Contents
Company Profile
Corporate Information
Financial Highlights
Highlights of the Year
Chairman’s Statement
Management Discussion and Analysis
Report of the Directors
Report of the Supervisory Committee
Corporate Governance Report
Financial Statements Prepared under
International Financial Reporting Standards
(cid:129) Independent Auditor’s Report
(cid:129) Consolidated Income Statement
2
5
7
9
12
22
42
57
61
76
78
(cid:129) Consolidated Statement of Comprehensive Income 80
(cid:129) Consolidated Balance Sheet
(cid:129) Company Balance Sheet
(cid:129) Consolidated Statement of Changes in Equity
(cid:129) Consolidated Cash Flow Statement
(cid:129) Notes to the Financial Statements
Supplementary Information
Five Year Summary
The Board of Directors, Supervisory Committee and
Senior Management
Glossary
81
83
85
86
88
186
191
193
200
1
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Company Profile
China Southern Airlines Company
Limited (the “Company”), together
with its subsidiaries (collectively,
the “Group”), is one of the largest
airlines in the People’s Republic
of China (“China” or the “PRC”).
In 2013, the Group ranked first
among all Chinese airlines in
terms of its fleet size, flight routes
network and volume of passenger
traffic. The Group has a network
of flight routes with Guangzhou as
the core hub and Beijing as a major
hub, covering China and the rest
of Asia and connecting Europe,
America, Australia and Africa. The
Company joined the SKYTEAM
in November 2007. Up to the
date of this report, the Group has
established a network connecting
1024 destinations of 187 countries
and regions and covering major
cities around the world.
2
Based in Guangzhou, the Group has 14 branches, including Xinjiang, Beifang,
Beijing, Shenzhen, Hainan, Heilongjiang, Jilin, Dalian, Hubei, Hunan, Guangxi, Xi’an,
Taiwan, Zhuhai Helicopter, and six major subsidiaries, including Xiamen Airlines
Company Limited (“Xiamen Airlines”), Shantou Airlines Company Limited (“Shantou
Airlines”), Zhuhai Airlines Company Limited (“Zhuhai Airlines”), Guizhou Airlines
Company Limited (“Guizhou Airlines”), Chongqing Airlines Company Limited
(“Chongqing Airlines”) and China Southern Airlines Henan Airlines Company Limited
(“Henan Airlines”). The Group has set up 23 domestic offices in cities including
Chengdu, Hangzhou and Nanjing. It also maintains 60 overseas offices including
Tokyo, Los Angeles, Paris, Sydney, Auckland, Singapore, Moscow and Vancouver.
Apart from the above, the Company has equity interests in Sichuan Airlines
Corporation Limited.
As of 31 December 2013, the Group had a fleet of 561 aircraft, consisting primarily
of Boeing 787, 777, 757, 747, 737 series, Airbus 380, 330, 320 series etc. The
average age of the Group’s registered aircraft was 6.0 years as at the year end of
2013.
Corporate Information
3
Corporate Information
Corporate Information
4
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Corporate Information
DIRECTORS
SUPERVISORS
Non-Executive Directors
Si Xian Min (Chairman)
Wang Quan Hua
Yuan Xin An
Yang Li Hua
Executive Directors
Tan Wan Geng (Vice Chairman and President)
Zhang Zi Fang (Executive Vice President)
Xu Jie Bo (Executive Vice President and
Chief Financial Officer)
Li Shao Bin
Independent Non-Executive Directors
Wei Jin Cai
Ning Xiang Dong
Liu Chang Le
Tan Jin Song (Appointed on 26 December 2013)
Pan Fu (Chairman of the Supervisory Committee)
Li Jia Shi
Zhang Wei
Yang Yi Hua
Wu De Ming (Appointed on 26 December 2013)
JOINT COMPANY SECRETARIES
Xie Bing
Liu Wei
AUTHORISED REPRESENTATIVES
Xu Jie Bo
Liu Wei
5
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Corporate Information
LEGAL ADVISERS
DLA Piper Hong Kong
Z&T Law Firm
SHARE REGISTRAR
Hong Kong Registrars Limited
17M Floor
Hopewell Centre
183 Queen’s Road East
Wanchai, Hong Kong
BNY Mellon Shareowner Services
P.O. Box 30170
College Station, TX 77842-3170
U.S.A.
China Securities Depository and Clearing Corporation
Limited Shanghai Branch
Floor 36, China Insurance Building
166 Lu Jia Zui East Road
Shanghai
PRC
CORPORATE HEADQUARTERS
278 Ji Chang Road
Guangzhou
PRC 510405
Website: www.csair.com
PLACE OF BUSINESS IN HONG KONG
Unit B1, 9th Floor
United Centre
95 Queensway
Hong Kong
INTERNATIONAL AUDITORS
PricewaterhouseCoopers
22/F Prince’s Building Central
10 Chater Road
Hong Kong
PRC AUDITORS
PricewaterhouseCoopers Zhong Tian LLP
11/F PricewaterhouseCoopers Center
2 Corporate Avenue
202 Hu Bin Road
Huangpu District
Shanghai
PRC
PRINCIPAL BANKERS
China Development Bank
Bank of China
China Construction Bank
The Export-Import Bank of China
Industrial & Commercial Bank of China
Agricultural Bank of China
6
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Financial Highlights
The board (the “Board”) of directors (the “Directors”) of the Company hereby presents below the consolidated results of
the Group for the year ended 31 December 2013, prepared in accordance with International Financial Reporting Standards
(“IFRSs”), together with the comparative figures for the corresponding period in 2012. The following consolidated results
should be read in conjunction with the financial statements and the Independent Auditor’s Report contained in this annual
report (the “Annual Report”).
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December
2013
RMB million
2012
RMB million
2013
HK$ million
2013
US$ million
2013 vs 2012
Increase/
(decrease)
%
Traffic revenue:
Passenger
Cargo and mail
Other operating revenue
88,271
6,413
94,684
3,863
89,544
6,556
96,100
3,414
112,276
8,157
120,433
4,914
14,478
1,052
15,530
634
(1.4%)
(2.2%)
(1.5%)
13.2%
Total operating revenue
98,547
99,514
125,347
16,164
(1.0%)
Operating expenses:
Flight operation expenses
Maintenance
Aircraft and traffic servicing expenses
Promotion and selling expenses
General and administrative expenses
Depreciation and amortisation
Impairment on property,
plant and equipment
Others
54,010
7,805
15,091
7,754
2,470
9,347
536
1,267
54,690
7,971
14,072
7,134
2,425
8,264
–
1,321
68,698
9,927
19,195
9,863
3,142
11,889
682
1,612
8,859
1,280
2,475
1,272
405
1,533
88
208
(1.2%)
(2.1%)
7.2%
8.7%
1.9%
13.1%
–
(4.1%)
Total operating expenses
98,280
95,877
125,008
16,120
2.5%
Other net income
1,243
1,462
1,581
Operating profit
1,510
5,099
1,920
Interest income
Interest expense
Share of associates’ results
Share of joint ventures’ results
Exchange gain, net
Other non-operating income
Profit before income tax
Income tax
307
(1,651)
294
96
2,903
25
3,484
(734)
235
(1,376)
317
121
267
75
4,738
(954)
390
(2,100)
374
122
3,692
32
4,430
(934)
204
248
50
(271)
48
16
476
4
571
(120)
(15.0%)
(70.4%)
30.6%
20.0%
(7.3%)
(20.7%)
987.3%
(66.7%)
(26.5%)
(23.1%)
Profit for the year
2,750
3,784
3,496
451
(27.3%)
Profit attributable to:
Equity shareholders of the Company
Non-controlling interests
Profit for the year
Earnings per share attributable to
equity shareholders of the Company
Basic and diluted
1,986
764
2,750
2,619
1,165
3,784
2,525
971
3,496
326
125
451
(24.2%)
(34.4%)
(27.3%)
RMB0.20
RMB0.27
HK$0.26
US$0.03
(25.9%)
7
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Financial Highlights
Note:
The above consolidated income statement has been prepared in Renminbi (“RMB”), the national currency of the PRC. Translations of
amounts from RMB into Hong Kong dollars (“HK$”) and United States dollars (“US$”) solely for the convenience of readers have been made
at the rates of HK$1.00 to RMB0.7862 and US$1.00 to RMB6.0969, respectively, being the average of the buying and selling rates as quoted
by the People’s Bank of China at the close of business on 31 December 2013. No representation is made that the RMB amounts could have
been or could be converted into HK$ or US$ at these rates on 31 December 2013 or on any other date.
Passenger Traffic (RPK)
million
Passenger Traffic Capacity (ASK)
million
Yield (Yield per RPK)
RMB
186,799.84
169,569.13
148,416.55
135,534.73
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
0.66
0.59
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
2012
2013
2012
2013
2012
2013
Total Operating Revenue 2013
RMB million
Passenger Traffic Capacity
Available Seat Kilometres
(“ASK”) 2013
million
Passenger Traffic
Revenue Passenger Kilometres
(“RPK”) 2013
million
3.9%
6.5%
15.1%
2.2%
20.6%
20.1%
1.9%
1.7%
72.3%
77.5%
78.2%
Domestic passenger revenue 71,277 (72.3%)
Hong Kong, Macau and Taiwan passenger revenue
2,162 (2.2%)
International passenger revenue 14,832 (15.1%)
Cargo and mail revenue 6,413 (6.5%)
Other operating revenue 3,863 (3.9%)
Domestic 144,732.62 (77.5%)
Hong Kong, Macau and Taiwan 3,594.29 (1.9%)
Domestic 116,105.71 (78.2%)
Hong Kong, Macau and Taiwan 2,574.27 (1.7%)
International 38,472.93 (20.6%)
International 29,736.57 (20.1%)
8
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Highlights of the Year
12 January
Participated in the Sydney Festival and sponsored the performance of Kun
Opera “The Peony Pavillion” (昆曲《牡丹亭》). Besides, the ferry named
“Nanhang” (南航號) participated in the Ferry Competition in celebration of
Australia Day.
