Form 6-K CHINA SOUTHERN AIRLINES For: Mar 31

Article Stock Quotes (1)

FREE Breaking News Alerts from StreetInsider.com!

StreetInsider.com Top Tickers, 6/25/2022

1. SPY
2. FDX
3. DRI
4. QTNT
5. SRPT

6. ZEN
7. ACN
8. QQQ
9. ZAL:GR
10. ZLNDY

Top News Most Read Special Reports

April 1, 2022 6:22 AM EDT

E-mail

Get inside Wall Street with StreetInsider Premium. Claim your 1-week free trial here.

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

March 31, 2022

CHINA SOUTHERN AIRLINES COMPANY LIMITED

68 Qi Xin Road

Guangzhou, 510403

People’s Republic of China

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ☐ No ☒

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

China Southern Airlines Company Limited (the “Company”) published the following announcements on March 30, 2022 on the Hong Kong Stock Exchange’s website at:

https://www1.hkexnews.hk/listedco/listconews/sehk/2022/0330/2022033002952.pdf, in relation to the annual results for the year ended December 31, 2021;

https://www1.hkexnews.hk/listedco/listconews/sehk/2022/0330/2022033003008.pdf, in relation to the 2021 corporate social responsibility report of the Company;

https://www1.hkexnews.hk/listedco/listconews/sehk/2022/0330/2022033003246.pdf, in relation to the provision for impairment of the Company; and

https://www1.hkexnews.hk/listedco/listconews/sehk/2022/0330/2022033003188.pdf, in relation to the resolutions of the board of directors and the supervisory committee of the Company.

The announcements in English are included as exhibits to this Form 6-K.

Certain statements contained in these announcements may be viewed as “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial condition or results of operations of the Company to be materially different from any future performance, financial condition or results of operations implied by such forward-looking statements. Further information regarding these risks, uncertainties and other factors is included in the Company’s filings with the U.S. Securities and Exchange Commission. You should not place undue reliance on these forward-looking statements. All information provided in this announcement is as of the date of this announcement, unless otherwise stated, and we undertake no duty to update such information, except as required under applicable law.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CHINA SOUTHERN AIRLINES COMPANY LIMITED


By:		/s/ Xie Bing
Name:		Xie Bing
Title:		Company Secretary

Date: March 31, 2022

Exhibit 99.1

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

LOGO

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 1055)

2021 ANNUAL RESULTS

The board of directors (the “Board”) of China Southern Airlines Company Limited (the “Company”) hereby announces the results of the Company and its subsidiaries (the “Group”) for the year ended 31 December 2021 together with the comparative figures for 2020, which have been derived from the Group’s audited consolidated financial statements for the year ended 31 December 2021.

FINANCIAL RESULTS

A.	PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”)

CONSOLIDATED INCOME STATEMENTS

For the year ended 31 December 2021

Note

2021

RMB million

2020

RMB million

Operating revenue

Traffic revenue

95,279

87,027

Other operating revenue

6,365

5,534

Total operating revenue

101,644

92,561

Operating expenses

Flight operation expenses

45,569

37,545

Maintenance expenses

12,162

13,375

Aircraft and transportation service expenses

21,147

18,743

Promotion and selling expenses

4,705

5,007

General and administrative expenses

3,663

4,088

Depreciation and amortisation

24,241

24,590

Impairment losses on property, plant and equipment, right-of-use assets and other assets

2,597

3,961

Others

2,256

1,802


	Note		2021 *RMB million*			2020 RMB million
Total operating expenses				116,340			109,111

Other net income		7		4,767			4,686

Operating losses				(9,929	)		(11,864	)

Interest income				675			322
Interest expense		8		(6,202	)		(6,716	)
Exchange gain, net		20		1,575			3,485
Share of associates’ results				9			(776	)
Share of joint ventures’ results				271			309
Changes in fair value of financial assets/liabilities				(309	)		53
Loss on disposal of a subsidiary				—			(8	)

Loss before income tax				(13,910	)		(15,195	)
Income tax		9		2,894			3,368

Loss for the year				(11,016	)		(11,827	)

Loss attributable to:
Equity shareholders of the Company				(12,106	)		(10,847	)
Non-controlling interests				1,090			(980	)

Loss for the year				(11,016	)		(11,827	)

Loss per share
Basic and diluted		10		RMB(0.75	)		RMB(0.77	)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the year ended 31 December 2021


	2021 *RMB million*			2020 RMB million
Loss for the year		(11,016	)		(11,827	)

Other comprehensive income:
Items that will not be reclassified to profit or loss
– Equity investments at fair value through other comprehensive income – net movement in fair value reserve (non-recycling)		(236	)		(250	)
– Share of other comprehensive income of an associate		(2	)		(2	)
– Income tax effect of the above items		60			63

Items that may be reclassified subsequently to profit or loss
– Cash flow hedge: fair value movement of derivative financial instrument		42			(45	)
– Differences resulting from the translation of foreign currency financial statements		—			8
– Share of other comprehensive income of an associate		3			(3	)
– Income tax effect of the above items		(10	)		11

Other comprehensive income for the year		(143	)		(218	)

Total comprehensive income for the year		(11,159	)		(12,045	)

Total comprehensive income attributable to:
Equity shareholders of the Company		(12,189	)		(11,011	)
Non-controlling interests		1,030			(1,034	)

Total comprehensive income for the year		(11,159	)		(12,045	)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 December 2021

Note

31 December

2021

RMB million

31 December

2020

RMB million

Non-current assets

Property, plant and equipment, net

91,186

86,146

Construction in progress

31,847

32,407

Right-of-use assets

138,439

151,065

Goodwill

237

237

Interest in associates

2,637

2,449

Interest in joint ventures

3,341

3,225

Aircraft lease deposits

321

362

Other equity instrument investments

563

799

Other non-current financial assets

589

Amounts due from related companies

151

—

Deferred tax assets

12,823

7,739

Other assets

3,211

2,877

285,345

287,398

Current assets

Inventories

1,652

1,760

Trade receivables

2,858

2,525

Other receivables

9,599

8,347

Cash and cash equivalents

21,456

25,419

Assets held for sale

1,292

—

Restricted bank deposits

158

117

Prepaid expenses and other current assets

736

732

Amounts due from related companies

115

37,866

38,985

Note

31 December

2021

RMB million

31 December

2020

RMB million

Current liabilities

Derivative financial liabilities

1,222

3,148

Borrowings

57,913

40,099

Lease liabilities

20,805

20,930

Trade payables

1,328

1,782

Contract liabilities

1,542

1,513

Sales in advance of carriage

3,716

3,997

Current income tax

844

462

Amounts due to related companies

363

357

Accrued expenses

15,479

15,920

Other liabilities

7,778

7,473

110,990

95,681

Net current liabilities

(73,124

)

(56,696

)

Total assets less current liabilities

212,221

230,702

Non-current liabilities

Borrowings

38,354

38,134

Lease liabilities

81,944

100,283

Derivative financial liabilities

Other non-current liabilities

1,824

2,036

Provision for major overhauls

4,820

4,216

Deferred benefits and gains

725

769

Deferred tax liabilities

127,713

145,571

Net assets

84,508

85,131

Capital and reserves

Share capital

16,948

15,329

Reserves

50,903

54,255

Total equity attributable to equity shareholders of the Company

67,851

69,584

Non-controlling interests

16,657

15,547

Total equity

84,508

85,131

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2021


	Attributable to equity shareholders of the Company
	Share capital		Share premium		Fair value reserve (recycling)			Fair value reserve (non- recycling)			Other reserves			Retained Earnings/(acc umulated losses)			Total			Non- controlling interests			Total equity
	RMB million		RMB million		RMB million			RMB Million			RMB million			RMB million			RMB million			RMB million			RMB million
Balance at 1 January 2020		12,267		25,652		2			409			2,844			22,932			64,106			13,223			77,329
Changes in equity for 2020
Loss for the year		—		—		—			—			—			(10,847	)		(10,847	)		(980	)		(11,827	)
Other comprehensive income		—		—		(37	)		(135	)		8			—			(164	)		(54	)		(218	)
Total comprehensive income		—		—		(37	)		(135	)		8			(10,847	)		(11,011	)		(1,034	)		(12,045	)
Issuance of shares		3,062		12,889		—			—			—			—			15,951			—			15,951
Acquisition of non-controlling interests in a subsidiary		—		—		—			—			(155	)		—			(155	)		(105	)		(260	)
Capital injection from non-controlling interests		—		—		—			—			700			—			700			3,521			4,221
Distributions to non-controlling interests		—		—		—			—			—			—			—			(57	)		(57	)
Decrease in non-controlling interests as a result of loss of control of a subsidiary		—		—		—			—			—			—			—			(1	)		(1	)
Change in other reserves		—		—		—			—			(7	)		—			(7	)		—			(7	)

Balance at 31 December 2020		15,329		38,541		(35	)		274			3,390			12,085			69,584			15,547			85,131

Changes in equity for 2021:
Loss for the year		—		—		—			—			—			(12,106	)		(12,106	)		1,090			(11,016	)
Other comprehensive income		—		—		35			(118	)		—			—			(83	)		(60	)		(143	)
Total comprehensive income		—		—		35			(118	)		—			(12,106	)		(12,189	)		1,030			(11,159	)
Distributions to non-controlling interests		—		—		—			—			—			—			—			(659	)		(659	)
Conversion of convertible bonds to ordinary shares		1,619		8,837		—			—			—			—			10,456			—			10,456
Capital injection from non-controlling interests		—		—		—			—			—			—			—			810			810
Decrease in non-controlling interests as a result of liquidation of a subsidiary		—		—		—			—			—			—			—			(71	)		(71	)

Balance at 31 December 2021		16,948		47,378		—			156			3,390			(21	)		67,851			16,657			84,508

Notes to the financial information prepared in accordance with IFRSs:

1.	CORPORATE INFORMATION

China Southern Airlines Company Limited (the “Company”), a joint stock limited company, was incorporated in the People’s Republic of China (the “PRC”) on 25 March 1995. The address of the Company’s registered office is Unit 301, 3/F, Office Tower, Guanhao Science Park Phase I, 12 Yuyan Street, Huangpu District, Guangzhou, Guangdong Province, the PRC. The Company and its subsidiaries (the “Group”) are principally engaged in the operation of civil aviation, including the provision of passenger, cargo, mail delivery and other extended transportation services.

The Company’s majority interest is owned by China Southern Air Holding Company Limited (“CSAH”), a state-owned enterprise incorporated in the PRC.

The Company’s shares are traded on the Shanghai Stock Exchange, The Stock Exchange of Hong Kong Limited and the New York Stock Exchange.

2.	BASIS OF PREPARATION

The consolidated financial statements have been prepared in accordance with all applicable International Financial Reporting Standards (“IFRSs”), which collective term includes all applicable individual IFRSs, International Accounting Standards (“IASs”) and Interpretations issued by the International Accounting Standards Board (the “IASB”). The consolidated financial statements also comply with the applicable disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The IASB has issued certain amendments to IFRSs that are first effective or available for early adoption for the current accounting period of the Group. Note 3 provides information on any changes in accounting policies resulting from initial application of these developments to the extent that they are relevant to the Group for the current accounting period reflected in these consolidated financial statements.

The consolidated financial statements for the year ended 31 December 2021 comprise the Group and the Group’s interest in associates and joint ventures.

The measurement basis used in the preparation of the consolidated financial statements is the historical cost basis except that the following assets and liabilities are stated at their fair value:

•

other equity instrument investments;

•

other non-current financial assets (FVPL); and

•

derivative financial assets/liabilities.

Non-current assets (or disposal groups) held for sale are stated at the lower of carrying amount and fair value less costs to sell.

3.	CHANGES IN ACCOUNTING POLICIES

The Group has applied the following amendments to IFRSs issued by the IASB to these financial statements for the current accounting period:

•

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, Interest rate benchmark reform – phase 2

•

Amendment to IFRS 16, Covid-19-related rent concessions beyond 30 June 2021

Other than the amendment to IFRS 16, the Group has not applied any new standard or interpretation that is not yet effective for the current accounting period. Impacts of the adoption of the amended IFRSs are discussed below:

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, Interest rate benchmark reform – phase 2

The amendments provide targeted reliefs from (i) accounting for changes in the basis for determining contractual cash flows of financial assets, financial liabilities and lease liabilities as modifications, and (ii) discontinuing hedge accounting when an interest rate benchmark is replaced by an alternative benchmark rate as a result of the reform of interbank offered rates (“IBOR reform”). The adoption of the amendments does not have any material impact on the financial position and the financial result of the Group.

Amendment to IFRS 16, Covid-19-related rent concessions beyond 30 June 2021 (“2021 amendment”)

The Group previously applied the practical expedient in IFRS 16 to all leases except for aircraft and engine leases such that as lessee it was not required to assess whether rent concessions occurring as a direct consequence of the COVID-19 pandemic were lease modifications, if the eligibility conditions are met. One of these conditions requires the reduction in lease payments affect only payments originally due on or before a specified time limit. The 2021 amendment extends this time limit from 30 June 2021 to 30 June 2022.

The Group has early adopted the 2021 amendment in this financial year. The adoption of 2021 amendment does not have any material impact on the financial position and the financial result of the Group.

