SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

 

 

FORM 6-K

 

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

September 17, 2021

 

 

CHINA SOUTHERN AIRLINES COMPANY LIMITED

 

 

68 Qi Xin Road

Guangzhou, 510403

People’s Republic of China

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  ☒    Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):                    

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):                    

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ☐    No  ☒

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):   N/A  

 

 

 


China Southern Airlines Company Limited (the “Company”) published the following announcements on September 16, 2021 on the Hong Kong Stock Exchange’s website at:

https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0916/2021091600802.pdf, in relation to the interim report 2021; and

https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0916/2021091600716.pdf, in relation to the notification letter.

The announcements in English are included as exhibits to this Form 6-K.

Certain statements contained in these announcements may be viewed as “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial condition or results of operations of the Company to be materially different from any future performance, financial condition or results of operations implied by such forward-looking statements. Further information regarding these risks, uncertainties and other factors is included in the Company’s filings with the U.S. Securities and Exchange Commission. You should not place undue reliance on these forward-looking statements. All information provided in these announcements is as of the date of these announcements, unless otherwise stated, and we undertake no duty to update such information, except as required under applicable law.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CHINA SOUTHERN AIRLINES COMPANY LIMITED

By: /s/ Xie Bing    

Name: Xie Bing

Title: Company Secretary

Date: September 17, 2021


EX-99.1

Exhibit 99.1

Corporate Mission

Connecting around the world for a prosperous life

Corporate Vision

Building a world-class air transport enterprise with global competitiveness

Core Value

CSAIR (Customer, Staff, Advantage, Innovation, Return)


Contents

 

About Us

4

  Important Information

5

  Definitions

7

  Company Information

Operating Results

12

  Principal Accounting Information and Financial Indicators

20

  Management Discussion and Analysis

Corporate Governance

38

  Corporate Governance

41

  Environmental and Social Responsibility

46

  Important Matters

62

  Changes in the Share Capital, Shareholders’ Profile and Disclosure of Interests

68

  Related Information of Bonds

Financial Report

76

  Review Report

77

  Interim Financial Report


Adhering to five concepts of development,

namely safety, high quality, innovation, cooperation and sharing development.


Important Information

 

I.

The board of directors (the “Board”) and the supervisory committee (the “Supervisory Committee”) of the Company and its directors (the “Directors”), supervisors (the “Supervisors”) and senior management warrant the truthfulness, accuracy and completeness of the content contained in this interim report, and the report does not contain inaccurate or misleading statements or have any material omission, and jointly and severally accept full legal responsibility.

 

II.

This report was considered and approved at the second meeting of the ninth session of the Board on 27 August 2021. 6 Directors were required to attend the meeting and 6 of them attended in person.

 

III.

The unaudited financial statements contained in this interim report of the Company have been prepared in accordance with the applicable disclosure provisions of the Listing Rules, including compliance with International Accounting Standard 34, Interim financial reporting, issued by the International Accounting Standards Board.

 

IV.

Mr. Ma Xu Lun (Chairman and the responsible person of the Company), Mr. Han Wen Sheng (the responsible person of accounting, Vice Chairman and President of the Company), Mr. Yao Yong (the responsible person of the accounting department, Executive Vice President, Chief Accountant and Chief Financial Officer of the Company) warrant the truthfulness, accuracy and completeness of the financial statements contained in this interim report.

 

V.

Forward-looking statements included in this report, including future plans and development strategies, do not constitute a guarantee of the Company to investors. Investors are advised to be aware of the risks of investment.

 

VI.

During the reporting period, neither the controlling shareholder of the Company, nor any of its connected persons has occupied the non-operating funds of the Company.

 

VII.

During the reporting period, the Company did not provide external guarantees in violation of any specified decision-making procedures.

 

VIII.

The Company has stated in details the possible risks in this report. Investors are advised to refer to the section headed “Management Discussion and Analysis – Potential Risk”.


Definitions

Unless the context otherwise requires, the terms below should have the following meanings in this report:

 

Company, CSA, China Southern Airlines

   China Southern Airlines Company Limited

Group

   China Southern Airlines Company Limited and its subsidiaries

CSAH

   China Southern Air Holding Company Limited

Xiamen Airlines

   Xiamen Airlines Company Limited

Guizhou Airlines

   Guizhou Airlines Company Limited

Zhuhai Airlines

   Zhuhai Airlines Company Limited

Shantou Airlines

   Shantou Airlines Company Limited

Chongqing Airlines

   Chongqing Airlines Company Limited

Henan Airlines

   China Southern Airlines Henan Airlines Company Limited

Hebei Airlines

   Hebei Airlines Company Limited

Jiangxi Airlines

   Jiangxi Airlines Company Limited

Finance Company

   China Southern Airlines Group Finance Company Limited

CSA Logistics

   China Southern Air Logistic Company Limited

Nan Lung

   Nan Lung Holding Limited

SACM

   Southern Airlines Culture and Media Co., Ltd.

SPV

   Special Purpose Vehicles exclusively set up by China Southern Airlines and its subsidiaries for leased aircraft

American Airlines

   American Airlines, Inc.

Sichuan Airlines

   Sichuan Airlines Corporation Limited

PRC

   The People’s Republic of China

CSRC

   China Securities Regulatory Commission

NDRC

   National Development and Reform Commission

CAAC

   Civil Aviation Administration of China

Daxing Airport

   Beijing Daxing International Airport

SSE

   Shanghai Stock Exchange

Stock Exchange

   The Stock Exchange of Hong Kong Limited

Articles of Association

   Articles of Association of China Southern Airlines Company Limited


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 as set out in Appendix 10 to the Listing Rules

Corporate Governance Code

   Corporate Governance Code as set out in Appendix 14 to the Listing Rules

SFO

   Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong)

Available Seat Kilometers or “ASK”

   the number of seats made available for sale multiplied by the kilometers flown

Available Tonne Kilometers or “ATK”

   the tonnes of capacity available for the transportation multiplied by the kilometers flown

Available Tonne Kilometers – passenger

   the tonnes of capacity available for passenger multiplied by the kilometers flown

Available Tonne Kilometers – cargo

   the tonnes of capacity available for cargo and mails multiplied by the kilometers flown

Revenue Passenger Kilometers or “RPK”

   i.e. passengers traffic volume, the number of passengers carried multiplied by the kilometers flown

Revenue Tonne Kilometers or “RTK”

   i.e. total traffic volume, the load (passengers, cargo and mail) in tonnes multiplied by the kilometers flown

Revenue Tonne Kilometers – cargo or “RFTK”

   i.e. cargo and mail traffic volume, the load for cargo and mail in tonnes multiplied by the kilometers flown

Revenue Tonne Kilometers – passenger

   the load for passenger in tonnes multiplied by the kilometers flown

Passenger Load Factor

   RPK expressed as a percentage of ASK

Overall Load Factor

   RTK expressed as a percentage of ATK

Yield per RPK

   revenue from passenger operations divided by RPK

Yield per RFTK

   revenue from cargo and mail operations divided by RFTK

Yield per RTK

   revenue divided by RTK

Operating expenses per ATK

   total operating expenses divided by ATK


Company Information

 

Chinese Name:

   中國南方航空股份有限公司

Chinese Short Name:

   南方航空

English Name:

   China Southern Airlines Company Limited

English Short Name:

   CSN

Legal Representative:

   Ma Xu Lun

Board and Company Secretary:

   Xie Bing

Securities Affairs Representative:

   Xu Yang

Shareholder Enquiry:

   The Board Office of the Company

Telephone:

   +86-20-86112480

Fax:

   +86-20-86659040

E-mail:

   ir@csair.com

Address:

   China Southern Air Building, 68 Qixin Road, Baiyun District, Guangzhou, Guangdong Province, PRC

Registered Address:

   Unit 301, 3/F, Office Tower Guanhao Science Park Phase I, 12 Yuyan Street, Huangpu District, Guangzhou, Guangdong Province, PRC

APP:

   China Southern Airlines

WeChat Official Account:

   China Southern Airlines

WeChat QR Code:

   LOGO


Sina Weibo:

   http://weibo.com/csair

Place of Business:

   China Southern Air Building, 68 Qixin Road, Baiyun District, Guangzhou, Guangdong Province, PRC

Place of Business in Hong Kong:

   Unit B1, 9th Floor, United Centre, 95 Queensway, Hong Kong

Website of the Company:

   www.csair.com

Authorised Representative under the Listing Rules:

  

Ma Xu Lun

Xie Bing

Controlling Shareholder:

   China Southern Air Holding Company Limited

Principal Bankers:

   China Development Bank
   The Export-Import Bank of China
   Bank of China
   Agricultural Bank of China
   China Construction Bank

Designated Newspapers for Information Disclosure (A Shares):

   China Securities Journal, Shanghai Securities News, Securities Times

Designated Website for Information Disclosure (A Shares):

   www.sse.com.cn

Designated Website for Information Disclosure (H Shares):

   www.hkexnews.hk

Interim Report Available for Inspection:

   The Board Office of the Company

Place of Listing of A Shares:

   Shanghai Stock Exchange

Short Name of A Shares:

   南方航空

Stock Code of A Shares:

   600029

A Share Registrar:

   China Securities Depository and Clearing Corporation Limited Shanghai Branch Floor 36, China Insurance Building, 166 Lu Jia Zui East Road, Shanghai, PRC


Place of Listing of H Shares:

   The Stock Exchange of Hong Kong Limited

Short Name of H Shares:

   CHINA SOUTH AIR

Stock Code of H Shares:

   01055

H Share Registrar:

   Hong Kong Registrars Limited
   17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong

Place of Listing of N Shares:

   New York Stock Exchange

Short Name of N Shares:

   China Southern Air

Stock Code of N Shares:

   ZNH

N Share Registrar:

   BNY Mellon Shareowner Services
   P.O.Box 505000,
   Louisville KY40233-5000, USA

Domestic Legal Adviser:

   Beijing Dentons Law Offices, LLP (Guangzhou)

Overseas Legal Adviser:

   Jingtian & Gongcheng LLP

Domestic Auditors:

   KPMG Huazhen LLP

Address of Domestic Auditors:

   8th Floor, KPMG Tower, Oriental Plaza, 1 East Chang An Avenue,
Beijing, China

Overseas Auditors:

   KPMG (Public Interest Entity Auditor registered in accordance with the
Financial Reporting Council Ordinance)

Address of Overseas Auditors:

   8th Floor, Prince’s Building, 10 Chater Road, Central, Hong Kong


Implementing five strategies,

namely hub network, ecosystem, innovation-driven, lean management and control, and brand management.


Principal Accounting Information and Financial Indicators

I.

PRINCIPAL ACCOUNTING INFORMATION AND FINANCIAL INDICATORS

OF THE GROUP AS AT THE END OF THE REPORTING PERIOD

(I) Principal Accounting Information

Unit: RMB million

 

Principal Accounting Information

   January to
June 2021
     January to
June 2020
     Increase/
(decrease)%
 

Operating revenue

     51,576        38,964        32.37  

Loss attributable to equity shareholders of the Company

     (4,690      (8,179      (42.66

Net cash flow generated from/(used in) operating activities

     4,940        (7,832      163.07  

 

Principal Accounting Figures

   30 June
2021
     31 December
2020
     Increase/
(decrease)%
 

Total equity attributable to equity shareholders of the Company

     75,287        69,584        8.20  

Total assets

     327,084        326,383        0.21  

(II) Principal Financial Indicators

 

Principal Financial Indicators

   January to June
2021
     January to
June 2020
     Increase/
(decrease)%
 

Basic loss per share (RMB/share)

     (0.30      (0.64      (53.13

Diluted loss per share (RMB/share)

     (0.30      (0.64      (53.13


II.

DIFFERENCE ON THE ACCOUNTING INFORMATION BETWEEN THE PRC ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISE (“PRC GAAP”) AND INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”)

(I) Difference in Net Loss and Equity Attributable to

Equity Shareholders of the Company under Consolidated Financial Information

in Financial Statements Between PRC GAAP and IFRSs

Unit: RMB million

 

     Net loss attributable to
equity shareholders
of the Company
     Equity attributable to
equity shareholders of
the Company
 
     January to
June 2021
     January to
June 2020
     30 June
2021
     31 December
2020
 

Amounts under PRC GAAP

     (4,688      (8,174      75,051        69,346  

Adjustments:

           

Capitalisation of exchange difference of specific loans (a)

     (4      (8      43        47  

Government grants (b)

     —          —          (6      (6

Adjustment arising from the Company’s business combination under common control (c)

     —          —          237        237  

Income tax effect of the above adjustments

     1        2        (9      (10

Effect of the above adjustments on non-controlling interests

     1        1        (29      (30
  

 

 

    

 

 

    

 

 

    

 

 

 

Amounts under IFRSs

     (4,690      (8,179      75,287        69,584  
  

 

 

    

 

 

    

 

 

    

 

 

 


(II) Reconciliation of Differences in Interim Financial Report Prepared under Different GAAPS

 

(a)

In accordance with the PRC GAAP, exchange difference arising on translation of specific loans and related interest denominated in a foreign currency is capitalised as part of the cost of qualifying assets. Under IFRSs, such exchange difference should be recognised in income statement unless the exchange difference represents an adjustment to interest.

 

(b)

In accordance with the PRC GAAP, assets related government grants (other than special funds) are deducted from the cost of the related assets. Special funds granted by the government and clearly defined in the approval documents as part of “capital reserve” are accounted for as increase in capital reserve. Under IFRSs, assets related government grants are deducted to the cost of the related assets. The difference is resulted from government grants received in previous years and are recognised in capital reserve under PRC GAAP.

 

(c)

In accordance with the PRC GAAP, the Company accounts for the business combination under common control by applying the pooling-of-interest method. Under the pooling-of-interest method, the difference between the historical carrying amount of the acquiree and the consideration paid is accounted for as an equity transaction. Business combinations under common control are accounted for as if the acquisition had occurred at the beginning of the earliest comparative year presented or, if later, at the date that common control was established; for this purpose, relevant comparative figures are restated under PRC GAAP. Under IFRSs, the Company adopts the purchase accounting method for acquisition of business under common control.

III.

MAJOR CHARGES ON ASSETS, COMMITMENTS

AND CONTINGENT LIABILITIES

As at 30 June 2021, the Group had capital commitments (exclusive of investment commitments) of approximately RMB60,828 million (as at 31 December 2020: RMB66,996 million). Of such amounts, RMB50,481 million was for acquisition of aircraft and related flight equipment and RMB10,347 million was for other property, plant and equipment.

Details of contingent liabilities of the Group are set out in Note 22 to the interim financial report prepared under International Accounting Standard 34.

As of 30 June 2021, the Group had no property, plant or equipment as collateral for borrowings (31 December 2020: Nil).


IV.

SUMMARY OF OPERATING DATA

 

     For the six months ended 30 June         
     2021      2020      Increase/
(decrease)%
 

Traffic

        

Revenue passenger kilometers (RPK) (million)

        

Domestic

     82,139.76        47,270.85        73.76  

Hong Kong, Macau and Taiwan

     100.13        184.63        (45.77

International

     1,979.39        10,421.29        (81.01

Total:

     84,219.28        57,876.77        45.51  
  

 

 

    

 

 

    

 

 

 

Revenue tonne kilometers (RTK) (million)

        

Domestic

     7,929.80        4,748.21        67.01  

Hong Kong, Macau and Taiwan

     15.49        20.82        (25.59

International

     3,528.44        3,619.73        (2.52

Total:

     11,473.74        8,388.76        36.78  
  

 

 

    

 

 

    

 

 

 

RTK – Passenger (million)

        

Domestic

     7,290.13        4,160.70        75.21  

Hong Kong, Macau and Taiwan

     8.88        16.09        (44.80

International

     175.92        903.98        (80.54

Total:

     7,474.93        5,080.76        47.12  
  

 

 

    

 

 

    

 

 

 

RTK – Cargo (million)

        

Domestic

     639.67        587.52        8.88  

Hong Kong, Macau and Taiwan

     6.61        4.74        39.64  

International

     3,352.53        2,715.75        23.45  

Total:

     3,998.81        3,308.00        20.88  
  

 

 

    

 

 

    

 

 

 

Passengers carried (thousand)

        

Domestic

     54,294.54        31,262.46        73.67  

Hong Kong, Macau and Taiwan

     95.90        161.45        (40.60

International

     334.78        2,301.63        (85.45

Total:

     54,725.22        33,725.54        62.27  
  

 

 

    

 

 

    

 

 

 


     For the six months ended 30 June         
     2021      2020      Increase/
(decrease)%
 

Cargo and mail carried (thousand tonnes)

        

Domestic

     386.41        356.94        8.26  

Hong Kong, Macau and Taiwan

     6.70        4.51        48.63  

International

     346.24        299.89        15.46  

Total:

     739.35        661.34        11.80  
  

 

 

    

 

 

    

 

 

 

Capacity

        

Available seat kilometres (ASK) (million)

        

Domestic

     109,769.63        69,932.13        56.97  

Hong Kong, Macau and Taiwan

     293.70        376.84        (22.06

International

     4,243.81        15,427.37        (72.49

Total:

     114,307.14        85,736.34        33.32  
  

 

 

    

 

 

    

 

 

 

Available tonne kilometres (ATK) (million)

        

Domestic

     12,589.36        7,813.14        61.13  

Hong Kong, Macau and Taiwan

     38.05        47.99        (20.71

International

     5,233.46        6,262.02        (16.43

Total:

     17,860.87        14,123.16        26.47  
  

 

 

    

 

 

    

 

 

 

ATK – Passenger Traffic (million)

        

Domestic

     9,879.27        6,293.89        56.97  

Hong Kong, Macau and Taiwan

     26.43        33.92        (22.06

International

     381.94        1,388.46        (72.49

Total:

     10,287.64        7,716.27        33.32  
  

 

 

    

 

 

    

 

 

 

ATK – Cargo (million)

        

Domestic

     2,710.09        1,519.25        78.38  

Hong Kong, Macau and Taiwan

     11.62        14.07        (17.46

International

     4,851.51        4,873.56        (0.45

Total:

     7,573.23        6,406.89        18.20  
  

 

 

    

 

 

    

 

 

 


     For the six months ended 30 June         
     2021      2020      Increase/
(decrease)
percentage
point
 

Load factor

        

Passenger load factor (RPK/ASK) (%)

        

Domestic

     74.83        67.60        7.23  

Hong Kong, Macau and Taiwan

     34.09        48.99        (14.90

International

     46.64        67.55        (20.91

Average:

     73.68        67.51        6.17  
  

 

 

    

 

 

    

 

 

 

Total load factor (RTK/ATK) (%)

        

Domestic

     62.99        60.77        2.22  

Hong Kong, Macau and Taiwan

     40.72        43.39        (2.67

International

     67.42        57.80        9.62  

Average:

     64.24        59.40        4.84  
  

 

 

    

 

 

    

 

 

 

Yield

                 Increase/
(decrease)%
 

Yield per RPK (RMB)

        

Domestic

     0.45        0.44        2.27  

Hong Kong, Macau and Taiwan

     1.40        0.94        48.94  

International

     1.48        0.75        97.33  

Average:

     0.47        0.50        (6.00
  

 

 

    

 

 

    

 

 

 

Yield per RFTK (RMB)

        

Domestic

     1.37        1.41        (2.84

Hong Kong, Macau and Taiwan

     11.35        10.13        12.04  

International

     2.36        2.50        (5.60

Average:

     2.22        2.32        (4.31
  

 

 

    

 

 

    

 

 

 

Yield per RTK (RMB)

        

Domestic

     4.73        4.55        3.96  

Hong Kong, Macau and Taiwan

     13.88        10.66        30.21  

International

     3.07        4.05        (24.20

Average:

     4.23        4.35        (2.76
  

 

 

    

 

 

    

 

 

 


     For the six months ended 30 June         
     2021      2020      Increase/
(decrease)%
 

Cost

        

Operating expenses per ATK (RMB)

     3.16        3.37        (6.23

Flight Volume

        

Kilometers flown (million)

     699.91        528.37        32.47  

Hours flown (thousand)

        

Domestic

     1,037.25        672.40        54.26  

Hong Kong, Macau and Taiwan

     2.44        3.47        (29.55

International

     88.55        146.07        (39.38

Total:

     1,128.24        821.94        37.27  
  

 

 

    

 

 

    

 

 

 

Number of flights (thousand)

        

Domestic

     439.35        288.12        52.49  

Hong Kong, Macau and Taiwan

     1.47        1.86        (21.27

International

     9.90        23.45        (57.79

Total:

     450.72        313.44        43.80  
  

 

 

    

 

 

    

 

 

 

 

Note:

Discrepancies between the column sum are due to rounding of percentage numbers.


