TIDMAIRC

RNS Number : 1371M

Air China Ld

17 September 2021

(short name: ) (English name: Air China Limited, short name: Air China) is the only national flag carrier of China.

As the old saying goes, " Phoenix, a bird symbolizing benevolence " and " The whole world will be at peace once a phoenix reveals itself " . The corporate logo of Air China is composed of an artistic phoenix figure, the Chinese characters of " " in calligraphy written by Deng Xiaoping, by whom the China ' s reform and opening-up blueprint was designed, and the characters of " AIR CHINA " in English. Signifying good auspices in the ancient Chinese legends, phoenix is the king of all birds. It " flies from the eastern Happy Land and travels over mountains and seas and bestows luck and happiness upon all parts of the world " . Air China advocates the core spirit of phoenix which is to " serve the world, to lead and move forward to higher goals " . By virtue of the immense historical heritage, Air China strives to create perfect travel experience and keep passengers safe by upholding the spirit of phoenix of being a practitioner, promoter and leader for the development of the Chinese civil aviation industry. The Company is also committed to leading the industrial development by establishing itself as a " National Brand " , at the same time pursuing outstanding performance through innovative and excelling efforts.

Air China was listed on The Stock Exchange of Hong Kong Limited (stock code: 00753) and the London Stock Exchange (stock code: AIRC) on 15 December 2004, and was listed on the Shanghai Stock Exchange (stock code: 601111) on 18 August 2006.

Headquartered in Beijing, Air China has set up branches in Southwest China, Zhejiang, Chongqing, Tianjin, Shanghai, Hubei, Guizhou, Tibet, Wenzhou, Xinjiang and Guangzhou. As at the end of the Reporting Period, the major subsidiaries of Air China are Shenzhen Airlines Company Limited (including Kunming Airlines Company Limited), Air Macau Company Limited, Beijing Airlines Company Limited, Dalian Airlines Company Limited, Air China Inner Mongolia Co., Ltd., Aircraft Maintenance and Engineering Corporation, Air China Import and Export Co., Ltd., Chengdu Falcon Aircraft Engineering Service Co., Ltd., Air China Shantou Industrial Development Company; and its joint ventures mainly include GA Innovation China Co., Ltd. and Sichuan Services Aero-Engine Maintenance Co., Ltd. Moreover, the associates of Air China are Cathay Pacific Airways Limited, Shandong Airlines Co., Ltd. and Tibet Airlines Co., Ltd.. Air China is also the largest shareholder of Shandong Aviation Group Co., Ltd.

With the goal of becoming " the world ' s leading airline " , Air China is actively implementing the strategic objectives of " globally leading competitive advantages, constantly enhanced development capability, excellent and unique customer experience, and steadily improved interests and benefits " . Air China is dedicated to serving passengers with credibility, convenience, comfort and choice. " Air China Miles " is the oldest frequent flier programme in China, under which all members of the frequent flier programmes under various brands of its subsidiaries and associates have been consolidated into the brand of " Phoenix Miles " . As at the end of the Reporting Period, the total number of " Phoenix Miles " members amounted to 70.306 million.

As of the end of the Reporting Period, the Group operated a fleet of 729 aircraft with an average age of 7.97 years, of which the Company operated a fleet of 453 aircraft with an average age of 8.18 years.

TABLE OF CONTENTS

 
Corporate Information                                                                                           2 
Summary of Financial Information                                                                                3 
Summary of Operating Data                                                                                       4 
Development of Fleet                                                                                            6 
Business Overview                                                                                               7 
Management Discussion and Analysis                                                                             13 
Changes in the Information of Directors, Supervisors and Senior Management of the Company                      20 
Shareholdings of Directors, Supervisors and Chief Executive and Substantial Shareholders of 
 the Company                                                                                                   21 
Corporate Governance                                                                                           24 
Miscellaneous                                                                                                  25 
Report on Review of Condensed Consolidated Financial Statements                                                30 
Condensed Consolidated Financial Statements 
 
     *    Condensed Consolidated Statement of Profit or Loss                                                   31 
 
     *    Condensed Consolidated Statement of Profit or Loss 
          and Other Comprehensive Income                                                                       32 
 
     *    Condensed Consolidated Statement of Financial 
          Position                                                                                             33 
 
     *    Condensed Consolidated Statement of Changes in Equity                                                35 
 
     *    Condensed Consolidated Statement of Cash Flows                                                       36 
 
     *    Notes to the Condensed Consolidated Financial 
          Statements                                                                                           37 
Report on Review of Condensed Consolidated Financial Statements (Issued by a Third Country 
 Auditor registered with The UK Financial Reporting Council)                                                   67 
Glossary of Technical Terms                                                                                    68 
Definitions                                                                                                    69 
 

CORPORATE INFORMATION

 
 REGISTERED CHINESE NAME:              SUPERVISORS: 
                                        Mr. Zhao Xiaohang 
                                        Mr. He Chaofan 
  ENGLISH NAME:                         Mr. Wang Jie 
  Air China Limited                     Mr. Qin Hao 
                                        Ms. Lyu Yanfang 
  REGISTERED OFFICE: 
  Blue Sky Mansion                      LEGAL REPRESENTATIVE OF THE COMPANY: 
  28 Tianzhu Road                       Mr. Song Zhiyong 
  Airport Industrial Zone 
  Shunyi District                       COMPANY SECRETARY: 
  Beijing                               Mr. Zhou Feng 
  China 
                                        AUTHORISED REPRESENTATIVES: 
  PRINCIPAL PLACE OF BUSINESS IN        Mr. Song Zhiyong 
  HONG KONG:                            Mr. Zhou Feng 
  5th Floor 
  CNAC House                            LEGAL ADVISERS TO THE COMPANY: 
  12 Tung Fai Road                      DeHeng Law Offices (as to PRC 
  Hong Kong International Airport       Law) 
  Hong Kong                             DLA Piper Hong Kong (as to Hong 
                                        Kong and English Law) 
  WEBSITE: 
  www.airchina.com.cn                   INTERNATIONAL AUDITOR: 
                                        Deloitte Touche Tohmatsu 
  DIRECTORS(1) :                        Registered Public Interest Entity 
  Mr. Song Zhiyong                      Auditors 
  Mr. Ma Chongxian 
  Mr. Feng Gang                         H SHARE REGISTRAR AND TRANSFER 
  Mr. Patrick Healy                     OFFICE: 
  Mr. Xue Yasong                        Computershare Hong Kong Investor 
  Mr. Duan Hongyi                       Services Limited 
  Mr. Stanley Hui Hon-chung             Rooms 1712-1716, 17th Floor, Hopewell 
  Mr. Li Dajin                          Centre 
                                        183 Queen's Road East 
                                        Wanchai 
                                        Hong Kong 
 
                                        LISTING VENUES: 
                                        Hong Kong, London and Shanghai 
 1. Effective from 9 February 2021, 
  Mr. Wang Xiaokang resigned from 
  his position as an independent 
  non-executive Director of the 
  Company due to his age. At the 
  2021 first extraordinary general 
  meeting of the Company, Mr. Ma 
  Chongxian was appointed as an 
  executive Director of the Company. 
 

SUMMARY OF FINANCIAL INFORMATION

 
                                                Six months      Six months 
                                             ended 30 June   ended 30 June 
 (RMB'000)                                            2021            2020     Change 
 
  Revenue                                       37,663,803      29,645,766     27.05% 
                                            --------------  --------------  --------- 
  Loss from operations                         (6,042,612)     (6,682,049)    (9.57%) 
                                            --------------  --------------  --------- 
  Loss before taxation                         (9,404,949)    (13,096,926)   (28.19%) 
                                            --------------  --------------  --------- 
  Loss after taxation                          (7,670,665)    (10,860,406)   (29.37%) 
                                            --------------  --------------  --------- 
     Loss attributable to non-controlling 
      interests                                  (889,236)     (1,420,607)   (37.40%) 
                                            --------------  --------------  --------- 
     Loss attributable to equity 
      shareholders 
      of the Company                           (6,781,429)     (9,439,799)   (28.16%) 
                                            --------------  --------------  --------- 
  EBITDA(1)                                      4,289,009       3,282,775     30.65% 
                                            --------------  --------------  --------- 
  EBITDAR(2)                                     4,844,258       3,650,317     32.71% 
                                            --------------  --------------  --------- 
  Loss per share attributable 
   to equity shareholders of the 
   Company (RMB)                                  (0.4937)        (0.6873)   (28.17%) 
                                            --------------  --------------  --------- 
  Return on equity attributable 
   to 
   equity shareholders (%)                          (9.10)         (10.69)   1.59 ppt 
                                            --------------  --------------  --------- 
 
 

(1) EBITDA represents earnings before finance income and finance costs, net exchange gain/loss, income tax expense, share of results of associates and joint ventures, depreciation and amortisation as computed under IFRSs.

(2) EBITDAR represents EBITDA before deducting lease expenses on aircraft and engines as well as other lease expenses.

 
                                      At 30 June  At 31 December 
 (RMB'000)                                  2021            2020    Change 
 
  Total assets                       287,991,744     284,029,616     1.39% 
                                    ------------  --------------  -------- 
  Total liabilities                  210,765,081     200,256,580     5.25% 
                                    ------------  --------------  -------- 
  Non-controlling interests            5,792,148       6,231,709   (7.05%) 
                                    ------------  --------------  -------- 
  Equity attributable to equity 
   shareholders 
   of the Company                     71,434,515      77,541,327   (7.88%) 
                                    ------------  --------------  -------- 
  Equity attributable to equity 
   shareholders 
   of the Company per share (RMB)           4.92            5.34   (7.87%) 
                                    ------------  --------------  -------- 
 
 

SUMMARY OF OPERATING DATA

The following is the operating data summary of the Company, Shenzhen Airlines (including Kunming Airlines), Air Macau, Beijing Airlines, Dalian Airlines and Air China Inner Mongolia.

 
                                             January to   January to    Increase/ 
                                              June 2021    June 2020   (decrease) 
 
  Capacity 
                                            -----------  -----------  ----------- 
  ASK (million)                               82,499.92    65,565.98       25.83% 
                                            -----------  -----------  ----------- 
     International                             2,115.00    15,533.42     (86.38%) 
                                            -----------  -----------  ----------- 
     Mainland China                           79,091.22    48,858.88       61.88% 
                                            -----------  -----------  ----------- 
     Hong Kong SAR, Macau SAR and Taiwan, 
      China                                    1,293.70     1,173.68       10.23% 
                                            -----------  -----------  ----------- 
  AFTK (million)                               5,494.08     4,035.20       36.15% 
                                            -----------  -----------  ----------- 
     International                             3,251.70     2,895.20       12.31% 
                                            -----------  -----------  ----------- 
     Mainland China                            2,183.95     1,088.57      100.63% 
                                            -----------  -----------  ----------- 
     Hong Kong SAR, Macau SAR and Taiwan, 
      China                                       58.43        51.43       13.61% 
                                            -----------  -----------  ----------- 
  ATK (million)                               12,928.38     9,943.04       30.02% 
                                            -----------  -----------  ----------- 
 
  Traffic 
                                            -----------  -----------  ----------- 
  RPK (million)                               58,252.60    44,222.02       31.73% 
                                            -----------  -----------  ----------- 
     International                               894.83    10,299.97     (91.31%) 
                                            -----------  -----------  ----------- 
     Mainland China                           56,630.89    33,247.90       70.33% 
                                            -----------  -----------  ----------- 
     Hong Kong SAR, Macau SAR and Taiwan, 
      China                                      726.89       674.16        7.82% 
                                            -----------  -----------  ----------- 
  RFTK (million)                               2,067.48     1,459.02       41.70% 
                                            -----------  -----------  ----------- 
     International                             1,402.29       957.24       46.49% 
                                            -----------  -----------  ----------- 
     Mainland China                              646.52       489.26       32.14% 
                                            -----------  -----------  ----------- 
     Hong Kong SAR, Macau SAR and Taiwan, 
      China                                       18.67        12.52       49.10% 
                                            -----------  -----------  ----------- 
  Passengers carried (thousand)               38,610.67    24,905.77       55.03% 
                                            -----------  -----------  ----------- 
     International                               145.81     2,003.89     (92.72%) 
                                            -----------  -----------  ----------- 
     Mainland China                           38,023.37    22,468.64       69.23% 
                                            -----------  -----------  ----------- 
     Hong Kong SAR, Macau SAR and Taiwan, 
      China                                      441.49       433.25        1.90% 
                                            -----------  -----------  ----------- 
  Cargo and mail carried (tonnes)            600,504.45   450,950.73       33.16% 
                                            -----------  -----------  ----------- 
  Kilometres flown (million)                     532.23       394.60       34.88% 
                                            -----------  -----------  ----------- 
  Block hours (thousand)                         860.26       617.01       39.43% 
                                            -----------  -----------  ----------- 
  Number of flights                             310,257      212,595       45.94% 
                                            -----------  -----------  ----------- 
     International                                9,490       18,691     (49.23%) 
                                            -----------  -----------  ----------- 
     Mainland China                             295,927      189,047       56.54% 
                                            -----------  -----------  ----------- 
     Hong Kong SAR, Macau SAR and Taiwan, 
      China                                       4,840        4,857      (0.35%) 
                                            -----------  -----------  ----------- 
  RTK (million)                                7,264.73     5,354.92       35.66% 
                                            -----------  -----------  ----------- 
 
  Load factor 
                                            -----------  -----------  ----------- 
  Passenger load factor (RPK/ASK)                70.61%       67.45%      3.16ppt 
                                            -----------  -----------  ----------- 
     International                               42.31%       66.31%   (24.00ppt) 
                                            -----------  -----------  ----------- 
     Mainland China                              71.60%       68.05%      3.55ppt 
                                            -----------  -----------  ----------- 
     Hong Kong SAR, Macau SAR and Taiwan, 
      China                                      56.19%       57.44%    (1.25ppt) 
                                            -----------  -----------  ----------- 
  Cargo and mail load factor (RFTK/AFTK)         37.63%       36.16%      1.47ppt 
                                            -----------  -----------  ----------- 
     International                               43.12%       33.06%     10.06ppt 
                                            -----------  -----------  ----------- 
     Mainland China                              29.60%       44.95%   (15.35ppt) 
                                            -----------  -----------  ----------- 
     Hong Kong SAR, Macau SAR and Taiwan, 
      China                                      31.95%       24.35%      7.60ppt 
                                            -----------  -----------  ----------- 
  Overall load factor (RTK/ATK)                  56.19%       53.86%      2.33ppt 
                                            -----------  -----------  ----------- 
 
  Daily utilisation of aircraft 
   (block hours per day per aircraft)              7.05         5.08   1.97 hours 
                                            -----------  -----------  ----------- 
 
 Yield 
                                            -----------  -----------  ----------- 
 Yield per RPK (RMB)                             0.5304       0.5189        2.22% 
                                            -----------  -----------  ----------- 
     International                               1.6561       0.6136      169.90% 
                                            -----------  -----------  ----------- 
     Mainland China                              0.5108       0.4828        5.80% 
                                            -----------  -----------  ----------- 
     Hong Kong SAR, Macau SAR and Taiwan, 
      China                                      0.6652       0.8524     (21.96%) 
                                            -----------  -----------  ----------- 
 Yield per RFTK (RMB)                            2.2130       2.8721     (22.95%) 
                                            -----------  -----------  ----------- 
     International                               2.5858       3.5569     (27.30%) 
                                            -----------  -----------  ----------- 
     Mainland China                              1.2510       1.2795      (2.23%) 
                                            -----------  -----------  ----------- 
     Hong Kong SAR, Macau SAR and Taiwan, 
      China                                      7.5265      12.7560     (41.00%) 
                                            -----------  -----------  ----------- 
 
  Unit cost 
                                            -----------  -----------  ----------- 
  Operating cost per ASK (RMB)                   0.5575       0.5826      (4.31%) 
                                            -----------  -----------  ----------- 
  Operating cost per ATK (RMB)                   3.5577       3.8414      (7.39%) 
                                            -----------  -----------  ----------- 
 
 

DEVELOPMENT OF FLEET

During the Reporting Period, the Group introduced 23 aircraft including three A350 aircraft, 14 A320NEO aircraft, four A321NEO aircraft and two ARJ21-700 aircraft, and phased out one A321 aircraft. As at the end of the Reporting Period, the Group operated a fleet of 729 aircraft with an average age of 7.97 years, of which the Company operated a total of 453 aircraft with an average age of 8.18 years. During the first half of the year, the Company introduced 22 aircraft, including five aircraft under the wet lease agreement with Air Macau.

Details of the fleet of the Group are set out in the table below:

 
                                          30 June 2021 
                                            Finance   Operating       Average 
                   Sub-total   Self-owned    leases      leases    age (year) 
                  ----------  -----------  --------  ----------  ------------ 
 
  Airbus                 393          148       130         115          7.81 
                  ----------  -----------  --------  ----------  ------------ 
     A319                 41           32         6           3         13.68 
                  ----------  -----------  --------  ----------  ------------ 
     A320/A321           272           88       101          83          6.94 
                  ----------  -----------  --------  ----------  ------------ 
     A330                 65           28         8          29          9.15 
                  ----------  -----------  --------  ----------  ------------ 
     A350                 15            0        15           0          1.81 
                  ----------  -----------  --------  ----------  ------------ 
  Boeing                 326          143        95          88          8.25 
                  ----------  -----------  --------  ----------  ------------ 
     B737                274          119        75          80          8.42 
                  ----------  -----------  --------  ----------  ------------ 
     B747                 10            8         2           0         11.97 
                  ----------  -----------  --------  ----------  ------------ 
     B777                 28            4        18           6          7.21 
                  ----------  -----------  --------  ----------  ------------ 
     B787                 14           12         0           2          4.36 
                  ----------  -----------  --------  ----------  ------------ 
  COMAC                    5            1         4           0          0.55 
                  ----------  -----------  --------  ----------  ------------ 
     ARJ21                 5            1         4           0          0.55 
                  ----------  -----------  --------  ----------  ------------ 
  Business jets            5            1         0           4          8.90 
                  ----------  -----------  --------  ----------  ------------ 
 
  Total                  729          293       229         207          7.97 
                  ----------  -----------  --------  ----------  ------------ 
 
 
 
                    Introduction Plan       Phase-out Plan 
                   2021    2022    2023   2021   2022   2023 
                 ------  ------  ------  -----  -----  ----- 
 
  Airbus             49      26       5      5     12     10 
                 ------  ------  ------  -----  -----  ----- 
     A319             -       -       -      -      6      4 
                 ------  ------  ------  -----  -----  ----- 
     A320/A321       44      18       -      2      -      3 
                 ------  ------  ------  -----  -----  ----- 
     A330             -       -       -      3      6      3 
                 ------  ------  ------  -----  -----  ----- 
     A350             5       8       5      -      -      - 
                 ------  ------  ------  -----  -----  ----- 
  Boeing              -       -       -      3     10      7 
                 ------  ------  ------  -----  -----  ----- 
     B737             -       -       -      3     10      7 
                 ------  ------  ------  -----  -----  ----- 
  COMAC               6       8       9      -      -      - 
                 ------  ------  ------  -----  -----  ----- 
     ARJ21            6       8       9      -      -      - 
                 ------  ------  ------  -----  -----  ----- 
 
  Total              55      34      14      8     22     17 
                 ------  ------  ------  -----  -----  ----- 
 
 

Note: Please refer to the actual operation for the introduction and phase-out of the Group's fleet in the future.

BUSINESS OVERVIEW

Containing the Pandemic

The Group insisted to give pandemic control top priority, stayed committed to "preventing the coronavirus from entering the country, stemming its domestic resurgence and implementing joint pandemic containment measures for individuals and goods" and actively responded to coronavirus resurgence in certain areas in China and the overseas imported cases. The Group timely adjusted and optimized the mechanism for leading pandemic prevention and control practices, timely deploying phased prevention and control work, updating the prevention and control operating procedures, following up and implementing prevention and control measures to ensure coordinated operation of such mechanism. With the thorough application of the pandemic data sharing platform, the Group improved the production planning and management efficiency of the flight attendant team. In response to the sudden outbreak in Beijing at the beginning of the year, the Group quickly organized full staff examination and implemented nucleic acid tests for all employees to ensure the responsibilities of joint pandemic prevention and control were in place. Specific inspection was conducted to remove loopholes, optimize management and undertake the responsibility in relation to pandemic prevention and control. The Group upheld that "all people eligible for vaccination have access to it", and the vaccination rate for key frontline staff reached 100%. The Group swiftly responded to the sudden outbreaks in various areas, coordinated the pandemic prevention and control, production planning and passenger service and prevented the domestic resurgence in an effective and orderly manner. The Group enhanced the identification and control of passengers on transit flights from third countries and implemented remote prevention and information control mechanism of "zero reporting". The Group also strictly implemented pandemic prevention measures for international flights and ensured effective disinfection management of flights, sites and incoming goods. Besides, the Group set high management standards for international flight attendants by selecting and assigning fully vaccinated personnel and carrying out medical examination as well as quarantine inspections for inbound flights stringently. Meanwhile, the Group expressed in-depth care for its employees by allocating pandemic prevention materials, improving security conditions and offering counseling service, thereby timely solved the employees' difficulties and maintained a stable workforce.

