Annual Report 2009 FINANCIAL HIGHLIGHTS
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CONTENTS Corporate Profile 1 Financial Highlights 2 Chairman’s Statement 4 Business Review 7 Management Discussion and Analysis of Financial Condition and Results of Operations 14 Corporate Governance Report 20 Report of Directors 34 Report of the Supervisory Committee 54 Independent Auditor’s Report 56 Consolidated Statement of Comprehensive Income 58 Consolidated Balance Sheet 59 Balance Sheet 60 Consolidated Statement of Changes 61 in Shareholders’ Equity Consolidated Cash Flow Statement 62 Notes to the Consolidated Financial Statements 63 Supplementary Information from 127 the Management Corporate Information 128 Biographies of Directors, Supervisors, 133 Senior Management and Company Secretary CORPORATE PROFILE TravelSky Technology Limited (the “Company”, or including its subsidiaries, the “Group”) is the dominant provider of information technology solutions for China’s aviation and travel industry. The Group has been devoted to developing leading products and services that satisfy the needs of all the industry participants - ranging from commercial airlines, airports and air travel products and services suppliers to travel agencies, corporate clients, travelers and cargo shippers - to conduct electronic transactions and manage the demand for travel-related information. The core businesses of the Company include aviation information technology service, distribution information technology service, clearing and accounting and settlement service for aviation industry, etc. The Company was incorporated in the People’s Republic of China (the “PRC” or “China”) on October 18, 2000. As of the date of this report, it has a direct controlling equity interest in each of the following significant subsidiaries: TravelSky Technology (Hong Kong) Limited, TravelSky Technology (Singapore) Limited, TravelSky Technology (Korea) Limited, TravelSky Technology (Japan) Limited, TravelSky Technology (Europe) GmbH, TravelSky Technology USA Ltd, Accounting Center of China Aviation Limited Company, Shanghai TravelSky Information Technology Limited, Guangzhou TravelSky Information Technology Limited, Hainan Civil Aviation Cares Co., Ltd., Cares Shenzhen Co., Ltd., Cares Hubei Co., Ltd., Cares Chongqing Information Technology Co., Ltd., Aviation Cares of Yunnan Information Co., Ltd., Civil Aviation Cares of Xiamen Ltd., Civil Aviation Cares of Qingdao Ltd., Civil Aviation Cares Technology of Xi’an Ltd., Civil Aviation Cares Technology of Xinjiang Ltd., InfoSky Technology Co., Ltd. and TravelSky Technology (Beijing) Real Estate Limited. The Company also holds an equity interest in each of the following associated companies: Shanghai Civil Aviation East China Cares System Integration Co., Ltd., Shenyang Civil Aviation Cares of Northeast China, Ltd., Aviation Cares of Southwest Chengdu, Ltd., Heilongjiang TravelSky Airport Technology Limited, Yunnan TravelSky Airport Technology Limited, Shanghai Dongmei Aviation Tourism Online Co., Ltd , Dalian TravelSky Airport Technology Limited , Hebei TravelSky Airport Technology Limited and Guangzhou Airport AirSpan Information Technology Co. Ltd. The Group had 4,097 employees as of December 31, 2009. The H shares of the Company were listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on February 7, 2001. As of the date of this report, the largest shareholder of the Company is China TravelSky Holding Company, which holds an equity interest of approximately 29.29% in the Company. A total of approximately 38.84% of the equity interest in the Company is held by 14 Chinese commercial airlines, including the holding companies of the three largest Chinese commercial airlines, namely, China Southern Air Holding Company, China Eastern Air Holding Company and China National Aviation Holding Company. The remaining 31.87% of the equity interest in the Company is held by holders of its H shares. The Company established a Sponsored Level I American Depositary Receipt Programme. American depositary shares under the programme commenced trading on the U.S. over-the-counter market on December 27, 2002. TravelSky Technology Limited 1 Annual Report 2009 FINANCIAL HIGHLIGHTS 2 TravelSky Technology Limited Annual Report 2009 FINANCIAL HIGHLIGHTS Note: The financial figures for the year 2005, 2006, 2007 and 2008 have been adjusted, as if ACCA had been acquired at the earliest period presented. TravelSky Technology Limited 3 Annual Report 2009 CHAIRMAN’S STATEMENT Dear Shareholders, In terms of operation environment, 2009 was one of the most challenging years the Group has experienced since the new millennium. Dragged by the impact of the global financial crisis and the H1N1 influenza, demand for international aviation industry plunged and then recovered amid many