V.

SUMMARY OF FLEET DATA

As at 30 June 2021, the scale and structure of fleet, the age of aircraft and the delivery and disposal of aircraft of the Group were as follows:

Unit: number of aircraft

 

Models

   Number of
aircraft
purchased
     Number of
aircraft under
finance
lease
     Number of
aircraft under
operating
lease
     Age of aircraft
(year)
     Delivery
during the
reporting
period
     Disposal
during the
reporting
period
     Total number
of aircraft at
the end of the
reporting
period
 

Passenger Aircraft

                    

A380 Series

     4        1        0        9.2        0        0        5  

A350 Series

     4        6        0        1.2        2        0        10  

A330 Series

     4        29        8        7.6        0        4        41  

A320 Series

     109        99        123        7.8        7        1        331  

B787 Series

     4        25        10        4.5        2        0        39  

B777 Series

     1        14        0        4.7        0        0        15  

B737 Series

     159        74        166        7.9        0        2        399  

EMB190

     6        0        0        8.4        0        3        6  

ARJ21

     3        4        0        0.8        1        0        7  

Freighter

                    

B777 Series

     7        7        0        7.7        0        0        14  

B747 Series

     2        0        0        18.9        0        0        2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     303        259        307        7.6        12        10        869  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As at 30 June 2021, the current information in relation to the capital expenditure plan and relevant financing plan for aircraft and related equipment has not changed materially from the information disclosed in the 2020 annual report of the Company.


Management Discussion and Analysis

During the reporting period, faced with a complex and severe situation, the Group resolutely implemented the decisions and deployments of the central government, continued pandemic prevention and control, firmly guard the safety bottom line, actively responded to market changes, strengthened lean cost control, promoted and implemented reforms and development, and improved the quality of operation services.

I.

THE COMPANY’S INDUSTRY AND PRINCIPAL BUSINESS

(I) Principal Business

The scope of business of the Company covers: (1) provision of scheduled and non-scheduled domestic, regional and international air transportation services for passengers, cargo, mail and luggage; (2) provision of general aviation services; (3) provision of aircraft repair and maintenance services; (4) acting as agent for other domestic and international airlines; (5) provision of air catering services (operated by branch office only); (6) engaging in other airline or airline-related business, including advertising for such businesses; (7) engaging in other aviation businesses and related businesses (limited to insurance agency business of personal accident insurance); provision of airline ground services; civil aircraft training (operated by branch office with proper licence); asset leasing services; project management and technical consultancy services; sales of aviation equipment; travel agency business; merchandise retail and wholesale; health and medical examination services. (For all projects subject to approval in accordance with laws, the business activities can only be carried out after obtaining approval from relevant authorities in accordance with the laws.)


(II) Operating Model

The Company, based on the strategic framework of “three-two-four-five-three” with regards to the building of an world-class air transport enterprise and guided by the development goals of the “14th Five-Year Plan” and the Long-Range Objectives Through the Year 2035, further focuses on quality and efficiency, and has determined the overarching approach for quality development featuring “adhering to five concepts of development, implementing five strategies, promoting six campaigns, and achieving six transformations”.

The Company adheres to the “five development” concepts of safety, high quality, innovation, cooperation and sharing; focuses on the “five strategies” in relation to hub network, ecosystem, innovation-driven, lean management and control, and brand management; carries out “six campaigns” on promoting safety production, grasping major strategic opportunities, deepening reforms in key areas, enhancing management to first class, optimizing and adjusting five major structures, improving service quality; and strives for “six transformations” from speed-oriented to quality-oriented, from comprehensive market expansion to exploring key areas, from a relatively single industry to high relevance and diversified industries, from planning management and control to market operation, from the traditional business model to digitalization and ecological circle, and from extensive management to refined management.


(III) Industry Summary

During the reporting period, the coronavirus disease pandemic (COVID-19) still had a huge impact on the recovery of the global aviation industry. As the pandemic was effectively prevented and controlled in China and the macro economy further recovered, the recovery of China’s civil aviation industry gained momentum. During the reporting period, the total transportation turnover volume, passenger transportation volume and cargo and mail transportation volume of China’s civil aviation were 46.5 billion ton-kilometers, 245 million passengers and 3.743 million tons, respectively, representing a recovery as to 74.1%, 76.2%, and 106.4% of the same period in 2019. The number of passengers carried on domestic routes in the second quarter returned to the level before the pandemic.

II.

ANALYSIS ON THE CORE COMPETITIVENESS

The Group’s five core competitive strengths have begun to take shape, including its powerful and well-rounded advantages of scale and network, its hub operations and management capability with Guangzhou and Beijing being the core hubs, its capabilities to achieve synergy of resources through a combination of integrated operation management and matrix management, its powerful influence associated with high quality and well-branded service and its comprehensive and leading information technology level.

During the reporting period, the Group, as the largest main base airline at Daxing Airport, operated an average of over 400 planned flights per day, reaching more than 40 domestic destinations and taking up 45% of all the time slots. Through the connection with ground transportation, it has formed an airline network that covers the Beijing-Tianjin-Hebei region and the Xiong’an New Area and that connects both domestic and international routes. In the future, we will continue to focus on building the two comprehensive international hubs in Guangzhou and Beijing to form a new development layout with Guangzhou Hub in the south and Beijing Hub in the north as double wings with excellence.

III.

DISCUSSION AND ANALYSIS OF OPERATING CONDITIONS

DURING THE REPORTING PERIOD

During the reporting period, the global economy gradually stabilized, but the recovery process diverged amid high uncertainties. The global vaccination experienced divergent progress and COVID-19 continue to mutate and spread, which brought downward risks to the recovery of the world economy. According to the forecast of the International Monetary Fund, the global economy was projected to grow by 6% in 2021, with a growth rate of 5.6% for developed economies, and 6.3% for emerging markets and developing economies.


China coordinated the overall domestic situations with international situations, balanced pandemic prevention and control with economic and social development, and implemented effective macroeconomic policies. In the first half of the year, the domestic GDP increased by 12.7% year-on-year, and the import and export trade volume increased by 27.1% year-on-year. The economy continued to recover steadily and make progress. According the World Economic Outlook Report of the International Monetary Fund, the growth rate of China’s economy in 2021 was expected to reach 8.1%.

During the reporting period, the global aviation industry exhibits divergent recovery. While the domestic markets of various countries recovered rapidly and the global air cargo market maintained rapid growth, the international passenger transportion market remained sluggish. Faced with a complex and severe situation, the Group resolutely implemented the decisions and deployments of the central government, continued pandemic prevention and control, firmly guard the safety bottom line, actively responded to market changes, strengthened lean cost control, promoted and implemented reforms and development, and improved the quality of operation services.

1. Pandemic Prevention and Control

During the reporting period, the Group strived to perform its responsibilities for pandemic prevention and control and continued its efforts in this regard. We continued to improve the mechanism for pandemic prevention and control, and formulated relevant guidelines and the treatment plan for employee with positive result in nucleic acid testing. We properly responded to local pandemic in China, upgraded prevention and control measures in a timely manner, and reduced conference and travel activities to decrease the flow of people. We spared no effort to ensure the overall control of passengers, and formulated special response plans for the risk of pandemic imported from abroad. We continued to strengthen employee protection, organized multiple rounds of nucleic acid testing for all employees, and promoted full coverage of vaccination. During the reporting period, the Group continued to maintain zero infection among passengers on board in international and domestic flights, and zero infection among all employees at work.


2. Safety Management

During the reporting period, the Group firmly guard the safety bottom line and continued to strengthen the construction of seven safety systems. We carried out a special three-year campaign to improve safety production, the “100-day campaign”, the “campaign of clearing hidden problems” and other activities for management and control of safe operation risk. We continued to strengthen the construction of the seven safety systems, and independently built an emergency management platform to conduct safety supervision and qualification checks on key joints. We also rectified the style of work of aircrew, and conducted “three awes” publicity and education in various forms. Technical means were applied to identify the work style issues. During the reporting period, the Group achieved safe flight of 1.128 million hours, secured aviation safety in 260 consecutive months and aviation security in 325 consecutive months, taking a lead in safety level within the civil aviation industry of China.

3. Management Response

During the reporting period, the Group proactively formulated response plans based on the development of the pandemic and changes in market. We formulated a proactive passenger transportion marketing strategy to seize opportunities in the domestic market by improving accuracy of capacity allocation, strengthening the management and control of price of international routes, and adjusting the capacity allocation in a timely manner. We continued to strengthen our customer base, and engaged 6.37 million new members and 2,902 new group customers, representing an increase of 62.2% and 119.8% as compared with the same period of last year, respectively. Meanwhile, we continued to seize the opportunity to increase freight revenue by further improving the utilization rate of freighters, converting 4,240 passenger flights to freight flights, and launching six major freight products. During the reporting period, the cargo and mail revenue was RMB8.866 billion.


4. Lean Control

During the reporting period, the Group pressed ahead the establishment of a comprehensive market-based accounting system, and took multiple measures to strengthen cost control. We promoted the construction of market-based accounting system in an all-round way, and carried out value creation accounting in secondary departments and branch companies. We vigorously advanced the lean cost management special activities, strictly controlled the scale of investment, and strove for preferential policies in taxation and aircraft sublease. We worked hard to expand low-cost financing channels, and issued tranches of ultra-short-term financing bills. We focused on improving fund management to enhance the centralized level of funds on a continuous basis. We innovated financing methods by applying bonded leasing of aircraft and low-interest overseas payment. We actively invigorated the real estate and continuously improved asset utilization efficiency of the Company.

5. Operation Service

During the reporting period, the Group continued to promote the integrated operation and offered “affinity and refinement” service. We kept optimizing the operation system, built and improved systems such as flight pre-management system and operation rewards and penalties system so as to further regulate the flight guarantee mechanism. We continued to increase resource investment, completed the upgrade and transformation of the headquarters’ centralized operation platform, and built a video collaboration platform for centralized operation in the headquarters and its domiciled place. In terms of services, we continued to build the service standard system, by establishing a cabin service standard committee and an air service standard research and development center further revising and improving service standards, and participating in the stipulation of industry service standards. We promoted special services such as services branded as “baggage home” (行李到家) and “food of CSA” (食尚南航), and continued our efforts in the research and development and design of meal products. During the reporting period, the flight on-time rate and accountability of fleet release of the Group remained taking leading position among three major Chinese airlines. The Company was awarded the Best Airline Award by CARNOC.com.

6. Reform and Development

During the reporting period, the Group clarified its mid-and-long-term development strategy and accelerated reforms in key areas. We established the overall principle of high-quality development of CSA, and prepared the development plan for the period of the “14th Five-Year Plan” and supporting special plans. We coordinated and promoted major strategies with key reform tasks, implemented the three-year action plan to deepen reforms, and launched a campaign to improve management to first class of the world. Initial results were achieved in the adjustment and optimization of five major structures. We promoted the Beijing hub to start with high-quality, and developed six express routes among Guangzhou-Shenzhen-Chengdu, increased market control in the Greater Bay Area, achieved increase in integrated mutual ticket sales by 356% on a year-on-year basis, marking breakthroughs in business ecosystem construction. We established the “ticket +” platform, realized increase in introduced products by 99% on a year-on-year basis, and expanded 15 online cooperation channels.


Business Plans for the Second Half of 2021

The World Bank predicts that the global economy will grow by 5.6% in 2021, maintaining optimistic expectations for global economic recovery. However, as the global pandemic continues evolving, coupled with uneven progress in vaccination globally and the constant mutation of the virus, the external environment would remain complex and severe. Upholding the underlying principle of pursuing progress while ensuring stability, China implements new development philosophy, deepens supply-side structural reforms, accelerates the building of a new development paradigm, and advances high-quality development.

Looking into the future, the pandemic remains the biggest uncertain factor affecting the recovery of the air transportion industry. According to International Air Transport Association, with the widespread vaccination globally and the recovery of global economy, there would be increasing optimism in the prospect of the industry, and the global passenger traffic is expected to gradually recover in the next three years, with a prospect to exceed the level before the pandemic in 2023.

Facing opportunities and challenges, the Group will strengthen its confidence in development, carry out the decision and deployment of the central government, and implement various work of pandemic prevention and control. It will firmly guard the safety bottom line, improve operating quality and operation service, and promote reform and innovation so as to gain new momentum for subsequent development.

1. Ensure Safety, Stability and Controllability

The Group will firmly guard the safety bottom line, and continuously improve safety quality. We will press ahead the building of seven major safety systems, integrate system building into daily safety management, and strengthen the entire process management of safety officer to comprehensively improve the level of safety management. We will further advance the special three-year campaign to improve safety production, carry out special campaigns to improve the performance in three aspects, namely violation of SOP, construction work noncompliance with the manual and work card, and safety supervision of ground agent, as means to improve work style on safety. We will enhance the management of hidden risks, consolidate and improve the analysis and control mechanism for safety risks, and dynamically manage the “two lists” of hidden dangers and institutional measures to resolutely eliminate such dangers. We will strengthen the qualification and capability building, use safety data to identify drawbacks, carry out pin-pointing training, and establish a retroactive investigation mechanism for safety training responsibility. The Group will keep ensuring aviation safety throughout 2021.


2. Strive to Improve Operating Quality

The Group will adjust its marketing strategy with flexibility, continue to seize opportunities in freight transportation, and take multiple measures to reduce costs and increase efficiency as a way to strive for better operating results. In terms of passenger transportation, we will match capacity input with market and price in accordance with the development of the pandemic and changes in market. We will coordinate capacity with time slot resources, continue to expand hubs and strategic key markets. The revenue strategies will be further optimized and the building of revenue system will be reinforced so as to continuously improve the quality of revenue. In terms of cargo transportion, we will proactively seize opportunities in the freight market, efficiently uitilise the volume of belly-hold, and strengthen the key account development. We will improve the assessment mechanism and carry forward conversion from passenger flights to freighters, promote internal and external cooperation in the industry, enhance supply chain management capability, and vigorously expand high value-added services such as the cold chain and express freight. We will strengthen the cargo operation of Daxing Airport to fully increase the cargo and mail throughput. We will constantly strive for excellence in respect of cost control and further make efforts on the special project of “golden idea makes benefits” to increase revenue and reduce expenditure.

3. Implement Strategies and Intensify Reforms

The Group will actively implement development strategies and continuously intensify efforts in reforms. We will actively promote the building of customer development and operation system to continuously strengthen customer base. Enhanced efforts will be made in hub construction to secure the initial operation of Daxing Airport. Actions will be taken to optimize the route network and product system to enhance the market control in the Greater Bay Area as a way to expedite the “four integrations” both in scope and in depth. We will continue the building of business ecosystem and formulate a five-year plan in this regard. This plan will focus on breakthroughs in platform building, one-stop solutions, and the use of membership reward points. We will accelerate the deployment in Hainan Free Trade Port and actively strive for policies support to promote the landing of the industrial sector. We will focus on promoting reforms, improve the assessment mechanism, and implement contractual management of the tenure system in a wider scope. We will steadily advance the adjustment and optimization of the five major structures, and work hard for greater results as soon as possible.

4. Continue to Improve the Service Brand

The Group will continue to improve operating efficiency and service quality. We will continue to improve the operating management and control capability of the headquarters, and take full leverage on the centralized operation in the domiciled place to achieve “intelligent operation”. We will carry out a special campaign to improve flight on-time performance to solidify the advantage of on-time flights. We will further promote the construction of integrated services, optimize the service management and control model so as to implement the affinity and refinement brand positioning at all levels of service, and enable air and ground crews to fully grasp skills of “affinity and refinement” service. We will formulate a special plan of CSA brand building during the period of the “14th Five-Year Plan” to deepen brand management strategies.


Facing opportunities and challenges, the Group will strengthen its confidence in development, carry out the decision and deployment of the central government, and implement various work of pandemic prevention and control. It will firmly guard the safety bottom line, improve operating quality and operation service, and promote reform and innovation so as to gain new momentum for subsequent development.

IV.

MAJOR INFORMATION OF OPERATIONS DURING THE RPORTING PERIOD

(I) Analysis on Changes in Financial Statements Related Items

Unit: RMB million

 

Items

   January to
June 2021
     January to
June 2020
     Increase/
(decrease)%
 

Operating revenue

     51,576        38,964        32.37  

Operating expenses

     56,465        47,568        18.70  

Net cash generated from/(used in) operating activities

     4,940        (7,832      163.07  

Net cash used in investing activities

     (6,436      (3,122      106.15  

Net cash generated from financing activities

     1,049        26,468        (96.04


(II) Operational Revenues Analysis

In the first half of 2021, the Group recorded operating revenue of RMB51,576 million, representing an increase of 32.37% as compared to the corresponding period of 2020. Among which, traffic revenue was RMB48,557 million, representing an increase of 33.18% as compared to the corresponding period of 2020, mainly due to the increase in passenger revenue. Passenger revenue increased in line with the increase of traffic volume, when COVID-19 pandemic was effectively prevented and controlled in China and the recovery of China’s civil aviation industry gained momentum during the reporting period. Cargo and mail revenue was RMB8,866 million, representing an increase of 15.64% as compared to the same period of 2020, mainly resulted from the increase in demand for freight, especially international freight, due to the impact of COVID-19 pandemic. Revenue from other businesses was RMB3,019 million, representing an increase of 20.57% as compared to the same period of 2020, mainly due to the increase in cargo handling income and hotel and tour operation income.

Unit: RMB million

 

Items

   January to
June 2021
     January to
June 2020
     Increase/
(decrease)%
 

Traffic revenue

     48,557        36,460        33.18  

Including: Passenger

     39,691        28,793        37.85  

Cargo and mail

     8,866        7,667        15.64  

Revenue from other businesses

     3,019        2,504        20.57  

Total

     51,576        38,964        32.37  
  

 

 

    

 

 

    

 

 

 

Passenger Revenue by Regions

Unit: RMB million

 

Items

   January to
June 2021
     January to
June 2020
     Increase/
(decrease)%
 

Domestic

     36,621        20,769        76.33  

International

     2,930        7,850        (62.68

Hong Kong, Macau and Taiwan

     140        174        (19.54

Total

     39,691        28,793        37.85  
  

 

 

    

 

 

    

 

 

 

Cargo and Mail Revenue by Regions

Unit: RMB million

 

Items

   January to
June 2021
     January to
June 2020
     Increase/
(decrease)%
 

Domestic

     874        827        5.68  

International

     7,917        6,792        16.56  

Hong Kong, Macau and Taiwan

     75        48        56.25  

Total

     8,866        7,667        15.64  
  

 

 

    

 

 

    

 

 

 


(III) Operational Expenses Analysis

 

     January to June 2021      January to June 2020      Increase/
(decrease)
 

Operating expenses

   RMB Million      Percentage (%)      RMB Million      Percentage (%)      (%)  

Flight operation expenses

     22,696        40.19        16,939        35.61        33.99  

Maintenance expenses

     6,054        10.72        5,956        12.52        1.65  

Aircraft and transportation service expenses

     10,438        18.49        7,631        16.04        36.78  

Promotion and selling expenses

     2,302        4.08        2,219        4.66        3.74  

General and administrative expenses

     1,772        3.14        1,676        3.52        5.73  

Depreciation and amortisation

     12,104        21.44        12,462        26.20        (2.87

Hotel and tour operation expenses

     323        0.57        195        0.41        65.64  

External air catering service expenses

     155        0.27        151        0.32        2.65  

Financial institute charges

     35        0.06        48        0.10        (27.08

Cargo handling expenses

     189        0.33        108        0.23        75.00  

Other

     397        0.71        183        0.39        116.94  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     56,465        100.00        47,568        100.00        18.70  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses in the first half of 2021 amounted to RMB56,465 million, representing an increase of RMB8,897 million or 18.70% as compared to the first half of 2020, mainly due to the increase of flight operation expenses and aircraft and transportation service expenses which were in line with the increase of traffic volume. Total operating expenses accounted for 109.48% of total operating revenue, representing a decrease by 12.60 percentage points as compared to the same period of 2020.

