Air China Regulatory News (AIRC)

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中國國際航空股份有限公司

AIR CHINA LIMITED

(a joint stock limited company incorporated in the People's Republic of China with limited liability)

(Stock Code: 00753)

INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2020

The Board presents the unaudited interim results of the Group for the six months ended 30 June 2020 as follows:

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2020

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 30 JUNE 2020

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

1. BASIS OF PREPARATION

The condensed consolidated financial statements for the six months ended 30 June 2020 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 Listing Rules. The condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's financial statements for the year ended 31 December 2019.

As at 30 June 2020, the Group's current liabilities exceeded its current assets by approximately RMB64,920 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 RMB128,481 million as at 30 June 2020, 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 2020. Accordingly, these condensed consolidated financial statements have been prepared on a basis that the Group will be able to continue as a going concern.

1A. SIGNIFICANT EVENTS AND TRANSACTIONS IN THE CURRENT INTERIM PERIOD

The outbreak of coronavirus ("Covid-19") and the subsequent quarantine measures as well as the travel restrictions imposed by many countries have had negative impacts to the global economy, business environment and directly and indirectly affect the operations of the Group. Air passenger travel within Mainland China was decreased after Spring Festival. Global travel restrictions have also reduced the demand for international routes. As such, the financial position and performance of the Group were affected as a result of the reduction in revenue as disclosed in the relevant notes.

2. 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 2020 are the same as those presented in the Group's annual consolidated financial statements for the year ended 31 December 2019.

Application of amendments to IFRSs

In the current interim period, the Group has applied the Amendments to References to the Conceptual Framework in IFRS Standards and 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 2020 for the preparation of the Group's condensed consolidated financial statements.

In addition, the Group has early applied the Amendment to IFRS 16 "Covid-19-Related Rent Concessions". Rent concessions relating to lease contracts that occurred as a direct consequence of the Covid-19 pandemic, the Group has elected to apply the practical expedient not to assess whether the change is a lease modification if all the specified conditions are met. Forgiveness or waiver of lease payments are accounted for as variable lease payments. The related lease liabilities are adjusted to reflect the amounts forgiven or waived with a corresponding adjustment recognised in profit or loss in the period in which the event occurs.

The application of the Amendments to References to the Conceptual Framework in IFRS Standards and the amendments to IFRSs in the current 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.

Changes in accounting estimates

During the current interim period, the Group changed the depreciation method of overhaul components of engine, included in property, plant and equipment and right-of-use assets, from straight-line method to the units of production method. The change was accounted for as a change in an accounting estimate in accordance with IAS 8 effect from 1 January 2020 and the impact on the condensed consolidated financial statements for the six months ended 30 June 2020 was a reduction in depreciation expense of approximately RMB899 million.

3A. REVENUE

Disaggregation of revenue from contracts with customers

3B. 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)/profit 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 2020 and 2019 and the reconciliations of reportable segment revenue and (loss)/profit before taxation to the Group's consolidated amounts under IFRSs:

For the six months ended 30 June 2020

For the six months ended 30 June 2019

The following table presents the segment assets of the Group's operating segments under CASs as at 30 June 2020 and 31 December 2019 and the reconciliations of reportable segment assets to the Group's consolidated amounts under IFRSs:

Geographical information

The following tables present the Group's consolidated revenue under IFRSs by geographical location for the six months ended 30 June 2020 and 2019, respectively:

For the six months ended 30 June 2020

For the six months ended 30 June 2019

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.

4. OTHER INCOME AND GAINS

5. (LOSS)/PROFIT FROM OPERATIONS

The Group's (loss)/profit from operations is arrived at after charging:

6. FINANCE COSTS

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

The interest capitalisation rates during the period range from 1.90% to 4.75% per annum (six months ended 30 June 2019: 3.80% to 4.75% per annum).

7. INCOME TAX (CREDIT)/EXPENSE

Under the relevant Corporate Income Tax Law and regulations in the PRC, except for two branches and two subsidiaries which are taxed at a preferential rate of 15% (six months ended 30 June 2019: 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 2019: 25%) during the current period. Subsidiaries in Hong Kong SAR, China are taxed at corporate income tax rates of 8.25% and 16.5% (six months ended 30 June 2019: 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 2019: 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.

8. DIVIDENDS

(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.