2 March
Received the fifth A380, symbolizing the completion of the Company’s fleet
of A380.
8 April
On the Second Anniversary of the Guangzhou-Auckland route’s launching,
the Prime Minister of New Zealand led the governmental delegates to visit
Guangzhou. The Company entered into a strategic cooperation agreement
with the Tourist Bureau of New Zealand, Immigration New Zealand, Ministry
of Education of New Zealand and Auckland Airport, in respect of the
operation of the route, marketing and promotion, tourist development and
other aspects for developing strategic cooperation.
9
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Highlights of the Year
20 April
An earthquake with the magnitude of 7.0 occurred in Ya’an City
in Sichuan Province. China Southern Airlines gave its full support
in respect of combating the earthquake and carrying out the relief
work. The number of accumulated flights is 40, with relief materials
being close to 65 tonnes and relief workers for such transportation
being more than 300.
31 May
Entered into an aviation agreement with Kenya Airways for
purposes of expanding the existing scope of code sharing and
strengthening the cooperation between both parties.
2 June
Received the first B787 Dreamliner in China Civil Aviation industry
and became the first airlines in the world operating B787 and A380
simultaneously.
19 June
Launched direct flight from Guangzhou to Moscow. This is the
Company’s fourth route involving direct flight from Guangzhou
(hub) to Europe.
1 August
Launched specialized services and products for keeping in line with
72 hours TWOV (“Transit without Visa”) at Baiyun International
Airport in Guangzhou, and implemented marketing in synchronized
manner in all the major cities around the world.
28 September
China Southern Airlines Henan Airlines Company Limited was
officially established in Zhengzhou.
12 October
As the official airlines sponsor, participated in the Melbourne
Festival and the annual major concert was named solely for the
Company and as the “Night for China Southern Airlines”.
10
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Highlights of the Year
2 December
Entered into a strategic cooperation agreement with Qantas
and commenced cooperation in respect of market development,
exchange of pilots, cargo service and others.
31 December
Recorded another year of flight safety with accumulated over 11.8
million safe flight hours and 91.79 million person-time passengers
of transportation, continuously maintained 170 consecutive months
of aviation safety and 234 consecutive months of aviation security,
and refreshed the records of aviation safety and aviation security in
China.
11
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Chairman’s Statement
Si Xian Min
Chairman
During the reporting period, the macro economic
recovery was slow and the aviation industry continued
to be weak, yet, the Chinese civil aviation market
maintained a steady growth on the back of a number
of factors, but the quality of yield deteriorated. The
Company continued to improve the operational
performance in various aspects, maintained a relatively
high operational quality, and met the expected targets
of the production and operation.
12
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Chairman’s Statement
Performance Review
In 2013, the overall global economy was still on the basic trend of slow
recovery, the risk of a deterioration of the economy was not completely
removed, and a new round of growth had yet to appear. The Chinese
economy entered into a period of deceleration after years of rapid growth,
experiencing the short-term pain of structural adjustments and the aftermath
of the earlier economic stimulus policies, all contributed to the fall back of
growth rate.
Due to the impact of the macro economy, the global aviation transportation
industry continued to be weak. The Chinese civil aviation market maintained
a steady growth, but due to factors such as the diversion of business by the
high-speed rail, the excess supply for the transport capacity in the industry,
keener market competition, high oil prices etc, resulting in an increase of
traffic volume with falling prices in the domestic market, and the quality of
yield in the whole industry dropped significantly.
Faced with harsh operational conditions, the Company insisted on the
concept of stable development, strengthened the establishment of the safety
management system, enhanced the level of precise marketing, steadily
promoted the strategic transformation and internationalization process,
actively enhanced the service quality and brand influences, and effectively
resolved the impact of various negative factors such as the complex and
changing market, shortage of development resources, higher competition
pressure etc, therefore the comprehensive competitiveness of the Company
continued to be strengthened.
13
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Chairman’s Statement
During the reporting period, the Company strengthened the standardized
management of safety, adjusted and increased the power of safety
management at all levels, enhanced the building up of qualifications
and ability of the technical personnel, emphasized on the
development and application of new technologies, well
protected our continuous safety, and managed to maintain
the best safety record among the Chinese airlines. In the
whole year, we completed 1,829,400 safe flight hours
and 12,000 hours of general aviation service, maintained
170 consecutive months of aviation safety and 234
consecutive months of aviation security.
During the reporting period, the excess supply
situation in the domestic civil aviation industry was
more acute, and market competition was intensified.
We actively coped with changes in the market,
adopted effective measures and maintained our
position in the market. In the whole year, the Company
completed 17,469 million revenue tonne kilometers,
representing an increase of 8.1% as compared with
last year; the Company completed 91.79 million person-
time passengers of transportation, representing an increase
of 6.1% as compared with last year; the Company achieved
business revenue of RMB98,547 million, representing a decrease of
1.0% as compared with last year.
We strengthened the sales to premium travellers, enhanced the operational quality,
the first and business class achieved passenger load factor of 44.8%, representing an increase of 2.9 percentage points
as compared with last year, and the Company achieved 2.52 million person-time of first and business class passengers,
representing an increase of 14.5% as compared with last year; we proactively followed the development trend of the
industry, greatly promoted the development of e-commerce, and achieved direct sales revenue of RMB15,600 million, with
the direct sales ratio reached 20.5%, representing
an increase of 4.5 percentage points as compared
with last year. Faced with the overall weak cargo
market, we actively explore the cargo market locally
and abroad by optimizing cargo fleet structure, and
thus the operating loss of freighters fleet has been
reduced.
In addition, we also successfully introduced the first
B787 Dreamliner into China, and became the first
airlines in the world which operated A380 and B787
at the same time, and the strength of the fleet was
further enhanced.
During the reporting period, we are actively committed to social responsibilities, and smoothly completed several
transportation protection missions such as maintaining peace and harmony, disaster relief, Chinese New Year passenger
transportation, China National Games etc., and continued to conduct charity activities such as “Ten Cent Care Foundation”
etc.; thoroughly carried out energy saving and carbon dioxide emission reduction, we were awarded as “The Most
Appreciated Top 50 Chinese Companies”, “2013 Top 100 Green Companies” etc.; we donated over RMB7.1 million from
“Ten Cent Care Foundation” fund, and continued to contribute to the society.
14
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Chairman’s Statement
Development Strategies
The general strategic goal of the Company in the “Twelfth Five-
year” was to become a safe and highly profitable airlines with
strong brand influence and international network scale; to
develop an interlinked “hub + point-to-point” operation mode
well balancing and synergizing the emphasis on its domestic
market and its share in the international market. The Company
implemented strategic transformation measures to improve its
flight hub network, marketing network and service guarantee
network. Leveraging its scale and network, the Company
fundamentally changed its growth pattern.
Safety strategy
To focus on safety and to make use of its SMS service. To
actively introduce modern scientific management approaches.
To emphasize the three operating functions namely the flight,
maintenance and dispatch. To let people come first and put
the safety culture at the wheel. To continuously improve its
regulations and systems. To implement fundamental training
determinedly to enhance staff’s quality. To speed up establishment
of regulations and systems of different departments and positions.
To solidify safety fundamentals and ensure uninterrupted safety.
Marketing strategy
To continue strengthening the “hub + point-to-point” route
network and function by enriching the hub network, improving
network products and leveraging the network edge. To
“consolidate the domestic market and expand the international
with emphasis on Japanese and Korean markets; to develop cargo
services and increase yield”. To be market-oriented and establish
a wholly interlinked marketing system for passenger and cargo
matching the hub network and maximizing network revenue.
Brand and service strategy
Under the general goal of establishing an airlines “the
best in China, top-class in Asia and renown globally”
and the idea of “Doing everything with client’s
feelings in mind, cherish each service an opportunity”,
to focus on enhancing passengers’ experience and
outperform major competitors. To be customer-
oriented and to design innovative products. To be
committed to stringent, precised and professionalized
management. To develop service differentiation by its
flexible problem-solving mechanism with caring services
and user-friendly products to rapidly enhance service
competitiveness.
15
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Chairman’s Statement
Information strategy
Closely adhering to the strategic transformation goal of
the Company, to implement unification in planning,
standards, design, investment, construction and
management. This “six unifications” principle will
fully apply modern information technology to
the Company’s production and operation.
Under the informatization, the Company
will implement strategic transformation and
internal management mechanism reform
to bring innovation into mechanisms,
m a n a g e m e n t a n d t e c h n o l o g y a n d
t h u s e n h a n c e m a n a g e m e n t l e v e l ,
c e n t r a l i z e d c o n t r o l c a p a b i l i t y a n d
core competitiveness. The Company
will strive for sustainable development
through the support and utilization of
informationalization.
Core Competitiveness
After years of effort, the Company’s competitiveness
begun to take shape, including its hub operation and
management capability focusing on Guangzhou, its resources
interoperability under the matrix management mode and its increasingly
service brand influence.
Hub operation and management capability
The Company’s strategic transformation mainly focused on developing transit and links with international long-distant flight
in Guangzhou, Beijing, Urumqi and Chongqing, thereby became an airlines with strong international network. Through
deepening strategic transformation, we continuously improved our hub operation and management capability, established
a new profit model and development mode. Currently, the four major hubs had concentration over 70%, in particular the
Guangzhou one, with significantly increased reputation and attraction. The “Canton Route” transit has gathered good
reputation with key indicators rising rapidly.