Flight operation expenses, accounted for 40.19% of total operating expenses, increased by 33.99% to RMB22,696 million as compared to the same period of 2020, mainly because of the increase of traffic volume attributable to the effective prevention and control of COVID-19 pandemic in China, as well as the increase of average jet fuel price.

Aircraft and transportation service expenses, accounted for 18.49% of total operating expenses, increased by 36.78% to RMB10,438 million as compared to the same period of 2020. The increase was mainly due to the increase in the amounts of take-off and landing fees and navigation fees, resulted from the increase of number of flights attributable to the prevention and effective control of COVID-19 pandemic in China.

Maintenance expenses, accounted for 10.72% of total operating expenses, promotion and selling expenses, accounted for 4.08% of total operating expenses, general and administrative expenses, accounted for 3.14% of the total operating expenses, and depreciation and amortisation, accounted for 21.44% of the total operating expenses, each stayed at the same level in amounts as compared to the same period of 2020, respectively.


(IV) Cash Flow Analysis

In the first half of 2021, the Group recorded a net cash inflows from operating activities amounted to RMB4,940 million, while the net cash outflows from operating activities was RMB7,832 million in the first half of 2020, mainly resulting from the increase of operating revenue due to the increase of traffic volume. Net cash used in investment activities was RMB6,436 million, representing an increase of 106.15% as compared to RMB3,122 million in the same period of 2020, mainly due to the increase in payment for acquisition of property, plant and equipment and other assets. The net cash generated from financing activities was RMB1,049 million, representing a decrease of 96.04% as compared to RMB26,468 million in the same period of 2020, mainly due to the increase in repayment of ultra-short-term financing bills while no issuance of shares or corporate bonds during the reporting period. As at 30 June 2021, the balance of cash and cash equivalents of the Group amounted to RMB24,966 million, representing a decrease of 1.78% compared to that as at 31 December 2020.

(V) Liquidity, Financial Resources and Capital Structure

1. Analysis on Assets and Liabilities Structure

Unit: RMB million

 

Items

   30 June
2021
     Percentage
of total
assets/
liabilities (%)
     31 December
2020
     Percentage of
total assets/
liabilities (%)
     Increase/
(decrease) (%)
    Change of
percentage
point of
total assets/
liabilities
 

Other non-current financial assets

     430        0.13        92        0.03        367.39       0.10  

Trade receivables

     3,883        1.19        2,525        0.77        53.78       0.42  

Prepaid expenses and other current assets

     419        0.13        732        0.22        (42.76     (0.09

Amounts due from related companies

     284        0.09        85        0.03        234.12       0.06  

Derivative financial liabilities – current

     1,220        0.52        3,148        1.30        (61.25     (0.78

Current income tax

     613        0.26        462        0.19        32.68       0.07  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

As of 30 June 2021, total assets of the Group amounted to RMB327,084 million, representing an increase of 0.21% as compared to that as of 31 December 2020, among which, current assets were RMB40,029 million, accounting for 12.24% of the total assets, while non-current assets were RMB287,055 million, accounting for 87.76% of the total assets. Trade receivables of the Group amounted to RMB3,883 million, accounting for 1.19% of the total assets, representing an increase of 53.78% as compared to that as of 31 December 2020, mainly due to the increase in traffic revenue during the reporting period.

As of 30 June 2021, total liabilities of the Group amounted to RMB234,797 million, representing a decrease of 2.68% as compared to that as of 31 December 2020, among which, current liabilities were RMB103,155 million, accounting for 43.93% of the total liabilities; non-current liabilities were RMB131,642 million, accounting for 56.07% of the total liabilities. Derivative financial liabilities-current of the Group amounted to RMB1,220 million, accounting for 0.52% of the total liabilities and a decrease of 61.25% as compared to that as of 31 December 2020, mainly due to the conversion of convertible bonds during the reporting period.


The Group’s interest-bearing liabilities classified by currencies are as follows:

Unit: RMB million

 

     30 June 2021      31 December 2020         
     Amount      Percentage
(%)
     Amount      Percentage
(%)
     Increase/
(decrease)(%)
 

USD

     50,010        25.73        52,862        26.45        (5.40

RMB

     140,489        72.29        142,545        71.33        (1.44

Other

     3,854        1.98        4,424        2.22        (12.88
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     194,353        100.00        199,831        100.00        (2.74
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Fixed rate interest-bearing liabilities

     133,367        68.62        130,072        65.09        2.53  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Floating rate interest-bearing liabilities

     60,986        31.38        69,759        34.91        (12.58
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net exchange gain of RMB793 million was recorded in the first half of 2021, as compared with a net exchange loss of RMB1,117 million in the corresponding period of 2020, primarily attributable to the exchange difference arising from the lease liabilities denominated in USD, along with the appreciation of Renminbi against the U.S. dollar.

2. Debt Paying Ability Analysis

As at 30 June 2021, the Group’s debt ratio (e.g. total liabilities divided by total assets) was 71.78%, representing a decrease of 2.14 percentage points as compared to 73.92% as at 31 December 2020. As at 30 June 2021, the Group’s current ratio (current assets divided by current liabilities) was 38.80%, representing a decrease of 1.94 percentage points as compared to that as at 31 December 2020. As at 30 June 2021, the Group has obtained credit facilities of approximately RMB333,576 million in aggregate granted by several banks and other financial institute, among which approximately RMB107,259 million has been utilised and the unutilised amount was approximately RMB226,317 million. These credit facilities are sufficient for the Group to meet the requirement of working capital and future capital commitments.

3. Major Restricted Assets at the End of the Reporting Period

As at 30 June 2021, restricted deposits with banks and other financial institute of the Group was RMB102 million. Other than restricted deposits, the Group has no other restricted assets.

V.

OTHER DISCLOSURE MATTERS

(I) Analysis on Investments

1. Major Equity Investment

Nil.

2. Major Non-equity Investment

Nil.


3. Financial Assets Carried at Fair Value

Unit: RMB million

 

Stock code

  

Abbreviation/full name

   Initial
Investment
cost
     Equity
ownership
(%)
     Carrying
value at
the end of
the period
     Profit
and loss
for the
reporting
period
    Changes
in owners’
equity during
the reporting
period
   

Accounting item

   Sources of the
shares
 
000099   

Citic Offshore Helicopter Co., Ltd. (“中信海直”)

     9        0.48        20        (2     /    

Other non-current financial assets

     Purchase  
601328   

Bank of Communications Co., Ltd. (“交通银行”)

     16        0.013        46        7       /    

Other non-current financial assets

     Purchase  
Not applicable   

China Air Service Ltd.

     2        1.00        1        —         /    

Other non-current financial assets

     Capital increase  
Not applicable   

Aviation Data Communication Corporation

     1        2.50        27        1       /    

Other non-current financial assets

     Capital increase  
00696   

Travelsky Technology Limited
(“中國民航信息網絡”)

     33        2.25        699        —         /    

Other equity instrument investments

     Establishment  
Not
applicable
  

Haikou Meilan International Airport Co., Ltd.

     100        2.35        —          —         (75  

Other equity instrument investments

     Capital increase  
Total         161        /        793        6       (75   /      /  
     

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

  

 

 

 

(II) Major Assets and Shareholding Disposal

During the reporting period, there were no disposal of any major assets or equity investments by the Company.

(III) Analysis on Major Subsidiaries and Joint Ventures and Associates

1. Main Operational Information of Six Aviation Subsidiaries of the Group:

 

Name

   Number of
aircraft
     Proportion
(%)
     Number of
passengers
carried
(thousand)
     Proportion
(%)
     Cargo and
mail carried
(tonne)
     Proportion
(%)
     RTK
(million)
     Proportion
(%)
     RPK
(million)
     Proportion
(%)
 

Xiaman Airlines

     208        23.94        15,022.73        27.45        105,909.90        14.32        2,229.63        19.43        21,620.88        25.67  

Shantou Airline

     16        1.84        1,189.49        2.17        6,304.90        0.85        148.60        1.30        1,575.22        1.87  

Zhuhai Airlines

     16        1.84        1,128.90        2.06        5,363.70        0.73        170.27        1.48        1,820.02        2.16  

Guizhou Airlines

     20        2.30        1,502.80        2.75        9,284.50        1.26        207.64        1.81        2,178.98        2.59  

Chongqing Airlines

     30        3.45        2,038.97        3.73        6,919.30        0.94        255.51        2.23        2,758.05        3.27  

Henan Airlines

     30        3.45        2,280.05        4.17        15,460.90        2.09        290.57        2.53        3,024.06        3.59  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Note: The operational information of Xiamen Airlines includes operational information of its subsidiaries, Hebei Airlines and Jiangxi Airlines.


2. Analysis on Major Subsidiaries and Controlling Companies

(1) Xiamen Airlines

Xiamen Airlines was established in August 1984 with registered capital of RMB14 billion. The legal representative is Wang Zhi Xue. The Company holds 55% of the shares in Xiamen Airlines; Xiamen Jianfa Group Co., Ltd. and Fujian Investment Group Co., Ltd. also hold 34% and 11% in Xiamen Airlines, respectively.

During the reporting period, Xiamen Airlines earned operating revenue of RMB11,397 million, representing an increase of 33.60% as compared with the same period of the previous year; and net loss of RMB48 million was recorded as compared with net loss of RMB1,507 million for the same period of the previous year. As at 30 June 2021, Xiamen Airlines’ total assets amounted to RMB53,221 million, and net assets amounted to RMB20,553 million.

(2) CSA Logistic

CSA Logistics was established in June 2018 with registered capital of RMB1,818,181,820. The legal representative is He Xiao Qun. CSA logistics is owned as to 55%, 10%, 10%, 10%, 5%, 1.9%, 0.6%, 3% and 4.5% by the Company, Shanghai Yinnan Enterprise Management Partnership (Limited Partnership), Taicang Zhongding Yuanxiang Equity Investment Partnership (Limited Partnership), Guoxin Shuangbai No. 1 (Hangzhou) Equity Investment Partnership (Limited Partnership), Zhuhai Junlian Yige Equity Investment Enterprise (Limited Partnership), Zhongjin Qichen (Suzhou) Emerging Industry Equity Investment Fund Partnership (Limited Partnership), Zhongjin Pucheng Investment Co., Ltd., Sinotrans Limited and Zhuhai Yuanqi Enterprise Management Partnership (Limited Partnership), respectively.

During the reporting period, CSA logistics earned operating revenue of RMB8, 643 million, representing an increase of 15.78% as compared with the same period of the previous year; and net profit of RMB2,365 million was recorded as compared with net profit of RMB2,211 million for the same period of the previous year. As at 30 June 2021, CSA logistics’ total assets amounted to RMB13,229 million, and net assets amounted to RMB9,017 million.

3. Information of Other Major Joint Ventures and Associates

 

Name of investee companies    Nature of business    Registered capital    Proportion of shares held at
the investee companies (%)
 

    

  

 

  

 

   Direct      Indirect  

1. Joint Venture

           

Guangzhou Aircraft Maintenance Engineering Co., Ltd.

  

Aircraft repair and maintenance services

   USD65,000,000      50        0  

MTU Maintenance Zhuhai Co., Ltd.

  

Aircraft repair and maintenance services

   USD163,100,000      50        0  

2. Associates

           

Finance Company

  

Financial services

   RMB1,377,730,000      41.81        6.78  

SACM

  

Advertising agency services

   RMB200,000,000      40        0  

Sichuan Airlines

  

Airlines transportation

   RMB1,000,000,000      39        0  
  

 

  

 

  

 

 

    

 

 

 


(IV) Potential Risk

1. Macro Environment Risks

(1) Risks of Fluctuation in Macro Economy

The degree of prosperity of the civil aviation industry is closely linked to the status of the development of the domestic and international macro economy. Macro economy has a direct impact on the economic activities, the disposable income of the residents and the import and export trade volume, which in turn affects the demand of the air passenger and air cargo, and further affects the business and operating results of the Group.

(2) Risks of Macro Policies

Macroeconomic policies made by the government, in particular the adjustment in the cyclical macro policies, such as credit, interest rate, exchange rate and fiscal expenditure, have a direct or indirect impact on the air transportion industry. In addition, the establishment of the new airlines, the opening of aviation rights, routes, air ticket fares and other aspects are regulated by the government, and the fuel surcharges pricing mechanism is also formulated by the government. The changes in the relevant policies will have a potential impact on the operating results and the future development of the business of the Company.

2. Force Majeure Risks such as Serious Pandemics and Natural Disasters

The aviation industry is subject to a significant impact from the external environment, public health emergencies, such as serious pandemics, natural disasters such as floods, typhoons and volcanic eruptions, terrorist attacks, international political turmoil and other factors. These risks will affect the normal operation of the airlines, and thus bringing unfavourable effect to the results and long-term development of the Company.


3. Industry Risks

(1) Risks of Intensified Competition in the Industry

Faced with ever-changing markets, if the Company fails to effectively enhance its ability to predict and adopt flexible sales strategies and pricing mechanisms, this may have an impact on the Company’s goal of achieving expected returns. With regard to the introduction of transportion capacity, rapid growth of industry capacity and the slowdown in market demand has become increasingly significant. If the Company fails to establish a corresponding capacity introduction and exit mechanism, it may have a material adverse effect on the Company’s operating efficiency. In terms of exploring the international market, if the Company fails to further improve the operational quality of international routes, it may affect the Company’s operating income and profit levels.

(2) Risks of Competition from Other Modes of Transportation

There is certain substitutability in short to medium range routes transportation among air transport, railway transportion and road transportation. With the improving high speed rails network, if the Company fails to develop an effective marketing strategy to deal with high-speed rail competition, it may affect the Company’s operating efficiency.

4. Risks of the Company Management

(1) Safety Risks

Flight safety is the prerequisite and foundation for the normal operation of the airlines. Adverse weather, mechanical failure, human error, aircraft defects as well as other force majeure incidents may have effect on the flight safety. With big size of aircraft fleet and large amount of cross-location, overnight or international operations, the Company was confronted with certain challenges in its safety operation. In case of any flight accident, it will have an adverse effect on the normal production and operation and reputation of the Company.

(2) Information Safety Risks

The information safety situation is becoming more and more severe. If the Company fails to manage the information safety affairs at company level or a higher level, increase input of information safety resources, and strengthen the information safety management, the Company’s safety, production, operation, marketing, service, etc. may be affected, as a result of which the Company may be affected and suffer losses.

(3) Risks of High Capital Expenditure

The major capital expenditure of the Company is to purchase aircraft. In recent years, the Company has been optimising the fleet structure and reducing the operational cost through introducing more advanced models, disposing obsolete models and streamlining the number of models. Due to the high fixed costs for the operation of aircraft, if the operation condition of the Company suffered from a severe downturn, it may lead to the significant drop in the operating profit, financial distress and other problems.


5. Financial Risks of the Company

(1) Risks of Fluctuation in Foreign Currency

Renminbi is not freely convertible into foreign currencies. All foreign exchange transactions involving Renminbi must take place either through the People’s Bank of China (“PBOC”) or other institutions authorised to buy and sell foreign exchange or at a swap centre. Substantially all of the Group’s lease liabilities are denominated in foreign currencies, principally US dollars, Euro and Japanese Yen. Depreciation or appreciation of Renminbi against foreign currencies therefore affects the Group’s results significantly, in particular, fluctuations in exchange rate of US dollar against Renminbi will have a material impact on the Company’s finance expense. Assuming risks other than exchange rate remain unchanged, the shareholders’ equity of the Group will increase (or decrease) by RMB358 million and the net loss of the Group will decrease (or increase) by RMB358 million during the reporting period in the case of each and every 1% increase (or decrease) of the exchange rate of RMB to US dollar at 30 June 2021.

(2) Risks of Fluctuation in Jet Fuel Price

The jet fuel cost is the most major expenditure for the Group. Both the fluctuation in the international crude oil prices and the adjustment of domestic fuel prices by the NDRC has big impact on the cost of the Group. Although the Group has adopted various fuel saving measures to decrease the fuel consumption volume, if there is significant fluctuation in the international oil prices, the operating results of the Group may be significantly affected. Assuming that the fuel oil consumption remains unchanged, in the case of each and every 10% increase or decrease in average fuel price during the reporting period, the Group’s operating expenses would increase or decrease by RMB1,234 million for the reporting period.

In addition, the Group is required to procure a majority of its jet fuel domestically at PRC spot market prices. There is currently no effective means available to manage the Group’s exposure to the fluctuations of domestic jet fuel prices. However, according to a “Notice on Questions about Establishing Linked Pricing Mechanism for Fuel Surcharges of Domestic Routes and Jet Fuel” jointly published by the NDRC and the CAAC in 2009, airlines may, within a prescribed scope, decide at their discretion the pricing structure of the fuel surcharges on passengers on domestic routes. The linked pricing mechanism, to a certain extent, reduces the Group’s exposure to fluctuation in jet fuel price.

(3) Risks of Fluctuation in Interest Rate

Since the civil aviation industry is featured with high investments, the gearing ratio of the airlines is generally high. Therefore, the interest rate fluctuation resulting from the changes in the amount of capital in the market has a relatively greater influence on the Group’s financial expenses would further affect the Group’s operating results. Assuming all other risk variables other than interest rate remained constant, in the case of 100 basis point increase (or decrease) of the Group’s comprehensive capital cost for the reporting period would cause decrease (or increase) in equity attributable to shareholders for the reporting period and increase (or decrease) net loss of the Group by the amount of RMB238 million. Please refer to note 3 to the interim financial report prepared under International Accounting Standard 34 for the details of risks of fluctuation in interest rate and related hedges.


Corporate Governance

 

I.

GENERAL MEETINGS

During the reporting period, on 30 April 2021, the Company held the first extraordinary general meeting of 2021, at which all resolutions were considered and approved by the shareholders by poll. For details, please refer to (i) the Announcement on Poll Result of 2021 First Extraordinary General Meeting of China Southern Airlines Company Limited published on China Securities Journal, Shanghai Securities News, Securities Times and the website of SSE on 6 May 2021; and (ii) the announcement of the Company published on the website of the Stock Exchange and the Company on 30 April 2021.

During the reporting period, on 30 June 2021, the Company held 2020 annual general meeting, at which all resolutions were considered and approved by the shareholders by poll. For details, please refer to (i) the Announcement on Poll Result of 2020 Annual General Meeting of China Southern Airlines Company Limited published on China Securities Journal, Shanghai Securities News, Securities Times and the website of SSE on 1 July 2021; and (ii) the announcement of the Company published on the website of the Stock Exchange and the Company on 30 June 2021.

 

II.

