UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
6-K
Report
of Foreign Private Issuer
Pursuant
to Rule 13a-16 or 15d-16
under
the Securities Exchange Act of 1934
For
the
month of April 2008.
Commission
File Number: 001-14550
China
Eastern Airlines Corporation Limited
(Translation
of Registrant’s name into English)
2550
Hongqiao Road
Hongqiao
Airport
Shanghai,
China 200335
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual reports under
cover of Form 20-F or Form 40-F: x Form
20-F o 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): o
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): o
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: o Yes x No
If
"Yes"
is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): n/a
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
Eastern Airlines Corporation Limited
(Registrant)
|
||
| |
|
|
| Date April 10, 2008 | By | /s/ Li Fenghua |
|
Name: Li Fenghua |
||
| Title: Chairman of the Board of Directors | ||
Certain
statements contained in this announcement may be regarded as "forward-looking
statements" within the meaning 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. The
forward-looking statements included in this announcement represent the Company's
views as of the date of this announcement. While the Company anticipates
that
subsequent events and developments may cause the Company's views to change,
the
Company specifically disclaims any obligation to update these forward-looking
statements, unless required by applicable laws. These forward-looking statements
should not be relied upon as representing the Company's views as of any date
subsequent to the date of this announcement.
THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If
you are in any doubt about
any
of the contents of this circular, you should obtain independent professional
advice.
If
you have sold or transferred all
your
shares in China Eastern Airlines Corporation Limited, you should at once hand
this circular to the purchaser or the transferee or to the bank, licensed
securities dealer or other agent through whom the sale or transfer was effected
for transmission to the purchaser or the transferee.
The
Stock
Exchange of Hong Kong Limited takes no responsibility for the contents of this
circular, makes no representation as to its accuracy or completeness and
expressly disclaims any liability whatsoever for any loss howsoever arising
from
or in reliance upon the whole or any part of the contents of this
circular.
(A
joint
stock limited company incorporated in the People's Republic of China
with
limited liability)
(Stock code: 670)
MAJOR TRANSACTION
10 April 2008
CONTENTS
|
Pages
|
||||
|
Definitions
|
1
|
|||
|
Letter
from the board of Directors
|
3
|
|||
|
1.
|
Introduction
|
3
|
||
|
2.
|
|
Parties
|
4
|
|
|
3.
|
The
Agreement
|
4
|
||
|
4.
|
Implications
under the Listing Rules
|
6
|
||
|
5.
|
Additional
information
|
6
|
||
|
Appendices
|
||||
|
Appendix
I
|
Financial
information of the Group
|
7
|
||
|
|
||||
|
Appendix
II
|
Certain
additional information required under the Listing Rules
|
101
|
||
|
Appendix
III
|
General
information
|
104
|
||
-i-
DEFINITIONS
In
this circular, unless the context otherwise requires, the following expressions
have the following meanings:
|
“Agreement”
|
means
the agreement entered into on 30 January 2008 by the Company with
Boeing
Company regarding the purchase of the Aircraft;
|
|
|
|
|
|
|
“Aircraft”
|
|
means
thirty brand new Boeing 737 NG series aircraft (with
engines);
|
|
|
|
|
|
“Boeing
Company”
|
|
means
Boeing Company, a company incorporated in the State of Delaware of
the
U.S.;
|
|
|
|
|
|
“CEA
Holding”
|
|
means中國東方航空集團公司(China
Eastern Air Holding Company), a wholly PRC state-owned enterprise
and the
controlling shareholder of the Company holding approximately 59.67%
of its
issued share capital as at the Latest Practicable Date;
|
|
|
|
|
|
“Company”
|
|
means中國東方航空股份有限公司(China
Eastern Airlines Corporation Limited), a joint stock limited company
incorporated in the PRC with limited liability, whose H shares, A
shares
and American depositary shares are listed on the Stock Exchange,
the
Shanghai Stock Exchange and the New York Stock Exchange, Inc.,
respectively;
|
|
|
|
|
|
“Directors”
|
|
means
the directors of the Company;
|
|
|
|
|
|
“Group”
|
|
means
the Company and its subsidiaries;
|
|
|
|
|
|
“Hong
Kong”
|
|
means
the Hong Kong Special Administrative Region of the PRC;
|
|
|
|
|
|
“Latest
Practicable Date”
|
|
means
7 April 2008, being the latest practicable date for ascertaining
certain
information included herein before the printing of this
circular;
|
|
|
|
|
|
“Listing
Rules”
|
|
means
the Rules Governing the Listing of Securities on The Stock Exchange
of
Hong Kong Limited;
|
|
|
|
|
|
“PRC”
|
|
means
the People’s Republic of China;
|
|
|
|
|
|
“RMB”
|
|
means
renminbi, the lawful currency of the
PRC;
|
-1-
DEFINITIONS
|
“SFO”
|
|
means
the Securities and Futures Ordinance (Chapter 571 of the Laws of
Hong
Kong);
|
|
|
|
|
|
“Stock
Exchange”
|
|
means
The Stock Exchange of Hong Kong Limited;
|
|
|
|
|
|
“US$”
|
|
means
United States dollar, the lawful currency of the U.S.;
and
|
|
|
|
|
|
“U.S.”
|
|
means
the United States of America.
|
For
illustration purpose only, translation of US$ to RMB is made in this circular
at
the rate of US$1.00 to RMB7.2062. No representation is made that any amount
in
RMB or US$ could have been or could be converted at such rate or at any other
rate or at all.
-2-
LETTER FROM THE BOARD OF DIRECTORS
(A
joint
stock limited company incorporated in the People's Republic of China
with
limited liability)
(Stock code: 670)
|
Directors:
|
Legal
address:
|
|
|
Li
Fenghua (Chairman,
Non-executive Director)
|
66
Airport Street
|
|
|
Li
Jun (Vice
Chairman, Non-executive Director)
|
Pudong
International Airport
|
|
|
Cao
Jianxiong (President,
Executive Director)
|
Shanghai
|
|
|
Luo
Chaogeng (Non-executive
Director)
|
PRC
|
|
|
Luo
Zhuping (Executive
Director)
|
||
|
Independent
non-executive Directors:
|
Head
office:
|
|
|
Hu
Honggao
|
2550
Hongqiao Road
|
|
|
Peter
Lok Wu
|
Shanghai
|
|
|
Baiwang
Zhou
|
PRC
|
|
|
Ruijin
Xie
|
||
|
Rong
|
Principal
place of business
|
|
|
in
Hong Kong:
|
||
|
5th
Floor, McDonald’s Building
|
||
|
48
Yee Wo Street
|
||
|
Hong
Kong
|
||
|
Hong
Kong share registrar and
|
||
|
transfer
office:
|
||
|
Hong
Kong Registrars Limited
|
||
|
Rooms
1712-1716
|
||
|
17th
Floor, Hopewell Centre
|
||
|
183
Queen’s Road East
|
||
|
Hong
Kong
|
||
|
10
April 2008
|
||
|
To
the shareholders of the Company
|
Dear Sir or Madam,
MAJOR TRANSACTION
| 1. |
Introduction
|
As
disclosed in the Company’s announcement dated 30 January 2008, the Company has
entered into the Agreement with Boeing Company regarding the purchase of
the
Aircraft.
The
Agreement constitutes a major transaction of the Company under Chapter 14
of the
Listing Rules.
-3-
LETTER FROM THE BOARD OF DIRECTORS
| 2. |
Parties
|
The
Company is principally engaged in the business of civil aviation.
Boeing
Company, to the Directors’ knowledge, is a company incorporated in the State of
Delaware of the U.S. and is a principally engaged in the business of aircraft
manufacturing.
To
the
best of the Directors’ knowledge, information and belief having made all
reasonable enquiry, Boeing Company and its ultimate beneficial owner(s) are
third parties independent of the Company and connected persons (as defined
in
the Listing Rules) of the Company, and are not connected persons of the
Company.
| 3. |
The Agreement
|
On
30
January 2008, the Company has entered into the Agreement with Boeing Company
regarding the purchase of the Aircraft in accordance with the terms and
conditions thereof.
Based
on
the information provided by Boeing Company, the total asset value of the
Aircraft, as determined by reference to the relevant catalogue price supplied
by
Boeing Company, amounts in aggregate to approximately US$1.94 billion
(approximately RMB13.98 billion). The Company has not conducted any independent
valuation on the Aircraft.
Consideration
The
aircraft basic price of the Aircraft is in aggregate approximately US$1.94
billion (approximately RMB13.98 billion) determined by reference to the relevant
price catalog in July 2005. Such aircraft basic price comprises the airframe
price (which is subject to price escalation by applying a formula), optional
features prices and engine price.
The
Agreement was negotiated and entered into in accordance with customary business
and industry practice, under which Boeing Company has granted to the Company
significant price concessions with regard to the Aircraft. These will take
the
form of credit memoranda which may be used by the Company towards the purchase
of the Aircraft
or
spare
parts, goods and services or may be used towards the final delivery invoice
payment of the Aircraft. Such credit memoranda were determined after arm’s
length
negotiations
between the parties and as a result, the actual consideration for the Aircraft
is lower than the aircraft basic price of the Aircraft mentioned
above.
Based
on
such actual consideration under the Agreement, the relevant “percentage ratio”
calculated under Rule 14.07 of the Listing Rules at the material time is
above
25% but less than 100%, the Agreement constitutes a major transaction of
the
Company under the Listing Rules as applied by the Stock Exchange. In respect
of
the transaction, the
-4-
LETTER FROM THE BOARD OF DIRECTORS
Company
understands its disclosure obligations normally required under Chapter 14
of the
Listing Rules, and has therefore on separate occasions raised the issue with
Boeing Company in order to seek its consent to the Company’s disclosing certain
otherwise required information (including the relevant consideration involved)
in the relevant announcements and circulars. Nonetheless, Boeing Company,
for
business reasons and from a commercial perspective, did not accede to the
Company’s request in this respect, and insisted preservation of the
confidentiality carried with such information to the extent possible. The
Company has made an application to the Stock Exchange for a waiver
from
strict compliance with the relevant provisions under the Listing Rules in
respect of the disclosure of the actual consideration for the
Aircraft.
The
Company considers that the extent of the price concessions granted to the
Company under the Agreement is comparable with the price concessions that
the
Company had obtained under its agreement entered into in April 2006 with
Boeing
Company regarding the purchase of certain Boeing 737 NG series aircraft.
The
Company believes that there is no material impact of the price concessions
obtained under the Agreement on the Company’s operating costs taken as a
whole.
Payment
terms and source of funding
The
consideration under the Agreement is payable by cash in US$ in instalments,
and
is, as currently contemplated, being funded principally by way of bank loans
or
other financial arrangements from banking institutions.
Delivery
The
Aircraft are expected to be delivered to the Company in stages from July
2011 to
November 2015.
Reasons
for and benefits expected to accrue to the Company
The
Company expects that the Aircraft will be introduced to satisfy the increasing
demand in the domestic short to middle range passenger air-routes. It is
also
believed that the transaction will enhance the Company’s market share and
competitiveness in the market segment serving short to middle range passenger
air-routes, thereby improving its aviation network coverage and
profitability.
The
Directors believe that the terms of the Agreement are fair and reasonable
and in
the interests of the Company’s shareholders as a whole.
The
transaction has been approved by the board of Directors and will be approved
by
the relevant regulatory authority(ies) in the PRC in compliance with the
relevant regulatory requirements.
-5-
LETTER FROM THE BOARD OF DIRECTORS
Financial
impact of the transaction
As
mentioned above, the consideration is being funded principally by way of
financial arrangements with banking institutions. The transaction may therefore
result in an increase in the Company’s debt-to-equity ratio, but is not expected
to impact on the Company’s cash-flow position or its business operations. The
transaction is not expected to result in any material impact on the earnings,
assets and liabilities of the Group.
| 4. |
Implications
under the Listing Rules
|
As
mentioned above, the Agreement constitutes a major transaction of the Company
under the Listing Rules as applied by the Stock Exchange and is subject to
shareholders’ approval.
CEA
Holding, which holds approximately 59.67% of the issued share capital of
the
Company, does not have any interest or benefit under the Agreement. No
shareholder (including CEA Holding) would be required to abstain from voting
at
any shareholders’ general meeting, if convened, to approve the
Agreement.
The
Agreement has accordingly been approved in writing by CEA Holding pursuant
to
Rule 14.44 of the Listing Rules, and no general meeting is required to be
convened.
| 5. |
Additional
information
|
Your
attention is also drawn to the additional information set out in the appendices
to this circular.
|
Yours
faithfully,
For
and on behalf of the board of Directors of
China
Eastern Airlines Corporation Limited
Li
Fenghua
Chairman
|
-6-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
THREE YEARS FINANCIAL SUMMARY
The
following is a consolidated income statement and a consolidated balance sheet
of
the Group for the three financial years ended 31 December 2006 and the audited
financial statements of the Group for the financial year ended 31 December
2006.
The financial information is extracted from the Company’s annual reports.
Certain comparative figures have been reclassified to conform with the
presentation in the Company’s 2006 financial statements.
Consolidated Income Statement
(Prepared
in accordance with International Financial Reporting
Standards)
For
the year ended 31 December 2006
|
2006
|
2005
|
2004
|
||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||
|
Restated
|
||||||||||
|
Revenues
|
37,488,875
|
27,454,443
|
21,386,553
|
|||||||
|
Other
operating income, net
|
424,265
|
245,279
|
85,004
|
|||||||
|
Operating
expenses
|
||||||||||
|
Commissions
|
(1,316,620
|
)
|
(969,587
|
)
|
(772,219
|
)
|
||||
|
Aircraft
fuel
|
(13,608,793
|
)
|
(8,888,873
|
)
|
(5,429,658
|
)
|
||||
|
Take-off
and landing charges
|
(4,989,382
|
)
|
(3,718,846
|
)
|
(3,019,742
|
)
|
||||
|
Ground
services and other charges
|
(162,104
|
)
|
(115,516
|
)
|
(99,296
|
)
|
||||
|
Civil
aviation infrastructure levies
|
(696,428
|
)
|
(466,191
|
)
|
(251,185
|
)
|
||||
|
Food
and beverages
|
(1,188,016
|
)
|
(976,787
|
)
|
(758,046
|
)
|
||||
|
Wages,
salaries and benefits
|
(3,476,096
|
)
|
(2,359,467
|
)
|
(1,865,879
|
)
|
||||
|
Aircraft
maintenance
|
(2,647,340
|
)
|
(1,383,989
|
)
|
(860,184
|
)
|
||||
|
Aircraft
depreciation and
|
||||||||||
|
operating
lease rentals
|
(6,973,863
|
)
|
(5,254,716
|
)
|
(4,466,523
|
)
|
||||
|
Other
depreciation, amortization and
|
||||||||||
|
operating
lease rentals
|
(782,044
|
)
|
(666,287
|
)
|
(495,916
|
)
|
||||
|
Ticket
reservation fees
|
(418,367
|
)
|
(292,412
|
)
|
(209,995
|
)
|
||||
|
Insurance
costs
|
(161,469
|
)
|
(148,862
|
)
|
(152,194
|
)
|
||||
|
Deficits
on revaluation of property,
|
||||||||||
|
plant
and equipment
|
(1,035,343
|
)
|
-
|
-
|
||||||
|
Office,
administrative and other expenses
|
(3,448,715
|
)
|
(2,443,941
|
)
|
(1,858,336
|
)
|
||||
|
Total
operating expenses
|
(40,904,580
|
)
|
(27,685,474
|
)
|
(20,239,173
|
)
|
||||
-7-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
2006
|
|
2005
|
|
2004
|
|
|||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
|||
|
|
|
|
|
|
|
Restated
|
|
|||
|
|
|
|
|
|
|
|
||||
|
Operating
(loss)/profit
|
(2,991,440
|
)
|
14,248
|
1,232,384
|
||||||
|
Interest
income
|
120,161
|
128,700
|
129,020
|
|||||||
|
Finance
costs
|
(877,579
|
)
|
(707,050
|
)
|
(770,176
|
)
|
||||
|
Share
of results of associates
|
103,566
|
(9,030
|
)
|
(50,524
|
)
|
|||||
|
Share
of results of jointly controlled entities
|
29,595
|
(4,300
|
)
|
45,268
|
||||||
|
(Loss)/profit
before income tax
|
(3,615,697
|
)
|
(577,432
|
)
|
585,972
|
|||||
|
Income
tax
|
162,932
|
138,704
|
(129,601
|
)
|
||||||
|
(Loss)/profit
for the year
|
(3,452,765
|
)
|
(438,728
|
)
|
456,371
|
|||||
|
Attributable
to:
|
||||||||||
|
Equity
holders of the Company
|
(3,313,425
|
)
|
(467,307
|
)
|
320,691
|
|||||
|
Minority
interests
|
(139,340
|
)
|
28,579
|
135,680
|
||||||
|
(3,452,765
|
)
|
(438,728
|
)
|
456,371
|
||||||
|
(Loss)/earnings
per share for (loss)/profit
|
||||||||||
|
attributable
to the equity holders
|
||||||||||
|
of
the Company during the year
|
||||||||||
|
-
basic and diluted
|
RMB(0.68
|
)
|
RMB(0.10
|
)
|
RMB0.07
|
|||||
-8-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
Consolidated
Balance Sheet
|
|||
| (Prepared
in accordance with International Financial Reporting
Standards)
For
the year ended 31 December
2006
|
|
2006
|
|
2005
|
|
2004
|
|
|||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
|||
|
|
|
|
|
|
|
Restated
|
||||
|
Non-current
assets
|
||||||||||
|
Property,
plant and equipment
|
40,050,466
|
38,347,516
|
29,743,886
|
|||||||
|
Construction
in progress
|
-
|
240,884
|
188,654
|
|||||||
|
Lease
prepayments
|
1,054,362
|
972,771
|
828,808
|
|||||||
|
Advanced
payments on acquisition of aircraft
|
7,668,708
|
9,072,673
|
2,678,603
|
|||||||
|
Intangible
assets
|
1,337,554
|
688,311
|
36,303
|
|||||||
|
Investments
in associates
|
623,390
|
629,746
|
633,212
|
|||||||
|
Investments
in jointly controlled entities
|
115,540
|
100,520
|
52,948
|
|||||||
|
Available-for-sale
financial assets
|
47,554
|
40,802
|
39,546
|
|||||||
|
Other
long-term assets
|
1,099,265
|
2,705,558
|
2,202,606
|
|||||||
|
Deferred
tax assets
|
82,146
|
434,839
|
395,465
|
|||||||
|
Derivative
assets
|
73,269
|
70,886
|
11,571
|
|||||||
|
52,152,254
|
53,304,506
|
36,811,602
|
||||||||
|
Current
assets
|
||||||||||
|
Flight
equipment spare parts
|
1,198,642
|
978,922
|
523,186
|
|||||||
|
Trade
receivables and notes receivable
|
2,002,855
|
1,918,409
|
1,707,062
|
|||||||
|
Amounts
due from related companies
|
352,719
|
205,712
|
122,253
|
|||||||
|
Prepayments,
deposits and other receivables
|
2,475,992
|
997,271
|
611,959
|
|||||||
|
Cash
and cash equivalents
|
1,987,486
|
1,864,001
|
2,114,447
|
|||||||
|
Derivative
assets
|
113,532
|
53,036
|
-
|
|||||||
|
Non-current
assets held for sale
|
882,426
|
-
|
-
|
|||||||
|
9,013,652
|
6,017,351
|
5,078,907
|
||||||||
|
Current
liabilities
|
||||||||||
|
Sales
in advance of carriage
|
891,659
|
823,149
|
719,957
|
|||||||
|
Trade
payables and notes payable
|
5,090,210
|
3,394,898
|
1,457,217
|
|||||||
|
Amounts
due to related companies
|
348,477
|
295,030
|
138,968
|
|||||||
|
Other
payables and accrued expenses
|
7,986,351
|
6,021,481
|
4,466,024
|
|||||||
|
Current
portion of provision for
|
||||||||||
|
aircraft
overhaul expenses
|
20,900
|
15,589
|
52,798
|
|||||||
|
Income
tax payable
|
80,483
|
47,259
|
162,606
|
|||||||
|
Current
portion of obligations under
|
||||||||||
|
finance
leases
|
2,803,956
|
2,428,037
|
1,189,648
|
|||||||
|
Current
portion of borrowings
|
16,016,327
|
18,554,630
|
9,382,351
|
|||||||
|
Derivative
liabilities
|
124,722
|
34,844
|
-
|
|||||||
|
Liabilities
directly associated with
|
||||||||||
|
non-current
assets held for sale
|
442,935
|
-
|
-
|
|||||||
|
33,806,020
|
31,614,917
|
17,569,569
|
||||||||
|
Net
current liabilities
|
(24,792,368
|
)
|
(25,597,566
|
)
|
(12,490,662
|
)
|
||||
|
Total
assets less current liabilities
|
27,359,886
|
27,706,940
|
24,320,940
|
|||||||
-9-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
2006
|
|
2005
|
|
2004
|
|
|||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
|||
|
|
|
|
|
|
|
Restated
|
||||
|
Non-current
liabilities
|
||||||||||
|
Provision
for aircraft overhaul expenses
|
489,721
|
388,410
|
201,211
|
|||||||
|
Obligations
under finance leases
|
9,048,642
|
8,180,460
|
7,472,638
|
|||||||
|
Borrowings
|
12,091,413
|
9,790,116
|
7,542,828
|
|||||||
|
Other
long-term liabilities
|
438,461
|
155,229
|
100,204
|
|||||||
|
Post-retirement
benefit obligations
|
1,292,960
|
1,202,877
|
618,232
|
|||||||
|
Long-term
portion of
|
||||||||||
|
staff
housing allowances
|
439,491
|
444,196
|
276,248
|
|||||||
|
Deferred
tax liabilities
|
68,459
|
601,340
|
687,850
|
|||||||
|
Derivative
liabilities
|
14,096
|
25,770
|
119,643
|
|||||||
|
23,883,243
|
20,788,398
|
17,018,854
|
||||||||
|
Net
assets
|
3,476,643
|
6,918,542
|
7,302,086
|
|||||||
|
Equity
|
||||||||||
|
Capital
and reserves attributable to
|
||||||||||
|
the
Company’s equity holders
|
||||||||||
|
Share
capital
|
4,866,950
|
4,866,950
|
4,866,950
|
|||||||
|
Reserves
|
(2,052,053
|
)
|
1,229,115
|
1,614,301
|
||||||
|
2,814,897
|
6,096,065
|
6,481,251
|
||||||||
|
Minority
interest
|
661,746
|
822,477
|
820,835
|
|||||||
|
Total
equity
|
3,476,643
|
6,918,542
|
7,302,086
|
|||||||
-10-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
Consolidated
Income Statement
|
|||
|
(Prepared
in accordance with International Financial Reporting
Standards)
For
the year ended 31 December
2006
|
|
2006
|
2005
|
|||||||||
|
|
Note
|
RMB’000
|
RMB’000
|
|||||||
|
Revenues
|
5
|
37,488,875
|
27,454,443
|
|||||||
|
Other
operating income, net
|
6
|
424,265
|
245,279
|
|||||||
|
Operating
expenses
|
||||||||||
|
Commissions
|
(1,316,620
|
)
|
(969,587
|
)
|
||||||
|
Aircraft
fuel
|
(13,608,793
|
)
|
(8,888,873
|
)
|
||||||
|
Take-off
and landing charges
|
(4,989,382
|
)
|
(3,718,846
|
)
|
||||||
|
Ground
services and other charges
|
(162,104
|
)
|
(115,516
|
)
|
||||||
|
Civil
aviation infrastructure levies
|
(696,428
|
)
|
(466,191
|
)
|
||||||
|
Food
and beverages
|
(1,188,016
|
)
|
(976,787
|
)
|
||||||
|
Wages,
salaries and benefits
|
8
|
(3,476,096
|
)
|
(2,359,467
|
)
|
|||||
|
Aircraft
maintenance
|
(2,647,340
|
)
|
(1,383,989
|
)
|
||||||
|
Aircraft
depreciation and operating lease rentals
|
(6,973,863
|
)
|
(5,254,716
|
)
|
||||||
|
Other
depreciation, amortisation and
|
||||||||||
|
operating
lease rentals
|
(782,044
|
)
|
(666,287
|
)
|
||||||
|
Ticket
reservation fees
|
(418,367
|
)
|
(292,412
|
)
|
||||||
|
Insurance
costs
|
(161,469
|
)
|
(148,862
|
)
|
||||||
|
Deficits
on revaluation of property,
|
||||||||||
|
plant
and equipment
|
15
|
(1,035,343
|
)
|
-
|
||||||
|
Office,
administrative and other expenses
|
(3,448,715
|
)
|
(2,443,941
|
)
|
||||||
|
Total
operating expenses
|
(40,904,580
|
)
|
(27,685,474
|
)
|
||||||
|
Operating
(loss)/profit
|
9
|
(2,991,440
|
)
|
14,248
|
||||||
|
Interest
income
|
120,161
|
128,700
|
||||||||
|
Finance
costs
|
10
|
(877,579
|
)
|
(707,050
|
)
|
|||||
|
Share
of results of associates
|
19
|
103,566
|
(9,030
|
)
|
||||||
|
Share
of results of jointly controlled entities
|
20
|
29,595
|
(4,300
|
)
|
||||||
|
Loss
before income tax
|
(3,615,697
|
)
|
(577,432
|
)
|
||||||
|
Income
tax
|
11
|
162,932
|
138,704
|
|||||||
|
Loss
for the year
|
(3,452,765
|
)
|
(438,728
|
)
|
||||||
|
Attributable
to:
|
||||||||||
|
Equity
holders of the Company
|
(3,313,425
|
)
|
(467,307
|
)
|
||||||
|
Minority
interests
|
(139,340
|
)
|
28,579
|
|||||||
|
(3,452,765
|
)
|
(438,728
|
)
|
|||||||
|
Loss
per share for loss attributable to the equity
|
||||||||||
|
holders
of the Company during the year
|
||||||||||
|
-
basic and diluted
|
13
|
RMB(0.68
|
)
|
RMB(0.10
|
)
|
|||||
-11-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
Consolidated
Balance Sheet
|
|||
|
(Prepared
in accordance with International Financial Reporting
Standards)
For
the year ended 31 December
2006
|
|
2006
|
2005
|
|||||||||
|
|
Note
|
RMB’000
|
RMB’000
|
|||||||
|
Non-current
assets
|
||||||||||
|
Intangible
assets
|
14
|
1,337,554
|
751,843
|
|||||||
|
Property,
plant and equipment
|
15
|
40,050,466
|
38,524,868
|
|||||||
|
Lease
prepayments
|
16
|
1,054,362
|
972,771
|
|||||||
|
Advanced
payments on acquisition of aircraft
|
17
|
7,668,708
|
9,072,673
|
|||||||
|
Investments
in associates
|
19
|
623,390
|
629,746
|
|||||||
|
Investments
in jointly controlled entities
|
20
|
115,540
|
100,520
|
|||||||
|
Available-for-sale
financial assets
|
47,554
|
40,802
|
||||||||
|
Other
long-term assets
|
21
|
1,099,265
|
2,705,558
|
|||||||
|
Deferred
tax assets
|
31
|
82,146
|
12,324
|
|||||||
|
Derivative
assets
|
34
|
73,269
|
70,886
|
|||||||
|
52,152,254
|
52,881,991
|
|||||||||
|
Current
assets
|
||||||||||
|
Flight
equipment spare parts
|
1,198,642
|
978,922
|
||||||||
|
Trade
receivables and notes receivable
|
22
|
2,002,855
|
1,918,409
|
|||||||
|
Amounts
due from related companies
|
41
|
352,719
|
205,712
|
|||||||
|
Prepayments,
deposits and other receivables
|
23
|
2,475,992
|
997,271
|
|||||||
|
Cash
and cash equivalents
|
24
|
1,987,486
|
1,864,001
|
|||||||
|
Derivative
assets
|
34
|
113,532
|
53,036
|
|||||||
|
Non-current
assets held for sale
|
37
|
882,426
|
-
|
|||||||
|
9,013,652
|
6,017,351
|
|||||||||
|
Current
liabilities
|
||||||||||
|
Sales
in advance of carriage
|
891,659
|
823,149
|
||||||||
|
Trade
payables and notes payable
|
25
|
5,090,210
|
3,113,898
|
|||||||
|
Amounts
due to related companies
|
41
|
348,477
|
576,030
|
|||||||
|
Other
payables and accrued expenses
|
26
|
7,986,351
|
5,995,751
|
|||||||
|
Current
portion of obligations under
|
||||||||||
|
finance
leases
|
27
|
2,803,956
|
2,428,037
|
|||||||
|
Current
portion of borrowings
|
28
|
16,016,327
|
18,554,630
|
|||||||
|
Income
tax payable
|
80,483
|
47,259
|
||||||||
|
Current
portion of provision for
|
||||||||||
|
aircraft
overhaul expenses
|
29
|
20,900
|
15,589
|
|||||||
|
Derivative
liabilities
|
34
|
124,722
|
34,844
|
|||||||
|
Liabilities
directly associated with
|
||||||||||
|
non-current
assets held for sale
|
37
|
442,935
|
-
|
|||||||
|
33,806,020
|
31,589,187
|
|||||||||
|
Net
current liabilities
|
(24,792,368
|
)
|
(25,571,836
|
)
|
||||||
|
Total
assets less current liabilities
|
27,359,886
|
27,310,155
|
||||||||
-12-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
2006
|
|
2005
|
|
|||||||
|
|
|
Note
|
|
RMB’000
|
|
RMB’000
|
||||
|
Non-current
liabilities
|
||||||||||
|
Obligations
under finance leases
|
27
|
9,048,642
|
8,159,517
|
|||||||
|
Borrowings
|
28
|
12,091,413
|
9,790,116
|
|||||||
|
Provision
for aircraft overhaul expenses
|
29
|
489,721
|
388,410
|
|||||||
|
Other
long-term liabilities
|
30
|
438,461
|
201,902
|
|||||||
|
Deferred
tax liabilities
|
31
|
68,459
|
178,825
|
|||||||
|
Post-retirement
benefit obligations
|
32
|
(b)
|
1,292,960
|
1,202,877
|
||||||
|
Long-term
portion of staff housing allowances
|
33
|
(b)
|
439,491
|
444,196
|
||||||
|
Derivative
liabilities
|
34
|
14,096
|
25,770
|
|||||||
|
23,883,243
|
20,391,613
|
|||||||||
|
Net
assets
|
3,476,643
|
6,918,542
|
||||||||
|
Equity
|
||||||||||
|
Capital
and reserves attributable to the
|
||||||||||
|
equity
holders of the Company
|
||||||||||
|
Share
capital
|
35
|
4,866,950
|
4,866,950
|
|||||||
|
Reserves
|
36
|
(2,052,053
|
)
|
1,229,115
|
||||||
|
2,814,897
|
6,096,065
|
|||||||||
|
Minority
interests
|
661,746
|
822,477
|
||||||||
|
Total
equity
|
3,476,643
|
6,918,542
|
||||||||
-13-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
Balance
Sheet
|
|||
|
(Prepared
in accordance with International Financial Reporting
Standards)
For
the year ended 31 December
2006
|
|
|
|
2006
|
|
2005
|
|
|||||
|
|
|
Note
|
|
RMB’000
|
|
RMB’000
|
||||
|
Non-current
assets
|
||||||||||
|
Intangible
assets
|
14
|
1,032,679
|
751,591
|
|||||||
|
Property,
plant and equipment
|
15
|
31,606,868
|
32,162,125
|
|||||||
|
Lease
prepayments
|
16
|
497,668
|
481,600
|
|||||||
|
Advanced
payments on acquisition of aircraft
|
17
|
7,006,853
|
8,157,515
|
|||||||
|
Investments
in subsidiaries
|
18
|
3,882,670
|
2,512,490
|
|||||||
|
Investments
in associates
|
19
|
377,872
|
620,659
|
|||||||
|
Investments
in jointly controlled entities
|
20
|
59,552
|
59,552
|
|||||||
|
Available-for-sale
financial assets
|
31,806
|
35,282
|
||||||||
|
Other
long-term assets
|
21
|
994,729
|
2,596,521
|
|||||||
|
Derivative
assets
|
34
|
73,269
|
70,886
|
|||||||
|
45,563,966
|
47,448,221
|
|||||||||
|
Current
assets
|
||||||||||
|
Flight
equipment spare parts
|
931,415
|
906,605
|
||||||||
|
Trade
receivables and notes receivable
|
22
|
1,260,572
|
1,260,283
|
|||||||
|
Amounts
due from related companies
|
41
|
351,209
|
203,113
|
|||||||
|
Prepayments,
deposits and other receivables
|
23
|
2,173,904
|
688,543
|
|||||||
|
Cash
and cash equivalents
|
24
|
1,109,834
|
940,609
|
|||||||
|
Derivative
assets
|
34
|
113,532
|
53,036
|
|||||||
|
Non-current
assets held for sale
|
37
|
882,426
|
-
|
|||||||
|
6,822,892
|
4,052,189
|
|||||||||
|
Current
liabilities
|
||||||||||
|
Sales
in advance of carriage
|
891,659
|
808,231
|
||||||||
|
Trade
payables and notes payable
|
25
|
4,674,301
|
2,975,827
|
|||||||
|
Amounts
due to related companies
|
41
|
246,362
|
205,189
|
|||||||
|
Other
payables and accrued expenses
|
26
|
6,683,039
|
5,132,878
|
|||||||
|
Current
portion of obligations under
|
||||||||||
|
finance
leases
|
27
|
2,636,057
|
2,361,974
|
|||||||
|
Current
portion of borrowings
|
28
|
13,004,878
|
15,375,864
|
|||||||
|
Current
portion of provision for aircraft
|
||||||||||
|
overhaul
expenses
|
29
|
20,900
|
15,589
|
|||||||
|
Income
tax payable
|
-
|
2,210
|
||||||||
|
Derivative
liabilities
|
34
|
124,722
|
34,844
|
|||||||
|
Liabilities
directly associated with non-current
|
||||||||||
|
assets
held for sale
|
37
|
442,935
|
-
|
|||||||
|
28,724,853
|
26,912,606
|
|||||||||
|
Net
current liabilities
|
(21,901,961
|
)
|
(22,860,417
|
)
|
||||||
|
Total
assets less current liabilities
|
23,662,005
|
24,587,804
|
||||||||
-14-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
2006
|
|
2005
|
|
|||||||
|
|
|
Note
|
|
RMB’000
|
|
RMB’000
|
||||
|
Non-current
liabilities
|
||||||||||
|
Obligations
under finance leases
|
27
|
7,511,373
|
7,363,308
|
|||||||
|
Borrowings
|
28
|
10,841,915
|
9,457,436
|
|||||||
|
Provision
for aircraft overhaul expenses
|
29
|
408,690
|
333,246
|
|||||||
|
Other
long-term liabilities
|
30
|
438,461
|
201,902
|
|||||||
|
Deferred
tax liabilities
|
31
|
-
|
160,067
|
|||||||
|
Post-retirement
benefit obligations
|
32
|
(b)
|
1,144,653
|
1,085,637
|
||||||
|
Long-term
portion of staff housing allowances
|
33
|
(b)
|
413,386
|
415,735
|
||||||
|
Derivative
liabilities
|
34
|
14,096
|
25,770
|
|||||||
|
20,772,574
|
19,043,101
|
|||||||||
|
Net
assets
|
2,889,431
|
5,544,703
|
||||||||
|
Equity
|
||||||||||
|
Capital
and reserves attributable to the
|
||||||||||
|
equity
holders of the Company
|
||||||||||
|
Share
capital
|
35
|
4,866,950
|
4,866,950
|
|||||||
|
Reserves
|
36
|
(1,977,519
|
)
|
677,753
|
||||||
|
Total
equity
|
2,889,431
|
5,544,703
|
||||||||
-15-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
Consolidated
Cash Flow Statement
|
|||
|
(Prepared
in accordance with International Financial Reporting
Standards)
For
the year ended 31 December
2006
|
|
2006
|
|
2005
|
|
|||||||
|
|
|
Note
|
|
RMB’000
|
|
RMB’000
|
||||
|
Cash
flows from operating activities
|
||||||||||
|
Cash
generated from operations
|
38
|
3,458,510
|
3,369,783
|
|||||||
|
Interest
paid
|
(2,097,077
|
)
|
(1,357,402
|
)
|
||||||
|
Income
tax paid
|
(22,740
|
)
|
(59,932
|
)
|
||||||
|
Net
cash inflow from operating activities
|
1,338,693
|
1,952,449
|
||||||||
|
Cash
flows from investing activities
|
||||||||||
|
Additions
of property, plant and equipment
|
(879,756
|
)
|
(2,676,050
|
)
|
||||||
|
Proceeds
from disposal of property,
|
||||||||||
|
plant
and equipment
|
328,419
|
32,923
|
||||||||
|
Acquisition
of land use rights
|
(37,158
|
)
|
(31,780
|
)
|
||||||
|
Acquisition
of available-for-sale financial assets
|
(6,751
|
)
|
(1,256
|
)
|
||||||
|
Advanced
payments on acquisition of aircraft
|
(4,560,694
|
)
|
(7,751,197
|
)
|
||||||
|
Refund
of advanced payments upon
|
||||||||||
|
delivery
of aircraft
|
3,744,513
|
-
|
||||||||
|
Repayment
of other payables
|
||||||||||
|
(instalment
payment for acquisition of
|
||||||||||
|
an
airline business)
|
(30,000
|
)
|
(30,000
|
)
|
||||||
|
Decrease/(increase)
in bank deposits
|
-
|
270
|
||||||||
|
Interest
received
|
120,161
|
128,700
|
||||||||
|
Dividend
received
|
8,617
|
-
|
||||||||
|
Acquisitions
of controlling interests in
|
||||||||||
|
associates,
net cash outflow
|
40
|
(366,529
|
)
|
(40,704
|
)
|
|||||
|
Net
cash outflow from investing activities
|
(1,679,178
|
)
|
(10,369,094
|
)
|
||||||
-16-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE GROUP
|
|
2006
|
|
2005
|
|
|||||||
|
|
|
Note
|
|
RMB’000
|
|
RMB’000
|
||||
|
Cash
flows from financing activities
|
||||||||||
|
Proceeds
from draw down of
|
||||||||||
|
short-term
bank loans
|
14,748,954
|
14,307,315
|
||||||||
|
Repayments
of short-term bank loans
|
(15,133,553
|
)
|
(8,872,754
|
)
|
||||||
|
Proceeds
from draw down of
|
||||||||||
|
long-term
bank loans
|
6,909,927
|
5,135,286
|
||||||||
|
Repayments
of long-term bank loans
|
(4,179,412
|
)
|
(3,843,483
|
)
|
||||||
|
Principal
repayments of
|
||||||||||
|
finance
lease obligations
|
(2,539,995
|
)
|
(1,157,334
|
)
|
||||||
|
Proceeds
from issuance of notes payable
|
7,696,014
|
4,228,783
|
||||||||
|
Repayments
of notes payable
|
(6,014,279
|
)
|
(3,376,072
|
)
|
||||||
|
Proceeds
from issuance of debentures
|
-
|
1,951,600
|
||||||||
|
Repayment
of debentures
|
(2,000,000
|
)
|
-
|
|||||||
|
Placement
of finance lease deposits
|
(803
|
)
|
-
|
|||||||
|
Refund
of deposits for finance leases upon
|
||||||||||
|
maturities
|
1,047,534
|
-
|
||||||||
|
Capital
injection from a minority shareholder
|
||||||||||
|
on
subsidiaries
|
1
|
-
|
||||||||
|
2004
dividend paid
|
(60,000
|
)
|
(97,339
|
)
|
||||||
|
Dividends
paid to minority shareholders of
|
||||||||||
|
subsidiaries
|
(53,550
|
)
|
(90,000
|
)
|
||||||
|
Net
cash inflow from financing activities
|
420,838
|
8,186,002
|
||||||||
|
Net
increase/(decrease) in cash and
|
||||||||||
|
cash
equivalents
|
80,353
|
(230,643
|
)
|
|||||||
|
Cash
and cash equivalents at 1 January
|
1,864,001
|
2,114,447
|
||||||||
|
Exchange
adjustments
|
43,132
|
(19,803
|
)
|
|||||||
|
Cash
and cash equivalents at 31 December
|
1,987,486
|
1,864,001
|
||||||||
-17-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
Consolidated
Statement of Changes in Equity
|
|||||
|
(Prepared
in accordance with International Financial Reporting
Standards)
For
the year ended 31 December
2006
|
|
Attributable
to equity
holders
of
the Company
|
||||||||||||||||
|
|
Share
Capital
|
Reserves
|
Sub-total
|
Minority
interests
|
Total
equity
|
|||||||||||
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
||||||||
|
Balance
at 1 January 2005
|
4,866,950
|
1,657,174
|
6,524,124
|
820,835
|
7,344,959
|
|||||||||||
|
Cash
flow hedges, net of tax
|
-
|
136,587
|
136,587
|
-
|
136,587
|
|||||||||||
|
Dividend
relating to 2004
|
-
|
(97,339
|
)
|
(97,339
|
)
|
-
|
(97,339
|
)
|
||||||||
|
Dividend
paid to minority interest
|
||||||||||||||||
|
in
subsidiaries
|
-
|
-
|
-
|
(90,000
|
)
|
(90,000
|
)
|
|||||||||
|
Contribution
from minority interest
|
||||||||||||||||
|
in
subsidiaries
|
-
|
-
|
-
|
63,063
|
63,063
|
|||||||||||
|
Loss
for the year
|
-
|
(467,307
|
)
|
(467,307
|
)
|
28,579
|
(438,728
|
)
|
||||||||
|
Balance
at 31 December 2005
|
4,866,950
|
1,229,115
|
6,096,065
|
822,477
|
6,918,542
|
|||||||||||
|
Balance
at 1 January 2006
|
4,866,950
|
1,229,115
|
6,096,065
|
822,477
|
6,918,542
|
|||||||||||
|
Cash
flow hedges, net of tax
|
-
|
8,441
|
8,441
|
-
|
8,441
|
|||||||||||
|
Revaluation
reserve, net of tax,
|
||||||||||||||||
|
arising
from the acquisition of
|
||||||||||||||||
|
a
controlling interest in
|
||||||||||||||||
|
an
associate
|
-
|
23,816
|
23,816
|
-
|
23,816
|
|||||||||||
|
Dividend
paid to minority interests
|
||||||||||||||||
|
in
subsidiaries
|
-
|
-
|
-
|
(42,892
|
)
|
(42,892
|
)
|
|||||||||
|
Loss
for the year
|
-
|
(3,313,425
|
)
|
(3,313,425
|
)
|
(139,340
|
)
|
(3,452,765
|
)
|
|||||||
|
Additions
through acquisitions of
|
||||||||||||||||
|
subsidiaries
(Note
40)
|
-
|
-
|
-
|
21,501
|
21,501
|
|||||||||||
|
Balance
at 31 December 2006
|
4,866,950
|
(2,052,053
|
)
|
2,814,897
|
661,746
|
3,476,643
|
||||||||||
-18-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
Notes to the Financial Statements
(Prepared
in accordance with International Financial Reporting
Standards)
For
the year ended 31 December 2006
| 1. |
CORPORATE INFORMATION
|
China
Eastern Airlines Corporation Limited (the “Company”), a joint stock company
limited by shares was incorporated in the People’s Republic of China (the “PRC”)
on 14 April 1995. The address of its registered office is 66 Airport
Street,
Pudong International Airport, Shanghai, the PRC. The Company and its
subsidiaries (together, the “Group”) are principally engaged in the operation of
civil aviation, including the provision of passenger, cargo, and mail
delivery
and other extended transportation services.