The Directors decided not to declare an interim dividend for the six months ended 30 June 2020 (six months ended 30 June 2019: Nil).

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

9. (LOSS)/EARNINGS PER SHARE

The calculation of basic (loss)/earnings per share was based on the loss attributable to ordinary equity shareholders of the Company of RMB9,440 million (six months ended 30 June 2019 (unaudited): profit of RMB3,144 million) and the number of 13,734,960,921 ordinary shares (six months ended 30 June 2019: 13,734,960,921 shares) in issue during the period, as adjusted to reflect the number of treasury shares held by Cathay Pacific through reciprocal shareholding.

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

10. 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:

11. 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:

CHAIRMAN'S STATEMENT

The first half of 2020 was extremely exceptional. The grave situation, huge challenges and the hardship in obtaining the current results during the half year were all unprecedented. The Group resolutely carried out the messages of the notable speeches and the important instructions of General Secretary Xi Jinping and the decisions and deployment plans of the Central Committee of the Party. The Group managed the complicated and ever-changing environment carefully and well organized and coordinated the "three strong fights" of containing the pandemic, safe operation and achieving operating performance. With its strenuous efforts, the Group has obtained certain significant results, surmounting all risks and challenges.

Facing the sudden outbreak of Covid-19 Pandemic that would be hardly seen in a hundred years, the Group despatched the pandemic control materials and medical teams promptly, pursuing the concept of an "unconditional and most priority" relief and rushing to the forefront for fighting the pandemic. Furthermore, it designated the aviation green way for rescue and relief freight against pandemic to demonstrate the vision and commitment of the national flag carrier persistently. At the most difficult time during the outbreak in China, we spared no effort in safeguarding the provision of transportation services for the guidance team appointed by the Central Government and the national medical teams to Wuhan timely against all odds, which involved a total of 166 charter flights, 11,306 pandemic fighting personnel and 1,158 tonnes of aid materials transported. Similarly, at the increasingly severe moments of the outbreak overseas, we despatched flights again to carry fellow nationals and students back from abroad where high risks existed, and delivered experts and prevention materials to assist various foreign countries in fighting the pandemic. A total of 16 flights for the mission of offshore aids were secured, carrying 144 members of medical teams and 156 tonnes of materials. When the industrial chain and supply chains were hard hit by the pandemic, we were at the forefront of the industry and launched the air cargo services with passenger aircraft. We transformed four B777-300 aircraft and two A330-200 aircraft to operate more than 5,800 air-cargo flights with these passenger aircraft. Our efforts ensured the international key manufacturers not to suffer from suspending production and safeguarded the core position of China among the global industrial chain and supply chains. To facilitate the resumption of work and production, we rapidly resumed flights again up to a number of nearly 2,000, carried out 67 domestic customized flights and international charter passenger flights, carrying a total of 7,788 passengers. By procuring pandemic relief, key flight routes, global supply chains and resumption of work and production without disruption with our best endeavors, we have faithfully fulfilled our political and social responsibilities as a central enterprise.

Always adhering to the principle of safety first as the lifeline of an aviation company, the Group insisted on the unwavering safety benchmark and strengthened risk management and control, and thus achieved a total of 0.617 million safe flight hours. We have strengthened our operation by persisting in the dynamic analysis of "one flight, one policy" so as to identify, assess, prevent and control the operation risks of flights. Further, we made serious inspections and investigations on any problems and hidden hazards, thereby enhancing the preparatory efforts for flight operation and the control on key working procedures. The Group strictly adhered to the flight operation standards, consolidated the allocation and rotation of flight crew members and arranged the technological enclosure and storage and daily maintenance of parked aircraft reasonably, ensuring the crew members and aircraft were always in good conditions for operation. We carefully implemented the operation and organization for international flight diversion to assure the safe operation of 242 diversion flights. We have built the protection model for "air-cargo flight with passenger aircraft" and formulated various risk prevention and control measures. With the orderly efforts such as the related training programs and maintenance for ARJ21 aircraft introduced, the first ARJ21 has been safely and successfully put into operation.

