REG - Air China Ld - ANNUAL REPORT 2023
26/04/2024 07:00
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RNS Number : 1829M Air China Ld 26 April 2024
中國國際航空股份有限公司 (short name: 中國國航) (English name:
Air China Limited, short name: Air China) is the only national flag carrier of
China.
As the old saying goes, "Phoenix, a bird symbolizing benevolence" and "The
whole world will be at peace once a phoenix reveals itself". The corporate
logo of Air China is composed of an artistic phoenix figure, the Chinese
characters of "中國國際航空公司" in calligraphy written by Deng
Xiaoping, by whom the China's reform and opening-up blueprint was designed,
and the characters of "AIR CHINA" in English. Signifying good auspices in the
ancient Chinese legends, phoenix is the king of all birds. It "flies from the
eastern Happy Land and travels over mountains and seas and bestows luck and
happiness upon all parts of the world". Air China advocates the core spirit of
phoenix which is to "serve the world, to lead and move forward to higher
goals". By virtue of the immense historical heritage, Air China strives to
create perfect travel experience and keep passengers safe by upholding the
spirit of phoenix of being a practitioner, promoter and leader for the
development of the Chinese civil aviation industry. The Company is also
committed to leading the industrial development by establishing itself as a
national brand, at the same time pursuing outstanding performance through
innovation and excelling efforts.
Air China was listed on The Stock Exchange of Hong Kong Limited (stock code:
00753) and the London Stock Exchange (stock code: AIRC) on 15 December 2004,
and was listed on the Shanghai Stock Exchange (stock code: 601111) on 18
August 2006.
Headquartered in Beijing, Air China has set up branches in Southwest China,
Zhejiang, Chongqing, Tianjin, Shanghai, Hubei, Xinjiang, Guangdong, Guizhou,
Tibet and Wenzhou. As at the end of the Reporting Period, the major
subsidiaries of Air China are Shenzhen Airlines Company Limited (including
Kunming Airlines Company Limited), Shandong Aviation Group Company Limited
(including Shandong Airlines Co., Ltd.), 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 Sichuan Services Aero-Engine Maintenance Co., Ltd,
Beijing Aero-Engine Services Co., Ltd. and GA Innovation China Co., Ltd.
Moreover, the associates of Air China include Cathay Pacific Airways Limited
and Tibet Airlines Co., Ltd.
With the goal of becoming "the world's leading airline", Air China remains
committed to the mission of "put safety first, serve passengers with
credibility, convenience, comfort and choice, maintain stable development,
help employees achieve success and fulfill corporate responsibilities",
advocates the values of "people-oriented, accountable, excelling efforts and
enjoyable flights" and positions the brand as "professional and reliable with
both international quality and Chinese temperament". The "Air China Miles"
programme of Air China is the oldest frequent flier programme in China, under
which all members of the frequent flier programmes of Air China member
airlines have been consolidated into the brand of "Phoenix Miles".
Contents
3 Corporate Information
4 Chairman's Statement
6 Summary of Financial Information
7 Summary of Operating Data
9 Fleet Information
10 Business Overview
23 Management's Discussion and Analysis of Financial Position and Operating
Results
30 Corporate Governance Report
53 Report of the Directors
81 Profile of Directors, Supervisors and
Senior Management
Financial Statements Prepared under International Financial Reporting
Standards
86 Independent Auditor's Report
92 Consolidated Statement of Profit or Loss
93 Consolidated Statement of Profit or Loss and Other Comprehensive Income
94 Consolidated Statement of Financial Position
96 Consolidated Statement of Changes in Equity
97 Consolidated Statement of Cash Flows
99 Notes to the Consolidated Financial Statements
205 Supplementary Information
206 Glossary of Technical Terms
207 Definitions
Corporate Information
REGISTERED CHINESE NAME:
中國國際航空股份有限公司
ENGLISH NAME:
Air China Limited
REGISTERED OFFICE:
1st Floor-9th Floor 101
Building 1
30 Tianzhu Road
Shunyi District
Beijing, the PRC
PRINCIPAL PLACE OF BUSINESS IN HONG KONG:
5th Floor
CNAC House
12 Tung Fai Road
Hong Kong International Airport
Hong Kong
WEBSITE:
www.airchina.com.cn
DIRECTORS:(1)
Mr. Ma Chongxian
Mr. Wang Mingyuan
Mr. Feng Gang
Mr. Patrick Healy
Mr. Xiao Peng
Mr. Li Fushen*
Mr. He Yun*
Mr. Xu Junxin*
Ms. Winnie Tam Wan-chi*
SUPERVISORS:(2)
Mr. Xiao Jian
Mr. Wang Mingzhu
Mr. Li Shuxing
Ms. Lyu Yanfang
Ms. Guo Lina
LEGAL REPRESENTATIVE OF THE COMPANY:
Mr. Ma Chongxian
JOINT COMPANY SECRETARIES:
Mr. Xiao Feng
Mr. Huen Ho Yin
* Independent Non-executive Directors
AUTHORISED REPRESENTATIVES:
Mr. Ma Chongxian
Mr. Xiao Feng
LEGAL ADVISERS TO THE COMPANY:
DeHeng Law Offices
(as to domestic laws)
Jingtian & Gongcheng LLP
(as to overseas laws)
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 61 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 61 of this annual report.
Chairman's Statement
2023 REVIEW
2023 is the year of marking the beginning of comprehensive implementation of
the spirit of the 20th National Congress of the Communist Party of China and a
critical year for carrying forward the "14th Five-Year Plan" development
blueprint. Over the past year, the Group has adhered to the underlying
principle of seeking progress while maintaining stability, coordinated safety
and development, made full efforts to reduce losses and break through
difficulties, accelerated its development into a world-class enterprise,
continued to promote in-depth reforms, improved service quality, strengthened
Party building for its leadership and support, and made significant progress
in all aspects of work.
Steadily maintaining safe development to lay a more solid safety foundation.
Faced with a complex environment and severe challenges, the Group has always
regarded safety as its primary political mission and a matter of paramount
importance. The Group comprehensively implemented the overall national
security concept, and maintained a stable situation in safe operation. The
Group has rigorously implemented its safety responsibilities, firmly
established the concept of safety development, resolutely implemented the Law
on the Production Safety (《安全生產法》) and the "15 Hard Measures"
("十五條硬措施") adopted by the Work Safety Committee of the State
Council（國務院安委會）, and continuously strengthened organisational
leadership in safety work. The Group thoroughly carried out key tasks,
diligently implemented the safety supervision and inspection requirements of
the Civil Aviation Administration of China, earnestly conducted rectification
and reform and improved the long-term mechanism in a bid to enhance the
overall level of safety management. By earnestly focusing on the key aspects,
the Group carried out specialised risk assessments in conjunction with the
characteristics of market recovery at various stages and seasonal
environmental changes so as to ensure that the operation support capability
matched the actual flight operations. In 2023, the Group successfully
safeguarded major transportation tasks such as the Chengdu Summer World
University Games, the Hangzhou Asian Games, "Belt and Road" Forum and
earthquake relief.
Significant improvement in operating performance with effective strides in
profitability. During the year, the Group seized the opportunity of market
recovery, implementing comprehensive measures to enhance quality and
efficiency, resulting in a substantial reduction in operational losses.
Capitalising on opportunities of increasing flight schedules at major domestic
airports, the Group continued to upgrade the quality of express routes,
enhanced the efficiency of utilizing advantageous aircraft types, and made
every effort to expand effective investment in the domestic market. With a
commitment to high-quality service for the country's "Going Global" and "Belt
and Road" initiatives, the Group strived to promote the resumption and
expansion of international routes. As of the end of the Reporting Period, the
number of weekly flights on international and regional routes had been
restored to 74% of the level in the same period in 2019. Proactively
maintaining market order, strengthening sales arrangement and yield level
management, the Group ensured yield level remaining stable. Furthermore, by
further integrating passenger and cargo operations and leveraging
international passenger aircraft capacity and hub networks, revenue from
bellyhold capacity saw significant year-on-year growth. Through rigorous cost
reduction and efficiency enhancement efforts, adhering to the concept of
"living within our means" ("過緊日子"), controlling major costs throughout
the entire process and tightening control over non-budgetary expenses, the
Group achieved cost reduction and efficiency improvements.
Enhancing standard quality management and steadily elevating service
standards. The Group is deeply committed to the people-centred ideology,
continuously refining and enhancing the quality of its aviation services. The
Group actively advanced the construction of the service standard system,
redesigned the top-level management of service standards, strengthened the
implementation of service standards, and promoted consistency in key service
standards among member companies. With efforts made to create outstanding
service products, expedite the launch of branded lounges, and introduce new
onboard products, the Group has continued to enhance the image of the service
brand. It strived to improve the management capabilities for service quality,
consolidate flight regularity management, optimise ticket refund and change
services, and enhance passenger service experience. In addition, the Group
accelerated the digital transformation of services, completed the functional
development of the in-flight catering reservation management system,
continuously enhanced the application of mobile-end scenarios, and steadily
upgraded the digitalisation of services.
Contributing to the "national priorities" and exemplifying our mission and
responsibility. The Group remains steadfast in its functional mission,
dedicated to the national strategies and fulfilling its political and social
responsibilities. New progress has been made in supporting regional
strategies. Proactively aligning with the national strategies, the Group
further refined regional development plans to continuously optimise market
layout and route networks. The Group has achieved new results in technology
innovation, focusing on the three major areas in safety operation, service
marketing and management synergy, resulting in the formulation of a top-level
design for the Group's digital development. Embracing the concept of green
development, the Group actively participated in formulating rules for the
civil aviation carbon market, released its action plan for achieving the
"Carbon Peak" initiative and drove its implementation. Demonstrating new roles
in fulfilling social responsibility, the Group effectively facilitated rural
revitalisation and consolidated achievements in poverty alleviation, earning
the highest rating for six consecutive years.
Strengthening Party building and its leadership to ensure high-quality
development. The Group fully implemented the spirit of the 20th National
Congress of the Communist Party of China, reinforcing Party leadership in
corporate governance, enhancing the development of cadre talent, and
steadfastly advancing comprehensive and strict Party self-governance. Such
effort aims to cultivate a clean and upright political environment, providing
a robust foundation for promoting high-quality development and advancing the
Group's transformation into a world-class enterprise.
The year 2024 marks the 75th anniversary of the founding of the People's
Republic of China, and an important year for the Group's journey towards
becoming a world-class enterprise. The Group will adhere to the principle of
seeking progress while ensuring stability, fully, precisely and
comprehensively implementing the new development philosophy, and contributing
to accelerating the establishment of the new development paradigm. The Group
will coordinate high-quality development and top-level safety, strengthen core
functions and enhance core competitiveness. By focusing on tasks such as
ensuring safe operations, enhancing quality and efficiency, deepening reform,
improving services and strengthening Party building, the Group aims to enhance
its ability for value creation, and will play its role in technological
innovation, industrial control and safety support, so as to make new
contributions to advancing civil aviation and building a strong transportation
nation.
Ma Chongxian
Chairman
Beijing, China
28 March 2024
Summary of Financial Information
(RMB'000)
2023 2022 2021 2020 2019
Revenue 141,100,234 52,897,584 74,531,670 69,503,749 136,180,690
Profit/(loss) from operations 2,889,523 (35,443,794) (16,862,176) (11,168,820) 14,641,918
(Loss)/profit before taxation (1,649,779) (45,876,891) (21,825,530) (18,466,406) 9,120,263
(Loss)/profit after taxation (1,561,248) (45,173,910) (18,822,238) (15,816,131) 7,263,764
(including (loss)/profit attributable to non-controlling interests)
(Loss)/profit attributable to (522,837) (6,556,415) (2,187,060) (1,412,788) 843,470
non-controlling interests
(Loss)/profit attributable to equity shareholders of the Company (1,038,411) (38,617,495) (16,635,178) (14,403,343) 6,420,294
EBITDA((1)) 30,000,030 (14,210,120) 4,072,326 9,239,497 35,921,002
EBITDAR((2)) 30,839,752 (13,632,238) 4,981,874 9,925,796 37,452,389
(Loss)/earnings per share attributable to equity shareholders of the Company (0.07) (2.81) (1.21) (1.05) 0.47
(RMB)
(Loss)/return on equity attributable to equity shareholders of the Company (%) (2.79) (163.79) (27.11) (18.58) 6.87
Notes:
(1) EBITDA represents earnings before finance income and finance
costs, exchange gains/losses, income tax, share of profits or losses 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 2023 31 December 2022 31 December 2021 31 December 2020 31 December 2019
Total assets 335,278,694 294,979,377 298,381,190 284,029,616 294,206,373
Total liabilities 300,014,685 273,451,149 232,550,079 200,256,580 192,876,910
Non-controlling interests (1,941,966) (2,048,948) 4,462,554 6,231,709 7,870,786
Equity attributable to equity shareholders of the Company 37,205,975 23,577,176 61,368,557 77,541,327 93,458,677
Equity attributable to equity shareholders of the Company per share (RMB) 2.30 1.62 4.23 5.34 6.43
Summary of Operating Data
The following is the operating data summary of the Company, Shenzhen Airlines
(including Kunming Airlines), Shandong Airlines, Air Macau, Beijing Airlines,
Dalian Airlines and Air China Inner Mongolia.
Current year Previous year Increase/
(decrease)
Capacity
ASK (million) 292,513.16 110,735.88 164.15%
International 47,693.43 4,691.31 916.63%
Mainland China 237,326.42 104,413.50 127.29%
Hong Kong SAR, Macau SAR and Taiwan, China 7,493.31 1,631.07 359.41%
AFTK (million) 9,648.19 8,510.90 13.36%
International 2,939.26 5,904.80 (50.22%)
Mainland China 6,511.56 2,488.21 161.70%
Hong Kong SAR, Macau SAR and Taiwan, China 197.37 117.88 67.43%
ATK (million) 36,002.19 18,482.42 94.79%
Traffic
RPK (million) 214,172.87 69,966.58 206.11%
International 32,306.61 2,076.48 1455.84%
Mainland China 176,788.86 67,134.33 163.34%
Hong Kong SAR, Macau SAR and Taiwan, China 5,077.40 755.76 571.82%
RFTK (million) 3,015.54 3,502.13 (13.89%)
International 1,637.80 2,532.04 (35.32%)
Mainland China 1,337.20 933.23 43.29%
Hong Kong SAR, Macau SAR and Taiwan, China 40.55 36.86 10.01%
Passengers carried (thousand) 125,454.54 45,086.67 178.25%
International 6,730.76 379.10 1675.48%
Mainland China 115,547.16 44,266.54 161.03%
Hong Kong SAR, Macau SAR and Taiwan, China 3,176.62 441.04 620.25%
Cargo and mail carried (tonnes) 1,070,372.96 902,821.18 18.56%
Kilometres flown (million) 1,565.96 748.10 109.33%
Block hours (thousand) 2,529.46 1,166.89 116.77%
Number of flights 902,517 409,870 120.20%
International 46,956 16,189 190.05%
Mainland China 830,317 387,566 114.24%
Hong Kong SAR, Macau SAR and Taiwan, China 25,244 6,115 312.82%
RTK (million) 21,887.15 9,688.36 125.91%
Load factor
Passenger load factor (RPK/ASK) 73.22% 63.18% 10.03 ppt
International 67.74% 44.26% 23.48 ppt
Mainland China 74.49% 64.30% 10.20 ppt
Hong Kong SAR, Macau SAR and Taiwan, China 67.76% 46.34% 21.42 ppt
Cargo and mail load factor (RFTK/AFTK) 31.26% 41.15% (9.89 ppt)
International 55.72% 42.88% 12.84 ppt
Mainland China 20.54% 37.51% (16.97 ppt)
Hong Kong SAR, Macau SAR and Taiwan, China 20.54% 31.27% (10.72 ppt)
Overall load factor (RTK/ATK) 60.79% 52.42% 8.37 ppt
Utilisation
Daily utilisation of aircraft (block hours per day per aircraft) 8.14 3.90 4.24 hours
Yield
Yield per RPK (RMB) 0.6094 0.6345 (3.96%)
International 0.6627 2.3444 (71.73%)
Mainland China 0.5948 0.5688 4.57%
Hong Kong SAR, Macau SAR and Taiwan, China 0.7785 1.0105 (22.96%)
Yield per RFTK (RMB) 1.3811 2.9644 (53.41%)
International 1.7094 3.3614 (49.15%)
Mainland China 0.8907 1.4926 (40.33%)
Hong Kong SAR, Macau SAR and Taiwan, China 4.2950 9.1181 (52.90%)
Unit cost
Cost of operation per ASK (RMB) 0.4978 0.9533 (47.78%)
Cost of operation per ATK (RMB) 4.0445 5.3980 (25.07%)
Note: As at 21 March 2023, the Company has gained control of Shandong
Aviation Group Corporation, and its subsidiaries within the consolidation
scope of Shandong Aviation Group Corporation, including Shandong Airlines,
have become companies within the scope of the consolidated financial
statements of the Group. For details, please refer to the announcement of the
Company dated 21 March 2023. The sections headed "SUMMARY OF OPERATING DATA"
and "FLEET INFORMATION" in this annual report include relevant operating data
and fleet information of Shandong Airlines, and the historical data in the
above table have been adjusted to a comparable basis.
Fleet Information
During the year of 2023, the Group introduced a total of 23 aircraft,
including seven A350, three A321NEO, three A320NEO, one B737-800 and nine
ARJ21-700, and phased out a total of 12 aircraft, including three A330-200,
one A320, seven B737-800 and one business jet.
As at the end of 2023, the Group had a total of 905 aircraft with an average
age of 9.36 years, of which the Company operated a fleet of 495 aircraft in
total, with an average age of 9.12 years. The Company introduced 20 aircraft
and phased out 12 aircraft.
Details of the fleet of the Group are set out in the table below:
31 December 2023
Sub-total Self-owned Finance leases Operating leases Average age
(year)
Airbus 438 195 123 120 8.96
A320 351 161 97 93 9.15
A330 57 24 6 27 11.07
A350 30 10 20 - 2.63
Boeing 439 183 81 175 10.19
B737 387 150 70 167 10.23
B747 10 8 2 - 14.47
B777 28 13 9 6 9.71
B787 14 12 - 2 6.86
COMAC 24 12 12 - 1.35
ARJ21 24 12 12 - 1.35
Business jets 4 1 - 3 10.28
Total 905 391 216 298 9.36
Introduction Plan Phase-out Plan
2024 2025 2026 2024 2025 2026
Airbus 4 26 33 11 6 11
A320 4 26 33 6 4 11
A330 - - - 5 2 -
Boeing 32 2 33 1 - -
B737 32 - 23 1 - -
B787 - 2 10 - - -
COMAC 9 2 - - - -
ARJ21 9 2 - - - -
Total 45 30 66 12 6 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 firmly rooted the concept of safety development, and diligently
conducted specific investigations and rectification of major hidden safety
hazards. The Group exerted full effort to ensure the support for safe and
orderly restoration of flight operation, conducting comprehensive risk
assessment for flight resumption work covering the aspects such as human
factors, mechanical issues, environmental concerns and management practices,
to ensure operational support capabilities aligned with actual flight
operations. Furthermore, the Group continued to bolster the development of
four safety operation systems encompassing safety management, flight training,
aircraft maintenance and operation management. The Group also deepened the
utilisation of the flight data management and application system (QBD).
Additionally, efforts were continued to advance the establishment of a safety
management system for the air transport of dangerous goods (SMS-DG),
implementing the dual prevention mechanism for risk control and hidden hazard
investigation. The Group organised and conducted the self-inspections to
ensure compliance with qualifications for personnel involved in air transport
of dangerous goods, including outsourced personnel. Moreover, comprehensive
enhancements were made to the construction of aviation security management
systems and capabilities, with the organisation of aviation security tests,
air defense drills, special fire safety inspections and firefighting and
rescue drills. Key personnel in fire safety management were duly licensed for
their duties.
The Group earnestly implemented all the directives from safety supervision
units, conducting comprehensive investigations and research in safety areas.
The Group exerted significant efforts to translate the findings of thematic
education research into action, successfully achieving the safety improvement
goals set during thematic education. The Group continued to improve its
emergency planning system, promptly responded to and effectively managed
emergencies. Through a focused cultivation of safety culture and the practical
promotion of safety practices, the Group launched qualification training for
safety officers in charge and management personnel at all levels, all of whom
successfully passed the assessments. The Group successfully safeguarded major
transportation tasks such as the Chengdu Summer World University Games, the
Hangzhou Asian Games, "Belt and Road" Forum and earthquake relief.
During the Reporting Period, the Group recorded 2.5295 million safe flight
hours, transported 125 million passengers safely, continuously maintaining an
overall stable and safe operation.
Maximising Operating Performance
Seizing the opportunity presented by the recovery of the air passenger
transportation market, and prioritizing safe operation, the Group further
advanced various initiatives aimed at enhancing quality and efficiency. The
Group made every effort to maximise operational performance, actively pursue
revenue generation and reduce costs. As a result, there was a year-on-year
increase in revenue of 166.74%, coupled with a decrease of RMB44,227 million
in loss before taxation, demonstrating a significant improvement in
operational performance amid stable economic conditions and operations.
Adhering to the principal of "increasing investment, maintaining price level
and competing for business volume", the Group bolstered its capacity for
"synergistic" development and focused on optimizing the allocation of core
resources. The Group enhanced the efficiency of utilizing advantageous
aircraft types and expanded effective inputs. By capturing opportunities of
increasing flight schedules at major domestic airports, the Group continued to
upgrade the express route products. To support the national "Going Global"
strategy and the "Belt and Road" initiative with high-quality service, the
Group has operated 55 "Belt and Road" related routes across 31 cities in 25
countries, with flight numbers close to 90% of those in the same period in
2019. The Group continued to promote the resumption and expansion of
international routes accordingly. Furthermore, the Group expedited marketing
innovation and digital transformation, and further implemented the linkage
between passenger aircraft and cargo operations, driving the year-on-year
growth in passenger and cargo transportation revenue.
Maintaining strict cost control and upholding the concept of "living within
our means" ("過緊日子"), the Group implemented rigorous budgetary
constraints and diligently reduced costs throughout the entire business chain
and the business. The Group optimised operational costs and effectively
managed fixed costs to reduce overall expenditure. Emphasizing the importance
of secure and sustainable cash flow, the Group strengthened its capital
management and control, enhanced the efficiency of fund using, continued to
optimise debt structure, effectively controlled interest-bearing liabilities
and reduced financial costs. In addition, the Group focused on improving labor
productivity across all levels and scientifically managed labor costs.
Enhancing Services
The Group has firmly embraced a "people-centred" development ideology and put
the concept of "sincere services" into practice. The Group has continuously
refined its service standard system, promoted the branding of its services and
products, optimised the end-to-end service experience and expedited the
enhancement of its high-quality service standards to consistently meet
passengers' expectations for a pleasant air travel experience.
In order to improve service standard system and revamp the service standard
management structure, the Group has ensured stable presentation of products
and services by refining the product and service standards and establishing or
revising several quality management standards and work standards. It promoted
the branding of service and products, with the opening of the "Zixuan"
("紫軒") and "Zichen" ("紫宸") branded self-operated lounges in Hangzhou
and Guiyang, the introducing of the "Phoenix Dance in the Cloud"
("鳳舞雲端") cabin new visual package products and a new version of
in-flight entertainment system, offering passengers a comprehensive and
exclusive audio-visual experience. The Group actively integrated regional food
and beverage cultures to launch featured meal sets and beverages, creating a
distinctive flavor for Air China. Besides, Air China Express Routes were
expanded to seven routes, and free ticket change and transfer services were
launched between Air China family airlines to facilitate convenient travel for
passengers.
To optimise the end-to-end service experience, the Company has strengthened
flight plan management, flight regularity monitoring and analysis as well as
comprehensive ground control over flights. As a result, the Company's flight
regularity has consistently surpassed the industry average. The Company has
formulated and implemented 11 measures to improve passenger ticket services,
enhancing the friendliness and convenience of ticket refunds and changes
services. Catering to the travel needs of special passengers, the Company has
provided special counters and terminal guidance for "first-time passengers".
With the launch of "automatic check-in" services on three routes in Guangzhou,
travel procedures have been effectively simplified for passengers. The Company
has also launched whole-process luggage tracking and inquiry services at 23
terminals, including Xi'an and Changsha, bringing the total number of
terminals having such services to 53.
Digital Transformation
To accelerate the promotion of digital transformation, the Group insisted on
safety operations as the bottom line, placing passenger service at the
forefront. By leveraging management synergy as the foundation, the Group
focused on cultivating the construction of three major digital platforms,
promoting the convergence of business and technology, and facilitating the
integration of the entire business process.
In 2023, the Group pushed forward the deepening application and dissemination
of the global ground flight support platform, on which four major modules have
been launched, namely flight monitoring, smart scheduling, mobile ground
services and data platform, covering over 1,200 functional points such as
flight plan management, security task monitoring and real-time dispatching.
Since its launch, the platform has safeguarded over 250,000 inbound and
outbound flights, benefiting approximately 6,000 business users including the
Ground Services Department, Comprehensive Security Support Department and
Beijing Aviation Catering, which significantly enhanced large-scale ground
production organisation efficiency. At the same time, the Group completed the
full-scale deployment of the Tianjin Branch, encompassing the Production
Command Centre, Ground Services Department, aircraft services and other major
security units.
Focusing on improving passenger service quality, the Group has comprehensively
promoted the system development in the full-process passenger service domain.
The Group introduced facial recognition functionality at lounges in Hangzhou
to provide passengers with an intelligent access method and, at the same time,
implemented management service functions on the mobile end to empower
frontline staff. Since January 2024, it has been rolling out mobile-end
functions across all 32 self-operated lounges in China, and expanding the face
recognition access scenarios in the lounges in regions including Xinjiang and
Shanghai.
To establish a high-quality air-to-ground interconnection network and increase
the speed of passengers' Internet access in order to significantly improve the
passengers' Internet experience, Air China's A350 fleet pioneered the
extension of in-flight Internet services to the take-off and landing phases in
September 2023, covering the entire passenger flight and laying the groundwork
for Internet services to encompass passenger trips "door-to-door". Moving
forward, the Group will continue to accelerate the building of an
internationally leading Internet fleet.
Risk Prevention and Control
Continuing to deepen the integrated collaborative mechanism of "emphasizing
the rule of law, strengthening internal control, preventing risks and
promoting compliance", the Group accelerated the implementation of risk
prevention and control across all processes, chains and areas, comprehensively
strengthening safety operation risk management and operational risk
prevention.
The Group secured a stable mechanism of risk assessment. Adhering to
governance decision-making procedures, the Group actively and steadily
reviewed and assessed major risks annually through in-depth research and
thematic diagnosis, and implemented comprehensive measures accordingly. By
enhancing the precision of risk quantification and quantifying key risk
indicators, the Group further improved graded and classified rolling
monitoring of important risk issues, carrying out closed-loop management. The
Group implemented a regular mechanism for annual inspection on overseas legal
compliance risks, emphasising the focus on risk control in foreign-related
legal compliance. Extending decision-making risk assessment mechanisms, the
Group ensured comprehensive risk evaluation for major decisions while
prioritising compliance as the premise, proactively mitigating and eliminating
risks. The Group promoted the in-depth integration of risk assessment into
reform and development, central tasks and material project management. The
Group soundly improved the coordinated mechanism of risk prevention and
control. The management supervised key task progress, focused on researching
and assessing risk control and management difficulties, and promoted practical
experience of risk control and management. The Group continued to strengthen
the information sharing mechanism among risk control, compliance, discipline
inspection, inspection and audit, collectively establishing three lines of
defense for risk prevention in management coordination. The responsibility
mechanism for risk prevention and control was comprehensively consolidated.
With strict risk classification and hierarchical management, the Group
enforced the responsibilities of risk mitigation to the specific position and
individual staff to enhance overall handling capacity of risk management
throughout the entire process.
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 transportation industry in the PRC. While pursuing outstanding
performance through innovation and excelling efforts, the Company is also
committed to leading the industrial development and establishing itself as a
"National Brand". 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.
In 2023, Air China established a leading organization for branding to further
promote the in-depth integration of brand building with its production and
operation, with a view to facilitating the high-quality development of the
Company. Actively in response to the "Belt and Road" initiative, Air China
meticulously organized the inaugural flights of the Xi'an-Astana and
Beijing-Hetian routes. It participated in important exhibitions such as the
Exposition of China Brand, the Western China International Fair, the China
International Tourism Fair, the International Exhibition on Transport
Technology and Equipment and the first CATA Aviation Conference at a high
level. In addition, by sponsoring the China International Fair for Investment
and Trade and the China International Supply Chain Expo, Air China has
actively demonstrated its operational strength and good brand image.
According to the ranking list released by the World Brand Lab, Air China
ranked no. 283 in the "World's Top 500 Brands" in 2023 and no. 24 in the
"China's 500 Most Valuable Brands" with a brand value of RMB235.162 billion,
maintaining a leading position in the domestic aviation service industry.
Besides, Air China won the "2023 Annual No.1 Chinese Brand Award in the
aviation services category".
Market leader of the Beijing hub
In 2023, basing itself on the domestic cycle, Air China actively promoted hub
construction in a bid to establish Beijing Capital International Airport into
a world-class aviation hub, and contribute to the development of Beijing
Daxing International Airport becoming a new driver for the national
development. Seizing the opportunity of the further release of flight
schedules in Beijing, Air China made every effort to secure flight schedules
at the Beijing Capital Airport. The average daily number of Air China's
flights at Beijing Capital Airport has reached 720 flights per day.
At the same time, Air China continued to 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. During the Reporting Period, in addition to increasing its
investment, Air China carefully developed well-established express route
products and strong express route brands. In 2023, it has added the
Beijing-Xiamen express route; and in the IATA winter and spring seasons, Air
China increased investment in seven express routes between Beijing Capital -
Shuangliu, Chengdu/Chongqing/Hongqiao,
Shanghai/Hangzhou/Guangzhou/Shenzhen/Xiamen, respectively, realizing a
year-on-year increase in investment, with the proportion of wide-body aircraft
reaching 71%.
Balanced and complementary route network
In 2023, being dedicated to the "people-oriented" development philosophy, Air
China actively implemented the requirements of the Central Government to
"increase international flights and ensure the steady and smooth flow of
China-European flights", and accelerated the resumption of key routes for
which people have a keen travel demand, in order to ensure smooth traffic flow
of the "bridges in the air" and meet the needs of personnel travel and
economic and trade exchange. As of the end of 2023, Air China had 94
international routes and 12 regional routes, with flights to 36 countries, 55
international cities and 3 regional cities, of which 6 were new and 45 were
resumed international routes, and 6 were resumed regional routes. As of the
end of 2023, the number of international and regional weekly flights was
recovered to 74% of that in the same period of 2019, with a rate of resumption
ranking among the top in the industry.
Meanwhile, Air China continued to serve for the national "Going Global"
strategy by implementing the eight actions proposed by the General Secretary
to support the joint construction of the "Belt and Road" by China and actively
promoting the resumption and launch of "Belt and Road" related routes. As of
the end of 2023, the number of executed "Belt and Road" related routes reached
55, involving 25 countries and 31 cities, and the number of flights was close
to 90% of that of the same period in 2019, which was higher than the overall
level of international recovery. Six new "Belt and Road" routes have been
launched, including Beijing-Istanbul, Hangzhou-Dubai, Chengdu-Manila,
Chengdu-Kuala Lumpur, Chongqing-Singapore and Beijing-Xi'an-Astana.
On the domestic front, serving for the national strategy of expanding domestic
demand, Air China efficiently coordinated its production organization and
continued to expand its effective investment in the domestic market. In 2023,
the Company's annual investment in domestic flight seat kilometres increased
by 33.7% as compared to 2019, and eight new domestic routes were launched,
including Tianjin-Shenyang, Wuhan-Dazhou and Beijing Capital-Lianyungang,
resulting in the opening of flights to 123 cities in Mainland China with a
total number of 336 flight routes. Upon acquiring the control of Shandong
Aviation Group Corporation and its shareholding control, the Company's
domestic route network has been effectively replenished, which is more
conducive to serving for the new development pattern which is mainly based on
the domestic circulation.
High quality customer base
In line with the Company's strategy for hub network, the Group is positioned
in the mid-to-high-end business mainstream traveler market and currently has
the most valuable traveler base in China. As at the end of the Reporting
Period, the number of "Phoenix Miles" members has exceeded 82.296 million,
revenue contributed by frequent fliers accounted for 52.8% of the Company's
air passenger revenue, the total number of users of Air China APP have reached
20.31 million, and the total number of effective major customers amounted to
6,680.
Leading cost control mechanism
Adhering to strict cost control and upholding the idea of "living within our
means", the Group exercised stringent budgetary control with rigid discipline,
while further curbing full-chain and full-business costs and expenses, and
tapping the potential of squeezing operating costs to control full-process
fixed costs and reduce the cost level. Highlighting the principle of secure
and sustainable cash flow, the Group strengthened its capital management and
control, enhanced the efficiency of use of funds, continued to optimize the
debt structure, effectively control the scale of interest-bearing liabilities
and save finance costs. In addition, it promoted the labor productivity of all
employees and controlled the labor costs in a scientific manner.
Continuous innovation of management mechanism
The Group persisted with innovation as the primary driving force for corporate
development, and continued to promote the implementation of specific
technological innovation plans under the "14th Five-year" plan. It has made
great efforts to build up the dominant position of enterprise technology
innovation, and actively deployed the layout of strategic emerging industries.
The Group also further participated in collaboration for major technological
breakthroughs and solidly promoted innovation from the stage of system
construction to the stage of efficiency enhancement.
To promote the transformation and application of innovative achievements, the
Group published its "Recommended Catalogue of Innovative Achievements", and
set up an information channel for matching supply and demand in terms of
innovative achievements. To create a favorable atmosphere for encouraging
innovation, the Group held its first Innovation Competition, in which young
employees actively participated to resolve production-related problems and a
number of outstanding innovation projects emerged. The "Carbon emission
monitoring and analysis platform of CNAHC Group" won the First Prize of the
19th Innovation Achievement Award for Corporate Management Modernization in
Transportation Enterprises. The "Civil Aircraft Avionic System Maintenance and
Testing Key Technologies and Equipment" won the First Prize of the Civil
Aviation Science and Technology Award of the China Air Transportation
Association (CATA) for the year 2021. The accumulation of innovative
achievements accelerated.
MAJOR SUBSIDIARIES AND ASSOCIATES AND THEIR OPERATING RESULTS
Notes: 1. As at the end of the Reporting Period, CNACG
is a wholly-owned subsidiary of CNAHC. Accordingly, CNAHC is directly and
indirectly interested in 50.14% of the shares of the Company.
2. As at the end of the Reporting
Period, Shandong Aviation Group Corporation is owned as to 66% by the Company,
while Shandong Airlines is owned as to 42% by Shandong Aviation Group
Corporation. Shandong Airlines is directly owned as to 22.8% by the Company,
hence the Company directly and indirectly holds 64.8% of the equity interests
of Shandong Airlines.
3. The shareholding percentages of
the Company's shareholders in the above chart represent the figures as of the
end of the Reporting Period.
During the Reporting Period, the operating results of the major subsidiaries
and associates of the Company were as follows:
Shenzhen Airlines Shandong Aviation Group Corporation Beijing Airlines Dalian Airlines Air China Air Macau Ameco CNAF Cathay Pacific
Inner Mongolia
Year of establishment 1992 1995 2011 2011 2013 1994 1989 1994 1946
Place of domicile Shenzhen Shandong Beijing Dalian Inner Mongolia Macau Beijing Beijing Hong Kong
Principal business Air passenger and air cargo services Air passenger and Business charter Air passenger and air cargo services Air passenger and air cargo services Air passenger and air cargo services Repair and Provision of financial services to CNAHC Group and the Group Air passenger and air cargo services
air cargo services
and public air passenger and air cargo services
overhaul of
aircraft, engines
and components
Registered capital RMB5,360,000,000 RMB10,454,489,846.24 RMB1,000,000,000 RMB3,000,000,000 RMB1,000,000,000 MOP842,042,000 USD300,052,800 RMB1,127,961,864 6,437,900,319
shares in issue
Percentage of shareholding by the Company 51% 66% 51% 80% 80% 66.92% 75% 51% 29.99%
Revenue 299.88 156.75 4.29 18.77 16.67 26.87 110.26 2.20 850.12
(RMB100 million)
(on a consolidated basis) (on a consolidated basis) (on a consolidated basis)
Year-on-year changes (%) 139.12 N/A 184.11 216.53 199.82 274.23 57.31 (25.17) 94.72
Total assets (RMB100 million) 631.72 317.76 9.38 37.15 19.99 55.88 69.60 203.84 1,577.87
Profit/(loss) attributable to parent company (RMB100 million) (17.22) 6.02 (0.81) (0.06) 0.00 (1.75) 2.35 0.47 81.58
Profit/(loss) attributable to parent company in the corresponding period of (111.27) N/A (1.90) (5.93) (4.25) (8.71) (11.53) 0.47 (61.27)
last year (RMB100 million)
Note: The period for the above financial data in profit or loss of
Shandong Aviation Group Corporation during the year was 21 March to 31
December 2023.
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/ Shenzhen Airlines Shandong Airlines Beijing Airlines* Dalian Airlines Air China Air Macau Cathay Pacific
During the Reporting Period
Inner Mongolia
Fleet size (unit) 226 133 3 13 11 20 230
(on a consolidated basis)
(on a consolidated basis)
Average age (year) 9.42 10.08 14.08 10.24 10.67 7.54 10.8
(on a consolidated basis)
ASK (100 million) 682.61 356.38 7.70 41.38 35.16 48.64 856.07
Year-on-year changes (%) 97.08 145.38 574.30 150.73 146.57 277.29 326.8
RPK (100 million) 519.39 283.34 4.85 30.36 25.44 34.86 733.42
Year-on-year changes (%) 145.83 194.78 740.02 193.60 213.72 443.45 396.8
Passengers carried (10 thousand) 3,321.57 1,927.21 36.46 208.32 189.85 205.32 1,798.5
Year-on-year changes (%) 127.40 197.37 757.48 189.98 174.24 448.82 541.4
Average passenger load factor (%) 76.09 79.50 63.00 73.37 72.37 71.66 85.7
Year-on-year changes (ppt) 11.43 13.32 12.43 10.71 15.49 21.91 12.1
*Note: As at the end of the Reporting Period, Beijing Airlines operated a
fleet of three entrusted business jets and one self-owned business jet with an
average age of 10.28 years. During the Reporting Period, in terms of business
charter service, Beijing Airlines completed 311 flights, representing a
year-on-year increase of 0.32%; it completed 1,092.79 flying hours,
representing a year-on-year increase of 30.53%; it carried a total of 2,344
passengers, representing a year-on-year decrease of 0.72%.
OPERATIONAL PLAN
The Company has established its operational focuses for 2024, which included
(1) to unwaveringly uphold the principle of safety first and firmly secure the
bottom line of safety; (2) to vigorously enhance efficiency and quality, and
significantly boost the level of profitability; (3) to intensify efforts in
reform and innovation, and accelerating the development into a world-class
enterprise; (4) to focus on creating "four excellence" and promoting
comprehensive improvement in service quality; (5) to strengthen the leading
and supporting roles, further enhancing the Party's leadership and Party
building.