4.	REVENUE AND SEGMENT INFORMATION

Operating revenue

The Group is principally engaged in the operation of civil aviation, including the provision of passenger, cargo, mail delivery, and other extended transportation services.

(i)

Disaggregation of revenue

Disaggregation of revenue from contracts with customers by major service lines is as follows:


	2021 *RMB million*		2020 RMB million
Revenue from contracts with customers within the scope of IFRS 15:
Disaggregated by service lines
– Traffic revenue
– Passenger		75,392		70,534
– Cargo and mail		19,887		16,493
– Commission income		2,677		2,771
– General aviation income		572		508
– Cargo handling income		864		507
– Hotel and tour operation income		538		390
– Ground services income		326		210
– Air catering service income		271		273
– Others		885		689

		101,412		92,375
Revenue from other sources:
– Rental income		232		186

		101,644		92,561

Disaggregation of revenue from contracts with customers by the timing of revenue recognition and by geographic markets is disclosed in Notes 4(b) and 4(c) respectively.

(ii)

Revenue expected to be recognised in the future arising from contracts with customers in existence at the reporting date

As at 31 December 2021, the aggregated amount of the transaction price allocated to the remaining performance obligation, which is the unredeemed credits under the frequent flyer award programmes, amounted to RMB3,061 million (31 December 2020: RMB3,196 million). This amount represents revenue expected to be recognised in the future when the customers obtain control of the goods or services.

Business segments

The Group has two reportable operating segments “airline transportation operations” and “other segments”, according to internal organisation structure, managerial needs and internal reporting system. “Airline transportation operations” comprises the Group’s passenger and cargo and mail operations. “Other segments” includes cargo handling, hotel and tour operation, ground services, air catering services and other miscellaneous services.

For the purposes of assessing segment performance and allocating resources between segments, the Group’s chief operating decision maker (“CODM”) monitors the results, assets and liabilities attributable to each reportable segment based on financial results prepared under the People’s Republic of China Accounting Standards for Business Enterprises (“PRC GAAP”). As such, the amount of each material reconciling item from the Group’s reportable segment loss before taxation, assets and liabilities which arises from different accounting policies, are set out in Note 4(d).

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.

Information regarding the Group’s reportable segments as provided to the Group’s CODM for the purposes of resource allocation and assessment of segment performance is set out below.

The segment results of the Group for the year ended 31 December 2021 are as follows:


	Airline transportation operations			Other segments			Elimination			Unallocated*			Total
	*RMB million*			*RMB million*			*RMB million*			*RMB million*			*RMB million*
Disaggregated by timing of revenue recognition
Point in time		2,763			1,418			(1,171	)		—			3,010
Over time		98,206			3,257			(2,829	)		—			98,634

Revenue from external customers		100,419			1,225			—			—			101,644
Inter-segment sales		550			3,450			(4,000	)		—			—

Reportable segment revenue		100,969			4,675			(4,000	)		—			101,644

Reportable segment loss before taxation		(13,769	)		(111	)		2			(25	)		(13,903	)

Reportable segment loss after taxation		(10,998	)		(67	)		2			52			(11,011	)

Other segment information
Income tax		(2,771	)		(44	)		—			(77	)		(2,892	)
Interest income		763			15			(103	)		—			675
Interest expense		6,291			26			(115	)		—			6,202
Depreciation and amortisation		23,854			380			—			—			24,234
Impairment loss		2,596			18			—			—			2,614
Credit losses		1			(2	)		—			—			(1	)
Share of associates’ results		—			—			—			9			9
Share of joint ventures’ results		—			—			—			271			271
Change in fair value of financial assets/liabilities		—			—			—			(309	)		(309	)
Non-current assets additions during the year^#		21,457			905			(359	)		—			22,003

The segment results of the Group for the year ended 31 December 2020 are as follows:


	Airline transportation operations			Other segments			Elimination			Unallocated*			Total
	RMB million			RMB million			RMB million			RMB million			RMB million
Disaggregated by timing of revenue recognition
Point in time		2,856			1,727			(1,483	)		—			3,100
Over time		89,196			2,448			(2,183	)		—			89,461

Revenue from external customers		91,722			839			—			—			92,561
Inter-segment sales		330			3,336			(3,666	)		—			—

Reportable segment revenue		92,052			4,175			(3,666	)		—			92,561

Reportable segment loss before taxation		(14,727	)		(112	)		1			(348	)		(15,186	)

Reportable segment loss after taxation		(11,388	)		(61	)		1			(372	)		(11,820	)

Other segment information
Income tax		(3,339	)		(51	)		—			24			(3,366	)
Interest income		328			26			(32	)		—			322
Interest expense		6,739			11			(34	)		—			6,716
Depreciation and amortisation		24,438			143			—			—			24,581
Impairment loss		4,015			2			—			—			4,017
Credit losses		153			11			—			—			164
Share of associates’ results		—			—			—			(776	)		(776	)
Share of joint ventures’ results		—			—			—			309			309
Change in fair value of financial assets/liabilities		—			—			—			53			53
Non-current assets additions during the year^#		24,039			547			(49	)		—			24,537

The segment assets and liabilities of the Group as at 31 December 2021 and 31 December 2020 are as follows:

Airline

transportation

operations

Other segments

Elimination

Unallocated*

Total

RMB million

As at 31 December 2021

Reportable segment assets

312,020

5,909

(1,616

)

6,635

322,948

Reportable segment liabilities

236,428

2,640

(1,607

)

1,242

238,703

As at 31 December 2020

Reportable segment assets

317,741

6,019

(4,209

)

6,564

326,115

Reportable segment liabilities

239,968

2,237

(4,154

)

3,201

241,252

Unallocated assets primarily include interest in associates and joint ventures, derivative financial assets and equity securities. Unallocated liabilities primarily include derivative financial liabilities. Unallocated results primarily include the share of results of associates and joint ventures, dividend income from equity securities, and the fair value movement of financial instruments recognised through profit or loss.

#	The additions of non-current assets do not include interests in associates and joint ventures, other equity instrument investments, other non-current financial assets, derivative financial assets and deferred tax assets.

Geographical information

The Group’s business segments operate in three main geographical areas, even though they are managed on a worldwide basis.

The Group’s revenue by geographical segment are analysed based on the following criteria:

(1)

Traffic revenue from services of both origin and destination within the PRC (excluding Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan (“Hong Kong, Macau and Taiwan”)), is classified as domestic revenue. Traffic revenue with origin and destination among PRC, Hong Kong, Macau and Taiwan is classified as Hong Kong, Macau and Taiwan revenue; while that with origin from or destination to other overseas markets is classified as international revenue.

(2)

Revenue from commission income, general aviation, cargo handling, hotel and tour operation, ground services, air catering services and other miscellaneous services are classified on the basis of where the services are performed.


	2021		2020
	*RMB million*		RMB million
Domestic		76,517		65,137
International		24,739		27,090
Hong Kong, Macau and Taiwan		388		334

		101,644		92,561

The major revenue earning assets of the Group are its aircraft fleet which is registered in the PRC and is deployed across its worldwide route network. Majority of the Group’s other assets are located in the PRC. CODM considers that there is no suitable basis for allocating such assets and related liabilities to geographical locations. Accordingly, geographical segment assets and liabilities are not disclosed.

Reconciliation of reportable segment loss before income tax, assets and liabilities to the consolidated figures as reported in the consolidated financial statements


	2021			2020
	*RMB million*			RMB million
Loss before income tax
Reportable segment loss before taxation		(13,903	)		(15,186	)
Capitalisation of exchange difference of specific loans		(8	)		(9	)
Government grants		1			—

Consolidated loss before income tax		(13,910	)		(15,195	)


	31 December 2021			31 December 2020
	*RMB million*			RMB million
Assets
Reportable segment assets		322,948			326,115
Capitalisation of exchange difference of specific loans		39			47
Government grants		(5	)		(6	)
Adjustments arising from business combinations under common control		237			237
Others		(8	)		(10	)

Consolidated total assets		323,211			326,383

Liabilities

As at 31 December 2021 and 2020, the amount of reportable segment liabilities is the same as the amount of consolidated total liabilities.

5	FLIGHT OPERATION EXPENSES


	2021		2020
	*RMB million*		RMB million
Jet fuel costs		25,505		18,797
Flight personnel payroll and welfare		10,763		10,232
Air catering expenses		1,577		1,765
Civil Aviation Development Fund		1,059		—
Aircraft operating lease charges		920		977
Training expenses		690		857
Aircraft insurance		184		191
Others		4,871		4,726

		45,569		37,545

6	DEPRECIATION AND AMORTISATION


	2021		2020
	*RMB million*		RMB million
Depreciation of property, plant and equipment		8,835		8,824
Depreciation of right-of-use assets		14,888		15,388
Other amortisation		518		378

		24,241		24,590

7	OTHER NET INCOME


	2021		2020
	*RMB million*		RMB million
Government grants		4,040		4,209
Gains/(loss) on disposal of property, plant and equipment, net
– Aircraft and spare engines		149		(18	)
– Other property, plant and equipment and right-of-use assets		214		75
Others		364		420

		4,767		4,686

8	INTEREST EXPENSE


	2021			2020
	*RMB million*			RMB million
Interest on borrowings		2,448			1,914
Interest relating to leases liabilities		4,434			5,180

Total interest expense on financial liabilities not at fair value through profit or loss		6,882			7,094
Less: interest expense capitalised (Note)		(701	)		(363	)

		6,181			6,731
Interest rate swaps: cash flow hedge, reclassified from equity		21			(15	)

		6,202			6,716

Note:

The weighted average interest rate used for interest capitalisation was 2.61% per annum in 2021 (2020: 2.51%).

9	INCOME TAX

(a)

Income tax credit in the consolidated income statement


	2021			2020
	*RMB million*			RMB million
PRC income tax
– Provision for the year		2,159			1,716
– Under-provision in prior year		35			48

		2,194			1,764
Deferred tax
Origination and reversal of temporary differences		(5,088	)		(5,132	)

Income tax credit		(2,894	)		(3,368	)

In respect of a majority of the Group’s airlines operation outside mainland China, 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 those overseas jurisdictions. Accordingly, no provision for overseas income tax has been made for overseas airlines operation in the current and prior years.

For the year of 2021, the Company and its branches and subsidiaries in mainland China are subject to income tax rates ranging from 15% to 25% (2020: 15% to 25%), and certain subsidiaries of the Company in Hong Kong are subject to income tax at 16.5% (2020: 16.5%).

(b)

Reconciliation between actual income tax credit and calculated tax based on accounting loss at applicable income tax rates


	2021			2020
	*RMB million*			RMB million
Loss before income tax		(13,910	)		(15,195	)

Notional tax on loss before taxation, calculated at the rates applicable to loss in the tax jurisdictions concerned		(3,380	)		(3,667	)

Adjustments for tax effect of:
Non-deductible expenses		96			102
Share of results of associates and joint ventures and other non-taxable income		(70	)		111
Unused tax losses and deductible temporary differences for which no deferred tax assets were recognised		489			80
Utilisation of unused tax losses and deductible temporary differences for which no deferred tax assets were recognised in prior years		(32	)		(8	)
Under-provision in prior year		35			48
Super deduction of research and development expenses		(32	)		(34	)

Income tax credit		(2,894	)		(3,368	)

10	LOSS PER SHARE

The calculation of basic loss per share for the year ended 31 December 2021 is based on the loss attributable to equity shareholders of the Company of RMB12,106 million (2020: RMB10,847 million) and the weighted average of 16,201,129,384 shares in issue during the year (2020: 14,056,887,174 shares).


	2021		2020
	*million*		million
Issued ordinary shares at 1 January		15,329		12,267
Effect of issuance of shares		872		1,790

Weighted average number of ordinary shares at 31 December		16,201		14,057

The amount of diluted loss per share is the same as basic loss per share as the effect of convertible bonds is anti-dilutive for the year ended 31 December 2021 and for the year ended 31 December 2020.

11	DIVIDENDS

The directors did not recommend any final dividend in respect of the years ended 31 December 2021 and 2020.