Amidst the Covid-19 pandemic outbreak, the Company has adjusted its operation strategies swiftly, seized the market opportunities precisely and prevented various operation risks stringently, striving to minimize the impacts of the pandemic. The operation quality of our main transportation business and competitive edge among the industry have been maintained accordingly. During the first half year, the Group completed the traffic measured by RTK of 5,355 million tonne kilometres. The Group's revenue amounted to RMB29,646 million, while loss attributable to equity shareholders of the Company amounted to RMB9,440 million. With prudent responsive measures for the market change such as timely adjustment on the operation model and rapid formulation of exceptional production and operation strategies, we managed to ensure maximization of the marginal total profit contribution. By unleashing the management effectiveness of optimizing the operation of the entire fleet, we timely captured the market opportunities, organized sources of customers effectively and refined the yield management, striving to increase the revenue. We have changed the offshore sales model swiftly and organized the international passenger freight according to the practice of "one route, one policy" and "one flight, one policy". With our arduous efforts, the general downside trend of the operating performance of the Group has been curbed effectively.

Bearing the concept of preparing for going through hard times, we put the strictest cost control measures into practice. The Group adjusted the introduction and retirement plan of aircraft, refined management and control on significant cost items, relocated the cost structures and systems and aligned operation with costs in a scientific manner. The Group strictly avoided capital risk, enhanced the management and control on cash flow forecast and improved efficiency in capital use. Moreover, the Group issued corporate bonds to replace bank borrowings so as to reduce financing cost and guarantee a secured and stable liquidity. We proactively prevented the contract performance risks by reviewing the performance of various contracts and timely identifying and following up on any extraordinary cases.

We actively implemented the required prevention and control measures against the pandemic to provide protection in our services for passengers in full swing. With increased awareness on offering active services and promptly adjusted service procedures, our employees of all levels have regarded the routes as if the front of cross-fire, the cabin as if the "Fangcang" mobile-cabin hospital, and the airport as if the battle field. We made all efforts to curtail the pandemic impacts on the travel of passengers with courage regardless of any dangers or risks. We adjusted the aircraft air-conditioning operation protocols, reduced the use of airport bridge-borne air conditioners, increased the frequency of daily clean ups and repair and maintenance of recirculating air conditioning units, strengthened the hygiene cleaning and ventilated disinfection of cabins and cockpits, strictly containing the spread of virus from passageways. Further, we promptly adjusted the on-board catering and provision of amenities in order to ensure safety of the food and on-board supplies. Meanwhile, we were sufficiently equipped with various pandemic fighting materials and sanitary utilities on aircraft, formulated and strictly implemented the operating rules and procedures on cleaning and sanitization with the facilities or equipment thereon. In view of the changes in travel demand of passengers and timely in response to the industrial demand, we made adjustment on flight planning, ticketing rules and service procedures, and 8.88 million tickets were returned and duly processed for free. We optimised products for transit, enhanced synergy among various channels, organized resources of services, strengthened delivery of information and properly handled the problems such as conflicts over the demand for and supply of international passenger tickets and provision of transit connection. In addition, we optimized online service capability and increased the use efficiency of self-service equipment in airports and expanded the "no-contact" service coverage. We have actively protected the rights of our frequent flyers and become the pioneer of the industry offering policy of extending the validity period of frequent flyers miles. With assured protection on international flight diversion services, we also improved the passenger service procedures during transit or landing of flights and orderly organized and provided protection for the subsequent flight journey of passengers.

Currently, the pandemic and economic conditions remain very sophisticated. Under the new pattern of accelerated construction of the dual circulation development, the economy of the PRC is moving forward steadily on the track of high-quality development with continuous upgrades. For the second half of 2020, we will focus on implementing the regularized pandemic prevention and control measures and adhering to the unwavering principles as follows: considering the health and safety of our passengers and employees as the top priority as always; insisting on the mission of responsibility in safety as significant as Mount Taishan and sticking to the "safety first" benchmark as always; putting huge efforts to pursue the fundamental strategies such as operating performance, precise and effective cost management and control, balanced development of domestic and global businesses as well as passenger and cargo freight, development of hub network and cost-oriented concept vigorously as always; persisting in the strategic directions such as innovation-driven mode, expedited upgrade of service quality and transformation of the business model and commitment to enhancing our services as always; being committed to the poverty-relief efforts in all our hearts, all our passions, all our might and all our minds, insisting on fighting the critical battle in respect of poverty-alleviation comprehensively as always.