OUTLOOK FOR FUTURE
1. Making contributions to the national development strategies by
the civil aviation industry in China
As a strategic pillar industry, China's civil aviation industry will shoulder
the mission and task of promoting high-quality development of the country. It
will leverage the supportive role of civil aviation in promoting circulation
and expanding circulation, further improve the modern airport system and route
network mutually in line with the development of the national economy and
society, the spatial layout of national land and space development, and major
production layout and serve the national major strategies for regional
development and coordination. Promoting the development of the "Silk Road in
the Sky" ("空中絲綢之路"), the Group will further optimise the overseas
market layout, expand global coverage and serve China's deeper participation
in global industrial division and cooperation. Playing its role of promoting
economic structural transformation and upgrading, the civil aviation industry
will encourage manufacturers to continuously improve the quality and
performance of their products, thereby promoting the development and robust
growth of China's aviation industry. Playing the leading role of civil
aviation industry in consumption upgrade, the Group will continue to innovate
services and products to improve the quality of life for the people. Giving
play to its leading role in the comprehensive transport system, the civil
aviation industry will develop a modern and comprehensive transport hub and
implement multiple-modal interlink operation to accelerate the development of
China into a strong nation in terms of transport.
2. Passenger volume will resume natural growth in China's civil
aviation industry
There is no change in the fundamentals of the Chinese economy with the basic
trend of economic stability and long-term improvement still intact. China
continues to be in a period of strategic opportunities. Leveraging the super
large-scale domestic demand market formed by a population of 1.4 billion,
including a middle income group of over 400 million people, China is striving
to build a new development paradigm centred around domestic circulation, with
the international and domestic circulations mutually reinforcing each other.
The demand for civil aviation in China will continue to maintain a positive
growth momentum.
3. Competition landscape of the domestic aviation market
It is expected that the competitive pressures in the domestic aviation market
will alleviate. On the demand side, with the continued rebound and improvement
of the national economy, the foundation for industrial recovery and
development will become more solid. This will lead to steady growth in the
domestic passenger transportation market, and the international passenger
transportation market will sooner recover, effectively alleviating the
situation of oversupply in the domestic aviation market. In terms of policy,
the CAAC has been advancing a series of reform measures to strengthen the
foundation for the industry building and development, enhance the
international competitiveness of aviation hubs, leading to diversified
operations among various types of airlines in the market and reducing
disorderly market competition.
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 RMB141,100 million,
representing an increase of RMB88,203 million or 166.74% as compared with last
year. Among which, air traffic revenue was RMB134,681 million, representing an
increase of RMB86,300 million or 178.38% as compared with last year; other
operating revenue was RMB6,419 million, representing a year-on-year increase
of RMB1,902 million or 42.11%.
Revenue Contributed by Geographical Segments
2023 2022
(in RMB'000) Amount Percentage Amount Percentage Change
Mainland China 112,765,304 79.92% 38,501,365 72.79% 192.89%
International 24,207,933 17.16% 13,299,094 25.14% 82.03%
Hong Kong SAR, Macau SAR and 4,126,997 2.92% 1,097,125 2.07% 276.16%
Taiwan, China
Total 141,100,234 100.00% 52,897,584 100.00% 166.74%
Air Passenger Revenue
During the Reporting Period, the Group recorded an air passenger revenue of
RMB130,517 million, representing an increase of RMB92,220 million over the
previous year. Among the air passenger revenue, the increase of capacity
contributed an increase of RMB78,135 million in the revenue, and the increase
of passenger load factor led to an increase of RMB19,465 million in the
revenue, while the decrease of passenger yield resulted in a decrease in
revenue of RMB5,380 million. The Group's capacity, passenger load factor and
yield per RPK in 2023 are as follows:
2023 2022 Change
ASK (million) 292,513.16 96,212.39 204.03%
Passenger load factor (%) 73.22 62.73 10.49 ppt
Yield per RPK (RMB) 0.6094 0.6345 (3.96%)
Note: The operating data for the corresponding period in 2022 in the
above table does not include the operating data of Shandong Airlines.
Air Passenger Revenue Contributed by Geographical Segments
2023 2022
(in RMB'000) Amount Percentage Amount Percentage Change
Mainland China 105,155,385 80.57% 32,736,473 85.48% 221.22%
International 21,408,328 16.40% 4,798,616 12.53% 346.14%
Hong Kong SAR, Macau SAR and Taiwan, China 3,952,845 3.03% 761,101 1.99% 419.36%
Total 130,516,558 100.00% 38,296,190 100.00% 240.81%
Air Cargo and Mail Revenue
During the Reporting Period, the Group's air cargo and mail revenue was
RMB4,165 million, representing a decrease of RMB5,920 million as compared with
last year. Among which, the increase of capacity contributed an increase of
RMB1,601 million in the revenue, while the decrease of cargo and mail load
factor resulted in a decrease in revenue of RMB2,746 million, and the decrease
of yield of cargo and mail resulted in a decrease of RMB4,775 million in the
revenue. The capacity, cargo and mail load factor and yield per RFTK in 2023
are as follows:
2023 2022 Change
Available freight tonne kilometres (million) 9,648.19 8,326.31 15.88%
Cargo and mail load factor (%) 31.26 40.86 (9.60 ppt)
Yield per RFTK (RMB) 1.3811 2.9644 (53.41%)
Note: The operating data for the corresponding period in 2022 in the
above table does not include the operating data of Shandong Airlines.
Air Cargo and Mail Revenue Contributed by Geographical Segments
2023 2022
(in RMB'000) Amount Percentage Amount Percentage Change
Mainland China 1,190,986 28.60% 1,248,132 12.38% (4.58%)
International 2,799,606 67.22% 8,500,478 84.29% (67.07%)
Hong Kong SAR, Macau SAR and Taiwan, China 174,151 4.18% 336,024 3.33% (48.17%)
Total 4,164,743 100.00% 10,084,634 100.00% (58.70%)
Operating Expenses
During the Reporting Period, the Group's operating expenses were RMB145,612
million, representing an increase of 58.76% from RMB91,716 million of last
year. The breakdown of the operating expenses is set out below:
2023 2022
(in RMB'000) Amount Percentage Amount Percentage Change
Jet fuel costs 46,725,219 32.09% 22,762,814 24.82% 105.27%
Take-off, landing and depot charges 15,554,795 10.68% 6,499,775 7.09% 139.31%
Depreciation and amortisation 27,110,507 18.62% 21,233,674 23.15% 27.68%
Aircraft maintenance, repair and overhaul costs 9,921,853 6.81% 5,640,163 6.15% 75.91%
Employee compensation costs 29,300,310 20.12% 25,338,553 27.63% 15.64%
Air catering charges 3,002,720 2.06% 872,189 0.95% 244.27%
Selling and marketing expenses 3,423,478 2.35% 1,639,889 1.79% 108.76%
General and administrative expenses 1,683,284 1.16% 1,240,365 1.35% 35.71%
Others 8,890,301 6.11% 6,488,734 7.07% 37.01%
Total 145,612,467 100.00% 91,716,156 100.00% 58.76%
• Jet fuel costs increased by RMB23,962 million on a
year-on-year basis, mainly due to the combined effect of the increase in the
consumption of jet fuel and decrease in the prices of jet fuel.
• Take-off, landing and depot charges increased by
RMB9,055 million on a year-on-year basis, mainly due to the year-on-year
increase in the number of take-offs and landings.
• Depreciation and amortisation expenses increased by
RMB5,877 million on a year-on-year basis, mainly due to the acquisition of
Shandong Aviation Group Corporation, the expansion of fleet as well as the
year-on-year increase in flying hours.
• Aircraft maintenance, repair and overhaul costs
increased by RMB4,282 million on a year-on-year basis, mainly due to the
year-on-year increase in flying hours.
• Employee compensation costs increased by RMB3,962
million on a year-on-year basis, mainly due to the acquisition of Shandong
Aviation Group Corporation and the year-on-year increase in flight hour fees.
• Air catering charges increased by RMB2,131 million on
a year-on-year basis, mainly due to the increase in the number of passengers.
• Selling and marketing expenses increased by RMB1,784
million on a year-on-year basis, mainly due to the acquisition of Shandong
Aviation Group Corporation, and the increase in handling fees for agency
services and booking fees resulting from the increase in the sales volumes and
the number of passengers.
• General and administrative expenses increased by
RMB443 million on a year-on-year basis, mainly due to the acquisition of
Shandong Aviation Group Corporation.
• Other operating expenses mainly included aircraft and
engine operating lease expenses, civil aviation development fund and
non-above-mentioned ordinary expenses arising from the core air traffic
business, which increased by RMB2,402 million on a year-on-year basis, mainly
due to the acquisition of Shandong Aviation Group Corporation and the increase
in the investment in production and operation.
Finance Income, Finance Costs and Net Exchange Losses
During the Reporting Period, the Group recorded a finance income of RMB605
million, representing a year-on-year increase of RMB376 million or 164.52%;
and incurred finance costs (excluding the capitalised portion) of RMB6,943
million, representing a year-on-year increase of RMB470 million. During the
Reporting Period, the Group recorded net exchange losses of RMB1,035 million,
which was decreased by RMB3,053 million on a year-on-year basis.
Share of Results of Associates and Joint Ventures
During the Reporting Period, the net gain from the Group's share of results of
its associates and joint ventures was RMB2,834 million, as compared to a net
loss of RMB101 million for the previous year. Among which, during the
Reporting Period, the Group recognised a gain on investment of Cathay Pacific
of RMB2,432 million, representing a year-on-year increase of RMB2,180 million.
Material Acquisitions and Disposals
On 30 December 2022, the Company entered into the equity transfer agreements
with Shansteel Financial Holdings Asset Management (Shenzhen) Company Limited
(山鋼金控資產管理(深圳)有限公司) and Qingdao Qifa Trading Co.,
Ltd. (青島市企發商貿有限公司), respectively, pursuant to which the
Company shall acquire the 1.4067% and 0.9043% equity interest in Shandong
Aviation Group Corporation held by each of the above companies at the
consideration of RMB20,064,883.27 and RMB12,898,394.49, respectively (the
"Equity Transfer"). The Company held 51.7178% equity interest in Shandong
Aviation Group Corporation upon the completion of the Equity Transfer.
Meanwhile, as the shareholders of Shandong Aviation Group Corporation proposed
to implement certain equity interest transfer arrangements in relation to the
equity interests of Shandong Aviation Group Corporation, upon the completion
of implementing the relevant Equity Transfer, the Company and Shandong
Hi-Speed Group Co., Ltd. (山東高速集團有限公司) proposed to make
capital increase to Shandong Aviation Group Corporation collectively, of which
the Company shall invest RMB6,600,000,000 (the "Capital Increase"). Upon the
completion of the Capital Increase, the Company held 66% equity interest in
Shandong Aviation Group Corporation.
As at 7 April 2023, the registration procedures for industrial and commercial
changes in respect of the transactions under the abovementioned equity
transfer agreements and capital increase agreement were completed, and the
closing thereof was also completed. The Company has acquired the control of
Shandong Aviation Group Corporation and the percentage of the equity interest
of Shandong Aviation Group Corporation held by the Company increased from
49.4067% to 66%. Shandong Aviation Group Corporation, Shandong Airlines and
their subsidiaries within the scope of consolidated financial statements have
been consolidated into the financial statements of the Company. The Company
also completed the registration of transfer of shares involved in the offer to
acquire Shandong Airlines on 26 April 2023. Finally, 25 accounts with a total
of 5,832 listed tradable shares (B shares) accepted the offer issued by the
Company. As at 26 April 2023, the Company directly held 22.8% of the shares of
Shandong Airlines and indirectly held, through Shandong Aviation Group
Corporation, 42% of the shares of Shandong Airlines. For details, please refer
to the announcements of the Company dated 21 March 2023 and 7 April 2023 and
the overseas regulatory announcement of the Company dated 26 April 2023.
Save as disclosed above, 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
RMB335,279 million, representing an increase of 13.66% from that of 31
December 2022, among which current assets accounted for RMB32,335 million or
9.64% of the total assets, while non-current assets accounted for RMB302,944
million or 90.36% of the total assets.
Among the current assets, cash and cash equivalents were RMB15,017 million,
accounting for 46.44% of the current assets and representing an increase of
41.56% from that as at 31 December 2022.
Among the non-current assets, the aggregated book value of property, plant and
equipment and right-of-use assets as at the end of the Reporting Period
amounted to RMB238,700 million, accounting for 78.79% of the non-current
assets and representing an increase of 5.90% from that of 31 December 2022.
Asset Mortgage/Pledge
As of 31 December 2023, the Group, pursuant to certain bank loans and finance
leasing agreements, had secured aircraft and buildings with an aggregated book
value of approximately RMB84,599 million (RMB95,499 million as at 31 December
2022) and land use rights with book value of approximately RMB24 million
(RMB25 million as at 31 December 2022). Meanwhile, the Group had monetary
capital with restricted ownership of approximately RMB612 million
(approximately RMB828 million as at 31 December 2022), which was mainly
statutory reserves deposited in the People's Bank of China.
Capital Expenditure
In 2023, the Group's capital expenditure totalled RMB27,505 million, of which
the total investment in aircraft was RMB15,425 million, mainly including
procurement of aircraft and engines, aircraft modifications, flight
simulators, etc. The cash component for the long-term investments amounted to
RMB9,297 million, mainly including the acquisition of Shandong Aviation Group
Corporation, the capital increase of Shandong Airlines in Sichuan Airlines,
etc. Other capital expenditure investment amounted to RMB2,783 million, mainly
including infrastructure construction, IT system construction, ground
equipment procurement, etc.
Equity Investment
As at the end of the Reporting Period, the Group's equity investment in its
associates amounted to RMB12,863 million, representing an increase of 22.08%
from that of 31 December 2022, mainly due to the combined effect of
recognising the share of gains of associates and other comprehensive income
during the year. Among this, the balance of the equity investment of the Group
in Cathay Pacific amounted to RMB12,596 million.
As at the end of the Reporting Period, the Group's equity investment in its
joint ventures was RMB2,414 million, representing an increase of 10.84% from
that as at 31 December 2022, mainly due to new investments and recognising the
share of gains of joint ventures during the Reporting Period.
Debt Structure Analysis
At the end of the Reporting Period, the Group's total liabilities were
RMB300,015 million, representing an increase of 9.71% from that as at 31
December 2022. Among them, current liabilities amounted to RMB110,317 million,
accounting for 36.77% of the total liabilities; and non-current liabilities
amounted to RMB189,698 million, accounting for 63.23% of the total
liabilities.
Among the current liabilities, interest-bearing debts (including
interest-bearing borrowings and lease liabilities) amounted to RMB65,447
million, representing an increase of 9.00% from that as at 31 December 2022.
Among the non-current liabilities, interest-bearing debts (including
interest-bearing borrowings and lease liabilities) amounted to RMB168,814
million, representing a decrease of 0.55% from that as at 31 December 2022.
The increase in interest-bearing debts was mainly due to the acquisition of
Shandong Aviation Group Corporation. Excluding this effect, the Group's
interest-bearing debts demonstrated a decreasing trend as compared with that
as at 31 December 2022.
Details of interest-bearing debts of the Group categorised by currency are set
out below:
31 December 2023 31 December 2022
(in RMB'000) Amount Percentage Amount Percentage Change
RMB 197,161,354 84.16% 187,990,038 81.81% 4.88%
US dollars 36,018,880 15.38% 39,999,600 17.41% (9.95%)
Others 1,080,481 0.46% 1,797,824 0.78% (39.90%)
Total 234,260,715 100.00% 229,787,462 100.00% 1.95%
Commitments and Contingent Liabilities
The Group's capital commitments, which mainly consisted of the expenditure in
the next few years for purchasing certain number of aircraft and related
equipment, increased by 23.19% from RMB58,509 million as at 31 December 2022
to RMB72,079 million as at 31 December 2023. The Group's investment
commitments mainly represented the investment agreements entered into,
amounted to RMB457 million as at 31 December 2023, as compared to RMB512
million as at 31 December 2022.
Details of the contingent liabilities of the Group are set out in note 41 to
the consolidated financial statements of the Group for 2023.
Gearing Ratio
As at the end of the Reporting Period, the Group's gearing ratio (total
liabilities divided by total assets) was 89.48%, representing a decrease of
3.22 percentage points from that of 31 December 2022.
Working Capital and its Sources
At the end of the Reporting Period, the Group's net current liabilities
(current liabilities minus current assets) were RMB77,983 million,
representing an increase of RMB7,745 million from that as at 31 December 2022.
Based on the structure of current assets and current liabilities, the Group's
current ratio (current assets divided by current liabilities) was 0.29,
representing an increase of 0.05 as compared to that of 31 December 2022.
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 RMB27,905 million, as
compared to the net cash outflow of RMB23,341 million for the corresponding
period in 2022, which was mainly due to the significant increase in revenue on
a year-on-year basis. Net cash outflow from investing activities was RMB15,246
million, representing an increase of net outflow of 121.89% from RMB6,871
million for the corresponding period in 2022, mainly due to the year-on-year
increase in the cash payments for the purchase of property, plant and
equipment, and the effect of the acquisition of Shandong Aviation Group
Corporation. Net cash outflow from financing activities amounted to RMB8,333
million, as compared to the net cash inflow of RMB24,677 million for the
corresponding period in 2022, mainly due to the year-on-year increase in
repayment of borrowings and rental payments.
The Company has obtained bank facilities of RMB217,683 million in aggregate
granted by several banks in China, among which approximately RMB92,530 million
has been utilised and approximately RMB125,153 million remained unutilised.
The remaining amount is sufficient to meet the Group's demands on working
capital and future capital commitments.
RISK FACTORS
Risks of External Environment
Market Fluctuation
With the gradual resumption of normal social and economic activities, the
domestic market has shown better performance than the international market
from the perspective of the overall aviation industry. During the Reporting
Period, the progress of recovery in the international market was lagging
behind under the influence of factors such as the restrictions of the
immigration policy of certain countries. Based on the characteristics of the
new development stage, the Group will fully, precisely and comprehensively
implement the new development philosophy, take the initiative to contribute to
and integrate with the new development paradigm, seek development based on the
domestic market and optimize international fleet capacity structure to
accelerate the recovery of profitability.
Oil Price Fluctuation
Jet fuel is one of the main operating costs of the Group. The results of the
Group are 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 RMB2,336 million.
Exchange Rate Fluctuation
The Group's certain assets and liabilities are denominated in US dollar.
Certain international income and expenses of the Group 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 2023 by RMB229 million.
Risks of Competition
Industry competition
During the Reporting Period, as there was no significant reduction in the
number of operating entities in the market, the Company still faced relatively
huge industry competition pressure. In respect of the domestic market, due to
the slow recovery of the international market, a large number of wide-body
aircraft were used in the domestic market, which intensified the imbalance
between supply and demand in the domestic market. In respect of the
international market, the newly resumed routes of domestic airlines were
mainly concentrated in destinations such as Hong Kong, Macau, Taiwan,
Southeast Asia and Europe, resulting in an intense competition in certain
regions within a short period of time. Adhering to its strategy for hub
network, the Company spared no efforts in building Beijing Capital Airport
into a world-class hub and Chengdu Tianfu Airport into an international hub,
realising differentiated development with other competing entities in the
market. Main routes and express routes were launched centering on hubs as well
as principal bases and markets with a view to consolidating its
competitiveness in the core markets with its high-quality products.
Alternative competition
As of the end of 2023, the mileage of high-speed railway in China reached
45,000 kilometres, achieving the goal scheduled for 2025 in advance. With the
increasing station density of high-speed railway, the existing passengers flow
of short- and medium-haul flights were gradually diverted to high-speed
railway, which posed challenges to the civil aviation industry. At the same
time, the efficient and mass transportation network of high-speed railway also
swiftly transported more passengers of medium- and long-haul routes from
different regions to airports on time, while more and more passengers chose
the air-rail interlink transportation mode. Leveraging the enhanced
cooperation and competition between civil aviation and high-speed railway with
complementary advantages, the integrated development of the air-rail interlink
operation will accelerate the construction of a modern comprehensive
transportation system.
Corporate Governance Report
MEMBERS OF THE SIXTH SESSION OF THE BOARD
Mr. Ma Chongxian
Mr. Wang Mingyuan
Mr. Feng Gang
Mr. Patrick Healy
Mr. Xiao Peng
Mr. Li Fushen
Mr. He Yun
Mr. Xu Junxin
Ms. Winnie Tam Wan-chi
With the goal of becoming "the world's leading airline", the Company remains
committed to the mission of "put safety first, serve passengers with
credibility, convenience, comfort and choice, maintain stable development,
help employees achieve success and fulfill corporate responsibilities",
advocates the values of "people-oriented, accountable, excelling efforts and
enjoyable flights" and positions the brand as "professional and reliable with
both international quality and Chinese temperament".
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 C1 to the Listing Rules (the "Code") during the Reporting Period.
The Company has established a Corporate Governance System in accordance with
the requirements of the corporate governance policy stipulated in the Code.
The Company's corporate governance practices are summarised and discussed
below.
BOARD OF DIRECTORS
Governance Structure
As at the end of the Reporting Period, the structure of the Board and each
special committee is set out as follows:
MEMBERS OF THE SIXTH SESSION OF THE SUPERVISORY COMMITTEE
Mr. Xiao Jian
Ms. Lyu Yanfang
Ms. Guo Lina
Mr. Wang Mingzhu
Mr. Li Shuxing
As at the date of this annual report, the sixth session of the Board comprises
nine Directors, out of which four are independent non-executive Directors. All
of the Directors of the sixth session of the Board have actively participated
in the activities of the Company during the Reporting Period.
The attendance records of all the Directors of the sixth session of the Board
present in person at general meetings, Board meetings and meetings of each
special committee during the Reporting Period are as follows:
Number of meetings attended in person/should be attended
General Meeting Board Meeting Audit and Risk Management Committee (Supervision Committee) Meeting Nomination and Remuneration Committee Meeting Remuneration and Appraisal Committee Meeting Strategy and Investment Committee Meeting Aviation Safety Committee Meeting
Executive Directors
Ma Chongxian 4/4 11/11 - - - 5/5 3/3
Wang Mingyuan 2/2 6/7 - - - - 0/0
Non-executive Directors
Feng Gang 2/4 11/11 - - - - -
Patrick Healy 3/4 10/11 - - - - -
Xiao Peng 3/3 9/10 - - - - -
Independent Non-executive Directors
Li Fushen 2/4 10/11 5/6 - 1/1 1/1 2/3
He Yun 3/4 10/11 6/6 5/6 1/1 - -
Xu Junxin 3/4 11/11 - 6/6 1/1 5/5 -
Winnie Tam Wan-chi 2/4 7/11 4/6 - - - -
Notes:
1. The Nomination Committee was established after the
amendments to the Articles of Association came into effect on 26 October 2023,
and the Nomination Committee did not convene any meeting since its
establishment up to the end of the Reporting Period.
2. On 2 March 2023, the Company convened the eighth meeting
of the third session of the employee representative congress where Mr. Xiao
Peng was elected as the employee representative Director of the Company. On 30
March 2023, the Company convened the 2023 second extraordinary general meeting
where Mr. Wang Mingyuan was elected as an executive Director of the Company.
3. On 26 October 2023, the Board reviewed and approved the
resolution in relation to the adjustment of the members of special committees
of the Board. Mr. Li Fushen was appointed as a member of the Strategy and
Investment Committee, and Mr. Wang Mingyuan was appointed as a member of the
Aviation Safety Committee.
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 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 senior management, the persons-in-charge of the
relevant departments of the Company and expertise to attend the meetings as
necessary to interpret, answer queries or provide advisory opinions on the
resolutions involved. The General Counsel shall attend any Board meeting that
involves legal affairs to be considered and provide legal advice.
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.
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.
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.
During the Reporting Report and as of the date of this annual report, the
Chairman and President of the Company are held by different persons. Details
are set out in the section headed "Changes in Shareholdings and Remuneration
of the Existing and Resigned Directors, Supervisors and Senior Management
during the Reporting Period" of this annual report.
Mechanism for the Board to Obtain Independent Opinions
The Company understands independent opinions for the Board is critical to good
corporate governance and effective operation. The Board has established a
mechanism to ensure the Board can obtain independent opinions when necessary
so as to enhance the objectivity and effectiveness of decision making.
Moreover, the Board reviews the implementation and effectiveness of the
following mechanisms annually:
1. The composition of the Board shall comply with the
requirements of the Listing Rules that the Board must comprise at least three
independent non-executive Directors and the so appointed independent
non-executive Directors must account for at least one-third of the Board;
2. Independent non-executive Directors must receive
appraisals on independence, qualifications and ability when appointed, and
conduct regular assessments on the aforementioned matters after appointment.
Each Independent Non-executive Director must promptly notify the Company
regarding any changes in circumstances that may affect their independence;
3. The Board receives the performance report by independent
non-executive Directors, and evaluates the time spent by independent
non-executive Directors on the affairs of the Company and their independent
opinions expressed during the year;
4. All Directors shall have the right to request further
information from the management on the matters under discussion at the Board
meetings. In order to facilitate their professional development, the Directors
may seek the assistance from the Company Secretary and external independent
professional advice when necessary while the relevant expenses shall be borne
by the Company;
5. Directors (including independent non-executive Directors)
having material interest in any contract, transaction or arrangement shall
abstain from voting and shall not be counted in a quorum for any Board
meetings approving such matters; and
6. Chairman shall hold meetings at least annually with
independent non-executive Directors without the presence of other Directors.
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 construction of the diversified and inclusive Board. The Board
shall not be a single gender board. The Nomination Committee shall take into
overall consideration of the abovementioned factors and actual situations such
as business operation, development and strategy of the Company 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 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 C.1.4 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
Ma Chongxian (Chairman) a, b
Wang Mingyuan (President) a, b
Non-executive Directors
Feng Gang a, b
Patrick Healy b
Xiao Peng a, b
Independent Non-executive Directors
Li Fushen a, b
He Yun a, b
Xu Junxin a, b
Winnie Tam Wan-chi a
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 C3 to the Listing Rules and the Company's code of conduct
throughout the Reporting Period.
The four independent non-executive Directors of the Company as at the end of
the Reporting Period, namely, Mr. Li Fushen, Mr. He Yun, Mr. Xu Junxin and Ms.
Winnie Tam Wan-chi, 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 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 Management Committee (Supervision Committee)
As at the end of the Reporting Period, the Audit and Risk Management Committee
(Supervision Committee) comprised Mr. Li Fushen, Mr. He Yun and Ms. Winnie Tam
Wan-chi, all being independent non-executive Directors, with Mr. Li Fushen
serving as the chairman of the committee.
The primary duties of the Audit and Risk Management Committee (Supervision
Committee) include: (1) to make recommendations to the Board on the
appointment, reappointment and removal of the external auditor, approve the
remuneration and terms of engagement of the external auditor pursuant to the
relevant authorizations and deal with any issues of its resignation or
dismissal; (2) to supervise and assess the internal audit work of the Company;
(3) to monitor the Company's financial information and disclosures, review the
truthfulness, accuracy and integrity of the Company's financial statements,
annual reports and accounts, interim reports, quarterly reports, and the key
opinions relating to financial reporting in any of the above; (4) to discuss
the establishment of the Company's risk management system and internal control
system with the management of the Company to ensure that the management has
performed its duty to establish an effective control system; (5) to consider
major investigation findings on risk management and internal control matters
and the management's responses to the above, as delegated by the Board or on
its own initiative; supervise the rectifying actions to address the
deficiencies in the Company's internal control; (6) to review the audit notes
submitted to the management by the certified public accountant for the annual
audit, any material enquiries raised by the auditor to the management
regarding accounting records, financial accounts and control systems, and the
management's responses to such enquiries; (7) to review the financial and
accounting policies and practices adopted by the Company and its subsidiaries;
(8) to supervise the Company's connected transactions control and the daily
management of such transactions; (9) to listen to the Company's reports on any
fraudulent conducts and the whistleblower reports of such conducts; and (10)
to address other matters authorized by the Board and other matters as required
by the laws and regulations as well as the relevant regulations of the stock
exchange where the Company is listed.
The main work of the Audit and Risk Management Committee (Supervision
Committee) during the Reporting Period includes:
Date of the meeting Subject of the meeting Other performance of duties at the meeting
13 January 2023 The tenth meeting of the Audit and Risk Management Committee (Supervision -
Committee) of the sixth session of the Board was held to consider the
proposals relating to the 2023 investment plan and 2023 financial plan.
29 March 2023 The eleventh meeting of the Audit and Risk Management Committee (Supervision The committee received the report of Deloitte, the auditor, on the 2022
Committee) of the sixth session of the Board was held to consider: 1. the 2022 financial reports and work summary on internal audit.
annual report; 2. the 2022 profit distribution plan; 3. the accumulated losses
of the Company exceeding one-third of the total amount of its paid-up share
capital; 4. the re-appointment of international and domestic auditors and
internal control auditors for 2023; 5. the replacement of self-raised funds The committee received the report of the audit department on the standardized
with proceeds from the non-public Issuance; 6. the 2022 assessment report on operation of the Company in the second half of 2022.
internal control and the audit report on internal control; 7. the 2022
internal audit work report and 2023 internal audit work plan; 8. the 2022
continuous risk assessment report of China National Aviation Finance Co.,
Ltd.; 9. the risk management proposal for conducting financial businesses such
as related parties loans and deposits between China National Aviation Finance
Co., Ltd. and its related parties; 10. the entering into of financial services
framework agreements and the application for annual caps of the continuing
connected transactions; 11. the entering into of the Continuing Connected
Transactions Framework Agreement on Trademark License between Air China and
CNAHC Group by the Company and CNAHC; 12. the entering into of the
Compensation Agreement between the Company and Beijing Air Catering Co., Ltd.
(北京航空食品有限公司) for the properties in the catering park of
Beijing Air Catering; 13. the 2022 performance report by the Audit and Risk
Management Committee (Supervision Committee).
26 April 2023 The twelfth meeting of the Audit and Risk Management Committee (Supervision The committee received the report of the audit department on work in relation
Committee) of the sixth session of the Board was held to consider the to the accountability of illegal operations and investments.
proposals relating to the first quarterly report of 2023 and the agreement in
relation to the transfer of eight A330 aircraft to Air China Cargo.
29 August 2023 The thirteenth meeting of the Audit and Risk Management Committee (Supervision The committee received the report of Deloitte, the auditor, on: 1. the report
Committee) of the sixth session of the Board was held to consider: 1. the 2023 on the completion of interim review for the year of 2023; 2. the audit plan
interim report; 2. the confirmation of the 2023 financial plan; 3. the special for internal control of financial reports for the year of 2023; 3. the
report on the deposit and actual use of proceeds from A share issuance in the pre-approval for the provision of non-assurance services by the auditor.
first half of 2023; 4. the amendments to the "Regulations on Management of
Interest Rate and Exchange Rate Risks of Air China Limited (Interim)"; 5. the
confirmation of the auditor's fees for the year of 2023; 6. the provision of
non-assurance services by the auditor; 7. the continuous risk assessment The committee received the report of the audit department on: 1. work plan on
report of China National Aviation Finance Co., Ltd. for the first half of the 2023 internal control assessment; 2. the standardized operation in the
2023. first half of 2023; 3. the report on internal audit in the first half of 2023.
The committee reviewed the list of related parties of the Company.
26 October 2023 The fourteenth meeting of the Audit and Risk Management Committee (Supervision The committee received the report of the audit department on audit in the
Committee) of the sixth session of the Board was held to consider the third third quarter of 2023.
quarterly report of 2023; the amendments to the "Working Rules of the Audit
and Risk Management Committee (Supervision Committee)"; and the amendments to
the "Regulations on Compliance Management" and "Code of Conduct for
Compliance".
22 December 2023 The fifteenth meeting of the Audit and Risk Management Committee (Supervision The committee received the report of Deloitte, the auditor, on the audit plan
Committee) of the sixth session of the Board was held to consider: 1. the for consolidated financial statements of 2023.
proposal of the issuance of A Shares to specific investor by the Company in
2023; 2. the preliminary proposal of the issuance of A Shares to specific
investor by the Company in 2023; 3. the discussion and analysis report on the
proposal of the issuance of A Shares to specific investor by the Company in The committee received the report of the financial department on work
2023; 4. the feasibility analysis report on the use of proceeds from the arrangement in relation to the approval of financial accounts of 2023 and the
issuance of A Shares to specific investor by the Company in 2023; 5. the implementation of rectification for problems identified during the approval of
report on use of proceeds from previous fund-raising activities of the financial accounts of 2021-2022.
Company; 6. the related (connected) transaction concerning the entering into
of the conditional A Share Subscription Agreement with specific subscriber by
the Company; 7. the proposal of the issuance of H Shares to specific investor
by the Company in 2023; 8. the related (connected) transaction concerning the The committee received the report of the audit department on the
entering into of the conditional H Share Subscription Agreement with specific implementation of rectification measures for audit issues in 2023.
subscriber by the Company; 9. the authorization by the general meeting to the
Board and its authorized person(s) to proceed with relevant matters in respect
of this issuance of Shares to specific investors by the Company in their sole
discretion.
The annual results and annual report of the Company for the year of 2023 had
been reviewed by the Audit and Risk Management Committee (Supervision
Committee).
Nomination and Remuneration Committee (which has been changed to the
Nomination Committee and Remuneration and Appraisal Committee on 26 October
2023)
From 1 January 2023 to 26 October 2023, the Nomination and Remuneration
Committee comprised Mr. He Yun and Mr. Xu Junxin, both are independent
non-executive Directors, 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 from 1 January 2023
to 26 October 2023 includes:
Date of the meeting Subject of the meeting
13 March 2023 The ninth meeting of the Nomination and Remuneration Committee of the sixth
session of Board was held to consider and recommend Mr. Wang Mingyuan as a
candidate for executive Director and propose to appoint him as the President
of the Company, and propose to appoint Mr. Sun Yuquan as the Chief Accountant
of the Company and Mr. Xiao Feng as the Chief Economist of the Company.
29 March 2023 The tenth meeting of the Nomination and Remuneration Committee of the sixth
session of Board was held to consider the proposals relating to the 2022
annual gross salary settlement plan and the 2023 annual gross salary budget
plan.
17 July 2023 The eleventh meeting of the Nomination and Remuneration Committee of the sixth
session of Board was held to consider the 2023 annual appraisal on the
operational performance by the management.
23 August 2023 The twelfth meeting of the Nomination and Remuneration Committee of the sixth
session of Board was held to propose the appointment of Mr. Zheng Weimin as
the Vice President of the Company.
29 August 2023 The thirteenth meeting of the Nomination and Remuneration Committee of the
sixth session of Board was held to receive the reports regarding the
management of employees' remuneration as well as salary distribution of the
Company during 2022-2023.
26 October 2023 The fourteenth meeting of the Nomination and Remuneration Committee of the
sixth session of Board was held to propose the appointment of Mr. Li Yunchuan
as the Chief Pilot of the Company and formulate the Working Rules of the
Nomination Committee and the Working Rules of the Remuneration and Appraisal
Committee.
The Nomination Committee
In accordance with the amendments to the Articles of Association of the
Company which came into effect on 26 October 2023, the original Nomination and
Remuneration Committee of the Company was changed to the Nomination Committee
and the Remuneration and Appraisal Committee from 26 October 2023. As at the
end of the Reporting Period, the Nomination Committee comprised Mr. Ma
Chongxian, an executive Director, and Mr. Li Fushen and Mr. He Yun, both are
independent non-executive Directors, with Mr. Ma Chongxian serving as the
chairman of the committee.
The primary duties of the Nomination Committee include: (1) to review the
structure, size and composition (including the skills, knowledge and
experience) of the Board at least annually and make recommendations on any
proposed changes to the Board to complement the Company's strategy; (2) to
study and propose to the Board the criteria and procedures for selecting
candidates for Directors and senior management of the Company; (3) to make
recommendations to the Board on the appointment or re-appointment of
Directors, succession planning for Directors (in particular the Chairman or
the President) and appointment of senior management; (4) to select qualified
candidates for Directors and senior management in accordance with relevant
requirements of Board diversity as well as review and make recommendations to
the Board on candidates for Director and senior management; (5) to assess the
independence of the independent non-executive Directors of the Company; and
(6) to address other matters authorized by the Board.
The Nomination Committee was established after the amendments to the Articles
of Association came into effect on 26 October 2023, and therefore the
Nomination Committee did not convene any meeting during the Reporting Period.
During the Reporting Period, the nomination policy for Directors implemented
by the Company was as follows: the Nomination 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 Committee.
The Remuneration and Appraisal Committee
In accordance with the amendments to the Articles of Association of the
Company which came into effect on 26 October 2023, the original Nomination and
Remuneration Committee of the Company was changed to the Nomination Committee
and the Remuneration and Appraisal Committee from 26 October 2023. As at the
end of the Reporting Period, the Remuneration and Appraisal Committee
comprised Mr. He Yun, Mr. Li Fushen and Mr. Xu Junxin, all of which are
independent non-executive Directors, with Mr. He Yun serving as the chairman
of the committee.
The primary duties of the Remuneration and Appraisal Committee include: (1) to
make recommendations to the Board on the Company's remuneration policy and
structure for all Directors and senior management and on the establishment of
a formal and transparent procedure for developing the remuneration policy of
the Company, and supervise the implementation of the remuneration policy of
the Company; (2) to review and approve the proposals for the remuneration of
the Company's management with reference to the corporate goals and objectives
formulated by the Board; (3) to make recommendations to the Board on the
remuneration packages of the Directors and senior management of the Company
having regards to salaries paid by companies in the same industry, time
commitment and responsibilities, as well as employment conditions of other
positions in the Company and its subsidiaries; (4) to review and approve
compensation payable to executive Directors and senior management of the
Company for loss or termination of their office or appointment; (5) to review
and approve compensation arrangements relating to dismissal or removal of
Directors for misconduct; (6) to review the performance of duties of the
Directors and senior management, organize and carry out the business
performance appraisal of the members of the management, and make
recommendations to the Board in respect of the appraisal results and
remuneration payment proposals; (7) to review matters relating to share
schemes based on domestic and overseas regulatory requirements, including but
not limited to reviewing the Company's share incentive scheme proposal,
verifying the conditions of granting and exercising during the implementation
of the Company's share incentive scheme, and reporting to the Board for its
consideration; and (8) to address other matters authorised by the Board.
The main work of the Remuneration and Appraisal Committee during the Reporting
Period includes:
Date of the meeting Subject of the meeting
22 December 2023 The first meeting of the Remuneration and Appraisal Committee of the sixth
session of Board was held to consider the 2022 appraisal result regarding the
operational performance and remuneration payment plan of the management.
During the Reporting Period, the remuneration policy for Directors implemented
by the Company 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 Remuneration and Appraisal 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 Remuneration and Appraisal Committee.
