Annual Report 2017
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Air China Limited London Brisbane Astana Paris New York Hong Kong Chicago Berlin Los Angeles Mexico Zurich Sydney Rome Tokyo Athens Seoul Barcelona Annual Report 20 Moscow Bangkok Jakarta No. 30, Tianzhu Road, Airport Industrial Zone, Shunyi District, Beijing, 101312, P.R. China 2017 Tel 86-10-61462799 17 ANNUAL REPORT Fax 86-10-61462805 www.airchina.com.cn Air China is the only national flag carrier of China and a member of Star Alliance, the world’s largest airline alliance. It is also the only Chinese civil aviation enterprise listed in “The World’s 500 Most Influential Brands”. Air China is headquartered in Beijing, the capital of China, with three increasingly important hubs in Chengdu, Shanghai and Shenzhen. With Star Alliance, our network covered 1,330 destinations in 192 countries as at 31 December 2017. Air China is dedicated to serving passengers with credibility, convenience, comfort and choice. Air China is actively implementing the strategic objectives of ranking among the top in terms of global competitiveness, continuously strengthening our development potentials, providing our customers with an excellent and unique experience and realising sustainable growth to create value for all related parties. In addition, Air China also holds direct or indirect interests in the following airlines: Air China Cargo Co., Ltd., Shenzhen Airlines Company Limited (including Kunming Airlines Company Limited), Air Macau Company Limited, Beijing Airlines Paris Company Limited, Dalian Airlines Company Limited, Air China Inner Mongolia Co., Ltd., Cathay Pacific Airways Limited, Shandong Airlines Co., Ltd. and Tibet Airlines New York Company Limited. Hong Kong Rome London Los Angeles Seoul Sydney Tokyo CONTENTS Corporate Information 2 Summary of Financial Information 6 Summary of Operating Data 8 Chairman’s Statement 10 Business Overview 12 Management’s Discussion and Analysis of 30 Financial Position and Operating Results Corporate Governance Report 40 Report of the Directors 58 Profile of Directors, Supervisors and Senior Management 82 Paris Financial Statements Prepared under International New York Financial Reporting Standards – Independent Auditor’s Report 93 – Consolidated Statement of Profit or Loss 99 Rome Hong Kong – Consolidated Statement of Profit or Loss and 100 Other Comprehensive Income – Consolidated Statement of Financial Position 101 London – Consolidated Statement of Changes in Equity 103 – Consolidated Statement of Cash Flow 104 Los Angeles – Notes to the Consolidated Financial Statements 106 Supplementary Information 203 Glossary of Technical Terms 204 Seoul Definitions 205 Sydney Tokyo CORPORATE INFORMATION REGISTERED CHINESE NAME: WEBSITE: 中國國際航空股份有限公司 www.airchina.com.cn ENGLISH NAME: DIRECTOR:1 Air China Limited Cai Jianjiang Song Zhiyong John Robert Slosar REGISTERED OFFICE: Xue Yasong Wang Xiaokang Blue Sky Mansion Liu Deheng 28 Tianzhu Road Stanley Hui Hon-chung Airport Industrial Zone Li Dajin Shunyi District Beijing China SUPERVISORS:2 Wang Zhengang PRINCIPAL PLACE OF BUSINESS IN He Chaofan HONG KONG: Xiao Yanjun Li Guixia 5th Floor CNAC House 12 Tung Fai Road Hong Kong International Airport Hong Kong 1 On 8 May 2017, the Board received resignation letters from independent non-executive Directors Mr. Pan Xiaojiang and Mr. Simon To Chi Keung, who resigned as independent non-executive Directors with effect from 25 May 2017 as their tenures have expired. On 25 May 2017, the Company convened its 2016 Annual General Meeting, at which Mr. Wang Xiaokang and Mr. Liu Deheng were elected as independent non-executive Directors. Given the election of the new session of the Board on 27 October 2017, Mr. Cao Jianxiong, Mr. Feng Gang and Mr. lan Sai Cheung Shiu have ceased to be non-executive Directors. Mr. Xue Yasong was elected as employee representative Director by the second session of the employee representative meeting of the Company in 2018. 2 Due to work rearrangement, Mr. Zhou Feng has conveyed to the Supervisory Committee his request to resign from the position as a Supervisor on 2 August 2017. Ms. Li Guixia was elected as the employee supervisor of the fifth session of the Supervisory Committee at the employee representative meeting of the Company and Mr. Shen Zhen has ceased to be the employee supervisor with effect from 27 October 2017. + 002 AIR CHINA LIMITED CORPORATE INFORMATION LEGAL REPRESENTATIVE OF THE COMPANY: LEGAL ADVISERS TO THE COMPANY: Cai Jianjiang DeHeng Law Offices (as to PRC Law) DLA Piper Hong Kong (as to Hong Kong and English Law) JOINT COMPANY SECRETARIES:3 Zhou Feng INTERNATIONAL AUDITOR:4 Tam Shuit Mui Deloitte Touche Tohmatsu AUTHORISED REPRESENTATIVES: H SHARE REGISTRAR AND TRANSFER Cai Jianjiang OFFICE: Tam Shuit Mui Computershare Hong Kong Investor Services Limited Rooms 1712-1716, 17th Floor, Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong LISTING VENUES: Hong Kong, London and Shanghai 3 On 30 August 2017, the Board received a resignation letter from Ms. Rao Xinyu, the board secretary. Due to work rearrangement, Ms. Rao Xinyu resigned as board secretary and joint company secretary of the Company. On the same date, the Company convened its 48th meeting of the 4th session of the Board, at which Mr. Zhou Feng was appointed as the board secretary and joint company secretary of the Company. 