Air China Regulatory News (AIRC)

11 Apr 2008 07:17

Air China Ld11 April 2008 Air China is the only national flag carrier of China and the exclusive airline partner of the 2008Beijing Olympic Games. Air China has been selected as one of the 2007 Top 20 Globally Most CompetitiveChinese Companies and has officially become a member of the Star Alliance, the world's largest airlinealliance, since December 2007. Air China is headquartered in Beijing, the capital of China, with Shanghai and Chengdu as its twoincreasingly important hubs. As at 31 December 2007, by joining the Star Alliance the routes network ofAir China could cover 155 countries and regions as well as 895 destinations. Air China continues tomaintain its core values of providing safe, convenient, comfortable and customised services, anddedicates to offer distinguished services and excellent experience to global passengers and cargoforwarders. The strategic objectives of Air China are "to build up international competitive strength, continue toenhance development potentials, offer its customers with unique and excellent experience and realise asustainable growth so as to create value to all the relevant parties". In addition, Air China also directly or indirectly holds interests in the following airlines: Air MacauCompany Limited (51%), Air China Cargo Co., Ltd. (51%), Shandong Airlines Company Limited (22.8%),Shenzhen Airlines Company Limited (25%) and Cathay Pacific Airways Limited (17.5%). Contents2 Corporate Information3 Summary of Financial Information4 Summary of Operating Data6 Chairman's Statement9 Business Overview13 Management's Discussion and Analysis of Financial Position and Operating Results20 Corporate Governance Report29 Report of the Directors45 Report of the Supervisory Committee46 Profile of Directors, Supervisors and Senior Management Financial Statements prepared under International Financial Reporting Standards50 - Independent Auditors' Report52 - Consolidated Income Statement53 - Consolidated Balance Sheet55 - Consolidated Statement of Changes in Equity56 - Consolidated Cash Flow Statement58 - Balance Sheet60 - Notes to Financial Statements Financial Statements prepared under China Accounting Standards139 - Consolidated Balance Sheet141 - Consolidated Income Statement142 Supplementary Information144 Glossary of Technical Terms Corporate Information REGISTERED CHINESE NAME ENGLISH NAMEAir China Limited REGISTERED OFFICE9/F, Blue Sky Mansion28 Tianzhu RoadZone A, Tianzhu Airport Industrial ZoneShunyi DistrictBeijingChina PRINCIPAL PLACE OF BUSINESS IN HONG KONG5th Floor, CNAC House12 Tung Fai RoadHong Kong International AirportHong Kong WEBSITE ADDRESSwww.airchina.com.cn DIRECTORSKong DongWang ShixiangYao WeitingMa XulunChristopher Dale PrattChen Nan Lok, PhilipCai JianjiangFan ChengHu Hung Lick, HenryWu ZhipanZhang KeJia Kang SUPERVISORSSun YudeLiao WeiZhou GuoyouLiu FengLiu Guoqing LEGAL REPRESENTATIVE OF THE COMPANYLi Jiaxiang JOINT COMPANY SECRETARIESHuang BinLi Man Kit (ACIS, ACS) QUALIFIED ACCOUNTANTDavid Tze-kin Ng (CPA) AUTHORISED REPRESENTATIVESCai JianjiangLi Man Kit LEGAL ADVISER TO THE COMPANYHaiwen & Partners (as to PRC Law)Freshfields Bruckhaus Deringer(as to Hong Kong and English Law) INTERNATIONAL AUDITORSErnst & Young H SHARE REGISTRAR AND TRANSFER OFFICEComputershare Hong Kong Investor Services LimitedRooms 1712-1716, 17th FloorHopewell Centre183 Queen's Road EastWanchaiHong Kong LISTING VENUESHong Kong, London and Shanghai Summary of Financial Information (in RMB'000) 2007 2006 2005 2004 2003---------------------------------------------------------------------------------------------------------- Operating Revenue 51,330,541 44,936,606 38,290,966 33,520,757 24,641,405Profit from operations 3,834,127 2,517,704 3,673,816 4,485,251 2,284,264Profit before tax 5,606,113 3,929,221 3,374,254 3,559,559 178,279Profit after tax(including profit attributableto minority shareholders) 4,121,500 3,305,097 2,470,380 2,548,695 88,498Profit attributable tominority shareholders (107,497) 617,256 64,124 162,731 (71,106)Profit attributableto shareholders of the Company 4,228,997 2,687,841 2,406,256 2,385,964 159,604EBITDA(1) 9,411,048 7,813,232 8,186,496 7,948,503 5,661,736EBITDAR(2) 11,961,669 10,206,623 9,928,427 9,207,230 6,753,854Earnings per share attributable toshareholders