CHANGES IN DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

During the reporting period, the changes in Directors, Supervisors and senior management were as follows:

 

Name

  

Position

  

Change

Ma Xu Lun

   Chairman and Director    Elected

Ma Xu Lun

   President    Resigned

Han Wen Sheng

   Vice Chairman and Director    Elected

Han Wen Sheng

   President    Appointed

Liu Chang Le

   Independent Non-executive Director    Elected

Gu Hui Zhong

   Independent Non-executive Director    Elected

Guo Wei

   Independent Non-executive Director    Elected

Yan Andrew Y

   Independent Non-executive Director    Elected

Zheng Fan

   Independent Non-executive Director    Resigned

Tan Jin Song

   Independent Non-executive Director    Resigned

Jiao Shu Ge

   Independent Non-executive Director    Resigned

Yao Yong

   Executive Vice President, Chief Accountant and Chief Financial Officer    Appointed

Li Jia Shi

   Chairman of Supervisory Committee and Supervisor    Elected

Lin Xiao Chun

   Supervisor    Elected

Mao Juan

   Employees’ Representative Supervisor    Elected

During the reporting period, the Company held the first extraordinary general meeting of 2021 on 30 April 2021. Mr. Ma Xu Lun and Mr. Han Wen Sheng were elected as Executive Directors of the ninth session of the Board of the Company; Mr. Liu Chang Le, Mr. Gu Hui Zhong, Mr. Guo Wei and Mr. Yan Andrew Y were elected as Independent Non-executive Directors of the ninth session of the Board of the Company; Mr. Li Jia Shi and Mr. Lin Xiao Chun were elected as Shareholder Representative Supervisors of the ninth session of the Supervisory Committee of the Company. The Company held the first meeting of the ninth session of the Board of the Company on 30 April 2021. Mr. Ma Xu Lun was elected as the Chairman of the ninth session of the Board of the Company, members of the special committees under the ninth session of the Board were appointed, and senior management of the Company were re-appointed. On the same day, the Company held the first meeting of the ninth session of the Supervisory Committee and elected Supervisor Li Jia Shi as the Chairman of the ninth session of the Supervisory Committee. The first joint meeting of the fifth session of employees’ representatives meeting of the Company has been held and Ms. Mao Juan was elected as an employees’ representative Supervisor of the 9th session of the Supervisory Committee of the Company. For details, please refer to (i) the relevant announcements of the Company published on China Securities Journal, Shanghai Securities News and Securities Times and the website of the SSE on 9 January 2021 and 6 May 2021, respectively; and (ii) the relevant announcements of the Company published on the website of the Stock Exchange and the Company on 8 January 2021 and 30 April 2021, respectively.


III.

PROPOSALS FOR PROFIT DISTRIBUTION OR THE TRANSFER OF CAPITAL RESERVE TO SHARE CAPITAL

No interim dividend for the six months period ended 30 June 2021 was declared by the Company, and there was no issue of shares by way of conversion of capital reserve. The profit distribution proposal of the Company for the year 2020 was considered and approved at the 2020 annual general meeting of the Company held on 30 June 2021.

 

IV.

EQUITY INCENTIVE PLAN

During the reporting period, the Company did not implement nor had an on-going equity incentive plan.

 

V.

CHANGES OF INFORMATION OF DIRECTORS OR SUPERVISORS UNDER RULE 13.51B(1) OF THE LISTING RULES

Below are the information relating to the changes of Directors or Supervisors required to be disclosed pursuant to rule 13.51B(1) of the Listing Rules since the date of the 2020 Annual Report:

Mr. Han Wen Sheng, the Director of the Company, ceased to act as the vice chairman and director of Sichuan Airlines;

Mr. Liu Chang Le, the Director of the Company, served as chairman of Carefree Development Limited, and ceased to act as chairman and chief executive officer of Phoenix Media Investment (Holdings) Limited.;

Ms. Mao Juan, the Supervisor of the Company, served as director of Xiamen Airlines, director of China Southern Airlines Overseas (Hong Kong) Co. Ltd. and Nan Lung and ceased to act as supervisor of Xiamen Airlines.

Save as disclosed above, there is no information required to be disclosed pursuant to rule 13.51B(1) of the Listing Rules.

 

VI.

INTERESTS OF THE DIRECTORS AND SUPERVISORS IN THE EQUITY OF THE COMPANY

As at 30 June 2021, none of the Directors, chief executive or Supervisors of the Company had interests or short positions in the shares, underlying shares and/or debentures (as the case may be) of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to the SFO (including interests or short positions which are taken or deemed to have under such provisions of the SFO), or which were required to be recorded in the register maintained by the Company pursuant to section 352 of the SFO, or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code as set out in Appendix 10 to the Listing Rules.

 

VII.

CHANGES IN THE SHAREHOLDING OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

During the reporting period, there was no change in shareholding of current Directors, Supervisors and senior management of the Company or the Directors, Supervisors and senior management of the Company who resigned during the reporting period.

During the reporting period, no share incentive was granted to the Directors, Supervisors and senior management of the Company.


VIII.

EMPLOYEES

As at 30 June 2021, the Group had an aggregate of 98,347 employees (31 December 2020: 100,431). The wages of the Group’s employees consist of basic salaries and bonuses. The current information in relation to the emolument policy of employees and training plan has not changed materially from the information disclosed in the 2020 annual report of the Company.

 

IX.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

As Mr. Wang Chang Shun resigned as the Chairman, the executive Director, the chairman of the Strategic and Investment Committee of the Board and the member of the Nomination Committee of the Board of the Company on 21 December 2020 due to his retirement, the Board on the same day appointed the then vice Chairman and president of the Company, Mr. Ma Xu Lun, as the Chairman of the 8th session of the Board. Due to the fact that Mr. Ma Xu Lun concurrently served as the Chairman and the President of the Company, the Company at that time was not in compliance with provision A.2.1 of the Corporate Governance Code which requires the roles of chairman and chief executive should be separate. Nevertheless, having considered that (i) the co-performance of the duties of the Chairman and the President was a temporary arrangement pending election and appointment of a candidate to fill vacancy of the President position; and (ii) the Board would meet regularly and whenever needed to consider matters relating to business operations of the Group, the Board at that time was of the view that this temporary arrangement would not impair the balance of power and authority of the Board and the management of the Company, nor will the effectiveness of corporate planning and implementation of corporate strategies and decisions will not be affected. On 22 June 2021, the Board appointed Mr. Han Wen Sheng as the President of the Company and Mr. Ma Xu Lun resigned from the President of the Company. From then on, the roles of Chairman and the President of the Company are held by different individuals, and accordingly, compliance in the code provisions as set out in provision A.2.1 of the Corporate Governance Code has been restored.

Save as disclosed above, the Board considers that the Group has complied with the code provisions of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules for the six months ended 30 June 2021.

 

X.

COMPLIANCE WITH THE MODEL CODE

The Company has adopted a code of conduct which is no less stringent than the Model Code as set out in Appendix 10 to the Listing Rules regarding securities transactions of the Directors of the Company. Having made specific enquiries with all the Directors, the Directors have complied with the Model Code and the code of conduct during the six months ended 30 June 2021.

 

XI.

REVIEW OF THE INTERIM REPORT BY THE AUDIT AND RISK MANAGEMENT COMMITTEE

The Audit and Risk Management Committee of the Company, together with the management and the external auditors, has reviewed the accounting principles and practises adopted by the Group and discussed the financial reporting matters, including the review of the interim financial report prepared in accordance with the International Accounting Standards 34.

 

XII.

PURCHASE, SALE OR REDEMPTION OF SHARES

During the six months ended 30 June 2021, neither the Company nor any of its subsidiaries purchased, sold or redeemed any shares of the Company.


Environmental and Social Responsibility

 

I.

INFORMATION ON ENVIRONMENT PROTECTION

 

(I)

Information on Environmental Protection of Enterprises and Its Key Subsidiaries which Were Classified as Major Pollution Discharge Units Published by the Environmental Protection Authorities

 

1.

Information on Pollution Discharge

The Group always adheres to the concept of green development, earnestly fulfills responsibilities for environmental protection, and continuously improves the pollution prevention and control as well as the management of environmental protection. The Shenyang Maintenance Base of the Mechanical Engineering Department of the Company is classified as a major pollution discharge unit for soil environment of Shenyang, and Guangzhou Aircraft Maintenance Engineering Co., Ltd., a joint venture of the Company, is classified as a major pollution discharge unit for atmospheric environment of Guangzhou. The main pollutants are wastewater, exhaust gas and hazardous waste. The details are as follows:

 

Name of
the Company or its
subsidiaries

  

Names of major
pollutants and
featured pollutants

  

Method of
discharge

  

Distribution of
discharge
outlets

  

Concentration of
pollutant discharged

  

Implemented
pollutant discharge
standards

  

Total discharge

  

Total
discharge
approved

  

Excessive
discharge

Shenyang Maintenance Base of China Southern Airlines Company Limited

  

Wastewater:COD, ammonia nitrogen, suspended solids, petroleum

  

Intermittent discharge

  

Wastewater:
1 main outlet

  

Wastewater: COD:104mg/L
ammonia nitrogen: 20.2mg/L
suspended solids: 35mg/L
petroleum: 2.63mg/L

  

Wastewater discharge standard is in accordance with the Integrated Sewage Discharge Standard of Liaoning Province (DB21/1627-2008)

  

COD: 2700 *50L/d/1000*0.85*150d*104mg/L=1.79t/a

Ammonia nitrogen: 2700 *50L/d/1000*0.85*150d*20.2mg/L=0.3477t/a

  

COD: 8.442t/a

Ammonia nitrogen:
0.8051t/a

  

No

  

Exhaust gas: PM, VOCs, dust, nitrogen oxide, sulfur dioxide

  

Intermittent discharge

  

Exhaust gas: 11 exhaust gas outlets

  

Exhaust gas:

Spray room: non-methane hydrocarbon 0.64 mg/m³

Drying room: non-methane hydrocarbon 0.58 mg/m³

Fading room: particulate matter 7.55 mg/m³

Lacquer storage room: non-methane hydrocarbon 0.54 mg/m³

Boiler:
Dust 6.6 mg/m³
Sulfur dioxide 10 mg/m³
Nitrogen oxides 75.7 mg/m³

  

Level 2 standard on new pollution source of the Integrated Emission Standards for Air Pollutants (GB16297-1996) was executed to handle the particulate matter in the exhaust gas;

The Emission Standard of Volatile Organic Compounds for Industrial Surface Coating (DB21/3160-2019) was executed to handle the exhaust gas of surface coating

The Emission Standard of Air Pollutants For Boiler (GB13271-2014) was executed to handle the boiler exhaust gas

  

TVOC: 0.0766kg/h*90h/a/1000=0.0069t/a

Nitrogen oxides: 75.7mg/m3*2000m3/h*3h/d*150=0.0682t/a

  

TVOC:
7.17005t/a

Nitrogen oxides:
1.323t/a

  

No


Name of
the Company or its
subsidiaries

  

Names of major
pollutants and
featured pollutants

  

Method of
discharge

  

Distribution of
discharge
outlets

  

Concentration of
pollutant discharged

  

Implemented
pollutant discharge
standards

  

Total discharge

  

Total
discharge
approved

  

Excessive
discharge

  

Hazardous waste

  

Intermittent discharge

  

4 temporary storage rooms for hazardous waste

4 underground storage tanks

  

/

  

The Standard for Pollution Control on the Storage and Disposal Site for General Industrial Solid Wastes (GB18599-2001) and its 2013 Revisions (Notice No. 36 of 2013) were executed to handle solid waste; The relevant provisions of the Pollution Control Standards for Hazardous Waste Storage
(GB18597-2001) and its Revisions (Notice No. 36 of the Ministry of Environmental Protection in 2013) were executed to handle hazardous waste; The relevant provisions of the Directory of National Hazardous Wastes were executed for the classification of industrial solid wastes.

  

Organic wastewater 80.64t

Discarded package 9.97t

Used mineral oil 13.02t

Other waste 12.44t

  

/

  

No

Guangzhou Aircraft

Maintenance

Engineering Co., Ltd.

  

Exhaust gas

  

Intermittent discharge

  

6 exhaust vents in paint hangar

1 exhaust vents in
surface treatment workshop

  

Benzene: <0.0015 mg/m³

Methylbenzene: 0.968 mg/m³

Xylene: 0.32 mg/m³

VOCs: 8.4 mg/m³

PM: <20 mg/m³

Lanthanum sulfate: 0.41 mg/m³

Mist of chromic acid: 0.014 mg/m³

Nitrogen oxides: 12 mg/m³

  

Emission Standard of Volatile Organic Compounds for Surface Coating (Motor Industry) DB44/816-2010, Emission Limits of Air
Pollutants DB44/27-2001

  

/

  

/

  

No

  

Wastewater

  

Intermittent discharge

  

1 pretreatment outlet
in sewage
treatment station

  

Hexavalent chromium: <0.004 mg/L

T-Cr: <0.03 mg/L

  

Emission Limits of Water Pollutants DB44/26-2001

  

/

  

/

  

No

        

1 main outlet in sewage
treatment station

  

COD: 16 mg/L

Five-day BOD: 3.7 mg/L

Suspended solids: <4 mg/L

Petroleum: <0.06 mg/L

Anionic surfactant: 0.15 mg/L

Fluoride: 0.09 mg/L

  

Emission Limits of Water Pollutants DB44/26-2001

  

/

  

/

  

No

        

1 pretreatment outlet in surface treatment workshop

  

Hexavalent chromium: <0.004 mg/L

T-Cr: 0.37 mg/L

  

Electroplating Water Pollutant Discharge Standard DB44/
1597-2015

  

/

  

/

  

No

        

1 main outlet in surface
treatment workshop

  

COD: 11 mg/L

Five-day BOD: 2.5 mg/L

Suspended solids: 11 mg/L

Petroleum: <0.06 mg/L

Anionic surfactant: 0.08 mg/L

Fluoride: 0.28 mg/L

  

Electroplating Water Pollutant Discharge Standard DB44/
1597-2015

  

/

  

/

  

No

During the reporting period, the discharge of pollutants of the Company was in compliance with the relevant national discharge standards, and there were no violations of laws and regulations in respect of environmental protection, no major environmental pollution accidents, or any severe or major damages to the ecological environment, nor was there any general environmental pollution accidents or ecological damage events.

 

2.

Construction and Operation of Facilities to Prevent Pollution

Supporting facilities to protect the environment and deal with exhaust gas, wastewater, noise and solid waste of infrastructures invested by the Group were put into use in strict accordance with the environmental impact assessment and the “three-simultaneous” requirement. The Company actively took environmental protection measures as required by environmental assessment and its approved documents. All projects were accepted upon the completion of construction projects for the purpose of environmental protection.

To treat wastewater, the Company has built physical and biochemical sewage treatment systems. The treated sewage, once meeting the standards, will be discharged to the airport sewage treatment plant for further treatment. To treat exhaust gas, the Company built processing facilities such as glass fiber secondary purification filter cotton, purification device of honeycomb activated carbon adsorption, and bag-type dust collector. The exhaust gas being collected and treated was discharged after meeting relevant standard. In terms of hazardous waste, the Company classified and stored them in hazardous waste warehouses and underground storage tanks, and entrusted qualified enterprises/institutions to transfer and disposal on a regular basis.


3.

Environmental Impact Assessment and Other Administrative Permission for Environmental Protection

The Group conducted environmental impact assessment on new, renovated and expanded projects in accordance with the law. During the reporting period, the Company obtained 1 administrative permission for environmental impact assessment.

 

4.

Emergency Plans for Environmental Contingencies

The Group actively established and improved emergency plans for environmental contingencies, and promoted to establish special management and plans for environmental impact assessment reports, environmental contingencies, fires, hazardous aviation chemicals, and hazardous wastes, and emergency plans of each secondary unit, so as to establish a complete emergency management system for environmental contingencies gradually. During the reporting period, all of the major pollutant discharge units of the Company have established emergency plans and filed with the local environment protection supervision department.

 

5.

Environment Self-monitoring Solutions

In accordance with relevant requirements of the measures for self-monitoring and information disclosure by enterprises subject to intensive monitoring and control of the state, the Group established and improved a pollution source monitoring and information disclosure system, formulated annual pollutant self-monitoring plans, and entrusted third-party companies with environmental monitoring qualifications to regularly monitor pollutants. During the reporting period, as monitored by the third-party company, the Company’s discharge of major pollutants achieved was up-to-standard.

 

(II)

Information that is Conducive to Protecting Ecology, Preventing Pollution, and Fulfilling Environmental Responsibilities

During the reporting period, the Company continued to push forward the Green Flight, advocated the concept of low-carbon travel, and reduced environmental pollution by use of market mechanism.

 

1.

Green Flight

During the reporting period, the Company continued to promote fuel saving, with focus on improving single-engine sliding and fuel-efficient launching, retracting flap height, and replacing Auxiliary Power Units with bridge-mounted equipment, and made progress in fuel saving. The Company pressed ahead meal-saving activities themed by “Green Flight” to encourage passengers to dine according to needs and cancel meals on voluntary basis.

 

2.

Research on “Dual Carbon”

During the reporting period, the Company carried out research on “carbon peak and carbon neutrality”, studied and determined when and how in technical sense CSA would achieve carbon peak, and checked ground carbon to get a clear picture of its emissions, and developed energy-saving and emission-reduction projects and managed carbon assets in a timely manner.


3.

Reduce Impact of Carbon Emission to Climate Change by Market Mechanism

The Company has been supporting and actively participating in Chinese government’s various work regarding the market mechanism of carbon trading. During the reporting period, according to the requirements of CAAC, the Company fully fulfilled its performance for 2020 under the European Union carbon trading scheme in May 2021. We fully completed the carbon dioxide emission report and verification of civil aviation flight activities in 2020 by using the self-developed flight carbon emission data monitoring, reporting and verification system (MRV system).

 

4.

Establish and Improve Information System of Environmental Protection and Management

During the reporting period, the Company continued the building of an information management system of environmental protection to realize online reporting and processing of data and information regarding energy consumption and pollutant discharge, and online monitoring of environmental pollution sources, risk points, and prevention and control measures.

 

5.

Establish and Improve the Emergency Management System for Environmental Contingencies

During the reporting period, the Company focused on emergency plans for environmental contingencies, which were supplemented by special management and plans for environmental impact assessment reports, environmental contingencies, fires, hazardous aviation chemicals, and hazardous wastes, and supported by emergency plans of each secondary unit, so as to establish a complete emergency management system for environmental contingencies.

 

6.

Fully Control Plastic Pollution

During the reporting period, the Company prepared the overall plan for the treatment of plastic pollution, formulated the replacement standards for disposable non-degradable plastic products, strictly implemented the standards of management and control in the production and procurement links, and carried out separate recycling and disposal. The Company has worked on innovation and research to build the CSA Building headquarters as a model.

 

(III)

Measures Taken to Reduce Carbon Emissions During the Reporting Period and Results

During the reporting period, the Company continued the refined jet fuel management. We deeply advanced special fuel-saving projects such as single-engine sliding, fuel-efficient launching, and flap height retracting. We continued to use temporary routes, increase cruise altitude, reduce the remaining fuel at landing, and improve the accuracy of traffic load reporting. During the reporting period, the fuel consumption per ton-kilometer was 2.82 tonnes/10,000-ton-kilometer, indicating the fine management of jet fuel was effective. We pressed ahead the blue sky protection campaign, carried forward the “petroleum-to-electricity” transformation for ground vehicles, and introduced new-energy field vehicles at the proportion set by regulatory requirements. We ensured that the aircraft used bridge-mounted air conditioners and bridge-mounted power supplies instead of Auxiliary Power Units, and reduced carbon emissions caused by the consumption of aviation kerosene, diesel and gasoline. We conducted research on the timetable, roadmap and approach to achieve carbon peak and neutrality goals, and determined when and how in technical sense the Company would achieved carbon peak, and checked ground carbon to find out its emissions.


II.

CONSOLIDATE AND EXPAND THE PROGRESS IN POVERTY ALLEVIATION AND FURTHER REVITALIZE THE COUNTRYSIDE

In 2021, China won complete victory in the battle against poverty, and started to fully implement the rural revitalization strategy. All designated poverty counties and paired villages of the Group walked out of poverty in 2020. Since the beginning of this year, in accordance with the requirements of the government authorities, CSA, while continuing the work on poverty alleviation as a finale in combating poverty, has launched paired assistance to mark a good beginning to the transition from consolidating and expanding the progress in poverty alleviation to rural revitalization.

 

1.

