Annual Report 2010 Air China Is the Only National Flag Carrier of China and a Member of the Star Alliance, the World’S Largest Airline Alliance

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Annual Report 2010 Air China Is the Only National Flag Carrier of China and a Member of the Star Alliance, the World’S Largest Airline Alliance Annual Report 2010 Air China is the only national flag carrier of China and a member of the Star Alliance, the world’s largest airline alliance. It is also the only Chinese civil aviation enterprise which is listed among “The World’s 500 Most Influential Brands”. Air China is headquartered in Beijing, the capital of China, with Shanghai and Chengdu as its two increasingly important hubs. As at 31 December 2010, through the Star Alliance, the routes network of Air China could cover 1,160 destinations in 181 countries. Air China is dedicated to providing passengers with safe, convenient, comfortable and customised services. The strategic objectives of Air China are to build up international competitive strength, continue to enhance development potentials, offer its customers unique and excellent experience and realise a sustainable growth so as to create value to all the relevant parties. In addition, Air China also directly or indirectly holds interests in the following airlines: Air China Cargo Co., Ltd., Air Macau Company Limited, Shenzhen Airlines Company Limited, Cathay Pacific Airways Limited and Shandong Airlines Co., Ltd. Contents 2 Corporate Information 3 Summary of Financial Information 5 Summary of Operating Data 7 Chairman’s Statement 10 Business Overview 15 Management’s Discussion and Analysis of Financial Position and Operating Results 22 Corporate Governance Report 32 Report of the Directors 51 Report of the Supervisory Committee 54 Profile of Directors, Supervisors and Senior Management Financial Statements prepared under International Financial Reporting Standards 60 – Independent Auditors’ Report 62 – Consolidated Income Statement 63 – Consolidated Statement of Comprehensive Income 64 – Consolidated Statement of Financial Position 66 – Consolidated Statement of Changes in Equity 67 – Consolidated Statement of Cash Flows 69 – Statement of Financial Position 71 – Notes to Financial Statements Financial Statements prepared under China Accounting Standards for Business Enterprises 164 – Consolidated Balance Sheet 166 – Consolidated Income Statement 167 Supplementary Information 169 Glossary of Technical Terms 170 Definitions Air China Limited • Annual Report 2010 1 Corporate Information REGISTERED CHINESE NAME LEGAL REPRESENTATIVE OF THE 中國國際航空股份有限公司 COMPANY Kong Dong ENGLISH NAME Air China Limited JOINT COMPANY SECRETARIES Huang Bin REGISTERED OFFICE Tam Shuit Mui 9/F, Blue Sky Mansion 28 Tianzhu Road AUTHORISED REPRESENTATIVES Zone A, Tianzhu Airport Economic Development Zone Cai Jianjiang Shunyi District Tam Shuit Mui Beijing China LEGAL ADVISERS TO THE COMPANY Haiwen & Partners (as to PRC Law) PRINCIPAL PLACE OF BUSINESS IN HONG Freshfields Bruckhaus Deringer KONG (as to Hong Kong and English Law) 5th Floor, CNAC House 12 Tung Fai Road INTERNATIONAL AUDITORS Hong Kong International Airport Ernst & Young Hong Kong H SHARE REGISTRAR AND TRANSFER WEBSITE ADDRESS OFFICE www.airchina.com.cn Computershare Hong Kong Investor Services Limited Rooms 1712-1716, 17th Floor DIRECTORS Hopewell Centre Kong Dong 183 Queen’s Road East Wang Yinxiang Wanchai Cao Jianxiong Hong Kong Sun Yude Christopher Dale Pratt LISTING VENUES Sai Cheung Shiu, Ian Hong Kong, London and Shanghai Cai Jianjiang Fan Cheng Jia Kang Fu Yang Li Shuang Han Fangming SUPERVISORS Li Qinglin Zhang Xueren He Chaofan Chen Bangmao Su Zhiyong 2 Air China Limited • Annual Report 2010 Summary of Financial Information (RMB’000) 2010 2009 2008 2007 2006 Turnover 82,487,539 51,393,191 52,908,161 51,081,667 44,936,606 Profit from operations 10,927,521 5,500,956 (9,806,971) 3,912,123 2,630,929 Profit before tax 14,833,612 5,066,285 (10,977,680) 5,448,165 3,929,221 Profit after tax (including profit attributable to non-controlling interests) 12,335,864 4,803,051 (9,367,030) 3,935,552 3,305,097 Profit attributable to non-controlling interests 330,860 (51,183) (111,208) (110,661) 617,256 Profit attributable to owners of the Company 12,005,004 4,854,234 (9,255,822) 4,046,213 2,687,841 EBITDA(1) 19,496,891 12,552,228 (3,441,696) 9,466,566 7,926,457 EBITDAR(2) 23,696,910 15,349,155 (593,230) 12,017,187 10,319,848 Earnings per share attributable to equity holders of the Company (RMB) 1.03 0.41 (0.78) 0.34 0.26 Return on equity attributable to owners of the Company (%) 28.97 20.30 (46.41) 13.22 9.04 (1) EBITDA represents earnings before