12	PROPERTY, PLANT AND EQUIPMENT, NET


	Investment properties			Buildings			Aircraft			Other flight equipment including rotables			Machinery, equipment and vehicles			Total
	RMB million			RMB million			RMB million			RMB million			RMB million			RMB million
Cost:
At 1 January 2020		470			16,046			113,276			24,385			8,253			162,430
Additions		—			12			1,435			542			935			2,924
Transferred from construction in progress		—			5,720			3,719			497			1,340			11,276
Reclassification on change of holding intention:
– transferred from other property, plant and equipment, net		52			(52	)		—			—			—			—
Transferred from right-of-use assets on exercise of purchase option (Note 14)		—			—			2,780			—			—			2,780
Disposals
– disposals		—			(152	)		(6,830	)		(399	)		(558	)		(7,939	)
– disposal of a subsidiary		—			(99	)		—			–			(34	)		(133	)

At 31 December 2020		522			21,475			114,380			25,025			9,936			171,338

At 1 January 2021		522			21,475			114,380			25,025			9,936			171,338

Additions		—			66			2,855			487			668			4,076
Transferred from construction in progress		—			2,097			8,796			434			486			11,813
Reclassification on change of holding intention:
– transferred to other property, plant and equipment, net		(32	)		32			—			—			—			—
– transferred from other property, plant and equipment, net		50			(50	)		—			—			—			—
Transfer to assets held for sale		—			—			(6,309	)		(152	)		—			(6,461	)
Transferred from right-of-use assets on exercise of purchase option (Note 14)		—			—			2,761			—			—			2,761
Others		9			—			—			—			—			9
Disposals		(8	)		(115	)		(6,393	)		(441	)		(556	)		(7,513	)

At 31 December 2021		541			23,505			116,090			25,353			10,534			176,023


	Investment properties			Buildings			Aircraft			Other flight equipment including rotables			Machinery, equipment and vehicles			Total
	RMB million			RMB million			RMB million			RMB million			RMB million			RMB million
Accumulated depreciation and impairment losses:
At 1 January 2020		166			4,917			54,177			13,119			5,263			77,642
Depreciation charge for the year		23			618			5,744			1,493			946			8,824
Reclassification on change of holding intention:
– transferred from other property, plant and equipment, net		21			(21	)		—			—			—			—
Transferred from right-of-use assets on exercise of purchase option (Note 14)		—			—			982			—			—			982
Disposals
– disposals		—			(59	)		(4,588	)		(372	)		(483	)		(5,502	)
– disposal of a subsidiary		—			(15	)		—			—			(11	)		(26	)
Provision for impairment losses		—			—			3,202			75			2			3,279
Impairment losses written off on disposals		—			—			—			(7	)		—			(7	)

At 31 December 2020		210			5,440			59,517			14,308			5,717			85,192

At 1 January 2021		210			5,440			59,517			14,308			5,717			85,192
Depreciation charge for the year		16			712			5,673			1,394			1,040			8,835
Reclassification on change of holding intention:
– transferred to other property, plant and equipment, net		(19	)		19			—			—			—			—
– transferred from other property, plant and equipment, net		35			(35	)		—			—			—			—
Transfer to assets held for sale		—			—			(2,746	)		(66	)		—			(2,812	)
Transferred from right-of-use assets on exercise of purchase option (Note 14)		—			—			1,202			—			—			1,202
Disposals		(6	)		(28	)		(4,270	)		(406	)		(414	)		(5,124	)
Provision for impairment losses (a)		—			—			914			80			—			994
Impairment losses transfer to assets held for sale		—			—			(2,581	)		(60	)		—			(2,641	)
Impairment losses written off on disposals		—			—			(809	)		—			—			(809	)

At 31 December 2021		236			6,108			56,900			15,250			6,343			84,837

Net book value:
At 31 December 2021		305			17,397			59,190			10,103			4,191			91,186

At 31 December 2020		312			16,035			54,863			10,717			4,219			86,146

(a)

As at 31 December 2021, the Group reported aircraft and related equipment in the amount of RMB199,407 million. For the year ended 31 December 2021, the Group made impairment provision of RMB2,579 million in aggregate towards certain aged or market value declined aircraft and related equipment based on its fleet disposal plans. Among which, the impairment provision for owned aircraft and related equipment were RMB994 million, and the impairment provision for leased aircraft and related equipment were RMB1,585 million (Note 14). Provision were made when asset’s carrying amount exceed its recoverable amount. The estimated recoverable amounts of above aircraft and related equipment with impairment indications were based on the fair value less cost to sell, which was determined by reference to the recent observable market prices for those aircraft and related equipment or appraisal results valued by external appraisal expert based on the cost method.

13.

CONSTRUCTION IN PROGRESS


	2021		2020
	*RMB million*		RMB million
Advance payment for aircraft and flight equipment		30,122		29,342
Others		1,725		3,065

		31,847		32,407

14	RIGHT-OF-USE ASSETS


	Aircraft and engines			Land use rights			Buildings			Others			Total
	RMB million			RMB million			RMB million			RMB million			RMB million
Cost:
At 1 January 2020		215,381			4,022			2,790			392			222,585
Additions		6,526			45			412			190			7,173
Transfer from construction in progress		5,993			2,440			—			226			8,659
Transferred to property, plant and equipment on exercise of purchase option (Note 12)		(2,780	)		—			—			—			(2,780	)
Disposals
– disposals		(4,419	)		—			(180	)		—			(4,599	)
– disposal of a subsidiary		—			(26	)		—			(43	)		(69	)

At 31 December 2020		220,701			6,481			3,022			765			230,969

At 1 January 2021		220,701			6,481			3,022			765			230,969
Additions		3,493			343			1,194			243			5,273
Transfer from construction in progress		302			61			—			152			515
Transferred to property, plant and equipment on exercise of purchase option (Note 12)		(2,761	)		—			—			—			(2,761	)
Transferred to assets held for sale		(1,582	)		—			—			—			(1,582	)
Disposals		(5,959	)		(75	)		(931	)		(26	)		(6,991	)

At 31 December 2021		214,194			6,810			3,285			1,134			225,423


	Aircraft and engines			Land use rights		Buildings			Others			Total
	RMB million			RMB million		RMB million			RMB million			RMB million
Accumulated amortization and impairment losses:
At 1 January 2020		67,890			813		637			34			69,374
Amortisation charge for the year		14,167			134		997			90			15,388
Transferred to property, plant and equipment on exercise of purchase option (Note 12)		(982	)		—		—			—			(982	)
Disposals
– disposals		(4,419	)		—		(132	)		—			(4,551	)
– disposal of a subsidiary		—			—		—			(7	)		(7	)
Provision for impairment losses		682			—		—			—			682

At 31 December 2020		77,338			947		1,502			117			79,904

At 1 January 2021		77,338			947		1,502			117			79,904
Amortisation charge for the year		13,616			140		954			178			14,888
Transferred to property, plant and equipment on exercise of purchase option (Note 12)		(1,202	)		—		—			—			(1,202	)
Transferred to assets held for sale		(616	)		—		—			—			(616	)
Disposals		(5,959	)		—		(913	)		(21	)		(6,893	)
Provision for impairment losses (Note 12(a))		1,585			—		—			—			1,585
Impairment losses transfer to assets held for sale		(682	)		—		—			—			(682	)

At 31 December 2021		84,080			1,087		1,543			274			86,984

Net book value:
At 31 December 2021		130,114			5,723		1,742			860			138,439

At 31 December 2020		143,363			5,534		1,520			648			151,065

15	DEFERRED TAX ASSETS

Deferred tax assets arise from deductible temporary differences and unused tax losses are recognised to the extent that it is probable that future taxable profits will be available against which the related tax benefit can be utilised. The Group’s tax losses in the PRC are available for carrying forward to set off future assessable income for a maximum period of five or eight years (According to the Notice of the Ministry of Finance on the Taxation Policy for supporting the prevention of pandemic of Covid-19 (No. 8, 2020), the carry over period for tax losses of enterprises in certain difficult industries suffering from the epidemic in 2020 will be extended from 5 years to 8 years). Therefore, the Group’s tax losses occurred in 2020 can be carried forward for 5-8 years, and the Group’s tax losses occurred in other years can be carried forward for 5 years.

16	TRADE RECEIVABLES

Credit terms granted by the Group to sales agents and other customers generally range from one to three months. Ageing analysis of trade receivables based on transaction date is set out below:


	2021			2020
	*RMB million*			RMB million
Within 1 month		2,337			1,972
More than 1 month but less than 3 months		273			307
More than 3 months but less than 12 months		236			231
More than 1 year		51			58

		2,897			2,568
Less: loss allowance		(39	)		(43	)

		2,858			2,525

17	OTHER RECEIVABLES


	2021			2020
	*RMB million*			RMB million
VAT recoverable		7,854			6,072
Government grants receivables		474			523
Rebate receivables on aircraft acquisitions		302			497
Other deposits		155			170
Others		972			1,244

		9,757			8,506
Less: loss allowance		(158	)		(159	)

		9,599			8,347

18	DERIVATIVE FINANCIAL LIABILITIES

In October 2020, the Group issued a total of 160,000,000 A share convertible bonds with par value of RMB100 each at par. The convertible bonds have a term of six years from the date of the issuance and the convertible bonds bear interest at the annual rate of 0.2% in the first year, 0.4% in the second year, 0.6% in the third year, 0.8% in the fourth year, 1.5% in the fifth year and 2.0% in the sixth year. Interest is paid once a year. Conversion rights are exercisable from 21 April 2021 to 14 October 2026 at an initial conversion price of RMB6.24 per share, subject to clauses of adjustment and downward revision of conversion price, redemption and sell-back. Convertible bonds, which conversion rights have not been exercised in five transaction days after maturity, will be redeemed at 106.5% of par value (including the interest for the sixth year).

Any excess of proceeds over the fair value amount initially recognised as the derivative component is recognised as the host liability component. Transaction costs related to the issuance of the convertible bonds are allocated to the host liability and are recognised initially as part of the liability. The derivative component is subsequently remeasured at fair value while the host liability component is subsequently carried at amortised cost using the effective interest method.

For the year ended 31 December 2021, 101,034,070 convertible bonds were converted to A shares at the conversion price of RMB6.24 per share, RMB1,619 million was credited to share capital. As at 31 December 2021, the carrying amount of liability component of the remaining 58,965,930 A share convertible bonds was RMB4,992 million (31 December 2020: 160,000,000 A share convertible bonds with a carrying amount of RMB12,833 million), and the fair value of the derivative component of remaining 58,965,930 A share convertible bonds was RMB1,222 million (31 December 2020: 160,000,000 A share convertible bonds with fair value of RMB3,092 million). For the year ended 31 December 2021, the loss on the changes in fair value of the derivative component amounted to RMB269 million was recognised (31 December 2020: gain on the changes in fair value amounted to RMB201 million).

19	BORROWINGS

Borrowings are analysed as follows:


	2021		2020
	*RMB million*		RMB million
Non-current
Long-term borrowings		15,389		8,811
Corporate bonds		1,000		7,500
Convertible bonds		4,984		12,833
Medium-term notes		16,981		8,990

		38,354		38,134

Current
Current portion of long-term borrowings		169		67
Short-term borrowings		25,116		25,286
Ultra-short-term financing bills		24,710		10,999
Current portion of corporate bonds and medium-term notes		7,910		3,747
Current portion of convertible bonds		8		—

		57,913		40,099

Total borrowings		96,267		78,233

The borrowings are repayable:
Within one year		57,913		40,099
In the second year		18,611		7,662
In the third to fifth year		16,747		14,394
After the fifth year		2,996		16,078

Total borrowings		96,267		78,233

20	LEASE LIABILITIES

At 31 December 2021, the leases liabilities were payable as follows:


	2021		2020
	*RMB million*		RMB million
Within 1 year		20,805		20,930
After 1 year but within 2 years		19,229		20,045
After 2 years but within 5 years		38,950		47,164
After 5 years		23,765		33,074

		102,749		121,213

The Group has significant lease liabilities which are denominated in USD as at 31 December 2021. The net exchange gain of RMB1,575 million for the year ended 31 December 2021 (2020: net exchange gain of RMB3,485 million) was mainly attributable to the translation of balances of lease liabilities which are denominated in USD.

21	TRADE PAYABLES

Ageing analysis of trade payables based on transaction date is set out below:


	2021		2020
	*RMB million*		RMB million
Within 1 month		403		431
More than 1 month but less than 3 months		221		473
More than 3 months but less than 6 months		221		313
More than 6 months but less than 1 year		268		329
More than 1 year		215		236

		1,328		1,782

B.	PREPARED IN ACCORDANCE WITH THE PRC GAAP

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2021


	2021			2020
	*RMB million*			RMB million
Revenue		101,644			92,561
Less: Operating costs		104,229			94,903
Taxes and surcharges		365			330
Selling and distribution expenses		4,993			5,248
General and administrative expenses		3,678			3,989
Research and development expenses		381			367
Finance expenses		4,025			2,993
Including: Interest expense		6,202			6,716
Interest income		675			322
Add: Other income		3,964			4,179
Investment income/(loss)		284			(401	)
Including: in come/(loss) from investment in associates and joint ventures		280			(467	)
(Loss)/gain on fair value movement		(309	)		53
Credit losses		1			(164	)
Impairment loss		(2,614	)		(4,017	)
Gain/(loss) on assets disposals		399			(22	)

Operating loss		(14,302	)		(15,641	)
Add: Non-operating income		660			652
Less: Non-operating expenses		261			197

Loss before income tax		(13,903	)		(15,186	)
Less: Income tax		(2,892	)		(3,366	)

Net loss for the year		(11,011	)		(11,820	)

(1) Net loss classified by continuity of operations:
1. Net loss from continuing operations		(11,011	)		(11,820	)
2. Net loss from discontinued operations		—			—
(2) Net loss classified by ownership:
1. Shareholders of the Company		(12,103	)		(10,842	)
2. Non-controlling interests		1,092			(978	)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 December 2021


	31 December 2021		31 December 2020
	*RMB million*		RMB million
Assets
Current assets:
Cash at bank and on hand		21,841		25,823
Bills receivable		4		12
Accounts receivable		2,894		2,544
Prepayments		736		732
Other receivables		1,275		1,955
Inventories		1,652		1,760
Assets held for sale		1,292		—
Non-current assets due within one year		138		—
Other current assets		8,034		6,159

