8 Chairman’s Statement China Eastern Airlines Corporation Limited Chairman’s Statement 9 Ye Yigan, Chairman Dear shareholders, Chinese government’s active fiscal policies and stable monetary policies, and I am pleased to announce the report on the further implementation of the policy the operating results of China Eastern to stimulate demand in the domestic Airlines Corporation Limited (the economy, China successfully realised a “Company”) and its subsidiaries stable transition in the first year after (collectively, the “Group”) for the year its accession to the WTO and the national ended 31 December 2002. On behalf of economy continued to maintain its high all the staff of the Group, I would like to rate of growth. extend my sincere thanks to the shareholders for their support of the Faced with the increasingly intense Group. competition in the domestic and international air transport market and, In 2002, the global economy began to in particular, the increased capacity of gradually recover. As a result of the China Eastern Airlines Corporation Limited 10 Chairman’s Statement response to the market Company provided venue and quality demand and attracted and transportation, conference and security ensured a more stable services for the annual meeting and won passenger traffic. In world-wide praises. addition, the Group improved its sales network, In 2002, traffic volume of the Group strengthened its marketing totalled 2,652 million tonne-kilometres, management, upgraded its an increase of 11.7% over the same period online ticket reservation in 2001, while revenues from the Group’s From left: Mr. Xia Xinghua, Director General of CAAC Eastern China Bureau, and payment system and principal business amounted to Mr. Han Zheng, Mayor of Shanghai Municipal Government, Mr. expanded e-commerce RMB12,482 million, an increase of Li Fenghua, President of our company, working together in October 2002 at Pudong International Airport for on-site review research and development. RMB804 million or 6.88% over the same of the allocation of flights to Pudong. The Group also expanded period in 2001. The average aircraft daily its cooperation with utilization was 8.6 hours, a reduction of foreign airline companies in the China foreign companies and established an 0.5 hours from the same period in 2001. market, the Group proactively adopted a equity joint venture avionics maintenance series of measures, which include actively service company with Rockwell Collins The increase in the revenues from the adjusting its capacity structure so as to Avionics of the United States in order to Group’s principal business derived mainly efficiently allocate passenger and enhance the quality of avionic product from the Group’s operations on freight capacity in response to market maintenance and reduce maintenance international routes. The increase in demand, optimising its route network, costs. The Company actively procured and passenger revenues was due to increase strengthening flight monitoring completed the restructuring of the former in passenger traffic on the Group’s capabilities and opening new passenger Wuhan Airlines Company and in August Japanese and Korean routes, and the routes. The Group opened the Beijing- 2002 established China Eastern Airlines recovery in market demand on its Delhi route, and subsequently the Wuhan Limited. In October 2002, China European and American routes from the Beijing-Tokyo and Shanghai-Kagoshima Eastern Air Holding Company (“CEA events of September 11. The significant routes, thereby increasing competitive Holding”) was formally established by increase in the Group’s cargo and mail advantage on certain international merging Eastern Air Group Company (“EA revenues was attributable to the routes. The Group also further developed Group”) with China Northwest Airlines increased volumn of importation and the transportation market and increased Company and Yunnan Airlines Company. exportation after China’s accession to the its market share in Shanghai through The establishment of CEA Holding will WTO and the positive effect on the Group’s promoting its “China Eastern Express” have a positive effect on the Group’s cargo operations by the west coast port service, and launching express transition future expansion of air transport strike in the United States in 2002. services on the Shanghai-Hong Kong- operation. As the host of the Taipei route together with Cathay Pacific 58th annual meeting of International In 2002, the Group’s total operating costs Airways. Such services were launched in Air Transportation Association, the reached RMB12,242 million, an increase China Eastern Airlines Corporation Limited 11 Chairman’s Statement of 8.50% over the same period in 2001. The increase in operating costs was primarily due to the increase in employee salaries, takeoff and landing charges and the deficit resulted from the revaluation of assets conducted by the Company in 2002. As at 31 December 2002, the Group conducted a revaluation of its assets pursuant to the requirements of IFRS. As a result of the revaluation, the Group In March 2002, our company provided quality transportation services to members of the National recognised a net revaluation surplus of Committee of the Chinese People’s Political Consultative Conference (CPPCC). Front: Mr. Wang Liping, Chairman of Shanghai CPPCC. RMB136,902,000 and in the revaluation reserve and a charge to profit and loss account of RMB171,753,000. As at 31 December 2002, the Group had to its employees’ medical benefits. The approximately 15,700 employees, Group believes that the implementation In addition, the Group has a significant most of them worked in China. The of such medical benefit scheme will not percentage of Japanese Yen compensation of the Group’s employees significantly affect the Group’s operations denominated liabilities. Due to the was primarily composed of the basic and financial condition. appreciation of the Japanese Yen against salary and performance-based bonus. the Renminbi in 2002, the Group’s There were no labour disputes between Outlook for the year 2003 financial statements reflect a foreign the Group and its employees. The Group The Group would like to caution readers currency exchange loss of RMB37.52 did not experience a loss of employees that this report contains, inter alia, some million for 2002. or encounter any difficulties in recruiting forward-looking statements, such as new employees. certain forward-looking statements on In summary, the Group’s profits the Asian and Chinese economies and attributable to shareholders were In January 2001, the Group joined the aviation markets. These forward-looking RMB86.37 million for the year ended 31 staff medical benefit scheme introduced statements are subject to numerous December 2002, a decrease of 84.06% by the Shanghai Municipal Government. uncertainties and risks. from the same period in 2001. The The Group and each of its employees are decrease was mainly due to the required to contribute to such scheme The Company believes that, in general, revaluation deficit resulted from the 12% and 2%, respectively, of the basic the global economy will continue to revaluation of assets conducted by the salaries of the relevant employee. Other recover, and the domestic economic Company as at 31 December 2002. The than such contribution, the Group does climate will be positive in 2003. The air earnings per share were RMB0.018. not have other obligations with regard transportation market will continue to China Eastern Airlines Corporation Limited 12 Chairman’s Statement business. China, with its extensive territory, large population and rich tourist resources, holds potential for the development and growth of air transportation. The Group expects to utilize the opportunities provided by large events, traditional holidays and tourism season and to timely adjust and allocate its transportation capacity in order to increase its traffic volume on all routes, thereby increasing its transportation revenues. Opening Ceremony for China Eastern Wuhan. As a result of the expanded reforms and strategic restructuring of China’s civil offer numerous opportunities and Chinese government’s continued policy to aviation industry, the Group’s route challenges. stimulate domestic demand. The Group’s network will be further improved. The main base of operations, Shanghai, is Group will also increase its capabilities The economies of the United States, leading the economy growth in China and to develop the air transportation market Japan and European Union will recover rapidly developing into an international in western China and build up a solid at a slow pace due to unstable financial economic centre, trade centre, financial foundation for the Group to face markets, limited space for trade growth centre and air transportation centre. The intensified market competition. The and relatively weak consumer demand. successful bid of Shanghai to hold Expo current market demand, China’s economy The Gulf War II will also significantly 2010 will also inject vigour into its and social development, and the Chinese affect the global political and economic economic development. The increase in government’s macro-economic policies all relations. On the other hand, however, import and export, and the volume of indicate that competition in the domestic the steady growth of the Chinese business activities and culture exchanges market will become more regulated and economy has brought hopes to global will drive a further boom in the air in order as a result of