New opportunities would arise from a crisis, while a new chapter would be turned from changes. By sustaining our strategic resilience, we insist on seeking growth in a steady manner, seizing the opportunities arising from crisis with confidence and recovering the loss arising from the pandemic with our best endeavors. We will procure a safe operation and strive to restore the operating performance to its normal level. We aspire to win the "three strong fights" of containing the pandemic, safe operation and achieving operating performance and as such, we look forward to making contributions to the successful achievement of the final year of the "13th five-year plan" and the accomplishment of completing the building of a moderately prosperous society in all respects, and make unremitting efforts to establish as a top-tier global aviation transportation group.

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.

Development of Fleet

During the Reporting Period, the Group introduced 3 aircraft including two A320NEO and one ARJ21- 700, and phased out 2 aircraft including one B737-800 and one A319. As at the end of the Reporting Period, the Group operated a fleet of 700 aircraft with an average age of 7.40 years, of which the Company operated a total of 428 aircrafts with an average age of 7.68 years. During the first half of the year, the Company introduced 3 aircraft and phased out 1 aircraft.

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

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

MANAGEMENT DISCUSSION AND ANALYSIS ON FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

The following discussion and analysis are based on the Group's interim condensed consolidated financial statements and notes thereto prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as well as with the applicable disclosure requirements of Appendix 16 to the Listing Rules and are designed to assist the readers in further understanding the information provided in this announcement 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 2020, the Group's available seat kilometres for air passenger amounted to 65,566 million, representing a year-on-year decrease of 53.74%; the total air passenger traffic amounted to 44,222 million RPK, representing a year-on-year decrease of 61.47%; passenger load factor was 67.45%, representing a year-on-year decrease of 13.54 percentage points. The available freight tonne kilometres for freight amounted to 4,035 million, representing a year-on-year decrease of 27.09%; the total cargo and mail traffic amounted to 1,459 million tonne kilometres, representing a year-on-year decrease of 37.47%; cargo and mail load factor was 36.16%, representing a year-on-year decrease of 6.00 percentage points. During the Reporting Period, the Group recorded a loss attributable to equity shareholders of the Company of RMB9,440 million compared to a profit attributable to equity shareholders of the Company of RMB3,144 million in the same period last year.

Revenue

During the Reporting Period, the Group's revenue was RMB29,646 million, representing a year-on-year decrease of RMB35,667 million or 54.61%. Among the revenues, air traffic revenue was RMB27,139 million, representing a year-on-year decrease of RMB35,542 million or 56.70%. Other operating revenue was RMB2,507 million, representing a year-on-year decrease of RMB125 million or 4.75%.

Revenue Contributed by Geographical Segments

Air Passenger Revenue

During the Reporting Period, the Group recorded an air passenger revenue of RMB22,948 million, representing a decrease of RMB36,903 million or 61.66% from that of the same period of 2019. Among the air passenger revenue, the decrease of capacity resulted in a decrease in revenue of RMB32,163 million, the decrease of passenger load factor resulted in a decrease in revenue of RMB4,630 million, while the decrease of passenger yield resulted in a decrease in revenue of RMB110 million. The capacity, passenger load factor and yield per RPK of air passenger business during the Reporting Period are as follows:

Air Passenger Revenue Contributed by Geographical Segments

Air Cargo and Mail Revenue

During the Reporting Period, the Group's air cargo and mail revenue was RMB4,191 million, representing an increase of RMB1,361 million as compared with that of the same period of 2019. Among the air cargo and mail revenue, the decrease of capacity resulted in a decrease in revenue of RMB766 million, while the decrease of cargo and mail load factor resulted in a decrease in revenue of RMB294 million, and the increase of yield of cargo and mail contributed an increase in revenue of RMB2,421 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:

Air Cargo and Mail Revenue Contributed by Geographical Segments

Operating Expenses

During the Reporting Period, the Group's operating expenses were RMB38,196 million, representing a decrease of 36.87% from RMB60,502 million in the same period of the previous year. The breakdown of the operating expenses is set out below:

• Jet fuel costs decreased by RMB10,803 million on a year-year basis, mainly due to the combined effect of the decrease in the consumption and prices of jet fuel.

• Take-off, landing and depot charges decreased by RMB4,161 million on a year-on-year basis, mainly due to a decrease in the number of take-offs and landings.