Safe Operation

The Group is well aware that safety responsibility is a kind of political responsibility and the guarantee for safe flight underlies the foundation of the Group's original aspiration and mission. The Group has firmly established the concept of safety development, under which the Group recognized and grasped the extreme importance of safety from an overall perspective, continued to implement 30 measures for safety development, completed operational organization for ongoing pandemic management and firmly promoted the construction of four operational safety systems including safety management, flight training, aircraft maintenance and operation management. The Group carried out in-depth safety hazard investigation work and carried out supervision and inspection on 10 key aspects including the specific three-year safety rectification action, safety hazard investigation and centralized rectification, style development and air crew rectification, safety and security and pandemic prevention and control. To ensure smooth and safe operation, the Group actively conducted specific risk assessment and effectively implemented various risk control measures for special operation conditions, such as seasonal changes, flying in extreme weather and the "one city, two airports" pattern in

Beijing and Chengdu. The Group constantly pushed forward the style development work and the reform of the flight attendant team by enhancing cautionary education and the building of a better style for the professional team. During the Reporting Period, the Group recorded 0.86 million safe flight hours while transporting 38.61 million passengers safely. The Group maintained stable and safe operation in general and successfully safeguarded the provision of important transportation services for various events, such as the 100th anniversary of the founding of the Communist Party of China.

Maximising Operating Performance

During the Reporting Period, the Company adhered to the general principle of pursuing progress while ensuring stability, for which the Company improved production and operation and strived to reduce costs, improve efficiency, cut losses and control risks. Based on the new development pattern of domestic economic circle playing a leading role, the Company has been optimizing the structure of transport capacity allocation in accordance with the principle of maximizing profit margins and closely monitoring the market trends to adjust the allocation swiftly. The Company took advantage of opportunities arising from market recovery, and maintained the capacity input of wide-body aircraft through operating in popular routes and converting passenger aircraft for cargo operations. As a result, the domestic transport capacity of wide-body aircraft increased by 69% year-on-year. In terms of the international market, the Company continued to promote the conversion of passenger aircraft for cargo operations. During the Reporting Period, the Company operated 7,935 cargo flights by passenger aircraft, which enabled the sharing of fixed costs of passenger aircraft while maintaining its industry-leading position in terms of business scale. The Company strengthened marketing control and continued dynamic monitoring and control, seized he opportunity of domestic market recovery in the second quarter, made full use of the network, built a high-quality and prosperous system and took various measures to maintain the stability and improve yield level of the main base and major routes. Taking the commencement of operation of Chengdu Tianfu International Airport as an opportunity, the Company strived to help develop Chengdu into an international aviation hub, where the Company would develop a core route network covering domestic and major markets such as Southeast Asia, Europe and North America, and established the aviation business presence of Air China at Tianfu base. The Company aimed to build the "Air China Express" brand and focused its strengths and resources to establish 10 boutique routes and express flights with excellent service quality providing "fast ground door-to-door services, frequent flights, outstanding onboard services, punctual flights and smooth ticket change" in order to achieve growth in both the number of flights and passenger load factor. The Company also actively tapped the growth points in the market and supported the integrated innovation and development of civil aviation and red tourism. During the Reporting Period, the Company provided red tourism routes to more than 73,710 travelers. By promoting mileage products, business charter cooperation products, elderly Rights Cards and interline products with targeted positioning, the Company boosted revenue growth and garnered a good reputation among customers. Furthermore, the Company exercised strict cost control and closely monitored major expenses, enhanced the cost management on comprehensive security, and defined the responsibilities for all segments of the aircraft cost management chain for facilitating effective cost control. Apart from that, the Company strengthened capital management and control as well as the internal and external financing mechanism, and rationalized the debt structure so as to offer protection for capital safety.

Enhancing Services

The Company was dedicated to the provision of "people-oriented" services as its core philosophy, focusing on all areas in the whole service process, continuing to enhance service quality, improving service and product quality, and giving play to the leading role of digitalization and intelligence development on an ongoing basis. During the Reporting Period, the overall traveler satisfaction of the Company increased steadily, as the service quality and traveler experience further improved. Pursuing the "user-oriented" design approach, the Company renovated and built nine self-operated lounges to create "oriental culture and arts" rest area of Air China. In order to create an exclusive cabin environment, the Company developed new aircraft seat products and launched the new interior design products under the "Dancing Phoenix" ( ) series. The Group has installed in-cabin WiFi system on a total of 359 aircraft, and such system commenced full operation. The Company also improved the overall quality of services, hardware and products, which highlighted the core competitiveness of its services and brand. For the purpose of further strengthening the soft power of services and products, the Company stood on the passengers' shoes and updated the service standards, passenger rules, ticketing rules and luggage transportation rules. The Company optimized the regular pandemic prevention and control mechanism by formulating and implementing 26 special ticketing measures. Based on the analysis of passenger travel behavior and operating data, the Company formulated a development plan to improve inflight entertainment and adjust the allocation of media resources. In order to provide more inflight meal options, the Company introduced new menus of "Henishuo" ( ) food box for different seasons and festivals, thereby offering diversified, targeted and customized services for passengers who wanted to choose and tailor-made their own meals in advance. In addition, the Company empowered "intelligent civil aviation" service and drove digitalization with innovation. The Company developed paperless and contactless service applications and optimized the functions and service experience of self-service channels. During the Reporting Period, the self-service check-in rate of passengers reached 79.27% and the online check-in rate of passengers reached 65.27%. The Company fully adopted RFID luggage tags with China-developed chips and promoted the luggage tracking service for the whole process. Nine routes had provided the whole-journey baggage tracking and passenger baggage status query service. Besides, the Company developed and upgraded several system platforms including the service quality management system and the passenger services payment system, which as a result, improved the service digitalization and innovation capability.

MAJOR SUBSIDIARIES AND ASSOCIATES AND THEIR OPERATING RESULTS

Notes: 1. CNACG is a wholly-owned subsidiary of CNAHC. Accordingly, CNAHC is directly and indirectly interested in 51.70% of the shares of the Company.

                2.   Shandong Aviation Group Corporation is owned as to 49.4% by the Company, while Shandong Airlines is owned as to 42% by Shandong Aviation Group Corporation. Accordingly, Shandong Airlines is directly and indirectly owned as to 43.548% by the Company. 

During the Reporting Period, the operating results of the major subsidiaries and associates of the Company were as follows:

 
                                                                                                 Air China 
                          Shenzhen               Air           Beijing            Dalian             Inner                                            Cathay        Shandong 
                          Airlines             Macau          Airlines          Airlines          Mongolia           AMECO              CNAF         Pacific        Airlines 
 
  Year of 
  establishment               1992              1994              2011              2011              2013            1989              1994            1946            1999 
                  ----------------  ----------------  ----------------  ----------------  ----------------  --------------  ----------------  --------------  -------------- 
  Place of                Shenzhen             Macau           Beijing            Dalian             Inner         Beijing           Beijing            Hong        Shandong 
  domicile                                                                                        Mongolia                                              Kong 
                  ----------------  ----------------  ----------------  ----------------  ----------------  --------------  ----------------  --------------  -------------- 
  Principal          Air passenger     Air passenger          Business     Air passenger     Air passenger          Repair         Provision   Air passenger   Air passenger 
  business                 and air           and air           charter           and air           and air    and overhaul      of financial         and air         and air 
                             cargo             cargo        and public             cargo             cargo    of aircraft,          services           cargo           cargo 
                          services          services     air passenger          services          services         engines                to        services        services 
                                                               and air                                      and components             CNAHC 
                                                                 cargo                                                                 Group 
                                                              services                                                               and the 
                                                                                                                                       Group 
                  ----------------  ----------------  ----------------  ----------------  ----------------  --------------  ----------------  --------------  -------------- 
  Registered      RMB5,360,000,000  MOP2,242,042,000  RMB1,000,000,000  RMB3,000,000,000  RMB1,000,000,000  USD300,052,800  RMB1,127,961,864   6,437,200,203  RMB400,000,000 
  capital                                                                                                                                             shares 
                                                                                                                                                    in issue 
                  ----------------  ----------------  ----------------  ----------------  ----------------  --------------  ----------------  --------------  -------------- 
  Percentage of 
   shareholding 
   by the 
   Company                     51%          66.9178%               51%               80%               80%             75%               51%          29.99%           22.8% 
                  ----------------  ----------------  ----------------  ----------------  ----------------  --------------  ----------------  --------------  -------------- 
  Revenue (RMB 
   million)                  9,681               513               204               611               631           3,616                97          13,268           6,636 
                             (on a                                                                                                                     (on a           (on a 
                      consolidated                                                                                                              consolidated    consolidated 
                            basis)                                                                                                                    basis)          basis) 
                  ----------------  ----------------  ----------------  ----------------  ----------------  --------------  ----------------  --------------  -------------- 
  Year-on-year 
   changes (%)               45.77             12.25             55.24             51.08             98.94          (0.69)           (17.09)         (46.99)           58.34 
                  ----------------  ----------------  ----------------  ----------------  ----------------  --------------  ----------------  --------------  -------------- 
  Air traffic 
   revenue 
   (RMB million)             9,390               448               204               588               624             N/A               N/A          11,256           6,281 
                  ----------------  ----------------  ----------------  ----------------  ----------------  --------------  ----------------  --------------  -------------- 
  Year-on-year 
   changes (%)               47.16              0.22             55.39             51.48            101.02             N/A               N/A         (47.61)           61.88 
                  ----------------  ----------------  ----------------  ----------------  ----------------  --------------  ----------------  --------------  -------------- 
  (Loss)/profit 
   after 
   taxation 
   (RMB million)           (1,433)             (336)              (39)              (54)              (37)            (75)                22         (6,330)           (795) 
                  ----------------  ----------------  ----------------  ----------------  ----------------  --------------  ----------------  --------------  -------------- 
  (Loss)/profit 
   after 
   taxation 
   in the 
   corresponding 
   period of 
   last 
   year (RMB 
   million)                (2,310)             (464)              (35)             (125)              (66)           (210)                39         (8,923)         (1,296) 
                  ----------------  ----------------  ----------------  ----------------  ----------------  --------------  ----------------  --------------  -------------- 
  (Loss)/profit 
   attributable 
   to parent 
   company 
   (RMB million)           (1,365)             (336)              (39)              (54)              (37)            (75)                22         (6,331)           (795) 
                  ----------------  ----------------  ----------------  ----------------  ----------------  --------------  ----------------  --------------  -------------- 
  (Loss)/profit 
   attributable 
   to parent 
   company 
   in the 
   corresponding 
   period of 
   last 
   year (RMB 
   million)                (2,227)             (464)              (35)             (125)              (66)           (210)                39         (8,924)         (1,296) 
                  ----------------  ----------------  ----------------  ----------------  ----------------  --------------  ----------------  --------------  -------------- 
 
 

The fleet information and operating data of the major subsidiaries and associates of the Company were as follows:

 
 As at the end 
  of the Reporting 
  Period/                                                                   Air China 
  During the Reporting          Shenzhen                Beijing     Dalian      Inner                         Shandong 
  Period                        Airlines  Air Macau   Airlines*   Airlines   Mongolia        Cathay Pacific   Airlines 
 
  Fleet size (unit)                  226 
                                   (on a 
                            consolidated                                                                238 
                                                                                         (on a consolidated 
                                  basis)         17           3         13         12                basis)        131 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
  Average age (year)                7.64       5.90       11.58       7.73       9.11                  10.3       7.34 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
  Aircraft introduced 
   (unit)                              4          2           0          0          0                     7          0 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
  Aircraft phased 
   out (unit)                          0          1           0          0          0                     8          0 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
  ASK (100 million)               270.88      11.42        3.00      15.37      15.94                 41.67     188.47 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
     Year-on-year 
      changes 
      (%)                          37.51       8.39       71.45      25.75      89.55                (85.0)      38.92 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
  RPK (100 million)               192.75       7.03        2.11      10.71      11.20                  7.88     149.49 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
     Year-on-year 
      changes 
      (%)                          42.94      10.78       95.21      40.13     114.43                (95.8)      54.15 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
  Passengers carried 
   (thousand)                   13,189.8      423.5       237.6        915        996                   157   10,480.8 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
     Year-on-year 
      changes 
      (%)                          42.85      13.59      108.05      54.44     106.31                (96.4)      59.61 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
  Average passenger 
   load factor (%)                 71.16      61.58       70.55      69.70      70.25                  18.9      79.32 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
     Year-on-year 
      changes 
      (ppt)                         2.70       1.33        8.59       7.15       8.15                (48.4)       7.84 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
  AFTK (million)                     603    18.1469      4.2514    14.3317    17.1164                 4,058        303 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
     Year-on-year 
      changes 
      (%)                          39.85       9.89      132.71      36.74     134.40                (31.9)      31.77 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
  RFTK (million)                     254     0.5004      1.3179     6.7156     5.6260                 3,301        132 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
     Year-on-year 
      changes 
      (%)                          12.29    (87.96)       39.91    (12.59)      13.66                (20.1)       9.58 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
  Volume of cargo 
   and mail carried 
   (tonnes)                      161,100     358.07    1,505.06   5,257.27   4,469.17               549,000     79,200 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
     Year-on-year 
      changes 
      (%)                          13.69    (86.15)       38.09     (0.90)      12.10                (17.7)      13.44 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
  Cargo and mail 
   load factor (%)                 42.14       2.76       31.00      46.86      32.87                  81.4      43.49 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
     Year-on-year 
      changes 
      (ppt)                      (10.34)    (22.41)     (20.56)    (26.44)    (34.92)                  12.1     (8.80) 
------------------------  --------------  ---------  ----------  ---------  ---------  --------------------  --------- 
 
 

*Note: As at the end of the Reporting Period, Beijing Airlines operated a fleet of four entrusted business jets and one self-owned business jet with an average age of 8.9 years. During the Reporting Period, in terms of business charter service, Beijing Airlines completed 154 flights, representing a year-on-year decrease of 0.65%; it completed 471.4 flying hours, representing a year-on-year decrease of 4.77%; it carried a total of 1,090 passengers, representing a year-on-year increase of 41.01%.

PARTICULARS OF EMPLOYEES

As at the end of the Reporting Period, the Company had a total of 46,457 employees, and the subsidiaries of the Company had a total of 42,024 employees.

REMUNERATION POLICY

Upholding the concept of "paying salary with reference to the value of job, personal ability as well as performance appraisal" and focusing on the enhancement of enterprises vitality and improving benefit and efficiency, the Company has continually established and improved a linkage mechanism combining salary distribution with performance, and implemented differentiated management on gross payroll and budget. During the Reporting Period, the Company continued to deepen the reform of its remuneration and welfare system. It pushed forward the market-oriented remuneration benchmarking and optimised the sound and scientific mechanism on wage decision and growth that reflects the labour market standards. In addition, it implemented differentiated salary adjustment to offer more incentives to employees with continuous outstanding performance.

Management Discussion and Analysis

The following discussion and analysis are based on the Group's interim condensed consolidated financial statements and notes thereto which were prepared in accordance with the International Accounting Standard 34 "Interim Financial Reporting" as well as the applicable disclosure requirements under Appendix 16 to the Listing Rules and are designed to assist the readers in further understanding the information provided in this report so as to better understand the financial conditions and results of operations of the Group as a whole.

OPERATION ANALYSIS

During the first half of 2021, the Group's available seat kilometres for air passenger amounted to 82,500 million, representing a year-on-year increase of 25.83%; the total air passenger traffic amounted to 58,253 million, representing a year-on-year increase of 31.73%; passenger load factor was 70.61%, representing a year-on-year increase of 3.16 percentage points. The available freight tonne kilometres for freight amounted to 5,494 million, representing a year-on-year increase of 36.15%; the total cargo and mail traffic amounted to 2,067 million tonne kilometres, representing a year-on-year increase of 41.70%; cargo and mail load factor was 37.63%, representing a year-on-year increase of 1.47 percentage points. During the Reporting Period, the Group recorded a loss attributable to equity shareholders of the Company of RMB6,781 million, representing a year-on-year decrease in loss of RMB2,658 million.

Revenue

During the Reporting Period, the Group's revenue was RMB37,664 million, representing a year-on-year increase of RMB8,018 million or 27.05%. Among the revenues, air traffic revenue was RMB35,470 million, representing a year-on-year increase of RMB8,331 million or 30.70%. Other operating revenue was RMB2,194 million, representing a year-on-year decrease of RMB313 million or 12.49%.

Revenue Contributed by Geographical Segments

 
                                          For the six months ended 30 June 
                                           2021                      2020 
                                 ------------------------  ------------------------  --------- 
  (in RMB'000)                        Amount   Percentage       Amount   Percentage     Change 
                                 -----------  -----------  -----------  -----------  --------- 
 
  International                    5,107,946       13.56%    9,725,366       32.81%   (47.48%) 
                                 -----------  -----------  -----------  -----------  --------- 
  Mainland China                  31,931,808       84.78%   19,186,009       64.72%     66.43% 
                                 -----------  -----------  -----------  -----------  --------- 
  Hong Kong SAR, Macau SAR and 
   Taiwan, China                     624,049        1.66%      734,391        2.47%   (15.02%) 
                                 -----------  -----------  -----------  -----------  --------- 
 
  Total                           37,663,803      100.00%   29,645,766      100.00%     27.05% 
                                 -----------  -----------  -----------  -----------  --------- 
 
 

Air Passenger Revenue

During the Reporting Period, the Group recorded an air passenger revenue of RMB30,895 million, representing an increase of RMB7,947 million or 34.63% from that of the same period in 2020. Among the air passenger revenue, the increase of capacity resulted in an increase in revenue of RMB5,927 million, the increase of passenger load factor resulted in an increase in revenue of RMB1,353 million, while the increase of passenger yield resulted in an increase in revenue of RMB667 million. The capacity, passenger load factor and yield per RPK of air passenger business during the Reporting Period are as follows:

 
                                         For the six months ended 30 
                                                     June 
                                                 2021            2020     Change 
                                       --------------  --------------  --------- 
 
 Available seat kilometres (million)        82,499.92       65,565.98     25.83% 
                                       --------------  --------------  --------- 
 Passenger load factor (%)                      70.61           67.45   3.16 ppt 
                                       --------------  --------------  --------- 
 Yield per RPK (RMB)                           0.5304          0.5189      2.22% 
                                       --------------  --------------  --------- 
 
 

Air Passenger Revenue Contributed by Geographical Segments

 
                                          For the six months ended 30 June 
                                           2021                      2020 
                                 ------------------------  ------------------------  --------- 
 (in RMB'000)                         Amount   Percentage       Amount   Percentage     Change 
                                 -----------  -----------  -----------  -----------  --------- 
 
  International                    1,481,942        4.80%    6,320,556       27.54%   (76.55%) 
                                 -----------  -----------  -----------  -----------  --------- 
  Mainland China                  28,929,694       93.64%   16,053,091       69.95%     80.21% 
                                 -----------  -----------  -----------  -----------  --------- 
  Hong Kong SAR, Macau SAR and 
   Taiwan, China                     483,530        1.56%      574,667        2.51%   (15.86%) 
                                 -----------  -----------  -----------  -----------  --------- 
 
  Total                           30,895,166      100.00%   22,948,314      100.00%     34.63% 
                                 -----------  -----------  -----------  -----------  --------- 
 
 

Air Cargo and Mail Revenue

During the Reporting Period, the Group's air cargo and mail revenue was RMB4,575 million, representing an increase of RMB384 million as compared with that of the same period in 2020. Among the air cargo and mail revenue, the increase of capacity resulted in an increase in revenue of RMB1,515 million, while the increase of cargo and mail load factor resulted in an increase in revenue of RMB232 million, and the decrease of yield of cargo and mail contributed to a decrease in revenue of RMB1,363 million. The capacity, cargo and mail load factor and yield per RFTK of air cargo and mail business during the Reporting Period are as follows:

 
                                        For the six months ended 30 
                                                    June 
                                                2021            2020     Change 
                                      --------------  --------------  --------- 
 
 Available freight tonne kilometres 
  (million)                                 5,494.08        4,035.20     36.15% 
                                      --------------  --------------  --------- 
 Cargo and mail load factor (%)                37.63           36.16   1.47 ppt 
                                      --------------  --------------  --------- 
 Yield per RFTK (RMB)                         2.2130          2.8721   (22.95%) 
                                      --------------  --------------  --------- 
 
 

Air Cargo and Mail Revenue Contributed by Geographical Segments

 
                                         For the six months ended 30 June 
                                           2021                     2020 
                                 -----------------------  -----------------------  --------- 
  (in RMB'000)                       Amount   Percentage      Amount   Percentage     Change 
                                 ----------  -----------  ----------  -----------  --------- 
 
  International                   3,626,004       79.25%   3,404,810       81.25%      6.50% 
                                 ----------  -----------  ----------  -----------  --------- 
  Mainland China                    808,780       17.68%     625,984       14.94%     29.20% 
                                 ----------  -----------  ----------  -----------  --------- 
  Hong Kong SAR, Macau SAR and 
   Taiwan, China                    140,519        3.07%     159,724        3.81%   (12.02%) 
                                 ----------  -----------  ----------  -----------  --------- 
 
  Total                           4,575,303      100.00%   4,190,518      100.00%      9.18% 
                                 ----------  -----------  ----------  -----------  --------- 
 
 

Operating Expenses

During the Reporting Period, the Group's operating expenses were RMB45,996 million, representing an increase of 20.42% from RMB38,196 million for the same period of the previous year. The breakdown of the operating expenses is set out below:

 
                                            For the six months ended 30 June 
                                             2021                      2020 
                                   ------------------------  ------------------------  -------- 
  (in RMB'000)                          Amount   Percentage       Amount   Percentage    Change 
                                   -----------  -----------  -----------  -----------  -------- 
 
  Jet fuel costs                     9,914,804       21.56%    6,811,760       17.83%    45.55% 
                                   -----------  -----------  -----------  -----------  -------- 
  Take-off, landing and depot 
   charges                           5,020,224       10.91%    3,893,701       10.19%    28.93% 
                                   -----------  -----------  -----------  -----------  -------- 
  Depreciation and amortisation     10,331,621       22.46%    9,964,824       26.09%     3.68% 
                                   -----------  -----------  -----------  -----------  -------- 
  Aircraft maintenance, repair 
   and overhaul costs                3,586,761        7.80%    2,874,176        7.52%    24.79% 
                                   -----------  -----------  -----------  -----------  -------- 
  Employee compensation costs       11,301,581       24.57%   10,091,701       26.42%    11.99% 
                                   -----------  -----------  -----------  -----------  -------- 
  Air catering charges                 912,392        1.98%      625,766        1.64%    45.80% 
                                   -----------  -----------  -----------  -----------  -------- 
  Selling and marketing expenses     1,140,228        2.48%    1,082,586        2.83%     5.32% 
                                   -----------  -----------  -----------  -----------  -------- 
  General and administrative 
   expenses                            469,485        1.02%      511,959        1.34%   (8.30%) 
                                   -----------  -----------  -----------  -----------  -------- 
  Others                             3,318,460        7.22%    2,339,027        6.14%    41.87% 
                                   -----------  -----------  -----------  -----------  -------- 
 
  Total                             45,995,556      100.00%   38,195,500      100.00%    20.42% 
                                   -----------  -----------  -----------  -----------  -------- 
 
 

-- Jet fuel costs increased by RMB3,103 million on a year-on-year basis, mainly due to the combined effect of the increase in the consumption and prices of jet fuel.