Total current assets		37,866		38,985

Non-current assets
Long-term equity investments		5,977		5,673
Other equity instrument investment		563		799
Other non-current financial assets		95		92
Investment properties		305		312
Fixed assets		90,817		85,754
Construction in progress		31,869		32,438
Right-of-use assets		132,725		145,540
Intangible assets		6,564		6,155
Long-term receivables		645		—
Aircraft lease deposits		321		362
Long-term deferred expenses		768		887
Deferred tax assets		12,831		7,749
Other non-current assets		1,602		1,369

Total non-current assets		285,082		287,130

Total assets		322,948		326,115


	31 December 2021		31 December 2020
	*RMB million*		RMB million
Liabilities and shareholders’ equity
Current liabilities
Short-term bank borrowings		25,116		25,286
Derivative financial liabilities		1,222		3,148
Bills payable		—		278
Accounts payable		12,183		11,974
Contract liabilities		1,542		1,513
Sales in advance of carriage		3,716		3,997
Employee benefits payable		4,457		4,328
Taxes payable		1,140		680
Other payables		7,914		8,640
Non-current liabilities due within one year		28,990		24,838
Other current liabilities		24,710		10,999

Total current liabilities		110,990		95,681

Non-current liabilities
Long-term bank borrowings		15,389		8,811
Bonds payable		22,965		29,323
Derivative financial liabilities		20		11
Hedging instrument		—		42
Lease liabilities		81,944		100,283
Long-term payables		193		291
Provision for major overhauls		4,820		4,216
Deferred benefits and gains		725		769
Deferred tax liabilities		26		80
Other non-current liabilities		1,631		1,745

Total non-current liabilities		127,713		145,571

Total liabilities		238,703		241,252


	31 December 2021		31 December 2020
	*RMB million*		RMB million
Net assets
Share capital		16,948		15,329
Capital reserve		47,887		39,050
Other comprehensive income		159		242
Surplus reserve		2,579		2,579
Retained earnings		43		12,146

Total equity attributable to equity shareholders of the Company		67,616		69,346
Non-controlling interests		16,629		15,517

Total equity		84,245		84,863

Total liabilities and equity		322,948		326,115

C.	RECONCILIATION OF DIFFERENCES IN FINANCIAL STATEMENTS PREPARED UNDER PRC GAAP AND IFRSs

Difference in loss and equity attributable to equity shareholders of the Company under consolidated financial information in financial statements between IFRSs and PRC GAAP


	Loss attributable to equity shareholders of the Company						Equity attributable to equity shareholders of the Company
	2021			2020			31 December 2021			31 December 2020
	*RMB million*			RMB million			*RMB million*			RMB million
Amounts under PRC GAAP		(12,103	)		(10,842	)		67,616			69,346
Adjustments:
Capitalisation of exchange difference of specific loans		(8	)		(9	)		39			47
Government grants		1			—			(5	)		(6	)
Adjustment arising from the Company’s business combination under common control		—			—			237			237
Income tax effect of the above adjustments		2			2			(8	)		(10	)
Effect of the above adjustments on non-controlling interests		2			2			(28	)		(30	)

Amounts under IFRSs		(12,106	)		(10,847	)		67,851			69,584

BUSINESS REVIEW

In 2021, the global economy rebounded significantly from the low base in 2020. According to the World Economic Outlook issued by the International Monetary Fund, the global economy experienced a growth of 5.9% in 2021. China’s economic development and pandemic prevention and control maintained a leading position in the world. Its construction of a new development paradigm moved a new step and high quality development made new progress. The economy of China grew at 8.1% for the whole year, the economy growth rate ranked at the leading position among major economies, and the GDP exceeded RMB110 trillion.

In 2021, the global aviation industry presented a recovery momentum, and travellers were more confident and willing to travel around. However, as affected by COVID-19 pandemic (the “pandemic”), the passenger transportation and cargo transportation of the global aviation continued to differentiate, with passenger transportation maintaining weak recovery and cargo transportation maintaining high growth. Under the repeated impact of the pandemic, China’s aviation industry showed the trend of gradual recovery and improvement. During the year, the total traffic turnover volume, passenger traffic volume, and cargo and mail transportation volume recorded 85.7 billion ton-kilometers, 440 million passengers and 7.32 million tonnes, respectively, representing a year-on-year increase of 7.3, 5.5 and 8.2 percentage points, respectively. The Group continued to improve pandemic prevention and control mechanism, gave top priority to aviation safety, actively responded to the operation challenges, accumulated new drivers for high quality development. During the reporting period, with the joint efforts of the management and all staff, the Group achieved 2.11 million hours of safe flight, served approximately 98.50 million passengers, and made a new record in operating results of cargo transportation. The “Green Flight” of the Company was awarded the first “Golden Key” Champion by the Ministry of Commerce, and the Company was awarded the First Brand in Aviation Service Industry by the Ministry of Industry and Information Technology in China Brand Power Research for 11 consecutive years.

1. Pandemic Prevention and Control

During the reporting period, the Group resolutely implemented the responsibilities for pandemic prevention and control, and continued to improve the pandemic prevention and control working mechanism. With reference to the national pandemic prevention and control policies, we updated and improved the Company’s pandemic prevention system and measures in a timely manner; we put a premium on the prevention of imported pandemic from overseas, advanced the pandemic prevention check points, ensured the pandemic prevention management and control for inbound tourists, formulated guidelines for the whole-process pandemic prevention for international flight crew; we actively coordinated with national pandemic prevention and control measures, promoted full coverage of vaccination and 100% completion of booster injection for international flight crew and personnel in high-risk positions. During the reporting period, the Group actively coped with the pandemic challenge, protected and quarantined approximately 50,000 crew members, organized the pandemic prevention training to all staff and organized to conduct more than 1.90 million nucleic acid tests. The Company’s special flight for COVID-19 vaccine transported more than 130 million doses of COVID-19 vaccines within and across the borders.

2. Safety Management

During the reporting period, the Group continued to enhance safety quality, commenced special work for safety system improvement, work style construction and rectification, and safety risk management and control. We further carried out a three-year campaign of rectification special work for safety production, pushed forward the construction of seven safety systems, formulated and improved safety management system; we utilized digitalised concept to constantly enhance safety management level, promoted and applied professional system for safety management; we conducted work style rectification special work and promoted the obviousness of work style issues by using technical means.

3. Management Response

During the reporting period, the Group closely followed the changes in the pandemic, made every effort to enhance operating efficiency. We adhered to positive and flexible operation strategy, emphasised “two matching and two strengthening”, that is matching the capacity with the market, matching the load volume with the load cost, strengthening the revenue management, strengthening customer base. We adjusted the pace of capacity introduction, continuously optimized feet structure, implemented different strategies based on the pandemic evolvement; we adjusted the deployment of transport capacity in a timely manner, proactively captured time slot resources; we increased the utilization rate of real estate and promoted the refined management of real estate. During the reporting period, we seized opportunities in the freight market, constantly innovated sales mode, and expanded warehousing, e-commerce trade and other innovative businesses, organized 7,023 freight flights converted from passenger aircraft, completed cargo and mail transportation volume of 1.442 million tonnes and made a new record in the operating results of cargo transportation.

4. Hub Network

During the reporting period, the Group further advanced its hub network strategy, accelerated the construction of two comprehensive international hubs in Guangzhou and Beijing. We continued to establish the Guangzhou-Shenzhen integrated hub, deeply cultivated in the Greater Bay Area market, further enhanced flight time slot coverage for the Greater Bay Area market; we drove the high quality development of Beijing hub, constantly propelled the construction of Daxing express route, developed 6 express routes including the Guangzhou-Shenzhen-Chengdu route and comprehensively enhanced the operating quality of Daxing Airport. We coordinated the expansion of Hainan Free Trade Port market and proactively pursued new time slots; we expanded route network by joint operation of airline network and signed new cooperation agreements with 7 business partners including Juneyao Airlines and Loong Airlines.

5. Lean Control

During the reporting period, the Group continued to improve the long-acting mechanism of cost control. We continued to carry out lean cost management special activities, implemented over 1,120 revenue-increase and cost-reduction measures, and the Company gradually formed a consensus on lean control; we positively pursued preferential policies and commenced taxation planning; we continued to improve procurement system and control the procurement expenses; we continued to optimize the Company’s debt structure, expanded diversified financing channels and lowered financing cost; we prevented and resolved risks in terms of oil prices, exchange rates, interest rates, and receivables, to ensure the security of the Company’s funds.

6. Operation Service

During the reporting period, the Group continued to improve operation quality, and enriched the service brand connotation. We carried out specific improvements actions on flight on-time performance, emphasized on the implementation of key measures to enhance operation efficiency, maintaining a leading position in the industry in terms of flight on-time performance rate for six consecutive years; we established AOC, GOC video collaboration platforms; we strengthened services management and control, established dynamic adjustment mechanism for pandemic service standard, strengthened the management of service quality in relation to flight adjustment within three days; we are the first in China to launch the baggage combined transport service, namely “baggage home” (行李到家) and “air-metro” (航空-地鐵). During the reporting period, the Group ranked No. 12 in Skytrax World Airline awards, and the first among major airlines in China.

7. Reform and Development

During the reporting period, the Group made progress in deepening reform and implemented its development strategies one by one. We formulated the overarching approach for high quality development, coordinated and prepared the development plan for the “14th Five-Year Plan”; promoted downward penetration of governance reform, developed authorization management system from the Board to the management; deeply drove the adjustment and optimization of five major structures for fleet, market, manpower, industry, assets and liabilities; thoroughly promoted the contractual management of the tenure system, promoted the downward penetration of the market-oriented operation mechanism; propelled the development of “marketization, integration, industrialization and internationalization” of aircraft maintenance; proceeded with the non-public issuance of shares. During the reporting period, the Group outperformed the three-year reform action plan and formed the branch of engineering technology and the corporate governance structure has been constantly improved, the adjustment and optimization of the five major structures have achieved initial results, and the Group has moved a solid step for high quality development.

8. Social Responsibility

During the reporting period, the Group firmly promoted the green flight concept, boosted the development of rural revitalization and proactively performed social responsibility. We actively responded to the requirements of peak carbon dioxide emissions and facilitated energy-saving and carbon reduction of aircrafts by optimizing air routes, managing aviation oil, reducing aircraft weight and other measures; the “Green Flight” project reduced over 2,000 tonnes airline meals wastage in aggregate by service on demand; the Group continued to improve environment management system and formulated Work Plan for Green Development, to reduce the use of plastics and accelerate the research and development of and actively promote advanced and applicable plastic replacement products. We continued to put more resources in rural revitalization and brought more than 40,000 impoverished people out of poverty.

OPERATING DATA SUMMARY

The following table sets forth operating data by geographic regions:


	For the year ended 31 December				Increase/(decrease)
	2021		2020		Increase/(decrease)
					(%)
Traffic
Revenue passenger kilometers (RPK) (million)
Domestic		148,223.63		140,135.20		5.77
Hong Kong, Macau and Taiwan		152.48		239.14		(36.24	)
International		4,050.18		13,065.78		(69.00	)

Total:		152,426.29		153,440.11		(0.66	)

Revenue tonne kilometers (RTK) (million)
Domestic		14,389.54		13,720.92		4.87
Hong Kong, Macau and Taiwan		25.48		30.19		(15.60	)
International		6,793.68		7,053.76		(3.69	)

Total:		21,208.71		20,804.88		1.94

RTK – passenger (million)
Domestic		13,124.43		12,390.86		5.92
Hong Kong, Macau and Taiwan		13.48		20.91		(35.54	)
International		359.50		1,138.30		(68.42	)

Total:		13,497.41		13,550.07		(0.39	)

RTK – cargo (million)
Domestic		1,265.11		1,330.06		(4.88	)
Hong Kong, Macau and Taiwan		12.01		9.29		29.30
International		6,434.18		5,915.47		8.77

Total:		7,711.30		7,254.81		6.29


	For the year ended 31 December				Increase/(decrease)
	2021		2020		Increase/(decrease)
					(%)
Passengers carried (thousand)
Domestic		97,717.02		93,911.34		4.05
Hong Kong, Macau and Taiwan		147.75		213.22		(30.71	)
International		639.89		2,731.48		(76.57	)

Total:		98,504.66		96,856.04		1.70

Cargo and mail carried (thousand tonnes)
Domestic		765.34		817.51		(6.38	)
Hong Kong, Macau and Taiwan		12.19		9.12		33.66
International		664.42		634.19		4.77

Total:		1,441.95		1,460.83		(1.29	)

Capacity
Available seat kilometres (ASKs) (million)
Domestic		205,437.17		193,935.93		5.93
Hong Kong, Macau and Taiwan		463.01		550.91		(15.96	)
International		8,021.64		20,235.13		(60.36	)

Total:		213,921.82		214,721.97		(0.37	)

Available tonne kilometres (ATKs) (million)
Domestic		23,431.06		22,182.70		5.63
Hong Kong, Macau and Taiwan		61.20		70.71		(13.46	)
International		10,025.45		11,638.87		(13.86	)

Total:		33,517.70		33,892.28		(1.11	)