The
Company is majority owned by China Eastern Air Holding Company (“CEA Holding”),
a state-owned enterprise incorporated in the PRC.
The
Company’s shares are traded on The Stock Exchange of Hong Kong Limited, The New
York Stock Exchange and The Shanghai Stock Exchange.
During
the year ended 31 December 2006, the Company acquired additional equity
interests of 56% in China Eastern Airlines Wuhan Co., Ltd. (“CEA Wuhan”).
Further details of the acquisition are set out in Note 40 to the financial
statements.
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
The
principal accounting policies applied in the preparation of these financial
statements are set out below. These policies have been consistently applied
to
all the years presented, unless otherwise stated.
|
|
(a)
|
Basis
of preparation
|
The
consolidated financial statements of the Company have been prepared in
accordance with International Financial Reporting Standards (“IFRS”) and the
disclosure requirements of the Hong Kong Companies Ordinance. The consolidated
financial statements have been prepared under the historical cost convention,
as
modified by the revaluation of property, plant and equipment, available-for-sale
financial assets, financial assets and financial liabilities (including
derivative instruments) at fair value through profit or loss.
The
preparation of financial statements in conformity with IFRS requires
the use of
certain critical accounting estimates. It also requires management to
exercise
its judgment in the process of applying the Company’s accounting policies. The
areas involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the financial statements,
are
disclosed in Note 4 to the financial statements. These estimates and
assumptions
affect the reported amounts of assets and liabilities and disclosure
of
contingent assets and liabilities at the date of the financial statements
and
the reported amounts of revenues and expenses during the year. Although
these
estimates are based on management’s best knowledge of current events and
actions, actual results ultimately may differ from those estimates.
The
Group
incurred a net loss attributable to equity holders of the Company of
approximately RMB3,313 million for the current financial year and as
at 31
December 2006 the Group’s accumulated losses were approximately RMB3,335 million
and its current liabilities exceeded its current assets by approximately
RMB24,792 million. Based on the Group’s history of obtaining finance, its
relationships with its bankers, banking facilities available and net
operating
cash inflow, the Board of Directors consider that the Group will be able
to
obtain sufficient financing to enable it to operate and meet its liabilities
as
and when they fall due. Accordingly, it is appropriate that these financial
statements should be prepared on a going concern basis and they do not
include
any adjustments that would be required should the Company and the Group
fail to
continue as a going concern.
-19-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
In
2006,
the Group adopted the following amendments and interpretations to existing
standards which are relevant to its operations. The adoption of these
amendments
and interpretations did not have any significant impact on its results
of
operations and financial position. In summary:
| · |
International
Accounting Standard (“IAS”) No. 39 and IFRS 4 (Amendment) - Financial
Guarantee Contracts
|
| · |
IAS
19 (Amendment) - Employee Benefits: Actuarial Gains and
Losses, Group
Plans and Disclosures
|
| · |
IAS
39 (Amendment) - The Fair Value
option
|
| · |
International
Financial Reporting Interpretations Committee (“IFRIC”) Interpretation 4 -
Determining whether an Arrangement contains a
Lease
|
The
following new/revised standards and interpretations to existing standards
have
been published which are relevant to the Group’s operations that are mandatory
for accounting periods beginning on or after 1 March 2006 or later periods.
The
Group is assessing the impact of these new/revised standards and interpretations
but management do not believe these new/revised standards and interpretations
will have a significant impact on its results of operations or financial
position.
| · |
IFRS
7 - Financial Instruments: Disclosures (effective for annual
periods
beginning on or after 1 March
2006)
|
| · |
IFRS
8 - Operating segments (effective for annual periods beginning
on or after
1 January 2009)
|
| · |
IAS
1 (Amendment) - Presentation of Financial Statements: Capital
disclosures
(effective for annual periods beginning on or after 1 January
2007)
|
| · |
IFRIC
Interpretation 8 - Scope of IFRS 2 (effective for annual
periods beginning
on or after 1 May 2006)
|
|
·
|
IFRIC
Interpretation 9 - Reassessment of Embedded Derivatives (effective
for
annual periods beginning on or after 1 June
2006)
|
| · |
IFRIC
Interpretation 10 - Interim Financial Reporting and Impairment
(effective
for annual periods beginning on or after 1 November
2006)
|
| · |
IFRIC
Interpretation 11 - IFRS 2 - Group and Treasury Share Transactions
(effective for annual periods beginning on or after 1 March
2007)
|
| · |
IFRIC
Interpretation 12 - Service Concession Arrangements (effective
for annual
periods beginning on or after 1 January
2008)
|
| (b) |
Consolidation
|
The
consolidated financial statements include the financial statements of
the
Company and all of its subsidiaries made up to 31 December.
(i) Subsidiaries
Subsidiaries
are all entities (including special purpose entities) over which the
Group has
the power to govern the financial and operating policies, generally accompanying
a shareholding of more than one half of the voting rights. The existence
and
effect of potential voting rights that are currently exercisable or convertible
are considered when assessing whether the Group controls another
entity.
Subsidiaries
are fully consolidated from the date on which control is transferred
to the
Group. They are de-consolidated from the date that control ceases.
-20-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
The
purchase method of accounting is used to account for the acquisition
of
subsidiaries by the Group, including those acquired from holding companies.
The
cost of an acquisition is measured as the fair value of the assets given,
equity
instruments issued and liabilities incurred or assumed at the date of
exchange,
plus costs directly attributable to the acquisition. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition
date,
irrespective of the extent of any minority interest. The excess of the
cost of
acquisition over the fair value of the Group’s share of the identifiable net
assets acquired is recorded as goodwill. If the cost of acquisition is
less than
the fair value of the net assets of the subsidiary acquired, the difference
is
recognised directly in the income statement.
Inter-company
transactions, balances and unrealised gains on transactions between group
companies are eliminated. Unrealised losses are also eliminated unless
the
transaction provides evidence of an impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary
to ensure
consistency with the policies adopted by the Group.
Minority
interests represents the interests of outside members in the operating
results
and net assets of subsidiaries. The Group applies a policy of treating
transactions with minority interests as transactions with parties external
to
the Group. Disposals to minority interests result in gains and losses
for the
Group that are recorded in the income statement. Purchases from minority
interests result in goodwill, being the difference between any consideration
paid and the relevant share acquired of the carrying value of net assets
of the
subsidiary.
In
the
Company’s balance sheet, the investments in subsidiaries are stated at cost less
provision for impairment losses, if any. The results of subsidiaries
are
accounted for by the Company on the basis of dividends received and
receivable.
(ii) Associates
Associates
are all entities over which the Group has significant influence but not
control,
generally accompanying a shareholding of between 20% and 50% of the voting
rights. Investments in associates are accounted for using the equity
method of
accounting and are initially recognised at cost. The Group’s investments in
associates includes goodwill (net of any accumulated impairment loss)
identified
on acquisition.
The
Group’s share of its associates’ post-acquisition profits or losses is
recognised in the income statement, and its share of post-acquisition
movements
in reserves is recognised in reserves. The cumulative post-acquisition
movements
are adjusted against the carrying amount of the investment. When the
Group’s
share of losses in an associate equals or exceeds its interest in the
associate,
including any other unsecured receivables, the Group does not recognise
further
losses, unless it has incurred obligations or made payments on behalf
of the
associate.
Unrealised
gains on transactions between the Group and its associates are eliminated
to the
extent of the Group’s interest in the associates. Unrealised losses are also
eliminated unless the transaction provides evidence of an impairment
of the
asset transferred. Accounting policies of associates have been changed
where
necessary to ensure consistency with the policies adopted by the
Group.
In
the
Company’s balance sheet, the investments in associates are stated at cost less
provision for impairment losses, if any. The results of associates are
accounted
for by the Company on the basis of dividends received and
receivable.
-21-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
(iii) Jointly
controlled entities
A
jointly
controlled entity is an entity in which the Group has joint control over
its
economic activity established under a contractual arrangement. The Group’s
investments in jointly controlled entities includes goodwill (net of
any
accumulated impairment loss) identified on acquisition.
The
Group’s interests in jointly controlled entities are accounted for by the equity
method of accounting based on the audited financial statements or management
accounts of the jointly controlled entities. The Group’s share of its jointly
controlled entities’ post-acquisition profits or losses is recognised in the
income statement, and its share of post-acquisition movements is adjusted
against the carrying amount of the investment. When the Group’s share of losses
in a jointly controlled entity equals or exceeds its interest in that
entity,
including any other unsecured receivables, the Group does not recognise
further
losses, unless it has incurred obligations or made payments on behalf
of the
jointly controlled entity.
Unrealised
gains on transactions between the Group and its jointly controlled entities
are
eliminated to the extent of the Group’s interest in the jointly controlled
entities. Unrealised losses are also eliminated unless the transaction
provides
evidence of an impairment of the asset transferred. Accounting policies
of
jointly controlled entities have been changed where necessary to ensure
consistency with the policies adopted by the Group.
In
the
Company’s balance sheet, the investments in jointly controlled entities are
stated at cost less provision for impairment losses. The results of jointly
controlled entities are accounted for by the Company on the basis of
dividends
received and receivable.
| (c) |
Segmental
reporting
|
A
business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments. A geographical segment is engaged
in
providing products or services within a particular economic environment
that is
subject to risks and returns that are different from those of segments
operating
in other economic environments.
In
accordance with the Group’s internal financial reporting, the Group has
determined that business segments be presented as the primary reporting
format
and geographical as the secondary reporting format.
The
Group
has two business segments, namely passenger (including cargo carried
by
passenger flights) and cargo and logistics, which are structured and
managed
separately, according to the nature of their operations and the services
they
provide.
In
respect of the geographical segment, the analysis of turnover and operating
profit is based on the following criteria:
(i) Traffic
revenue from services within the PRC (excluding the Hong Kong Special
Administrative Region (“Hong Kong”)) is classified as domestic operations.
Traffic revenue from inbound and outbound services between the PRC and
Hong Kong
or overseas markets is classified under Hong Kong or the relevant overseas
locations.
(ii) Revenue
from ticket handling services, airport ground services and other miscellaneous
services are classified on the basis of where the services are
performed.
-22-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (d) |
Foreign
currency translation
|
(i)
Functional
and presentation currency
Items
included in the financial statements of each of the Group’s entities are
measured using the currency of the primary economic environment in which
the
entity operates (the “functional currency”). The consolidated financial
statements are presented in Chinese Renminbi (“RMB”), which is the Company’s
functional and presentation currency.
(ii)
Transactions
and balances
Foreign
currency transactions are translated into the functional currency using
the
exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and
from the
translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement,
except
when deferred in equity as qualifying cash flow hedges.
Changes
in the fair value of monetary securities denominated in foreign currency
classified as available for sale are analysed between translation differences
resulting from changes in the amortised cost of the security and other
changes
in the carrying amount of the security. Translation differences related
to
changes in the amortised cost are recognised in profit or loss, and other
changes in the carrying amount are recognised in equity.
Translation
differences on non-monetary financial assets and liabilities are reported
as
part of the fair value gain or loss. When a gain or loss on a non-monetary
item
is recognised directly in equity, any exchange component of that gain
or loss is
recognised directly in equity. Conversely, when a gain or loss on a non-monetary
item is recognised in the income statement, any exchange component of
that gain
or loss is recognised in the income statement.
| (e) |
Revenue
recognition and sales in advance of
carriage
|
Revenue
comprises the fair value of the consideration received or receivable
for the
sale of goods and the provision of services in the ordinary course of
the
Group’s activities. Revenue is shown net of business and value-added taxes,
returns, rebates and discounts and after eliminating sales within the
Group.
The
Group
recognises revenue when the amount of revenue can be reliably measured,
it is
probable that future economic benefits will flow to the entity and specific
criteria have been met for each of the Group’s activities as described below.
The amount of revenue is not considered to be reliably measurable until
all
contingencies relating to the sale have been resolved. The Group bases
its
estimates on historical results, taking into consideration the type of
customer,
the type of transaction and the specifics of each arrangement.
(i) Traffic
revenues
Passenger,
cargo and mail revenues are recognised as traffic revenues when the
transportation services are provided. The value of sold but unused tickets
is
recognised as sales in advance of carriage (“SIAC”).
(ii)
Commission
income
Commission
income represents amounts earned from other carriers in respect of sales
made by
the Group’s agents on their behalf, and is recognised in the income statement
upon ticket sales.
(iii)
Other
operating income
Revenues
from other operating businesses, including income derived from the provision
of
ground services and cargo handling services, are recognised when the
services
are rendered.
(iv)
Rental
income
Rental
income from subleases of aircraft is recognised on a straight-line basis
over
the terms of the respective leases. Rental income from leasing office
premises
and cargo warehouses is recognised on a straight-line basis over the
lease
term.
-23-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (f) |
Government
grants
|
Grants
from the government are recognised at their fair value where there is
a
reasonable assurance that the grant will be received and the Group will
comply
with all attached conditions.
Government
grants relating to costs are deducted from the related cost in the income
statement.
Government
grants relating to property, plant and equipment are recognised as a
reduction
of the carrying amount of the asset. The grant is recognised as income
over the
life of a depreciable asset by way of a reduced depreciation
charge.
| (g) |
Interest
income
|
Interest
income is recognised on a time-proportion basis using the effective interest
method. When a receivable is impaired, the Group reduces the carrying
amount to
its recoverable amount, being the estimated future cash flow discounted
at the
original effective interest rate of the instrument, and continues unwinding
the
discount as interest income. Interest income on impaired loans is recognised
using the original effective interest rate.
| (h) |
Retirement
benefits
|
The
Group
participates in defined contribution retirement schemes regarding pension
and
medical benefits for employees organised by the municipal governments
of the
relevant provinces. The contributions to the schemes are charged to the
income
statement as and when incurred.
In
addition, the Group provides retirees with post-retirement benefits including
retirement subsidies, transportation subsidies, social function activity
subsidies as well as other welfare. The liability recognised in the balance
sheet in respect of defined benefit pension plans is the present value
of the
defined benefit obligation at the balance sheet date less the fair value
of plan
assets, together with adjustments for unrecognised actuarial gains or
losses and
past service costs. The defined benefit obligation is calculated annually
using
the projected unit credit method. The present value of the defined benefit
obligation is determined by discounting the estimated future cash outflows
using
interest rates of government bonds that are denominated in the currency
in which
the benefits will be paid, and that have terms to maturity approximating
to the
terms of the related pension liability. Actuarial gains and losses arising
from
experience adjustments and changes in actuarial assumptions in excess
of the
greater of 10% of the value of plan assets or 10% of the defined benefit
obligation are charged or credited to income over the employees’ expected
average remaining working lives.
Past-service
costs are recognised immediately in income, unless the changes to the
pension
plan are conditional on the employees remaining in service for a specified
period of time (the vesting period). In this case, the past-service costs
are
amortised on a straight-line basis over the vesting period.
| (i) |
Maintenance
and overhaul costs
|
In
respect of aircraft under operating leases, the Group has the responsibility
to
fulfill certain return conditions under relevant leases. In order to
fulfill
these return conditions, major overhauls are required to be conducted
on a
regular basis. Accordingly, the present value of estimated costs of major
overhauls for aircraft under operating leases are provided at each balance
sheet
date. The provision in each period is estimated using historical major
overhaul
costs incurred during each overhaul and the estimated period between
overhauls
using the ratios of actual flying hours and estimated flying hours between
overhauls. Differences between the estimated cost and the actual cost
of the
overhaul are included in the income statement in the period of
overhaul.
In
respect of aircraft owned by the Group or held under finance leases,
costs of
overhauls are capitalised as a component of property, plant and equipment
and
are depreciated over the appropriate maintenance cycles. When each overhaul
is
performed, its cost is recognised in the carrying amount of the item
of
property, plant and equipment and is depreciated over the estimated period
between overhauls, on a straight-line basis. Upon completion of an overhaul,
any
remaining carrying amount of the cost of the previous overhaul is derecognised
and charged to the income statement.
-24-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
All
other
routine repairs and maintenance costs incurred in restoring such assets
to their
normal working condition are charged to the income statement as and when
incurred.
Improvements
are capitalised and depreciated over their expected useful lives to the
Group.
| (j) |
Income
tax
|
The
Group
provides for current income tax based on the results for the year as
adjusted
for items which are not assessable or deductible for current income tax
purposes. Current income tax of the Group is determined in accordance
with the
relevant tax rules and regulations applicable in the jurisdictions where
the
Group operates.
Deferred
income tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and
their
carrying amounts in the financial statements. However, deferred income
tax is
not accounted for if it arises from initial recognition of an asset or
liability
in a transaction other than a business combination that at the time of
the
transaction affects neither accounting nor taxable profit or loss. Deferred
tax
is determined using tax rates (and laws) that have been enacted or substantively
enacted by the balance sheet date and are expected to apply when the
related
deferred income tax asset is realised or the deferred income tax liability
is
settled.
Deferred
tax assets are recognised to the extent that it is probable that future
taxable
profit will be available against which the temporary differences can
be
utilised.
Deferred
income tax is provided on temporary differences arising on investments
in
subsidiaries, associates and jointly controlled entities, except where
the
timing of the reversal of the temporary difference is controlled by the
Group
and it is probable that the temporary difference will not reverse in
the
foreseeable future.
| (k) |
Property,
plant and equipment
|
Property,
plant and equipment is recognised initially at cost which comprises purchase
price, advance payments on acquisition and any directly attributable
costs of
bringing the assets to the condition for their intended use.
Subsequent
to initial recognition, property, plant and equipment is stated at revalued
amount less accumulated depreciation and accumulated impairment losses,
if any.
Independent valuations are performed at least once every five years,
or sooner
if considered necessary by the Directors. In the intervening years, the
Directors review the carrying values of property, plant and equipment
and
adjustment is made where they are materially different from fair value.
Increases in the carrying amount arising on revaluation are credited
to the
revaluation reserve. Decreases in valuation of property, plant and equipment
are
first offset against increases from earlier valuations of the same asset
and are
thereafter charged to the income statement. All other decreases in valuation
are
charged to the income statement. Any subsequent increases are credited
to the
income statement up to the amount previously charged. Any accumulated
depreciation at the date of revaluation is eliminated against the gross
carrying
amount of the asset, and the net amount is restated to the revalued amount
of
the asset.
Costs
of
overhaul for aircraft owned by the Group or held under finance leases
are
capitalised as a component of property, plant and equipment and are depreciated
over the appropriate maintenance cycles (Note 2(i)).
All
other
repairs and maintenance is charged in the income statement during the
financial
period in which it is incurred.
-25-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
Depreciation
of property, plant and equipment is calculated using the straight-line
method to
write down their costs or revalued amounts to their residual values over
their
estimated useful lives, as follows:
Aircraft,
engines and flight equipment
·
Components
related to overhaul
costs 2
to 8
years
·
Others 20
years
Buildings 15
to 35
years
Other
property, plant and equipment 5
to 20
years
The
assets’ residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date.
Gains
and
losses on disposals are determined by comparing the proceeds with the
assets’
carrying amount and are recognised within office, administrative and
other
expenses, in the income statements. When revalued assets are sold, the
amounts
included in the revaluation reserve are transferred to retained
profits.
Construction
in progress represents buildings under construction and plant and equipment,
being mainly flight simulators, pending installation. This includes the
costs of
construction or acquisition and interest capitalised. No depreciation
is
provided on construction in progress until the asset is completed and
ready for
use.
| (l) |
Intangible
assets
|
(i) Goodwill
Goodwill
represents the excess of the cost of an acquisition over the fair value
of the
Group’s share of the net identifiable assets of the acquired subsidiary,
associate, jointly controlled entity or business at the date of acquisition.
Goodwill on acquisition of subsidiaries and businesses is included in
‘intangible assets’. Goodwill on acquisition of associates and jointly
controlled entities is included in ‘investments in associates’ and ‘investments
in jointly controlled entities’. Recognised goodwill is tested annually for
impairment and carried at cost less accumulated impairment losses, if
any.
Impairment losses on goodwill are not reversed. Gains and losses on the
disposal
of an entity include the carrying amount of goodwill relating to the
entity
sold.
Goodwill
is allocated to cash-generating units for the purpose of impairment testing.
The
allocation is made to those cash-generating units or groups of cash-generating
units that are expected to benefit from the business combination in which
the
goodwill arose.
(ii)
Sponsorship
fees
Sponsorship
fees paid in relation to the 2010 Shanghai Expo have been capitalised
and are
being amortised on a straight-line basis over the period of the sponsorship
program. The cost of the intangible asset is calculated based on the
expected
cash payment and the fair value of the services to be provided.
(iii)
Computer
software costs
Expenditure
on computer software costs is capitalised and amortised using the straight-line
method over the expected useful lives of the software, which vary from
5 to 6
years.
| (m) |
Impairment
of investments in subsidiaries, associates, jointly controlled
entities
and non- financial assets
|
Assets
that have an indefinite useful life or which are not yet available for
use are
not subject to amortisation and are tested annually for impairment. Assets
that
are subject to amortisation are reviewed for impairment whenever events
or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which
the
asset’s carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs to sell and value in use. For
the purposes of assessing impairment, assets are grouped at the lowest
levels
for which there are separately identifiable cash flows (cash-generating
units).
Assets other than goodwill that have suffered an impairment are reviewed
for
possible reversal of the impairment at each balance sheet date.
-26-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (n) |
Lease
prepayments
|
Lease
prepayments represent acquisition costs of land use rights less accumulated
amortisation. Amortisation is provided over the lease period of the land
use
rights on a straight-line basis.
| (o) |
Advanced
payments on acquisition of
aircraft
|
Advanced
payments on acquisition of aircraft represent payments to aircraft manufacturers
to secure deliveries of aircraft in future years and the related interest
capitalised. The balance is transferred to property, plant and equipment
upon
delivery of the aircraft.
| (p) |
Borrowing
costs
|
Interest
attributable to loans for advance payments used to finance the acquisition
of
aircraft and other qualifying assets is capitalised as an additional
cost of the
related asset. Interest is capitalised at the Group’s weighted average interest
rate on borrowings or, where applicable, the interest rate related to
specific
borrowings during the period of time that is required to complete and
prepare
the asset for its intended use.
All
other
borrowing costs are charged to the income statement in the period in
which they
are incurred.
| (q) |
Long-term
bank deposits
|
Held-to-maturity
long-term bank deposits placed to secure future lease obligations are
classified
as held-to-maturity financial assets and included under other long-term
assets
in the balance sheet. Held-to-maturity financial assets are initially
recognised
in the balance sheet at fair value plus transaction costs. Subsequently,
they
are stated at amortised cost less impairment losses.
| (r) |
Flight
equipment spare parts
|
Flight
equipment spare parts are stated at the lower of cost and net realisable
value.
Cost is determined using the weighted average method. The cost of flight
equipment spare parts comprises the purchase price (net of discounts),
freight
charges, duty and value added tax and other miscellaneous charges. Net
realisable value is the estimated replacement cost of the flight equipment
spare
parts.
| (s) |
Trade
receivables
|
Trade
receivables are recognised initially at fair value and subsequently measured
at
amortised cost using the effective interest method, less provision for
impairment. A provision for impairment of trade receivables is established
when
there is objective evidence that the Group will not be able to collect
all
amounts due according to the original terms of the receivables. Significant
financial difficulties of the debtor, probability that the debtor will
enter
bankruptcy or financial reorganisation, and default or delinquency in
payments
are considered indicators that the trade receivable is impaired. The
amount of
the provision is the difference between the asset’s carrying amount and the
present value of estimated future cash flows, discounted at the original
effective interest rate. The carrying amount of the assets is reduced
through
the use of an allowance account, and the amount of the loss is recognised
in the
income statement. When a trade receivable is uncollectible, it is written
off
against the allowance account for trade receivables. Subsequent recoveries
of
amounts previously written off are credited in the income
statement.
| (t) |
Cash
and cash equivalents
|
Cash
equivalents includes cash in hand, deposits held at call with banks and
other
short-term highly liquid investments with original maturities of three
months or
less.
-27-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (u) |
Borrowings
|
Borrowings
are recognised initially at fair value, net of transaction costs incurred.
Borrowings are subsequently stated at amortised cost; any differences
between
the proceeds (net of transaction costs) and the redemption value is recognised
in the income statement over the period of the borrowings using the effective
interest method.
Borrowings
are classified as current liabilities unless the Group has an unconditional
right to defer settlement of the liability for at least 12 months after
the
balance sheet date.
| (v) |
Provisions
|
Provisions
are recognised when the Group has a present legal or constructive obligation
as
a result of past events, it is probable that an outflow of resources
will be
required to settle the obligation, and the amount can be reliably
estimated.
Where
there are a number of similar obligations, the likelihood that an outflow
will
be required in settlement is determined by considering the class of obligations
as a whole. A provision is recognised even if the likelihood of an outflow
with
respect to any one item included in the same class of obligations may
be
small.
Provisions
are measured at the present value of the expenditures expected to be
required to
settle the obligation using a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the
obligation.
The increase in the provision due to passage of time is recognised as
interest
expense.
| (w) |
Leases
|
(i) A
Group company is the lessee
Finance
leases
The
Group
leases certain property, plant and equipment. Leases of property, plant
and
equipment where the Group has acquired substantially all the risks and
rewards
of ownership are classified as finance leases. Finance leases are capitalised
at
the lease’s commencement at the lower of the fair value of the leased property
and the present value of the minimum lease payments.
Each
lease payment is allocated between the liability and finance charges
so as to
achieve a constant rate on the finance balance outstanding. The corresponding
rental obligations, net of finance charges, are included in other short-term
and
other long-term payables. The interest element of the finance cost is
charged to
the income statement over the lease period so as to produce a constant
periodic
rate of interest on the remaining balance of the liability for each period.
Leased assets are depreciated using a straight-line basis over their
expected
useful lives to residual values.
For
sale
and leaseback transactions resulting in a finance lease, differences
between
sales proceeds and net book values are deferred and amortised over the
minimum
lease terms.
Operating
leases
Leases
in
which a significant portion of the risks and rewards of ownership are
retained
by the lessor are classified as operating leases. Payments made under
operating
leases (net of any incentives received from the lessor) are charged to
the
income statement on a straight-line basis over the period of the
lease.
For
sale
and leaseback transactions resulting in an operating lease, differences
between
sales proceeds and net book values are recognised immediately in the
income
statement, except to the extent that any profit or loss is compensated
for by
future lease payments at above or below market value.
-28-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
(ii) A
Group company is the lessor
When
assets are leased out under a finance lease, the present value of the
lease
payments is recognised as a receivable. The difference between the gross
receivable and the present value of the receivable is recognised as unearned
finance income. Lease income is recognised over the term of the lease
using the
net investment method, which reflects a constant periodic rate of
return.
Assets
leased out under operating leases are included in property, plant and
equipment
in the balance sheet. They are depreciated over their expected useful
lives on a
basis consistent with similar property, plant and equipment. Rental income
is
recognised on a straight-line basis over the lease term.
| (x) |
Derivative
financial instruments
|
Derivative
financial instruments are initially recognised in the balance sheet at
fair
value and are subsequently remeasured at their fair value. The accounting
for
subsequent changes in fair value depends on whether the derivative is
designated
as a hedging instrument, and if so, the nature of the item being
hedged.
The
Group
documents at the inception of the transaction the relationship between
hedging
instruments and hedged items, as well as its risk management objectives
and
strategy for undertaking various hedge transactions. The Group also documents
its assessment, both at hedge inception and on an ongoing basis, of whether
the
derivatives that are used in hedging transactions are highly effective
in
offsetting changes in fair values or cash flows of hedged items.
Derivative
financial instruments that do not qualify for hedge accounting are accounted
for
as trading instruments and any unrealised gains or losses, being changes
in fair
value of the derivatives, are recognised in the income statement
immediately.
Changes
in the fair value of derivatives that are designated and qualify as fair
value
hedges and that are highly effective, are recorded in the income statement,
along with any changes in the fair value of the hedged assets or liabilities
that are attributable to the hedged risk.
Derivative
financial instruments that qualify for hedge accounting and which are
designated
as a specific hedge of the variability in cashflows of a highly probable
forecast transaction, are accounted for as follows:
(i) the
effective portion of any change in fair value of the derivative financial
instrument is recognised directly in equity. Where the forecast transaction
or
firm commitment results in the recognition of an asset or a liability,
the gains
and losses previously deferred in equity are included in the initial
measurement
of the cost of the asset or liability. Otherwise, the cumulative gain
or loss on
the derivative financial instrument is removed from equity and recognised
in the
income statement in the same period during which the hedged forecast
transaction
affects net profit or loss.
(ii) the
ineffective portion of any change in fair value is recognised in the
income
statement immediately.
When
a
hedging instrument expires or is sold, or when a hedge no longer meets
the
criteria for hedge accounting, any cumulative gain or loss existing in
equity at
that time remains in equity and is recognised in the income statement
when the
committed or forecast transaction ultimately occurs. When a committed
or
forecast transaction is no longer expected to occur, the cumulative gain
or loss
that was recorded in equity is immediately transferred to the income
statement.
-29-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (y) |
Dividend
|
Dividend
distribution to the Company’s shareholders is recognised as a liability in the
financial statements in the period in which the dividends are approved
by the
Company’s shareholders.
| (z) |
Available-for-sale
financial assets
|
Investments
in securities other than subsidiaries, associates and jointly controlled
entities, being held for non-trading purposes, are classified as
available-for-sale financial assets and are initially recognised at fair
value
plus transaction costs. At each balance sheet date, the fair value is
remeasured, with any resulting gain or loss being recognised directly
in equity,
except for impairment losses. When these investments are derecognised,
the
cumulative gain or loss previously recognised directly in equity is recognised
in the income statement.
The
Group
assesses at each balance sheet date whether there is objective evidence
that a
financial asset is impaired. In the case of equity securities classified
as
available for sale, a significant or prolonged decline in the fair value
of the
securities below its cost is considered an indicator that the securities
are
impaired. If any such evidence exists for available-for-sale financial
assets,
the cumulative loss, measured as the difference between the acquisition
cost and
the current fair value less any impairment loss on that financial asset
previously recognised in the income statement, is removed from equity
and
recognised in the income statement. Impairment losses recognised in the
income
statement on equity instruments are not reversed through the income
statement.
(aa) Comparatives
Where
necessary, prior year amounts have been reclassified to conform with
changes in
presentation in the current year.
| 3. |
FINANCIAL
RISK MANAGEMENT
|
| (a) |
Financial
risk factors
|
The
Group’s activities expose it to a variety of financial risks: business risk,
market risk (including currency risk, fair value interest rate risk,
cash flow
interest rate risk and price risk), credit risk, and liquidity risk.
The Group’s
overall risk management programme focuses on the unpredictability of
financial
markets and seeks to minimise potential adverse effects on the Group’s financial
performance. The Group uses derivative financial instruments to hedge
certain
risk exposures.
(i) Business
risk
The
operations of the air transportation industry are substantially influenced
by
global political and economic development. Accidents, wars, natural disasters,
etc. may have a material impact on the Group’s operations or the industry as a
whole. In addition, the Group conducts its principal operations in the
PRC and
accordingly is subject to special considerations and significant risks
not
typically associated with companies in ‘Western’ countries. These include risks
associated with, among others, the political, economic and legal environment,
competition and the influence of the Civil Aviation Administration of
China
(“CAAC”) in the PRC civil aviation industry.
(ii) Foreign
currency risk
The
Group’s finance lease obligations as well as certain bank and other loans are
denominated in US dollars, Japanese Yen and Euros, and certain expenses
of the
Group are denominated in currencies other than RMB. The Group generates
foreign
currency revenues from ticket sales made in overseas offices and would
normally
generate sufficient foreign currencies after payment of foreign currency
expenses, to meet its foreign currency liabilities repayable within one
year.
The Group also enters into certain foreign currency forward contracts
to hedge
against foreign currency risk. Details of foreign currency forward contracts
are
disclosed in Note 34(b) to the financial statements.
-30-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
(iii)
Interest
rate risk
The
Group
has significant bank borrowings at floating variable rates and is exposed
to
risk arising from changes in market interest rates. To hedge against
the
variability in the cash flows arising from a change in market interest
rates,
the Group has entered into certain interest rate swaps to swap variable
rates
into fixed rates. The interest rates and terms of repayment of borrowings
made
to the Group and interest rate swaps are disclosed in Notes 28 and 34(a)
to the
financial statements.
(iv) Price
risk
The
Group’s results of operations may be significantly affected by fluctuations
in
fuel prices which is a significant expense for the Group. While international
fuel prices are determined by worldwide market demand and supply, domestic
fuel
prices are regulated by CAAC. The Group has entered into certain financial
derivatives to hedge against fuel price risk. Details of fuel option
contracts
are disclosed in Note 34(c) to the financial statements.
(v) Credit
risk
The
Group
has no significant concentrations of credit risk. The Group has policies
in
place to ensure that blank tickets are made to sales agents with an appropriate
credit history. A major portion of sales are conducted through sales
agents and
the majority of these agents are connected to various settlement plans
and/or
clearing systems which have tight requirements on the credit standing
of these
agents.
Transactions
in relation to derivative financial instruments are only carried out
with
financial institutions of high reputation. The Group has policies that
limit the
amount of credit exposure to any one financial institution.
(vi) Liquidity
risk
The
Group’s primary cash requirements have been for additions of and upgrades to
aircraft, engines and flight equipment and payments on related borrowings/debts.
The Group finances its working capital requirements through a combination
of
funds generated from operations and both short and long term bank loans.
The
Group generally finances the acquisition of aircraft through long-term
finance
leases and bank loans.
The
Group
operates with a working capital deficit. As at 31 December 2006, the
Group’s net
current liabilities amounted to RMB24,792 million (2005: RMB25,572 million).
For
the year ended 31 December 2006, the Group recorded a net cash inflow
from
operating activities of RMB1,338 million (2005: RMB1,952 million), a
net cash
outflow from investing activities and financing activities of RMB1,258
million
(2005: RMB2,183 million), and an increase in cash and cash equivalents
of RMB80
million (2005: decrease of RMB231 million).