Strengthen Organizational Leadership, and Effectively Enhance the Sense of Responsibility and Mission to Fully Promote Rural Revitalization

We always attach great importance to the transition work from consolidating and expanding the progress in poverty alleviation to rural revitalization. We studied the spirit of an important speech delivered by Secretary-General Xi Jinping at a grand gathering to mark China’s achievements in poverty alleviation and to honor its model fighters against poverty. We organized a meeting to review the work of CSA on poverty alleviation and to kick off paired assistance to further sum up experience, practices and highlights of CSA in poverty alleviation. We continued to consolidate and expand the achievements made in poverty alleviation by continuing the paired relationship and the responsibility therewith, to make the foundation for poverty alleviation more stable and sustainable. We deepened poverty alleviation with characteristics of aviation, continued “air poverty alleviation”, and cultivated industries with local features as a way to coordinate poverty alleviation with the full revitalization of the rural area. We enhanced publicity efforts and planned special publicity represented by exemplary individuals in poverty alleviation nationwide to foster a strong atmosphere of learning, advocating, and striving to be the exemplary, and exhibited a good image as a responsible state-owned enterprise directly under the central government.

 

2.

Enhance Top-level Design and Promote Paired Assistance with High Quality

During the reporting period, we officially launched paired assistance to advance the implementation of the rural revitalization strategy in an orderly manner. We adjusted organizational structures, established a paired assistance system that met the requirements of rural revitalization, studied and formulated paired assistance plans of CSA, and clearly identified the overall idea of the paired assistance. We launched a new round of village assistance by rotating the Group’s temporary cadres and onsite village teams in counties and villages across China where paired assistance was formed to work on a new round of paired assistance during the reporting period. We actively promoted the project of “doing practical work for the people” by insisting on “increasing the assistance associated with distinctive cultural characteristics, deepening poverty alleviation and promoting rural revitalization” in the first batch of 8 key projects to enhance people’s well-being. Leveraging on the role of labor union, e-commerce platforms, temporary cadres, and on-site village teams, we continued to increase assistance through consumption. During the reporting period, the Company directly purchased and helped sell agricultural products of the region assisted by RMB2.82 million.


Important Matters

 

I.

UNDERTAKING

Undertakings given by CSAH, the controlling shareholder of the Company, during the reporting period or existing to the reporting period are as follows:

 

Background of
undertaking

   Type of
undertaking
   Undertakings
making party
  

Content of undertaking

   Time and
term of
undertaking
   Fulfilment
time limit,
if any
   Strict
fulfilment
in time, if
any

Undertaking related to share reform

   Other    CSAH   

Upon completion of the share reform plan, and subject to compliance with the relevant laws and regulations of the PRC, CSAH will support the Company in respect of the formulation and implementation of a management equity incentive system.

   Long-term    Yes    Yes

Other undertaking

   Other    CSAH   

CSAH and the Company entered into a Separation Agreement with regard to the definition and allocation of the assets and liabilities between CSAH and the Company on 25 March 1995 (amended on 22 May 1997). According to the Separation Agreement, CSAH and the Company agreed to compensate the other party for the claims, liabilities and costs borne by such party as a result of the business, assets and liabilities held or inherited by CSAH and the Company pursuant to the Separation Agreement.

   Long-term    Yes    Yes

Other undertaking

   Other    CSAH   

The relevant undertakings under the Financial Services Framework Agreement entered into between the Company and Finance Company include: A. Finance Company is an enterprise group finance company duly incorporated under the “Administrative Measures for Enterprise Group Finance Companies” and other relevant laws and regulations, whose principal business is to provide finance management services, such as deposit and financing for the members of the Group and the relevant capital flows are kept within the Group; B. the operations of Finance Company are in compliance with the requirements of the relevant laws and regulations and well-performed, therefore the deposits placed with and borrowings from Finance Company by the Company are secured. In future, Finance Company will continue to operate in strict compliance with the requirements of the relevant laws and regulations; C. in respect of the Company’s deposits with and borrowings from Finance Company, the Company will continue to implement its internal procedures and make decision on its own in accordance with relevant laws and regulations and the Articles of Association, and CSAH will not intervene in the relevant decision-making process of the Company; and D. CSAH will continue to fully respect the rights of the Company to manage its own operations, and will not intervene in the daily business operations of the Company.

   Long-term    Yes    Yes

Other Undertaking

   Resolving
defects
in land
and
other
properties
   CSAH   

In respect of the connected transaction entered into between the Company and CSAH on 14 August 2007 in relation to the sale and purchase of various assets, the application for building title certificates for eight properties of Air Catering (with a total gross floor area of 8,013.99 square meters) and 11 properties of the Training Centre (with a total gross floor area of 13,948.25 square meters) have not been made for various objective reasons. On 19 December 2019, the Company received the Undertaking Letter on Building Title Certificates Application Work of Air Catering and Training Centre (《關於南航食品公司及培訓中心房產辦證工作的承諾函》 ) from CSAH, the controlling shareholder of the Company. So far, the application for building title certificates for 12 properties aforementioned has been completed with a total gross floor area of 14,178.25 s.q.m.. The main reason for the incomplete application of the remaining property title certificates is that the land where the property is located is leased land. Due to the change of relevant laws, regulations and policies, the application for the property title certificates cannot be made. CSAH undertook with the Company that: (1) in the case that the application of the title certificate for related property is allowed due to subsequent policy changes, all the costs and expenses arising from the application of the relevant title certificates would be borne and paid by CSAH; (2) if any third party claimed against the Company as a result of the properties not having the title certificates, or the title defect of the properties having an effect on the daily operation of the Company and giving rise to loss, such loss shall be borne by CSAH and CSAH shall have no right to seek recovery from the Company.

   Long-term    Yes    Yes


Background of
undertaking

   Type of
undertaking
   Undertakings
making party
  

Content of undertaking

   Time and
term of
undertaking
   Fulfilment
time limit,
if any
   Strict
fulfilment
in time, if
any

Other Undertaking

   Other    CSAH   

On 7 February 2018, the Company received an undertaking letter from CSAH, the controlling shareholder of the Company, in respect of certain land and properties without having ownership certificates by the Company, details of which are set out as follows: as at 30 September 2017, the Company and its branches, offices held 3 parcels of land (with a total area of 181,350.42 square meters) and 342 properties (with a total area of 244,228.08 square meters), being land and properties allocated to the Company from CSAH on different occasions. The registration of the abovementioned land and properties has not been completed to change the title to the applicant. These land and properties were transferred under the Separation Agreement, Agreement regarding the Reorganisation of China Northern Airlines Company and Xinjiang Airlines Company and Assets Sale & Purchase Agreement entered into between the Company and CSAH in 1997, 2004 and 2007, respectively. CSAH undertook that if any third party claimed against the Company as a result of the land and properties without having the ownership certificates, or the title defect of the land and properties having an effect on the daily operation of the Company and giving rise to loss, such loss shall be borne by CSAH and CSAH shall have no right to seek recovery from the Company.

   Long-term    Yes    Yes

 

II.

UTILISATION OF THE NON-OPERATING FUNDS BY THE CONTROLLING SHAREHOLDER AND ITS CONNECTED PERSONS

During the reporting period, neither the controlling shareholder of the Company, nor any of its connected persons has utilised the non-operating funds of the Company.

 

III.

GUARANTEES IN VIOLATION

During the reporting period, the Company did not provide external guarantees in violation of any specified decision-making procedures.

 

IV.

APPOINTMENT AND DISMISSAL OF AUDITORS

At the seventeenth meeting of the eighth session of the Board of the Company held on 30 March 2021, the Board considered and approved the proposed appointment of KPMG Huazhen LLP to provide professional services to the Company for its domestic financial reporting and internal control reporting, U.S. financial reporting and internal control reporting for the year 2021 and KPMG to provide professional services to the Company for its Hong Kong financial reporting for the year 2021.

On 30 June 2021, the above-mentioned resolution was considered and passed at 2020 annual general meeting, and authorised the Board to determine their remuneration based on the actual work done.

 

V.

BANKRUPTCY OR RESTRUCTURING EVENTS

During the reporting period, the Company was not involved in any bankruptcy or restructuring events.


VI.

MATERIAL LITIGATIONS AND ARBITRATIONS

During the reporting period, the Company was not involved in any material litigation or arbitration.

 

VII.

PENALTY ON AND RECTIFICATION ON THE LISTED COMPANIES, ITS DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT AND THE SHAREHOLDERS HOLDING MORE THAN 5% EQUITY INTERESTS OF THE COMPANY

During the reporting period, the Company did not have the above situation.

 

VIII.

DESCRIPTION OF THE COMMERCIAL CREDIBILITY OF THE COMPANY AND ITS CONTROLLING SHAREHOLDERS DURING THE REPORTING PERIOD

During the reporting period, based on the analysis and assessment conducted by China Lianhe Credit Rating Co., Ltd. and China Chengxin International Credit Rating Co., Ltd., respectively, the long-term credit rating of the Company and its controlling shareholder, CSAH, was AAA with “stable” prospect.

 

IX.

MATERIAL CONNECTED TRANSACTIONS

 

(I)

Connected Transactions Related to Daily Operation

During the reporting period, those connected transactions related to daily operation were mainly the connected transactions entered into between the Company and CSAH or its subsidiaries in its ordinary and usual course of business, specific details are as follows:

 

1.

On 11 November 2008, the Company and SACM entered into Intangible Assets Franchise Agreement. For details, please refer to (i) H Share Announcement of Company published on the website of the SSE on 12 November 2008 and (ii) the announcement of the Company published on the website of the Stock Exchange on 11 November 2008.

 

2.

On 27 December 2018, the Company entered into the Catering Services Framework Agreement with Shenzhen Air Catering Co., Ltd. For details, please refer to (i) the Announcement on Daily Connected Transaction in respect of the Catering Services Framework Agreement of the Company published on China Securities Journal, Shanghai Securities News and Securities Times and the website of the SSE on 28 December 2018; and (ii) the announcement of the Company published on the website of the Stock Exchange and the Company on 27 December 2018.

 

3.

On 27 December 2018, the Company entered into the Media Service Framework Agreement (which was supplemented by the Supplemental Agreement dated 29 November 2019) with SACM. For details, please refer to (i) the H Share Announcements of the Company published on the website of the SSE on 28 December 2018 and 30 November 2019; and (ii) the announcements of the Company published on the website of the Stock Exchange and the Company on 27 December 2018 and 29 November 2019.

 

4.

On 27 August 2019, the Company and the Finance Company entered into the Financial Services Framework Agreement. For details, please refer to (i) the Announcement of the Daily Connected Transaction in respect of the Financial Services Framework Agreement of the Company published on China Securities Journal, Shanghai Securities News and Securities Times and the website of the SSE on 28 August 2019; and (ii) the announcement of the Company published on the website of the Stock Exchange and the Company on 27 August 2019.


5.

On 10 October 2019, the Company entered into the 2020-2022 Finance and Lease Service Framework Agreement with CSA International Finance Leasing Co., Ltd. For details, please refer to (i) the Announcement of the Daily Connected Transaction of the Company published on China Securities Journal, Shanghai Securities News and Securities Times and the website of the SSE on 11 October 2019; and (ii) the announcement of the Company published on the websites of the Stock Exchange and the Company on 10 October 2019.

 

6.

On 29 November 2019, the Company entered into the Supplemental Agreement to the Media Service Framework Agreement with SACM. For details, please refer to (i) the H Share Announcement of the Company published on the website of the SSE on 30 November 2019; and (ii) the announcement of the Company published on the websites of the Stock Exchange and the Company on 29 November 2019.

 

7.

On 30 December 2019, the Company entered into the Property and Land Lease Framework Agreement with CSAH. For details, please refer to (i) the H Share Announcement of the Company published on the website of the SSE on 31 December 2019; and (ii) the announcement of the Company published on the websites of the Stock Exchange and the Company on 30 December 2019.

 

8.

On 21 December 2020, the Company renewed the Property Management Framework Agreement with China Southern Airlines Group Property Management Company Limited (中國南航集團物業管理有限公司). For details, please refer to (i) the H Share Announcement on the Continuing Connected Transaction of Company published on the website of the SSE on 22 December 2020; and (ii) the announcement of the Company published on the websites of the Stock Exchange and the Company on 21 December 2020.

 

9.

On 21 December 2020, the Company renewed the Asset Lease Framework Agreement with CSAH. For details, please refer to (i) the Announcement on Daily Connected Transaction in respect of Asset Lease Framework Agreement of the Company published on China Securities Journal, Shanghai Securities News and Securities Times and the website of the SSE on 22 December 2020; and (ii) the announcement of the Company published on the websites of the Stock Exchange and the Company on 21 December 2020.

The terms of the above connected transactions were fair and reasonable and were entered into on normal commercial terms. The prices of the relevant connected transactions were determined with reference to the fair market price, which were no less favourable than those available to independent third parties. The relevant transactions will not affect the independence of the Company and were in the interests of the Company and the shareholders as a whole.

 

(II)

Connected Transactions Related to Acquisition of Assets or Acquisition or Disposal of Shareholding

Nil.


(III)

Share Issuance

 

1.

Share Issuance in 2020

On 27 December 2019, the Company’s 2019 second extraordinary general meeting, the 2019 first class meeting for holders of A shares, and the 2019 first class meeting for holders of H shares considered and approved the resolution to issue to CSAH not more than 2,453,434,457 A shares (including 2,453,434,457 A shares) (“A Share Issuance”) and enter into the A shares subscription agreement with CSAH and the resolution to issue not more than 613,358,614 H shares (including 613,358,614 H shares) to Nan Lung (a wholly-owned subsidiary of CSAH) and to enter into the H shares subscription agreement with Nan Lung (“H Share Issuance”). The proceeds from the A Share Issuance will be utilised in the procurement of aircraft and the repayment of the Company’s borrowings, and the proceeds from the H Share Issuance will be utilised to supplement the general working capital of the Company. For details of the A Share Issuance and the H Share Issuance, please refer to (i) the Announcement of the Connected Transaction in respect of the Non-public Issuance of A Shares and Non-public Issuance of H Shares of the Company published on China Securities Journal, Shanghai Securities News and Securities Times and the website of the SSE on 31 October 2019; and (ii) the announcement on Connected Transactions in respect of Proposed Share Issuance of the Company published on the website of the Stock Exchange and the Company on 30 October 2019.

On 15 April 2020, the Company issued 608,695,652 H shares in total to Nan Lung at the issue price of HK$5.75 per H share pursuant to the subscription agreement dated 30 October 2019 entered into between the Company and Nan Lung. The net price of each new H share issued under the H Share Issuance was HK$5.74 per H share. The use of proceeds utilized was consistent with the intended use of proceeds as previously disclosed.

Gross proceeds and the use of proceeds from H Shares Issuance:

 

Gross proceeds from
H Shares Issuance
(HKD)

  

Intended use of the
proceeds as previously
disclosed

  

Utilised
proceeds as of
30 June 2021
(HKD)

  

Unutilised
proceeds as of
30 June 2021
(HKD)

  

Expected timeline for
the use of unutilised
proceeds

3,499,999,999   

Supplement of general working capital

   3,499,999,999    0    Not Applicable

 

  

 

  

 

  

 

  

 

 

  Note:

The total amounts of funds raised from 2020 Non-public Issuance of H shares was HKD3,499,999,999, equivalent to RMB3,178,664,999.09 based on the middle exchange rate of HKD1=RMB0.90819 on 15 April 2020. After deducting the issuance expenses of RMB3,570,544.56, the net proceeds raised was RMB3,175,094,454.53.

On 18 June 2020, the Company issued 2,453,434,457 A shares in total to CSAH at the issue price of RMB5.21 per A share pursuant to the subscription agreement dated 30 October 2019 and entered into between CSAH and the Company. The net price of each new A share issued under the A Share Issuance was RMB5.21 per A share. For details, please refer to the announcement of the Company published on the website of the Stock Exchange on 18 June 2020. The use of proceeds utilized was consistent with the intended use of proceeds as previously disclosed.


Gross proceeds and the use of proceeds from A Shares Issuance:

 

Gross proceeds from
A Shares Issuance
(RMB)

  

Intended use of the
proceeds as previously
disclosed

  

Utilised
proceeds as of
30 June 2021
(RMB)

  

Unutilised
proceeds as of
30 June 2021
(RMB)

  

Expected timeline for
the use of unutilised
proceeds

12,782,393,520.97   

Procurement of aircraft

   5,389,052,249.85    3,887,033,063.57   

On or before
30 June 2022

  

Repayment of the Company’s borrowings

   3,500,000,000.00    0   

Not applicable

 

  

 

  

 

  

 

  

 

 

  Note:

The total amounts of funds raised from 2020 Non-public Issuance of A shares was RMB12,782,393,520.97. After deducting the underwriting expenses of RMB2,000,000.00 (including VAT), the net cash subscription amount actually received was RMB12,780,393,520.97. After deducting other issuance expenses of RMB4,308,207.55 (including VAT) paid by the Company from the net cash subscription amounts, the actual net proceeds raised was RMB12,776,085,313.42.

 

(IV)

A Share Convertible Bonds Issuance

On 14 May 2020, the thirteenth meeting of the eighth session of the Board considered and approved, among others, the relevant resolutions on the issuance plan of the convertible corporate bonds in the total amount of not more than RMB16 billion (including RMB16 billion) which are convertible into new A shares and proposed to be issued by the Company within the PRC (the “A Share Convertible Bonds”) and the possible subscription for the A Share Convertible Bonds by CSAH.

On 15 October 2020, the Company has completed the public issuance of 160 million A Share Convertible Bonds in the total amount of RMB16 billion with a nominal value of RMB100 each and the initial conversion price of RMB6.24 per share, out of which CSAH subscribed for 101,027,580 A Share Convertible Bonds.

Pursuant to the approval by the Self-discipline Supervision Decision [2020] No. 355 issued by the SSE, the A Share Convertible Bonds were listed on the SSE since 3 November 2020 with the bond abbreviation of “Nanhang Convertible Bonds (南航轉債)” and the bond code of “110075”. The closing price of each bond on that day was RMB117.

On 21 April 2021, the conversion of the A Share Convertible Bonds was commenced, with the conversion price being RMB6.24 per share and the conversion period being from 21 April 2021 to 14 October 2026.

On 18 June 2021, CSAH converted all the A Share Convertible Bonds held by it, with a nominal value of RMB10,102,758,000, into A shares of the Company, with the number of shares converted being 1,619,031,728 shares. Upon completion of the conversion, CSAH does not hold any A Share Convertible Bonds. Immediately following the completion of the conversion, CSAH and its concert parties held in aggregate 10,880,881,085 RMB ordinary shares and overseas-listed foreign shares of the Company, representing 64.20% of the total shares in issue of the Company.

The use of proceeds utilized was consistent with the intended use of proceeds as previously disclosed.


Gross proceeds and the use of proceeds from the issuance of the A Share Convertible Bonds:

 

Gross proceeds from
the A Shares
Convertible Bonds
issuance (RMB)

  

Intended use of the
proceeds as previously
disclosed

   Utilised proceeds
as of 30 June 2021
(RMB)
     Unutilised
proceeds as of 30
June 2021 (RMB)
    

Expected timeline for
the use of unutilised
proceeds

16,000,000,000.00   

Purchasing aircraft and aviation equipment and maintenance projects

     2,949,269,871.52        7,630,334,048.20     

On or before
31 December 2022

  

Introduction of spare engines

     296,931,423.39        303,068,576.61     

On or before
31 December 2022

  

Supplementing working capital

     4,800,000,000.00        0     

Not applicable

 

Note:

The total amounts of funds raised from 2020 Public Issuance of A Share Convertible Bonds was RMB16,000,000,000.00. After deducting the underwriting expenses of RMB17,691,726.00 (including VAT), the net cash subscription amount actually received was RMB15,982,308,274.00. After deducting other issuance expenses of RMB2,704,354.28 (including VAT) paid by the Company from the net cash subscription amount, the actual net proceeds raised was RMB15,979,603,919.72.

As of 30 June 2021, the A Share Convertible Bonds with a nominal value of RMB5,896,806,000 were outstanding. If the outstanding A Share Convertible Bonds were fully converted during the reporting period based on the conversion price of RMB6.24 per share, the Company would have issued approximately 945,000,961 A shares and the total issued shares of the Company would have increased to approximately 17,893,404,885 shares, while the shares held by the controlling shareholder of the Company, CSAH, would have decreased to approximately 60.81% of the total issued shares of the Company. The A Share Convertible Bonds may be conditionally redeemed by the Company during the conversion period. It is expected that the full redemption of the outstanding A Share Convertible Bonds would not have material adverse impact on the financial and liquidity position of the Company. Please refer to note 12 and 17 to the interim financial report prepared under International Accounting Standard 34 and the section headed “Related Information of Bonds – II. Corporate Convertible Bonds” for the dilution impact on earnings per share may be brought by the full conversion of the outstanding A Share Convertible Bonds during the reporting period and other details of the A Share Convertible Bonds.

