition, including the "Aircraft-ground Crossfeed Fuel System",
which received the Innovation Project Award of the Fourth China
Aviation Maintenance (MRO CHINA) Red Crown Award.
In a bid to promote recruitment of innovation talents and team
building, the Group held the "First Innovation Awards and 2021
Innovation Contest ( 2021 )", which featured two major tracks:
"Innovative Thinking ( )" and "Open Competition ( )". By soliciting
projects in relation to the innovation of product, technology and
process, the Company endeavoured to identify and cultivate
technological innovation talents and teams.
With a view to broadening the network for synergistic innovation
and collaboration, the Company joined the National Technical
Standards Innovation Base (Civil Aviation) ( ( )) and the
Technology Innovation Strategic Alliance for Civil Airport Cluster
and the Integrated Transportation Industry ( ). The Company also
actively took part in various exchanges of the industry, such as
the Smart Civil Aviation Technological Innovation Summit ( ) and
the Civil Aviation Science and Education Innovation Achievement
Exhibition ( ), so as to demonstrate its significant progress and
achievements in technological innovation.
MAJOR SUBSIDIARIES AND ASSOCIATES AND THEIR OPERATING
RESULTS
Notes: 1. CNACG is a wholly-owned subsidiary of CNAHC.
Accordingly, CNAHC is directly and indirectly interested in 51.70%
of the shares of the Company.
2. Shandong Aviation Group Corporation is owned as to 49.4% by the Company, while Shandong Airlines is owned as to 42% by Shandong Aviation Group Corporation. Accordingly, Shandong Airlines is directly and indirectly owned as to 43.548% by the Company.
During the Reporting Period, the operating results of the major
subsidiaries and associates of the Company were as follows:
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 domicile Shenzhen Macau Beijing Dalian Inner Beijing Beijing Hong Shandong
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 MOP2,242,042,000 RMB1,000,000,000 RMB3,000,000,000 RMB1,000,000,000 USD300,052,800 RMB1,127,961,864 6,437,200,203 RMB400,000,000
capital shares
in issue
Percentage of
shareholding
by the Company 51% 66.92% 51% 80% 80% 75% 51% 29.99% 22.8%
Revenue (RMB100
million) 185.00 9.33 3.17 10.17 11.43 81.67 2.29 378.20 125.15
Year-on-year
changes (%) 6.36 40.30 (21.84) (3.72) 16.75 (4.93) 0.78 (7.24) 18.80
Total assets
(RMB100 million) 670.44 60.15 11.31 44.37 22.14 64.83 223.93 1,607.62 326.44
Profit/(loss)
attributable
to parent
company
(RMB100 million) (33.43) (6.74) (1.16) (1.89) (1.38) (1.46) 0.46 (50.80) (18.14)
Profit/(loss)
attributable
to parent
company
in the
corresponding
period of last
year
(RMB100 million) (20.62) (9.18) (0.32) 0.25 (0.35) (1.53) 0.65 (190.04) (23.82)
The fleet information and operating data of the major
subsidiaries and associates of the Company were as follows:
As at the end of
the Reporting
Period/ Air China
During the Reporting Shenzhen Beijing Dalian Inner Cathay Shandong
Period Airlines Air Macau Airlines* Airlines Mongolia Pacific Airlines
Fleet size (unit) 229 17 3 13 12 234 134
(on a consolidated (on a consolidated
basis) basis)
Average age (year) 8.04 5.56 12.08 8.24 9.61 10.5 8.21
ASK (100 million) 518.35 19.62 4.51 26.01 28.79 132.28 350.94
Year-on-year changes
(%) (0.41) 11.14 (18.29) (11.01) 17.01 (61.8) 3.83
RPK (100 million) 358.59 11.76 3.04 17.72 19.58 41.20 268.56
Year-on-year changes
(%) (3.57) 28.96 (22.40) (12.11) 13.70 (79.5) 4.80
Passengers carried
(10 thousand) 2,433.13 69.85 31.67 149.10 174.28 71.7 1,865.49
Year-on-year changes
(%) (4.51) 27.95 (26.19) (5.52) 10.94 (84.5) 2.53
Average passenger
load factor (%) 69.18 59.96 67.31 68.11 67.99 31.1 76.53
Year-on-year changes
(ppt) (2.27) 8.28 (3.57) (0.85) (1.98) (26.9) 0.71
*Note: As at the end of the Reporting Period, Beijing Airlines
operated a fleet of four entrusted business jets and one self-owned
business jet with an average age of 8.52 years. During the
Reporting Period, in terms of business charter service, Beijing
Airlines completed 294 flights, representing a year-on-year
decrease of 15.52%; it completed 983.45 flying hours, representing
a year-on-year decrease of 4.89%; it carried a total of 2,528
passengers, representing a year-on-year increase of 13.77%.
OPERATIONAL PLAN
The Company has established its operational focuses for 2022,
including (1) focusing on enhancing operation safety resolutely and
maintaining safety and stable operation; (2) staying committed to
pandemic prevention and control and implementing the measures and
requirements from a detailed perspective; (3) striving to maximise
the operating performance despite difficulties and endeavouring to
reduce and control loss; (4) persisting to strengthen the in-depth
reform to fully unleash the effectiveness therefrom; (5)pursuing
pragmatic innovation and adhering to enhancing services, thereby
increasing brand value; (6) staying committed to seeking strategic
progress and enhancing the quality of development; (7) adhering to
the leadership of the Party and promoting the Party building,
safeguarding high quality development.
OUTLOOK FOR FUTURE
Making contributions to the national development strategies by
the civil aviation industry in China
China's civil aviation industry will further implement national
initiatives and regional strategies, namely the "Belt and Road"
initiative, the Ecological Protection and High-quality Development
Strategy of Yellow River Basin, the Yangtze River Economic Belt
Development Plan, the Yangtze River Delta Integration Plan, the
"Beijing-Tianjin-Hebei" Integration Plan, the Plan for Xiong'an New
Area, Chengdu-Chongqing Economic Circle Plan, and Guangdong-Hong
Kong-Macau Greater Bay Area Development Plan, and will strengthen
regional aviation links and coordination as well as the existing
aviation market pattern. The "Belt and Road" initiative will
promote China's economic and trade exchange and cooperation with
Southeast Asia and Europe, not only strengthening the international
hub status of, among others, Shanghai and Guangzhou, but also
providing development opportunities for airports in domestic
second-tier cities. The Ecological Protection and High-quality
Development Strategy of Yellow River Basin will promote the
economic development and optimization of industrial structure of
the nine provinces and regions along the Yellow River Basin, which
will present development opportunities for the aviation industry.
The Yangtze River Economic Belt Development Plan and Yangtze River
Delta Integration Plan will speed up the formation of the aviation
network with Shanghai international aviation hub and regional
aviation hub as the core. The strategy of coordinated development
of Beijing-Tianjin-Hebei and the Plan for Xiong'an New Area will
significantly enhance the international competitiveness of Beijing
aviation hub, and the hub function will be further strengthened,
which will promote the
regional development of Tianjin and Hebei. Chengdu-Chongqing
Economic Circle Plan will consolidate the coordinated development
of Sichuan and Chongqing, accelerate the development of the
international aviation hub of Chengdu Tianfu International Airport
and promote the operation of "two integrated airports" in Chengdu,
thereby pushing forward the coordinated development of airports in
Chengdu and Chongqing. The Guangdong-Hong Kong-Macau Greater Bay
Area Development Plan will deepen the cooperation among the
Mainland, Hong Kong and Macau, and promote the construction of
international hubs of Hong Kong, Guangzhou and Shenzhen. The
construction of airport groups serving the four major urban
agglomerations received increasing attention from the State, and
the pattern of "one city, two airports" in Beijing, Shanghai,
Chengdu and other major cities has taken or is taking shape.
Gradual resumption of passenger and freight volume in the civil
aviation industry in China
There is no change in the fundamentals of the Chinese economy or
in the basic trend of economic stability and long-term improvement,
thereby the economy will achieve steady recovery. Although the
world economy is undergoing profound adjustment, the overall trend
of economic globalization will remain unchanged, while China's
development still sees strategic opportunities. Leveraging the
super large-scale domestic demand market formed with a population
of 1.4 billion, including a middle-class group of more than 400
million, China is striving to build a new development paradigm
which is based on domestic macro-circulation, along with the
international and domestic dual-circulation under mutual promotion.
Civil aviation demand in China will continue to rise and market
potential will remain immense. The aviation market in China will
continue its recovery. In the long run, the demand for air travel
will remain strong with huge market potential. As the pandemic is
brought under control, business travel and holiday tours continue
to be growth drivers of the aviation industry, and air travel
demand will become increasingly customized and popular. During the
"14th Five-Year Plan" period, construction of new airports and
airport renovations and expansions are underway in various regions
and the management capability in air transportation is steadily
increased, which can better satisfy the demand of the industrial
development.
Competition landscape among global and domestic aviation
markets
The original competition landscape is expected to continue in
the global aviation market. With the impact of the global pandemic,
aviation companies around the world are suffering from operating
difficulties attributable to cash shortfall. Governments of various
countries have provided financial relief of varying degrees to
their local aviation industry respectively. According to the IATA
statistics, the overall financial losses of airlines decreased
during Q3 of 2021. Certain airlines achieved their first profitable
quarter since the pandemic crisis, among which airlines in North
America performed the best, while the air passenger volume
increased in Europe, promoting the market recovery. Along with
further recovery and opening up of the market, the global market
competition landscape is expected to resume and continue the
previous trend of the strong growing stronger.
It is expected that the competitive pressure will be mitigated
in the domestic aviation market. Regarding the demand side, as the
national economy remains stable and improved and domestic pandemic
prevention and control situation is under control generally, the
foundation of industrial recovery and development will be more
solid, envisaging the domestic market demand will continue its
revival. Regarding the supply side, according to the analysis in
the "14th Five-Year Plan" of civil aviation, 2021-2022 is the
recovery and consolidation period of the industry, and the growth
rate of capacity deployment of the industry will slow down, but
this will help alleviate the short-term excess capacity pressure
brought by the transfer of some aircraft from the international
market to the domestic market.
Management's Discussion and Analysis of Financial Position and
Operating Results
The following discussion and analysis are based on the Group's
consolidated financial statements and the notes thereto prepared in
accordance with the IFRSs and are designed to assist the readers in
further understanding the information provided in this report so as
to better understand the financial conditions and results of
operations of the Group as a whole.
Revenue
During the Reporting Period, the Group's revenue was RMB74,532
million, representing an increase of RMB5,028 million or 7.23% as
compared with last year. Among which, air traffic revenue was
RMB69,430 million, representing an increase of RMB5,150 million or
8.01% as compared with last year; other operating revenue was
RMB5,102 million, representing a year-on-year decrease of RMB122
million or 2.33%.
Revenue Contributed by Geographical Segments
2021 2020
(in RMB'000) Amount Percentage Amount Percentage Change
Mainland China 60,833,951 81.63% 51,953,674 74.74% 17.09%
Hong Kong SAR, Macau
SAR and Taiwan, China 1,172,112 1.57% 1,032,767 1.49% 13.49%
Europe 4,795,494 6.43% 6,176,092 8.89% (22.35%)
North America 2,661,521 3.57% 3,397,082 4.89% (21.65%)
Japan and Korea 958,898 1.29% 2,123,022 3.05% (54.83%)
Asia Pacific and others 4,109,694 5.51% 4,821,112 6.94% (14.76%)
Total 74,531,670 100.00% 69,503,749 100.00% 7.23%
Air Passenger Revenue
During the Reporting Period, the Group recorded an air passenger
revenue of RMB58,317 million, representing an increase of RMB2,590
million over the previous year. Among the air passenger revenue,
the decrease of capacity contributed a decrease of RMB1,291 million
in the revenue, and the decrease of passenger load factor led to a
decrease of RMB1,352 million in the revenue, while the increase of
passenger yield resulted in an increase in revenue of RMB5,233
million. The Group's capacity, passenger load factor and yield per
RPK in 2021 are as follows:
2021 2020 Change
ASK (million) 152,444.53 156,060.66 (2.32%)
Passenger load factor (%) 68.63 70.38 (1.75 ppt)
Yield per RPK (RMB) 0.5574 0.5074 9.85%
Air Passenger Revenue Contributed by Geographical Segments
2021 2020
(in RMB'000) Amount Percentage Amount Percentage Change
Mainland China 53,974,171 92.56% 45,307,186 81.30% 19.13%
Hong Kong SAR, Macau
SAR and Taiwan, China 859,594 1.47% 777,411 1.40% 10.57%
Europe 1,299,608 2.23% 3,567,703 6.40% (63.57%)
North America 717,278 1.23% 1,955,890 3.51% (63.33%)
Japan and Korea 344,866 0.59% 1,345,339 2.41% (74.37%)
Asia Pacific and others 1,121,178 1.92% 2,773,333 4.98% (59.57%)
Total 58,316,695 100.00% 55,726,862 100.00% 4.65%
Air Cargo and Mail Revenue
During the Reporting Period, the Group's air cargo and mail
revenue was RMB11,113 million, representing an increase of RMB2,560
million as compared with last year. Among which, the increase of
capacity contributed an increase of RMB1,000 million in the
revenue, while the increase of cargo and mail load factor resulted
in an increase in revenue of RMB791 million, and the increase of
yield of cargo and mail resulted in an increase of RMB769 million
in the revenue. The capacity, cargo and mail load factor and yield
per RFTK in 2021 are as follows:
2021 2020 Change
Available freight tonne kilometres
(million) 10,760.61 9,634.66 11.69%
Cargo and mail load factor (%) 39.99 36.93 3.06 ppt
Yield per RFTK (RMB) 2.5828 2.4040 7.44%
Air Cargo and Mail Revenue Contributed by Geographical
Segments
2021 2020
(in RMB'000) Amount Percentage Amount Percentage Change
Mainland China 1,758,093 15.82% 1,423,008 16.64% 23.55%
Hong Kong SAR, Macau
SAR and Taiwan, China 312,518 2.81% 255,356 2.98% 22.39%
Europe 3,495,886 31.46% 2,608,389 30.50% 34.02%
North America 1,944,244 17.49% 1,441,192 16.85% 34.91%
Japan and Korea 614,032 5.53% 777,683 9.09% (21.04%)
Asia Pacific and others 2,988,515 26.89% 2,047,779 23.94% 45.94%
Total 11,113,288 100.00% 8,553,407 100.00% 29.93%
Operating Expenses
During the Reporting Period, the Group's operating expenses were
RMB95,465 million, representing an increase of 12.27% from
RMB85,030 million in the same period last year. The breakdown of
the operating expenses is set out below:
2021 2020
(in RMB'000) Amount Percentage Amount Percentage Change
Jet fuel costs 20,703,780 21.69% 14,817,474 17.43% 39.73%
Take-off, landing and
depot charges 9,667,650 10.13% 9,239,943 10.87% 4.63%
Depreciation and amortisation 20,934,502 21.93% 20,408,317 24.00% 2.58%
Aircraft maintenance,
repair and overhaul
costs 6,910,741 7.24% 6,423,313 7.55% 7.59%
Employee compensation
costs 24,230,071 25.38% 22,012,834 25.89% 10.07%
Air catering charges 1,650,028 1.73% 1,605,027 1.89% 2.80%
Selling and marketing
expenses 2,576,346 2.70% 2,568,362 3.02% 0.31%
General and administrative
expenses 1,263,044 1.32% 1,051,495 1.24% 20.12%
Others 7,528,446 7.88% 6,902,750 8.12% 9.06%
Total 95,464,608 100.00% 85,029,515 100.00% 12.27%
Jet fuel costs increased by RMB5,886 million on a year-on-year
basis, mainly due to the combined effect of the increase in the
prices and consumption of jet fuel.
Take-off, landing and depot charges increased by RMB428 million
on a year-on-year basis, mainly due to an increase in the number of
take-offs and landings.
Depreciation and amortisation increased by RMB526 million on a
year-on-year basis, mainly due to the increase in the fleet
size.
Employee compensation costs increased by RMB2,217 million on a
year-on-year basis, mainly due to the increase in the investment in
production and operation and the adjustment of policy in relation
to the 50% reduction in social insurance levy last year.
Air catering charges increased by RMB45 million on a
year-on-year basis, mainly due to the increase in the number of
passengers.
Other operating expenses mainly included operating lease
expenses on aircraft and engines, civil aviation development fund
and non-above-mentioned ordinary expenses arising from the core air
traffic business, which increased by 9.06% on a year-on-year basis,
mainly due to the increase in transport and the resumption on the
levy of civil aviation development fund during the Reporting
Period.
Finance Income, Finance Costs and Net Exchange Loss
During the Reporting Period, the Group recorded a finance income
of RMB112 million, representing a year-on-year decrease of RMB80
million or 41.51%; and incurred finance costs (excluding the
capitalised portion) of RMB5,495 million, representing a
year-on-year increase of RMB395 million. During the Reporting
Period, the Group recorded a net exchange gain of RMB1,235 million,
representing a year-on-year decrease of RMB2,368 million.
Share of Results of Associates and Joint Ventures
During the Reporting Period, the net loss of the Group's share
of results of its associates and joint ventures was RMB816 million,
representing a year-on-year decrease of RMB5,177 million. Among
which, during the Reporting Period, the Group recognized a loss on
investment of Cathay Pacific of RMB865 million, representing a
year-on-year decrease of RMB4,244 million; and recognized a loss on
investment of Shandong Aviation Group Corporation and Shandong
Airlines of RMB250 million, representing a year-on-year decrease of
RMB718 million.
Material Acquisitions and Disposals
The Company did not make any material acquisitions and disposals
of subsidiaries, associates or joint ventures during the Reporting
Period.
Assets Structure Analysis
As at the end of the Reporting Period, the total assets of the
Group was RMB298,381 million, representing an increase of 5.05%
from that as at 31 December 2020, among which current assets
accounted for RMB30,397 million or 10.19% of the total assets,
while non-current assets accounted for RMB267,984 million or 89.81%
of the total assets.
Among the current assets, cash and cash equivalents were
RMB15,935 million, accounting for 52.42% of the current assets and
representing an increase of 172.95% from that as at 31 December
2020.
Among the non-current assets, the book value of property, plant
and equipment and right-of-use assets as at the end of the
Reporting Period amounted to RMB220,415 million, accounting for
82.25% of the non-current assets and representing an increase of
2.10% from that as at 31 December 2020.
Asset Mortgage/Pledge
As at the end of the Reporting Period, the Group, pursuant to
certain bank loans and finance leasing agreements, had mortgaged
certain aircraft and premises with an aggregated book value of
approximately RMB89,565 million (RMB79,983 million as at 31
December 2020) and land use rights with book value of approximately
RMB26 million (RMB27 million as at 31 December 2020). In addition,
as at the end of the Reporting Period, the Group had bank deposits
restricted in ownership of approximately RMB775 million
(approximately RMB737 million as at 31 December 2020), which were
mainly statutory reserves deposited in the People's Bank of
China.
Capital Expenditure
In 2021, the Group's capital expenditure totalled RMB20,170
million, of which the total investment in aircraft was RMB14,034
million, mainly including procurement of aircraft and engines,
aircraft modifications, flight simulators, etc. Other capital
expenditure investment amounted to RMB6,136 million, mainly
including infrastructure construction, IT system construction,
ground equipment procurement and cash component of the long-term
investments.
Equity Investment
As at the end of the Reporting Period, the Group's equity
investment in its associates amounted to RMB10,391 million,
representing a decrease of 5.01% from that as at 31 December 2020.
Among this, the balance of the equity investment of the Group in
Cathay Pacific and Shandong Aviation Group Corporation amounted to
RMB9,449 million and RMB475 million, respectively.
As at the end of the Reporting Period, the Group's equity
investment in its joint ventures was RMB1,830 million, representing
an increase of 15.75% from that as at 31 December 2020.
Debt Structure Analysis
As at the end of the Reporting Period, the Group's total
liabilities were RMB232,550 million, representing an increase of
16.13% from that as at 31 December 2020. Among them, current
liabilities amounted to RMB91,620 million, accounting for 39.40% of
the total liabilities; and non-current liabilities amounted to
RMB140,930 million, accounting for 60.60% of the total
liabilities.
Among the current liabilities, interest-bearing debts (including
bank loans and other borrowings, bills payable and lease
liabilities) amounted to RMB54,935 million, representing an
increase of 3.16% from that as at 31 December 2020.
Among the non-current liabilities, interest-bearing debts
(including bank loans and other borrowings and lease liabilities)
amounted to RMB129,467 million, representing an increase of 20.17%
from that as at 31 December 2020.
Details of interest-bearing debts of the Group categorized by
currency are set out below:
31 December 2021 31 December 2020
(in RMB'000) Amount Percentage Amount Percentage Change
RMB 139,158,663 75.46% 109,420,080 67.96% 27.18%
US dollars 43,949,421 23.84% 49,669,410 30.85% (11.52%)
Others 1,294,474 0.70% 1,902,083 1.19% (31.94%)
Total 184,402,558 100.00% 160,991,573 100.00% 14.54%
Commitments and Contingent Liabilities
The Group's capital commitments, which mainly consisted of the
payables in the next few years for purchasing certain aircraft and
related equipment, decreased by 25.59% from RMB41,020 million as at
31 December 2020 to RMB30,522 million as at the end of the
Reporting Period. The Group's investment commitments, which was
mainly used in the investment agreements entered into, amounted to
RMB22 million as at the end of the Reporting Period, as compared to
RMB23 million as at 31 December 2020.
Details of the Group's contingent liabilities are set out in
note 43 to the consolidated financial statements of the Group for
2021.
Gearing Ratio
As at the end of the Reporting Period, the Group's gearing ratio
(total liabilities divided by total assets) was 77.94%,
representing an increase of 7.43 percentage points from that as at
31 December 2020. Given that high gearing ratio is common among
aviation enterprises, the current gearing ratio of the Group is at
a relatively reasonable level and its long-term insolvency risk is
within controllable range.
Working Capital and its Sources
As at the end of the Reporting Period, the Group's net current
liabilities (current liabilities minus current assets) were
RMB61,223 million, representing an increase of RMB361 million from
that as at 31 December 2020. Based on the structure of current
assets and current liabilities, the Group's current ratio (current
assets divided by current liabilities) was 0.33, representing an
increase from 0.24 as at 31 December 2020.
The Group meets its working capital needs mainly through its
operating activities and external financing activities. During the
Reporting Period, the Group's net cash inflow from operating
activities was RMB7,130 million, as compared to the net cash
outflow of RMB4,017 million for the corresponding period in 2020,
which was mainly because the sales revenue increased and the number
of ticket refunds declined on a year-on-year basis. Net cash
outflow from investing activities was RMB4,453 million,
representing a decrease of 71.93% from RMB15,865 million for the
corresponding period in 2020, mainly due to the year-on-year
decrease in the cash payment for the acquisition and construction
of fixed assets and other long-term assets and the subscription of
shares of Cathay Pacific during the corresponding period of last
year. Net cash inflow from financing activities amounted to
RMB7,469 million, representing a decrease of 55.77% from RMB16,888
million for the corresponding period in 2020, mainly due to the
larger growth of its financing scale to cope with the impact of
COVID-19 pandemic and ensure the liquidity safety during the
corresponding period of the previous year.
The Company has obtained bank facilities of RMB175,405 million
in aggregate granted by several banks in China, among which
approximately RMB61,928 million has been utilised. The remaining
amount is sufficient to meet our demands on working capital and
future capital commitments.
RISK FACTORS
Risks of External Environment
Market Fluctuation
The Chinese economy has strong resilience and its long-term
positive fundamentals will remain unchanged. Nonetheless, in view
of the lingering impact of the COVID-19 pandemic, it is confronted
with triple pressure of shrinking demand, supply shocks and
weakening expectations. There exist certain uncertainties in the
momentum of the general demand recovery accordingly. Based on the
characteristics of the new development phase, the Group will fully
implement the new development philosophy and establish new
development paradigm with a primary focus on the supply-side
structural reform, at the same time responding to the risks of
market fluctuation actively.
Oil Price Fluctuation
Jet fuel is one of the main operating costs of the Group. The
results of the Group is relatively more affected by the changes in
jet fuel price. During the Reporting Period, with other variables
remaining unchanged, if the average price of the jet fuel rises or
falls by 5%, the Group's jet fuel costs will rise or fall by
approximately RMB1,035 million.
Exchange Rate Fluctuation
The Group's certain lease liabilities, bank loans and other
loans are mainly denominated in US dollar. Certain international
income and expenses are denominated in currencies other than RMB.
Assuming that the risk variables other than the exchange rate stay
unchanged, the appreciation or depreciation of RMB against US
dollar by 1% due to the changes in the exchange rate will result in
the increase or decrease in the Group's net profit and
shareholders' equity as at 31 December 2021 by RMB317 million.
Details of the financial risk management objectives and policies
of the Group are set out in note 45 to the financial statements of
the Group for 2021.
Risks of Competition
Industry competition
Affected by the COVID-19 pandemic, global airlines grounded a
large number of planes and faced a cash flow crisis, while many
aviation companies in the United States and Europe went bankrupt.
Such integration is expected to alleviate excess capacity and
facilitate the integration of civil aviation resources and
subsequent development. During the early period of the "14th
Five-Year" development of civil aviation, active adjustment and
control on the growth rate of capacity based on the assessment of
the industry on the period of market recovery will help alleviate
the pressure of peer competition arising from short-term excess
capacity in the domestic market.
Alternative competition
China has built up the world's largest high-speed railway
network. It is extending its reach towards central and western
China and accelerating the development through long-term planning.
In the long run, the high-speed railway will change China's
geographic pattern of the economy and, as a result of its
cooperation and competition with civil aviation, the air-rail
interlink operation will provide strong support to the development
of aviation hubs.
Corporate Governance Report
MEMBERS OF THE SIXTH SESSION OF THE BOARD
Mr. Song Zhiyong
Mr. Ma Chongxian
Mr. Feng Gang
Mr. Patrick Healy
Mr. Li Fushen
Mr. He Yun
Mr. Xu Junxin
Ms. Winnie Tam Wan-chi
The Company has been committed to maintaining and enhancing the
level of its corporate governance so as to ensure greater
accountability and transparency of the Group and deliver long-term
return to its shareholders. The Company has complied with the code
provisions as set out in the Corporate Governance Code in Appendix
14 to the Listing Rules (the "Code") during the Reporting Period,
except for code provision A.4.2.
BOARD OF DIRECTORS
Governance Structure
As at the end of the Reporting Period, the structure of the
Board and each special committee is set out as follows:
MEMBERS OF THE SIXTH SESSION OF THE SUPERVISORY COMMITTEE
Mr. He Chaofan
Mr. Wang Jie
Mr. Qin Hao
Ms. Lyu Yanfang
Ms. Guo Lina
As of the end of the Reporting Period, the fifth session of the
Board of the Company comprised eight Directors, out of which three
were independent non-executive Directors. The Company completed the
re-election of the Board on 25 February 2022. As at the date of
this annual report, the sixth session of the Board comprises eight
Directors, out of which four are independent non-executive
Directors. All of the Directors of the fifth and sixth session of
the Board have actively participated in the activities of the
Company.
The attendance records of all the Directors of the fifth session
of the Board present in person at general meetings, Board meetings
and meetings of each special committee during the Reporting Period
are as follows:
Number of meetings attended in person/should be
attended
Audit and
Risk Control Strategy
Committee Nomination and Aviation
(Supervision and Remuneration Investment Safety
General Board Committee) Committee Committee Committee
Meeting Meeting Meeting Meeting Meeting Meeting
Executive Directors
Song Zhiyong 2/3 10/11 N/A N/A 7/7 2/2
Ma Chongxian 0/1 6/6 N/A N/A N/A N/A
Non-executive Directors
Feng Gang 2/3 11/11 N/A N/A N/A N/A
Patrick Healy 3/3 11/11 N/A N/A N/A N/A
Xue Yasong 2/3 10/11 N/A N/A N/A N/A
Independent Non-executive
Directors
Wang Xiaokang
(resigned during the
Reporting Period) 0/0 0/1 N/A 0/0 N/A N/A
Duan Hongyi 3/3 11/11 8/8 6/6 7/7 N/A
Stanley Hui Hon-chung 3/3 11/11 8/8 N/A N/A 2/2
Li Dajin 3/3 10/11 7/8 6/6 N/A N/A
For the Reporting Period, the number of Board meetings held, the
convening procedures, minutes and records, rules of procedure and
other relevant matters in connection with such meetings were in
compliance with the relevant code provisions of the Code. It can be
shown from the attendance rates that all Directors have discharged
their duty of diligence and are dedicated to making contribution
for the interest of the Company and its shareholders as a
whole.
The Responsibilities of the Board
The Board is accountable to the general meeting and exercises
the power according to the Articles of Association and the "Rules
and the Procedures of the Board". Pursuant to the Articles of
Association, the main responsibilities of the Board include: (1) to
determine the Company's business policies and investment plans; (2)
to formulate the Company's preliminary and final annual financial
budgets; (3) to formulate the Company's profit distribution
proposals and loss recovery proposals; (4) to determine the
establishment of the Company's internal management bodies; and (5)
to appoint or dismiss the President of the Company and the
Secretary to the Board, as well as appraise them and determine
their remuneration; and based on the nomination of the President,
to appoint or dismiss the Vice President, the Chief Financial
Officer, the Chief Pilot, the general counsel and other senior
management personnel of the Company, as well as appraise them and
determine their remuneration.
The Board shall be responsible for performing the following
corporate governance duties: (1) to develop and review the
Company's policies and practices on corporate governance, and
provide recommendations in this regard; (2) to review and monitor
the training and continuous professional development of the
Directors and senior management; (3) to review and monitor the
Company's policies and practices on compliance with legal and
regulatory requirements; (4) to develop, review and monitor the
code of conduct and compliance manual applicable to employees and
Directors; and (5) to review the Company's compliance with the
Corporate Governance Code and the disclosure in the Corporate
Governance Report. During the Reporting Period, the Board actively
performed the corporate governance duties. Please refer to the
disclosure in this Corporate Governance Report for details of the
implementation in this regard.