twists. Benefiting from the appropriate policy implemented by the PRC government, and driven by the resilience in China’s economy, the demand for domestic aviation was the first to rebound and thrive among its peers around the world. In 2009, the Group initiated a number of measures to cope with the financial crisis. We integrated the newly acquired accounting, settlement and clearing services with our existing core businesses, which further lowered cost expenses and improved operational efficiency. In addition, through persistent effort devoted to the implementation of our corporate strategies, we attained achievements in various aspects, including enhancement of production safety, consolidation of main businesses, development of new businesses, as well as the preliminary preparation work done for the construction of the Mr. Xu Qiang new operating centre in Beijing. The effective Chairman measures launched by the Group, together with the cohesive and dedicated efforts of all our staff overcame the adverse impact of the financial crisis, enabling the Group to achieve gratifying operating conditions and financial performance. Looking forward to 2010, it is predicted that the recovery of world economy will be built on shaky grounds, as countries face dilemmas over the exit strategies of their financial stimulus policies, making the outlook of international aviation industry seems not the time to be optimistic. On the other hand, despite the implementation of policies by the PRC government to stimulate consumption, which provided a favorable basis for domestic aviation industry to maintain strong growth in demand, external factors, such as oil price and exchange rate fluctuations, the launch of high-speed rails, as well as the transformation in the growth pattern of China’s economy, and the structural adjustment of the industry, will bring along various changes to the domestic aviation market in different aspects, including industry structure, competitive landscape, business model and growth pattern. The Group is called to thoroughly study the repercussion of these factors on our information technology solution services, and find out the changes in demands and formulate effective measures in response. Seeing the above mentioned uncertainties in this “Post-crisis Era”, the rapid development in internet, the extensive application of open technology, and the gradual relaxation in GDS restriction of major aviation markets around the world, as well as the development of new industrial participants, the Group expects greater challenges ahead. 4 TravelSky Technology Limited Annual Report 2009 CHAIRMAN’S STATEMENT As such, the Group will accelerate the construction of the new operating centre in Shunyi, Beijing and the development of the new generation aviation passenger service system in 2010, increase our capability of sustainable development. Through technological innovation, management innovation and enhancement of talent and team building, the Group will devote greater efforts to elevating its technological services capability, market expansion capability and operation management ability. We will leverage on organic growth in existing traditional businesses and continual exploration into new businesses, in order to realize the objective of “staying committed to becoming a leading information technology service provider with core competitiveness, sparing no effort to achieve the goal of becoming a top-tier enterprise with international competitiveness”. With respect to the construction of infrastructure, the construction of the new operating centre in Shunyi new zone will lay a good foundation for the Group’s sustainable development in its main aviation business. This centre will also serve as a low cost expansion platform for the Group’s expansion into new businesses and third-party public information hosting business. With respect to the technological innovation, the Group will further reinforce the safety measures as well as accelerate the development of the new generation aviation passenger service information system and related products portfolio. We will also optimize the correlation between the sharing platform and individual services, grasping the core demand of customers, which are to gain competitive edge and minimize costs. While exploit the potential value of our existing platforms, the Group will set its eyes on the IT market covering the whole industry, and formulate an all-rounded IT platform construction strategy in line with the development direction of “boosting platform resources and enriching product offerings”. Hence, the Group will create an IT service platform that encompasses the complete traveling flow of aviation passengers, and therefore set up a comprehensive airport information technology solution, so as to cultivate leapfrog