The
Directors of Company believe that cash from operations and short-term
bank
borrowings will be sufficient to meet the Group’s operating cashflow. Due to the
dynamic nature of the underlying businesses, the Group’s treasury policy aims at
maintaining flexibility in funding by keeping credit lines available.
The
Directors of the Company believe that the Group has obtained sufficient
general
credit facilities from PRC banks for financing future capital commitments
and
for working capital purposes.
-31-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (b) |
Fair
value estimation of financial assets and
liabilities
|
The
fair
value of financial instruments traded in active markets (such as publicly
traded
derivatives, and trading and available-for-sale securities) is based
on quoted
market prices at the balance sheet date. The quoted market price used
for
financial assets held by the Group is the current bid price; the quoted
market
price used for financial liabilities is the current asking price.
The
fair
value of financial instruments that are not traded in an active market
is
determined by using valuation techniques. The Group uses a variety of
methods
and makes assumptions that are based on market conditions existing at
each
balance sheet date. Quoted market prices or dealer quotes for similar
instruments are used for long-term debt. Other techniques, such as estimated
discounted cash flows, are used to determine fair value for the remaining
financial instruments. The fair value of interest-rate swaps is calculated
as
the present value of the estimated future cash flows. The fair value
of forward
foreign exchange contracts is determined using forward exchange market
rates at
the balance sheet date. The fair value of fuel option contracts is determined
using quoted market values.
The
carrying value less impairment provision for trade receivables and payables
are
assumed to approximate their fair values. The fair values of other long-term
receivables are based on cash flows discounted using a rate based on
the
borrowing rate. The fair value of financial liabilities for disclosure
purposes
is estimated by discounting the future contractual cash flows at the
current
market interest rate that is available to the Group for similar financial
instruments.
| 4. |
CRITICAL
ACCOUNTING ESTIMATES AND
JUDGMENTS
|
Estimates
and judgments used in preparing the financial statements are continually
evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under
the
circumstances. The Group makes estimates and assumptions concerning the
future.
The resulting accounting estimates will, by definition, seldom equal
the related
actual results. The estimates and assumptions that have a significant
risk of
causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below.
| (a) |
Estimated
impairment of property, plant and equipment and intangible
assets
|
The
Group
tests annually whether property, plant and equipment and intangible assets
have
been impaired in accordance with the accounting policy stated in Note
2(m) to
the financial statements. The recoverable amounts of cash generating
units have
been determined based on value-in-use calculations. These calculations
require
the use of estimates which are disclosed in Note 14 to the financial
statements.
| (b) |
Valuation
of property, plant and
equipment
|
The
Group’s property, plant and equipment is subsequently stated at revalued amounts
less accumulated depreciation in accordance with the accounting policy
stated in
Note 2(k) to the financial statements. Revaluations of property, plant
and
equipment will be performed at sufficiently regular intervals, at least
every
five years, by independent professional valuers. In each of the intervening
years valuations will be undertaken by the Directors of the Company.
If the
subsequent revalued amounts differ materially from carrying amounts,
the
carrying amounts will be adjusted to the revalued amounts. Their recorded
value
is impacted by management judgment, including valuations performed by
the
management and/or independent professional valuers, estimates of useful
lives,
residual value and impairment charges. If different judgments or estimates
had
been utilized, material differences could have resulted in the amount
of
revaluation and related depreciation charges.
| (c) |
Fair
value estimation
|
The
carrying amounts of the Group’s current financial assets, including cash and
cash equivalents, trade receivables, prepayments, other receivables,
amounts due
from related companies and current financial liabilities including trade
payables and note payables, other payables and accrued expenses and amounts
due
to related companies, approximate their fair values due to their short
maturities.
-32-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (d) |
Revenue
recognition
|
The
Group
recognises passenger, cargo and mail revenues in accordance with the
accounting
policy stated in Note 2(e) to the financial statements. Unused tickets
are
recognised in traffic revenues based on current estimates. Management
periodically evaluate the balance in the SIAC and record any adjustments,
which
can be material, in the period the evaluation is completed. These adjustments
result from differences between the estimates of certain revenue transactions
and the timing of recognising revenue for any unused air tickets and
the related
sales price, and are impacted by various factors, including a complex
pricing
structure and interline agreements throughout the industry, which affect
the
timing of revenue recognition.
| (e) |
Overhaul
costs
|
The
amount of overhaul costs charged/amortised to operating profits is impacted
by
management’s estimates of the expected flying hours and overhaul costs, which
are largely based on past experience of overhauls of the same or similar
models
of aircraft. Different judgments or estimates could significantly affect
the
estimated overhaul provision and materially impact the results of
operations.
| (f) |
Retirement
benefits
|
The
Group
operates and maintains defined retirement benefit plans which provide
retirees
with benefits including transportation subsidies, social activity subsidies
as
well as other welfare. The cost of providing the aforementioned benefits
in the
defined retirement benefit plan is actuarially determined and recognised
over
the employees’ service period by utilising various actuarial assumptions and
using the projected unit credit method in accordance with the accounting
policy
stated in Note 2(h) to the financial statements. These assumptions include,
without limitation, the selection of discount rate, annual rate of increase
of
per capita benefit payment and employees’ turnover rate. The discount rate is
based on management’s review of local high quality corporate bonds. The annual
rate of increase of benefit payments is based on the general local economic
conditions. The employees’ turnover rate is based on historical trends of the
Group. Additional information regarding the retirement benefit plans
is
disclosed in Note 32 to the financial statements.
| (g) |
Deferred
income tax
|
In
assessing the amount of deferred tax assets that need to be recognised
in
accordance with the accounting policy stated in Note 2(j) to the financial
statements, the Group considers future taxable income and ongoing prudent
and
feasible tax planning strategies. In the event that the Group’s estimates of
projected future taxable income and benefits from available tax strategies
are
changed, or changes in current tax regulations are enacted that would
impact the
timing or extent of the Group’s ability to utilise the tax benefits of net
operating loss carry forwards in the future, adjustments to the recorded
amount
of net deferred tax assets and taxation expense would be made.
| (h) |
Current
tax
|
The
Group
make provision for current tax based on the estimated income tax liabilities.
The estimated income tax liabilities are primarily computed based on
the tax
filings as prepared by our Company and based on management’s interpretation of
relevant tax rulings.
| (i) |
Classification
of leases
|
The
Group
classifies leases into finance leases or operating leases in accordance
with the
accounting policies stated in Note 2(w) to the financial statements.
Whether a
lease is a finance lease or operating lease depends on the substance
of the
transactions rather than the form of the contract. In determining whether
a
lease is a finance lease or an operating lease, significant estimates
and
judgment are required. In making these estimates, and judgment, the Group
evaluates among other factors, if the present value of the minimum lease
payments amounts to at least substantially all of the fair value of the
leased
asset at the inception of the lease. To evaluate a lease based on this
model, a
number of assumptions, such as the incremental borrowing rate of interest,
interest rate implicit in the lease and residual values of the aircraft
at the
end of the lease period have been made. Any changes to these assumptions
would
affect the classification of the lease.
-33-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
5.
|
REVENUES
|
The
Group
is principally engaged in the operation of civil aviation, including the
provision of passenger, cargo, mail delivery and other extended transportation
services.
|
Group
|
|
||||||
|
|
|
2006
|
|
2005
|
|
||
|
|
|
RMB’000
|
|
RMB’000
|
|||
|
Revenues
|
|||||||
|
Traffic
revenues
|
|||||||
|
-
Passenger
|
31,229,591
|
21,367,747
|
|||||
|
-
Cargo and mail
|
5,776,671
|
5,087,244
|
|||||
|
Ground
service income
|
781,130
|
806,755
|
|||||
|
Cargo
handling income
|
289,530
|
292,488
|
|||||
|
Commission
income
|
125,576
|
185,827
|
|||||
|
Rental
income from operating subleases of aircraft
|
-
|
183,260
|
|||||
|
Others
|
263,169
|
198,175
|
|||||
|
38,465,667
|
28,121,496
|
||||||
|
Less:
Business tax (Note)
|
(976,792
|
)
|
(667,053
|
)
|
|||
|
37,488,875
|
27,454,443
|
||||||
| Note: |
Except
for traffic revenues derived from inbound international and regional
flights, which are not subject to the People’s Republic of China (“PRC”)
business tax, the Group’s traffic revenues, commission income, ground
service income, cargo handling income and other revenues are subject
to
PRC business tax levied at rates ranging from 3% to 5%, pursuant
to PRC
business tax rules and regulations.
|
| 6. |
OTHER OPERATING INCOME, NET
|
|
Group
|
|
||||||
|
|
|
2006
|
|
2005
|
|
||
|
|
|
RMB’000
|
|
RMB’000
|
|||
|
Government
subsidies (Note)
|
462,370
|
193,069
|
|||||
|
Net
fair value (losses)/gains on financial instruments
|
|||||||
|
-
forward foreign exchange contracts
|
26,744
|
25,002
|
|||||
|
-
fuel hedging (losses)/income
|
(64,849
|
)
|
27,208
|
||||
|
424,265
|
245,279
|
||||||
| Note: |
The
government subsidies represent (i) subsidies granted by local government
to the Company in consideration of the relocation of the Company’s
international flights and related facilities from Shanghai Hongqiao
Airport to Pudong International Airport; (ii) subsidies granted
by various
local municipalities to encourage the Group to operate certain
routes to
places where these municipalities are located; and (iii) other
subsidies
granted by the Central Government.
|
-34-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| 7. |
SEGMENT INFORMATION
|
| (a) |
Primary reporting format by business segment
|
Segment
information is presented in respect of the Group’s business and geographical
segments. Business segment information is chosen as the primary reporting
format. For the year ended 31 December 2005, the Group principally operated
in
one business segment, which was the operation of civil aviation, including
the
provision of passenger, cargo, mail delivery and other extended transportation
services. In view of the growth of the China cargo and logistic transportation
services, the Group has decided to report it as a separate business segment.
In
the
prior year’s financial statements, the Group’s corporate general and
administrative expenses (the “Corporate Expenses”) were allocated to respective
segments. In order to better reflect the impact of recent business acquisitions
and a rapid increase in business volumes, Corporate Expenses have not been
allocated on a geographical basis because the basis of such an allocation
cannot
be performed on a non-arbitrary basis. Accordingly, the analysis of segment
results for both 2006 and 2005 has been presented on this basis.
| (1) |
Passenger
business segment includes cargo carried by passenger flights.
|
| (2) |
Inter-segment
transfers or transactions are entered into under normal commercial
terms
and conditions that would also be available to unrelated third
parties.
|
The
segment results for the year ended 31 December 2006 are as follows:
|
|
|
Cargo
and
|
|
|
|
|
|
||||||
|
|
|
Passenger
|
|
logistics
|
|
Unallocated
|
|
Total
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
Traffic
revenues
|
33,489,978
|
2,842,836
|
-
|
36,332,814
|
|||||||||
|
Other
revenues and
|
|||||||||||||
|
operating
income
|
1,066,296
|
709,069
|
140,525
|
1,915,890
|
|||||||||
|
Total
segment revenue
|
34,556,274
|
3,551,905
|
140,525
|
38,248,704
|
|||||||||
|
Inter-segment
revenue
|
(759,829
|
)
|
-
|
-
|
(759,829
|
)
|
|||||||
|
Revenues
|
33,796,445
|
3,551,905
|
140,525
|
37,488,875
|
|||||||||
|
Operating
(loss)/profit
|
|||||||||||||
|
-
segment results
|
(2,770,861
|
)
|
(242,526
|
)
|
21,947
|
(2,991,440
|
)
|
||||||
|
Interest
income
|
112,181
|
6,247
|
1,733
|
120,161
|
|||||||||
|
Finance
costs
|
(776,647
|
)
|
(93,026
|
)
|
(7,906
|
)
|
(877,579
|
)
|
|||||
|
Share
of results of associates
|
103,566
|
-
|
-
|
103,566
|
|||||||||
|
Share
of results of
|
|||||||||||||
|
jointly
controlled entities
|
29,595
|
-
|
-
|
29,595
|
|||||||||
|
(Loss)/profit
before
|
|||||||||||||
|
income
tax
|
(3,302,166
|
)
|
(329,305
|
)
|
15,774
|
(3,615,697
|
)
|
||||||
|
Income
tax
|
198,088
|
(30,262
|
)
|
(4,894
|
)
|
162,932
|
|||||||
|
(Loss)/profit
for the year
|
(3,104,078
|
)
|
(359,567
|
)
|
10,880
|
(3,452,765
|
)
|
||||||
-35-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
The
segment results for the year ended 31 December 2005 are as
follows:
|
|
|
Cargo
and
|
|
|
|
|
|
||||||
|
|
|
Passenger
|
|
logistics
|
|
Unallocated
|
|
Total
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
||||
|
|
|
|
|
|
|
|
|
|
|||||
|
Traffic
revenues
|
23,182,516
|
2,731,636
|
-
|
25,914,152
|
|||||||||
|
Other
revenues and operating income
|
1,012,076
|
574,776
|
97,911
|
1,684,763
|
|||||||||
|
Total
segment revenue
|
24,194,592
|
3,306,412
|
97,911
|
27,598,915
|
|||||||||
|
Inter-segment
revenue
|
(144,472
|
)
|
-
|
-
|
(144,472
|
)
|
|||||||
|
Revenues
|
24,050,120
|
3,306,412
|
97,911
|
27,454,443
|
|||||||||
|
Operating
(loss)/profit
|
|||||||||||||
|
-
segment results
|
(165,559
|
)
|
167,414
|
12,393
|
14,248
|
||||||||
|
Interest
income
|
120,155
|
6,149
|
2,396
|
128,700
|
|||||||||
|
Finance
costs
|
(623,536
|
)
|
(83,518
|
)
|
4
|
(707,050
|
)
|
||||||
|
Share
of results of associates
|
(9,030
|
)
|
-
|
-
|
(9,030
|
)
|
|||||||
|
Share
of results of jointly controlled entities
|
(4,300
|
)
|
-
|
-
|
(4,300
|
)
|
|||||||
|
(Loss)/profit
before income tax
|
(682,270
|
)
|
90,045
|
14,793
|
(577,432
|
)
|
|||||||
|
Income
tax
|
153,226
|
(11,415
|
)
|
(3,107
|
)
|
138,704
|
|||||||
|
(Loss)/profit
for the year
|
(529,044
|
)
|
78,630
|
11,686
|
(438,728
|
)
|
|||||||
Other
segment items included in the income statement for the year ended 31 December
2006 are as follows:
|
|
|
Cargo
and
|
|
|
|
|
|
||||||
|
|
|
Passenger
|
|
logistics
|
|
Unallocated
|
|
Total
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
Depreciation
|
3,937,182
|
524,150
|
32,240
|
4,493,572
|
|||||||||
|
Amortisation
|
72,737
|
-
|
-
|
72,737
|
|||||||||
|
Revaluation
deficits of property plant and equipment
|
1,035,343
|
-
|
-
|
1,035,343
|
|||||||||
Other
segment items included in the income statement for the year ended 31 December
2005 are as follows:
|
|
|
Cargo
and
|
|
|
|
|
|
||||||
|
|
|
Passenger
|
|
logistics
|
|
Unallocated
|
|
Total
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
Depreciation
|
3,434,649
|
445,501
|
17,992
|
3,898,142
|
|||||||||
|
Amortisation
|
13,580
|
-
|
-
|
13,580
|
|||||||||
Segment
assets and liabilities comprise operating assets and liabilities that are
directly attributable to the segment.
-36-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
The
segment assets and liabilities at 31 December 2006 and capital expenditure
for
the year then ended are as follows:
|
|
|
Cargo
and
|
|
|
|
|
|
||||||
|
|
|
Passenger
|
|
logistics
|
|
Unallocated
|
|
Total
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
||||
|
|
|
|
|
|
|
|
|
|
|||||
|
Segment
assets
|
54,778,224
|
5,185,564
|
463,188
|
60,426,976
|
|||||||||
|
Investments
in associates
|
498,295
|
10,760
|
114,335
|
623,390
|
|||||||||
|
Investments
in jointly controlled entities
|
115,540
|
-
|
-
|
115,540
|
|||||||||
|
Total
assets
|
55,392,059
|
5,196,324
|
577,523
|
61,165,906
|
|||||||||
|
Segment
liabilities
|
(53,632,097
|
)
|
(3,992,814
|
)
|
(64,352
|
)
|
(57,689,263
|
)
|
|||||
|
Capital
expenditure
(Note 14 & 15)
|
15,566,384
|
1,170,712
|
52,623
|
16,789,719
|
|||||||||
The
segment assets and liabilities at 31 December 2005 and capital expenditure
for
the year then ended are as follows:
|
|
|
Cargo
and
|
|
|
|
|
|
||||||
|
|
|
Passenger
|
|
logistics
|
|
Unallocated
|
|
Total
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
Segment
assets
|
52,560,982
|
5,182,541
|
425,553
|
58,169,076
|
|||||||||
|
Investments
in associates
|
510,059
|
7,187
|
112,500
|
629,746
|
|||||||||
|
Investments
in jointly controlled entities
|
100,520
|
-
|
-
|
100,520
|
|||||||||
|
Total
assets
|
53,171,561
|
5,189,728
|
538,053
|
58,899,342
|
|||||||||
|
Segment
liabilities
|
(48,461,886
|
)
|
(3,473,228
|
)
|
(45,686
|
)
|
(51,980,800
|
)
|
|||||
|
Capital
expenditure
(Note 14 & 15)
|
12,170,540
|
1,044,973
|
14,838
|
13,230,351
|
|||||||||
| (b) |
Secondary reporting format by geographical segment
|
The
Group’s two business segments operate in four main geographical areas, even
though they are managed on a worldwide basis.
The
Group’s revenues (net of business tax) by geographical segment are analysed as
follows:
|
Group
|
|
||||||
|
|
|
2006
|
|
2005
|
|
||
|
|
|
RMB’000
|
|
RMB’000
|
|||
|
Domestic
(the PRC, excluding Hong Kong)
|
20,803,441
|
13,357,972
|
|||||
|
Hong
Kong
|
3,244,846
|
3,150,123
|
|||||
|
Japan
|
3,582,962
|
2,644,372
|
|||||
|
Other
countries
|
9,857,626
|
8,301,976
|
|||||
|
Total
|
37,488,875
|
27,454,443
|
|||||
The
major
revenue-earning assets of the Group are its aircraft, all of which are
registered in the PRC. Since the Group’s aircraft are deployed flexibly across
its route network, there is no suitable basis of allocating such assets and
the
related liabilities to geographical segments and hence segment assets and
capital expenditure by geographic segment have not been presented.
-37-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| 8. |
WAGES, SALARIES AND BENEFITS
|
|
Group
|
|
||||||
|
|
|
2006
|
|
2005
|
|
||
|
|
|
RMB’000
|
|
RMB’000
|
|||
|
Wages,
salaries, bonus and allowances
|
2,476,924
|
1,579,292
|
|||||
|
Employee
welfare and benefits
|
295,185
|
166,267
|
|||||
|
Defined
contribution retirement schemes (Note
32(a))
|
298,363
|
280,218
|
|||||
|
Post-retirement
benefits (Note
32(b))
|
146,968
|
102,459
|
|||||
|
Staff
housing fund (Note
33(a))
|
228,000
|
195,000
|
|||||
|
Staff
housing allowance (Note
33(b))
|
30,656
|
36,231
|
|||||
|
3,476,096
|
2,359,467
|
||||||
| (a) |
Emoluments of Directors, supervisors and senior management
|
Details
of the emoluments paid to the Company’s Directors, supervisors and senior
management are as follows:
|
2006
|
|
|||||||||
|
|
|
Salaries
and
|
|
|
|
|
|
|||
|
|
|
allowances
|
|
Bonus
|
|
Total
|
|
|||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
||||
|
Executive
Directors
|
||||||||||
|
Li
Fenghua*
|
-
|
-
|
-
|
|||||||
|
Luo
Chaogeng*
|
-
|
-
|
-
|
|||||||
|
Cao
Jainxiong*
|
-
|
-
|
-
|
|||||||
|
Wan
Mingwu*
|
-
|
-
|
-
|
|||||||
|
Zhong
Xiong*
|
-
|
-
|
-
|
|||||||
|
Luo
Zhuping
|
157
|
-
|
157
|
|||||||
|
Independent
non-executive Directors
|
||||||||||
|
Hu
Honggao*
|
-
|
-
|
-
|
|||||||
|
Peter
Lok *
|
-
|
-
|
-
|
|||||||
|
Wu
Baiwang*
|
-
|
-
|
-
|
|||||||
|
Zhou
Ruijin*
|
-
|
-
|
-
|
|||||||
|
Xie
Rong*
|
-
|
-
|
-
|
|||||||
|
Supervisors
|
||||||||||
|
Li
Wenxin*
|
-
|
-
|
-
|
|||||||
|
Ba
Shengji*
|
-
|
-
|
-
|
|||||||
|
Yang
Xingen
|
149
|
-
|
149
|
|||||||
|
Yang
Jie
|
100
|
-
|
100
|
|||||||
|
Liu
Jiashun*
|
-
|
-
|
-
|
|||||||
|
Vice
executive Directors
|
||||||||||
|
Zhang
Jianzhong
|
176
|
-
|
176
|
|||||||
|
Li
Yangmin
|
156
|
-
|
156
|
|||||||
|
Fan
Ru
|
454
|
-
|
454
|
|||||||
|
Finance
controller
|
||||||||||
|
Luo
Weide
|
173
|
-
|
173
|
|||||||
|
Total
|
1,365
|
-
|
1,365
|
|||||||
-38-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
2005
|
|
|||||||||
|
|
|
Salaries
and
|
|
|
|
|
|
|||
|
|
|
allowances
|
|
Bonus
|
|
Total
|
|
|||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
|||
|
|
|
|
|
|
|
|
||||
|
Executive
Directors
|
||||||||||
|
Li
Fenghua*
|
-
|
-
|
-
|
|||||||
|
Luo
Chaogeng*
|
-
|
-
|
-
|
|||||||
|
Cao
Jianxiong*
|
-
|
-
|
-
|
|||||||
|
Wan
Mingwu*
|
-
|
-
|
-
|
|||||||
|
Zhong
Xiong*
|
-
|
-
|
-
|
|||||||
|
Luo
Zhuping
|
103
|
59
|
162
|
|||||||
|
Independent
non-executive Directors
|
||||||||||
|
Hu
Honggao*
|
-
|
-
|
-
|
|||||||
|
Peter
Lok *
|
-
|
-
|
-
|
|||||||
|
Wu
Baiwang*
|
-
|
-
|
-
|
|||||||
|
Zhou
Ruijin*
|
-
|
-
|
-
|
|||||||
|
Xie
Rong*
|
-
|
-
|
-
|
|||||||
|
Supervisors
|
||||||||||
|
Li
Wenxin*
|
-
|
-
|
-
|
|||||||
|
Ba
Shengji*
|
-
|
-
|
-
|
|||||||
|
Yang
Xingen
|
86
|
55
|
141
|
|||||||
|
Yang
Jie
|
66
|
49
|
115
|
|||||||
|
Liu
Jiashun*
|
-
|
-
|
-
|
|||||||
|
Vice
executive Directors
|
||||||||||
|
Wu
Jiuhong
|
119
|
231
|
350
|
|||||||
|
Zhou
Liguo
|
126
|
352
|
478
|
|||||||
|
Zhang
Jianzhong
|
101
|
93
|
194
|
|||||||
|
Tong
Guozhao
|
121
|
352
|
473
|
|||||||
|
Li
Yangmin
|
90
|
55
|
145
|
|||||||
|
Finance
controller
|
||||||||||
|
Luo
Weide
|
111
|
75
|
186
|
|||||||
|
|
||||||||||
|
Total
|
923
|
1,321
|
2,244
|
|||||||
|
*
|
Certain
Directors of the Company received emoluments from CEA Holding,
the parent
company, part of which is in respect of their services to the Company
and
its subsidiaries. No apportionment has been made as it is impracticable
to
apportion this amount between their services to the Group and their
services to CEA Holding.
|
During
the year ended 31 December 2006, no Directors and supervisors waived their
emoluments (2005: Nil).
-39-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (b) |
Five highest paid individuals
|
One
(2005: None) of the vice executive Directors, whose emoluments are reflected
in
the above analysis were among the five highest paid individuals in the Group
for
the year. The emoluments payable to the remaining four (2005: five) highest
paid
individuals are as follows:
|
Group
|
|||||||
|
|
2006
|
2005
|
|||||
|
|
RMB’000
|
RMB’000
|
|||||
|
Wages,
salaries, bonus and allowances
|
1,736
|
1,679
|
|||||
|
The
emoluments fell within the following
band:
|
|
Number
of individuals
|
|||||||
|
Emolument
band
|
2006
|
2005
|
|||||
|
Below
HK$1,000,000
|
4
|
5
|
|||||
During
the year ended 31 December 2006, no emoluments were paid by the Group to
the
Directors, supervisors or the five highest paid individuals as an inducement
to
join or upon joining the Group, or as a compensation for loss of office (2005:
Nil).
| 9. |
OPERATING LOSS/PROFIT
|
Operating
loss/profit is stated after charging and crediting the following items:
|
Group
|
|||||||
|
2006
|
2005
|
||||||
|
RMB’000
|
RMB’000
|
||||||
|
Charging:
|
|||||||
|
Depreciation
of property, plant and equipment
|
4,493,572
|
3,898,142
|
|||||
|
Operating
lease rentals
|
|||||||
|
-
aircraft
|
2,954,751
|
1,785,615
|
|||||
|
-
land and buildings
|
276,715
|
212,027
|
|||||
|
Amortisation
of intangible assets
|
72,737
|
13,580
|
|||||
|
Amortisation
of lease prepayments
|
30,869
|
25,219
|
|||||
|
Consumption
of flight equipment spare parts
|
326,248
|
239,134
|
|||||
|
Allowances
for obsolescence of flight equipment spare parts
|
31,734
|
-
|
|||||
|
Deficits
on revaluation of property, plant and equipment
|
1,035,343
|
-
|
|||||
|
Provision
for impairment of trade and other receivables
|
97,805
|
25,325
|
|||||
|
Auditors’
remuneration
|
20,120
|
10,000
|
|||||
|
Crediting:
|
|||||||
|
Reversal
of allowances for obsolescence of flight equipment spare
parts
|
-
|
13,930
|
|||||
|
Gain
on disposals of property, plant and equipment
|
36,207
|
8,073
|
|||||
-40-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| 10. |
FINANCE COSTS
|
|
Group
|
|||||||
|
|
2006
|
2005
|
|||||
|
|
RMB’000
|
RMB’000
|
|||||
|
Interest
relating to obligations under finance leases
|
|||||||
|
-
wholly repayable within five years
|
244,962
|
195,764
|
|||||
|
-
not wholly repayable within five years
|
298,991
|
128,869
|
|||||
|
543,953
|
324,633
|
||||||
|
Interest
on loans from banks and financial institutions
|
|||||||
|
-
wholly repayable within five years
|
1,387,469
|
746,788
|
|||||
|
-
not wholly repayable within five years
|
193,067
|
243,433
|
|||||
|
1,580,536
|
990,221
|
||||||
|
Interest
relating to notes payable
|
91,280
|
52,639
|
|||||
|
Amortisation
of the discount on zero coupon debentures
|
25,456
|
22,944
|
|||||
|
Interest
relating to long-term payables
|
4,961
|
6,999
|
|||||
|
2,246,186
|
1,397,436
|
||||||
|
Less:
Amounts capitalised into advance payments on
acquisition
of aircraft (Note
17)
|
(424,316
|
)
|
(279,989
|
)
|
|||
|
1,821,870
|
1,117,447
|
||||||
|
Net
foreign exchange gains (Note)
|
(888,402
|
)
|
(414,640
|
)
|
|||
|
Fair
value (gains)/losses on financial instruments
|
|||||||
|
-
transfer from equity in respect of interest rate swaps qualified
as cash
flow hedges
|
(55,889
|
)
|
4,243
|
||||
|
877,579
|
707,050
|
||||||
| Note: |
The
exchange gain for the year ended 31 December 2006 primarily relates
to the
revaluation of the Group’s foreign currency denominated borrowings and
obligations under finance leases.
|
| 11. |
INCOME TAX
|
Income tax (credited)/charged to the consolidated income statement is as follows:
|
Group
|
|
||||||
|
|
|
2006
|
|
2005
|
|
||
|
|
|
RMB’000
|
|
RMB’000
|
|||
|
Provision
for PRC income tax
|
48,072
|
(81,734
|
)
|
||||
|
Deferred
taxation (Note
31)
|
(211,004
|
)
|
(56,970
|
)
|
|||
|
(162,932
|
)
|
(138,704
|
)
|
||||
The
Company is subject to PRC income tax at a reduced rate of 15%, pursuant to
the
Circular Hu Shui Er Cai (2001) No. 104 issued by the Shanghai Municipal Tax
Bureau. Developments relating to the reform of the Corporate Income Tax Law
are
described in Note 44 to the financial statements.
-41-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
Two
of
the major subsidiaries of the Group, namely China Cargo Airlines Co. Ltd. and
Shanghai Eastern Flight Training Co., Ltd, are subject to PRC income tax at
a
reduced rate of 15%, pursuant to the preferential tax policy in Pudong,
Shanghai. Shanghai Eastern Logistics Co., Ltd. (“Eastern Logistics”), another
subsidiary of the Group, was exempted from PRC income tax in 2005 pursuant
to
the circular Hu Di Shui Er Shui (2004) No.68 issued by the Shanghai Municipal
Tax Bureau. Eastern Logistics is subject to PRC income tax at a reduced rate
of
15% in 2006. Other subsidiaries of the Group are generally subject to the PRC
corporate income tax at the standard rate of 33%.
On
16
March 2007, the National People’s Congress approved the Corporate Income Tax Law
of the People’s Republic of China which may impact on the future income tax
rates of the Group. Details refer to Post Balance Sheet Event (Note 44(b)).
Tax
on
the Group’s consolidated income statement differs from the theoretical amount
that would arise using the taxation rate of the home country of the Company
as
follows:
|
Group
|
|||||||
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|||
|
Loss
before income tax
|
(3,615,697
|
)
|
(577,432
|
)
|
|||
|
Adjusted
by:
|
|||||||
|
Share
of result of associates and jointly controlled entities
|
(133,161
|
)
|
13,330
|
||||
|
(3,748,858
|
)
|
(564,102
|
)
|
||||
|
Tax
calculated at enacted tax rate of 15%
|
562,329
|
84,615
|
|||||
|
Effect
attributable to subsidiaries charged at tax rate of 17.5% or
33%
|
27,969
|
18,334
|
|||||
|
Effect
attributable to subsidiaries with income tax exemptions
|
-
|
33,852
|
|||||
|
Income
not subject to taxation
|
-
|
4,462
|
|||||
|
Expenses
not deductible for tax purposes
|
(13,852
|
)
|
(5,642
|
)
|
|||
|
Gain
arising from intra-group property, plant and equipment disposal subject
to
taxation
|
(46,578
|
)
|
-
|
||||
|
Reversal
of income tax provision made in prior years as a result of tax clearance
with local tax bureau
|
-
|
81,807
|
|||||
|
Utilisation
of previously recognised tax losses
|
(23,130
|
)
|
-
|
||||
|
Unrecognised
tax losses
|
(327,739
|
)
|
(86,074
|
)
|
|||
|
Other
temporary differences not recognised
|
(16,067
|
)
|
-
|
||||
|
Others
|
-
|
7,350
|
|||||
|
Tax
credit
|
162,932
|
138,704
|
|||||
The
Group
operates international flights to overseas destinations. There was no material
overseas taxation for the years ended 31 December 2006 and 2005, as there are
double tax treaties between the PRC and the corresponding jurisdictions
(including Hong Kong) relating to aviation businesses.
| 12. |
DIVIDEND
|
No
interim dividend was paid during both the current and prior years.
The
Board
of Directors of the Company has not recommended any dividend in respect of
the
year ended 31 December 2006. No final dividend was paid in respect of the year
ended 31 December 2005.
-42-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| 13. |
LOSS
PER SHARE
|
The
calculation of basic loss per share is based on the loss attributable to equity
holders of the Company of RMB3,313,425,000 (2005: RMB467,307,000) and the
weighted average number of shares of 4,866,950,000 (2005: 4,866,950,000) in
issue during the year.
The
Company
has no potentially dilutive ordinary shares.
| 14. |
INTANGIBLE
ASSETS
|
|
Group
|
|||||||||||||
|
|
Sponsorship
|
Computer
|
|
||||||||||
|
|
Goodwill
|
fees
|
software
|
Total
|
|||||||||
|
|
(Note
(a))
|
(Note
(b))
|
|
|
|||||||||
|
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
|||||||||
|
Cost
|
|||||||||||||
|
At
1 January 2005
|
79,176
|
-
|
46,396
|
125,572
|
|||||||||
|
Additions
through business acquisitions
|
609,135
|
-
|
-
|
609,135
|
|||||||||
|
Other
additions
|
-
|
-
|
38,568
|
38,568
|
|||||||||
|
At
31 December 2005
|
688,311
|
-
|
84,964
|
773,275
|
|||||||||
|
At
1 January 2006
|
688,311
|
-
|
84,964
|
773,275
|
|||||||||
|
Additions
through the acquisition of of a controlling interest in an associate
(Notes
19 & 40)
|
304,832
|
-
|
28
|
304,860
|
|||||||||
|
Other
additions
|
-
|
320,000
|
33,617
|
353,617
|
|||||||||
|
Disposals
|
-
|
-
|
(36
|
)
|
(36
|
)
|
|||||||
|
At
31 December 2006
|
993,143
|
320,000
|
118,573
|
1,431,716
|
|||||||||
|
Accumulated
amortisation
|
|||||||||||||
|
At
1 January 2005
|
-
|
-
|
7,852
|
7,852
|
|||||||||
|
Charge
for the year
|
-
|
-
|
13,580
|
13,580
|
|||||||||
|
At
31 December 2005
|
-
|
-
|
21,432
|
21,432
|
|||||||||
|
At
1 January 2006
|
-
|
-
|
21,432
|
21,432
|
|||||||||
|
Charge
for the year
|
-
|
52,870
|
19,867
|
72,737
|
|||||||||
|
Disposals
|
-
|
-
|
(7
|
)
|
(7
|
)
|
|||||||
|
At
31 December 2006
|
-
|
52,870
|
41,292
|
94,162
|
|||||||||
|
Net
book amount
|
|||||||||||||
|
At
31 December 2005
|
688,311
|
-
|
63,532
|
751,843
|
|||||||||
|
At
31 December 2006
|
993,143
|
267,130
|
77,281
|
1,337,554
|
|||||||||
-43-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
|
|
Company
|
|
|
|
||||||||
|
|
|
|
|
Sponsorship
|
|
Computer
|
|
|
|
||||
|
|
|
Goodwill
|
|
fees
|
|
software
|
|
Total
|
|
||||
|
|
|
(Note
(a))
|
|
(Note
(b))
|
|
|
|
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
Cost
|
|||||||||||||
|
At
1 January 2005
|
79,176
|
-
|
45,240
|
124,416
|
|||||||||
|
Additions
through business acquisitions
|
609,135
|
-
|
-
|
609,135
|
|||||||||
|
Other
additions
|
-
|
-
|
38,568
|
38,568
|
|||||||||
|
At
31 December 2005
|
688,311
|
-
|
83,808
|
772,119
|
|||||||||
|
At
1 January 2006
|
688,311
|
-
|
83,808
|
772,119
|
|||||||||
|
Additions
|
-
|
320,000
|
33,617
|
353,617
|
|||||||||
|
Disposals
|
-
|
-
|
(36
|
)
|
(36
|
)
|
|||||||
|
At
31 December 2006
|
688,311
|
320,000
|
117,389
|
1,125,700
|
|||||||||
|
Accumulated
amortisation
|
|||||||||||||
|
At
1 January 2005
|
-
|
-
|
7,171
|
7,171
|
|||||||||
|
Charge
for the year
|
-
|
-
|
13,357
|
13,357
|
|||||||||
|
At
31 December 2005
|
-
|
-
|
20,528
|
20,528
|
|||||||||
|
At
1 January 2006
|
-
|
-
|
20,528
|
20,528
|
|||||||||
|
Charge
for the year
|
-
|
52,870
|
19,630
|
72,500
|
|||||||||
|
Disposals
|
-
|
-
|
(7
|
)
|
(7
|
)
|
|||||||
|
At
31 December 2006
|
-
|
52,870
|
40,151
|
93,021
|
|||||||||
|
Net
book amount
|
|||||||||||||
|
At
31 December 2005
|
688,311
|
-
|
63,280
|
751,591
|
|||||||||
|
At
31 December 2006
|
688,311
|
267,130
|
77,238
|
1,032,679
|
|||||||||
-44-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
Notes:
| (a) |
Impairment
tests for goodwill
|
The
Group
operates in two cash-generating units (“CGU”) which are passenger (including
cargo carried by passenger flights) and cargo and logistics.
The
recoverable amount of a CGU is determined based on value-in-use calculations.
These calculations use cash flow projections based on financial budgets approved
by management covering a five-year period. Cash flows beyond the five-year
period are extrapolated using the estimated growth rates stated below. The
growth rate does not exceed the long-term average growth rate for the aviation
businesses in which the CGU operates.
Key
assumptions used for value-in-use calculations
|
-
Gross margin
|
14%-17%
|
|
|
-
Growth rate
|
10%-16%
|
|
|
|
||
|
-
Discount rate
|
10%
|
Management
determined budgeted gross margin based on past performance and its expectations
for market development. The weighted average growth rate used is consistent
with
the forecasts included in industry reports. The discount rate used is pre-tax
and reflects specific risks relating to the Company’s business.
| (b) |
Sponsorship
fees
|
In
March
2006, the Company entered into an agreement (the “Sponsorship Agreement”) with
the Bureau of 2010 Expo Shanghai (the “Bureau”) which designated the Group as
the exclusive airline passenger carrier in the PRC to sponsor the 2010 Shanghai
Expo. The Company will be entitled to a number of rights, including but not
limited to the use of the Expo logo in the Group’s products, priority to
purchase advertising space at the Expo site etc. In return, the Company is
required to pay a total sponsorship fee of RMB320 million, RMB160 million
of
which would be paid in cash by installments, the remaining RMB160 million
would
be settled by value-in-kind services (“VIK”) (in the form of goods or services)
to support the 2010 Shanghai Expo. Accordingly, an intangible asset has been
recognised and amortised on straight-line basis over the beneficial period
from
the effective date of the Sponsorship Agreement to the completion of the
Expo.
The outstanding sponsorship fee of RMB279 million has also been recognised
as
other long-term liabilities (Note 30) in the Group’s balance sheet.