-- Take-off, landing and depot charges increased by RMB1,127 million on a year-on-year basis, mainly due to an increase in the number of take-offs and landings.

-- Depreciation and amortisation increased by RMB367 million on a year-on-year basis, mainly due to the increase in the fleet size.

-- Aircraft maintenance, repair and overhaul costs increased by RMB713 million on a year-on-year basis, mainly due to the increase in the fleet size and the increase in the investment in production and operation.

-- Employee compensation costs increased by RMB1,210 million on a year-on-year basis, mainly due to the increase in investment in production and operation and the effect of 50% reduction in social insurance contribution in the same period of the previous year.

-- Air catering charges increased by RMB287 million on a year-on-year basis, mainly due to the increase in the number of passengers.

-- Other operating expenses mainly included operating lease expenses on aircraft and engines, civil aviation development fund and non-above-mentioned ordinary expenses arising from the core air traffic business, which increased by 41.87% on a year-on-year basis, mainly due to the increase in transport and the resumption on the levy of civil aviation development fund during the Reporting Period.

Net Exchange Gain (Loss) and Finance Costs

During the Reporting Period, the Group recorded a net exchange gain of RMB563 million, as compared to a net exchange loss of RMB1,019 million for the same period of the previous year. The Group incurred finance costs of RMB2,658 million (excluding those capitalised) during the Reporting Period, representing a year-on-year increase of RMB110 million.

Share of Results of Associates and Joint Ventures

During the Reporting Period, the Group's share of losses of its associates was RMB1,419 million, representing a year-on-year decrease of RMB1,592 million. The Group recorded a loss on investment of Cathay Pacific of RMB1,364 million during the Reporting Period, representing a year-on-year decrease of RMB1,009 million; and recorded a loss on investment of Shandong Aviation Group Corporation and Shandong Airlines of RMB91 million, representing a year-on-year decrease of RMB410 million.

During the Reporting Period, the Group's share of profits of its joint ventures was RMB110 million, representing a year-on-year increase of RMB3 million.

Assets Structure Analysis

As at the end of the Reporting Period, the total assets of the Group were RMB287,992 million, representing an increase of 1.39% from that as at 31 December 2020. Among them, the current assets accounted for RMB23,498 million or 8.16% of the total assets, while the non-current assets accounted for RMB264,494 million or 91.84% of the total assets.

Among the current assets, cash and cash equivalents were RMB8,452 million, representing an increase of 44.78% from that as at 31 December 2020, which was mainly due to the flexible adjustment of available liquidity in line with the capital arrangement of the Group.

Among the non-current assets, the aggregate carrying amount of property, plant and equipment and right-of-use assets as at the end of the Reporting Period was RMB218,494 million, representing an increase of 1.21% from that as at 31 December 2020.

Asset Mortgage/Pledge

As at the end of the Reporting Period, the Group, pursuant to certain bank loans and finance leasing agreements, had mortgaged certain aircraft and flight equipment, buildings and machinery with an aggregated net book value of approximately RMB85,687 million (31 December 2020: RMB79,981 million) and land use rights with net book value of approximately RMB26 million (31 December 2020: RMB27 million). In addition, the Group had restricted bank deposits of approximately RMB643 million (31 December 2020: approximately RMB737 million), which were mainly reserves deposited in the People's Bank of China.

Capital Expenditure

During the Reporting Period, the Group's capital expenditure amounted to a total of RMB6,501 million, of which the total investment in aircraft and engines was RMB4,620 million. Other capital expenditure investment amounted to RMB1,881 million, mainly including investment in rotables, flight simulators, infrastructure construction, IT system construction, ground equipment procurement and cash component of the long-term investments.

Equity Investment

As at the end of the Reporting Period, the Group's equity investment in its associates amounted to RMB10,234 million, representing a decrease of 6.44% from that as at 31 December 2020, among which, the balance of the equity investment of the Group in Cathay Pacific and Shandong Aviation Group Corporation amounted to RMB9,115 million and RMB634 million, respectively.

As at the end of the Reporting Period, the Group's equity investment in its joint ventures was RMB1,667 million, representing an increase of 5.44% from that as at 31 December 2020.

Debt Structure Analysis

As at the end of the Reporting Period, the total liabilities of the Group amounted to RMB210,765 million, representing an increase of 5.25% from those as at 31 December 2020, among which current liabilities were RMB85,860 million and non-current liabilities were RMB124,905 million, accounting for 40.74% and 59.26% of the total liabilities, respectively.

Among the current liabilities, interest-bearing debts (including bank loans and other borrowings, corporate bonds and short-term commercial papers, bills payable and lease liabilities) amounted to RMB53,254 million, remaining relatively stable as compared with that as at 31 December 2020.

Among the non-current liabilities, interest-bearing debts (including bank loans and other borrowings, corporate bonds and lease liabilities) amounted to RMB113,590 million, representing an increase of 5.43% from that as at 31 December 2020.

Details of interest-bearing liabilities of the Group by currency are set out below:

 
                       30 June 2021             31 December 2020 
 (in RMB'000)         Amount   Percentage        Amount   Percentage     Change 
                ------------  -----------  ------------  -----------  --------- 
 
 RMB             117,043,872       70.15%   109,420,080       67.97%      6.97% 
                ------------  -----------  ------------  -----------  --------- 
 US dollars       48,839,674       29.27%    49,669,410       30.85%    (1.67%) 
                ------------  -----------  ------------  -----------  --------- 
 Others              961,119        0.58%     1,902,082        1.18%   (49.47%) 
                ------------  -----------  ------------  -----------  --------- 
 
 Total           166,844,665      100.00%   160,991,572      100.00%      3.64% 
                ------------  -----------  ------------  -----------  --------- 
 
 

Commitments AND CONTINGENT LIABILITIES

The Group's capital commitments, which mainly consisted of the payables in the next few years for purchasing certain aircraft and related equipment, increased by 6.59% from RMB41,020 million as at 31 December 2020 to RMB43,722 million as at the end of the Reporting Period. The Group's investment commitments, which was mainly used for the investment agreements entered into, amounted to RMB23 million as at the end of the Reporting Period, remaining stable as compared with that as at 31 December 2020, which was mainly attributable to the investment in GA Innovation China Co., Ltd.

Details of the Group's contingent liabilities are set out in note 20 of the condensed consolidated financial statements included in this interim report.

Gearing Ratio

As at the end of the Reporting Period, the Group's gearing ratio (total liabilities divided by total assets) was 73.18%, representing an increase of 2.67 percentage points from that as at 31 December 2020. High gearing ratio is common among aviation enterprises, and the current gearing ratio of the Group is at a reasonable level. Its long-term insolvency risk is within controllable range.

Working Capital and its Sources

As at the end of the Reporting Period, the Group's net current liabilities (current liabilities minus current assets) were RMB62,361 million, representing an increase of RMB1,499 million from that as at 31 December 2020. The Group's current ratio (current assets divided by current liabilities) was 0.27, representing an increase of 0.03 as compared to that as at 31 December 2020.

The Group meets its working capital needs mainly through its operating activities and external financing activities. During the Reporting Period, the Group's net cash inflow from operating activities was RMB4,432 million, as compared to the net cash outflow of RMB10,256 million for the corresponding period in 2020, which was mainly because the sales revenue increased and the number of ticket refunds declined on a year-on-year basis. Net cash inflow from investing activities was RMB846 million, as compared with the net cash outflow of RMB7,397 million for the corresponding period in 2020, mainly due to the year-on-year decrease in the cash payment for the acquisition of fixed assets and other long-term assets during the Reporting Period. Net cash outflow from financing activities amounted to RMB2,638 million, as compared with the net cash inflow from financing activities of RMB22,148 million for the same period of 2020, mainly due to the increase of its financing scale to cope with the impact of COVID-19 pandemic and ensure the liquidity safety during the corresponding period of the previous year.

The Company has obtained bank facilities of up to RMB179,347 million granted by several banks in the PRC, among which approximately RMB55,215 million has been utilised. The remaining amount is sufficient to meet our demands on working capital and future capital commitments.

POTENTIAL RISKS

Risks of External Environment

Market Fluctuation

With ongoing pandemic prevention and control measures, China upheld the underlying principle of pursuing progress while ensuring stability in the first half of 2021. Adopting the new development concept, China promoted high-quality development and devoted strenuous efforts on ensuring stability on the six fronts. This led to steady economic recovery, overall positive market expectation, as well as orderly planning and commencement of various tasks for the "14th Five-Year Plan". However, the recovery and growth of the international aviation market is still subject to great uncertainties due to the ongoing spread and resurgence of pandemic worldwide and certain outbreak of the pandemic in China.

Oil Price Fluctuation

During the Reporting Period, the global oil price was on the rise. Jet fuel constitutes one of the major components of the Group's operating costs, for which the Group's performance is substantially subject to the fluctuation of jet fuel price. During the Reporting Period, with other variables remaining unchanged, if the average price of the jet fuel rises or falls by 5%, the Group's jet fuel costs will rise or fall by approximately RMB496 million.

Exchange Rate Fluctuation

The Group's certain lease liabilities, bank loans and other loans are mainly denominated in US dollar. Certain international income and expenses of the Group are denominated in currencies other than RMB. Assuming that the risk variables other than the exchange rate stay unchanged, the appreciation or depreciation of RMB against US dollar by 1% due to the changes in the exchange rate will result in an increase or decrease in the Group's net profit and shareholders' equity as at 30 June 2021 by RMB354 million.

Risks of Competition

Industry competition

As the COVID-19 pandemic weakened the global market demand, domestic aviation companies increased their investments in the domestic market, which might escalate the competition in the domestic market. In addition, global airlines grounded a large number of planes and faced a cash flow crisis, while many aviation companies around the world entered bankruptcy or restructuring. Such integration is expected to alleviate excess capacity and facilitate the integration of civil aviation resources and subsequent development.

Alternative competition

China has built the world's largest high-speed railway network. It is extending its reach towards central and western China and accelerating development through long-term planning. In the long run, the high-speed railway will change China's geographic pattern of the economy and, as a result of its cooperation and competition with civil aviation, the air-rail interlink operation will provide strong support to the development of international hubs. Regarding the domestic routes, as the Company's medium- and short-haul routes account for a relatively low proportion in the industry, the Company may suffer from the competition of high-speed railway transportation to a limited extent overall.

CHANGES IN THE INFORMATION OF DIRECTORS, SUPERVISORS AND

SENIOR MANAGEMENT OF THE COMPANY

1. On 9 February 2021, Mr. Wang Xiaokang ceased to serve as an independent non-executive Director and a member of the nomination and remuneration committee of the Board of the Company due to his age.

2. On 30 March 2021, Mr. Duan Hongyi was elected as a member of the nomination and remuneration committee of the Board.

3. On 31 May 2021, the Board appointed Mr. Ma Chongxian as the president of the Company with effect from the same day. On 20 July 2021, the 2021 first extraordinary general meeting of the Company considered and approved the resolution in relation to the appointment of Mr. Ma Chongxian as an executive Director of the Company. Effective from 20 July 2021, Mr. Ma Chongxian served as the vice chairman of the Company.

SHAREHOLDINGS OF DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE AND

SUBSTANTIAL SHAREHOLDERS OF THE COMPANY

DISCLOSURE OF INTERESTS OF DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE

As at the end of the Reporting Period, none of the Directors, Supervisors or chief executive of the Company had interests or short positions in shares, underlying shares and/or debentures (as the case may be) of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required to be recorded in the register kept by the Company pursuant to section 352 of the SFO, or otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code.

Mr. Patrick Healy is a non-executive Director of the Company and is concurrently the chairman and executive director of Cathay Pacific. Cathay Pacific is a substantial shareholder of the Company, holding 2,633,725,455 H Shares of the Company as at the end of the Reporting Period, which shall be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO. Mr. Song Zhiyong, the Chairman and an executive Director of the Company, and Mr. Ma Chongxian, an executive Director, are concurrently non-executive directors of Cathay Pacific. Cathay Pacific competes or is likely to compete either directly or indirectly with some aspects of the business of the Company as it operates airline services to certain destinations which are also served by the Company. In addition, Mr. Song Zhiyong (the Chairman and an executive Director of the Company) also served as a director of Air China Cargo. Air China Cargo competes or is likely to compete either directly or indirectly with some aspects of the business of the Company as it operates cargo airline services by cargo aircraft to certain destinations, which are also served by the bellyhold cargo of the Company.

Save as disclosed above, none of the Directors or Supervisors of the Company and their respective associates (as defined in the Listing Rules) has any competing interests which shall be disclosed under Rule 8.10 of the Listing Rules.

SUBSTANTIAL SHAREHOLDERS' INTERESTS IN THE COMPANY

As at the end of the Reporting Period, to the knowledge of the Directors, Supervisors and chief executive of the Company, the following persons (other than the Directors, Supervisors or chief executive of the Company) had interests or short positions in the shares or underlying shares of the Company as recorded in the register required to be kept under section 336 of the SFO:

 
                                                              Percentage 
                                                                  of the     Percentage     Percentage 
                                                    Type and       total         of the         of the 
                                                      number      issued   total issued   total issued 
                                                   of shares      shares       A Shares       H Shares 
                                                        held      of the         of the         of the 
 Name                  Type of interests      by the Company     Company        Company        Company  Short position 
 
                        Beneficial             5,952,236,697 
  CNAHC                  owner                      A Shares      40.98%         59.75%              -               - 
                      --------------------  ----------------  ----------  -------------  -------------  -------------- 
                        Equity                 1,332,482,920 
  CNAHC (1)              attributable               A Shares       9.17%         13.38%              -               - 
                      --------------------  ----------------  ----------  -------------  -------------  -------------- 
                        Equity                   223,852,000 
  CNAHC (1)              attributable               H Shares       1.54%              -          4.91%               - 
                      --------------------  ----------------  ----------  -------------  -------------  -------------- 
                        Beneficial             1,332,482,920 
  CNACG                  owner                      A Shares       9.17%         13.38%              -               - 
                      --------------------  ----------------  ----------  -------------  -------------  -------------- 
                        Beneficial               223,852,000 
  CNACG                  owner                      H Shares       1.54%              -          4.91%               - 
                      --------------------  ----------------  ----------  -------------  -------------  -------------- 
                        Beneficial             2,633,725,455 
  Cathay Pacific         owner                      H Shares      18.13%              -         57.72%               - 
                      --------------------  ----------------  ----------  -------------  -------------  -------------- 
  Swire Pacific         Equity                 2,633,725,455 
   Limited (2)           attributable               H Shares      18.13%              -         57.72%               - 
                      --------------------  ----------------  ----------  -------------  -------------  -------------- 
  John Swire & Sons 
   (H.K.) Limited                              2,633,725,455 
   (2)                 Equity attributable          H Shares      18.13%              -         57.72%               - 
                      --------------------  ----------------  ----------  -------------  -------------  -------------- 
  John Swire & Sons     Equity                 2,633,725,455 
   Limited (2)           attributable               H Shares      18.13%              -         57.72%               - 
                      --------------------  ----------------  ----------  -------------  -------------  -------------- 
 
 

Notes:

Based on the information available to the Directors, Supervisors and chief executive (including such information available on the website of the Hong Kong Stock Exchange) and so far as the Directors, Supervisors and chief executive are aware, as at the end of the Reporting Period:

1. By virtue of CNAHC's 100% interest in CNACG, CNAHC was deemed to be interested in the 1,332,482,920 A Shares and 223,852,000 H Shares directly held by CNACG.

2. By virtue of John Swire & Sons Limited's 100% interest in John Swire & Sons (H.K.) Limited and their approximately 57.89% equity interest and 66.24% voting rights in Swire Pacific Limited, and Swire Pacific Limited's approximately 45.00% equity interest in Cathay Pacific as at the end of the Reporting Period, John Swire & Sons Limited, John Swire & Sons (H.K.) Limited and Swire Pacific Limited were deemed to be interested in the 2,633,725,455 H Shares of the Company directly held by Cathay Pacific.

Save as disclosed above, as of the end of the Reporting Period, to the knowledge of the Directors, Supervisors and chief executive of the Company, no other person had any interest or short position in the shares or underlying shares of the Company as recorded in the register required to be kept under section 336 of the SFO.

TOTAL NUMBER OF SHAREHOLDERS

 
 
  Total number of holders of ordinary       150,734 accounts, of which 3,078 
   shares as at the end of the Reporting     accounts are registered holders 
   Period (account)                          of H Shares 
                                          ---------------------------------- 
 
 

INFORMATION OF SHAREHOLDERS

Unit: Share

 
                                                 Shareholdings of the top 10 shareholders 
 
 
                                                                                   Shares pledged, 
                                                                                   marked or frozen 
                   --------------  --------------  ------------  -------------  --------------------  ---------------- 
 
                                           Number 
                                        of shares 
                                          held as                       Number 
                        Change(s)          at the                    of shares 
 Name of                   during          end of  Shareholding   held subject 
 shareholder        the Reporting   the Reporting    percentage     to selling                        Nature of 
 (full name)               Period          Period           (%)   restrictions  Status        Number   shareholder 
                   --------------  --------------  ------------  -------------  -------  -----------  ---------------- 
 
  China National 
   Aviation 
   Holding 
   Corporation                                                                                        State-owned 
   Limited                      0   5,952,236,697         40.98              0  Frozen   127,445,536   legal person 
                   --------------  --------------  ------------  -------------  -------  -----------  ---------------- 
  Cathay Pacific 
   Airways                                                                                            Foreign legal 
   Limited                      0   2,633,725,455         18.13              0  Nil                0   person 
                   --------------  --------------  ------------  -------------  -------  -----------  ---------------- 
  HKSCC NOMINEES                                                                                      Foreign legal 
   LIMITED                286,000   1,688,020,388         11.62              0  Nil                0   person 
                   --------------  --------------  ------------  -------------  -------  -----------  ---------------- 
  China National 
   Aviation 
   Corporation 
   (Group)                                                                                            Foreign legal 
   Limited                      0   1,556,334,920         10.72              0  Frozen    36,454,464   person 
                   --------------  --------------  ------------  -------------  -------  -----------  ---------------- 
  China National 
   Aviation 
   Fuel 
   Group                                                                                              State-owned 
   Corporation         -4,000,000     462,583,102          3.18              0  Nil                0   legal person 
                   --------------  --------------  ------------  -------------  -------  -----------  ---------------- 
  China 
   Securities 
   Finance 
   Corporation                                                                                        State-owned 
   Limited                      0     311,302,365          2.14              0  Nil                0   legal person 
                   --------------  --------------  ------------  -------------  -------  -----------  ---------------- 
  Hong Kong 
   Securities 
   Clearing 
   Company                                                                                            Foreign legal 
   Limited            -45,880,981     108,675,892          0.75              0  Nil                0   person 
                   --------------  --------------  ------------  -------------  -------  -----------  ---------------- 
  Agricultural 
   Bank 
   of China 
   Limited 
   - GF Balanced 
   Preferred 
   Hybrid 
   Securities                                                                                         Domestic 
   Investment                                                                                          non-state-owned 
   Fund                70,423,446      70,423,446          0.48              0  Nil                0   legal person 
                   --------------  --------------  ------------  -------------  -------  -----------  ---------------- 
  Industrial Bank 
   Co., 
   Ltd. - GF 
   Stable 
   Preferred 
   Six-month 
   Hybrid 
   Securities                                                                                         Domestic 
   Investment                                                                                          non-state-owned 
   Fund                36,560,030      36,560,030          0.25              0  Nil                0   legal person 
                   --------------  --------------  ------------  -------------  -------  -----------  ---------------- 
  China 
   Construction 
   Bank 
   Corporation 
   - GF Value 
   Leading 
   Hybrid 
   Securities                                                                                         Domestic 
   Investment                                                                                          non-state-owned 
   Fund                33,059,964      33,059,964          0.23              0  Nil                0   legal person 
                   --------------  --------------  ------------  -------------  -------  -----------  ---------------- 
 
 

Unit: Share

 
               Shareholdings of the top 10 shareholders not subject to selling 
                                         restrictions 
 
                                                                  Class and number of shares 
                                          ------------------  -------------------------------- 
 
                                          Number of tradable 
                                                 shares held 
                                                 not subject 
                                                  to selling 
 Name of shareholder                            restrictions   Class             Number 
                                          ------------------  -----------------  ------------- 
 
  China National Aviation Holding                               RMB ordinary 
   Corporation Limited                         5,952,236,697     shares          5,952,236,697 
                                          ------------------  -----------------  ------------- 
                                                                Overseas listed 
  Cathay Pacific Airways Limited               2,633,725,455     foreign shares  2,633,725,455 
                                          ------------------  -----------------  ------------- 
                                                                Overseas listed 
  HKSCC NOMINEES LIMITED                       1,688,020,388     foreign shares  1,688,020,388 
                                          ------------------  -----------------  ------------- 
  China National Aviation Corporation                           RMB ordinary 
   (Group) Limited                             1,556,334,920     shares          1,332,482,920 
                                          ------------------  -----------------  ------------- 
                                                                Overseas listed 
                                                                 foreign shares    223,852,000 
                                          ------------------  -----------------  ------------- 
  China National Aviation Fuel                                  RMB ordinary 
   Group Corporation                             462,583,102     shares            462,583,102 
                                          ------------------  -----------------  ------------- 
  China Securities Finance Corporation                          RMB ordinary 
   Limited                                       311,302,365     shares            311,302,365 
                                          ------------------  -----------------  ------------- 
  Hong Kong Securities Clearing                                 RMB ordinary 
   Company Ltd.                                  108,675,892     shares            108,675,892 
                                          ------------------  -----------------  ------------- 
  Agricultural Bank of China Limited 
   - GF Balanced Preferred Hybrid                               RMB ordinary 
   Securities Investment Fund                     70,423,446     shares             70,423,446 
                                          ------------------  -----------------  ------------- 
  Industrial Bank Co., Ltd. - 
   GF Stable Preferred Six-month 
   Hybrid Securities Investment                                 RMB ordinary 
   Fund                                           36,560,030     shares             36,560,030 
                                          ------------------  -----------------  ------------- 
  China Construction Bank Corporation 
   - GF Value Leading Hybrid Securities                         RMB ordinary 
   Investment Fund                                33,059,964     shares             33,059,964 
                                          ------------------  -----------------  ------------- 
 
  Explanation on repurchase accounts      Nil 
   among the top ten shareholders 
                                          ------------------  -----------------  ------------- 
 
  Explanation on entrusting voting        Nil 
   right, entrusted voting right 
   and waiver of voting right of 
   the Shareholders above 
                                          ------------------  -----------------  ------------- 
 
  Explanation on the related parties      CNACG is a wholly-owned subsidiary 
   or concerted parties' relations         of CNAHC. Accordingly, CNAHC is directly 
   of the Shareholders above               and indirectly interested in 51.70% 
                                           of the shares of the Company. 
                                          ---------------------------------------------------- 
 
  Explanation on the preferred            Nil 
   shareholders with voting rights 
   restored and number of shares 
   held 
                                          ------------------  -----------------  ------------- 
 
 

1. HKSCC NOMINEES LIMITED is a subsidiary of The Stock Exchange of Hong Kong Limited and its principal business is acting as nominee for and on behalf of other corporate shareholders or individual shareholders. The 1,688,020,388 H Shares held by it in the Company do not include the 166,852,000 shares held by it as nominee of CNACG.