•

• Depreciation and amortisation decreased by RMB338 million on a year-on-year basis, mainly due to the change of depreciation method of the Group's overhaul components of engine from straight-line method to the units-of-production method (see Note 2 to the condensed consolidated financial statements for details).

• Employee compensation costs decreased by RMB1,669 million on a year-on-year basis, mainly due to the decrease in the number of flights, the adjustment of compensation standards and the 50% reduction in social insurance.

• Air catering charges decreased by RMB1,303 million on a year-on-year basis, mainly due to the decrease in the number of passengers.

• Selling and marketing expenses decreased by RMB1,283 million on a year-on-year basis, mainly due to the decrease in handling fees and booking fees resulting from the decrease in the sales volumes and the number of passengers.

• General and administrative expenses decreased by RMB132 million on a year-on-year basis, mainly due to the decrease in bank handling fees and other expenses.

• Other operating expenses mainly included civil aviation development fund and non-above- mentioned ordinary expenses arising from the core air traffic business, which decreased by 52.70% on a year-on-year basis, mainly due to the decrease in transport and the exemption of civil aviation development fund.

Net Exchange Loss and Finance Costs

During the Reporting Period, the Group recorded a net exchange loss of RMB1,019 million, representing a year-on-year increase of RMB900 million. The Group incurred finance costs of RMB2,548 million (excluding those capitalised) during the Reporting Period, representing a year-on-year increase of RMB109 million.

Share of Results of Associates and Joint Ventures

During the Reporting Period, the Group's share of losses of its associates was RMB3,011 million, as compared with the share of profits of RMB146 million for the same period of the previous year. Among them, the Group recorded a loss on investment of Cathay Pacific of RMB2,373 million during the Reporting Period, as compared with the profit on investment of RMB199 million for the same period of the previous year.

During the Reporting Period, the Group's share of profits of its joint ventures was RMB107 million, representing a year-on-year decrease of RMB5 million.

Assets Structure Analysis

As at the end of the Reporting Period, the total assets of the Group were RMB293,591 million, representing a decrease of 0.21% from that as at 31 December 2019. Among them, the current assets accounted for RMB28,470 million or 9.70% of the total assets, while the non-current assets accounted for RMB265,121 million or 90.30% of the total assets.

Among the current assets, cash and cash equivalents were RMB13,443 million, representing an increase of 50.44% from that as at 31 December 2019.

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 RMB216,370 million, representing a decrease of 2.33% from that as at 31 December 2019.

Asset Mortgage

As at the end of the Reporting Period, the Group, pursuant to certain bank loans and finance leasing agreements, had mortgaged certain aircraft and premises with an aggregated net book value of approximately RMB78,851 million (approximately RMB81,724 million as at 31 December 2019) and land use rights with net book value of approximately RMB27 million (approximately RMB27 million as at 31 December 2019). In addition, the Group had restricted bank deposits of approximately RMB664 million (approximately RMB728 million as at 31 December 2019), 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 RMB3,907 million, of which the total investment in aircraft and engines was RMB2,556 million. Other capital expenditure investment amounted to RMB1,351 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 RMB10,930 million, representing a decrease of 25.38% from that as at 31 December 2019, among which, the balance of the equity investment of the Group in Cathay Pacific, Shandong Aviation Group Corporation and Shandong Airlines amounted to RMB9,371 million, RMB886 million and RMB283 million, respectively. Cathay Pacific, Shandong Aviation Group Corporation and Shandong Airlines recorded a net loss attributable to its shareholders of RMB8,924 million, RMB464 million and RMB1,296 million, respectively, for the Reporting Period.

As at the end of the Reporting Period, the Group's equity investment in its joint ventures was RMB1,650 million, representing an increase of 6.92% from that as at 31 December 2019.

Debt Structure Analysis

As at the end of the Reporting Period, the total liabilities of the Group amounted to RMB204,502 million, representing an increase of 6.03% from those as at 31 December 2019, among which current liabilities were RMB93,390 million and non-current liabilities were RMB111,112 million, accounting for 45.67% and 54.33% of the total liabilities, respectively.

Among the current liabilities, interest-bearing debts (including bank and other loans, corporate bonds and lease liabilities) amounted to RMB64,567 million, representing an increase of 76.45% from that as at 31 December 2019, mainly due to the increase of the Group's financing scale to cope with the impact of Covid-19 pandemic and ensure the liquidity safety.