-45-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| 15. |
PROPERTY, PLANT AND EQUIPMENT
|
|
Group
|
|
||||||||||||||||||
|
|
|
Aircraft,
engines and
flight equipment |
Other
property,
|
||||||||||||||||
|
Owned
|
|
Held
under finance leases
|
|
Buildings
|
|
plant
and equipment
|
|
Construction
in progress
|
|
Total
|
|
||||||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||||
|
Valuation
or cost
|
|||||||||||||||||||
|
At
1 January 2005
|
26,142,685
|
13,452,651
|
2,254,015
|
2,274,961
|
188,654
|
44,312,966
|
|||||||||||||
|
Transfers
from construction in progress
|
-
|
-
|
33,582
|
116,985
|
(150,567
|
)
|
-
|
||||||||||||
|
Transfers
from advance payments on acquisition of aircraft
(Note 17)
|
445,949
|
1,191,167
|
-
|
-
|
-
|
1,637,116
|
|||||||||||||
|
Additions
through business acquisitions
|
4,781,327
|
2,155,855
|
72,222
|
293,429
|
13,577
|
7,316,410
|
|||||||||||||
|
Other
additions
|
1,952,356
|
991,640
|
71,451
|
424,455
|
189,220
|
3,629,122
|
|||||||||||||
|
Disposals
|
(67,354
|
)
|
-
|
(6,281
|
)
|
(125,299
|
)
|
-
|
(198,934
|
)
|
|||||||||
|
At
31 December 2005
|
33,254,963
|
17,791,313
|
2,424,989
|
2,984,531
|
240,884
|
56,696,680
|
|||||||||||||
|
Accumulated
depreciation
|
|||||||||||||||||||
|
At
1 January 2005
|
9,638,471
|
3,264,609
|
392,209
|
1,123,681
|
-
|
14,418,970
|
|||||||||||||
|
Charge
for the year
|
2,307,706
|
1,161,395
|
87,284
|
341,757
|
-
|
3,898,142
|
|||||||||||||
|
Disposals
|
(66,030
|
)
|
-
|
(159
|
)
|
(79,111
|
)
|
-
|
(145,300
|
)
|
|||||||||
|
At
31 December 2005
|
11,880,147
|
4,426,004
|
479,334
|
1,386,327
|
-
|
18,171,812
|
|||||||||||||
|
Net
book amount
|
|||||||||||||||||||
|
At
31 December 2005
|
21,374,816
|
13,365,309
|
1,945,655
|
1,598,204
|
240,884
|
38,524,868
|
|||||||||||||
|
At
1 January 2005
|
16,504,214
|
10,188,042
|
1,861,806
|
1,151,280
|
188,654
|
29,893,996
|
|||||||||||||
-46-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
Group
|
|
||||||||||||||||||
|
|
|
Aircraft,
engines and
flight equipment |
|
|
|
Other
property,
|
|
|
|
|
|
||||||||
|
|
|
Owned
|
|
Held
under finance leases
|
|
Buildings
|
|
plant
and equipment
|
|
Construction
in progress
|
|
Total
|
|
||||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||||
|
Valuation
or cost
|
|||||||||||||||||||
|
At
1 January 2006
|
33,254,963
|
17,791,313
|
2,424,989
|
2,984,531
|
240,884
|
56,696,680
|
|||||||||||||
|
Reclassification
upon a purchase
|
2,011,940
|
(2,011,940
|
)
|
||||||||||||||||
|
Transfers
from construction in progress
|
-
|
-
|
52,832
|
242,669
|
(295,501
|
)
|
-
|
||||||||||||
|
Transfers
from advance payments on acquisition of aircraft
(Note 17)
|
3,797,430
|
2,591,545
|
-
|
-
|
-
|
6,388,975
|
|||||||||||||
|
Additions
through the acquisitions of controlling interests in
associates
(Note 40)
|
78,291
|
305,663
|
303,064
|
33,292
|
2,447
|
722,757
|
|||||||||||||
|
Other
additions
|
5,612,187
|
2,724,601
|
-
|
384,743
|
297,979
|
9,019,510
|
|||||||||||||
|
Valuation
deficit
|
(939,655
|
)
|
(95,688
|
)
|
-
|
-
|
-
|
(1,035,343
|
)
|
||||||||||
|
Transfer
to non-current assets held for sale
(Note (b) & 37)
|
(2,108,763
|
)
|
(202,898
|
)
|
-
|
-
|
-
|
(2,311,661
|
)
|
||||||||||
|
Disposals
by sale and
|
|||||||||||||||||||
|
leaseback
(Note
(c))
|
(7,940,164
|
)
|
-
|
-
|
-
|
-
|
(7,940,164
|
)
|
|||||||||||
|
Other
disposals
|
(314,615
|
)
|
-
|
(41,639
|
)
|
(131,322
|
)
|
-
|
(487,576
|
)
|
|||||||||
|
At
31 December 2006
|
33,451,614
|
21,102,596
|
2,739,246
|
3,513,913
|
245,809
|
61,053,178
|
|||||||||||||
|
Accumulated
depreciation
|
|||||||||||||||||||
|
At
1 January 2006
|
11,880,147
|
4,426,004
|
479,334
|
1,386,327
|
-
|
18,171,812
|
|||||||||||||
|
Reclassification
upon a purchase
|
940,464
|
(940,464
|
)
|
-
|
-
|
-
|
-
|
||||||||||||
|
Charge
for the year
|
2,600,331
|
1,418,781
|
106,441
|
368,019
|
-
|
4,493,572
|
|||||||||||||
|
Transfer
to non-current assets held for sale
(Note b & 37)
|
(1,346,228
|
)
|
(121,049
|
)
|
-
|
-
|
-
|
(1,467,277
|
)
|
||||||||||
|
Disposals
|
(97,146
|
)
|
-
|
(3,703
|
)
|
(94,546
|
)
|
-
|
(195,395
|
)
|
|||||||||
|
At
31 December 2006
|
13,977,568
|
4,783,272
|
582,072
|
1,659,800
|
-
|
21,002,712
|
|||||||||||||
|
Net
book amount
|
|||||||||||||||||||
|
At
31 December 2006
|
19,474,046
|
16,319,324
|
2,157,174
|
1,854,113
|
245,809
|
40,050,466
|
|||||||||||||
|
At
1 January 2006
|
21,374,816
|
13,365,309
|
1,945,655
|
1,598,204
|
240,884
|
38,524,868
|
|||||||||||||
-47-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
Company
|
|||||||||||||||||||
|
Aircraft,
engines and
flight equipment |
Other
property,
|
||||||||||||||||||
|
Owned
|
Held
under finance leases
|
Buildings
|
plant
and equipment
|
Construction
in progress
|
Total
|
||||||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||||||
|
Valuation
or cost
|
|||||||||||||||||||
|
At
1 January 2005
|
20,068,300
|
13,452,651
|
1,370,995
|
1,491,533
|
77,534
|
36,461,013
|
|||||||||||||
|
Transfer
to a subsidiary
|
(779,895
|
)
|
-
|
-
|
-
|
-
|
(779,895
|
)
|
|||||||||||
|
Transfers
from construction in progress
|
-
|
-
|
18,847
|
16,582
|
(35,429
|
)
|
-
|
||||||||||||
|
Transfers
from advance payments on acquisition of aircraft
(Note 17)
|
445,949
|
682,020
|
-
|
-
|
-
|
1,127,969
|
|||||||||||||
|
Additions
through business acquisitions
|
4,781,327
|
2,155,855
|
72,222
|
293,429
|
13,577
|
7,316,410
|
|||||||||||||
|
Other
additions
|
1,138,394
|
375,995
|
14,195
|
341,339
|
33,120
|
1,903,043
|
|||||||||||||
|
Disposals
|
(67,354
|
)
|
-
|
(2,836
|
)
|
(106,801
|
)
|
-
|
(176,991
|
)
|
|||||||||
|
At
31 December 2005
|
25,586,721
|
16,666,521
|
1,473,423
|
2,036,082
|
88,802
|
45,851,549
|
|||||||||||||
|
Accumulated
depreciation
|
|||||||||||||||||||
|
At
1 January 2005
|
6,847,515
|
3,264,609
|
264,374
|
829,672
|
-
|
11,206,170
|
|||||||||||||
|
Transfer
to a subsidiary
|
(599,975
|
)
|
(599,975
|
)
|
-
|
-
|
--
|
||||||||||||
|
Charge
for the year
|
1,780,387
|
1,119,334
|
53,914
|
265,721
|
-
|
3,219,356
|
|||||||||||||
|
Disposals
|
(66,030
|
)
|
-
|
(104
|
)
|
(69,993
|
)
|
-
|
(136,127
|
)
|
|||||||||
|
At
31 December 2005
|
7,961,897
|
4,383,943
|
318,184
|
1,025,400
|
-
|
13,689,424
|
|||||||||||||
|
Net
book amount
|
|||||||||||||||||||
|
At
31 December 2005
|
17,624,824
|
12,282,578
|
1,155,239
|
1,010,682
|
88,802
|
32,162,125
|
|||||||||||||
|
At
1 January 2005
|
13,220,785
|
10,188,042
|
1,106,621
|
661,861
|
77,534
|
25,254,843
|
|||||||||||||
-48-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
Company
|
|||||||||||||||||||
|
Aircraft,
engines and
flight equipment |
Other
property,
|
||||||||||||||||||
|
Owned
|
Held
under finance leases
|
Buildings
|
plant
and equipment
|
Construction
in progress
|
Total
|
||||||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||||||
|
Valuation
or cost
|
|||||||||||||||||||
|
At
1 January 2006
|
25,586,721
|
16,666,521
|
1,473,423
|
2,036,082
|
88,802
|
45,851,549
|
|||||||||||||
|
Reclassification
upon a purchase
|
2,011,940
|
(2,011,940
|
)
|
-
|
-
|
-
|
-
|
||||||||||||
|
Transfer
to a subsidiary
|
(482,982
|
)
|
-
|
-
|
-
|
-
|
(482,982
|
)
|
|||||||||||
|
Transfers
from construction in progress
|
-
|
-
|
25,507
|
12,210
|
(37,717
|
)
|
-
|
||||||||||||
|
Transfers
from advanced payments on acquisition of aircraft (Note
17)
|
3,744,513
|
1,843,577
|
-
|
-
|
-
|
5,588,090
|
|||||||||||||
|
Other
additions
|
4,812,055
|
2,345,391
|
40,491
|
271,479
|
100,145
|
7,560,561
|
|||||||||||||
|
Valuation
deficit
|
(939,655
|
)
|
(95,688
|
)
|
-
|
-
|
-
|
(1,035,343
|
)
|
||||||||||
|
Transfer
to non-current assets held for sale
(Note 37)
|
(2,108,763
|
)
|
(202,898
|
)
|
-
|
-
|
-
|
(2,311,661
|
)
|
||||||||||
|
Disposals
by sale and leaseback (Note
(c))
|
(7,940,164
|
)
|
-
|
-
|
-
|
-
|
(7,940,164
|
)
|
|||||||||||
|
Other
disposals
|
(313,016
|
)
|
-
|
(36,277
|
)
|
(107,363
|
)
|
-
|
(456,656
|
)
|
|||||||||
|
At
31 December 2006
|
24,370,649
|
18,544,963
|
1,503,144
|
2,212,408
|
151,230
|
46,782,394
|
|||||||||||||
|
Accumulated
|
|||||||||||||||||||
|
depreciation
|
|||||||||||||||||||
|
At
1 January 2006
|
7,961,897
|
4,383,943
|
318,184
|
1,025,400
|
-
|
13,689,424
|
|||||||||||||
|
Reclassification
upon a purchase
|
940,464
|
(940,464
|
)
|
-
|
-
|
-
|
-
|
||||||||||||
|
Transfer
to a subsidiary
|
(458,832
|
)
|
-
|
-
|
-
|
-
|
(458,832
|
)
|
|||||||||||
|
Charge
for the year
|
1,939,393
|
1,317,355
|
54,726
|
274,242
|
-
|
3,585,716
|
|||||||||||||
|
Transfer
to non-current assets held for sale
(Note 37)
|
(1,346,228
|
)
|
(121,049
|
)
|
-
|
-
|
-
|
(1,467,277
|
)
|
||||||||||
|
Disposals
|
(97,146
|
)
|
-
|
(2,997
|
)
|
(73,362
|
)
|
-
|
(173,505
|
)
|
|||||||||
|
At
31 December 2006
|
8,939,548
|
4,639,785
|
369,913
|
1,226,280
|
-
|
15,175,526
|
|||||||||||||
|
Net
book amount
|
|||||||||||||||||||
|
At
31 December 2006
|
15,431,101
|
13,905,178
|
1,133,231
|
986,128
|
151,230
|
31,606,868
|
|||||||||||||
|
At
1 January 2006
|
17,624,824
|
12,282,578
|
1,155,239
|
1,010,682
|
88,802
|
32,162,125
|
|||||||||||||
Notes:
| (a) |
On
31 December 2006, the Group’s aircraft, engines and flight equipment were
revalued by the Directors of the Company on a market value basis
or
replacement cost basis based on the valuations conducted by independent
valuers.
|
-49-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
The
result of the revaluation revealed a deficit of RMB1,035 million for certain
aircraft and related equipment which has been charged to the income statement.
Except for the aircraft and related equipment referred to above, the revalued
amounts of all other assets under revaluation are not materially different
from
their carrying amounts. Accordingly, the carrying values of these assets
have
not been adjusted in the consolidated financial statements as at 31 December
2006.
Had
the
property, plant and equipment of the Group and the Company been stated at
cost
less accumulated depreciation and impairment losses, the carrying amounts
of
property, plant and equipment would have been as follows:
|
Group
|
|
Company
|
|
||||||||||
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
At
31 December
|
40,475,461
|
37,943,085
|
32,108,040
|
31,796,398
|
|||||||||
| (b) |
In
December 2006, the Board of Directors passed a resolution to dispose
the
aircraft and the related equipment with the valuation deficit as
described
in the note 15(a) above and have been actively seeking buyers subsequent
to the pass of the resolution. The assets have been reclassified
as
“Non-current assets held for sales” at 31 December 2006 (Note 37).
|
| (c) |
During
the year, the Group entered into sale and leaseback transactions
for
certain newly acquired aircraft. There leaseback transactions are
classified as operating leases and the related gains arising from
these
sales and leaseback transactions have been recognised in the income
statement.
|
| (d) |
As
at 31 December 2006, aircraft owned by the Group and the Company
with an
aggregate net book amount of approximately RMB9,044 million and
RMB8,310
million respectively (2005: RMB9,074 million) were pledged as collateral
under certain loan arrangements (Note 28).
|
| 16. |
LEASE
PREPAYMENTS
|
|
Group
|
Company
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||
|
Cost
|
|||||||||||||
|
At
1 January
|
1,134,644
|
965,462
|
582,621
|
486,168
|
|||||||||
|
Additions
through business acquisitions (Note
40)
|
75,302
|
74,339
|
-
|
74,339
|
|||||||||
|
Other
additions
|
37,158
|
94,843
|
33,932
|
22,114
|
|||||||||
|
At
31 December
|
1,247,104
|
1,134,644
|
616,553
|
582,621
|
|||||||||
|
Accumulated
amortisation
|
|||||||||||||
|
At
1 January
|
161,873
|
136,654
|
101,021
|
89,687
|
|||||||||
|
Charge
for the year
|
30,869
|
25,219
|
17,864
|
11,334
|
|||||||||
|
At
31 December
|
192,742
|
161,873
|
118,885
|
101,021
|
|||||||||
|
Net
book amount
|
|||||||||||||
|
At
31 December
|
1,054,362
|
972,771
|
497,668
|
481,600
|
|||||||||
Lease
prepayments represent unamortised prepayments for land use rights.
The
Group’s land use rights are located in the PRC and the majority of these land
use rights have terms of 50 years from the date of grant. As at 31 December
2006, the majority of these land use rights had remaining terms ranging from
40
to 55 years (2005: from 41 to 49 years).
-50-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| 17. |
ADVANCED PAYMENTS ON ACQUISITION OF AIRCRAFT
|
|
Group
|
Company
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||
|
At
1 January
|
9,072,673
|
2,678,603
|
8,157,515
|
2,678,603
|
|||||||||
|
Additions
|
4,560,694
|
7,751,197
|
4,059,327
|
6,341,709
|
|||||||||
|
Interest
capitalised (Note
10)
|
424,316
|
279,989
|
378,101
|
265,172
|
|||||||||
|
Transfers
to property, plant and equipment (Note
15)
|
(6,388,975
|
)
|
(1,637,116
|
)
|
(5,588,090
|
)
|
(1,127,969
|
)
|
|||||
|
At
31 December
|
7,668,708
|
9,072,673
|
7,006,853
|
8,157,515
|
|||||||||
Included
in the Group’s and the Company’s balance as at 31 December 2006 is accumulated
interest capitalised of RMB516 million (2005: RMB410 million), at an average
interest rate of 5.7% (2005: 4.0%).
| 18. |
INVESTMENTS IN SUBSIDIARIES
|
|
Company
|
|||||||
|
2006
|
2005
|
||||||
|
RMB’000
|
RMB’000
|
||||||
|
Unlisted
shares, at cost
|
2,831,235
|
2,163,864
|
|||||
|
Amounts
due from subsidiaries
|
1,051,435
|
348,626
|
|||||
|
3,882,670
|
2,512,490
|
||||||
Amounts
due from subsidiaries are unsecured, non-interest bearing and are not repayable
before 1 January 2008.
Particulars
of the principal subsidiaries, all of which are limited liability companies
established and operating in the PRC or Hong Kong, are as follows:
|
Company
|
Place
and date of establishment
|
Paid-up
capital
|
Attributable
equity interest
|
Principal
activities
|
|||||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||||||||
|
RMB’000
|
|
RMB’000
|
|||||||||||||||||
|
China
Eastern Airlines
|
PRC
|
880,000
|
880,000
|
63
|
%
|
63
|
%
|
Provision
of
|
|||||||||||
|
Jiangsu
Co., Ltd.
|
3
May 1993
|
airline
services
|
|||||||||||||||||
|
|
|
||||||||||||||||||
|
China
Eastern Airlines
|
PRC
|
600,000
|
600,000
|
96
|
%
|
40
|
%
|
Provision
of
|
|||||||||||
|
Wuhan
Co., Ltd. (“CEA Wuhan”)
|
16
August 2002
|
airline
services
|
|||||||||||||||||
|
|
|
||||||||||||||||||
|
China
Cargo Airlines
|
PRC
|
500,000
|
500,000
|
70
|
%
|
70
|
%
|
Provision
of
|
|||||||||||
|
Co.,
Ltd.
|
22
July 1998
|
cargo
carriage services
|
|||||||||||||||||
|
|
|||||||||||||||||||
|
Shanghai
Eastern Flight
|
PRC
|
473,000
|
473,000
|
95
|
%
|
95
|
%
|
Provision
of
|
|||||||||||
|
Training
Co., Ltd.
|
18
December 1995
|
flight
training services
|
|||||||||||||||||
|
|
|
||||||||||||||||||
|
Shanghai
Eastern Airlines
|
PRC
|
412,500
|
412,500
|
99
|
%
|
99
|
%
|
Investment
|
|||||||||||
|
Investment
Co., Ltd.
|
8
May 2002
|
holding
|
|||||||||||||||||
-51-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
Company
|
Place
and date of establishment
|
Paid-up
capital
|
Attributable
equity interest
|
Principal
activities
|
|||||||||||||||
|
|
|
2006
|
2005
|
2006
|
2005
|
|
|||||||||||||
|
|
|
RMB’000
|
RMB’000
|
|
|
||||||||||||||
|
Shanghai
Eastern Airlines
|
PRC
|
200,000
|
200,000
|
70
|
%
|
70
|
%
|
Provision
of
|
|||||||||||
|
Logistics
Co., Ltd.
|
23
August 2004
|
cargo
logistics
services
|
|||||||||||||||||
|
|
|
||||||||||||||||||
|
Eastern
Airlines Hotel
|
PRC
|
70,000
|
70,000
|
86
|
%
|
86
|
%
|
Provision
of
|
|||||||||||
|
Co.,
Ltd.
|
18
March 1998
|
hotel
services primarily to crew members
|
|||||||||||||||||
|
|
|
||||||||||||||||||
|
Shanghai
Eastern
|
PRC
|
25,658
|
25,658
|
60
|
%
|
60
|
%
|
Provision
of
|
|||||||||||
|
Maintenance
Co., Ltd.
|
27
November 2002
|
aircraft
repair and maintenance services
|
|||||||||||||||||
|
|
|
||||||||||||||||||
|
China
Eastern Airlines
|
PRC
|
10,047
|
10,162
|
80
|
%
|
40
|
%
|
Provision
of
|
|||||||||||
|
Development
(HK) Co., Ltd.
|
20
May 1995
|
ticket
sales and logistics
|
|||||||||||||||||
|
|
|
||||||||||||||||||
|
China
Eastern Airlines
|
PRC
|
10,000
|
10,000
|
55
|
%
|
55
|
%
|
Provision
of
|
|||||||||||
|
(Shantou)
Economics
|
18
March 1998
|
airline
|
|||||||||||||||||
|
Development
Co., Ltd.
|
|
equipment
sales
|
|||||||||||||||||
| 19. |
INVESTMENTS
IN ASSOCIATES
|
|
Group
|
Company
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||
|
Unlisted
investments, at cost
|
544,266
|
763,240
|
377,872
|
620,659
|
|||||||||
|
Goodwill
|
-
|
47,060
|
-
|
-
|
|||||||||
|
Share
of post acquisition results/reserves
|
79,124
|
(180,554
|
)
|
-
|
-
|
||||||||
|
623,390
|
629,746
|
377,872
|
620,659
|
||||||||||
The
movement on investments in associates is as follows:
|
Group
|
Company
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||
|
At
1 January
|
629,746
|
633,212
|
620,659
|
615,095
|
|||||||||
|
Cost
of additional investment
|
-
|
5,564
|
-
|
5,564
|
|||||||||
|
Reduction
as a result of the acquisition of a controlling interest in an associate
(Note
40)
|
(109,922
|
)
|
-
|
(242,787
|
)
|
-
|
|||||||
|
Share
of results
|
103,566
|
(9,030
|
)
|
-
|
-
|
||||||||
|
At
31 December
|
623,390
|
629,746
|
377,872
|
620,659
|
|||||||||
-52-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
Particulars
of the principal associates, all of which are limited liability companies
established and operating in the PRC, are as follows:
|
Company
|
Place
and date of establishment
|
Paid-up
capital
|
Attributable
equity interest
|
Principal
activities
|
||||||||||||
|
RMB’000
|
2006
|
2005
|
||||||||||||||
|
Qingdao
Liuting
|
PRC
|
450,000
|
25
|
%
|
25
|
%
|
Provision
of
|
|||||||||
|
International
Airport
|
1
December 2000
|
airport
operation
|
||||||||||||||
|
Co.,
Ltd.
|
|
services
|
||||||||||||||
|
|
|
|||||||||||||||
|
Eastern
Air Group Finance
|
PRC
|
400,000
|
25
|
%
|
25
|
%
|
Provision
of
|
|||||||||
|
Co.,
Ltd. (“EAGF”)
|
6
December 1995
|
financial
|
||||||||||||||
|
|
services
to group
companies
of CEA Holding
|
|||||||||||||||
|
|
|
|||||||||||||||
|
China
Eastern Air Catering
|
PRC
|
350,000
|
45
|
%
|
45
|
%
|
Provision
of air
|
|||||||||
|
Investment
Co., Ltd.
|
17
November 2003
|
catering
services
|
||||||||||||||
|
|
|
|||||||||||||||
|
Jiangsu
Huayu General
|
PRC
|
110,000
|
27
|
%
|
27
|
%
|
Provision
of
|
|||||||||
|
Aviation
Co., Ltd.
|
1
Dec 2004
|
aviation
support services
|
||||||||||||||
|
|
|
|||||||||||||||
|
Eastern
Aviation Import &
|
PRC
|
80,000
|
45
|
%
|
45
|
%
|
Provision
of
|
|||||||||
|
Export
Co., Ltd.
|
9
June 1993
|
aviation
|
||||||||||||||
|
(“EAIEC”)
|
|
equipment,
spare
|
||||||||||||||
|
|
|
|||||||||||||||
|
Collins
Aviation
|
PRC
|
57,980
|
35
|
%
|
35
|
%
|
Provision
of airline
|
|||||||||
|
Maintenance
Service
|
27
September 2002
|
electronic
|
||||||||||||||
|
Shanghai
Ltd.
|
|
product
maintenance services
|
||||||||||||||
|
|
|
|||||||||||||||
|
Shanghai
Dongmei
|
PRC
|
51,369
|
27.16
|
%
|
45
|
%
|
Provision
of
|
|||||||||
|
Aviation
Travel Co., Ltd.
|
17
October 2004
|
traveling
and
|
||||||||||||||
|
(“SDATC”)
|
|
accommodation
agency services
|
||||||||||||||
|
|
|
|||||||||||||||
|
Shanghai
Hongpu Civil
|
PRC
|
25,000
|
30
|
%
|
30
|
%
|
Provision
of cable
|
|||||||||
|
Airport
Communication
|
18
October 2002
|
and
wireless
|
||||||||||||||
|
Co.,
Ltd.
|
|
communication
services
|
||||||||||||||
|
|
|
|||||||||||||||
|
Eastern
Aviation
|
PRC
|
10,000
|
45
|
%
|
45
|
%
|
Provision
of
|
|||||||||
|
Advertising
Services
|
4
March 1986
|
aviation
|
||||||||||||||
|
Co.,
Ltd.
|
|
advertising
agency services
|
||||||||||||||
Note:
The
Group’s aggregated share of the revenues, results, assets and liabilities of its
associates are as follows:
|
Assets
|
Liabilities
|
Revenues
|
Profit/(loss)
|
||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||
|
2006
|
1,728,738
|
1,105,449
|
1,221,191
|
103,566
|
|||||||||
|
2005
|
1,807,387
|
1,177,641
|
887,928
|
(9,030
|
)
|
||||||||
-53-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| 20. |
INVESTMENTS IN JOINTLY CONTROLLED ENTITIES
|
|
Group
|
Company
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||
|
Unlisted
investments, at cost
|
59,552
|
59,552
|
59,522
|
59,552
|
|||||||||
|
Share
of post-acquisition results/reserves
|
55,988
|
40,968
|
-
|
-
|
|||||||||
|
115,540
|
100,520
|
59,522
|
59,552
|
||||||||||
The
movement on investments in jointly controlled entities is as follows:
|
Group
|
Company
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||
|
At
1 January
|
100,520
|
52,948
|
59,552
|
7,680
|
|||||||||
|
Cost
of additional investment
|
-
|
51,872
|
-
|
51,872
|
|||||||||
|
Dividend
received during the year
|
(14,575
|
)
|
-
|
-
|
-
|
||||||||
|
Share
of results
|
29,595
|
(4,300
|
)
|
-
|
-
|
||||||||
|
At
31 December
|
115,540
|
100,520
|
59,552
|
59,552
|
|||||||||
Particulars
of the principal jointly controlled entities, all of which are limited liability
companies established and operating in the PRC are as follows:
|
Company
|
Place
and date of establishment
|
|
Paid-up
capital
|
|
Attributable
equity interest
|
|
Principal
activities
|
|||||||||
|
RMB’000
|
2006
|
|
2005
|
|||||||||||||
|
Shanghai
Technologies
|
PRC
|
113,843
|
51
|
%
|
51
|
%
|
Provision
of repair
|
|||||||||
|
Aerospace
Co., Ltd.
|
28
September 2004
|
and
maintenance
|
||||||||||||||
|
(“STA”)
(Note
(a))
|
|
services
|
||||||||||||||
|
|
|
|||||||||||||||
|
Shanghai
Eastern Union
|
PRC
|
17,484
|
40
|
%
|
40
|
%
|
Provision
of spare
|
|||||||||
|
Aviation
Wheels &
|
28
December 1995
|
parts
repair and
|
||||||||||||||
|
Brakes
Overhaul
|
|
maintenance
|
||||||||||||||
|
Engineering
Co., Ltd
|
|
services
|
||||||||||||||
|
(“Wheels
& Brakes”)
|
|
|
||||||||||||||
|
|
||||||||||||||||
|
Eastern
China Kaiya
|
PRC
|
10,000
|
41
|
%
|
41
|
%
|
Provision
of
|
|||||||||
|
System
Integration
|
21
May 1999
|
Computer
|
||||||||||||||
|
Co.,
Ltd.
|
|
Systems
development
|
||||||||||||||
Notes:
| (a) |
Under
a Joint Venture Agreement dated 10 March 2003, the Company has
agreed to
share control over the economic activities of STA. Any strategic
financial
and operating decisions relating to the activities of STA require
the
unanimous consent of the Company and the other joint venture partner.
|
-54-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (b) |
The
Group’s aggregated share of the revenues, results, assets and liabilities
of its jointly controlled entities is as follows:
|
|
Assets
|
Liabilities
|
Revenues
|
Profit/(loss)
|
||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||
|
2006
|
314,348
|
125,479
|
171,471
|
29,595
|
|||||||||
|
2005
|
142,667
|
42,147
|
133,570
|
(4,300
|
)
|
||||||||
| 21. |
OTHER
LONG-TERM ASSETS
|
|
Group
|
Company
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||
|
Deposits
relating to aircraft under operating leases (Note
(a))
|
532,878
|
446,323
|
449,055
|
425,850
|
|||||||||
|
Held-to-maturity
financial assets
(Note (b))
|
389,871
|
2,026,220
|
389,871
|
2,026,220
|
|||||||||
|
Prepaid
staff benefits (Note
(c))
|
54,898
|
62,096
|
44,524
|
54,178
|
|||||||||
|
Rental
and renovation deposits
|
31,338
|
34,777
|
31,338
|
34,777
|
|||||||||
|
Prepaid
customs duty and value added tax
|
-
|
4,756
|
-
|
4,756
|
|||||||||
|
Other
long-term receivables
|
90,280
|
131,386
|
79,941
|
50,740
|
|||||||||
|
1,099,265
|
2,705,558
|
994,729
|
2,596,521
|
||||||||||
Notes:
| (a) |
The
fair value of deposits relating to aircraft under operating leases
of both
the Group and the Company are RMB480 million and RMB414 million
(2005:
RMB446 million and RMB426 million), which are determined using
the
expected future payments discounted at market interest rates prevailing
at
the year end of 2.5%-4.0% (2005: 4.4%).
|
| (b) |
Held-to-maturity
financial assets comprise long-term bank deposits which are pledged
as
collateral under certain finance lease arrangements (Note 27).
The
deposits have maturities of 1-2 years. The fair value of long-term
bank
deposits of both the Group and the Company are RMB1,249 million
(2005:
RMB2,114 million), which are determined using the expected future
payments
discounted at market interest rates prevailing at the year end
of 2.6%
(2005: 2.5% to 6.5%).
|
|
Group
|
|
Company
|
|
||||||||||
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
Held-to-maturity
financial assets
|
1,199,250
|
2,026,220
|
1,195,650
|
2,026,220
|
|||||||||
|
Less:
Held-to-maturity fiancial assets - current portion
(Note 23)
|
(809,379
|
)
|
-
|
(805,779
|
)
|
-
|
|||||||
|
Held-to-maturity
financial asets - Long term portion
|
389,871
|
2,026,220
|
389,871
|
2,026,220
|
|||||||||
| (c) |
Prepaid
staff benefits represent subsidies to certain employees as an
encouragement to purchase motor vehicles. The employees are required
to
serve the Group for six years from the date of receipt of the subsidies.
If the employee leaves before the end of the six-year period, a
refund by
the employee is required calculated on a pro-rata basis. These
subsidies
are amortised over six years on the straight-line basis.
|
-55-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE GROUP
|
| 22. |
TRADE
RECEIVABLES AND NOTES RECEIVABLE
|
The
credit terms given to trade customers are determined on an individual basis,
with the credit periods generally ranging from half a month to three months.
The
aging
analysis of trade receivables and notes receivable is as follows:
|
Group
|
Company
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||
|
Less
than 31 days
|
1,556,144
|
1,580,082
|
955,992
|
1,031,946
|
|||||||||
|
31
to 60 days
|
147,439
|
134,095
|
83,669
|
56,918
|
|||||||||
|
61
to 90 days
|
44,602
|
122,377
|
24,300
|
108,014
|
|||||||||
|
91
to 180 days
|
132,977
|
34,097
|
90,573
|
14,603
|
|||||||||
|
181
to 365 days
|
102,534
|
13,302
|
87,187
|
11,523
|
|||||||||
|
Over
365 days
|
112,934
|
127,466
|
108,403
|
118,986
|
|||||||||
|
2,096,630
|
2,011,419
|
1,350,124
|
1,341,990
|
||||||||||
|
Less:
provision for impairment of receivables
|
(93,775
|
)
|
(93,010
|
)
|
(89,552
|
)
|
(81,707
|
)
|
|||||
|
Trade
receivables and notes receivable, net
|
2,002,855
|
1,918,409
|
1,260,572
|
1,260,283
|
|||||||||
| 23. |
PREPAYMENTS,
DEPOSITS AND OTHER RECEIVABLES
|
|
Group
|
Company
|
||||||||||||
|
|
2006
|
2005
|
2006
|
2005
|
|||||||||
|
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
|||||||||
|
Held-to-maturity
financial assets
|
|||||||||||||
|
-
current portion (Note
21(b))
|
809,379
|
-
|
805,779
|
-
|
|||||||||
|
Rebates
receivable on aircraft acquisitions
|
627,641
|
102,582
|
593,202
|
78,314
|
|||||||||
|
Prepaid
aircraft operating lease rentals
|
315,470
|
191,211
|
270,998
|
174,248
|
|||||||||
|
Prepayment
for acquisition of flight equipment and other assets
|
178,577
|
179,206
|
162,749
|
179,206
|
|||||||||
|
Custom
duties and value added tax recoverable (Note
(a))
|
87,684
|
124,917
|
24,550
|
66,887
|
|||||||||
|
Rental
deposits
|
86,822
|
49,303
|
71,159
|
37,116
|
|||||||||
|
Deposits
with banks and a financial institution with original maturity
over three
months but less than a year (Note
(b))
|
38,343
|
175,332
|
20,143
|
8,888
|
|||||||||
|
Others
|
332,076
|
174,720
|
225,324
|
143,884
|
|||||||||
|
2,475,992
|
997,271
|
2,173,904
|
688,543
|
||||||||||
Notes:
| (a) |
Pursuant
to the Caiguanshui No. 63 issued by the Ministry of Finance
on 29 December
2004, PRC airlines (including the Company, China Cargo Airlines
Co., Ltd.
and China Eastern Airlines Jiangsu Co., Ltd.) are subject to
reduced
custom duties and value added tax on imported flight equipment
and
overseas repair costs in relation to those aircraft flying
on
international and regional routes with effect
|
-56-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
From
1
January 2005 to 31 October 2006, the Group had been continuing to pay
duties and
value added tax at the standard rates and hence is entitled to a refund
for over
payment in excess of the reduced rates. From 1 November 2006 onwards,
the Group
started to pay the custom and duties and value added tax at the reduced
rates.
As at 31 December 2006, the Group’s related refundable amount of the custom
duties and value added tax amounted to RMB88 million (2005: RMB125 million).
| (b) |
As
at 31 December 2006, the effective interest rate on deposits
with banks
with original maturity over three months but less than a year
was 0.7%
(2005: 0.7%).
|
| 24. |
CASH
AND CASH EQUIVALENTS
|
The
carrying amounts of the Group’s and Company’s cash and cash equivalents are
denominated in the following currencies:
|
Group
|
Company
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||
|
Renminbi
|
1,251,901
|
1,281,206
|
426,705
|
415,462
|
|||||||||
|
US
Dollars
|
435,944
|
333,099
|
412,160
|
306,254
|
|||||||||
|
Japanese
Yen
|
68,950
|
76,591
|
54,871
|
55,803
|
|||||||||
|
Euro
|
66,454
|
37,420
|
61,029
|
28,163
|
|||||||||
|
Pounds
Sterling
|
17,416
|
22,979
|
17,416
|
22,979
|
|||||||||
|
Canadian
Dollars
|
14,525
|
14,187
|
14,525
|
14,187
|
|||||||||
|
Singapore
Dollars
|
13,032
|
15,943
|
13,032
|
15,943
|
|||||||||
|
Australian
Dollars
|
7,563
|
18,969
|
7,563
|
18,969
|
|||||||||
|
Others
|
111,701
|
63,607
|
102,533
|
62,849
|
|||||||||
|
1,987,486
|
1,864,001
|
1,109,834
|
940,609
|
||||||||||
| 25. |
TRADE
PAYABLES AND NOTES PAYABLE
|
The
aging
analysis of trade payables and notes payable is as follows:
|
Group
|
Company
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||
|
Less
than 31 days
|
1,374,384
|
1,416,293
|
1,146,144
|
1,593,009
|
|||||||||
|
31
to 60 days
|
577,883
|
397,187
|
493,877
|
364,480
|
|||||||||
|
61
to 90 days
|
781,666
|
195,869
|
745,800
|
163,058
|
|||||||||
|
91
to 180 days
|
2,030,629
|
846,775
|
1,980,677
|
605,039
|
|||||||||
|
181
to 365 days
|
243,296
|
212,025
|
226,510
|
212,025
|
|||||||||
|
Over
365 days
|
82,352
|
45,749
|
81,293
|
38,216
|
|||||||||
|
5,090,210
|
3,113,898
|
4,674,301
|
2,975,827
|
||||||||||
As
at 31
December 2006, all notes payable totaling RMB3,471 million (2005: RMB1,775
million) were unsecured. Discount rates ranged from 2.4% to 3.3% (2005:
2.9% to
3.2%) and all notes are repayable within six months.