2. According to the "Implementation Measures on Partial Transfer of State-owned Shares to the National Social Security Fund in the Domestic Securities Market" (Cai Qi [2009] No. 94) ( ( [2009]94 )) and the Notice ([2009] No. 63) jointly issued by the Ministry of Finance, the State-owned Assets Supervision and Administration Commission of the State Council, China Securities Regulatory Commission and the National Council for Social Security Fund, 127,445,536 shares and 36,454,464 shares held by CNAHC, the controlling shareholder of the Company, and CNACG respectively are frozen at present.

CORPORATE GOVERNANCE

Compliance with the Corporate Governance Code

The Company has complied with the code provisions of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules throughout the Reporting Period, except for code provision A.4.2 and code provision A.5.1.

Code provision A.4.2 stipulates that, among others, every Director, including those appointed for a specific term, should be subject to retirement by rotation at least once every three years. As disclosed in the announcement of the Company dated 23 October 2020, the terms of the fifth session of the Board and the Supervisory Committee expired on 26 October 2020. As the nomination process of candidates for Directors and Supervisors of the new session of the Board and the Supervisory Committee has not been completed, the re-election and appointment of members of the Board and the Supervisory Committee was postponed. The terms of the special committees of the fifth session of the Board are also extended accordingly. The Company will endeavour to complete the re-election and appointment of members of the Board and the Supervisory Committee as soon as possible and fulfill relevant information disclosure obligations in a timely manner. All members of the fifth session of the Board and the Supervisory Committee of the Company will continue to fulfill their respective duties and responsibilities of Directors and Supervisors in accordance with the requirements of the laws, administrative rules and the Articles of Association until the re-election work is completed. The postponed re-election of the members of the Board and the Supervisory Committee will not affect the normal operation of the Company.

Code provision A.5.1 requires that the nomination committee shall comprise a majority of independent non-executive Directors. Effective from 9 February 2021, Mr. Wang Xiaokang resigned from his position as an independent non-executive Director of the Company due to his age. Following the resignation of Mr. Wang Xiaokang, the Company failed to meet the composition requirements of code provision A.5.1 which requires that the nomination committee shall comprise a majority of independent non-executive Directors. On 30 March 2021, Mr. Duan Hongyi, an independent non-executive Director, was elected as a member of the nomination and remuneration committee of the Board. Since then, the Company has complied with all requirements of code provision A.5.1.

Compliance with the Model Code

The Company has adopted and formulated a code of conduct on terms no less stringent than the required standards of the Model Code as set out in Appendix 10 to the Listing Rules. After making specific enquiries, the Company confirmed that each Director and each Supervisor have complied with the required standards of the Model Code and the Company's code of conduct throughout the Reporting Period.

MISCELLANEOUS

Other Material Contract

On 18 March 2021, the 26th meeting of the fifth session of the Board of the Company approved the execution of the agreement among the Company, Air China Import and Export Co., Ltd. (a wholly-owned subsidiary of the Company) and AFS Investments I, Inc. (a wholly-owned subsidiary of GE Capital Aviation Services Limited), for the purchase of 18 Airbus A320NEO aircraft from AFS Investments I, Inc. at a total list price of USD2,236.5 million (including the airframe price, engine price and optional features price). For details, please refer to the announcement of the Company dated 18 March 2021.

AMMENTS TO THE ARTICLES OF ASSOCIATION

On 18 March 2021, the Board proposed to amend the provisions relating to the Company's address and the business name of the promotor of the Company in the Articles of Association. At the annual general meeting of the Company convened on 25 May 2021, the shareholders of the Company approved the proposed amendments by way of a special resolution. For details, please refer to the announcements of the Company dated 18 March 2021 and 25 May 2021.

ENVIRONMENTAL PROTECTION INFORMATION

During the Reporting Period, the Group stayed committed to the major deployments of the Central Committee of the Party on ecological civilization establishment by implementing various energy saving and environmental protection initiatives. Apart from continuing to optimise the management system for better management capability, the Group enhanced energy management for the aviation business to achieve steady low-carbon development. It also strengthened pollution prevention and risk control for ground support services. The Group complied with the civil aviation requirements for the battle against air pollution and promoted the transition from fuel to electricity. In order to enhance carbon assets management capability, it adopted a scientific approach in managing carbon emission. The Group actively participated in environmental and public welfare campaigns to fulfil its social responsibility. For instance, it rolled out the carbon emission calculator for passengers to help them know more about carbon emission during their flights. Through the steady introduction of public welfare activities for passengers, the Group worked closely with travelers to preserve the beauty of China.

CORPORATE BONDS

The Group's corporate bonds are summarised as the followings:

Unit: billion Currency: RMB

 
                                                                                               Payment of  Arrangements 
 Name of                                                                    Balance  Interest  principal    for 
  Corporate                                Issue      Date       Expiry      of the      Rate  and          investors'    Transaction 
  Bond              Abbreviation     Code   Date       of Value   Date         Bond       (%)  interest     suitability    Mechanism 
 
                                                                                                                          Listed and 
                                                                                                                          traded on 
                                                                                                                          the auction 
                                                                                                                          trading 
                                                                                                                          system 
                                                                                               Interest                   and the 
                                                                                               to be paid                 fixed 
                                                                                               annually                   income 
  Air China                                                                                    and         For public     platform 
   Limited 2012                                                                                principal   investors      of the 
   Corporate                               18         18         18                            to be paid  and            Shanghai 
   Bond (First                             January    January    January                       upon        institutional  Stock 
   Tranche)         12AC01         122218  2013       2013       2023         5.115      5.10  expiration  investors      Exchange 
                    -------------  ------  ---------  ---------  ---------  -------  --------  ----------  -------------  ----------- 
                                                                                                                          Listed and 
                                                                                                                          traded on 
                                                                                                                          the auction 
                                                                                                                          trading 
                                                                                                                          system 
                                                                                               Interest                   and the 
                                                                                               to be paid                 fixed 
                                                                                               annually                   income 
  Air China                                                                                    and         For public     platform 
   Limited 2012                                                                                principal   investors      of the 
   Corporate                                                                                   to be paid  and            Shanghai 
   Bond (Second                            16 August  16 August  16 August                     upon        institutional  Stock 
   Tranche)         12AC03         122269   2013       2013       2023        1.569      5.30  expiration  investors      Exchange 
                    -------------  ------  ---------  ---------  ---------  -------  --------  ----------  -------------  ----------- 
                                                                                                                          Listed and 
                                                                                                                          traded on 
                                                                                                                          the auction 
                                                                                                                          trading 
                                                                                                                          system 
                                                                                               Interest                   and the 
                                                                                               to be paid                 fixed 
                                                                                               annually                   income 
  Air China                                                                                    and                        platform 
   Limited 2016                                                                                principal                  of the 
   Corporate                               20         20         20                            to be paid  For qualified  Shanghai 
   Bond (Second                            October    October    October                       upon         investors     Stock 
   Tranche)         16AC02         136776  2016       2016       2021         4.086      3.08  expiration   only          Exchange 
                    -------------  ------  ---------  ---------  ---------  -------  --------  ----------  -------------  ----------- 
                                                                                                                          Listed and 
                                                                                                                          traded on 
                                                                                                                          the auction 
                                                                                                                          trading 
                                                                                                                          system 
                                                                                               Interest                   and the 
                                                                                               to be paid                 fixed 
  Shenzhen                                                                                     annually                   income 
   Airlines                                                                                    and                        platform 
   Company Limited                                                                             principal                  of the 
   2018 Corporate                          6          7          7                             to be paid  For qualified  Shanghai 
   Bond (Third                             September  September  September                     upon         investors     Stock 
   Tranche)         18SA06         143793  2018       2018       2021         0.621      4.35  expiration   only          Exchange 
                    -------------  ------  ---------  ---------  ---------  -------  --------  ----------  -------------  ----------- 
                                                                                                                          Listed and 
                                                                                                                          traded on 
                                                                                                                          the auction 
                                                                                                                          trading 
                                                                                                                          system 
                                                                                               Interest                   and the 
                                                                                               to be paid                 fixed 
  Shenzhen                                                                                     annually                   income 
   Airlines                                                                                    and                        platform 
   Company Limited                                                                             principal                  of the 
   2019 Corporate                                                                              to be paid  For qualified  Shanghai 
   Bond (First                             25 April   26 April   26 April                      upon         investors     Stock 
   Tranche)         19SA01         155388   2019       2019       2022        1.007      4.00  expiration   only          Exchange 
                    -------------  ------  ---------  ---------  ---------  -------  --------  ----------  -------------  ----------- 
                                                                                                                          Dual listed 
                                                                                                                          and traded 
                                                                                                                          on the 
                                                                                                                          centralized 
  Shenzhen                                                                                                                auction 
   Airlines                                                                                                               trading 
   Company Limited                                                                                                        system and 
   2021 Public                                                                                                            the 
   Issue                                                                                                   For            integrated 
   Short-term                                                                                              professional   negotiated 
   Corporate                                                                                   Interest    investors      trading 
   Bond                                                                                        and         who are        platform 
   for                                                                                         principal   also           of the 
   Professional                            4          5          5                             to be paid  institutional  Shenzhen 
   Investors                               February   February   February                      upon        investors      Stock 
   (First Tranche)  21SAD1         149379  2021       2021       2022         0.506      3.09  expiration  only           Exchange 
                    -------------  ------  ---------  ---------  ---------  -------  --------  ----------  -------------  ----------- 
                                                                                                                          Listed and 
                                                                                                           For not        traded on 
  Shenzhen                                                                                                 more than      the 
   Airlines                                                                                                200            integrated 
   Company Limited                                                                                         professional   negotiated 
   2021 Non-public                                                                             Interest    investors      trading 
   Issue                                                                                       and         who are        platform 
   Short-term                                                                                  principal   also           of the 
   Corporate                                                                                   to be paid  institutional  Shenzhen 
   Bond (First                             3 June     4 June     4 June                        upon        investors      Stock 
   Tranche)         21SAD2         133010   2021       2021       2022        2.005      3.10  expiration  only           Exchange 
                    -------------  ------  ---------  ---------  ---------  -------  --------  ----------  -------------  ----------- 
 
 

The corporate bonds "12AC01", "12AC03", "16AC02", "18SA06" and "19SA01" are traded on the Shanghai Stock Exchange, and the corporate bonds "21SAD1" and "21SAD2" are traded on the Shenzhen Stock Exchange. The bonds as shown in the table are not exposed to the risk of termination of listing.

The Company and Shenzhen Airlines fulfilled the obligations of payment of principal and/or interest for "12AC01", "12AC03", "16AC02", "18SA06", "19SA01", "21SAD1" and "21SAD2" corporate bonds on time. The interests of the above"12AC01", "12AC03", "16AC02", "18SA06" and "19SA01" bonds were paid from the date of value on an annual basis and the principal amount will be paid in full upon expiration. The interests and principal of the "21SAD1" and "21SAD2" bonds will be paid upon expiration. Details of principal and interests payment will be disclosed by the Company in the relevant announcements published on media designated by the CSRC in compliance with the relevant state regulations.

Non-financial corporate debt financing instruments

The Group's debt financing instruments are summarised as the followings:

Unit: billion Currency: RMB

 
                                                                                    Balance 
                                                                                     of the             Payment of 
  Name of the Debt                                         Date                        Debt  Interest   principal     Arrangements 
  Financing                                       Issue    of       Expiry        Financing      Rate   and           for investors' 
  Instruments         Abbreviation    Code         Date    Value     Date       Instruments       (%)   interest      suitability 
 
                                                                                                         Interest 
                                                                                                         to be paid 
                                                                                                         annually 
  Shenzhen Airlines                                                                                      and 
   Company Limited                                                                                       principal 
   2019 Medium-Term                                14       18                                           to be paid    Qualified 
   Notes (First                                    March    March    18 March                            upon          institutional 
   Tranche)            19SA MTN001    101900344    2019     2019      2022            1.010      3.73    expiration    investors 
                     --------------  ----------  -------  -------  -----------  -----------  --------  ------------  --------------- 
                                                                                                         Interest 
                                                                                                         to be paid 
                                                                                                         annually 
  Shenzhen Airlines                                                                                      and 
   Company Limited                                                                                       principal 
   2019 Medium-Term                                21       23                                           to be paid    Qualified 
   Notes (Second                                   May      May      23 May                              upon          institutional 
   Tranche)            19SA MTN002    101900725    2019     2019      2022            1.004      3.79    expiration    investors 
                     --------------  ----------  -------  -------  -----------  -----------  --------  ------------  --------------- 
                                                                                                         Interest 
  Shenzhen Airlines                                                                                      to be paid 
   Company Limited     20SA                                                                              annually 
   2020 Medium-Term     (Pandemic                                                                        and 
   Notes (Pandemic      Prevention                                                                       principal 
   Prevention and       and Control                3        5                                            to be paid    Qualified 
   Control Debt)        Debt)                      March    March    5 March                             upon          institutional 
   (First Tranche)      MTN001        102000224    2020     2020      2023            1.009      3.00    expiration    investors 
                     --------------  ----------  -------  -------  -----------  -----------  --------  ------------  --------------- 
  Shenzhen Airlines 
   Company Limited                                                                                       Interest 
   2021                                                                                                  and 
   Ultra-short-term                                                                                      principal 
   Commercial                                      26       29                                           to be paid    Qualified 
   Papers                                          March    March    9 July                              upon          institutional 
   (First Tranche)     21SA SCP001    012101258    2021     2021      2021            0.201      2.50    expiration    investors 
                     --------------  ----------  -------  -------  -----------  -----------  --------  ------------  --------------- 
  Shenzhen Airlines 
   Company Limited                                                                                       Interest 
   2021                                                                                                  and 
   Ultra-short-term                                                                                      principal 
   Commercial                                      28       28                                           to be paid    Qualified 
   Papers                                          May      May      26 August                           upon          institutional 
   (Second Tranche)    21SA SCP002    012102016    2021     2021      2021            0.501      2.36    expiration    investors 
                     --------------  ----------  -------  -------  -----------  -----------  --------  ------------  --------------- 
  Shenzhen Airlines 
   Company Limited                                                                                       Interest 
   2021                                                                                                  and 
   Ultra-short-term                                                                                      principal 
   Commercial                                      28       31                                           to be paid    Qualified 
   Papers                                          May      May      31 August                           upon          institutional 
   (Third Tranche)     21SA SCP003    012102018    2021     2021      2021            0.601      2.35    expiration    investors 
                     --------------  ----------  -------  -------  -----------  -----------  --------  ------------  --------------- 
  Shenzhen Airlines 
   Company Limited                                                                                       Interest 
   2021                                                                                                  and 
   Ultra-short-term                                                                                      principal 
   Commercial                                      2        3        1                                   to be paid    Qualified 
   Papers                                          June     June     September                           upon          institutional 
   (Fourth Tranche)    21SA SCP004    012102048    2021     2021     2021             0.501      2.33    expiration    investors 
                     --------------  ----------  -------  -------  -----------  -----------  --------  ------------  --------------- 
 
 

All the non-financial corporate debt financing instruments listed in the above table are traded on the Shanghai Clearing House, the trading mechanism of which enables all instruments to be traded and transferred among the National Interbank Bond Market. All of these non-financial corporate debt financing instruments are not exposed to the risk of termination of listing.

Shenzhen Airlines fulfilled the obligations of payment of principal and/or interest for "19SA MTN001", "19SA MTN002", "20SA (Pandemic Prevention and Control Debt) MTN001", "21SA SCP001", "21SA SCP002", "21SA SCP003" and "21SA SCP004" on time. The interests of the "19SA MTN001", "19SA MTN002" and "20SA (Pandemic Prevention and Control Debt) MTN001" bonds were paid from the date of value on an annual basis and the principal amount will be paid in full upon expiration. The last instalment of interest will be paid together with the principal. The interests and principal of the "21SA SCP001", "21SA SCP002", "21SA SCP003" and "21SA SCP004" bonds shall be paid upon expiration. Details of principal and interests payment will be disclosed by the Company in the relevant announcements published on the designated media in compliance with the relevant regulations.

PURCHASE, SALE OR REDEMPTION OF SECURITIES

During the Reporting Period, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any listed securities of the Company (the term "securities" has the meaning ascribed to it under paragraph 1 of Appendix 16 to the Listing Rules).

INTERIM DIVID

No interim dividend will be paid by the Company for the six months ended 30 June 2021.

REVIEW BY THE AUDIT AND RISK CONTROL COMMITTEE

The audit and risk control committee of the Company has reviewed the Company's interim report for the six months ended 30 June 2021, the Company's unaudited interim condensed consolidated financial statements and the accounting policies and practices adopted by the Group.

OTHER INFORMATION

According to paragraph 40 of Appendix 16 to the Listing Rules, save as disclosed herein, the Company confirms that the information of the Company in relation to those matters set out in paragraph 32 of Appendix 16 has not changed materially from the information disclosed in the Company's 2020 annual report.

SUBSEQUENT EVENTS

On 20 July 2021, Mr. Ma Chongxian was elected as an executive Director. The appointment of Mr. Ma as vice chairman of the Company took effect on 20 July 2021. For details, please refer to the announcements of the Company dated 31 May 2021 and 20 July 2021 and the notice of extraordinary general meeting of the Company dated 3 June 2021.