4 After being considered by the 44th meeting of the 4th session of the Board and considered and approved by the 2016 Annual General Meeting, Deloitte Touche Tohmatsu was appointed as the international auditor of the Company for the year of 2017. KPMG has ceased to be the international auditor of the Company. ANNUAL REPORT 2017 + 003 Profit before tax of RMB11,486 million, “Beijing 2022 Winter Olympic with a year-on-year increase of 12.47% Newly Newly and Paralympic Winter Games” RPKs reached RFTKs reached launched launched Net profit attributable to equity shareholders of “International Horticultural the Company was RMB7,244 million, 201,078 7,553 12 49 Exhibition 2019 Beijing China” representing a year-on-year increase of 6.39% million million International and Domestic Routes Regional Routes Exclusive Official Partner of Air Passenger Gearing ratio of the Group decreased by 6.15 Transport percentage point to 59.75% compared with last year Passenger routes reached 185 Cities On 13 December 2017, the Company, Star Alliance and Beijing ● The total number of “Phoenix Miles” members Capital International Airport entered into the “Move under One amounted to 50.91 million Roof” MOU, pursuant to which, the parties will cooperate closely together to build the world-class aviation hub. ● The revenue contributed by first class and business class service increased to RMB13.11 billion, In 2017, the Group introduced 56 passenger aircraft, including 7 NUMBER OF BOEING 737-8MAX, representing a year-on-year increase of 12.7% BOEING 737-8MAX and 2 AIRBUS 320NEO. FREQUENT FLYER MEMBER AIRBUS 320NEO EXCEEDED 50 MILLION ● The percentage of the Group’s passenger transport direct sales has increased from 26% to 50.9%, and the percentage of agency commission expense of the marketing revenue has decreased from 4.2% to 1.5% + 004 AIR CHINA LIMITED Profit before tax of RMB11,486 million, “Beijing 2022 Winter Olympic with a year-on-year increase of 12.47% Newly Newly and Paralympic Winter Games” RPKs reached RFTKs reached launched launched Net profit attributable to equity shareholders of “International Horticultural the Company was RMB7,244 million, 201,078 7,553 12 49 Exhibition 2019 Beijing China” representing a year-on-year increase of 6.39% million million International and Domestic Routes Regional Routes Exclusive Official Partner of Air Passenger Gearing ratio of the Group decreased by 6.15 Transport percentage point to 59.75% compared with last year Passenger routes reached 185 Cities On 13 December 2017, the Company, Star Alliance and Beijing ● The total number of “Phoenix Miles” members Capital International Airport entered into the “Move under One amounted to 50.91 million Roof” MOU, pursuant to which, the parties will cooperate closely together to build the world-class aviation hub. ● The revenue contributed by first class and business class service increased to RMB13.11 billion, In 2017, the Group introduced 56 passenger aircraft, including 7 NUMBER OF BOEING 737-8MAX, representing a year-on-year increase of 12.7% BOEING 737-8MAX and 2 AIRBUS 320NEO. FREQUENT FLYER MEMBER AIRBUS 320NEO EXCEEDED 50 MILLION ● The percentage of the Group’s passenger transport direct sales has increased from 26% to 50.9%, and the percentage of agency commission expense of the marketing revenue has decreased from 4.2% to 1.5% ANNUAL REPORT 2017 + 005 SUMMARY OF FINANCIAL INFORMATION (RMB’000) 2017 2016 2015 2014 2013 Revenue 124,026,202 115,144,692 110,057,034 105,964,897 98,265,058 Profit from operations 11,755,712 17,532,575 15,551,622 7,257,047 4,091,469 Profit before taxation 11,486,232 10,212,902 9,355,251 5,134,866 4,592,283 Profit after taxation (including profit attributable to non-controlling interests) 8,641,449 7,758,681 7,509,487 4,334,102 3,667,422 Profit attributable to non- controlling interests 1,397,128 949,522 446,140 481,610 396,595 Profit attributable to equity shareholders of the Company 7,244,321 6,809,159 7,063,347 3,852,492 3,270,827 EBITDA(1) 25,352,031 31,006,295 28,562,383 18,650,476 15,119,959 EBITDAR(2) 33,740,737 38,261,866 34,725,582 24,131,141 20,044,184 Earnings per share attributable to equity shareholders of the Company (RMB) 0.54 0.55 0.57 0.31 0.27 Return on equity attributable to equity shareholders of the Company (%) 8.42 9.90 11.82 7.10 6.06 (1) EBITDA represents earnings before finance income, finance costs, income taxes, share of profits of joint ventures and associates, depreciation and amortisation as computed under the IFRSs.