	For the year ended 31 December				Increase/(decrease)
	2021		2020		Increase/(decrease)
					(%)
Available tonne kilometres (ATKs) – passenger (million)
Domestic		18,489.35		17,454.23		5.93
Hong Kong, Macau and Taiwan		41.67		49.58		(15.96	)
International		721.95		1,821.16		(60.36	)

Total:		19,252.96		19,324.98		(0.37	)

Available tonne kilometres (ATKs) – cargo (million)
Domestic		4,941.71		4,728.46		4.51
Hong Kong, Macau and Taiwan		19.53		21.13		(7.59	)
International		9,303.50		9,817.71		(5.24	)

Total:		14,264.74		14,567.30		(2.08	)


	For the year ended 31 December				Increase/(decrease) percentage points
	2021		2020		Increase/(decrease) percentage points
Load factor
Passenger load factor (RPK/ASK) (%)
Domestic		72.15		72.26		(0.11	)
Hong Kong, Macau and Taiwan		32.93		43.41		(10.47	)
International		50.49		64.57		(14.08	)

Average:		71.25		71.46		(0.21	)

Overall load factor (RTK/ATK) (%)
Domestic		61.41		61.85		(0.44	)
Hong Kong, Macau and Taiwan		41.64		42.70		(1.06	)
International		67.76		60.61		7.16

Average:		63.28		61.39		1.89


	For the year ended 31 December				Increase/(decrease)
	2021		2020		(%)
Yield
Yield per RPK (RMB)
Domestic		0.46		0.41		12.20
Hong Kong, Macau and Taiwan		1.46		1.05		39.05
International		1.61		0.96		67.71

Average:		0.49		0.46		6.52

Yield per RFTK (RMB)
Domestic		1.18		1.36		(13.24	)
Hong Kong, Macau and Taiwan		13.74		8.93		53.86
International		2.83		2.47		14.57

Average:		2.58		2.27		13.66

Yield per RTK (RMB)
Domestic		4.88		4.34		12.44
Hong Kong, Macau and Taiwan		15.23		11.06		37.70
International		3.64		3.84		(5.21	)

Average:		4.49		4.18		7.42

Cost
Operating expenses per ATK (RMB)		3.47		3.22		7.76

Flight Volume
Kilometers flown (million)		1,317.85		1,304.67		1.01

Hours flown (thousand)
Domestic		1,935.98		1,835.82		5.46
Hong Kong, Macau and Taiwan		3.78		4.88		(22.58	)
International		170.60		236.51		(27.87	)

Total:		2,110.36		2,077.21		1.60

Number of flights (thousand)
Domestic		822.25		786.17		4.59
Hong Kong, Macau and Taiwan		2.27		2.71		(16.17	)
International		18.80		33.58		(44.00	)

Total:		843.32		822.46		2.54

Note: Discrepancies between the column sum and the total sum are due to rounding of numbers.

MANAGEMENT DISCUSSION AND ANALYSIS

I. FINANCIAL PERFORMANCE

Part of the financial information presented in this section below is derived from the Group’s audited consolidated financial statements that have been prepared in accordance with IFRSs.

The net loss attributable to equity shareholders of the Company of RMB12,106 million was recorded in 2021 as compared to the net loss attributable to equity shareholders of the Company of RMB10,847 million in 2020. The Group’s total operating revenue increased by RMB9,083 million or 9.81% from RMB92,561 million in 2020 to RMB101,644 million in 2021. Passenger load factor decreased by 0.21 percentage point from 71.46% in 2020 to 71.25% in 2021. Yield per RPK increased by 6.52% from RMB0.46 in 2020 to RMB0.49 in 2021. Yield per RTK increased by 7.42% from RMB4.18 in 2020 to RMB4.49 in 2021. Operating expenses increased by RMB7,229 million or 6.63% from RMB109,111 million in 2020 to RMB116,340 million in 2021. Mainly affected by the impact of the COVID-19 pandemic on the aviation industry, operating loss of RMB9,929 million was recorded in 2021 as compared to operating loss of RMB11,864 million in 2020.

II. OPERATING REVENUE

2021

2020

Operating
revenue

Percentage

Operating
revenue

Percentage

Changes in
revenue

RMB million

RMB million

Traffic revenue

95,279

93.74

87,027

94.02

9.48

Including:Passenger revenue

75,392

70,534

6.89

– Domestic

68,656

57,793

18.80

– Hong Kong, Macau and Taiwan

223

251

(11.16

)

– International

6,513

12,490

(47.85

)

Cargo and mail revenue

19,887

16,493

20.58

Other operating revenue

6,365

6.26

5,534

5.98

15.02

Mainly including:

Commission income

2,677

2,771

(3.39

)

Ground services income

326

210

55.24

General aviation income

572

508

12.60

Hotel and tour operation income

538

390

37.95

Cargo handling income

864

507

70.41

Total operating revenue

101,644

100.00

92,561

100.00

9.81

Less: fuel surcharge income

(673

)

(1,259

)

(46.54

)

Total operating revenue excluding fuel surcharge

100,971

91,302

10.59

Substantially all of the Group’s operating revenue is attributable to airlines transport operations. Traffic revenue accounted for 94.02% and 93.74% of the total operating revenue in 2020 and 2021, respectively. Passenger revenue and cargo and mail revenue accounted for 79.13% and 20.87%, respectively, of the traffic revenue in 2021. During the reporting period, the Group’s total traffic revenue was RMB95,279 million, representing an increase of RMB8,252 million or 9.48% from the same period of prior year, mainly because of the increase in passenger revenue and in cargo revenue. The other operating revenue of the Group is mainly derived from commission income, hotel and tour operation income, general aviation income, cargo handling income and ground services income.

The increase in operating revenue was primarily due to an increase in passenger revenue by 6.89% from RMB70,534 million in 2020 to RMB75,392 million in 2021. The total number of passengers carried increased by 1.7% from 96.86 million passengers in 2020 to 98.50 million passengers in 2021. RPKs decreased by 0.66% from 153,440 million in 2020 to 152,426 million in 2021.

Domestic passenger revenue, which accounted for 91.07% of the total passenger revenue in 2021, increased by 18.80% from RMB57,793 million in 2020 to RMB68,656 million in 2021, mainly due to the maturity of COVID-19 prevention policies in the PRC and the number of passengers carried by domestic flight increased by 4.05% as compare to 2020. Domestic passenger traffic in RPKs increased by 5.77%, while passenger capacity in ASKs increased by 5.93%, resulting in a decrease in passenger load factor by 0.11 percentage point from 72.26% in 2020 to 72.15% in 2021. Yield per RPK increased by 12.2% from RMB0.41 in 2020 to RMB0.46 in 2021.

Hong Kong, Macau and Taiwan passenger revenue, which accounted for 0.30% of total passenger revenue, decreased by 11.16% from RMB251 million in 2020 to RMB223 million in 2021. For Hong Kong, Macau and Taiwan flights, passenger traffic in RPKs decreased by 36.24%, while passenger capacity in ASKs decreased by 15.96%, resulting in a decrease in passenger load factor by 10.47 percentage points from 43.41% in 2020 to 32.93% in 2021. Passenger yield per RPK increased from RMB1.05 in 2020 to RMB1.46 in 2021.

International passenger revenue, which accounted for 8.64% of total passenger revenue, decreased by 47.85% from RMB12,490 million in 2020 to RMB6,513 million in 2021, primarily due to the continuous impact of overseas COVID-19 pandemic and the restriction of cross border traveling policy not lifted yet. For international flights, passenger traffic in RPKs decreased by 69.00%, while passenger capacity in ASKs decreased by 60.36%, resulting in a decrease in passenger load factor by 14.08 percentage points from 64.57% in 2020 to 50.49% in 2021. Passenger yield per RPK increased from RMB0.96 in 2020 to RMB1.61 in 2021.

Cargo and mail revenue, which accounted for 20.87% of the Group’s total traffic revenue and 19.57% of total operating revenue, increased by 20.58% from RMB16,493 million in 2020 to RMB19,887 million in 2021. The increase was mainly attributable to the increase of demand for freight, especially international freight, due to the impact of COVID-19 pandemic.

Other operating revenue increased by 15.02% from RMB5,534 million in 2020 to RMB6,365 million in 2021. The increase was primarily due to the increase of ground services income, general aviation income, and hotel and tour operation income, and cargo handling income .

III. OPERATING EXPENSES

Total operating expenses in 2021 amounted to RMB116,340 million, representing an increase of RMB7,229 million or 6.63% comparing to that of 2020 because of the increase of various traffic expenses. Total operating expenses as a percentage of total operating revenue decreased from 117.88% in 2020 to 114.46% in 2021.

Operating expenses

2021

2020

RMB million

Percentage (%)

RMB million

Percentage (%)

Flight operation expenses

45,569

39.17

37,545

34.41

Mainly including:

Jet fuel costs

25,505

18,797

Aircraft operating lease charges

920

977

Flight personnel payroll and welfare

10,763

10,232

Maintenance expenses

12,162

10.45

13,375

12.26

Aircraft and transportation service expenses

21,147

18.18

18,743

17.18

Promotion and selling expenses

4,705

4.04

5,007

4.59

General and administrative expenses

3,663

3.15

4,088

3.75

Depreciation and amortisation

24,241

20.84

24,590

22.54

Impairment losses on property, plant and equipment, right-of-use assets and other assets

2,597

2.23

3,961

3.63

Hotel and tour operation expense

423

0.36

317

0.29

External air catering service expense

368

0.32

333

0.31

Financial institution charges

0.06

0.08

Cargo handling expense

398

0.34

400

0.37

Others

993

0.86

668

0.61

Total operating expenses

116,340

100.00

109,111

100.00

Flight operation expenses, which accounted for 39.17% of total operating expenses, increased by 21.37% from RMB37,545 million in 2020 to RMB45,569 million in 2021, mainly resulted from the increase of jet fuel cost, which increased by 35.69% from RMB18,797 million in 2020 to RMB25,505 million in 2021. The increase in jet fuel cost was caused by the increase in jet fuel price in 2021.

Maintenance expenses, which accounted for 10.45% of total operating expenses, decreased by 9.07% from RMB13,375 million in 2020 to RMB12,162 million in 2021.

Aircraft and transportation service expenses, which accounted for 18.18% of total operating expenses, increased by 12.83% from RMB18,743 million in 2020 to RMB21,147 million in 2021. The increase was mainly due to an increase in the amounts of take-off and landing as well as navigation fees and ground service related staff costs.

Promotion and selling expenses, which accounted for 4.04% of total operating expenses, decreased by 6.03% from RMB5,007 million in 2020 to RMB4,705 million in 2021. General and administrative expenses, which accounted for 3.15% of the total operating expenses, decreased by 10.40% from RMB4,088 million in 2020 to RMB3,663million in 2021.

Depreciation and amortisation, which accounted for 20.84% of the total operating expenses, stayed at the same level in amounts as compared to 2020.

Impairment losses on property, plant and equipment and right-of-use assets, which accounted for 2.23% of the total operating expenses, decreased by 34.44% from RMB3,961 million in 2020 to RMB2,597 million in 2021, mainly due to the impairment provision for aircraft and related equipment.

IV.

OPERATING LOSS

Operating loss of RMB9,929 million was recorded in 2021 (2020: operating loss of RMB11,864 million).

V.	OTHER NET INCOME

Other net income slightly increased by RMB81 million from RMB4,686 million in 2020 to RMB4,767 million in 2021.

VI.

INCOME TAX

Income tax credit of RMB2,894 million was recorded in 2021 (2020: income tax credit of RMB3,368 million was recorded), as the Company recorded operating loss as impacted by the COVID-19 pandemic, and recognised deferred tax asset for tax losses.

VII.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

As at 31 December 2021, the Group’s current liabilities exceeded its current assets by RMB73,124 million. For the year ended 31 December 2021, the Group recorded a net cash inflow from operating activities of RMB7,688 million mainly due to the improvement of the operation, a net cash outflow from investing activities of RMB15,820 million mainly due to the increase in the purchase of self-owned aircrafts, net cash inflow from financing activities of RMB4,186 million mainly due to the non-public issuance of shares and public issuance of convertible bonds of the Company in 2020, and the absence of such event in 2021, which in total resulted in a net decrease in cash and cash equivalents of RMB3,946 million. The decrease in cash and cash equivalents was mainly due to the decrease in the scale of financing for issuance of shares, bonds and long-term and short-term loans.

The Group is dependent on its ability to maintain adequate cash inflow from operations, its ability to maintain existing external financing, and its ability to obtain new external financing to meet its debt obligations as they fall due and to meet its committed future capital expenditures. The Group’s policy is to regularly monitor its liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term. As at 31 December 2021, the Group has obtained credit facilities of RMB295,683 million in aggregate (31 December 2020: RMB315,452 million) granted by several banks and other financial institutes, among which approximately RMB204,051 million was unutilised. The Directors of the Company believe that sufficient financing will be available to the Group when and where needed.