-57-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
26.
|
OTHER
PAYABLES AND ACCRUED EXPENSES
|
|
Group
|
Company
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||
|
Accrued
fuel cost
|
1,824,714
|
1,415,797
|
1,636,726
|
1,262,586
|
|||||||||
|
Duties
and levies payable
|
1,227,450
|
755,373
|
1,045,405
|
707,060
|
|||||||||
|
Other
accrued operating expenses
|
1,036,090
|
739,415
|
850,401
|
605,902
|
|||||||||
|
Accrued
take-off and landing charges
|
1,022,127
|
810,226
|
755,936
|
607,370
|
|||||||||
|
Accrued
aircraft overhaul expenses
|
834,075
|
745,627
|
697,149
|
587,400
|
|||||||||
|
Deposits
received from ticketing agents
|
448,176
|
353,805
|
318,568
|
299,218
|
|||||||||
|
Accrued
salaries, wages and benefits
|
343,560
|
271,963
|
271,477
|
238,234
|
|||||||||
|
Staff
welfare payable
|
142,703
|
39,433
|
107,082
|
31,915
|
|||||||||
|
Staff
housing fund payable
(Note 33(a))
|
123,277
|
136,510
|
123,277
|
136,510
|
|||||||||
|
Current
portion of other long-term liabilities (Note
30)
|
62,000
|
66,029
|
62,000
|
66,029
|
|||||||||
|
Current
portion of post-retirement benefit obligations (Note
32(b))
|
30,724
|
35,825
|
28,727
|
34,528
|
|||||||||
|
Current
portion of operating lease payables
|
-
|
52,268
|
-
|
52,268
|
|||||||||
|
Others
|
891,455
|
573,480
|
786,291
|
503,858
|
|||||||||
|
7,986,351
|
5,995,751
|
6,683,039
|
5,132,878
|
||||||||||
-58-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| 27. |
OBLIGATIONS UNDER FINANCE LEASES
|
At
31
December 2006, the Group and the Company had 46 and 40 aircraft (2005: 36
and 33
aircraft) respectively under finance leases. Under the terms of the leases,
the
Group/the Company has the option to purchase, at or near the end of the lease
terms, certain aircraft at fair market value and others at either fair market
value or a percentage of the respective lessors’ defined cost of the aircraft.
The obligations under finance leases are principally denominated in US
Dollars.
The
future minimum lease payments (including interest), and the present value
of the
minimum lease payments under finance leases are as follows:
|
Company
|
|||||||||||||||||||
|
2006
|
2005
|
||||||||||||||||||
|
|
|
|
|
Present
|
|
|
|
|
|
Present
|
|
||||||||
|
|
|
|
|
|
|
value
of
|
|
|
|
|
|
value
of
|
|
||||||
|
|
|
Minimum
|
|
|
|
minimum
|
|
Minimum
|
|
|
|
minimum
|
|
||||||
|
|
|
lease
|
|
|
|
lease
|
|
lease
|
|
|
|
lease
|
|
||||||
|
|
|
payments
|
|
Interest
|
|
payments
|
|
payments
|
|
Interest
|
|
payments
|
|||||||
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||||||
|
Within
one year
|
3,447,738
|
546,904
|
2,900,834
|
2,885,047
|
457,010
|
2,428,037
|
|||||||||||||
|
In
the second year
|
2,371,076
|
430,139
|
1,940,937
|
2,870,162
|
300,106
|
2,570,056
|
|||||||||||||
|
In
the third to
|
|||||||||||||||||||
|
fifth
year inclusive
|
3,514,758
|
912,607
|
2,602,151
|
3,487,110
|
472,914
|
3,014,196
|
|||||||||||||
|
After
the fifth year
|
5,173,152
|
667,598
|
4,505,554
|
2,913,057
|
337,792
|
2,575,265
|
|||||||||||||
|
Total
|
14,506,724
|
2,557,248
|
11,949,476
|
12,155,376
|
1,567,822
|
10,587,554
|
|||||||||||||
|
Less:
amount
|
|||||||||||||||||||
|
repayable
|
|||||||||||||||||||
|
within
|
|||||||||||||||||||
|
one
year
|
(3,348,020
|
)
|
(544,064
|
)
|
(2,803,956
|
)
|
(2,885,047
|
)
|
(457,010
|
)
|
(2,428,037
|
)
|
|||||||
|
amount
|
|||||||||||||||||||
|
reclassified
to
|
|||||||||||||||||||
|
non-current
|
|||||||||||||||||||
|
assets
held
|
|||||||||||||||||||
|
for
sale
|
|||||||||||||||||||
|
(Note
37)
|
(99,718
|
)
|
(2,840
|
)
|
(96,878
|
)
|
-
|
-
|
-
|
||||||||||
|
Long-term
portion
|
11,058,986
|
2,010,344
|
9,048,642
|
9,270,329
|
1,110,812
|
8,159,517
|
|||||||||||||
-59-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
Company
|
|||||||||||||||||||
|
2006
|
2005
|
||||||||||||||||||
|
|
|
|
|
Present
|
|
|
|
|
|
Present
|
|
||||||||
|
|
|
|
|
|
|
value
of
|
|
|
|
|
|
value
of
|
|
||||||
|
|
|
Minimum
|
|
|
|
minimum
|
|
Minimum
|
|
|
|
minimum
|
|
||||||
|
|
|
lease
|
|
|
|
lease
|
|
lease
|
|
|
|
lease
|
|
||||||
|
|
|
payments
|
|
Interest
|
|
payments
|
|
payments
|
|
Interest
|
|
payments
|
|
||||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||||
|
Within
one year
|
3,195,142
|
459,367
|
2,735,775
|
2,779,448
|
417,474
|
2,361,974
|
|||||||||||||
|
In
the second year
|
2,146,228
|
351,312
|
1,794,916
|
2,764,563
|
263,806
|
2,500,757
|
|||||||||||||
|
In
the third to
|
|||||||||||||||||||
|
fifth
year inclusive
|
2,903,681
|
722,981
|
2,180,700
|
3,170,314
|
384,958
|
2,785,356
|
|||||||||||||
|
After
the fifth year
|
4,033,038
|
497,281
|
3,535,757
|
2,347,521
|
270,326
|
2,077,195
|
|||||||||||||
|
Total
|
12,278,089
|
2,030,941
|
10,247,148
|
11,061,846
|
1,336,564
|
9,725,282
|
|||||||||||||
|
Less:
amount
|
|||||||||||||||||||
|
repayable
|
|||||||||||||||||||
|
within
|
|||||||||||||||||||
|
year
|
(3,092,584
|
)
|
(456,527
|
)
|
(2,636,057
|
)
|
(2,779,448
|
)
|
(417,474
|
)
|
(2,361,974
|
)
|
|||||||
|
amount
|
|||||||||||||||||||
|
transferred
|
|||||||||||||||||||
|
to
non-
|
|||||||||||||||||||
|
current
|
|||||||||||||||||||
|
assets
held
|
|||||||||||||||||||
|
for
sale
|
|||||||||||||||||||
|
(Note
37)
|
(102,558
|
)
|
(2,840
|
)
|
(99,718
|
)
|
-
|
-
|
-
|
||||||||||
|
Long-term
portion
|
9,082,947
|
1,571,574
|
7,511,373
|
8,282,398
|
919,090
|
7,363,308
|
|||||||||||||
The
fair
value of obligations under finance leases of the Group and the Company are
RMB11,550 million and RMB9,833 million (2005: RMB10,432 million and RMB9,690
million), which are determined using the expected future payments discounted
at
market interest rates prevailing at the year end of 2.5% to 7.0% (2005: 2.5%
to
7.0%).
At
31
December 2006, the Group and the Company had long-term bank deposits totaling
RMB1,199 million (2005: RMB2,026 million) pledged as collateral under certain
finance lease arrangements (Note 21(b)). In addition, the finance lease
obligations are guaranteed by certain international and PRC banks in the
PRC.
Certain
leases that were entered into during the first quarter of 2006 and initially
classified as finance leases, have been reassessed and reclassified as operating
leases since the announcement of the unaudited 2006 interim results. The
resulting impact increased the Group’s consolidated net assets at 30 June 2006
by RMB113 million and decreased its consolidated loss for the six-month period
ended 30 June 2006 by the same amount. The consolidated financial statements
as
at and for the year ended 31 December 2006 are not affected.
-60-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| 28. |
BORROWINGS
|
|
Group
|
|
Company
|
|
||||||||||
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
Non-current
|
|||||||||||||
|
Long-term
bank borrowings
|
|||||||||||||
|
(Note
(a))
|
|||||||||||||
|
-
secured
|
5,028,836
|
5,809,678
|
4,413,836
|
5,526,998
|
|||||||||
|
-
unsecured
|
7,062,577
|
3,980,438
|
6,428,079
|
3,930,438
|
|||||||||
|
12,091,413
|
9,790,116
|
10,841,915
|
9,457,436
|
||||||||||
|
Current
|
|||||||||||||
|
Long-term
bank borrowings
|
|||||||||||||
|
(Note
(a))
|
|||||||||||||
|
-
secured
|
773,494
|
1,555,313
|
773,494
|
1,516,173
|
|||||||||
|
-
unsecured
|
2,067,200
|
1,313,917
|
1,476,740
|
1,313,917
|
|||||||||
|
Short-term
bank borrowings
|
|||||||||||||
|
(Note
(b))
|
|||||||||||||
|
-
secured
|
-
|
33,000
|
-
|
-
|
|||||||||
|
-
unsecured
|
13,175,633
|
13,677,856
|
10,754,644
|
10,571,230
|
|||||||||
|
Debentures
(Note
(c))
|
-
|
1,974,544
|
-
|
1,974,544
|
|||||||||
|
16,016,327
|
18,554,630
|
13,004,878
|
15,375,864
|
||||||||||
|
Total
borrowings (Note
(d))
|
28,107,740
|
28,344,746
|
23,846,793
|
24,833,300
|
|||||||||
|
The
borrowings are repayable
|
|||||||||||||
|
as
follows:
|
|||||||||||||
|
Within
one year
|
16,016,327
|
18,554,630
|
13,004,878
|
15,375,864
|
|||||||||
|
In
the second year
|
3,053,315
|
2,663,434
|
2,953,315
|
2,631,154
|
|||||||||
|
In
the third to
|
|||||||||||||
|
fifth
year inclusive
|
7,560,389
|
5,517,473
|
7,020,891
|
5,217,073
|
|||||||||
|
After
the fifth year
|
1,477,709
|
1,609,209
|
867,709
|
1,609,209
|
|||||||||
|
28,107,740
|
28,344,746
|
23,846,793
|
24,833,300
|
||||||||||
Notes:
| (a) |
The
fair value of long-term borrowings of the Group and the Company
are
RMB15,397 million and RMB13,546 million (2005: RMB12,044 million
and
RMB11,696 million), which are determined using the expected future
payments discounted at market interest rates prevailing at the
year end of
4.5% (2005: 4.5%).
|
As
at 31
December 2006, the secured bank borrowings of the Group and the Company
for the
purchases of aircraft were secured by the related aircraft with an aggregate
net
book amount of RMB9,044 million and RMB8,310 million respectively (2005:
RMB9,074 million) (Note 15). Certain secured bank borrowings with an aggregate
net book amount of RMB186 million (2005: RMB837 million) were also guaranteed
by
Export-Import Bank of the United States, China Industrial and Commercial
Bank
and China Construction Bank.
Certain
unsecured bank borrowings of the Group and the Company totaling of RMB695
million and RMB100 million (2005: RMB1,282 million and RMB200 million)
were
guaranteed by CEA Holding (Note 41).
-61-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
The
terms
of the long-term bank loans are summarised as follows:
|
|
|
Group
|
|
Company
|
||||||||||||
|
Interest
rate and final maturities
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||||||
|
|
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
||||||
|
RMB
denominated bank loans:
|
||||||||||||||||
|
Loans
for working
|
Fixed
interest rates ranging from 5.18% to
|
|||||||||||||||
|
capital
|
5.76%
per annum as at 31 December
|
|||||||||||||||
|
2006;
1 to 4-year loans with final
|
||||||||||||||||
|
maturity
through to 2010
|
3,785,000
|
3,253,500
|
3,710,000
|
3,153,500
|
||||||||||||
|
Loans
for the
|
Fixed
interest rates ranging from 5.18% to
|
|||||||||||||||
|
purchases
of
|
6.16%
per annum as at 31 December
|
|||||||||||||||
|
aircraft*
|
2006;
2 to 11-year loans with final
|
|||||||||||||||
|
maturities
through to 2017
|
1,777,500
|
1,455,000
|
767,500
|
1,455,000
|
||||||||||||
|
Loans
for
|
Fixed
interest rates ranging from 5.30% to
|
|||||||||||||||
|
construction
|
5.76%
per annum as at 31 December
|
|||||||||||||||
|
projects
|
2006;
1 to 5-year loans with final
|
|||||||||||||||
|
maturities
through to 2011
|
245,000
|
200,000
|
100,000
|
200,000
|
||||||||||||
|
U.S.
dollar denominated bank loans:
|
||||||||||||||||
|
Loans
for the
|
Fixed
interest rates ranging from 5.90% to
|
|||||||||||||||
|
purchases
of
|
6.20%
per annum as at 31 December
|
|||||||||||||||
|
aircraft
|
2006;
2 to 3-year loans with final
|
|||||||||||||||
|
|
maturities
through to 2009
|
1,008,982
|
296,120
|
546,609
|
296,120
|
|||||||||||
|
Loans
for the
|
Floating
interest rates ranging from 3
|
|||||||||||||||
|
purchases
of
|
months
LIBOR+0.25% to 6 months
|
|||||||||||||||
|
aircraft*
|
LIBOR+0.75%
as at 31 December 2006;
|
|||||||||||||||
|
|
2
to 9-year loans with final maturities
|
|||||||||||||||
|
through
to 2015
|
6,017,637
|
7,295,480
|
6,017,637
|
7,135,480
|
||||||||||||
|
Loans
for the
|
Floating
interest rates of 6 months LIBOR
|
|||||||||||||||
|
purchase
of an
|
+0.6%
as at 31 December 2006; 3 to
|
|||||||||||||||
|
aircraft
simulator
|
5-year
loans with final maturities in
|
|||||||||||||||
|
2011
|
147,585
|
111,820
|
-
|
-
|
||||||||||||
|
Loans
for working
|
Floating
interest rates ranging from 3
|
|||||||||||||||
|
capital
|
months
LIBOR+0.55% to 6 months
|
|||||||||||||||
|
|
LIBOR+0.75%
as at 31 December 2006;
|
|||||||||||||||
|
2
to 3-year loans with final maturities
|
||||||||||||||||
|
through
to 2009
|
866,287
|
-
|
866,287
|
-
|
||||||||||||
|
Loans
for finance
|
Floating
interest rates of 6 months LIBOR
|
|||||||||||||||
|
leases
of aircraft
|
+0.75%
as at 31 December 2006; 3-year
|
|||||||||||||||
|
|
loans
with final maturity in 2009
|
927,942
|
47,426
|
927,942
|
47,426
|
|||||||||||
|
Loans
for
|
Floating
interest rates of 6 months LIBOR
|
|||||||||||||||
|
construction
|
+0.75%
as at 31 December 2006; 1-year
|
|||||||||||||||
|
projects
|
loans
with final maturity in 2007
|
156,174
|
-
|
156,174
|
-
|
|||||||||||
|
Total
long-term bank
|
||||||||||||||||
|
loans
|
14,932,107
|
12,659,346
|
13,092,149
|
12,287,526
|
||||||||||||
*
These
loans are secured by the related aircraft.
| (b) |
Short-term
borrowings of the Group and the Company are repayable within one
year with
interest charged at the prevailing market rates based on the rates
quoted
by the People’s Bank of China. As at 31 December 2006, the interest rates
relating to such borrowings ranged from 4.39% to 6.12% per annum
(2005:
2.22% to 5.04% per annum). During the year ended 31 December 2006,
the
weighted average interest rate on short-term bank loans was 5.60%
per
annum (2005: 4.62% per annum).
|
-62-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (c) |
On
5 August 2005, the Company issued debentures with a face value
of
RMB1,000,000,000 at an issue price of RMB971,600,000, being 97.16%
of the
face value, and repayable on 4 August 2006. On 23 August 2005,
the Company
issued additional debentures with a face value of RMB1,000 million
at an
issue price of RMB980 million, being 98% of the face value, and
repayable
on 22 May 2006. During 2006, all debentures were repaid at face
value on
the respective due dates.
|
The
zero
coupon debentures are accounted for in the balance sheets of the Group and
the
Company as follows:
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|||
|
Nominal
value
|
-
|
2,000,000
|
|||||
|
Less:
Unamortised discount
|
-
|
(25,456
|
)
|
||||
|
-
|
1,974,544
|
||||||
| (d) |
The
carrying amounts of the borrowings are denominated in the following
currencies:
|
|
Group
|
|
Company
|
|
||||||||||
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||
|
|
|
|
RMB’000
|
|
|
RMB’000
|
|
|
RMB’000
|
|
|
RMB’000
|
|
|
Renminbi
|
11,409,006
|
13,112,485
|
7,836,006
|
10,521,485
|
|||||||||
|
US
Dollars
|
16,698,734
|
15,232,261
|
16,010,787
|
14,311,815
|
|||||||||
|
28,107,740
|
28,344,746
|
23,846,793
|
24,833,300
|
|
|||||||||
| 29. |
PROVISION
FOR AIRCRAFT OVERHAUL
EXPENSES
|
|
Group
|
|
Company
|
|
||||||||||
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
At
1 January
|
403,999
|
254,009
|
348,835
|
200,725
|
|||||||||
|
Additions
through
|
|||||||||||||
|
business
acquisitions
|
-
|
196,122
|
-
|
196,122
|
|||||||||
|
Additions
through the acquisition of a
|
|||||||||||||
|
controlling
interest in
|
|||||||||||||
|
an
associate (Note
40(a))
|
23,994
|
-
|
-
|
-
|
|||||||||
|
Additional
provisions
|
150,390
|
64,700
|
134,697
|
54,767
|
|||||||||
|
Reversal
resulting from
|
|||||||||||||
|
change
in estimate (Note)
|
-
|
(58,577
|
)
|
-
|
(58,577
|
)
|
|||||||
|
Utilisation
|
(67,762
|
)
|
(52,255
|
)
|
(53,942
|
)
|
(44,202
|
)
|
|||||
|
At
31 December
|
510,621
|
403,999
|
429,590
|
348,835
|
|||||||||
|
Less:
current portion
|
(20,900
|
)
|
(15,589
|
)
|
(20,900
|
)
|
(15,589
|
)
|
|||||
|
Long-term
portion
|
489,721
|
388,410
|
408,690
|
333,246
|
|||||||||
Provision
of aircraft overhaul expenses represents the present value of estimated costs
of
major overhauls for aircraft under operating leases as the Group has the
responsibility to fulfill certain return conditions under relevant
leases.
| Note: |
Prior
to 2005, overhauls for certain aircraft models under operating
leases were
performed by overseas service providers. In 2005, the Company identified
domestic facilities to carry out overhauls for certain aircraft
models at
lower cost. Accordingly, the Company changed its estimate for provision
for aircraft overhauls relating to those aircraft models.
|
-63-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| 30. |
OTHER
LONG-TERM LIABILITIES
|
|
Group
and Company
|
|
||||||
|
|
|
2006
|
|
2005
|
|
||
|
|
|
RMB’000
|
|
RMB’000
|
|||
|
Long-term
payable to the Bureau of 2010 Expo Shanghai
|
|||||||
|
(Note
14(b))
|
278,680
|
-
|
|||||
|
Long-term
payable to Aviation China Civil Flight Institute
|
|||||||
|
(Note
(a))
|
90,000
|
120,000
|
|||||
|
Deferred
credit on government grants (Note
(b))
|
70,410
|
70,410
|
|||||
|
Deferred
gains on sale and leaseback transactions of aircraft
|
33,605
|
46,673
|
|||||
|
Other
long-term payable
|
27,766
|
30,848
|
|||||
|
500,461
|
267,931
|
||||||
|
Less:
Current portion (Note
26)
|
(62,000
|
)
|
(66,029
|
)
|
|||
|
Long-term
portion
|
438,461
|
201,902
|
|||||
Notes:
| (a) |
The
balance is unsecured, bearing interest at an effective rate of
6.21% per
annum and is repayable by annual instalments of RMB30 million up
to year
2009.
|
| (b) |
Deferred
credit on government grants represents government grants received
for
construction and acquisition of safety and security facilities.
As at 31
December 2006, the related facilities have not been constructed
or
purchased.
|
| 31. |
DEFERRED
TAXATION
|
Deferred
income tax assets and liabilities are offset when there is a legally enforceable
right of offset and when the deferred income taxes relate to the same authority.
The following amounts, determined after appropriate offsetting, are shown
in the
balance sheets:
|
Group
|
|
Company
|
|
||||||||||
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
Deferred
tax assets
|
|||||||||||||
|
-
Deferred tax asset to be utilised
|
|||||||||||||
|
after
12 months
|
81,010
|
8,892
|
-
|
-
|
|||||||||
|
-
Deferred tax asset to be utilised
|
|||||||||||||
|
within
12 months
|
1,136
|
3,432
|
-
|
-
|
|||||||||
|
82,146
|
12,324
|
-
|
-
|
||||||||||
|
Deferred
tax liabilities
|
|||||||||||||
|
-
Deferred tax liability to be
|
|||||||||||||
|
realised
after 12 months
|
(68,459
|
)
|
(144,302
|
)
|
-
|
-
|
|||||||
|
-
Deferred tax liability to be
|
|||||||||||||
|
realised
within 12 months
|
-
|
(34,523
|
)
|
-
|
(160,067
|
)
|
|||||||
|
(68,459
|
)
|
(178,825
|
)
|
-
|
(160,067
|
)
|
|||||||
|
Deferred
tax assets/(liabilities), net
|
13,687
|
(166,501
|
)
|
-
|
(160,067
|
)
|
|||||||
-64-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
Movements
in the net deferred taxation asset/(liability) are as follows:
|
Group
|
|
Company
|
|
||||||||||
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
||||
|
At
1 January
|
(166,501
|
)
|
(292,385
|
)
|
(160,067
|
)
|
(278,942
|
)
|
|||||
|
Additions
through
|
|||||||||||||
|
business
acquisitions (Note
40(a))
|
(29,326
|
)
|
93,017
|
(29,326
|
)
|
93,017
|
|||||||
|
Credited
to income statement
|
|||||||||||||
|
(Note
11)
|
211,004
|
56,970
|
190,883
|
49,961
|
|||||||||
|
Charged/(credited)
to equity
|
|||||||||||||
|
-
gain/(losses) on
|
|||||||||||||
|
cashflow
hedges (Note
36)
|
(1,490
|
)
|
(24,103
|
)
|
(1,490
|
)
|
(24,103
|
)
|
|||||
|
At
31 December
|
13,687
|
(166,501
|
)
|
-
|
(160,067
|
)
|
|||||||
The
deferred tax assets and liabilities (prior to the offsetting of balances
within
the same tax jurisdiction) were made up of the taxation effects of the
following:
|
Group
|
|
Company
|
|
||||||||||
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
Deferred
tax assets:
|
|||||||||||||
|
Tax
losses carried forward
|
972,778
|
451,659
|
667,648
|
414,529
|
|||||||||
|
Provision
for obsolete flight
|
|||||||||||||
|
equipment
spare parts
|
68,574
|
33,192
|
66,008
|
32,748
|
|||||||||
|
Provision
for receivables
|
57,467
|
12,474
|
28,092
|
12,213
|
|||||||||
|
Provision
for post-retirement
|
|||||||||||||
|
benefits
|
216,570
|
185,102
|
176,007
|
168,842
|
|||||||||
|
Other
accrued expenses and
|
|||||||||||||
|
provisions
|
97,823
|
48,412
|
67,191
|
34,682
|
|||||||||
|
1,413,212
|
730,839
|
1,004,946
|
663,014
|
||||||||||
|
Less:
unrecognised assets
|
(882,443
|
)
|
(338,194
|
)
|
(594,326
|
)
|
(301,064
|
)
|
|||||
|
530,769
|
392,645
|
410,620
|
361,950
|
||||||||||
|
Deferred
tax liabilities:
|
|||||||||||||
|
Depreciation
and amortisation
|
(517,082
|
)
|
(559,146
|
)
|
(410,620
|
)
|
(522,017
|
)
|
|||||
|
(517,082
|
)
|
(559,146
|
)
|
(410,620
|
)
|
(522,017
|
)
|
||||||
|
Net
deferred tax assets/(liabilities)
|
13,687
|
(166,501
|
)
|
-
|
(160,067
|
)
|
|||||||
-65-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
Movements
of the net deferred tax assets/(liabilities) of the Group for the year:
|
|
|
|
|
|
|
Additions
|
|
|
|
|||||||
|
|
|
At
the
|
|
(Charged)/
|
|
|
|
Through
|
|
|
|
|||||
|
|
|
Beginning
|
|
Credited
|
|
(Charged)/
|
|
Business
|
|
At
the
|
|
|||||
|
|
|
of
the
|
|
to
income
|
|
Credited
|
|
acquisitions
|
|
end
of the
|
|
|||||
|
|
|
year
|
|
statement
|
|
to
equity
|
|
(Note
40)
|
|
year
|
|
|||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
||||||
|
For
the year ended
|
||||||||||||||||
|
31
December 2006
|
||||||||||||||||
|
Tax
losses carried forward
|
113,465
|
(23,130
|
)
|
-
|
-
|
90,335
|
||||||||||
|
Provision
for obsolete flight
|
||||||||||||||||
|
equipment
spare parts
|
33,192
|
35,382
|
-
|
-
|
68,574
|
|||||||||||
|
Provision
for receivables
|
12,474
|
44,993
|
-
|
-
|
57,467
|
|||||||||||
|
Provision
for post-retirement
|
||||||||||||||||
|
benefits
|
185,102
|
31,468
|
-
|
-
|
216,570
|
|||||||||||
|
Other
accrued expenses and
|
||||||||||||||||
|
provisions
|
48,412
|
50,901
|
(1,490
|
)
|
-
|
97,823
|
||||||||||
|
392,645
|
139,614
|
(1,490
|
)
|
-
|
530,769
|
|||||||||||
|
Depreciation
and amortisation
|
(559,146
|
)
|
71,390
|
-
|
(29,326
|
)
|
(517,082
|
)
|
||||||||
|
(559,146
|
)
|
71,390
|
-
|
(29,326
|
)
|
(517,082
|
)
|
|||||||||
|
Net
deferred tax assets/(liabilities)
|
(166,501
|
)
|
211,004
|
(1,490
|
)
|
(29,326
|
)
|
13,687
|
||||||||
|
|
|
|
|
|
|
Additions
|
|
|
|
|||||||
|
|
|
At
the
|
|
(Charged)/
|
|
|
|
Through
|
|
|
|
|||||
|
|
|
Beginning
|
|
Credited
|
|
(Charged)/
|
|
Business
|
|
At
the
|
|
|||||
|
|
|
of
the
|
|
to
income
|
|
Credited
|
|
acquisitions
|
|
end
of the
|
|
|||||
|
|
|
year
|
|
statement
|
|
to
equity
|
|
(Note
40)
|
|
year
|
|
|||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
||||||
|
For
the year ended
|
||||||||||||||||
|
31
December 2005
|
||||||||||||||||
|
Tax
losses carried forward
|
97,442
|
16,023
|
-
|
-
|
113,465
|
|||||||||||
|
Provision
for obsolete flight
|
||||||||||||||||
|
equipment
spare parts
|
54,014
|
(20,628
|
)
|
-
|
(194
|
)
|
33,192
|
|||||||||
|
Provision
for receivables
|
10,146
|
2,328
|
-
|
-
|
12,474
|
|||||||||||
|
Provision
for post-retirement
|
||||||||||||||||
|
benefits
|
95,252
|
12,066
|
-
|
77,784
|
185,102
|
|||||||||||
|
Other
accrued expenses and
|
||||||||||||||||
|
provisions
|
123,469
|
(16,647
|
)
|
(24,103
|
)
|
(34,307
|
)
|
48,412
|
||||||||
|
380,323
|
(6,858
|
)
|
(24,103
|
)
|
43,283
|
392,645
|
||||||||||
|
Depreciation
and amortisation
|
(672,708
|
)
|
63,828
|
-
|
49,734
|
(559,146
|
)
|
|||||||||
|
(672,708
|
)
|
63,828
|
-
|
49,734
|
(559,146
|
)
|
||||||||||
|
Net
deferred tax liabilities
|
(292,385
|
)
|
56,970
|
(24,103
|
)
|
93,017
|
(166,501
|
)
|
||||||||
-66-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
In
accordance with the PRC tax law, tax losses can be carried forward to offset
against future taxable income for a period of five years. As at 31 December
2006, the Group and the Company had tax losses carried forward of approximately
RMB5,782 million and RMB4,451 million respectively (2005: RMB3,011 million
and
RMB2,764 million respectively) which will expire between 2007 and 2011, and
which are available to set off against the Group and the Company’s future
taxable income. As at 31 December 2006, the Group and the Company did not
recognise RMB882 million and RMB594 million respectively (2005: RMB338 million
and RMB301 million respectively) of deferred tax assets arising from tax
losses
available as management did not consider it probable that such tax losses
would
be realised before they expire.
32.
RETIREMENT BENEFIT PLANS AND POST-RETIREMENT BENEFITS
| (a) |
Defined
contribution retirement schemes
|
(i)
Pension
The
Group
companies participate in defined contribution retirement schemes organised
by
municipal governments of the various provinces in which the Group companies
operate, and substantially all of the Group’s PRC employees are eligible to
participate in the Group companies’ retirement schemes. The Group companies are
required to make annual contributions to the schemes at rates ranging from
20%
to 22% on the employees’ prior year salary and allowances. Employees are
required to contribute to the schemes at rates ranging from 7% to 8% of their
basic salaries. The Group has no other material obligation for the payment
of
retirement benefits beyond the annual contributions under these schemes.
For the
year ended 31 December 2006, the Group’s pension cost charged to the
consolidated income statement amounted to RMB238 million (2005: RMB228 million).
(ii)
Medical insurance
The
majority of the Group’s PRC employees participate in the medical insurance
schemes organised by the municipal governments, under which the Group and
its
employees are required to contribute to the scheme approximately 12% and
2%,
respectively, of the employee’s basic salaries. For those employees who
participate in these schemes, the Group has no other obligation for the payment
of medical expense beyond the annual contributions. For the year ended 31
December 2006, the Group’s medical insurance contributions charged to the income
statement amounted to RMB60 million (2005: RMB52 million).
| (b) |
Post-retirement
benefits
|
In
addition to the above retirement schemes, the Group provides retirees with
other
post-retirement benefits including transportation subsidies, social function
activities subsidies and others. The expected cost of providing these
post-retirement benefits is actuarially determined and recognised by using
the
projected unit credit method, which involves a number of assumptions and
estimates, including inflation rate, discount rate and employees’ turnover
ratio.
The
post-retirement benefit obligations recognised in the balance sheets are
as
follows:
|
Group
|
|
Company
|
|
||||||||||
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
Present
value of
|
|||||||||||||
|
unfunded
post-retirement
|
|||||||||||||
|
benefit
obligations
|
1,892,926
|
1,970,292
|
1,650,889
|
1,792,522
|
|||||||||
|
Unrecognised
|
|||||||||||||
|
actuarial
losses
|
(569,242
|
)
|
(731,590
|
)
|
(477,509
|
)
|
(672,357
|
)
|
|||||
|
Post-retirement
|
|||||||||||||
|
benefit
obligations
|
1,323,684
|
1,238,702
|
1,173,380
|
1,120,165
|
|||||||||
|
Less:
Current portion
|
|||||||||||||
|
(Note
26)
|
(30,724
|
)
|
(35,825
|
)
|
(28,727
|
)
|
(34,528
|
)
|
|||||
|
Long-term
portion
|
1,292,960
|
1,202,877
|
1,144,653
|
1,085,637
|
|||||||||
-67-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
Changes
in post-retirement benefit obligations are as follows:
|
Group
|
|
Company
|
|
||||||||||
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
At
1 January
|
1,238,702
|
645,732
|
1,120,165
|
539,945
|
|||||||||
|
Additions
through business acquisition
|
-
|
519,881
|
-
|
519,881
|
|||||||||
|
Total
expenses charged in the income statement
|
146,968
|
102,459
|
114,422
|
89,467
|
|||||||||
|
Payments
|
(61,986
|
)
|
(29,370
|
)
|
(61,207
|
)
|
(27,778
|
)
|
|||||
|
Others
|
-
|
-
|
-
|
(1,350
|
)
|
||||||||
|
At
31 December
|
1,323,684
|
1,238,702
|
1,173,380
|
1,120,165
|
|||||||||
The
costs
of post-retirement benefits are recognised under wages, salaries and benefits
in
the income statement as follows:
|
Group
|
Company
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||
|
Current
service cost
|
63,957
|
56,436
|
51,964
|
50,775
|
|||||||||
|
Interest
cost
|
72,435
|
45,200
|
54,175
|
38,009
|
|||||||||
|
Actuarial
losses recognised
|
10,576
|
823
|
8,283
|
683
|
|||||||||
|
Total
(Note
8)
|
146,968
|
102,459
|
114,422
|
89,467
|
|||||||||
The
principal actuarial assumptions at the balance sheet date are as
follows:
|
Group
and Company
|
|||||||
|
2006
|
2005
|
||||||
|
Discount
rate
|
3.75
|
%
|
3.5
|
%
|
|||
|
Annual
rate of increase of per capita benefit payment
|
1.5
|
%
|
1.5
|
%
|
|||
|
Employee
turnover rate
|
3.0
|
%
|
3.0
|
%
|
|||
| 33. |
STAFF
HOUSING BENEFITS
|
| (a) |
Staff
housing fund
|
In
accordance with the PRC housing reform regulations, the Group is required
to
contribute to the State-sponsored housing fund at rates ranging from 1%
to 15%
(2005: 1% to 15%) of the specified salary amount of its PRC employees.
At the
same time, the employees are required to contribute an amount equal to
the
Group’s contribution. The employees are entitled to claim the entire sum of the
fund contributed under certain specified withdrawal circumstances. For
the year
ended 31 December 2006, the Group’s contributions to the housing funds amounted
to RMB228 million (2005: RMB195 million) which has been charged to the
income
statement. The staff housing fund payable as at 31 December 2006 amounted
to
RMB123 million (2005: RMB137 million) (Note 26). The Group has no legal
or
constructive obligations to pay further contributions if the fund does
not hold
sufficient assets to pay all employees the benefits relating to employee
service
in the current and prior periods.
-68-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (b) |
Staff
housing allowances
|
The
Company also provides staff housing allowances to eligible employees who
joined
the Group prior to 1998 according to the Group’s staff housing allowance policy
introduced in October 2003 (the “Staff Housing Allowance Policy”).
Under
the
Staff Housing Allowance Policy, employees who have not been allocated with
any
housing quarters or who have not been allocated with a quarter above the
minimum
area as set out in the Staff Housing Allowance Policy, are entitled to
a cash
allowance based on the area of quarter to which they are entitled and the
unit
price as set out in the Staff Housing Allowance Policy. The total entitlement
is
principally vested over a period of 20 years. Upon an employee’s resignation,
his or her entitlement will cease and any unpaid entitlement related to
past
service up to the date of resignation will be paid. Upon the establishment
of
the Staff Housing Allowance Policy, employees are entitled to a portion
of the
total entitlement already accrued based on his or her past service period.
Such
entitlement is paid over a period of 4 to 5 years. As at 31 December 2006,
the
present obligation of the provision for employee’s staff housing entitlement is
RMB439 million (2005: RMB457 million).
For
the
year ended 31 December 2006, the staff housing benefit provided under the
Staff
Housing Allowance Policy amounted to RMB31 million (2005: RMB36 million)
which
has been charged to the income statement.
| 34. |
DERIVATIVE
FINANCIAL INSTRUMENTS
|
|
Group
and Company
|
|||||||||||||
|
Assets
|
Liabilities
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||||
|
At
31 December Interest rate swaps
(Note (a))
|
118,689
|
71,260
|
36,392
|
19,821
|
|||||||||
|
Forward
foreign exchange contracts
(Note (b))
|
8,290
|
2,469
|
4,962
|
17,808
|
|||||||||
|
Fuel
option contracts (Note
(c))
|
59,822
|
50,193
|
97,464
|
22,985
|
|||||||||
|
Total
|
186,801
|
123,922
|
138,818
|
60,614
|
|||||||||
|
Less:
non-current portion
|
|||||||||||||
|
Interest
rate swaps
|
(73,269
|
)
|
(70,292
|
)
|
(14,096
|
)
|
(2,731
|
)
|
|||||
|
Forward
foreign exchange contracts
|
-
|
(594
|
)
|
-
|
(10,380
|
)
|
|||||||
|
Fuel
option contracts
|
-
|
-
|
-
|
(12,659
|
)
|
||||||||
|
(73,269
|
)
|
(70,886
|
)
|
(14,096
|
)
|
(25,770
|
)
|
||||||
|
Current
portion
|
113,532
|
53,036
|
124,722
|
34,844
|
|||||||||
Notes:
| (a) |
Interest
rate swaps
|
The
Group
uses interest rate swaps to reduce the risk of changes in market interest
rates
(Note 3(a)(iii)). The interest rate swaps entered into by the Group are
generally for swapping variable rates, usually referenced to LIBOR, into
fixed
rates. The Group’s interest rate swaps qualify for hedge accounting and are
accounted for as cashflow hedges. As at 31 December 2006, the notional
amount of
the outstanding interest rate swap agreements was approximately US$631
million
(2005: US$661 million). These agreements will expire between 2007 and 2016.
For
the year ended 31 December 2006, a net gain of RMB4 million (2005: RMB79
million) arising from changes in the fair value of the interest rate swaps
subsequent to initial recognition has been recognised directly in the hedging
reserve (Note 36).
-69-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (b) |
Forward
foreign exchange contracts
|
The
Group
uses currency forward contracts to reduce risk of changes in currency exchange
rates in respect of ticket sales and expenses denominated in foreign currencies
(Note 3(a)(vi)). These contracts are generally for selling Japanese Yen and
purchasing U.S. dollars at fixed exchange rates. As at 31 December 2006,
the
notional amount of the outstanding currency forward contracts was approximately
US$33 million (2005: US$92 million), which will expire between 2006 and 2010.
For the year ended 31 December 2006, a net gain of RMB6 million (2005: a
net
loss of RMB82 million) arising from changes in the fair value of these foreign
currency forwards has been recognised directly in the hedging reserve (Note
36).
| (c) |
Fuel
option contracts
|
The
Group
uses fuel option contracts to reduce the risk of changes in market oil/petroleum
prices in connection with aircraft fuel costs. As at 31 December 2006, the
Group
had outstanding fuel option contracts to buy approximately 10,690,000 barrels
of
crude oil at prices which ranged from US$54.75 to US$95 per barrel and to
sell
approximately 23,310,000 barrels of crude oil at prices which ranged from
US$40
to US$115 per barrel, all of which will expire between 2007 and 2009. Management
did not designate these fuel option contracts for hedge accounting and changes
in fair values have been recognised directly in the income statement.
| 35. |
SHARE
CAPITAL
|
|
2006
|
2005
|
||||||
|
RMB’000
|
RMB’000
|
||||||
|
Registered,
issued and fully paid of RMB1.00 each
|
|||||||
|
Unlisted
shares held by CEA Holding and employees
|
3,000,000
|
3,000,000
|
|||||
|
A
shares listed on The Shanghai Stock Exchange
|
300,000
|
300,000
|
|||||
|
H
shares listed on The Stock Exchange of Hong Kong Limited
|
1,566,950
|
1,566,950
|
|||||
|
4,866,950
|
4,866,950
|
||||||
Pursuant
to articles 49 and 50 of the Company’s Articles of Association, each of the
unlisted shares, the listed A shares and the listed H shares are all registered
ordinary shares and carry equal rights.