Changes in Shareholdings and Remuneration of the Existing and Resigned
Directors, Supervisors and Senior Management during the Reporting Period
Name Position Gender Age Starting date of Expiry date of Total remuneration payables received from the Company during the Reporting Whether received remuneration from the Company's related parties or not
term of office
term of office Period (RMB0'000)
Ma Chongxian Secretary of the Communist Party Committee Male 58 27 September 2022 - - Yes
Chairman 27 September 2022 - -
Executive Director 20 July 2021 - -
Wang Mingyuan Vice President Male 58 22 February 2011 13 March 2023 - Yes
Deputy Secretary of the Communist Party Committee 13 February 2023 - -
President 13 March 2023 - -
Director, Vice Chairman 30 March 2023 - -
Feng Gang Deputy Secretary of the Communist Party Committee Male 60 19 November 2019 - - Yes
Non-executive Director 26 May 2020 - -
Patrick Healy Non-executive Director Male 58 19 December 2019 - - Yes
Xiao Peng Chairman of the Labour Union Male 58 15 November 2022 - 92.36 No
Chief Engineer 28 November 2022 -
Employee Representative Director 2 March 2023 -
Li Fushen Independent Non-executive Director Male 61 25 February 2022 - - No
He Yun Independent Non-executive Director Male 62 25 February 2022 - - No
Xu Junxin Independent Non-executive Director Male 59 25 February 2022 - - No
Winnie Tam Wan-chi Independent Non-executive Director Female 62 25 February 2022 - 11.34 No
He Chaofan Supervisor Male 61 29 October 2013 13 January 2023 - Yes
Chairman of the Supervisory Committee 25 February 2022 13 January 2023 -
Xiao Jian Supervisor Male 60 10 February 2023 - - Yes
Chairman of the Supervisory Committee 10 March 2023 - -
Wang Jie Employee Representative Supervisor Male 58 25 September 2020 2 March 2023 - Yes
Qin Hao Employee Representative Supervisor Male 55 25 September 2020 2 March 2023 50.00 No
Lyu Yanfang Supervisor Female 52 18 December 2020 - 83.53 No
Guo Lina Supervisor Female 53 25 February 2022 - 82.97 No
Wang Mingzhu Employee Representative Supervisor Male 56 2 March 2023 - 57.50 No
Li Shuxing Employee Representative Supervisor Male 56 2 March 2023 - 59.23 No
Tan Huanmin Secretary of Committee for Discipline Inspection Male 59 19 January 2019 - - Yes
Zhang Sheng Vice President Male 51 9 June 2020 - - Yes
Chen Zhiyong Vice President Male 60 17 December 2012 5 March 2024 - Yes
Sun Yuquan Standing Committee Member of Communist Party Committee Male 50 7 April 2022 - - Yes
Chief Accountant 13 March 2023 - -
Ni Jiliang Vice President Male 57 12 May 2022 - - Yes
Zheng Weimin Vice President Male 58 23 August 2023 - - Yes
Yan Fei Vice President Male 55 5 March 2024 - - Yes
Zhang Hua General Counsel Male 58 9 August 2017 - 112.75 No
Xiao Feng Chief Accountant Male 55 28 July 2014 13 March 2023 113.27 No
Chief Economist 13 March 2023 -
Secretary to the Board 28 March 2024 -
Wang Yingnian Chief Pilot Male 60 27 November 2014 10 February 2023 38.54 No
Yan Simeng Chief Information Officer Male 41 7 September 2021 - 195.07 No
Shen Jianming Chief Safety Officer Male 56 19 October 2022 - 185.14 No
Li Yunchuan Chief Pilot Male 56 26 October 2023 - 30.46 No
Huang Bin Secretary to the Board Male 60 30 September 2021 28 March 2024 103.6 No
Assistant to the President 10 December 2021 28 March 2024
Total / / / / / 1,215.76 /
Notes: 1. The remuneration of Mr. Li Fushen, Mr. He Yun,
Mr. Xu Junxin and Ms. Winnie Tam Wan-chi, being independent Directors, will be
determined pursuant to relevant national policies.
2. Directors, Supervisors and senior
managements' "total remuneration payables received from the Company during the
Reporting Period" include pre-tax remuneration and the portion of benefits and
security, including social insurance, housing fund and enterprise annuity,
contributed by the enterprise. Total remunerations of employees, which are
subject to changes during the year, represent the actual remuneration for
his/her term of office.
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. Ma Chongxian, an executive Director, and Mr. Li Fushen and Mr.
Xu Junxin, both are independent non-executive Directors, with Mr. Ma Chongxian
serving as the chairman of the committee.
The primary duties of the Strategy and Investment Committee include: (1) to
study and make recommendations on the Company's strategic plan for long-term
development, annual investment plan, significant investment and financing
proposals that require the approval of the Board, important production and
operation decisions and projects that require the approval of the Board and
other significant matters that may affect the Company's development; (2) to
consider the establishment, merger and dissolution of branches of the Company;
(3) to formulate the environmental, social and governance structure,
objectives, management approaches and strategies of the Company; (4) to
consider the environmental, social and governance-related works and reports;
and (5) to address other matters authorised by the Board.
The main work of the Strategy and Investment Committee during the Reporting
Period includes:
Date of the meeting Subject of the meeting Other performance of duties at the meeting
13 January 2023 The seventh meeting of the Strategy and Investment Committee of the sixth The committee received the reports on the completion of the 2022 investment
session of Board was held to consider the 2023 investment plan. plan of the Company and evaluation of significant projects, and the report on
implementation of the three-year action for the reform of the Company.
29 March 2023 The eighth meeting of the Strategy and Investment Committee of the sixth -
session of Board was held to consider the 2022 Corporate Social Responsibility
Report.
26 April 2023 The ninth meeting of the Strategy and Investment Committee of the sixth -
session of Board was held to consider the transfer of 8 A330 aircraft under
the agreement with Air China Cargo.
26 October 2023 The tenth meeting of the Strategy and Investment Committee of the sixth -
session of Board was held to consider the amendments to the Working Rules of
the Strategy and Investment Committee.
22 December 2023 The eleventh meeting of the Strategy and Investment Committee of the sixth -
session of Board was held to consider 1. the Company's fulfilment of
conditions in respect of the issuance of A shares to specific investor; 2. the
proposal of the issuance of A Shares to specific investor by the Company in
2023; 3. the preliminary proposal of the issuance of A Shares to specific
investor by the Company in 2023; 4. the discussion and analysis report on the
proposal of the issuance of A Shares to specific investor by the Company in
2023; 5. the feasibility analysis report on the use of proceeds from the
issuance of A Shares to specific investor by the Company in 2023; 6. the
proposal of the issuance of H Shares to specific investor by the Company in
2023.
Aviation Safety Committee
As at the end of the Reporting Period, the Aviation Safety Committee comprised
Mr. Wang Mingyuan, an executive Directors, Mr. Li Fushen, an independent
non-executive Director, and Mr. Ma Chongxian, an executive Director, with Mr.
Wang Mingyuan serving as the chairman of the committee.
The primary duties of the Aviation Safety Committee include: (1) to adhere to
the principle of "putting safety first", and 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; (2) to receive the safety analysis
report of the Company on a regular basis and report to the Board; (3) to study
and deal with significant problems in relation to aviation safety work of the
Company; and (4) to address other matters authorised by the Board.
The main work of the Aviation Safety Committee during the Reporting Period
includes:
Date of the meeting Subject of the meeting
13 January 2023 The third meeting of the Aviation Safety Committee of the sixth session of
Board was held to receive the reports regarding the safety work in 2022 and
the work arrangements in 2023.
29 August 2023 The fourth meeting of the Aviation Safety Committee of the sixth session of
Board was held to receive the report on aviation safety in the first half of
2023.
26 October 2023 The fifth meeting of the Aviation Safety Committee of the sixth session of
Board was held to amend the Working Rules of the Aviation Safety Committee.
MANAGEMENT
Duties of the Management
The management of the Company 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 implement annual business plans
and investment proposals; (3) 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; (4) to sign
contracts and agreements on behalf of the Company in accordance with the
authorization granted by the Board or the legal representative; (5) to draft
plans for the establishment of the Company's internal management structure;
(6) to draft the Company's basic management system; (7) to formulate basic
rules and regulations for the Company; (8) to propose the appointment or
dismissal of the vice president, chief accountant, chief pilot and general
legal counsel of the Company; and (9) to appoint or dismiss responsible
management personnel other than those required to be 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 are 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 Management 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 Management 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 Management
Committee (Supervision Committee) and considered that the system was adequate
and effective. The review of the Audit and Risk Management Committee
(Supervision Committee) covered key control aspects, including financial
controls, operational controls and compliance controls. The Audit and Risk
Management 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,
environmental, social and governance performance 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 2023, 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 Management 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 Management Committee (Supervision Committee) for review of
risk management and internal control system. The Audit and Risk Management
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.
COMPANY SECRETARY
During the Reporting Period, the joint company secretaries of the Company are
Mr. Huang Bin and Mr. Huen Ho Yin. The joint company secretaries 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.
On 28 March 2024, due to the retirement of Mr. Huang Bin, the joint company
secretaries of the Company were changed to Mr. Xiao Feng and Mr. Huen Ho Yin.
Please refer to the announcement of the Company dated 28 March 2024 for
details.
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:
RMB10,902,000 (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 2023 and for the audit of the Group's consolidated
financial statements for the year ended 31 December 2023; an aggregate amount
of RMB7,493,000 (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 2023; 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 RMB742,850 (including value-added tax) was charged for the
rendering of other non-audit services, such as tax advisory services, to the
Group.
AMENDMENTS TO THE ARTICLES OF ASSOCIATION
The Company made amendments to the Articles of Association twice during the
Reporting Period:
1. On 17 January 2023, as the total number of total issued
shares and the registered capital of the Company are changed into
16,200,792,838 shares and RMB16,200,792,838 respectively following the
completion of the non-public issuance of 1,675,977,653 A Shares, the Company
made amendments to relevant articles in the Articles of Association. Please
refer to the announcement of the Company dated 17 January 2023 for details.
2. On 30 August 2023, according to the new regulations
promulgated by regulatory authorities and in light of the actual operation and
management needs of the Company, the Company proposed to make amendments to
the Articles of Association, the Rules and Procedures of Shareholders'
Meetings and the Rules and Procedures of Meetings of the Board. These proposed
amendments have been approved at the extraordinary general meeting, the class
meeting for holders of A Shares and the class meeting for holders of H Shares
convened on 26 October 2023. Please refer to the announcements of the Company
dated 30 August 2023 and 26 October 2023 for details.
SHAREHOLDER'S COMMUNICATION POLICY
The Company attaches great importance to the communication with shareholders
and has formulated "Measures for Investor Relation Management" to regulate and
strengthen its communication with shareholders and investors. During the
Reporting Period, the Company continued to establish 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, results presentations,
roadshows, briefings on dividend distribution, etc., thus maintaining active,
effective and transparent communication with shareholders.
Moreover, 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 Management
Committee (Supervision Committee), Remuneration and Appraisal Committee,
Nomination Committee, Strategy and Investment Committee and Aviation Safety
Committee will answer queries raised by shareholders at the general meeting.
Resolutions in respect of independent matters 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 as required. In accordance with articles 57 and
58 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 clearly stated topics
for discussion. 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 and the extraordinary general
meeting should be held within two months of 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 59 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).
During the Reporting Period, the Company convened 1 annual general meeting, 3
extraordinary general meeting, 1 class meeting for holders of A Shares and 1
class meeting for holders of H Shares. The Company held 3 results
presentations to interact with investors in regard to their concerns. The
Company has conducted a review on the implementation and effectiveness of the
aforesaid shareholder's communication policies during the Reporting Period,
and is satisfied with the review result.
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 2023 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, the compliance of laws and regulations
that have a material impact on the Group 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, as well as the 2023 Corporate Social
Responsibility (ESG) Report published by the Company.
FIVE-YEAR FINANCIAL HIGHLIGHTS
The Group's results and balance sheet prepared in accordance with IFRSs for
the five years ended 31 December 2023 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 RMB16,200,792,838, divided into 16,200,792,838 shares of RMB1.00 each. The
following table sets out the share capital structure of the Company as at the
end of the Reporting Period:
Category of shares Number of shares Percentage of the total share capital
A Shares 11,638,109,474 71.84%
H Shares 4,562,683,364 28.16%
Total 16,200,792,838 100.00%
SIGNIFICANT INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES OF
THE COMPANY
As at the end of the Reporting Period, to the knowledge of the Directors,
Supervisors and chief executive of the Company, the interests or short
positions of the following persons (other than a Director, Supervisor or chief
executive of the Company) in the shares and underlying shares of the Company
which were required to be recorded in the register kept by the Company
pursuant to Section 336 of the SFO are as follows:
Total long positions in the shares and underlying shares of the Company
Name Type of interests Type and number of shares held by the Company Percentage of the total issued shares of the Company Percentage of the total issued A shares of the Company Percentage of the total issued H shares of the Company Short positions
CNAHC Beneficial owner 6,566,761,847 A Shares 40.53% 56.42% - -
CNAHC((1)) Equity attributable 1,332,482,920 A Shares 8.22% 11.45% - -
CNAHC((1)) Equity attributable 223,852,000 H Shares 1.38% - 4.91% -
CNACG Beneficial owner 1,332,482,920 A Shares 8.22% 11.45% - -
CNACG Beneficial owner 223,852,000 H Shares 1.38% - 4.91% -
Cathay Pacific Beneficial owner 2,633,725,455 H Shares 16.26% - 57.72% -
Swire Pacific Limited((2)) Equity attributable 2,633,725,455 H Shares 16.26% - 57.72% -
John Swire & Sons (H.K.) Limited((2)) Equity attributable 2,633,725,455 H Shares 16.26% - 57.72% -
John Swire & Sons Limited((2)) Equity attributable 2,633,725,455 H Shares 16.26% - 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
60.31% equity interest and 68.13% voting rights in Swire Pacific Limited, and
Swire Pacific Limited's approximately 45.00% interest in Cathay Pacific as at
the end of the Reporting Period, John Swire & Sons Limited, John Swire
& Sons (H.K.) Limited and Swire Pacific Limited were deemed to be
interested in the 2,633,725,455 H Shares of the Company directly held by
Cathay Pacific.
Total short positions in the shares and underlying shares of the Company
As at the end of the Reporting Period, the Company was not aware of any
substantial shareholders holding short positions in the shares or underlying
shares of the Company.
Save as disclosed above, as at the end of the Reporting Period, to the
knowledge of the Directors, Supervisors and chief executive of the Company, no
other person had an interest or short position in the Shares or underlying
shares of the Company which were required to be recorded in the register kept
by the Company pursuant to Section 336 of the SFO.
INFORMATION OF SHAREHOLDERS
Total number of shareholders
Total number of holders of ordinary shares as at the end of the 163,275 accounts, of which 2,914 accounts are registered holders of H Shares
Reporting Period (account)
Total number of holders of ordinary shares as at the end of the month 161,709 accounts, of which 2,903 accounts are registered holders of H Shares
preceding to the disclosing date 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 (excluding shares lent through
securities lending and refinancing)
Name of shareholder (full name) Change(s) during the Reporting Period Number of shares held as at the end of the Reporting Period Shareholding percentage (%) Number of shares held subject to selling restrictions Shares pledged, Nature of shareholder
marked or frozen
Status Number
China National Aviation Holding Corporation Limited 614,525,150 6,566,761,847 40.53 614,525,150 Frozen 127,445,536 State-owned legal person
Cathay Pacific Airways Limited 0 2,633,725,455 16.26 0 Nil 0 Foreign legal person
HKSCC NOMINEES LIMITED 404,990 1,689,035,335 10.43 0 Nil 0 Foreign legal person
China National Aviation Corporation (Group) Limited 0 1,556,334,920 9.61 0 Frozen 36,454,464 Foreign legal person
China Securities Finance Corporation Limited 0 311,302,365 1.92 0 Nil 0 Other
China National Aviation Fuel Group Corporation 157,122,665 238,524,158 1.47 0 Nil 0 State-owned legal person
Hong Kong Securities Clearing Company Limited -9,660,684 181,556,697 1.12 0 Nil 0 Foreign legal person
China Structural Reform Fund Co., Ltd. 67,039,106 67,039,106 0.41 0 Nil 0 State-owned legal person
(中國國有企業結構調整基金股份有限公司)
Bank of China Limited - China Merchants Anhua 60,658,700 60,658,700 0.37 0 Nil 0 Other
Bond Securities Investment Fund
(中國銀行股份有限公司－招商安華債券型證券
投資基金)
Industrial Bank Co., Ltd. - GF Ruiyi Leading Hybrid Securities Investment Fund 256,900 49,637,666 0.31 0 Nil 0 Other
(興業銀行股份有限公司－廣發睿毅領先混合型
證券投資基金)
Shareholdings of the top 10 shareholders not subject to selling restrictions
Name of shareholder Number of tradable shares held not subject to selling restrictions Type and number of shares
Type Number
China National Aviation Holding Corporation Limited 5,952,236,697 RMB ordinary shares 5,952,236,697
Cathay Pacific Airways Limited 2,633,725,455 Overseas listed foreign shares 2,633,725,455
HKSCC NOMINEES LIMITED 1,689,035,335 Overseas listed foreign shares 1,689,035,335
China National Aviation Corporation (Group) Limited 1,556,334,920 RMB ordinary shares 1,332,482,920
Overseas listed foreign shares 223,852,000
China Securities Finance Corporation Limited 311,302,365 RMB ordinary shares 311,302,365
China National Aviation Fuel Group Corporation 238,524,158 RMB ordinary shares 238,524,158
Hong Kong Securities Clearing Company Limited 181,556,697 RMB ordinary shares 181,556,697
China Structural Reform Fund Co., Ltd. 67,039,106 RMB ordinary shares 67,039,106
(中國國有企業結構調整基金股份有限公司)
Bank of China Limited - China Merchants Anhua Bond Securities Investment Fund 60,658,700 RMB ordinary shares 60,658,700
(中國銀行股份有限公司－招商安華債券型證券
投資基金)
Industrial Bank Co., Ltd. - GF Ruiyi Leading Hybrid Securities Investment Fund 49,637,666 RMB ordinary shares 49,637,666
(興業銀行股份有限公司
－廣發睿毅領先混合型證券投資基金)
Explanation on the repurchase special accounts among the top 10 shareholders Nil
Explanation on the right to vote by proxy, proxy and abstention from voting Nil
among the above shareholders
Explanation on connected relationship or action CNACG is a wholly-owned subsidiary of CNAHC. Accordingly, CNAHC is directly
in concert among the above shareholders and indirectly interested in 50.14% of the shares of the Company.
Explanation on preference shareholders whose voting rights have been restored Nil
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 1,689,035,335 H shares held by it in the Company do not include the
166,852,000 shares held by it as nominee of CNACG.
2. According to the "Implementation Measures on Partial
Transfer of State-owned Shares to the National Social Security Fund in the
Domestic Securities Market" (Cai Qi 2009 No. 94)
(《境內證券市場轉持部分國有股充實全國社會保障基金實施辦法》(財企 2009 94號))
and the Notice ( 2009 No. 63) jointly issued by the Ministry of Finance, the
SASAC, CSRC and the National Council for Social Security Fund, 127,445,536
shares and 36,454,464 shares held by CNAHC, the controlling shareholder of the
Company, and CNACG respectively are frozen at present.
PUBLIC FLOAT
Pursuant to public information available to the Company and to the knowledge
of the Directors of the Company, the Company has maintained a public float as
required by the Listing Rules and agreed by the Hong Kong Stock Exchange as at
the date of this annual report.
DIVIDEND POLICY
In accordance with the relevant requirements of the CSRC and the CSRC Beijing
Bureau on the cash dividends of listed companies and the provisions of 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 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
profits 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 recognized for the current year 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 179, Article 180 and Article 181 of the Articles of
Association for details of the principles and policies of dividend
distribution of the Company.
TAXATION ON DIVIDEND
In accordance with the "Enterprise Income Tax Law of the People's Republic of
China" and the "Rules for the Implementation of the Enterprise Income Tax Law
of the People's Republic of China", both of which came into effect and were
implemented on 1 January 2008 and the "Circular on Issues Concerning
Withholding of Enterprise Income Tax on Dividends Paid by PRC Resident
Enterprises to Offshore Non-resident Enterprise Holders of H Shares" (Guo Shui
Han 2008 No. 897)
(《關於中國居民企業向境外H股非居民企業股東派發股息代扣代繳企業所得稅有關問題的通知》(國稅函 2008 897號))
promulgated by the State Administration of Taxation on 6 November 2008, the
Company is obliged to withhold and pay PRC enterprise income tax on behalf of
non-resident enterprise shareholders at a tax rate of 10% from 2008 onwards
when the Company distributes any dividends to non-resident enterprise
shareholders whose names appear on the register of members of H Shares.
Any H Shares which are not registered in the name(s) of individual(s) (which,
for this purpose, includes shares registered in the name(s) of HKSCC Nominees
Limited, other nominees, trustees, or other organisations or bodies) shall be
deemed to be H Shares held by non-resident enterprise shareholder(s), and
their entitlement to dividends will be subject to deduction of enterprise
income tax. After receiving the dividends, the non-resident enterprise
shareholders may apply for a tax refund (if any) in accordance with the
relevant requirements, such as tax agreements (arrangements).
In accordance with the "Circular on Certain Issues Concerning the Policies of
Individual Income Tax" (Cai Shui Zi 1994 No. 020)
(《關於個人所得稅若干政策問題的通知》(財稅字 1994 020號))
promulgated by the Ministry of Finance of the PRC and the State Administration
of Taxation on 13 May 1994, overseas individuals are, tentatively exempted
from the PRC individual income tax on dividends or bonuses received from
foreign-invested enterprises. As the Company is a foreign-invested enterprise,
the Company will not withhold and pay the PRC individual income tax on behalf
of individual shareholders whose names appear on the register of members of H
Shares of the Company at the time of payment of the final dividends.
Pursuant to the Circular on Tax Policies Concerning the Pilot Programme of the
Shanghai and Hong Kong Stock Market Trading Interconnection Mechanism (Cai
Shui 2014 No. 81)
(《關於滬港股票市場交易互聯互通機制試點有關稅收政策的通知》(財稅 2014 81號))
promulgated on 31 October 2014 and the Circular on the Tax Policies Concerning
the Pilot Programme of the Shenzhen and Hong Kong Stock Market Trading
Interconnection Mechanism (Cai Shui 2016 No. 127)
(《關於深港股票市場交易互聯互通機制試點有關稅收政策的通知》(財稅 2016 127號))
promulgated on 5 November 2016 by the Ministry of Finance of the PRC, the
State Administration of Taxation and the CSRC:
The Company is obliged to withhold PRC individual income tax on behalf of
Mainland individual shareholders at a tax rate of 20% when the Company
distributes the final dividends to Mainland individual investors who invest in
the H Shares of the Company through Shanghai-Hong Kong Stock Connect and
Shenzhen-Hong Kong Stock Connect. Where individual investors have already paid
foreign withholding taxes for such income, investors may apply to the
competent tax authorities of China Securities Depository and Clearing
Corporation Limited for foreign tax credit with valid tax withholding
certificates. The Company is obliged to withhold PRC individual income tax on
behalf of Mainland securities investment funds investing in H Shares of the
Company through Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock
Connect in accordance with the aforementioned requirements when the Company
distributes the final dividends; and the Company will not withhold income tax
on behalf of Mainland enterprise investors investing in H Shares of the
Company through Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock
Connect when the Company distributes the final dividends. The Mainland
enterprise investors shall report the income and make tax payment by
themselves.
Shareholders are recommended to consult their tax advisors regarding the PRC,
Hong Kong and other tax implications of owning and disposing of the H Shares
of the Company.
DIVIDENDS
According to the audited financial statements of the Company prepared in
accordance with the CASs and the IFRSs, the Company recorded negative profits
available for distribution to shareholders in 2023. As considered and approved
by the 28th meeting of the sixth session of the Board of the Company, the
Company proposed not to make profit distribution for the year of 2023.
ANNUAL GENERAL MEETING
The Company proposed to hold the annual general meeting (the "AGM") on
Thursday, 30 May 2024. The register of members of H Shares will be closed from
Thursday, 23 May 2024 to Thursday, 30 May 2024 (both days inclusive), during
which period no transfer of H shares will be effected. In order to qualify for
attendance and voting at the AGM, 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
Wednesday, 22 May 2024. The holders of H Shares whose names appear on the
register of members of the Company at the close of business on Wednesday, 22
May 2024 are entitled to attend and vote at the AGM.
PURCHASES, SALES OR REDEMPTION OF LISTED SECURITIES
During the Reporting Period, neither the Company nor any of its subsidiaries
purchased, sold or redeemed any listed securities (the term "securities" has
the meaning ascribed to it under Paragraph 1 of Appendix D2 to the Listing
Rules) of the Company.
PRE-EMPTIVE RIGHTS
The Articles of Association does not provide for any pre-emptive rights
requiring the Company to offer new shares to the existing shareholders in
proportion to their existing shareholdings.
USE OF PROCEEDS FROM NON-PUBLIC ISSUANCE OF A SHARES
In order to optimize its fleet structure, replenish long-term capacity and
expand its carrying capacity, while relieving the pressure of daily operating
funds and reducing its asset and liability ratio, on 17 January 2023, the
Company completed the non-public issuance of 1,675,977,653 A shares to 22
subscribers, including CNAHC (with an aggregate nominal value of
RMB1,675,977,653) at an issue price of RMB8.95 per share ("Non-public Issuance
of A Shares"). Net proceeds raised amounted to RMB14,993,016,587.32 and the
net proceeds per share from the Non-public Issuance of A shares were
RMB8.9458. For details, please refer to the announcement of the Company dated
17 January 2023. On 17 January 2023, the closing price of the Company's A
shares was RMB10.58. During the Reporting Period, the net proceeds from the
Non-public Issuance of A shares have been utilized according to the plan
disclosed by the Company. The following table shows the use of net proceeds
from the Non-public Issuance of A shares:
Unit: RMB
Committed investment project Total committed investment of proceeds raised Investment during the Reporting Period Outstanding amount as at the end of the Reporting Period Expected timeline for the completion of utilisation of proceeds raised
Purchase of 22 aircraft 10,793,016,587.32 10,793,016,587.32 - N/A
Replenishing working capital 4,200,000,000.00 4,200,000,000.00 - N/A
As at the end of the Reporting Period, the balance of the special account for
proceeds raised was RMB0.
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
Ma Chongxian (Chairman and Executive Director) Elected as executive Director on 20 July 2021, elected as Vice Chairman on 25
February 2022, elected as Chairman and resigned as Vice Chairman on 27
September 2022.
Wang Mingyuan (Vice Chairman and Executive Director) Elected on 30 March 2023
Feng Gang (Non-executive Director) Elected on 26 May 2020
Patrick Healy (Non-executive Director) Elected on 19 December 2019
Xiao Peng (Non-executive Director and employee Elected on 2 March 2023
representative director)
Li Fushen (Independent non-executive Director) Elected on 25 February 2022
He Yun (Independent non-executive Director) Elected on 25 February 2022
Xu Junxin (Independent non-executive Director) Elected on 25 February 2022
Winnie Tam Wan-chi (Independent non-executive Director) Elected on 25 February 2022
Supervisors
Set out below is the list of Supervisors during the Reporting Period and as at
the date of this annual report (unless otherwise stated).
Name Date of election and if applicable, leaving office as Supervisor
He Chaofan (Then Chairman of the Supervisory Committee and Supervisor) Elected as supervisor on 29 October 2013, elected as Chairman of the
Supervisory Committee on 25 February 2022, retired on 13 January 2023
Xiao Jian (Chairman of the Supervisory Committee and shareholder Elected as shareholder representative supervisor on 10 February 2023, elected
representative Supervisor) as Chairman of the Supervisory Committee on 10 March 2023
Wang Jie (Then employee representative Supervisor) Elected on 25 September 2020, retired on 2 March 2023
Qin Hao (Then employee representative Supervisor) Elected on 25 September 2020, retired on 2 March 2023
Lyu Yanfang (Shareholder representative Supervisor) Elected on 18 December 2020
Guo Lina (Shareholder representative Supervisor) Elected on 25 February 2022
Wang Mingzhu (Employee representative Supervisor) Elected on 2 March 2023
Li Shuxing (Employee representative Supervisor) Elected on 2 March 2023
CHANGES IN THE DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT OF THE COMPANY
DURING THE REPORTING PERIOD AND UP TO THE DATE OF THIS ANNUAL REPORT
1. On 13 January 2023, Mr. He Chaofan ceased to serve as the
Chairman of the Supervisory Committee and a Supervisor of the Company due to
retirement.
2. On 10 February 2023, Mr. Xiao Jian was elected as a
shareholder representative Supervisor of the Company at the first
extraordinary general meeting of the Company in 2023.
On 10 March 2023, Mr. Xiao Jian was elected as the Chairman of the Supervisory
Committee of the Company at the ninth meeting of the sixth session of the
Supervisory Committee of the Company.
3. On 10 February 2023, Mr. Wang Yingnian ceased to serve as
the Chief Pilot of the Company due to retirement.
4. On 2 March 2023, Mr. Xiao Peng was elected as the employee
representative Director of the Company and Mr. Wang Mingzhu and Mr. Li Shuxing
were elected as the employee representative Supervisors of the Company at the
eighth meeting of the third session of the employee representative congress of
the Company. Mr. Wang Jie and Mr. Qin Hao ceased to serve as the employee
representative Supervisors of the Company.
5. On 13 March 2023, at the sixteenth meeting of the sixth
session of the Board of the Company, Mr. Wang Mingyuan was appointed as the
President of the Company, and was approved to be nominated as a candidate for
executive Director of the Company, provided that he would be elected as a
Director at the general meeting. The Board agreed to elect Mr. Wang Mingyuan
as the Vice Chairman. On 30 March 2023, Mr. Wang Mingyuan was elected as the
executive Director of the Company at the 2023 second extraordinary general
meeting of the Company and was appointed as the Vice Chairman.
6. On 13 March 2023, at the sixteenth meeting of the sixth
session of the Board of the Company, Mr. Sun Yuquan was appointed as the Chief
Accountant of the Company; and Mr. Xiao Feng was appointed as the Chief
Economist of the Company and ceased to serve as the Chief Accountant of the
Company.
7. On 23 August 2023, Mr. Zheng Weimin was appointed as the
Vice President of the Company at the 22nd meeting of the sixth session of the
Board of the Company.
8. On 26 October 2023, Mr. Li Yunchuan was appointed as the
Chief Pilot of the Company at the 24th meeting of the sixth session of the
Board of the Company.
9. On 5 March 2024, Mr. Yan Fei was appointed as the Vice
President of the Company at the 27th meeting of the sixth session of the Board
of the Company.
10. On 5 March 2024, Mr. Chen Zhiyong ceased to serve as the Vice
President of the Company due to retirement.
11. On 28 March 2024, Mr. Huang Bin ceased to serve as a
secretary to the Board, a joint company secretary and an assistant to the
President of the Company due to retirement.
12. On 28 March 2024, Mr. Xiao Feng was appointed as a secretary
to the Board of the Company and a joint company secretary at the 28th meeting
of the sixth session of the Board of the Company.
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. Ma Chongxian, Mr. Wang Mingyuan (both are
executive Directors) 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.
Save as disclosed above, during the Reporting Period, 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.
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 2023 and remains in effect as at the date of
this report.
EMPLOYEES
The Company implements an open, fair and equal employment policy, insists on
equal pay for equal work and is committed to avoiding any discrimination in
respect of gender, race, nationality, physical condition, religion and marital
status of employees. The Company continues to promote the diversity of
employees and protect employees' legitimate rights and interests. The Group
will continue to take measures, including recruiting and treating employees in
accordance with the principle of gender equality, provide gender equality
training and development opportunities, and ensure the rights and interests of
female employees, to promote gender diversity at all levels and focus on
diversified management talent reserves.
As at the end of the Reporting Period, the Group had a total of 102,874
employees (including 63,305 male employees and 39,569 female employees,
accounting for 61.5% and 38.5% of the total employees of the Group
respectively), among which, the Company had 46,221 employees and the
subsidiaries of the Company had 56,653 employees. The differences in employee
background and job requirements are the main factors affecting the gender
diversity of employees.
The categories of employees of the Group are as follows:
Professional Categories As at 31 December 2023 As at 31 December 2022 Increase/(Decrease)
Management 12,561 10,943 1,618
Marketing and Sales 5,740 4,954 786
Operation 5,429 4,625 804
Ground Handling 13,082 11,838 1,244
Cabin Service 26,392 22,961 3,431
Logistics and Support 6,922 5,872 1,050
Flight Crew 13,303 10,789 2,514
Engineering and Maintenance 16,696 13,372 3,324
Information Technology 1,071 910 161
Others 1,678 926 752
Total 102,874 87,190 15,684
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
promoted the reform of three systems in an in-depth manner and made
well-targeted efforts in adjusting income distribution. The Company continued
to strengthen the relevance and effectiveness of the management and control
over gross payroll, enhanced cost reduction and efficiency of human resource
management and helped to boost both the operating performance and labor
efficiency. It stepped up the assessment on and incentive for the person in
charge and adhered to rigid assessment and fulfillment, while pushing forward
the effective implementation of tenure system and contractual management. The
Company also perfected the salary benchmarking and analysis mechanism and
further advanced the reform of market-oriented incentive mechanism to optimize
the internal remuneration distribution relationship. It enhanced the incentive
guarantee for technological innovation, implemented medium- and long-term
incentives for key positions in an orderly manner and actively carried out
appraisal and allocation of authority in respect of the Board to optimize the
remuneration management mechanism.
TRAINING PROGRAMME
In 2023, the Company implemented the major strategic plans of the 20th
National Congress of the CPC, and strived to foster team building of
high-calibre cadres who are loyal to the Communist Party, dedicated to
innovation, honest and upright while effectively managing the enterprise and
promoting corporate development. In terms of online training, the Company set
up the "Online College of the CNAHC Group " (中航集團網絡學院) to
develop an integrated online learning platform, and organized and launched
four special online training sessions for middle to senior management, leaders
and cadres. Continuing to improve the standard of online training, the Company
published 31 articles on the CNAHC Leadership Learning Platform and launched
49 courses under 9 series, including courses regarding the Central Economic
Work Conference. In addition, the Company continued to carry out off-the-job
training programs, and held 3 basic rotation training programs for young
cadres, 2 international training programs for outstanding young cadres, 2
senior manager training programs, and 3 "Let's talk about HR"
(開講啦，HR！) training programs, and all outstanding young cadres have
completed the basic rotation training. To maintain valid qualification of all
operating staff, the Company provided various types of qualification training
for pilots, flight attendants, flight trainees, aviation dispatch personnel
and ground service personnel, which recorded a total of 580,000 hours of
online training, 155,693 hours of flight simulator training and 72,449 hours
of other trainings. 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 2024, the Company will further pursue the spirit of the National Work
Conference on Cadre Education and Training, effectively implement the
requirements of the Working Rules on Cadre Education and Training
(《幹部教育培訓工作條例》), the National Cadre Education and
Training Plan (2023-2027) (《全國幹部教育培訓規劃(2023-2027年)》)
and other relevant documents. It will precisely identify the training needs
and launch featured training programs as well as international exchanges and
trainings to continuously enhance the political insights, execution and
leadership of leaders and cadres. By accelerating the empowerment of cadres
and talents, the Company will provide strong talent support and intellectual
guarantee for ushering the high-quality development of the Group as a
world-class enterprise.
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 21, 22 and
23 to the financial statements of this annual report.
BANK LOANS AND OTHER BORROWINGS
Details of the bank loans and other borrowings of the Company and the Group
are set out in note 35 to the financial statements of this annual report.
FIXED ASSETS
Changes in the fixed assets of the Group for the year ended 31 December 2023
are set out in note 17 to the financial statements of this annual report.
AIRCRAFT AND FLIGHT EQUIPMENT
The aggregate net book value of the Group's aircraft, engines and flight
equipment as at the end of the Reporting Period are set out in note 17 to the
financial statements of this annual report. The Group's capital commitment
amounts for aircraft and flight equipment as at the end of the Reporting
Period are set out in note 43 to the financial statements of this annual
report.
CAPITALISED INTERESTS
Details of the capitalised interests of the Group for the year ended 31
December 2023 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 40 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 RMB45.0843 million.
MAJOR CUSTOMERS AND SUPPLIERS
During the Reporting Period, the purchases of the Group from the largest
supplier accounted for 24.00% of the total purchases of the Group, while the
purchases of the Group from the five largest suppliers accounted for 38.91% 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 to the five largest customers of the
Group 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
During the Reporting Period, the Group adhered to Xi Jinping's ecological
civilization thought and the important instructions and spirit on civil
aviation, and focused on the task of building a strong civil aviation country
in the new era and the requirements of high-quality development. Guided by the
objectives of achieving carbon peak and carbon neutrality, the Group took
reform and innovation as the driving force to strengthen the low-carbon demand
across the entire aviation industrial chain and push forward the green
transformation of air traffic.
By continuing to improve its management system and enhancing its management
capabilities, the Group obtained ISO14001 environmental management system
certification. The Group took the initiative to serve the carbon peak and
carbon neutrality strategies and published carbon peak action plan. Staying
committed to low-carbon operation, the Group continued to promote fuel-saving
operation and APU replacement. With a focus on pollution prevention and
control, the Group accelerated the "fuel-to-electricity" special work and
steadily promoted the ban on plastic. It also actively promoted the energy
conservation and environmental protection, and further pushed forward
the"Enjoy Clean Flight (淨享飛行)" project. As at the end of 2023, a total
of around 12,000 passengers took part in the "Enjoy Low Carbon Flight
(淨享飛行低碳行)" campaign, offsetting 2,500 tonnes of carbon dioxide.
Furthermore, the "Enjoy Ecological Flight (淨享飛行生態行) " Phase II
Project was launched, and a welfare release station was set up in Wuhan, Hubei
Province, to commence special operations on protecting Chinese sturgeons.
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 SFO, the Companies Ordinance, the Stock Listing Rules
of the Shanghai Stock Exchange (《上海證券交易所股票上市規則》)
and the Listing Rules 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.
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, threatened or
initiated against the Company.
CONNECTED TRANSACTIONS
The Group has entered into several connected transaction agreements with
certain connected persons of the Group as described in the paragraphs below.
The Company has complied with the disclosure requirements of the connected
transactions in accordance with Chapter 14A of the Listing Rules.
For the purpose of this section headed "Connected Transactions" in this Report
of the Directors, "CNAHC Group" refers to CNAHC, its subsidiaries and
associates (as defined under the Listing Rules) excluding the Group, "ACC
Group" refers to Air China Cargo, its subsidiaries and its 30%-controlled
companies (as defined under the Listing Rules), "Cathay Pacific Group" refers
to Cathay Pacific and its subsidiaries (as defined under the Listing Rules).
ONE-OFF CONNECTED TRANSACTIONS
On 30 March 2023, the Company entered into the compensation agreement with
Beijing Air Catering, pursuant to which the Company will pay a compensation of
RMB348.7092 million in one lump sum to Beijing Air Catering to obtain the
complete property rights of the buildings and structures invested and
constructed by Beijing Air Catering on the land occupied by the Capital
Airport Catering Park（首都機場配餐園區）. Beijing Air Catering is a
subsidiary of CNAHC, the controlling shareholder of the Company, and is
therefore a connected person of the Company. The transaction contemplated
under the compensation agreement constitutes a connected transaction of the
Company under Chapter 14A of the Listing Rules. For details, please refer to
announcement of the Company dated 30 March 2023.