The Board has independent access to the senior management
personnel for enquiries in relation to the Company's management.
The Board has established special committees to provide support to
the Board in its decision-making process. For details, please refer
to the section headed "Special Committees of the Board" below.
Procedure of Board Meeting
Board meetings are held regularly throughout the year and
generally include annual meeting, interim meeting and meetings for
the first and third quarters. The Board shall formulate meeting
plans on an annual basis, which mainly include matters such as the
time and venue of the Board meeting as well as routine proposals
such as review of financial reports, and shall inform all Directors
of such plans in the beginning of the year.
Board meetings shall be convened by the Chairman and a notice of
14 days shall be given to all Directors before each meeting. The
Directors may attend in person or through other electronic means of
communication. If an extraordinary Board meeting is proposed to be
convened, the Chairman of the Board shall issue a notice of the
extraordinary Board meeting within 10 days from the receipt of the
proposal(s). The relevant documents of the meeting shall be given
to all Directors, Supervisors and other persons attending the
meeting at least three days in advance.
For the purpose of considering resolutions or matters during
Board meetings, the Directors may arrange the persons-in-charge of
the relevant departments of the Company to attend the meetings as
necessary to answer queries.
The Secretary to the Board shall be responsible for the
communications and liaison with all Directors from the time when
the notice is served to the commencement of the meeting, and shall
provide in a timely manner the necessary information to the
Directors to facilitate their decision-making on matters set out in
the agenda. All Directors shall have access to the Secretary to the
Board. Under the leadership of the Board and the Chairman, the
Secretary to the Board shall take the initiative to keep himself or
herself abreast of the implementation progress of the Board
resolutions, and report to and advise the Board and the Chairman in
a timely manner on major issues arising in the course of
implementation. Minutes of Board meetings shall be kept by the
Secretary to the Board and made available for inspection by any
Director at any time.
Election of Directors
Directors other than employee representative director(s) are
elected at the shareholders' general meeting of the Company, while
employee representative director(s) is/are elected or dismissed by
the employee representative meeting of the Company. Directors are
appointed for a term of three years and are eligible for
re-election and re-appointment upon expiry of their terms of
office.
Code provision A.4.2 stipulates that, among others, every
director, including those appointed for a specific term, should be
subject to retirement by rotation at least once every three years.
As disclosed in the announcement of the Company dated 23 October
2020, the terms of the fifth session of the Board and the
Supervisory Committee expired on 26 October 2020. As the nomination
process of candidates for Directors and Supervisors of the new
session of the Board and the Supervisory Committee has not been
completed during the Reporting Period, the re-election and
appointment of members of the Board and the Supervisory Committee
were postponed appropriately. The terms of the special committees
of the fifth session of the Board of the Company were also extended
accordingly. The Company completed the re-election and appointment
of members of the Board and the Supervisory Committee on 25
February 2022 and fulfilled respective information disclosure
obligations in a timely manner. All members of the fifth session of
the Board and the Supervisory Committee have continued to fulfill
their respective duties and responsibilities of Directors and
Supervisors in accordance with the requirements of the laws,
administrative rules and the Articles of Association until the
re-election work are completed. The postponed re-election of the
members of the Board and the Supervisory Committee did not affect
the normal operation of the Company.
Chairman and President
The Chairman shall be elected and dismissed by a simple majority
of the Directors. The term of office of the Chairman shall be three
years, and the Chairman is eligible for re-election and
re-appointment upon expiry of the term. The Chairman is responsible
for leading the Board and ensuring the Board's efficient operation
and that all major and relevant issues are discussed by the Board
in a prompt and constructive manner. Mr. Song Zhiyong was elected
as the Chairman of the Company on 29 December 2020 and was
re-elected on 25 February 2022.
The Company has a President who shall be appointed or dismissed
by the Board. The President is authorized to oversee the Group's
business, implement various strategies and be responsible for the
Company's daily operation to attain overall commercial goals. Mr.
Ma Chongxian was appointed as the President of the Company on 31
May 2021 and was re-appointed on 25 February 2022.
Board Diversity Policy
The Directors have extensive expertise and experience in the
fields of aviation, finance, law and financial management and
provide substantial support for the scientific and effective
decision-making of the Board. The "Board Diversity Policy" was
adopted by the Board, which sets out the approach of the Company
towards achieving diversity of the Board.
-- The Company takes into consideration a number of factors,
including but not limited to professional experience and
qualifications, cultural and educational background, skills,
industry knowledge and reputation, knowledge of the laws and
regulations applicable to the Company, gender, age, language skills
and length of service, with a view to achieving diversity of the
Board. These factors shall be taken into account by the Nomination
and Remuneration Committee in reviewing the structure and
composition of the Board and making recommendations to the Board on
the appointment, re-appointment and succession of Directors.
-- The above factors should be balanced as appropriate in
determining the optimal composition of the Board. For the
appointment of Directors, the above factors shall be considered on
a case-by-case basis in light of the actual circumstances of the
Company and its business operations, development and strategies.
Appointment by the Board should be made based on merits and the
contributions that the individual is expected to bring to the Board
with due regard for the benefits of diversity in the Board. The
Board is structured to include more external Directors than
internal Directors, and the members of the Board include one
full-time deputy secretary of the Communist Party Committee as
non-executive Director, one shareholder representative Director,
one employee representative Director and four independent
Directors. Among the four independent Directors, at least one shall
possess extensive experience in accounting or relevant financial
management areas with appropriate professional qualifications, and
other Directors shall possess extensive experience in the aviation,
legal and management areas to facilitate scientific decision-making
of the Board. At least one female director shall be appointed to
the Board of the Company. On 25 February 2022, the Company
appointed Ms. Winnie Tam Wan-chi as an independent non-executive
Director of the Company.
-- The Nomination and Remuneration Committee shall monitor the
implementation of the Board Diversity Policy on an ongoing basis,
and review this policy as appropriate.
Directors' Training and Continuous Professional Development
The management of the Company provides Directors with
appropriate and sufficient information in a timely manner so as to
update them with the latest developments of the Company and
facilitate their discharge of duties.
Newly appointed Directors shall be given introduction in
relation to the Company to ensure that they have a sufficient
understanding of the management, business and governance practices
of the Company. The Company also encourages its Directors to
participate in seminars and courses conducted by recognized
institutions so as to ensure that they constantly improve their
skills and are aware of the latest developments or changes in laws
and regulations, the Listing Rules and the Code with which they are
required to comply in discharging their duties.
The Directors confirmed that they have complied with code
provision A.6.5 of the Code in relation to the training of
Directors. All Directors have participated in continuing
professional development by attending trainings and courses or
reading relevant materials to broaden their knowledge base and
sharpen their skills, and have provided their training records to
the Company.
Training for Directors during the Reporting Period Category (Notes)
Executive Directors
Song Zhiyong (Chairman) a, b
Ma Chongxian (President) a, b
Non-executive Directors
Feng Gang b
Patrick Healy a
Xue Yasong a, b
Independent Non-executive Directors
Wang Xiaokang (resigned during the Reporting Period) a
Duan Hongyi a, b
Stanley Hui Hon-chung a, b
Li Dajin a, b
Notes:
a. Trainings on the responsibilities of the Directors provided
by the Company's legal advisers and the information about the
latest laws and regulations and regulatory developments in the
domestic and foreign capital markets prepared by the Company on a
regular basis, for the Directors to study by themselves.
b. Special trainings provided by the regulatory authorities.
Biographical Details and Other Information of Directors
The list of Directors and their respective roles on the Board
and special committees under the Board are set out in this annual
report and published on the websites of the Company and Hong Kong
Stock Exchange. For biographical details of the Directors, please
refer to the section headed "Profile of Directors, Supervisors and
Senior Management" of this annual report.
On 5 September 2005, the Company formulated and adopted the
Model Code for Securities Transactions, which was subsequently
amended on 19 March 2007 and 4 December 2009, respectively, on
terms no less exacting than the required standards of the Model
Code. The Model Code for Securities Transactions of the Company
also applies to the Supervisors and the relevant employees. After
making specific enquiries, the Company confirmed that each Director
and each Supervisor have complied with the required standards of
the Model Code set out in Appendix 10 to the Listing Rules and the
Company's code of conduct throughout the Reporting Period.
The three independent non-executive Directors of the Company as
at the end of the Reporting Period, namely, Mr. Duan Hongyi, Mr.
Stanley Hui Hon-chung and Mr. Li Dajin, have confirmed their
independence with the Hong Kong Stock Exchange when they were
elected. The Company had already received from those independent
non-executive Directors the annual statements concerning their
independence and re-confirmed their independence. The four
independent non-executive Directors of the sixth session of the
Board of the Company, namely Mr. Li Fushen, Mr. He Yun, Mr. Xu
Junxin and Ms. Winnie Tam Wan-chi, have also confirmed their
independence. The Company considers all independent non-executive
Directors as independent within the meaning of Rule 3.13 of the
Listing Rules.
Besides the working relationships in the Company, there are no
financial, business, family relationship or other material
relationships among the Directors, Supervisors and senior
management.
The Company has purchased liability insurance for the Directors,
Supervisors and senior management.
SPECIAL COMMITTEES OF THE BOARD
Audit and Risk Control Committee (Supervision Committee)
As at the end of the Reporting Period, the Audit and Risk
Control Committee (Supervision Committee) comprised Mr. Duan
Hongyi, Mr. Stanley Hui Hon-chung and Mr. Li Dajin, all of whom are
independent non-executive Directors, with Mr. Duan Hongyi serving
as the chairman of the committee. As at the date of this annual
report, the Audit and Risk Control Committee (Supervision
Committee) comprises Mr. Li Fushen, Mr. He Yun and Ms. Winnie Tam
Wan-chi, all of whom are independent non-executive Directors, with
Mr. Li Fushen serving as the chairman of the committee.
The primary duties of the Audit and Risk Control Committee
(Supervision Committee) include: (1) to propose the engagement or
change of external auditors, conduct appropriate review and
evaluation, as well as give opinion in writing to the Board, in
connection with the appointment of new accounting firms or
re-appointment of the existing accounting firms; (2) to review and
supervise the Company's internal auditing system and its
implementation, review the duties and responsibilities of the
internal audit personnel and receive and consider the work report
prepared by the responsible person of the audit department; (3) to
be responsible for the communications between the internal audit
department and external auditors; (4) to review and verify the
Company's financial information and its disclosure; (5) to review
the Company's financial control, internal control and risk control
system, and evaluate the appropriateness of the system; (6) to
monitor the implementation and self-assessment of the Company's
internal control system, review the risk control and internal
control system with the management, ensuring that the management
have performed their duties properly and established an effective
internal control system; (7) to study the results of the important
investigation on the internal control and the feedback of the
management on the results; (8) to assess the effectiveness of the
control rules and the operational standards relating to risk
investments, including but not limited to financial derivative
instruments, and consider the strategies and proposals of the
Company's risk investment; (9) to be responsible for the control
and daily management of the related/connected transactions of the
Company, and to review the Company's significant related/connected
transactions; and (10) to receive reports relating to fraudulent
acts and discovery and complaints.
The main work of the Audit and Risk Control Committee
(Supervision Committee) during the Reporting Period includes
reviewing the following documents: (1) the 2020 annual report, the
reports for the first and third quarters and the interim report of
2021; (2) the 2020 profit distribution plan; (3) the 2020
assessment report on internal control and the audit report on
internal control; (4) the 2020
performance report by the Audit and Risk Control Committee; (5)
the special reports regarding the deposit and actual use of the
proceeds from issuance of A Shares for 2020; (6) the 2021 financial
plan and investment plan; (7) the re-appointment of international
and domestic auditors and internal control auditors for 2021; (8)
The signing of five framework agreements for continuing related
(connected) transactions between Air China and China National
Aviation Holding Corporation Limited and its subsidiaries and the
application of annual caps for 2022 to 2024; and (9) Adjustment to
the annual caps for 2021 to 2022 on the continuing related
(connected) transactions of contracting operation income from
bellyhold space business with Air China Cargo Co. Ltd..
In addition to the above, the Audit and Risk Control Committee
(Supervision Committee) also received the following reports during
the Reporting Period: (1) Announcement of profit warning for 2020;
(2) Preparation plan for the 2020 annual report; (3) Auditing of
the 2020 financial report; (4) List of related parties in A shares
for 2020; (5) Special self-inspection on corporate governance of
listed companies; (6) Auditing and work plan for rectification; (7)
Work plan on internal audit for 2021; (8) Air China's annual report
and industry analysis and research report; (9) the 2020 assessment
on internal control; (10) Analysis and study of the reports for the
first quarter of 2021 of the three major airlines; (11) Auditing
rectification; (12) Work plan on internal control self-assessment
for 2021; (13) Interim review of financial plan and internal
control audit plan for 2021; (14) Overview of the capital market in
June and the first half of 2021; (15) List of related parties in A
shares for the first half of 2021; and (16) Implementation of the
three-year action plan for the reform of State-owned
enterprises.
The annual results and annual report of the Company for the year
of 2021 had been reviewed by the Audit and Risk Control Committee
(Supervision Committee).
Nomination and Remuneration Committee
As at the end of the Reporting Period, the Nomination and
Remuneration Committee comprised Mr. Duan Hongyi and Mr. Li Dajin,
both are independent non-executive Directors, with Mr. Li Dajin
serving as the chairman of the committee. As at the date of this
annual report, the Nomination and Remuneration Committee comprises
Mr. He Yun and Mr. Xu Junxin, two independent non-executive
Directors, and Mr. Song Zhiyong, an executive Director, with Mr. He
Yun serving as the chairman of the committee.
The primary duties of the Nomination and Remuneration Committee
include: (1) to study on the criteria and procedures for selecting
candidates for the Directors and senior management and make
recommendations to the Board; (2) to nominate to the Board the
candidates to fill casual vacancies on the Board, and make
recommendations regarding the Directors' remuneration to the Board;
(3) to evaluate the performance of the senior management of the
Company and determine their remuneration structure; (4) to make
recommendations to the Board on the remuneration policy and
structure for the Directors and senior management and on the
establishment of a set of formal and transparent procedures for
formulating remuneration policy, and supervise the implementation
of the remuneration policy of the Company; (5) to assess the
independence of the independent non-executive Directors; and (6) to
formulate the proposal of the Company's share incentive plan,
verify the compliance with relevant regulations on granting and
fulfillment of exercise conditions, and make recommendations to the
Board for consideration.
The main work of the Nomination and Remuneration Committee
during the Reporting Period includes: nomination of Mr. Ma
Chongxian as a candidate for Director and appointment as President
of the Company, nomination of Mr. Yan Simeng as Chief Information
Officer of the Company, nomination of Mr. Huang Bin as Secretary to
the Board and Joint Company Secretary of the Company, and
nomination of Mr. Huang Bin as Assistant to the President of the
Company. In addition to the above, the Nomination and Remuneration
Committee also received the report on the Company's remuneration
incentive policy.
During the Reporting Period, the nomination policy for Directors
of the Company implemented by the Nomination and Remuneration
Committee is as follows: The Nomination and Remuneration Committee
shall review the qualification of candidates for directorship and
senior management according to the standards as set out in the
Articles of Association and the Board Diversity Policy and submit a
report to the Board. For the diversity policy, please refer to the
section headed "Board Diversity Policy" above. A shareholder
holding 3% or more of the shares of the Company is entitled to
nominate Directors to the Nomination and Remuneration
Committee.
During the Reporting Period, the remuneration policy for
Directors implemented by the Nomination and Remuneration Committee
is as follows: except for independent non-executive Directors,
other Directors will not receive director's remuneration. The
remuneration standards of the independent non-executive Directors
shall be determined according to the relevant national policies,
and the remuneration of the senior management shall be determined
in accordance with the relevant laws and regulations of the PRC and
the provisions of the "Interim Measures for Remuneration
Administration of Responsible Persons of Enterprise" of the
Company. The Nomination and Remuneration Committee made
recommendations to the Board on the remuneration packages of
independent non-executive Directors and senior management based on
the above-mentioned standards. The remuneration of the Directors
and Supervisors of the Company shall be determined by the general
meeting, and that of the senior management shall be determined by
the Board after being considered by the Nomination and Remuneration
Committee.
Changes in shareholdings and remuneration of the existing and
resigned Directors, Supervisors and senior management during the
Reporting Period
Total remuneration
payables Whether
received received
from the remuneration
Company from the
during Company's
Starting Expiry date the Reporting related
date of term of term Period parties
Name Position Gender Age of office of office (RMB0'000) or not
Song Zhiyong Executive Director Male 56 22 May 2014 - - Yes
Secretary of 14 December - -
the Communist 2020
Party Committee
Chairman 29 December - -
2020
Ma Chongxian Vice President Male 56 8 April 2010 31 May 2021 - Yes
Vice Chairman 20 July 2021 - -
President 31 May 2021 - -
Deputy Secretary 11 May 2021 - -
of the Communist
Party Committee
Deputy Secretary
of the Communist 19 November
Feng Gang Party Committee Male 58 2019 - - Yes
Non-executive 26 May 2020 - -
Director
Non-executive 19 December
Patrick Healy Director Male 56 2019 - - Yes
Employee Representative 29 March 25 February
Xue Yasong Director Male 60 2018 2022 82.81 No
Chairman of 31 October 15 December -
the Labour 2016 2021
Union
Independent
Non-executive 9 February
Wang Xiaokang Director Male 66 25 May 2017 2021 1 No
Independent
Non-executive 25 February
Duan Hongyi Director Male 58 26 May 2020 2022 - No
Independent
Stanley Hui Non-executive 25 February
Hon-chung Director Male 71 22 May 2015 2022 20 No
Independent
Non-executive 22 December 25 February
Li Dajin Director Male 63 2015 2022 20 No
Independent
Non-executive 25 February
Li Fushen Director Male 59 2022 - - No
Independent
Non-executive 25 February
He Yun Director Male 60 2022 - - No
Independent
Non-executive 25 February
Xu Junxin Director Male 57 2022 - - No
Independent
Winnie Tam Non-executive 25 February
Wan-chi Director Female 60 2022 - - No
22 February 25 February
Zhao Xiaohang Vice President Male 60 2011 2022 - Yes
Chairman of 19 December 25 February -
the Supervisory 2019 2022
Committee
29 October
He Chaofan Supervisor Male 59 2013 - - Yes
Chairman of 25 February -
the Supervisory 2022
Committee
Employee Representative 25 September
Wang Jie Supervisor Male 56 2020 - 85.73 No
Employee Representative 25 September
Qin Hao Supervisor Male 53 2020 - 78.53 No
18 December
Lyu Yanfang Supervisor Female 50 2020 - 65.13 No
25 February
Guo Lina Supervisor Female 51 2022 - - No
Secretary of
Committee
for Discipline 19 January
Tan Huanmin Inspection Male 57 2019 - - Yes
22 February
Wang Mingyuan Vice President Male 56 2011 - - Yes
Zhang Sheng Vice President Male 49 9 June 2020 - - Yes
17 December
Chen Zhiyong Vice President Male 58 2012 - - Yes
14 March
Chai Weixi Vice President Male 59 2012 - 96.79 No
Chief Safety 17 December
Xu Chuanyu Officer Male 57 2012 - 137.06 No
9 August
Zhang Hua General Counsel Male 56 2017 - 95.77 No
Xiao Feng Chief Accountant Male 53 28 July 2014 - 94.89 No
27 November
Wang Yingnian Chief Pilot Male 58 2014 - 136.13 No
21 January
Ni Jiliang Chief Engineer Male 55 2020 - 94.24 No
Chief Information 7 September
Yan Simeng Officer Male 39 2021 - 46.61 No
Secretary to 30 August 30 September
Zhou Feng the Board Male 60 2017 2021 40.97 No
Secretary to 30 September
Huang Bin the Board Male 58 2021 - 24.41 No
Assistant to 10 December -
the President 2021
Assistant to 14 March 8 November
Shao Bin the President Male 56 2012 2021 205.89 No
Assistant to 27 October
Zhao Yang the President Male 54 2017 - 146.80 No
Total / / / / / 1,472.76 /
1. During the Reporting Period, apart from the 10,000 A shares
of the Company held by Mr. Zhou Feng, the former Secretary to the
Board of the Company, all other Directors, Supervisors and senior
management of the Company did not acquire, sell or hold any shares
of the Company.
2. The remuneration of Mr. Wang Xiaokang and Mr. Duan Hongyi,
both being non-executive independent Directors, will be determined
pursuant to relevant national policies.
3. Total salaries received by the Directors, Supervisors and
senior management, who are subject to changes during the year, from
the Company for the Reporting Period represent the total
remuneration for his/her term of office during the year.
Details of the remuneration for the Directors during the
Reporting Period are set out in note 13 to the financial statements
of this annual report.
Strategy and Investment Committee
As at the end of the Reporting Period, the Strategy and
Investment Committee comprised Mr. Song Zhiyong, an executive
Director, and Mr. Duan Hongyi, an independent non-executive
Director, with Mr. Song Zhiyong serving as the chairman of the
Committee. As at the date of this annual report, the Strategy and
Investment Committee comprises Mr. Ma Chongxian, an executive
Director, Mr. Xu Junxin, an independent non-executive Director, and
Mr. Song Zhiyong, an executive Director, with Mr. Ma Chongxian
serving as the chairman of the committee.
The primary duties of the Strategy and Investment Committee
include: (1) to study the Company's strategic plan for long-term
development and significant investment and financing proposals, as
well as important operation and production decisions, and make
recommendations on other significant matters that may affect the
Company's development; (2) to formulate the environmental, social
and governance structure, objectives, management approaches and
strategies of the Company; and (3) to make decisions on the
establishment, merger and dissolution of branches of the
Company.
The main work of the Strategy and Investment Committee during
the Reporting Period includes: consideration and approval of the
amendment to the Working Rules of the Strategy and Investment
Committee of the Board, the investment plan for 2021, the
procurement of eighteen A320NEO aircraft, the amendment to the
Articles of Association, the 2020 Corporate Social Responsibility
Report, the retirement of twelve A330-200 aircraft and the outline
of the Company's "14th Five-Year" Development Plan. In addition to
the above, the Strategy and Investment Committee also received the
report on Air China's development strategy and implementation of
the three-year action for the reform of State-owned
enterprises.
Aviation Safety Committee
As at the end of the Reporting Period, the Aviation Safety
Committee comprised Mr. Song Zhiyong, an executive Director, and
Mr. Stanley Hui Hon-chung, an independent non-executive Director,
with Mr. Song Zhiyong serving as the chairman of the committee. As
at the date of this annual report, the Aviation Safety Committee
comprises Mr. Song Zhiyong, an executive Director, Mr. Li Fushen,
an independent non-executive Director, and Mr. Ma Chongxian, an
executive Director, with Mr. Song Zhiyong serving as the chairman
of the committee.
The primary duties of the Aviation Safety Committee include: (1)
to receive the safety report of the Company on a regular basis and
report to the Board; (2) to study and deal with significant
problems in relation to aviation safety work of the Company; and
(3) to supervise and guide the production activities of the Company
and the allocation of various kinds of resources such as human
resources, properties and materials to fulfill the needs of safety
operation of the Company.
The Aviation Safety Committee received the special report on
aviation safety of the Company twice during the Reporting
Period.
MANAGEMENT
Duties of the Management
The management shall be accountable to the Board and its main
responsibilities include: (1) to manage the operation of the
Company and to implement the resolutions of the Board; (2) to
formulate the plans on the establishment of the Company's internal
management bodies; (3) to implement annual business plans and
investment proposals; (4) to establish fundamental rules and
regulations of the Company; (5) to formulate fundamental management
systems of the Company; (6) to make decision on transactions
relating to the Company's main business involving a value within a
monetary threshold or within a specific proportion of the Company's
latest audited net asset value, subject to applicable laws and the
Articles of Association; and (7) to appoint or dismiss responsible
management personnel other than those appointed or dismissed by the
Board, etc.
The Company established the "Rules and Procedures for
President's Office" to regulate the daily operation of the
President's Office.
FINANCIAL REPORTING
The Company prepares and publishes annual reports, interim
reports and quarterly reports in accordance with the requirements
of the regulatory rules of the listing places of the Company and
other relevant laws and regulations in a timely manner each year,
and the information disclosed is adequate for the shareholders to
evaluate the performance, financial position and prospects of the
Company.
Key operating data of the Company are published monthly in order
to improve the transparency of the Company's performance and to
provide the latest developments of the Company in a timely
manner.
The Company has a sound environment for implementing internal
controls. The Company has set up an effective electronic
information system to support business development which comprises
various operation systems, settlement system and a core accounting
and audit platform, i.e. the Oracle financial information system.
For treasury management, the Company has implemented a global
online banking management system. An effective accounting
information system was also established.
The responsibilities of the Directors in relation to the
financial statements are set out below and shall be read together
with the "Independent Auditor's Report" set out in this annual
report. The statement of reporting responsibility of the auditors
is included in the section headed "Independent Auditor's Report"
set out in this annual report.
-- Annual reports and accounts
The Directors acknowledge that they are responsible for
preparing the financial statements for each financial year so as to
present a true and fair view of the financial position of the
Company and the Group, and of the financial performance and cash
flow of the Group.
-- Accounting policies
When preparing the financial statements of the Company and the
Group, the Directors have consistently applied appropriate
accounting policies under the relevant accounting standards.
-- Accounting records
The Directors are responsible for ensuring that the Company
shall keep the accounting records, which will reflect the financial
position of the Company with reasonable accuracy, enabling the
Group to prepare the financial statements in accordance with the
requirements of the Listing Rules, Hong Kong Companies Ordinance
and the relevant accounting standards.
-- Ongoing operation
After making appropriate enquiries, the Directors believe that
the Group has sufficient resources for operation in the foreseeable
future. Accordingly, the Group's financial statements should be
prepared on a going concern basis.
RISK MANAGEMENT AND INTERNAL CONTROL
The Board bears the ultimate responsibility for the Group's risk
management and internal control system and for reviewing the
effectiveness of the system. The risk management and internal
control system is designed to manage rather than eliminate the risk
of failing to achieve business objectives and to make reasonable,
but not absolute, assurances that there will be no material
misstatement or loss. The Board monitors the risk level with the
assistance of the Audit and Risk Control Committee (Supervision
Committee) and the management of the Company.
The Company conducts at least one review of the soundness and
effectiveness of the risk management and internal control system
every year. The Board will publish the self-assessment annual
report on the internal control after it is reviewed by the Audit
and Risk Control Committee (Supervision Committee) and reported to
the Board.
During the Reporting Period, the Board reviewed the Group's risk
management and internal control system for the year through the
Audit and Risk Control Committee (Supervision Committee) and
considered that the system was adequate and effective. The review
of the Audit and Risk Control Committee (Supervision Committee)
covered key control aspects, including financial controls,
operational controls and compliance controls. The Audit and Risk
Control Committee (Supervision Committee) also reviewed the Group's
resources, qualifications and experience of the responsible staff,
training courses and budget in respect of the accounting, internal
audit and financial reporting functions and expressed satisfaction
with the adequacy of such measures. The Board also confirmed that
the Company has established effective systems and procedures to
ensure the control and management of the strategic risks, financial
risks, operational risks, legal risks, contingent risks, etc..
The basic procedures of the Group's risk management include: (1)
collection of risk information; (2) identification and assessment
of risks; (3) formulation and implementation of risk reduction
measures; and (4) monitoring of risk management.
The Company has established a clear organizational structure to
allocate responsibilities for formulation, implementation and
monitoring as required. An information reporting mechanism has been
formed for risk management, which covers the Company's main
business units to ensure that significant risks are effectively
monitored and coped with within the Group.
The Group ranks the risks based on priority so as to pay special
attention to critical risks. It sets risk indicators for critical
risks, and monitors and judges the key indicators on a regular
basis so that the risks are always under control. All the business
units are required to compile a summary of the risks and report to
the Risk Management Working Group Office on a regular basis. The
Risk Management Working Group Office has set up a monthly reporting
procedure to regularly report the risk status and risk tracking to
the management and regulatory authorities.
According to the risk assessment in 2021, the main risks that
the Group is facing are set out in the section headed "Management's
Discussion and Analysis of Financial Position and Operating Results
- Risk Factors" of this annual report.
The Company has established an audit department and legal
department to assist the Audit and Risk Control Committee
(Supervision Committee) and to analyze and evaluate the adequacy
and effectiveness of the Group's internal control and risk
management system and to supervise and evaluate the risk management
and internal control of the Group. The audit department and legal
department regularly reports the annual, interim work reports and
annual audit plans to the Audit and Risk Control Committee
(Supervision Committee) for review of risk management and internal
control system. The Audit and Risk Control Committee (Supervision
Committee) reviews the reporting compliance, reviews and monitors
the effectiveness of the internal audit, internal control
development and risk compliance, keeps tracks of the corrective
actions for the problems spotted and guides business units to
operate efficiently.
The Company has implemented a registration and filing system for
the insiders and established the profiles of the insiders, who
should bear the responsibility of confidentiality for the inside
information they are aware of. The Board should guarantee the
truthfulness, accuracy and completeness of the profiles of the
insiders. The Company will conduct regular and occasional inquiries
on the trading of shares and derivatives of the Company by the
insiders. If insiders are found to have involved in insider dealing
or have breached the laws and regulations due to dereliction of
duty, the Company will ensure that the relevant personnel are held
accountable in accordance with relevant laws and regulations and
the Company's policies. The Company is also aware of its
obligations under the SFO and the Listing Rules for the handling
and disclosure of inside information, and unless the information
falls within the "Safe Harbor", the Company will disclose such
inside information to the public as soon as practicable.
ARTICLES OF ASSOCIATION
During the Reporting Period, amendments were made to the
Articles of Association as follows:
On 18 March 2021, the Board of Directors proposed to amend the
articles relating to the Company's address and the business name of
the promotor of the Company in the Articles of Association, of
which the amendments were approved by the shareholders at the
annual general meeting of the Company held on 25 May 2021. For
details, please refer to the Company's circular dated 8 April 2021
and the announcement dated 25 May 2021.