 

(V)

Amounts due to or from Connected Parties

 

1.

Matters Disclosed in Temporary Announcement with No Subsequent Progress or Changes

 

Event summary

  

Inquiry index

On 4 June 2021, the Company entered into
the Entrusted Loan Agreement with CSAH and Finance Company

  

For details, please refer to (i) the Announcement on Related Transactions of the Provision of Entrusted Loans by Controlling Shareholders of the Company published on China Securities Journal, Shanghai Securities News and Securities Times and the website of the SSE on 5 June 2021; and (ii) the announcement of the Company published on the websites of the Stock Exchange and the Company on 4 June 2021.


(VI)

Financial Business Between the Company and Its Related Financial Company, and Between Financial Company Controlled by the Company and Related Parties

 

1.

Deposits Business

Unit: RMB

 

Related party

  

Related party
relationship

   The maximum
daily deposit limit
     Deposit interest
rate range
    Balance at
the beginning
of the period
     Net increase      Balance at
the end
of the period
 

Finance Company

  

The same controlling shareholder

     14,500,000,000.00        0.49%-2.1     9,097,058,477.38        3,060,354,175.68        12,157,412,653.06  

Total

   /      /        /       9,097,058,477.38        3,060,354,175.68        12,157,412,653.06  
  

 

  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

2.

Loan Business

Unit: RMB

 

Related party

  

Related party
relationship

   Loan limit      Loan interest rate
range
    Balance at
the beginning
of the period
     Net increase      Balance at the end
of the period
 

Finance Company

  

The same controlling shareholder

     14,500,000,000.00        3%-4.075     1,687,583,610.41        3,019,656,585.29        4,707,240,195.70  

Total

   /      /        /       1,687,583,610.41        3,019,656,585.29        4,707,240,195.70  
  

 

  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Both of the amounts of net increase and balances included the principal and interest expenses of loan.

 

3.

Credit Business and Other Financial Business

Unit: RMB

 

Related party

  

Related party relationship

  

Type of business

   Total amount      Amount incurred  

Finance Company

  

The samecontrolling shareholder

  

Service charge for Letter of guarantee

     470,349.85        470,349.85  


X.

MAJOR CONTRACTS

 

(I)

Trust, Sub-contracting and Lease

During the reporting period, the Company did not enter into any trust or sub-contracting arrangement.

Please refer to the sections headed “Summary of Fleet Data” in “Principal Accounting Information and Financial Indicators” and “Connected Transactions Related to Daily Operation” in “Important Matters” for matters related to the Company’s lease transactions during the reporting period.

 

(II)

Guarantee

Unit: RMB million

 

Total amount of external guarantees provided by the Company (not including guarantees provided for its subsidiaries)  

Guarantor

  Relationship
between
guarantor
and listed
company
   

Guarantee

  Guaranteed
amount
    Commencement
date of
guarantee
(Agreement
execution date)
    Commencement
date of
guarantee
    Expiry
date of
guarantee
    Type of
guarantee
    Principal
guaranteed
debt
    Collaterals
(if any)
   

Guarantee
fully
fulfilled?

 

Overdue, if
any

  Overdue
amount
of
guarantee
    Counter
guarantee
available,
if any
    Guarantee
provided
to the
related
parties, if
any
    Connected
party
relationship
 

The Company

    /    

Self-sponsored trainee pilots of the Company

    193.81      
30 June
2008
 
 
   
30 June
2008
 
 
   
20 April
2033
 
 
   

Joint
liability
guarantee
 
 
 
    Nil       Nil    

Partial performance completed

 

Partial performance of joint liability guarantee

    19.91       Yes       No       /  

Xiamen Airlines

    /    

Half self-sponsored trainee pilots of Xiamen Airlines

    8.16      
4 May
2010
 
 
   
4 May
2010
 
 
   
6 July
2025
 
 
   

Joint
liability
guarantee
 
 
 
    Nil       Nil    

Partial performance completed

 

Partial performance of joint liability guarantee

    1.38       Yes       No       /  

 

Total guarantees incurred during the reporting period (excluding those provided to subsidiaries)

     0  

Total balance of guarantees as at the end of the reporting period (A) (excluding those provided to subsidiaries)

     202  
  

 

 

 
Guarantees provided by the Company and its subsidiaries to subsidiaries

 

Total guarantees to subsidiaries incurred during the reporting period

     0  

Total balance of guarantees to subsidiaries as at the end of the reporting period (B)

     37,447  
  

 

 

 
Aggregate guarantees provided by the Company (including those provided to subsidiaries)

 

Aggregate guarantees (A+B)

     37,649  

Percentage of aggregate guarantees to net assets of the Company (%)

     50.16  

Representing:

  

Amount of guarantees provided to shareholders, ultimate controller and their connected parties (C)

     0  

Amount of debts guarantees directly or indirectly provided to guaranteed parties with gearing ratio over 70% (D)

     0  

Excess amount of aggregate guarantees over 50% of net assets (E)

     0  

Aggregate amount of the above three categories (C+D+E)

     0  

Statement on the contingent joint and several liability in connection with unexpired guarantees

     /  

Statement on guarantees

     Nil  
  

 

 

 


The table below sets out the guarantees provided for SPVs by the Group as of the date of this report:

 

No.

  

Established SPV

  

Actually Provided
(Yes/no)

   Guaranteed Amount
(US$ 100 million)
 
1   

China Southern Airlines No. 1

  

Yes

     1.50  
2   

China Southern Airlines No. 2

  

Yes

     1.40  
3   

China Southern Airlines No. 3

  

Yes

     3.28  
4   

China Southern Airlines No. 4

  

Yes

     0.16  
5   

China Southern Airlines No. 5

  

Yes

     0.92  
6   

China Southern Airlines No. 6

  

Yes

     0.35  
7   

China Southern Airlines No. 7

  

Yes

     0.35  
8   

China Southern Airlines No. 8

  

Yes

     0.35  
9   

China Southern Airlines No. 9

  

Yes

     5.88  
10   

China Southern Airlines No. 10

  

Yes

     5.17  
11   

China Southern Airlines No. 11

  

Yes

     2.98  
12   

China Southern Airlines No. 12

  

Yes

     0.25  
13   

China Southern Airlines No. 13

  

Yes

     0.25  
14   

China Southern Airlines No. 14

  

Yes

     0.33  
15   

China Southern Airlines No. 15

  

Yes

     3.11  
16   

China Southern Airlines No. 16

  

Yes

     5.26  
17   

China Southern Airlines No. 17

  

Yes

     1.49  
18   

China Southern Airlines No. 18

  

Yes

     2.50  
19   

China Southern Airlines No. 19

  

Yes

     0.51  
20   

China Southern Airlines No. 20

  

Yes

     0.51  
21   

China Southern Airlines No. 21

  

Yes

     0.48  
22   

China Southern Airlines No. 22

  

Yes

     0.48  
23   

China Southern Airlines No. 23

  

Yes

     0.48  
24   

China Southern Airlines No. 24

  

Yes

     2.78  
25   

China Southern Airlines No. 25

  

Yes

     2.04  
26   

China Southern Airlines No. 26

  

Yes

     4.73  
27   

Chongqing Airlines No.1

  

Yes

     3.52  
28   

Chongqing Airlines No.2

  

Yes

     0.32  
29   

Xiamen Airlines No.1

  

Yes

     0.17  
30   

Xiamen Airlines No.2

  

Yes

     0.11  
31   

Xiamen Airlines No.3

  

Yes

     0.11  
32   

Xiamen Airlines No.4

  

Yes

     0.14  
33   

Xiamen Airlines No.5

  

Yes

     0.15  
34   

Xiamen Airlines No.6

  

Yes

     0.20  


No.

  

Established SPV

  

Actually Provided
(Yes/no)

   Guaranteed Amount
(US$ 100 million)
 
35   

Xiamen Airlines No.7

  

Yes

     0.11  
36   

Xiamen Airlines No.8

  

Yes

     0.14  
37   

Xiamen Airlines No.9

  

Yes

     0.15  
38   

Xiamen Airlines No.10

  

Yes

     0.15  
39   

Xiamen Airlines No.11

  

Yes

     0.16  
40   

Xiamen Airlines No.12

  

Yes

     0.13  
41   

Xiamen Airlines No.13

  

Yes

     0.19  
42   

Xiamen Airlines No.14

  

Yes

     0.18  
43   

Xiamen Airlines No.15

  

Yes

     0.18  
44   

Xiamen Airlines No.16

  

Yes

     0.13  
45   

Xiamen Airlines No.17

  

Yes

     0.12  
Total       /      53.90  

 

Note

The total guarantee amounts actually provided for the aforementioned 45 SPVs by the Company and its subsidiaries, i.e. Xiamen Airlines and Chongqing Airlines, are approximately US$5.390 billion (equivalent to approximately RMB34.82 billion, calculated based on the middle exchange rate of US$1=RMB6.4601 published by the People’s Bank of China on 30 June 2021), which are within the scope of the amount of guarantee authorisation considered and approved by the general meeting of the Company.

 

XI.

CIRCUMSTANCES, REASONS AND EFFECT OF CHANGES IN ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND ACCOUNTING METHODS COMPARED WITH THE PREVIOUS ACCOUNTING PERIOD

Changes in significant accounting policies

The Group has applied the following amendments to IFRSs issued by the IASB to this interim financial report for the current accounting period:

 

 

Amendment to IFRS 16, Covid-19-related rent concessions beyond 30 June 2021

 

 

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, Interest rate benchmark reform — phase 2

Other than the amendment to IFRS 16, the Group has not applied any new standard or interpretation that is not yet effective for the current accounting period. Impacts of the adoption of the amended IFRSs are discussed below:

Amendment to IFRS 16, Covid-19-related rent concessions beyond 30 June 2021 (“2021 amendment”)

The Group previously applied the practical expedient in IFRS 16 to all qualifying COVID-19-related rent concessions granted to the Group except for aircraft and engine leases such that as lessee it was not required to assess whether rent concessions occurring as a direct consequence of the COVID-19 pandemic were lease modifications, if the eligibility conditions are met. One of these conditions requires the reduction in lease payments affect only payments originally due on or before a specified time limit. The 2021 amendment extends this time limit from 30 June 2021 to 30 June 2022.

The Group has early adopted the 2021 amendment in this financial year. The adoption of 2021 amendment does not have any material impact on the financial position and the financial result of the Group.

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, Interest rate benchmark reform – phase 2

The amendments provide targeted reliefs from (i) accounting for changes in the basis for determining contractual cash flows of financial assets, financial liabilities and lease liabilities as modifications, and (ii) discontinuing hedge accounting when an interest rate benchmark is replaced by an alternative benchmark rate as a result of the reform of interbank offered rates (“IBOR reform”). The adoption of the amendments do not have any material impact on the financial position and the financial result of the Group.


XII. ENTRUSTED WEALTH MANAGEMENT

 

(I)

Overall Condition of Entrusted Wealth Management

Unit: RMB million

 

Type

  

Source of funding

   Amount
incurred
     Balance not
yet due
     Amount due
but not yet
recovered
 

Large-value certificates of deposit

  

unutilised funds from the non-public issuance of A shares

     0        4,079        /  

Seven-day notice deposit

  

unutilised funds from the non-public issuance of A shares

     168.22        37.36        /  

Large-value certificates of

deposit

  

unutilised funds from the public issuance of A Share Convertible Bonds

     0        8,172        /  

Seven-day notice deposit

  

unutilised funds from the public issuance of A Share Convertible Bonds

     43.58        0                /  
     

 

 

    

 

 

    

 

 

 

 

(II)

Single Entrusted Wealth Management

Unit: RMB million

 

Trustee

  

Type of
entrusted
wealth
management

   Amount of
entrusted
wealth
management
   Beginning
date of
entrusted
wealth
management
  

Termination
date of
entrusted
wealth
management

  

Source of
funds

  

Investment
of funds

   Method to
determine
return
   Annualized
rate of
return
  Actual
income
   Actual
recovery
   Through
procedure
prescribed
by law or
not
 

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   140    2020/6/23   

2021/6/10

     

Large-value certificates of deposit

   Fixed income    3.850%   2.56    142.56   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   200    2020/6/23   

2021/6/10

     

Large-value certificates of deposit

   Fixed income    3.850%   3.66    203.66   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   600    2020/6/23   

2021/4/20

  

unutilised funds from the non-public issuance of A shares

  

Large-value certificates of deposit

   Fixed income    3.900%   9.2    609.2      Yes  

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   20    2020/6/23   

2021/4/22

     

Large-value certificates of deposit

   Fixed income    3.900%   0.31    20.31   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   380    2020/6/23   

Not yet determined

     

Large-value certificates of deposit

   Fixed income    3.900%   5.83    5.83   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   500    2020/6/23   

Not yet determined

     

Large-value certificates of deposit

   Fixed income    3.900%   9.75    9.75   


Trustee

  

Type of
entrusted
wealth
management

   Amount of
entrusted
wealth
management
   Beginning
date of
entrusted
wealth
management
  

Termination
date of
entrusted
wealth
management

  

Source of
funds

  

Investment
of funds

   Method to
determine
return
   Annualized
rate of
return
  Actual
income
   Actual
recovery
   Through
procedure
prescribed
by law or
not
 

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   1,000    2020/6/23   

Not yet determined

     

Large-value certificates of deposit

   Fixed income    3.900%   19.5    19.5   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   1,000    2020/6/23   

Not yet determined

     

Large-value certificates of deposit

   Fixed income    3.900%   19.5    19.5   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   1,000    2020/6/23   

Not yet determined

     

Large-value certificates of deposit

   Fixed income    3.900%   19.5    19.5   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   150    2020/7/6   

2021/4/13

     

Large-value certificates of deposit

   Fixed income    3.850%   2.67    152.67   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   250    2020/7/6   

2021/6/10

     

Large-value certificates of deposit

   Fixed income    3.850%   4.49    254.49   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   199    2020/7/6   

Not yet determined

  

unutilised funds from the non-public issuance of A shares

  

Large-value certificates of deposit

   Fixed income    3.850%   3.52    3.52      Yes  

China Everbright Bank Company Limited

  

Seven-day notice deposit

   62    2020/12/10   

2021/4/13

     

Seven-day notice deposit

   Fixed income    2.025%   0.43    62.43   

China Everbright Bank Company Limited

  

Seven-day notice deposit

   3    2020/12/10   

Not yet determined

     

Seven-day notice deposit

   Fixed income    2.025%   0    0   

China Everbright Bank Company Limited

  

Seven-day notice deposit

   104    2020/12/23   

2021/2/23

     

Seven-day notice deposit

   Fixed income    2.025%   0.36    104.36   

China Everbright Bank Company Limited

  

Seven-day notice deposit

   220    2020/12/23   

2021/3/30

     

Seven-day notice deposit

   Fixed income    2.025%   1.2    221.2   

China Everbright Bank Company Limited

  

Seven-day notice deposit

   22    2020/12/23   

2021/4/20

     

Seven-day notice deposit

   Fixed income    2.025%   0.15    22.15   


Trustee

  

Type of
entrusted
wealth
management

   Amount of
entrusted
wealth
management
   Beginning
date of
entrusted
wealth
management
  

Termination
date of
entrusted
wealth
management

  

Source of
funds

  

Investment
of funds

   Method to
determine
return
   Annualized
rate of
return
  Actual
income
   Actual
recovery
   Through
procedure
prescribed
by law or
not
 

China Everbright Bank Company Limited

  

Seven-day notice deposit

   17.33    2021/1/25   

2021/3/3

     

Seven-day notice deposit

   Fixed income    2.025%   0.04    17.37   

China Everbright Bank Company Limited

  

Seven-day notice deposit

   1.41    2021/1/25   

Not yet determined

     

Seven-day notice deposit

   Fixed income    2.025%   0    0   

China Everbright Bank Company Limited

  

Seven-day notice deposit

   100.03    2021/2/7   

2021/2/23

     

Seven-day notice deposit

   Fixed income    2.025%   0.09    100.12   

China Everbright Bank Company Limited

  

Seven-day notice deposit

   5    2021/3/1   

2021/3/29

  

unutilised funds from the non-public issuance of A shares

  

Seven-day notice deposit

   Fixed income    2.025%   0.01    5.01   

China Everbright Bank Company Limited

  

Seven-day notice deposit

   19    2021/4/29   

Not yet determined

     

Seven-day notice deposit

   Fixed income    2.025%   0    0   

China Everbright Bank Company Limited

  

Seven-day notice deposit

   11.5    2021/5/8   

2021/6/10

     

Seven-day notice deposit

   Fixed income    2.025%   0.02    11.52      Yes  

China Everbright Bank Company Limited

  

Seven-day notice deposit

   2.45    2021/5/11   

Not yet determined

     

Seven-day notice deposit

   Fixed income    2.025%   0    0   

China Everbright Bank Company Limited

  

Seven-day notice deposit

   11.5    2021/6/18   

Not yet determined

     

Seven-day notice deposit

   Fixed income    2.025%   0    0   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   110    2020/10/26   

2021/2/26

     

Large-value certificates of deposit

   Fixed income    4.000%   1.58    111.58   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   180    2020/10/26   

2021/3/10

  

unutilised funds from the public issuance of A Share Convertible Bonds

  

Large-value certificates of deposit

   Fixed income    4.000%   2.53    182.53   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   210    2020/10/26   

2021/3/17

     

Large-value certificates of deposit

   Fixed income    4.000%   3.16    213.16   


Trustee

  

Type of
entrusted
wealth
management

   Amount of
entrusted
wealth
management
   Beginning
date of
entrusted
wealth
management
  

Termination
date of
entrusted
wealth
management

  

Source of
funds

  

Investment
of funds

   Method to
determine
return
   Annualized
rate of
return
  Actual
income
   Actual
recovery
   Through
procedure
prescribed
by law or
not
 

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   140    2020/10/26   

2021/3/26

     

Large-value certificates of deposit

   Fixed income    4.000%   2.21    142.21   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   23    2020/10/26   

2021/4/7

     

Large-value certificates of deposit

   Fixed income    4.000%   0.32    23.32   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   20    2020/10/26   

2021/4/14

     

Large-value certificates of deposit

   Fixed income    4.000%   0.32    20.32   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   170    2020/10/26   

2021/4/26

     

Large-value certificates of deposit

   Fixed income    4.000%   2.53    172.53   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   130    2020/10/26   

2021/5/7

     

Large-value certificates of deposit

   Fixed income    4.000%   1.89    131.89   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   90    2020/10/26   

2021/5/19

  

unutilised funds from the public issuance of A Share Convertible Bonds

  

Large-value certificates of deposit

   Fixed income    4.000%   1.26    91.26      Yes  

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   380    2020/10/26   

2021/5/26

     

Large-value certificates of deposit

   Fixed income    4.000%   5.68    385.68   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   50    2020/10/26   

2021/6/2

     

Large-value certificates of deposit

   Fixed income    4.000%   0.63    50.63   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   200    2020/10/26   

2021/6/23

     

Large-value certificates of deposit

   Fixed income    4.000%   2.84    202.84   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   270    2020/10/26   

2021/6/28

     

Large-value certificates of deposit

   Fixed income    4.000%   4.1    274.1   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   172    2020/10/26   

Not yet determined

     

Large-value certificates of deposit

   Fixed income    4.000%   2.53    2.53   


Trustee

  

Type of
entrusted
wealth
management

   Amount of
entrusted
wealth
management
   Beginning
date of
entrusted
wealth
management
  

Termination
date of
entrusted
wealth
management

  

Source of
funds

  

Investment
of funds

   Method to
determine
return
   Annualized
rate of
return
  Actual
income
   Actual
recovery
   Through
procedure
prescribed
by law or
not
 

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   2,000    2020/10/26   

Not yet determined

     

Large-value certificates of deposit

   Fixed income    4.000%   40    40   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   2,000    2020/10/26   

Not yet determined

     

Large-value certificates of deposit

   Fixed income    4.000%   40    40   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   2,000    2020/10/26   

Not yet determined

     

Large-value certificates of deposit

   Fixed income    4.000%   40    40   

China Everbright Bank Company Limited

  

Large-value certificates of deposit

   2,000    2020/10/26   

Not yet determined

     

Large-value certificates of deposit

   Fixed income    4.000%   40    40   

China Everbright Bank Company Limited

  

Seven-day notice deposit

   43    2020/12/10   

2021/1/26

  

unutilised funds from the public issuance of A Share Convertible Bonds

  

Seven-day notice deposit

   Fixed income    2.025%   0.11    43.11      Yes  

China Everbright Bank Company Limited

  

Seven-day notice deposit

   30    2020/12/10   

2021/2/23

     

Seven-day notice deposit

   Fixed income    2.025%   0.13    30.13   

China Everbright Bank Company Limited

  

Seven-day notice deposit

   14.64    2021/2/7   

2021/2/23

     

Seven-day notice deposit

   Fixed income    2.025%   0.01    14.65   

China Everbright Bank Company Limited

  

Seven-day notice deposit

   14.64    2021/2/23   

2021/3/10

     

Seven-day notice deposit

   Fixed income    2.025%   0.01    14.65   

China Everbright Bank Company Limited

  

Seven-day notice deposit

   6.3    2021/3/23   

2021/5/20

     

Seven-day notice deposit

   Fixed income    2.025%   0.02    6.32   

China Everbright Bank Company Limited

  

Seven-day notice deposit

   8    2021/6/3   

2021/6/23

     

Seven-day notice deposit

   Fixed income    2.025%   0.01    8.01   


Changes in the Share Capital, Shareholders’ Profile and Disclosure of Interests

 

I.