On 26 April 2023, the Company entered into the aircraft sale and purchase
agreement with Air China Cargo, pursuant to which the Company shall transfer
to Air China Cargo eight A330-200 aircraft. The base price of the aircraft to
be transferred shall be US$14.70 million per aircraft. It is expected that the
average final consideration shall not exceed the base price. As Air China
Cargo is a subsidiary of CNAHC, the controlling shareholder of the Company,
and is therefore a connected person of the Company. The transaction
contemplated under the aircraft sale and purchase agreement constitutes a
connected transaction of the Company under Chapter 14A of the Listing Rules.
For details, please refer to announcement of the Company dated 26 April 2023.
On 22 December 2023, the Company has entered into the A Share subscription
agreement with CNAHC for the issuance of not more than 854,700,854 new A
Shares to CNAHC at the A Share issue price (i.e. RMB7.02 per share) with
expected gross proceeds (before deducting relevant issuance expenses) of not
more than RMB6.00 billion, and the Company will enter into the H Share
Subscription Agreement with CNACG, for the issuance of not more than
392,927,308 new H Shares to CNACG at the H Share issue price (i.e. HKD5.09 per
share) with expected gross proceeds (before deducting relevant issuance
expenses) of not more than HKD2.00 billion. Since CNAHC is a substantial
shareholder of the Company and CNACG is a wholly-owned subsidiary of CNAHC,
CNAHC and CNACG are connected persons of the Company, and each of the issuance
of A Shares to CNAHC and the issuance of H Shares to CNACG constitutes a
connected transaction of the Company under Chapter 14A of the Listing Rules.
For details, please refer to announcement of the Company dated 22 December
2023.
Continuing connected transactions
During the Reporting Period, the transactions under the following continuing
connected transaction framework agreements constituted non-exempt continuing
connected transactions of the Company:
Agreement Parties and Connected Relationship Execution Date and Term of Agreement Contents of Agreement Pricing Policy
1 Properties Leasing Framework Agreement The Company and CNAHC (a substantial shareholder of the Company and therefore Renewed on 29 October 2021 with a term from 1 January 2022 to 31 December 2024 The Group and CNAHC Group agreed to lease from each other certain properties The Group (as lessor) may rent out its own properties (including properties
a connected person of the Company)
(including ancillary facilities) and land use rights owned by each other for constructed by the Group or customized upon the request of CNAHC Group) or
their respective production and operation, office and storage use. land with legal use rights to CNAHC Group for its production and operation,
office and storage use. The pricing principles and conducting of the
The details are set out in the announcement of the Company dated 29 October transaction shall be as follows: First, the Group shall provide quotation for
2021 the leased properties or land to CNAHC Group after taking into account the
factors including the relevant costs, tax and reasonable profit margin
relating to the properties or land. The related costs include, among others,
construction costs, depreciation costs, funding costs and maintenance costs.
Then, the rent payable for the leased properties or land shall be determined
through arm's length negotiations between the Group and CNAHC Group after
CNAHC Group takes into account the factors such as the location of the leased
properties or land and the service quality. Such rent shall not be lower than
the rent offered by the Group to an independent third party (if any) in
comparable circumstances.
The Group (as lessee) may lease properties owned by CNAHC Group and land with
legal use right from CNAHC Group based on its production and operation, office
and storage needs. The pricing principles and conducting of the transaction
shall be as follows: First, the Group shall conduct market research and
collect, consolidate and analyze information in respect of provision of
leasing services by independent third parties for the same type of properties
or land (if any) in close proximity to the properties or land. Then, (i) if
there is comparable market of the same type found through market research, the
parties shall determine the rental prices for the leased properties or land
through arm's length negotiations with reference to the market price for the
same type of services available from at least two independent third parties
and take into account certain factors; (ii) if there is no comparable market
of the same type found in the neighboring areas through market research, the
price shall be determined by adopting the cost-plus approach: the rental price
of the leased properties or land shall be determined through arm's length
negotiations between the parties based on the relevant costs, tax and
reasonable profit margin of the properties or land offered by CNAHC Group.
When leasing each other's properties or land, the parties may determine the
price for leasing their respective properties or land based on the above
pricing principles, and then exchange the properties or land use right in
accordance with the principle of equivalent exchange.
2 Comprehensive Services Framework Agreement The same as above The same as above (i) The Group accepts CNAHC Group's appointment to provide CNAHC Group For the services mentioned in item (i), the price to be charged by the Group
with products or services including but not limited to retiree management will be determined after arm's length negotiations between the parties on the
services, human resources services (including general, servicing and basis of the costs of the Group adding a reasonable service fee (generally
consulting services in respect of personnel employment, archival information, ranging from 3% to 10% of the costs) and/or with reference to the price for
salaries and benefits, social insurance and employee services), information the same type of products or services provided by the Group to other parties
technology services, procurement services, training services, air passenger under non-related (non-connected) transactions.
transportation agency services and in-flight supplies.
For the services mentioned in item (ii), the parties shall, according to the
(ii) CNAHC Group was appointed by the Group as the provider of ancillary service items and specific needs, determine the relevant service fees through
production services or the administrator of supply services of the Group for arm's length negotiations in accordance with the following principles: (1) the
which CNAHC Group shall provide the following products or services to the final transaction price shall be determined after arm's length negotiations
Group including but not limited to (provided that the provider has obtained between the parties based on the quotations provided by CNAHC Group, with
the relevant qualifications and certifications): (1) on-board catering and reference to the market price (if any) for the same type of services available
food supply management services on global flights; (2) operation and from at least two independent third parties in the market and take into
management services of office buildings; (3) property management services in account factors including the service standard, service scope, business volume
office buildings and the regions at which the office buildings are located; and specific needs of the parties; and/or (2) the service fee shall be
(4) support services for resident group, support services for delayed flights determined after arm's length negotiations between the parties based on the
passengers and scenario mileage payment products; (5) catering support and costs of CNAHC Group adding a reasonable service fee, and offering rewards or
cleaning services for check-in area and lounge for highend passengers at imposing penalties depending on the management of CNAHC Group, the final
terminals; (6) other commissioned services. settlement of which shall be made on the basis of the actual transaction
amount.
(iii) CNAHC Group was engaged by the Group as one of the providers of
ancillary production or supply services of the Group, which CNAHC Group shall For the services mentioned in item (iii), (1) if government-set or guided
provide the Group with the following products or services including but not price is available, government-set or guided price shall be adopted; (2) in
limited to (provided that the provider has obtained the relevant the absence of government-set or guided price, the final transaction price
qualifications and certifications): (1) hotel accommodation and staff shall be determined after arm's length negotiations between the parties with
recuperation services; (2) air ticket printing services and other printed reference to the market price (if any) for the same type of products or
materials; (3) air passenger transportation agency services; (4) other services available from at least two independent third parties in the market,
services such as airline catering services and provision of all kinds of by taking into account certain factors including the service standard, service
on-board services supplies. scope, business volume and specific needs of the parties; (3) if open market
price is not available or there are no identical or similar business
activities in the market, the parties shall settle the actual transaction
amount based on the costs of CNAHC Group adding a reasonable service fee, and
(iv) The Group and CNAHC Group commission each other for the human offering rewards or imposing penalties depending on the management of CNAHC
resources sharing business within the two groups. Group.
For the services mentioned in item (iv), in principle, the transaction price
shall be determined through arm's length negotiations between the parties
based on the labor costs incurred, and the transaction price shall be fully
borne by the worksite employer.
3 Government Charter Flight Service Framework Agreement The same as above The same as above CNAHC shall use the charter flight services of the Company for fulfilling its The parties will determine the price for the Government Charter Flight
government charter flight assignments. Services through arm's length negotiations based on the cost incurred by the
carrier in providing the Government Charter Flight Services adding a
reasonable profit (the reasonable profit margin generally ranges from 5% to
10%). The costs include direct costs and indirect costs.
4 Media Services Framework Agreement The Company and CNAMC (CNAMC is a wholly- owned subsidiary of CNAHC and The same as above CNAMC has agreed to provide Media Services to the Group. Of which, the Company For the Entrusted Services, the Group will make reference to the service items
therefore a connected person of the Company) grants CNAMC an exclusive right to distribute in-flight reading materials, and specific requirements, and (i) the parties shall determine the final
movies, TV series, music, sound effect and other cultural contents. transaction price through arm's length negotiations based on the quotations
provided by CNAMC with reference to the market price (if any) for the same
type of services available from at least two independent third parties after
taking into account factors including the service standard, service scope,
The Company has commissioned CNAMC as the general service provider with business volume and specific needs of the parties; and/or (ii) the service
respect to the Media Services of the Company which CNAMC shall provide the fees shall be determined after arm's length negotiations between the parties
Company with the following Media Services (the "Entrusted Services"): (1) based on the costs of CNAMC adding a reasonable service fee, and offering
in-flight entertainment system business and in-flight network platform rewards or imposing penalty depending on the management of CNAMC, the final
business; (2) brand communication and product marketing business; (3) news and settlement of which shall be made on the basis of the actual transaction
publicity business, including but not limited to external media operation and amount.
maintenance and internal newspaper production; (4) advertisement management
business and media cooperation and management business; (5) other Media
Services entrusted by the Company.
In respect of the media products or services other than the Entrusted Services
that are purchased by the Company from CNAMC, the Group shall determine and
pay the relevant services fees in accordance with the following principles and
the arm's length negotiations with CNAMC: (1) if government-set or guided
price is available, government-set or guided price shall be adopted; (2) in
the absence of government-set or guided price, the final transaction price
shall be determined after arm's length negotiations between the parties based
on the quotation provided by CNAMC with reference to the market price (if any)
for the same type of services available from at least two independent third
parties in the market after taking into account certain factors including the
service standard, service scope, business volume and specific needs of the
parties; (3) if open market price is not available or there are no identical
or similar business activities in the market, the parties shall settle the
actual transaction amount based on the costs of CNAMC adding a reasonable
service fee, and offering rewards or imposing penalties depending on the
management of CNAMC.
In respect of the Company's media used by CNAMC in operating the Media
Services, CNAMC shall pay the Company an annual media resource fee of
RMB13.8915 million for each of the three years of 2022, 2023 and 2024 as per
the comparable market prices of the media resources.
5 Construction Project Commissioned Management Framework Agreement The Company and CNACD (a wholly- owned subsidiary of CNAHC and therefore a The same as above CNACD Group is commissioned by the Company to serve as a manager of the CNACD Group receives service fees based on the size of or investment in the
connected person of the Company) construction projects and establish project department. CNACD Group shall projects in accordance with the commissioned management scope, and the service
provide management services for the Company's projects based on project fees shall be calculated as per actual expenses and rewards and
characteristics using its industry expertise and professional skills. The penalties-related expenses on a full labor cost basis (including reward for
subsidiaries of the Company may also commission CNACD Group to carry out the labor cost budget surplus, rewards and penalty for construction period
project management work. management and reward and penalty for investment control balance) based on the
human resources invested by CNACD Group as verified by the Company, and the
particulars to be specified in relevant agreements.
6 Financial Services Agreement The Company and CNAF (CNAF is a non-wholly owned subsidiary of the Company Renewed on 28 August 2020 with a term from 1 January 2021 to 31 December 2023, CNAF agreed to provide the Group with a range of financial services including Interest rates applicable to deposits: should (i) comply with the requirements
that CNAHC holds 49% of its equity interest and therefore a connected and subsequently renewed on 30 March 2023 with a term from 1 January 2024 to deposit services, credit services and other financial services. prescribed by the People's Bank of China on the interest rates for such type
subsidiary of the Company) 31 December 2026 of deposits; (ii) not be lower than the interest rates for the same type of
services charged by state-owned commercial banks to the Group under the same
The details are set out in the announcements of the Company dated 28 August conditions; and (iii) not be lower than the interest rates for the same type
2020 and 30 March 2023 of services charged by CNAF to other CNAHC member companies under the same
conditions.
Interest rates applicable to credit services: should (i) comply with the
requirements prescribed by the People's Bank of China on the interest rates
for such type of loans; (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
rate 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.
7 Financial Services Framework Agreement CNAF (a non-wholly owned subsidiary of the Company), and CNAHC (a substantial The same as above CNAF agreed to provide CNAHC Group with a range of financial services Interest rates applicable to deposits: should (i) comply with the requirements
shareholder of the Company and therefore a connected person of the Company) including deposit services, credit services and other financial services. prescribed by the People's Bank of China on the interest rates for such type
of deposits; (ii) not be higher than the interest rates for the same type of
services charged by state-owned commercial banks to CNAHC Group under the same
conditions; and (iii) not be higher than the interest rates for the same type
of services charged by CNAF to other CNAHC member companies under the same
conditions.
Interest rates applicable to credit services: should (i) comply with the
requirements prescribed by the People's Bank of China on the interest rates
for such type of loans; (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
rate 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.
8 Framework Agreement The Company and CNACG (CNACG is a substantial shareholder of the Company and Renewed on 20 September 2022 with a term from 1 January 2023 to 31 December Finance and operating lease services: CNACG Group agreed to provide finance Finance and operating lease services: The final transaction price will be
therefore a connected person of the Company) 2025 and operating lease services in respect of, including but not limited to, determined on arm's length negotiations between both parties with reference to
aircraft, engines, simulators, aircraft-related materials, equipment and the prices for the same type of lease services offered by independent third
vehicles to the Group; the Group agreed to provide finance and operating lease parties and after taking into account certain factors. Such factors include
services in respect of, including but not limited to, equipment and vehicles purchasing price of the leasing subject, interest rate and arrangement fees
The details are set out in the announcement of the Company dated 20 September to CNACG Group. (if any) (for finance lease), rental fee (for operating lease), the lease
2022
terms, the features of the leasing subject and the comparable market rental
prices. The final transaction price shall not be higher than the transaction
prices offered by at least two independent third parties on the same
Ground support services and other services: including but not limited to the conditions.
following transactions conducted between any member of the Group on the one
hand and any member of CNACG Group on the other hand: ground support services,
aircraft maintenance services, aircraft repair services, property investment
and management services, ticket and tourism services, logistics services, Ground support services and other services:
administrative management services, cleaning and washing services, resident
security services, lounge supplies procurement services and aircraft material
procurement services.
(1) Follow the government pricing or guidance price if it is available;
(2) If no government pricing or guidance price is available, the final
transaction price will be determined on arm's length negotiations between the
parties, with reference to the market prices offered by at least two
independent third parties on the market for the same type of service, and
after taking into account certain factors such as the service standard,
service scope, business volume and specific needs of the parties. If any
service needs of the service recipient change, appropriate adjustment will be
made to the transaction price after negotiation between both parties based on
the extent of variation in the relevant costs, service quality or other
factors;
(3) If neither of the above cases is applicable, the price will be
determined on the basis of costs plus reasonable profit. The costs are mainly
based on the costs and expenses of the service provider, including costs of
human resources, facility, equipment and materials. Reasonable profit margin
will be determined with mainly making reference to the historical average
prices of similar products or services (where possible) published in the
relevant industry, and/or the profit margin of the comparable products and
services disclosed by other listed companies. The profit margin of CNACG Group
shall not exceed 10%. The final transaction prices shall be determined on
terms that, to the Group, are no less favorable than those provided by
independent third parties to the Group or those provided by CNACG Group to
independent third parties (with regards to the receiving 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).
9 Framework Agreement The Company and Cathay Pacific (Cathay Pacific is a substantial shareholder of Renewed on 30 August 2022 with a term from 1 January 2023 to 31 December 2025 Providing a framework for the transactions between the Group and Cathay Interline arrangements and code share arrangements: Revenue is apportioned
the Company and therefore a connected person of the Company)
Pacific Group arising from interline arrangements, code sharing arrangements, between the parties in accordance with bilateral prorate agreements which
joint operating arrangements, aircraft leasing, frequent flyer programmes, the follow the principles in the Multi-lateral Prorate Agreement of International
provision of airline catering, ground support and engineering services and Air Transport Association.
The details are set out in the announcement of the Company dated 30 August other services agreed to be provided and other transactions agreed to be
2022 undertaken under the Framework Agreement.
Joint operating arrangements: Revenue is apportioned between the parties
having regard to the fleet capacity of both parties and the values of seats
sold by each party.
Aircraft leasing: Rentals payable under aircraft leases are determined after
negotiations at arm's length between the parties having regard to rentals
payable under comparable leases between unconnected parties for comparable
aircraft and comparable periods and prevailing long-term interest rates.
Frequent flyer programmes: Frequent flyers of either party can earn mileage
credits by taking the other party's flights. Payments by each party to the
other for mileage values are determined by the parties on an arm's length
basis having regard to comparable mileage values payable by unconnected
airlines to each other.
Airline catering: The parties determine the pricing of airline catering having
regard to quotations provided by unconnected caterers, taking due account of
material and labor costs, quality, assurance of supply, safety and innovation
(including changes in the foregoing matters).
Ground support and engineering services: The pricing is required to be no less
favorable than that offered for comparable services to unconnected parties
taking due account of the quality of services.
Other products and services (including leasing premises and customs
declaration services): The pricing is determined having regard to relevant
market information (including independent third party quotations for
comparable products and services), costs incurred by the relevant party and
the quality of products and services (including changes in any of the
foregoing).
10 Framework Agreement The Company and Air China Cargo (a 51%-owned subsidiary of CNAHC and therefore Renewed on 20 September 2022 with a term from 14 October 2022 to 31 December Exclusive operation of the passenger aircraft cargo business: The Group and Exclusive operation of the passenger aircraft cargo business:
a connected person of the Company) 2024 the ACC Group have determined to carry out a long-term collaboration for the
passenger aircraft cargo business under an exclusive operating model. The
entire passenger aircraft cargo business of the Group will be operated
exclusively by the ACC Group, and the ACC Group shall undertake the overall During the exclusive operation term, the Group shall charge the ACC Group the
The details are set out in the announcement of the Company dated 20 September responsibilities for transporting the cargos to the consignors with respect to transportation service fee regularly in each year. Such transportation service
2022 the cargos which are transported through the passenger aircraft. fee shall be determined based on the ACC Group's actual cargo revenue
generated from the exclusive operation of the Group's passenger aircraft cargo
business after deducting certain operating fee rate. The specific formulas are
as follows: transportation service fee = actual revenue from the passenger
Ground support services and other services: The ground support services and aircraft cargo business × (1 - operating fee rate)
other services provided by the Group to the ACC Group include but are not
limited to operation support services, IT sharing services, comprehensive
support services, engine and aircraft-related materials sharing services,
retiree management services, training services, human resources services, and Ground support services and other services:
procurement and maintenance services. The ground support services and other
services provided by the ACC Group to the Group include but are not limited to
ground support services (cargo terminal services and airport apron services),
container and pallet management services, engine and aircraft-related (1) Follow the government and industry pricing or guidance price if it is
materials sharing services. available;
(2) If no government and industry pricing or guidance price is available,
the final transaction price shall 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 change, 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 shall 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 reasonable
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 than
those provided by independent third parties to the Group or those provided by
ACC Group to independent third parties.
Property leasing: The Group may rent out its own properties or land with legal Property leasing services:
use rights to ACC Group for its production and operation, office and storage
use, and the Group may lease ACC Group's self-owned properties and land from
the ACC Group in the event that its own properties could not be able to meet
its business needs such as production and operation, office and storage. (1) The Group as lessor: First, the Group shall provide quotation of the
leased properties or land to ACC Group after taking into account the factors
including the relevant costs, tax and reasonable profit margin relating to the
properties or land. Then, the rental prices for the leased properties or land
shall be determined through arm's length negotiations between the Group and
ACC Group after ACC Group takes into account the factors such as the location
of the leased properties or land and the service quality. Such rental prices
shall not be lower than the rent offered by the Group to an independent third
party (if any) in comparable circumstances.
(2) The Group as lessee: First, the Group shall conduct market research
and collect, consolidate and analyze information in respect of provision of
leasing services by independent third parties for the same type of properties
or land (if any) in close proximity to the properties or land to be leased.
Then, (a) if there is comparable market of the same type identified through
market research, the parties shall determine the rental prices for the leased
properties or land through arm's length negotiations with reference to the
market price for the same type of services available from at least two
independent third parties after taking into account the relevant factors. The
relevant factors include the geographical location, function and layout,
furnishing, ancillary facilities and property services of the property or land
as well as the specific needs of the lessee; and (b) if there is no comparable
market of the same type found in the neighboring areas through market
research, the price shall be determined by adopting the cost-plus approach:
the rental price of the leased properties or land shall be determined through
arm's length negotiations between the parties based on the relevant costs, tax
and reasonable profit margin of the properties or land offered by ACC Group.
The relevant costs include construction costs, depreciation costs, funding
costs and maintenance costs. Reasonable profit margin will be determined with
mainly making reference to the historical average prices on similar services
(where possible) published regarding the property leasing industry, and/or the
profit margin of the comparable services disclosed by other listed companies,
and the reasonable profit margin of ACC Group shall not exceed 10%. The
abovementioned rental prices shall not be higher than those offered by ACC
Group to the independent third parties (if any) in comparable circumstances.
(3) The Group as lessee and lessor: When leasing each other's properties
or land, as a separate matter, the parties may determine the quotation for the
rental prices of their respective properties or land based on the above
pricing principles, and then exchange the properties and land use right in
accordance with the principle of equivalent exchange.
(4) The payment method of rental fee shall be subject to specific
agreement.
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:
Revenue from charter flight services RMB 900 383
Revenue from comprehensive services RMB 110 57
Expenditure on comprehensive services RMB 2,750 1,920
Revenue from property leasing RMB 166 51
Total value of right-of-use assets involved in property leasing RMB 370 55
Single rent received from customized properties RMB 230 0
Expenditure on media and advertising services RMB 500 109
Expenditure on construction project management services RMB 90 40
Maximum daily balance of loans and other credit services granted by CNAF to RMB 6,500 265
CNAHC Group
Transactions with CNACG Group:
Expenditure on ground handling and other services RMB 750 423
Total value of right-of-use assets involved in financing and RMB 14,000 808
operating leasing
Annual rental fee in relation to the operating leases not accounted for as RMB 100 18
right-of-use assets provided by the CNACG Group
Transactions with Cathay Pacific Group:
Aggregate amount payable/paid by the Group to Cathy Pacific Group HKD 700 74
Aggregate amount payable/paid by Cathay Pacific Group to the Group HKD 700 174
Transactions with ACC Group ((1)):
Transportation service fee of the passenger aircraft cargo business paid by RMB 17,000 3,412
ACC Group to the Group
Aggregate amount of ground handling and other services paid by ACC Group to RMB 2,500 887
the Group
Aggregate amount of ground handling and other services paid by the Group to RMB 1,500 681
ACC Group
Revenue from property leasing services RMB 250 134
Transactions with CNAF:
Maximum daily balance of deposits placed by the Group with CNAF RMB 20,000 7,952
CONFIRMATION FROM INDEPENDENT NON-EXECUTIVE DIRECTORS
The independent non-executive Directors of the Company have confirmed that
during the Reporting Period, all continuing connected transactions to which
the Company was a party have been entered into in the ordinary and usual
course of business of the Company, on normal commercial terms or better and
have been carried out according to the agreements governing them and that the
terms of them were fair and reasonable and in the interests of the
shareholders of the Company as a whole.
CONFIRMATION FROM THE AUDITOR
Pursuant to Rule 14A.56 of the Listing Rules, the listed issuer must engage
its auditors to report on the continuing connected transactions every year.
The auditor 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 for transactions involving 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 agreements governing the transactions; and
(4) have exceeded the annual 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 (Revised) "Assurance Engagements Other Than Audits or Reviews
of Historical Financial Information" and with reference to Practice Note 740
(Revised) "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.
RELATED PARTY TRANSACTIONS
Details of the significant related party transactions entered into by the
Group during the Reporting Period are set out in note 47 to the financial
statements of this annual report. None of these related party transactions
constitutes a disclosable connected transaction as defined under the Listing
Rules, except for the transactions described in the section headed "Connected
Transactions" in this Report of the Directors, in respect of which the
disclosure requirements under Chapter 14A of the Listing Rules have been
complied with.
CONTRACT OF SIGNIFICANCE
Save as disclosed in the section headed "Connected Transactions" of this
Report of the Directors, none of the Company or any of its subsidiaries
entered into any contract of significance with the controlling shareholder or
any of its subsidiaries, and there is no contract of significance in relation
to provision of services by the controlling shareholder or any of its
subsidiaries to the Company or any of its subsidiaries.
CORPORATE BONDS
The Group's corporate bonds as at the end of the Reporting Period are
summarised as the followings:
Unit: RMB billion, Currency: RMB
Name of Corporate Bond Abbreviation Code Issue Date Value Date Expiry Date Balance of the Bond Interest Rate (%) Payment of Investor suitability arrangement (if any) Trading Mechanism
principal and interest
Shenzhen Airlines Company Limited 2022 Non-public Offering of Corporate Bond 22SA01 133201 23 February 2022 25 February 2022 25 February 2025 1.540 3.18 Interest on annual basis Repayment of principal on maturity For not more than 200 institutional investors among professional investors Listed and Transferred on the Integrated Agreement Trading Platform of SZSE
for Professional Investors (First Tranche) only
Shenzhen Airlines Company Limited 2022 Non-public Offering of Corporate Bond 22SA02 133215 17 March 2022 21 March 2022 21 March 2025 1.027 3.43 Interest on annual basis Repayment of principal on maturity For not more than 200 institutional investors among professional investors Listed and Transferred on the Integrated Agreement Trading Platform of SZSE
for Professional Investors (Second Tranche) only
Shenzhen Airlines Company Limited 2022 Non-public Offering of Corporate Bond 22SA03 133229 1 April 2022 7 April 2022 7 April 2025 1.537 3.4 Interest on annual basis Repayment of principal on maturity For not more than 200 institutional investors among professional investors Listed and Transferred on the Integrated Agreement Trading Platform of SZSE
for Professional Investors (Third Tranche) only
Shenzhen Airlines Company Limited 2022 Non-public Offering of Corporate Bond 22SA04 133240 25 April 2022 26 April 2022 26 April 2025 0.716 3.4 Interest on annual basis Repayment of principal on maturity For not more than 200 institutional investors among professional investors Listed and Transferred on the Integrated Agreement Trading Platform of SZSE
for Professional Investors (Fourth Tranche) only
"22SA01", "22SA02", "22SA03" and "22SA04" are traded on the Shenzhen Stock
Exchange (SZSE). No bond in the table is subject to the risk of termination of
listing and trading.
Payment of principal and interest for corporate bonds during the Reporting
Period
Name of Corporate Bond Payment of Principal and Interest
Air China Limited 2012 Corporate Bond (First Tranche) On 18 January 2023, the Company completed the payment of principal and
interest on "12AC01" Corporate Bond.
Air China Limited 2012 Corporate Bond (Second Tranche) On 16 August 2023, the Company completed the payment of principal and interest
on "12AC03" Corporate Bond.
Shenzhen Airlines Company Limited 2022 Non-public Offering of Corporate Bond On 25 February 2023, the Company completed the interest payment on the
for Professional Investors (First Tranche) non-public offering of "22SA01" Corporate Bond.
Shenzhen Airlines Company Limited 2022 Non-public Offering of Corporate Bond On 21 March 2023, the Company completed the interest payment on the non-public
for Professional Investors (Second Tranche) offering of "22SA02" Corporate Bond.
Shenzhen Airlines Company Limited 2022 Non-public Offering of Corporate Bond On 7 April 2023, the Company completed the interest payment on the non-public
for Professional Investors (Third Tranche) offering of "22SA03" Corporate Bond.
Shenzhen Airlines Company Limited 2022 Non-public Offering of Corporate Bond On 26 April 2023, the Company completed the interest payment on the non-public
for Professional Investors (Fourth Tranche) offering of "22SA04" Corporate Bond.
Basic information on debt financing instruments as at the end of the Reporting
Period
Unit: RMB billion, Currency: RMB
Name of Bond Abbreviation Code Issue Date Value Date Expiry Date Balance of the Bond Interest Rate (%) Payment of
principal and interest
Air China Limited 2022 Medium Term Note (First Tranche) 22ACMTN001 102282150 22 September 2022 23 September 2022 23 September 2025 3.021 2.54 Interest on annual basis Repayment of principal on maturity
Shenzhen Airlines Company Limited 2021 Medium Term Note (First Tranche) 21SAMTN001 102101631 19 August 2021 23 August 2021 23 August 2024 2.022 3.20 Interest on annual basis Repayment of principal on maturity
Shenzhen Airlines Company Limited 2022 Medium Term Note (First Tranche) 22SAMTN001 102280281 16 February 2022 18 February 2022 18 February 2025 1.538 2.99 Interest on annual basis Repayment of principal on maturity
The bonds set out in the table, namely "22ACMTN001", "21SAMTN001" and
"22SAMTN001", are all traded on the interbank bond market, issued to
institutional investors in the national interbank bond market, performed in
accordance with the trading rules of the National Interbank Funding Centre
(全國銀行間同業拆借中心), and are not subject to the risk of
termination of listing and trading.
Payment of principal and interest for bonds during the Reporting Period
Name of Bond Payment of Principal and Interest
Air China Limited 2022 Super Short-term Commercial Paper (Fourth Tranche) On 28 July 2023, the Company completed the payment of principal and interest
on "22ACSCP004" Super Short-term Commercial Paper.
Air China Limited 2022 Medium Term Note (First Tranche) On 23 September 2023, the Company completed the interest payment on
"22ACMTN001" Medium Term Note.
Shenzhen Airlines Company Limited 2020 Medium Term Note (First Tranche) On 5 March 2023, the Company completed the payment of principal and interest
on "20SAMTN001" Medium Term Note.
Shenzhen Airlines Company Limited 2021 Medium Term Note (First Tranche) On 23 August 2023, the Company completed the interest payment on "21SAMTN001"
Medium Term Note.
Shenzhen Airlines Company Limited 2022 Medium Term Note (First Tranche) On 18 February 2023, the Company completed the interest payment on
"22SAMTN001" Medium Term Note.
SUBSEQUENT EVENT
The Company convened the 25th meeting of the sixth session of the Board on 22
December 2023 and convened the first extraordinary general meeting of 2024 on
26 January 2024, at which relevant resolutions, including the proposal in
relation to issuance of A Shares and H Shares to specific investors by the
Company in 2023, were approved and passed. On 7 February 2024, the Company
completed the issuance of H Shares to the specific investor, CNACG.
392,927,308 H Shares were issued at the issue price of HKD5.09 per H Share.
Upon completion of the issue of new H Shares to CNACG, the total share capital
of the Company increased to 16,593,720,146 shares, comprising 11,638,109,474 A
Shares and 4,955,610,672 H Shares. For details, please refer to the
announcements of the Company dated 7 February 2024, 26 January 2024 and 22
December 2023.
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 2023. 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
Ma Chongxian
Chairman
28 March 2024
Profile of Directors, Supervisors and Senior Management
DIRECTORS
Mr. Ma Chongxian, aged 58, 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
to September 2022, as well as the director of CNAHC from May 2021. He was the
general manager of CNAHC, and concurrently the President and deputy secretary
of the Communist Party Committee of the Company from May 2021 to September
2022. He has also served as the vice chairman of the board of directors of
Cathay Pacific since November 2022 and an executive Director of the Company
since July 2021. He served as the Vice Chairman of the Company from July 2021
to September 2022. He has been serving as the chairman and secretary of the
Communist Party Group of CNAHC, the chairman and secretary of the Communist
Party Committee of the Company, and concurrently as the chairman of CNACG
since September 2022.
Mr. Wang Mingyuan, aged 58, graduated from Xiamen University majoring in
planning and statistics. Mr. Wang started his career in the civil aviation
industry in July 1988. Mr. Wang was appointed as a member of the Standing
Committee of the Communist Party Committee of the Company in February 2011,
and served as the vice president of the Company from February 2011 to March
2023. Since April 2011, he has concurrently served as the chairman of Air
China Development Corporation (Hong Kong) Limited. He was appointed as a
member of the Communist Party Group of CNAHC in April 2020, and served as the
deputy general manager of CNAHC from April 2020 to January 2023. He has also
served as the vice chairman of Tibet Airlines Co., Ltd. since June 2020 and
the chairman of Air Macau Company Limited since March 2022. He was appointed
as a director, the general manager and deputy secretary of the Communist Party
Group of CNAHC in January 2023, and was appointed as the deputy secretary of
the Communist Party Committee of the Company in February 2023. He has been
serving as the President, Director and Vice Chairman of the Company since
March 2023, and as the non-executive director of Cathay Pacific Airways
Limited since April 2023.
Mr. Feng Gang, aged 60, 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 58, 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 the Company since December 2019, and a director of Swire Pacific
Limited since August 2021.
Mr. Xiao Peng, aged 58, graduated from Civil Aviation College of China
majoring in maintenance of aircraft engine under the department of aviation
machinery. He started his career in the civil aviation industry in August
1988. He has been serving as the chairman of the labor union of CNAHC and the
chairman of the labor union and Chief Engineer of the Company since November
2022, as well as the employee representative Director of CNAHC and the
employee representative Director of the Company since March 2023.
Mr. Li Fushen, aged 61, is a senior accountant with a bachelor's degree in
engineering. 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 62, holds a postgraduate diploma in software engineering from
Beijing Institute of Technology. He served as 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 59, is a senior economist and holds a doctorate's degree
in technical economics and management. 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 62, 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, the
chairman of the Hong Kong Communications Authority, a member of the Chief
Executive's Advisory Council (Innovation and Entrepreneurship), 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 appointed by the government, 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 the chairman of the
board of Hong Kong Palace Museum. She has been serving as an independent
non-executive Director of the Company since February 2022.
SUPERVISORS
Mr. Xiao Jian, aged 60, graduated from the Graduate School of the Party School
of the Central Committee of Communist Party of China majoring in economics and
holds a postgraduate diploma. Mr. Xiao started his career in the civil
aviation industry in 1983. He has been serving as a director and a member of
the Communist Party Committee of CNACG since March 2016. From March 2016 to
October 2022, he was the secretary of the Communist Party Committee, vice
president and secretary of the Committee for Discipline Inspection of CNACG.
Between October 2022 and August 2023, he was the president of CNACG. He has
been serving as a Supervisor of the Company since February 2023 and the
Chairman of the Supervisory Committee of the Company since March 2023.
Ms. Lyu Yanfang, aged 52, 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 53, 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 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. 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.
Mr. Wang Mingzhu, aged 56, graduated from Hebei University majoring in
philosophy. He is a senior political work specialist. He started his career in
the civil aviation industry in July 1991. He has been serving as the secretary
of the Communist Party Committee and deputy general manager of the Company's
general fleet since December 2022, and the employee representative Supervisor
of the Company since March 2023.
Mr. Li Shuxing, aged 56, holds a bachelor's degree in agronomy from Inner
Mongolia Agricultural College. He started his career in the civil aviation
industry in July 1991. He has been serving as the secretary of the Communist
Party Committee, deputy director and chairman of the labor union of the
Company's commercial committee since October 2022, and the employee
representative Supervisor of the Company since March 2023.
SENIOR MANAGEMENT
Mr. Wang Mingyuan: Please refer to "Directors" for his biographies.
Mr. Tan Huanmin, aged 59, graduated from Jilin University School of Law
majoring in constitutional law and holds a postgraduate diploma. Mr. Tan is a
senior political work specialist. 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. Zhang Sheng, aged 51, 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. 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 60, 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
served as Vice President and a member of the Standing Committee of the
Communist Party Committee of the Company from December 2012 to March 2024. He
also served as the director of Shenzhen Airlines from May 2014 to April 2023.
Between May 2014 and September 2020, he was the president and deputy secretary
of the Communist Party Committee of Shenzhen Airlines. He was the chairman of
Shenzhen Airlines from March 2020 to April 2023. Between July 2020 and January
2024, he served as the deputy general manager and a member of the Communist
Party Group of CNAHC.
Mr. Sun Yuquan, aged 50, graduated from Nanjing University of Science &
Technology majoring in accounting. He is a professional senior engineer and a
senior accountant. He served as the general manager of the finance department
of China Rong Tong Asset Management Group Corporation Limited from July 2019
to February 2022. He has been serving as the chief accountant and a member of
the Communist Party Group of CNAHC since February 2022. Since March 2022, he
has been serving as a member of the Standing Committee of the Communist Party
Committee of the Company, and as the non-executive director of Cathay Pacific
Airways Limited, the chairman of China National Aviation Capital Holding Co.,
Ltd. and the chairman of China National Aviation Media Co., Ltd. He became the
Chief Accountant of the Company in March 2023. He has also been serving as the
chairman of China National Aviation Finance Co., Ltd. since November 2023.
Mr. Ni Jiliang, aged 57, 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 Aircraft Maintenance and Engineering Corporation between
September 2017 and April 2020, and the Chief Engineer of the Company from
January 2020 to November 2022. Since April 2020, he has served as the chairman
and secretary to the Communist Party Committee of Aircraft Maintenance and
Engineering Corporation. He has been serving as the deputy general manager and
a member of the Communist Party Group of CNAHC since April 2022, and the Vice
President and a member of the Standing Committee of the Communist Party
Committee of the Company since May 2022. He was also appointed as the chairman
of Beijing Aero-Engine Services Co., Ltd. in July 2022, and the chairman of
Sichuan Services Aero-Engine Maintenance Co., Ltd. in September 2022.
Mr. Zheng Weimin, aged 58, graduated from the First Aviation Academy of Air
Force majoring in aviation and holds a postgraduate diploma. Mr. Zheng is a
senior pilot. He started his career in civil aviation industry in 1987 and
served as the chief captain of the general fleet and deputy secretary of the
Communist Party Committee of the Company from December 2014 to March 2021.
Between March 2021 to July 2023, he served as an assistant to the general
manager of CNAHC. He was also appointed as the chairman of Air China Inner
Mongolia Co., Ltd. in March 2023, and was appointed as the deputy general
manager and a member of the Communist Party Group of CNAHC, as well as a
standing member of the Communist Party Committee of the Company in July 2023.
He has been serving as the Vice President of the Company since August 2023.
Mr. Yan Fei, aged 55, graduated from Tianjin University majoring in business
administration and holds a master's degree in business administration. Mr. Yan
started his career in civil aviation industry in July 1992. From December 2018
to September 2021, he served as the general manager of the ground service
department and the deputy secretary of the Communist Party Committee of the
Company. Between September 2021 and June 2022, he was the deputy general
manager of Tianjin Branch of the Company, being responsible for overseeing the
works of the branch. He served as the general manager and the deputy secretary
of the Communist Party Committee of Tianjin Branch of the Company from June
2022 to January 2024. He has been serving as the deputy general manager and a
member of the Communist Party Group of CNAHC since January 2024. He has also
been serving as the Vice President and a member of the Communist Party
Committee of the Company since March 2024.
Mr. Zhang Hua, aged 58, 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 chairman of Dalian Airlines Company Limited since
March 2020 and chairman of Beijing Airlines Company Limited since September
2022. Since December 2022, he has concurrently served as the Chief Compliance
Officer of CNAHC and the Company.
Mr. Xiao Peng: Please refer to "Directors" for his biographies.
Mr. Xiao Feng, aged 55, 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 served as the Chief Accountant of the Company from July 2014 to March
2023. Since November 2015, he has been serving as the chairman of China
National Aviation Company Limited, and from February 2016 to November 2023, he
became the chairman of China National Aviation Finance Co., Ltd. He served as
the non-executive director of Cathay Pacific Airways Limited since January
2017. He became the Chief Economist of the Company in March 2023. He was
appointed as the secretary to the Board of the Company and joint company
secretary in March 2024.