On 26 November 2021, according to the provisions and regulatory
requirements of the Company Law of the People's Republic of China,
the Securities Law of the People's Republic of China, the Official
Reply of the State Council regarding Adjusting the Application of
Provisions to Matters Including the Notice Period for Convention of
Shareholders' Meetings by Overseas Listed Companies ( ), the
Guidelines for the Articles of Association of Listed Companies ( ),
the Code of Corporate Governance for Listed Companies ( ) and other
laws and regulations and regulatory documents as well as the actual
operational and management needs of the Company, the Board of
Directors proposed to amend the Articles of Association as well as
the "Rules and the Procedures of General Meeting" and "Rules and
the Procedures of the Board". The proposed amendments were approved
by the shareholders at the extraordinary general meeting of the
Company held on 30 December 2021. For details, please refer to the
Company's circular dated 14 December 2021 and the announcement
dated 30 December 2021.
COMPANY SECRETARY
The joint company secretaries, namely Mr. Huang Bin and Mr. Huen
Ho Yin, are responsible for facilitating the procedures of the
Board, as well as facilitating the communications among Board
members, and communications with shareholders and with the
management. The biographies of the joint company secretaries are
set out in the section headed "Profile of Directors, Supervisors
and Senior Management" of this annual report. During the Reporting
Period, the joint company secretaries respectively attended a total
of more than 15 hours of professional training to update their
skills and knowledge.
AUDITORS AND THEIR REMUNERATION
The international and domestic auditors of the Company are
Deloitte Touche Tohmatsu and Deloitte Touche Tohmatsu Certified
Public Accountants LLP respectively. Breakdown of the remuneration
to the Company's external auditors for providing audit and
non-audit services for the Reporting Period is as follows:
RMB9,522,000 (including value-added tax) was charged in
aggregate for the review of the Group's condensed consolidated
financial statements for the six months ended 30 June 2021 and for
the audit of the Group's consolidated financial statements for the
year ended 31 December 2021; an aggregate amount of RMB7,495,000
(including value-added tax) was charged for the audit of the
financial statements of certain subsidiaries of the Group for the
year ended 31 December 2021; an aggregate of RMB1,000,000
(including value-added tax) was charged for providing internal
control audit services to the Group; and an aggregate of
RMB1,581,000 (including value-added tax) was charged for the
rendering of other non-audit services, such as tax advisory
services, to the Group.
COMMUNICATION WITH SHAREHOLDERS
The Company has established and maintained various communication
channels with its shareholders through the publication of annual
reports, interim reports and quarterly reports, press releases and
announcements on the websites of the Company and the stock
exchanges (if applicable), results presentations, roadshows,
briefings on dividend distribution, etc. The Company has formulated
the "Measures for Investors Relation Management" to regulate and
strengthen its communication with the shareholders and investors,
so as to optimize its corporate governance and enhance its
corporate image.
The annual general meeting represents an effective means for the
shareholders to exchange their views with the Board. The Chairman
of the Board, as well as the respective chairmen of the Audit and
Risk Control Committee (Supervision Committee), Nomination and
Remuneration Committee, Strategy and Investment Committee and
Aviation Safety Committee will answer queries raised by
shareholders at the annual general meeting. Resolutions in respect
of independent matters, including the election and change of the
Directors, shall be tabled as separate resolutions at the annual
general meeting.
Other than the annual general meeting, the Company would also
hold extraordinary general meeting ("EGM") as required. In
accordance with articles 66 and 91 of the Articles of Association,
shareholder(s), individually or in aggregate, holding more than 10%
of the shares of the Company may request the Board to convene an
extraordinary general meeting by making one or more written
request(s) in the same form to the Board with a clear agenda. The
Board shall respond to such written request(s) within ten days of
receipt of such written request(s). If the Board agrees to convene
an extraordinary general meeting, it shall within five days of the
Board resolution resolving to hold an extraordinary general meeting
issue a notice convening an extraordinary general meeting within
two months of receiving such request(s) from the shareholder(s). If
the Board does not accept the request(s) from shareholder(s) for a
meeting or fails to respond within ten days of the receipt of such
written request(s), such shareholder(s) shall request the
Supervisory Committee to convene an extraordinary general meeting
by written request(s). If the Supervisory Committee fails to issue
a notice convening a meeting within five days of the receipt of
such written request(s), shareholder(s), individually or in
aggregate, holding more than 10% of the shares of the Company for a
consecutive 90 days or more may convene and hold a meeting by
themselves.
For including a resolution relating to other matters in a
general meeting, shareholders are requested to follow the
requirements and procedures as set out in article 68 of the
Articles of Association which provides that shareholder(s),
individually or in aggregate, holding more than 3% of the shares of
the Company may put forward proposal(s) by providing a written
request to the convener of the meeting not less than ten days
before the meeting. The convener of the meeting shall, within two
days of the receipt of such written request, give supplemental
meeting notice to shareholders which specifies information on such
proposal(s).
The Board values the views and input of shareholders.
Shareholders may send their enquiries and concerns to the Board at
any time by addressing them to the Company Secretary, whose contact
details are as follows:
Address: Air China Headquarter, 30 Tian Zhu Road, Airport
Industrial Zone, Beijing, 101312
Email: ir@airchina.com
Telephone number: 86-10-61462560
Fax number: 86-10-61462805
Report of the Directors
STRATEGIC OBJECTIVES
The Group will, on the basis of enhancing safety management,
continue to advance the implementation of its strategies; improve
global network coverage to increase the commercial value of hub
network; optimise the allocation of its core resources to improve
the efficiency of resource utilisation; reasonably deploy transport
capacity to grasp opportunities in the market; take multiple
measures to strengthen marketing competitiveness; enhance service
management, promote product innovation to improve customer
experience with an aim to ensure sound operation and bring better
returns to its shareholders and investors.
GROUP ACTIVITIES AND RESULTS
The Group is a provider of air passenger, air cargo and
airline-related services. The results of the Group for the year
ended 31 December 2021 and the financial position of the Group and
the Company as at the same date are set out in the audited
financial statements of this annual report.
REVIEW OF BUSINESS
Description of the fair review of the Group's business and the
analysis using the financial key performance indicators,
description of the principal risks and uncertainties facing the
Group, future prospects of the Group's business, the environment
policy and performance and the important relations statement with
employees, customers and suppliers of the Group are set out in this
Report of the Directors, the section headed "Business Overview" and
the section headed "Management's Discussion and Analysis of
Financial Position and Operating Results" of this annual
report.
FIVE-YEAR FINANCIAL HIGHLIGHTS
The Group's results and balance sheet prepared in accordance
with IFRSs for the five years ended 31 December 2021 are summarized
and set out in the section headed "Summary of Financial
Information" of this annual report.
SHARE CAPITAL STRUCTURE
As at the end of the Reporting Period, the Company had a total
share capital of RMB14,524,815,185, divided into 14,524,815,185
shares of RMB1.00 each. The following table sets out the share
capital structure of the Company as at the end of the Reporting
Period:
Percentage
of the total share
Category of shares Number of shares 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 of the of the
Type and total issued total issued total issued
number of shares A shares H shares
shares held of the of the of the
Name Type of interests by the Company Company Company 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 57.89%
equity interest and 66.24% voting rights in Swire Pacific Limited,
and Swire Pacific Limited's approximately 45.00% interest in Cathay
Pacific as at the end of the Reporting Period, John Swire &
Sons Limited, John Swire & Sons (H.K.) Limited and Swire
Pacific Limited were deemed to be interested in the 2,633,725,455 H
Shares of the Company directly held by Cathay Pacific.
Total short positions in the shares and underlying shares of the
Company
As at the end of the Reporting Period, the Company was not aware
of any substantial shareholders holding short positions in the
shares or underlying shares of the Company.
Save as disclosed above, as at the end of the Reporting Period,
to the knowledge of the Directors, Supervisors and chief executive
of the Company, no other person had an interest or short position
in the Shares or underlying shares of the Company which were
required to be recorded in the register kept by the Company
pursuant to Section 336 of the SFO.
INFORMATION OF SHAREHOLDERS
Total number of shareholders
Total number of holders of ordinary 120,745 accounts, of which 3,040
shares as at the end accounts are registered holders
of the Reporting Period (account) of H Shares
Total number of holders of ordinary 111,460 accounts, of which 3,203
shares as at the end of the month accounts are registered holders
preceding to the disclosing date of H Shares
of the annual report (account)
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,
marked or
frozen
Number
of shares
held as Number
Change(s) at the of shares
Name of during end of Shareholding held subject
shareholder the Reporting the Reporting percentage to selling Nature of
(full name) Period Period (%) restrictions Status Number shareholder
China National
Aviation
Holding
Corporation State-owned legal
Limited 0 5,952,236,697 40.98 0 Frozen 127,445,536 person
Cathay Pacific
Airways Foreign legal
Limited 0 2,633,725,455 18.13 0 Nil 0 person
HKSCC NOMINEES Foreign legal
LIMITED 399,977 1,688,134,365 11.62 0 Nil 0 person
China National
Aviation
Corporation
(Group) Foreign legal
Limited 0 1,556,334,920 10.72 0 Frozen 36,454,464 person
China National
Aviation
Fuel Group State-owned legal
Corporation (40,910,035) 425,673,067 2.93 0 Nil 0 person
China Securities
Finance
Corporation State-owned legal
Limited 0 311,302,365 2.14 0 Nil 0 person
Hong Kong
Securities
Clearing Company Foreign legal
Limited (78,569,831) 75,987,042 0.52 0 Nil 0 person
Agricultural Bank
of China Limited
- Guangfa
Balanced
Preferred Hybrid
Securities
Investment Domestic
Fund non-State-owned
( ) 67,263,829 67,263,829 0.46 0 Nil 0 legal person
Industrial Bank
Co.
Ltd. - Guangfa
Stable
Preferred
Six-Month
Holding Period
Hybrid
Securities
Investment Domestic
Fund non-State-owned
( ) 33,734,114 33,734,114 0.23 0 Nil 0 legal person
China
Construction
Bank Corporation
- Guangfa Value
Leadership
Hybrid
Securities Domestic
Investment Fund non-State-owned
( ) 28,410,985 28,410,985 0.20 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 1,688,134,365 foreign shares 1,688,134,365
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 425,673,067 shares 425,673,067
China Securities Finance Corporation RMB ordinary
Limited 311,302,365 shares 311,302,365
Hong Kong Securities Clearing RMB ordinary
Company Limited 75,987,042 shares 75,987,042
Agricultural Bank of China Limited
- Guangfa Balanced Preferred Hybrid
Securities Investment Fund RMB ordinary
( ) 67,263,829 shares 67,263,829
Industrial Bank Co. Ltd. - Guangfa
Stable Preferred Six-Month Holding
Period Hybrid Securities Investment
Fund RMB ordinary
( ) 33,734,114 shares 33,734,114
China Construction Bank Corporation
- Guangfa Value Leadership Hybrid
Securities Investment Fund RMB ordinary
( ) 28,410,985 shares 28,410,985
Explanation on the repurchase Nil
special accounts
among the top 10 shareholders
Explanation on the right to vote Nil
by proxy, proxy and abstention
from voting among the above shareholders
Explanation on connected relationship CNACG is a wholly-owned subsidiary
or action in concert among the of CNAHC. Accordingly, CNAHC is directly
above shareholders and indirectly interested in 51.70%
of the shares of the Company.
Explanation on preference shareholders Nil
whose voting rights have been
restored and the number of shares
held
1. HKSCC NOMINEES LIMITED is a subsidiary of The Stock Exchange
of Hong Kong Limited and its principal business is acting as
nominee for and on behalf of other corporate shareholders or
individual shareholders. The 1,688,134,365 H shares held by it in
the Company do not include the 166,852,000 shares held by it as
nominee of CNACG.
2. According to the "Implementation Measures on Partial Transfer
of State-owned Shares to the National Social Security Fund in the
Domestic Securities Market" (Cai Qi [2009] No. 94) ( ( [2009]94 ))
and the Notice ([2009] No. 63) jointly issued by the Ministry of
Finance, the SASAC, China Securities Regulatory Commission and the
National Council for Social Security Fund, 127,445,536 and
36,454,464 shares held by CNAHC, the controlling shareholder of the
Company, and CNACG respectively are frozen at present.
PUBLIC FLOAT
Pursuant to public information available to the Company and to
the knowledge of the Directors of the Company, the Company has
maintained a public float as required by the Listing Rules and
agreed by the Hong Kong Stock Exchange as at the date of this
annual report.
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 audited financial statements of the Company
prepared in accordance with the CASs and the IFRSs, the Company
recorded a net loss attributable to the owner of the parent company
in 2021. As considered and approved by the 2nd meeting of the sixth
session of the Board of the Company, the Company proposed not to
make profit distribution for the year of 2021. Such proposal is
subject to the approval by the shareholders of the Company at the
general meeting.
ANNUAL GENERAL MEETING
The Company proposed to convene the annual general meeting on 25
May 2022. The register of members of H Shares will be closed from
Wednesday, 18 May 2022 to Wednesday, 25 May 2022 (both days
inclusive), during which period no transfer of H Shares will be
effected. In order to qualify for attendance and voting at the
annual general meeting, the holders of H Shares must return all the
transfer documents to the Company's H Shares registrar in Hong
Kong, Computershare Hong Kong Investor Services Limited, at Shops
1712-1716, 17/F, Hopewell Centre, 183 Queen's Road East, Wan Chai,
Hong Kong by 4:30 p.m. on Tuesday, 17 May 2022. The holders of H
Shares whose names appear on the register of members of the Company
after the close of business on Tuesday, 17 May 2022 are entitled to
attend and vote at the annual general meeting.
PURCHASES, SALES OR REDEMPTION OF LISTED SECURITIES
During the Reporting Period, neither the Company nor any of its
subsidiaries purchased, sold or redeemed any of the listed
securities (the term "securities" has the meaning ascribed to it
under Paragraph 1 of Appendix 16 to the Listing Rules) of the
Company.
PRE-EMPTIVE RIGHTS
The Articles of Association does not provide for any pre-emptive
rights requiring the Company to offer new shares to the existing
shareholders in proportion to their existing shareholdings.
DIRECTORS AND SUPERVISORS OF THE COMPANY
Directors
Set out below is the list of Directors during the Reporting
Period and as at the date of this annual report (unless otherwise
stated).
Name Date of election and if applicable,
leaving office as Director
Song Zhiyong (Chairman and executive Elected as executive Director on
Director) 22 May 2014 and as Vice Chairman
on 6 June 2016, elected as Chairman
on 29 December 2020
Ma Chongxian (President, Vice Chairman Elected as President on 31 May 2021
and executive Director) and as executive Director on 20
July 2021
Feng Gang (Non-executive Director) Elected on 26 May 2020
Patrick Healy (Non-executive Director) Elected on 19 December 2019
Xue Yasong (Then non-executive Elected on 29 March 2018, retired
Director and employee representative on 25 February 2022
Director)
Wang Xiaokang (Then independent Elected on 25 May 2017, resigned
non-executive Director) on 9 February 2021
Duan Hongyi (Then independent non-executive Elected on 26 May 2020, retired
Director) on 25 February 2022
Stanley Hui Hon-chung (Then independent Elected on 22 May 2015, retired
non-executive Director) on 25 February 2022
Li Dajin (Then independent non-executive Elected on 22 December 2015, retired
Director) on 25 February 2022
Li Fushen (Independent non-executive Elected on 25 February 2022
Director)
He Yun (Independent non-executive Elected on 25 February 2022
Director)
Xu Junxin (Independent non-executive Elected on 25 February 2022
Director)
Winnie Tam Wan-chi (Independent Elected on 25 February 2022
non-executive 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,
Name leaving office as Supervisor
Zhao Xiaohang (Then Chairman of Elected on 19 December 2019, retired
the Supervisory Committee) on 25 February 2022
He Chaofan (Chairman of the Supervisory Elected on 29 October 2013
Committee)
Wang Jie (Employee representative Elected on 25 September 2020
Supervisor)
Qin Hao (Employee representative Elected on 25 September 2020
Supervisor)
Lyu Yanfang Elected on 18 December 2020
Guo Lina Elected on 25 February 2022
DIRECTORS AND SUPERVISORS' RIGHTS TO ACQUIRE SHARES OR
DEBENTURES
At any time during the Reporting Period or as at the end of the
Reporting Period, none of the Company, its holding company, any of
the Company's subsidiaries or fellow subsidiaries was a party to
any agreement or arrangement which enables the Directors and
Supervisors of the Company to acquire benefits by means of the
acquisition of Shares in, or debentures, of the Company or any
other body corporate.
INTERESTS AND SHORT POSITIONS OF DIRECTORS, SUPERVISORS AND THE
CHIEF EXECUTIVE IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF
THE COMPANY
As at the end of the Reporting Period, none of the Directors,
Supervisors or the chief executive of the Company had interests or
short positions in the shares, underlying shares and/or debentures
(as the case may be) held by the Company or its associated
corporations (within the meaning of Part XV of the SFO) which shall
be recorded and maintained in the register pursuant to section 352
of the SFO, or which shall be notified to the Company and the Hong
Kong Stock Exchange pursuant to the Model Code.
INTERESTS OF DIRECTORS AND SUPERVISORS IN CONTRACTS AND SERVICE
CONTRACTS
Each of the Directors has entered into a service contract with
the Company. All Directors shall serve a term of three years.
None of the Directors or Supervisors has any existing or
proposed service contract with any member of the Group which is not
terminable by the Group within one year without payment of
compensation (other than statutory compensation).
Save as disclosed in the section headed "Connected Transactions"
set out in this Report of the Directors, none of the Company, its
holding company, or any of the Company's subsidiaries or fellow
subsidiaries has entered into any significant transactions,
arrangements or contracts relating to the Group's business, in
which a Director or Supervisor or his or her connected entity
directly or indirectly had any material interest, and which
subsisted at the end of the Reporting Period or at any time during
the Reporting Period.
During the Reporting Period, Mr. Song Zhiyong (executive
Director), Mr. Ma Chongxian (executive Director) and Mr. Patrick
Healy (non-executive Director) also served as directors of Cathay
Pacific. Cathay Pacific competes or is likely to compete either
directly or indirectly with some aspects of the business of the
Company as it operates airline services to certain destinations,
which are also served by the Company. At the same time, Mr. Song
Zhiyong (executive Director of the Company) also served as director
of Air China Cargo. Air China Cargo competes or is likely to
compete either directly or indirectly with some aspects of the
business of the Company as it operates cargo airline services by
cargo aircraft to certain destinations, which are also served by
the bellyhold cargo of the Company.
Save as disclosed above, none of the Directors and their
respective close associates (as defined in the Listing Rules) has
any competing interests which would be required to be disclosed
under Rule 8.10 of the Listing Rules if they were controlling
shareholders of the Company.
PERMITTED INDEMNITY PROVISION
Appropriate directors' liability insurance coverage has been
arranged by the Company to indemnify the Directors for liabilities
arising out of corporate activities. These directors' liability
insurance was valid throughout the financial year ended 31 December
2021 and remains in effect as at the date of this report.
EMPLOYEES
As at the end of the Reporting Period, the Group had a total of
88,395 employees, among which, the Company had 46,485 employees and
the subsidiaries of the Company had 41,910 employees. The
categories of employees of the Group are as follows:
As at 31 December As at 31 December
Professional Categories 2021 2020 Increase/(Decrease)
Management 10,856 11,001 (145)
Marketing and Sales 5,337 6,277 (940)
Operation 4,531 4,705 (174)
Ground Handling 11,698 11,278 420
Cabin Service 23,382 23,619 (237)
Logistics and Support 6,964 7,323 (359)
Flight Crew 10,644 9,632 1,012
Engineering and Maintenance 13,146 13,628 (482)
Information Technology 809 820 (11)
Others 1,028 1,090 (62)
Total 88,395 89,373 (978)
REMUNERATION POLICY
Upholding the concept of "paying salary with reference to the
job value, personal ability as well as performance appraisal" and
centering on enhancing enterprises vitality and improving benefit
and efficiency, the Company advances high-quality development.
During the Reporting Period, the Company continued to deepen the
reform of the distribution system and sought a breakthrough in the
increase and decrease of salary. We improved the total labor cost
management mechanism, and continuously enhanced the level of labor
cost control and output efficiency; we promoted the reform of the
assessment and incentive mechanism for heads of departments, and
reasonably widened the salary gap for the heads; we advanced the
reform of the market-oriented salary system for mixed reform
enterprises and demonstration enterprises of scientific reform,
while establishing and improving the medium- and long-term
incentive mechanism to strengthen the positive incentives for core
talents; furthermore, we dynamically optimized the pandemic subsidy
policy, and continued to implement the subsidies for aircrew and
front-line staff of pandemic prevention and control; we also
improved the salary benchmarking and analysis mechanism, and
continuously promoted differentiated and precise incentives to
stimulate the vitality of the workforce.
TRAINING PROGRAMME
In 2021, the Company closely focused on strategic work
priorities and actively explored ways to carry out cadre education
and training under normalized pandemic prevention and control. In
terms of online training, in response to the growing demand for
personalized and differentiated online learning among cadres and
employees, the Company iterated and optimized the WeChat learning
platform "CNAHC Leadership", by enriching training course content,
improving platform functions and operating innovative activities. A
total of 3,777,726 participants completed 992,171 hours of learning
in the year. In terms of off-the-job training, the Company took
active measures to cope with the impact of the pandemic, completing
the selection and deployment of 31 transferring training projects
organized by higher-level units and implementing six categorized
and graded training programs for middle to senior management. To
maintain valid qualification of all operating staff, the Company
provided various types of qualification training for pilots, flight
attendants, flight trainees, aircraft maintenance personnel,
aviation dispatch personnel and ground service personnel during the
Covid-19 pandemic by organizing and completing 317 live broadcast
training sessions, which recorded a total of 220,420 hours of
training, and 131,836 hours of full-motion simulator training for
pilots. Through continuously optimising the training content,
actively developing course resources and flexibly using a variety
of teaching methods to improve the quality and effectiveness of
training, the relevance, practicality and effectiveness of training
is constantly improved, providing a solid guarantee for the Company
to achieve high-quality training.
In 2022, the Company will actively implement the cadre education
and training plan, highlighting three aspects of training, namely
political theory, Communist Party of China's history and character,
and professional abilities. By continuously strengthening political
attributes, further improving the system of cadre education and
training, strengthening the construction of online learning
platforms, and optimizing the setting of training programs, the
Company will enhance the relevance and effectiveness of training,
cultivate the roots and cast the spirit of our cadre to empower
them, and provide talent and intellectual support for the
development of a world-class aviation and transportation group with
global competitiveness.
SUPPLIER MANAGEMENT
The Company firmly promoted open procurement with a focus on
"compliance, efficiency and quality", and strived to improve
procurement management capabilities. We facilitated the
establishment of procurement system, comprehensively strengthened
procurement risk management and control and continuously deepened
standardized management, which has resulted in better procurement
compliance. The Company also achieved steady improvement in
procurement efficiency through dynamic integration of management
optimization with service refinement. The Company improved the
regulations concerning supplier selection, access management and
annual performance appraisal to ensure the good operation and
maintenance of supplier information base, and established a good
cooperative relationship with its suppliers to achieve sustainable
development together.
EMPLOYEES AND EMPLOYEES' PENSION SCHEME
Details of the employees' pension scheme and other welfare are
set out in note 9 to the financial statements, and retired
employees are entitled to benefits under the social pension scheme
approved and provided by the labour and social security authority
of the local governments.
SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
Details of the subsidiaries, associates and joint ventures of
the Group as at the end of the Reporting Period are set out
respectively in notes 22, 23 and 24 to the financial statements of
this annual report.
BANK LOANS AND OTHER BORROWINGS
Details of the bank loans and other borrowings of the Group are
set out in note 37 to the financial statements of this annual
report.
FIXED ASSETS
Changes in the fixed assets of the Group for the year ended 31
December 2021 are set out in note 17 to the financial statements of
this annual report.
AIRCRAFT AND FLIGHT EQUIPMENT
The aggregate net book value of the Group's aircraft, engines
and flight equipment as at the end of the Reporting Period are set
out in note 17 to the financial statements of this annual report.
The Group's capital commitment amounts for aircraft and flight
equipment as at the end of the Reporting Period are set out in note
44 to the financial statements of this annual report.
CAPITALISED INTERESTS
Details of the capitalised interests of the Group for the year
ended 31 December 2021 are set out in note 12 to the financial
statements of this annual report.
RESERVES
Changes in the reserves of the Company and the Group during the
year are set out in note 42 and the consolidated statement of
changes in equity to the financial statements of this annual
report.
DONATIONS
During the Reporting Period, the Group made donations for
charitable and other purposes amounting to RMB63.54 million.
MAJOR CUSTOMERS AND SUPPLIERS
During the Reporting Period, the purchases of the Group from the
largest supplier accounted for 20.77% of the total purchases of the
Group, while the purchases of the Group from the five largest
suppliers accounted for 32.47% of the total purchases of the Group.
None of the Directors or Supervisors, their associates, nor any
shareholder of the Company, who to the knowledge of the Directors
owns 5% or more of the Company's share capital, had any interest in
the five largest suppliers of the Company.
During the Reporting Period, the sales of the Group to the five
largest customers accounted for not more than 30% of the total
sales of the Group.
PROPERTY TITLE CERTIFICATE
The Company effected the changes of titles of assets (land,
buildings and vehicles), in accordance with its undertakings as
disclosed in the Company's prospectus when shares were issued. The
title transfer procedures for the underlying assets relating to the
above undertakings have been completed.
ENVIRONMENTAL POLICY AND PERFORMANCE OF THE GROUP
Focusing on the task of building a strong civil aviation country
in the new era and the requirements of high-quality development,
taking reform and innovation as the driving force, as well as
carbon reduction and pollution control as the approaches, and
targeting to meet the demand for green aviation from relevant
stakeholders, the Group has continuously improved its management
and governance system, striven to improve the efficiency of energy
use, strictly implemented the requirements of pollution prevention
and control, enhanced the management capability of carbon assets in
a scientific manner, actively participated in green public welfare,
and integrated green development into the overall layout of the
Group's high-quality development.
During the Reporting Period, the Group steadfastly pursued the
major deployment of the Central Committee of CPC for the
development of ecological civilization and solidly advanced the
sound results of energy conservation and environmental protection.
The Group continued to improve its management system and enhance
its management capabilities, strengthened energy management and
steadily achieved low-carbon development. We also enhanced risk
control of pollution prevention and control to steadily promote the
ban on plastic. Meanwhile, we implemented the requirements of the
Civil Aviation's Blue Sky Protection Campaign, promoted APU
(aircraft auxiliary power units) replacement facilities on the
basis of "maximizing the use if appropriate", and continuously
deepened the results of the "fuel-to-electricity" work. In
addition, we scientifically managed carbon emissions and enhanced
the management capabilities of carbon assets. We actively promoted
the energy conservation and environmental protection and fulfilled
our social responsibility. In 2021, Air China obtained the
certificate of ISO14001, becoming the first airline in mainland
China to be fully accredited with environmental management systems.
In December, we launched a new green travel service, "Enjoy Low
Carbon Flight ( )", on Air China App, which allowed passengers to
enjoy fast and efficient air travel services while participating in
carbon emission reduction projects such as reforestation through
flight miles and donations to offset their carbon emissions in
the flights and achieve "carbon neutrality".
COMPLIANCE OPERATIONS
As a Chinese company listed on the Hong Kong Stock Exchange and
the Shanghai Stock Exchange, the Company shall comply with
regulations such as the Company Laws of the People's Republic of
China, the Securities Law of the People's Republic of China, the
Securities and Futures Ordinance, the Hong Kong Companies
Ordinance, the Stock Listing Rules of the Shanghai Stock Exchange (
) and the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited in relation to listed companies'
securities issue and trading. CNAF, a non-wholly owned subsidiary
of the Company, as a non-bank financial institution established in
Mainland China, shall comply with rules in respect of financial
regulation in Mainland China. The Group, with civil aviation
transportation and related services as its principal businesses,
shall comply with requirements in relation to civil aviation safety
regulations of locations where the Group operates, and laws and
regulations in respect of consumer rights protection, environmental
protection, anti-monopoly, anti-unfair competition and tax,
etc.
The Group has the procedure of compliance in place to ensure
compliance with applicable laws, regulations and normative legal
documents, and in particular those having a significant impact on
its principal businesses. The Group will notify the relevant
employees and operating teams of any change in applicable laws,
regulations and normative legal documents relating to its principal
businesses from time to time.
During the Reporting Period, so far as the Directors of the
Company were aware, the Group did not commit any violations of laws
and regulations in all material aspects that would have a
significant impact on the Group.
Save as disclosed in note 43 to the financial statements of this
annual report, as at the end of the Reporting Period, the Company
was not involved in any significant litigation or arbitration and
to the knowledge of the Company, there was no litigation or claim
of material importance pending or threatened or initiated against
the Company.
CONNECTED TRANSACTIONS
The Group has entered into several connected transaction
agreements with certain connected persons of the Group as described
in the paragraphs below. The Company has complied with the
disclosure requirements of the connected transactions in accordance
with Chapter 14A of the Listing Rules.
For the purpose of this section headed "Connected Transactions"
in this Report of the Directors, "CNAHC Group" refers to CNAHC, its
subsidiaries and associates (as defined under the Listing Rules)
excluding the Group, "ACC Group" refers to Air China Cargo, its
subsidiaries and its 30%-controlled companies (as defined under the
Listing Rules), "Cathay Pacific Group" refers to Cathay Pacific and
its subsidiaries (as defined under the Listing Rules).
Continuing connected transactions
During the Reporting Period, the transactions under the
following continuing connected transaction framework agreements
constituted non-exempt continuing connected transactions of the
Company:
Execution
Parties Date and
and Connected Term of Contents of
Agreement Relationship Agreement Agreement Pricing Policy
1 Properties The Company Renewed The Group agreed The rent payable will be
Leasing and CNAHC on 30 October to lease from consulted
Framework (a substantial 2018 with and to CNAHC and determined based on the
Agreement shareholder a term Group a number price for leasing services
of the from 1 of properties. available
Company January from independent third parties
and therefore 2019 to for the same type of properties
a connected 31 December in close proximity to the
person 2021 properties
of the with reference to other factors
Company) The details including property service
are set quality,
out in location, district of properties
the announcement and specific needs of the
of the parties.