On
18
December 2006, the Company convened the Relevant Shareholder’s Meeting of A
Share Shareholders in which the Company’s share reform plan was approved.
Details please refer to Post Balance Sheet Event (Note 44).
-70-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE GROUP
|
| 36. |
RESERVES
|
|
Group
|
|
|||||||||||||||||||||
|
|
|
Share
premium
|
|
Statutory
and discretionary reserves
|
|
Revaluation
reserve
|
|
Capital
reserve
|
|
Hedging
reserve
|
|
Retained
profits/ (accumulated losses)
|
|
Total
|
|
|||||||
|
|
|
|
|
(Note
(a))
|
|
|
|
(Note
(b))
|
|
(Note
34)
|
|
|
|
|
||||||||
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
||||||||||
|
At
1 January 2005
|
1,006,455
|
381,171
|
490,688
|
(720,057
|
)
|
(91,861
|
)
|
590,778
|
1,657,174
|
|||||||||||||
|
Unrealised
gains on cashflow hedges
(Note 34)
|
||||||||||||||||||||||
|
-
gross
|
-
|
-
|
-
|
-
|
181,449
|
-
|
181,449
|
|||||||||||||||
|
-
tax
|
-
|
-
|
-
|
-
|
(27,217
|
)
|
-
|
(27,217
|
)
|
|||||||||||||
|
Realised
gains on Cashflow hedges (Note
34)
|
||||||||||||||||||||||
|
-
gross
|
-
|
-
|
-
|
-
|
(20,759
|
)
|
-
|
(20,759
|
)
|
|||||||||||||
|
-
tax
|
-
|
-
|
-
|
-
|
3,114
|
-
|
3,114
|
|||||||||||||||
|
Dividend
relating to 2004
|
-
|
-
|
-
|
-
|
-
|
(97,339
|
)
|
(97,339
|
)
|
|||||||||||||
|
Loss
attributable to equity holders of the Company
|
-
|
-
|
-
|
-
|
-
|
(467,307
|
)
|
(467,307
|
)
|
|||||||||||||
|
Transfer
from retained profits to reserves
(Note (a))
|
-
|
26,671
|
-
|
-
|
-
|
(26,671
|
)
|
-
|
||||||||||||||
|
At
31 December 2005
|
1,006,455
|
407,842
|
490,688
|
(720,057
|
)
|
44,726
|
(539
|
)
|
1,229,115
|
|||||||||||||
|
At
1 January 2006
|
1,006,455
|
407,842
|
490,688
|
(720,057
|
)
|
44,726
|
(539
|
)
|
1,229,115
|
|||||||||||||
|
Unrealised
gains on cashflow hedges
(Note 34)
|
||||||||||||||||||||||
|
-
gross
|
-
|
-
|
-
|
-
|
12,774
|
-
|
12,774
|
|||||||||||||||
|
-
tax
|
-
|
-
|
-
|
-
|
(1,916
|
)
|
-
|
(1,916
|
)
|
|||||||||||||
|
Realised
gains on cashflow hedges
(Note 34)
|
||||||||||||||||||||||
|
-
gross
|
-
|
-
|
-
|
-
|
(2,843
|
)
|
-
|
(2,843
|
)
|
|||||||||||||
|
-
tax
|
-
|
-
|
-
|
-
|
426
|
-
|
426
|
|||||||||||||||
|
Revaluation
reserve, net of tax, arising from acquisition of a controlling
interest in
an associate
|
-
|
-
|
23,816
|
-
|
-
|
-
|
23,816
|
|||||||||||||||
|
Loss
attributable to equity holders of the Company
|
-
|
-
|
-
|
-
|
-
|
(3,313,425
|
)
|
(3,313,425
|
)
|
|||||||||||||
|
Transfer
from retained profits to reserves
(Note (a))
|
-
|
20,966
|
-
|
-
|
-
|
(20,966
|
)
|
-
|
||||||||||||||
|
At
31 December 2006
|
1,006,455
|
428,808
|
514,504
|
(720,057
|
)
|
53,167
|
(3,334,930
|
)
|
(2,052,053
|
)
|
||||||||||||
-71-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
Group
|
||||||||||||||||||||||
|
Share
premium
|
Statutory
and discretionary reserves
|
Revaluation
reserve
|
Capital
reserve
|
Hedging
reserve
|
Retained
profits/ (accumulated losses)
|
Total
|
||||||||||||||||
|
(Note
(a))
|
(Note
(b))
|
(Note
34)
|
||||||||||||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||||||||
|
At
1 January 2005
|
1,006,455
|
182,336
|
435,077
|
(720,057
|
)
|
(91,861
|
)
|
232,917
|
1,044,867
|
|||||||||||||
|
Unrealised
gains on cashflow hedges
|
||||||||||||||||||||||
|
(Note
34)
|
||||||||||||||||||||||
|
-
gross
|
-
|
-
|
-
|
-
|
181,449
|
-
|
181,449
|
|||||||||||||||
|
-
tax
|
-
|
-
|
-
|
-
|
(27,217
|
)
|
-
|
(27,217
|
)
|
|||||||||||||
|
Realised
gains on cashflow hedges
(Note 34)
|
||||||||||||||||||||||
|
-
gross
|
-
|
-
|
-
|
-
|
(20,759
|
)
|
-
|
(20,759
|
)
|
|||||||||||||
|
-
tax
|
-
|
-
|
-
|
-
|
3,114
|
-
|
3,114
|
|||||||||||||||
|
Dividend
relating to 2004
|
-
|
-
|
-
|
-
|
-
|
(97,339
|
)
|
(97,339
|
)
|
|||||||||||||
|
Loss
for the year
|
-
|
-
|
-
|
-
|
-
|
(406,362
|
)
|
(406,362
|
)
|
|||||||||||||
|
At
31 December 2005
|
1,006,455
|
182,336
|
435,077
|
(720,057
|
)
|
44,726
|
(270,784
|
)
|
677,753
|
|||||||||||||
|
At
1 January 2006
|
1,006,455
|
182,336
|
435,077
|
(720,057
|
)
|
44,726
|
(270,784
|
)
|
677,753
|
|||||||||||||
|
Unrealised
gains on cashflow hedges
(Note 34)
|
||||||||||||||||||||||
|
-
gross
|
-
|
-
|
-
|
-
|
12,774
|
-
|
12,774
|
|||||||||||||||
|
-
tax
|
-
|
-
|
-
|
-
|
(1,916
|
)
|
-
|
(1,916
|
)
|
|||||||||||||
|
Realised
gains on cashflow hedges
(Note 34)
|
||||||||||||||||||||||
|
-
gross
|
-
|
-
|
-
|
-
|
(2,843
|
)
|
-
|
(2,843
|
)
|
|||||||||||||
|
-
tax
|
-
|
-
|
-
|
-
|
426
|
-
|
426
|
|||||||||||||||
|
Loss
for the year
|
-
|
-
|
-
|
-
|
-
|
(2,663,713
|
)
|
(2,663,713
|
)
|
|||||||||||||
|
At
31 December 2006
|
1,006,455
|
182,336
|
435,077
|
(720,057
|
)
|
53,167
|
(2,934,497
|
)
|
(1,977,519
|
)
|
||||||||||||
Notes:
| (a) |
Statutory
and Discretionary Reserves
|
|
Group
|
Company
|
||||||||||||
|
2006
|
2005
|
2006
|
2005
|
||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||
|
Statutory
common reserve fund
|
400,819
|
196,746
|
154,428
|
77,214
|
|||||||||
|
Statutory
common welfare fund
|
-
|
183,107
|
-
|
77,214
|
|||||||||
|
Discretionary
common reserve fund
|
27,989
|
27,989
|
27,908
|
27,908
|
|||||||||
|
428,808
|
407,842
|
182,336
|
182,336
|
||||||||||
-72-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
Pursuant
to the PRC regulations and the Group companies’ Articles of Association, each of
the Group companies is required to transfer 10% of its profit for the year,
as
determined under the PRC Accounting Regulations, to a statutory common
reserve
fund until the fund balance exceeds 50% of the Group company’s registered
capital. The statutory common reserve fund can be used to make good previous
years’ losses, if any, and to issue new shares to shareholders in proportion to
their existing shareholdings or to increase the par value of the shares
currently held by them, provided that the balance after such issue is not
less
than 25% of the registered capital.
Pursuant
to the PRC regulations and the Group companies’ Articles of Association, each of
the companies was required to transfer 5% to 10% of its profit for the
year, as
determined under the PRC Accounting Regulations, to the statutory common
welfare
fund. This fund can only be used to provide staff welfare facilities and
other
collective benefits to the Group companies’ employees. This fund is
non-distributable other than on liquidation. From 1 January 2006 onward,
the
Group companies are prohibited from providing further appropriations out
of
their profit for the year to the statutory common welfare fund pursuant
to the
revised Company Law. The balance of the statutory common welfare fund as
at 1
January 2006 was converted into the statutory common reserve fund.
Each
of
the Group companies is permitted to transfer 5% of its profit for the year
as
determined under the PRC Accounting Regulations, to a discretionary common
reserve fund. The transfer to this reserve is subject to approval at
shareholders’ meetings.
For
the
year ended 31 December 2006, under the PRC Accounting Regulations, the
Company
recorded a loss for the year. Accordingly, no profit appropriation by the
Company to the discretionary common reserve fund has been made for the
year
ended 31 December 2006 (2005: nil). The transfer from retained profits
to
reserves for the year represents the profit appropriation to reserves of
certain
subsidiaries of the Company.
| (b) |
Capital
reserve
|
Capital
reserve represents the difference between the fair value of the net assets
injected and the nominal amount of the Company’s share capital issued in respect
of a group restructuring in June 1996.
| 37. |
NON-CURRENT
ASSETS HELD FOR SALE
|
On
27
December 2006, the Board of Directors passed a resolution to dispose certain
aged aircraft and related flight equipment in the forthcoming 12-months
in
consideration of the poor market reception and the high maintenance cost
of
these aircraft. Subsequent to the pass of the resolution, the Company has
taken
active programme to locate potential buyers no agreement has been reached
as of
the date of this report. These aircraft together with the related flight
equipment and spare parts with an aggregate carrying amount of RMB882 million
has been classified as non-current asset held for sale as at 31 December
2006.
Prior to the reclassification, a valuation deficit of RMB1,035 million
for these
assets was recognised in the income statement as a result of the asset
revaluation (Note 15). The liabilities directly associated with these assets
held for sale amounted to RMB443 million as at 31 December 2006, comprising
finance lease obligation of RMB97 million with interest rates of 6.24%
and final
maturities through to 2007 and bank loans of RMB346 million with interest
rates
ranging from 5.79% to 6.32% and final maturities through to 2008. The bank
loans
are secured by the related aircraft at net carrying amount of RMB586 million.
-73-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| 38. |
NOTE
TO CONSOLIDATED CASH FLOW STATEMENT
|
| (a) |
Cash
generated from operations
|
|
2006
|
2005
|
||||||
|
RMB’000
|
RMB’000
|
||||||
|
Loss
before income tax
|
(3,615,697
|
)
|
(577,432
|
)
|
|||
|
Adjustments
for:
|
|||||||
|
Depreciation
of property, plant and equipment
|
4,566,309
|
3,911,722
|
|||||
|
Gains
on disposals of property, plant and equipment
|
(36,207
|
)
|
(8,073
|
)
|
|||
|
Share
of results of associates
|
(103,566
|
)
|
9,030
|
||||
|
Share
of results of jointly controlled entities
|
(29,595
|
)
|
4,300
|
||||
|
Amortisation
of lease prepayments
|
30,869
|
25,219
|
|||||
|
Net
foreign exchange gains
|
(888,402
|
)
|
(414,640
|
)
|
|||
|
Amortisation
of deferred revenue
|
(13,068
|
)
|
-
|
||||
|
Fair
value gains on financial assets at fair value
|
|||||||
|
through
profit or loss
|
(17,784
|
)
|
(30,877
|
)
|
|||
|
Consumption
of flight equipment spare parts
|
326,248
|
239,134
|
|||||
|
(Reversal
of allowance)/allowance for obsolescence of flight equipment
spare
parts
|
31,734
|
(13,930
|
)
|
||||
|
Provision
for impairment of trade and other receivables
|
98,156
|
25,325
|
|||||
|
Provision
for post-retirement benefits
|
146,968
|
102,459
|
|||||
|
Provision
for staff housing allowance
|
30,656
|
36,231
|
|||||
|
Provision
for aircraft overhaul expenses
|
150,390
|
64,700
|
|||||
|
Revaluation
deficit
|
1,035,343
|
-
|
|||||
|
Interest
income
|
(120,161
|
)
|
(128,700
|
)
|
|||
|
Interest
expenses
|
1,821,870
|
1,100,357
|
|||||
|
Operating
profit before working capital changes
|
3,414,063
|
4,344,825
|
|||||
|
2006
|
2005
|
||||||
|
RMB’000
|
RMB’000
|
||||||
|
Changes
in working capital
|
|||||||
|
Flight
equipment spare parts
|
(583,027
|
)
|
(294,969
|
)
|
|||
|
Trade
receivables
|
14,273
|
(112,027
|
)
|
||||
|
Amount
due from related companies
|
(147,007
|
)
|
(83,459
|
)
|
|||
|
Prepayments,
deposits and other receivables
|
(538,347
|
)
|
(306,283
|
)
|
|||
|
Sales
in advance of carriage
|
68,510
|
101,490
|
|||||
|
Trade
payables and notes payables
|
(182,383
|
)
|
821,222
|
||||
|
Amounts
due to related companies
|
125,327
|
156,062
|
|||||
|
Other
payables and accrued expenses
|
1,515,138
|
(1,030,806
|
)
|
||||
|
Other
long-term liabilities
|
23,627
|
(67,764
|
)
|
||||
|
Provision
for aircraft overhaul expenses
|
(67,762
|
)
|
(110,832
|
)
|
|||
|
Post-retirement
benefit obligations
|
(61,986
|
)
|
(29,370
|
)
|
|||
|
Staff
housing allowances
|
(35,361
|
)
|
(18,306
|
)
|
|||
|
Operating
lease deposits
|
(86,555
|
)
|
-
|
||||
|
44,447
|
(975,042
|
)
|
|||||
|
Cash
generated from operations
|
3,458,510
|
3,369,783
|
|||||
-74-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (b) |
Non-cash
transactions
|
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|||
|
Investing
activities not affecting cash:
|
|||||||
|
Sale
and leaseback of aircrraft
|
7,940,164
|
-
|
|||||
|
Financing
activities not affecting cash:
|
|||||||
|
Finance
lease obligations incurred for
|
|||||||
|
acquisition
of aircraft
|
2,350,978
|
991,640
|
|||||
| 39. |
COMMITMENTS
|
| (a) |
Capital
commitments
|
The
Group
and the Company had the following capital commitments:
|
|
|
Group
|
|
Company
|
|
||||||||
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
Authorised
and contracted for:
|
|||||||||||||
|
-
Aircraft, engines and
|
|||||||||||||
|
flight
equipment
|
61,763,771
|
47,259,446
|
60,222,477
|
44,408,107
|
|||||||||
|
-
Other property, plant and
|
|||||||||||||
|
equipment
|
567,582
|
96,827
|
561,220
|
70,170
|
|||||||||
|
-
Acquisition of a subsidiary
|
-
|
390,000
|
-
|
390,000
|
|||||||||
|
62,331,353
|
47,746,273
|
60,783,697
|
44,868,277
|
||||||||||
|
Authorised
but not contracted
|
|||||||||||||
|
for:
|
|
||||||||||||
|
-
Aircraft, engines and
|
|||||||||||||
|
flight
equipment
|
723,000
|
723,000
|
-
|
-
|
|||||||||
|
-
Other property, plant and
|
|||||||||||||
|
equipment
|
7,772,639
|
13,424,055
|
7,268,631
|
13,281,864
|
|||||||||
|
8,495,639
|
14,147,055
|
7,268,631
|
13,281,864
|
||||||||||
|
70,826,992
|
61,893,328
|
68,052,328
|
58,150,141
|
||||||||||
Contracted
expenditures for the above aircraft and flight equipment, including deposits
prior to delivery, subject
to future inflation increases built into the contracts and any discounts
available upon delivery of the
aircraft, if any, were expected to be paid as
follows:
|
|
|
Group
|
|
Company
|
|
||||||||
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
Within
one year
|
14,894,068
|
9,006,906
|
13,352,744
|
7,301,334
|
|||||||||
|
In
the second year
|
18,844,893
|
12,703,578
|
18,844,893
|
11,557,811
|
|||||||||
|
In
the third year
|
15,591,463
|
13,523,589
|
15,591,463
|
13,523,589
|
|||||||||
|
In
the fourth year
|
12,433,347
|
6,256,592
|
12,433,347
|
6,256,592
|
|||||||||
|
In
the fifth year
|
-
|
5,768,781
|
-
|
5,768,781
|
|||||||||
|
61,763,771
|
47,259,446
|
60,222,447
|
44,408,107
|
||||||||||
-75-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (b) |
Operating
lease commitments
|
The
Group
and the Company had commitments under operating leases to pay future
minimum
lease rentals as follows:
|
|
|
Group
|
|
Company
|
|
||||||||
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
Aircraft,
engines and flight
equipment
|
|||||||||||||
|
Within
one year
|
2,984,137
|
1,633,301
|
2,609,673
|
1,444,458
|
|||||||||
|
In
the second year
|
2,961,023
|
1,550,209
|
2,596,944
|
1,361,362
|
|||||||||
|
|
|||||||||||||
|
In
the third to fifth year inclusive
|
6,524,538
|
4,075,691
|
6,050,572
|
3,632,279
|
|||||||||
|
After
the fifth year
|
12,737,377
|
2,015,670
|
12,661,592
|
2,015,670
|
|||||||||
|
25,207,075
|
9,274,871
|
23,918,781
|
8,453,769
|
||||||||||
|
Land
and buildings
|
|||||||||||||
|
Within
one year
|
153,487
|
68,739
|
133,775
|
67,799
|
|||||||||
|
In
the second year
|
42,362
|
60,330
|
40,366
|
59,190
|
|||||||||
|
In
the third to fifth year inclusive
|
71,587
|
44,951
|
69,590
|
44,463
|
|||||||||
|
After
the fifth year
|
54,535
|
2,846
|
54,535
|
2,846
|
|||||||||
|
321,971
|
176,866
|
298,266
|
174,298
|
||||||||||
|
25,529,046
|
9,451,737
|
24,217,047
|
8,628,067
|
||||||||||
| 40. |
BUSINESS
ACQUISITIONS
|
| (a) |
Acquisition
of CEA Wuhan
|
CEA
Wuhan
was an associate of the Company in which the Company had 40% equity
interests.
On
8
December 2005, the Company entered into agreements with each of Wuhan
Municipality State-owned Assets Supervision and Administration Commission
(“Wuhan SASAC”) and Shanghai Junyao Aviation Investment Company Limited
(“Shanghai Junyao”) to acquire (i) equity interests of 38% in CEA Wuhan from
Wuhan SASAC for a consideration of RMB278 million, and (ii) equity
interests of
18% in CEA Wuhan from Shanghai Junyao for a consideration of RMB140
million,
totaling RMB418 million, respectively. The acquisition was completed
in January
2006. Proforma financial information to reflect the acquisition as
if it had
occurred on 1 January 2006 is not presented as the impact would not
have been
material to the consolidated financial statements.
Details
of net assets acquired and related goodwill are as
follows:
|
2006
|
|
|||
|
|
|
RMB’000
|
||
|
Purchase
consideration:
|
||||
|
-
Cash
|
418,000
|
|||
|
-
Direct costs relating to the acquisition
|
-
|
|||
|
Total
purchase consideration
|
418,000
|
|||
|
Fair
value of net assets acquired
|
||||
|
-
shown as below
|
(160,229
|
)
|
||
|
Goodwill
(Note
14)
|
257,771
|
|||
-76-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
The
goodwill is attributable to an increase in the Company’s competitiveness as a
result of its increased size and the extension of its business scope
geographically to the central regions of the PRC.
The
assets and liabilities arising from the acquisition are as
follows:
|
|
|
|
|
Acquiree’s
|
|
||
|
|
|
Fair
value
|
|
carrying
amount
|
|
||
|
|
|
RMB’000
|
|
RMB’000
|
|||
|
Property,
plant and equipment
|
677,465
|
588,599
|
|||||
|
Lease
prepayments
|
75,302
|
75,302
|
|||||
|
Other
long-term and current assets
|
189,456
|
189,456
|
|||||
|
Trade
receivables
|
256,808
|
104,808
|
|||||
|
Cash
and cash equivalents
|
19,266
|
19,266
|
|||||
|
Other
long-term and current liabilities
|
(868,797
|
)
|
(868,797
|
)
|
|||
|
Provision
for aircraft overhaul expenses
|
(23,994
|
)
|
(23,994
|
)
|
|||
|
Deferred
tax liabilities
|
(29,326
|
)
|
-
|
||||
|
Minority
interests in CEA Wunan’s subsidiaries
|
(10,056
|
)
|
(10,056
|
)
|
|||
|
Net
assets
|
286,124
|
74,584
|
|||||
|
Share
acquired
|
56
|
%
|
|||||
|
Net
assets acquired
|
160,229
|
||||||
|
Purchase
consideration
|
418,000
|
||||||
|
Goodwill
|
257,771
|
||||||
|
Cash
outflow on business acquisition:
|
|||||||
|
Purchase
consideration settled in cash
|
418,000
|
||||||
|
Less:
Cash and cash equivalents acquired
|
(19,266
|
)
|
|||||
|
Purchase
consideration paid in prior year
|
(28,000
|
)
|
|||||
|
Cash
outflow on business acquisition
|
370,734
|
||||||
-77-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE GROUP
|
| (b) |
Acquisition
of China Eastern Airlines Development (HK) Co., Ltd. (“CEA Development
(HK)”) In
March 2006, the Company acquired additional 40% equity interests
in CEA
Development (HK), a former associate of the Company in which the
Company
had 40% interests, for HK$4 million. After the acquisition of the
additional interests, the Company’s shares in CEA Development (HK) has
increased from 40% to 80%, CEA Development (HK) become a subsidiary
of the
Company.
|
The
assets and liabilities arising from the acquisition are as follows:
|
|
|
|
|
Acquiree’s
|
|
||
|
|
|
Fair
value
|
|
carrying
amount
|
|
||
|
|
|
RMB’000
|
|
RMB’000
|
|||
|
Property,
plant and equipment
|
45,292
|
45,292
|
|||||
|
Cash
and cash equivalents
|
8,341
|
8,341
|
|||||
|
Other
long-term and current liabilities
|
(38,363
|
)
|
(38,363
|
)
|
|||
|
Net
assets
|
15,270
|
15,270
|
|||||
|
Share
acquired
|
40
|
%
|
|||||
|
Net
assets acquired
|
6,108
|
||||||
|
Purchase
consideration
|
(4,136
|
)
|
|||||
|
Negative
goodwill
|
1,972
|
||||||
|
Cash
inflow on business acquisition:
|
|||||||
|
Purchase
consideration settled in cash
|
4,136
|
||||||
|
Less:
Cash and cash equivalents acquired
|
(8,341
|
)
|
|||||
|
Cash
inflow on business acquisition
|
(4,205
|
)
|
|||||
| 41. |
RELATED
PARTY TRANSACTIONS
|
The
Group
is controlled by CEA Holding, which owns approximately 61.64% of the Company’s
shares as at 31 December 2006. The aviation industry in the PRC is administrated
by the CAAC. CEA Holding and the Group is ultimately controlled by the PRC
government, which also controls a significant portion of the productive assets
and entities in the PRC (collectively referred as the “SOEs”).
| (a) |
Related
party transactions
|
The
Group
sells air tickets through sales agents and is therefore likely to have extensive
transactions with other state-controlled enterprises, and the employees and
their close family members of SOEs while such employees are on corporate
business. These transactions are carried out on normal commercial terms that
are
consistently applied to all of the Group’s customers. Due to the large volume
and the pervasiveness of these transactions, management is unable to determine
the aggregate amount of the transactions for disclosure. Therefore, retail
transactions with these related parties are not disclosed herein. The Directors
of the Company believe that meaningful related party disclosures on these
retail
transactions have been adequately made.
-78-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
The
other
related party transactions are:
|
|
|
Income/
|
|
|||||||
|
|
|
|
|
(expenses
or payments)
|
|
|||||
|
Nature
of transaction
|
|
Related
party
|
|
2006
|
|
2005
|
|
|||
|
|
|
|
|
RMB’000
|
|
RMB’000
|
||||
|
With
CEA Holding or companies directly or
indirectly held by CEA Holding:
|
||||||||||
|
Interest
income on deposits at an average
|
EAGF**
|
8,036
|
5,341
|
|||||||
|
rate
of 0.72% per annum (2005: 0.72% per
|
||||||||||
|
annum)
|
||||||||||
|
Interest
expense on loans at rate of 5.01%
|
EAGF**
|
(23,393
|
)
|
(14,855
|
)
|
|||||
|
per
annum (2005: 4.50% per annum)
|
||||||||||
|
Commission
expense on air tickets sold
|
SDATC**
|
(6,085
|
)
|
(7,402
|
)
|
|||||
|
on
behalf of the Group, at rates ranging
|
Shanghai
Tourism (HK)
|
|
(1,491
|
)
|
(21,815
|
)
|
||||
|
from
3% to 9% of the value of tickets sold
|
Co.,
Ltd
|
|||||||||
|
Handling
charges of 0.1% to 2% for
|
EAIEC**
|
(40,971
|
)
|
(40,590
|
)
|
|||||
|
purchase
of aircraft, flight equipment,
|
||||||||||
|
flight
equipment spare parts, other
|
||||||||||
|
property,
plant and equipment
|
||||||||||
|
Repairs
and maintenance expense for
|
Wheels
& Brakes
|
(60,066
|
)
|
(63,972
|
)
|
|||||
|
aircraft
and engines
|
STA
|
(126,114
|
)
|
(104,853
|
)
|
|||||
|
Supply
of food and beverages
|
Shanghai
Eastern Air
|
(213,360
|
)
|
(184,306
|
)
|
|||||
|
Catering
Co., Ltd
|
||||||||||
|
Qingdao
Eastern Air
|
(16,082
|
)
|
(15,055
|
)
|
||||||
|
Catering
Investment
|
||||||||||
|
Co.,
Ltd.
|
||||||||||
|
Xian
Eastern Air Catering
|
(22,821
|
)
|
(15,079
|
)
|
||||||
|
Investment
Co.,Ltd.
|
||||||||||
|
Yunnan
Eastern Air Catering
|
(31,977
|
)
|
(17,451
|
)
|
||||||
|
Investment
Co.,Ltd.
|
||||||||||
|
Advertising
expense
|
CAASC
|
(11,583
|
)
|
(8,612
|
)
|
|||||
|
Purchase
of aviation equipment
|
Shanghai
Eastern
|
(11,303
|
)
|
(8,987
|
)
|
|||||
|
Aviation
Equipment Manufacturing
Corporation
|
||||||||||
| * |
The
Group acquired the aviation business of CEA Northwest and CEA
Yunnan and
an additional equity interest of 56% in CEA Wuhan with effect
from June
2005 and January 2006 respectively. Transactions with CEA Northwest
and
CEA Yunnan up to 30 June 2005 and with CEA Wuhan up to 31 December
2005
are regarded as related party transactions.
|
| ** |
EAGF
is also a 25% owned associate of the Group; SDATC and EAIEC are
both a 45%
owned associates of the Group.
|
-79-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
|
|
|
|
Income/
|
|
|||||
|
|
|
|
|
(expenses
or payments)
|
|
|||||
|
Nature
of transaction
|
|
Related
party
|
|
2006
|
|
2005
|
|
|||
|
|
|
|
|
RMB’000
|
|
RMB’000
|
||||
|
With
CAAC and its affiliates:
|
||||||||||
|
Civil
aviation infrastructure levies paid to
|
CAAC
|
696,428
|
466,191
|
|||||||
|
Aircraft
insurance premiums paid through
|
CAAC
|
168,972
|
201,653
|
|||||||
|
CAAC
which entered into the insurance
|
||||||||||
|
policy
on behalf of the Group
|
||||||||||
|
With
other SOE:
|
||||||||||
|
Take-off
and landing fee charges
|
State-controlled
airports
|
3,876,737
|
2,461,858
|
|||||||
|
Purchase
of aircraft fuel
|
State-controlled
fuel suppliers
|
10,242,349
|
4,571,155
|
|||||||
|
Ticket
reservation service charges for
utilisation
of computer reservation
|
Travel
Sky Technology Limited
|
(209,572
|
)
|
(124,677
|
)
|
|||||
|
system
|
||||||||||
|
Interest
income on deposits at an average
|
State-controlled
banks
|
18,701
|
30,948
|
|||||||
|
rates
of 0.72% per annum
|
||||||||||
|
(2005:
0.72% per annum)
|
||||||||||
|
Interest
expense on loans at an average
|
State-controlled
banks
|
1,227,278
|
790,478
|
|||||||
|
rate
of 5.53% per annum
|
||||||||||
|
(2005:
4.54% per annum)
|
||||||||||
|
Commission
expense on air tickets sold on
|
other
PRC airlines
|
89,977
|
153,528
|
|||||||
|
behalf
of the Group at rates ranging from
|
||||||||||
|
3%
to 9% of the value of tickets sold
|
||||||||||
|
Supply
of food and beverages
|
other
state-control enterprises
|
469,255
|
368,120
|
|||||||
| (b) |
Balances
with related
companies
|
| (i) |
Amounts
due from related
companies
|
|
|
Group
|
|
Company
|
|
|||||||||
|
Company
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
CEA
Holding
|
298,287
|
57,773
|
298,287
|
57,773
|
|||||||||
|
SDATC
|
30,908
|
43,223
|
30,908
|
43,223
|
|||||||||
|
Shanghai
Tourism (HK)Co., Ltd
|
5,091
|
23,177
|
5,091
|
23,177
|
|||||||||
|
CEA
Development (HK)
|
-
|
66,457
|
-
|
66,457
|
|||||||||
|
CEA
Wuhan
|
-
|
3,541
|
-
|
3,541
|
|||||||||
|
EAIEC
|
5,090
|
4,956
|
5,090
|
2,357
|
|||||||||
|
Other
related companies
|
13,343
|
6,585
|
11,833
|
6,585
|
|||||||||
|
|
|||||||||||||
|
Total
|
352,719
|
205,712
|
351,209
|
203,113
|
|||||||||
Except
for the amount due from CEA Holding, which is reimbursement in nature, all
other
amounts due from related companies are trade in nature, interest free and
payable within normal credit terms given to trade customers.
-80-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (ii) |
Amounts
due to related
companies
|
|
Group
|
|
Company
|
|
||||||||||
|
Company
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||
|
EAIEC
|
(270,514
|
)
|
(371,123
|
)
|
(179,582
|
)
|
(289,773
|
)
|
|||||
|
CEA
Holding
|
(40,338
|
)
|
(94,216
|
)
|
(40,338
|
)
|
(94,216
|
)
|
|||||
|
Shanghai
Eastern
|
|||||||||||||
|
Airlines
Catering Co.
|
|||||||||||||
|
Ltd.
|
(7,261
|
)
|
-
|
(7,261
|
)
|
-
|
|||||||
|
Yunnan
Eastern Air
|
|||||||||||||
|
Catering
Investment
|
|||||||||||||
|
Co.,
Ltd.
|
(11,036
|
)
|
-
|
(11,036
|
)
|
-
|
|||||||
|
CAASC
|
(101
|
)
|
(2,285
|
)
|
(101
|
)
|
(2,285
|
)
|
|||||
|
Other
related companies
|
(19,227
|
)
|
(108,406
|
)
|
(8,044
|
)
|
(99,915
|
)
|
|||||
|
Total
|
(348,477
|
)
|
(576,030
|
)
|
(246,362
|
)
|
(486,189
|
)
|
|||||
Except
for amounts due to EAGF and CEA Holding, which are reimbursement in nature,
all
other amounts due to related companies are trade in nature, interest free
and
payable within normal credit terms given by trade creditors.
| (iii) |
Short-term
deposits and short-term loans with an associate
|
|
Average
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
interest
rate
|
|
Group
|
|
Company
|
|
||||||||||||
|
Company
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||||
|
|
|
|
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||||
|
Short-term
deposits
|
|||||||||||||||||||
|
(included
in Prepayments,
|
|||||||||||||||||||
|
Deposits
and Other
|
|||||||||||||||||||
|
Receivables)
“EAGF”*
|
0.7
|
%
|
0.7
|
%
|
755,665
|
475,078
|
59,637
|
31,238
|
|||||||||||
|
Short-term
loans (included
|
|||||||||||||||||||
|
in
Borrowings) “EAGF”*
|
5.1
|
%
|
4.5
|
%
|
788,991
|
213,702
|
182,000
|
180,702
|
|||||||||||
| * |
EAGF
is a 25% owned associate of the Group;
|
| (iv) |
State-controlled
banks and other financial institutions
|
|
Average
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
interest
rate
|
|
Group
|
|
Company
|
|
||||||||||||
|
Company
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
||||||
|
|
|
|
|
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|
RMB’000
|
|||||||
|
Bank
deposits (included in
|
|||||||||||||||||||
|
cash
and cash equivalents)
|
0.7
|
%
|
0.7
|
%
|
759,110
|
1,196,963
|
571,863
|
755,225
|
|||||||||||
|
Long-term
bank borrowings
|
5.5
|
%
|
3.2
|
%
|
12,825,763
|
10,438,483
|
11,230,805
|
10,066,664
|
|||||||||||
-81-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (c) |
Guarantees
by holding company
|
As
at 31
December 2006, bank loans of the Group and the Company with an aggregate
amount
of RMB695 million and 100 million respectively (2005: RMB1,282 million and
200
million) were guaranteed by CEA Holding (Note 28).
| (d) |
Key
management compensation
|
|
2006
|
|
2005
|
|
||||
|
|
|
RMB’000
|
|
RMB’000
|
|||
|
Salaries,
bonus, allowances and benefits
|
1,365
|
1,825
|
|||||
| 42. |
ULTIMATE
HOLDING COMPANY
|
The
Directors regard CEA Holding, a state-owned enterprise established in the
PRC,
as being the ultimate holding company.
| 43. |
CONTINGENT
LIABILITIES
|
In
2005,
the Company received a legal claim in the United States of America for
unspecified damages by family members of certain victims in the air crash
of an
aircraft of CEA Yunnan which occurred on 21 November 2004 in Baotou, Neimonggol,
the PRC.
Management
has engaged legal representatives to vigorously contest the proceedings.
The
proceedings are still in an early stage and in the opinion of the Directors,
based on professional advice, it is unlikely that there will be any significant
adverse effect to the financial position of the Group.
| 44. |
POST
BALANCE SHEET EVENT
|
| (a) |
Share
Reform
|
On
18
December 2006, the Company convened the Relevant Shareholder ’s Meeting of A
Share Shareholders in which the Company’s share reform plan (the “Share Reform
Plan”) was approved. According to the Share Reform Plan, each holder of
circulating A shares of the Company whose name appeared on the shareholders’
register on the register date of the Share Reform Plan (i.e. 10 January
2007)
would be offered 3.2 shares as a consideration by CEA Holding, the only
holder
of the unlisted and non-circulating shares of the Company, for every 10
circulating A shares held by it. The original non-circulating shares held
by CEA
Holding would be granted the status of listing after implementation of
the Share
Reform Plan. The Share Reform Plan was approved by the Ministry of Commerce
on 4
January 2007 and implemented on 9 January 2007. In this connection, CEA Holding
granted 96 million shares in total to the holders of the circulating shares
and
the original non-circulating shares held by CEA Holding were granted the
status
of listing subject to certain circulating conditions on 12 January 2007.
-82-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
After
the
implementation of Share Reform Plan, the share structure of the Company will
be
as follows:
|
Prior
to Share Reform
|
After
Share Reform
|
||||||||||||
|
|
No.
of shares
|
%
of total
|
No.
of shares
|
%
of total
|
|||||||||
|
|
held
|
no.
of shares
|
held
|
no.
of shares
|
|||||||||
|
|
|
|
|
|
|||||||||
|
Unlisted
and non-circulating shares
|
|||||||||||||
|
|
|||||||||||||
|
Shares
held by the PRC
|
|||||||||||||
|
Government
|
3,000,000,000
|
61.64
|
-
|
-
|
|||||||||
|
Circulating
shares with
|
|||||||||||||
|
restricted
transfer held by
|
|||||||||||||
|
the
PRC Government
|
-
|
-
|
2,904,000,000
|
59.67
|
|||||||||
|
Circulating
shares without
|
|||||||||||||
|
restricted
transfer RMB
|
|||||||||||||
|
Common
shares listed
|
|||||||||||||
|
within
the PRC
|
300,000,000
|
6.16
|
396,000,000
|
8.13
|
|||||||||
|
Foreign
shares listed outside
|
|||||||||||||
|
the
PRC
|
1,566,950,000
|
32.20
|
1,566,950,000
|
32.20
|
|||||||||
|
Circulating
shares total
|
1,866,950,000
|
38.36
|
1,962,950,000
|
40.33
|
|||||||||
|
Total
number of shares
|
4,866,950,000
|
100
|
4,866,950,000
|
100
|
|||||||||
| (b) |
Tax
reform
|
On
16
March 2007, the National People’s Congress approved the Corporate Income Tax Law
of the People’s Republic of China (the “new CIT Law”). This legislation reduces
the corporate income tax rate for domestic enterprises from 33% to 25% with
effect from 1 January 2008. In addition, certain preferential and reduced
tax
rates may be withdrawn, subject to grandfathering provisions.
Since
deferred tax assets and deferred tax liabilities are measured at the tax
rates
that are expected to apply to the period when the asset is realized or the
liability is settled, the change in the applicable tax rate will affect the
determination of the carrying values of deferred tax assets and deferred
tax
liabilities of the Group. As at the date that these financial statements
are
approved for issue, detailed measures of the new CIT Law have yet to be issued,
specific provisions concerning the applicable income tax rates, computation
of
taxable income, as well as specific preferential tax treatments and their
related transitional provisions for the periods from 2008 and onwards have
not
been clarified. Consequently, the Group is not in a position to reasonably
assess the impact, if any, to the carrying values of deferred tax assets
and
deferred tax liabilities as the result of the implementation of the new CIT
Law.
The Group will further evaluate the impact to its operating results and
financial positions of future periods as more detailed measures and other
related regulations are announced.