Mr. Yan Simeng, aged 41, graduated from the Department of Physics of Peking
University and obtained his doctorate in theoretical and computational physics
from the University of California, Irvine. Mr. Yan has been serving as Chief
Information Officer of the Company since September 2021.
Mr. Shen Jianming, aged 56, graduated from the First Flying Academy of China
Air Force with a bachelor's degree in airplane piloting. Mr. Shen is a
first-class pilot. He started his career in the civil aviation industry in
1987. He has been serving as the Chief Safety Officer of the Company since
October 2022.
Mr. Li Yunchuan, aged 56, graduated from Civil Aviation Flight University of
China majoring in flight technology and holds a postgraduate diploma. Mr. Li
is a senior pilot. He started his career in the civil aviation industry in
1988. He has been serving as the Chief Pilot of the Company since October
2023.
Mr. Huang Bin, aged 60, graduated from the Civil Aviation Institute of China,
majoring in Planning and Finance, is a senior accountant. He joined Air China
in 1983. He served as a secretary to the Board of the Company from September
2021 to March 2024 and an assistant to the President of the Company from
December 2021 to March 2024.
JOINT COMPANY SECRETARIES
Mr. Xiao Feng: Please refer to "Senior Management" for his biographies.
Mr. Huen Ho Yin, aged 62, holds a Bachelor of Laws (Hons) Degree from the
University of Leicester in the United Kingdom and a Postgraduate Certificate
in Laws from the University of Hong Kong. Mr. Huen has been practicing as a
solicitor of the High Court of Hong Kong. He is currently a partner of Huen
& Partners Solicitors. From August 1994 to April 2003, he served as a
partner of Richard Tai & Co., Solicitors. Since April 2003, he has been
serving as a partner of Huen & Partners Solicitors. From June 2018 to
February 2020, he served as an independent non-executive director of Grand
Peace Group Holdings Limited. From April 2020 to August 2020, Mr. Huen served
as joint company secretary of the Company. Mr. Huen has been serving as joint
company secretary of the Company since September 2021.
Independent Auditor's Report
TO THE SHAREHOLDERS OF AIR CHINA LIMITED
(中國國際航空股份有限公司)
(Incorporated in the People's Republic of China with limited liability)
Opinion
We have audited the consolidated financial statements of Air China Limited
(the "Company") and its subsidiaries (collectively referred to as the "Group")
set out on pages 90 to 198, which comprise the consolidated statement of
financial position as at 31 December 2023, 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 material accounting policy
information and other explanatory information.
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
2023, 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 2023, the provision for major overhauls of RMB13,739 million Our procedures in relation to provision for major overhauls to fulfil the
was recorded in the consolidated statement of financial position. return condition of aircraft under leases included:
The Group held certain aircraft under leases at 31 December 2023. Under the • Testing and evaluating the design and operating
terms of the lease arrangements, the Group is contractually committed to effectiveness of the key internal controls relevant to the audit of provision
return the aircraft to the lessors in a certain condition agreed with the for major overhauls to fulfil the return condition of aircraft under leases;
lessors at the inception of each lease. In order to fulfil these return
conditions, major overhauls are required to be conducted on a regular basis.
• Evaluating the appropriateness of the methodology and
key assumptions adopted by management in estimating the provision for these
Management estimates the maintenance costs of major overhauls for aircraft major overhauls. This evaluation based on the terms of the leases and the
held under leases at the end of each reporting period and accrues such costs Group's maintenance cost experience;
over the lease terms. The calculation of such costs includes a number of
variable factors and assumptions, including the anticipated utilisation of the
aircraft and the expected costs of maintenance.
• Performing a retrospective review of the provision for
major overhauls to evaluate the appropriateness of the assumptions adopted by
management by comparing the assumptions adopted by management in prior years
We identified provision for major overhauls to fulfil the return condition of with actual maintenance costs incurred;
aircraft under leases as a key audit matter because of the significant
management estimation and judgement required in assessing the variable factors
and assumptions in order to quantify the amount of provision required at each
reporting date. • Discussing with managers in the engineering department
responsible for aircraft engineering about the utilisation pattern of
aircraft, obtaining relevant operating data, performing recalculation, and
checking the assumptions adopted by management and the mathematical accuracy
Details of the related estimation uncertainty are set out in Notes 4, 5 and 36 of the calculation of provision for major overhauls prepared by management for
to the consolidated financial statements. those aircraft under leases.
Key Audit Matters (continued)
Key audit matter How our audit addressed the key audit matter
Acquisition of a subsidiary
On 20 March 2023, the Company completed the acquisition of Shandong Aviation Our procedures in relation to the acquisition of the Subsidiary included:
Group Co., Ltd. (the ''Subsidiary''). The acquisition has been accounted for
as an acquisition of business using the acquisition method. The excess of the
sum of the consideration transferred and the fair value of previously held
equity interests over the fair value of the identifiable net assets acquired, • Assessing the appropriateness of the management's
amounting to RMB2,996 million, was recognised as goodwill. understanding on the contractual terms by:
We identified the acquisition of the Subsidiary as a key audit matter due to (i) obtaining the equity transfer agreements, board
its significance to the consolidated financial statements as a whole, together resolutions related to the acquisition and understanding the key contractual
with the management's estimation and judgement in identifying the identifiable terms and transaction conditions;
assets acquired and liabilities assumed and measuring their fair values, and
calculating the amount of goodwill.
(ii) examining the payment records of the considerations
transferred;
Details are set out in Notes 4, 5 and 42 to the consolidated financial
statements.
(iii) checking the completeness of necessary changes in the
acquiree's articles of association and shareholders' registry.
• Understanding and evaluating the reasonableness of the
methodology used by the management on the recognition of identifiable assets
acquired and liabilities assumed at the acquisition date;
• Conducting interviews with the independent valuer
engaged by the management, understanding their qualifications and evaluating
their objectivity and capabilities;
• Involving our internal valuation specialists to assess
the reasonableness of the valuation methodology and key assumptions adopted by
the management and the independent valuer in the determination of the fair
value of net identifiable assets; and
• Assessing the appropriateness of the accounting
treatment and the reasonableness of the goodwill measurement.
Other Information
The directors of the Company are responsible for the other information. The
other information comprises the information included in the annual report, but
does not include the consolidated financial statements and our auditor's
report thereon.
Our opinion on the consolidated financial statements does not cover the other
information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Directors and Those Charged with Governance for the
Consolidated Financial Statements
The directors of the Company are responsible for the preparation of the
consolidated financial statements that give a true and fair view in accordance
with IFRSs issued by the IASB and the disclosure requirements of the Hong Kong
Companies Ordinance, and for such internal control as the directors determine
is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are
responsible for assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
Those charged with governance are responsible for overseeing the Group's
financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial
Statements
Our objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report
that includes our opinion solely to you, as a body, in accordance with our
agreed terms of engagement, and for no other purpose. We do not assume
responsibility towards or accept liability to any other person for the
contents of this report. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with HKSAs will
always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial
statements.
Auditor's Responsibilities for the Audit of the Consolidated Financial
Statements (continued)
As part of an audit in accordance with HKSAs, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement
of the consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
• Obtain an understanding of internal control relevant
to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group's internal control.
• Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting estimates and related disclosures
made by the directors.
• Conclude on the appropriateness of the directors' use
of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group's ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor's report to the related disclosures
in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor's report. However, future
events or conditions may cause the Group to cease to continue as a going
concern.
• Evaluate the overall presentation, structure and
content of the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding
the financial information of the entities or business activities within the
Group to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we
identify during our audit.
Auditor's Responsibilities for the Audit of the Consolidated Financial
Statements (continued)
We also provide those charged with governance with a statement that we have
complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, actions taken to
eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine
those matters that were of most significance in the audit of the consolidated
financial statements for the current period and are therefore the key audit
matters. We describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in
our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in the independent auditor's
report is Ng Kwok Ho.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
28 March 2024
Consolidated Statement of Profit or Loss
For the Year Ended 31 December 2023
2023 2022
NOTES RMB'000 RMB'000
Revenue 6 141,100,234 52,897,584
Other income and gains 8 7,401,756 3,374,778
148,501,990 56,272,362
Operating expenses
Jet fuel costs (46,725,219) (22,762,814)
Employee compensation costs 9 (29,300,310) (25,338,553)
Depreciation and amortisation 11 (27,110,507) (21,233,674)
Take-off, landing and depot charges (15,554,795) (6,499,775)
Aircraft maintenance, repair and overhaul costs (9,921,853) (5,640,163)
Air catering charges (3,002,720) (872,189)
Aircraft and engine lease expense (237,319) (135,767)
Other lease expenses (602,403) (442,115)
Other flight operation expenses (7,838,908) (5,869,052)
Selling and marketing expenses (3,423,478) (1,639,889)
General and administrative expenses (1,683,284) (1,240,365)
Impairment loss recognised on non-current assets 11 (187,054) (62,584)
Net impairment loss (recognised)/reversed under expected credit 10 (24,617) 20,784
loss model
(145,612,467) (91,716,156)
Profit/(loss) from operations 11 2,889,523 (35,443,794)
Finance income 605,004 228,720
Finance costs 12 (6,943,087) (6,472,620)
Share of results of associates 2,554,412 (477,414)
Share of results of joint ventures 279,566 376,872
Exchange losses, net (1,035,197) (4,088,655)
Loss before taxation (1,649,779) (45,876,891)
Income tax credit 14 88,531 702,981
Loss for the year (1,561,248) (45,173,910)
Attributable to:
- Equity shareholders of the Company (1,038,411) (38,617,495)
- Non-controlling interests (522,837) (6,556,415)
(1,561,248) (45,173,910)
Loss per share
- Basic and diluted 15 RMB(6.74) cents RMB(281.16) cents
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the Year Ended 31 December 2023
2023 2022
RMB'000 RMB'000
Loss for the year (1,561,248) (45,173,910)
Other comprehensive income/(expense) for the year
Items that will not be reclassified to profit or loss:
- Fair value gains on investments in equity instruments at fair value through 149,253 65,394
other comprehensive income
- Remeasurement of net defined benefit liability (912) (952)
- Share of other comprehensive income of associates and joint ventures 43,458 26,901
- Income tax expense relating to items that will not be reclassified to (37,313) (16,348)
profit or loss
Items that may be reclassified subsequently to profit or loss:
- Fair value gains/(losses) on investments in debt instruments at fair value 9,138 (9,101)
through other comprehensive income
- Impairment loss recognised on investments in debt instruments at fair value (6,688) (3,275)
through other comprehensive income
- Share of other comprehensive expense of associates and joint ventures (472,484) (550,580)
- Exchange differences on translation of foreign operations 250,817 1,356,971
- Income tax relating to items that may be reclassified subsequently to (613) 3,094
profit or loss
Other comprehensive (expense)/income for the year (net of tax) (65,344) 872,104
Total comprehensive expense for the year (1,626,592) (44,301,806)
`
Attributable to:
- Equity shareholders of the Company (1,097,758) (37,791,121)
- Non-controlling interests (528,834) (6,510,685)
(1,626,592) (44,301,806)
Consolidated Statement of Financial Position
At 31 December 2023
31 December 31 December
2023 2022
NOTES RMB'000 RMB'000
Non-current assets
Property, plant and equipment 17 117,728,498 99,574,059
Right-of-use assets 18 120,971,059 125,818,601
Investment properties 19 726,594 530,510
Intangible assets 106,580 35,031
Goodwill 20 4,095,732 1,099,975
Interests in associates 22 12,863,023 10,536,483
Interests in joint ventures 23 2,413,799 2,177,809
Advance payments for aircraft and flight equipment 26,114,064 20,094,732
Deposits for aircraft under leases 525,463 539,624
Equity instruments at fair value through other comprehensive income 24 1,547,986 241,717
Debt instruments at fair value through other comprehensive income 25 1,397,310 1,360,982
Deferred tax assets 26 13,757,180 10,473,327
Other non-current assets 696,685 251,396
302,943,973 272,734,246
Current assets
Inventories 27 3,682,821 2,557,823
Accounts receivable 28 3,182,797 1,649,356
Bills receivable 3,601 7,483
Prepayments, deposits and other receivables 29 5,852,345 3,176,418
Financial assets at fair value through profit or loss 2,505 3,398
Restricted bank deposits 30 611,692 828,166
Cash and cash equivalents 30 15,016,804 10,607,711
Assets held for sale 108,527 1,302
Other current assets 31 3,873,629 3,413,474
32,334,721 22,245,131
Total assets 335,278,694 294,979,377
Current liabilities
Air traffic liabilities (8,366,222) (2,757,601)
Accounts payable 32 (17,954,298) (10,935,546)
Bills payable (500,160) -
Dividends payable (98,000) (98,000)
Other payables and accruals 33 (15,701,546) (16,548,144)
Advance - (58,970)
Current taxation (76,662) (9,359)
Lease liabilities 34 (18,175,349) (17,085,829)
Interest-bearing borrowings 35 (47,271,768) (42,957,170)
Provision for return condition checks 36 (650,777) (936,804)
Contract liabilities 37 (1,522,492) (1,095,185)
(110,317,274) (92,482,608)
Net current liabilities (77,982,553) (70,237,477)
Total assets less current liabilities 224,961,420 202,496,769
Non-current liabilities
Lease liabilities 34 (64,053,967) (76,897,347)
Interest-bearing borrowings 35 (104,759,631) (92,847,116)
Provision for return condition checks 36 (17,196,982) (8,605,418)
Provision for early retirement benefit obligations (720) (807)
Long-term payables (1,082,301) (251,497)
Contract liabilities 37 (1,663,987) (1,422,843)
Defined benefit obligations 38 (187,810) (202,016)
Deferred income 39 (404,103) (418,200)
Deferred tax liabilities 26 (347,910) (323,297)
(189,697,411) (180,968,541)
NET ASSETS 35,264,009 21,528,228
CAPITAL AND RESERVES
Issued capital 40 16,200,793 14,524,815
Treasury shares 40 (3,047,564) (3,047,564)
Reserves 24,052,746 12,099,925
Total equity attributable to equity shareholders of the Company 37,205,975 23,577,176
Non-controlling interests (1,941,966) (2,048,948)
TOTAL EQUITY 35,264,009 21,528,228
The consolidated financial statements on pages 90 to 198 were approved and
authorised for issue by the board of directors on 28 March 2024 and signed on
its behalf by:
Ma Chongxian Wang Mingyuan
DIRECTOR DIRECTOR
Consolidated Statement of
Changes in Equity
For the Year Ended 31 December 2023
Attributable to equity shareholders of the Company
===
NOTES Issued Treasury Capital Reserve General Foreign exchange Retained earnings/ Total Non- Total
capital
shares
reserve
funds
reserve
translation
(accumulated losses)
controlling
equity
and safety
reserve
interests
fund
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
As at 1 January 2022 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
Changes in equity for 2022
Loss for the year - - - - - - (38,617,495) (38,617,495) (6,556,415) (45,173,910)
Other comprehensive (expense)/income - - (504,113) - - 1,330,487 - 826,374 45,730 872,104
Total comprehensive (expense)/income - - (504,113) - - 1,330,487 (38,617,495) (37,791,121) (6,510,685) (44,301,806)
Appropriation of discretionary reserve funds and others - - - - - - (260) (260) (174) (434)
Appropriation of general reserve - - - - 5,222 - (5,222) - - -
Dividends paid to non-controlling shareholders - - - - - - - - (643) (643)
Others - - 10 - - - (10) - - -
As at 31 December 2022 and 14,524,815 (3,047,564) 30,552,858 11,564,287 137,138 (1,424,734) (28,729,624) 23,577,176 (2,048,948) 21,528,228
1 January 2023
Changes in equity for 2023
Loss for the year - - - - - - (1,038,411) (1,038,411) (522,837) (1,561,248)
Other comprehensive (expense)/income - - (307,841) - - 248,494 - (59,347) (5,997) (65,344)
Total comprehensive (expense)/income - - (307,841) - - 248,494 (1,038,411) (1,097,758) (528,834) (1,626,592)
Issue of new shares 40 1,675,978 - 13,317,039 - - - - 14,993,017 - 14,993,017
Acquisition of a subsidiary 42 - - (146,162) - 3,047 - 146,162 3,047 405,039 408,086
Equity transaction with non-controlling shareholders 42 - - (133) - - - - (133) 120 (13)
Dissolution of a subsidiary - - - - - - - - (5,282) (5,282)
Capital reduction by a non-controlling shareholder 21 - - - - - - (268,952) (268,952) 252,952 (16,000)
Dividends paid to non-controlling shareholders - - - - - - - - (16,734) (16,734)
Appropriation of discretionary reserve funds and others - - - - - - (335) (335) (224) (559)
Appropriation of general reserve - - - - 16,609 - (16,609) - - -
Others - - 20 - (107) - - (87) (55) (142)
As at 31 December 2023 16,200,793 (3,047,564) 43,415,781 11,564,287 156,687 (1,176,240) (29,907,769) 37,205,975 (1,941,966) 35,264,009
Consolidated Statement of Cash Flows
For the Year Ended 31 December 2023
2023 2022
RMB'000 RMB'000
Operating activities
Loss before taxation (1,649,779) (45,876,891)
Adjustments for:
Share of results of associates and joint ventures (2,833,978) 100,542
Exchange losses, net 1,035,197 4,088,655
Finance income (605,004) (228,720)
Finance costs 6,943,087 6,472,620
Fair value changes of financial assets at fair value through profit or loss 893 (168)
Gain on disposal of property, plant and equipment, right-of-use assets (900,086) (24,281)
and investment properties
(Gain)/loss on disposal of assets held for sale (18,519) 6,774
Depreciation of property, plant and equipment 11,611,121 8,784,570
Depreciation of right-of-use assets 15,468,124 12,425,265
Depreciation of investment properties 31,256 23,839
Amortisation of intangible assets 6 -
Impairment loss recognised on property, plant and equipment 184,166 62,584
Impairment losses recognised on inventories 35,049 3,168
Impairment losses recognised on interests in associates 2,888 -
Impairment loss recognised/(reversed) on accounts receivable, net 22,785 (3,705)
Impairment losses recognised/(reversed) in financial assets include in other 5,211 (1,322)
current assets, net
Impairment losses recognised/(reversed) on deposits and other receivables, net 3,309 (5,854)
Impairment loss reversed on debt instruments at fair value through other (6,688) (3,275)
comprehensive income, net
Impairment losses recognised on other financial assets, net - (6,628)
Dividend income (14,286) (9,368)
Operating cash flows before movements in working capital 29,314,752 (14,192,195)
Decrease in deposits for aircraft under leases 14,161 27,060
(Increase)/decrease in other non-current assets (445,289) 5,924
Increase in inventories (623,648) (468,187)
(Increase)/decrease in accounts receivable (740,308) 1,326,380
Decrease/(increase) in bills receivable 9,854 (3,892)
(Increase)/decrease in prepayments, deposits and other receivables (1,004,702) 723,036
(Increase)/decrease in other current assets (323,580) 1,260,440
Increase in air traffic liabilities 5,248,339 641,573
Increase/(decrease) in accounts payable 3,986,902 (1,803,203)
Increase/(decrease) in bills payable 322,204 (199,276)
Decrease in other payables and accruals (2,058,569) (3,425,293)
Increase/(decrease) in provision for return condition checks 1,121,382 (161,850)
Decrease in provision for early retirement benefit obligations (87) (199)
Decrease in defined benefit obligations (23,194) (24,621)
Decrease in in deferred income (14,097) (4,419)
Increase/(decrease) in contract liabilities 581,839 (733,898)
(Decrease)/increase in advance (58,970) 58,970
Increase in long-term payables 272,549 235,851
Cash generated/(used in) from operations 35,579,538 (16,737,799)
Income tax paid (161,068) (24,258)
Interest paid (7,513,966) (6,579,396)
Net cash from/(used in) operating activities 27,904,504 (23,341,453)
2023 2022
NOTES RMB'000 RMB'000
Investing activities
Advance payments for aircraft and flight equipment (13,118,593) (6,649,088)
Payments for the purchase of property, plant and equipment (9,650,751) (988,906)
Payments for the purchase of debt instruments and equity instruments at fair (1,354,692) (872,680)
value through other comprehensive income
Investment in a joint venture (61,838) (177,755)
(Decrease)/increase in restricted bank deposits against aircraft leases and (4,456) 13,324
others
Net cash inflows arising on acquisition of a subsidiary 42 5,392,113 -
Proceeds from disposal of property, plant and equipment, and assets held for 1,323,832 673,202
sale
Interest received 605,004 228,720
Dividends received from associates and joint ventures 141,907 221,138
Interests received from debt instruments at fair value through other 59,343 49,149
comprehensive income
Proceeds from disposal of debt instruments and equity instruments at fair 1,408,988 592,775
value through other comprehensive income
Dividends received from equity instruments at fair value through 13,440 5,531
other comprehensive income
Proceeds from disposal of investment in an associate - 33,882
Net cash used in investing activities (15,245,703) (6,870,708)
Financing activities
Repayments of bank loans and other borrowings (42,035,455) (63,266,576)
Repayments of lease liabilities (25,400,182) (17,561,884)
Repayments of corporate bonds and short-term commercial papers (10,500,000) (20,000,000)
Dividends paid (16,734) (643)
Transaction costs attributable to issue of new shares (6,983) -
Payments for acquisition of non-controlling interests (13) -
Proceeds from new bank loans and other borrowings 51,226,029 109,555,661
Proceeds from issue of new shares 15,000,000 -
Capital contribution from a non-controlling shareholder of a subsidiary 3,400,000 -
Proceeds from issuance of corporate bonds - 15,950,000
Net cash (used in)/from financing activities (8,333,338) 24,676,558
Net increase/(decrease) in cash and cash equivalents 4,325,463 (5,535,603)
Cash and cash equivalents at 1 January 30 10,607,711 15,934,713
Effect of foreign exchange rate changes 83,630 208,601
Cash and cash equivalents at 31 December 30 15,016,804 10,607,711
Notes to the Consolidated Financial Statements
For the Year Ended 31 December 2023
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, 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 2023, the Group's current liabilities exceeded its current
assets by approximately RMB77,983 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 RMB125,153 million as at 31 December 2023, the
Directors believe that adequate funding is available to fulfil the Group's
debt obligations and capital expenditure requirements to continue in
operational existence for the foreseeable future when preparing the
consolidated financial statements for the year ended 31 December 2023.
Accordingly, the consolidated financial statements have been prepared on a
basis that the Group will be able to continue as a going concern.
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRSs") issued by the
International Accounting Standards Board (the "IASB"). For the purpose of
preparation of the consolidated financial statements, information is
considered material if such information is reasonably expected to influence
decisions made by primary users. In addition, the consolidated financial
statements include applicable disclosures required by the Rules Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited ("Listing
Rules") and by the Hong Kong Companies Ordinance ("Companies Ordinance").
The consolidated financial statements have been prepared on the historical
cost basis, except for certain financial instruments that are measured at fair
values at the end of each reporting period, as explained in the accounting
policies set out below. Historical cost is generally based on the fair value
of the consideration given in exchange for goods and services.
2. BASIS OF PREPARATION (continued)
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date, regardless of whether that price is directly observable
or estimated using another valuation technique. In estimating the fair value
of an asset or a liability, the Group takes into account the characteristics
of the asset or liability if market participants would take those
characteristics into account when pricing the asset or liability at the
measurement date. Fair value for measurement and/or disclosure purposes in
these consolidated financial statements is determined on such a basis, except
for leasing transactions that are accounted for in accordance with IFRS 16
Leases, and measurements that have some similarities to fair value but are not
fair value, such as net realisable value in IAS 2 Inventories or value in use
in IAS 36 Impairment of Assets.
For financial instruments which are transacted at fair value and a valuation
technique that unobservable inputs is to be used to measure fair value in
subsequent periods, the valuation technique is calibrated so that at initial
recognition the results of the valuation technique equals the transaction
price.
In addition, for financial reporting purposes, fair value measurements are
categorised into Level 1, 2 or 3 based on the degree to which the inputs to
the fair value measurements are observable and the significance of the inputs
to the fair value measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities that the entity can access
at the measurement date;
• Level 2 inputs are inputs, other than quoted prices
included within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset
or liability.
3. APPLICATION OF NEW AND AMENDMENTS TO IFRSs
New and amendments to IFRSs that are mandatorily effective for the current
year
In the current year, the Group has applied the following new and amendments to
IFRSs issued by the IASB for the first time, which are mandatorily effective
for the Group's annual period beginning on 1 January 2023 for the preparation
of the consolidated financial statements:
IFRS 17 (including the June 2020 and Insurance Contracts
December 2021 Amendments to IFRS 17)
Amendments to IAS 1 and IFRS Disclosure of Accounting Policies
Practice Statement 2
Amendments to IAS 8 Definition of Accounting Estimates
Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from
a Single Transaction
Amendments to IAS 12 International Tax Reform-Pillar Two model Rules
Except as described below, the application of the new and amendments to IFRSs
in the current year has had no material impact on the Group's financial
positions and performance for the current and prior years and/or on the
disclosures set out in these consolidated financial statements.
3. APPLICATION OF NEW AND AMENDMENTS TO IFRSs (continued)
3.1 Impacts on application of Amendments to IAS 12 Deferred Tax
related to Assets and Liabilities arising from a Single Transaction
The Group has applied the amendments for the first time in the current year.
The amendments narrow the scope of the recognition exemption of deferred tax
liabilities and deferred tax assets in paragraphs 15 and 24 of IAS 12 Income
Taxes so that it no longer applies to transactions that, on initial
recognition, give rise to equal taxable and deductible temporary differences.
In accordance with the transitional provisions:
(i) the Group has applied the new accounting policy
retrospectively to leasing transactions that occurred on or after 1 January
2022;
(ii) the Group also, as at 1 January 2022, recognised a deferred
tax asset (to the extent that it is probable that taxable profit will be
available against which the deductible temporary difference can be utilised)
and a deferred tax liability for all deductible and taxable temporary
difference associated with lease liabilities, provision for return condition
checks, the provision for major overhauls and related right-of-use assets
separately.
The application of the amendments has had no material impact on the Group's
financial position and performance, except that the Group recognised the
related deferred tax assets and deferred tax liabilities on a gross basis, but
it has no material impact on the retained earnings at the earliest period
presented.
3.2 Impacts on application of Amendments to IAS1 and IFRS Practice
Statement 2 Disclosure of Accounting Policies
The Group has applied the amendments for the first time in the current year.
IAS 1 Presentation of Financial Statements is amended to replace all instances
of the term "significant accounting policies" with "material accounting policy
information". Accounting policy information is material if, when considered
together with other information included in an entity's financial statements,
it can reasonably be expected to influence decisions that the primary users of
general purpose financial statements make on the basis of those financial
statements.
The amendments also clarify that accounting policy information may be material
because of the nature of the related transactions, other events or conditions,
even if the amounts are immaterial. However, not all accounting policy
information relating to material transactions, other events or conditions is
itself material. If an entity chooses to disclose immaterial accounting policy
information, such information must not obscure material accounting policy
information.
3. APPLICATION OF NEW AND AMENDMENTS TO IFRSs (continued)
3.2 Impacts on application of Amendments to IAS1 and IFRS Practice
Statement 2 Disclosure of Accounting Policies (continued)
IFRS Practice Statement 2 Making Materiality Judgements (the "Practice
Statement") is also amended to illustrate how an entity applies the "four-step
materiality process" to accounting policy disclosures and to judge whether
information about an accounting policy is material to its financial
statements. Guidance and examples are added to the Practice Statement.
The application of the amendments has had no material impact on the Group's
financial positions and performance but has affected the disclosure of the
Group's accounting policies set out in Note 4 to the consolidated financial
statements.
Amendments to IFRSs in issue but not yet effective
The Group has not early applied the following amendments to IFRSs that have
been issued but are not yet effective:
Amendments to IFRS 10 Sale or Contribution of Assets between an Investor and
and IAS 28
its Associate or Joint Venture(1)
Amendments to IFRS 16 Lease Liability in a Sale and Leaseback(2)
Amendments to IAS 1 Classification of Liabilities as Current or Non-current (2)
Amendments to IAS 1 Non-current Liabilities with Covenants(2)
Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements(2)
Amendments to IAS 21 Lack of Exchangeability(3)
(1) Effective for annual periods beginning on or after a
date to be determined.
(2) Effective for annual periods beginning on or 1 January
2024.
(3) Effective for annual periods beginning on or 1 January
2025.
The Directors anticipate that the application of all amendments to IFRSs will
have no material impact on the consolidated financial statements in the
foreseeable future.
4. MATERIAL ACCOUNTING POLICY INFORMATION
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 item of other comprehensive income are attributed to
the owners of the Company and to the non-controlling interests ("NCI"). Total
comprehensive income of subsidiaries is attributed to the owners of the
Company and to the NCI even if this results in the NCI having a deficit
balance.
When necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies in line with the Group's
accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows
relating to transactions between members of the Group are eliminated in full
on consolidation.
NCI 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.
Business combinations
Acquisitions of businesses, other than business combination under common
control are accounted for using the acquisition method. The consideration
transferred in a business combination is measured at fair value, which is
calculated as the sum of the acquisition-date fair values of the assets
transferred by the Group, liabilities incurred by the Group to the former
owners of the acquiree and the equity interests issued by the Group in
exchange for control of the acquiree. Acquisition-related costs are generally
recognised in profit or loss as incurred.
The identifiable assets acquired and liabilities assumed must meet the
definitions of an asset and a liability in the Conceptual Framework for
Financial Reporting (the "Conceptual Framework") except for transactions and
events within the scope of IAS 37 Provisions, Contingent Liabilities and
Contingent Assets or IFRIC-Int 21 Levies, in which the Group applies IAS 37 or
IFRIC-Int 21 instead of the Conceptual Framework to identify the liabilities
it has assumed in a business combination. Contingent assets are not
recognised.
4. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
Business combinations (continued)
At the acquisition date, the identifiable assets acquired and the liabilities
assumed are recognised at their fair value, except that:
• deferred tax assets or liabilities, and assets or
liabilities related to employee benefit arrangements are recognised and
measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits
respectively;
• liabilities or equity instruments related to
share-based payment arrangements of the acquiree or share-based payment
arrangements of the Group entered into to replace share-based payment
arrangements of the acquiree are measured in accordance with IFRS2 at the
acquisition date (see the accounting policy below);
• assets (or disposal groups) that are classified as
held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations are measured in accordance with that standard; and
• lease liabilities are recognised and measured at the
present value of the remaining lease payments (as defined in IFRS 16) as if
the acquired leases were new leases at the acquisition date, except for leases
for which (a) the lease term ends within 12 months of the acquisition date; or
(b) the underlying asset is of low value. Right-of-use assets are recognised
and measured at the same amount as the relevant lease liabilities, adjusted to
reflect favourable or unfavourable terms of the lease when compared with
market terms.
Goodwill is measured as the excess of the sum of the consideration
transferred, the amount of any NCI in the acquiree, and the fair value of the
acquirer's previously held equity interest in the acquiree over the net amount
of the identifiable assets acquired and the liabilities assumed as at
acquisition date. If, after re-assessment, the net amount of the identifiable
assets acquired and liabilities assumed exceeds the sum of the consideration
transferred, the amount of any NCI in the acquiree and the fair value of the
acquirer's previously held interest in the acquiree (if any), the excess is
recognised immediately in profit or loss as a bargain purchase gain.
NCI that are present ownership interests and entitle their holders to a
proportionate share of the relevant subsidiary's net assets in the event of
liquidation are initially measured at the NCIs' proportionate share of the
recognised amounts of the acquiree's identifiable net assets or at fair value.
When a business combination is achieved in stages, the Group's previously held
equity interest in the acquiree is remeasured to fair value at the acquisition
date (i.e. the date when the Group obtains control), and the resulting gain or
loss, if any, is recognised in profit or loss or other comprehensive income,
as appropriate. Amounts arising from interests in the acquiree prior to the
acquisition date that have previously been recognised in other comprehensive
income and measured under IFRS 9 would be accounted for on the same basis as
would be required if the Group had disposed directly of the previously held
equity interest.
4. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as
established at the date of acquisition of the business (see the accounting
policy above) less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the
Group's cash-generating units (or group of cash-generating units) that is
expected to benefit from the synergies of the combination, which represent the
lowest level at which the goodwill is monitored for internal management
purposes and not larger than an operating segment.
A cash-generating unit (or group of cash-generating units) to which goodwill
has been allocated is tested for impairment annually or more frequently when
there is indication that the unit may be impaired. For goodwill arising on an
acquisition in a reporting period, the cash-generating unit (or group of
cash-generating units) to which goodwill has been allocated is tested for
impairment before the end of that reporting period. If the recoverable amount
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).
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 these consolidated financial statements using the equity
method of accounting. 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.
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.
4. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
Investments in associates and joint ventures (continued)
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
Information about the Group's accounting policies relating to contracts with
customers is provided in Note 5, 6 and 37.
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
assets 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.
4. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
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.
Right-of-use assets are measured at cost, less any accumulated depreciation
and impairment losses, and adjusted for any remeasurement of lease
liabilities.
Right-of-use assets in which the Group is reasonably certain to obtain
ownership of the underlying leased assets at the end of the lease term are
depreciated from commencement date to the end of the useful life. Otherwise,
right-of-use assets are depreciated on a straight-line basis over the shorter
of its estimated useful life and the lease term.
When the Group obtains ownership of the underlying leased assets at the end of
the lease term, upon exercising purchase options, the cost of the relevant
right-of-use assets and the related accumulated depreciation and impairment
loss are transferred to property, plant and equipment.
The Group presents right-of-use assets as a separate line item on the
consolidated statement of financial position.
4. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
Leases (continued)
The Group as a lessee (continued)
Lease liabilities
At the commencement date of a lease, the Group recognises and measures the
lease liability at the present value of lease payments that are unpaid at that
date. In calculating the present value of lease payments, the Group uses the
incremental borrowing rate at the lease commencement date if the interest rate
implicit in the lease is not readily determinable.
The lease payments include:
• fixed payments (including in-substance fixed payments)
less any lease incentives receivable;
• variable lease payments that depend on an index or a
rate, initially measured using the index or rate as at the commencement date;
• amounts expected to be payable by the Group under
residual value guarantees;
• the exercise price of a purchase option if the Group
is reasonably certain to exercise the option; and
• payments of penalties for terminating a lease, if the
lease term reflects the Group exercising an option to terminate the lease.
Variable lease payments that reflect changes in market rental rates are
initially measured using the market rental rates as at the commencement date.
Variable lease payments that do not depend on an index or a rate are not
included in the measurement of lease liabilities and right-of-use assets, and
are recognised as expense in the period on which the event or condition that
triggers the payment occurs.
After the commencement date, lease liabilities are adjusted by interest
accretion and lease payments.
The Group remeasures lease liabilities (and makes a corresponding adjustment
to the related right-of-use assets) whenever:
• the lease term has changed or there is a change in the
assessment of exercise of a purchase option, in which case the related lease
liability is remeasured by discounting the revised lease payments using a
revised discount rate at the date of reassessment.
• the lease payments change due to changes in market
rental rates following a market rent review/expected payment under a
guaranteed residual value, in which cases the related lease liability is
remeasured by discounting the revised lease payments using the initial
discount rate.
The Group presents lease liabilities as a separate line item on the
consolidated statement of financial position.
4. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
Leases (continued)
The Group as a lessee (continued)
Lease modifications
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 by making
corresponding adjustments to the relevant right-of-use assets.
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.
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.
Sale and leaseback transactions
The Group applies the requirements of IFRS 15 Revenue from Contracts with
Customers to assess whether sale and leaseback transaction constitutes a sale
by the Group.
The Group acts as a seller-lessee
For a transfer that does not satisfy the requirements as a sale, the Group as
a seller-lessee continues to recognise the assets and accounts for the
transfer proceeds as borrowings within the scope of IFRS 9.
4. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
Foreign currencies
In preparing the financial statements of each individual group entity,
transactions in currencies other than the functional currency of that entity
(foreign currencies) are recognised at the rates of exchanges prevailing on
the dates of the transactions.
At the end of the reporting period, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated in foreign currencies are
retranslated at the rates prevailing on the date when the fair value was
determined. When a fair value gain or loss on a non-monetary item is
recognised in profit or loss, any exchange component of that gain or loss is
also recognised in profit or loss. When a fair value gain or loss on a
non-monetary item is recognised in other comprehensive income, any exchange
component of that gain or loss is also recognised in other comprehensive
income. Non-monetary items that are measured in terms of historical cost in a
foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the
retranslation of monetary items, are recognised in profit or loss in the
period in which they arise.
For the purposes of presenting the consolidated financial statements, the
assets and liabilities of the Group's foreign operations are translated into
the presentation currency of the Group (i.e. RMB) at the rate of exchange
prevailing at the end of the reporting period. Income and expenses are
translated at the average exchange rates for the year, unless exchange rates
fluctuate significantly during the year, in which case, the exchange rates
prevailing at the dates of transactions are used. Exchange differences
arising, if any, are recognised in other comprehensive income and accumulated
in equity under the heading of foreign exchange translation reserve
(attributed to NCI as appropriate).
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
Any specific borrowing that remain outstanding after the related asset is
ready for its intended use or sale is included in the general borrowing pool
for calculation of capitalisation rate on general borrowings. Investment
income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible
for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in
which they are incurred.
4. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
Government grants
Government grants are not recognised until there is reasonable assurance that
the Group will comply with the conditions attaching to them and that the
grants will be received.
Government grants are recognised in profit or loss on a systematic basis over
the periods in which the Group recognises as expenses the related costs for
which the grants are intended to compensate. Specifically, government grants
whose primary condition is that the Group should purchase, construct or
otherwise acquire non-current assets are recognised as deferred income in the
consolidated statement of financial position and transferred to profit or loss
on a systematic and rational basis over the useful lives of the related
assets.
Government grants related to income that are receivable as compensation for
expenses or losses already incurred or for the purpose of giving immediate
financial support to the Group with no future related costs are recognised in
profit or loss in the periods in which they become receivable.
Employee benefits
Retirement benefit costs
Payments to defined contribution retirement benefit plans are recognised as an
expense when employees have rendered service entitling them to the
contributions.
For defined benefit retirement benefit plans, the cost of providing benefits
is determined using the projected unit credit method, with actuarial
valuations being carried out at the end of each annual reporting period. In
determining the present value of the Group's defined benefit obligations and
the related current service cost and, where applicable, past service cost, the
Group attributes benefit to periods of service under the plan's benefit
formula. However, if an employee's service in later years will lead to a
materially higher level of benefit than earlier years, the Group attributes
the benefit on a straight-line basis from:
(a) the date when service by the employee first leads to
benefits under the plan (whether or not the benefits are conditional on
further service); until
(b) the date when further service by the employee will lead to
no material amount of further benefits under the plan, other than from further
salary increases.
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).
4. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
Employee benefits (continued)
Retirement benefit costs (continued)
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.
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 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 entity can no longer withdraw the offer of the termination benefit and
when it recognises any related restructuring costs.
Short-term and other long-term employee benefits
Short-term employee benefits are recognised at the undiscounted amount of the
benefits expected to be paid as and when employees rendered the services. All
short-term employee benefits are recognised as an expense unless another IFRS
requires or permits the inclusion of the benefit in the cost of an asset.