In addition, to take the advantage of 72 hours TWOV in Guangzhou, we developed designated new products and new
process to enhance experience at Guangzhou as an international hub. Going forwards, we will continue the optimization of
the transit flow to enhance its comprehensive support capabilities at Guangzhou and further strengthen transit connection of
the Guangzhou hub to establish the “Canton Route” as an international brand.
16
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Chairman’s Statement
Resources interoperability
With its scale of having multiple bases, hubs, models and flights, we adopted a matrix
management mode based on “horizontal integration and resources sharing”, which
not only unified the headquarters’ control over resources, policy and operation but
also demonstrated branches’ and subsidiaries’ motivated participation in security,
marketing and service innovation, making good use of the edge of the Company’s
scale and network.
At present, the matrix management mode has been implemented as a normal
practice, under which core resources such as the transport capacity, routes and slots
were methodically coordinated and the synergy among supporting resources such as
marketing, flights, maintenance and service continued to rise. In the future, we will
further strengthen innovation in systems and mechanisms to enhance efficiency of
resource allocation, system coordination and add value to its existing edge.
Brand influence
By constantly benchmarking SKYTRAX’s five-star criteria, the Company’s brand
became more influential. The Company, an airlines rated four-star by SKYTRAX,
aimed to become “the best in China, top-class in Asia and renown globally”. It
constantly benchmarked its service against SKYTRAX’s five-star criteria and has been
improving accordingly, resulting in increasing brand influence both in China and
overseas.
In order to elevate and improve its service quality, the Company started the PSDA
project with International Air Transportation Association. It also set up the product
and service management department to coordinate internal and external resources so
as to positively establish a customer-oriented product and service management system
and satisfy customers’ diverse needs. From here on, we will continue to optimize its
service experience and process to promote its service brand into the next stage.
17
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Chairman’s Statement
2014 Operational Situation Analysis
Looking ahead for 2014, the Company is faced with both development opportunities and challenges, favourable and
unfavourable factors co-exist.
The major favourable conditions are as follows:
It is hopeful that the global economy will maintain the recovery trend.
According to forecast of the International Monetary Fund, the global economy will grow at 3.7% in 2014. Due to the impact
of the overall economic environment, it is expected that the 2014 international aviation transportation demand will continue
to maintain growth. The US economic growth rate will accelerate, the European economy will stabilize, which will have a
positive effect to the development of the aviation transportation industry. IATA predicts that this year the earnings of the
European and American civil aviation industry will rise by USD4.2 billion as compared with last year, and the aviation oil price
will be lower than that of 2013.
There is no change in the fundamentals of the long term positive trend of the Chinese economy.
In particular, the central government has made the overall deployment for the full deepening of reforms by promulgating a
series of reform measures, the merits of which will be further released, and the dynamics and vitality of development will be
further stimulated. The Chinese economy will continue to maintain a growth rate of around 7.5%, supported by a number
of new favourable factors and rare opportunities. Amid such background, the domestic aviation transportation industry will
continue to maintain a positive development trend, which will offer good market opportunities for China Southern Airlines.
The new urbanization development will stimulate demand for aviation transportation.
It was specified that in the coming few years the focus of urbanization of China is to develop tier-two and tier-three cities.
With the continuous accumulation of such urban population, the demand for aviation transportation will have a faster
growth, which is beneficial for the Company to make use of its extensive network and develop potential markets.
The major unfavourable conditions are as follows:
There are still quite a lot of uncertainties in the international economic growth.
The foundation of the economic recovery of developed countries is not solid, and the emerging economies in general are
faced with weak overseas demand, insufficient growth momentum generated locally and inflation etc. The missions of
structural adjustments and mode changing of the Chinese economy are tough, the restraints of the environmental resources
are increasing, all exerting downward pressure to the Chinese economy.
The tapering of quantitative easing by the US Federal Reserve Fund will have a negative impact on the Company.
On one hand, this will have an appreciation pressure on the USD against RMB conversion, which may result in a substantial
reduction in the exchange gain of the Company. On the other hand, this may also lead to a hike in the USD interest rate,
causing an increase in finance costs of the Company.
Industry competition is keener.
Following the full deepening of reforms of the civil aviation industry, a relaxation of market entrance, rapid growth of
transport capacity etc, the aviation market of China will enter into an era of full competition; the popularization of aviation
will become more obvious, and low-cost airlines will have rapid development, while there will be less room for growth of the
traditional business market.
The impact of the express railway on civil aviation becomes stronger.
Currently, the mileage of coverage of the high-speed railway of China exceeds 10,000 kilometers, and the network with
“Four Vertical, Four Horizontal” will gradually be built, so that the medium and short journey travellers will be further
diversified elsewhere, while these will bring harsh challenges to the operating capability and quality of operation of China
Southern Airlines.
18
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Chairman’s Statement
2014 Major Business Initiatives
In 2014, we will seriously study the changes in the internal and external situations and market
environment, master the development trend of the industry, stress on reform and innovation,
emphasize quality enhancement and effectiveness improvement, further emancipate minds,
stimulate vibrant action, increase the safety management and control level, actively cope with market
competition, continue to promote strategic transformation, fully raise the service level, and continue
to enhance the comprehensive competitiveness of the Company. We will focus on accomplishing the
following tasks:
Raising the safety management level, improving the operational efficiency.
In 2014, we will continue to solidify the safety foundation, strengthen safety inspection and
supervision at all levels, and enhance the building of qualifications and ability of the professional team.
We will make good use of new technologies, raise the flight quality; work on the establishment of
systems, speed up the implementation of systems, and fully implement the aviation safety year.
In 2014, we will devote all efforts to raise the regularity level of flights, upgrade the operation
command system, and increase the operation management quality efficiency; we will enhance
our capability to handle flight delay, and improve the response mechanism of flight delay; we will
strengthen the optimization of routes, saving of aviation oil, information release etc., to enhance the
comprehensive results of aviation management.
19
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Chairman’s Statement
Enhancing operating management ability with all efforts, emphasis of
enhancing the quality of transformation.
In 2014, we will insist on the orientation towards the market and clients,
stress on strengthening refined marketing, and properly master the degree
of matching of carriage capacity and market; we must analyze in details the
changes in aviation customer structure and changes in consumer behavior
and habits, and increase the ability to forecast the market and response
speed; we must enhance the ability in high end marketing and emphasize on
developing key corporate accounts.
In 2014, we will steadily develop the international market, flexibly adjust the
operating strategies of the major international routes of Europe, America,
Australia and New Zealand etc., pay more attention to the short and medium
journey markets such as Japan and Korea; we will continue to expand the
hub effect, optimize the guarantee of transit services, work hard on the
“Canton Route”, and continue to improve the positioning and development
of the Chongqing hub, so as to expand the effects of transformation and
fully realize the target results.
20
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Chairman’s Statement
Strengthening the customer-orientation, expanding brand influence.
In 2014, the Company will continue to improve the service standard, make good use of the role of the full work flow
service platform, and enhance the consistency of services; we will improve the service management, improve the inspection
of service quality, the rectification and feedback systems, and increase the supervision and rectification strength; we will
emphasize on the strengthening of service team management, and enhance the consistency and practicality of training.
We will speed up our work in brand building through quality services, and actively promote our brand by marketing, in order
to enhance the features and competitive advantages of the brand. We plan to hold activities regularly with marketing as
focus and fully use all opportunities to promote the influence of internationalization of the brand, in order to expand the
awareness of the brand on a global scale.
Deepening the comprehensive budget management, strengthening our cost advantages.
In 2014, we will improve the comprehensive budget management in an in-depth manner, and set up cost and revenue
dynamic budget adjustment mechanisms; we will strengthen benchmarking toward advanced airlines, stress on control of
major cost items, and implement refinement of control of major cost items; we will push forward the oil saving policy reform,
gradually form cost advantages and enhance the comprehensive management standard of the Company.
21
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
Tan Wan Geng
President
D u r i n g t h e r e p o r t i n g p e r i o d , t h e s t r a t e g i c
transformation of the Company entered on a new
level, and the internationalization process was
further speeded up. The Company focused on
strengthening service management, introduced a
series of new products and new services. We made
the solid accomplishments in all aspects.
22
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
Business Analysis
During the reporting period, the strategic transformation of the Company
entered on a new level, the internationalization process was further
speeded up.
We steadily pushed forward the strategic transformation and internationalization
process, and launched new routes like Guangzhou-Moscow, Bali, Chiang Mai etc.
We also increased the frequency of flights to London, Brisbane, Auckland and Delhi,
improved the “Canton Route” flight network, and further established Guangzhou
as a convenient hub for Europe-Australia, North America-Southeast Asia, Southeast
Asia –Northeast Asia. At the same time, we put the flagship aircraft type such as
A380 and B787 to the major international markets in Europe and Atlantic Ocean,
equipped them with the best service personnel, and enhanced the software and
hardware strengths of our international routes; given the opportunities offered by
favourable policies like visa-free transit in Guangzhou within 72 hours, we improved
the comprehensive guarantee level of the hub. With a series of efforts, the effects
of the hub establishment of the Company were more obvious, the quality and
impact of our internationalization transformation were further enhanced. The
transit passengers in the four hubs of Guangzhou, Beijing, Urumqi and Chongqing
increased by 3.9%, and revenue increased by 6.4%, of which the number of
international transit persons increased by 11.1%, and revenue increased by 10.8%,
The overall passenger load factor of international major routes from Guangzhou hub
reached 81%, and the transit ratio already exceeded 55%.