REPORT ON REVIEW OF CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

TO THE BOARD OF DIRECTORS OF AIR CHINA LIMITED

( )

(Incorporated in the People's Republic of China with limited liability)

INTRODUCTION

We have reviewed the condensed consolidated financial statements of Air China Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") set out on pages 3 1 to 66, which comprise the condensed consolidated statement of financial position as of 30 June 2021 and the related condensed consolidated statement of profit or loss, statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the six-month period then ended, and certain explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and International Accounting Standard 34 "Interim Financial Reporting" ("IAS 34") issued by the International Accounting Standards Board. The directors of the Company are responsible for the preparation and presentation of these condensed consolidated financial statements in accordance with IAS 34. Our responsibility is to express a conclusion on these condensed consolidated financial statements based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

SCOPE OF REVIEW

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants. A review of these condensed consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong

27 August 2021

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE SIX MONTHSED 30 JUNE 2021

 
                                                           Six months ended 30 June 
-----------------------------------------------  -----  ------------------------------ 
                                                                    2021          2020 
-----------------------------------------------  -----  ----------------  ------------ 
                                                 NOTES           RMB'000       RMB'000 
-----------------------------------------------  -----  ----------------  ------------ 
                                                             (Unaudited)   (Unaudited) 
-----------------------------------------------  -----  ----------------  ------------ 
 
 
  Revenue                                         4A          37,663,803    29,645,766 
                                                 -----  ----------------  ------------ 
  Other income and gains                           5           2,289,141     1,867,685 
                                                 -----  ----------------  ------------ 
 
 
                                                              39,952,944    31,513,451 
                                                 -----  ----------------  ------------ 
 
 
  Operating expenses 
                                                 -----  ----------------  ------------ 
  Jet fuel costs                                             (9,914,804)   (6,811,760) 
                                                 -----  ----------------  ------------ 
  Employee compensation costs                               (11,301,581)  (10,091,701) 
                                                 -----  ----------------  ------------ 
  Depreciation and amortisation                             (10,331,621)   (9,964,824) 
                                                 -----  ----------------  ------------ 
  Take-off, landing and depot charges                        (5,020,224)   (3,893,701) 
                                                 -----  ----------------  ------------ 
  Aircraft maintenance, repair and overhaul 
   costs                                                     (3,586,761)   (2,874,176) 
                                                 -----  ----------------  ------------ 
  Air catering charges                                         (912,392)     (625,766) 
                                                 -----  ----------------  ------------ 
  Aircraft and engine lease expenses                           (214,147)     (121,882) 
                                                 -----  ----------------  ------------ 
  Other lease expenses                                         (341,102)     (245,660) 
                                                 -----  ----------------  ------------ 
  Other flight operation expenses                            (2,753,906)   (2,055,640) 
                                                 -----  ----------------  ------------ 
  Selling and marketing expenses                             (1,140,228)   (1,082,586) 
                                                 -----  ----------------  ------------ 
  General and administrative expenses                          (469,485)     (511,959) 
                                                 -----  ----------------  ------------ 
  Net impairment loss (recognised)/reversed 
   under expected credit loss model                              (9,305)        84,155 
                                                 -----  ----------------  ------------ 
 
 
                                                            (45,995,556)  (38,195,500) 
                                                 -----  ----------------  ------------ 
 
 
  Loss from operations                             6         (6,042,612)   (6,682,049) 
                                                 -----  ----------------  ------------ 
  Finance income                                                  41,215        56,102 
                                                 -----  ----------------  ------------ 
  Finance costs                                    7         (2,658,298)   (2,548,296) 
                                                 -----  ----------------  ------------ 
  Share of results of associates                             (1,418,976)   (3,010,754) 
                                                 -----  ----------------  ------------ 
  Share of results of joint ventures                             110,282       106,840 
                                                 -----  ----------------  ------------ 
  Exchange gain/(loss), net                                      563,440   (1,018,769) 
                                                 -----  ----------------  ------------ 
 
 
  Loss before taxation                                       (9,404,949)  (13,096,926) 
                                                 -----  ----------------  ------------ 
  Income tax credit                                8           1,734,284     2,236,520 
                                                 -----  ----------------  ------------ 
 
 
  Loss for the period                                        (7,670,665)  (10,860,406) 
                                                 -----  ----------------  ------------ 
 
 
  Attributable to: 
                                                 -----  ----------------  ------------ 
 
       *    Equity shareholders of the Company               (6,781,429)   (9,439,799) 
                                                 -----  ----------------  ------------ 
 
       *    Non-controlling interests                          (889,236)   (1,420,607) 
                                                 -----  ----------------  ------------ 
 
 
                                                             (7,670,665)  (10,860,406) 
                                                 -----  ----------------  ------------ 
 
 
  Loss per share 
                                                 -----  ----------------  ------------ 
                                                                            RMB(68.73) 
       *    Basic and diluted                     10    RMB(49.37) cents         cents 
                                                 -----  ----------------  ------------ 
 
 

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE SIX MONTHSED 30 JUNE 2021

 
                                                                     Six months ended 30 June 
------------------------------------------------------------------  -------------------------- 
                                                                            2021          2020 
------------------------------------------------------------------  ------------  ------------ 
                                                                         RMB'000       RMB'000 
------------------------------------------------------------------  ------------  ------------ 
                                                                     (Unaudited)   (Unaudited) 
------------------------------------------------------------------  ------------  ------------ 
 
 
  Loss for the period                                                (7,670,665)  (10,860,406) 
                                                                    ------------  ------------ 
 
 
  Other comprehensive income/(expense) for 
   the period 
                                                                    ------------  ------------ 
  Items that will not be reclassified to 
   profit or loss: 
                                                                    ------------  ------------ 
 
       *    Fair value loss on investments in equity instruments 
            at fair value through other comprehensive income            (18,915)      (69,638) 
                                                                    ------------  ------------ 
 
       *    Income tax relating to items that will not be 
            reclassified to profit or loss                                 4,729        17,409 
                                                                    ------------  ------------ 
 
       *    Remeasurement of net defined benefit liability               (2,125)       (4,432) 
                                                                    ------------  ------------ 
 
       *    Share of other comprehensive expense of associates 
            and joint ventures                                           (3,858)     (103,423) 
                                                                    ------------  ------------ 
 
 
  Items that may be reclassified subsequently 
   to profit or loss: 
                                                                    ------------  ------------ 
 
       *    Fair value loss on investments in debt instruments 
            measured at fair value through other comprehensive 
            income                                                       (5,169)       (5,918) 
                                                                    ------------  ------------ 
 
       *    Impairment loss (reversed)/recognised on investments 
            in debt instruments measured at fair value through 
            other comprehensive income                                  (15,277)        11,083 
                                                                    ------------  ------------ 
 
       *    Income tax relating to items that may be reclassified 
            subsequently to profit or loss                                 5,111       (1,291) 
                                                                    ------------  ------------ 
 
       *    Share of other comprehensive income/(expense) of 
            associates and joint ventures                                878,718     (902,862) 
                                                                    ------------  ------------ 
 
       *    Exchange differences on translation of foreign 
            operations                                                 (194,718)       436,992 
                                                                    ------------  ------------ 
 
 
  Other comprehensive income/(expense) 
   for the period (net of tax)                                           648,496     (622,080) 
                                                                    ------------  ------------ 
 
 
  Total comprehensive expense for the period                         (7,022,169)  (11,482,486) 
                                                                    ------------  ------------ 
 
 
  Attributable to: 
                                                                    ------------  ------------ 
 
       *    Equity shareholders of the Company                       (6,106,812)  (10,046,662) 
                                                                    ------------  ------------ 
 
       *    Non-controlling interests                                  (915,357)   (1,435,824) 
                                                                    ------------  ------------ 
 
 
                                                                     (7,022,169)  (11,482,486) 
                                                                    ------------  ------------ 
 
 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 30 JUNE 2021

 
                                                                  At             At 
                                                             30 June    31 December 
                                                                2021           2020 
                                                -----  -------------  ------------- 
                                                NOTES        RMB'000        RMB'000 
----------------------------------------------  -----  -------------  ------------- 
                                                         (Unaudited)      (Audited) 
----------------------------------------------  -----  -------------  ------------- 
 
 
  Non-current assets 
                                                -----  -------------  ------------- 
  Property, plant and equipment                  11       99,841,057    101,346,490 
                                                -----  -------------  ------------- 
  Right-of-use assets                            11      118,652,505    114,539,680 
                                                -----  -------------  ------------- 
  Investment properties                                      584,378        600,329 
                                                -----  -------------  ------------- 
  Intangible assets                                           36,559         36,580 
                                                -----  -------------  ------------- 
  Goodwill                                                 1,099,975      1,099,975 
                                                -----  -------------  ------------- 
  Interests in associates                        12       10,233,582     10,938,428 
                                                -----  -------------  ------------- 
  Interests in joint ventures                              1,667,387      1,581,105 
                                                -----  -------------  ------------- 
  Advance payments for aircraft and 
   flight equipment                                       21,497,690     24,907,862 
                                                -----  -------------  ------------- 
  Deposits for aircraft under leases                         571,075        615,537 
                                                -----  -------------  ------------- 
  Equity instruments at fair value through 
   other comprehensive income                                214,265        233,180 
                                                -----  -------------  ------------- 
  Debt instruments at fair value through 
   other comprehensive income                              1,313,267      1,344,829 
                                                -----  -------------  ------------- 
  Deferred tax assets                                      8,505,139      6,750,883 
                                                -----  -------------  ------------- 
  Other non-current assets                                   276,453        298,836 
                                                -----  -------------  ------------- 
 
 
                                                         264,493,332    264,293,714 
                                                -----  -------------  ------------- 
 
 
  Current assets 
                                                -----  -------------  ------------- 
  Inventories                                              2,325,036      1,853,990 
                                                -----  -------------  ------------- 
  Accounts receivable                            13        3,738,511      2,942,799 
                                                -----  -------------  ------------- 
  Bills receivable                                             8,922          6,593 
                                                -----  -------------  ------------- 
  Prepayments, deposits and other receivables    14        3,949,155      3,912,471 
                                                -----  -------------  ------------- 
  Restricted bank deposits                                   642,782        737,245 
                                                -----  -------------  ------------- 
  Cash and cash equivalents                                8,451,613      5,837,998 
                                                -----  -------------  ------------- 
  Other current assets                                     4,382,393      4,444,806 
                                                -----  -------------  ------------- 
 
 
                                                          23,498,412     19,735,902 
                                                -----  -------------  ------------- 
 
 
  Total assets                                           287,991,744    284,029,616 
                                                -----  -------------  ------------- 
 
 
  Current liabilities 
                                                -----  -------------  ------------- 
  Air traffic liabilities                                (2,433,265)    (2,002,649) 
                                                -----  -------------  ------------- 
  Accounts payable                               15     (14,757,240)   (12,510,582) 
                                                -----  -------------  ------------- 
  Bills payable                                             (73,659)       (62,570) 
                                                -----  -------------  ------------- 
  Dividends payable                                         (98,000)       (98,000) 
                                                -----  -------------  ------------- 
  Other payables and accruals                    16     (12,951,404)   (11,177,928) 
                                                -----  -------------  ------------- 
  Current taxation                                          (41,382)       (45,614) 
                                                -----  -------------  ------------- 
  Lease liabilities                              17     (14,039,145)   (13,560,862) 
                                                -----  -------------  ------------- 
  Interest-bearing borrowings                    18     (39,141,554)   (39,630,365) 
                                                -----  -------------  ------------- 
  Provision for return condition checks                  (1,073,858)      (229,514) 
                                                -----  -------------  ------------- 
  Contract liabilities                                   (1,250,375)    (1,280,102) 
                                                -----  -------------  ------------- 
 
 
                                                        (85,859,882)   (80,598,186) 
                                                -----  -------------  ------------- 
 
  Net current liabilities                               (62,361,470)   (60,862,284) 
                                                -----  -------------  ------------- 
 
 
  Total assets less current liabilities                  202,131,862    203,431,430 
                                                -----  -------------  ------------- 
 
  Non-current liabilities 
                                                -----  -------------  ------------- 
  Lease liabilities                              17     (76,997,169)   (76,098,678) 
                                                -----  -------------  ------------- 
  Interest-bearing borrowings                    18     (36,593,137)   (31,639,097) 
                                                -----  -------------  ------------- 
  Provision for return condition checks                  (8,219,318)    (8,580,560) 
                                                -----  -------------  ------------- 
  Provision for early retirement benefit 
   obligations                                               (1,161)        (1,351) 
                                                -----  -------------  ------------- 
  Long-term payables                                        (11,086)       (21,022) 
                                                -----  -------------  ------------- 
  Contract liabilities                                   (2,051,050)    (2,264,843) 
                                                -----  -------------  ------------- 
  Defined benefit obligations                              (222,944)      (229,332) 
                                                -----  -------------  ------------- 
  Deferred income                                          (478,610)      (488,791) 
                                                -----  -------------  ------------- 
  Deferred tax liabilities                                 (330,724)      (334,720) 
                                                -----  -------------  ------------- 
 
 
                                                       (124,905,199)  (119,658,394) 
                                                -----  -------------  ------------- 
 
 
  NET ASSETS                                              77,226,663     83,773,036 
                                                -----  -------------  ------------- 
 
 
  CAPITAL AND RESERVES 
                                                -----  -------------  ------------- 
  Issued capital                                 19       14,524,815     14,524,815 
                                                -----  -------------  ------------- 
  Treasury shares                                        (3,047,564)    (3,047,564) 
                                                -----  -------------  ------------- 
  Reserves                                                59,957,264     66,064,076 
                                                -----  -------------  ------------- 
 
 
  Total equity attributable to equity 
   shareholders of the Company                            71,434,515     77,541,327 
                                                -----  -------------  ------------- 
  Non-controlling interests                                5,792,148      6,231,709 
                                                -----  -------------  ------------- 
 
 
  TOTAL EQUITY                                            77,226,663     83,773,036 
                                                -----  -------------  ------------- 
 
 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHSED 30 JUNE 2021

 
                                                          Attributable to equity shareholders 
                                                                     of the Company 
 
                                                                                          Foreign 
                                                                                         exchange 
                               Issued     Treasury      Capital     Reserve  General  translation     Retained                Non-controlling         Total 
                     Note     capital       shares      reserve       funds  reserve      reserve     earnings         Total        interests        equity 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
                              RMB'000      RMB'000      RMB'000     RMB'000  RMB'000      RMB'000      RMB'000       RMB'000          RMB'000       RMB'000 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
 
 
  As at 1 January 
   2021 
   (Audited)               14,524,815  (3,047,564)   30,146,498  11,564,287  110,628  (2,311,036)   26,553,699    77,541,327        6,231,709    83,773,036 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
  Changes in equity 
  for 
  the six months 
  ended 
  30 June 2021 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
  Loss for the 
   period                           -            -            -           -        -            -  (6,781,429)   (6,781,429)        (889,236)   (7,670,665) 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
  Other 
   comprehensive 
   income/(expense)                 -            -      858,210           -        -    (183,593)            -       674,617         (26,121)       648,496 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
 
 
  Total 
   comprehensive 
   income/(expense)                 -            -      858,210           -        -    (183,593)  (6,781,429)   (6,106,812)        (915,357)   (7,022,169) 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
 
 
  Capital 
   contribution 
   from 
   non-controlling 
   shareholder of a 
   subsidiary                       -            -            -           -        -            -            -             -          490,148       490,148 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
  Dividends paid to 
   non-controlling 
   shareholders                     -            -            -           -        -            -            -             -         (14,352)      (14,352) 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
  Others                            -            -        3,637           -        -            -      (3,637)             -                -             - 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
 
 
  As at 30 June 
   2021 (Unaudited)        14,524,815  (3,047,564)   31,008,345  11,564,287  110,628  (2,494,629)   19,768,633    71,434,515        5,792,148    77,226,663 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
 
 
  As at 1 January 
   2020 
   (Audited)               14,524,815  (3,047,564)   29,916,386  11,026,605  110,628  (1,223,899)   42,151,706    93,458,677        7,870,786   101,329,463 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
  Changes in equity 
  for 
  the six months 
  ended 
  30 June 2020 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
  Loss for the 
   period                           -            -            -           -        -            -  (9,439,799)   (9,439,799)      (1,420,607)  (10,860,406) 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
  Other 
   comprehensive 
   (expense)/income                 -            -  (1,034,270)           -        -      427,407            -     (606,863)         (15,217)     (622,080) 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
 
 
  Total 
   comprehensive 
   (expense)/income                 -            -  (1,034,270)           -        -      427,407  (9,439,799)  (10,046,662)      (1,435,824)  (11,482,486) 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
 
 
  Appropriation of 
   discretionary 
   reserve funds                    -            -            -     537,682        -            -    (537,682)             -                -             - 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
  Dividends 
   paid/payable 
   to 
   non-controlling 
   shareholders                     -            -            -           -        -            -            -             -        (112,787)     (112,787) 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
  Dividends 
   declared in 
   respect of the 
   previous 
   year               9             -            -            -           -        -            -    (645,192)     (645,192)                -     (645,192) 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
 
 
  As at 30 June 
   2020 (Unaudited)        14,524,815  (3,047,564)   28,882,116  11,564,287  110,628    (796,492)   31,529,033    82,766,823        6,322,175    89,088,998 
                     ----  ----------  -----------  -----------  ----------  -------  -----------  -----------  ------------  ---------------  ------------ 
 
 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHSED 30 JUNE 2021

 
                                                   Six months ended 30 June 
------------------------------------------------  -------------------------- 
                                                          2021          2020 
------------------------------------------------  ------------  ------------ 
                                                       RMB'000       RMB'000 
------------------------------------------------  ------------  ------------ 
                                                   (Unaudited)   (Unaudited) 
------------------------------------------------  ------------  ------------ 
 
 
  Operating activities 
                                                  ------------  ------------ 
  Cash generated from (used in) operations           7,350,249   (6,727,707) 
                                                  ------------  ------------ 
  Income tax paid                                     (18,532)     (906,008) 
                                                  ------------  ------------ 
  Interest paid                                    (2,899,468)   (2,622,740) 
                                                  ------------  ------------ 
 
 
  Net cash generated from (used in) operating 
   activities                                        4,432,249  (10,256,455) 
                                                  ------------  ------------ 
 
 
  Investing activities 
                                                  ------------  ------------ 
  Payments for the purchase of property, 
   plant and equipment                             (1,355,134)   (4,892,688) 
                                                  ------------  ------------ 
  Refund (advance) payments for aircraft 
   and flight equipment                                756,263   (2,498,324) 
                                                  ------------  ------------ 
  Proceeds from disposal of property, plant 
   and equipment                                        84,728        61,742 
                                                  ------------  ------------ 
  Purchases of debt instruments at fair value 
   through other comprehensive income                 (99,514)     (607,678) 
                                                  ------------  ------------ 
  Proceeds from disposal of debt instruments 
   at fair value through other comprehensive 
   income                                            1,399,866       467,167 
                                                  ------------  ------------ 
  Dividends received from joint ventures 
   and associates                                        2,631        11,559 
                                                  ------------  ------------ 
  Cash flows arising from other investing 
   activities                                           57,421        61,263 
                                                  ------------  ------------ 
 
 
  Net cash generated from (used in) investing 
   activities                                          846,261   (7,396,959) 
                                                  ------------  ------------ 
 
 
  Financing activities 
                                                  ------------  ------------ 
  Capital contribution from a non-controlling 
   shareholder of a subsidiary                         490,148             - 
                                                  ------------  ------------ 
  New bank loans and other loans                    28,111,014    25,639,476 
                                                  ------------  ------------ 
  Proceeds from issuance of corporate bonds          4,300,000    24,500,000 
                                                  ------------  ------------ 
  Repayment of bank loans and other loans         (24,473,165)  (12,453,290) 
                                                  ------------  ------------ 
  Repayment of corporate bonds                     (3,300,000)   (9,100,000) 
                                                  ------------  ------------ 
  Repayment of leases liabilities                  (7,752,136)   (6,423,623) 
                                                  ------------  ------------ 
  Dividends paid to non-controlling shareholder 
   of a subsidiary                                    (14,352)      (14,787) 
                                                  ------------  ------------ 
 
 
  Net cash (used in) generated from financing 
   activities                                      (2,638,491)    22,147,776 
                                                  ------------  ------------ 
 
 
  Net increase in cash and cash equivalents          2,640,019     4,494,362 
                                                  ------------  ------------ 
 
 
  Cash and cash equivalents at 1 January             5,837,998     8,935,282 
                                                  ------------  ------------ 
  Effect of foreign exchanges rates changes           (26,404)        12,973 
                                                  ------------  ------------ 
 
 
  Cash and cash equivalents at 30 June               8,451,613    13,442,617 
                                                  ------------  ------------ 
 
 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHSED 30 JUNE 2021

   1.    CORPORATE INFORMATION 

Air China Limited (the "Company") was established as a joint stock limited company in Beijing, the People's Republic of China (the "PRC"), on 30 September 2004. The Company's H shares are listed on The Stock Exchange of Hong Kong Limited (the "HKSE") and the London Stock Exchange (the "LSE") while the Company's A shares are listed on the Shanghai Stock Exchange. In the opinion of the directors of the Company (the "Directors"), the Company's parent and ultimate holding company is China National Aviation Holding Corporation Limited ("CNAHC"), a state-owned enterprise established in the PRC under the supervision of the State Council.

The principal activities of the Company and its subsidiaries (together referred to as the "Group") are provision of airline and airline-related services, including aircraft engineering services and airport ground handling services.

The registered office of the Company is located at Blue Sky Mansion, 28 Tianzhu Road, Airport Industrial Zone, Shunyi District, Beijing 101312, the PRC.

The condensed consolidated financial statements are presented in Renminbi ("RMB"), the currency of the primary economic environment in which most of the group entities operate (the functional currency of the Company and most of the entities comprising the Group), and all values are rounded to the nearest thousand ('000) unless otherwise indicated.

   2.    BASIS OF PREPARATION 

The condensed consolidated financial statements for the six months ended 30 June 2021 have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" ("IAS 34") issued by the International Accounting Standards Board (the "IASB") as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"). The condensed consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements, and should be read in conjunction with the Group's consolidated financial statements for the year ended 31 December 2020.

As at 30 June 2021, the Group's current liabilities exceeded its current assets by approximately RMB62,361 million. The liquidity of the Group is primarily dependent on its ability to maintain cash inflows from operations and sufficient financing to meet its financial obligations as and when they fall due. Considering the Company's sources of liquidity and the unutilised bank facilities of RMB124,132 million as at 30 June 2021, the Directors believe that adequate funding is available to fulfil the Group's debt obligations and capital expenditure requirements when preparing these condensed consolidated financial statements for the six months ended 30 June 2021. Accordingly, these condensed consolidated financial statements have been prepared on a basis that the Group will be able to continue as a going concern.

   3.    PRINCIPAL ACCOUNTING POLICIES 

The condensed consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values.

Other than application of amendments to International Financial Reporting Standards ("IFRSs"), the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2021 are the same as those presented in the Group's annual consolidated financial statements for the year ended 31 December 2020.

Application of amendments to IFRSs

In the current interim period, the Group has applied the following amendments to IFRSs issued by the IASB, for the first time, which are mandatorily effective for the annual period beginning on or after 1 January 2021 for the preparation of the Group's condensed consolidated financial statements.

 
Amendments to IFRS 9, IAS 39, IFRS  Interest Rate Benchmark 
 7,                                  Reform-Phase 2 
 IFRS 4 and IFRS 16 
 

In addition, the Group has early applied the Amendment to IFRS 16 "Covid-19-Related Rent Concessions beyond 30 June 2021".

Except as described below, the application of the amendments to IFRSs in the current interim period has had no material impact on the Group's financial positions and performance for the current and prior periods and/or on the disclosures set out in these condensed consolidated financial statements.