A liability is recognised for benefits accruing to employees (such as wages
and salaries, annual leave and sick leave) after deducting any amount already
paid.
Liabilities recognised in respect of other long-term employee benefits are
measured at the present value of the estimated future cash outflows expected
to be made by the Group in respect of services provided by employees up to the
reporting date. Any changes in the liabilities' carrying amounts resulting
from service cost, interest and remeasurements are recognised in profit or
loss except to the extent that another IFRS requires or permits their
inclusion in the cost of an asset.
4. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
Taxation
Income tax expense represents the sum of current and deferred income tax
expense
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 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 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 and at the time of the
transaction does not give rise to equal taxable and deductible temporary
differences. In addition, deferred tax liabilities are not recognised if the
temporary difference arises from the initial recognition of goodwill.
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.
4. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
Taxation (continued)
For leasing transactions in which the tax deductions are attributable to the
lease liabilities, the Group applies IAS 12 Income Taxes requirements to the
lease liabilities, the provision for return condition checks, the provision
for major overhauls and the related assets separately. The Group recognises a
deferred tax asset related to lease liabilities to the extent that it is
probable that taxable profit will be available against which the deductible
temporary difference can be utilised and a deferred tax liability for all
taxable temporary differences.
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 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.
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, including costs of testing whether the related
assets are functioning properly, 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.
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.
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.
4. MATERIAL ACCOUNTING POLICY INFORMATION (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 these 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 testing a cash-generating unit for impairment, corporate assets are
allocated to the relevant cash-generating unit when a reasonable and
consistent basis of allocation can be established, or otherwise they are
allocated to the smallest group of cash-generating units for which a
reasonable and consistent allocation basis can be established. The recoverable
amount is determined for the cash-generating unit or group of cash-generating
units to which the corporate asset belongs, and is compared with the carrying
amount of the relevant cash-generating unit or group of cash-generating units.
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 estimated
to be 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. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of
inventories are determined on a weighted average method. 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 non-incremental 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. The unavoidable costs under a contract reflect the
least net cost of exiting from the contract, which is the lower of the net
cost of fulfilling it and any compensation or penalties arising from failure
to fulfil it.
When assessing whether a contract is onerous or loss-making, the Group
includes costs that relate directly to the contract, consisting of both the
incremental costs and an allocation of other costs that relate directly to
fulfilling contracts.
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.
4. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
Financial instruments (continued)
The effective interest method is a method of calculating the amortised cost of
a financial asset or financial liability and of allocating interest income and
interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated
future cash receipts and payments (including all fees and points paid or
received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) through the expected life
of the financial asset or financial liability, or, where appropriate, a
shorter period, to the net carrying amount on initial recognition.
Financial assets
Classification and subsequent measurement of financial assets
Financial assets that meet the following conditions are subsequently measured
at amortised cost:
• the financial asset is held within a business model
whose objective is to collect contractual cash flows; and
• the contractual terms give rise on specified dates to
cash flows that are solely payments of principal and interest on the principal
amount outstanding.
Financial assets that meet the following conditions are subsequently measured
at fair value through other comprehensive income ("FVTOCI"):
• the financial asset is held within a business model
whose objective is achieved by both selling and collecting contractual cash
flows; and
• the contractual terms give rise on specified dates to
cash flows that are solely payments of principal and interest on the principal
amount outstanding.
All other financial assets are subsequently measured at FVTPL, except that at
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.
A financial asset is held for trading if:
• it has been acquired principally for the purpose of
selling in the near term; or
• on initial recognition it is a part of a portfolio of
identified financial instruments that the Group manages together and has a
recent actual pattern of short-term profit-taking; or
• it is a derivative that is not designated and
effective as a hedging instrument.
In addition, the Group may irrevocably designate a financial asset that are
required to be measured at the amortised cost or FVTOCI as measured at FVTPL
if doing so eliminates or significantly reduces an accounting mismatch.
4. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
Financial instruments (continued)
Financial assets (continued)
Classification and subsequent measurement of financial assets (continued)
(i) Amortised cost and interest income
Interest income is recognised using the effective interest method for
financial assets measured subsequently at amortised cost and debt instruments
subsequently measured at FVTOCI. Interest income is calculated by applying the
effective interest rate to the gross carrying amount of a financial asset,
except for financial assets that have subsequently become credit-impaired (see
below). For financial assets that have subsequently become credit-impaired,
interest income is recognised by applying the effective interest rate to the
amortised cost of the financial assets from the next reporting period. If the
credit risk on the credit-impaired financial instrument improves so that the
financial asset is no longer credit-impaired, interest income is recognised by
applying the effective interest rate to the gross carrying amount of the
financial asset from the beginning of the reporting period following the
determination that the asset is no longer credit impaired.
(ii) Debt instruments classified as at FVTOCI
Subsequent changes in the carrying amounts for debt instruments classified as
at FVTOCI as a result of interest income calculated using the effective
interest method are recognised in profit or loss. All other changes in the
carrying amount of these debt instruments are recognised in other
comprehensive income and accumulated under the heading of capital reserve.
Impairment allowances are recognised in profit or loss with corresponding
adjustment to other comprehensive income without reducing the carrying amount
of these debt instruments. When these debt instruments are derecognised, the
cumulative gains or losses previously recognised in other comprehensive income
are reclassified to profit or loss.
(iii) Equity instruments designated as at FVTOCI
Investments in equity instruments at FVTOCI are subsequently measured at fair
value with gains and losses arising from changes in fair value recognised in
other comprehensive income and accumulated in the capital reserve; and are not
subject to impairment assessment. The cumulative gain or loss will not be
reclassified to profit or loss on disposal of the equity investments, and will
be transferred to retained earnings/(accumulated losses).
Dividends from these investments in equity instruments are recognised in
profit or loss when the Group's right to receive the dividends is established,
unless the dividends clearly represent a recovery of part of the cost of the
investment. Dividends are included in the "other income and gains" line item
in profit or loss.
(iv) Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured at amortised
cost or FVTOCI or designated as FVTOCI are measured at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each
reporting period, with any fair value gains or losses recognised in profit or
loss. The net gain or loss recognised in profit or loss excludes any dividend
or interest earned on the financial asset and is included in the "other income
and gains" line item.
4. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
Financial instruments (continued)
Financial assets (continued)
Impairment of financial assets and other items subject to impairment
assessment under IFRS 9
The Group performs impairment assessment under expected credit loss ("ECL")
model on financial assets (including accounts receivable, deposits and other
receivables, deposits for aircraft under leases, bills receivable, loans to
related parties included in other current assets, restricted bank deposits,
cash and cash equivalents, financial assets included in other non-current
assets and debt instruments at FVTOCI) 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 is 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.
For all other instruments, the Group measures the loss allowance equal to 12m
ECL, unless there has been a significant increase in credit risk since initial
recognition, in which case the Group recognises lifetime ECL. The assessment
of whether lifetime ECL should be recognised is based on significant increases
in the likelihood or risk of a default occurring since initial recognition.
(i) Significant increase in credit risk
In assessing whether the credit risk has increased significantly since initial
recognition, the Group compares the risk of a default occurring on the
financial instrument as at the reporting date with the risk of a default
occurring on the financial instrument as at the date of initial recognition.
In making this assessment, the Group considers both quantitative and
qualitative information that is reasonable and supportable, including
historical experience and forward-looking information that is available
without undue cost or effort.
In particular, the following information is taken into account when assessing
whether credit risk has increased significantly:
• an actual or expected significant deterioration in the
financial instrument's external (if available) or internal credit rating;
• significant deterioration in external market
indicators of credit risk, e.g., a significant increase in the credit spread,
the credit default swap prices for the debtor;
4. MATERIAL ACCOUNTING POLICY INFORMATION (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)
• 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.
The Group regularly monitors the effectiveness of the criteria used to
identify whether there has been a significant increase in credit risk and
revises them as appropriate to ensure that the criteria are capable of
identifying significant increase in credit risk before the amount becomes past
due.
(ii) Definition of default
For internal credit risk management, the Group considers an event of default
occurs when information developed internally or obtained from external sources
indicates that the debtor is unlikely to pay its creditors, including the
Group, in full (without taking into account any collaterals held by the
Group).
Irrespective of the above, the Group considers that default has occurred when
a financial asset is more than 90 days past due unless the Group has
reasonable and supportable information to demonstrate that a more lagging
default criterion is more appropriate.
4. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
Financial instruments (continued)
Financial assets (continued)
Impairment of financial assets and other items subject to impairment
assessment under IFRS 9 (continued)
(iii) Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a
detrimental impact on the estimated future cash flows of that financial asset
have occurred. Evidence that a financial asset is credit-impaired includes
observable data about the following events:
(a) significant financial difficulty of the issuer or the
borrower;
(b) a breach of contract, such as a default or past due event;
(c) the lender(s) of the borrower, for economic or contractual
reasons relating to the borrower's financial difficulty, having granted to the
borrower a concession(s) that the lender(s) would not otherwise consider;
(d) it is becoming probable that the borrower will enter
bankruptcy or other financial reorganisation; or
(e) the disappearance of an active market for that financial
asset because of financial difficulties.
(iv) Write-off policy
The Group writes off a financial asset when there is information indicating
that the counterparty is in severe financial difficulty and there is no
realistic prospect of recovery, for example, when the counterparty has been
placed under liquidation or has entered into bankruptcy proceedings. Financial
assets written off may still be subject to enforcement activities under the
Group's recovery procedures, taking into account legal advice where
appropriate. A write-off constitutes a derecognition event. Any subsequent
recoveries are recognised in profit or loss.
(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 and forward-looking information.
Estimation of ECL reflects an unbiased and probability-weighted amount that is
determined with the respective risks of default occurring as the weights. The
Group uses a practical expedient in estimating ECL on accounts receivable
using a provision matrix taking into consideration historical credit loss
experience and 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.
4. MATERIAL ACCOUNTING POLICY INFORMATION (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 (continued)
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 collective assessment, 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.
Except for investments in debt instruments that are measured at FVTOCI, 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.
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, other
payables, interest-bearing borrowings and dividends payables) are subsequently
measured at amortised cost using the effective interest method.
4. MATERIAL ACCOUNTING POLICY INFORMATION (continued)
Financial instruments (continued)
Financial liabilities and equity (continued)
Derecognition/modification 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.
For non-substantial modifications of financial liabilities that do not result
in derecognition, the carrying amount of the relevant financial liabilities
will be calculated at the present value of the modified contractual cash flows
discounted at the financial liabilities' original effective interest rate.
Transaction costs or fees incurred are adjusted to the carrying amount of the
modified financial liabilities and are amortised over the remaining term. Any
adjustment to the carrying amount of the financial liability is recognised in
profit or loss at the date of modification.
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 underlying 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.
Impairment test on 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 2023, the carrying amount of goodwill was RMB4,096 million
(2022: RMB1,100 million) (net of impairment). Details of the recoverable
amount calculation are disclosed in Note 20.
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.
5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF
ESTIMATION UNCERTAINTY (continued)
Impairment of non-financial assets (other than goodwill) (continued)
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 RMB178
million (2022: RMB63 million) for certain aircrafts that are about to retire
from service in advance. As at 31 December 2023, 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
RMB254,810 million (2022: RMB238,672 million). Details of related items are
disclosed in Notes 17, 18, 19, 22 and 23.
Overhaul provisions
Overhaul provisions for aircraft under leases are accrued using the estimated
maintenance costs for aircraft to fulfil these return conditions. Management
estimates the maintenance costs of major overhauls for aircraft held under
leases at the end of each reporting period and accrues such costs over the
lease term. The calculation of such costs includes a number of variable
factors and assumptions, including the anticipated utilisation of the aircraft
and the expected costs of maintenance. Different estimates could significantly
affect the estimated overhaul provision and the results of operations.
As at 31 December 2023, provision for major overhauls of the Group amounted to
RMB13,739 million (2022: RMB6,421 million) and details are disclosed in Note
36.
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 based on expected redemption rate. The expected redemption rate
was estimated considering expected future redemption activities, including 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 2023, the contract liabilities related to frequent-flyer
programme was RMB2,172 million (2022: RMB2,028 million) and details are
disclosed in Note 37.
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 the consolidated statement of financial position is after
adjusting the effect of expected breakage.
5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF
ESTIMATION UNCERTAINTY (continued)
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 2023, deferred tax assets of RMB23,182 million (2022:
RMB18,679 million) in relation to deductible temporary differences and tax
losses have been recognised. No deferred tax asset has been recognised on the
deductible tax losses of RMB59,113 million (2022: RMB47,281 million) and other
deductible temporary differences of RMB327 million (2022: RMB0.5 million) due
to the unpredictability of the future streams and details are disclosed in
Note 26.
The determination of fair value of identifiable net assets acquired and
goodwill recognised arising from the acquisition of a subsidiary
During the year, the Group completed the acquisition of Shandong Aviation and
Shandong Airlines Co., Ltd. (''Shandong Airlines'') (a subsidiary of Shandong
Aviation). The acquisition has been accounted for as an acquisition of
business using the acquisition method. At the acquisition date, the
identifiable assets acquired and the liabilities assumed are recognised at
their fair value, and the excess of the sum of the consideration transferred
and the fair value of previously held equity interests over the net amount of
the identifiable assets acquired and the liabilities assumed is recognised as
goodwill. Identifying the identifiable assets acquired and liabilities assumed
and measuring their fair values, and calculating the amount of goodwill
involves management estimation and judgement. Details are disclosed in Note
42.
6. REVENUE
2023 2022
RMB'000 RMB'000
Revenue from contracts with customers 140,721,730 52,612,867
Rental income (included in revenue of airline operations segment) 378,504 284,717
Total revenue 141,100,234 52,897,584
Disaggregation of revenue from contracts with customers
2023 2022
Segments Airline Other Airline Other
operations
operations
operations
operations
RMB'000 RMB'000 RMB'000 RMB'000
Type of goods or services
Airline operations
Passenger 130,516,558 - 38,296,190 -
Cargo and mail 4,164,743 - 10,084,634 -
Others 1,704,339 - 1,621,602 -
136,385,640 - 50,002,426 -
Other operations
Aircraft engineering income - 4,238,926 - 2,505,219
Others - 97,164 - 105,222
- 4,336,090 - 2,610,441
Total 136,385,640 4,336,090 50,002,426 2,610,441
Geographical markets
Mainland China 108,050,710 4,336,090 35,606,207 2,610,441
Hong Kong Special Administrative
Region ("SAR"), Macau SAR and 4,126,997 - 1,097,125 -
Taiwan, China
International 24,207,933 - 13,299,094 -
Total 136,385,640 4,336,090 50,002,426 2,610,441
6. REVENUE (continued)
Performance obligations for contracts with customers
Passenger revenue is recognised when transportation services are provided.
Besides, the Group recognises the expected breakage amount as passenger
revenue in proportion to the pattern of rights exercised by the passenger (or
flown revenue) based on historical experience. Ticket sales for transportation
not yet provided are recorded in air traffic liabilities.
The Group operates frequent-flyer programme and provides free services or
products to the customers according to the miles they earn. The Group
allocates the transaction price to each performance obligation on a relative
stand-alone selling price basis. The amount allocated to the miles earned by
the frequent-flyer programme members is recorded in contract liabilities and
deferred until the miles are redeemed when the Group fulfils its obligations
to supply services or products or when the miles expire. During the year, the
Group recognised revenue of RMB1,455 million (2022: RMB1,483 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 contract 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.
Inter-segment sales and transfers are transacted with reference to the selling
prices used for sales made to third parties at the then prevailing market
prices.
7. SEGMENT INFORMATION (continued)
Operating segments
The following tables present the Group's consolidated revenue and loss 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 2023 and 2022, and the reconciliations of reportable
segment revenue and loss before taxation to the Group's consolidated amounts
under IFRSs:
Year ended 31 December 2023
Airline operations Other operations Elimination Total
RMB'000 RMB'000 RMB'000 RMB'000
Revenue
Sales to external customers 136,764,144 4,336,090 - 141,100,234
Inter-segment sales 206,970 7,909,425 (8,116,395) -
Revenue for reportable segments under CASs and IFRSs 136,971,114 12,245,515 (8,116,395) 141,100,234
Segment (loss)/profit before taxation
(Loss)/profit before taxation for reportable segments under CASs (2,084,670) 475,041 (50,778) (1,660,407)
Effect of differences between IFRSs and CASs 10,628
Loss before taxation for the year under IFRSs (1,649,779)
7. SEGMENT INFORMATION (continued)
Operating segments (continued)
Year ended 31 December 2022
Airline operations Other Elimination Total
operations
RMB'000 RMB'000 RMB'000 RMB'000
Revenue
Sales to external customers 50,287,143 2,610,441 - 52,897,584
Inter-segment sales 211,473 5,134,296 (5,345,769) -
Revenue for reportable segments under CASs and IFRSs 50,498,616 7,744,737 (5,345,769) 52,897,584
Segment loss before taxation
Loss before taxation for reportable segments under CASs (44,354,029) (1,418,775) (106,759) (45,879,563)
Effect of differences between IFRSs and CASs 2,672
Loss before taxation for the year under IFRSs (45,876,891)
7. SEGMENT INFORMATION (continued)
Operating segments (continued)
The following tables present the assets, liabilities and other information of
the Group's operating segments under CASs as at 31 December 2023 and 2022 and
the reconciliations of reportable segment assets, segment liabilities and
other segment information to the Group's consolidated amounts under IFRSs:
Airline operations Other Elimination Total
operations
RMB'000 RMB'000 RMB'000 RMB'000
Segment assets
Total assets for reportable segments as at 31 December 2023 under CASs 323,324,926 30,250,454 (18,272,699) 335,302,681
Effect of differences between IFRSs and CASs (23,987)
Total assets under IFRSs 335,278,694
Total assets for reportable segments as at 31 December 2022 under CASs 284,165,518 26,473,501 (15,627,684) 295,011,335
Effect of differences between IFRSs and CASs (31,958)
Total assets under IFRSs 294,979,377
Airline operations Other Elimination Total
operations
RMB'000 RMB'000 RMB'000 RMB'000
Segment liabilities
Total liabilities for reportable segments as at 31 December 2023 under CASs 294,072,306 23,748,047 (17,805,668) 300,014,685
and IFRSs
Total liabilities for reportable segments as at 31 December 2022 under CASs 268,114,481 20,560,734 (15,224,066) 273,451,149
and IFRSs
7. SEGMENT INFORMATION (continued)
Operating segments (continued)
Year ended 31 December 2023
Airline operations Other operations Elimination Total Effect of differences between IFRSs Amounts under IFRSs
and CASs
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Other segment information
Share of profit of associates and joint ventures 2,501,992 331,986 - 2,833,978 - 2,833,978
Net impairment losses (recognised)/reversed on financial assets (18,271) 41,094 (47,440) (24,617) - (24,617)
Impairment losses recognised on non-financial assets 192,203 29,900 - 222,103 - 222,103
Depreciation and amortisation 26,839,044 437,075 (154,982) 27,121,137 (10,630) 27,110,507
Income tax credit/(expense) 254,127 (170,957) 8,018 91,188 (2,657) 88,531
Interests in associates and joint ventures 12,559,126 2,656,782 (79,005) 15,136,903 139,919 15,276,822
Additions to non-current assets 25,053,588 346,788 (17,211) 25,383,165 - 25,383,165
Year ended 31 December 2022
Airline operations Other operations Elimination Total Effect of differences between Amounts under IFRSs
IFRSs
and CASs
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Other segment information
Share of (loss)/profit of associates and joint ventures (484,499) 383,957 - (100,542) - (100,542)
Net impairment losses reversed/(recognised) on financial assets 7,239 (4,760) 18,305 20,784 - 20,784
Impairment losses recognised/(reversed) on non-financial assets 66,278 (526) - 65,752 - 65,752
Depreciation and amortisation 20,902,720 475,483 (132,746) 21,245,457 (11,783) 21,233,674
Income tax credit 336,326 337,427 29,896 703,649 (668) 702,981
Interests in associates and joint ventures 10,257,014 2,389,058 (71,699) 12,574,373 139,919 12,714,292
Additions to non-current assets 26,238,224 367,171 (39,835) 26,565,560 - 26,565,560
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 2023 and 2022,
respectively:
Year ended 31 December 2023
Mainland Hong Kong SAR, Macau SAR and Taiwan, China International Total
China
RMB'000 RMB'000 RMB'000 RMB'000
Sales to external customers and 112,765,304 4,126,997 24,207,933 141,100,234
total revenue
Year ended 31 December 2022
Mainland Hong Kong International Total
China
SAR, Macau
SAR and
Taiwan, China
RMB'000 RMB'000 RMB'000 RMB'000
Sales to external customers and 38,501,365 1,097,125 13,299,094 52,897,584
total revenue
In determining the Group's geographical information, revenue is attributed to
the segments based on the origin or destination of each flight. Assets, which
consist principally of aircraft and ground equipment, supporting the Group's
worldwide transportation network, are mainly registered/located in Mainland
China. According to the business demand, the Group needs to flexibly allocate
different aircraft to match the need of the route network. An analysis of the
assets of the Group by geographical distribution has therefore not been
included.
There was no individual customer that amounted to 10% or more of the Group's
revenue during the year ended 31 December 2023 (2022: CNAHC and its
subsidiaries (other than the Group) amounted to 21% of the Group's revenue).
8. OTHER INCOME AND GAINS
2023 2022
RMB'000 RMB'000
Co-operation routes income and subsidy income 4,450,650 2,899,943
Dividend income 14,286 9,368
Gains/(losses) on disposal of:
- Property, plant and equipment and right-of-use assets 934,614 64,922
- Asset held for sale 18,519 (6,774)
- Investment in an associate - 4,599
- Investment properties (315) -
(Loss)/gain arising on financial assets at FVTPL (893) 168
Others (Note) 1,984,895 402,552
7,401,756 3,374,778
Note: These mainly include flight operation remedies.
9. EMPLOYEE COMPENSATION COSTS
An analysis of the Group's employee compensation costs, including the
emoluments of Directors and supervisors, is as follows:
2023 2022
RMB'000 RMB'000
Wages, salaries and other benefits 25,769,065 21,637,625
Retirement benefit costs:
- Contributions to defined contribution retirement scheme 3,530,426 3,700,390
- Early retirement benefits 819 538
29,300,310 25,338,553
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 RECOGNISED/(REVERSED) UNDER EXPECTED
CREDIT LOSS MODEL
2023 2022
RMB'000 RMB'000
Impairment losses recognised/(reversed) on financial assets:
- Accounts receivable 22,785 (3,705)
- Financial assets included in other current assets 5,211 (1,322)
- Deposits and other receivables 3,309 (5,854)
- Debt instruments at FVTOCI (6,688) (3,275)
- Others - (6,628)
24,617 (20,784)
Details of impairment assessment are set out in Note 44.
11. PROFIT/(LOSS) FROM OPERATIONS
The Group's profit/(loss) from operations is arrived at after charging:
2023 2022
RMB'000 RMB'000
Depreciation of property, plant and equipment 11,611,121 8,784,570
Depreciation of right-of-use assets 15,468,124 12,425,265
Depreciation of investment properties 31,256 23,839
Amortisation of intangible assets 6 -
Total depreciation and amortisation 27,110,507 21,233,674
Impairment losses recognised on property, plant and equipment 184,166 62,584
Impairment losses recognised on inventories 35,049 3,168
Impairment losses recognised on interests in associates 2,888 -
Auditors' remuneration:
- Audit related services 19,395 17,817
- Other services 1,088 4,443
12. FINANCE COSTS
2023 2022
RMB'000 RMB'000
Interest on interest-bearing borrowings 3,872,746 3,383,021
Interest on lease liabilities 3,328,563 3,363,993
Imputed interest expenses on defined benefit obligations 6,204 6,573
7,207,513 6,753,587
Less: Interest capitalised (Note) (264,426) (280,967)
6,943,087 6,472,620
Note: The interest capitalisation rates ranged from 2.40% to 4.45% per
annum (2022: 2.73% to 5.80% 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:
2023 2022
RMB'000 RMB'000
Directors' fee 113 198
Salaries and other allowances 1,973 1,502
Discretionary bonus 1,781 851
Retirement benefit scheme contributions 503 523
4,370 3,074
13. DIRECTORS', CHIEF EXECUTIVE'S, SUPERVISORS' AND EMPLOYEES'
EMOLUMENTS (continued)
For the year ended 31 December 2023
Directors' Salaries and Discretionary Retirement benefit scheme Total
fee
other allowances
bonus
contributions
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Executive directors
Ma Chongxian (Notes (a) and (e)) - - - - -
Wang Mingyuan (Note (a)) (Appointed on 30 March 2023) - - - - -
Non-executive directors
Feng Gang (Note (a)) - - - - -
Patrick Healy (Note (b)) - - - - -
Xiao Peng - 580 241 102 923
(Appointed on 2 March 2023)
- 580 241 102 923
Independent non-executive directors
Li Fushen - - - - -
He Yun - - - - -
Xu Junxin - - - - -
Winnie Tam Wan-chi 113 - - - 113
113 - - - 113
Supervisors
He Chaofan (Note (a)) - - - - -
(Resigned on 13 January 2023)
Wang Jie (Note (a)) - - - - -
(Resigned on 2 March 2023)
Qin Hao - 83 367 50 500
(Resigned on 2 March 2023)
Xiao Jian - - - - -
(Appointed on 10 February 2023)
Lyu Yanfang - 379 350 106 835
Guo Lina - 394 340 96 830
Wang Mingzhu - 263 238 75 576
(Appointed on 2 March 2023)
Li Shuxing - 274 245 74 593
(Appointed on 2 March 2023)
- 1,393 1,540 401 3,334
113 1,973 1,781 503 4,370
13. DIRECTORS', CHIEF EXECUTIVE'S, SUPERVISORS' AND EMPLOYEES'
EMOLUMENTS (continued)
For the year ended 31 December 2022
Directors' Salaries and Discretionary Retirement benefit scheme Total
fee
other
bonus
contributions
allowances
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Executive directors
Song Zhiyong (Note (a)) - - - - -
(Resigned on 27 September 2022)
Ma Chongxian (Notes (a) and (e)) - - - - -
Non-executive directors
Feng Gang (Note (a)) - - - - -
Patrick Healy (Note (b)) - - - - -
Xue Yasong - - - - -
(Resigned on 25 February 2022)
- - - - -
Independent non-executive directors
Duan Hongyi - - - - -
(Resigned on 25 February 2022)
Stanley Hui Hon-chung 33 - - - 33
(Resigned on 25 February 2022)
Li Dajin 33 - - - 33
(Resigned on 25 February 2022)
Li Fushen - - - - -
(Appointed on 25 February 2022)
He Yun - - - - -
(Appointed on 25 February 2022)
Xu Junxin - - - - -
(Appointed on 25 February 2022)
Winnie Tam Wan-chi 132 - - - 132
(Appointed on 25 February 2022)
198 - - - 198
Supervisors
Zhao Xiaohang (Note (a)) - - - - -
(Resigned on 25 February 2022)
He Chaofan (Note (a)) - - - - -
Wang Jie - 387 260 145 792
Qin Hao - 363 241 136 740
Lyu Yanfang - 392 177 124 693
Guo Lina - 360 173 118 651
(Appointed on 25 February 2022)
- 1,502 851 523 2,876
198 1,502 851 523 3,074
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
their remuneration 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 their remuneration were borne by Cathay Pacific.
(c) None of the directors, supervisors and chief executive has
waived any emoluments during the years ended 31 December 2023 and 2022.
(d) For the year ended 31 December 2023, the Group received
service fee of Hong Kong Dollar ("HKD") 2,351,000 (2022: HKD2,579,000) from
Cathay Pacific for the directors' services provided by certain directors and
management to Cathay Pacific.
(e) Being the chief executive of the Company.
Five highest paid individuals
For both 2023 and 2022, 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:
2023 2022
RMB'000 RMB'000
Salaries and other allowances 11,566 10,507
Discretionary bonuses 51 81
Retirement benefit scheme contributions 238 193
11,855 10,781
Discretionary bonuses are calculated based on the Group's or respective
employee's performance for such financial year.
The number of the five highest paid individuals whose remuneration fell within
the following bands is as follows:
2023 2022
HKD2,000,001 to HKD2,500,000 - 2
HKD2,500,001 to HKD3,000,000 5 3
5 5
During both years, 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.
14. INCOME TAX CREDIT
2023 2022
RMB'000 RMB'000
Current income tax:
- Mainland China 214,771 26,148
- Hong Kong SAR and Macau SAR, China - 1,587
Under provision in respect of prior years 13,600 1,310
Deferred tax (Note 26) (316,902) (732,026)
(88,531) (702,981)
Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and
Implementation Regulation of the EIT Law, except for three (2022: three)
branches and five (2022: three) subsidiaries of the Company, and some branches
of two subsidiaries of the Company which are taxed at a preferential rate of
15% (2022: 15%), all group companies located in Mainland China are subject to
a income tax rate of 25% during the year (2022: 25%). Subsidiaries in Hong
Kong SAR, China are taxed at profits tax rate of 16.5% (2022: 16.5%) and
subsidiaries in Macau SAR, China are taxed at profits tax rate of 12% (2022:
12%), for each reporting period.
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.
The taxation for the year can be reconciled to the loss before taxation per
consolidated statement of profit or loss as follows:
2023 2022
RMB'000 RMB'000
Loss before taxation (1,649,779) (45,876,891)
Tax at the applicable tax rate of 25% (412,445) (11,469,223)
Preferential tax rates on income of group entities 85,063 676,241
Tax effect of share of results of associates and joint ventures (703,457) 98,907
Tax effect of non-deductible expenses 139,600 259,889
Tax effect of non-taxable income (18,395) (8,112)
Tax effect of deductible temporary differences and tax losses not 1,005,444 9,734,551
recognised
Utilisation of tax losses and deductible temporary differences (197,941) (1,188)
not recognised in prior years
Under provision in respect of prior years 13,600 1,310
Others - 4,644
Income tax credit (88,531) (702,981)
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:
2023 2022
RMB'000 RMB'000
Loss
Loss for the purpose of basic and diluted loss per share (1,038,411) (38,617,495)
2023 2022
'000 '000
Number of shares
Number of ordinary shares for the purpose of basic 15,401,755 13,734,961
and diluted loss per share
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 40(c)).
The Group had no potential dilutive ordinary shares in issue during both
years.
16. DIVIDENDS
No dividend was paid or proposed for ordinary shareholders of the Company
during the years ended 31 December 2022 and 2023, nor has any dividend been
proposed since the end of both reporting periods.
17. PROPERTY, PLANT AND EQUIPMENT
Aircraft, engines and flight Buildings Other Construction Total
equipment
equipment
in progress
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Cost
At 1 January 2022 155,373,060 14,448,877 12,761,493 13,352,420 195,935,850
Additions 644,635 18,908 261,489 19,861,821 20,786,853
Transfer from construction in progress 5,978,392 1,359,998 519,664 (7,858,054) -
Transfer from right-of-use assets upon obtaining ownership of the underlying 3,045,004 - - - 3,045,004
leased assets
Transfer from investment properties - 28,459 - - 28,459
Transfer to right-of-use assets - - - (12,542,369) (12,542,369)
Transfer to assets held for sale - (4,381) - - (4,381)
Disposals (3,590,275) (41,473) (327,060) - (3,958,808)
Exchange realignment 189,148 - 15,260 - 204,408
At 31 December 2022 161,639,964 15,810,388 13,230,846 12,813,818 203,495,016
Additions 1,474,811 - 345,048 19,095,961 20,915,820
Acquired on the acquisition of a subsidiary (Note 42) 3,984,723 2,250,124 378,651 581,635 7,195,133
Transfer from construction in progress 14,198,998 2,351,893 1,077,561 (17,628,452) -
Transfer from right-of-use assets upon obtaining ownership of the underlying 8,230,018 - 147,229 - 8,377,247
leased assets
Transfer from investment properties - 72 - - 72
Transfer to right-of-use assets - - - (2,562,597) (2,562,597)
Transfer to assets held for sale (1,745,995) - - (1,745,995)
Disposals (3,590,606) (501,950) (662,077) - (4,754,633)
Exchange realignment 34,773 - 3,315 - 38,088
At 31 December 2023 184,226,686 19,910,527 14,520,573 12,300,365 230,958,151
Accumulated depreciation
At 1 January 2022 (81,988,338) (6,003,302) (8,564,171) - (96,555,811)
Depreciation charge for the year (7,529,353) (487,866) (767,351) - (8,784,570)
Transfer from right-of-use assets upon obtaining ownership of the underlying (1,473,724) - - - (1,473,724)
leased assets
Transfer from investment properties - (16,853) - - (16,853)
Transfer to assets held for sale - 3,079 - - 3,079
Eliminated on disposals 3,272,966 28,508 267,863 3,569,337
Exchange realignment (89,959) - (12,940) - (102,899)
At 31 December 2022 (87,808,408) (6,476,434) (9,076,599) - (103,361,441)
Depreciation charge for the year (9,977,790) (656,050) (977,281) - (11,611,121)
Transfer from right-of-use assets upon obtaining ownership of the underlying (3,085,065) - (34,099) - (3,119,164)
leased assets
Transfer from investment properties - (58) - - (58)
Transfer to assets held for sale 1,484,763 - - - 1,484,763
Eliminated on disposals 3,086,662 269,509 566,823 - 3,922,994
Exchange realignment (14,373) - (2,868) - (17,241)
At 31 December 2023 (96,314,211) (6,863,033) (9,524,024) - (112,701,268)
Impairment
At 1 January 2022 (575,332) - - - (575,332)
Recognised for the year (62,584) - - - (62,584)
Eliminated on disposals 78,400 - - - 78,400
At 31 December 2022 (559,516) - - - (559,516)
Recognised for the year (177,726) - - (6,440) (184,166)
Transfer to assets held for sale 152,705 - - - 152,705
Eliminated on disposals 62,592 - - - 62,592
At 31 December 2023 (521,945) - - (6,440) (528,385)
Net book value
At 31 December 2023 87,390,530 13,047,494 4,996,549 12,293,925 117,728,498
At 31 December 2022 73,272,040 9,333,954 4,154,247 12,813,818 99,574,059
17. PROPERTY, PLANT AND EQUIPMENT (continued)
During the year, the Group recognised impairment losses amounting to
approximately RMB178 million (2022: RMB63 million) for certain aircrafts that
are about to retire from service in advance. The impairment provisions refer
to the difference between the recoverable amounts of RMB174 million and the
carrying amounts of the assets, approximately RMB352 million. The recoverable
amounts are based on the fair value of the assets less disposal expenses.
Among them, the fair value refers to agreed price of the contractual
agreements or the evaluation values of the assets by independent valuers.
In addition, the Company and its subsidiaries, primarily operating as airline
operators, performed impairment assessments on their airline operation related
assets other than those mentioned above. The airline operation related assets
include aircrafts and other operating non-current assets (including property,
plant and equipment, right-of-use assets, investment properties and intangible
assets) and are grouped as separate cash-generating units. The recoverable
amounts for these cash-generating units were determined based on value in use
calculations. These calculations used cash flow projections based on financial
budgets approved by managements covering a five-year period. Key assumptions
for these value in use calculations include budgeted sales and gross margins
which are based on these cash-generating units' past performances and
managements' market development expectations. The discount rates used are
pre-tax rates that reflect the risks specific to each unit, ranging from 9% to
11.5% (2022: 9% to 11%). The cash flows beyond the five-year period were
extrapolated using a 2.5% (2022: 2.5%). As the recoverable amounts are above
the carrying amounts of cash-generating units, no further impairment loss was
recognised during the year.
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.
Estimated Residual Depreciation rate
useful life/flying
value
per annum/per
hours
thousand hours
Aircraft, engines and flight equipment:
Core parts of airframe and engines 15 to 30 years 5% 3.17% - 6.33%
Overhaul of airframe and cabin refurbishment 5 to 12 years Nil 8.33% - 20.00%
Overhaul components of engines 9 to 43 thousand hours Nil 2.33% - 11.11%
Rotable 3 to 15 years Nil 6.67% - 33.33%
Buildings 5 to 50 years 3%-5% 1.90% - 19.40%
Other equipment 3 to 20 years Nil-5% 4.75% - 33.33%
As at 31 December 2023, the Group's aircraft and flight equipment, buildings
and other equipment with an aggregate net book value of approximately RMB839
million (2022: RMB1,994 million) were pledged to secure certain bank loans of
the Group (Note 35).
As at 31 December 2023, the Group was in the process of applying for the title
certificates of certain buildings with an aggregate net book value of
approximately RMB7,390 million (2022: RMB4,854 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 2023.
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 2022 186,385,876 3,197,737 2,385,679 371,704 192,340,996
Additions 3,331,617 906,430 1,072,921 109,472 5,420,440
Transfer from property, plant and equipment 12,540,646 - - 1,723 12,542,369
Transfer from investment properties - 9,018 - - 9,018
Transfer to property, plant and equipment upon obtaining ownership of the (3,045,004) - - - (3,045,004)
underlying leased assets
Reduction upon completion/early termination of leases (1,981,336) (7,051) (179,541) (6,895) (2,174,823)
Exchange adjustments 404,495 - 12,482 - 416,977
At 31 December 2022 197,636,294 4,106,134 3,291,541 476,004 205,509,973
Additions 1,253,435 215,003 346,015 54,089 1,868,542
Acquired on the acquisition of a subsidiary subsidiary (Note 42) 10,631,781 863,396 62,158 - 11,557,335
Transfer from property, plant and equipment 2,061,865 500,732 - - 2,562,597
Transfer to property, plant and equipment upon obtaining ownership of the (8,230,018) - - (147,229) (8,377,247)
underlying leased assets
Reduction upon completion/early termination of leases (4,576,768) (87,864) (260,804) (22,183) (4,947,619)
Exchange adjustments 84,700 - 2,481 - 87,181
At 31 December 2023 198,861,289 5,597,401 3,441,391 360,681 208,260,762
Accumulated depreciation
At 1 January 2022 (68,631,778) (801,018) (1,242,126) (55,820) (70,730,742)
Depreciation charged for the year (11,462,583) (77,698) (779,458) (105,526) (12,425,265)
Transfer from investment properties - (3,175) - - (3,175)
Transfer to property, plant and equipment upon obtaining ownership of the 1,473,724 - - - 1,473,724
underlying leased assets
Reduction upon completion/early termination of leases 1,960,333 2,565 169,842 6,893 2,139,633
Exchange adjustments (140,806) - (4,741) - (145,547)
At 31 December 2022 (76,801,110) (879,326) (1,856,483) (154,453) (79,691,372)
Depreciation charged for the year (14,419,495) (106,817) (835,601) (106,211) (15,468,124)
Transfer to property, plant and equipment upon obtaining ownership of the 3,085,065 - - 34,099 3,119,164
underlying leased assets
Reduction upon completion/early termination of leases 4,490,941 16,898 257,657 22,126 4,787,622
Exchange adjustments (35,715) - (1,278) - (36,993)
At 31 December 2023 (83,680,314) (969,245) (2,435,705) (204,439) (87,289,703)
Net book value
At 31 December 2023 115,180,975 4,628,156 1,005,686 156,242 120,971,059
At 31 December 2022 120,835,184 3,226,808 1,435,058 321,551 125,818,601
During the year, expense relating to short-term leases amounted to
approximately RMB832 million (2022: RMB578 million), expense relating to
leases of low-value assets, excluding short-term leases of low value assets,
amounted to approximately RMB7,261,000 (2022: RMB344,000).