Company
dated 30
October
2018
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 be
Agreement customers and consulted and determined on
act as the a fair and voluntary basis;
Group's sales specific sales targets and the
agents for corresponding incentive plans
the Group's for achieving such targets may
air tickets be agreed to the extent
and cargo spaces permitted
on a commission by law and in accordance with
basis; or (ii) the industry practice.
purchase air
tickets (other The air cargo agency services:
than domestic the transportation prices shall
air tickets) be not less favourable than
and cargo spaces the prices offered by
from the Group independent
and resell third parties in China's air
such air tickets cargo transportation market
and cargo spaces for transporting such products,
to end customers. 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 relation
Services as above as above of CNAHC engaged to air transportation business:
Framework in ancillary (i) the prices of airline
Agreement services in catering
relation to services will be consulted and
air transportation determined based on the price
business will for the same type of catering
be appointed services available from
as suppliers independent
of ancillary third parties with reference
services in to relevant factors; (ii) the
relation to prices of property management
production services will be consulted and
or supply services determined based on the price
business to for the same type of property
the Company. management services available
from independent third parties
(ii) The Company with reference to relevant
is commissioned factors;
by CNAHC to (iii) the prices of hotel
provide welfare accommodation
logistics services and staff recuperation services
for CNAHC's shall be no less favourable
retired employees. 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
Charter as above as above to resort to flight
Flight the Company's services = Total cost per flight
Service charter flight hour * (1 + 6.5%). Total cost
Framework services so per flight hour includes direct
Agreement as to fulfill costs and indirect costs.
the government
charter flight
assignment.
5 Media Services The Company The same CNAMC provided For the entrusted media services
Framework and CNAMC as above the Group with provided by CNAMC to the
Agreement (CNAMC media services. Company,
is a wholly-owned Among them, the Company should pay the
subsidiary the Company relevant
of CNAHC grants CNAMC service fee at market price
and therefore an exclusive to CNAMC.
a connected right to distribute
person the in-flight For the media resources of the
of the reading materials Company used in the course of
Company) of the Company. 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 The same CNACD was commissioned CNACD receives service fees
Project and CNACD as above by the Company based on the audited amounts
Management (a wholly-owned to serve as in the financial settlement
Framework subsidiary the manager of specific commissioned
Agreement of CNAHC of the construction projects
and therefore projects and in accordance with the
a connected establish project commissioned
person headquarters. management contract. The service
of the It shall provide fees shall be calculated at
Company) management 3% of the audited amount in
services for the financial settlement of
the Company's the investment relating to the
projects based management contents provided
on its project by CNACD as commissioned by
characteristics the Company, with the rewards
using its industry and penalties agreed by both
expertise and parties based on the project
professional management progress and the
skills. balance. Alternatively, CNACD
may receive service fees from
the Company as per the
commissioned
management contents based on
the size of or investment in
the projects to be commissioned,
and the service fees shall be
calculated as per the
full-labour
cost (including management fee)
based on the human resources
and materials invested by CNACD,
with the rewards and penalties
agreed by both parties based
on the project management
progress
and the balance.
7 Financial The Company Renewed CNAF agreed Interest rates applicable to
Services and CNAF on 28 August to provide deposits: should (i) comply
Agreement (CNAF is 2020 with the Group with with the requirements prescribed
a non-wholly a term a range of by the People's Bank of China
owned subsidiary from 1 financial services on the interest rates for such
of the January including deposit type of deposit; (ii) not be
Company 2021 to services, credit lower than the interest rates
that CNAHC 31 December services and for the same type of services
holds 49% 2023 other financial charged by State-owned
of its services. commercial
equity The details banks to the Group under the
interest are set same conditions; and (iii) not
and therefore out in be lower than the interest rates
a connected the announcement for the same type of services
subsidiary of the charged by CNAF to other CNAHC
of the Company member companies under the same
Company) dated 28 conditions.
August
2020 Interest rates applicable to
credit services: should (i)
comply with the requirements
prescribed by the People's Bank
of China on the interest rates
for such type of loan; (ii)
not be higher than the interest
rates for the same type of
services
offered by State-owned
commercial
banks to the Group under the
same conditions; and (iii) not
be higher than the interest
rates for the same type of
services
offered by CNAF to other CNAHC
member companies under the same
conditions.
Fees for other paid financial
services: should (i) comply
with the relevant charging
standards
(if any) prescribed by the
People's
Bank of China, CBIRC, CSRC,
NAFMII or other regulatory
authorities;
(ii) not be higher than those
for the same type of services
charged by State-owned
commercial
banks to the Group under the
same conditions; and (iii) not
be higher than those for the
same type of services charged
by CNAF to other CNAHC member
companies under the same
conditions.
8 Financial CNAF (a The same CNAF agreed Interest rates applicable to
Services non-wholly as above to provide deposits: should (i) comply
Framework owned subsidiary CNAHC Group with the requirements prescribed
Agreement1 of the with a range by the People's Bank of China
Company), of financial on the interest rates for such
and CNAHC services including type of deposit; (ii) not be
(a substantial deposit services, higher than the interest rates
shareholder credit services for the same type of services
of the and other financial charged by State-owned
Company services. commercial
and therefore banks to CNAHC Group under the
a connected same conditions; and (iii) not
person be higher than the interest
of the rates for the same type of
Company) services
charged by CNAF to other CNAHC
member companies under the same
conditions.
Interest rates applicable to
credit services: should (i)
comply with the requirements
prescribed by the People's Bank
of China on the interest rates
for such type of loan; (ii)
not be lower than the interest
rates for the same type of
services
offered by State-owned
commercial
banks to the CNAHC Group under
the same conditions; and (iii)
not be lower than the interest
rates for the same type of
services
offered by CNAF to other CNAHC
member companies under the same
conditions.
Fees for other paid financial
services: should (i) comply
with the relevant charging
standards
(if any) prescribed by the
People's
Bank of China, CBIRC, CSRC,
NAFMII or other regulatory
authorities;
(ii) not be lower than those
for the same type of services
charged by State-owned
commercial
banks to the CNAHC Group under
the same conditions; and (iii)
not be lower than those for
the same type of services
charged
by CNAF to other CNAHC member
companies under the same
conditions.
9 Framework The Company Renewed Finance and Finance and operating lease
Agreement and CNACG and revised operating lease services: The final transaction
(CNACG on 30 October services: CNACG price will be determined on
is a substantial 2019 with Group agreed arm's length negotiations
shareholder a term to provide between
of the from 1 finance and both parties with reference
Company January operating lease to the prices for the same type
and therefore 2020 to services in of lease services offered by
a connected 31 December respect of, independent third parties and
person 2022 among other after taking into account
of the things, aircraft, certain
Company) The details engines, simulators, factors. Such factors include
are set equipment and purchasing price of the leasing
out in vehicles to subject, interest rate and
the announcement the Group; arrangement
of the the Group agreed fees (if any) (for finance
Company to provide lease),
dated 30 finance and rental fee (for operating
October operating lease lease),
2019 services in the lease terms, the features
respect of, of the leasing subject and the
among other comparable market rental prices.
things, equipment The final transaction price
and vehicles shall not be higher than the
to CNACG Group. transaction prices offered by
at least two independent third
Ground support parties on the same conditions.
services and
other services: Ground support services and
including but other services:
not limited
to the following (1) Follow the government
transactions pricing
conducted between or guidance price if it is
any member available;
of the Group
on the one (2) If no government pricing
hand and any or guidance price is available,
member of CNACG the final transaction price
Group on the will be determined on arm's
other hand: length negotiations between
ground support the parties, with reference
services, aircraft to the market prices offered
maintenance by at least two independent
services, aircraft third parties on the market
repair services, for the same type of service,
property investment and after taking into account
and management certain factors such as the
services, ticket service standard, service scope,
and tourism business volume and specific
services, logistics needs of the parties. If any
services, administrative service needs of the service
management recipient changes, appropriate
services, cleaning adjustment will be made to the
and washing transaction price after
services, resident negotiation
security services, between both parties based on
lounge supplies the extent of variation in the
procurement relevant costs, service quality
services and or other factors;
aircraft material
procurement (3) If neither of the above
services. cases is applicable, the price
will be determined on the basis
of costs plus reasonable profit.
The costs are mainly based on
the costs and expenses of the
service provider, including
costs of human resources,
facility,
equipment and materials.
Reasonable
profit margin will be determined
with mainly making reference
to the historical average prices
of similar products or services
(where possible) published in
the relevant industry, and/or
the profit margin of the
comparable
products and services disclosed
by other listed companies. The
profit margin of CNACG Group
shall not exceed 10%. The final
transaction prices shall be
determined on terms that, to
the Group, are no less favorable
to those provided by independent
third parties to the Group or
those provided by CNACG Group
to independent third parties
(with regards to the receipt
of services by the Group), or
no more favorable than those
provided by the Group to the
independent third parties (with
regards to the rendering of
services by the Group).
10 Framework The Company Renewed Providing a Interline arrangements and code
Agreement and Cathay on 1 October framework for share arrangements: Revenue
Pacific 2019 with the transactions is apportioned between the
(Cathay a term between the parties
Pacific from 1 Group and Cathay in accordance with bilateral
is a substantial January Pacific Group prorate agreements which follow
shareholder 2020 to arising from the principles in the
of the 31 December interline arrangements, Multi-lateral
Company 2022 code sharing Prorate Agreement of
and therefore arrangements, International
a connected The details joint operating Air Transport Association.
person are set arrangements,
of the out in aircraft leasing, Joint operating arrangements:
Company) the announcement frequent flyer Revenue is apportioned between
of the programmes, the parties having regard to
Company the provision the fleet capacity of both
dated 28 of airline parties
August catering, ground and the values of seats sold
2019 support and by each party.
engineering
services and Aircraft leasing: Rentals
other services payable
agreed to be under aircraft leases are
provided and determined
other transactions after negotiations at arm's
agreed to be length between the parties
undertaken having
under the Cathay regard to rentals payable under
Pacific Framework comparable leases between
Agreement. 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 Bellyhold space Contracting Operation Income:
Agreement and Air and revised business contracting The Company will regularly
China Cargo on 30 October operation: receive
(a 51%-owned 2019 with The Company the contracting operation income
subsidiary a term has contracted from Air China Cargo in respect
of CNAHC from 1 the operation of bellyhold space business
and therefore January of all bellyhold each year. The parties shall
a connected 2020 to space business determine the benchmark income
person 31 December to Air China (excluding tax) of bellyhold
of the 2022 Cargo. Air space business contracting
Company) China Cargo operation
The details shall undertake after arm's length negotiations
are set the overall with reference to the Company's
out in responsibilities fleet capacity, overall load
the announcement for transporting factor and yield level. The
of the the cargos specific formula is as follows:
Company in the capacity benchmark income (excluding
dated 30 of contracted tax) = ATK (available tonne
October carrier to kilometres) × OLF (overall
2019 the consignors load factor) × yield level
with respect per kilometer.
to the cargos
which are transported The parties agreed to jointly
through the appoint a qualified accounting
bellyhold spaces firm to conduct a special audit
of passenger on the actual income (excluding
aircraft. tax) of Air China Cargo for
the operation of bellyhold space
Ground support business of the previous
services and financial
other services: year within three months after
The ground the end of each financial year.
support services Where there is any difference
and other services between the benchmark income
provided by (excluding tax) and the actual
the Group to income (excluding tax), the
ACC Group include excess income or risk incurred
but are not shall be allocated between Air
limited to China Cargo and the Company
operation support at the proportion of 51% and
services, IT 49%, respectively, and paid
sharing services, accordingly.
comprehensive
support services, The operation expense of the
engine and bellyhold space business: The
other aircraft-related Company shall pay the operation
materials lease expenses of the bellyhold space
services and business to Air China Cargo
labor management on a regular basis per year.
services. The In accordance with the common
ground support industry practice, the operation
services and expense shall be determined
other services according to the settlement
provided by price (determined according
ACC Group to to the method as set out above
the Group include in the paragraph headed
but are not "Contracting
limited to Operation Income") and the
terminal cargo Expense
and mail services, Rate, and the calculation
airport apron formula
services, container is as follows: Operation Expense
and pallet = Settlement Price ×
management Expense
services, engine Rate. The expense rate shall
and other aircraft be determined by the parties
related materials through arm's length negotiation
lease services. with reference to historical
expense rates and other factors
such as expense rates of
companies
in the relevant industry and
their variation trends.
Ground support services and
other services: The pricing
policies for the ground support
services and other services
provided to or by the Group
are set forth below:
(1) Follow the government
pricing
or guidance price if it is
available;
(2) If no government pricing
or guidance price is available,
the final transaction price
will be determined on arm's
length negotiations between
the parties, with reference
to the market prices offered
by at least two independent
third parties on the market
for the same type of service,
and after taking certain factors
into account such as the service
standard, service scope,
business
volume and specific need of
parties. If any service needs
of the service recipient
changes,
appropriate adjustment will
be made to the transaction price
after negotiation between both
parties based on the extent
of variation in relevant costs,
service quality or other
factors;
(3) If neither of the above
cases is applicable, the price
will be determined on the basis
of costs plus reasonable profit.
The costs are mainly based on
the costs and expenses of the
service provider, including
costs of human resources and
costs of facility, equipment
and materials. Reasonable profit
margin will be determined with
mainly making reference to the
historical average prices of
similar products or services
(where possible) published in
the relevant industry, and/or
the profit margin of the
comparable
products and services disclosed
by other listed companies. The
profit margin of ACC Group shall
not exceed 10%. The final
transaction
prices shall be determined on
terms that, to the Group, are
no less favorable to those
provided
by independent third parties
to the Group or those provided
by ACC Group to independent
third parties (with regards
to the receipt of services by
the Group), or no more favorable
than those provided by the Group
to the independent third parties
(with regards to the rendering
of services by the Group).
The agreements No.1 to No.6 as set out above were renewed and
revised for a term of three years from 1 January 2022 to 31
December 2024 as approved by the independent shareholders on 30
December 2021. Please refer to the Company's announcements dated 29
October 2021 and 30 December 2021 for further details.
The Company has confirmed that the execution and implementation
of the specific agreements under the continuing connected
transactions set out above during the Reporting Period has followed
the pricing policies of such continuing connected transactions.
Transaction Caps and Actual Transaction Amounts for the
Reporting Period
Actual transaction amounts and transaction caps of the
above-mentioned continuing connected transactions for the Reporting
Period are as follows:
Total amount for
the Reporting Period
Currency Annual cap Actual amount
(in millions) (in millions)
Transactions with CNAHC Group:
Charter flight services RMB 900 365
Comprehensive services RMB 3,000 1,123
Total value of right-of-use assets involved
in property leasing RMB 620 92
Media and advertising services RMB 750 152
Expenditure on construction project management
services RMB 130 34
Financial services
Maximum daily balance of loans and other
credit services granted by CNAF to CNAHC
Group RMB 6,500 90
Transactions with CNACG Group:
Ground handling and other services RMB 696 91
Total value of right-of-use assets involved
in financing and operating leasing RMB 16,000 3,526
Transactions with Cathay Pacific Group:
Aggregate amount payable/paid by the Group
to Cathy Pacific Group HKD 900 20
Aggregate amount payable/paid by Cathay Pacific
Group to the Group HKD 900 39
Transactions with ACC Group:
Operation expenses of bellyhold space paid
by the Group to ACC Group RMB 960 609
Aggregate amount of ground handling and other
services paid by the Group to ACC Group RMB 1,200 630
Bellyhold space business contracting operation
paid by ACC Group to the Group(1) RMB 11,000 10,491
Aggregate amount of ground handling and other
services paid by ACC Group to the Group RMB 1,000 789
Transactions with CNAF:
Maximum daily balance of deposits placed
by the Group with CNAF RMB 15,000 10,798
Note: (1) The revised annual caps applicable to the contracting
operation income from bellyhold space business payable to the Group
by ACC Group for the two years ending 31 December 2022 have been
approved on 30 December 2021 at the EGM of the Company. Please
refer to the Company's announcements dated 10 December 2021 and 30
December 2021 for details.
CONFIRMATION FROM 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
transactions every year. The auditors must provide a letter to the
listed issuer's board of directors confirming whether anything has
come to their attention that causes them to believe that the
continuing connected transactions:
(1) have not been approved by the listed issuer's board of directors;
(2) were not, in all material respects, in accordance with the
pricing policies of the listed issuer's group if the transactions
involve the provision of goods or services by the listed issuer's
group;
(3) were not entered into, in all material respects, in
accordance with the relevant agreement governing the transactions;
and
(4) have exceeded the cap.
Pursuant to the above requirement under Rule 14A.56 of the
Listing Rules, the Board engaged the auditors of the Company to
report on the Group's continuing connected transactions in
accordance with Hong Kong Standard on Assurance Engagements 3000
"Assurance Engagements Other Than Audits or Reviews of Historical
Financial Information" and with reference to Practice Note 740
"Auditor's Letter on Continuing Connected Transactions under the
Hong Kong Listing Rules" issued by the Hong Kong Institute of
Certified Public Accountants. The auditors have issued their
unmodified letter containing their conclusion in respect of the
continuing connected transactions in accordance with Rule 14A.56 of
the Listing Rules. A copy of the auditors' letter has been provided
by the Company to the Hong Kong Stock Exchange.
RELATED PARTY TRANSACTIONS
Details of the significant related party transactions entered
into by the Group during the Reporting Period are set out in note
48 to the financial statements of this annual report. None of these
related party transactions constitutes a disclosable connected
transaction as defined under the Listing Rules, except for the
transactions described in the section headed "Connected
Transactions" in this Report of the Directors, in respect of which
the disclosure requirements under Chapter 14A of the Listing Rules
have been complied with.
CONTRACT OF SIGNIFICANCE
Save as disclosed in the section headed "Connected Transactions"
of this Report of the Directors, none of the Company or any of its
subsidiaries entered into any contract of significance with the
controlling shareholder or any of its subsidiaries, and there is no
contract of significance in relation to provision of services by
the controlling shareholder or any of its subsidiaries to the
Company or any of its subsidiaries.
CORPORATE BONDS
The Group's corporate bonds as at the end of the Reporting
Period are summarised as the followings:
Unit: RMB billion, Currency: RMB
Payment
Balance of Investor
Name of of Interest principal suitability
Corporate Issue Value Expiry the Rate and arrangement Trading
Bond Abbreviation Code Date Date Date Bond (%) interest (if any) Mechanism
Listed and
Interest traded on
on annual the Auction
basis Trading
Air China Repayment Issued System
Limited 2012 of to public and Fixed
Corporate 18 18 18 principal and Income
Bond (First January January January on institutional Platform
Tranche) 12AC01 122218 2013 2013 2023 5.243 5.10 maturity investors of SSE
Listed and
Interest traded on
on annual the Auction
basis Trading
Air China Repayment Issued System
Limited 2012 of to public and Fixed
Corporate 16 16 16 principal and Income
Bond (Second August August August on institutional Platform
Tranche) 12AC03 122269 2013 2013 2023 1.530 5.30 maturity investors of SSE
Listed and
Interest traded on
on annual the Auction
Shenzhen basis Trading
Airlines Repayment System
Company Limited of Issued and Fixed
2019 Corporate principal to qualified Income
Bond (First 25 April 26 April 26 April on investors Platform
Tranche) 19SA01 155388 2019 2019 2022 1.027 4.00 maturity only of SSE
Bilateral
listed and
Shenzhen traded on
Airlines the
Company Limited Centralized
2021 Public Bidding
Offering Payment For System
of Short-term of institutional and
Corporate principal investors Integrated
Bond for and among Agreement
Professional 4 5 5 interest professional Trading
Investors February February February on investors Platform
(First Tranche) 21SAD1 149379 2021 2021 2022 0.514 3.09 maturity only of SZSE
Shenzhen For not
Airlines more than Listed and
Company Limited Payment 200 Transfered
2021 Non-public of institutional on the
Offering principal investors Integrated
Short-term and among Agreement
Corporate interest professional Trading
Bond (First 3 June 4 June 4 June on investors Platform
Tranche) 21SAD2 133010 2021 2021 2022 2.036 3.10 maturity only of SZSE
"12AC01", "12AC03" and "19SA01" are traded on the Shanghai Stock
Exchange (SSE), while "21SAD1" and "21SAD2" are traded on the
Shenzhen Stock Exchange (SZSE). No bond in the table is subject to
the risk of termination of listing and trading.
Payment of principal and interest for corporate bonds during the
Reporting Period
Name of Corporate Bond Payment of Principal and Interest
Air China Limited 2012 Corporate On 18 January 2021, the Company
Bond (First Tranche) completed the interest payment on
"12AC01" Corporate Bond.
Air China Limited 2012 Corporate On 16 August 2021, the Company completed
Bond (Second Tranche) the interest payment on "12AC03"
Corporate Bond.
Air China Limited 2016 Corporate On 22 October 2021, the Company
Bond (Second Tranche) completed the payment of principal
and interest on "16AC02" Corporate
Bond.
Air China Limited 2020 Public Offering On 19 April 2021, the Company completed
Corporate Bond (First Tranche) the payment of principal and interest
on "20AC01" Corporate Bond.
Shenzhen Airlines Company Limited On 25 April 2021, Shenzhen Airlines
2019 Public Offering Corporate Bond completed the interest payment on
(First Tranche) "19SA01" Corporate Bond.
Shenzhen Airlines Company Limited On 14 March 2021, Shenzhen Airlines
2018 Public Offering Corporate Bond completed the payment of principal
(Second Tranche) and interest on "18SA02" Corporate
Bond.
Shenzhen Airlines Company Limited On 23 April 2021, Shenzhen Airlines
2018 Public Offering Corporate Bond completed the payment of principal
(Fourth Tranche) and interest on "18SA04" Corporate
Bond.
Shenzhen Airlines Company Limited On 7 September 2021, Shenzhen Airlines
2018 Public Offering Corporate Bond completed the payment of principal
(Sixth Tranche) and interest on "18SA06" Corporate
Bond.
Shenzhen Airlines Company Limited On 19 March 2021, Shenzhen Airlines
2020 Public Offering Short-term completed the payment of principal
Corporate Bond (First Tranche) and interest on "20SAD1" Short-term
Corporate Bond.
The proceeds from the issuance of "12AC01" and "12AC03"
Corporate Bonds were used towards the replenishment of liquidity
and repayment of bank loans so as to satisfy the needs of the
Company's daily production and operation. The proceeds from the
issuance of "19SA01", "21SAD1" and "21SAD2"Corporate Bonds were
used towards the repayment of corporate debts and replenishment of
working capital. The abovementioned proceeds have been fully
utilized in accordance with the use of proceeds as set out in the
prospectuses and the balance of proceed as at the end of the
Reporting Period is zero.
Basic information on debt financing instruments as at the end of
the Reporting Period
Unit: RMB billion, Currency: RMB
Balance Payment of
of Interest principal
Issue Value Expiry the Rate and
Name of Bond Abbreviation Code Date Date Date Bond (%) interest
One-off
payment
Air China Limited of
2021 Super principal
Short-term and
Commercial Paper 8 October 8 October 8 April interest
(First Tranche) 21ACSCP001 012103630 2021 2021 2022 2.011 2.42 on maturity
One-off
payment
Air China Limited of
2021 Super principal
Short-term and
Commercial Paper 11 October 11 October 8 July interest
(Second Tranche) 21ACSCP002 012103651 2021 2021 2022 1.005 2.43 on maturity
One-off
payment
Air China Limited of
2021 Super principal
Short-term and
Commercial Paper 20 October 21 October 19 January interest
(Third Tranche) 21ACSCP003 012103822 2021 2021 2022 1.758 2.34 on maturity
One-off
payment
Air China Limited of
2021 Super principal
Short-term and
Commercial Paper 22 October 25 October 22 July interest
(Fourth Tranche) 21ACSCP004 012103867 2021 2021 2022 1.005 2.5 on maturity
One-off
payment
Air China Limited of
2021 Super principal
Short-term and
Commercial Paper 15 December 16 December 14 June interest
(Fifth Tranche) 21ACSCP005 012105420 2021 2021 2022 2.002 2.34 on maturity
One-off
payment
Air China Limited of
2021 Super principal
Short-term and
Commercial Paper 21 December 22 December 16 September interest
(Sixth Tranche) 21ACSCP006 012105483 2021 2021 2022 2.001 2.49 on maturity
Interest on
annual
basis
Shenzhen Airlines Repayment
Company Limited of
2019 Medium Term principal
Note (First 14 March 18 March 18 March on
Tranche) 19SAMTN001 101900344 2019 2019 2022 1.030 3.73 maturity
Interest on
annual
basis
Shenzhen Airlines Repayment
Company Limited of
2019 Medium Term principal
Note (Second 21 May 23 May 23 May on
Tranche) 19SAMTN002 101900725 2019 2019 2022 1.023 3.79 maturity
Shenzhen Airlines
Company Limited Interest on
2020 Medium Term annual
Note (First basis
Tranche) Repayment
(i.e. Bond for 20SAMTN001(Bond of
COVID-19 for COVID-19 principal
prevention prevention 3 March 5 March 5 March on
and control) and control) 102000224 2020 2020 2023 1.024 3.00 maturity
Interest on
annual
basis
Shenzhen Airlines Repayment
Company Limited of
2021 Medium Term principal
Note (First 19 August 23 August 23 August on
Tranche) 21SAMTN001 102101631 2021 2021 2024 2.023 3.2 maturity
The bonds set out in the table, namely "21ACSCP001",
"21ACSCP002", "21ACSCP003", "21ACSCP004", "21ACSCP005",
"21ACSCP006", "19SAMTN001", "19SAMTN002", "20SAMTN001(Bond for
COVID-19 prevention and control)" and "21SAMTN001", are all traded
on the interbank bond market, issued to institutional investors in
the national interbank bond market, performed in accordance with
the trading rules of the National Interbank Funding Centre ( ), and
are not subject to the risk of termination of listing and
trading.
Payment of principal and interest for bonds during the Reporting
Period
Name of Bond Payment of Principal and Interest
Shenzhen Airlines Company Limited On 9 July 2021, Shenzhen Airlines
2021 Super Short-term Commercial completed the payment of principal
Paper (First Tranche) and interest on "21SASCP001" Super
Short-term Commercial Paper
Shenzhen Airlines Company Limited On 26 August 2021, Shenzhen Airlines
2021 Super Short-term Commercial completed the payment of principal
Paper (Second Tranche) and interest on "21SASCP002" Super
Short-term Commercial Paper
Shenzhen Airlines Company Limited On 31 August 2021, Shenzhen Airlines
2021 Super Short-term Commercial completed the payment of principal
Paper (Third Tranche) and interest on "21SASCP003" Super
Short-term Commercial Paper
Shenzhen Airlines Company Limited On 1 September 2021, Shenzhen Airlines
2021 Super Short-term Commercial completed the payment of principal
Paper (Fourth Tranche) and interest on "21SASCP004" Super
Short-term Commercial Paper
Shenzhen Airlines Company Limited On 1 March 2021, Shenzhen Airlines
2019 Medium Term Note (First Tranche) completed the interest payment on
"19SAMTN001" Medium Term Note
Shenzhen Airlines Company Limited On 23 May 2021, Shenzhen Airlines
2019 Medium Term Note (Second Tranche) completed the interest payment on
"19SAMTN002" Medium Term Note
Shenzhen Airlines Company Limited On 5 March 2021, Shenzhen Airlines
2020 Medium Term Note (First Tranche) completed the interest payment on
(i.e. Bond for COVID-19 prevention "20SAMTN001(Bond for COVID-19 prevention
and control) and control)" Medium Term Note
The proceeds from the issuance of "21ACSCP001", "21ACSCP002",
"21ACSCP003", "21ACSCP004", "21ACSCP005", "21ACSCP006",
"19SAMTN001", "19SAMTN002""20SAMTN001(Bond for COVID-19 prevention
and control)" and "21SAMTN001" were used towards the repayment of
corporate debts and replenishment of working capital. The
abovementioned proceeds have been fully utilized in accordance with
the use of proceeds as set out in the prospectus and the balance of
proceed as at the end of the Reporting Period is zero.
SUBSEQUENT EVENT
The Company completed the re-election and appointment of members
of the Board and the Supervisory Committee on 25 February 2022. For
details, please refer to the announcement of the Company dated 25
February 2022.
AUDITOR
The Company has appointed Deloitte Touche Tohmatsu and Deloitte
Touche Tohmatsu Certified Public Accountants LLP (collectively,
"Deloitte") as the Company's international auditor and domestic
auditor respectively for the year of 2021. The auditor of the
Company has been changed to Deloitte since 2017.
The sections, reports or notes of this annual report mentioned
above constitute a part of this Report of the Directors.
By Order of the Board
Song Zhiyong
Chairman
30 March 2022
Profile of Directors, Supervisors and Senior Management
DIRECTORS
Mr. Song Zhiyong , aged 56, is a senior pilot and graduated from
the First Flying Academy of China Air Force with a bachelor's
degree in aviation. He started his career in the civil aviation
industry in 1987. From January 2014 to December 2020, he served as
President and Deputy Secretary of the Communist Party Committee of
the Company to handle the comprehensive work of the Company. Mr.
Song served as a non-executive Director of Cathay Pacific since
March 2014. He has served as an executive Director of the Company
since May 2014. He served as the Vice Chairman of the Company from
June 2016 to December 2020, the director, General Manager and
Deputy Secretary of the Communist Party Group of CNAHC from
December 2016 to October 2020. He has been serving as the Chairman
and Secretary of the Communist Party Group of CNAHC since October
2020, and the Chairman and Secretary of the Communist Party
Committee of the Company since December 2020. He has served as the
vice chairman of the board of directors of Cathay Pacific since
December 2020.
Mr. Ma Chongxian , aged 56, graduated from the department of
economics of Inner Mongolia University majoring in planning and
statistics and holds a degree of EMBA in Tsinghua University. Mr.
Ma started his career in the civil aviation industry in July 1988.