During the reporting period, the Company focused on strengthening service
management and further improved customer service quality.
We adhered to the idea of “Doing everything with clients’ feelings in mind, cherish
each service an opportunity”, stressed on improving the service management
process, enhanced the ability and standard of the service team, increased investment
in the service software and hardware, and further enhanced the quality of cabin
services and ground services. On one hand we speeded up the nurturing of
23
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
international talents, on the other hand we actively hire foreign flight attendants, striving to provide barrier-free quality
services. At the same time, the Company highly emphasized the operation of flights, with continuous improvement of the
ordinary management system of flights, we grasped the opportunities of air zone management improvement, adopted
measures like handling of flight delay project, worked hard to overcome difficulties like frequent occurrence of bad weather,
poor operational environment etc., so that the regularity of flight rate was maintained at the forefront among the industry,
the rate of delay attributable to the Company decreased by 1.18 percentage points, and these were fully recognized by the
society.
During the reporting period, the Company introduced a series of new products and new services, which were
recognized by its passengers.
We launched the “Year of International Brand & Service Improving” and introduced a series of new products and new services,
which were recognized by passengers. It was rated 6 by SKYTRAX and 4 by Australia review website this year, 5% and 43%
higher than last year, respectively. We put elite pilots to flights of the “Canton Route”, upgraded the entertainment system of
wide-body aircraft and provided characteristic Cantonese foods such as claypot rice and rice noodle. These steadily enhanced
the service of international long-distance flights. We linked the direct luggage carrying service among 11 airports in Los Angeles,
Vancouver and other places, which was convenient for passenger changing between domestic flights and international flights
at Guangzhou. We continued to enhance the hardware of high-end services by completing renovations and upgrades of its
Sky Pearl VIP lounge in seven airports including Guangzhou, Shenyang, Guilin, Nanning, Guiyang, Changchun and Shenzhen.
We developed a flight changing
WWWW
e ddddev lllelop ddded a fffflililili hhhghtt hhhchan iiiging
management system. During the
mmm
year, there have been a total of
yyyye
nearly 3 million short messages of
ne
flight delay successfully sent, which ensured passengers had timely access to the latest updates of flights and was well received.
We also launched the public service platform on WeChat and became the first airlines in China which support ticket purchase,
check-in and other services through WeChat. As of the end of the year, the public account of China Southern Airlines on WeChat
had over 1 million followers, which elevated the refined services.
During the reporting period, the Company further strengthened cooperation with all parties, enhanced the brand
publicity.
By using the opportunities offered by the visit of the Premier of New Zealand, the story of “Going into the New State-owned
Enterprises” of CCTV, operation of the first B787 in China, Sydney and Melbourne Festivals, “The Future of Air Transportation
2013” Forum in London etc., we expanded the brand awareness and influence of China Southern Airlines in China and the
overseas countries. We signed strategic cooperation agreements with the New Zealand government, Hubei provincial government,
Guangdong Provincial Airport Group etc, and pushed forward the cooperation with Qantas Airways, British Airways, Aeroflot,
Etihad Airways and Kenya Airways, which further secured the development foundation.
24
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
Risk Exposure
Macro environment risks
Risks of fluctuation in macroeconomy
The degree of prosperity of the civil aviation industry is closely linked to the status of the development of the domestic and
international macroeconomy. Macroeconomy has a direct impact on the economic activities, the disposable income of the
residents and the import and export trade volume, which in turn affects the demand of the air passenger and air cargo. For
example, in the past years, the financial crisis in the United States and the European debt crisis caused the consumers to
reduce expenditure or shift expenditures to other consumption items, which resulted in the significant drop in the demand
for air transport. Therefore, the changing status of economy will affect the demand for air transport, which leads to the
volatile business and operating results.
Risks of macro policies
Macroeconomic policies made by the government, in particular the adjustment in the cyclical macro policies, including credit,
interest rate, exchange rate and fiscal expenditure, have a direct or indirect impact on the air transport industry. In addition,
the establishment of the new airlines, the opening of aviation rights, routes, fuel surcharges, air ticket fares and other aspects
are regulated by the government, and the changes in the relevant policies will have a potential impact on the operating
results and the future development of the business of the Company.
Risks of the increasing operating cost arising from the levy of carbon tax in Europe
In 2008, the EU Commission introduced legislation to the effect that the EU will levy carbon tax from 2012. Pursuant to this
policy, the domestic airlines having flight points in Europe will undertake the same carbon emission reductions obligation
as the European local airlines, which will lead to a significant increase in the operating cost of domestic airlines in Europe,
including our Company and add to pressure in the operations. Although the EU Commission has brought forward to the
Council of the EU and the European Parliament the EU Emission Trading System (ETS) legislation amendment, which will
narrow down ETS within the EU airspace, the EU has not yet made the final decision.
25
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
Industry risks
Risks of intensifying competition in the industry
With the gradual opening of the domestic civil aviation market, the competition in the scale, flights, prices, service and other
aspects among three big airlines, foreign airlines and small and medium airlines has been intensifying, which poses tough
challenges to our operation model and management level. As for the Hong Kong, Macau, Taiwan and international routes,
the Company faces the competition from a number of powerful foreign airlines. The foreign airlines have certain advantages
in the operation management and customer resources, which brings certain unfavourable effect on the market share and
profitability of the Company.
Risks of competition from other modes of transportation
There are certain substitutability in short to medium range routes transportation among air transport, railway transport
and road transportation. With the roll-out of CRH trains, the construction of the national high speed rails network and the
improving inter-city expressways network, the competition and substitution of railway transport and road transportation
with relatively inexpensive cost poses certain competitive pressure on the development of the air transport business of the
Company.
Other force majeure and unforeseen risks
The aviation industry is subject to a significant impact from the external environment, and the natural disasters, including
earthquake, typhoon, and tsunami, abrupt public health incidents as well as terrorist attacks, international political turmoil
and other factors will affect the normal operation of the airlines, thus bringing unfavourable effect to the results and long-
term development of the Company.
Risks of the Company management
Safety risks
Flight safety is the prerequisite and foundation for the normal operation of the airlines. Adverse weather, mechanical
failure, human error, aircraft defects as well as other force majeure incidents may have effect on the flight safety. With big
size of aircraft fleet and more cross-location, overnight and international operations, the Company was confronted with a
certain test in its safety operation. In case of any flight accident, it will have an adverse effect on the normal production and
operation and reputation of the Company.
Risks of high capital expenditure
The major capital expenditure of the Company is to purchase aircraft. In recent years, the Company has been optimizing
the aircraft fleet structure and reducing on the operational cost through introducing the advanced types of aircrafts, exit of
obsolete types of aircrafts and streamlining the types of aircrafts. Due to the high fixed costs for the operation of aircraft, if
the operation condition of the Company suffered from a severe downturn, it may lead to the significant drop in the annual
profit, financial distress and other problems.
Risks of fluctuations in the fuel
The fuel cost is the most major cost and expenditure for an airlines. Both the fluctuation in the international crude oil prices
and the adjustment of domestic fuel prices by the National Development and Reform Commission has big effect on the
profit of the Company. Although the Company has adopted various fuel-saving measures to control the unit fuel cost and
decrease the fuel consumption volume, if the fuel prices continues to rise in the future or there is significant fluctuations in
the international oil prices, the operating performance of the Company may be significantly affected.
26
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
Risks of fluctuation in the interest rate and exchange rate
High leveraged operation is one of the characteristics of the airlines industry. Therefore, the change in the interest rate
for the debts of the Company will have big effect on the capital cost of the Company. In addition, substantially all of the
Company’s lease obligations and most of loans are denominated in foreign currencies, principally in US dollars and Japanese
Yen, and depreciation or appreciation of the Renminbi against foreign currencies affects the Company’s results significantly
because the Group’s foreign currency payments generally exceed its foreign currency receipts in its operation.
Risks of the seasonal fluctuation in operation
The operation results of the Company are, to a significant extent, related to passenger transportation volume and volume of
cargoes and mails. Because the civil aviation industry is of a cyclical nature, and there is a clear distinction between peak and
off seasons for air transport in a year, therefore, the revenue and profit from the passenger services of the Company will also
fluctuate with different seasons.