The analyses of the Group’s total interest-bearing liabilities are as follows:

Composition of interest-bearing liabilities


	31 December 2021		31 December 2020
	*RMB million*		RMB million
Lease liabilities		102,749		121,213
Borrowings		96,267		78,233
Long-term payable		291		385

Fixed rate interest-bearing liabilities		144,553		130,072
Floating rate interest-bearing liabilities		54,754		69,759

Analysis of interest-bearing liabilities by currency


	31 December 2021		31 December 2020
	*RMB million*		RMB million
USD		43,778		52,862
RMB		152,429		142,545
Others		3,100		4,424

Total		199,307		199,831

Maturity analysis of interest-bearing liabilities


	31 December 2021		31 December 2020
	*RMB million*		RMB million
Within 1 year		78,816		61,123
After 1 year but within 2 years		37,942		27,805
After 2 years but within 5 years		55,761		61,751
After 5 years		26,788		49,152

Total		199,307		199,831

Interest expense and exchange difference/net exchange loss

Interest expense decreased by RMB514 million from RMB6,716 million in 2020 to RMB6,202 million in 2021, mainly due to decrease in interest expense on lease liabilities.

Net exchange gains of RMB1,575 million was recorded in 2021, as compared with a net exchange gains of RMB3,485 million in 2020. Net exchange gain was primarily attributable to the exchange difference arising from the lease liabilities denominated in USD, along with the depreciation of the U.S. dollar against Renminbi .

The Group’s capital structure at the end of the year is as follows:


	31 December 2021			31 December 2020			Change
Total liabilities (RMB million)		238,703			241,252			(1.06	%)
Total assets (RMB million)		323,211			326,383			(0.97	%)
Debt ratio		73.85	%		73.92	%		Decreased by 0.07 percentage point

The Group monitors capital on the basis of debt ratio, which is calculated as total liabilities divided by total assets. The debt ratio decreased by 0.07 percentage point compared to that of the end of 2020.

VIII. MAJOR CHARGE ON ASSETS

As at 31 December 2021, no property, plant and equipment of the Group (31 December 2020: Nil) were mortgaged for bank borrowings.

IX. COMMITMENTS AND CONTINGENCIES

Commitments

As at 31 December 2021, the Group had capital commitments (excluding investment commitment) of RMB64,243 million (31 December 2020: RMB66,996 million), of which, RMB54,662 million (31 December 2020: RMB56,547 million) related to the acquisition of aircraft and related flight equipment and RMB9,581 million (31 December 2020: RMB10,449 million) related to other projects of the Group.

The Group had investment commitments as follows:


	31 December 2021		31 December 2020
	*RMB million*		RMB million
Authorised and contracted for:
Share of capital commitments of a joint venture		185		405
Capital contributions for acquisition of interest in an associate		171		—

		356		405
Authorised but not contracted for:
Share of capital commitments of a joint venture		24		26

		380		431

Contingent liabilities

(a)

The Group leased certain properties and buildings from CSAH which were located in Guangzhou, Wuhan, Haikou, etc. Although such properties and buildings were used by CSAH before being leased to the Group, as known to the Group, such properties and buildings lack adequate documentation evidencing CSAH’s rights thereto. Pursuant to the indemnification agreement dated 22 May 1997 entered into between the Group and CSAH, CSAH has agreed to indemnify the Group against any loss or damage arising from any challenge of the Group’s right to use the aforementioned properties and buildings.

(b)

The Group entered into certain agreements with CSAH in prior years to acquire certain land use right and buildings from CSAH. The change of business registration of such land use right and buildings are still in progress. CSAH issued letters of commitment to the Company, committing to indemnify the Group against any claims from third parties to the Group, or any loss or damage in the Group’s operation activities due to lack adequate documentation of the certain properties and buildings, without recourse to the Group.

(c)

The Company and its subsidiary, Xiamen Airlines, entered into agreements with certain pilot trainees and certain banks to provide guarantees on personal bank loans amounting to RMB696 million (31 December 2020: RMB696 million) that can be drawn by the pilot trainees to finance their respective flight training expenses. As at 31 December 2021, total personal bank loans of RMB181 million (31 December 2020: RMB221 million), under these guarantees, were drawn down from the banks. During the year, RMB2 million has been made by the Group (2020: Nil) due to the default of payments of certain pilot trainees.

SUBSEQUENT EVENTS

On 29 October 2021, the Company entered into the Conditional Subscription Agreement in relation to the Subscription of the A Shares under the Non-public Issue of A Shares of China Southern Airlines Company Limited with CSAH, pursuant to which the Company proposed to issue 803,571,428 new A Shares to CSAH (“the A Share Issuance”). The total funds to be raised from the A Share Issuance will be not more than RMB4,500 million (including RMB4,500 million). The consideration shall be made by CSAH in full by cash. On 29 October 2021, the Company entered into the Conditional Subscription Agreement in relation to the Subscription of the H Shares under the Non-public Issue of H Shares of China Southern Airlines Company Limited with Nan Lung Holding Limited (“Nan Lung”), pursuant to which the Company proposed to issue not more than 855,028,969 new H shares (including 855,028,969 H shares) to Nan Lung (“the H Share Issuance”). The total funds to be raised from the H Share Issuance will be not more than HKD1,800 million (including HK$1,800 million). The consideration shall be made by Nan Lung in full by cash. Both of the A Share Issuance and the connected transaction contemplated under H Share Issuance were approved by the Extraordinary General Meeting of the Company on 28 December 2021. The Company announced that it had received the “Acceptance Notice of the Application for Administration Permission” issued by China Securities Regulatory Commission (“CSRC”) for the A Share Issuance and H share Issuance on 10 January 2022 and 11 January 2022, respectively. On 18 March 2022, the Company announced that it had received the Approval on Issuance of Overseas Listed Foreign Shares by China Southern Airlines Company Limited (Zheng Jian Xu Ke 2022 No. 497) issued by the CSRC. As at the date of this announcement, the A Share Issuance is under review by the CSRC.

CHANGES IN SHARE CAPITAL STRUCTURE

Unit: Share


	31 December 2020				Increase/ (decrease) in 2021			31 December 2021
	Number of Shares		Percentage *(%)*		Number of Shares			Number of Shares		Percentage *(%)*
I. Shares subject to restrictions on sales
1. RMB ordinary shares		2,942,637,115		19.20		(489,202,658	)		2,453,434,457		14.48
2. Foreign listed shares (Note)		1,209,621,577		7.89		(1,209,621,577	)		0		0

Total		4,152,258,692		27.09		(1,698,824,235	)		2,453,434,457		14.48

II. S hares not subject to restrictions on sales
1. RMB ordinary shares		8,111,520,431		52.91		2,108,338,291			10,219,858,722		60.30
2. Foreign listed shares (Note)		3,065,523,272		20.00		1,209,621,577			4,275,144,849		25.22

Total		11,177,043,703		72.91		3,317,959,868			14,495,003,571		85.52

III. Total number of shares		15,329,302,395		100		1,619,135,633			16,948,438,028		100

Note:

In the above table, the 1,209,621,577 foreign listed shares of the Company subject to restrictions on sales as at 31 December 2020 included (i) 600,925,925 H shares (“2018 Subscription Shares”) owned by Nan Lung, a wholly-owned subsidiary of the Company’s controlling shareholder, China Southern Air Holding Company Limited, as a result of the subscription of the non-public issuance of H shares of the Company in 2018, while Nan Lung undertook that the 2018 Subscription Shares shall not be listed or traded on any stock exchange, or transferred within 36 months from the completion date of the issuance thereof (i.e. 11 September 2018) and such commitment period has expired during the year ended 31 December 2021; (ii) 608,695,652 H shares (“2020 Subscription Shares”) owned by Nan Lung as a result of the subscription of the non-public issuance of H shares of the Company in 2020, while Nan Lung undertook that the 2020 Subscription Shares shall not be listed or traded on any stock exchange, or transferred within 36 months from the completion date of the issuance thereof (i.e. 15 April 2020). Considering that the 2018 Subscription Shares and the 2020 Subscription Shares are not subject to restrictions on sales in nature, the 2018 Subscription Shares and the 2020 Subscription Shares were reclassified as the Company’s foreign listed shares not subject to restrictions on sales during the year ended 31 December 2021.

PURCHASE, SALE OR REDEMPTION OF SHARES

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any shares during the year ended 31 December 2021.

PRE-EMPTIVE RIGHTS

There is no specific provision under the PRC laws or the articles of association of the Company regarding pre-emptive rights, which requires the Company to offer new shares to existing shareholders in proportion to their existing shareholdings when there is issuance of shares.

AUDIT AND RISK MANAGEMENT COMMITTEE

The Audit and Risk Management Committee of the Company has reviewed the audited consolidated financial statements of the Group for the year ended 31 December 2021.

COMPLIANCE WITH THE MODEL CODE

Having made specific enquiries, all Directors and Supervisors of the Company confirmed that they had complied with the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 to the Rules (the “Listing Rules”) Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) for the year ended 31 December 2021. The code of conduct adopted by the Company regarding securities transactions by the Directors and Supervisors is no less stringent than the Model Code.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

As Mr. Wang Chang Shun resigned as the Chairman, the executive Director, the chairman of the Strategic and Investment Committee of the Board and the member of the Nomination Committee of the Board of the Company on 21 December 2020 due to his retirement, the Board on the same day appointed the vice Chairman and president of the Company, Mr. Ma Xu Lun, as the Chairman of the 8th session of the Board. Due to the fact that Mr. Ma Xu Lun concurrently served as the Chairman and the President of the Company, the Company at that time was not in compliance with provision A.2.1 of the Corporate Governance Code which requires the roles of chairman and chief executive should be separate. Nevertheless, having considered that (i) the co-performance of the duties of the Chairman and the President was a temporary arrangement pending election and appointment of a candidate to fill vacancy of the President position; and (ii) the Board would meet regularly and whenever needed to consider matters relating to business operations of the Group, the Board at that time was of the view that this temporary arrangement would not impair the balance of power and authority of the Board and the management of the Company, nor will the effectiveness of corporate planning and implementation of corporate strategies and decisions be affected. On 22 June 2021, the Board appointed Mr. Han Wen Sheng as the President of the Company and Mr. Ma Xu Lun resigned from the President of the Company. From then on, the roles of Chairman and the President of the Company are held by different individuals, and accordingly, compliance in the code provisions as set out in provision A.2.1 of the Corporate Governance Code has been restored.

Save as disclosed above, the Board considers that the Group has complied with the code provisions of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules for the year ended 31 December 2021.

DIVIDENDS

Considering that the Company suffered an operating loss for year of 2021, which does not meet the conditions for profit distribution as required under the Articles of Association of the Company, the Board did not recommend any payment of cash dividend or conversion of capital reserve into share capital or other profit distribution of the Company for the year of 2021. The proposal in relation to the profit distribution plan is still subject to the consideration and approval of the shareholders’ general meeting of the Company.

2022 OUTLOOK

Looking forward to 2022, the trend of the global pandemic still has relatively highly uncertainty, and measures for pandemic prevention and control of different countries differentiated gradually. The prospects for economic recovery in both developed countries and developing countries are uncertain. According to the forecast of the International Monetary Fund, the global economy is more fragile than expected. The global economy growth for 2022 is expected to be lowered to 4.4%.

China’s economic development encounters three pressures, namely demand reduction, supply disruption and anticipation weakening. In 2022, China will insist on the overall basis of prioritising stability and persuing improvement in stability, accelerating the building of new development pattern, comprehensively deepen reform and opening up, adhere to innovation-driven development to drive high quality development, and keep taking supply-side structural reform as its main task, to coordinate pandemic prevention and control and economic and social development.

Facing the complicated and changeable environment both domestically and abroad, the Group will proactively participate in the construction of a strong country in the new era and support China’s civil aviation in building a strong country of civil aviation. Besides, the Group will coordinate pandemic prevention and control and management response, stick to high quality development and spare no efforts to build the Group into a world-class air transport enterprise with global competitiveness.

1.	To stick to scientific and precise prevention and control, and strengthen normalized management of pandemic prevention and control

The Group will stick to scientific and precise prevention and control, and assume its main responsibility for pandemic prevention and control. We will pay attention to the situation of pandemic prevention and control, and follow the requirements of each regulator to dynamically adjust measures for pandemic prevention and control; we will strengthen pandemic prevention training and the supervision and inspection of epidemic prevention, and strengthen the awareness of responsibility for pandemic prevention and control; we will manage passengers and staffs according to their classifications, so as to implement precise prevention and control; we will continue to amend working system for pandemic prevention and control, improve working mechanism to achieve scientific prevention and control; and we will continue to control the risk of imported pandemic and whole-process monitoring of passengers, to implement normalized management of pandemic prevention and control.

2.	To put safety first, and prevent and dissolve safety risks

The Group will build a sustainable and high quality safety, and by taking the deepening the construction of seven major safety systems as its core, strengthen responsibilities, controlling risks and managing process. We will strictly implement safety responsibility, improve the construction of safety system; improve safety training system, reform flight training management system, implement maintenance skill improvement training; perform dual prevention mechanism of safety risks classification and control and the identification and management of potential safety hazards, to propel the construction of operation risk control system; strengthen safety performance management and application, to drive the digital transformation of safety process management; to promote the construction of safety system by means of innovative technologies. In 2022, the Group will ensure its continuation in aviation safety as in past years.