Mr. Ma has been serving as the Vice President and a member of the
Standing Committee of the Communist Party Committee of Air China
from April 2010 to May 2021. From December 2016 to April 2021, he
served as Deputy General Manager and a member of the Communist
Party Group of CNAHC. He was the Deputy Secretary of the Communist
Party Group of CNAHC from April 2021, as well as the director and
General Manager of CNAHC, and concurrently the President and Deputy
Secretary of the Communist Party Committee of the Company from May
2021. He has served as non-executive director of Cathay Pacific
since June 2021 and an executive Director and the Vice Chairman of
the Company since July 2021.
Mr. Feng Gang , aged 58, graduated from Sichuan University
majoring in semiconductor. He started his career in July 1984. From
April 2014 to November 2019, he served as the Deputy General
Manager of CNAHC. He served as non-executive Director of the
Company between August 2014 and October 2017. From May 2017 to
November 2019, he served as Deputy President of the Company. Since
November 2019, he has served as the director and the Deputy
Secretary of the Communist Party Group of CNAHC and the Deputy
Secretary of the Communist Party Committee of the Company. From May
2020, he has been the non-executive Director of the Company.
Mr. Patrick Healy , aged 56, graduated from the University of
Cambridge with a Bachelor of Arts (Honours) degree in Modern
Languages. He has acted as an executive director of the beverages
division of Swire Pacific Limited since January 2013, a director of
John Swire & Sons (H.K.) Limited since December 2014. He has
been serving as the chairman of Swire Coca-Cola Limited since
October 2019 and the executive Director and chairman of Cathay
Pacific Airways Limited since November 2019. He has been serving as
a non-executive Director of Air China Limited since December 2019,
and a director of Swire Pacific Limited since August 2021.
Mr. Xue Yasong , aged 60, graduated from the Institute of
Financial Science under the Ministry of Finance with a master's
degree in Economics. He served as the deputy general manager of
CNAHC from November 2004 to July 2009, and the chairman of the
labour union of CNAHC from July 2009 to December 2021. He was the
chairman of the labour union of the Company from October 2016 to
December 2021. He has been serving as an employee representative
director of CNAHC since December 2017, and was the employee
representative Director of the Company from March 2018 to February
2022.
Mr. Wang Xiaokang , aged 66, graduated from Peking University
majoring in law. Since December 2011, he has been serving as the
president of China Industrial Energy Conservation and Clean
Production Association. He served as an independent non-executive
Director of the Company between May 2017 and February 2021, and an
external director of China Datang Corporation Ltd. from August 2018
to August 2019.
Mr. Duan Hongyi , aged 58, is a professorate senior accountant
and a holder of master's degree in business administration. He held
various positions including a director and general manager of Nam
Kwong (Group) Company Limited [China Nam Kwong (Group) Company
Limited]. He has been a professional external director for
State-owned enterprises since November 2019. He has also served as
the external director of both China Telecommunications Corporation
and China National Nuclear Corporation since March 2020. He served
as an independent non-executive Director of the Company from May
2020 to February 2022.
Mr. Stanley Hui Hon-chung , aged 71, holds the bachelor's degree
of Science from the Chinese University of Hong Kong. Mr. Hui is the
member of the 13th session of National Committee of CPPCC and the
General Committee of the Hong Kong General Chamber of Commerce. In
July 2006, Mr. Hui was appointed as a Justice of the Peace by the
Chief Executive of the HKSAR. Mr. Hui served as an independent
non-executive Director of the Company from May 2015 to February
2022. He served as independent non-executive director of Guangzhou
Baiyun International Airport Co., Ltd. from December 2016, and the
independent non-executive director of Beijing Capital International
Airport Co., Ltd. since June 2020. In October 2020, he was
appointed as the director of NWFB Services and Citybus Limited. In
December 2020, he was appointed as the Director of Greater Bay
Airlines Company Limited in Hong Kong, and in June 2021, he was
appointed as a director of China Power International Development
Limited.
Mr. Li Dajin , aged 63, graduated from Peking University
majoring in law. He is a director, partner and lawyer of East &
Concord Partners. Mr. Li currently serves as a member of the 13th
CPPCC, legislative consultant to the Standing Committee of Beijing
Municipal People's Congress, invited supervisor to the PRC Supreme
People's Court, visiting professor to Lawyer College Renmin
University of China, lecturer for master candidate of Tsinghua
University Law School, and visiting professor of Southwest
University of Political Science & Law. From December 2015 to
February 2022, he served as an independent non-executive Director
of the Company.
Mr. Li Fushen , aged 59, is a senior accountant with a
bachelor's degree in engineering. He was a non-executive director
of PCCW Limited from July 2007 to December 2021. He held various
positions from January 2009 to May 2021, including deputy general
manager, a member of the Communist Party Group, chief accountant,
executive director and deputy secretary of the Communist Party
Group of China United Network Communications Group Company Limited.
He served as an executive director of China Unicom (Hong Kong)
Limited from March 2011 to June 2021, a director of China United
Network Communications Limited from May 2011 to June 2021, and a
non-executive director of HKT Trust and HKT Limited as well as a
non-executive director of HKT Management Limited from November 2011
to December 2021. He has been a professional external director for
State-owned enterprises since June 2021, and has been an external
director of China Energy Conservation and Environmental Protection
Group and COFCO Corporation since July 2021. He has been serving as
an independent non-executive Director of the Company since February
2022.
Mr. He Yun , aged 60, holds a postgraduate diploma in software
engineering from Beijing Institute of Technology. He served as the
deputy director and director of the Supervisory Committee of
Central Enterprises Working Commission and the Board of Supervisors
Office of the State-owned Assets Supervision and Administration
Commission of the State Council, head of the work department of
Board of Supervisors and head of the first supervision department
of the State-owned Assets Supervision and Administration Commission
of the State Council from July 2000 to March 2018; and the head of
the fourth corporate audit office of the National Audit Office from
April 2018 to March 2021. He has been serving as an independent
non-executive Director of the Company since February 2022.
Mr. Xu Junxin , aged 57, is a senior economist and holds a
doctorate's degree in technical economics and management. From June
2018 to September 2021, he served as the secretary to the Board and
director of the general office (office of the Communist Party Group
as well as office of the board of directors and supervisory
committee), assistant to general manager, secretary to the Board
and director of group affairs office (office of the Communist Party
Group and office of the board of directors) of China Three Gorges
Corporation ( ). He has been a professional external director for
State-owned enterprises since September 2021. He has been an
external director of China Anneng Construction Group Corporation
Limited since December 2021. He has been serving as an independent
non-executive Director of the Company since February 2022.
Ms. Winnie Tam Wan-chi , aged 60, graduated from the Faculty of
Law of The University of Hong Kong, a barrister, international
arbitrator and mediator. She was appointed as a "Senior Counsel" in
2006, and was awarded the Justice of the Peace and the Silver
Bauhinia Star for her contributions to public service. She is
currently the Head of Chambers of Des Voeux Chambers and a recorder
of the Court of First Instance of the High Court of Hong Kong. She
is the Chairman of the Hong Kong Communications Authority, the
Chairman of the Committee on Sports Law of the Hong Kong Bar
Association, a member of the Chief Executive's Council of Advisers
on Innovation and Strategic Development, a member of the Qianhai
and Shekou Free Trade Zone Development Advisory Committee, a member
of the Law Reform Commission, a member of the Independent
Commission on Remuneration for Members of the Executive Council and
the Legislature and Officials under the Political Appointment
System of the Hong Kong Special Administrative Region, a member of
the board of directors of eBRAM International Online Dispute
Resolution Centre Limited, a member of the Board of the West
Kowloon Cultural District Authority, a member of the board of
governors of Hong Kong Philharmonic Society Limited and a member of
the Mainland Business Advisory Committee of the Hong Kong Trade
Development Council. She has been serving as an independent
non-executive Director of the Company since February 2022.
SUPERVISORS
Mr. Zhao Xiaohang , aged 60, graduated from the School of
Economics and Management of Tsinghua University majoring in
management engineering, and holds a postgraduate diploma. He
started his career in the civil aviation industry in August 1986.
Mr. Zhao served as the Vice President and a member of the Standing
Committee of Communist Party Committee of the Company from February
2011 to February 2022. He has been serving as the chairman of Air
Macau since March 2016, and a member of the Communist Party Group
of CNAHC from August 2016 to February 2022. He was the Vice General
Manager of CNAHC from December 2016 to March 2022, the chairman of
CNAMC since December 2016, and the deputy chairman of CNACG between
December 2016 and May 2020. He has been serving as chairman of
Capital Holding since September 2018. From December 2019 to
February 2022, he served as Chairman of the Supervisory Committee
of the Company. He was appointed as the chairman of CNACG in May
2020.
Mr. He Chaofan , aged 59, graduated from Civil Aviation
University of China majoring in operation management. Mr. He
started his career in the civil aviation industry in 1983. He
served as the chairman of Zhongyi Aviation Investment Co., Ltd.
between February 2019 and September 2020. He has been serving as
the chairman of China National Aviation Leasing Company Limited (
), chairman of CNAC (Macau) Aviation Limited ( ) , chairman of CNAC
(Beijing) Financial Leasing Company Limited ( ( ) ) and chairman of
China National Aviation Corporation (Hong Kong) Limited ( ( ) )
since February 2019. Mr. He was appointed as a Supervisor of the
Company in October 2013 and has been serving as the director,
president, member of Communist Party Committee of CNACG since
December 2018. He has been serving as Chairman of the Supervisory
Committee of the Company since February 2022.
Mr. Wang Jie , aged 56, graduated from China Europe
International Business School with a master's degree in Business
Administration. He joined Air China in August 1989 and served as
the general manager of the human resource department of the Company
from December 2009 to November 2014. He has been serving as the
deputy director and secretary of the Communist Party Committee of
the commercial committee of the Company since November 2014 as well
as chairman of the labor union of the commercial committee of the
Company since May 2019. He has been serving as an employee
representative Supervisor of the Company since September 2020.
Mr. Qin Hao , aged 53, graduated from Party School of the
Central Committee of the Communist Party of China with a master's
degree in Political Economics. He joined Air China in August 1989.
He was the Deputy General Manager and secretary of the Communist
Party Committee of the passenger cabin service department of the
Company between November 2014 and April 2021, as well as chairman
of the labor union of the passenger cabin service department of the
Company from August 2019 to April 2021. He has been serving as an
employee representative Supervisor of the Company since September
2020. He has been the secretary of the Communist Party Committee of
Air China Inner Mongolia Co., Ltd. since April 2021 and the deputy
general manager of Air China Inner Mongolia Co., Ltd. since May
2021.
Ms. Lyu Yanfang , aged 50, graduated from Northwest Institute of
Politics and Law majoring in law and holds a bachelor's degree in
law. She joined Air China in 1996 and served as the general manager
of the legal department of CNAHC (Air China) since August 2017.
From April 2018, she has been serving as the supervisor of China
National Aviation Capital Holding Co., Ltd. From August 2018, she
has served as the chairwoman of the supervisory committee of China
National Aviation Finance Co., Ltd. She has been serving as the
Supervisor of the Company since December 2020. She has been a
supervisor of Shenzhen Airlines Company Limited since June 2021 and
was appointed as the chairwoman of the supervisory committee since
October 2021.
Ms. Guo Lina , aged 51, graduated from Chinese Academy of Fiscal
Sciences of the Ministry of Finance majoring in finance and
obtained a master degree in economics. She also graduated from the
School of Economics and Management of Tsinghua University majoring
in executive business administration and obtained a master's degree
in business administration, and is a senior accountant. She started
her career in the civil aviation industry in October 2001. From
April 2017, she has served as the supervisor of Air China Inner
Mongolia Co., Ltd. She served as the deputy general manager of the
finance department of CNAHC (Air China) from May 2017 to April
2021. She has also served as a supervisor of Dalian Airlines
Company Limited since July 2020 and was appointed as the chairwoman
of the supervisory committee since September 2020. She served as
the deputy general manager of the audit department of CNAHC (Air
China) from April 2021 to February 2022. Since February 2022, she
has been serving as a Supervisor of the Company, and general
manager of the audit department of CNAHC. She was appointed the
general manager of the audit department of the Company in March
2022.
SENIOR MANAGEMENT
Mr. Ma Chongxian , aged 56, graduated from the department of
economics of Inner Mongolia University majoring in planning and
statistics and holds a degree of EMBA in Tsinghua University. Mr.
Ma started his career in the civil aviation industry in July 1988.
Mr. Ma has been serving as the Vice President and a member of the
Standing Committee of the Communist Party Committee of Air China
from April 2010 to May 2021. From December 2016 to April 2021, he
served as Deputy General Manager and a member of the Communist
Party Group of CNAHC. He was the Deputy Secretary of the Communist
Party Group of CNAHC from April 2021, as well as the director and
General Manager of CNAHC, and concurrently the President and Deputy
Secretary of the Communist Party Committee of the Company from May
2021. He has served as the non-executive director of Cathay Pacific
since June 2021 and an executive Director and the Vice Chairman of
the Company since July 2021.
Mr. Zhao Xiaohang , aged 60, graduated from the School of
Economics and Management of Tsinghua University majoring in
management engineering, and holds a postgraduate diploma. He
started his career in the civil aviation industry in August 1986.
Mr. Zhao served as the Vice President and a member of the Standing
Committee of Communist Party Committee of the Company from February
2011 to February 2022. He has been serving as the chairman of Air
Macau since March 2016, and a member of the Communist Party Group
of CNAHC from August 2016 to February 2022. He was the Vice General
Manager of CNAHC from December 2016 to March 2022, the chairman of
CNAMC since December 2016, and the deputy chairman of CNACG between
December 2016 and May 2020. He has been serving as chairman of
Capital Holding since September 2018. From December 2019 to
February 2022, he served as Chairman of the Supervisory Committee
of the Company. He was appointed as the chairman of CNACG in May
2020.
Mr. Tan Huanmin , aged 57, graduated from Jilin University
School of Law majoring in constitutional law. From December 2016 to
January 2019, Mr. Tan was a member of the Communist Party Group and
team leader of the Discipline Inspection Group of Communist Party
Group of China Aerospace Science & Technology Corporation.
Since January 2019, Mr. Tan has been serving as team leader of the
Discipline Inspection and Supervision Group and a member of the
Communist Party Group of CNAHC, and in January 2019, he was
appointed as a standing member of the Communist Party Committee and
the Secretary of Committee for Discipline Inspection of the
Company.
Mr. Wang Mingyuan , aged 56, graduated from Xiamen University
majoring in planning and statistics. Mr. Wang started his career in
the civil aviation industry in July 1988. He served as a director
of Shandong Airlines Co., Ltd. from March 2006 to June 2021, and a
director and a member of the Executive Board Committee of Air Macau
Company Limited from March 2007 to July 2021. Mr. Wang was
appointed as the Vice President and a member of the Standing
Committee of CPC of the Company in February 2011. Since April 2011,
he has served as chairman of Air China Development Corporation
(Hong Kong) Limited. He was appointed as the deputy general manager
and a member of the Communist Party Group of CNAHC in April 2020.
He has been serving as vice chairman of Tibet Airlines Co., Ltd.
since June 2020.
Mr. Zhang Sheng , aged 49, graduated from the Renmin University
of China/American City University with a bachelor's degree in
business administration and a master's degree in business
administration. Mr. Zhang started his career in the civil aviation
industry in July 1992. From August 2017 to May 2020, he served as
the general manager and the deputy secretary of the Communist Party
Committee of the Beijing Branch of China Southern Airlines Company
Limited. In May 2020, he was appointed as the deputy general
manager and a member of the Communist Party Group of CNAHC as well
as a member of the Standing Committee of the Communist Party
Committee of the Company. In June 2020, he was appointed as the
Vice President of the Company.
Mr. Chen Zhiyong , aged 58, graduated from Civil Aviation Flight
University of China majoring in flight technology. Mr. Chen is a
first-class pilot. Mr. Chen started his career in the civil
aviation industry in October 1982. Mr. Chen has been serving as
Vice President and a member of the Standing Committee of the
Communist Party Committee of the Company since December 2012. He
was appointed as the director of Shenzhen Airlines in May 2014.
Between May 2014 and September 2020, he was also the president and
deputy secretary of the Community Party Committee of Shenzhen
Airlines. He was appointed as the Chairman of Shenzhen Airlines in
March 2020. Since July 2020, he served as the deputy general
manager and a member of the Communist Party Group of CNAHC.
Mr. Chai Weixi , aged 59, graduated from City University of
Seattle and holds a postgraduate diploma and a master's degree. Mr.
Chai is a senior engineer. Mr. Chai joined Air China in September
1980. He was the director of Ameco between October 2005 and January
2020, and was appointed as Vice President and a member of the
Standing Committee of the Communist Party Committee of the Company
in March 2012. Mr. Chai has been the chairman of Sichuan Services
Aero-Engine Maintenance Co., Ltd. since October 2012. Since October
2020, he has been serving as the chairman of Beijing Airlines
Company Limited.
Mr. Xue Yasong , aged 60, graduated from the Institute of
Financial Science under the Ministry of Finance with a master's
degree in Economics. He served as the deputy general manager of
CNAHC from November 2004 to July 2009, and the chairman of the
labor union of CNAHC from July 2009 to December 2021. He was the
chairman of the labor union of the Company from October 2016 to
December 2021. He has been serving as an employee representative
director of CNAHC since December 2017, and was the employee
representative Director of the Company from March 2018 to February
2022.
Mr. Xu Chuanyu , aged 57, graduated from Civil Aviation Flight
University of China majoring in airplane piloting and obtained an
MBA degree from Tsinghua University. Mr. Xu is a first-class pilot.
He joined Air China in July 1985. He has been serving as the Chief
Pilot of CNAHC and chief safety officer of the Company since
December 2012. Mr. Xu was appointed as chairman, president, deputy
secretary of the Communist Party Committee of Shandong Aviation
Group Corporation in November 2016.
Mr. Zhang Hua , aged 56, graduated from Zhongnan University of
Finance and Economics majoring in industrial economics and is an
on-job postgraduate of the Party School of the Central Committee of
the Communist Party of China majoring in economics and management.
He was appointed as the general legal counsel of CNAHC and of the
Company in August 2016 and August 2017, respectively. He has been a
supervisor of Zhongyi Aviation Investment Co., Ltd. since April
2018, chairman of Dalian Airlines Company Limited since March 2020,
and a director of Air China Cargo Co. Ltd. since September
2021.
Mr. Xiao Feng , aged 53, graduated from Harbin Civil Engineering
& Architectural Institute majoring in management engineering.
Mr. Xiao holds an undergraduate degree and is a senior accountant.
He joined Air China in July 1990. He has been serving as a director
of Ameco since September 2012 and the chief accountant of the
Company since July 2014. In October 2015, he became a director of
Air China Overseas Holding Company ( ). Since November 2015, he has
been serving as the chairman of the board of directors of China
National Aviation Company Limited, and in February 2016, he became
the chairman of China National Aviation Finance Co., Ltd. He has
served as a non-executive director of Cathay Pacific since January
2017, and a director of Air China Cargo Co. Ltd. since September
2021.
Mr. Wang Yingnian , aged 58, graduated from Sichuan Guanghan
Aviation College majoring in airplane piloting and is a firstclass
pilot. Mr. Wang started his career in the civil aviation industry
in August 1984. He has been serving as a director of Beijing
Airlines Company Limited since February 2011, and Chief Pilot of
the Company since November 2014. He served concurrently as general
manager and Deputy Secretary of Communist Party Committee of the
training department of the Company from February 2017 to November
2019. He has also been serving as the chairman of Air China Inner
Mongolia Co., Ltd. since November 2017.
Mr. Ni Jiliang , aged 55, graduated from Civil Aviation College
of China majoring in maintenance of aircraft, engines and equipment
under the department of aviation machinery. He joined Air China in
July 1988. He has been the chief executive officer and the deputy
secretary of the Communist Party Committee of Ameco between
September 2017 and April 2020, and the chief engineer of the
Company since January 2020. Since April 2020, he has served as the
chairman and secretary to the Communist Party Committee of Ameco.
Since November 2021, he has been serving as a director of China
Aircraft Services Limited ( ).
Mr. Yan Simeng , aged 39, graduated from the Department of
Physics of Peking University and obtained his doctorate in
theoretical and computational physics from the University of
California, Irvine. He was a senior data scientist of Google
(formerly Fitbit) in the United States from November 2017 to April
2018. He served as vice president of engineering at All in Eyes Co.
Ltd. ( ) from April 2018 to July 2021. Mr. Yan has been serving as
Chief Information Officer of the Company since September 2021.
Mr. Zhou Feng , aged 60, obtained a master's degree in economics
from Shanghai University of Finance and Economics and a master's
degree of business administration (EMBA) from China Europe
International Business School, and is a senior accountant. He
started his career in the civil aviation industry in 1983. He
served as the head of the office of the board of CNAHC and the
Company from June 2017 to June 2021, and the Secretary to the Board
of the Company from August 2017 to September 2021.
Mr. Huang Bin , aged 58, graduated from the Civil Aviation
Institute of China, majoring in Planning and Finance, is a senior
accountant. He joined Air China in 1983. Between April 2011 and
August 2021, he served as secretary of the Communist Party
Committee, vice president, member of the Communist Party Committee
and Standing Committee of Air China Cargo Co. Ltd.. He was
appointed as a director and a member of the Executive Committee of
Air China Cargo Co. Ltd. in April 2011, secretary to the Board and
Joint Company Secretary of Air China Limited in September 2021 and
assistant to the President of the Company in December 2021.
Mr. Shao Bin , aged 56, graduated from Tsinghua University
School of Economics and Management majoring in EMBA, and is a
senior pilot. He joined Air China in July 1987. He served as
assistant to the president of the Company from November 2014 to
November 2021. He has been serving as vice president of Shenzhen
Airlines since December 2014. He was also the chief pilot of
Shenzhen Airlines from July 2016 to August 2017. He has been
concurrently serving as chairman of Kunming Airlines Company
Limited since January 2022.
Mr. Zhao Yang , aged 54, graduated from Civil Aviation Flight
University of China majoring in flight technology. Mr. Zhao started
his career in the civil aviation industry in August 1988. Mr. Zhao
served as the deputy general manager and Chief Pilot, a member and
standing member of the Communist Party Committee of the southwest
branch of the Company since November 2014. He served as the deputy
operation officer of the Company and the general manager of the
operation control centre, and Deputy Secretary of the Communist
Party Committee of the operation control centre since October 2017.
Mr. Zhao has been serving as assistant to the President of the
Company since October 2017.
Joint Company Secretaries
Mr. Huang Bin , aged 58, graduated from the Civil Aviation
Institute of China, majoring in Planning and Finance, is a senior
accountant. He joined Air China in 1983. Between April 2011 and
August 2021 he served as secretary of the Communist Party
Committee, vice president, member of the Communist Party Committee
and Standing Committee of Air China Cargo Co. Ltd.. He was
appointed as a director and a member of the Executive Committee of
Air China Cargo Co. Ltd. in April 2011, secretary to the Board and
joint company secretary of Air China Limited in September 2021 and
assistant to the President of the Company in December 2021.
Mr. Huen Ho Yin , aged 59, holds a Bachelor of Laws (Hons)
Degree from the University of Leicester in the United Kingdom and a
Postgraduate Certificate in Laws from the University of Hong Kong.
Mr. Huen has been practicing as a solicitor of the High Court of
Hong Kong. He is currently a partner of Huen & Partners
Solicitors. From August 1994 to April 2003, he served as a partner
of Richard Tai & Co., Solicitors. Since April 2003, he has been
serving as a partner of Huen & Partners Solicitors. From June
2018 to February 2020, he served as an independent non-executive
director of Grand Peace Group Holdings Limited. From April 2020 to
August 2020, Mr. Huen served as joint company secretary of the
Company. Mr. Huen has been serving as joint company secretary of
the Company since September 2021.
Independent Auditor's Report
TO THE SHAREHOLDERS OF AIR CHINA LIMITED
( )
(Incorporated in the People's Republic of China with limited
liability)
Opinion
We have audited the consolidated financial statements of Air
China Limited (the "Company") and its subsidiaries (collectively
referred to as the "Group") set out on pages 82 to 186 , which
comprise the consolidated statement of financial position as at 31
December 2021, and the consolidated statement of profit or loss and
the consolidated statement of profit or loss and other
comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the year then ended,
and notes to the consolidated financial statements, including a
summary of significant accounting policies.
In our opinion, the consolidated financial statements give a
true and fair view of the consolidated financial position of the
Group as at 31 December 2021, and of its consolidated financial
performance and its consolidated cash flows for the year then ended
in accordance with International Financial Reporting Standards
("IFRSs") issued by the International Accounting Standards Board
(the "IASB") and have been properly prepared in compliance with the
disclosure requirements of the Hong Kong Companies Ordinance.
Basis for Opinion
We conducted our audit in accordance with Hong Kong Standards on
Auditing ("HKSAs") issued by the Hong Kong Institute of Certified
Public Accountants ("HKICPA"). Our responsibilities under those
standards are further described in the Auditor's Responsibilities
for the Audit of the Consolidated Financial Statements section of
our report. We are independent of the Group in accordance with the
HKICPA's Code of Ethics for Professional Accountants (the "Code"),
and we have fulfilled our other ethical responsibilities in
accordance with the Code. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
consolidated financial statements for the current period. These
matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters.
Key Audit Matters (continued)
Key audit matter How our audit addressed the key audit matter
Provision for major overhauls
As at 31 December 2021, the provision for major overhauls Our procedures in relation to provision for major
of RMB6,373 million was recorded overhauls to fulfil the return condition
in the consolidated statement of financial position. of aircraft under leases included:
The Group held certain aircraft under leases at 31 -- Testing and evaluating the design and operating
December 2021. Under the terms of the lease effectiveness of the key internal controls
arrangements, the Group is contractually committed to relevant to the audit of provision for major overhauls to
return the aircraft to the lessors in fulfil the return condition of aircraft
a certain condition agreed with the lessors at the under leases.
inception of each lease. In order to fulfil
these return conditions, major overhauls are required to -- Evaluating the appropriateness of the methodology and
be conducted on a regular basis. key assumptions adopted by management
in estimating the provision for these major overhauls.
Management estimates the maintenance costs of major This evaluation based on the terms
overhauls for aircraft held under leases of the leases and the Group's maintenance cost
at the end of each reporting period and accrues such experience.
costs over the lease terms. The calculation
of such costs includes a number of variable factors and -- Performing a retrospective review of the provision for
assumptions, including the anticipated major overhauls to evaluate the
utilisation of the aircraft and the expected costs of appropriateness of the assumptions adopted by management
maintenance. by comparing the assumptions adopted
by management in prior years with actual maintenance
We identified provision for major overhauls to fulfil the costs incurred.
return condition of aircraft under
leases as a key audit matter because of the significant -- Discussing with managers in the engineering department
management estimation and judgement responsible for aircraft engineering
required in assessing the variable factors and about the utilisation pattern of aircraft, obtaining
assumptions in order to quantify the amount relevant operating data, performing recalculation
of provision required at each reporting date. and checking the assumptions adopted by management and
the mathematical accuracy of the calculation
Details of the related estimation uncertainty are set out of provision for major overhauls prepared by management
in Notes 4, 5 and 38 to the consolidated for those aircraft under leases.