CHANGES IN SHARE CAPITAL

 

(I)

Changes in Shareholdings

Unit: Share

 

     31 December 2020      Increase/(decrease)
during January to
June 2021
     30 June 2021  
     Number of Shares      Percentage
(%)
     Number of Shares      Number of Shares      Percentage
(%)
 

I. Shares subject to trading restrictions

              

1. RMB ordinary shares

     2,942,637,115        19.20        0        2,942,637,115        17.36  

2. Overseas-listed foreign shares

     1,209,621,577        7.89        0        1,209,621,577        7.14  

Total

     4,152,258,692        27.09        0        4,152,258,692        24.50  

II. Shares not subject to trading restrictions

              

1. RMB ordinary shares

     8,111,520,431        52.91        1,619,101,529        9,730,621,960        57.41  

2. Overseas-listed foreign shares

     3,065,523,272        20.00        0        3,065,523,272        18.09  

Total

     11,177,043,703        72.91        1,619,101,529        12,796,145,232        75.50  

III. Total number of shares

     15,329,302,395        100.00        1,619,101,529        16,948,403,924        100.00  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(II)

Description of Change in Shares

Approved by the CSRC by the “Approval of China Southern Airlines Company Limited’s Public Issuance of Convertible Bonds (《關於核准中國南方航空股份有限公司公開發行可轉換公司債券的批復》 (證監許可[2020]2264))” (Zheng Jian Xu Ke [2020] No. 2264), the Company publicly issued 160 million A Share Convertible Bonds with a nominal value of RMB100 each and a total amount of RMB16 billion with a maturity of 6 years on 15 October 2020. On 3 November 2020, pursuant to the approval of the Self-discipline Supervision Decision [2020] No. 355 issued by the SSE, the convertible bonds of the Company with an amount of RMB16 billion were listed on the SSE with the bond abbreviation of “Nanhang Convertible Bonds (南航轉債)” and the bond code of “110075”. According to the relevant provisions of the Rules Governing the Listing of Stocks on the SSE and the agreement of the Offering Document of the Public issuance of A Share Convertible Bonds by China Southern Airlines Company Limited, the conversion of the A Share Convertible Bonds was commenced on 21 April 2021, with the conversion price being RMB6.24 per share. During the reporting period, Nanhang Convertible Bonds with nominal value of RMB10,103,194,000 were converted into A shares of the Company, and the total number of shares being converted was 1,619,101,529. For details, please refer to the relevant announcements published on the China Securities Journal, Shanghai Securities News and Securities Times and the website of the SSE on 14 April 2021, 23 June 2021, and 3 July 2021, respectively.

 

(III)

Other Information Considered to Be Discloseable by the Company or Required to Be Disclosed by the Securities Regulatory Authorities

Nil.

 

II.

PARTICULARS OF SHAREHOLDERS AND DE FACTO CONTROLLER

 

(I)

Number of Shareholders

As at the end of the reporting period, total number of ordinary shareholders of the Company was 200,309.


(II)

Particulars of Shareholdings of Top Ten Shareholders and Top Ten Shareholders Holding the Company’s Tradable Shares (or Shareholders Not Subject to Trading Restrictions)

Particulars of the top ten shareholders

Unit: Share

 

Name of the shareholder (in
full)

   Increase/
(decrease)
during the
reporting period
    Total number of
shares held at
the end of
reporting period
     Shareholding
percentage
at the end of
reporting
period (%)
     Number of
shares subject to
trading
restrictions at
the end of
reporting period
     Status of pledge or
freeze
Status of pledged or
frozen shares
    

Capacity of shareholders

   Status of
shares
     Number  

China Southern Air Holding Company Limited

     1,619,031,728       8,600,897,508        50.75        2,942,637,115        Nil        0      State-owned legal entity

Nan Lung Holding Limited

     0       2,243,271,577        13.24        1,209,621,577        Nil        0      State-owned legal entity

HKSCC Nominees Limited

     (20,000     1,750,442,857        10.33        0        Unknown        —        Overseas legal entity

Hong Kong Securities Clearing Company Limited

     (11,540,773     616,420,624        3.64        0        Nil        0      Overseas legal entity

China National Aviation Fuel Group Limited

     (25,811,790     457,147,480        2.70        0        Nil        0      State-owned legal entity

China Securities Finance Corporation Limited

     (8     320,484,148        1.89        0        Nil        0      State-owned legal entity

American Airlines, Inc.

     0       270,606,272        1.60        0        Nil        0      Overseas legal entity

China Structural Reform Fund Corporation Limited

     (46,882,483     194,019,933        1.14        0        Nil        0      State-owned legal entity

Spring Airlines Co., Ltd.

     0       140,531,561        0.83        0        Nil        0      Domestic Non-State-owned legal entity

China Reform State-owned Enterprise Operation Investment Fund Management (Guangzhou) Co., Ltd. – China Reform State-owned Enterprise Operation (Guangzhou) Investment Fund (LLP)

     0       70,006,275        0.41        0        Nil        0      Domestic Non-State-owned legal entity

Particulars of the top ten shareholders not subject to trading restrictions

Unit: Share

 

Name of Shareholder

   Number of tradable shares
not subject to trading
restrictions
     Type and number of shares  
  

Type of shares

   Number  

CSAH

     5,658,260,393      RMB ordinary shares      5,658,260,393  

Nan Lung

     1,033,650,000      Overseas-listed foreign shares      1,033,650,000  

HKSCC Nominees Limited

     1,750,442,857      Overseas-listed foreign shares      1,750,442,857  

Hong Kong Securities Clearing Company Limited

     616,420,624      RMB ordinary shares      616,420,624  

China National Aviation Fuel Group Limited

     457,147,480      RMB ordinary shares      457,147,480  

China Securities Finance Corporation Limited

     320,484,148      RMB ordinary shares      320,484,148  

American Airlines, Inc.

     270,606,272      Overseas-listed foreign shares      270,606,272  

China Structural Reform Fund Corporation Limited

     194,019,933      RMB ordinary shares      194,019,933  

Spring Airlines Co., Ltd

     140,531,561      RMB ordinary shares      140,531,561  

China Reform State-owned Enterprise Operation Investment Fund
Management (Guangzhou) Co., Ltd. – China Reform State-owned Enterprise Operation (Guangzhou) Investment Fund (LLP)

     70,006,275      RMB ordinary shares      70,006,275  

Note on the connected relationship or acting in concert relationship of the above shareholders

    



CSAH held in aggregate 2,279,983,577 (including shares subject to
trading restrictions) H shares of the Company through its wholly-owned
subsidiaries in Hong Kong, namely Nan Lung and Perfect Lines (Hong
Kong) Limited. The Company is not aware of any other connected
relationship between other shareholders.
 
 
 
 
 


Particulars of the top ten shareholders subject to trading restrictions and the conditions of trading restrictions

Unit: Share

 

No.

  

Name of
shareholder subject
to trading
restrictions

   Number of
shares held
subject to
trading
restrictions
     Listing status of shares which are subject
to trading restrictions
    

Conditions for trading restrictions

   Eligible listing time    Number of new
listed shares
 

1

   Nan Lung      600,925,925      10 September 2021      600,925,925      Non-public Issuance of shares subject to commitments

2

   CSAH      489,202,658      27 September 2021      489,202,658      Non-public Issuance of shares subject to trading restrictions

3

   Nan Lung      608,695,652      14 April 2023      608,695,652      Non-public Issuance of shares subject to commitments

4

   CSAH      2,453,434,457      19 June 2023      2,453,434,457      Non-public Issuance of shares subject to trading restrictions

Note on the connected relationship or acting in concert relationship of the above shareholders

    


CSAH held aggregate 2,279,983,577 (including shares subject to trading restrictions) H shares of the
Company through its wholly-owned subsidiaries in Hong Kong, namely Nan Lung and Perfect Lines (Hong
Kong) Limited (including shares subject to trading restrictions). The Company is not aware of any other
connected relationship between other shareholders.

 

(III)

Strategic Investors or General Legal Entities becoming one of the Top Ten Shareholder of the Company as a Result of Placing of New Shares

Nil.

 

(IV)

Changes of the Controlling Shareholder or De Facto Controller

During the reporting period, there were no changes of the controlling shareholder or de facto controller of the Company.


III.

DISCLOSURE OF INTERESTS

As at 30 June 2021, to the best knowledge of the Directors, chief executive and Supervisors of the Company, the following persons (other than the Directors, chief executive or Supervisors of the Company) had interests or short positions in the shares (“Shares”) or underlying shares of the Company which are required to be recorded in the register of the Company required to be kept under section 336 of the SFO:

 

Name of shareholders

  

Capacity

  

Class of
Shares

   Number of Shares
held
    % of the total
issued A
Shares of the
Company
(Note 3)
    % of the total
issued H
Shares of the
Company
(Note 3)
    % of the total
issued share
capital of the
Company
(Note 3)
 

CSAH (Note 1)

   Beneficial Owner    A Share      8,600,897,508 (L)      67.87     —         50.75
   Interest of controlled corporations    H Share      2,279,983,577 (L)      —         53.33     13.45
      Sub-total      10,880,881,085 (L)      —         —         64.20
        

 

 

   

 

 

   

 

 

   

 

 

 

Nan Lung (Note 1)

   Beneficial Owner Interest of controlled corporations    H Share      2,279,983,577 (L)      —         53.33     13.45
        

 

 

   

 

 

   

 

 

   

 

 

 

American Airlines Group Inc. (Note 2)

   Interest of controlled corporations    H Share      270,606,272 (L)      —         6.33     1.60
        

 

 

   

 

 

   

 

 

   

 

 

 

Notes:

 

(1)

CSAH was deemed to be interested in an aggregate of 2,279,983,577 H Shares through its direct and indirect wholly-owned subsidiaries in Hong Kong, of which 31,150,000 H Shares were directly held by Perfect Lines (Hong Kong) Limited (representing approximately 0.73% of its then total issued H Shares) and 2,248,833,577 H Shares were directly held by Nan Lung (representing approximately 52.60% of its then total issued H Shares). As Perfect Lines (Hong Kong) Limited is a wholly-owned subsidiary of Nan Lung, Nan Lung was also deemed to be interested in the 31,150,000 H Shares held by Perfect Lines (Hong Kong) Limited.

(2)

American Airlines Group Inc. was deemed to be interested in 270,606,272 H Shares by virtue of its 100% control over American Airlines.

(3)

The percentage was calculated according to the relevant total issued A Shares, total issued H Shares and the total issued share capital of the Company as at 30 June 2021.

Save as disclosed above, as at 30 June 2021, so far as was known to the Directors, chief executive and Supervisors of the Company, no other person (other than the Directors, chief executive or Supervisors of the Company) had interests or short positions in the Shares or underlying shares of the Company recorded in the register of the Company required to be kept under section 336 of the SFO.


Promoting six

campaigns,

namely safety production,

grasping major strategic opportunities,

deepening reforms in key areas,

enhancing management to first class,

optimizing and adjusting five major structures,

and improving service quality.


Related Information of Bonds

 

I.

ENTERPRISE BOND, CORPORATE BOND AND NON-FINANCIAL CORPORATE DEBT FINANCING INSTRUMENTS

 

(I)

Enterprise Bond

Nil

 

(II)

Corporate Bond

 

1.

Basic Information of Corporate Bond

The table below sets out the corporate bond outstanding of the Group as of the date of this report:

Unit: RMB million

 

Name

 

Abbreviation

  Code     Issuance
date
    Interest
date
    Maturity
date
    Outstanding
balance of
bonds
    Interest
rate (%)
   

Repayment of
principal and
interest

 

Trading
floor

 

Arrangement to
ensure the
suitability of
investors (if
any)

 

Trading
mechanism

 

Whether
there is a
risk of
termination
of the
listing

2019 corporate bonds publicly offered of China Southern Airlines Company Limited (the second tranche)

 

19 China Southern Airlines 02

    155417       2019/5/16       2019/5/17       2022/5/17       2,000       3.72    

Pay interests once a year, pay back principal plus interests when due

  SSE  

Only qualified investors stipulated by SSE can participate in the transaction

 

Adopt bidding, quotation, inquiry and agreement trading at the same time

  No

2019 corporate bonds publicly offered of China Southern Airlines Company Limited (the first tranche)

 

19 China Southern Airlines 01

    155185       2019/2/21       2019/2/22       2022/2/22       3,000       3.45    

Pay interests once a year, pay back principal plus interests when due

  SSE  

Only qualified investors stipulated by SSE can participate in the transaction

 

Adopt bidding, quotation, inquiry and agreement trading at the same time

  No

2018 corporate bonds publicly offered of China Southern Airlines Company Limited (the first tranche)

 

18 China Southern Airlines 01

    155052       2018/11/26       2018/11/27       2021/11/27       2,000       3.92    

Pay interests once a year, pay back principal plus interests when due

  SSE  

Only qualified investors stipulated by SSE can participate in the transaction

 

Adopt bidding, quotation, inquiry and agreement trading at the same time

  No

2020 corporate bonds publicly offered of Xiamen Airlines Company Limited (the first tranche)(Type 1)

 

20 Xiamen Airlines 01

    163273       2020/3/16       2020/3/16       2023/3/16       1,000       2.95    

Pay interests once a year, pay back principal plus interests when due

  SSE  

Only qualified investors stipulated by SSE can participate in the transaction

 

Adopt bidding, quotation, inquiry and agreement trading at the same time

  No

2019 corporate bonds publicly offered of Xiamen Airlines Company Limited (the first tranche)

 

19 Xiamen Airlines 01

    163004       2019/11/20       2019/11/20       2022/11/20       1,500       3.58    

Pay interests once a year, pay back principal when due

  SSE  

Only qualified investors stipulated by SSE can participate in the transaction

 

Adopt bidding, quotation, inquiry and agreement trading at the same time

  No


2.

During the Reporting Period, the Implementation, Changes and Impact of Guarantee, Debt Repayment Plan and Other Debt Repayment Protection Measures

Corporate bonds of the Company are unsecured bonds. During the reporting period, debt repayment plan and other debt repayment protection measures are implemented in accordance with the provisions and commitments in the prospectus.

 

3.

Other Information about Corporate Bonds

On 14 May 2021, the Company disclosed the Announcement on Principal and Interest Settlement of 2021 and Delisting of 2016 Corporate Bonds of China Southern Airlines Company Limited (Second Tranche) (《中國南方航空股份有限公司2016年公司債券(第二期)2020年本息兌付及摘牌公告》 ). The Company fully paid the principal and interest of “16 China Southern Airlines 02” corporate bonds to the bank account designated by China Securities Depository and Clearing Corporation Limited Shanghai Branch two trading days before the date of settling the principal and interest of 2016 Corporate Bonds of China Southern Airlines Company Limited (the second tranche). On 25 May 2021, the Company fully settled the principal and interest of the 2016 Corporate Bonds of China Southern Airlines Company Limited (the second tranche) to investors, and “16 China Southern Airlines 02” corporate bonds were delisted on the date of settlement.

 

(III)

Non-financial Corporate Debt Financing Instruments in the Interbank Bond Market

Basis information of non-financial corporate debt financing instruments

The table below sets out the non-financial corporate debt financing instruments outstanding of the Group as of the date of this report:

Unite: RMB million

 

Name

 

Abbreviation

  Code     Issuance
date
    Interest
date
    Maturity
date
    Outstanding
balance of
bonds
    Interest
rate (%)
   

Repayment
of principal
and interest

 

Trading floor

 

Arrangement
to ensure the
suitability of
investors (if
any)

 

Trading
mechanism

 

Whether
there is a
risk of
termination
of the
listing

The fifteenth tranche of Ultra-short-term Financing Bills of China Southern Airlines Company Limited in 2021

 

21 China Southern Airlines SCP015

    012102109       2021/6/8       2021/6/9       2021/9/7       2,000       2.16    

Repayment of the principal and interest in lump sum when due

 

National interbank bond market

  /  

Price-enquiry transaction approach and one-click-order transaction approach

  No

The first tranche of medium-term notes of China Southern Airlines Company Limited in 2019

 

19 China Southern Airlines MTN001

    101901408       2019/10/18       2019/10/21       2022/10/21       1,000       3.20    

Pay interests once a year, pay back principal plus interests when due

 

National interbank bond market

  /  

Price-enquiry transaction approach and one-click-order transaction approach

  No

The first tranche of medium-term notes of China Southern Airlines Company Limited in 2020

 

20 China Southern Airlines MTN001

    102000113       2020/2/12       2020/2/13       2023/2/13       1,000       3.12    

Pay interests once a year, pay back principal plus interests when due

 

National interbank bond market

  /  

Price-enquiry transaction approach and one-click-order transaction approach

  No

The second tranche of medium-term notes of China Southern Airlines Company Limited in 2020

 

20 China Southern Airlines MTN002

    102000199       2020/2/26       2020/2/27       2023/2/27       1,000       3.05    

Pay interests once a year, pay back principal plus interests when due

 

National interbank bond market

  /  

Price-enquiry transaction approach and one-click-order transaction approach

  No

The third tranche of medium-term notes of China Southern Airlines Company Limited in 2020

 

20 China Southern Airlines MTN003

    102000238       2020/3/3       2020/3/5       2023/3/5       1,000       3.00    

Pay interests once a year, pay back principal plus interests when due

 

National interbank bond market

  /  

Price-enquiry transaction approach and one-click-order transaction approach

  No


Name

 

Abbreviation

 

Code

 

Issuance
date

 

Interest
date

 

Maturity
date

 

Outstanding
balance of
bonds

 

Interest
rate
(%)

 

Repayment
of
principal
and
interest

 

Trading
floor

 

Arrangement
to ensure
the
suitability
of
investors

(if any)

 

Trading
mechanism

 

Whether
there is a
risk of
termination
of the
listing

The fourth tranche of medium-term notes of China Southern Airlines Company Limited in 2020

 

20 China Southern Airlines MTN004

  102000239   2020/3/3   2020/3/5   2023/3/5   1,000   3.00  

Pay interests once a year, pay back principal plus interests when due

 