Leases committed
As at 31 December 2023, the Group had future undiscounted lease payments under
non-cancellable period of RMB2 million (2022: RMB275 million), which was not
recognised as lease liabilities since leases have yet to be commenced.
During the year, total cash outflow for leases was RMB26,240 million (2022:
RMB18,140 million).
Details of the lease maturity analysis of lease liabilities are set out in
Notes 34 and 44.
As at 31 December 2023, all the Group's land use rights, which are recorded as
part of right-of-use assets are located in Mainland China, with an aggregate
net book value of approximately RMB24 million (2022: RMB25 million) were
pledged to secure certain bank loans and other borrowings of the Group (Note
35).
As at 31 December 2023, the Group was in the process of applying for the title
certificates of certain land use rights acquired by the Group with an
aggregate net book value of approximately RMB595 million (2022: RMB841
million). The Directors are of the opinion that the Group is entitled to
lawfully and validly occupy and use the above-mentioned land, and the
aforesaid matter did not have any significant impact on the Group's financial
position as at 31 December 2023.
19. INVESTMENT PROPERTIES
2023 2022
RMB'000 RMB'000
Cost
As at 1 January 722,215 759,692
Acquired on the acquisition of a subsidiary (Note 42) 227,669 -
Disposals (1,662) -
Transfer to property, plant and equipment (72) (28,459)
Transfer to right-of-use assets - (9,018)
As at 31 December 948,150 722,215
Accumulated depreciation
As at 1 January (191,705) (187,894)
Depreciation for the year (31,257) (23,839)
Disposals 1,348 -
Transfer to property, plant and equipment 58 16,853
Transfer to right-of-use assets - 3,175
As at 31 December (221,556) (191,705)
Net carrying amount
As at 31 December 726,594 530,510
20. GOODWILL
2023 2022
RMB'000 RMB'000
Cost
As at 1 January 1,229,710 1,229,710
Arising on acquisition of a subsidiary (Note 42) 2,995,757 -
At 31 December 4,225,467 1,229,710
Impairment
As at 1 January and 31 December (129,735) (129,735)
Carrying amount
As at 31 December 4,095,732 1,099,975
For the purposes of impairment testing, goodwill acquired through these
business combinations has been allocated to the cash-generating units of
Shenzhen Airlines and Shandong Aviation respectively.
The recoverable amounts for both Shenzhen Airlines and Shandong Aviation
cash-generating units were determined based on value in use calculations.
These calculations used cash flow projections based on financial budgets
approved by the managements covering a five-year period and discount rates of
11% to 11.5% for both Shenzhen Airlines and Shandong Aviation (2022: 11% for
Shenzhen Airlines). The discount rates used are pre-tax rates that reflect the
risks specific to each unit. The cash flows beyond the five-year period were
extrapolated using a 2.5% growth rate for both Shenzhen Airlines and Shandong
Aviation (2022: 2.5% for Shenzhen Airlines: 2.5%). Other key assumptions for
value in use calculations include budgeted sales and gross margins which are
based on the cash-generating units' past performances and managements' market
development expectations.
As the recoverable amounts are significantly above the carrying amounts of
Shenzhen Airlines and Shandong Aviation cash-generating units respectively,
the Management believes that any reasonably possible change in any of these
assumptions would not result in impairment.
21. INTERESTS IN SUBSIDIARIES
Details of the subsidiaries directly and indirectly held by the Company at the
end of the reporting period are set out below:
Name of Subsidiaries Place of incorporation/registration/operations Legal status Paid up issued/registered capital Proportion of ownership Principal activities
interest and voting power
held by the Company
Direct Indirect
2023 2022 2023 2022
% % % %
China National Aviation Company Limited ("CNAC") Hong Kong SAR, China Limited liability company HKD331,268,000 69 69 31 31 Investment holding
(中航興業有限公司)
Air China Import and Export Co., Ltd. PRC/Mainland China Limited liability company RMB95,080,786 100 100 - - Import and export trading
(國航進出口有限公司) (Note (a))
Zhejiang Aviation Service Co., Ltd. PRC/Mainland China Limited liability company RMB20,000,000 100 100 - - Provision of cabin service and airline catering
(浙江航空服務有限公司) (Note (a))
Air China Development Corporation Hong Kong SAR, China Limited liability company HKD9,379,010 95 95 - - Provision of air ticketing services
(Hong Kong) Limited
(國航香港發展有限公司)
Air China Shantou Industrial Development Co., Ltd. PRC/Mainland China Limited liability company RMB18,000,000 51 51 - - Airline related service
(中國國際航空汕頭實業發展公司)(#)
Beijing Golden Phoenix Human Resource Co., Ltd. PRC/Mainland China Limited liability company RMB2,000,000 100 100 - - Provision of human resources services
(北京金鳳凰人力資源服務有限公司) (Note (a))
Total Transform Group Ltd. British Virgin Islands ("BVI") Limited liability company HKD13,765,440,000 99.94 99.94 0.06 0.06 Investment holding
(國航海外控股有限公司)
Air Macau Company Limited Macau SAR, China Limited liability company Macau Pataca ("MOP") - - 66.9 66.9 Airline operator
(澳門航空股份有限公司)
842,042,000
Beijing Airlines Co., Ltd. PRC/Mainland China Limited liability company RMB1,000,000,000 51 51 - - Airline operator
(北京航空有限責任公司) (Note (a))
Dalian Airlines Co., Ltd.(#) PRC/Mainland China Limited liability company RMB3,000,000,000 80 80 - - Airline operator
(大連航空有限責任公司) (Note (a))
Air China Inner Mongolia Co., Ltd. PRC/Mainland China Limited liability company RMB1,000,000,000 80 80 - - Airline operator
(中國國際航空內蒙古有限公司)
(Note (a))
China National Aviation Finance Co., Ltd. ("CNAF") PRC/Mainland China Limited liability company RMB1,127,961,864 51 51 - - Provision of financial services
(中國航空集團財務有限責任公司)
(Note (a))
Chengdu Falcon Aircraft Engineering Service Co., Ltd. PRC/Mainland China Limited liability company RMB80,000,000 30 30 30 30 Provision of aircraft overhaul and maintenance services
(成都富凱飛機工程服務有限公司) (Note (b))
Shenzhen Airlines PRC/Mainland China Limited liability company RMB5,360,000,000 51 51 - - Airline operator
(深圳航空有限責任公司) (Note (b))
Kunming Airlines Co., Ltd. PRC/Mainland China Limited liability company RMB1,064,000,000 - - 100 80 Airline operator
("Kunming Airlines")
(昆明航空有限公司)
(Notes (a) and (d))
Aircraft Maintenance and Engineering Corporation ("AMECO") PRC/Mainland China Limited liability company United State Dollar ("USD") 300,052,800 75 75 - - Provision of aircraft overhaul and maintenance services
(北京飛機維修工程有限公司)
(Note (b))
Shandong Aviation PRC/Mainland China Limited liability company RMB10,454,489,846.24 66 49.4 - - Airline related service
(山東航空集團有限公司)
(Notes (a) and (c))
Shandong Airline PRC/Mainland China Limited liability company RMB400,000,000 22.8 22.8 42 N/A Airline operator
(山東航空股份有限公司)
(Notes (a) and (c))
(#) The English name of the company is direct translations
of their Chinese names.
21. INTERESTS IN SUBSIDIARIES (continued)
Notes:
(a) These companies are wholly-domestic owned enterprises.
(b) These companies are sino-foreign equity joint ventures.
(c) Upon the completion of the acquisition as set out in Note
42, Shandong Aviation and Shandong Aviation, being associates of the Company
previously, became non-wholly owned subsidiaries of the Company.
(d) In April 2023, upon the capital reduction of the
non-controlling shareholder in Kunming Airlines, the equity interest of
Shenzhen Airlines in Kunming Airlines increased from 80% to 100% and Kunming
Airlines become an indirect wholly owned subsidiaries of the Company.
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 2023, the Company had a subsidiary which had outstanding
issued debt securities as follows:
Name Face value of Carrying value of Maturity date
debt securities
debt securities
RMB'000 RMB'000
Shenzhen Airlines 2,000,000 2,022,242 23/08/2024
1,500,000 1,538,030 18/02/2025
1,500,000 1,540,063 25/02/2025
1,000,000 1,026,566 21/03/2025
1,500,000 1,537,082 07/04/2025
700,000 716,048 26/04/2025
8,380,031
21. INTERESTS IN SUBSIDIARIES (continued)
Information of debt securities, representing corporate bonds and short-term
commercial papers, issued by a subsidiary of the Group: (continued)
As at 31 December 2022, the Company had a subsidiary which had outstanding
issued debt securities as follows:
Name Face value of Carrying value of Maturity date
debt securities
debt securities
RMB'000 RMB'000
Shenzhen Airlines 1,000,000 1,024,739 05/03/2023
2,000,000 2,020,817 23/08/2024
1,500,000 1,537,210 18/02/2025
1,500,000 1,539,672 25/02/2025
1,000,000 1,026,309 21/03/2025
1,500,000 1,536,677 07/04/2025
700,000 715,855 26/04/2025
9,401,279
Composition of the Group
Principal activities Place of incorporation/registration Number of principal
subsidiaries
and operations
2023 2022
Airline operator PRC/Macau SAR 7 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 air ticketing service Hong Kong SAR 1 1
Provision of human resources services PRC 1 1
Provision of aircraft overhaul and PRC 2 2
maintenance services
Provision of airline related services PRC 2 1
Provision of financial services PRC 1 1
18 16
21. INTERESTS IN SUBSIDIARIES (continued)
Details of non-wholly owned subsidiaries that have material NCI
The table below shows details of non-wholly owned subsidiaries of the Company
that have material NCI:
Name of subsidiaries Place of Proportion of (Loss)/profit allocated Accumulated NCI
registration
ownership interest and
to NCI year ended
at 31 December
and operations
voting power held by NCI
31 December
at 31 December
2023 2022 2023 2022 2023 2022
RMB'000 RMB'000 RMB'000 RMB'000
Shenzhen Airlines PRC 49% 49% (855,954) (5,753,524) (5,155,650) (4,548,830)
Shandong Aviation PRC 34% N/A 326,024 - 710,618 -
Individually immaterial subsidiaries with NCI 7,093 (802,891) 2,503,066 2,499,882
Total (522,837) (6,556,415) (1,941,966) (2,048,948)
Summarised financial information in respect of the Company's subsidiaries that
have material NCI 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 subsidiaries' financial
statements prepared in accordance with IFRSs.
21. INTERESTS IN SUBSIDIARIES (continued)
Details of non-wholly owned subsidiaries that have material NCI (continued)
Shenzhen Airlines
2023 2022
RMB'000 RMB'000
Current assets 5,121,868 4,043,309
Non-current assets 58,049,688 60,266,673
Current liabilities (27,502,925) (22,057,983)
Non-current liabilities (46,202,653) (51,028,062)
Net liabilities (10,534,022) (8,776,063)
- Equity contributed to equity shareholders of Shenzhen Airlines (10,545,827) (8,288,691)
- Equity contributed to the NCI of Shenzhen Airlines' subsidiaries 11,805 (487,372)
Carrying amount of NCI (5,155,650) (4,548,830)
Revenue 29,988,128 12,540,728
Loss for the year (1,734,168) (11,428,498)
Total comprehensive expense (1,741,959) (11,379,944)
- attributable to equity shareholders of Shenzhen Airlines (1,729,779) (11,078,847)
- attributable to NCI of Shenzhen Airlines' subsidiaries (12,180) (301,097)
Dividend paid to NCI - -
Cash from/(used in)operating activities 7,535,277 (3,936,692)
Cash used in investing activities (3,184,482) (489,364)
Cash (used in)/from financing activities (4,486,825) 3,765,041
Shandong Aviation
31 December 2023
RMB'000
Current assets 4,962,693
Non-current assets 26,812,919
Current liabilities (9,207,792)
Non-current liabilities (17,650,278)
Net assets 4,917,542
- Equity contributed to equity shareholders of Shandong Aviation 8,946,512
- Equity contributed to the NCI of Shandong Aviation' subsidiaries (4,028,970)
Carrying amount of NCI 710,618
21. INTERESTS IN SUBSIDIARIES (continued)
Details of non-wholly owned subsidiaries that have material NCI (continued)
Shandong Aviation
For the period
from the acquisition
date to
31 December
2023
RMB'000
Revenue 15,674,953
Profit for the year 906,335
Total comprehensive income 879,751
- attributable to equity shareholders of Shandong Aviation 575,816
- attributable to NCI of Shandong Aviation' subsidiaries 303,935
Dividend paid to NCI 7,339
Cash generated from operating activities 2,363,998
Cash used in investing activities (1,190,298)
Cash used in financing activities (4,177,576)
The summarised financial information of Shandong Aviation is presented based
on the fair value measurement of identifiable net assets acquired on a
recurring basis since the acquisition date. Details of the fair value of
identifiable net assets acquired on the acquisition date are set out in Note
42.
22. INTERESTS IN ASSOCIATES
2023 2022
RMB'000 RMB'000
Share of net assets
- Listed shares in the PRC (Note) - -
- Listed shares in Hong Kong SAR, China 10,024,259 7,828,779
- Unlisted investments 266,939 144,913
Goodwill 2,571,825 2,562,791
As at 31 December 12,863,023 10,536,483
Market value of listed shares 14,275,696 14,692,504
22. INTERESTS IN ASSOCIATES (continued)
Details of each of the Group's associates at the end of the reporting period
are as follows:
Company name Place of incorporation/registration and operations Paid up issued/ Percentage of equity interests attributable to the Group Principal activities
registered capital
as at 31 December
2023 2022
% %
Cathay Pacific* (國泰航空有限公司) Hong Kong SAR, China HKD28,822,000,000 29.99 29.99 Airline operator
Menzies Macau Airport Services Limited* Macau SAR, China MOP10,000,000 41 41 Provision of airport ground handling services
(明捷澳門機場服務有限公司)
Chongqing Civil Aviation Cares Information Technology Co., Ltd. PRC/Mainland China RMB14,800,000 24.5 24.5 Provision of airline-related information system services
(重慶民航凱亞信息技術有限公司)
Chengdu Civil Aviation Southwest Cares Co., Ltd. PRC/Mainland China RMB10,000,000 35 35 Provision of airline-related information system services
(成都民航西南凱亞有限責任公司)
Tibet Airlines Co., Ltd. (西藏航空有限公司) PRC/Mainland China RMB280,000,000 31 31 Airline operator
ZhengZhou Aircraft Maintenance and Engineering Co., Ltd.(#) PRC/Mainland China RMB150,000,000 30 30 Provision of overhaul and maintenance services
(鄭州飛機維修工程有限公司)
Shandong Aviation (山東航空集團有限公司) (Note) PRC/Mainland China RMB10,454,489,846 N/A 49.4 Investment holding
Shandong Airlines (山東航空股份有限公司) (Note) PRC/Mainland China RMB400,000,000 N/A 22.8 Airline operator
Staeco (Beijing) Business Jet Maintenance Co., Ltd.* PRC/Mainland China RMB5,000,000 40 N/A Provision of overhaul and maintenance services
(北京山太公務機維修技術有限公司)
("Staeco Business Jet Maintenance") (Note)
Shandong Airlines Rainbow Jet Co., Ltd.* PRC/Mainland China RMB50,000,000 51 N/A Airline operator
(山東航空彩虹公務機有限公司)
("Shandong Airlines Rainbow") (Note)
* 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.
22. INTERESTS IN ASSOCIATES (continued)
Note: Upon the completion of the acquisition on 20 March 2023 as set out
in Note 42, Shandong Aviation and Shandong Airlines became non-wholly owned
subsidiaries of the Company. In addition, Staeco Business Jet Maintenance and
Shandong Airlines Rainbow which are previously associates of Shandong
Aviation, became associates of the Group at the acquisition date.
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
2023 2022
RMB'000 RMB'000
Gross amounts of the associate's
Current assets 20,615,599 23,525,160
Non-current assets 137,170,897 138,079,890
Current liabilities (41,226,666) (38,769,705)
Non-current liabilities (62,156,724) (65,769,684)
Equity 54,403,106 57,065,661
- Equity contributed to equity shareholders of the associate 44,911,357 37,887,154
- Equity contributed to preferred shareholders of the associate 9,008,733 18,703,287
- Equity contributed to NCI of the associate 6,344 5,360
- Equity contributed to convertible bond holders of the associate 476,672 469,860
Revenue 85,012,406 43,657,981
Profit/(loss) for the year 8,741,428 (5,600,533)
Other comprehensive expense (1,667,227) (1,555,181)
Total comprehensive income/(expense) 7,074,201 (7,155,714)
Reconciled to the Group's interests in the associate
Gross amounts of net assets of the associate attributable to 44,911,357 37,887,154
equity shareholders
Group's effective interest 29.99% 29.99%
Group's share of net assets of the associate 13,468,916 11,362,357
Elimination of reciprocal shareholding (3,444,657) (3,533,578)
Goodwill 2,571,825 2,535,073
Carrying amount in the consolidated financial statements 12,596,084 10,363,852
22. INTERESTS IN ASSOCIATES (continued)
Aggregate information of associates that are not individually material:
2023 2022
RMB'000 RMB'000
Aggregate carrying amounts of individually immaterial associates 266,939 172,631
in the consolidated financial statements
Aggregate amounts of the Group's share of those associates'
- Profit/(loss) for the year 122,300 (729,401)
- Other comprehensive income for the year 698 3,821
- Total comprehensive income/(expense) for the year 122,998 (725,580)
23. INTERESTS IN JOINT VENTURES
2023 2022
RMB'000 RMB'000
Share of net assets 2,407,304 2,171,314
Goodwill 6,495 6,495
2,413,799 2,177,809
23. INTERESTS IN JOINT VENTURES (continued)
Details of each of the Group's joint ventures at the end of the reporting
period are as follows:
Company name Place of incorporation/registration and operations Paid up issued/ Percentage of equity interests attributable to the Group Principal activities
registered capital
as at 31 December
2023 2022
% %
Shanghai Pudong International Airport Cargo Terminal Co., Ltd.(#) PRC/Mainland China RMB680,000,000 39 39 Provision of cargo carriage services
(上海浦東國機場西區公共貨運站有限公司)
Sichuan Services Aero-Engine Maintenance Co., Ltd. PRC/Mainland China USD88,000,000 60 60 Provision of engine overhaul and maintenance services
(四川國際航空發動機維修有限公司)
GA Innovation China PRC/Mainland China USD10,000,000 50 50 Wholesale and import of aircraft and components
(北京集安航空資產管理有限公司)
Shanghai International Airport Ground Services Ltd. PRC/Mainland China RMB360,000,000 24 24 Provision of airport ground handling services
(上海國際機場地面服務有限公司)
Wuxi Xiangyi Development Co., Ltd.(#) PRC/Mainland China RMB20,000,000 46.3 46.3 Property development
(無錫市祥翼發展有限公司)
Beijing Aero-Engine Services Co., Ltd.(#) PRC/Mainland China USD190,000,000 50 50 Provision of engine overhaul and maintenance services
(北京航空發動機維修有限公司)
(#) 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.
23. 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:
2023 2022
RMB'000 RMB'000
Aggregate carrying amounts of individually immaterial joint 2,413,799 2,177,809
ventures in the consolidated financial statements
Aggregate amounts of the Group's share of those joint ventures'
- Profit for the year 279,566 376,872
- Total comprehensive income for the year 279,566 376,872
24. EQUITY INSTRUMENTS AT FVTOCI
2023 2022
RMB'000 RMB'000
Unlisted investments:
- Equity securities 1,547,986 241,717
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.
25. DEBT INSTRUMENTS AT FVTOCI
2023 2022
RMB'000 RMB'000
Investments in listed bonds 1,397,310 1,360,982
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 44.
26. DEFERRED TAXATION
The movements in deferred tax assets and liabilities during the year were as
follows:
2023 2022
RMB'000 RMB'000
Deferred tax assets:
As at 1 January 18,679,375 18,231,095
Acquisition of a subsidiary (Note 42) 5,695,801 -
Credited to profit or loss (Note 14) (1,194,005) 446,056
Exchange realignment 408 2,224
Gross deferred tax assets as at 31 December 23,181,579 18,679,375
Deferred tax liabilities:
As at 1 January 8,529,345 8,802,061
Acquisition of a subsidiary (Note 42) 2,715,945 -
Charged to profit or loss (Note 14) (1,510,907) (285,970)
Charged to other comprehensive income 37,926 13,254
Gross deferred tax liabilities as at 31 December 9,772,309 8,529,345
Net deferred tax assets as at 31 December 13,409,270 10,150,030
26. DEFERRED TAXATION (continued)
The principal components of the Group's deferred tax assets and liabilities
were as follows:
2023 2022
RMB'000 RMB'000
Deferred tax assets:
Deductible tax losses 7,452,665 6,295,356
Provisions and accruals 5,562,188 3,313,963
Lease liabilities 9,498,934 8,495,367
Impairment 375,037 294,182
Unrealised profit of intra-group transactions 238,823 222,470
Differences in value of property, plant and equipment 53,218 55,875
Impairment of investments in debt instruments at FVTOCI 487 2,159
Unrealised loss on derivative financial instruments 227 3
Gross deferred tax assets 23,181,579 18,679,375
Deferred tax liabilities:
Right-of-use assets (7,748,228) (6,762,099)
Depreciation allowances in excess of the related depreciation (1,372,469) (1,318,755)
Changes in fair value of equity instruments at FVTOCI (205,426) (51,247)
Unrealised equity investment income (122,284) (117,033)
Changes in fair value of debt instruments at FVTOCI (4,064) (1,779)
Impairment of investments in debt instruments at FVTOCI (487) (2,159)
Others (319,351) (276,273)
Gross deferred tax liabilities (9,772,309) (8,529,345)
Net deferred tax assets 13,409,270 10,150,030
The following amounts, determined after appropriate offsetting, are shown
separately on the consolidated statement of financial position:
2023 2022
RMB'000 RMB'000
Net deferred tax assets 13,757,180 10,473,327
Net deferred tax liabilities (347,910) (323,297)
13,409,270 10,150,030
26. DEFERRED TAXATION (continued)
Details of tax losses and other deductible temporary differences not
recognised are set out below:
2023 2022
RMB'000 RMB'000
Deductible tax losses 59,112,856 47,280,705
Other unrecognised deductible temporary differences 326,651 490
59,439,507 47,281,195
At the end of the reporting period, the Group has unused tax losses of
approximately RMB90,173 million (2022: RMB72,462 million) available for offset
against future profits. Deferred tax asset has been recognised in respect of
approximately RMB31,060 million (2022: RMB25,181 million) of such losses. No
deferred tax asset has been recognised in respect of the remaining tax losses
of approximately RMB59,113 million (2022: RMB47,281 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 RMB59,085 million (2022:
RMB47,251 million) with expiry dates as disclosed in the following table.
Other tax losses may be carried forward indefinitely.
2023 2022
RMB'000 RMB'000
2023 - 445,810
2024 302,295 302,295
2025 450,281 450,281
2026 9,696,642 7,437,825
2027 39,300,103 33,417,819
2028 9,335,472 5,197,211
59,084,793 47,251,241
27. INVENTORIES
An analysis of inventories as at the end of the reporting period is as
follows:
2023 2022
RMB'000 RMB'000
Spare parts of flight equipment 2,184,056 1,136,602
Work in progress 1,297,067 1,242,975
Catering supplies 101,531 78,418
Equipment 7,653 7,440
Others 92,514 92,388
3,682,821 2,557,823
28. ACCOUNTS RECEIVABLE
2023 2022
RMB'000 RMB'000
Accounts receivable 3,357,916 1,794,464
Less: Allowance for expected credit losses (175,119) (145,108)
3,182,797 1,649,356
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:
2023 2022
RMB'000 RMB'000
Within 30 days 2,349,927 871,543
31 to 60 days 265,953 354,939
61 to 90 days 155,337 103,925
Over 90 days 411,580 318,949
3,182,797 1,649,356
Details of impairment assessment of accounts receivable are set out in Note
44.
29. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
An analysis of prepayments, deposits and other receivables as at the end of
the reporting period, net of allowance for expected credit losses, was as
follows:
2023 2022
RMB'000 RMB'000
Manufacturers' credits 567,759 456,026
Prepayments of jet fuel 99,925 85,077
Other prepayments 314,506 283,615
982,190 824,718
Deposits and other receivables 4,870,155 2,351,700
5,852,345 3,176,418
As at 31 December 2023, the allowance at lifetime ECL recognised on
credit-impaired debtor mainly consisted of the full provision for the amount
due from Shenzhen Airlines Property Development Co., Ltd. of RMB293,685,000
(2022: RMB293,685,000).
Details of impairment assessment of deposits and other receivables are set out
in Note 44.
30. RESTRICTED BANK DEPOSITS, CASH AND CASH EQUIVALENTS
2023 2022
RMB'000 RMB'000
Time deposits with banks 439,195 231,390
Bank and cash 15,189,301 11,204,487
Less: Restricted bank deposits (Note) (611,692) (828,166)
Cash and cash equivalents 15,016,804 10,607,711
Note: As at 31 December 2023 and 2022, the Group's restricted bank
deposits mainly contains deposits with the People's Bank of China by CNAF,
deposits against aircraft leases and bank deposits with an original maturity
of more than three months.
31. OTHER CURRENT ASSETS
2023 2022
RMB'000 RMB'000
The value added tax credit 3,503,185 2,458,518
Loans to related parties 265,217 120,107
Debt instruments at FVTOCI 99,365 793,677
Others 17,173 47,272
3,884,940 3,419,574
Impairment (11,311) (6,100)
3,873,629 3,413,474
Loans to related parties mainly represented loans to CNAHC and its
subsidiaries by CNAF at a rate of 2.50%-3.30% (2022: 3.20%-3.60%) per annum
and the loans are repayable within one year.
Details of impairment assessment of other current assets are set out in Note
44.
32. ACCOUNTS PAYABLE
The ageing analysis of the accounts payable, based on the transaction date, as
at the end of the reporting period was as follows:
2023 2022
RMB'000 RMB'000
Within 30 days 7,517,749 4,233,975
31 to 60 days 2,479,368 1,228,802
61 to 90 days 3,411,397 950,354
Over 90 days 4,545,784 4,522,415
17,954,298 10,935,546
The accounts payable are non-interest-bearing and have normal credit terms up
to 90 days.
33. OTHER PAYABLES AND ACCRUALS
An analysis of other payables and accruals as at the end of the reporting
period was as follows:
2023 2022
RMB'000 RMB'000
Accrued salaries, wages and benefits 3,154,495 4,371,313
Payables for construction in progress 1,715,427 1,484,480
Deposits received from sales agents 512,378 307,024
Other tax payables 495,176 266,571
Current portion of long-term payables 4,233 3,003
Deposits received by CNAF from related parties 7,088,514 7,790,663
Others 2,731,323 2,325,090
15,701,546 16,548,144
34. LEASE LIABILITIES
The Group has obligations under lease agreements expiring during the years
from 2024 to 2033 (2022: from 2023 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 2023 At 31 December 2022
Lease Present Lease Present
payments
values of
payments
values of
lease payments
lease payments
RMB'000 RMB'000 RMB'000 RMB'000
Amounts repayable
- Within 1 year 20,663,819 18,175,349 20,023,361 17,085,829
- After 1 year but within 2 years 17,712,432 15,840,293 18,618,357 16,082,080
- After 2 years but within 5 years 35,082,619 32,158,689 40,807,251 36,673,405
- After 5 years 16,889,125 16,054,985 25,190,894 24,141,862
Total 90,347,995 82,229,316 104,639,863 93,983,176
Less: Amounts representing future (8,118,679) (10,656,687)
finance costs
Present values of lease payments 82,229,316 93,983,176
Less: Portion classified as current (18,175,349) (17,085,829)
liabilities
Non-current portion 64,053,967 76,897,347
The weighted average incremental borrowing rates applied to lease liabilities
ranged from 0.37% to 8.31% per annum at 31 December 2023 (2022: from 0.32% to
4.90%).
Under the terms of certain lease agreements, the Group has the option to
purchase the aircraft at the end of or during the lease term, at the price as
stipulated in those lease agreements.
35. INTEREST-BEARING BORROWINGS
2023 2022
RMB'000 RMB'000
Bank loans and other borrowings:
- Secured 748,462 1,315,191
- Unsecured 139,882,030 113,287,610
140,630,492 114,602,801
Corporate bonds and short-term commercial papers:
- Secured - 6,773,180
- Unsecured 11,400,907 14,428,305
11,400,907 21,201,485
152,031,399 135,804,286
2023 2022
RMB'000 RMB'000
Bank loans and other borrowings repayable:
- Within 1 year 45,067,693 32,949,027
- After 1 year but within 2 years 57,883,821 19,980,259
- After 2 years but within 5 years 33,414,939 61,558,753
- After 5 years 4,264,039 114,762
140,630,492 114,602,801
Corporate bonds and short-term commercial papers repayable:
- Within 1 year 2,204,075 10,008,143
- After 1 year but within 2 years 9,196,832 2,020,817
- After 2 years but within 5 years - 9,172,525
11,400,907 21,201,485
Total interest-bearing borrowings 152,031,399 135,804,286
Less: Portion classified as current liabilities (47,271,768) (42,957,170)
Non-current portion 104,759,631 92,847,116
35. INTEREST-BEARING BORROWINGS (continued)
Bank and other borrowings denominated in currencies other than the functional
currencies of respective entities are set out below:
2023 2022
RMB'000 RMB'000
MOP 487,814 673,747
European Dollar ("EURO") 121,611 114,859
USD - 116,117
HKD - 403,299
609,425 1,308,022
The carrying amount of the bank and other borrowings and the range of interest
rates are as below:
2023 2022
RMB'000 % RMB'000 %
Fixed rate bank loans and other borrowings 91,804,188 2.00-4.38 75,590,803 2.00-4.38
Fixed rate corporate bonds and short-term commercial papers 11,400,907 2.54-3.46 21,201,485 1.81-5.30
Floating rate bank loans and 48,826,304 2.30-4.45 39,011,998 2.25-5.79
other borrowings
152,031,399 135,804,286
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 Group's interest-bearing borrowings had been secured by the Group's assets
and the carrying amounts of the respective assets at the end of the reporting
period are as follows:
2023 2022
RMB'000 RMB'000
Aircraft and flight equipment, buildings and other equipment 837,673 1,994,160
Land use rights 24,221 25,008
Intangible assets 6,105 -
867,999 2,019,168
As at 31 December 2022, corporate bonds issued by the Group with a par value
of RMB6,500 million were guaranteed by CNAHC, As these corporate bonds were
repaid at maturity during the year, there are no guaranteed borrowings as at
31 December 2023.
As at 31 December 2023, corporate bonds with carrying amount of RMB8,380
million (2022: corporate bonds with carrying amount of RMB9,401 million) were
issued by Shenzhen Airlines, a subsidiary of the Company.
36. 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:
2023 2022
RMB'000 RMB'000
As at 1 January 9,542,222 9,384,846
Acquisition of a subsidiary (Note 42) 6,951,253 -
Provision for the year 2,659,165 963,654
Utilisation during the year (1,304,881) (806,278)
As at 31 December 17,847,759 9,542,222
Less: Portion classified as current liabilities (650,777) (936,804)
Non-current portion 17,196,982 8,605,418
As at 31 December 2023, provision for major overhauls was RMB13,739 million
(2022: RMB6,421 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.
37. CONTRACT LIABILITIES
2023 2022
RMB'000 RMB'000
Frequent-flyer programme (Note) 2,172,125 2,028,222
Others 1,014,354 489,806
3,186,479 2,518,028
Analysed as:
Current portion 1,522,492 1,095,185
Non-current portion 1,663,987 1,422,843
3,186,479 2,518,028
37. CONTRACT LIABILITIES (continued)
Note:
The movements of the Group's frequent-flyer programme during the year were as
follows:
2023 2022
RMB'000 RMB'000
As at 1 January 2,028,222 2,706,173
Additions during the year 1,598,477 805,257
Recognised as revenue during the year (1,454,574) (1,483,208)
As at 31 December 2,172,125 2,028,222
Less: Portion classified as current liabilities (508,138) (605,379)
Non-current portion 1,663,987 1,422,843
The Group operates frequent-flyer programme and provides free services or
products to the customers according to the miles they earn. The Group
maintains 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.
38. DEFINED BENEFIT OBLIGATIONS
The liabilities recognised in the consolidated statement of financial position
represent:
2023 2022
RMB'000 RMB'000
Post-retirement benefit obligations 210,054 225,824
Less: current portion (22,244) (23,808)
Long-term portion 187,810 202,016
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.
38. DEFINED BENEFIT OBLIGATIONS (continued)
Movements of the defined benefit obligations were set out as follows:
2023 2022
RMB'000 RMB'000
At 1 January 225,824 242,920
Remeasurement loss 912 952
Past service cost 308 -
Interest cost 6,204 6,573
Payments (23,194) (24,621)
At 31 December 210,054 225,824
Less: current portion (22,244) (23,808)
Long-term portion 187,810 202,016
Expenses recognised in the consolidated statement of profit or loss and other
comprehensive income are as follows:
2023 2022
RMB'000 RMB'000
Finance costs
- Interest cost 6,204 6,573
Past service cost 308 -
Other comprehensive expense
- Remeasurement loss 912 952
Total defined benefit costs 7,424 7,525
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 2023 and 2022 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.
38. DEFINED BENEFIT OBLIGATIONS (continued)
Significant actuarial assumptions (expressed as weighted averages) are as
follows:
2023 2022
Discount rate 2.60% 2.90%
Average expected remaining life of eligible participants 11.0 years 11.7 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 RMB7.6 million
(2022: increase by RMB8.3 million).
• If the mortality changes to 95% of original
assumption, the defined benefit obligations would increase by RMB4.8 million
(2022: increase by RMB4.9 million).
39. DEFERRED INCOME
2023 2022
RMB'000 RMB'000
Government grants 308,315 317,993
Others 95,788 100,207
404,103 418,200
40. 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 earnings/ Total
capital
reserve
funds
(accumulated losses)
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
As at 1 January 2022 14,524,815 27,536,676 11,527,181 6,892,057 60,480,729
Total comprehensive expense for the year - (10) - (30,794,040) (30,794,050)
Others - 10 - (10) -
As at 31 December 2022 14,524,815 27,536,676 11,527,181 (23,901,993) 29,686,679
Total comprehensive expense for the year - - - (3,070,996) (3,070,996)
Issue new shares 1,675,978 13,317,039 - - 14,993,017
As at 31 December 2023 16,200,793 40,853,715 11,527,181 (26,972,989) 41,608,700
Under the PRC Company Law and the Company's articles of association, profit
after taxation as reported in the PRC statutory financial statements can only
be distributed as dividends after allowances have been made for the following:
(i) making up prior years' cumulative losses, if any;
(ii) allocations to the statutory reserve fund of at least 10%
of the after-tax profit, until the fund reaches 50% of the Company's
registered capital (for the purpose of calculating transfers to reserves,
profit after taxation would be the amount determined under CASs). The
transfers to reserves should be made before any distribution of dividends to
shareholders. The statutory reserve fund can be used to offset previous years'
losses, if any, and part of the statutory reserve fund can be capitalised as
the Company's share capital provided that the amount of such reserve remaining
after the capitalisation shall not be less than 25% of the share capital of
the Company; and
(iii) allocations to the discretionary reserve fund approved by
the shareholders.
40. CAPITAL AND RESERVES (continued)
(a) Movements in components of equity (continued)
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
2023, in accordance with the PRC Company Law, amount of approximately
RMB11,527 million (2022: 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 accumulated losses of approximately RMB28,356 million as at 31
December 2023 (2022: accumulated losses of approximately RMB25,147 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
2023 and 31 December 2022 are as follows:
Number of Nominal Number of Nominal
shares
value
shares
value
2023
2023
2022
2022
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 11,023,584,324 11,023,585 9,962,131,821 9,962,132
- Tradable-restricted (Note) 614,525,150 614,525 - -
16,200,792,838 16,200,793 14,524,815,185 14,524,815
A shares rank pari passu, in all material respects, with H shares of the
Company.
Note: On 3 January 2023, the Company issued 1,675,977,653 new non-public
A shares at the price of RMB8.95 per share with par value of RMB1. Total
proceed of the issuance was RMB15,000 million and the net proceed was
RMB14,993 million, after deducting issue cost of RMB7 million (excluding
value-added tax), of which RMB1,676 million was recognised as issued capital
and RMB13,317 million was recognised as capital reserve. Upon completion of
the issuance, the new A shares subscribed by CNAHC and other subscribers are
subject to a lock-up period of 18 months and 6 months respectively. The new A
shares issued rank pari passu with the existing A shares and H shares in all
respects.
(c) Treasury shares
As at 31 December 2023, the Group owned 29.99% equity interest in Cathay
Pacific (2022: 29.99%), which in turn owned 16.26% (2022: 18.13%) equity
interest in the Company. 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.
40. 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 2023 and 2022.
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:
2023 2022
RMB'000 RMB'000
Total liabilities 300,014,685 273,451,149
Total assets 335,278,694 294,979,377
Gearing ratio 89.48% 92.70%
41. CONTINGENT LIABILITIES
As at 31 December 2023, 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.
42. ACQUISITION OF A SUBSIDIARY
According to the share transfer agreement signed between the Company and
shareholders of Shandong Aviation, the Company acquired 2.311% of Shandong
Aviation from its existing shareholders and acquired another 14.2823% of
Shandong Aviation through a capital injection. Both the equity transfer and
the capital injection belong to a single transaction. Upon the completion of
the acquisition on 20 March 2023, the Company's direct equity interest in
Shandong Aviation is 66% and Shandong Aviation became a non-wholly owned
subsidiary of the Company from then on. Prior to the acquisition, the
Company's equity interests in Shandong Aviation and Shandong Airline, a
subsidiary of Shandong Aviation, were accounted for as interest in associates
under equity method. The acquisition has been accounted for as an acquisition
of business using the acquisition method.
Assets and liabilities recognised at the date of acquisition
RMB'000
Property, plant and equipment 7,195,133
Right-of-use assets 11,557,335
Investment properties 227,669
Intangible assets 71,553
Advance payments for aircraft and flight equipment 4,912,566
Deferred tax assets 3,059,699
Inventories 476,996
Accounts receivable 378,666
Prepayments, deposits and other receivables 10,416,460
Restricted bank deposits 20,919
Cash and cash equivalents 5,425,076
Other current and non-current assets 753,874
Accounts payable (3,027,852)
Lease liabilities (9,876,072)
Interest-bearing borrowings and corporate bonds (17,919,560)
Provision for return condition checks (6,951,253)
Deferred tax liabilities (79,843)
Other current and non-current liabilities (2,600,691)
Net assets recognised at the date of acquisition 4,040,675
The gross contractual amounts of the receivables acquired (which principally
comprised accounts receivable and other receivables) at the date of
acquisition were approximate their fair values. The best estimate at the
acquisition date of the contractual cash flows not expected to be collected
amounted to RMB155 million.
NCI
The NCI recognised at the acquisition date were measured by reference to the
proportionate share of recognised amounts of net assets of Shandong Aviation
and amounted to RMB403 million.