3.	To ensure management response, and spare no effort to improve business performance

The Group will pay close attention to the pandemic situation and changes in the aviation market, and adjust operation strategies in a timely manner. We will increase inputs in domestic transportation capacity, optimize international layout, continue to enhance market control, optimize market structure, spare no efforts to pursue time slot resources, and establish management system for high-value clients and to consolidate the cooperation with airlines; we will capture the opportunities in the international freight market to improve the utilization rate of freighters and do well in international in-bound market and belly-hold operation; an improved product system will be established to expand group customers and increase freight flights converted from passenger aircraft; we will accelerate the construction of freight hubs to establish Guangzhou-Shenzhen integrated hub, strengthen Shanghai Pudong hub and enhance the operating quality of Beijing Daxing hub; we will promote the sustainable development of warehousing, e-commerce trade, supply chain management and other new businesses.

4.	To establish a long-term mechanism for cost control, and enhance the ability to resist risks

The Group shall establish a long-term mechanism for cost control to found a solid foundation for high quality development. We will continue to conduct projects of “Golden Idea Makes Benefits”, comprehensive improvement of budget management, market-based accounting, digitalised finance, goal setting and benchmarking management, etc. and optimize the business-based variable cost management system; we will expand financing channels to realize diversified and low-cost financing, continue to optimize debt structure; proceed with non-public issuance of shares, to constantly optimize assets and liabilities structure; strengthen the management of financial risks and finance risks; strengthen centralized control of funds to ensure the security of capital chain; and continue to invigorate idle assets and real estate.

5.	To improve operation quality, and build a first-class brand service system

The Group will continue to improve operational efficiency and service quality. We will strengthen the management ability to the operation and dispatching system at all levels, and promote the digitalised and intelligent transformation in operational area; improve the whole chain management mechanism for jet fuel, to drive the data-based transformation of fuel saving control and constantly lower fuel consumption per ATK; we will establish a customer-oriented service quality management system, to manage the service quality during the whole process, and promote the integration of service with marketing and operation, so as to develop “Humanized, Digitalized, Refined, Personalized, Convenient” service. We will strengthen the brand image of “Affinity and Refinement”, further enhance brand management capacity, formulate and optimize the management standard of corporate identity system.

6.	To intensify reforms, expedite the implementation of strategies and create momentum for development

The Group will deeply promote the reform of systems and mechanisms, to ensure that the critical strategies for high quality development are implemented gradually, and continue to explore development space. We will complete the reforms of three systems, to realize the full coverage of tenure system and contractual management of staff; deepen reform of aircraft maintenance to build aircraft maintenance brand; promote the implementation of “Double Hundred Action” and “Innovative Technology Reform Demonstration Actions”, continue to improve the modern enterprise system with Chinese characteristics, and perform the powers and functions of the Board; establish “Sunshine Purchase” system to drive the construction of standardized procurement; we will proceed with the construction of hubs in high quality, grasp the opportunities arising from the development of Greater Bay Area, continue to expedite the “Four Integrations”; continue to promote the adjustment and optimization of five major structures, deeply proceed the building of business ecosystem and establish products lines by focusing on “food, accommodation, transportation, entertainment, travel and shopping”. We will accelerate the deployment in Hainan Free Trade Port, to drive the implementation of projects in freight, air catering, general aviation and e-commerce industries.

PUBLICATION OF ANNUAL REPORT ON THE WEBSITES OF THE STOCK EXCHANGE AND THE COMPANY

The 2021 annual report of the Company, which contains consolidated financial statements for the year ended 31 December 2021, with an unmodified auditor’s report, and all other information required under Appendix 16 to the Listing Rules will be despatched to the shareholders of the Company and published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company(www.csair.com) in due course.

By order of the Board

China Southern Airlines Company Limited

Xie Bing

Company Secretary

Guangzhou, the People’s Republic of China

30 March 2022

As at the date of this announcement, the Directors include Ma Xu Lun and Han Wen Sheng as executive Directors; and Liu Chang Le, Gu Hui Zhong, Guo Wei and Yan Andrew Y as independent non-executive Directors.

Exhibit 99.2

China Southern Airlines Co., Ltd.

Corporate Social Responsibility Report

Year 2021

Set Sail on a New Journey-

Flying Safely into the Future

About the Report

This report is the 15^th Corporate Social Responsibility report issued by China Southern Airlines Co., Ltd. It presents the Company’s practice and achievements in the fields of economics, environment and Corporate Social Responsibility.

We look forward to your learning more about China Southern Airlines through this report.

Reliability Guarantee

The Board of Directors and all directors of the Company undertake that there are no false records, misleading statements or major omissions in the contents of this report and are responsible for the authenticity, accuracy and completeness of its contents.

Report Time Frame

The reporting time range is from January 1 to December 31, 2021 and has been appropriately extended to enhance the comparability of the report. This report is published concurrently with the Annual Report, which was published in March 2021.

Reporting Boundaries

The disclosure boundary of the data indicators in this report is mainly based on China Southern Airlines Co., Ltd., and individual indicators are extended to China Southern Airlines Group Co., Ltd. The scope of data disclosure has been specified in the report. There are no significant changes in the organization size, structure, ownership or supply chain during the reporting period.

Data Statement

The financial data in this report comes from the audited annual report of China Southern and other data comes from the public data of government departments, official documents of the Company and relevant statistics. This report collects data based on the quantitative Corporate Social Responsibility indicator system that conforms to the characteristics of China Southern Airlines.

The financial data in this report is in RMB unless otherwise stated.

Compilation Basis

The State-owned Assets Management and Supervision Commission of the State Council “Guiding Opinions on the Fulfillment of Corporate Social Responsibility by Central Enterprises”

Hong Kong Stock Exchange Environmental, Social and Governance Reporting Guidelines (HK-ESG)

Guidelines for the preparation of the “Report on Corporate Social Responsibility” issued by the Shanghai Stock Exchange

Chinese Academy of Social Sciences “Guidelines for Compilation of Corporate Social Responsibility Reports in China” (CASS-CSR4.0)

Global Sustainability Standards Council GRI Sustainability Reporting Standards (GRI Standards)

GB/T 36001-2015 Guidelines for Compilation of Corporate Social Responsibility Reports

Appellation Description

For the convenience of expression and reading, “China Southern Airlines Co., Ltd.” is also represented by “China Southern” or “Company”, “China Southern Group Co., Ltd.” is also represented by “China Southern Group”, “Group”, “Xiamen Airlines Co., Ltd.” is also represented by “Xiamen Airlines”, local branches are represented by “region name + branch company” and “Civil Aviation Administration of China” is also represented by “Civil Aviation Administration.”

Report Acquisition

This report includes both Chinese and English versions and is published in both paper and electronic formats. You may log in to the official website of China Southern Airlines to browse or download this report online.

Contact Information

If you have any questions or suggestions about this report, please write to us at China Southern Airlines Co., Ltd.

Address: China Southern Airlines Company Limited, No.68 Qixin Road, Baiyun District, Guangzhou.

Postal code: 51040

Website: www.csair.com

Contact: Huang Kun

E-mail: [email protected]

TABLE OF CONTENTS5


Letter from the Chairman			5

About Us			7

Board Statement			14

Focus 2021			21

1. Building a Strong Line of Defense - Setting Sail for a Safe Future			35

1.1 Consolidating Safety Management			35

1.2 Adhering to Aviation Safety			37

1.3 Ensuring Passenger Safety			41

1.4 Managing Occupational Health			42

2. Low Carbon Environmental Protection - Setting Sail Towards a Green Future			44

2.1 Improving Environmental Management			44

2.2 Implementing Energy Saving and Emission Reduction			46

2.3 Strengthening Pollution Prevention and Control			47

2.4 Advocating Green Environmental Protection			49

3. Affinity and Refinement - Setting Sail for a Warm Future			51

3.1 Guaranteeing Safe Flight Operations			51

3.2 Smart Travel			52

3.3 Providing Warm Service			54

3.4 Maintaining Customer Relations			59

3.5 Quality Logistics Service			62

4. Innovation and Efficiency - Setting Sail for a Prosperous Future			65

4.1 Compliant and Stable Flight Operations			65

4.2 Deepening Reforms			69


4.3 Sustainable Supply Chain			71

4.4 Strengthening Exchanges and Cooperation			74

5. Moving Forward Hand in Hand - Setting Sail Toward a Wonderful Future			78

5.1 Helping Employees Flourish			78

5.2 Contributing to a Harmonious Society			88

6. Report Appendix

Outlook			98

List of Policies and Regulations			99

Performance Data			103

Index of Indicators			107

Feedback Form			115

Letter from the Chairman

During Year 2021, in the face of the complex and severe situation created by the COVID-19 global pandemic, China Southern adhered to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and resolutely implemented the requirements of the Central Government and superiors, staying true to its original mission.

China Southern began this new “normal” situation of COVID-19 with practical work and made overall plans for pandemic prevention and control as well as safe production and operation, reform and promoting various work of party building, fully fulfilled political, economic and social responsibilities, and practiced “airline of the people and for the people” with practical actions.

We took solid and meticulous prevention and control measures to push down the impact of COVID-19. We regarded pandemic prevention and control of COVID-19 as a top priority, further consolidating responsibilities, improved pandemic prevention and control mechanisms, adjusted in-flight service procedures, carried out special rectification at airports to prevent the importation of this plague from overseas travelers and strengthened our closed-loop management of five categories of personnel on international flights. Concurrently, we strengthened employee pandemic prevention training and education and psychological counseling for quarantined personnel and promoted the full coverage of vaccination. A total of 79 new crown vaccine charter flights were carried out throughout the year, carrying 130 million doses of new crown vaccine, ranking first in China’s civil aviation.

We overcame multiple challenges and demonstrated good momentum for high-quality development. In terms of safety, we vigorously promoted the construction of seven major safety systems and continuously provided flight operations safely for 266 months and air defense safely for 331 months. This high safety level commitment continued to maintain China Southern Airlines’ leadership position in China’s civil aviation.

In terms of flight operations, we fully responded to the severe impact of the COVID-19 pandemic, improved operational revenue, reduced costs and revitalized resources; regarding flight operations, a special campaign to improve flight regularity was carried out and as flight regularity rate reached a strong 89.89%, 1.9 percentage points higher than the industry average.

In terms of service, we built a new service brand. “Affinity and Refinement”, strengthened service management and control and all service indicators were listed in the forefront of China’s domestic airlines. Strategically, the overall idea of high-quality development has been clarified; The 14th Five-Year Plan has been formulated; Digital transformation has been accelerated; Five major structural adjustments have been optimized; China Southern’s ecosystem has been built, and various strategic tasks have been steadily advanced. In terms of reform, more than 70% of the three-year reform action tasks have been exceeded and the vitality of development momentum has been further enhanced.

We fully fulfilled the Corporate Social Responsibilities of central enterprises and achieved “three boosts”. The first was to boost the national strategy, promoting the high-quality development of our Beijing at Beijing Daxing International Airport hub; promoted the “four integrations” of the Greater Bay Area market, products, services and networks and accelerated the implementation of projects such as cross-border e-commerce, general aviation and aircraft leasing at the Hainan Free Trade Port. The second was to boost rural revitalization, investing 17.28 million in assistance funds and implementing 40 new projects in the rural revitalization stage throughout the year. We donated five million to purchase 5,617 television sets that were given to disadvantaged residents of Moyu and Pishan counties in the Hotan area of Xinjiang - the designated aid targets - and invested 58 million to construct the Xinjiang Moyu Mingzhu Primary School. The total amount of consumer assistance exceeded 66.32 million. The

third was to promote green development, carrying out a streamlined digital energy conservation and emission reduction program that reduced carbon emissions by 221,100 tons, guiding passengers to our all-new On Demand Dining in-flight meal program which saved more than 3.71 million meals and earned the “Annual Environmental Protection Airline”, “Golden Key” Champion Award, “Carbon Neutral Case” and other honors.

We focused on people’s livelihood projects and conducted “three services” very well. In the study of party history, the “I do practical things for the masses” activity was carried out, 21 new key livelihood projects were announced, and secondary units launched more than 600 key livelihood projects, meeting the people’s “urgent and long-awaited” challenges. One is to serve the public. We always put the safety of people’s lives first. In April 2021, in order to rescue a Uyghur boy with a broken arm, China Southern airport officials instructed the flight to return to the departure gate to open the cabin door a second time to invite the child (and his parents) into the cabin and still maintained an on-time departure/arrival so the young child could meet the awaiting ambulance and receive needed treated in time; In June, a shipment of lychees from Guangdong was blocked due to the COVID-19 pandemic. China Southern urgently deployed 320 flights, carrying more than 7,200 tons of lychees, opening up the air passage for Guangdong lychees to leave the province and in doing so earned a special contribution award of “I do practical things for farmers who grow lychees” by Guangdong Province. The second was to serve our travelling passengers. We sincerely care for our special passenger groups, and we have opened service windows for our senior travelers at 66 directly affiliated ticket offices and 30 airports, and launched the “one-network interconnection” function for unaccompanied minors. The arrival time of flight delay compensation has been shortened to less than two minutes, and the entire process of domestic passenger tickets has now been automated. Our baggage transportation error rate dropped by 15.7% year-on-year. The third is to honor and respect the more than 100,000 employees and managers who work for China Southern Airlines. We optimized and adjusted the standard of heatstroke prevention fees for front-line positions, popularized supplementary medical insurance policies, provided additional service for families where both husband-and-wife are working for China Southern, strengthened the care of quarantined personnel, equipped 900 sets of fitness equipment, and launched nearly 500,000 “specialized quarantine meals” to let employees and the masses experience the special cuisine which was created just for them!