finance revenue, finance costs, enterprise income taxes, share of profits and losses of associates, depreciation and amortisation as computed under the International Financial Reporting Standards. (2) EBITDAR represents EBITDA before deducting operating lease expenses on aircraft and engines as well as other operating lease expenses. Turnover (RMB’000) 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000 0 2006 2007 2008 2009 2010 Air China Limited • Annual Report 2010 3 Summary of Financial Information (RMB’000) 31 December 31 December 31 December 31 December 31 December 2010 2009 2008 2007 2006 Total assets 158,773,999 107,919,022 100,401,224 91,300,277 84,477,536 Total liabilities 117,402,762 83,964,555 79,944,718 60,548,027 52,741,843 Non-controlling interests (66,717) 38,571 513,654 138,050 2,011,435 Equity attributable to owners of the Company (excluding non-controlling interests) 41,437,954 23,915,896 19,942,852 30,614,200 29,724,258 Equity attributable to owners of the Company per share (RMB) 3.56 2.02 1.68 2.58 2.43 Total Assets (RMB’000) 200,000,000 150,000,000 100,000,000 50,000,000 2006 2007 2008 2009 2010 4 Air China Limited • Annual Report 2010 Summary of Operating Data The following summary includes the operating data of the Company, Air China Cargo, Air Macau, Shenzhen Airlines (including Kunming Airlines). Increase/ 2010 2009 (decrease) Traffic RPK (in millions) 105,694.99 75,473.77 40.04% International 33,206.63 27,543.73 20.56% Domestic 67,839.75 44,140.45 53.69% Hong Kong, Macau and Taiwan 4,648.61 3,789.59 22.67% RFTK (in millions) 4,840.90 3,528.37 37.20% International 3,583.74 2,605.90 37.52% Domestic 1,154.99 819.38 40.96% Hong Kong, Macau and Taiwan 102.17 103.09 (0.89%) Passengers carried (in thousands) 60,006.20 41,278.71 45.37% International 6,944.98 5,560.08 24.91% Domestic 50,185.69 33,369.15 50.40% Hong Kong, Macau and Taiwan 2,875.53 2,349.48 22.39% Cargo and mail carried (tonnes) 1,347,267.42 974,044.97 38.32% Kilometers flown (in millions) 767.37 558.19 37.47% Block hours (in thousands) 1,218.36 888.28 37.16% Number of flights 435,371 318,793 36.57% International 48,551 42,086 15.36% Domestic 362,107 254,784 42.12% Hong Kong, Macau and Taiwan 24,713 21,923 12.73% RTK (in millions) 14,294.41 10,293.56 38.87% Capacity ASK (in millions) 132,074.76 98,624.71 33.92% International 41,476.98 35,706.86 16.16% Domestic 84,370.14 57,524.61 46.67% Hong Kong, Macau and Taiwan 6,227.64 5,393.25 15.47% AFTK (in millions) 7,852.31 6,506.89 20.68% International 5,256.11 4,267.20 23.17% Domestic 2,375.50 2,010.00 18.18% Hong Kong, Macau and Taiwan 220.70 229.70 (3.92%) ATK (in millions) 19,740.75 15,414.72 28.06% Air China Limited • Annual Report 2010 5 Summary of Operating Data Increase/ 2010 2009 (decrease) Load factor Passenger load factor (RPK/ASK) 80.03% 76.53% 3.50ppt International 80.06% 77.14% 2.92ppt Domestic 80.41% 76.73% 3.68ppt Hong Kong, Macau and Taiwan 74.64% 70.27% 4.37ppt Cargo and mail load factor (RFTK/AFTK) 61.65% 54.23% 7.42ppt International 68.18% 61.07% 7.11ppt Domestic 48.62% 40.77% 7.85ppt Hong Kong, Macau and Taiwan 46.29% 44.88% 1.41ppt Yield Yield per RPK (RMB) 0.64 0.57 12.28% International 0.57 0.48 18.75% Domestic 0.67 0.60 11.67% Hong Kong, Macau and Taiwan 0.79 0.66 19.70% Yield per RFTK (RMB) 1.85 1.53 20.92% International 1.64 1.47 11.56% Domestic 2.29 1.54 48.70% Hong Kong, Macau and Taiwan 5.01 2.93 70.99% Fleet Total number of aircraft in service at year end 393 274 119 Daily utilisation (block hours per day per aircraft) 9.71 9.65 0.06 hour Unit cost Operating cost per ASK (RMB) 0.54 0.47 14.89% Operating cost per ATK (RMB) 3.46 2.98 16.11% Note: The significant increase of the operating data for 2010 as compared to those of 2009 was mainly due to the fact that the Company had achieved a controlling position in Shenzhen Airlines with the completion of the capital injection in April 2010. The operating data of the Group for 2010 included the data of Shenzhen Airlines (including Kunming Airlines) on and after 20 April 2010. 6 Air China Limited • Annual Report 2010 Chairman’s Statement Kong Dong Chairman of the Board Dear Shareholders, In 2010, the Group adhered to its working guidelines of maintaining stable operations and sustainable growth. By fully capitalizing on the stable recovery of the global economy and the rapid growth of the domestic economy as well as opportunities arising from the Shanghai World Expo and the Guangzhou Asian Games, the Group was able to further optimize its networks, intensify its operations and marketing efforts, strengthen its cost control and enhance the consolidation of its resources.
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