of the Company (RMB) 0.356 0.262 0.255 0.360 N/AReturn on shareholders' equity (%) 13.49 9.04 11.98 14.42 2.32---------------------------------------------------------------------------------------------------------- (1) EBITDA represents earnings before finance revenue (including interest income, net exchange gains, net gains on fuel derivatives and dividend income from available-for-sale investments), finance costs, enterprise income taxes, gain on disposal of an associate, share of profits and losses of associates, depreciation and amortisation as computed under the International Financial Reporting Standards. (2) EBITDAR represents EBITDA less operating lease expenses on aircraft and engines as well as other operating lease expenses. (in RMB'000) 31 December 31 December 31 December 31 December 31 December 2007 2006 2005 2004 2003---------------------------------------------------------------------------------------------------------- Total assets 91,056,277 84,477,536 68,201,943 66,689,269 56,397,062Total liabilities 59,548,924 52,741,843 46,651,337 48,660,727 48,081,813Minority interests 150,216 2,011,435 1,458,365 1,480,287 1,422,380Shareholders' equity (excludingminority interests) 31,357,137 29,724,258 20,092,241 16,548,255 6,892,869Shareholders' equity per share (RMB) 2.64 2.43 2.13 1.83 N/A---------------------------------------------------------------------------------------------------------- Summary of Operating Data The following summary includes the operating data of Air China Limited (the "Company"), Air China CargoCo., Ltd. ("Air China Cargo") and Air Macau Company Limited ("Air Macau") 2007 2006 Increase/(decrease)---------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------Traffic RPK (in millions) 70,025.8 63,361.6 10.52%International 30,200.8 27,120.1 11.36%Mainland China 36,534.4 32,970.3 10.81%Hong Kong and Macau 3,290.6 3,271.1 0.60% RFTK (in millions) 3,875.5 3,477.5 11.44%International 2,948.6 2,603.6 13.25%Mainland China 776.3 723.9 7.24%Hong Kong and Macau 150.5 150.1 0.23% Passengers (in thousands) 37,256.2 33,971.2 9.67%International 7,356.5 6,696.0 9.86%Mainland China 27,931.2 25,253.2 10.60%Hong Kong and Macau 1,968.6 2,022.0 (2.64%) Cargos and mails carried (tonnes) 1,103,914.0 1,019,359.3 8.29% Kilometers flown (in millions) 519.6 484.9 7.16% Block hours (in thousands) 817.6 755.2 8.27% Number of flights 294,905 280,814 5.02%International 56,288 50,753 10.91%Mainland China 219,237 209,656 4.57%Hong Kong and Macau 19,380 20,405 (5.02%) RTK (in millions) 10,170.3 9,174.2 10.86%---------------------------------------------------------------------------------------------------------- Capacity---------------------------------------------------------------------------------------------------------- ASK (in millions) 89,233.7 83,492.3 6.88%International 39,206.5 36,038.0 8.79%Mainland China 45,558.7 42,902.2 6.19%Hong Kong and Macau 4,468.5 4,551.9 (1.83%) AFTK (in millions) 6,868.1 6,404.4 7.24%International 5,099.9 4,615.4 10.50%Mainland China 1,531.3 1,524.6 0.44%Hong Kong and Macau 236.9 264.4 (10.42%) ATK (in millions) 14,938.7 13,959.2 7.02%---------------------------------------------------------------------------------------------------------- 2007 2006 Increase/(decrease)---------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------Load factor Passenger load factor (RPK/ASK) 78.47% 75.89% 2.59pptInternational 77.03% 75.25% 1.78pptMainland China 80.19% 76.85% 3.34pptHong Kong and Macau 73.64% 71.86% 1.78ppt Cargo and mail load factor (RFTK/AFTK) 56.43% 54.30% 2.13pptInternational 57.82% 56.41% 1.41pptMainland China 50.70% 47.48% 3.21pptHong Kong and Macau 63.52% 56.78% 6.75ppt---------------------------------------------------------------------------------------------------------- Yield---------------------------------------------------------------------------------------------------------- Yield per RPK (RMB) 0.6231 0.5929 5.10%International 0.5913 0.5629 5.05%Mainland China 0.6429 0.6082 5.71%Hong Kong and Macau 0.6955 0.6875 1.16% Yield per RFTK (RMB) 1.8927 2.0577 (8.02%)International 1.8504 2.1260 (12.97%)Mainland China 1.5239 1.3183 15.60%Hong Kong and Macau 4.6267 4.4393 4.22%---------------------------------------------------------------------------------------------------------- Fleet---------------------------------------------------------------------------------------------------------- Total