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 Our procedures in relation to
consists of passenger revenue passenger revenue recognition
amounting to RMB58,317 million included:
for the year ended 31 December
2021. -- 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:
l 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.
l 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.
l Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the directors.
l 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.
l 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.
l Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for
our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
Auditor's Responsibilities for the Audit of the Consolidated
Financial Statements (continued)
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, actions taken to eliminate
threats or safeguards applied.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements
for the current period and are therefore the key audit matters. We
describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
The engagement partner on the audit resulting in the independent
auditor's report is Yam Siu Man.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
30 March 2022
Consolidated Statement of Profit or Loss
For the Year Ended 31 December 2021
2021 2020
NOTES RMB'000 RMB'000
Revenue 6 74,531,670 69,503,749
Other income and gains 8 4,070,762 4,356,946
78,602,432 73,860,695
Operating expenses
Jet fuel costs (20,703,780) (14,817,474)
Employee compensation costs 9 (24,230,071) (22,012,834)
Depreciation and amortisation 11 (20,934,502) (20,408,317)
Take-off, landing and depot charges (9,667,650) (9,239,943)
Aircraft maintenance, repair and overhaul
costs (6,910,741) (6,423,313)
Air catering charges (1,650,028) (1,605,027)
Aircraft and engine lease expenses (236,287) (223,034)
Other lease expenses (673,261) (463,265)
Other flight operation expenses (6,488,734) (5,869,393)
Selling and marketing expenses (2,576,346) (2,568,362)
General and administrative expenses (1,263,044) (1,051,495)
Impairment loss recognised on property,
plant and equipment 17 (292,562) (439,656)
Impairment loss recognised on intangible
assets 20 (750) -
Net impairment loss reversed under expected
credit loss model 10 163,148 92,598
(95,464,608) (85,029,515)
Loss from operations 11 (16,862,176) (11,168,820)
Finance income 112,062 191,598
Finance costs 12 (5,495,052) (5,099,785)
Share of results of associates (1,088,759) (6,148,692)
Share of results of joint ventures 272,965 155,541
Exchange gain, net 1,235,430 3,603,752
Loss before taxation (21,825,530) (18,466,406)
Income tax credit 14 3,003,292 2,650,275
Loss for the year (18,822,238) (15,816,131)
Attributable to:
- Equity shareholders of the Company (16,635,178) (14,403,343)
- Non-controlling interests (2,187,060) (1,412,788)
(18,822,238) (15,816,131)
Loss per share
RMB(121.12) RMB(104.87)
- Basic and diluted 15 cents cents
Consolidated Statement of Profit or Loss
and other Comprehensive Income
For the Year Ended 31 December 2021
2021 2020
RMB'000 RMB'000
Loss for the year (18,822,238) (15,816,131)
Other comprehensive income/(expense) for the
year
Items that will not be reclassified to profit
or loss:
- Fair value losses on investments in equity
instruments at fair value through other comprehensive
income (56,457) (19,933)
- Remeasurement of net defined benefit liability (5,787) 3,265
- Share of other comprehensive income of associates 121,787 94,761
- Income tax relating to items that will not
be reclassified to profit or loss 14,114 4,983
Items that may be reclassified subsequently
to profit or loss:
- Fair value gains/(losses) on investments
in debt instruments at fair value through other
comprehensive income 3,234 (4,310)
- Impairment loss (recognised)/reversed on
investments in debt instruments at fair value
through other comprehensive income included
in profit or loss (10,647) 7,637
- Share of other comprehensive income of associates 813,808 139,255
- Exchange differences on translation of foreign
operations (464,804) (1,111,691)
- Income tax relating to items that may be
reclassified subsequently to profit or loss 1,854 (832)
Other comprehensive income/(expense) for the
year (net of tax) 417,102 (886,865)
Total comprehensive expense for the year (18,405,136) (16,702,996)
Attributable to:
- Equity shareholders of the Company (16,172,537) (15,260,368)
- Non-controlling interests (2,232,599) (1,442,628)
(18,405,136) (16,702,996)
Consolidated Statement of Financial Position
At 31 December 2021
31 December 31 December
2021 2020
NOTES RMB'000 RMB'000
Non-current assets
Property, plant and equipment 17 98,804,707 101,346,490
Right-of-use assets 18 121,610,254 114,539,680
Investment properties 19 571,798 600,329
Intangible assets 20 35,430 36,580
Goodwill 21 1,099,975 1,099,975
Interests in associates 23 10,390,940 10,938,428
Interests in joint ventures 24 1,830,070 1,581,105
Advance payments for aircraft and flight
equipment 21,510,230 24,907,862
Deposits for aircraft under leases 566,684 615,537
Equity instruments at fair value through
other comprehensive income 25 176,323 233,180
Debt instruments at fair value through
other comprehensive income 26 1,373,634 1,344,829
Deferred tax assets 27 9,757,097 6,750,883
Other non-current assets 257,320 298,836
267,984,462 264,293,714
Current assets
Inventories 28 2,050,282 1,853,990
Accounts receivable 29 2,991,037 2,942,799
Bills receivable 3,591 6,593
Prepayments, deposits and other receivables 30 3,631,521 3,912,471
Financial assets at fair value through
profit or loss 4,157 -
Restricted bank deposits 31 774,951 737,245
Cash and cash equivalents 31 15,934,713 5,837,998
Assets held for sale 32 333,884 -
Other current assets 33 4,672,592 4,444,806
30,396,728 19,735,902
Total assets 298,381,190 284,029,616
Current liabilities
Air traffic liabilities (2,116,028) (2,002,649)
Accounts payable 34 (12,590,775) (12,510,582)
Bills payable (199,276) (62,570)
Dividends payable (98,000) (98,000)
Other payables and accruals 35 (19,593,940) (11,177,928)
Current taxation (4,572) (45,614)
Lease liabilities 36 (14,534,309) (13,560,862)
Interest-bearing borrowings 37 (40,201,875) (39,630,365)
Provision for return condition checks 38 (801,235) (229,514)
Contract liabilities 39 (1,479,717) (1,280,102)
(91,619,727) (80,598,186)
Net current liabilities (61,222,999) (60,862,284)
Total assets less current liabilities 206,761,463 203,431,430
Non-current liabilities
Lease liabilities 36 (76,347,051) (76,098,678)
Interest-bearing borrowings 37 (53,120,047) (31,639,097)
Provision for return condition checks 38 (8,583,611) (8,580,560)
Provision for early retirement benefit
obligations (1,006) (1,351)
Long-term payables (15,646) (21,022)
Contract liabilities 39 (1,772,209) (2,264,843)
Defined benefit obligations 40 (218,336) (229,332)
Deferred income 41 (544,383) (488,791)
Deferred tax liabilities 27 (328,063) (334,720)
(140,930,352) (119,658,394)
NET ASSETS 65,831,111 83,773,036
CAPITAL AND RESERVES
Issued capital 42 14,524,815 14,524,815
Treasury shares 42 (3,047,564) (3,047,564)
Reserves 49,891,306 66,064,076
Total equity attributable to equity
shareholders of the Company 61,368,557 77,541,327
Non-controlling interests 4,462,554 6,231,709
TOTAL EQUITY 65,831,111 83,773,036
The consolidated financial statements on pages 82 to 186 were
approved and authorised for issue by the board of directors on 30
March 2022 and signed on its behalf by:
Song Zhiyong Ma Chongxian
DIRECTOR DIRECTOR
Consolidated Statement of
Changes in Equity
For the Year Ended 31 December 2021
Attributable to equity shareholders
of the Company
Foreign
exchange Non-
Issued Treasury Capital Reserve General translation Retained controlling Total
Note capital shares reserve funds reserve reserve earnings Total interests equity
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
As at 1 January
2020 14,524,815 (3,047,564) 29,916,386 11,026,605 110,628 (1,223,899) 42,151,706 93,458,677 7,870,786 101,329,463
Changes in equity
for 2020
Loss for the year - - - - - - (14,403,343) (14,403,343) (1,412,788) (15,816,131)
Other
comprehensive
income/(expense) - - 230,112 - - (1,087,137) - (857,025) (29,840) (886,865)
Total
comprehensive
income/(expense) - - 230,112 - - (1,087,137) (14,403,343) (15,260,368) (1,442,628) (16,702,996)
Appropriation
of discretionary
reserve funds
and others - - - 537,682 - - (549,472) (11,790) (3,944) (15,734)
Dividends paid
to
non-controlling
shareholders - - - - - - - - (192,505) (192,505)
Dividends
declared
in respect of
the previous
year 16 - - - - - - (645,192) (645,192) - (645,192)
As at 31 December
2020 and
1 January 2021 14,524,815 (3,047,564) 30,146,498 11,564,287 110,628 (2,311,036) 26,553,699 77,541,327 6,231,709 83,773,036
Changes in equity
for 2021
Loss for the year - - - - - - (16,635,178) (16,635,178) (2,187,060) (18,822,238)
Other
comprehensive
income/(expense) - - 906,826 - - (444,185) - 462,641 (45,539) 417,102
Total
comprehensive
income/(expense) - - 906,826 - - (444,185) (16,635,178) (16,172,537) (2,232,599) (18,405,136)
Capital
contribution
from
non-controlling
shareholder of
a subsidiary - - - - - - - - 490,148 490,148
Appropriation
of discretionary
reserve funds
and others - - - - - - (233) (233) (155) (388)
Appropriation
of general
reserve - - - - 21,288 - (21,288) - - -
Dividends paid
to
non-controlling
shareholders - - - - - - - - (26,549) (26,549)
Others - - 3,637 - - - (3,637) - - -
As at 31 December
2021 14,524,815 (3,047,564) 31,056,961 11,564,287 131,916 (2,755,221) 9,893,363 61,368,557 4,462,554 65,831,111
Consolidated Statement of Cash Flows
For the Year Ended 31 December 2021
2021 2020
RMB'000 RMB'000
Operating activities
Loss before taxation (21,825,530) (18,466,406)
Adjustments for:
Share of results of associates and joint
ventures 815,794 5,993,151
Exchange gains, net (1,235,430) (3,603,752)
Finance income (112,062) (191,598)
Finance costs 5,495,052 5,099,785
Fair value changes of financial assets
at fair value through profit or loss 404 -
Depreciation of property, plant and equipment 9,259,782 9,168,355
Depreciation of right-of-use assets 11,649,695 11,214,630
Gain on disposal of property, plant and
equipment (21,112) (38,943)
Loss/(gain) on disposal of right-of-use
assets - (348)
Depreciation of investment properties 24,961 25,302
Amortisation of intangible assets 64 30
Impairment loss on property, plant and
equipment 292,562 439,656
Impairment loss recognised on intangible
assets 750 -
Impairment loss (reversed)/recognised
on debt instruments at fair value through
other comprehensive income (10,647) 7,637
Impairment losses on inventories 44,122 35,958
Impairment loss recognised/(reversed)
on accounts receivable, net 5,915 (73,882)
Impairment losses (reversed)/recognised
on deposits and other receivables, net (170,783) 2,508
Impairment losses recognised/(reversed)
on other non-current assets, net - (4,155)
Impairment losses recognised/(reversed)
on other current assets, net 6,812 (25,687)
Impairment losses recognized on others,
net 5,555 981
Dividend income (4,904) (8,034)
Operating cash flows before movements
in working capital 4,221,000 9,575,188
Decrease in deposits for aircraft under
leases 48,853 21,134
(Increase)/decrease in other non-current
assets (128,970) 115,531
(Increase)/decrease in inventories (294,893) 212,825
(Increase)/decrease in accounts receivable (63,057) 3,174,548
Decrease/(increase) in bills receivable 3,002 (6,231)
Decrease/(increase) in prepayments, deposits
and other receivables 182,212 (56,132)
(Increase)/decrease in other current
assets (234,598) 599,807
Increase/(decrease) in air traffic liabilities 113,379 (7,977,651)
Increase/(decrease) in accounts payable 713,192 (4,419,169)
Increase in bills payables 136,706 62,570
Increase in dividends payable - 98,000
Increase in other payables and accruals 8,043,213 1,002,580
Increase in provision for return condition
checks 419,460 247,016
Decrease in provision for early retirement
benefit obligations (345) (638)
Decrease in defined benefit obligations (25,548) (26,548)
Increase/(decrease) in deferred income 55,592 (32,436)
Decrease in contract liabilities (293,019) (162,996)
Decrease in long-term payables (5,376) (94,168)
Cash generated from operations 12,890,803 2,333,230
Income tax paid (3,031) (925,056)
Interest paid (5,757,299) (5,425,047)
Net cash from/(used) in operating activities 7,130,473 (4,016,873)
2021 2020
NOTE RMB'000 RMB'000
Investing activities
Payments for the purchase of property,
plant and equipment (1,824,030) (5,030,019)
Advance payments for aircraft and flight
equipment (4,250,608) (7,008,116)
Proceeds from disposal of property, plant
and equipment 213,252 133,118
Decrease/(increase) in restricted bank
deposits against aircraft leases and
others 31,279 (920)
Payment for ordinary shares of an associate 23 - (2,957,136)
Proceeds from disposal of equity instruments
at fair value through other comprehensive
income 808 -
Proceeds/(purchase) of debt instruments
at fair value through other comprehensive
income 1,649,011 (1,331,309)
Purchase of debt instruments at amortised
cost (500,000) -
Interest received 112,062 191,598
Dividends received from associates and
joint ventures 30,831 129,999
Interests received from debt instruments
at fair value through other comprehensive
income 82,696 -
Dividends received from equity instruments
at fair value through other comprehensive
income 1,916 7,472
Net cash used in investing activities (4,452,783) (15,865,313)
Financing activities
Capital contribution from a non-controlling
shareholder of a subsidiary 490,148 -
New bank loans and other loans 54,273,008 63,607,615
Proceeds from issuance of corporate bonds
and short-term commercial papers 16,050,000 29,700,000
Repayments of bank loans and other loans (38,535,887) (27,348,267)
Repayments of lease liabilities (15,082,110) (14,332,052)
Repayments of corporate bonds and short-term
commercial papers (9,700,000) (34,000,000)
Dividends paid (26,549) (739,697)
Net cash from financing activities 7,468,610 16,887,599
Net increase/(decrease) in cash and cash
equivalents 10,146,300 (2,994,587)
Cash and cash equivalents at 1 January 31 5,837,998 8,935,282
Effect of foreign exchange rate changes (49,585) (102,697)
Cash and cash equivalents at 31 December 31 15,934,713 5,837,998
Notes to the Consolidated Financial Statements
For the Year Ended 31 December 2021
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 PRC state-owned enterprise 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 1st Floor -
9th Floor 101, Building 1, 30 Tianzhu Road, 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 2021, the Group's current liabilities exceeded
its current assets by approximately RMB61,223 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 RMB113,477 million as at 31 December
2021, 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 2021. 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. If there is
assets impairment, the corresponding impairment will be made in
accordance with relevant accounting policies.
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 IFRSs
Amendments to IFRSs that are mandatorily effective for the
current year
In the current year, the Group has the following amendments to
IFRSs for the first time, which are mandatorily effective for the
annual period beginning on or after 1 January 2021 for the
preparation of the consolidated financial statements:
Amendments to IFRS 9, IAS 39, Interest Rate Benchmark Reform - Phase 2
IFRS 7, IFRS 4 and IFRS 16
In addition, the Group has early applied the Amendment to IFRS
16 Covid-19-Related Rent
Concessions beyond 30 June 2021 .
3. APPLICATION OF AMMENTS TO IFRSs (continued)
The Group also applied the agenda decision of the IFRS
Interpretations Committee of the International Accounting Standards
Board issued in June 2021 which clarified the costs an entity
should include as "estimated costs necessary to make the sale" when
determining the net realisable value of inventories.
Except as described below, the application of 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 condensed consolidated
financial statements.
Impacts on application of Amendment to IFRS 9, IAS 39, IFRS 7,
IFRS 4 and IFRS 16 Interest Rate Benchmark Reform - Phase 2
The Group has applied the amendments for the first time in the
current year. The amendments relate to changes in the basis for
determining the contractual cash flows of financial assets,
financial liabilities and lease liabilities as a result of interest
rate benchmark reform, specific hedge accounting requirements and
the related disclosure requirements applying IFRS 7 Financial
Instruments: Disclosures.
As at 1 January 2021, the Group has certain lease liabilities
denominated in United States Dollar ("USD") amounting to RMB10,678
million and lease liabilities denominated in Japanese Yen ("JPY")
amounting to RMB830 million, the interests of which are indexed to
benchmark rates that will or may be subject to interest rate
benchmark reform.
The amendments have had no impact on the consolidated financial
statements as none of the relevant contracts has been transitioned
to the relevant replacement rates during the year. The Group will
apply the practical expedient in relation to the changes in
contractual cash flows resulting from the interest rate benchmark
reform for lease liabilities. Additional disclosures as required by
IFRS 7 are set out in Note 45.
3. APPLICATION OF AMMENTS TO IFRSs (continued)
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(2)
Amendments to IFRS 3 Reference to the Conceptual Framework(1)
Amendments to IFRS 10 Sale or Contribution of Assets between
and IAS 28 an Investor and its Associate or Joint
Venture(3)
Amendments to IAS 1 Classification of Liabilities as Current
or Non-current(2)
Amendments to IAS 1 and Disclosure of Accounting Policies(2)
IFRS Practice Statement
2
Amendments to IAS 8 Definition of Accounting Estimates(2)
Amendments to IAS 12 Deferred Tax related to Assets and Liabilities
arising from a Single Transaction(2)
Amendments to IAS 16 Property, Plant and Equipment: Proceeds
before Intended Use(1)
Amendments to IAS 37 Onerous Contracts-Cost of Fulfilling a
Contract(1)
Amendments to IFRSs Annual Improvements to IFRS Standards 2018-2020(1)
(1) Effective for annual periods beginning on or after 1 January 2022.
(2) Effective for annual periods beginning on or after 1 January 2023.
(3) Effective for annual periods beginning on or after a date to be determined.
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.
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.
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.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Goodwill (continued)
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.
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.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue from contracts with customers (continued)
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.
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.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Leases (continued)
The Group as a lessee (continued)
Right-of-use assets (continued)
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.
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.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Leases (continued)
The Group as a lessee (continued)
Lease liabilities (continued)
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.
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.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Leases (continued)
The Group as a lessee (continued)
Covid-19 related rent concessions (continued)
A lessee 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.
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.
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.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign currencies (continued)
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.
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.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Government grants (continued)
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 and annual 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.
Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Taxation (continued)
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 investments in subsidiaries and
associates, and interests in 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.
For the purposes of measuring deferred tax for leasing
transactions in which the Group recognises the right-of-use assets
and the related lease liabilities, the Group first determines
whether the tax deductions are attributable to the right-of-use
assets or the lease liabilities.
For leasing transactions in which the tax deductions are
attributable to the lease liabilities, the Group applies IAS 12
Income Taxes requirements to the leasing transaction as a whole.
Temporary differences relating to right-of-use assets and lease
liabilities are assessed on a net basis. Excess of depreciation on
right-of-use assets over the lease payments for the principal
portion of lease liabilities results in net deductible temporary
differences.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Taxation (continued)
Deferred tax (continued)
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.
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.
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.
Non-current assets held for sale
Non-current assets (and disposal groups) are classified as held
for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. This
condition is regarded as met only when the asset (or disposal
group) is available for immediate sale in its present condition
subject only to terms that are usual and customary for sales of
such asset (or disposal group) and its sale is highly probable.
Management must be committed to the sale, which should be expected
to qualify for recognition as a completed sale within one year from
the date of classification.
Non-current assets (and disposal groups) classified as held for
sale are measured at the lower of their previous carrying amount
and fair value less costs to sell.
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.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
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.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
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. Costs necessary to make the sale
include incremental costs directly attributable to the sale and
other necessary costs which the Group must incur 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.
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.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
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.
(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.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
Financial assets (continued)
Classification and subsequent measurement of financial assets
(continued)
(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.
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.
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
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;
-- 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.
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)
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.
(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 not credit-impaired 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 lease receivable, the cash flows used for
determining the ECL is consistent with the cash flows used in
measuring the lease receivable in accordance with IFRS 16.
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.
Financial liabilities at amortised cost
Financial liabilities (including accounts payable, bills
payable, dividends payable, other payables, interest-bearing
borrowings and long-term payables) are subsequently measured at
amortised cost using the effective interest method.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
Financial liabilities and equity (continued)
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.
Offsetting a financial asset and a financial liability
A financial asset and a financial liability are offset and the
net amount presented in the consolidated statement of financial
position when, and only when, the Group currently has a legally
enforceable right to set off the recognised amounts; and intends
either to settle on a net basis, or to realise the asset and settle
the liability simultaneously.
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 2021, the carrying amount of goodwill was
RMB1,100 million (2020: 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 RMB292.5 million for certain aircrafts included in
property, plant and equipment that will be retired. As at 31
December 2021, 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 was
RMB233,243 million (2020: RMB229,043 million). Details of these
items are set out in Notes 17, 18, 19, 20, 23 and 24.
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.
5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)
Overhaul provisions (continued)
As at 31 December 2021, overhaul provisions of the Group
amounted to RMB6,373 million (2020: RMB6,011 million) and details
are disclosed in Note 38.
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 2021, the contract liabilities related to
frequent-flyer programme was RMB2,706 million (2020: RMB3,093
million) and details are disclosed in Note 39.
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 2021, deferred tax assets of RMB9,757 million
(2020: RMB6,751 million) in relation to deductible temporary
differences and tax losses 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 RMB7,919
million (2020: RMB500 million) and other deductible temporary
differences of RMB0.5 million (2020: RMB0.2 million) due to the
unpredictability of the future streams and details are disclosed in
Note 27.
6. REVENUE
2021 2020
RMB'000 RMB'000
Revenue from contracts with customers 74,244,919 69,244,930
Rental income (included in revenue of
airline operations segment) 286,751 258,819
Total revenue 74,531,670 69,503,749
Disaggregation of revenue from contracts with customers
2021 2020
Airline Other
Segments Airline operations Other operations operations operations
RMB'000 RMB'000 RMB'000 RMB'000
Type of goods or services
Airline operations
Passenger 58,316,695 - 55,726,862 -
Cargo and mail 11,113,288 - 8,553,407 -
Ground service income 202,812 - 239,713 -
Others 1,364,285 - 1,565,162 -
70,997,080 - 66,085,144 -
Other operations
Aircraft engineering income - 2,901,247 - 2,771,588
Others - 346,592 - 388,198
- 3,247,839 - 3,159,786
Total 70,997,080 3,247,839 66,085,144 3,159,786
Geographical markets
Mainland China 57,299,361 3,247,839 48,535,069 3,159,786
Hong Kong, Special Administrative
Region ("SAR"), Macau
SAR and
Taiwan, China 1,172,112 - 1,032,767 -
International 12,525,607 - 16,517,308 -
Total 70,997,080 3,247,839 66,085,144 3,159,786
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.
6. REVENUE (continued)
Performance obligations for contracts with customers
(continued)
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 RMB1,486 million (2020:
RMB1,537 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.
Operating segments
The following tables present the Group's consolidated revenue
and loss 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
2021 and 2020 and the reconciliations of reportable segment revenue
and loss before taxation to the Group's consolidated amounts under
IFRSs:
7. SEGMENT INFORMATION (continued)
Operating segments (continued)
Year ended 31 December 2021
Airline operations Other operations Elimination Total
RMB'000 RMB'000 RMB'000 RMB'000
Revenue
Sales to external customers 71,283,831 3,247,839 - 74,531,670
Inter-segment sales 166,623 5,846,246 (6,012,869) -
Revenue for reportable
segments under CASs and
IFRSs 71,450,454 9,094,085 (6,012,869) 74,531,670
Segment loss before taxation
Loss before taxation for
reportable segments under
CASs (21,687,315) (93,034) (54,690) (21,835,039)
Effect of differences
between IFRSs and CASs 9,509
Loss before taxation for
the year under IFRSs (21,825,530)
Year ended 31 December 2020
Other
Airline 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)
The following tables present the segment assets, liabilities and
other information of the Group's operating segments under CASs as
at 31 December 2021 and 2020 and the reconciliations of reportable
segment assets, liabilities and other information to the Group's
consolidated amounts under IFRSs:
Airline operations Other operations Elimination Total
RMB'000 RMB'000 RMB'000 RMB'000
Segment assets
Total assets for reportable
segments as at 31 December
2021 under CASs 283,966,030 30,399,066 (15,949,944) 298,415,152
Effect of differences
between IFRSs and CASs (33,962)
Total assets under IFRSs 298,381,190
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
Airline operations Other operations Elimination Total
RMB'000 RMB'000 RMB'000 RMB'000
Segment liabilities
Total liabilities for
reportable segments as
at 31 December 2021 under
CASs and IFRSs 224,449,461 23,710,137 (15,609,519) 232,550,079
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
7. SEGMENT INFORMATION (continued)
Operating segments (continued)
Year ended 31 December 2021
Effect
of
differences
between
Airline Other IFRSs Amounts
operations operations Elimination Total and CASs under 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 (1,106,530) 290,736 - (815,794) - (815,794)
Impairment losses
reversed/(recognized)
on financial assets 169,463 (15,185) 8,870 163,148 - 163,148
Impairment losses
recognised on non-financial
assets 302,661 34,773 - 337,434 - 337,434
Depreciation and
amortisation 20,668,858 408,365 (131,171) 20,946,052 (11,550) 20,934,502
Income tax (credit)/expense (2,983,013) (16,140) (6,516) (3,005,669) 2,377 (3,003,292)
Interests in associates
and joint ventures 10,078,844 2,067,736 (65,489) 12,081,091 139,919 12,221,010
Additions to non-current
assets 24,007,672 531,694 (14,077) 24,525,289 - 24,525,289
Year ended 31 December 2020
Effect
of
differences
between
Airline Other IFRSs Amounts
operations operations Elimination Total and CASs under 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
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 2021 and 2020, respectively:
Year ended 31 December 2021
Hong Kong
SAR, Macau
Mainland SAR and
China Taiwan, China International Total
RMB'000 RMB'000 RMB'000 RMB'000
Sales to external customers
and total revenue 60,833,951 1,172,112 12,525,607 74,531,670
Year ended 31 December 2020
Hong Kong
SAR, Macau
Mainland SAR 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
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.
Revenue from transactions with CNAHC and its subsidiaries (other
than the Group) amounted to 16% of the Group's revenue during the
year ended 31 December 2021, which is the only single customer with
revenue from transactions amounted to 10% or more of the Group's
revenue.
8. OTHER INCOME AND GAINS
2021 2020
RMB'000 RMB'000
Co-operation routes income and subsidy
income 3,840,535 4,076,199
Dividend income 4,904 8,034
Gain/(loss) on disposal of
- Property, plant and equipment 37,593 38,943
- Right-of-use assets - 348
- E
quity instruments at fair value through
other comprehensive income 408 -
Loss arising on financial assets at fair
value through profit or loss (404) -
Others 187,726 233,422
4,070,762 4,356,946
9. EMPLOYEE COMPENSATION COSTS
An analysis of the Group's employee compensation costs,
including the emoluments of Directors and supervisors, is as
follows:
2021 2020
RMB'000 RMB'000
Wages, salaries and other benefits 21,396,711 20,338,486
Retirement benefit costs:
- C
ontributions to defined contribution
retirement scheme 2,833,298 1,674,117
- Early retirement benefits 62 231
24,230,071 22,012,834
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 the 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 UNDER EXPECTED CREDIT LOSS MODEL
2021 2020
RMB'000 RMB'000
Impairment losses recognised/(reversed)
on financial assets:
- Accounts receivable 5,915 (73,882)
- Deposits and other receivables (170,783) 2,508
- Debt instruments at FVTOCI (10,647) 7,637
- F
inancial assets included in other current
assets 6,812 (25,687)
- F
inancial assets included in other non-current
assets - (4,155)
- Others 5,555 981
(163,148) (92,598)
Details of impairment assessment are set out in Note 45.
11. LOSS FROM OPERATIONS
The Group's loss from operations is arrived at after
charging:
2021 2020
RMB'000 RMB'000
Depreciation of property, plant and equipment 9,259,782 9,168,355
Depreciation of right-of-use assets 11,649,695 11,214,630
Depreciation of investment properties 24,961 25,302
Amortisation of intangible assets 64 30
Total depreciation and amortisation 20,934,502 20,408,317
Impairment losses recognised on property,
plant and equipment (Note 17) 292,562 439,656
Impairment losses recognised on intangible
assets (Note 20) 750 -
Impairment losses recognised on inventories 44,122 35,958
Auditors' remuneration:
- Audit related services 18,017 18,660
- Other services 1,581 435
12. FINANCE COSTS
2021 2020
RMB'000 RMB'000
Interest on interest-bearing borrowings 2,464,834 1,848,869
Interest on lease liabilities 3,302,207 3,694,546
Imputed interest expenses on defined
benefit obligations 7,749 8,163
5,774,790 5,551,578
Less: I
nterest capitalised (279,738) (451,793)
5,495,052 5,099,785
The interest capitalisation rates during the year ranged from
1.75% to 4.41% (2020: 1.9% to 4.41%) 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:
2021 2020
RMB'000 RMB'000
Directors' fee 410 465
Salaries and other allowances 2,113 1,041
Discretionary bonus 806 663
Retirement benefit scheme contributions 203 113
3,532 2,282
13. DIRECTORS', CHIEF EXECUTIVE'S, SUPERVISORS' AND EMPLOYEES' EMOLUMENTS (continued)
2021
Retirement
Salaries benefit
Directors' and other Discretionary scheme
fee allowances bonus contributions Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Executive directors
Song Zhiyong (Note
(a)) - - - - -
Ma Chongxian (Note
(a))(Appointed on
31 May 2021) - - - - -
Non-executive directors
Patrick Healy (Note
(b)) - - - - -
Xue Yasong - 418 366 44 828
Feng Gang (Note (a)) - - - - -
- 418 366 44 828
Independent non-executive
directors
Wang Xiaokang (Resigned
on 9 February 2021) 10 - - - 10
Stanley Hui Hon-chung 200 - - - 200
Li Dajin 200 - - - 200
Duan Hongyi - - - - -
410 - - - 410
Supervisors
Zhao Xiaohang (Note
(a)) - - - - -
He Chaofan (Note
(a)) - - - - -
Lyu Yanfang - 481 117 53 651
Wang Jie - 624 180 53 857
Qin Hao - 590 143 53 786
- 1,695 440 159 2,294
410 2,113 806 203 3,532
13. DIRECTORS', CHIEF EXECUTIVE'S, SUPERVISORS' AND EMPLOYEES' EMOLUMENTS (continued)
2020
Retirement
Salaries benefit
Directors' and 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
(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)
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 2021 and 2020.
(d) For the year ended 31 December 2021, the Group received cash
consideration from Cathay Pacific of Hong Kong Dollar ("HKD")
2,418,000 for making available directors' services to Cathay
Pacific (2020: HKD2,672,000).
Five highest paid individuals
For both 2021 and 2020, 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:
2021 2020
RMB'000 RMB'000
Salaries and other allowances 10,054 9,950
Discretionary bonuses 133 187
Retirement benefit scheme contributions 182 130
10,369 10,267
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:
2021 2020
HKD2,000,001 to HKD2,500,000 2 5
HKD2,500,001 to HKD3,000,000 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 (2020: Nil).
14. INCOME TAX CREDIT
2021 2020
RMB'000 RMB'000
Current income tax:
- Mainland China 28,344 23,894
- Hong Kong SAR and Macau SAR, China 1,644 326
(Over)/under-provision in respect of
prior years (35,341) 7,718
Deferred tax (Note 27) (2,997,939) (2,682,213)
(3,003,292) (2,650,275)
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 three subsidiaries of the
Company, and some branches of a subsidiary of the Company which are
taxed at a preferential rate of 15% (2020: 15%), all group
companies located in Mainland China are subject to a corporate
income tax rate of 25% (2020: 25%) during the year. Subsidiaries in
Hong Kong SAR, China are taxed at corporate income tax rates of
16.5% (2020: 8.25% and 16.5%) and subsidiaries in Macau SAR, China
are taxed at corporate income tax rate of 12% (2020: 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 (continued)
The taxation for the year can be reconciled to the loss before
taxation per consolidated statement of profit or loss as
follows:
2021 2020
RMB'000 RMB'000
Loss before taxation (21,825,530) (18,466,406)
Tax at the applicable tax rate of 25% (5,456,383) (4,616,602)
Preferential tax rates on income of group
entities 383,349 304,015
Tax effect of share of results of associates
and joint ventures 247,210 1,498,288
Tax effect of non-deductible expenses 97,000 48,931
Tax effect of non-taxable income (4,812) (8,133)
Tax effect of deductible temporary differences
and tax losses not recognised 1,808,606 118,485
Tax effect of utilisation of tax losses
and deductible temporary differences
not recognised in prior years (42,921) (2,977)
(Over)/under-provision in respect of
prior years (35,341) 7,718
Income tax credit for the year (3,003,292) (2,650,275)
15. LOSS PER SHARE
The calculation of the basic and diluted loss per share
attributable to equity shareholders of the Company is based on the
following data:
2021 2020
RMB'000 RMB'000
Loss
Loss for the purpose of basic and diluted
loss per share (16,635,178) (14,403,343)
2021 2020
'000 '000
Number of shares
Number of ordinary shares for the purpose
of basic and diluted loss per share 13,734,961 13,734,961
The number of ordinary shares for the purpose of basic and
diluted loss 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 42(c)).