OPERATING DATA SUMMARY
The following table sets forth certain financial information and operating data by geographic regions:
Traffic
Revenue passenger kilometers (RPK) (million)
– Domestic
– Hong Kong, Macau and Taiwan
– International
For the year ended
31 December
2013
2012
2013 vs 2012
Increase/
(Decrease)
%
116,105.71
2,574.27
29,736.57
107,278.56
2,536.91
25,719.26
8.23%
1.47%
15.62%
Total:
148,416.55
135,534.73
9.50%
Revenue tonne kilometers (RTK) (million)
– Domestic
– Hong Kong, Macau and Taiwan
– International
11,765.27
241.05
5,462.27
10,924.30
242.43
4,993.39
7.70%
(0.57%)
9.39%
Total:
17,468.59
16,160.12
8.10%
RTK –Passenger (million)
– Domestic
– Hong Kong, Macau and Taiwan
– International
10,285.77
226.65
2,628.76
9,524.08
223.64
2,277.71
8.00%
1.35%
15.41%
Total:
13,141.18
12,025.43
9.28%
27
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
RTK –Cargo (million)
– Domestic
– Hong Kong, Macau and Taiwan
– International
For the year ended
31 December
2013
2012
2013 vs 2012
Increase/
(Decrease)
%
1,479.50
14.40
2,833.51
1,400.22
18.79
2,715.68
5.66%
(23.36%)
4.34%
Total:
4,327.41
4,134.69
4.66%
Passengers carried (thousand)
– Domestic
– Hong Kong, Macau and Taiwan
– International
82,172.28
2,019.28
7,599.41
77,634.23
1,928.54
6,922.22
5.85%
4.71%
9.78%
Total:
91,790.97
86,484.99
6.14%
Cargo and mail carried (thousand tonnes)
– Domestic
– Hong Kong, Macau and Taiwan
– International
923.73
13.70
338.92
890.38
15.66
325.82
3.75%
(12.52%)
4.02%
Total:
1,276.35
1,231.86
3.61%
Capacity
Available seat kilometers (ASK) (million)
– Domestic
– Hong Kong, Macau and Taiwan
– International
144,732.62
3,594.29
38,472.93
131,821.86
3,464.29
34,282.98
9.79%
3.75%
12.22%
Total:
186,799.84
169,569.13
10.16%
Available tonne kilometers (ATK) (million)
– Domestic
– Hong Kong, Macau and Taiwan
– International
16,486.17
407.59
8,058.23
15,069.70
396.74
7,598.25
9.40%
2.73%
6.05%
Total:
24,951.99
23,064.69
8.18%
28
Load factor
Passenger load factor (RPK/ASK) (%)
– Domestic
– Hong Kong, Macau and Taiwan
– International
Overall:
Overall load factor (RTK/ATK)(%)
– Domestic
– Hong Kong, Macau and Taiwan
– International
Overall:
Yield
Yield per RPK (RMB)
– Domestic
– Hong Kong, Macau and Taiwan
– International
Overall:
Yield per RFTK (RMB)
– Domestic
– Hong Kong, Macau and Taiwan
– International
Overall:
Yield per RTK (RMB)
– Domestic
– Hong Kong, Macau and Taiwan
– International
Overall:
Cost
Operating cost per ATK (RMB)
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
For the year ended
31 December
2013
2012
2013 vs 2012
Increase/
(Decrease)
%
80.22
71.62
77.29
79.45
71.36
59.14
67.78
70.01
0.61
0.84
0.50
0.59
1.42
6.02
1.49
1.48
6.24
9.33
3.49
5.42
81.38
73.23
75.02
79.93
72.49
61.11
65.72
70.06
0.69
0.84
0.53
0.66
1.57
5.22
1.57
1.59
6.96
9.20
3.57
5.95
(1.43%)
(2.20%)
3.03%
(0.60%)
(1.56%)
(3.22%)
3.13%
(0.07%)
(11.59%)
–
(5.66%)
(10.61%)
(9.55%)
15.33%
(5.10%)
(6.92%)
(10.34%)
1.41%
(2.24%)
(8.91%)
3.94
4.16
(5.29%)
29
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
Fleet
Total number of aircraft at year end
– Boeing
– Airbus
– Other
Total:
Number of flights (thousand)
– Domestic
– Hong Kong, Macau and Taiwan
– International
For the year ended
31 December
2013
2012
2013 vs 2012
Increase/
(Decrease)
%
282
253
26
561
243
225
23
491
731.61
17.25
61.01
682.73
16.03
58.26
16.05%
12.44%
13.04%
14.26%
7.16%
7.61%
4.72%
Total:
809.87
757.02
6.98%
Kilometers flown (million)
1,147.07
1,052.50
8.99%
Hours flown (thousand)
1,829.43
1,680.69
8.85%
Overall utilization rate (hours per day)
– Boeing
– Airbus
– Other
Total:
Overall fleet age (year)
9.79
9.79
6.32
9.63
6.00
10.04
9.95
5.97
(2.49%)
(1.61%)
5.86%
9.81
(1.83%)
6.32
(5.06%)
30
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
FLEET DATA SUMMARY
As at 31 December 2013, the size and structure of the aircraft fleets and the delivery and disposal of aircrafts of the Group
were as follows:
Number of Number of
aircraft
aircraft
under
operating
lease
finance
under Number of
aircraft
lease purchased
Delivery
Number of
aircraft
Disposal
Models
Boeing 787
Boeing 777-200
Boeing 757-200
Boeing 737 Series
Boeing 747-400F
Boeing 777-200F
Airbus 380-800
Airbus 330-300
Airbus 330-200
Airbus 320 Series
EMB190
EMB145
Total
0
0
0
68
0
0
0
8
2
84
20
0
182
8
0
0
51
0
4
2
3
11
58
0
0
137
0
8
19
118
2
4
3
0
3
79
0
6
242
8
44
2
1
3
24
3
85
2
13
15
8
8
19
237
2
8
5
11
16
221
20
6
561
Layout
As at 31 December 2013, the layout of each model were as follows:
Models
Boeing 787
Boeing 777-200
Boeing 757-200
Boeing 737 Series
Boeing 747-400F
Boeing 777-200F
Airbus 380-800
Airbus 330-200
Airbus 330-300
Airbus 320 Series
EMB190
EMB145
228
360/284
204/197/196/192/180/174
170/164/161/159/148/144/140/138/128/126/120
n/a
n/a
506
258/218
284/275
179/152/122
98
50
31
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
During the period from 2014 to 2016, the plans for delivery and disposal of aircraft of the Group are as follows:
Year
2014
2015
2016
Forecast
data
at the end
of the
period Delivery Disposal
Forecast
data
at the end
of the
period Delivery Disposal
Forecast
data
at the end
of the
period
Delivery Disposal
4
5
31
4
21
65
12
5
8
17
256
0
4
5
15
16
240
20
0
602
2
12
2
8
2
6
24
4
7
4
4
2
28
4
10
52
15
16
7
4
10
280
0
12
5
19
16
250
20
0
639
3
4
5
12
0
16
10
4
10
284
0
12
5
24
16
250
20
0
651
Models
Boeing 787
Boeing 777-300ER
Boeing 777-200
Boeing 757-200
Boeing 737 Series
Boeing 747-400F
Boeing 777-200F
Airbus 380-800
Airbus 330-300
Airbus 330-200
Airbus 320 Series
EMB190
EMB145
Total
Note: The above information is for reference only. The number and schedule for the delivery and disposal of aircrafts as set out above
may be adjusted according to the actual circumstances.
32
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
FINANCIAL PERFORMANCE
Part of the financial information presented in this section is derived from the Company’s audited financial statements that
have been prepared in accordance with IFRSs.
The profit attributable to equity shareholders of the Company of RMB1,986 million was recorded in 2013 as compared to
the profit attributable to equity shareholders of the Company of RMB2,619 million in 2012. The Group’s operating revenue
decreased by RMB967 million or 1.0% from RMB99,514 million in 2012 to RMB98,547 million in 2013. Passenger load
factor decreased by 0.4 percentage point from 79.9% in 2012 to 79.5% in 2013. Passenger yield (in passenger revenue per
RPK) decreased by 10.61% from RMB0.66 in 2012 to RMB0.59 in 2013. Average yield (in traffic revenue per RTK) decreased
by 8.91% from RMB5.95 in 2012 to RMB5.42 in 2013. Operating expenses increased by RMB2,403 million or 2.5% from
RMB95,877 million in 2012 to RMB98,280 million in 2013. As a result of the increase in operating expenses, operating
profit of RMB1,510 million was recorded in 2013 as compared to operating profit of RMB5,099 million in 2012, decrease by
RMB3,589 million.
OPERATING REVENUE
2013
Operating
revenue
RMB million
Percentage
%
2012
Operating
revenue
RMB million
Percentage
%
Changes
in revenue
%
Traffic revenues
94,684
96.1%
96,100
96.6%
(1.5%)
Including: Passenger revenues
– Domestic
– Hong Kong, Macau and Taiwan
– International
Cargo and mail revenue
Other operating revenues
Mainly including: Commission income
Ground service income
Expired sales in advance
of carriage
General aviation income
Hotel and tour
operation income
88,271
71,277
2,162
14,832
6,413
3,863
1,040
349
684
484
565
3.9%
89,544
73,845
2,133
13,566
6,556
3,414
757
350
495
445
647
3.4%
(1.4%)
(3.5%)
1.4%
9.3%
(2.2%)
13.2%
37.4%
(0.3%)
38.2%
8.8%
(12.7%)
Total operating revenues
98,547
100.0%
99,514
100.0%
(1.0%)
Less: fuel surcharge income
(13,062)
(13,378)
Total operating revenue excluding
fuel surcharge
85,485
86,136
33
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
Traffic revenue composition (RMB million)
6,413 (6.8%)
6,556 (6.8%)
88,271 (93.2%)
89,544 (93.2%)
2013
2012
Passenger Revenue
Cargo and Mail Revenue
Passenger revenue composition (RMB million)
14,832
(16.8%)
2,162
(2.4%)
13,566
(15.2%)
2,133
(2.4%)
71,277
(80.8%)
73,845
(82.5%)
2013
2012
Domestic
Hong Kong, Macau and Taiwan
International
Substantially all of the Group’s operating revenues is attributable to airlines and airlines related operations. Traffic revenues
accounted for 96.1% and 96.6% of total operating revenue in 2013 and 2012, respectively. Passenger revenues and cargo
and mail revenues accounted for 93.2% and 6.8%, respectively of the total traffic revenue in 2013. During the reporting
period, the Group’s total traffic revenues was RMB94,684 million, representing a decrease of RMB1,416 million or 1.5%
from prior year, mainly due to the VAT reform which leads to the decrease of domestic revenues of RMB4,798 million. The
other operating revenues is mainly derived from commission income, expired sales in advance of carriage, hotel and tour
operation income, general aviation income and ground services income.