-83-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING
STANDARDS (“IFRS”)
Condensed Consolidated Income Statement
For
the six months ended 30 June 2007
|
(Unaudited)
|
||||||||||
|
Six
months ended 30 June
|
||||||||||
|
Restated
|
||||||||||
|
2007
|
2006
|
|||||||||
|
Note
|
RMB’000
|
RMB’000
|
||||||||
|
(note
2)
|
||||||||||
|
Revenues
|
4
|
19,047,452
|
16,961,037
|
|||||||
|
Other
operating income
|
5
|
547,055
|
157,883
|
|||||||
|
Operating
expenses
|
||||||||||
|
Aircraft
fuel
|
(6,974,569
|
)
|
(6,176,056
|
)
|
||||||
|
Take-off
and landing charges
|
(2,534,090
|
)
|
(2,433,116
|
)
|
||||||
|
Depreciation
and amortisation
|
(2,164,814
|
)
|
(2,261,394
|
)
|
||||||
|
Wages,
salaries and benefits
|
(1,795,944
|
)
|
(1,561,031
|
)
|
||||||
|
Aircraft
maintenance
|
(1,228,105
|
)
|
(1,259,041
|
)
|
||||||
|
Food
and beverages
|
(568,501
|
)
|
(584,139
|
)
|
||||||
|
Aircraft
operating lease rentals
|
(1,452,674
|
)
|
(1,372,662
|
)
|
||||||
|
Other
operating lease rentals
|
(118,144
|
)
|
(118,042
|
)
|
||||||
|
Selling
and marketing expenses
|
(748,180
|
)
|
(772,582
|
)
|
||||||
|
Civil
aviation infrastructure levies
|
(382,247
|
)
|
(332,405
|
)
|
||||||
|
Ground
services and other charges
|
(84,281
|
)
|
(62,647
|
)
|
||||||
|
Insurance
costs
|
(93,473
|
)
|
(60,428
|
)
|
||||||
|
Office,
administrative and other expenses
|
(1,704,073
|
)
|
(1,272,023
|
)
|
||||||
|
Total
operating expenses
|
(19,849,095
|
)
|
(18,265,566
|
)
|
||||||
|
Operating
loss
|
(254,588
|
)
|
(1,146,646
|
)
|
||||||
|
Interest
income
|
52,135
|
62,710
|
||||||||
|
Finance
costs
|
(173,457
|
)
|
(656,823
|
)
|
||||||
|
Share
of results of associates
|
33,691
|
4,451
|
||||||||
|
Share
of results of jointly controlled entities
|
9,869
|
4,394
|
||||||||
|
Loss
before income tax
|
(332,350
|
)
|
(1,731,914
|
)
|
||||||
|
Income
tax
|
6
|
(51,604
|
)
|
21,299
|
||||||
|
Loss
for the period
|
(383,954
|
)
|
(1,710,615
|
)
|
||||||
|
Attributable
to:
|
||||||||||
|
Equity
holders of the Company
|
(305,624
|
)
|
(1,582,505
|
)
|
||||||
|
Minority
interests
|
(78,330
|
)
|
(128,110
|
)
|
||||||
|
(383,954
|
)
|
(1,710,615
|
)
|
|||||||
|
Loss
per share for loss attributable to equity
|
||||||||||
|
holders
of the Company during the period
|
||||||||||
|
-
basic and diluted
|
7
|
(0.063
|
)
|
(0.325
|
)
|
|||||
-84-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
Condensed Consolidated Balance Sheet
As at 30 June 2007
|
(Unaudited)
|
(Audited)
|
|||||||||
|
|
|
30
June
|
31
December
|
|||||||
|
|
|
2007
|
2006
|
|||||||
|
|
Note
|
RMB’000
|
RMB’000
|
|||||||
|
Non-current
assets
|
||||||||||
|
Intangible
assets
|
1,295,327
|
1,337,554
|
||||||||
|
Property,
plant and equipment
|
10
|
41,786,073
|
40,050,466
|
|||||||
|
Lease
prepayments
|
976,811
|
1,054,362
|
||||||||
|
Advance
payments on acquisition of aircraft
|
11
|
7,992,581
|
7,668,708
|
|||||||
|
Investments
in associates
|
661,200
|
623,390
|
||||||||
|
Investments
in jointly controlled entities
|
239,333
|
115,540
|
||||||||
|
Available-for-sale
financial assets
|
47,554
|
47,554
|
||||||||
|
Other
long-term assets
|
681,106
|
1,099,265
|
||||||||
|
Deferred
tax assets
|
82,146
|
82,146
|
||||||||
|
Derivative
assets
|
81,278
|
73,269
|
||||||||
|
53,843,409
|
52,152,254
|
|||||||||
|
Current
assets
|
||||||||||
|
Flight
equipment spare parts
|
1,167,712
|
1,198,642
|
||||||||
|
Trade
receivables
|
12
|
2,489,976
|
2,002,855
|
|||||||
|
Amounts
due from related companies
|
130,273
|
352,719
|
||||||||
|
Prepayments,
deposits and other receivables
|
2,157,404
|
2,475,992
|
||||||||
|
Cash
and cash equivalents
|
1,882,183
|
1,987,486
|
||||||||
|
Derivative
assets
|
116,936
|
113,532
|
||||||||
|
Non-current
assets held for sale
|
856,422
|
882,426
|
||||||||
|
|
8,800,906
|
9,013,652
|
||||||||
|
|
||||||||||
|
Current
liabilities
|
||||||||||
|
Sales
in advance of carriage
|
1,236,260
|
891,659
|
||||||||
|
Trade
payables and notes payable
|
13
|
4,700,672
|
5,090,210
|
|||||||
|
Amounts
due to related companies
|
348,355
|
348,477
|
||||||||
|
Other
payables and accrued expenses
|
8,604,428
|
7,986,351
|
||||||||
|
Current
portion of obligations under
|
||||||||||
|
finance
leases
|
14
|
2,390,470
|
2,803,956
|
|||||||
|
Current
portion of borrowings
|
15
|
16,192,880
|
16,016,327
|
|||||||
|
Income
tax payable
|
74,536
|
80,483
|
||||||||
|
Current
portion of provision for aircraft
|
||||||||||
|
overhaul
expenses
|
24,497
|
20,900
|
||||||||
|
Derivative
liabilities
|
42,325
|
124,722
|
||||||||
|
Liabilities
directly associated with non-current
|
||||||||||
|
assets
held for sale
|
313,391
|
442,935
|
||||||||
|
33,927,814
|
33,806,020
|
|||||||||
|
Net
current liabilities
|
(25,126,908
|
)
|
(24,792,368
|
)
|
||||||
|
Total
assets less current liabilities
|
28,716,501
|
27,359,886
|
||||||||
-85-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
(Unaudited)
|
(Audited)
|
|||||||||
|
|
|
30
June
|
31
December
|
|||||||
|
|
|
2007
|
2006
|
|||||||
|
|
Note
|
RMB’000
|
RMB’000
|
|||||||
|
Non-current
liabilities
|
||||||||||
|
Obligations
under finance leases
|
14
|
10,040,478
|
9,048,642
|
|||||||
|
Borrowings
|
15
|
12,808,721
|
12,091,413
|
|||||||
|
Provision
for aircraft overhaul expenses
|
520,503
|
489,721
|
||||||||
|
Other
long-term liabilities
|
384,368
|
438,461
|
||||||||
|
Deferred
tax liabilities
|
84,646
|
68,459
|
||||||||
|
Post-retirement
benefit obligations
|
1,328,138
|
1,292,960
|
||||||||
|
Long-term
portion of staff housing allowances
|
439,895
|
439,491
|
||||||||
|
Derivative
liabilities
|
-
|
14,096
|
||||||||
|
25,606,749
|
23,883,243
|
|||||||||
|
Net
assets
|
3,109,752
|
3,476,643
|
||||||||
|
Equity
|
||||||||||
|
Capital
and reserves attributable
|
||||||||||
|
to
the equity holders of the Company
|
||||||||||
|
Share
capital
|
16
|
4,866,950
|
4,866,950
|
|||||||
|
Reserves
|
(2,340,114
|
)
|
(2,052,053
|
)
|
||||||
|
2,526,836
|
2,814,897
|
|||||||||
|
Minority
interests
|
582,916
|
661,746
|
||||||||
|
Total
equity
|
3,109,752
|
3,476,643
|
||||||||
-86-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
Condensed Consolidated Statement of Changes in Shareholders’ Equity
For
the six months ended 30 June 2007
|
Attributable
to equity
|
||||||||||||||||
|
holders
of the Company
|
||||||||||||||||
|
Share
|
Other
|
Accumulated
|
Minority
|
Total
|
||||||||||||
|
capital
|
reserves
|
losses
|
interests
|
equity
|
||||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||||
|
Six
months ended 30 June 2007
|
||||||||||||||||
|
(Unaudited)
|
||||||||||||||||
|
Balances
as at 1 January 2007
|
4,866,950
|
1,282,877
|
(3,334,930
|
)
|
661,746
|
3,476,643
|
||||||||||
|
Unrealised
gains on cash flow
|
||||||||||||||||
|
hedges
|
-
|
17,563
|
-
|
-
|
17,563
|
|||||||||||
|
Loss
for the period
|
-
|
-
|
(305,624
|
)
|
(78,330
|
)
|
(383,954
|
)
|
||||||||
|
Dividends
paid to minority
|
||||||||||||||||
|
investors
of subsidiaries
|
-
|
-
|
-
|
(500
|
)
|
(500
|
)
|
|||||||||
|
Balances
as at 30 June 2007
|
4,866,950
|
1,300,440
|
(3,640,554
|
)
|
582,916
|
3,109,752
|
||||||||||
|
Six
months ended 30 June 2006
|
||||||||||||||||
|
(Unaudited)
|
||||||||||||||||
|
Balances
as at 1 January 2006
|
4,866,950
|
1,229,654
|
(539
|
)
|
822,477
|
6,918,542
|
||||||||||
|
Unrealised
gains on cash flow
|
||||||||||||||||
|
hedges
|
-
|
46,935
|
-
|
-
|
46,935
|
|||||||||||
|
Fair
value changes arising from
|
||||||||||||||||
|
business
combinations
|
-
|
23,816
|
-
|
-
|
23,816
|
|||||||||||
|
Net
gains not recognised in the
|
||||||||||||||||
|
income
statement
|
-
|
70,751
|
-
|
-
|
70,751
|
|||||||||||
|
Loss
for the period
|
-
|
-
|
(1,582,505
|
)
|
(128,110
|
)
|
(1,710,615
|
)
|
||||||||
|
Dividends
paid to minority
|
||||||||||||||||
|
investors
of subsidiaries
|
-
|
-
|
-
|
(44,550
|
)
|
(44,550
|
)
|
|||||||||
|
Additions
through business
|
||||||||||||||||
|
combinations
|
-
|
-
|
-
|
10,056
|
10,056
|
|||||||||||
|
Balances
as at 30 June 2006
|
4,866,950
|
1,300,405
|
(1,583,044
|
)
|
659,873
|
5,244,184
|
||||||||||
-87-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
Condensed Consolidated Cash Flow Statement
For
the six months ended 30 June 2007
|
(Unaudited)
|
|||||||
|
|
Six
months ended 30 June
|
||||||
|
|
2007
|
2006
|
|||||
|
|
RMB’000
|
RMB’000
|
|||||
|
Net
cash generated from operating activities
|
1,668,460
|
195,048
|
|||||
|
Net
cash used in investing activities
|
(1,398,654
|
)
|
(604,123
|
)
|
|||
|
Net
cash (used in)/generated from financing activities
|
(441,787
|
)
|
407,259
|
||||
|
Net
decrease in cash and cash equivalents
|
(171,981
|
)
|
(1,816
|
)
|
|||
|
Cash
and cash equivalents at 1 January
|
1,987,486
|
1,864,001
|
|||||
|
Exchange
adjustments
|
66,678
|
(1,152
|
)
|
||||
|
Cash
and cash equivalents at 30 June
|
1,882,183
|
1,861,033
|
|||||
-88-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE GROUP
|
Notes
to the Condensed Consolidated Interim Financial
Information
| 1. |
CORPORATE INFORMATION
|
The
Company, a joint stock company limited by shares was incorporated in the
People’s Republic of China (“PRC”) on 14 April 1995. The address of its
registered office is 66 Airport Street, Pudong International Airport, Shanghai,
the PRC. The Group is principally engaged in the operation of civil aviation,
including the provision of passenger, cargo, and mail delivery and other
extended transportation services.
The
Company is majority owned by China Eastern Air Holding Company (“CEA Holding”),
a state-owned enterprise incorporated in the PRC.
The
Company’s shares are traded on The Stock Exchange of Hong Kong Limited (the
“Hong Kong Stock Exchange”), The New York Stock Exchange and The Shanghai Stock
Exchange.
| 2. |
BASIS
OF PREPARATION AND ACCOUNTING
POLICIES
|
This
unaudited condensed consolidated interim financial information for the six
months ended 30 June 2007 has been prepared in accordance with International
Accounting Standard (“IAS”) 34 “Interim Financial Reporting”. The unaudited
condensed consolidated interim financial information should be read in
conjunction with the annual financial statements for the year ended 31 December
2006.
At
30
June 2007 the Group’s accumulated losses were approximately RMB3,641 million and
its current liabilities exceeded its current assets by approximately RMB25,127
million. Based on the Group’s history of obtaining finance, its relationships
with its bankers, banking facilities available and net operating cash inflow,
the Board of Directors consider that the Group will be able to obtain sufficient
financing to enable it to operate and meet its liabilities as and when they
fall
due. Accordingly, it is appropriate that this financial information should
be
prepared on a going concern basis and it does not include any adjustments
that
would be required should the Company and the Group fail to continue as a
going
concern.
In
respect of prior year comparatives, the interim results for the six months
ended
30 June 2006 have been restated for the purposes of this report to reflect
re-assessments made in connection with the classification of certain leases
at
30 June 2006 as described in the annual financial statements for the year
ended
31 December 2006. The resulting impact increased the Group’s consolidated net
assets by RMB113 million as at 30 June 2006 and decreased its consolidated
loss
for the six months ended 30 June 2006 by the same amount from the previously
reported results. Additionally, where necessary, prior year comparative amounts
have been reclassified to conform with changes in presentation in the current
year.
The
accounting policies adopted are consistent with those described in the annual
financial statements for the year ended 31 December 2006, except that the
Group
has adopted the following new standards, amendments to standards and
interpretations which are relevant to the Group’s operations and are mandatory
for the financial year ending 31 December 2007.
|
Presentation
of Financial Statements: Capital Disclosures
|
||
|
IFRS
7
|
Financial
Instruments: Disclosures
|
|
|
IFRIC-Int
8
|
Scope
of IFRS 2, Share-based Payments
|
|
|
Reassessment
of Embedded Derivatives
|
||
|
IFRIC-Int
10
|
Interim
Financial Reporting and Impairment
|
The
adoption of the above new standards, amendments to standards and interpretations
did not have any significant impact on its results of operations or financial
position. The full disclosure as required by IAS 1 (Amendment) and IFRS 7
will
be included in the annual financial statements for the year ending 31 December
2007.
The
Group
has not early adopted new standards, amendments to standards and interpretations
which have been issued but are not effective for 2007. The Group is assessing
the impact of these new standards, amendments to standards and interpretations
but is not yet in a position to state whether any substantial changes to
the
Group’s accounting policies or to the presentation of the financial statements
will be required.
-89-
| APPENDIX I | FINANCIAL INFORMATION OF THE GROUP |
| 3. |
REVISED
ACCOUNTING ESTIMATE RELATING TO PROPERTY, PLANT AND
EQUIPMENT
|
The
Group
has changed the estimated useful life of flight equipment. Previously, flight
equipment was depreciated over 20 years plus an annual provision of 7% for
scrapped items. The economic useful life of flight equipment has been reviewed
and is now depreciated over 10 years with no annual provision for scrapped
items
with effect from 1 January 2007. Management considers that the new policy
more
accurately reflects past experience and is consistent with industry practice.
The change in estimate has resulted in a decreased depreciation charge of
RMB27
million for the six months ended 30 June 2007.
| 4. |
REVENUES
AND SEGMENT INFORMATION
|
| (a) |
Revenues
|
The
Group
is principally engaged in the operation of civil aviation, including the
provision of passenger, cargo, mail delivery and other extended transportation
services.
|
(Unaudited)
|
|||||||
|
Six
months ended 30 June
|
|||||||
|
2007
|
2006
|
||||||
|
RMB’000
|
RMB’000
|
||||||
|
Revenues
|
|||||||
|
-
Passenger
|
16,252,553
|
14,118,257
|
|||||
|
-
Cargo and mail
|
2,475,853
|
2,575,645
|
|||||
|
Ground
service income
|
437,388
|
366,121
|
|||||
|
Cargo
handling income
|
168,517
|
130,098
|
|||||
|
Commission
income
|
63,956
|
59,612
|
|||||
|
Others
|
138,597
|
168,163
|
|||||
|
19,536,864
|
17,417,896
|
||||||
|
Less:
Business tax (Note)
|
(489,412
|
)
|
(456,859
|
)
|
|||
|
19,047,452
|
16,961,037
|
||||||
| Note: |
Except
for traffic revenues derived from inbound international and regional
flights, which are not subject to the PRC business tax, the Group’s
traffic revenues, commission income, ground service income, cargo
handling
income and other revenues are subject to PRC business tax levied
at rates
ranging from 3% to 5%, pursuant to PRC business tax rules and
regulations.
|
| (b) |
Primary
reporting format by business
segment
|
Segment
information is presented in respect of the Group’s business and geographical
segments. Business segment information is the Group’s primary reporting
format.
| (1) |
Passenger
business segment includes cargo carried by passenger
flights.
|
| (2) |
Inter-segment
transfers or transactions are entered into under normal commercial
terms
and conditions that would also be available to unrelated third
parties.
|
-90-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
The
segment results for the six months ended 30 June 2007 are as
follows:
|
(Unaudited)
|
||||||||||||||||
|
Cargo
and
|
||||||||||||||||
|
Passenger
|
Logistics
|
Unallocated
|
Eliminations
|
Total
|
||||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||||
|
Traffic
revenues
|
16,991,665
|
1,268,516
|
-
|
-
|
18,260,181
|
|||||||||||
|
Other
revenues and
|
||||||||||||||||
|
operating
income
|
350,724
|
394,332
|
42,215
|
-
|
787,271
|
|||||||||||
|
Inter-segment
revenue
|
67,087
|
-
|
61,567
|
(128,654
|
)
|
-
|
||||||||||
|
Revenues
|
17,409,476
|
1,662,848
|
103,782
|
(128,654
|
)
|
19,047,452
|
||||||||||
|
Operating
(loss)/profit
|
||||||||||||||||
|
-
segment results
|
(214,774
|
)
|
(56,657
|
)
|
16,843
|
-
|
(254,588
|
)
|
||||||||
The
segment results for the six months ended 30 June 2006 are as
follows:
|
|
|
(Unaudited)
|
|
|
||||||||||||
|
|
|
Cargo
and
|
|
|
|
|||||||||||
|
|
Passenger
|
logistics
|
Unallocated
|
Eliminations
|
Total
|
|||||||||||
|
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
|||||||||||
|
Traffic
revenues
|
15,031,096
|
1,222,941
|
-
|
-
|
16,254,037
|
|||||||||||
|
Other
revenues and
|
||||||||||||||||
|
operating
income
|
360,840
|
280,049
|
66,111
|
-
|
707,000
|
|||||||||||
|
Inter-segment
revenue
|
320,784
|
-
|
33,508
|
(354,292
|
)
|
-
|
||||||||||
|
Revenues
|
15,712,720
|
1,502,990
|
99,619
|
(354,292
|
)
|
16,961,037
|
||||||||||
|
Operating
(loss)/profit
|
||||||||||||||||
|
-
segment results
|
(917,936
|
)
|
(246,230
|
)
|
17,520
|
-
|
(1,146,646
|
)
|
||||||||
| (c) |
Secondary reporting format by geographical segment
|
The
Group’s two business segments operate in four main geographical areas, even
though they are managed on a worldwide basis.
The
Group’s revenues (net of business tax) by geographical segment are analysed as
follows:
|
(Unaudited)
|
|||||||
|
Six
months ended 30 June
|
|||||||
|
2007
|
2006
|
||||||
|
RMB’000
|
RMB’000
|
||||||
|
Domestic
(the PRC, excluding Hong Kong)
|
10,734,319
|
9,569,818
|
|||||
|
Hong
Kong
|
1,342,746
|
1,531,712
|
|||||
|
Japan
|
1,566,153
|
1,698,264
|
|||||
|
Other
countries
|
5,404,234
|
4,161,243
|
|||||
|
Total
|
19,047,452
|
16,961,037
|
|||||
The
major
revenue-earning assets of the Group are its aircraft, all of which are
registered in the PRC. Since the Group’s aircraft are deployed flexibly across
its route network, there is no suitable basis of allocating such assets and
the
related liabilities to geographical segments and hence segment assets and
capital expenditure by geographic segment have not been presented.
-91-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| 5. |
OTHER OPERATING INCOME
|
|
(Unaudited)
|
|||||||
|
Six
months ended 30 June
|
|||||||
|
2007
|
2006
|
||||||
|
RMB’000
|
RMB’000
|
||||||
|
Government
subsidies (note)
|
408,129
|
70,091
|
|||||
|
Net
fair value gains on financial instruments
|
|||||||
|
-
forward foreign exchange contracts
|
2,350
|
13,130
|
|||||
|
-
fuel hedging income
|
136,576
|
74,662
|
|||||
|
547,055
|
157,883
|
||||||
| Note: |
The
government subsidies represent (i) subsidies granted by the Central
Government and local government to the Group; and (ii) other subsidies
granted by various local municipalities to encourage the Group
to operate
certain routes to cities where these municipalities are
located.
|
| 6. |
INCOME
TAX
|
Income
tax is charged to the consolidated income statement as follows:
|
(Unaudited)
|
|||||||
|
Six
months ended 30 June
|
|||||||
|
2007
|
2006
|
||||||
|
RMB’000
|
RMB’000
|
||||||
|
Provision
for PRC income tax - current period
|
35,417
|
21,877
|
|||||
|
Deferred
taxation
|
16,187
|
(43,176
|
)
|
||||
|
51,604
|
(21,299
|
)
|
|||||
Note:
The
Company is subject to PRC income tax at a reduced rate of 15%, pursuant to
the
Circular Hu Shui Er Cai (2001) No. 104 issued by the Shanghai Municipal Tax
Bureau. No provision for PRC profits tax has been made as the Company did
not
have taxable profits for the period. The current income tax charges of the
Group
for the period represent the provision for income tax payable by certain
of the
Company’s subsidiaries.
Subsidiaries
of the Group which are incorporated in Pudong New District, Shanghai, are
currently subject to PRC income tax at a reduced rate of 15%, pursuant to
the
preferential tax policy in Pudong, Shanghai. Other subsidiaries of the Group
are
generally subject to the PRC corporate income tax at the standard rate of
33%.
The
Group
operates international flights to certain overseas destinations. There was
no
material overseas taxation for the six months ended 30 June 2007 as there
exists
double tax relief between the PRC and the corresponding jurisdictions (including
Hong Kong) (2006: Nil).
| 7. |
LOSS
PER SHARE
|
The
calculation of basic loss per share is based on the unaudited consolidated
loss
attributable to equity holders of the Company of RMB305,624,000 (2006:
RMB1,582,505,000) and 4,866,950,000 (2006: 4,866,950,000) shares in issue
during
the period. The Company has no potentially dilutive ordinary
shares.
| 8. |
DIVIDEND
|
The
Board
of Directors of the Company does not recommend the payment of an interim
dividend for the six months ended 30 June 2007 (2006: Nil).
-92-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| 9. |
PROFIT
APPROPRIATION
|
No
appropriation to the statutory reserves has been made during the six months
ended 30 June 2007. Such appropriations will be made at the year end in
accordance with the PRC regulations and the articles of association of
individual group companies.
| 10. |
PROPERTY,
PLANT AND EQUIPMENT
|
|
(Unaudited)
|
||||||||||
|
Six
months ended 30 June 2007
|
||||||||||
|
Aircraft
|
||||||||||
|
and
flight
|
||||||||||
|
equipment
|
Others
|
Total
|
||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||
|
Carrying
amounts at 1 January 2007
|
35,793,370
|
4,257,096
|
40,050,466
|
|||||||
|
Transfers
from advance payments on
|
||||||||||
|
acquisition
of aircraft (note
11)
|
1,556,572
|
-
|
1,556,572
|
|||||||
|
Other
additions
|
1,953,789
|
497,151
|
2,450,940
|
|||||||
|
Depreciation
charged for the period
|
(1,895,020
|
)
|
(253,972
|
)
|
(2,148,992
|
)
|
||||
|
Disposals
|
(53,222
|
)
|
(69,691
|
)
|
(122,913
|
)
|
||||
|
Carrying
amounts at 30 June 2007
|
37,355,489
|
4,430,584
|
41,786,073
|
|||||||
|
(Audited)
|
||||||||||
|
Year
ended 31 December 2006
|
||||||||||
|
Aircraft
|
||||||||||
|
and
flight
|
||||||||||
|
equipment
|
Others
|
Total
|
||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||
|
Carrying
amounts at 1 January 2006
|
34,740,125
|
3,784,743
|
38,524,868
|
|||||||
|
Transfers
from advance payments on
|
||||||||||
|
acquisition
of aircraft (note
11)
|
6,388,975
|
-
|
6,388,975
|
|||||||
|
Additions
through business combinations
|
383,954
|
338,803
|
722,757
|
|||||||
|
Other
additions
|
8,336,788
|
682,722
|
9,019,510
|
|||||||
|
Valuation
deficit
|
(1,035,343
|
)
|
-
|
(1,035,343
|
)
|
|||||
|
Depreciation
charged for the year
|
(4,019,112
|
)
|
(474,460
|
)
|
(4,493,572
|
)
|
||||
|
Transfer
to non-current assets held for sale
|
(844,384
|
)
|
-
|
(844,384
|
)
|
|||||
|
Disposals
|
(8,157,633
|
)
|
(74,712
|
)
|
(8,232,345
|
)
|
||||
|
Carrying
amounts at 31 December 2006
|
35,793,370
|
4,257,096
|
40,050,466
|
|||||||
| 11. |
ADVANCE PAYMENTS ON ACQUISITION OF AIRCRAFT
|
|
(Unaudited)
|
(Audited)
|
||||||
|
30
June
|
31
December
|
||||||
|
2007
|
2006
|
||||||
|
RMB’000
|
RMB’000
|
||||||
|
At
beginning of period/year
|
7,668,708
|
9,072,673
|
|||||
|
Additions
and interest capitalised
|
1,880,445
|
4,985,010
|
|||||
|
Transfers
to property, plant and equipment (note
10)
|
(1,556,572
|
)
|
(6,388,975
|
)
|
|||
|
At
end of period/year
|
7,992,581
|
7,668,708
|
|||||
-93-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| 12. |
TRADE
RECEIVABLES
|
The
credit terms given to trade customers are determined on an individual
basis,
with credit periods within three months.
As
at 30
June 2007, the aging of trade receivables as follows:
|
(Unaudited)
|
(Audited)
|
||||||
|
30
June
|
31
December
|
||||||
|
2007
|
2006
|
||||||
|
RMB’000
|
RMB’000
|
||||||
|
Less
than 31 days
|
1,856,452
|
1,556,144
|
|||||
|
31
to 60 days
|
186,381
|
147,439
|
|||||
|
61
to 90 days
|
78,284
|
44,602
|
|||||
|
91
to 180 days
|
227,411
|
132,977
|
|||||
|
181
to 365 days
|
103,441
|
102,534
|
|||||
|
Over
365 days
|
142,976
|
112,934
|
|||||
|
2,594,945
|
2,096,630
|
||||||
|
Less:
Provision for impairment of receivables
|
(104,969
|
)
|
(93,775
|
)
|
|||
|
Trade
receivables, net
|
2,489,976
|
2,002,855
|
|||||
| 13. |
TRADE PAYABLES AND NOTES PAYABLE
|
The aging of trade payables and notes payable as follows:
|
(Unaudited)
|
(Audited)
|
||||||
|
30
June
|
31
December
|
||||||
|
2007
|
2006
|
||||||
|
RMB’000
|
RMB’000
|
||||||
|
Less
than 31 days
|
1,482,398
|
1,374,384
|
|||||
|
31
to 60 days
|
529,371
|
577,883
|
|||||
|
61
to 90 days
|
578,984
|
781,666
|
|||||
|
91
to 180 days
|
1,572,525
|
2,030,629
|
|||||
|
181
to 365 days
|
422,317
|
243,296
|
|||||
|
Over
365 days
|
115,077
|
82,352
|
|||||
|
4,700,672
|
5,090,210
|
||||||
-94-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE GROUP
|
| 14. |
OBLIGATIONS
UNDER FINANCE LEASES
|
Movements of obligations under finance leases are
as follows:
|
(Unaudited)
|
(Audited)
|
||||||
|
30
June
|
31
December
|
||||||
|
2007
|
2006
|
||||||
|
RMB’000
|
RMB’000
|
||||||
|
At
beginning of period/year
|
11,852,598
|
10,608,497
|
|||||
|
Additions
through business combinations
|
-
|
101,007
|
|||||
|
Inception
of finance lease obligations
|
2,400,987
|
4,053,989
|
|||||
|
Repayments
|
(1,822,637
|
)
|
(2,910,895
|
)
|
|||
|
At
end of period/year
|
12,430,948
|
11,852,598
|
|||||
|
Less:
Current portion
|
(2,390,470
|
)
|
(2,803,956
|
)
|
|||
|
Long-term
portion
|
10,040,478
|
9,048,642
|
|||||
| 15. |
BORROWINGS
|
Movements of borrowings are as follows:
|
(Unaudited)
|
(Audited)
|
||||||
|
|
30
June
|
31
December
|
|||||
|
|
2007
|
2006
|
|||||
|
RMB’000
|
RMB’000
|
||||||
|
At
beginning of period/year
|
28,107,740
|
28,344,746
|
|||||
|
Additions
through business combinations
|
-
|
220,000
|
|||||
|
Proceeds
of drawn down of borrowings
|
10,256,534
|
20,830,503
|
|||||
|
Repayments
|
(9,362,673
|
)
|
(21,287,509
|
)
|
|||
|
At
end of period/year
|
29,001,601
|
28,107,740
|
|||||
|
Less:
Current portion
|
(16,192,880
|
)
|
(16,016,327
|
)
|
|||
|
Long-term
portion
|
12,808,721
|
12,091,413
|
|||||
| 16. |
SHARE CAPITAL
|
|
(Unaudited)
|
(Audited)
|
||||||
|
30
June
|
31
December
|
||||||
|
2007
|
2006
|
||||||
|
RMB’000
|
RMB’000
|
||||||
|
Registered,
issued and fully paid of RMB1.00 each
|
|||||||
|
Unlisted
shares held by CEA Holding and employees
|
-
|
3,000,000
|
|||||
|
Circulating
shares with restricted transfer held by
|
|||||||
|
CEA
Holding and employees
|
2,904,000
|
-
|
|||||
|
A
shares listed on The Shanghai Stock Exchange
|
396,000
|
300,000
|
|||||
|
H
shares listed on The Stock Exchange of Hong Kong Limited
|
1,566,950
|
1,566,950
|
|||||
|
4,866,950
|
4,866,950
|
||||||
On
4
January 2007, the Company’s share reform plan was approved by the Ministry of
Commerce. In this connection, CEA Holding granted 96 million shares in total
to
the holders of the circulating shares and the original non-circulating shares
held by CEA Holding were granted the status of listing subject to certain
circulating conditions as disclosed in the Company’s announcement dated 21
November 2006.
-95-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| 17. |
COMMITMENTS
|
| (a) |
Capital commitments
|
The Group had the following capital commitments:
|
(Unaudited)
|
(Audited)
|
||||||
|
30
June
|
31
December
|
||||||
|
2007
|
2006
|
||||||
|
RMB’000
|
RMB’000
|
||||||
|
Authorised
and contracted for:
|
|||||||
|
-
Aircraft, engines and flight equipment
|
56,297,260
|
61,763,771
|
|||||
|
-
Other property, plant and equipment
|
546,422
|
567,582
|
|||||
|
56,843,682
|
62,331,353
|
||||||
|
Authorised
but not contracted for:
|
|||||||
|
-
Aircraft, engines and flight equipment
|
723,000
|
723,000
|
|||||
|
-
Other property, plant and equipment
|
7,611,141
|
7,772,639
|
|||||
|
8,334,141
|
8,495,639
|
||||||
|
65,177,823
|
70,826,992
|
||||||
| (b) |
Operating lease commitments
|
The
Group
had future aggregate minimum lease payments under non-cancellable operating
leases as follows:
|
(Unaudited)
|
(Audited)
|
||||||||||||
|
30
June 2007
|
31
December 2006
|
||||||||||||
|
Aircraft
|
Aircraft
|
||||||||||||
|
and
flight
|
Land
and
|
and
flight
|
Land
and
|
||||||||||
|
equipment
|
buildings
|
equipment
|
buildings
|
||||||||||
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||
|
Within
one year
|
2,821,958
|
190,437
|
2,547,670
|
153,487
|
|||||||||
|
In
the second year
|
2,690,978
|
64,611
|
2,534,942
|
42,362
|
|||||||||
|
In
the third to fifth year inclusive
|
5,849,389
|
65,857
|
5,864,566
|
71,587
|
|||||||||
|
After
the fifth year
|
6,208,344
|
43,110
|
6,383,857
|
54,535
|
|||||||||
|
17,570,669
|
364,015
|
17,331,035
|
321,971
|
||||||||||
| 18. |
RELATED PARTY TRANSACTIONS
|
The
Group
is controlled by CEA Holding, which owns approximately 62% of the Company’s
shares as at 30 June 2007. The aviation industry in the PRC is administrated
by
the Civil Aviation Administration of China (“CAAC”). CEA Holding and the Group
is ultimately controlled by the PRC government, which also controls a
significant portion of the productive assets and entities in the PRC
(hereinafter collectively referred to as “the state-controlled
enterprises”).
The
Group
sells air tickets through sales agents and is therefore likely to have extensive
transactions with other state-controlled enterprises, and the employees of
state-controlled enterprises while such employees are on corporate business
as
well as their close family members. These transactions are carried out on
normal
commercial terms that are consistently applied to all of the Group’s customers.
Due to the large volume and the pervasiveness of these transactions, management
is unable to determine the aggregate amount of the transactions for disclosure.
Therefore, retail transactions with these related parties are not disclosed
herein. Management believes that meaningful related party disclosures on
these
retail transactions have been adequately made.