The Group had no potential dilutive ordinary shares in issue
during both years.
16. DIVIDS
No dividend was paid or proposed for ordinary shareholders of
the Company during 2021, nor has any dividend been proposed since
the end of the reporting period.
Dividends for the shareholders of ordinary shares of the Company
for the year ended 31 December 2019 of RMB645,192,000 were approved
during 2020.
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 2020 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
Additions 1,187,483 4,058 420,054 17,134,135 18,745,730
Transfer from construction
in progress 2,924,342 1,828,768 608,004 (5,361,114) -
Transfer from right-of-use
assets upon obtaining
ownership of the
underlying leased
assets 1,010,679 - - - 1,010,679
Transfer from investment
properties - 4,699 - - 4,699
Transfer to right-of-use
assets - - - (11,651,605) (11,651,605)
Transfer to assets
held for sale (3,477,249) - - - (3,477,249)
Disposals (2,667,061) (38,679) (181,882) - (2,887,622)
Exchange realignment (48,711) - (4,692) - (53,403)
At 31 December 2021 155,373,060 14,448,877 12,761,493 13,352,420 195,935,850
Accumulated depreciation
At 1 January 2020 (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)
Depreciation charge
for the year (8,106,372) (448,018) (705,392) - (9,259,782)
Transfer from right-of-use
assets upon obtaining
ownership of the
underlying leased
assets (545,076) - - - (545,076)
Transfer from investment
properties - (1,170) - - (1,170)
Transfer to assets
held for sale 2,593,812 - - - 2,593,812
Eliminated on disposals 2,406,583 10,917 121,158 - 2,538,658
Exchange realignment 17,089 - 3,891 - 20,980
At 31 December 2021 (81,988,338) (6,003,302) (8,564,171) - (96,555,811)
Impairment
At 1 January 2020 (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)
Recognised for the
year (Note) (292,467) - (95) - (292,562)
Transfer to assets
held for sale 549,553 - - - 549,553
Eliminated on disposals 162,480 - 95 - 162,575
At 31 December 2021 (575,332) - - - (575,332)
Net book value
At 31 December 2021 72,809,390 8,445,575 4,197,322 13,352,420 98,804,707
At 31 December 2020 77,094,305 7,085,000 3,936,181 13,231,004 101,346,490
17. PROPERTY, PLANT AND EQUIPMENT (continued)
Note: During the year, the Group recognised impairment loss
amounting to approximately RMB292.5 million for certain aircraft
that will unlikely return to service before they retire from
service (2020: approximately RMB439.7 million for certain aircraft
that were planned to be retired in 2021).
The above impairment provision refers to the difference between
the recoverable amount of the asset and its book value. The
recoverable amount is based on the fair value of the assets less
disposal expenses. Among them, the fair value refers to agreed
price of the contractual agreement or the evaluation value of the
aircraft and related equipment by a third-party evaluation
institution.
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 15 to 30 years 5% 3.17% - 6.33%
engines
Overhaul of airframe and 5 to 12 years Nil 8.33% - 20.00%
cabin refurbishment
Overhaul components of engines 9 to 43 thousand Nil 2.33% - 11.11%
hours
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 2021, the Group's aircraft and flight
equipment, buildings and other equipment with an aggregate net book
value of approximately RMB2,230 million (2020: RMB1,593 million)
were pledged to secure certain bank loans of the Group (Note
37).
As at 31 December 2021, the Group was in the process of applying
for the title certificates of certain buildings with an aggregate
net book value of approximately RMB4,617 million (2020: RMB3,478
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 consolidated financial position as at 31
December 2021.
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 2020 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
Additions 6,522,528 - 913,925 207,804 7,644,257
Transfer from property,
plant and equipment 11,651,605 - - - 11,651,605
Transfer from investment
properties - 62 - - 62
Transfer to property,
plant and equipment
upon obtaining ownership
of the underlying
leased assets (1,010,679) - - - (1,010,679)
Lease modification (987,558) - (364,984) (19,299) (1,371,841)
Exchange adjustments (118,007) - (4,095) - (122,102)
At 31 December 2021 186,385,876 3,197,737 2,385,679 371,704 192,340,996
Accumulated depreciation
At 1 January 2020 (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 leases 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)
Depreciation charged
for the year (11,066,632) (68,854) (480,147) (34,062) (11,649,695)
Transfer from investment
properties - (21) - - (21)
Transfer to property,
plant and equipment
upon obtaining ownership
of the underlying
leased assets 545,076 - - - 545,076
Lease modification 952,224 - 360,018 19,299 1,331,541
Exchange adjustments 50,595 - 1,776 - 52,371
At 31 December 2021 (68,631,778) (801,018) (1,242,126) (55,820) (70,730,742)
Net book value
At 31 December 2021 117,754,098 2,396,719 1,143,553 315,884 121,610,254
At 31 December 2020 111,214,946 2,465,532 717,060 142,142 114,539,680
During the year, expense relating to short-term leases amounted
to approximately RMB909 million (2020: RMB686 million), expense
relating to leases of low-value assets, excluding short-term leases
of low value assets, amounted to approximately RMB1 million (2020:
RMB1 million).
Leases committed
As at 31 December 2021, the Group had future undiscounted lease
payments under non-cancellable period of RMB330 million (2020:
RMB1,386 million), which was not recognised as lease liabilities
since leases have yet to be commenced.
During the year, total cash outflow for leases was RMB15,992
million (2020: RMB15,018 million).
Details of the lease maturity analysis of lease liabilities are
set out in Notes 36 and 45.
As at 31 December 2021, 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 RMB26
million (2020: RMB27 million) were pledged to secure certain bank
loans and other borrowings of the Group (Note 37).
As at 31 December 2021 and 2020, the Group had title
certificates for all the land use rights acquired.
19. INVESTMENT PROPERTIES
2021 2020
RMB'000 RMB'000
Cost
As at 1 January 764,453 779,134
Transfer from property, plant and equipment - 5,579
Transfer to property, plant and equipment (4,699) -
Transfer to right-of-use assets (62) -
Decrease - (20,260)
As at 31 December 759,692 764,453
Accumulated depreciation
As at 1 January (164,124) (141,148)
Depreciation for the year (24,961) (25,302)
Transfer to property, plant and equipment 1,170 -
Transfer to right-of-use assets 21 -
Decrease - 2,326
As at 31 December (187,894) (164,124)
Net carrying amount
As at 31 December 571,798 600,329
20. INTANGIBLE ASSETS
2021 2020
RMB'000 RMB'000
As at 1 January 36,580 36,610
Disposal (39) -
Amortisation for the year (64) (30)
Impairment (750) -
Cash refund upon admission of new Star
Alliance members (297) -
As at 31 December 35,430 36,580
The Group's intangible assets mainly 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 2021 (2020:
approximately RMB35 million). The Admission Rights have an
indefinite useful life due to their lasting legal and economic
significance.
21. GOODWILL
2021 2020
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% (2020: 12.5%). 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% (2020: 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.
The recoverable amount is significantly above the carrying
amount of Shenzhen Airlines cash-generating unit. The Management
believes that any reasonably possible change in any of these
assumptions would not result in impairment.
22. INTERESTS IN SUBSIDIARIES
Particulars of the principal subsidiaries as at 31 December 2021
and 31 December 2020 were as follows:
Percentage
of equity
Place of Paid up interests
incorporation/ issued/ attributable
registration
and registered to the Company Principal
Company name operations Legal status capital Direct Indirect activities
% %
China National Aviation
Company Limited Hong Kong Limited liability Investment
("CNAC") ( ) SAR, China company HK$331,268,000 69 31 holding
Air China Import
and Export Co., PRC/Mainland Limited liability Import and
Ltd. (#) ( )(Note(a)) China company RMB95,080,786 100 - export trading
Zhejiang Aviation PRC/Mainland Limited liability Provision
Service Co., Ltd.(#) China company RMB20,000,000 100 - of cabin
( ) (Note(a)) service
and airline
catering
Shanghai International PRC/Mainland Limited liability RMB2,000,000 - - Provision
Aviation China company of ground
Air Service Co., service
Ltd.(#)
( ) (Notes(a),
(c))
Air China Development Hong Kong Limited liability Provision
Corporation SAR, China company HK$9,379,010 95 - of
(Hong Kong) Limited air ticketing
( ) services
Beijing Golden Phoenix PRC/Mainland Limited liability Provision
Human China company RMB2,000,000 100 - of human
Resource Co., Ltd. resources
(#) services
( )
(Note(a))
Total Transform British Limited liability Investment
Group Ltd. Virgin Islands company HK$13,765,440,000 99.94 0.06 holding
( )
Air Macau Company Macau SAR, Limited liability MOP2,242,042,000 - 66.9 Airline
Limited China company operator
( )
Provision
of aircraft
Chengdu Falcon Aircraft overhaul
Engineering Service PRC/Mainland Limited liability and maintenance
Co., Ltd. # China company RMB80,000,000 30 30 services
( ) (Note(b))
PRC/Mainland Limited liability Airline
Shenzhen Airlines China company RMB5,360,000,000 51 - operator
( ) (Note(b))
Kunming Airlines PRC/Mainland Limited liability RMB80,000,000 - 80 Airline
Co., Ltd. (#) China company operator
( ) (Note(b))
Beijing Airlines PRC/Mainland Limited liability Airline
Co., Ltd. (#) China company RMB1,000,000,000 51 - operator
( ) (Note(a))
Dalian Airlines PRC/Mainland Limited liability Airline
Co., Ltd. (#) China company RMB3,000,000,000 80 - operator
( ) (Note(a))
Air China Inner
Mongolia Co., Ltd. PRC/Mainland Limited liability Airline
(#) China company RMB1,000,000,000 80 - operator
( ) (Note(a))
Aircraft Maintenance PRC/Mainland Limited liability Provision
and Engineering China company US$300,052,800 75 - of aircraft
Corporation ("AMECO") overhaul
and
( ) (Note(b)) maintenance
services
China National Aviation PRC/Mainland Limited liability Provision
Finance Co., Ltd. China company RMB1,127,961,864 51 - of
("CNAF") ( ) financial
(Note(a)) services
# The English names of these companies are direct translations of their Chinese names.
22. INTERESTS IN SUBSIDIARIES (continued)
Notes:
(a) These companies are wholly-domestic owned enterprises.
(b) These companies are sino-foreign equity joint ventures.
(c) Shanghai International Aviation Air Service Co., Ltd
completed its deregistration on 3 September 2021.
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 2021, 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 500,000 513,912 05/02/2022
1,000,000 1,029,464 18/03/2022
1,000,000 1,027,397 26/04/2022
1,000,000 1,023,027 23/05/2022
2,000,000 2,035,841 04/06/2022
1,000,000 1,024,401 05/03/2023
2,000,000 2,022,970 23/08/2024
8,677,012
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
500,000 510,810 19/03/2021
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
6,567,843
22. INTERESTS IN SUBSIDIARIES (continued)
Composition of the Group
Place of incorporation/registration Number of principal
Principal activity and operations subsidiaries
2021 2020
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
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
15 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
equity interests
and voting rights Loss
allocated to Accumulated
held by non- non- non-
controlling controlling controlling
interests interests interests
Place of
registration year ended 31
Name of subsidiary and operations at 31 December December at 31 December
2021 2020 2021 2020 2021 2020
RMB'000 RMB'000 RMB'000 RMB'000
Shenzhen Airlines PRC 49% 49% (1,785,914) (1,081,740) 1,180,902 2,991,480
Individually
immaterial subsidiaries
with non-controlling
interests (401,146) (331,048) 3,281,652 3,240,229
Total (2,187,060) (1,412,788) 4,462,554 6,231,709
22. INTERESTS IN SUBSIDIARIES (continued)
Details of non-wholly owned subsidiary that have material
non-controlling interests (continued)
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.
Shenzhen Airlines
2021 2020
RMB'000 RMB'000
Current assets 4,783,241 2,266,583
Non-current assets 62,260,532 61,551,957
Current liabilities (26,981,907) (24,638,535)
Non-current liabilities (37,457,985) (33,037,450)
Net assets 2,603,881 6,142,555
- E
quity contributed to equity shareholders
of Shenzhen Airlines 2,790,155 6,178,578
- E
quity contributed to the non-controlling
interests ("NCI") of Shenzhen Airlines'
subsidiaries (186,274) (36,023)
Carrying amount of NCI 1,180,902 2,991,480
Revenue 18,500,326 17,394,252
Loss for the year (3,490,838) (2,133,420)
Total comprehensive expense (3,536,273) (2,147,294)
- a
ttributable to equity shareholders of
Shenzhen Airlines (3,388,423) (2,075,991)
- a
ttributable to NCI of Shenzhen Airlines'
subsidiaries (147,850) (71,303)
Dividend paid to NCI (2,400) (98,000)
Cash generated from operating activities 2,156,595 1,364,932
Cash used in investing activities (1,483,742) (1,004,598)
Cash from/(used in) financing activities 1,739,780 (1,026,268)
23. INTERESTS IN ASSOCIATES
2021 2020
RMB'000 RMB'000
Share of net assets
- Listed shares in the PRC - -
- Listed shares in Hong Kong SAR, China 7,128,872 7,372,164
- Unlisted investments 796,274 976,857
Goodwill 2,465,794 2,589,407
As at 31 December 10,390,940 10,938,428
Market value of listed shares 10,459,833 12,207,958
23. INTERESTS IN ASSOCIATES (continued)
Particulars of the principal associates of the Group as at 31
December 2021 and 31 December 2020 were as follows:
Percentage
of
Place of incorporation/ Paid up equity interests
registration
and issued/registered attributable
Company name operations capital to the Group Principal activities
%
Cathay Pacific * ( Hong Kong SAR,
) China HK$28,822,000,000 29.99 Airline operator
Shandong Aviation PRC/Mainland Investment
Group Co., Ltd. China RMB580,000,000 49.4 holding
( )
Shandong Airlines PRC/Mainland
Co., Ltd. China RMB400,000,000 22.8 Airline operator
( )
Menzies Macau Airport Macau SAR, Provision of
Services Limited* China MOP10,000,000 41 airport
( ) ground handling
services
PRC/Mainland Civil aircraft
Yunnan Airport Aircraft China RMB10,000,000 40 line
Maintenance & Services
Co., Ltd. maintenance
( )
Chongqing Civil Aviation PRC/Mainland
Cares Information China RMB14,800,000 24.5 Provision of
Technology Co., Ltd.
(#) airline-related
( ) information
system services
Chengdu Civil Aviation PRC/Mainland
Southwest Cares China RMB10,000,000 35 Provision of
Co., Ltd. (#) ( ) airline-related
information
system services
Tibet Airlines Co., PRC/Mainland
Ltd.(#) China RMB280,000,000 31 Airline operator
( )
ZhengZhou Aircraft PRC/Mainland
Maintenance China RMB150,000,000 30 Provision of
and Engineering Co.,Ltd.(#) overhaul and
( ) maintenance
services
Chongqing Air Catering PRC/Mainland Provision of
Co., Ltd.(#) China RMB80,000,000 6.25 airline
( ) catering service
* 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.
23. INTERESTS IN ASSOCIATES (continued)
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.
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.
Cathay Pacific
2021 2020
RMB'000 RMB'000
Gross amounts of the associate's
Current assets 23,626,187 23,201,490
Non-current assets 137,136,048 148,976,171
Current liabilities (35,267,176) (39,324,787)
Non-current liabilities (66,424,277) (71,193,486)
Equity 59,070,782 61,659,388
- Equity contributed to equity shareholders
of the associate 42,019,734 45,244,041
- Equity contributed to preferred shareholders
of the associate 16,616,902 16,411,980
- Equity contributed to NCI of the associate 4,088 3,367
- Equity contributed to convertible
bond holders of the associate 430,058 -
Revenue 37,819,887 40,772,035
Loss for the year (4,584,480) (18,804,965)
Other comprehensive income 3,308,525 862,629
Total comprehensive expenses (1,275,955) (17,942,336)
Reconciled to the Group's interests in
the associate
Gross amounts of net assets of the associate 42,019,734 45,244,041
Group's effective interest 29.99% 29.99%
Group's share of net assets of the associate 12,601,718 13,568,688
Elimination of reciprocal shareholding (5,472,846) (6,196,524)
Goodwill 2,320,324 2,388,549
Carrying amount in the consolidated financial
statements 9,449,196 9,760,713
23. INTERESTS IN ASSOCIATES (continued)
Cathay Pacific (continued)
Aggregate information of associates that are not individually
material:
2021 2020
RMB'000 RMB'000
Aggregate carrying amounts of individually
immaterial associates in the consolidated
financial statements 941,744 1,177,715
Aggregate amounts of the Group's share
of those associates'
- Loss for the year (224,094) (1,039,558)
- Other comprehensive expense for the
year (5,046) (81,202)
- Total comprehensive expense for the
year (229,140) (1,120,760)
24. INTERESTS IN JOINT VENTURES
2021 2020
RMB'000 RMB'000
Share of net assets 1,823,575 1,574,610
Goodwill 6,495 6,495
1,830,070 1,581,105
24. INTERESTS IN JOINT VENTURES (continued)
Particulars of the joint ventures of the Group at 31 December
2021 and 31 December 2020 were as follows:
Place of
registration Paid up Percentage
and issued/ of Ownership Profit
registered Principal
Company name operations capital interest sharing activities
% %
Shanghai Pudong PRC/Mainland Provision
International China RMB680,000,000 39 39 of cargo
Airport Cargo Terminal
Co., Ltd.(#) carriage services
(
)
Sichuan Services PRC/Mainland Provision
Aero-Engine China US$88,000,000 60 60 of engine
Maintenance Co.,
Ltd.(#) overhaul and
maintenance
( ) services
GA Innovation China PRC/Mainland Wholesale
Co., Ltd. (#) China US$10,000,000 50 50 and
import of
( ) aircraft
and components
Shanghai International PRC/Mainland Provision
Airport China RMB360,000,000 24 24 of airport
Ground Service Co.,
Ltd. (#) ground handling
( ) 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:
2021 2020
RMB'000 RMB'000
Aggregate carrying amounts of individually
immaterial joint
ventures in the consolidated financial
statements 1,830,070 1,581,105
Aggregate amounts of the Group's share
of those joint ventures'
- Profit for the year 272,965 155,541
- Total comprehensive income for the
year 272,965 155,541
25. EQUITY INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
2021 2020
RMB'000 RMB'000
Unlisted investments:
- Equity securities 176,323 233,180
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
2021 2020
RMB'000 RMB'000
Investments in listed bonds 1,373,634 1,344,829
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 debt instruments at
FVTOCI.
Details of impairment assessment are set out in Note 45.
27. DEFERRED TAXATION
The movements in deferred tax assets and liabilities during the
year were as follows:
2021 2020
RMB'000 RMB'000
Deferred tax assets:
As at 1 January 8,179,742 5,604,557
Credited to profit or loss (Note 14) 2,909,931 2,576,398
Exchange realignment (1,036) (1,213)
Gross deferred tax assets as at 31 December 11,088,637 8,179,742
Deferred tax liabilities:
As at 1 January 1,763,579 1,873,545
Credited to profit or loss (Note 14) (88,008) (105,815)
Credited to other comprehensive income (15,968) (4,151)
Gross deferred tax liabilities as at
31 December 1,659,603 1,763,579
Net deferred tax assets as at 31 December 9,429,034 6,416,163
27. DEFERRED TAXATION (continued)
The principal components of the Group's deferred tax assets and
liabilities were as follows:
2021 2020
RMB'000 RMB'000
Deferred tax assets:
Differences in value of property, plant
and equipment 56,543 58,920
Provisions and accruals 3,326,843 3,169,837
Unrealised profit of intra-group transactions 198,248 195,515
Impairment 440,958 414,705
Deductible tax losses 6,076,172 3,098,764
Impairment of investments in debt instruments
at FVTOCI 2,978 5,640
Right-of-use assets and lease liabilities 986,794 1,236,361
Unrealised loss on derivative financial
instruments 101 -
Gross deferred tax assets 11,088,637 8,179,742
Deferred tax liabilities:
Changes in fair value of equity instruments
at FVTOCI (34,899) (49,013)
Changes in fair value of debt instruments
at FVTOCI (4,054) (3,246)
Depreciation allowances in excess of
the related depreciation (1,341,399) (1,429,407)
Impairment of investments in debt instruments
at FVTOCI (2,978) (5,640)
Others (276,273) (276,273)
Gross deferred tax liabilities (1,659,603) (1,763,579)
Net deferred tax assets 9,429,034 6,416,163
The following amounts, determined after appropriate offsetting,
are shown separately on the consolidated statement of financial
position:
2021 2020
RMB'000 RMB'000
Net deferred tax assets 9,757,097 6,750,883
Net deferred tax liabilities (328,063) (334,720)
9,429,034 6,416,163
27. DEFERRED TAXATION (continued)
Details of tax losses and other deductible temporary differences
not recognised are set out below:
2021 2020
RMB'000 RMB'000
Deductible tax losses 7,919,175 500,376
Other unrecognised deductible temporary
differences 484 232
7,919,659 500,608
The Group's tax losses in the PRC are available for carrying
forward to set off future assessable income for a maximum period of
five or eight years. In accordance with the Notice of the Ministry
of Finance on the Taxation Policy for supporting the prevention of
pandemic of Covid-19 (No. 8, 2020) issued by the Ministry of
Finance and the State Administration of Taxation in February 2020,
the Company and certain subsidiaries of the Group fall within
enterprises of difficult industries suffering from the epidemic in
2020, and the carry over period of their tax losses incurred in
2020 will be extended from five years to eight years. At the end of
the reporting period, the Group has unused tax losses of
approximately RMB32,224 million (2020: RMB12,895 million) available
for offset against future profits. Deferred tax asset has been
recognised in respect of approximately RMB24,305 million (2020:
RMB12,395 million) of such losses. No deferred tax asset has been
recognised in respect of the remaining tax losses of approximately
RMB7,919 million (2020: RMB500 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 RMB7,897 million (2020: RMB488 million) with expiry
dates as disclosed in the following table. Other tax losses may be
carried forward indefinitely.
2021 2020
RMB'000 RMB'000
2021 - 11,582
2022 8,219 8,219
2023 445,810 445,810
2024 302,295 2,451
2025 18,689 19,980
2026 5,243,540 -
2028 1,878,358 -
7,896,911 488,042
28. INVENTORIES
An analysis of inventories as at the end of the reporting period
is as follows:
2021 2020
RMB'000 RMB'000
Spare parts of flight equipment 1,072,143 1,089,743
Catering supplies 82,534 92,538
Equipment 9,072 8,836
Others 886,533 662,873
2,050,282 1,853,990
29. ACCOUNTS RECEIVABLE
2021 2020
RMB'000 RMB'000
Accounts receivable 3,150,020 3,102,328
Less: A
llowance for expected credit losses (158,983) (159,529)
2,991,037 2,942,799
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:
2021 2020
RMB'000 RMB'000
Within 30 days 1,841,788 1,270,198
31 to 60 days 912,729 488,965
61 to 90 days 68,098 259,396
Over 90 days 168,422 924,240
2,991,037 2,942,799
Details of impairment assessment of accounts receivable are set
out in Note 45.
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:
2021 2020
RMB'000 RMB'000
Manufacturers' credits 639,348 1,036,936
Prepayments of jet fuel 66,756 61,520
Other prepayments 373,518 359,717
Others - 15,604
1,079,622 1,473,777
Deposits and other receivables 2,551,899 2,438,694
3,631,521 3,912,471
As at 31 December 2021, the impairment loss mainly consisted of
the full provision for the amount due from Shenzhen Airlines
Property Development Co., Ltd. of RMB298,438,000 (2020:
RMB468,796,000). The decrease of impairment was due to the
collection of RMB170,358,000 from Shenzhen Airlines Property
Development Co., Ltd this year.
Details of impairment assessment of deposits and other
receivables are set out in Note 45.
31. RESTRICTED BANK DEPOSITS, CASH AND CASH EQUIVALENTS
2021 2020
RMB'000 RMB'000
Time deposits with banks 223,818 93,765
Bank and cash 16,485,846 6,481,478
Less: R
estricted bank deposits (Note) (774,951) (737,245)
Cash and cash equivalents 15,934,713 5,837,998
Note: As at December 31 2021, the Group has restricted bank
deposits amounting to RMB774,951,000 (2020: RMB737,245,000), which
mainly contains deposits with the People's Bank of China by CNAF,
restricted bank deposits against aircraft leases and others and
bank deposits with a maturity for more than three months.
32. ASSETS HELD FOR SALE
2021 2020
RMB'000 RMB'000
Assets held for sale 333,884 -
Assets held for sale consisted of aircraft of the Group that
management entered into a contract to sell and expected to be sold
within twelve months.
33. OTHER CURRENT ASSETS
2021 2020
RMB'000 RMB'000
The value added tax credit 4,050,877 2,682,245
Debt instruments at amortised cost 500,000 -
Debt instruments at FVTOCI - 1,686,930
Loans to related parties 80,000 20,000
Others 49,137 56,241
4,680,014 4,445,416
Impairment (7,422) (610)
4,672,592 4,444,806
Loans to related parties mainly represented loans to CNAHC and
its subsidiaries by CNAF at a rate of 3.5% (2020: 3.3%) per annum
and the loans are repayable within one year.
Details of impairment assessment of other current assets are set
out in Note 45.
34. ACCOUNTS PAYABLE
The ageing analysis of the accounts payable as at the end of the
reporting period was as follows:
2021 2020
RMB'000 RMB'000
Within 30 days 4,440,586 4,674,784
31 to 60 days 1,070,102 1,394,258
61 to 90 days 1,053,190 1,385,660
Over 90 days 6,026,897 5,055,880
12,590,775 12,510,582
The accounts payable are non-interest-bearing and have normal
credit terms up to 90 days.
35. OTHER PAYABLES AND ACCRUALS
An analysis of other payables and accruals as at the end of the
reporting period was as follows:
2021 2020
RMB'000 RMB'000
Accrued salaries, wages and benefits 3,610,772 2,717,751
Payables for construction in progress 1,496,416 172,655
Other tax payables 161,513 160,933
Deposits received from sales agents 367,250 564,275
Current portion of long-term payables 15,624 28,449
Deposits received by CNAF from related
parties 11,336,605 4,460,614
Others 2,605,760 3,073,251
19,593,940 11,177,928
36. LEASE LIABILITIES
The Group has obligations under lease agreements expiring during
the years from 2022 to 2033 (2020: from 2021 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 2021 At 31 December 2020
Present values Present values
Lease of Lease of
payments lease payments payments lease payments
RMB'000 RMB'000 RMB'000 RMB'000
Amounts repayable
- Within 1 year 17,511,588 14,534,309 16,632,893 13,560,862
- After 1 year but within
2 years 16,940,172 14,468,929 15,824,712 13,160,310
- After 2 years but within
5 years 41,151,717 36,603,375 41,987,455 36,749,314
- After 5 years 26,984,463 25,274,747 27,801,689 26,189,054
Total 102,587,940 90,881,360 102,246,749 89,659,540
Less: A
mounts representing future
finance costs (11,706,580) (12,587,209)
Present values of lease
payments 90,881,360 89,659,540
Less: P
ortion classified as current
liabilities (14,534,309) (13,560,862)
Non-current portion 76,347,051 76,098,678
The weighted average incremental borrowing rates applied to
lease liabilities ranged from 0.37% to 4.90% per annum at 31
December 2021 (2020: from 0.27% to 5.22%).
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.
37. INTEREST-BEARING BORROWINGS
2021 2020
RMB'000 RMB'000
Bank loans and other borrowings:
- Secured 1,560,835 2,023,792
- Unsecured 66,528,013 50,359,853
68,088,848 52,383,645
Corporate bonds and short-term commercial
papers:
- Secured 6,773,180 6,773,214
- Unsecured 18,459,894 12,112,603
25,233,074 18,885,817
93,321,922 71,269,462
2021 2020
RMB'000 RMB'000
Bank loans and other borrowings repayable:
- Within 1 year or payable on demand 24,468,380 31,242,946
- After 1 year but within 2 years 20,840,886 733,833
- After 2 years but within 5 years 22,626,486 20,175,216
- After 5 years 153,096 231,650
68,088,848 52,383,645
Corporate bonds and short-term commercial
papers repayable:
- Within 1 year 15,733,495 8,387,419
- After 1 year but within 2 years 7,476,609 2,999,157
- After 2 years but within 5 years 2,022,970 7,499,241
25,233,074 18,885,817
Total interest-bearing borrowings 93,321,922 71,269,462
Less: P
ortion classified as current liabilities (40,201,875) (39,630,365)
Non-current portion 53,120,047 31,639,097
37. INTEREST-BEARING BORROWINGS (continued)
Bank and other borrowings denominated in currencies other than
the functional currencies of respective entities are set out
below:
2021 2020
RMB'000 RMB'000
United State Dollar ("USD") 1,464,616 532,013
European Dollar ("EURO") 111,716 648,209
HKD 368,619 42,178
Macau Pataca ("MOP") - 164,539
1,944,951 1,386,939
The carrying amount of the bank and other borrowings and the
range of interest rates are as below:
2021 2020
RMB'000 % RMB'000 %
Fixed rate bank and other
borrowings 49,849,416 1.30-4.38 38,204,596 1.50-4.38
Fixed rate corporate bonds
and short-term commercial
papers 25,233,074 2.34-5.30 18,885,817 1.95-5.30
Floating rate bank and
other borrowings 18,239,432 2.66-4.65 14,179,049 2.57-4.75
93,321,922 71,269,462
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.