number of aircraft in service at year end 234 225 9Daily utilization (block hours per dayper aircraft) 9.92 10.10 (1.81%)---------------------------------------------------------------------------------------------------------- Unit cost---------------------------------------------------------------------------------------------------------- Operating expenses per ASK (RMB) 0.55 0.52 5.77%Operating expenses per ATK (RMB) 3.28 3.14 4.46%---------------------------------------------------------------------------------------------------------- Chairman's Statement Dear Shareholders, In 2007, China's economy continued to maintain the trend of a rapid but steady growth and the marketdemand for air transportation remained robust. The Company has, while ensuring its flight safety,improved the service quality and realised steady growth in profitability as well as created more valueto all relevant parties. During the reporting period, the Group (including the Company and its subsidiaries and joint ventures)recorded a total traffic turnover of 10.17 billion tonne kilometres and carried 37.256 millionpassengers and handled 1.104 million tonnes of cargos and mails, representing an increase of 10.9%, 9.7%and 8.3% respectively as compared with the corresponding period of last year. The Group's total revenuefrom business operations (including air traffic revenue and other operating revenue) amounted toRMB51.33 billion and profit before tax amounted to RMB5.606 billion, representing an increase of 14.23%and 42.68% respectively as compared with the corresponding period of last year. The Group achieved newheight in terms of profitability and continued to maintain its leading position among domestic airlinesin China. As compared with the same period last year, the share of profit generated from air transportationbusiness in our total profit has increased. The Company's investment return has increased substantiallyowing to strong performance of Cathay Pacific Airways Limited ("Cathay Pacific"), while the appreciationof Renminbi also contributed positively to our profit. Strengthening the hub building and solidifying the market position. By the end of 2007, the number ofaircraft serving Beijing has reached 132, representing 60% of our total capacity. In order to optimiseand expand our route network, five international routes (including Beijing-Sapporo and Beijing-Athensroutes) and a number of domestic routes were launched, the number of connecting flights has steadilyincreased and the number of transit passengers has significantly increased. Our passenger throughput atBeijing hub accounted for 44.6% of the total passenger throughput of all domestic airlines at BeijingCapital International Airport, and the Company's market position in Beijing is thus strengthened. Themarket shares of the Company in Chengdu and Shanghai have also been steadily increasing. Substantial progress in forming alliance and business cooperation and further enhanced market influence.In December 2007, the Company was formally admitted to the Star Alliance, the largest airline alliancein the world, and thereafter the route network coverage of the Star Alliance extended to 155 countriesand regions with 895 destinations. By taking the advantage of its admission to the alliance, the Companyis able to fully expand its geographical coverage. Starting from 26 March 2008, the Company willcommence its full operation at Terminal 3 of the Beijing Capital International Airport, which may helpto realise the strategy of "Move Under One Roof" with other members of the Star Alliance and tofacilitate a smooth operation of connecting flights between the Company and other members of the StarAlliance. During the reporting period, the Company continued to strengthen its business cooperation with CathayPacific by setting up a jointly operated Beijing-Hong Kong route. The sales teams of the two companiesin Beijing and Hong Kong were combined and a mechanism for regular capacity and scheduling coordinationwas set up. We have been also successfully promoting our cooperation in areas of procurement, cabinservice, aircraft maintenance and IT. Innovative services and products and marketing means and excellent market integration