During Year 2022, China Southern Airline is pledged to work closely around the CPC Central Committee with Comrade Xi Jinping as the core, forge ahead with a new journey of high-quality development with a more high-spirited attitude, accelerate the pace of becoming a world-class airline while actively giving back to the society and celebrating the successful convening of the 20^th National Congress of the CPC.

Ma Xulun

Chairman

China Southern Airlines Co., Ltd.

About Us

Company Profile

Headquartered in Guangzhou, China Southern Airlines Co., Ltd. was established in Year 1995, listed on the Hong Kong Stock Exchange and the New York Stock Exchange in 1997 and was listed on the Shanghai Stock Exchange in Year 2003. As the largest airline of the People’s Republic of China, China Southern has 20 branches (including branches in Taiwan and Macau), with 23 domestic sales offices and 55 international sales offices.

China Southern Airlines is proud to operate the largest number of modern aircraft, the most developed route network and the largest annual passenger volume in China. The scope of business services spans domestic, international and regional scheduled and irregular air passenger, cargo, mail and luggage transportation.

In recent years, China Southern has made significant progress in building up its Guangzhou-Beijing dual aviation hubs through newly opened and optimized route networks … while continuously providing passengers with safe and reliable air transportation products and services as it works to become a world-class air transport enterprise.

By the conclusion of Year 2021

Routes operated by China Southern – 1,401 lines

New domestic routes throughout the year - 175 lines

The total transportation turnover was 21.2 billion ton-kilometers

98.50 million passenger traffic

1.44 million tons of cargo and mail

Ranked 12^th in Skytrax’s “2021 Global Airline Top 100” list, ranked #1 among major domestic airlines

Earned the seventh CAPSE Airline Service Award for “Best Airline” and “Innovative Service”

Awarded the highest “Seven-Star Safety Rating” and the title of “COVID-19 Pandemic Prevention Seven Star Airline” by AirlineRatings.com – an internationally renowned independent aviation rating network.

Earned the “Advanced Unit to Win the Blue Sky Defense War” by the Civil Aviation Administration

The 4^th “China Centralized Supply Chain Leading Enterprise” Award in 2021

Ranked 7^th in Brand Finance Magazines’ 2021 “World’s 50 Most Valuable Airlines”

Claimed 41^st place in “China’s 50 Most Valuable Brands” by World Brand Lab in 2021

Selected as a “Typical Case of Carbon Neutrality” by People’s Daily Online

Ranked No. 1 in China’s Brand Power Research Aviation Service Industry for 11 Consecutive Years

Ranked in the “2021 Chinese Enterprise Sustainable Development 100 List”

Ranked the top 15 of SASAC’s 2020 Important Enterprise Brand Building Capability Top 30 List

Named the Best Airline of the Year Award from CAPSE for the four consecutive year


2021 Fleet Structure

Passenger Aircraft

Airbus A350 系列		12

Airbus A330 系列		40

Airbus A320 系列		334

Airbus A380 系列		5

Boeing B787 系列		39

Boeing B777 系列		15

Boeing B737 系列		399

EMB190 系列		6

ARJ21 系列		12

Cargo Aircraft

Boeing B777 系列		14

Boeing B747 系列		2

A total of 878 passenger aircraft

862 passenger aircraft

16 cargo aircraft

Company Culture

China Southern’s corporate culture embraces “Sunshine China Southern Convention” as its precious spiritual wealth, accumulated during the continued Company’s growth and development. It is both a call to action and ideological guide that all China Southern staff and senior managers abide by and practice together, which injects a special inspiration into all employees to build China Southern into a world-class air transport enterprise with global competitiveness.


Core Concepts	Cultural Character: Sunshine China Southern	Corporate Mission Connecting the world for a better life

		Corporate Vision Building a world-class air transport enterprise with global competitiveness

		Spirit of China Southern Diligence, pragmatism, tolerance, innovation

		Core Values: CSAIR Customers first, respecting all talents, pursuing excellence with continuous innovation

Development Strategy

Year 2021 was the first year of the “14th Five-Year Plan”.

With the vision and goal focused squarely becoming a major, world-class airline, China Southern remains steadfast in its mission of high-quality development, adheres to five major developments, implements five major strategies, promotes six major actions, realizes six major transformations and formulates the “14th Five-Year” development plan and 19 business sub-plans by actively promoting the implementation of its strategic plan while striving to develop a its market-leading high-quality development path.


Five Major Developments

Safe Development	High-Quality Development	Innovative Development	Cooperative Development	Shared Development

Five Strategies

Hub Network Strategy	Ecosystem Strategy	Innovation Driven Strategy	Lean and Control Strategy	Brand Management Strategy

Six Actions

Special Rectification of Production Safety	Grasping Major Strategic Opportunities	Deepening Key Reform Breakthroughs	Improving the Benchmarking of First Class Management	Adjusting and Optimizing Five Major Structures	Improving Service Quality

Six Changes

From Speed to Quality	From Comprehensive Market Expansion to Key Breakthroughs	From Single Industry to Related Diversified Industry	From Planned Management to Market Operation	From Traditional Business Model to Digital and Ecosystem	From Extensive Management to Refined Management

Daxing China Southern - China Southern Daxing

During Year 2021, China Southern thoroughly implemented its strategy of serving the nation, serving the coordinated development of the Beijing-Tianjin-Hebei region, the construction of the Xiongan New Area and regarded “comprehensively improving the operational quality of Beijing Daxing International Airport” as one of the seven tough battles.

Decisive efforts were made during Year 2021 to build up China Southern’s Beijing hub brand of “Daxing China Southern - China Southern Daxing” as well as “comprehensively improving the operational quality of Beijing Daxing International Airport” which has become a protracted battle that requires long-term investments and in-depth cultivation in the deepening operation stage of the airline’s Beijing hub, which is a challenge earned by all of China Southern Airlines team members and also serves as a comprehensive improvement of all factors such as market, transportation capacity, basic support and mechanism construction.

“Daxing China Southern - China Southern Daxing” is the new brand of China Southern hub construction which has achieved remarkable positive results.

Voice of Stakeholders

“”Beijing-Guangzhou Express Line’ runs every half an hour or an hour, you don’t have to wait, you can fly when you arrive and there is a dedicated check-in and security check channel which I have found to be very convenient. It feels like taking a bus or subway in the city.”

• Mr. Zhang, passenger

•

Improving Beijing Daxing International Airport Operational Quality

The opening of the “Beijing-Guangzhou Express” and “Beijing-Shenzhen Express” flight service has become an exciting new, two-core air express business at Beijing Daxing International Airport, which will provide passengers with a convenient and comfortable travel experience. At present, China Southern has carried out nearly 68,000 flights safely on the routes at Beijing Daxing International Airport. The network spans 47 domestic destinations and the average daily flight volume exceeds 300 to form a new route network radiating outward from Beijing-Tianjin-Hebei and Xiongan New Area to nearly every part of the nation.

•

Launching Daxing “Multi-point Check-In”

Launched a new “multi-point check-in” at Beijing Daxing International Airport required the addition of self-service kiosks as well as new sales counters to meet the needs of rail transit passengers when making their airport check-in as well as a consignment ticket change booth, itinerary printing and other services … all focused on reducing valued time at multi-point check-in.

•

Building Daxing Goods Station

Building an aviation hub and “urban cargo terminal” requires the active rights of international airlines and efficiently transporting temperature-controlled pharmaceutical goods as well as actively opening up domestic and international logistics air channels in North China. This dramatically has worked to build up the Daxing Cargo Terminal into an important facility for the coordinated development of Beijing, Tianjin and Hebei.

On September 25, 2021, China Southern Beijing Daxing-Vancouver general cargo passenger-to-cargo flight successfully launched its maiden flight, signifying China Southern Daxing Cargo Terminal becoming the only cargo terminal that offers international passenger-to-cargo general cargo transportation at the international port of Beijing Daxing International Airport.

Corporate Governance

China Southern implemented the “Two Consistency”, strictly implementing a three-year action program for the reform of state-owned enterprises which has as its core the strengthening of party leadership in improving corporate governance.

The Company complied with national laws and regulations while improving its corporate governance systems, articles of association and other governance systems, and revised the “Articles of Association”, “Procedure Rules of the Board of Directors” and formulated corporate governance documents such as the “Administrative Measures for the Authorization of the Board of Directors”, “Procedure Rules for the Chairman’s Office Meeting” and promoted the group and subsidiaries at all levels to formulate a list of major business management matters that will be studied and discussed in advance by the party organization and clarified the boundaries of rights and responsibilities of each governance body.

The Company comprehensively standardized the governance of the Board of Directors, strengthened the construction of the Board of Directors, implemented the functions and powers of the Board of Directors, promoted that the Board of Directors should be fully established, and ensured that external directors in the Board of Directors occupy the majority in principle, ensured that the management performs their powers and duties in accordance with the law, and strove to ensure the standardized and stable operation of the Company.

LOGO

Information Disclosure and Investor Relations Management

China Southern Airlines followed the regulatory requirements of listed companies to carry out information disclosure, revised the “Information Disclosure Management System of Listed Companies of China Southern Airlines Co., Ltd.”, and expanded online and offline information disclosure channels and established good investors communication mechanisms with dedicated shareholder communication to protect the interests of small and medium investors and fully protected investors’ “Right to Know”.

Received the Shanghai Stock Exchange’s A-level evaluation for information disclosure for eight consecutive years

Party Building

China Southern adheres to the leadership of the party, thoroughly studied and implemented Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, and continuously improved the quality of China Southern’s party building and maintained an “A” grade in the assessment of the Party Building Work Responsibility System of the SASAC of the State Council for four consecutive years. The Company promulgated the “China Southern’s Opinions on Guaranteeing High-Quality Development with High-Quality Party Building” and the “Outline of China Southern’s “14th Five-Year Plan” Leadership and Cadre Team Building Planning Outline to ensure the high-quality development of China Southern Airlines and is dedicated to building a world-class air transport enterprise as it transformed into a streamlined state-owned enterprise.

•

Strengthening Political Leadership

The Company carried out high-quality party history learning and education, organized a series of activities to celebrate the 100^th Anniversary of the founding of the CPC, carried forward the great spirit of party building, and carried out in-depth “I do practical things for the masses” to boost spirit and unite the entrepreneurial efforts of officers. The Company’s higher-level steering group applauded China Southern’s party history learning and education programs that achieved remarkable results.

•

Strengthening the Construction of Party Style and Good Government

The Company promoted normalization of political supervision, deepened the reform of the discipline inspection and supervision system, focusing on building an integrated system and mechanism to promote the “do not dare to be corrupt, cannot be corrupt and do not want to be corrupt”, improved the supervision of “top leaders” and leading groups at all levels; consolidated the effectiveness of central inspections and rectifications, further improved the reporting system for important matters of party committee inspections in secondary units and established a special inspection mechanism for inspections and rectification.

•

Improving the Quality of Party Building Work

Implemented the requirements of the “Year of Innovation and Expansion of Party Building in Central Enterprises” and introduced systems to strengthen the party building work in mixed-ownership enterprises and the assessment and evaluation of the responsibility system for party building work; continued to strengthen the “Three Base Construction” vigorously carried out “Party Member Pioneer Action” and creatively created and delivered a “Four Dimensions” party organization of the Headquarters functional department with high theoretical study and ideological work, vigorous promotion of development and bright organizational activities.

•

Strengthening the Training of Outstanding Young Cadres

Created a talent pool of outstanding cadres and formulated a management plan for the construction of China Southern’s talent team; completed the first phase of “Pearl Talents” management trainee internal and external recruitment and selection and promoted management trainees to rotate in the service system and marketing system.

•

Promoting the Integration of Party Building into Production and Operation

Built an effective organizational system and improved the system and mechanism, and carried out in-depth research, assistance and guidance on the work of the party building integration center; optimized the party building assessment of “one enterprise, one policy” and strengthened the standardization of branches.

The Party Committee of the Cabin Department earned the title of “National Advanced Grassroots Party Organization”.

•

Strengthening Publicity and Ideological Work

The Company continued to strengthen theoretical study and strengthened positive publicity, actively promoting media integration. The total exposure of the entire network reached 8.3 billion person-times, of which 1,609 were reported by key Chinese media. The brand of Sunshine China Southern has been streamlined, the corporate culture system has been improved and the incident of the boy with a broken arm in Xinjiang became a national social media phenomenon with 1.6 billion exposures and featured the Beijing Daxing International Hub, “Affinity and Refinement” and Green Flight were all well-publicized.

•

Deepening the Reforms of the Cadre and Personnel Systems

The Company hired a professional cadre talent team and implemented the “Six Haves” guidance on selecting and employing personnel while actively promoting the exchange of cadres. The exchange rate of cadres between the group-level Headquarters and the grassroots offices throughout China reached 9.8%.

The allowed for rectification of challenges of “Institutionalization of Central Enterprise Headquarters” and penetrated downwards, increasing the intensity of competitive selection, organized and implemented the competitive induction and open selection work for more than 250 positions at the group level as the proportion of personnel quitting exceeds five percent.