National interbank bond market

  /  

Price-enquiry transaction approach and one-click-order transaction approach

  No

The fifth tranche of medium-term notes of China Southern Airlines Company Limited in 2020

 

20 China Southern Airlines MTN005

  102000240   2020/3/3   2020/3/5   2025/3/5   1,000   3.28  

Pay interests once a year, pay back principal plus interests when due

 

National interbank bond market

  /  

Price-enquiry transaction approach and one-click-order transaction approach

  No

The sixth tranche of medium-term notes of China Southern Airlines Company Limited in 2020

 

20 China Southern Airlines MTN006

  102000280   2020/3/5   2020/3/9   2023/3/9   1,000   3.00  

Pay interests once a year, pay back principal plus interests when due

 

National interbank bond market

  /  

Price-enquiry transaction approach and one-click-order transaction approach

  No

The seventh tranche of medium-term notes of China Southern Airlines Company Limited in 2020

 

20 China Southern Airlines MTN007

  102000859   2020/4/23   2020/4/26   2023/4/26   1,000   2.44  

Pay interests once a year, pay back principal plus interests when due

 

National interbank bond market

  /  

Price-enquiry transaction approach and one-click-order transaction approach

  No

The eighth tranche of medium-term notes of China Southern Airlines Company Limited in 2020

 

20 China Southern Airlines MTN008

  102000858   2020/4/23   2020/4/27   2023/4/27   500   2.44  

Pay interests once a year, pay back principal plus interests when due

 

National interbank bond market

  /  

Price-enquiry transaction approach and one-click-order transaction approach

  No

The ninth tranche of medium-term notes of China Southern Airlines Company Limited in 2020

 

20 China Southern Airlines MTN009

  102000888   2020/4/27   2020/4/28   2023/4/28   500   2.44  

Pay interests once a year, pay back principal plus interests when due

 

National interbank bond market

  /  

Price-enquiry transaction approach and one-click-order transaction approach

  No

The second tranche of medium-term notes of Xiamen Airlines Company Limited in 2016

 

16 Xiamen Airlines MTN002

  101656044   2016/10/20   2016/10/21   2021/10/21   1,600   3.11  

Pay interests once a year, pay back principal plus interests when due

 

National interbank bond market

  /  

Price-enquiry transaction approach and one-click-order transaction approach

  No

The eighteenth tranche of Ultra-short-term Financing Bills of China Southern Airlines Company Limited in 2021

 

21 China Southern Airlines SCP018

  012102519   2021/7/12   2021/7/14   2021/9/10   4,200   2.22  

Repayment of the principal and interest in lump sum when due

 

National interbank bond market

  /  

Price-enquiry transaction approach and one-click-order transaction approach

  No

The first tranche of medium-term notes of China Southern Airlines Company Limited in 2021

 

21 China Southern Airlines MTN001

  102101342   2021/7/19   2021/7/21   2024/7/21   1,000   3.17  

Pay interests once a year, pay back principal plus interests when due

 

National interbank bond market

  /  

Price-enquiry transaction approach and one-click-order transaction approach

  No


(IV) Principal Accounting Data and Financial Indicators

 

Major indicators

   As at the end of this
reporting period
     As at the end of last
year
     Increase/decrease as
compared to that as
at the end of last
year (%)
     Reasons for changes  

Current ratio

     0.39        0.41        (4.88      /  

Quick ratio

     0.37        0.39        (5.13      /  

Asset-liability ratio (%)

     71.78        73.92        (2.90      /  

 

     During this
reporting period

(January to June)
     During the
corresponding
period of last year
     Increase/decrease as
compared to that
for the
corresponding
period of
last year (%)
    

Reasons for changes

Net profit after deduction of non-recurring profit and loss

     (4,802      (8,423      42.99     

Decrease of loss for the period.

Debt-to-EBITDA ratio

     4.34        1.66        161.45     

Decrease of loss for the period.

Interest coverage ratio

     (1      (2      (50.00   

Decrease of loss for the period.

Cash interest coverage ratio

     4        (0.12      3,433.33     

A net cash inflow from operating activities recorded due to the increase of operating revenue for the period.

EBITDA-to-interest coverage ratio

     3        1        200.00     

Decrease of loss for the period.

Loan repayment rate (%)

     100.00        100.00        /      /

Interest repayment rate (%)

     100.00        100.00        /      /

 

II.

CORPORATE CONVERTIBLE BONDS

 

(I)

Issuance of Convertible Bonds

On 14 May 2020, the thirteenth meeting of the eighth session of Board of the Company was held, and the resolution on the satisfaction by the Company of the conditions of the public issuance of A Share Convertible Bonds was passed, as well as the resolutions on the specific plan, preliminary proposal and feasibility report, etc. On 30 June 2020, 2019 annual general meeting, 2020 first class meeting for holders of A Shares and 2020 first class meeting for holders of H Shares were held, at which the relevant resolutions on the public issuance of A Share Convertible Bonds were considered and approved.

On 10 July 2020, the Company received the CSRC’s Acceptance Notice of the Application for Administration Permission (Acceptance No. 201734) (《中國證監會行政許可申請受理單》(201734 )) issued by the CSRC. The CSRC, pursuant to applicable laws, conducted a review of the application materials for administrative permission of listed companies’ Issuance of A Share Convertible Bonds submitted by the Company. The CSRC is of the opinion that the application materials are complete and has decided to accept the applications for administrative permission for further processing.

On 24 August 2020, the 124th working meeting in 2020 of the 18th session of the Issuance Examination Committee of the CSRC reviewed the Company’s application for the public issuance of convertible bonds. According to the meeting review results, the Company’s application for the public issuance of convertible bonds was approved.


On 21 September 2020, the Company received the “Approval of China Southern Airlines Company Limited’s Public Issuance of Convertible Bonds (Zheng Jian Xu Ke [2020] No. 2264) (《關於核准中國南方航空股份有限公司公開發行可轉換公司債券的批復》 (證監許可[2020]2264))” issued by the CSRC. On 15 October 2020, the Company publicly issued 160 million A Share Convertible Bonds with nominal value of RMB100 each, representing a total amount of RMB16 billion. On 21 October 2020, the Company received the proceeds from public issuance of A Share Convertible Bonds and deposited them in the special account for the proceeds.

Pursuant to the approval by the Self-discipline Supervision Decision [2020] No. 355 issued by the SSE, the convertible bonds of the Company with an amount of RMB16 billion were listed on the SSE since 3 November 2020 with the bond abbreviation of “Nanhang Convertible Bonds (南航轉債)” and the bond code of “110075”.

 

(II)

Holders and Guarantors of Convertible Bonds During the Reporting Period

 

Name of corporate convertible bonds

   2020 Corporate Convertible
Bonds of China Southern
Airlines Company Limited
 

Numbers of holders of convertible bonds at the end of the period

     60,788  

Guarantor of the convertible bonds of the Company

     Nil  

Material changes in profitability, assets conditions, and credit of guarantors

     Nil  

Particulars of the top ten convertible bonds holders:

 

Name of the corporate convertible bonds holders

   Total number of
bonds held at
the end of
reporting
period (RMB)
     Bond-holding
percentage (%)
 

Specific accounts for bonds repurchase and pledge under the registration and settlement system (Industrial and Commercial Bank of China)

     728,107,000        12.35  

Agricultural Bank of China Limited – Guangfa Balance Selected Mixed Type Securities Investment Fund (廣發均衡優選混合型證券投資基金)

     559,995,000        9.50  

Specific accounts for bonds repurchase and pledge under the registration and settlement system (China Construction Bank)

     358,648,000        6.08  

Industrial Bank Co., Ltd. – GF Stable Preferred Six-month Hybrid Securities Investment Fund (廣發穩健優選六個月持有期混合型證券投資基金)

     321,586,000        5.45  

Industrial and Commercial Bank of China Limited – E Fund Management Anxin Huibao Bond Securities Investment Fund (易方達安心回報債券型證券投資基金)

     216,557,000        3.67  

Specific accounts for bonds repurchase and pledge under the registration and settlement system (China Merchants Bank Co., Ltd.)

     197,608,000        3.35  

Specific accounts for bonds repurchase and pledge under the registration and settlement system (Bank of Communications)

     189,717,000        3.22  

Specific accounts for bonds repurchase and pledge under the registration and settlement system (Agricultural Bank of China)

     170,918,000        2.90  

Taikang Life Insurance Co., Ltd. – Dividend – Personal Dividend – 019L- FH002 Shanghai (泰康人壽保險股份有限公司-分紅-個人分紅-019L- FH002)

     168,232,000        2.85  

Specific accounts for bonds repurchase and pledge under the registration and settlement system (Bank of China)

     133,621,000        2.27  


(III)

Changes in Convertible Bonds During the Reporting Period

Unit: RMB

 

Name of the corporate convertible bonds

   Prior to
current change
     Increase/decrease in the current changes      After current
changes
 
   Converted      Redeemed      Resold  

2020 Corporate Convertible Bonds of China Southern Airlines Company Limited

     16,000,000,000.00        10,103,194,000.00        —          —          5,896,806,000.00  

 

(IV)

Cumulative Number of Shares Converted During the Reporting Period

 

Name of Convertible Bonds

   2020 Corporate
Convertible Bonds of
China Southern
Airlines Company
Limited
 

Nominal value of convertible bonds converted during the reporting period (RMB)

     10,103,194,000.00  

Number of shares converted during the reporting period (shares)

     1,619,101,529  

Aggregated number of shares converted (shares)

     1,619,101,529  

Aggregated number of shares converted per the total number of shares issued by the Company before conversion (%)

     10.56  

Nominal value of outstanding convertible bonds (RMB)

     5,896,806,000.00  

Outstanding convertible bonds per the total number of convertible bonds issued (%)

     36.86  

 

(V)

Information on the Company’s Liability and Credit Changes As Well As the Cash Arrangement for the Future Annual Debt Repayment

Pursuant to the relevant provisions of the Administrative Measures for the Issuance of Securities by Listed Companies, the Administrative Measures for Issuance and Trading of Corporate Bonds and the Rules Governing the Listing of Stocks on Shanghai Stock Exchange, during the reporting period, the Company entrusted a credit rating agency China Lianhe Credit Rating Co., Ltd (聯合資信評估股份有限公司) to conduct credit rating for the Nanhang Convertible Bonds issued by the Company in October 2020. China Lianhe Credit Rating Co., Ltd issued the 2021 Follow-up Rating Report for Convertible Bonds of China Southern Airlines Company Limited (《中國南方航空股份有限公司可轉換公司債券2021年跟蹤評級報告》). The rating results are as follows: it maintained the AAA long-term credit rating of the main body of the Company, maintained the credit rating of AAA of Nanhang Convertible Bonds with stable outlook. The Company’s operations are stable in all aspects with reasonable asset structure, and the liabilities situation has not changed significantly, and the credit status is good. The Company’s cash sources for debt repayment in the coming years mainly include cash inflows from income from the normal business operations of the Company.

 

(VI)

Other Information About Corporate Convertible Bonds

Nil.


Achieving six transformations,

namely transformation towards high quality, exploring key areas, high relevance and diversified industries, market-driven operation, digitalization and ecological circle, and refined management.


REVIEW REPORT

Review report to the Board of Directors of China Southern Airlines Company Limited

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

Introduction

We have reviewed the interim financial report set out on pages 77 to 111 which comprises the consolidated statement of financial position of China Southern Airlines Company Limited (the “Company”) as of 30 June 2021 and the related consolidated income statement, consolidated statement of comprehensive income and consolidated statement of changes in equity and consolidated cash flow statement for the six-month period then ended and explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of an interim financial report to be in compliance with the relevant provisions thereof and International Accounting Standard 34, Interim financial reporting, issued by the International Accounting Standards Board. The directors are responsible for the preparation and presentation of the interim financial report in accordance with International Accounting Standard 34.

Our responsibility is to form a conclusion, based on our review, on the interim financial report 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 the interim financial report consists of making enquiries, 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 interim financial report as at 30 June 2021 is not prepared, in all material respects, in accordance with International Accounting Standard 34, Interim financial reporting.

KPMG

Certified Public Accountants

8th Floor, Prince’s Building

10 Chater Road

Central, Hong Kong

27 August 2021


CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2021 – unaudited

 

            Six months ended 30 June  
            2021     2020  
     Note      RMB million     RMB million  

Operating revenue

       

Traffic revenue

        48,557       36,460  

Other operating revenue

        3,019       2,504  
     

 

 

   

 

 

 

Total operating revenue

     4        51,576       38,964  
     

 

 

   

 

 

 

Operating expenses

       

Flight operation expenses

        22,696       16,939  

Maintenance expenses

        6,054       5,956  

Aircraft and transportation service expenses

        10,438       7,631  

Promotion and selling expenses

        2,302       2,219  

General and administrative expenses

        1,772       1,676  

Depreciation and amortisation

        12,104       12,462  

Others

        1,099       685  
     

 

 

   

 

 

 

Total operating expenses

        56,465       47,568  
     

 

 

   

 

 

 

Other net income

     8        1,832       1,713  
     

 

 

   

 

 

 

Operating losses

        (3,057     (6,891

Interest income

        381       42  

Interest expense

     7        (3,191     (3,405

Share of associates’ results

        23       (788

Share of joint ventures’ results

        155       129  

Exchange gain/(loss), net

        793       (1,117

Changes in fair value of financial assets/liabilities

        (205     86  
     

 

 

   

 

 

 

Loss before income tax

        (5,101     (11,944

Income tax

     10        1,134       2,462  
     

 

 

   

 

 

 

Loss for the period

        (3,967     (9,482
     

 

 

   

 

 

 

(Loss)/profit attributable to:

       

Equity shareholders of the Company

        (4,690     (8,179

Non-controlling interests

        723       (1,303
     

 

 

   

 

 

 

Loss for the period

        (3,967     (9,482
     

 

 

   

 

 

 

Loss per share

       

Basic and diluted

     12        RMB(0.30     RMB(0.64
     

 

 

   

 

 

 


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2021 – unaudited

 

            Six months ended 30 June  
            2021     2020  
     Note      RMB million     RMB million  

Loss for the period

        (3,967     (9,482
     

 

 

   

 

 

 

Other comprehensive income:

       

Items that will not be reclassified to profit or loss

       

       

Equity investments at fair value through other comprehensive income – net movement in fair value reserve (non-recycling)

        (100     (111

– Share of other comprehensive income of an associate

        (2     (3

– Income tax effect of the above items

        25       28  

Items that may be reclassified subsequently to profit or loss

       

       

Cash flow hedges: fair value movement of derivative financial assets/liabilities

        15       (66

       

Differences resulting from the translation of foreign currency financial statements

        —         (1

– Share of other comprehensive income of an associate

        2       (6

– Income tax effect of the above items

        (4     17  
     

 

 

   

 

 

 

Other comprehensive income for the period

     11        (64     (142
     

 

 

   

 

 

 

Total comprehensive income for the period

        (4,031     (9,624
     

 

 

   

 

 

 

Total comprehensive income for the period attributable to:

       

Equity shareholders of the Company

        (4,753     (8,282

Non-controlling interests

        722       (1,342
     

 

 

   

 

 

 

Total comprehensive income for the period

        (4,031     (9,624
     

 

 

   

 

 

 


CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2021 – unaudited

 

           At 30 June     At 31 December  
           2021     2020  
     Note     RMB million     RMB million  

Non-current assets

      

Property, plant and equipment, net

     13       89,550       86,146  

Construction in progress

     14       30,356       32,407  

Right-of-use assets

     15       147,067       151,065  

Goodwill

       237       237  

Interest in associates

       2,454       2,449  

Interest in joint ventures

       3,195       3,225  

Aircraft lease deposits

       315       362  

Other equity instrument investments

       699       799  

Other non-current financial assets

       430       92  

Deferred tax assets

       9,955       7,739  

Other assets

       2,797       2,877  
    

 

 

   

 

 

 
       287,055       287,398  
    

 

 

   

 

 

 

Current assets

      

Inventories

       1,801       1,760  

Trade receivables

     16       3,883       2,525  

Other receivables

       8,574       8,347  

Cash and cash equivalents

       24,966       25,419  

Restricted bank deposits

       102       117  

Prepaid expenses and other current assets

       419       732  

Amounts due from related companies

     21 (c)      284       85  
    

 

 

   

 

 

 
       40,029       38,985  
    

 

 

   

 

 

 

Current liabilities

      

Derivative financial liabilities

       1,220       3,148  

Borrowings

     17       48,765       40,099  

Lease liabilities

       21,066       20,930  

Trade payables

     18       1,534       1,782  

Contract liabilities

       1,433       1,513  

Sales in advance of carriage

       3,951       3,997  

Current income tax

       613       462  

Amounts due to related companies

     21 (c)      277       357  

Accrued expenses

       16,856       15,920  

Other liabilities

       7,440       7,473  
    

 

 

   

 

 

 
       103,155       95,681  
    

 

 

   

 

 

 

Net current liabilities

       (63,126     (56,696
    

 

 

   

 

 

 

Total assets less current liabilities

       223,929       230,702  
    

 

 

   

 

 

 


           At 30 June      At 31 December  
           2021      2020  
     Note     RMB million      RMB million  

Non-current liabilities

       

Borrowings

     17       31,917        38,134  

Lease liabilities

       92,267        100,283  

Derivative financial liabilities

       34        53  

Other non-current liabilities

       1,980        2,036  

Provision for major overhauls

       4,520        4,216  

Deferred benefits and gains

       872        769  

Deferred tax liabilities

       52        80  
    

 

 

    

 

 

 
       131,642        145,571  
    

 

 

    

 

 

 

Net assets

       92,287        85,131  
    

 

 

    

 

 

 

Capital and reserves

       

Share capital

     19 (b)      16,948        15,329  

Reserves

       58,339        54,255  
    

 

 

    

 

 

 

Total equity attributable to equity shareholders of the Company

       75,287        69,584  

Non-controlling interests

       17,000        15,547  
    

 

 

    

 

 

 

Total equity

       92,287        85,131  
    

 

 

    

 

 

 

Approved and authorised for issue by the Board of Directors on 27 August 2021.

 

Ma Xu Lun    Han Wen Sheng
Director    Director


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2021 – unaudited

 

          Attributable to equity shareholders of the Company              
    Note     Share
capital
RMB million
    Share
premium
RMB million
    Fair value
reserve
(recycling)
RMB million
    Fair value
reserve
(non-recycling)
RMB million
    Other
reserves
RMB million
    Retained
earnings
RMB million
    Total
RMB million
    Non-controlling
interests
RMB million
    Total equity
RMB million
 

Balance at 1 January 2020

      12,267       25,652       2       409       2,844       22,932       64,106       13,223       77,329  

Changes in equity for the six months ended
30 June 2020:

                   

Loss for the period

      —         —         —         —         —         (8,179     (8,179     (1,303     (9,482

Other comprehensive income

      —         —         (55     (47     (1     —         (103     (39     (142
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

      —         —         (55     (47     (1     (8,179     (8,282     (1,342     (9,624

Issuance of shares

      3,062       12,889       —         —         —         —         15,951       —         15,951  

Acquisition of non-controlling interests of a subsidiary

      —         —         —         —         (155     —         (155     (105     (260

Changes in other reserves

      —         —         —         —         (7     —         (7     —         (7
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at 30 June 2020 and 1 July 2020

      15,329       38,541       (53     362       2,681       14,753       71,613       11,776       83,389  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Changes in equity for the six months ended
31 December 2020:

                   

Loss for the period

      —         —         —         —         —         (2,668     (2,668     323       (2,345

Other comprehensive income

      —         —         18       (88     9       —         (61     (15     (76
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

      —         —         18       (88     9       (2,668     (2,729     308       (2,421

Capital injection from non-controlling interests

      —         —         —         —         700       —         700       3,521       4,221  

Distributions to non-controlling interests

      —         —         —         —         —         —         —         (57     (57

Decrease in non-controlling interests as
a result of loss of control of a subsidiary

      —         —         —         —         —         —         —         (1     (1
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at 31 December 2020 and
1 January 2021

      15,329       38,541       (35     274       3,390       12,085       69,584       15,547       85,131