The decrease in operating revenue was primarily due to a 1.4% decrease in passenger revenue from RMB89,544 million
in 2012 to RMB88,271 million in 2013. The total number of passengers carried increased by 6.14% to 91.791 million
passengers in 2013. RPKs increased by 9.50% from 135,535 million in 2012 to 148,417 million in 2013, primarily as a result
of the increase in number of passengers carried. Passenger yield per RPK decreased from RMB0.66 in 2012 to RMB0.59 in
2013, which is mainly due to the impact from VAT reform.
34
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
Domestic passenger revenue, which accounted for 80.7% of the total passenger revenue in 2013, decreased by 3.5% from
RMB73,845 million in 2012 to RMB71,277 million in 2013. Domestic passenger traffic in RPKs increased by 8.23%, while
passenger capacity in ASKs increased by 9.79%, resulting in a decrease in passenger load factor by 1.2 percentage points
from 81.4% in 2012 to 80.2% in 2013. Domestic passenger yield per RPK decreased from RMB0.69 in 2012 to RMB0.61 in
2013.
Hong Kong, Macau and Taiwan passenger revenue, which accounted for 2.4% of total passenger revenue, increased by
1.4% from RMB2,133 million in 2012 to RMB2,162 million in 2013. For Hong Kong, Macau and Taiwan flights, passenger
traffic in RPKs increased by 1.47%, while passenger capacity in ASKs increased by 3.75%, resulting in a decrease in
passenger load factor by 1.6 percentage points from 73.2% in 2012 to 71.6% in 2013. Passenger yield per RPK remained at
RMB0.84 in 2012 and 2013.
International passenger revenue, which accounted for 16.8% of total passenger revenue, increased by 9.3% from
RMB13,566 million in 2012 to RMB14,832 million in 2013. For international flights, passenger traffic in RPKs increased by
15.62%, while passenger capacity in ASKs increased by 12.22%, resulting in a 2.3 percentage points increase in passenger
load factor from 75.0% in 2012 to 77.3% in 2013. Passenger yield per RPK decreased from RMB0.53 in 2012 to RMB0.50 in
2013.
Cargo and mail revenue, which accounted for 6.8% of the Group’s total traffic revenue and 6.5% of total operating
revenue, decreased by 2.2% from RMB6,556 million in 2012 to RMB6,413 million in 2013. The decrease was attributable to
the continued downturn of the demand in the cargo market and the low level cargo fare.
Other operating revenue increased by 13.2% from RMB3,414 million in 2012 to RMB3,863 million in 2013. The increase was
primarily due to the general growth in income from commission and expired sales in advance of carriage.
OPERATING EXPENSES
Total operating expenses in 2013 amounted to RMB98,280 million, representing an increase of 2.5% or RMB2,403
million over 2012, primarily due to the total effect of increases in payroll, landing and navigation fees, depreciation and
amortisation, and other operating costs. Total operating expenses as a percentage of total operating revenue increased from
96.3% in 2012 to 99.7% in 2013.
35
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
Operating expenses
RMB million
Percentage
RMB million
Percentage
2013
2012
Flight operation expenses
Mainly including: Jet fuel costs
Aircraft operating lease charges
Flight personnel payroll
and welfare
Maintenance
Aircraft and traffic servicing expenses
Promotion and selling expenses
General and administrative expenses
Depreciation and amortisation
Impairment on property, plant and equipment
Others
54,010
35,538
4,767
5,799
7,805
15,091
7,754
2,470
9,347
536
1,267
55.0%
7.9%
15.4%
7.9%
2.5%
9.5%
0.5%
1.3%
54,690
37,401
4,897
5,051
7,971
14,072
7,134
2,425
8,264
–
1,321
57.0%
8.3%
14.7%
7.5%
2.5%
8.6%
–
1.4%
Total operating expenses
98,280
100.0%
95,877
100.0%
Composition of operating expenses in 2013
Comparision of operating expenses
0.5% 1.3%
Flight operation expenses
9.5%
2.5%
7.9%
(RMB million)
60,000
50,000
40,000
30,000
20,000
10,000
Maintenance
Aircraft and traffic
servicing expenses
Promotion and selling
expenses
General and
administrative expenses
Depreciation and
amortisation
Impairment on property,
plant and equipment
Others
2013
2012
Others
0
D epreciatio n an d a m ortisatio n
G eneral an d ad ministrative expenses
Pro m otio n an d sellin g expenses
Aircraft an d traffic servicin g expenses
Im pair m ent o n pro perty, plant an d eq uip m ent
M aintenance
Flig ht o peratio n expenses
15.4%
7.9%
55.0%
Flight operations expenses, which accounted for 55.0% of total operating expenses, decreased by 1.2% from RMB54,690
million in 2012 to RMB54,010 million in 2013, primarily as a result of decrease in jet fuel costs because of decrease in
average fuel prices. Jet fuel costs, which accounted for 65.8% of flight operations expenses, decreased by 5.0% from
RMB37,401 million in 2012 to RMB35,538 million in 2013.
Maintenance expenses, which accounted for 7.9% of total operating expenses, decreased by 2.1% from RMB7,971 million
in 2012 to RMB7,805 million in 2013. The decrease was mainly due to the impact of the VAT reform.
36
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
Aircraft and traffic servicing expenses, which accounted for 15.4% of total operating expenses, increased by 7.2% from
RMB14,072 million in 2012 to RMB15,091 million in 2013. The increase was primarily due to a 5.9% rise in landing and
navigation fees from RMB8,984 million in 2012 to RMB9,510 million in 2013, resulted from the increase in the number of
take-off and landings and the average unit price of take-off and landing charges.
Promotional and selling expenses, which accounted for 7.9% of total operating expenses, increased by 8.7% from
RMB7,134 million in 2012 to RMB7,754 million in 2013.
General and administrative expenses, which accounted for 2.5% of the total operating expenses, increased by 1.9% from
RMB2,425 million in 2012 to RMB2,470 million in 2013.
OPERATING PROFIT
Operating profit of RMB1,510 million was recorded in 2013 (2012: RMB5,099 million). The decrease in profit was mainly due
to the net effect of decrease in operating revenue by RMB967 million or 1.0% in 2013 and increase in operating expenses by
RMB2,403 million or 2.5%.
OTHER NET INCOME
Other net income decreased by RMB219 million from RMB1,462 million in 2012 to RMB1,243 million in 2013, mainly due to
the decrease of government grants and loss on disposal of property, plant and equipment.
Interest expense increased by RMB275 million from RMB1,376 million in 2012 to RMB1,651 million in 2013 was mainly due
to the increase in number of aircraft held through a finance lease.
Net exchange gain of RMB2,903 million was recorded in 2013, an increase of RMB2,636 million from RMB267 million in
2012, mainly due to Renminbi appreciated significantly against US dollar in 2013.
INCOME TAX
Income tax expense of RMB734 million was recorded in 2013, decrease by RMB220 million from RMB954 million in 2012,
mainly due to the decrease of profit before income tax.
LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE
As at 31 December 2013, the Group’s current liabilities exceeded its current assets by RMB28,640 million. For the year ended
31 December 2013, the Group recorded a net cash inflow from operating activities of RMB9,703 million, a net cash outflow
from investing activities of RMB12,205 million and a net cash inflow from financing activities of RMB4,168 million and an
increase in cash and cash equivalents of RMB1,666 million.
Net cash generated from operating activities
Net cash used in investing activities
Net cash from financing activities
Net increase in cash and cash equivalents
2013
RMB million
2012
RMB million
9,703
(12,205)
4,168
11,704
(12,153)
668
1,666
219
37
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
In 2013 and thereafter, the liquidity of the Group primarily depends on its ability to maintain adequate cash inflow from
operations to meet its debt obligations as they fall due, and its ability to obtain adequate external financing to meet
its committed future capital expenditures. As at 31 December 2013, the Group had banking facilities with several PRC
commercial banks for providing loan facilities up to approximately RMB166,270 million (2012: RMB173,162 million), of
which approximately RMB120,904 million (2012: RMB112,793 million) was unutilised. The Directors believe that sufficient
financing will be available to the Group.
The Directors have carried out a detailed review of the cash flow forecast of the Group for the twelve months ending 31
December 2014. Based on such forecast, the Directors have determined that adequate liquidity exists to finance the working
capital and capital expenditure requirements of the Group during that period. In preparing the cash flow forecast, the
Directors have considered historical cash requirements of the Group as well as other key factors, including the availability of
the above-mentioned loan finance which may impact the operations of the Group during the next twelve-month period. The
Board is of the opinion that the assumptions and sensitivities which are included in the cash flow forecast are reasonable.
However, as with all assumptions in regard to future events, these are subject to inherent limitations and uncertainties and
some or all of these assumptions may not be realised.
The analyses of the Group’s borrowings and lease obligation are as follows:
Composition of borrowings and lease obligation
2013
RMB million
2012
RMB million
Change
Total borrowings and lease obligation
92,497
73,960
25.1%
Fixed rate borrowings and lease obligation
Floating rate borrowings and lease obligation
4,974
87,523
6,139
67,821
(19.0%)
29.0%
4,974
(5.4%)
6,139
(8.3%)
87,523
(94.6%)
67,821
(91.7%)
2013
2012
Fixed rate
(RMB million)
Floating rate
(RMB million)
38
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
Analysis of borrowings and lease obligation by currency
USD
RMB
Others
Total
Maturity analysis of borrowings
Within 1 year
After 1 year but within 2 years
After 2 years but within 5 years
After 5 years
Total borrowings
2013
RMB million
2012
RMB million
88,970
670
2,857
70,865
807
2,288
92,497
73,960
2013
RMB million
2012
RMB million
23,878
14,805
30,553
23,261
24,393
9,639
23,112
16,816
92,497
73,960
The Group’s capital structure at the end of the year is as follows:
Net debts (RMB million)
Total equity (RMB million)
Ratio of net debt to total equity
42,451
(28.9%)
39,734
(31.4%)
2013
2012
Change
104,345
42,451
246%
86,669
39,734
218%
20.4%
6.8%
12.8%
104,345(71.1%)
86,669 (68.6%)
2013
2012
Net debts (RMB Million)
Total equity (RMB Million)
39
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
Net debts (aggregate of borrowings, obligations under finance leases, trade payables, sales in advance of carriage, amounts
due to related companies, accrued expenses and other liabilities less cash and cash equivalents) increased by 20.4% to
RMB104,345 million at 31 December 2013, compared to RMB86,669 million at 31 December 2012.