-96-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
|
(a)
|
Related
party transactions
|
The
other
related party transactions are as follows:
|
(Unaudited)
|
||||||||||
|
Six
months ended 30 June
|
||||||||||
|
Nature
of transactions
|
Related
party
|
2007
|
2006
|
|||||||
|
RMB’000
|
RMB’000
|
|||||||||
|
(i)
With CEA Holding or companies
|
||||||||||
|
directly
or indirectly held by CEA
|
||||||||||
|
Holding:
|
||||||||||
|
Interest
income on deposits at an
|
Eastern
Air Group
|
6,129
|
4,333
|
|||||||
|
average
rate of 0.72%
|
Finance
Co., Ltd
|
|||||||||
|
(2006:
0.72%) per annum
|
(“EAGF”)*
|
|||||||||
|
Interest
expense on loans at rate of
|
EAGF*
|
2,144
|
5,227
|
|||||||
|
5.54%
(2006: 4.73%) per annum
|
||||||||||
|
Commission
expense on air tickets
|
Shanghai
Dongmei
|
3,827
|
2,985
|
|||||||
|
sold
on behalf of the Group, at
|
Aviation
TravelCo.,
|
|||||||||
|
rates
ranging from 3% to 9% of the
|
Ltd
(“SDATC”)*
|
|||||||||
|
value
of tickets sold
|
||||||||||
|
Shanghai
Tourism
|
2,610
|
4,153
|
||||||||
|
(HK)
Co., Ltd
|
||||||||||
|
(“STCL”)***
|
||||||||||
|
Handling
charges of 0.1% to 2% for the
|
Eastern
Aviation
|
15,309
|
19,433
|
|||||||
|
purchase
of aircraft, flight spare
|
Import
& Export
|
|||||||||
|
parts,
other property, plant and flight
|
Co.,
Ltd
|
|||||||||
|
equipment
|
(“EAIEC”)*
|
|||||||||
|
Ticket
reservation service charges For
|
Travel
Sky
|
111,396
|
73,799
|
|||||||
|
utilisation
of computer reservation
|
Technology
|
|||||||||
|
System
|
Limited***
|
|||||||||
|
Repairs
and maintenance expense for
|
Shanghai
Eastern
|
27,033
|
30,291
|
|||||||
|
aircraft
and engines
|
Union
Aviation
|
|||||||||
|
Wheels
& Brakes
|
||||||||||
|
Overhaul
|
||||||||||
|
Engineering
Co.,
|
||||||||||
|
Ltd
(“Wheels &
|
||||||||||
|
Brakes”)**
|
||||||||||
|
|
||||||||||
|
Shanghai
|
95,019
|
71,719
|
||||||||
|
Technologies
|
||||||||||
|
Aerospace
Co., Ltd
|
||||||||||
|
(“STACO”)**
|
||||||||||
|
|
||||||||||
|
Supply
of food and beverages
|
Shanghai
Eastern Air
|
72,402
|
64,061
|
|||||||
|
Catering
Co., Ltd
|
||||||||||
|
(“SEAC”)***
|
||||||||||
|
|
||||||||||
|
Qingdao
Eastern Air
|
10,928
|
7,068
|
||||||||
|
Catering
Investment
|
||||||||||
|
Co.,
Ltd.***
|
||||||||||
-97-
| APPENDIX I | FINANCIAL INFORMATION OF THE< ;/f ont> GROUP |
|
(Unaudited)
|
||||||||||
|
|
|
Six
months ended 30 June
|
||||||||
|
Nature
of transactions
|
Related
party
|
2007
|
2006
|
|||||||
|
RMB’000
|
RMB’000
|
|||||||||
|
Xian
Eastern Air
|
8,010
|
11,993
|
||||||||
|
Catering
Investment
|
||||||||||
|
Co.,
Ltd.***
|
||||||||||
|
Yunnan
Eastern Air
|
15,599
|
14,736
|
||||||||
|
Catering
Investment
|
||||||||||
|
Co.,
Ltd.
|
||||||||||
|
(“YEAC”)***
|
||||||||||
|
Advertising
expense
|
Eastern
Aviation
|
6,360
|
5,086
|
|||||||
|
Advertising
|
||||||||||
|
Services
Co., Ltd
|
||||||||||
|
(“CAASC”)*
|
||||||||||
|
(ii)
With CAAC and its affiliates:
|
||||||||||
|
Civil
aviation infrastructure levies
|
CAAC
|
382,247
|
332,405
|
|||||||
|
paid
|
||||||||||
|
Aircraft
insurance premium paid
|
CAAC
|
52,009
|
90,311
|
|||||||
|
through
CAAC which entered into
|
||||||||||
|
the
insurance policy on behalf of the
|
||||||||||
|
Group
|
||||||||||
|
(ii)
With other state-controlled
|
||||||||||
|
enterprises:
|
||||||||||
|
Take-off
and landing fees charges
|
State-controlled
|
1,214,935
|
1,200,009
|
|||||||
|
airports
|
||||||||||
|
Purchase
of aircraft fuel
|
State-controlled
fuel
|
5,214,725
|
3,716,408
|
|||||||
|
suppliers
|
||||||||||
|
Interest
income on deposits at an
|
State-controlled
banks
|
6,870
|
6,005
|
|||||||
|
average
rate of 0.72% (2006:
|
|
|||||||||
|
0.72%)
per annum
|
||||||||||
|
Interest
expense on loans at an average
|
State-controlled
banks
|
607,715
|
485,623
|
|||||||
|
rate
of 6.0% (2006: 4.5%) per annum
|
||||||||||
|
Commission
expense on air tickets
|
Other
PRC airlines
|
5,846
|
7,582
|
|||||||
|
sold
on behalf of the Group at
|
||||||||||
|
rates
ranging from 3% to 9% of the
|
||||||||||
|
value
of tickets sold
|
||||||||||
|
Supply
of food and beverages
|
Other
state-controlled
|
142,397
|
122,093
|
|||||||
|
enterprises
|
||||||||||
-98-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (b) |
Balances with related
0;parties
|
| (i) |
Amounts due from related companies
|
|
(Unaudited)
|
(Audited)
|
||||||
|
30
June
|
31
December
|
||||||
|
Company
|
2007
|
2006
|
|||||
|
RMB’000
|
RMB’000
|
||||||
|
CEA
Holding
|
7,027
|
298,287
|
|||||
|
SDATC*
|
53,251
|
30,908
|
|||||
|
STCL***
|
15,204
|
5,091
|
|||||
|
EAIEC*
|
46,304
|
5,090
|
|||||
|
Other
related companies
|
8,487
|
13,343
|
|||||
|
130,273
|
352,719
|
||||||
Except
for amounts due from CEA Holding, which are reimbursement in nature, all
other
amounts due from related companies are trade in nature, interest free and
payable within normal credit terms given to trade customers.
| (ii) |
Amounts due to related companies
|
|
(Unaudited)
|
(Audited)
|
||||||
|
30
June
|
31
December
|
||||||
|
Company
|
2007
|
2006
|
|||||
|
RMB’000
|
RMB’000
|
||||||
|
EAIEC*
|
279,245
|
270,514
|
|||||
|
CEA
Holding
|
49,934
|
40,338
|
|||||
|
YEAC***
|
10,223
|
11,036
|
|||||
|
SEAC***
|
6,057
|
7,261
|
|||||
|
CAASC
|
-
|
101
|
|||||
|
Other
related companies
|
2,896
|
19,227
|
|||||
|
348,355
|
348,477
|
||||||
Except
for amounts due to EAGF and CEA Holding, which are reimbursement in nature,
all
other amounts due to related companies are trade in nature, interest free
and
payable within normal credit terms given by trade creditors.
| (iii) |
Short-term deposits and short-term loans with EAGF, a 25% associate of the Group
|
|
(Unaudited)
|
(Audited)
|
||||||
|
30
June
|
31
December
|
||||||
|
2007
|
2006
|
||||||
|
RMB’000
|
RMB’000
|
||||||
|
Included
in “Prepayments, Deposits and Other
|
|||||||
|
Receivables”
are short-term deposits with an average
|
|||||||
|
interest
rate of 0.7% (2006: 0.7%) per annum
|
411,603
|
755,665
|
|||||
|
Included
in “Borrowings” are short-term loans with an
|
|||||||
|
average
interest rate of 5.45% (2006: 5.1%) per annum
|
379,693
|
788,991
|
|||||
-99-
|
APPENDIX
I
|
FINANCIAL
INFORMATION OF THE
GROUP
|
| (iv) |
State-controlled banks and other financial institutions
|
|
(Unaudited)
|
(Audited)
|
||||||
|
|
30
June
|
31
December
|
|||||
|
|
2007
|
2006
|
|||||
|
RMB’000
|
RMB’000
|
||||||
|
Included
in “Cash and Cash Equivalents” are bank deposits
|
|||||||
|
with
an average interest rate of 0.7% (2006: 0.7%)
|
|||||||
|
per
annum
|
789,142
|
759,110
|
|||||
|
Included
in “Borrowings” are long-term loans with an
|
|||||||
|
average
interest rate of 6.0% (2006: 5.5%) per annum
|
12,626,721
|
12,825,763
|
|||||
| (c) |
Guarantees by holding company
|
As
at 30
June 2007, long-term bank loans of the Group with an aggregate amount of
RMB715,279,930 (31 December 2006: RMB694,584,430) were guaranteed by CEA
Holding.
Notes:
| * |
EAGF
is an 25% associate of the Group. SDATC, CAASC and EAIEC are both
45%
associates of the Group.
|
| ** |
Wheels
& Brakes and STACO are 40% and 51% jointly controlled entities of the
Group respectively.
|
| *** |
These
companies are related companies of the Group as they are either,
directly
or indirectly, controlled by or significant influence of CEA
Holdings.
|
| 19. |
SEASONALITY
|
The
civil
aviation industry is subject to seasonal fluctuations, with peak demand during
the holiday season in the second half of the year. As such, the revenues and
results of the Group in the first half of the year are generally lower than
those in the second half of the year.
| 20. |
WORKING
CAPITAL
|
The
Group’s primary cash requirements have been for additions of and upgrades to
aircraft and flight equipment and payments for debt related to such additions
and upgrades. The Group finances its working capital requirements through a
combination of funds generated from operations and short and long-term bank
borrowings.
The
Group
generally operates with a working capital deficit. The Directors believe that
cash from operations and short and long-term bank borrowings will be sufficient
to meet the Group’s operating cash flow needs for the foreseeable future. The
Group’s treasury department aims to maintain flexibility in funding by keeping
credit lines available. The Directors believe that the Group has obtained
sufficient general credit facilities from PRC banks for financing future capital
commitments and for working capital purposes.
| 21. |
CONTINGENT
LIABILITIES
|
In
2005,
the Company received a legal claim in the United States of America for
unspecified damages by family members of certain victims of the crash of a
CEA
Yunnan aircraft which occurred on 21 November 2004 in Baotou, Neimonggol, in
the
PRC. The Company defended against the suit to the U.S. court and on 10 July
2007, the U.S. court dismissed the suit on the basis of inconvenience to the
court and ordered to stay all the related actions. On 27 July 2007, the family
members of certain victims each filed an appeal but the U.S. court has not
delivered the judgment yet.
Management
has engaged legal representatives to vigorously contest the proceedings. In
the
opinion of the Directors, based on professional advice, it is unlikely that
there will be any significant adverse impact on the financial position of the
Group.
-100-
| APPENDIX II | CERTAIN ADDITIONAL INFORMATION REQUIRED UNDER THE LISTING RULES |
INDEBTEDNESS
Borrowings
As
at the
close of business on 31 January 2008, being the latest practicable date for
the
purpose of this statement of indebtedness prior to the printing of this
circular, the Group had the following borrowings:
|
Secured
|
Unsecured
|
|||||||||||||||
|
Non-
|
Non-
|
|||||||||||||||
|
guaranteed
|
Guaranteed
|
guaranteed
|
Total
|
|||||||||||||
|
Notes
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
||||||||||||
|
Finance
lease obligations
|
(a)
|
|
16,100,955
|
-
|
-
|
16,100,955
|
||||||||||
|
Short-term
bank loans
|
(b)
|
-
|
-
|
15,603,671
|
15,603,671
|
|||||||||||
|
Long-term
bank loans
|
(b),
(c)
|
|
4,668,798
|
1,006,187
|
9,149,265
|
14,824,250
|
||||||||||
|
Bills
payable
|
-
|
-
|
877,503
|
877,503
|
||||||||||||
|
Loans
from an associate
|
||||||||||||||||
|
-
Eastern Air Group
|
||||||||||||||||
|
Finance
Co., Ltd.
|
-
|
-
|
421,038
|
421,038
|
||||||||||||
|
20,769,753
|
1,006,187
|
26,051,477
|
47,827,417
|
|||||||||||||
| Note (a): |
Finance
lease obligations were secured by the related aircraft, engines
and flight
equipment under finance leases with an aggregate carrying amount
of
RMB22,662,129,000 as at 31 January 2008 and assignments of all
benefits of
the relevant insurance policies relating to the aircraft, engines
and
flight equipment and bank deposits amounting to
RMB387,645,000.
|
| Note (b): |
Bank
loans which are wholly repayable within one year and wholly repayable
after one year from the date of drawn down are described as “short-term
bank loans” and “long-term bank loans”, respectively for the purpose of
the above statement of
indebtedness.
|
| Note (c): |
Secured
long-term bank loans were secured by certain aircraft, engines
and flight
equipment with an aggregate carrying amount of RMB8,859,795,000
and
certain buildings with an aggregate carrying amount of RMB62,780,000
as at
31 January 2008. Unsecured guaranteed long-term bank loans were
guaranteed
by China Eastern Air Holding Company中國東方航空集團公司 ,
the major shareholder of the
Company.
|
Contingent
liabilities
In
2005,
the Company received a legal claim in the U.S. for unspecified damages by
family
members of certain victims of the crash of a CEA Yunnan aircraft which occurred
on 21 November 2004 in Baotou, Neimonggol, the PRC. The Company defended
against
the suit to the relevant U.S. court and on 10 July 2007, the U.S. court
dismissed the suit on the basis of inconvenience to the court and ordered
to
stay all the related actions. On 27 July 2007, the family members of certain
victims each filed an appeal but the U.S. court has not delivered the judgment
yet. Management has engaged legal representatives to vigorously contest the
proceedings. In the opinion of the Directors of the Company, based on
professional advice, it is unlikely that there will be any significant adverse
impact on the financial position of the Group.
-101-
| APPENDIX II | CERTAIN ADDITIONAL INFORMATION REQUIRED UNDER THE LISTING RULES |
Material
capital commitments
Other
than the capital commitments of the Group as at 31 December 2006 disclosed
in
note 39(a) to the audited consolidated financial statements of the Group
as set
out in Appendix I to this circular, the Group has, subsequent to 31 December
2006 and up to 31 January 2008, received six Airbus A330, two Airbus A300,
two
Airbus A319, two Airbus A320, four Airbus A321, two Boeing 737 NG series,
one
Boeing 747 series, and three ERJ-145 aircraft, and entered into an aircraft
purchase agreement with a vendor under which the Group has agreed to purchase
ten Airbus A320 series aircraft (with engines) at an estimated consideration
of
US$613 million (equivalent to appropriately RMB4.41 billion) as disclosed
in the
Company’s announcement dated 20 July 2007. In addition, the Group has entered
into an agreement to purchase thirty Boeing 737 NG series aircraft (with
engines), which is the subject matter of this circular.
Disclaimer
Save
as
aforesaid and apart from intra-group liabilities and normal trade payables
in
the ordinary course of business, as at the close of business on 31 January
2008,
the Group did not have any outstanding debt securities issued and outstanding
or
authorised or otherwise created but unissued, term loans, other borrowings
or
indebtedness in the nature of borrowings including bank overdrafts, liabilities
under acceptances (other than normal trade bills), acceptance credits,
hire
purchase commitments, mortgages and charges, contingent liabilities or
guarantees.
SUFFICIENCY
OF WORKING CAPITAL
The
Directors are satisfied after due and careful enquiry that after taking
into
account the Group’s history of obtaining finance, its relationships with its
bankers, its present internal resources and the existing banking facilities
available, the Group has sufficient working capital for its present
requirements, that is for at least the next 12 months from the date of
this
circular, in the absence of unforeseeable circumstances.
TRADING
AND FINANCIAL PROSPECTS
Trading
prospects
As
an air
transport enterprise which performs public service functions, is linked
closely
to political and economic situations, both internationally and locally.
As such,
the operation of the Group and of the whole sector is, to a substantial
extent,
subject to the risks associated with geopolitics and the outbreaks of unexpected
events.
The
Group
envisages that the global economy will face considerable uncertainties
in 2008
due to turbulence of financial market. But the economic growth in the PRC
continues, and at the same time, with the process of the project to build
Shanghai as an aviation hub and the opening of 2008 Beijing Olympic Games,
demand in the domestic air transportation market is expected to maintain
a
steady growth.
-102-
| APPENDIX II | CERTAIN ADDITIONAL INFORMATION REQUIRED UNDER THE LISTING RULES |
The
Group
will seize the opportunity and make timely adjustments to its capacity,
thereby
comprehensively increasing its turnover volume in air-transport, hence
its
revenue in air transport.
Financial
outlook
The
Directors believe that China’s air passenger and cargo traffic will continue to
grow in 2008 and beyond, reflecting a positive outlook for China’s economic and
trade growth, rising domestic consumption and growth of business and leisure
travel. At the same time, industry consolidation as evidenced by the
restructuring undertaken by the three major airline groups in China, i.e.
Air
China, China Southern Airlines, and China Eastern Airlines (i.e. the Company’s
group), will be beneficial to the establishment of a healthy and orderly
market
competition situation. As a result of immense market demand, the Company
expects
that, Chinese carriers, including the Group, may experience positive revenue
growth in 2008 subject to the impact of high aviation fuel
price.
MATERIAL
ADVERSE CHANGE
Save
as
disclosed in this circular or otherwise previously announced, the Directors
confirm that, as far as they are aware, there was no material adverse change
in
the financial or trading position of the Group since 31 December 2006 (being
the
date to which the latest published audited accounts of the Group have been
made
up).
-103-
| APPENDIX III | GENERAL INFORMATION |
RESPONSIBILITY
STATEMENT
This
circular includes particulars given in compliance with the Listing Rules
for the
purpose of giving information with regard to the Group. The Directors
collectively and individually accept full responsibility for the accuracy
of the
information contained in this circular and confirm, having made all reasonable
enquiries, that to the best of their knowledge and belief, there are no other
facts not contained in this circular, the omission of which would make any
statement herein misleading.
DISCLOSURE
OF INTERESTS
Directors,
supervisors, chief executives and senior management
The
interests of the Directors, supervisors, chief executives and senior management
in the issued share capital of the Company as at the Latest Practicable Date
were set out as follows:
|
Number
and type of shares held and nature of interest
|
||||||||||||
|
|
|
|
|
|
|
Capacity
in
|
||||||
|
|
|
|
|
|
|
which
the
|
||||||
|
|
|
|
|
|
|
A
shares
|
||||||
|
Name
|
Position
|
Personal
|
Family
|
Corporate
|
Total
|
were
held
|
||||||
|
Li
Fenghua
|
Chairman,
Non-
|
6,600
|
-
|
-
|
6,600
|
Beneficial
|
||||||
|
executive
Director
|
A
shares
|
A
shares
|
owner
|
|||||||||
|
(Note
1)
|
(Note
1)
|
|||||||||||
|
Li
Jun
|
Vice-Chairman,
Non-
|
-
|
-
|
-
|
0
|
-
|
||||||
|
executive
Director
|
|
|||||||||||
|
Cao
Jianxiong
|
President,
Executive
|
7,656
|
-
|
-
|
7,656
|
Beneficial
|
||||||
|
Director
|
A
shares
|
|
|
A
shares
|
owner
|
|||||||
|
(Note
2)
|
|
(Note
2)
|
||||||||||
|
Luo
Chaogeng
|
Non-executive
Director
|
6,600
|
-
|
-
|
|
6,600
|
Beneficial
|
|||||
|
A
shares
|
A
shares
|
owner
|
||||||||||
|
(Note
1)
|
(Note
1)
|
|
||||||||||
|
Luo
Zhuping
|
Executive
Director,
|
11,616
|
-
|
-
|
11,616
|
Beneficial
|
||||||
|
Company
secretary
|
A
shares
|
A
shares
|
owner
|
|||||||||
|
(Note
3)
|
(Note
3)
|
|||||||||||
|
Hu
Honggao
|
Independent
non-
|
-
|
-
|
-
|
0
|
-
|
||||||
|
executive
Director
|
||||||||||||
|
Peter
Lok
|
Independent
non-
|
-
|
-
|
-
|
0
|
-
|
||||||
|
executive
Director
|
||||||||||||
|
Wu
Baiwang
|
Independent
non-
|
-
|
-
|
-
|
0
|
-
|
||||||
|
executive
Director
|
||||||||||||
|
Zhou
Ruijin
|
Independent
non-
|
|||||||||||
|
executive
Director
|
-
|
-
|
-
|
0
|
-
|
|||||||
|
Xie
Rong
|
Independent
non-
|
|||||||||||
|
executive
Director
|
-
|
-
|
-
|
0
|
-
|
|||||||
-104-
| APPENDIX III | GENERAL INFORMATION |
|
Number
and type of shares held and nature of interest
|
||||||||||||
|
|
|
|
|
|
|
Capacity
in
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
which
the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
shares
|
|
Name
|
Position
|
Personal
|
|
Family
|
|
Corporate
|
|
Total
|
|
were
held
|
||
|
Liu
Jiangbo
|
Chairman
of
|
-
|
-
|
-
|
0
|
-
|
||||||
|
|
the
Supervisory
|
|
|
|
|
|
||||||
|
|
Committee
|
|
|
|
|
|
||||||
|
Xu
Zhao
|
Supervisor
|
-
|
-
|
-
|
0
|
-
|
||||||
|
Wang
Taoying
|
Supervisor
|
-
|
-
|
-
|
0
|
-
|
||||||
|
Yang
Jie
|
Supervisor
|
6,600
|
-
|
-
|
6,600
|
Beneficial
|
||||||
|
|
|
A
shares
|
|
|
A
shares
|
owner
|
||||||
|
|
|
(Note
1)
|
|
|
(Note
1)
|
|
||||||
|
Liu
Jiashun
|
Supervisor
|
3,960
|
-
|
-
|
3,960
|
Beneficial
|
||||||
|
|
|
A
shares
|
|
|
A
shares
|
owner
|
||||||
|
|
|
(Note
4)
|
|
|
(Note
4)
|
|
||||||
|
Zhang
Jianzhong
|
Vice
president
|
-
|
-
|
-
|
0
|
-
|
||||||
|
Li
Yangmin
|
Vice
president
|
3,960
|
-
|
-
|
3,960
|
Beneficial
|
||||||
|
|
|
A
shares
|
|
|
A
shares
|
owner
|
||||||
|
|
|
(Note
4)
|
|
|
(Note
4)
|
|
||||||
|
Fan
Ru
|
Vice
president
|
3,696
|
-
|
-
|
3,696
|
Beneficial
|
||||||
|
|
|
A
shares
|
|
|
A
shares
|
owner
|
||||||
|
|
|
(Note
5)
|
|
|
(Note
5)
|
|
||||||
|
Luo
Weide
|
Chief
financial officer
|
3,960
|
-
|
-
|
3,960
|
Beneficial
|
||||||
|
|
|
A
shares
|
|
|
A
shares
|
owner
|
||||||
|
|
|
(Note
4)
|
|
|
(Note
4)
|
|
||||||
|
Note
1:
|
representing
approximately 0.0002% of the Company’s total issued listed A shares,
totalling 3,300,000,000 A shares, as at the Latest Practicable
Date.
|
|
|
|
|
Note
2:
|
representing
approximately 0.000232% of the Company’s total issued listed A shares,
totaling 3,300,000,000 A shares, as at the Latest Practicable
Date.
|
|
|
|
|
Note
3:
|
representing
approximately 0.000352% of the Company’s total issued listed A shares,
totaling 3,300,000,000 A shares, as at the Latest Practicable
Date.
|
|
|
|
|
Note
4:
|
representing
approximately 0.00012% of the Company’s total issued listed A shares,
totaling 3,300,000,000 A shares, as at the Latest Practicable
Date.
|
|
|
|
|
Note
5:
|
representing
approximately 0.000112% of the Company’s total issued listed A shares,
totaling 3,300,000,000 A shares, as at the Latest Practicable
Date.
|
-105-
| APPENDIX III | GENERAL INFORMATION |
Save
as
disclosed above, as at the Latest Practicable Date, none of the Directors,
the
Company’s supervisors, chief executives or members of senior management of the
Company had any interest or short position in the shares, underlying shares
and/or debentures (as the case may be) of the Company and/or any of its
associated corporations (within the meaning of Part XV of the SFO) which
was
required to be (i) notified to the Company and the Stock Exchange pursuant
to
Divisions 7 and 8 of Part XV of the SFO (including any interest and short
position which he/she was taken or deemed to have under such provisions of
the
SFO) or (ii) entered in the register of interests required to be kept by
the
Company pursuant to section 352 of the SFO or (iii) notified to the Company
and
the Stock Exchange pursuant to the Model Code for Securities Transactions
by
Directors of Listed Issuers as set out in appendix 10 to the Listing
Rules.
Each
of
Li Fenghua, Li Jun, Cao Jianxiong and Luo Chaogeng was as at the Latest
Practicable Date a director or employee of CEA Holding, which, as disclosed
below, was a company having, as at the Latest Practicable Date, an interest
in
the Company’s shares required to be disclosed to the Company and the Stock
Exchange under the provisions of Divisions 2 and 3 of Part XV of the
SFO.
-106-
| APPENDIX III | GENERAL INFORMATION |
Substantial shareholders
Interests in the Company
So
far as
is known to the Directors, as at the Latest Practicable Date, each of the
following persons, other than a Director, supervisor, chief executive or
member
of the Company’s senior management, had an interest and/or short position in the
Company’s shares or underlying shares (as the case may be) which would fall to
be disclosed to the Company and the Stock Exchange under the provisions of
Divisions 2 and 3 of Part XV of the SFO, or was otherwise interested in 5%
or
more of any class of the then issued share capital of the
Company:
|
Interest
|
|||||||||||||||||||
|
as
at the Latest Practicable Date
|
|||||||||||||||||||
|
Approximate
|
|||||||||||||||||||
|
percentage
|
Approximate
|
Approximate
|
|||||||||||||||||
|
of
|
percentage
|
Percentage
|
|||||||||||||||||
|
shareholding
|
of
|
of
|
|||||||||||||||||
|
in
the
|
shareholding
|
shareholding
|
|||||||||||||||||
|
Company’s
|
in
the
|
in
the
|
|||||||||||||||||
|
Nature
of
|
Number
of
|
total
issued
|
Company’s
|
Company’s
|
|||||||||||||||
|
Name
of
|
shares
|
Shares
|
shares
|
total
issued
|
total
issued
|
Short
|
|||||||||||||
|
shareholder
|
interested
|
interested
|
capital
|
A
shares
|
H
shares
|
position
|
|||||||||||||
|
CEA
Holding
|
A
shares
|
2,904,000,000
|
59.67
|
%
|
88
|
%
|
-
|
-
|
|||||||||||
|
Singapore
Airlines
|
|||||||||||||||||||
|
Limited
(Note
1)
|
A
shares
|
2,913,999,969
|
59.87
|
%
|
88.3
|
%
|
-
|
-
|
|||||||||||
|
Temasek
Holdings
|
|||||||||||||||||||
|
(Private)
Limited
|
|||||||||||||||||||
|
(Note
1)
|
A
shares
|
2,913,999,969
|
59.87
|
%
|
88.3
|
%
|
-
|
-
|
|||||||||||
|
CEA
Holding
|
|||||||||||||||||||
|
(Note
2)
|
H
shares
|
2,984,850,000
|
61.33
|
%
|
-
|
190.49
|
%
|
-
|
|||||||||||
|
Singapore
Airlines
|
|||||||||||||||||||
|
Limited
(Note
2)
|
H
shares
|
2,984,850,000
|
61.33
|
%
|
-
|
190.49
|
%
|
-
|
|||||||||||
|
Temasek
Holdings
|
|||||||||||||||||||
|
(Private)
Limited
|
|||||||||||||||||||
|
(Note
2)
|
H
shares
|
2,984,850,000
|
61.33
|
%
|
-
|
190.49
|
%
|
-
|
|||||||||||
|
HKSCC
Nominees
|
|||||||||||||||||||
|
Limited
|
|||||||||||||||||||
|
(Notes
3 to 8)
|
H
shares
|
1,546,517,499
|
31.78
|
%
|
-
|
98.70
|
%
|
-
|
|||||||||||
Notes:
Based
on
the information available to the Directors (including such information as
was
available on the website of the Stock Exchange) and so far as they are aware
and
understand, as at the Latest Practicable Date:
| 1. |
Pursuant
to section 317 and 318 of the SFO, by virtue of the Shareholders
Agreement
entered into between CEA Holding, SIA and Temasek, (i) SIA and
Temasek
Holdings (Private) Limited are deemed to be interested in the
2,904,000,000 A shares (representing approximately 88% of the then
total
issued A shares) held by CEA Holding in the capacity of beneficial
owner
and (ii) SIA and Temasek Holdings (Private) Limited are also deemed
to be
interested in the 9,999,969 A shares (representing approximately
0.30% of
the then total issued A shares) deemed to be interested by Temasek
Holdings (Private) Limited. Such 9,999,969 A shares were held by
Temasek
Fullerton Alpha Pte. Ltd. in the capacity of beneficial owner,
which in
turn was 100% held by Fullerton (Private) Limited, which in turn
was
ultimately 100% held by Temasek Holdings (Private)
Limited.
|
-107-
| APPENDIX III | GENERAL INFORMATION |
|
2.
|
Pursuant
to sections 317 and 318 of the SFO, by virtue of the Shareholders
Agreement entered into between CEA Holding, SIA and Temasek, each
of CEA
Holding, SIA and Temasek Holdings (Private) Limited is deemed to
be
interested in all of the 2,984,850,000 H shares of the Company
being the
total of (i) 1,100,418,000 H shares deemed to be interested by
CEA
Holding, (ii) 1,235,005,263 H shares deemed to be interested by
SIA, and
(iii) 649,426,737 H shares deemed to be interested by Temasek Holdings
(Private) Limited.
|
| 3. |
Among
the 1,546,517,499 H shares held by HKSCC Nominees Limited, 189,078,000
H
shares (representing approximately 12.07% of the Company’s then total
issued H shares) were held by China National Aviation Corporation
(Group)
Limited in the capacity of beneficial owner, which in turn was
ultimately
100% controlled by China National Aviation Holding
Company.
|
| 4. |
Among
the 1,546,517,499 H shares held by HKSCC Nominees Limited, 78,652,000
H
shares (representing approximately 5.02% of the Company’s then total
issued H shares) were held by Citadel Equity Fund Ltd. in the capacity
of
beneficial owner, which in turn was 100% controlled by Citadel
Holdings
Ltd., which in turn was ultimately 80.45% controlled by Citadel
Kensington
Global Strategies Fund Limited.
|
| 5. |
Among
the 1,546,517,499 H shares held by HKSCC Nominees Limited, 78,652,000
H
shares (representing approximately 5.02% of the Company’s then total
issued H shares) were held by Citadel Limited Partnership in the
capacity
of beneficial owner, which in turn was ultimately 100% controlled
by
Citadel Investment Group, LLC.
|
| 6. |
Among
the 1,546,517,499 H shares held by HKSCC Nominees Limited, 78,652,000
H
shares (representing approximately 5.02% of the Company’s then total
issued H shares) were held by Citadel Investment Group (Hong Kong)
Limited
in the capacity of beneficial owner, which in turn was ultimately
100%
controlled by Citadel Investment Group,
LLC.
|
| 7. |
Among
the 1,546,517,499 H shares held by HKSCC Nominees Limited, Barclays
PLC
had, through controlled corporations, an interest in an aggregate
of
93,647,370 H shares of the Company (representing approximately
5.98% of
the Company’s then total issued H shares). Barclays PLC was interested in
the aforesaid 93,647,370 H shares of the Company in the manner
as
follows:
|
| (a) |
338,970
H shares (representing approximately 0.02% of the Company’s then total
issued H shares) were held by Barclays Global Investors Ltd in
the
capacity of beneficial owner, which in turn was 100% controlled
by
Barclays Global Investors UK Holdings Limited, which in turn was
92.3%
controlled by Barclays Bank PLC, which in turn was ultimately 100%
controlled by Barclays PLC;
|
| (b) |
10,456,000
H shares (representing approximately 0.467% of the Company’s then total
issued H shares) were held by Barclays Global Investors, N.A. in
the
capacity of beneficial owner, which in turn was 100% controlled
by
Barclays California Corporation, which in turn was 100% controlled
by
Barclays Global Investors Finance Limited, which in turn was 100%
controlled by Barclays Global Investors UK Holdings Limited, which
in turn
was 92.3% controlled by Barclays Bank PLC, which in turn was ultimately
100% controlled by Barclays PLC;
and
|
| (c) |
842,852,400
H shares (representing approximately 5.3% of the Company’s then total
issued H shares) were held by Barclays Global Fund Advisors in
the
capacity of beneficial owner, which in turn was 100% controlled
by
Barclays Global Investors, N.A., which in turn was 100% controlled
by
Barclays California Corporation, which in turn was 100% controlled
by
Barclays Global Investors Finance Limited, which in turn was 100%
controlled by Barclays Global Investors UK Holdings Limited, which
in turn
was 92.3% controlled by Barclays Bank PLC, which in turn was ultimately
100% controlled by Barclays PLC.
|
A
short
position of 1,532,000 H shares (representing approximately 0.1% of the Company’s
then total issued H shares) were held by Barclays Global Investors, N.A.
in the
capacity of beneficial owner, which in turn was 100% controlled by Barclays
California Corporation, which in turn was 100% controlled by Barclays Global
Investors Finance Limited, which in turn was 100% controlled by Barclays
Global
Investors UK Holdings Limited, which in turn was 92.3% controlled by Barclays
Bank PLC, which in turn was ultimately 100% controlled by Barclays
PLC.
| 8. |
Among
the 1,546,517,499 H shares held by HKSCC Nominees Limited, 78,553,400
H
shares (representing approximately 5.01% of the Company’s then total
issued H shares) were held by INVESCO Hong Kong Limited (previously
known
as INVESCO Asia Limited) in the capacity of investment
manager.
|
-108-
| APPENDIX III | GENERAL INFORMATION |
Save
as
disclosed above and so far as the Directors are aware, as at the Latest
Practicable Date, no other person had an interest or short position in the
Company’s shares or underlying shares (as the case may be) which would fall to
be disclosed to the Company and the Stock Exchange under the provisions of
Divisions 2 and 3 of Part XV of the SFO.
Interests
in other members of the Group
So
far as
is known to the Directors, as at the Latest Practicable Date, each of the
following persons, other than the Company or any of its Directors, supervisors,
chief executives and members of the senior management, was directly or
indirectly interested in 10% or more of the nominal value of any class of
share
capital carrying rights to vote in all circumstances at general meetings
of the
relevant member of the Group:
|
Approximate
|
||||
|
Name
of relevant
|
percentage
of
|
|||
|
Subsidiary
|
substantial
shareholder
|
shareholding
|
||
|
上海科技宇航有限公司(Shanghai
|
新加坡科技宇航有限公司
|
49%
|
||
|
Technology
Aerospace Company Limited)
|
(Singapore
Technology
|
|||
|
Aerospace
Limited)
|
||||
|
東方航空(汕頭)經濟發展有限公司
|
汕頭航空用品總公司
|
45%
|
||
|
(Eastern
Airlines (Shantou) Economic
|
(Shantou
Aviation
|
|||
|
Development
Co., Ltd.)
|
Equipment
Group
|
|||
|
Company)
|
||||
|
上海東方飛機維修有限公司(Shanghai
|
Aircraft
Engineering
|
40%
|
||
|
Eastern
Aircraft Maintenance Co., Ltd.)
|
Investment
Ltd.
|
|||
|
中國貨運航空有限公司
|
中國遠洋運輸(集團)總公司
|
30%
|
||
|
(China
Cargo Airlines Co., Ltd.)
|
(China
Ocean Shipping
|
|||
|
(Group)
Company)
|
||||
|
上海東方遠航物流有限公司(Shanghai
|
中國遠洋運輸(集團)總公司
|
30%
|
||
|
Eastern
Logistics Co. Ltd.)
|
(China
Ocean Shipping
|
|||
|
(Group)
Company)
|
||||
|
中國東方航空江蘇有限公司(China
Eastern
|
江蘇省國信資產管理集團
|
23.89%
|
||
|
Airlines
Jiangsu Co., Ltd.)
|
有限公司
|
|||
|
(Jiangsu
Provincial
|
||||
|
Guoxin
Asset
|
||||
|
Management
Group Co.,
|
||||
|
Ltd.)
|
-109-
| APPENDIX III | GENERAL INFORMATION |
|
Approximate
|
||||
|
Name
of relevant
|
percentage
of
|
|||
|
Subsidiary
|
substantial
shareholder
|
shareholding
|
||
|
東航發展(香港)有限公司
|
大中華運通有限公司
|
20%
|
||
|
(Eastern
Airlines Development (HK) Co., Ltd.)
|
(Dazhonghua
Yuntong
|
|||
|
Co.,
Ltd.)
|
||||
|
東航大酒店有限公司
|
CEA
Holding
|
14%
|
||
|
(Eastern
Airlines Hotel Co., Ltd.)
|
Save
as
disclosed above and so far as is known to the Directors, as at the Latest
Practicable Date, no other person (other than the Directors, the Company’s
supervisors, chief executives or members of senior management of the Company)
had an interest or short position in the Company’s shares or underlying shares
(as the case may be) which would fall to be disclosed to the Company and
the
Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the
SFO,
or was directly or indirectly interested in 10% or more of the nominal value
of
any class of share capital carrying rights to vote in all circumstances at
general meetings of any other member of the Group.
MISCELLANEOUS
Company’s
officers
Mr.
Luo
Zhuping, who is a holder of a Master ’s degree in global economics, is a
Director and the secretary of the Company.
Mr.
Luo
Weide, the Company’s Chief Financial Officer having a professional accounting
qualification recognised in the PRC, is the qualified accountant of the Company
appointed pursuant to Rule 3.24 of the Listing Rules. Since Mr. Luo does
not
possess the professional qualification normally required under Rule 3.24
of the
Listing Rules, the Company has applied for, and the Stock Exchange has granted,
a conditional waiver from strict compliance with that rule for a period of
three
years commencing on 28 January 2005. Such waiver was expired on 26 January
2008.
The Company has further applied for, and the Stock Exchange has granted,
a
conditional waiver from strict compliance with Rule 3.24 of the Listing Rules
for a period of 1 year from 27 January 2008. Details of the waiver are disclosed
in the Company’s announcement dated 10 March 2008.
Service
contracts
As
at the
Latest Practicable Date, none of the Directors had any existing or proposed
service contract with any member of the Group which is not expiring or
terminable by the Group within a year without payment of any compensation
(other
than statutory compensation).
-110-
| APPENDIX III | GENERAL INFORMATION |
Competing
interests
As
at the
Latest Practicable Date, none of the Directors or, so far as is known to
them,
any of their respective associates was interested in any business (apart
from
the Group’s business) which competes or is likely to compete either directly or
indirectly with the Group’s business (as would be required to be disclosed under
Rule 8.10 of the Listing Rules if each of them were a controlling
shareholder).
Interests
in the Group’s assets or contracts or arrangements significant to the
Group
As
at the
Latest Practicable Date, none of the Directors or supervisors of the Company
had
any interest in any assets which have been, since 31 December 2006 (being
the
date to which the latest published audited accounts of the Company were made
up), acquired or disposed of by or leased to any member of the Group, or
are
proposed to be acquired or disposed of by or leased to any member of the
Group.
As
at the
Latest Practicable Date, none of the Directors or supervisors of the Company
was
materially interested in any contract or arrangement, subsisting at the date
of
this circular, which is significant in relation to the business of the
Group.
Litigation
In
2005,
the family members of certain victims in the aircraft accident (the aircraft
was
then owned and operated by China Eastern Air Yunnan Company), which occurred
in
Baotou on 21 November 2004, sued the Company in a U.S. court for compensation,
the amount of which is yet to be determined. The Company had filed a motion
to
contest the claim in the U.S. court and on 10 July 2007, the U.S. court granted
a motion to dismiss the claim on the grounds of forum non conveniens and
ordered
each of the actions stayed. On 27 July 2007, family members of certain victims
appealed, but the U.S. court has not yet rendered judgment.
Save
as
disclosed above, as at the Latest Practicable Date, the Directors were not
aware
of any litigation or claim of material importance pending or threatened against
any member of the Group.
Material
contracts
On
9
November 2007, the Company entered into a subscription agreement (“Investor
Subscription Agreement”) with Singapore Airlines Limited (“SIA”) and Lentor
Investment Pte. Ltd.. Simultaneously with the entering into the Investor
Subscription Agreement, CEA Holding entered into a subscription agreement
(“CEA
Holding Subscription Agreement”) with the Company. On the same date, SIA and the
Company entered into a cooperation agreement (“Cooperation Agreement”) and a
personnel secondment agreement (“Personnel Secondment Agreement”). Details of
the above agreements are disclosed in the circular of the Company dated 23
November 2007.
-111-
| APPENDIX III | GENERAL INFORMATION |
On
16
November 2007, CEA Holding (as the acquirer), the Company (as the seller)
and
上海民航華東凱亞系統集成有限公司
(East China Cares System Co., Ltd.) (“East China Cares”) (as the seller) entered
into an equity transfer agreement (“Equity Transfer Agreement”) pursuant to
which the Company and East China Cares agreed to dispose of their entire
equity
interests in 上海東航投資有限公司 (China
Eastern Air Investment Company Limited) (“CEA Investment”) to CEA Holding. The
consideration to be received by the Company and the East China Cares are
approximately RMB461.9 million and RMB5.66 million respectively. Details
of the
above agreements are disclosed in the announcement of the Company dated 10
November 2007.
Save
as
disclosed above, no material contract (not being contract entered into in
the
ordinary course of business) has been entered into by any member of the Group
within the two years immediately preceding the issue of this
circular.
Documents
for inspection
Copies
of
the following documents are available for inspection at the offices of Baker
& McKenzie, 14th Floor, Hutchison House, 10 Harcourt Road, Central, Hong
Kong during normal business hours up to and including 6:00 p.m. on the date
which is 14 days (excluding Saturdays and Sundays) from the date of this
circular:
(i) the
articles of association of the Company;
(ii) the
Company’s 2005 and 2006 annual reports;
(iii) the
Agreement;
(iv) the
Investor Subscription Agreement;
(v) the
CEA
Holding Subscription Agreement (in Chinese);
(vi) the
Cooperation Agreement;
(vii) the
Personnel Secondment Agreement; and
(viii) the
Equity Transfer Agreement.
-112-