results. Duringthe reporting period, the Company fully completed the renovation scheme for its first class and businessclass cabins in March. In August, the Company introduced the "Forbidden Pavilion" for its first classcabin and "Capital Pavilion" for its business class cabin and in October the Junior Phoenix Card( ) was launched. Our newly purchased aircraft are all equipped with new designed seats toprovide upgraded services for our first class and business class customers. The introduction of variousservices and products are intended to provide more options for our customers. In this regard, the Companyaggressively promoted e-commerce, self-service check-in, online check-in and electronic passengerticketing operation. As a result of further expanding the through check-in business, the average monthlythrough check-in business handled by overseas and domestic airports substantially increased. Whileresource integration of both international and domestic markets was also strengthened, our Europe routestarted to post a profit while loss in the North America route was largely reduced. Our operating resultswere better than expected and positive effects of integration also started to reveal in other regions. Enhancing service quality and brand value by leveraging on 2008 Olympic Games and "Quality Service Year"campaign. During the reporting period, the Company continued to further strengthen its notion ofproviding safe, convenient, comfortable and customised services by launching the "Quality Service Year"campaign. By leveraging our status as the sole passenger airline partner of Beijing 2008 Olympic Games,the Company has formulated and refined the service assurance plan for 2008 Olympic Games and passed theexamination and review of 26 Good Luck Beijing test events and pre-competitions to fully prepare itselffor providing high quality services during the Olympic Games. In 2007, the Company was enlisted in the"World's Top Five Hundred Brands" and the "2007 Top 20 Globally Most Competitive Chinese Companies". TheCompany was ranked No.27 for the "Top 500 Most Valuable Chinese Brands". The Company's brand value wasfurther enhanced. Emphasising energy saving and emission reduction and further strengthening cost control. During thereporting period, the Company adopted various measures to improve the energy efficiency. Such measuresinclude strengthening the management on the use of aircraft ramp supporting facilities, eliminatinginefficient load, optimising air route, increasing the overall load factor, introducing and usingadditional fuel saving aircraft and engines. These measures not only lowered unit fuel consumption levelbut also reduced the carbon dioxide emission and noise pollution. Meanwhile, our cashflow management,debt management and financing management were also improved through various measures such as centralprocurement, fuel saving, fuel hedging and maintenance expenses control. Cost control was furtherstrengthened accordingly. Looking ahead in 2008, the Company believes that China's economy and the air transportation market willcontinue to remain buoyant. However, competition in the air transportation market has becomeincreasingly fierce, especially with the implementation of the liberalization policy, the Chineseaviation industry will face stronger challenges. In response to the changing market situation, theCompany has adjusted its corporate strategies from time to time and set higher business developmentobjectives to "build up international competitive strength, continue to enhance development potentials,offer its customers with unique and excellent experience and realise a sustainable growth so as tocreate value to all the relevant parties". I believe, with the support of our shareholders and the joint effort of our management and colleagues,the Company will continue to improve its services, increase its revenue, strengthen its cost control andcreate better returns for its shareholders, its employees as well as the society. Acting Chairman of the BoardKong Dong Beijing, the PRC,17 March 2008 To view the full text of this press release, paste the following link into your web browser: http://www.rns-pdf.londonstockexchange.com/rns/1387s_-2008-4-11.pdf This information is provided by RNS The company news service from the London Stock Exchange