As at 31 December 2013, total equity attributable to equity shareholders of the Company amounted to RMB34,329 million,
representing an increase of RMB1,490 million from RMB32,839 million at 31 December 2012. Total equity at 31 December
2013 amounted to RMB42,451 million (2012: RMB39,734 million).
Ratio of net debt to total equity of the Group at 31 December 2013 was 246%, as compared to 218% at 31 December
2012.
FINANCIAL RISK MANAGEMENT POLICY
Foreign currency risk
The Renminbi is not freely convertible into foreign currencies. All foreign exchange transactions involving Renminbi must
take place either through the People’s Bank of China or other institutions authorised to buy and sell foreign exchange or at a
swap centre.
The Group has significant exposure to foreign currency risk as substantially all of the Group’s obligations under finance lease,
borrowings and operating lease commitment are denominated in foreign currencies, principally in US dollars, Singapore
dollars and Japanese Yen. Depreciation or appreciation of the Renminbi against foreign currencies affects the Group’s results
significantly because the Group’s foreign currency payments generally exceed its foreign currency receipts. The Group is not
able to hedge its foreign currency exposure effectively other than by retaining its foreign currency denominated earnings and
receipts to the extent permitted by the State Administration of Foreign Exchange, or subject to certain restrictive conditions,
entering into forward foreign exchange contracts with authorised banks.
Jet fuel price risk
The Group is required to procure a majority of its jet fuel domestically at PRC spot market prices. There are currently no
effective means available to manage the Group’s exposure to the fluctuations in domestic jet fuel prices. However, according
to a pricing mechanism that was jointly introduced by the National Development and Reform Commission and the Civil
Aviation Administration of China in 2009, which allows certain flexible levy of fuel surcharge linked to the jet fuel price,
airlines companies may, within a prescribed scope, make its own decision as to fuel surcharges for domestic routes and the
pricing structure. The pricing mechanism, to a certain extent, reduces the Group’s exposure to fluctuation in jet fuel price.
MAJOR CHARGE ON ASSETS
As at 31 December 2013, certain aircraft of the Group with an aggregate carrying value of approximately RMB80,233 million
(2012: RMB60,538 million) were mortgaged under certain borrowings and lease agreements.
40
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Management Discussion and Analysis
COMMITMENTS AND CONTINGENCIES
Commitments
As at 31 December 2013, the Group had capital commitments (excluding investment commitment) of approximately
RMB51,353 million (2012: RMB75,129 million). Of such amounts, RMB47,651 million related to the acquisition of aircraft
and related flight equipment and RMB3,702 million for other projects.
As at 31 December 2013, the Group had investment commitments as follows:
Authorised and contracted for
Capital contributions for acquisition of interests in associates
Share of capital commitments of a joint venture
Authorised but not contracted for
Share of capital commitments of a joint venture
2013
RMB million
2012
RMB million
70
58
128
171
299
119
113
232
218
450
In 2013, the Company has made the contribution amounting to RMB0.72 billion in cash as the first installment for Henan
Airlines, a joint venture company owned as to 60% by the Company and 40% by Henan Civil Aviation Development and
Investment Co., Ltd., respectively. Henan Airlines has not officially commenced its operation during 2013.
Contingent Liabilities
(a)
The Group leased certain properties and buildings from CSAHC which located in Guangzhou, Wuhan and Haikou, etc.
However, such properties and buildings lack adequate documentation evidencing CSAHC’s rights thereto.
(b)
(c)
Pursuant to the indemnification agreement dated 22 May 1997 between the Group and CSAHC, CSAHC has agreed
to indemnify the Group against any loss or damage arising from any challenge of the Group’s right to use the certain
properties and buildings.
The Company and its subsidiary, Xiamen Airlines, entered into agreements with its pilot trainees and certain banks
to provide guarantees on personal bank loans amounting to RMB656 million (2012: RMB581 million) to be granted
to its pilot trainees to finance their respective flight training expenses. As at 31 December 2013, an aggregate of
personal bank loans of RMB464 million (2012: RMB398 million), under these guarantees, were drawn down from the
banks. During the year, the Group has made repayments of RMB6 million (2012: RMB3 million) due to the default of
payments of certain pilot trainees.
The Company received a claim on 11 July 2011 from an overseas entity (the “claimant”) against the Company for the
alleged breach of certain terms and conditions of an aircraft sale agreement. The claimant has made a claim against
the Company for an indemnity of USD46 million or for the refund of the down payments of USD12 million, and the
interest thereon which is calculated in accordance with Clause 35A, Supreme Court Act 1981 of the United Kingdom.
In 2012, the claimant subsequently changed its claim for the refund of the down payment to USD13 million. As at 25
July 2013, High Court of the United Kingdom announced the sentence of this case, overruled the claim and upheld the
counter claim the Company made, which include an indemnity of USD28 million, legal costs and the interest thereon.
As of the date of issuance of this financial information, the claimant has appealed. The Directors are of the opinion that
an outflow of resource embodying economic benefits is not probable to occur.
41
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Directors
The Board hereby presents this Annual Report and the audited financial statements for the year ended 31 December 2013 of
the Group to the shareholders of the Company.
PRINCIPAL ACTIVITIES, OPERATING RESULTS AND FINANCIAL POSITION
The Group is principally engaged in airlines operations. The Group also operates certain airlines related businesses, including
provision of aircraft maintenance and air catering services. The Group is one of the largest airlines in China. In 2013, the
Group ranked first among all Chinese airlines in terms of number of passengers carried, number of scheduled flights per
week, number of hours flown, number of routes and size of aircraft fleet. The Group has prepared the financial statements
for the year ended 31 December 2013 in accordance with IFRSs. Please refer to pages 78 to 185 of this Annual Report for
details.
FIVE-YEAR SUMMARY
A summary of the results and the assets and liabilities of the Group prepared under IFRSs for the five-year period ended 31
December 2013 are set out on pages 191 to 192 of this Annual Report.
DIVIDENDS
No interim dividend was paid during the year ended 31 December 2013 (2012: nil).
The Board recommends the payment of a final dividend of RMB0.4 (inclusive of applicable tax) per 10 shares for the year
ended 31 December 2013, totalling approximately RMB393 million based on the Company’s 9,817,567,000 issued shares.
A resolution for the dividend payment will be submitted for consideration at the 2013 annual general meeting of the
Company. The dividend will be denominated and declared in RMB and payable in RMB to holders of A share, and in HKD
to holders of H shares. The profit distribution proposal is subject to shareholders’ approval at the general meeting of the
Company.
Enterprise Income Tax of Overseas Non-Resident Enterprises
In accordance with the relevant tax laws and regulations in the PRC, the Company is obliged to withhold and pay PRC
enterprise income tax on behalf of non-resident enterprise shareholders at a tax rate of 10% when the Company distributes
any dividends to non-resident enterprise shareholders. As such, any H Shares of the Company which are not registered in
the name(s) of individual(s) (which, for this purpose, includes shares registered in the name of Hong Kong Securities Clearing
Company Nominees Limited, other nominees, trustees, or other organisations or groups) shall be deemed to be H Shares
held by non-resident enterprise shareholder(s), and the PRC enterprise income tax shall be withheld from any dividends
payable thereon. Non-resident enterprise shareholders may wish to apply for a tax refund (if any) in accordance with the
relevant requirements, such as tax agreements (arrangements), upon receipt of any dividends.
Individual Income Tax of Overseas Individual Shareholders
In accordance with the relevant tax laws and regulations in the PRC, when non-foreign investment companies of the
mainland which are listed in Hong Kong distribute dividends to their shareholders, the individual shareholders in general will
be subject to a withholding tax rate of 10% without making any application for the entitlement for the above-mentioned tax
rate. However, the Company is a foreign investment company and, as confirmed by the relevant tax authorities, according
to the Circular on Certain Issues Concerning the Policies of Individual Income Tax (Cai Shui Zi [1994] No. 020) («關於個人
所得稅若干政策問題的通知»(財稅字[1994]020號)) promulgated by the Ministry of Finance and the State Administration of
Taxation on 13 May 1994, overseas individuals are, as an interim measure, exempted from the PRC individual income tax for
dividends or bonuses received from foreign investment enterprises.
42
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Directors
BANK LOANS AND OTHER BORROWINGS
Details of the borrowings and obligations under finance leases of the Company and the Group are set out in notes 36 and 37
to the financial statements prepared under IFRSs.
INTEREST CAPITALISATION
For the year ended 31 December 2013, RMB321 million (2012: RMB389 million) was capitalised as the cost of construction in
progress and property, plant and equipment in the financial statements prepared under IFRSs.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment of the Company and the Group and movements of property, plant and equipment during the
year ended 31 December 2013 are set out in note 22 to the financial statements prepared under IFRSs.
MAJOR CUSTOMERS AND SUPPLIERS
The Group’s purchases from the largest supplier for the year represented approximately 20.1% of the Group’s total
purchases. Purchases from the five largest suppliers accounted for an aggregate of approximately 35.7% of the Group’s total
purchases in 2013. At no time during the year have the directors, their associates or any shareholder of the Company (which
to the knowledge of the directors owns more than 5% of the Company’s share capital) had any interest in these five largest
suppliers.