The nominal amount of the Group's bank loans and corporate bonds
of approximately RMB8,334 million as at 31 December 2021 (2020:
RMB8,797 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 RMB2,230 million as at 31 December 2021
(2020: RMB1,593 million) (Note 17); and land use rights with an
aggregate carrying amount of approximately RMB26 million as at 31
December 2021 (2020: RMB27 million) (Note 18);
(b) As at 31 December 2021, there is no pledge of its rights to
collect cash flows in relation to Billing and Settlement Plan
("BSP") to secure bank loans (2020: RMB150 million);
(c) As at 31 December 2021, corporate bonds issued by the Group
with a face value of RMB6,500 million (2020: RMB6,500 million) were
guaranteed by CNAHC.
As at 31 December 2021, corporate bonds and short-term
commercial papers with carrying amount of RMB8,677 million (2020:
RMB6,568 million) were issued by Shenzhen Airlines, a subsidiary of
the Company.
38. 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:
2021 2020
RMB'000 RMB'000
As at 1 January 8,810,074 8,407,746
Provision for the year 1,196,797 1,052,793
Utilisation during the year (622,025) (650,465)
As at 31 December 9,384,846 8,810,074
Less: P
ortion classified as current liabilities (801,235) (229,514)
Non-current portion 8,583,611 8,580,560
As at 31 December 2021, provision for major overhauls was
RMB6,373 million (2020: RMB6,011 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.
39. CONTRACT LIABILITIES
2021 2020
RMB'000 RMB'000
Frequent-flyer programme (Note) 2,706,173 3,092,542
Others 545,753 452,403
3,251,926 3,544,945
Analysed as:
Current portion 1,479,717 1,280,102
Non-current portion 1,772,209 2,264,843
3,251,926 3,544,945
39. CONTRACT LIABILITIES (continued)
Note:
The movements of the Group's frequent-flyer programme during the
year were as follows:
2021 2020
RMB'000 RMB'000
As at 1 January 3,092,542 3,453,557
Additions during the year 1,099,211 1,176,071
Recognised as revenue during the year (1,485,580) (1,537,086)
As at 31 December 2,706,173 3,092,542
Less: P
ortion classified as current liabilities (933,964) (827,699)
Non-current portion 1,772,209 2,264,843
40. DEFINED BENEFIT OBLIGATIONS
The liabilities recognised in the consolidated statement of
financial position represent:
2021 2020
RMB'000 RMB'000
Post-retirement benefit obligations 242,920 254,932
Less: c
urrent portion (24,584) (25,600)
Long-term portion 218,336 229,332
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.
40. DEFINED BENEFIT OBLIGATIONS (continued)
Movements of the defined benefit obligations were set out as
follows:
2021 2020
RMB'000 RMB'000
At 1 January 254,932 276,582
Remeasurement loss/(gain) 5,787 (3,265)
Interest cost 7,749 8,163
Payments (25,548) (26,548)
At 31 December 242,920 254,932
Less: c
urrent portion (24,584) (25,600)
Long-term portion 218,336 229,332
Expenses recognised in the consolidated statement of profit or
loss and other comprehensive income are as follows:
2021 2020
RMB'000 RMB'000
Finance costs
- Interest cost 7,749 8,163
Other comprehensive expense/(income)
- Remeasurement loss/(gain) 5,787 (3,265)
Total defined benefit costs 13,536 4,898
The Plan exposes the Group to actuarial risks such as interest
rate risk and longevity risk.
Interest rate risk The present value of the defined benefit plan
obligation 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 2021 were carried out
by an independent firm of actuaries, Ernst & Young (China)
Advisory Limited. The present value of the defined benefit
obligations, and the related past cost were measured using the
projected unit credit method.
40. DEFINED BENEFIT OBLIGATIONS (continued)
Significant actuarial assumptions (expressed as weighted
averages) are as follows:
2021 2020
Discount rate 2.85% 3.20%
Average expected remaining life of eligible
participants 12.3 years 12.8 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 RMB9.2 million
(2020: increase by RMB9.8 million).
-- If the mortality changes to 95% of original assumption, the
defined benefit obligations would increase by RMB5.1 million (2020:
increase by RMB5.2 million).
41. DEFERRED INCOME
2021 2020
RMB'000 RMB'000
Government grants 439,757 379,747
Others 104,626 109,044
544,383 488,791
42. 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
2020 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
statutory reserve
funds (ii) - - - - -
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
Total comprehensive
expense for the
year - (3,858) - (13,252,578) (13,256,436)
Appropriation of
statutory reserve
funds (ii) - - - - -
Others - 3,637 - (3,637) -
As at 31 December
2021 14,524,815 27,536,676 11,527,181 6,892,057 60,480,729
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
42. CAPITAL AND RESERVES (continued)
(a) Movements in components of equity (continued)
(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 2021, in accordance with the PRC
Company Law, amount of approximately RMB11,527 million (2020:
RMB11,527 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 RMB5,649million
available for distribution as at 31 December 2021 (2020: RMB18,913
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 2021 and 31 December 2020 are as follows:
Number of Nominal Number of Nominal
shares value shares value
2021 2021 2020 2020
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 9,962,131,821 9,962,132
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.
(c) Treasury shares
As at 31 December 2021, the Group owned 29.99% equity interest
in Cathay Pacific (2020: 29.99%), which in turn owned 18.13% equity
interest in the Company (2020: 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.
42. CAPITAL AND RESERVES (continued)
(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
2021 and 2020.
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:
2021 2020
RMB'000 RMB'000
Total liabilities 232,550,079 200,256,580
Total assets 298,381,190 284,029,616
Gearing ratio 77.94% 70.51%
43. CONTINGENT LIABILITIES
As at 31 December 2021, the Group had the following contingent
liabilities:
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.
44. 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:
2021 2020
RMB'000 RMB'000
Contracted, but not provided for:
- Aircraft and flight equipment 28,695,911 38,456,252
- Buildings and others 1,825,802 2,564,193
Total capital commitments 30,521,713 41,020,445
(b) Investment commitments
The Group had the following amount of investment commitments as
at the end of the reporting period:
2021 2020
RMB'000 RMB'000
Contracted, but not provided for:
- investment commitment to a joint
venture 22,315 22,837
45. FINANCIAL INSTRUMENTS
a. Categories of financial instruments
2021 2020
RMB'000 RMB'000
Financial assets
Amortised cost:
Accounts receivable 2,991,037 2,942,799
Deposits and other receivables 2,551,899 2,438,694
Deposits for aircraft under leases 566,684 615,537
Bills receivable 3,591 6,593
Loans to related parties 73,795 19,390
Debt instruments at amortised cost 498,783 -
Other non-current assets 7,962 8,227
Restricted bank deposits 774,951 737,245
Cash and cash equivalents 15,934,713 5,837,998
23,403,415 12,606,483
Financial assets at FVTPL 4,157 -
Equity instruments at FVTOCI 176,323 233,180
Debt instruments at FVTOCI (including
debt instruments at FVTOCI included
in other current assets) 1,373,634 3,031,759
Financial liabilities
Amortised cost:
Accounts payable 12,590,775 12,510,582
Bills payable 199,276 62,570
Other payables 15,402,329 7,776,154
Interest-bearing borrowings 93,321,922 71,269,462
Dividends payable 98,000 98,000
121,612,302 91,716,768
Lease liabilities 90,881,360 89,659,540
45. 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, liquidity risk and risks arising from
the interest rate benchmark reform. 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 lease liabilities and fixed rate bank and other
borrowings (see Notes 36 and 37 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 (2020: 50 basis
points) higher/lower with all other variables held constant, the
Group's post-tax loss for the year ended 31 December 2021 would
increase/decrease by approximately RMB222,196,000 (2020:
RMB207,744,000) 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.
Details of the impacts on the Group's risk management strategy
arising from the interest rate benchmark reform and the progress
towards implementation of alternative benchmark interest rates are
set out under "interest rate benchmark reform" in this note.
45. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies (continued)
Market risk (continued)
(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 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.
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
2021 2020 2021 2020
RMB'000 RMB'000 RMB'000 RMB'000
USD 2,749,520 3,157,561 44,986,142 50,759,652
EURO 201,872 75,765 405,609 1,317,565
HKD 205,125 156,701 476,904 60,511
JPY 31,088 24,573 675,798 903,179
Sensitivity analysis
The sensitivity analysis below has been determined based on a 1%
(2020: 1%) increase/decrease in functional currency of respective
group entities against the relevant foreign currencies. 1% (2020:
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% (2020: 1%) change in
foreign currency rates. A positive number below indicates a
decrease in the Group's post-tax loss, where functional currency of
respective group entities had strengthened 1% (2020:1%) against the
relevant foreign currency. For a 1% (2020: 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 loss for the year.
Decrease Decrease/(increase)
in the Group's in the Group's
post-tax loss post-tax loss
2021 2020
RMB'000 RMB'000
- if RMB strengthens against USD 316,775 357,016
- if RMB strengthens against EURO 1,528 9,314
- if RMB strengthens against HKD 2,038 (721)
- if RMB strengthens against JPY 4,835 6,590
45. 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 43.
Account receivables of the Group mainly include receivables of
sales of cargo space from Air China Cargo Co., Ltd., receivables
from CNAHC and receivables from BSP agents (a clearing system
between airlines and sales agents organised by the International
Air Transportation Association). The balance due from above
customers respectively amounted to approximately RMB1,588 million
or 50% of accounts receivable, RMB384 million or 12% of accounts
receivable, and RMB312 million or 10% of accounts receivable as at
31 December 2021 (2020: RMB1,456 million or 47% of accounts
receivables, RMB403 million or 13% of accounts receivable, and
RMB221 million or 7% of accounts receivable). The credit risk
exposure to above customers 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.
The Group continues to pay attention to the credit risk and the
balance of the above amounts.
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.
45. 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:
2021 2020
External Gross Gross
credit 12m or carrying carrying
lifetime
Notes rating ECL amount Subtotal amount Subtotal
RMB'000 RMB'000 RMB'000 RMB'000
Financial assets
at FVTOCI
Investments in
listed bonds 26 AAA 12m ECL 1,373,634 1,344,829
Other current
assets - debt
instruments 33 AAA 12m ECL - 1,373,634 1,686,930 3,031,759
Financial assets
at
amortised costs
Lifetime
ECL (provision
Accounts receivable 29 N/A matrix) 3,009,598 2,964,346
Credit-impaired 140,422 3,150,020 137,982 3,102,328
Deposits and other
receivables 30 N/A 12m ECL 2,521,917 2,420,409
Lifetime
ECL (not
credit-impaired) 49,173 49,169
Credit-impaired 638,538 3,209,628 808,891 3,278,469
Deposits for aircraft
under leases N/A 12m ECL 566,684 566,684 615,537 615,537
Other non-current
assets - other
deposits N/A 12m ECL 7,962 7,962 8,227 8,227
Bills receivable N/A 12m ECL 3,591 3,591 6,593 6,593
Loans to related
parties 33 N/A 12m ECL 80,000 80,000 20,000 20,000
Debt instruments 33 N/A 12m ECL 500,000 500,000 - -
Restricted bank
deposits 31 N/A 12m ECL 774,951 774,951 737,245 737,245
Cash and cash
equivalents 31 N/A 12m ECL 15,933,417 15,933,417 5,833,538 5,833,538
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 2021. Debtors with credit-impaired with gross
carrying amounts of RMB140 million as at 31 December 2021 (2020:
RMB138 million) were assessed individually.
45. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies (continued)
Credit risk and impairment assessment (continued)
For deposits and other receivables, financial assets included in
other current assets and other non-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.
Gross carrying amount of accounts receivable using a provision
matrix
2021 2020
Accounts Accounts
Customer group Loss rate receivable Loss rate receivable
RMB'000 RMB'000
Ground service receivable 1% 20,777 1% 66,405
BSP international 1% 4,174 1% 1,282
Others 0.05%-4% 2,984,647 0.05%-4% 2,896,659
3,009,598 2,964,346
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 Lifetime ECL
(credit-
(not credit-impaired) impaired) Total
RMB'000 RMB'000 RMB'000
As at 1 January 2020 36,231 208,320 244,551
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
Transfer to credit-impaired (884) 884 -
Impairment losses recognised 1,980 10,104 12,084
Impairment losses reversed (4,016) (2,153) (6,169)
Write-offs - (6,395) (6,395)
Exchange adjustments (66) - (66)
As at 31 December 2021 18,561 140,422 158,983
45. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies (continued)
Gross carrying amount of accounts receivable using a provision
matrix (continued)
The following table shows reconciliation of loss allowances that
has been recognised for deposits and other receivables.
Lifetime Lifetime
ECL ECL
(not credit- (credit-
12m ECL impaired) impaired) Total
RMB'000 RMB'000 RMB'000 RMB'000
As at 1 January 2020 24,639 5,069 808,891 838,599
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
Transfer to credit-impaired (11,255) - 11,255 -
Net impairment losses
reversed (431) - (170,352) (170,783)
Write-offs - - (11,256) (11,256)
Exchange adjustments (7) - - (7)
As at 31 December
2021 14,118 5,073 638,538 657,729
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 RMB175,405 million as at 31 December 2021 (2020:
RMB174,669 million), of which an amount of approximately RMB61,928
million was utilised (2020: RMB52,427 million).
The Directors had carried out a detailed review of the cash flow
forecast of the Group for the year ended 31 December 2021. 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.
45. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies (continued)
Liquidity risk (continued)
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.
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 cash
one year year year year year years flows amount
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
At 31 December
2021
Accounts payable 12,590,775 - - - - - 12,590,775 12,590,775
Bills payable 199,276 - - - - - 199,276 199,276
Other payables 15,402,329 - - - - - 15,402,329 15,402,329
Lease liabilities 17,511,588 16,940,172 15,889,614 13,778,550 11,483,553 26,984,463 102,587,940 90,881,360
Interest-bearing
borrowings 42,265,384 30,062,186 24,642,416 268,847 331,302 253,305 97,823,440 93,321,922
Dividends payables 98,000 - - - - - 98,000 98,000
88,067,352 47,002,358 40,532,030 14,047,397 11,814,855 27,237,768 228,701,760 212,493,662
Repayable
on
demand Total
or within In the In the In the In the After undiscounted Carrying
second third fourth fifth five cash
one year year year year year years 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
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
45. FINANCIAL INSTRUMENTS (continued)
c. Interest rate benchmark reform
As listed in Note 36, several of the Group's lease liabilities
denominated based on LIBOR will be subject to the interest rate
benchmark reform. The Group is closely monitoring the market and
managing the transition to new benchmark interest rates, including
announcements made by the relevant IBOR regulators.
LIBOR
The Financial Conduct Authority has confirmed all LIBOR settings
will either cease to be provided by any administrator or no longer
be representative:
-- immediately after 31 December 2021, in the case of all
sterling, euro, Swiss franc and Japanese yen settings, and the
1-week and 2-month US dollar settings; and
-- immediately after 30 June 2023, in the case of the remaining US dollar settings.
Progress towards implementation of alternative benchmark
interest rates
The Group is planning to transition the majority of its
LIBOR-linked contracts through introduction of, or amendments to,
fallback clauses into the contracts which will change the basis for
determining the interest cash flows from LIBOR to alternative
reference rate at an agreed point in time.
The following table shows the total amounts of outstanding
contracts and the progress in completing the transition to
alternative benchmark rates as at 31 December 2021. The amounts of
financial assets and liabilities are shown at their carrying
amounts.
Carrying
amounts/
Transition progress
Financial instruments Maturing notional Hedging for financial
prior to transition in amounts accounting instruments
RMB'000
Lease liabilities 2022-2024 1,776,510 N/A Expected to
linked to 3 month transition in
USD LIBOR 2023
Lease liabilities 2023-2025 6,645,022 N/A Expected to
linked to 6 month transition in
USD LIBOR 2023
Lease liabilities 2026-2027 610,336 N/A Completed transition
linked to 3 month to
JPY LIBOR
Tokyo Term Risk
Free Rate In
January 2022
45. FINANCIAL INSTRUMENTS (continued)
d. 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
at Fair value measurements
as at 31 December 2021 categorised
31 December into
2021 Level 1 Level 2 Level 3
RMB'000 RMB'000 RMB'000 RMB'000
Financial assets at
fair value through
profit or loss 4,157 4,157 - -
Equity instruments
at FVTOCI 176,323 - - 176,323
Debt instruments at
FVTOCI 1,373,634 - 1,373,634 -
Total financial assets
at fair value 1,554,114 4,157 1,373,634 176,323
Fair value
at Fair value measurements
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
During the year ended 31 December 2021 and 2020, there were no
transfers between Level 1 and Level 2, or 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.
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..
45. FINANCIAL INSTRUMENTS (continued)
d. Fair value measurements of financial instruments (continued)
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
2021 2020 2021 2020
RMB'000 RMB'000 RMB'000 RMB'000
Financial liabilities
- corporate bonds
(fixed rate) 12,900,439 18,375,007 12,701,744 18,123,860
Fair value hierarchy as at 31 December 2021
Level 1 Level 2 Level 3 Total
RMB'000 RMB'000 RMB'000 RMB'000
Financial liabilities
- corporate bonds
(fixed rate) - 12,701,744 - 12,701,744
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
46. 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
Borrowings papers Lease liabilities
Note 37 Note 37 Note 36 Total
RMB'000 RMB'000 RMB'000 RMB'000
At 1 January 2020 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)
(Decrease)/increase 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
Financing cash flows 15,737,121 6,350,000 (15,082,110) 7,005,011
Foreign exchange translation (42,398) - (1,174,665) (1,217,063)
New leases entered/lease
modified - - 17,518,895 17,518,895
Lease modification - - (40,300) (40,300)
(Decrease)/increase in
accrued interest 10,480 (2,743) - 7,737
At 31 December 2021 68,088,848 25,233,074 90,881,360 184,203,282
47. 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 RMB19,296 million (2020: RMB7,857
million) and lease liabilities of RMB17,519 million (2020: RMB7,142
million).
48. 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
2021 2020
RMB'000 RMB'000
Service provided to the CNAHC
Group
Sales commission income 626 9,287
Sale of cargo space 10,497,274 7,688,836
Government charter flights 365,433 424,921
Ground services income 96,671 100,055
Air catering income 30,103 39,601
Income from advertising media
business 13,105 13,105
Aircraft maintenance income 240,477 234,402
Land and buildings rental income 133,371 135,576
Aviation communication expenses 53,268 22,589
Others 281,286 131,966
11,711,614 8,800,338
Service provided by the CNAHC
Group
Sales commission expenses 609,478 351,242
Air catering charges 747,368 660,396
Airport ground services, take-off,
landing and depot expenses 1,146,468 1,085,708
Repair and maintenance costs 15,430 9,282
Management fees 253,146 170,809
Expense relating to short-term
leases and leases of low-value
assets 93,200 120,390
Other procurement and maintenance 201,752 213,675
Aviation communication expenses 419,691 408,374
Interest expenses 54,693 29,041
Media advertisement expenses 174,578 137,696
Construction management expenses 33,533 44,102
Others 62,763 23,252
3,812,100 3,253,967
48. 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)
2021 2020
RMB'000 RMB'000
Loans to the CNAHC Group by CNAF:
Advances/(repayments) of loans 60,000 (510,000)
Interest income 1,457 3,263
Deposits from the CNAHC Group
received by CNAF:
Increase in deposits received 6,876,696 1,090,264
Interest expenses 56,786 43,278
As a lessee with CNAHC Group:
Addition in right-of-use assets
on new leases 3,703,170 2,000,363
Addition in lease liabilities
on new leases 3,703,170 2,000,363
Lease payments paid 1,881,577 1,526,060
Interest on lease liabilities 391,434 346,230
Service provided to joint ventures
and associates
Sales commission income 523 1,176
Ground services income 92,971 101,481
Aircraft maintenance income 107,800 103,315
Air catering income 3,726 2,947
Frequent-flyer programme income 43,293 31,294
Land and buildings rental income 4,336 6,596
Others 1,307 1,543
253,956 248,352
48. 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)
2021 2020
RMB'000 RMB'000
Service provided by joint ventures
and associates
Sales commission expenses 685 655
Air catering charges 13 1,971
Airport ground services, take-off,
landing and depot expenses 219,987 217,864
Repair and maintenance costs 925,000 1,506,834
Expense relating to short-term
leases and leases of low value
assets 19,389 1,160
Other procurement and maintenance 17,084 17,850
Aviation communication expenses 5,743 5,407
Frequent-flyer programme expenses 448 588
Airline joint operation expenses - 10,482
1,188,349 1,762,811
Loans to joint ventures and associates
by CNAF:
Net repayment of loans - 192,400
Interest income - 5,187
Deposits from joint ventures and
associates received by CNAF:
Decrease in deposits received 2,708 71,997
Interest expenses 2,670 3,809
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.
48. 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
2021 2020
RMB'000 RMB'000
Outstanding balances with related
parties*
Amount due from the ultimate holding
company 384,102 591,909
Amounts due from associates 139,177 209,549
Amounts due from joint ventures 2,745 486
Amounts due from other related
companies 1,878,142 1,895,852
Amount due to the ultimate holding
company 45,707 43,703
Amounts due to associates 80,836 87,811
Amounts due to joint ventures 320,974 432,560
Amounts due to other related companies 14,713,417 12,985,411
* 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.
2021 2020
RMB'000 RMB'000
Outstanding borrowing balances
with related parties:
Interest-bearing borrowings:
- Due to the ultimate holding
company 1,101,150 -
- Due to other related companies 330,280 1,361,244
48. 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)
2021 2020
RMB'000 RMB'000
Outstanding balances between CNAF
and related parties:
(1) Outstanding balances between
CNAF and CNAHC Group
Loans granted 80,000 20,000
Deposits received 11,236,165 4,359,469
Interest payable to related parties 13,622 11,488
Interest receivable from related
parties 85 20
(2) Outstanding balances between
CNAF and joint ventures and associates
of the Group
Deposits received 86,789 89,499
Interest payable to related parties 29 158
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.
(b) An analysis of the compensation of key management personnel of the Group is as follows:
2021 2020
RMB'000 RMB'000
Short term employee benefits 14,068 15,134
Retirement benefits 660 682
Total emoluments for key management
personnel 14,728 15,816
48. RELATED PARTY TRANSACTIONS (continued)
(b) An analysis of the compensation of key management personnel
of the Group is as follows: (continued)
The breakdown of emoluments for key management personal are as
follows:
2021 2020
RMB'000 RMB'000
Directors and supervisors 3,532 2,282
Senior management 11,196 13,534
14,728 15,816
Further details of the remuneration of the directors and
supervisors are included in Note 13 to the consolidated financial
statements.
(c) Guarantee with related parties
Amount of guaranty at 31 December 2021:
Amount
of guaranty
Inception Maturity
at 31 December date date
Name of guarantor Name of guarantee 2021 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
48. RELATED PARTY TRANSACTIONS (continued)
(c) Guarantee with related parties (continued)
Amount of guaranty at 31 December 2020:
Amount
of guaranty
Inception Maturity
at 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
(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.
49. 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
2021 2020
RMB'000 RMB'000
Non-current assets
Property, plant and equipment 72,239,615 74,974,274
Right-of-use assets 85,304,541 78,626,049
Intangible assets 11,015 11,312
Interests in subsidiaries (Note 22) 20,153,167 20,155,167
Interests in associates 885,731 1,130,610
Interests in joint ventures 1,616,067 1,481,943
Advance payments for aircraft and flight
equipment 13,425,634 16,212,663
Deposits for aircraft under leases 440,475 481,531
Equity instruments at fair value through
other comprehensive income 22,110 22,110
Deferred tax assets 7,505,632 5,679,491
Other non-current assets 535,016 671,414
202,139,003 199,446,564
Current assets
Inventories 81,634 88,664
Accounts receivable 2,492,262 2,259,952
Prepayments, deposits and other receivables 2,665,597 3,260,947
Financial assets at fair value through
profit or loss 3,066 -
Restricted bank deposits 30,635 42,226
Cash and cash equivalents 5,794,662 4,609,130
Assets held for sale 333,884 -
Other current assets 3,364,547 2,327,892
14,766,287 12,588,811
Total assets 216,905,290 212,035,375
49. INFORMATION ABOUT THE STATEMENT OF FINANCIAL POSITION OF THE COMPANY (continued)
31 December 31 December
2021 2020
RMB'000 RMB'000
Current liabilities
Air traffic liabilities (1,885,651) (1,652,124)
Accounts payable (9,830,667) (10,370,375)
Other payables and accruals (7,225,128) (5,873,289)
Current taxation - (32,658)
Lease liabilities (10,044,657) (9,300,338)
Interest-bearing borrowings (27,495,473) (27,764,649)
Provision for return condition checks (170,111) (5,990)
Contract liabilities (1,189,785) (1,006,813)
(57,841,472) (56,006,236)
Net current liabilities (43,075,185) (43,417,425)
Total assets less current liabilities 159,063,818 156,029,139
Non-current liabilities
Lease liabilities (52,938,427) (51,955,400)
Interest-bearing borrowings (38,320,863) (22,967,910)
Provision for return condition checks (5,441,494) (5,022,067)
Provision for early retirement benefit
obligations (1,006) (1,351)
Long-term payables - (8,650)
Contract liabilities (1,528,569) (1,981,139)
Deferred income (352,730) (355,457)
(98,583,089) (82,291,974)
NET ASSETS 60,480,729 73,737,165
CAPITAL AND RESERVES
Issued capital 14,524,815 14,524,815
Reserves 45,955,914 59,212,350
TOTAL EQUITY 60,480,729 73,737,165
Independent 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 82 to 186, which
comprise the consolidated statement of financial position as at 31
December 2021, and the consolidated statement of profit or loss and
the consolidated statement of profit or loss and other
comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the year then ended,
and notes to the consolidated financial statements, including a
summary of significant accounting policies.
In our opinion, the consolidated financial statements give a
true and fair view of the consolidated financial position of the
Group as at 31 December 2021, and of its consolidated financial
performance and its consolidated cash flows for the year then ended
in accordance with International Financial Reporting Standards
("IFRSs") issued by the International Accounting Standards Board
(the "IASB") and have been properly prepared in compliance with the
disclosure requirements of the Hong Kong Companies Ordinance.
Basis for Opinion
We conducted our audit in accordance with 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 2021, the provision for major overhauls Our procedures in relation to provision for major
of RMB6,373 million was recorded overhauls to fulfil the return condition
in the consolidated statement of financial position. of aircraft under leases included:
The Group held certain aircraft under leases at 31 -- Testing and evaluating the design and operating
December 2021. Under the terms of the lease effectiveness of the key internal controls
arrangements, the Group is contractually committed to relevant to the audit of provision for major overhauls to
return the aircraft to the lessors in fulfil the return condition of aircraft
a certain condition agreed with the lessors at the under leases.
inception of each lease. In order to fulfil
these return conditions, major overhauls are required to -- Evaluating the appropriateness of the methodology and
be conducted on a regular basis. key assumptions adopted by management
in estimating the provision for these major overhauls.
Management estimates the maintenance costs of major This evaluation based on the terms
overhauls for aircraft held under leases of the leases and the Group's maintenance cost
at the end of each reporting period and accrues such experience.
costs over the lease terms. The calculation
of such costs includes a number of variable factors and -- Performing a retrospective review of the provision for
assumptions, including the anticipated major overhauls to evaluate the
utilisation of the aircraft and the expected costs of appropriateness of the assumptions adopted by management
maintenance. by comparing the assumptions adopted
by management in prior years with actual maintenance
We identified provision for major overhauls to fulfil the costs incurred.
return condition of aircraft under
leases as a key audit matter because of the significant -- Discussing with managers in the engineering department
management estimation and judgement responsible for aircraft engineering
required in assessing the variable factors and about the utilisation pattern of aircraft, obtaining
assumptions in order to quantify the amount relevant operating data, performing recalculation
of provision required at each reporting date. and checking the assumptions adopted by management and
the mathematical accuracy of the calculation
Details of the related estimation uncertainty are set out of provision for major overhauls prepared by management
in Notes 4, 5 and 38 to the consolidated for those aircraft under leases.
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 Our procedures in relation to
consists of passenger revenue passenger revenue recognition
amounting to RMB58,317 million included:
for the year ended 31 December
2021. -- 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 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:
l 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.
l 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.
l Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the directors.
l 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.
l 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.
l 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
(Registered as a Third Country Auditor with the UK Financial
Reporting Council)
Hong Kong
30 March 2022
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:
2021 2020
Notes RMB'000 RMB'000
Net loss attributable to shareholders
of the Company under CASs (16,642,310) (14,409,429)
Deferred taxation (i) (2,377) (2,028)
Differences in value of fixed assets
and other non-current assets (ii) 9,509 8,114
Net loss attributable to shareholders
of the Company under IFRSs (16,635,178) (14,403,343)
31 December 31 December
2021 2020
Notes RMB'000 RMB'000
Equity attributable to shareholders
of the Company under CASs 61,402,519 77,582,421
Deferred taxation (i) 56,543 58,920
Differences in value of fixed assets
and other non-current assets (ii) (230,424) (239,933)
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 61,368,557 77,541,327
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)
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; (2) 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" or the number of tonnes of capacity
"ATK(s)" available for transportation multiplied
by the kilometres flown
"available seat kilometres" or "ASK(s)" the number of seats available for
sale multiplied by the kilometres
flown
"available freight tonne kilometres" the number of tonnes of capacity
or "AFTK(s)" available 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" or the number of revenue passengers
"RPK(s)" carried 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
or "RFTK(s)" in tonnes multiplied by the kilometres
flown
"revenue tonne kilometres" or "RTK(s)" the revenue load (passenger and
cargo) 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 RPK" revenues from passenger operations
divided 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:
"Airbus" Airbus S.A.S.
"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
"Boeing" The Boeing Company
"CASs" China Accounting Standards for Business Enterprises
"Capital Holding" China National Aviation Capital Holding Co.,
Ltd., a wholly-owned subsidiary of CNAHC
"Cathay Pacific" Cathay Pacific Airways Limited, an associate
of the Company
"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 China Limited, a company incorporated in
"Air 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
"IATA" International Air Transport Association
"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 2021 to 31 December 2021
"Date of this Annual 30 March 2022
Report"
"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 Shandong Aviation Group Company Limited, an associate
Group Corporation" 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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