Form 6-K CHINA SOUTHERN AIRLINES For: Mar 31

April 1, 2022 6:22 AM EDT

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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

     4        101,644        92,561  
     

 

 

    

 

 

 

Operating expenses

        

Flight operation expenses

     5        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

     6        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

     12        91,186        86,146  

Construction in progress

     13        31,847        32,407  

Right-of-use assets

     14        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        92  

Amounts due from related companies

        151        —    

Deferred tax assets

     15        12,823        7,739  

Other assets

        3,211        2,877  
     

 

 

    

 

 

 
        285,345        287,398  
     

 

 

    

 

 

 

Current assets

        

Inventories

        1,652        1,760  

Trade receivables

     16        2,858        2,525  

Other receivables

     17        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        85  
     

 

 

    

 

 

 
        37,866        38,985  
     

 

 

    

 

 

 


     Note     

31 December

2021

RMB million

   

31 December

2020

RMB million

 

Current liabilities

       

Derivative financial liabilities

     18        1,222       3,148  

Borrowings

     19        57,913       40,099  

Lease liabilities

     20        20,805       20,930  

Trade payables

     21        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

     19        38,354       38,134  

Lease liabilities

     20        81,944       100,283  

Derivative financial liabilities

        20       53  

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

        26       80  
     

 

 

   

 

 

 
        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

 

  a.

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.

 

  b.

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      RMB million      RMB million     RMB million      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.

 

  c.

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.

 

  d.

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  
                   (%)  

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  
                   (%)  

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  
                   (%)  

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  

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

     74        0.06        84        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

 

1


About the Report

This report is the 15th 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.

 

2


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]

 

3


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


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.

 

5


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!

 

6


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 20th 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

 

7


Ranked 12th 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 4th “China Centralized Supply Chain Leading Enterprise” Award in 2021
Ranked 7th in Brand Finance Magazines’ 2021 “World’s 50 Most Valuable Airlines”
Claimed 41st 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

 

8


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.

 

9


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.

 

10


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.

 

11


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.

 

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Strengthening Political Leadership

The Company carried out high-quality party history learning and education, organized a series of activities to celebrate the 100th 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.

 

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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.