Among the non-current liabilities, interest-bearing debts (including bank and other loans, corporate bonds and lease liabilities) amounted to RMB99,337 million, representing a decrease of 3.73% from that as at 31 December 2019.

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

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, decreased by 2.72% from RMB50,007 million as at 31 December 2019 to RMB48,648 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 RMB3,234 million as at the end of the Reporting Period, as compared to that of RMB24 million as at 31 December 2019, which was mainly attributable to the addition of RMB3,209 million regarding the investment commitment to Cathay Pacific.

Gearing Ratio

As at the end of the Reporting Period, the Group's gearing ratio (total liabilities divided by total assets) was 69.66%, representing an increase of 4.10 percentage points from the gearing ratio as at 31 December 2019. 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 RMB64,920 million, representing an increase of RMB11,765 million from that as at 31 December 2019. The Group's current ratio (current assets divided by current liabilities) was 0.30, representing a decrease as compared to that of 0.32 as at 31 December 2019.

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 outflow from operating activities was RMB10,256 million, as compared to the net cash inflow of RMB13,075 million for the corresponding period in 2019, which was mainly because the sales fell and the number of ticket refunds rose on a year-on-year basis as affected by the Covid-19 pandemic. Net cash outflow from investing activities was RMB7,397 million, representing an increase of 114.06% from RMB3,456 million for the corresponding period in 2019, mainly due to the year-on-year increase in the cash payment of advances and remaining balances for the purchase of aircraft during the Reporting Period. Net cash inflow from financing activities amounted to RMB22,148 million, as compared with the net cash outflow from financing activities of RMB8,703 million for the same period of the previous year, mainly due to the increase of its financing scale to cope with the impact of Covid-19 pandemic and ensure the liquidity safety.

The Company has obtained bank facilities of up to RMB158,648 million granted by several banks in the PRC, among which approximately RMB30,167 million has been utilised. The remaining amount is sufficient to meet our demands on working capital and future capital commitments.

Description on the changes in annual results

As affected by the Covid-19 pandemic across the globe, aviation demand dropped sharply. During this critical period, the Group earnestly performed its social responsibilities and its missions as a national flag carrier by safeguarding the transportation of personnel and materials for the prevention of the pandemic in an effort to maximize the protection for the health and safety of its passengers and employees. The Group grasped the changes in market demand, dynamically optimized the deployment of transport capacity, refined marketing control, optimized yield management, strengthened cost control, and actively sought to increase revenue through flexible adjustment between domestic and international flights, passenger and freight transportation, through resource guarantee mechanisms and other measures, all with an aim to minimize the impact of the pandemic with best efforts. However, in view of the uncertainties of the evolvement of the pandemic and its serious impact on the civil aviation transport industry, it is anticipated that the Group's results from the beginning of the year to the end of next reporting period will be significantly affected.

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 DIVIDEND

No interim dividend will be paid by the Company for the six months ended 30 June 2020.

SUBSEQUENT EVENTS

On 9 June 2020, the Company issued an Irrevocable Undertaking to Cathay Pacific, pursuant to which the Company has irrevocably undertaken to procure each of the Relevant Subsidiaries to take up in full at the Subscription Price of HK$4.68 per Cathay Pacific Rights Share its respective entitlement to Cathay Pacific Rights Shares according to the Cathay Pacific Rights Issue. Cathay Pacific Rights Issue was completed on 10 August 2020 and the Relevant Subsidiaries of the Company have taken up a total of 750,756,347 Cathay Pacific Rights Shares which were allocated to such subsidiaries in the Cathay Pacific Rights Issue.

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.

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.

DISCLOSURE REQUIREMENTS UNDER THE LISTING RULES

In order to comply with the requirements under paragraph 46 of Appendix 16 to the Listing Rules, the Company confirmed that save as disclosed in this announcement, there are no material changes in the current information of the Company in relation to matters as set out in paragraph 46(3) of Appendix 16 to the Listing Rules as compared with relevant disclosures in 2019 annual report of the Company.

REVIEW BY THE AUDIT AND RISK CONTROL COMMITTEE

The audit and risk control committee of the Company has reviewed the Company's interim results for the six months ended 30 June 2020, the Company's unaudited interim condensed consolidated financial statements and the accounting policies and practices adopted by the Group.

GLOSSARY OF TECHNICAL TERMS

DEFINITIONS

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