42. ACQUISITION OF A SUBSIDIARY (continued)
Consideration transferred and goodwill arising on acquisition
RMB'000
49.4067% equity interests in Shandong Aviation previously held -
22.8% equity interests in Shandong Airlines previously held -
Cash consideration for the 2.311% equity interests in Shandong Aviation 32,963
Injected capital to Shandong Aviation 6,600,000
Total 6,632,963
Plus: NCI 403,469
Less: net assets recognised at the date of acquisition (4,040,675)
Goodwill arising on acquisition 2,995,757
None of the goodwill arising on this acquisition is expected to be deductible
for tax purposes.
The capital contribution of RMB6,600 million and RMB3,400 million by the
Company and a NCI respectively were injected in April 2023.
Net cash inflows arising on acquisition are as follows:
RMB'000
Consideration paid in cash 32,963
Less: cash and cash equivalents acquired (5,425,076)
Net cash inflows 5,392,113
Impact of acquisition on the results of the Group
Included in the loss for the year of the Group is profit of RMB906 million
attributable to the additional business generated by Shandong Aviation after
the acquisition. Revenue for the year of the Group includes RMB15,675 million
generated from Shandong Aviation after the acquisition.
Had the acquisition been completed on 1 January 2023, revenue and loss for the
year of the Group would have been RMB144,538 million and RMB1,891 million,
respectively. The pro forma information has not been audited and is for
illustrative purposes only and is not necessarily an indication of revenue and
results of operations of the Group that actually would have been achieved had
the acquisition been completed on 1 January 2023, nor is it intended to be a
projection of future results.
In determining the 'pro-forma' revenue and profit of the Group had Shandong
Aviation been acquired at the beginning of the current year, the Directors of
the Company calculated depreciation of property, plant and equipment,
right-of-use assets and investment properties based on the recognised amounts
at the date of the acquisition.
42. ACQUISITION OF A SUBSIDIARY (continued)
Impact of acquisition on the results of the Group (continued)
On the date of acquisition, the cumulative share of other comprehensive income
of Shandong Aviation and Shandong Airlines previously accumulated in the
capital reserve were transferred to accumulated losses.
As set out in the announcement published by the Company dated 27 April 2023,
on 22 March 2023, in accordance with the Regulations on the Takeover of Listed
Companies issued by China Securities Regulatory Commission, the Company made a
general offer to the shareholders of Shandong Airlines other than the Company
and Shandong Aviation at the price of Hong Kong Dollars 2.62 per share. Upon
the expiration of the offer period, the Company have acquired 5,832 B shares
with consideration amounting to approximately RMB13,000. The transaction was
accounted for as an equity transaction with non-controlling shareholders.
43. COMMITMENTS
(a) Capital commitments
The Group had the following amounts of contractual commitments for the
acquisition and construction of property, plant and equipment as at the end of
the reporting period:
2023 2022
RMB'000 RMB'000
Contracted for but not provided in the consolidated 72,078,516 58,508,783
financial statements
(b) Investment commitments
The Group had the following amount of investment commitments as at the end of
the reporting period:
2023 2022
RMB'000 RMB'000
Contracted, but not provided for:
- investment commitment to joint ventures 456,834 511,898
In 2012, the Company entered into an agreement with a joint venture as its 50%
shareholder. As at 31 December 2023 and 2022, the Company has invested USD1.5
million and committed to invest USD3.5 million in the future.
In 2022, the Company entered into an agreement with a joint venture as its 50%
shareholder. As at 31 December 2023, the Company has invested USD34 million
(2022: USD25 million) and committed to further invest USD61 million (2022:
USD70 million) in the future.
44. FINANCIAL INSTRUMENTS
a. Categories of financial instruments
2023 2022
RMB'000 RMB'000
Financial assets
Amortised cost:
Accounts receivable 3,182,797 1,649,356
Deposits and other receivables 4,870,155 2,351,700
Deposits for aircraft under leases 525,463 539,624
Bills receivable 3,601 7,483
Loans to related parties 253,906 114,007
Restricted bank deposits 611,692 828,166
Cash and cash equivalents 15,016,804 10,607,711
Long-term receivables from related parties included in 328,886 -
other non-current assets
24,793,304 16,098,047
Financial assets at FVTPL 2,505 3,398
Equity instruments at FVTOCI 1,547,986 241,717
Debt instruments at FVTOCI (including debt instruments at FVTOCI included in 1,496,675 2,154,659
other current assets)
Financial liabilities
Amortised cost:
Accounts payable 17,954,298 10,935,546
Bills payable 500,160 -
Other payables 11,569,341 11,744,531
Interest-bearing borrowings 152,031,399 135,804,286
Dividends payable 98,000 98,000
182,153,198 158,582,363
Lease liabilities 82,229,316 93,983,176
44. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies
The above table lists the Group's major financial instruments. Details of
these financial instruments are disclosed in the respective notes. The risks
associated with these financial instruments include market risks (interest
rate risk and foreign currency risk), credit risk, and liquidity risk. The
policies on how to mitigate these risks are set out below. The management
manages and monitors these exposures to ensure appropriate measures are
implemented on a timely and effective manner.
Market risk
(i) Interest rate risk
The Group is exposed to fair value interest rate risk which arises from fixed
rate lease liabilities, fixed rate bank loans and other borrowings (see Notes
34 and 35 for details), fixed rate corporate bonds, loans to related parties
include in other current assets.
In addition, the Group is exposed to cash flow interest rate risk which arises
from floating rate bank loans and other borrowings, lease liabilities,
restricted bank deposits, bank balances and loans to related parties include
in other current assets. 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
loans to related parties include in other current assets, floating rate bank
loans and other borrowings and floating rate 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 (2022: 50 basis points)
higher/lower with all other variables held constant, the Group's post-tax loss
for the year ended 31 December 2023 and equity as at 31 December 2023 would
increase/decrease by approximately RMB288 million (2022: RMB337 million)
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.
44. 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, deposits and 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
2023 2022 2023 2022
RMB'000 RMB'000 RMB'000 RMB'000
USD 7,331,898 4,662,006 37,869,554 41,190,431
EURO 152,202 126,316 1,081,917 662,117
HKD 75,215 250,970 181,287 504,600
JPY 50,836 27,488 594,172 501,719
Sensitivity analysis
The sensitivity analysis below has been determined based on a 1% (2022: 1%)
increase/decrease in functional currency of respective group entities against
USD. 1% (2022: 1%) is the sensitivity rate used and represents management's
assessment of the reasonably possible change in exchange rate. The sensitivity
analysis includes only outstanding USD denominated monetary items and adjusts
their translation at the end of the reporting period for a 1% (2022: 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% (2022: 1%) against USD. For a 1% (2022: 1%)
weakening of functional currency of respective group entities against USD,
there would be an equal and opposite impact on the post-tax loss for the year.
Decrease Decrease
in the Group's post-tax loss/
in the Group's
equity
post-tax loss/
equity
2023 2022
RMB'000 RMB'000
- if RMB strengthens against USD 229,032 273,963
44. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies (continued)
Credit risk and impairment assessment
Credit risk refers to the risk that counterparty will default on its
contractual obligations resulting in financial loss to the Group. At the end
of the reporting period, the Group's maximum exposure is arising from the
carrying amount of the respective recognised financial assets as stated in the
consolidated statement of financial position.
Accounts receivable of the Group mainly include receivables from receivables
from BSP agents (a clearing system between airlines and sales agents organised
by the International Air Transportation Association), receivables of
transportation service fee on the passenger aircraft cargo business and CNAHC.
The balance due from above customers respectively amounted to approximately
RMB689 million or 21% of accounts receivable, RMB568 million or 17% of
accounts receivable, and RMB353 million or 11% of accounts receivable as at 31
December 2023 (2022: RMB242 million or 13% of accounts receivable, RMB308
million or 17% of accounts receivable, and RMB403 million or 22% 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 bank deposits 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.
44. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies (continued)
Credit risk and impairment assessment (continued)
The tables below detail the credit risk exposures of the Group's financial
assets, which are subject to ECL assessment:
2023 2022
Notes External credit 12m or Gross carrying Subtotal Gross carrying Subtotal
rating
lifetime ECL
amount
amount
RMB'000 RMB'000 RMB'000 RMB'000
Financial assets at FVTOCI
Investments in listed bonds 25 AAA 12m ECL 1,397,310 1,360,982
Other current assets - debt instruments 31 AAA 12m ECL 99,365 1,496,675 793,677 2,154,659
Financial assets at amortised costs
Accounts receivable 28 N/A Lifetime ECL (provision matrix) 3,226,410 1,668,139
Credit-impaired 131,506 3,357,916 126,325 1,794,464
Deposits and other receivables 29 N/A 12m ECL 3,142,033 2,317,669
Lifetime ECL (not credit-impaired) 1,779,571 49,173
Credit-impaired 740,186 5,661,790 636,749 3,003,591
Deposits for aircraft under leases N/A 12m ECL 525,463 525,463 539,624 539,624
Bills receivable N/A 12m ECL 3,601 3,601 7,483 7,483
Loans to related parties 31 N/A 12m ECL 265,217 265,217 120,107 120,107
Restricted bank deposits 30 N/A 12m ECL 611,692 611,692 828,166 828,166
Cash and cash equivalents 30 N/A 12m ECL 15,014,189 15,014,189 10,603,771 10,603,771
Other non-current assets-long-term receivables N/A 12m ECL 328,886 328,886 - -
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 2023. Debtors with credit-impaired with gross
carrying amounts of RMB132 million as at 31 December 2023 (2022: RMB126
million) were assessed individually.
44. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies (continued)
Credit risk and impairment assessment (continued)
For deposits and other receivables, debt instruments included in other current
assets and long-term receivables included in 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
2023 2022
Customer group Loss rate Accounts receivable Loss rate Accounts receivable
RMB'000 RMB'000
Ground service receivable 1% 32,551 1% 11,522
BSP international 1% 110,617 1% 19,942
Others 0.05% - 4% 3,083,242 0.05% - 4% 1,636,675
3,226,410 1,668,139
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.
44. 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 the movements in lifetime ECL that has been
recognised for accounts receivable under the simplified approach.
Lifetime ECL Lifetime ECL Total
(not credit-impaired)
(credit-
impaired)
RMB'000 RMB'000 RMB'000
As at 1 January 2022 18,561 140,422 158,983
Transfer to credit-impaired (21) 21 -
Impairment losses recognised 653 7,795 8,448
Impairment losses reversed (650) (11,503) (12,153)
Write-offs - (10,410) (10,410)
Exchange adjustments 240 - 240
As at 31 December 2022 18,783 126,325 145,108
Acquisition of a subsidiary (Note 42) 15,712 2,766 18,478
Transfer to credit-impaired (4,236) 4,236 -
Impairment losses recognised 13,339 13,007 26,346
Impairment losses reversed - (3,561) (3,561)
Write-offs - (11,314) (11,314)
Exchange adjustments 15 47 62
As at 31 December 2023 43,613 131,506 175,119
44. 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.
12m ECL Lifetime ECL (not credit-impaired) Lifetime ECL Total
(credit-impaired)
RMB'000 RMB'000 RMB'000 RMB'000
As at 1 January 2022 14,118 5,073 638,538 657,729
Transfer to credit-impaired (2,942) - 2,942 -
Impairment losses recognised 1 - 25 26
Impairment losses reversed (1,127) - (4,753) (5,880)
Write-offs - - (3) (3)
Exchange adjustments 19 - - 19
As at 31 December 2022 10,069 5,073 636,749 651,891
Acquisition of a subsidiary 14,887 18,117 103,451 136,455
(Note 42)
Impairment losses recognised - 4,510 10 4,520
Impairment losses reversed (1,211) - - (1,211)
Write-offs - - (24) (24)
Exchange adjustments 4 - - 4
As at 31 December 2023 23,749 27,700 740,186 791,635
44. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies (continued)
Liquidity risk
In the management of the liquidity risk, the Group monitors and maintains a
level of cash and cash equivalents as well as undrawn banking facilities
deemed adequate by the management to finance the Group's operations and
mitigate the effects of fluctuations in cash flows. The management monitors
the utilisation of bank borrowings to ensure compliance with loan covenants.
The liquidity of the Group is primarily dependent on its ability to maintain
adequate cash inflows from operations to meet its financial obligations as and
when they fall due, and its ability to obtain external financing to meet its
committed future capital expenditure. With regard to its future capital
commitments and other financing requirements, the Company has already obtained
banking facilities with several PRC banks of up to an aggregate amount of
RMB217,683 million as at 31 December 2023 (2022: RMB196,101 million), of which
an amount of approximately RMB92,530 million was utilised (2022: RMB85,156
million).
The Directors had carried out a detailed review of the cash flow forecast of
the Group for the year ended 31 December 2023. Based on such forecast, the
Directors had determined that adequate liquidity existed to finance the
working capital and capital expenditure requirements of the Group. In
preparing the cash flow forecast, the Directors had considered historical cash
requirements of the Group as well as other key factors, including the
availability of the above-mentioned loans financing which may impact the
operations of the Group. The Directors are of the opinion that the assumptions
and sensitivities which are included in the cash flow forecast are reasonable.
However, these are subject to inherent limitations and uncertainties and some
or all of these assumptions may not be realised.
The following tables detail the Group's remaining contractual maturities for
its non-derivative financial liabilities. The tables have been drawn up based
on the undiscounted cash flows of financial liabilities based on the earliest
date on which the Group can be required to pay. The maturity dates for other
non-derivative financial liabilities are based on the agreed repayment dates.
44. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies (continued)
Liquidity risk (continued)
The table includes both interest and principal cash flows. To the extent that
interest flows are floating rate, the undiscounted amount is derived from
interest rate at the end of the reporting period.
Repayable on demand or within In the In the In the In the After Total undiscounted Carrying
one year
second year
third year
fourth year
fifth year
five years
cash flows
amount
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
At 31 December 2023
Accounts payable 17,954,298 - - - - - 17,954,298 17,954,298
Bills payable 500,160 - - - - - 500,160 500,160
Other payables 11,569,341 - - - - - 11,569,341 11,569,341
Interest-bearing borrowings 50,231,667 69,430,545 27,741,092 4,473,986 2,236,734 4,483,142 158,597,166 152,031,399
Dividends payable 98,000 - - - - - 98,000 98,000
Lease liabilities 20,663,819 17,712,432 14,434,039 11,675,095 8,973,485 16,889,125 90,347,995 82,229,316
101,017,285 87,142,977 42,175,131 16,149,081 11,210,219 21,372,267 279,066,960 264,382,514
Repayable on demand or within In the In the In the In the After Total undiscounted Carrying
one year
second year
third year
fourth year
fifth year
five years
cash flows
amount
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
At 31 December 2022
Accounts payable 10,935,546 - - - - - 10,935,546 10,935,546
Other payables 11,744,531 - - - - - 11,744,531 11,744,531
Interest-bearing borrowings 45,530,167 24,036,740 69,132,604 460,109 3,220,491 212,761 142,592,872 135,804,286
Dividends payable 98,000 - - - - - 98,000 98,000
Lease liabilities 20,023,361 18,618,357 16,072,381 13,454,997 11,279,873 25,190,894 104,639,863 93,983,176
88,331,605 42,655,097 85,204,985 13,915,106 14,500,364 25,403,655 270,010,812 252,565,539
44. FINANCIAL INSTRUMENTS (continued)
c. Fair value measurements of financial instruments
Fair value measurements for financial instruments measured at fair value on a
recurring basis
The following table presents the fair value of the Group's financial
instruments measured at the end of the reporting period on a recurring basis,
categorised into the three-level fair value hierarchy as defined in IFRS 13
Fair value measurement. The level into which a fair value measurement is
classified is determined with reference to the observability and significance
of the inputs used in the valuation technique.
Fair value at Fair value measurements
31 December
as at 31 December 2023 categorised into
2023
Level 1 Level 2 Level 3
RMB'000 RMB'000 RMB'000 RMB'000
Financial assets at FVTPL 2,505 2,505 - -
Equity instruments at FVTOCI 1,547,986 - - 1,547,986
Debt instruments at FVTOCI (including debt instruments at FVTOCI included in 1,496,675 - 1,496,675 -
other current assets)
Total financial assets at fair value 3,047,166 2,505 1,496,675 1,547,986
Fair value at Fair value measurements
31 December
as at 31 December 2022 categorised into
2022
Level 1 Level 2 Level 3
RMB'000 RMB'000 RMB'000 RMB'000
Financial assets at FVTPL 3,398 3,398 - -
Equity instruments at FVTOCI 241,717 - - 241,717
Debt instruments at FVTOCI (including debt instruments at FVTOCI included in 2,154,659 - 2,154,659 -
other current assets)
Total financial assets at fair value 2,399,774 3,398 2,154,659 241,717
During the year ended 31 December 2023 and 2022, 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.
44. FINANCIAL INSTRUMENTS (continued)
c. Fair value measurements of financial instruments (continued)
Fair value measurements for financial instruments measured at fair value on a
recurring basis (continued)
Valuation techniques and inputs used in Level 2 fair value measurements
All financial instruments classified within Level 2 of the fair value
hierarchy are debt investments the fair value of which were determined based
upon the valuation conducted by the China Central Depository & Clearing
Co., Ltd.
Valuation techniques and inputs used in Level 3 fair value measurements
The fair value of equity instruments at FVTOCI was mainly estimated by
reference to the quoted prices in an active market with an adjustment of
discount for lack of marketability.
Fair values of financial assets and liabilities carried at other than fair
value
Except as detailed in the following table, the Directors consider that the
carrying amounts of financial assets and financial liabilities measured at
amortised cost in these consolidated financial statements approximate their
fair values.
Carrying amounts Fair values
As at As at As at As at
31 December 31 December 31 December 31 December
2023 2022 2023 2022
RMB'000 RMB'000 RMB'000 RMB'000
Financial liabilities
- corporate bonds (fixed rate) 11,400,907 19,195,336 11,183,499 18,834,464
Fair value hierarchy as at 31 December 2023
Level 1 Level 2 Level 3 Total
RMB'000 RMB'000 RMB'000 RMB'000
Financial liabilities
- corporate bonds (fixed rate) - 11,183,499 - 11,183,499
Fair value hierarchy as at 31 December 2022
Level 1 Level 2 Level 3 Total
RMB'000 RMB'000 RMB'000 RMB'000
Financial liabilities
- corporate bonds (fixed rate) - 18,834,464 - 18,834,464
45. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING
ACTIVITIES
The table below details major changes in the Group's liabilities arising from
financing activities, including both cash and non-cash changes. Liabilities
arising from financing activities are those for which cash flows were, or
future cash flows will be, classified in the Group's consolidated statement of
cash flows as cash flows from financing activities.
Borrowings Corporate bonds and short-term commercial papers Lease liabilities
Note 35 Note 35 Note 34 Total
RMB'000 RMB'000 RMB'000 RMB'000
At 1 January 2022 68,088,848 25,233,074 90,881,360 184,203,282
Financing cash flows 46,289,085 (4,050,000) (17,561,884) 24,677,201
Foreign exchange translation 195,738 - 3,770,867 3,966,605
New leases entered/lease modified - - 16,923,537 16,923,537
Lease modification - - (30,704) (30,704)
Increase in accrued interest 29,130 18,411 - 47,541
At 31 December 2022 114,602,801 21,201,485 93,983,176 229,787,462
Acquisition of subsidiary (Note 42) 16,892,454 1,027,106 9,876,072 27,795,632
Financing cash flows 9,190,574 (10,500,000) (25,400,182) (26,709,608)
Foreign exchange translation 26,552 - 705,222 731,774
New leases entered/lease modified - - 3,215,087 3,215,087
Reduction upon completion/early termination of lease - - (89,031) (89,031)
Decrease in accrued interest (81,889) (327,684) - (409,573)
Debt restructuring - - (61,028) (61,028)
At 31 December 2023 140,630,492 11,400,907 82,229,316 234,260,715
46. MAJOR NON-CASH TRANSACTIONS
During the year, the Group entered into new lease agreements for the use of
aircraft and engines, land, buildings and others and recognised right-of-use
assets of RMB3,715 million (2022: RMB17,056 million) and lease liabilities of
RMB3,215 million (2022: RMB16,924 million).
47. RELATED PARTY TRANSACTIONS
(a) During the year, the Group had the following significant
transactions with (i) CNAHC, its subsidiaries (other than the Group), joint
ventures and associates (collectively, the "CNAHC Group"); (ii) its joint
ventures; and (iii) its associates:
(i) Transactions with related parties
2023 2022
RMB'000 RMB'000
Service provided to the CNAHC Group
Transportation service fees on the passenger 3,411,895 9,665,584
aircraft cargo business
Government charter flight services 382,960 252,041
Aircraft maintenance income 300,836 318,691
Transfer of pilots income 189,610 172,051
Land and buildings rental income 185,073 151,343
Ground services income 121,679 106,920
Air catering income 50,335 18,551
Aviation communication expenses 21,460 30,157
Income from advertising media business 13,881 13,162
Sales commission income 9,608 506
Trademark licensing income 9,320 -
Others 295,529 422,959
4,992,186 11,151,965
Service provided by the CNAHC Group
Air catering charges 1,271,030 372,721
Airport ground services, take-off, landing 1,228,412 847,820
and depot expenses
Aviation communication expenses 673,840 235,687
Other procurement and maintenance 586,547 258,174
Interest expenses 392,291 352,399
Management fees 360,827 295,118
Media advertisement expenses 128,148 145,832
Expense relating to short-term leases and 64,569 87,882
leases of low-value assets
Repair and maintenance costs 55,707 23,831
Construction management expenses 8,367 10,413
Sales commission expenses 865 1,193
Others 49,838 50,147
4,820,441 2,681,217
47. RELATED PARTY TRANSACTIONS (continued)
(a) During the year, the Group had the following significant
transactions with (i) CNAHC, its subsidiaries (other than the Group), joint
ventures and associates (collectively, the "CNAHC Group"); (ii) its joint
ventures; and (iii) its associates: (continued)
(i) Transactions with related parties (continued)
2023 2022
RMB'000 RMB'000
Loans to the CNAHC Group by CNAF:
Advances of loans 145,000 40,000
Interest income 5,440 2,556
Deposits from the CNAHC Group received by CNAF:
Decrease in deposits received (573,910) (3,629,327)
Interest expenses 63,708 85,012
As a lessee with CNAHC Group:
Additions to right-of-use assets and lease liabilities 980,919 5,043,426
on new leases
Lease payments paid 2,578,096 2,154,594
Interest on lease liabilities 464,896 418,957
Service provided to joint ventures and associates
Aircraft maintenance income 106,702 97,592
Ground services income 61,181 70,636
Frequent-flyer programme expenses 4,886 1,236
Air catering income 3,935 2,907
Land and buildings rental income 2,189 3,085
Sales commission income 551 398
Others 546 645
179,990 176,499
47. RELATED PARTY TRANSACTIONS (continued)
(a) During the year, the Group had the following significant
transactions with (i) CNAHC, its subsidiaries (other than the Group), joint
ventures and associates (collectively, the "CNAHC Group"); (ii) its joint
ventures; and (iii) its associates: (continued)
(i) Transactions with related parties (continued)
2023 2022
RMB'000 RMB'000
Service provided by joint ventures and associates
Repair and maintenance costs 2,400,112 517,249
Airport ground services, take-off, landing 334,691 126,676
and depot expenses
Other procurement and maintenance 29,528 94,547
Air catering charges 12,446 1,317
Aviation communication expenses 4,620 5,166
Expense relating to short-term leases and leases of 2,990 1,181
low value assets
Frequent-flyer programme expenses 1,459 -
Sales commission expenses 381 300
Others - 8
2,786,227 746,444
Deposits from joint ventures and associates
received by CNAF:
(Decrease)/increase in deposits received (131,239) 86,385
Interest expenses 982 2,406
The Directors are of the opinion that the above transactions were conducted in
the ordinary course of business of the Group.
Part of the related transactions above also constitute connected transactions
or continuing connected transactions as defined in Chapter 14A of Listing
Rules.
47. RELATED PARTY TRANSACTIONS (continued)
(a) During the year, the Group had the following significant
transactions with (i) CNAHC, its subsidiaries (other than the Group), joint
ventures and associates (collectively, the "CNAHC Group"); (ii) its joint
ventures; and (iii) its associates: (continued)
(ii) Balances with related parties
2023 2022
RMB'000 RMB'000
Outstanding balances with related parties*
Amount due from the ultimate holding company 353,478 405,194
Amounts due from associates 56,710 109,162
Amounts due from joint ventures 536 547
Amounts due from other related companies 1,193,322 653,381
Amount due to the ultimate holding company 22,240 39,706
Amounts due to associates 43,354 78,787
Amounts due to joint ventures 957,807 248,095
Amounts due to other related companies 17,140,447 17,214,383
* Outstanding balances with related parties exclude
borrowing balances with related parties and outstanding balances between CNAF
and related parties.
Except for lease liabilities, the above outstanding balances with related
parties are unsecured, interest-free and repayable within one year or have no
fixed terms of repayment.
2023 2022
RMB'000 RMB'000
Outstanding borrowing balances with related parties:
Interest-bearing borrowings:
- Due to the ultimate holding company 17,297,166 14,796,068
- Due to other related companies 1,361,917 1,061,844
47. RELATED PARTY TRANSACTIONS (continued)
(a) During the year, the Group had the following significant
transactions with (i) CNAHC, its subsidiaries (other than the Group), joint
ventures and associates (collectively, the "CNAHC Group"); (ii) its joint
ventures; and (iii) its associates: (continued)
(ii) Balances with related parties (continued)
2023 2022
RMB'000 RMB'000
Outstanding balances between CNAF and related parties:
(1) Outstanding balances between CNAF
and CNAHC Group
Loans granted 265,000 120,000
Deposits received 7,038,063 7,598,398
Interest payable to related parties 8,487 22,062
Interest receivable from related parties 217 67
(2) Outstanding balances between CNAF and
joint ventures and associates of the Group
Deposits received 41,937 173,151
Interest payable to related parties 27 52
Interest receivable to related parties - 40
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:
2023 2022
RMB'000 RMB'000
Short term employee benefits 10,849 10,931
Retirement benefits 1,309 1,632
Total emoluments for key management personnel 12,158 12,563
47. 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:
2023 2022
RMB'000 RMB'000
Directors and supervisors 4,370 3,074
Senior management 7,788 9,489
12,158 12,563
Further details of the remuneration of the directors and supervisors are
included in Note 13 to the consolidated financial statements.
(c) As at 31 December 2022, corporate bonds issued by the Group with a
par value of RMB6,500 million were guaranteed by CNAHC. As these corporate
bonds were repaid at maturity during the year, there are no guaranty given or
received with related parties as at 31 December 2023.
(d) Asset transfers with the CNAHC Group:
2023 2022
RMB'000 RMB'000
Sales of aircraft 108,434 -
Purchase of property, plant and equipment 332,104 -
47. RELATED PARTY TRANSACTIONS (continued)
(e) Transactions with other government-related entities in the PRC
The Company is ultimately controlled by the PRC government and the Group
operates in an economic environment currently predominated by entities
controlled, jointly controlled or significantly influenced by the PRC
government ("government-related entities").
Apart from above transactions with CNAHC Group, the Group has collectively,
but not individually significant transactions with other government-related
entities, which include but are not limited to the following:
• Rendering and receiving services
• Sales and purchases of goods, properties, and other
assets
• Lease of assets
• Depositing and borrowing money
• Use of public utilities
The transactions between the Group and other government-related entities are
conducted in the ordinary course of the Group's business within normal
business operations. The Group has established its approval process for
providing of services, purchase of products, properties and services, purchase
of lease service and its financing policy for borrowing. Such approval
processes and financing policy do not depend on whether the counterparties are
government-related entities or not.
48. EVENTS AFTER THE REPORTING PERIOD
In February 2024, pursuant to the approvals on 22 December 2023, the Company
issued 392,927,308 new H shares at the price of HKD5.09 per share with par
value of RMB1 to CNACG and total proceeds amounting to HKD2,000 million
(equivalent to RMB1,817 million) have been received on 7 February 2024. After
deducting issuance expenses of RMB1 million (excluding value added tax), the
net proceeds raised by the Company amounted to RMB1,816 million.
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
2023 2022
RMB'000 RMB'000
Non-current assets
Property, plant and equipment 84,568,476 74,601,990
Right-of-use assets 79,748,959 90,522,197
Intangible assets 11,015 11,015
Interests in subsidiaries 26,786,144 20,153,167
Interests in associates 197,012 119,756
Interests in joint ventures 1,933,838 1,724,271
Advance payments for aircraft and flight equipment 13,080,703 12,546,345
Deposits for aircraft under leases 367,511 393,104
Equity instruments at fair value through other comprehensive income 195,437 22,110
Deferred tax assets 7,991,836 7,837,205
Other non-current assets 716,168 477,690
215,597,099 208,408,850
Current assets
Inventories 75,541 70,232
Accounts receivable 2,190,617 1,095,090
Prepayments, deposits and other receivables 3,256,871 2,536,882
Financial assets at FVTPL 2,505 3,398
Restricted bank deposits 30,853 30,744
Cash and cash equivalents 6,842,157 6,057,863
Assets held for sale 108,527 -
Other current assets 2,270,689 1,857,777
14,777,760 11,651,986
Total assets 230,374,859 220,060,836
49. INFORMATION ABOUT THE STATEMENT OF FINANCIAL POSITION OF THE
COMPANY (continued)
Information about the statement of financial position of the Company at the
end of the reporting period included: (continued)
31 December 31 December
2023 2022
RMB'000 RMB'000
Current liabilities
Air traffic liabilities (6,530,022) (2,220,131)
Accounts payable (11,529,019) (7,349,395)
Other payables and accruals (5,485,133) (7,537,444)
Lease liabilities (11,192,725) (12,456,662)
Interest-bearing borrowings (31,796,215) (34,055,549)
Provision for return condition checks (397,148) (657,202)
Contract liabilities (903,374) (919,221)
(67,833,636) (65,195,604)
Net current liabilities (53,055,876) (53,543,618)
Total assets less current liabilities 162,541,223 154,865,232
Non-current liabilities
Lease liabilities (40,444,416) (55,125,953)
Interest-bearing borrowings (73,107,211) (63,420,855)
Provision for return condition checks (5,623,509) (5,135,749)
Provision for early retirement benefit obligations (720) (807)
Contract liabilities (1,565,882) (1,256,237)
Deferred income (190,785) (238,952)
(120,932,523) (125,178,553)
NET ASSETS 41,608,700 29,686,679
CAPITAL AND RESERVES
Issued capital 16,200,793 14,524,815
Reserves 25,407,907 15,161,864
TOTAL EQUITY 41,608,700 29,686,679
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF AIR CHINA LIMITED
(中國國際航空股份有限公司)
(Incorporated in the People's Republic of China with limited liability)
OPINION
We have audited the consolidated financial statements of Air China Limited
(the "Company") and its subsidiaries (collectively referred to as the "Group")
set out on pages 90 to 198, which comprise the consolidated statement of
financial position as at 31 December 2023, 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 material accounting policy
information and other explanatory information.
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
2023, 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 (including International Independence
Standards) (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 2023, the provision for major overhauls of RMB13,739 million Our procedures in relation to provision for major overhauls to fulfil the
was recorded in the consolidated statement of financial position. return condition of aircraft under leases included:
The Group held certain aircraft under leases at 31 December 2023. Under the · Testing and evaluating the design and operating effectiveness of the
terms of the lease arrangements, the Group is contractually committed to key internal controls relevant to the audit of provision for major overhauls
return the aircraft to the lessors in a certain condition agreed with the to fulfil the return condition of aircraft under leases;
lessors at the inception of each lease. In order to fulfil these return
conditions, major overhauls are required to be conducted on a regular basis.
· Evaluating the appropriateness of the methodology and key assumptions
adopted by management in estimating the provision for these major overhauls.
Management estimates the maintenance costs of major overhauls for aircraft This evaluation based on the terms of the leases and the Group's maintenance
held under leases at the end of each reporting period and accrues such costs cost experience;
over the lease terms. The calculation of such costs includes a number of
variable factors and assumptions, including the anticipated utilisation of the
aircraft and the expected costs of maintenance.
· Performing a retrospective review of the provision for major
overhauls to evaluate the appropriateness of the assumptions adopted by
management by comparing the assumptions adopted by management in prior years
We identified provision for major overhauls to fulfil the return condition of with actual maintenance costs incurred;
aircraft under leases as a key audit matter because of the significant
management estimation and judgement required in assessing the variable factors
and assumptions in order to quantify the amount of provision required at each
reporting date. · Discussing with managers in the engineering department responsible
for aircraft engineering about the utilisation pattern of aircraft, obtaining
relevant operating data, performing recalculation, and checking the
assumptions adopted by management and the mathematical accuracy of the
Details of the related estimation uncertainty are set out in Notes 4, 5 and 36 calculation of provision for major overhauls prepared by management for those
to the consolidated financial statements. aircraft under leases.
Key Audit Matters - continued
Key audit matter How our audit addressed the key audit matter-continued
Acquisition of a subsidiary
On 20 March 2023, the Company completed the acquisition of Shandong Aviation Our procedures in relation to the acquisition of the Subsidiary included:
Group Co., Ltd. (the ''Subsidiary''). The acquisition has been accounted for
as an acquisition of business using the acquisition method. The excess of the
sum of the consideration transferred and the fair value of previously held
equity interests over the fair value of the identifiable net assets acquired, · Assessing the appropriateness of the management's understanding on
amounting to RMB2,996 million, was recognised as goodwill. the contractual terms by:
(i) obtaining the equity transfer agreements, board resolutions related
to the acquisition and understanding the key contractual terms and transaction
We identified the acquisition of the Subsidiary as a key audit matter due to conditions;
its significance to the consolidated financial statements as a whole, together
with the management's estimation and judgement in identifying the identifiable (ii) examining the payment records of the considerations transferred;
assets acquired and liabilities assumed and measuring their fair values, and
calculating the amount of goodwill. (iii) checking the completeness of necessary changes in the acquiree's
articles of association and shareholders' registry.
Details are set out in Notes 4, 5 and 42 to the consolidated financial
statements. · Understanding and evaluating the reasonableness of the methodology
used by the management on the recognition of identifiable assets acquired and
liabilities assumed at the acquisition date;
· Conducting interviews with the independent valuer engaged by the
management, understanding their qualifications and evaluating their
objectivity and capabilities;
· Involving our internal valuation specialists to assess the
reasonableness of the valuation methodology and key assumptions adopted by the
management and the independent valuer in the determination of the fair value
of net identifiable assets; and
· Assessing the appropriateness of the accounting treatment and the
reasonableness of the goodwill measurement.
OTHER INFORMATION
The directors of the Company are responsible for the other information. The
other information comprises the information included in the annual report, but
does not include the consolidated financial statements and our auditor's
report thereon.
Our opinion on the consolidated financial statements does not cover the other
information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE
CONSOLIDATED FINANCIAL STATEMENTS
The directors of the Company are responsible for the preparation of the
consolidated financial statements that give a true and fair view in accordance
with IFRSs issued by the IASB and the disclosure requirements of the Hong Kong
Companies Ordinance, and for such internal control as the directors determine
is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are
responsible for assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
Those charged with governance are responsible for overseeing the Group's
financial reporting process.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report
that includes our opinion solely to you, as a body, in accordance with our
agreed terms of engagement, and for no other purpose. We do not assume
responsibility towards or accept liability to any other person for the
contents of this report. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs will
always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial
statements.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
As part of an audit in accordance with ISAs, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:
· Identify and assess the risks of material misstatement of
the consolidated financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
· Obtain an understanding of internal control relevant to
the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group's internal control.
· Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and related disclosures made by
the directors.
· Conclude on the appropriateness of the directors' use of
the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group's ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor's report to the related disclosures
in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor's report. However, future
events or conditions may cause the Group to cease to continue as a going
concern.
· Evaluate the overall presentation, structure and content
of the consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
· Obtain sufficient appropriate audit evidence regarding
the financial information of the entities or business activities within the
Group to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we
identify during our audit.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
We also provide those charged with governance with a statement that we have
complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, actions taken to
eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine
those matters that were of most significance in the audit of the consolidated
financial statements for the current period and are therefore the key audit
matters. We describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in
our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in the independent auditor's
report is Lu Jingze.
Deloitte Touche Tohmatsu Certified Public Accountants LLP
Certified Public Accountants
(Registered as a Third Country Auditor with the UK Financial Reporting
Council)
Shanghai, China
28 March 2024
Supplementary Information
EFFECTS OF DIFFERENCES BETWEEN IFRSs AND CASs
The effects of differences between the consolidated financial statements of
the Group prepared under IFRSs and CASs are as follows:
2023 2022
Notes RMB'000 RMB'000
Net loss attributable to shareholders of the Company under CASs (1,046,382) (38,619,499)
Deferred taxation (i) (2,657) (668)
Differences in value of fixed assets and certain non-current assets (ii) 10,628 2,672
Net loss attributable to shareholders of the Company under IFRSs (1,038,411) (38,617,495)
31 December 31 December
2023 2022
Notes RMB'000 RMB'000
Equity attributable to shareholders of the Company under CASs 37,229,962 23,609,134
Deferred taxation (i) 53,218 55,875
Differences in value of fixed assets and certain non-current assets (ii) (217,124) (227,752)
Unrealised profit on the disposal of Hong Kong Dragon (iii) 139,919 139,919
Airlines Limited
Equity attributable to shareholders of the Company under IFRSs 37,205,975 23,577,176
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 certain
non-current assets mainly consist of the following: 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.
(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 "ATK(s)" the number of tonnes of capacity 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" or "AFTK(s)" the number of tonnes of capacity 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 "RPK(s)" the number of revenue passengers carried multiplied by the kilometres flown
"cargo and mail traffic" measured in RFTK, unless otherwise specified
"revenue freight tonne kilometres" or "RFTK(s)" the revenue cargo and mail load 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" each 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, unless the context otherwise requires, the following
terms shall have the following meanings:
"Airbus" Airbus S.A.S., a company established in Toulouse, France
"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
"Beijing Air Catering" Beijing Air Catering Co., Ltd., a subsidiary of CNAHC
"Board" the board of directors of the Company
"Boeing" The Boeing Company
"CASs" China Accounting Standards for Business Enterprises
"CAAC" Civil Aviation Administration of China
"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
"CBIRC" China Banking and Insurance Regulatory Commission
"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" Air China Limited, a company incorporated in 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)" ordinary share(s) in the share capital of the Company, with a nominal value of
RMB1.00 each, which are listed on the Hong Kong Stock Exchange as primary
listing venue and have been admitted into the Official List of the UK Listing
Authority as secondary listing venue
"International Financial Reporting Standards" International Financial 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
"NAFMII" National Association of Financial Market Institutional Investors
"Model Code" the Model Code for Securities Transactions by Directors of Listed Issuers as
set out in Appendix C3 to the Listing Rules
"Reporting Period" from 1 January 2023 to 31 December 2023
"Date of this Annual Report" 28 March 2024
"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 the Company
"Shandong Aviation Group Corporation" Shandong Aviation Group Company Limited, a non-wholly owned subsidiary 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
"Sichuan Airlines" Sichuan Airlines Co., Ltd.
"US dollars" United States dollars, the lawful currency of the United States
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