3.1 Impacts on early application of Amendment to IFRS 16 "Covid-19-Related Rent Concessions beyond 30 June 2021"

The Group has early applied the amendment in the current interim period. The application of this amendment has had no material impact on the Group's financial positions and performance for the current and prior periods.

3.2 Impacts and accounting policies on application of Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 "Interest Rate Benchmark Reform - Phase 2"

As at 1 January 2021, the Group has certain lease liabilities denominated in United States Dollar ("USD") based on London Interbank Offered Rate ("LIBOR"). The accounting policies and the potential impact from the amendment that are relevant to the Group are described below.

   3.    PRINCIPAL ACCOUNTING POLICIES (Continued) 

3.2 Impacts and accounting policies on application of Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 "Interest Rate Benchmark Reform - Phase 2" (Continued)

   3.2.1     Accounting policies 

Leases

The Group as a lessee

Changes in the basis for determining the future lease payments as a result of interest rate benchmark reform

For changes in the basis for determining the future lease payments as a result of interest rate benchmark reform, the Group applies the practical expedient to remeasure the lease liabilities by discounting the revised lease payments using the unchanged discount rate, unless the change in lease payments results from a change in floating interest rates. In that case, the Group uses the revised discount rate that reflects change in the interest rate and makes a corresponding adjustment to the related right-of-use assets.

A lease modification is required by interest rate benchmark reform if, and only if, both of these conditions are met:

-- the modification is necessary as a direct consequence of interest rate benchmark reform; and

-- the new basis for determining the lease payments is economically equivalent to the previous basis (i.e. the basis immediately preceding the modification).

   3.2.2     Transition and summary of effects 

The amendments have had no impact on the condensed consolidated financial statements as none of the above contracts has been transitioned to the relevant replacement rates during the interim period.

4A. REVENUE

 
                                           Six months ended 30 June 
                                                  2021          2020 
                                          ------------  ------------ 
                                               RMB'000       RMB'000 
                                          ------------  ------------ 
                                           (Unaudited)   (Unaudited) 
                                          ------------  ------------ 
 
 
  Revenue from contracts with customers     37,568,479    29,487,931 
                                          ------------  ------------ 
  Rental income (included in revenue of 
   airline operations segment)                  95,324       157,835 
                                          ------------  ------------ 
 
 
  Total revenue                             37,663,803    29,645,766 
                                          ------------  ------------ 
 
 

Disaggregation of revenue from contracts with customers

 
                                        Six months ended 30 June        Six months ended 30 
                                                   2021                       June 2020 
                                                               Other      Airline        Other 
  Segments                           Airline operations   operations   operations   operations 
                                     ------------------  -----------  -----------  ----------- 
                                                RMB'000      RMB'000      RMB'000      RMB'000 
                                     ------------------  -----------  -----------  ----------- 
                                            (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited) 
                                     ------------------  -----------  -----------  ----------- 
 
 
  Type of goods or services 
                                     ------------------  -----------  -----------  ----------- 
  Airline operations 
                                     ------------------  -----------  -----------  ----------- 
     Passenger                               30,895,166            -   22,948,314            - 
                                     ------------------  -----------  -----------  ----------- 
     Cargo and mail                           4,575,303            -    4,190,518            - 
                                     ------------------  -----------  -----------  ----------- 
     Ground service income                      107,195            -      162,179            - 
                                     ------------------  -----------  -----------  ----------- 
     Others                                     580,640            -      755,956            - 
                                     ------------------  -----------  -----------  ----------- 
 
 
                                             36,158,304            -   28,056,967            - 
                                     ------------------  -----------  -----------  ----------- 
 
 
  Other operations 
                                     ------------------  -----------  -----------  ----------- 
     Aircraft engineering 
      income                                          -    1,271,234            -    1,270,971 
                                     ------------------  -----------  -----------  ----------- 
     Others                                           -      138,941            -      159,993 
                                     ------------------  -----------  -----------  ----------- 
 
 
                                                      -    1,410,175            -    1,430,964 
                                     ------------------  -----------  -----------  ----------- 
 
 
  Total                                      36,158,304    1,410,175   28,056,967    1,430,964 
                                     ------------------  -----------  -----------  ----------- 
 
 
  Geographical markets 
                                     ------------------  -----------  -----------  ----------- 
  Mainland China                             30,426,309    1,410,175   17,597,210    1,430,964 
                                     ------------------  -----------  -----------  ----------- 
  Hong Kong Special Administrative 
   Region ("SAR"), Macau 
   SAR and Taiwan, China                        624,049            -      734,391            - 
                                     ------------------  -----------  -----------  ----------- 
  International                               5,107,946            -    9,725,366            - 
                                     ------------------  -----------  -----------  ----------- 
 
 
  Total                                      36,158,304    1,410,175   28,056,967    1,430,964 
                                     ------------------  -----------  -----------  ----------- 
 
 

4B. SEGMENT INFORMATION

The Group's operating businesses are structured and managed separately, according to the nature of their operations and the services they provide. The Group has the following reportable operating segments:

(a) the "airline operations" segment which mainly comprises the provision of air passenger and air cargo services; and

(b) the "other operations" segment which comprises the provision of aircraft engineering and other airline-related services.

Intersegment sales and transfers are transacted with reference to the selling prices used for sales made to third parties at the then prevailing market prices.

Operating segments

The following tables present the Group's consolidated revenue and loss before taxation regarding the Group's operating segments in accordance with the Accounting Standards for Business Enterprises of the PRC ("CASs") for the six months ended 30 June 2021 and 2020 and the reconciliations of reportable segment revenue and loss before taxation to the Group's consolidated amounts under IFRSs:

For the six months ended 30 June 2021

 
                                            Airline 
                                         operations  Other operations  Elimination        Total 
                                            RMB'000           RMB'000      RMB'000      RMB'000 
                                        -----------  ----------------  -----------  ----------- 
 
 
  Revenue 
                                        -----------  ----------------  -----------  ----------- 
  Sales to external customers            36,253,628         1,410,175            -   37,663,803 
                                        -----------  ----------------  -----------  ----------- 
  Intersegment sales                         74,687         2,682,677  (2,757,364)            - 
                                        -----------  ----------------  -----------  ----------- 
 
 
  Revenue for reportable segments 
   under CASs and IFRSs                  36,328,315         4,092,852  (2,757,364)   37,663,803 
                                        -----------  ----------------  -----------  ----------- 
 
 
  Segment loss before taxation 
                                        -----------  ----------------  -----------  ----------- 
  Loss before taxation for reportable 
   segments under CASs                  (9,366,578)          (33,554)     (10,666)  (9,410,798) 
                                        -----------  ----------------  -----------  ----------- 
 
 
  Effect of differences between 
   IFRSs and CASs                                                                         5,849 
                                        -----------  ----------------  -----------  ----------- 
 
 
  Loss before taxation for the 
   period under IFRSs                                                               (9,404,949) 
                                        -----------  ----------------  -----------  ----------- 
 
 

4B. SEGMENT INFORMATION (Continued)

Operating segments (Continued)

For the six months ended 30 June 2020

 
                                             Airline 
                                          operations  Other operations  Elimination         Total 
                                             RMB'000           RMB'000      RMB'000       RMB'000 
                                        ------------  ----------------  -----------  ------------ 
 
 
  Revenue 
                                        ------------  ----------------  -----------  ------------ 
  Sales to external customers             28,214,802         1,430,964            -    29,645,766 
                                        ------------  ----------------  -----------  ------------ 
  Intersegment sales                          52,006         2,686,484  (2,738,490)             - 
                                        ------------  ----------------  -----------  ------------ 
 
 
  Revenue for reportable segments 
   under CASs and IFRSs                   28,266,808         4,117,448  (2,738,490)    29,645,766 
                                        ------------  ----------------  -----------  ------------ 
 
 
  Segment loss before taxation 
                                        ------------  ----------------  -----------  ------------ 
  Loss before taxation for reportable 
   segments under CASs                  (12,898,404)         (158,866)     (41,428)  (13,098,698) 
                                        ------------  ----------------  -----------  ------------ 
 
 
  Effect of differences between 
   IFRSs and CASs                                                                           1,772 
                                        ------------  ----------------  -----------  ------------ 
 
 
  Loss before taxation for the 
   period under IFRSs                                                                (13,096,926) 
                                        ------------  ----------------  -----------  ------------ 
 
 

The following table presents the segment assets of the Group's operating segments under CASs as at 30 June 2021 and 31 December 2020 and the reconciliations of reportable segment assets to the Group's consolidated amounts under IFRSs:

 
                                       Airline 
                                    operations  Other operations   Elimination        Total 
                                       RMB'000           RMB'000       RMB'000      RMB'000 
                                   -----------  ----------------  ------------  ----------- 
 
 
  Segment assets 
                                   -----------  ----------------  ------------  ----------- 
  Total assets for reportable 
   segments as at 30 June 2021 
   under CASs (unaudited)          278,033,335        22,059,855  (12,064,739)  288,028,451 
                                   -----------  ----------------  ------------  ----------- 
 
 
  Effect of differences between 
   IFRSs and CASs                                                                  (36,707) 
                                   -----------  ----------------  ------------  ----------- 
 
 
  Total assets as at 30 June 
   2021 under IFRSs (unaudited)                                                 287,991,744 
                                   -----------  ----------------  ------------  ----------- 
 
 
  Total assets for reportable 
   segments as at 31 December 
   2020 under CASs (audited)       276,189,234        21,125,795  (13,244,319)  284,070,710 
                                   -----------  ----------------  ------------  ----------- 
 
 
  Effect of differences between 
   IFRSs and CASs                                                                  (41,094) 
                                   -----------  ----------------  ------------  ----------- 
 
 
  Total assets as at 31 December 
   2020 under IFRSs (audited)                                                   284,029,616 
                                   -----------  ----------------  ------------  ----------- 
 
 

4B. SEGMENT INFORMATION (Continued)

Geographical information

The following tables present the Group's consolidated revenue under IFRSs by geographical location for the six months ended 30 June 2021 and 2020, respectively:

For the six months ended 30 June 2021

 
                                              Hong Kong 
                                             SAR, Macau 
                                                SAR and 
                                  Mainland      Taiwan, 
                                     China        China  International       Total 
                                   RMB'000      RMB'000        RMB'000     RMB'000 
                                ----------  -----------  -------------  ---------- 
 
 
  Sales to external customers 
   and total revenue            31,931,808      624,049      5,107,946  37,663,803 
                                ----------  -----------  -------------  ---------- 
 
 

For the six months ended 30 June 2020

 
                                              Hong Kong 
                                             SAR, Macau 
                                                SAR and 
                                  Mainland      Taiwan, 
                                     China        China  International       Total 
                                   RMB'000      RMB'000        RMB'000     RMB'000 
                                ----------  -----------  -------------  ---------- 
 
 
  Sales to external customers 
   and total revenue            19,186,009      734,391      9,725,366  29,645,766 
                                ----------  -----------  -------------  ---------- 
 
 

In determining the Group's geographical information, revenue is attributed to the segments based on the origin or destination of each flight. Assets, which consist principally of aircraft and ground equipment, supporting the Group's worldwide transportation network, are mainly registered/located in Mainland China. According to the business demand, the Group needs to flexibly allocate different aircraft to match the need of the route network. An analysis of the assets of the Group by geographical distribution has therefore not been included.

   5.    OTHER INCOME AND GAINS 
 
                                            Six months ended 30 June 
                                                   2021          2020 
                                           ------------  ------------ 
                                                RMB'000       RMB'000 
                                           ------------  ------------ 
                                            (Unaudited)   (Unaudited) 
                                           ------------  ------------ 
 
 
  Co-operation routes income and subsidy 
   income                                     2,192,115     1,726,210 
                                           ------------  ------------ 
  Dividend income                                 2,631         5,410 
                                           ------------  ------------ 
  Gain on disposal of property, plant 
   and equipment                                  5,598        22,749 
                                           ------------  ------------ 
  Others                                         88,797       113,316 
                                           ------------  ------------ 
 
 
                                              2,289,141     1,867,685 
                                           ------------  ------------ 
 
 
   6.    LOSS FROM OPERATIONS 

The Group's loss from operations is arrived at after charging:

 
                                                 Six months ended 30 June 
                                                        2021          2020 
                                                ------------  ------------ 
                                                     RMB'000       RMB'000 
                                                ------------  ------------ 
                                                 (Unaudited)   (Unaudited) 
                                                ------------  ------------ 
 
 
  Depreciation of property, plant and 
   equipment                                       4,596,415     4,431,039 
                                                ------------  ------------ 
  Depreciation of right-of-use assets              5,722,680     5,521,043 
                                                ------------  ------------ 
  Depreciation of investment properties               12,505        12,742 
                                                ------------  ------------ 
  Amortisation of intangible assets                       21             - 
                                                ------------  ------------ 
  Impairment losses recognised on inventories              -           137 
                                                ------------  ------------ 
  Research and development costs recognised 
   as an expense                                      60,826       164,604 
                                                ------------  ------------ 
 
 
   7.    FINANCE COSTS 

An analysis of the Group's finance costs during the period is as follows:

 
                                             Six months ended 30 June 
                                                    2021          2020 
                                            ------------  ------------ 
                                                 RMB'000       RMB'000 
                                            ------------  ------------ 
                                             (Unaudited)   (Unaudited) 
                                            ------------  ------------ 
 
 
  Interest on interest-bearing borrowings      1,205,093       902,463 
                                            ------------  ------------ 
  Interest on lease liabilities                1,596,943     1,900,472 
                                            ------------  ------------ 
  Imputed interest expenses on defined 
   benefit obligations                             3,976         4,183 
                                            ------------  ------------ 
 
 
                                               2,806,012     2,807,118 
                                            ------------  ------------ 
  Less: Interest capitalised                   (147,714)     (258,822) 
                                            ------------  ------------ 
 
 
                                            2,658,298     2,548,296 
                                            ------------  ------------ 
 
 

The interest capitalisation rates during the period ranged from 1.75% to 4.41% per annum (six months ended 30 June 2020: 1.90% to 4.75% per annum).

   8.    INCOME TAX CREDIT 
 
                                                  Six months ended 30 June 
                                                         2021          2020 
                                                 ------------  ------------ 
                                                      RMB'000       RMB'000 
                                                 ------------  ------------ 
                                                  (Unaudited)   (Unaudited) 
                                                 ------------  ------------ 
 
 
  Current income tax: 
                                                 ------------  ------------ 
 
       *    Mainland China                             15,048        68,822 
                                                 ------------  ------------ 
 
       *    Hong Kong SAR and Macau SAR, China            827         2,655 
                                                 ------------  ------------ 
  Over-provision in respect of prior years            (1,575)      (37,316) 
                                                 ------------  ------------ 
  Deferred tax                                    (1,748,584)   (2,270,681) 
                                                 ------------  ------------ 
 
 
                                                  (1,734,284)   (2,236,520) 
                                                 ------------  ------------ 
 
 

Under the relevant Corporate Income Tax Law and regulations in the PRC, except for two branches and three subsidiaries of the Company, and some branches of a subsidiary of the Company which are taxed at a preferential rate of 15% (six months ended 30 June 2020: 15%) during the current period, all group companies located in Mainland China are subject to a corporate income tax rate of 25% (six months ended 30 June 2020: 25%) during the current period. Subsidiaries in Hong Kong SAR, China are taxed at corporate income tax rates of 16.5% (six months ended 30 June 2020: 8.25% and 16.5%), and subsidiaries in Macau SAR, China are taxed at corporate income tax rate of 12% (six months ended 30 June 2020: 12%).

In respect of majority of the Group's overseas airline activities, 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 these overseas jurisdictions. Accordingly, no provision for overseas tax has been made for overseas airlines activities in the current and prior periods.

   9.    DIVIDS 
   (a)   Dividends payable to equity shareholders attributable to the interim period 

In accordance with the Company's articles of association, the profit after tax of the Company for the purpose of dividend distribution is based on the lesser of (i) the profit determined in accordance with CASs; and (ii) the profit determined in accordance with IFRSs.

No interim dividend has been declared by the Directors for the six months ended 30 June 2021 (six months ended 30 June 2020: Nil).

(b) Dividends payable to equity shareholders attributable to the previous financial year, approved during the current interim period

No dividend has been declared by the Directors for the financial year 2020 during the current interim period (six months ended 30 June 2020: RMB0.4442 per ten shares (including tax) for the financial year 2019, amounting to RMB645,192,000).

10. LOSS PER SHARE

The calculation of basic loss per share was based on the loss attributable to ordinary equity shareholders of the Company of RMB6,781 million (six months ended 30 June 2020 (unaudited): loss of RMB9,440 million) and the number of 13,734,960,921 ordinary shares (six months ended 30 June 2020: 13,734,960,921 shares) in issue during the period, as adjusted to reflect the number of treasury shares held by Cathay Pacific Airways Limited ("Cathay Pacific") through reciprocal shareholding (Note 12).

The Group had no potential ordinary shares in issue during both periods.

11. PROPERTY, PLANT AND EQUIPMENT AND RIGHT-OF-USE ASSETS

During the six months ended 30 June 2021, additions to property, plant and equipment were RMB8,835 million (six months ended 30 June 2020: RMB3,791 million). Property, plant and equipment with carrying amount of RMB84 million were disposed of during the six months ended 30 June 2021 (six months ended 30 June 2020: RMB70 million), resulting in a gain on disposal of RMB6 million (six months ended 30 June 2020: RMB23 million).

As at 30 June 2021, the Group's aircraft and flight equipment, buildings and machinery with an aggregate net book value of approximately RMB2,319 million (31 December 2020: RMB1,593 million) were pledged to secure certain bank loans of the Group (Note 18).

As at 30 June 2021, the Group was in the process of applying for the title certificates of certain buildings with an aggregate net book value of approximately RMB4,710 million (31 December 2020: RMB3,478 million). The Directors are of the opinion that the Group is entitled to lawfully and validly occupy and use the above-mentioned buildings, and therefore the aforesaid matter did not have any significant impact on the Group's financial position as at 30 June 2021.

During the current interim period, the Group entered into several new lease agreements for the use of aircraft and engines, land, buildings and others. At the commencement date, the Group recognised right-of-use assets of RMB4,221 million (six months ended 30 June 2020: RMB1,014 million).

As at 30 June 2021, the Group had future undiscounted lease payments under non-cancellable leases of RMB691 million (31 December 2020: RMB1,386 million), which was not recognised as lease liabilities since leases have yet to be commenced.

As at 30 June 2021, the Group's land use rights, which are recorded as part of right-of-use assets and all located in Mainland China, with an aggregate net book value of approximately RMB26 million (31 December 2020: RMB27 million) were pledged to secure certain bank loans of the Group (Note 18).

12. INTERESTS IN ASSOCIATES

 
                                                             At            At 
                                                        30 June   31 December 
                                                           2021          2020 
                                                        RMB'000       RMB'000 
                                                    -----------  ------------ 
                                                    (Unaudited)     (Audited) 
                                                    -----------  ------------ 
 
 
  Share of net assets 
                                                    -----------  ------------ 
 
       *    Listed shares in the PRC                -            - 
                                                    -----------  ------------ 
 
       *    Listed shares in Hong Kong SAR, China     6,754,044     7,372,164 
                                                    -----------  ------------ 
 
       *    Unlisted investments                        972,649       976,857 
                                                    -----------  ------------ 
  Goodwill                                            2,506,889     2,589,407 
                                                    -----------  ------------ 
 
 
                                                     10,233,582    10,938,428 
                                                    -----------  ------------ 
 
 
  Market value of listed shares                      10,939,809    12,207,958 
                                                    -----------  ------------ 
 
 

Summarised financial information in respect of Cathay Pacific, the only individually material associate of the Group, and a reconciliation to the carrying amount in the condensed consolidated financial statements, are set out below. The summarised financial information below represents amounts shown in the associate's condensed consolidated financial statements.

Cathay Pacific

 
                                                                            At            At 
                                                                       30 June   31 December 
                                                                          2021          2020 
                                                                       RMB'000       RMB'000 
                                                                  ------------  ------------ 
 
 
  Gross amounts of the associate's 
                                                                  ------------  ------------ 
  Current assets                                                    27,468,625    23,201,490 
                                                                  ------------  ------------ 
  Non-current assets                                               143,663,604   148,976,171 
                                                                  ------------  ------------ 
  Current liabilities                                             (39,229,244)  (39,324,787) 
                                                                  ------------  ------------ 
  Non-current liabilities                                         (73,751,411)  (71,193,486) 
                                                                  ------------  ------------ 
  Equity                                                            58,151,574    61,659,388 
                                                                  ------------  ------------ 
 
       *    Equity attributable to equity shareholders of the 
            associate                                               41,678,888    45,244,041 
                                                                  ------------  ------------ 
 
       *    Equity contributed to preferred shareholders of the 
            associate                                               16,468,527    16,411,980 
                                                                  ------------  ------------ 
 
       *    Equity attributable to non-controlling interests of 
            the associate                                                4,159         3,367 
                                                                  ------------  ------------ 
 
 

12. INTERESTS IN ASSOCIATES (Continued)

Cathay Pacific (Continued)

 
                                          Six months ended 30 June 
                                                 2021          2020 
                                         ------------  ------------ 
                                              RMB'000       RMB'000 
                                         ------------  ------------ 
 
 
  Revenue                                  13,267,578    25,029,654 
                                         ------------  ------------ 
  Loss for the period                     (6,330,009)   (8,923,073) 
                                         ------------  ------------ 
  Other comprehensive income/(expense)      3,066,255   (3,199,606) 
                                         ------------  ------------ 
  Total comprehensive expense             (3,263,754)  (12,122,679) 
                                         ------------  ------------ 
 
 
 
                                                          At            At 
                                                     30 June   31 December 
                                                        2021          2020 
                                                     RMB'000       RMB'000 
                                                 -----------  ------------ 
 
 
  Reconciled to the Group's interests 
   in the associate 
                                                 -----------  ------------ 
  Gross amounts of net assets of the associate    41,678,888    45,244,041 
                                                 -----------  ------------ 
  Group's effective interest                          29.99%        29.99% 
                                                 -----------  ------------ 
  Group's share of net assets of the associate    12,499,499    13,568,688 
                                                 -----------  ------------ 
  Elimination of reciprocal shareholding         (5,745,455)   (6,196,524) 
                                                 -----------  ------------ 
  Goodwill                                         2,361,418     2,388,549 
                                                 -----------  ------------ 
 
 
  Carrying amount                                  9,115,462     9,760,713 
                                                 -----------  ------------ 
 
 

Based on the unaudited results of Cathay Pacific for the six months ended 30 June 2021, it incurred a loss for the first half of 2021 due to the continued impact of the Covid-19 pandemic.

The Group performed impairment testing on investments in Cathay Pacific due to the impact of the Covid-19 pandemic on Cathay Pacific's market value and cash flow projections. No significant impairment loss was considered necessary.

Aggregate information of associates that are not individually material:

 
                                                      At            At 
                                                 30 June   31 December 
                                                    2021          2020 
                                                 RMB'000       RMB'000 
                                               ---------  ------------ 
 
 
  Aggregate carrying amounts of individually 
   immaterial associates in the condensed 
   consolidated financial statements           1,118,120     1,177,715 
                                               ---------  ------------ 
 
 

12. INTERESTS IN ASSOCIATES (Continued)

 
                                                          Six months ended 30 June 
                                                                 2021          2020 
                                                         ------------  ------------ 
                                                              RMB'000       RMB'000 
                                                         ------------  ------------ 
 
 
  Aggregate amounts of the Group's share 
   of those associates' 
                                                         ------------  ------------ 
 
       *    Loss for the period                                55,327       637,447 
                                                         ------------  ------------ 
 
       *    Other comprehensive expense for the period          4,268       102,432 
                                                         ------------  ------------ 
 
 
  Total comprehensive expense for the 
   period                                                      59,595       739,879 
                                                         ------------  ------------ 
 
 

13. ACCOUNTS RECEIVABLE

The ageing analysis of the accounts receivable as at the end of the reporting period, based on the transaction date, net of allowance for expected credit losses, was as follows:

 
                            At            At 
                       30 June   31 December 
                          2021          2020 
                       RMB'000       RMB'000 
                   -----------  ------------ 
                   (Unaudited)     (Audited) 
                   -----------  ------------ 
 
 
  Within 30 days     1,492,624     1,270,198 
                   -----------  ------------ 
  31 to 60 days        831,147       488,965 
                   -----------  ------------ 
  61 to 90 days        662,551       259,396 
                   -----------  ------------ 
  Over 90 days         752,189       924,240 
                   -----------  ------------ 
 
 
                     3,738,511     2,942,799 
                   -----------  ------------ 
 
 

14. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

An analysis of prepayments, deposits and other receivables as at the end of the reporting period, net of allowance for expected credit losses, was as follows:

 
                                            At            At 
                                       30 June   31 December 
                                          2021          2020 
                                       RMB'000       RMB'000 
                                   -----------  ------------ 
                                   (Unaudited)     (Audited) 
                                   -----------  ------------ 
 
 
  Manufacturers' credits               959,643     1,036,936 
                                   -----------  ------------ 
  Prepayments of jet fuel               80,437        61,520 
                                   -----------  ------------ 
  Other prepayments                    462,164       359,717 
                                   -----------  ------------ 
  Others                                 4,689        15,604 
                                   -----------  ------------ 
 
 
                                     1,506,933     1,473,777 
                                   -----------  ------------ 
  Deposits and other receivables     2,442,222     2,438,694 
                                   -----------  ------------ 
 
 
                                     3,949,155     3,912,471 
                                   -----------  ------------ 
 
 

As at 30 June 2021, the allowance for expected credit losses mainly consisted of the full provision for the amount due from Shenzhen Airlines Property Development Co., Ltd. of RMB468,796,000 (31 December 2020: RMB468,796,000).

15. ACCOUNTS PAYABLE

The ageing analysis of the accounts payable, based on the transaction date, as at the end of the reporting period was as follows:

 
                            At            At 
                       30 June   31 December 
                          2021          2020 
                       RMB'000       RMB'000 
                   -----------  ------------ 
                   (Unaudited)     (Audited) 
                   -----------  ------------ 
 
 
  Within 30 days     5,042,845     4,674,784 
                   -----------  ------------ 
  31 to 60 days      1,716,307     1,394,258 
                   -----------  ------------ 
  61 to 90 days      1,786,927     1,385,660 
                   -----------  ------------ 
  Over 90 days       6,211,161     5,055,880 
                   -----------  ------------ 
 
 
                    14,757,240    12,510,582 
                   -----------  ------------ 
 
 

16. OTHER PAYABLES AND ACCRUALS

An analysis of other payables and accruals as at the end of the reporting period was as follows:

 
                                                      At            At 
                                                 30 June   31 December 
                                                    2021          2020 
                                                 RMB'000       RMB'000 
                                             -----------  ------------ 
                                             (Unaudited)     (Audited) 
                                             -----------  ------------ 
 
 
  Accrued salaries, wages and benefits         2,174,318     2,717,751 
                                             -----------  ------------ 
  Accrued operating expenses                     215,078       172,655 
                                             -----------  ------------ 
  Other tax payable                              154,547       160,933 
                                             -----------  ------------ 
  Deposits received from sales agents            476,455       564,275 
                                             -----------  ------------ 
  Current portion of long-term payables           20,766        28,449 
                                             -----------  ------------ 
  Deposits received by China National 
   Aviation 
                                             -----------  ------------ 
  Finance Co., Ltd. ("CNAF"), a subsidiary 
   of the Company, 
   from related parties                        6,437,744     4,460,614 
                                             -----------  ------------ 
  Others                                       3,472,496     3,073,251 
                                             -----------  ------------ 
 
 
                                              12,951,404    11,177,928 
                                             -----------  ------------ 
 
 

17. LEASE LIABILITIES

The Group has obligations under lease agreements expiring from the second half of 2021 to 2033 (31 December 2020: 2021 to 2033). An analysis of the lease payments as at the end of the reporting period, together with the present values of the lease payments which are principally denominated in foreign currencies, is as follows:

 
                                                       At 30 June 2021                At 31 December 2020 
                                                                       Present                          Present 
                                                                     values of                        values of 
                                               Lease payments   lease payments  Lease payments   lease payments 
                                               --------------  ---------------  --------------  --------------- 
                                                      RMB'000          RMB'000         RMB'000          RMB'000 
                                               --------------  ---------------  --------------  --------------- 
                                                  (Unaudited)      (Unaudited)       (Audited)        (Audited) 
                                               --------------  ---------------  --------------  --------------- 
 
 
  Amounts repayable 
                                               --------------  ---------------  --------------  --------------- 
 
       *    Within 1 year                          17,090,704       14,039,145      16,632,893       13,560,862 
                                               --------------  ---------------  --------------  --------------- 
 
       *    After 1 year but within 2 years        16,061,606       13,500,047      15,824,712       13,160,310 
                                               --------------  ---------------  --------------  --------------- 
 
       *    After 2 years but within 5 years       41,759,641       36,897,485      41,987,455       36,749,314 
                                               --------------  ---------------  --------------  --------------- 
 
       *    After 5 years                          28,488,422       26,599,637      27,801,689       26,189,054 
                                               --------------  ---------------  --------------  --------------- 
 
 
  Total                                           103,400,373       91,036,314     102,246,749       89,659,540 
                                               --------------  ---------------  --------------  --------------- 
 
 
  Less: Amounts representing 
   future finance costs                          (12,364,059)                     (12,587,209) 
                                               --------------  ---------------  --------------  --------------- 
 
 
  Present values of lease payments                 91,036,314                       89,659,540 
                                               --------------  ---------------  --------------  --------------- 
  Less: Portion classified as 
   current liabilities                           (14,039,145)                     (13,560,862) 
                                               --------------  ---------------  --------------  --------------- 
 
 
  Non-current portion                              76,997,169                       76,098,678 
                                               --------------  ---------------  --------------  --------------- 
 
 

18. INTEREST-BEARING BORROWINGS

 
                                                           At            At 
                                                      30 June   31 December 
                                                         2021          2020 
                                                      RMB'000       RMB'000 
                                                 ------------  ------------ 
                                                  (Unaudited)     (Audited) 
                                                 ------------  ------------ 
 
 
  Bank loans and other borrowings: 
                                                 ------------  ------------ 
 
       *    Secured                                 1,825,360     2,023,792 
                                                 ------------  ------------ 
 
       *    Unsecured                              54,172,620    50,359,853 
                                                 ------------  ------------ 
 
 
                                                   55,997,980    52,383,645 
                                                 ------------  ------------ 
 
 
  Corporate bonds and short-term commercial 
   papers: 
                                                 ------------  ------------ 
 
       *    Secured                                 6,684,056     6,773,214 
                                                 ------------  ------------ 
 
       *    Unsecured                              13,052,655    12,112,603 
                                                 ------------  ------------ 
 
 
                                                   19,736,711    18,885,817 
                                                 ------------  ------------ 
 
 
                                                   75,734,691    71,269,462 
                                                 ------------  ------------ 
 
 
  Bank loans and other borrowings repayable: 
                                                 ------------  ------------ 
 
       *    Within 1 year or payable on demand     26,903,727    31,242,946 
                                                 ------------  ------------ 
 
       *    After 1 year but within 2 years         1,491,604       733,833 
                                                 ------------  ------------ 
 
       *    After 2 years but within 5 years       27,442,464    20,175,216 
                                                 ------------  ------------ 
 
       *    After 5 years                             160,185       231,650 
                                                 ------------  ------------ 
 
 
                                                   55,997,980    52,383,645 
                                                 ------------  ------------ 
 
 
  Corporate bonds and short-term commercial 
   papers repayable: 
                                                 ------------  ------------ 
 
       *    Within 1 year                          12,237,827     8,387,419 
                                                 ------------  ------------ 
 
       *    After 1 year but within 2 years         5,998,884     2,999,157 
                                                 ------------  ------------ 
 
       *    After 2 years but within 5 years        1,500,000     7,499,241 
                                                 ------------  ------------ 
 
 
                                                   19,736,711    18,885,817 
                                                 ------------  ------------ 
 
 
  Total interest-bearing borrowings                75,734,691    71,269,462 
                                                 ------------  ------------ 
  Less: Portion classified as current 
   liabilities                                   (39,141,554)  (39,630,365) 
                                                 ------------  ------------ 
 
 
  Non-current portion                              36,593,137    31,639,097 
                                                 ------------  ------------ 
 
 

As at 30 June 2021, the interest rates of the Group's bank loans and other borrowings ranged from 1.35% to 4.50% (31 December 2020: 1.5% to 4.75%) per annum.

As at 30 June 2021, the interest rates of the Group's corporate bonds and short-term commercial papers ranged from 2.33% to 5.30% (31 December 2020: 1.95% to 5.30%) per annum.

18. INTEREST-BEARING BORROWINGS (Continued)

The nominal amount of the Group's bank loans and corporate bonds of approximately RMB8,509 million as at 30 June 2021 (31 December 2020: RMB8,797 million) were secured by:

(a) Mortgages over certain of the Group's aircraft and flight equipment, buildings and machinery with an aggregate net book value of approximately RMB2,319 million as at 30 June 2021 (31 December 2020: RMB1,593 million) (Note 11); and land use rights with an aggregate net book value of approximately RMB26 million as at 30 June 2021 (31 December 2020: RMB27 million) (Note 11);

(b) As at 30 June 2021, the Group pledged its rights to collect cash flows in relation to Billing and Settlement Plan ("BSP") to secure bank loans of RMB150 million (31 December 2020: RMB150 million);

(c) As at 30 June 2021, corporate bonds issued by the Group with a face value of RMB6,500 million (31 December 2020: RMB6,500 million) were guaranteed by CNAHC.

As at 30 June 2021, corporate bonds and short-term commercial papers with carrying amount of RMB8,967 million (31 December 2020: RMB6,568 million) were issued by Shenzhen Airlines Company Limited ("Shenzhen Airlines"), a subsidiary of the Company.

19. ISSUED CAPITAL

The numbers of shares of the Company and their nominal values as at 30 June 2021 and 31 December 2020 are as follows:

 
                                            30 June 2021               31 December 2020 
                                          Number of      Nominal       Number of     Nominal 
                                             shares        value          shares       value 
                                     --------------  -----------  --------------  ---------- 
                                                         RMB'000                     RMB'000 
                                     --------------  -----------  --------------  ---------- 
                                                     (Unaudited)                   (Audited) 
                                     --------------  -----------  --------------  ---------- 
 
 
  Registered, issued and fully 
   paid: 
                                     --------------  -----------  --------------  ---------- 
 
    *    H shares of RMB1.00 each: 
                                     --------------  -----------  --------------  ---------- 
        Tradable                      4,562,683,364    4,562,683   4,562,683,364   4,562,683 
                                     --------------  -----------  --------------  ---------- 
 
    *    A shares of RMB1.00 each: 
                                     --------------  -----------  --------------  ---------- 
        Tradable                      9,962,131,821    9,962,132   9,962,131,821   9,962,132 
                                     --------------  -----------  --------------  ---------- 
 
 
                                     14,524,815,185   14,524,815  14,524,815,185  14,524,815 
                                     --------------  -----------  --------------  ---------- 
 
 

20. CONTINGENT LIABILITIES

As at 30 June 2021, the Group had the following contingent liabilities:

Pursuant to the restructuring of CNAHC in preparation for the listing of the Company's H shares on the HKSE and the LSE, the Company entered into a restructuring agreement (the "Restructuring Agreement") with CNAHC and China National Aviation Corporation (Group) Limited ("CNACG", a wholly-owned subsidiary of CNAHC) on 20 November 2004. According to the Restructuring Agreement, except for liabilities constituting or arising out of or relating to business undertaken by the Company after the restructuring, no liabilities would be assumed by the Company and the Company would not be liable, whether severally, or jointly and severally, for debts and obligations incurred prior to the restructuring by CNAHC and CNACG. The Company has also undertaken to indemnify CNAHC and CNACG against any damage suffered or incurred by CNAHC and CNACG as a result of any breach by the Company of any provision of the Restructuring Agreement.

21. FINANCIAL INSTRUMENTS

   (a)   Financial assets measured at fair value 
   (i)     Fair value hierarchy 

The following table presents the fair value of the Group's financial instruments measured at the end of the reporting period on a recurring basis, categorised into the three-level fair value hierarchy as defined in IFRS 13 Fair value measurement. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as follows:

-- Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

-- Level 2 valuations: Fair value measured using Level 2 inputs i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available.

   --        Level 3 valuations: Fair value measured using significant unobservable inputs. 
 
                                                       Fair value measurements as 
                                                                    at 
                                                         30 June 2021 categorised 
                                                                   into 
                                      Fair value 
                                      at 30 June 
                                            2021      Level 1      Level 2      Level 3 
                                                  -----------  -----------  ----------- 
                                         RMB'000      RMB'000      RMB'000      RMB'000 
                                     -----------  -----------  -----------  ----------- 
                                     (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited) 
                                     -----------  -----------  -----------  ----------- 
 
 
  Equity instruments at 
   fair value through other 
   comprehensive income ("FVTOCI")       214,265            -            -      214,265 
                                     -----------  -----------  -----------  ----------- 
  Debt instruments at FVTOCI           1,313,267            -    1,313,267            - 
                                     -----------  -----------  -----------  ----------- 
  Debt instruments at FVTOCI 
   included in other current 
   assets                                391,942            -      391,942            - 
                                     -----------  -----------  -----------  ----------- 
 
 
  Total financial assets 
   at fair value                       1,919,474            -    1,705,209      214,265 
                                     -----------  -----------  -----------  ----------- 
 
 

21. FINANCIAL INSTRUMENTS (Continued)

   (a)   Financial assets measured at fair value (Continued) 
   (i)     Fair value hierarchy (Continued) 
 
                                                   Fair value measurements as 
                                                                at 
                                                   31 December 2020 categorised 
                                                               into 
                                    Fair value 
                                at 31 December 
                                          2020     Level 1     Level 2    Level 3 
                                                ----------  ----------  --------- 
                                       RMB'000     RMB'000     RMB'000    RMB'000 
                               ---------------  ----------  ----------  --------- 
                                     (Audited)   (Audited)   (Audited)  (Audited) 
                               ---------------  ----------  ----------  --------- 
 
 
  Equity instruments at 
   FVTOCI                      233,180          -           -           233,180 
                               ---------------  ----------  ----------  --------- 
  Debt instruments at FVTOCI   1,344,829        -           1,344,829   - 
                               ---------------  ----------  ----------  --------- 
  Debt instruments at FVTOCI 
   included in other current 
   assets                      1,686,930        -           1,686,930   - 
                               ---------------  ----------  ----------  --------- 
 
 
  Total financial assets 
   at fair value               3,264,939        -           3,031,759   233,180 
                               ---------------  ----------  ----------  --------- 
 
 

During the six months ended 30 June 2021 and 2020, there were no transfers between Level 1 and Level 2, or transfers into or out of Level 3. The Group's policy is to recognise transfers between levels of fair value hierarchy as at the end of the reporting period in which they occur.

   (ii)    Valuation techniques and inputs used in Level 2 fair value measurements 

All financial instruments classified within Level 2 of the fair value hierarchy are debt investments, the fair value of which were determined based upon the valuation conducted by the China Central Depository & Clearing Co., Ltd..

   (iii)   Valuation techniques and inputs used in Level 3 fair value measurements 

The fair value of equity instruments at FVTOCI was mainly estimated by reference to the quoted prices in an active market with an adjustment of discount for lack of marketability.

(b) Fair values of financial assets and liabilities carried at other than fair value

Except as detailed in the following table, the Directors consider that the carrying amounts of financial assets and financial liabilities recognised in these condensed consolidated financial statements approximate their fair values.

21. FINANCIAL INSTRUMENTS (Continued)

(b) Fair values of financial assets and liabilities carried at other than fair value (Continued)

 
                                              Carrying amounts           Fair values 
                                                 As at    As at 31       As at    As at 31 
                                               30 June    December     30 June    December 
                                                  2021        2020        2021        2020 
                                           -----------  ----------  ----------  ---------- 
                                               RMB'000     RMB'000     RMB'000     RMB'000 
                                           -----------  ----------  ----------  ---------- 
                                           (Unaudited)   (Audited) 
                                           -----------  ----------  ----------  ---------- 
 
 
  Financial liabilities 
                                           -----------  ----------  ----------  ---------- 
 
       *    Corporate bonds (fixed rate)    15,421,773  18,375,007  15,335,400  18,123,860 
                                           -----------  ----------  ----------  ---------- 
 
 

Fair value hierarchy as at 30 June 2021

 
                                           Level 1     Level 2  Level 3       Total 
                                           RMB'000     RMB'000  RMB'000     RMB'000 
                                           -------  ----------  -------  ---------- 
 
 
  Financial liabilities 
                                           -------  ----------  -------  ---------- 
 
       *    Corporate bonds (fixed rate)         -  15,335,400        -  15,335,400 
                                           -------  ----------  -------  ---------- 
 
 

Fair value hierarchy as at 31 December 2020

 
                                           Level 1     Level 2  Level 3       Total 
                                           RMB'000     RMB'000  RMB'000     RMB'000 
                                           -------  ----------  -------  ---------- 
 
 
  Financial liabilities 
                                           -------  ----------  -------  ---------- 
 
       *    Corporate bonds (fixed rate)         -  18,123,860        -  18,123,860 
                                           -------  ----------  -------  ---------- 
 
 

22. COMMITMENTS

   (a)   Capital commitments 

The Group had the following amounts of contractual commitments for the acquisition and construction of property, plant and equipment as at the end of the reporting period:

 
                                                     At            At 
                                                30 June   31 December 
                                                   2021          2020 
                                                RMB'000       RMB'000 
                                            -----------  ------------ 
                                            (Unaudited)     (Audited) 
                                            -----------  ------------ 
 
 
  Contracted, but not provided for: 
                                            -----------  ------------ 
 
       *    Aircraft and flight equipment    41,227,815    38,456,252 
                                            -----------  ------------ 
 
       *    Buildings and others              2,494,266     2,564,193 
                                            -----------  ------------ 
 
 
  Total capital commitments                  43,722,081    41,020,445 
                                            -----------  ------------ 
 
 

(b) Investment commitments

The Group had the following amounts of investment commitments as at the end of the reporting period:

 
                                                                At            At 
                                                           30 June   31 December 
                                                              2021          2020 
                                                           RMB'000       RMB'000 
                                                       -----------  ------------ 
                                                       (Unaudited)     (Audited) 
                                                       -----------  ------------ 
 
 
  Contracted, but not provided for: 
                                                       -----------  ------------ 
 
       *    investment commitment to a joint venture        22,610        22,837 
                                                       -----------  ------------ 
 
 

23. RELATED PARTY TRANSACTIONS

(a) During the period, the Group had the following significant transactions with (i) CNAHC, its subsidiaries (other than the Group), joint ventures and associates (collectively, the "CNAHC Group"); (ii) its joint ventures and its associates:

   (i)     Transactions with related parties 
 
                                               Six months ended 30 June 
                                                      2021          2020 
                                              ------------  ------------ 
                                                   RMB'000       RMB'000 
                                              ------------  ------------ 
                                               (Unaudited)   (Unaudited) 
                                              ------------  ------------ 
 
 
  Service provided to the CNAHC Group 
                                              ------------  ------------ 
 
  Sales commission income                              626         7,392 
                                              ------------  ------------ 
  Sale of cargo space                            4,225,056     3,839,744 
                                              ------------  ------------ 
  Government charter flights                             -        28,087 
                                              ------------  ------------ 
  Air catering income                               15,954        24,812 
                                              ------------  ------------ 
  Ground services income                            43,020        47,392 
                                              ------------  ------------ 
  Income from advertising media business             6,553         6,553 
                                              ------------  ------------ 
  Aircraft maintenance income                       93,969       147,612 
                                              ------------  ------------ 
  Aviation communication income                      1,185         1,185 
                                              ------------  ------------ 
  Aircraft and flight equipment rental 
   income                                            7,460        12,622 
                                              ------------  ------------ 
  Land and buildings rental income                  66,797        76,959 
                                              ------------  ------------ 
  Others                                            52,927        40,176 
                                              ------------  ------------ 
 
 
                                                 4,513,547     4,232,534 
                                              ------------  ------------ 
 
 
  Service provided by the CNAHC Group 
                                              ------------  ------------ 
 
  Sales commission expenses                        260,718       161,877 
                                              ------------  ------------ 
  Air catering charges                             425,734       231,850 
                                              ------------  ------------ 
  Airport ground services, take-off, 
   landing and depot expenses                      584,866       482,319 
                                              ------------  ------------ 
  Management fees                                  112,644        62,216 
                                              ------------  ------------ 
  Repair and maintenance costs                       7,952         8,534 
                                              ------------  ------------ 
  Short-term leases and leases of low-value 
   assets                                           48,622        57,279 
                                              ------------  ------------ 
  Other procurement and maintenance                 78,357        64,068 
                                              ------------  ------------ 
  Aviation communication expenses                  252,480       155,473 
                                              ------------  ------------ 
  Interest expenses                                 21,109        14,206 
                                              ------------  ------------ 
  Media advertisement expenses                      76,917        48,338 
                                              ------------  ------------ 
  Others                                            20,340        26,662 
                                              ------------  ------------ 
 
 
                                                 1,889,739     1,312,822 
                                              ------------  ------------ 
 
 
  Loans to the CNAHC Group by CNAF 
                                              ------------  ------------ 
 
  Advances/(repayments) of loans                    30,000     (530,000) 
                                              ------------  ------------ 
  Interest income                                      407         3,232 
                                              ------------  ------------ 
 
 

23. RELATED PARTY TRANSACTIONS (Continued)

(a) During the period, the Group had the following significant transactions with (i) CNAHC, its subsidiaries (other than the Group), joint ventures and associates (collectively, the "CNAHC Group"); (ii) its joint ventures and its associates: (Continued)

   (i)      Transactions with related parties (Continued) 
 
                                              Six months ended 30 June 
                                                     2021          2020 
                                             ------------  ------------ 
                                                  RMB'000       RMB'000 
                                             ------------  ------------ 
                                              (Unaudited)   (Unaudited) 
                                             ------------  ------------ 
 
 
  Deposits from the CNAHC Group received 
   by CNAF 
                                             ------------  ------------ 
 
  Increase/(decrease) in deposits received      1,845,111     (109,543) 
                                             ------------  ------------ 
  Interest expenses                                24,160        18,130 
                                             ------------  ------------ 
 
 
 
                                          Six months ended 30 June 
                                                 2021          2020 
                                         ------------  ------------ 
                                              RMB'000       RMB'000 
                                         ------------  ------------ 
                                          (Unaudited)   (Unaudited) 
                                         ------------  ------------ 
 
 
  As a lessee with CNAHC Group 
                                         ------------  ------------ 
 
  Addition in right-of-use assets on 
   new leases                               1,941,169        34,262 
                                         ------------  ------------ 
  Addition in lease liabilities on new 
   leases                                   1,941,169        34,262 
                                         ------------  ------------ 
  Lease payments paid                         897,597       772,818 
                                         ------------  ------------ 
  Interest on lease liabilities               187,038       179,093 
                                         ------------  ------------ 
 
 
 
                                        Six months ended 30 June 
                                               2021          2020 
                                       ------------  ------------ 
                                            RMB'000       RMB'000 
                                       ------------  ------------ 
                                        (Unaudited)   (Unaudited) 
                                       ------------  ------------ 
 
 
  Service provided to joint ventures 
   and associates 
                                       ------------  ------------ 
 
  Sales commission income                       239           575 
                                       ------------  ------------ 
  Aircraft maintenance income                61,877        66,402 
                                       ------------  ------------ 
  Air catering income                         1,992           396 
                                       ------------  ------------ 
  Ground services income                     44,926        47,822 
                                       ------------  ------------ 
  Frequent-flyer programme income            13,206         9,449 
                                       ------------  ------------ 
  Land and buildings rental income            1,155         1,885 
                                       ------------  ------------ 
  Others                                        603         2,805 
                                       ------------  ------------ 
 
 
                                            123,998       129,334 
                                       ------------  ------------ 
 
 

23. RELATED PARTY TRANSACTIONS (Continued)

(a) During the period, the Group had the following significant transactions with (i) CNAHC, its subsidiaries (other than the Group), joint ventures and associates (collectively, the "CNAHC Group"); (ii) its joint ventures and its associates: (Continued)

   (i)      Transactions with related parties (Continued) 
 
                                                 Six months ended 30 June 
                                                        2021          2020 
                                                ------------  ------------ 
                                                     RMB'000       RMB'000 
                                                ------------  ------------ 
                                                 (Unaudited)   (Unaudited) 
                                                ------------  ------------ 
 
 
  Service provided by joint ventures 
   and associates 
                                                ------------  ------------ 
 
  Sales commission expenses                              482           404 
                                                ------------  ------------ 
  Air catering charges                                     9         1,432 
                                                ------------  ------------ 
  Airport ground services, take-off, 
   landing and depot expenses                        129,234        95,074 
                                                ------------  ------------ 
  Repair and maintenance costs                       248,114       938,132 
                                                ------------  ------------ 
  Short-term leases and leases of low-value 
   assets                                             15,917           443 
                                                ------------  ------------ 
  Other procurement and maintenance                    7,271         9,994 
                                                ------------  ------------ 
  Aviation communication expenses                      2,871         2,704 
                                                ------------  ------------ 
  Airline joint operation expenses                         -        10,630 
                                                ------------  ------------ 
  Frequent-flyer programme expenses                      189           488 
                                                ------------  ------------ 
 
 
                                                     404,087     1,059,301 
                                                ------------  ------------ 
 
 
  Loans to joint ventures and associates 
   by CNAF 
                                                ------------  ------------ 
 
  Net repayment of loans                                   -        14,800 
                                                ------------  ------------ 
  Interest income                                          -         3,672 
                                                ------------  ------------ 
 
 
  Deposits from joint ventures and associates 
   received by CNAF 
                                                ------------  ------------ 
 
  Increase in deposits received                      125,586       183,840 
                                                ------------  ------------ 
  Interest expenses                                    1,302         1,403 
                                                ------------  ------------ 
 
 

The Directors are of the opinion that the above transactions were conducted in the ordinary course of business of the Group.

Part of the related transactions above also constitute connected transactions or continuing connected transactions as defined in Chapter 14A of the Listing Rules.

23. RELATED PARTY TRANSACTIONS (Continued)

(a) During the period, the Group had the following significant transactions with (i) CNAHC, its subsidiaries (other than the Group), joint ventures and associates (collectively, the "CNAHC Group"); (ii) its joint ventures and its associates: (Continued)

   (ii)     Balances with related parties 
 
                                                      At            At 
                                                 30 June   31 December 
                                                    2021          2020 
                                                 RMB'000       RMB'000 
                                             -----------  ------------ 
                                             (Unaudited)     (Audited) 
                                             -----------  ------------ 
 
 
  Outstanding balances with related 
   parties* 
                                             -----------  ------------ 
  Amount due from the ultimate holding 
   company                                       200,740       591,909 
                                             -----------  ------------ 
  Amounts due from associates                    187,749       209,549 
                                             -----------  ------------ 
  Amounts due from joint ventures                  2,656           486 
                                             -----------  ------------ 
  Amounts due from other related companies     1,944,635     1,895,852 
                                             -----------  ------------ 
 
 
  Amount due to the ultimate holding 
   company                                        47,772        43,703 
                                             -----------  ------------ 
  Amounts due to associates                       96,772        87,810 
                                             -----------  ------------ 
  Amounts due to joint ventures                  159,395       432,560 
                                             -----------  ------------ 
  Amounts due to other related companies      14,170,689    12,985,411 
                                             -----------  ------------ 
 
 

* Outstanding balances with related parties exclude borrowing balances with related parties and outstanding balances between CNAF and related parties.

Except for lease liabilities, the above outstanding balances with related parties are unsecured, interest-free and repayable within one year or have no fixed terms of repayment.

 
                                                           At            At 
                                                      30 June   31 December 
                                                         2021          2020 
                                                      RMB'000       RMB'000 
                                                  -----------  ------------ 
                                                  (Unaudited)     (Audited) 
                                                  -----------  ------------ 
 
 
  Outstanding borrowing balances with 
   related parties 
                                                  -----------  ------------ 
  Interest-bearing borrowings 
                                                  -----------  ------------ 
 
       *    Due to the ultimate holding company       600,442             - 
                                                  -----------  ------------ 
 
       *    Due to other related companies          1,367,540     1,361,244 
                                                  -----------  ------------ 
 
 

23. RELATED PARTY TRANSACTIONS (Continued)

(a) During the period, the Group had the following significant transactions with (i) CNAHC, its subsidiaries (other than the Group), joint ventures and associates (collectively, the "CNAHC Group"); (ii) its joint ventures and its associates: (Continued)

   (ii)     Balances with related parties (Continued) 
 
                                                            At            At 
                                                       30 June   31 December 
                                                          2021          2020 
                                                       RMB'000       RMB'000 
                                                   -----------  ------------ 
                                                   (Unaudited)     (Audited) 
                                                   -----------  ------------ 
 
 
  Outstanding balances between CNAF 
   and related parties 
                                                   -----------  ------------ 
 
  (1) Outstanding balances between CNAF 
   and CNAHC Group 
                                                   -----------  ------------ 
        Loans granted                                   50,000        20,000 
                                                   -----------  ------------ 
        Deposits received                            6,204,580     4,359,469 
                                                   -----------  ------------ 
        Interest payable to related parties             18,060        11,488 
                                                   -----------  ------------ 
        Interest receivable from related parties            48            20 
                                                   -----------  ------------ 
 
 
  (2) Ou 
   tstanding balances between CNAF and 
   joint ventures and associates of the 
   Group 
                                                   -----------  ------------ 
        Deposits received                              215,084        89,498 
                                                   -----------  ------------ 
        Interest payable to related parties                 20           158 
                                                   -----------  ------------ 
 
 

The outstanding balances between CNAF and related parties represent loans to related parties or deposits received by CNAF from related parties. The applicable interest rates are determined in accordance with the prevailing borrowing rates/deposit saving rates published by the People's Bank of China.

23. RELATED PARTY TRANSACTIONS (Continued)

(b) An analysis of the compensation of key management personnel of the Group is as follows:

 
                                     Six months ended 30 June 
                                            2021          2020 
                                    ------------  ------------ 
                                         RMB'000       RMB'000 
                                    ------------  ------------ 
                                     (Unaudited)   (Unaudited) 
                                    ------------  ------------ 
 
 
  Short term employee benefits             6,250         6,089 
                                    ------------  ------------ 
  Retirement scheme contributions            322           398 
                                    ------------  ------------ 
 
 
                                           6,572         6,487 
                                    ------------  ------------ 
 
 

The breakdown of emoluments for key management personal are as follows:

 
                               Six months ended 30 June 
                                      2021          2020 
                              ------------  ------------ 
                                   RMB'000       RMB'000 
                              ------------  ------------ 
                               (Unaudited)   (Unaudited) 
                              ------------  ------------ 
 
 
  Directors and supervisors          1,130           422 
                              ------------  ------------ 
  Senior management                  5,442         6,065 
                              ------------  ------------ 
 
 
                                     6,572         6,487 
                              ------------  ------------ 
 
 

23. RELATED PARTY TRANSACTIONS (Continued)

   (c)   Guarantee with related parties: 

At 30 June 2021:

 
                                          Amount of 
                                           guaranty 
                                                 at   Inception    Maturity 
                                            30 June     date of     date of 
 Name of guarantor   Name of guarantee         2021    guaranty    guaranty 
                                            RMB'000 
                    ------------------  -----------  ----------  ---------- 
                                        (Unaudited) 
                    ------------------  -----------  ----------  ---------- 
 
 
  Corporate bonds: 
                    ------------------  -----------  ----------  ---------- 
  CNAHC              Air China Limited    5,000,000  18/01/2013  18/07/2023 
                    ------------------  -----------  ----------  ---------- 
  CNAHC              Air China Limited    1,500,000  16/08/2013  16/02/2024 
                    ------------------  -----------  ----------  ---------- 
 
 

At 31 December 2020:

 
                                           Amount of 
                                            guaranty 
                                                  at   Inception    Maturity 
                                         31 December     date of     date of 
 Name of guarantor   Name of guarantee          2020    guaranty    guaranty 
                                             RMB'000 
                    ------------------  ------------  ----------  ---------- 
                                           (Audited) 
                    ------------------  ------------  ----------  ---------- 
 
 
  Corporate bonds: 
                    ------------------  ------------  ----------  ---------- 
  CNAHC              Air China Limited     5,000,000  18/01/2013  18/07/2023 
                    ------------------  ------------  ----------  ---------- 
  CNAHC              Air China Limited     1,500,000  16/08/2013  16/02/2024 
                    ------------------  ------------  ----------  ---------- 
 
 

23. RELATED PARTY TRANSACTIONS (Continued)

(d) Transactions with other government-related entities in the PRC

The Company is ultimately controlled by the PRC government and the Group operates in an economic environment currently predominated by entities controlled, jointly controlled or significantly influenced by the PRC government ("government-related entities").

Apart from above transactions with CNAHC Group, the Group has collectively, but not individually significant transactions with other government-related entities, which include but are not limited to the following:

   --        Rendering and receiving services 
   --        Sales and purchases of goods, properties and other assets 
   --        Lease of assets 
   --        Depositing and borrowing money 
   --        Use of public utilities 

The transactions between the Group and other government-related entities are conducted in the ordinary course of the Group's business within normal business operations. The Group has established its approval process for providing of services, purchase of products, properties and services, purchase of lease service and its financing policy for borrowing. Such approval processes and financing policy do not depend on whether the counterparties are government-related entities or not.

- REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO THE BOARD OF DIRECTORS OF AIR CHINA LIMITED

( )

(Incorporated in the People's Republic of China with limited liability)

INTRODUCTION

We have reviewed the condensed consolidated financial statements of Air China Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") set out on pages 31 to 66, which comprise the condensed consolidated statement of financial position as of 30 June 2021 and the related condensed consolidated statement of profit or loss, statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the six-month period then ended, and certain explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and International Accounting Standard 34 "Interim Financial Reporting" ("IAS 34") issued by the International Accounting Standards Board. The directors of the Company are responsible for the preparation and presentation of these condensed consolidated financial statements in accordance with IAS 34. Our responsibility is to express a conclusion on these condensed consolidated financial statements based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

SCOPE OF REVIEW

We conducted our review in accordance with International Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the International Auditing and Assurance Standards Board. A review of these condensed consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34.

Deloitte Touche Tohmatsu Certified Public Accountants LLP

Certified Public Accountants

(Registered as a Third Country Auditor with the UK Financial Reporting Council)

Shanghai, China

27 August 2021

GLOSSARY OF TECHNICAL TERMS

Capacity Measurements

 
  "available tonne kilometres"          the number of tonnes of capacity available 
   or "ATK(s)"                           for transportation multiplied by the 
                                         kilometres flown 
 
  "available seat kilometres"           the number of seats available for 
   or "ASK(s)"                           sale multiplied by the kilometres 
                                         flown 
 
  "available freight tonne kilometres"  the number of tonnes of capacity available 
   or "AFTK(s)"                          for the carriage of cargo and mail 
                                         multiplied by the kilometres flown 
 

Traffic Measurements

 
  "passenger traffic"                 measured in RPK, unless otherwise 
                                       specified 
 
  "revenue passenger kilometres"      the number of revenue passengers carried 
   or "RPK(s)"                         multiplied by the kilometres flown 
 
  "cargo and mail traffic"            measured in RFTK, unless otherwise 
                                       specified 
 
  "revenue freight tonne kilometres"  the revenue cargo and mail load in 
   or "RFTK(s)"                        tonnes multiplied by the kilometres 
                                       flown 
 
  "revenue tonne kilometres" or       the revenue load (passenger and cargo) 
   "RTK(s)"                            in tonnes multiplied by the kilometres 
                                       flown 
 

Efficiency Measurements

 
  "passenger load factor"       RPK expressed as a percentage of ASK 
 
  "cargo and mail load factor"  RFTK expressed as a percentage of 
                                 AFTK 
 
  "overall load factor"         RTK expressed as a percentage of ATK 
 
  "block hour"                  whole and/or partial hour elapsing 
                                 from the moment the chocks are removed 
                                 from the wheels of the aircraft for 
                                 flights until the chocks are next 
                                 again returned to the wheels of the 
                                 aircraft 
 

Yield Measurements

 
  "passenger yield"/"yield per    revenues from passenger operations 
   RPK"                            divided by RPKs 
 
  "cargo yield"/"yield per RFTK"  revenues from cargo operations divided 
                                   by RFTKs 
 

DEFINITIONS

In this interim report, the following expressions shall have the following meanings unless the context requires:

 
"Airbus"                    Airbus S.A.S., a company established in 
                             Toulouse, France 
 
"Air China Cargo"           Air China Cargo Co., Ltd., a subsidiary 
                             of CNAHC 
 
"Air China Inner Mongolia"  Air China Inner Mongolia Co., Ltd., a subsidiary 
                             of the Company 
 
"Air Macau"                 Air Macau Company Limited, a subsidiary 
                             of the Company 
 
"AMECO"                     Aircraft Maintenance and Engineering Corporation, 
                             a subsidiary of the Company 
 
"Articles of Association"   the articles of association of the Company, 
                             as amended from time to time 
 
"A Share(s)"                ordinary share(s) in the share capital 
                             of the Company, with a nominal value of 
                             RMB1.00 each, which are subscribed for 
                             and traded in Renminbi and listed on the 
                             Shanghai Stock Exchange 
 
"Beijing Airlines"          Beijing Airlines Company Limited, a subsidiary 
                             of the Company 
 
"Board"                     the board of directors of the Company 
 
"CASs"                      China Accounting Standards for Business 
                             Enterprises 
 
"Cathay Pacific"            Cathay Pacific Airways Limited, an associate 
                             of the Company 
 
"CNACG"                     China National Aviation Corporation (Group) 
                             Limited 
 
"CNAF"                      China National Aviation Finance Co., Ltd, 
                             a subsidiary of the Company 
 
"CNACG Group"               CNACG and its subsidiaries 
 
"CNAHC"                     China National Aviation Holding Corporation 
                             Limited 
 
"CNAHC Group"               CNAHC and its subsidiaries 
 
"COMAC"                     Commercial Aircraft Corporation of China, 
                             Ltd. 
 
"Company" or "Air China"    Air China Limited, a company incorporated 
                             in the PRC, whose H Shares are listed on 
                             the Hong Kong Stock Exchange as its primary 
                             listing venue and on the Official List 
                             of the UK Listing Authority as its secondary 
                             listing venue, and whose A Shares are listed 
                             on the Shanghai Stock Exchange 
 
"CSRC"                      China Securities Regulatory Commission 
 
 
 
"Dalian Airlines"                      Dalian Airlines Company Limited, a subsidiary 
                                        of the Company 
 
"Director(s)"                          the director(s) of the Company 
 
"Group"                                the Company and its subsidiaries 
 
"Hong Kong"                            the Hong Kong Special Administrative Region 
                                        of the People's Republic of China 
 
"Hong Kong Stock Exchange"             The Stock Exchange of Hong Kong Limited 
 
"H Share(s)"                           overseas-listed foreign invested share(s) 
                                        in the share capital of the Company, with 
                                        a nominal value of RMB1.00 each, which 
                                        are listed on the Hong Kong Stock Exchange 
                                        (as primary listing venue) and have been 
                                        admitted into the Official List of the 
                                        UK Listing Authority (as secondary listing 
                                        venue) 
 
"International Financial Reporting     International Financial Reporting Standards 
 Standards" or "IFRSs" 
 
"Kunming Airlines"                     Kunming Airlines Company Limited, a subsidiary 
                                        of Shenzhen Airlines 
 
"Listing Rules"                        The Rules Governing the Listing of Securities 
                                        on The Stock Exchange of Hong Kong Limited 
 
"Model Code"                           The Model Code for Securities Transactions 
                                        by Directors of Listed Issuers 
 
"Reporting Period"                     the period from 1 January 2021 to 30 June 
                                        2021 
 
"RMB"                                  Renminbi, the lawful currency of the PRC 
 
"SAR"                                  Special Administrative Region of the People's 
                                        Republic of China 
 
"SFO"                                  the Securities and Futures Ordinance (Chapter 
                                        571 of the Laws of Hong Kong) 
 
"Shandong Airlines"                    Shandong Airlines Co., Ltd., a subsidiary 
                                        of Shandong Aviation Group Corporation 
 
"Shandong Aviation Group Corporation"  Shandong Aviation Group Company Limited, 
                                        an associate of the Company 
 
"Shareholder(s)"                       the shareholder(s) of the Company 
 
"Shenzhen Airlines"                    Shenzhen Airlines Company Limited, a subsidiary 
                                        of the Company 
 
"Supervisor(s)"                        the supervisor(s) of the Company 
 
"Supervisory Committee"                the supervisory committee of the Company 
 
"US dollars"                           United States dollars, the lawful currency 
                                        of the United States 
 

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September 17, 2021 03:17 ET (07:17 GMT)

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