The Group’s aggregate turnover with its five largest customers did not exceed 30% of the Group’s total turnover in 2013.
TAXATION
Details of taxation of the Company and the Group are set out in notes 19 and 30 to the financial statements prepared under
IFRSs.
RESERVES
Movements in the reserves of the Company and the Group during the year are set out in note 47 to the financial statements
prepared under IFRSs.
43
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Directors
EMOLUMENT POLICY
As at 31 December 2013, the Group had an aggregate of 80,175 employees (2012: 73,668).
The emolument policy for the employees of the Group is principally set up by the Board on the basis of their merit,
qualifications, competence and the Group’s operating results.
The emolument policy of the Directors and senior management of the Company are recommended by the Remuneration and
Assessment Committee to the Board, having regard to the Group’s operating results, individual performance and comparable
market statistics in accordance with the “Administrative Measures on Remuneration of Directors” and “Administrative
Measures on Remuneration of Senior Management”.
On 30 November 2011, the Company’s General Meeting approved the “H Share Appreciation Rights Scheme of China
Southern Airlines Company Limited” with an aim to provide medium to long term incentive to certain Directors, senior
management, managerial personnel and key technical of the Company and promote the continuous development of the
business of the Group, details of the scheme is set out in note 50(c) to the financial statements prepared under IFRSs.
Details of the remuneration of the Directors, Supervisors and senior management of the Company are set out in note 18 to
the financial statements prepared under IFRSs.
Details of other employees’ retirement and housing benefits are set out in notes 14 and 50 to the financial statements
prepared under IFRSs.
Band
HK$
0-500,000
500,001-1,000,000
1,000,001-1,500,000
1,500,001-2,000,000
Total
Number of Senior Management
2013
2012
1
8
1
3
13
1
8
4
1
14
SUBSIDIARIES
Details of the principal subsidiaries of the Company are set out in note 25 to the financial statements prepared under IFRSs.
SHARE CAPITAL STRUCTURE
Change in Share Capital
There was no change in the share capital of the Company in 2013.
44
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Directors
Share Capital Structure
As at 31 December 2013, the share capital of the Company comprised the following:
Type of Shares
1. H Shares
2. A Shares
Total issued Shares
Number of Shares
total share capital (%)
Approximate
percentage of
2,794,917,000
7,022,650,000
9,817,567,000
28.47
71.53
100.00
SUBSTANTIAL SHAREHOLDERS
As at 31 December 2013, to the knowledge of the Directors, chief executives and Supervisors of the Company, the following
persons (other than the Directors, chief executive or Supervisors of the Company) had interests and short positions in the
shares and underlying shares of the Company which were required to be recorded in the register of the Company required to
be kept under section 336 of the Securities and Futures Ordinance (the “SFO”):
% of the
% of the
issued share
% of the total
Name of
shareholder
Capacity
Type of
Share
Number of
total issued
total issued
capital of
Shares held
A Shares
H Shares
the Company
China Southern Air
Beneficial owner
A Share
4,150,050,000 (L)
59.10%
–
42.27%
Holding Company
Interest in controlled
(“CSAHC”) (Note)
corporation
H Share
Total
1,064,770,000 (L)
5,214,820,000 (L)
Nan Lung Holding Limited
Beneficial Owner
H Share
1,064,770,000 (L)
(‘Nan Lung”)
(Note)
Interest in controlled
corporation
–
–
–
38.10%
–
10.85%
53.12%
38.10%
10.85%
Note:
CSAHC was deemed to be interested in an aggregate of 1,064,770,000 H Shares through its direct and indirect wholly-owned subsidiaries
in Hong Kong, of which 31,120,000 H Shares were directly held by Yazhou Travel Investment Company Limited (representing approximately
1.11% of its then total issued H Shares) and 1,033,650,000 H Shares were directly held by Nan Lung (representing approximately 36.98%
of its then total issued H Shares). As Yazhou Travel Investment Company Limited is also an indirect wholly-owned subsidiary of Nan Lung,
Nan Lung was also deemed to be interested in the 31,120,000 H Shares held by Yazhou Travel Investment Company Limited. As disclosed
in the announcement of the Company dated 22 January 2014, CSAHC increased its shareholdings in the Company by 1,175,267 A shares
via the trading system of the Shanghai Stock Exchange on 22 January 2014. Immediately following the increase in shareholdings, CSAHC
held 4,151,225,267 A shares of the Company, representing approximately 42.28% of the total issued share capital of the Company and
all shares of the Company directly and indirectly held by CSAHC represents approximately 53.13% of the total issued share capital of the
Company.
45
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Directors
Save as disclosed above, as at 31 December 2013, so far as was known to the Directors, chief executive and Supervisors of
the Company, no other person (other than the Directors, chief executive or Supervisors of the Company) had an interest or
a short position in the shares and underlying shares of the Company recorded in the register of the Company required to be
kept under section 336 of the SFO.
PARTICULAR OF SHAREHOLDERS
The total number of shareholders of the Company as at 31 December 2013 was 252,561.
Particulars of shareholdings of the Company’s 10 largest shareholders as at 31 December 2013 are as follows:
Shareholdings of 10 largest shareholders
Name of shareholders
Nature of shareholders
Percentage
of Shares
frozen shares
Total number
Pledged or
%
CSAHC
State-owned shareholder
42.27
4,150,050,000
None
HKSCC Nominees Limited
H shareholder
17.83
1,745,768,297
Unknown
Nan Lung
H shareholder
10.53
1,033,650,000
None
Anhui Conch Venture
Investment Co., Ltd.
Zhong Hang Xin Gang
Guarantee Co., Ltd.
A shareholder
A shareholder
2.09
205,263,890
Unknown
1.62
159,000,000
Unknown
Zhao Xiao Dong
A shareholder
1.51
147,878,224
Unknown
Wuhu RuiJian Investment
A shareholder
1.45
142,050,000
Unknown
Consultation Company Limited
The Industrial and Commercial
Bank of China – Baoying Pan-Coastal
Regional Growth Equity
Securities Investment Fund
（中國工商銀行－寶盈泛沿海區域
增長股票證券投資基金）
A shareholder
National Social Security Fund 501
A shareholder
0.24
0.20
23,976,800
Unknown
20,110,035
Unknown
Guoyuan Securities Co., Ltd.
Agreed Repurchase Securities
Trading Special Securities Account
（國元證券股份有限公司約定
購回式證券交易專用證券帳）
A shareholder
0.19
18,970,000
Unknown
PURCHASE, SALE OR REDEMPTION OF SHARES
Neither the Company nor any of its subsidiaries purchased, sold or redeemed any Shares during the year ended 31 December
2013.
46
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Directors
PRE-EMPTIVE RIGHTS
None of the provisions of the articles of association of the Company provides for any pre-emptive rights requiring the
Company to offer new Shares to existing shareholders in proportion to their existing shareholdings.
AUDIT COMMITTEE
The audit committee of the Company has reviewed and confirmed the audited financial statements of the Group for the year
ended 31 December 2013 and this Annual Report.
COMPLIANCE WITH THE MODEL CODE
Having made specific enquiries with all the Directors, the Directors have for the year ended 31 December 2013 complied with
the Model Code (the “Model Code”) for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of
the Rules Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock
Exchange”).
The Company has adopted a code of conduct which is no less stringent than the Model Code regarding securities
transactions of the Directors.
COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
In the opinion of the Board, the Group has complied with the code provisions of the Corporate Governance Code (the
“Code”) as set out in Appendix 14 of the Listing Rules for the year ended 31 December 2013.
DIRECTORS AND SUPERVISORS
The Directors and Supervisors during the year are set out as follows:
Position
Gender
Age
Name
Si Xian Min
Wang Quan Hua
Yuan Xin An
Yang Li Hua (Appointed on 24 January 2013)
Tan Wan Geng
Zhang Zi Fang
Xu Jie Bo
Li Shao Bin (Appointed on 24 January 2013)
Chairman of the Board and Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Vice Chairman of the Board and Executive Director
Executive Director
Executive Director
Executive Director
Gong Hua Zhang (Resigned on 26 December 2013)
Independent Non-executive Director
Wei Jin Cai
Ning Xiang Dong
Liu Chang Le
Independent Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Tan Jin Song (Appointed on 26 December 2013)
Independent Non-executive Director
Pan Fu
Li Jia Shi
Zhang Wei
Yang Yi Hua
Liang Zhong Gao (Resigned on 26 December 2013)
Wu De Ming (Appointed on 26 December 2013)
Chairman of the Supervisory Committee
Supervisor
Supervisor
Supervisor
Supervisor
Supervisor
Male
Male
Male
Female
Male
Male
Male
Male
Male
Male
Male
Male
Male
Male
Male
Female
Female
Male
Male
56
59
57
58
49
55
48
48
68
64
48
62
49
51
52
47
53
57
55
Save as disclosed above, since 1 January 2013 and up to the date of this Annual Report, there has been no change to the
Directors and Supervisors.
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CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Directors
INTERESTS AND SHORT POSITIONS OF DIRECTORS AND SUPERVISORS IN THE COMPANY AND
ASSOCIATED CORPORATIONS
As at 31 December 2013, none of the Directors, chief executives or Supervisors of the Company had interests or short
positions in the shares, underlying shares and/or debentures (as the case may be) of the Company or any of its associated
corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock
Exchange pursuant to Divisions 7 and 8 of Part XV of SFO (including interests or short positions which are taken or deemed
to have taken by such Directors and Supervisors under such provisions of the SFO), or which were required to be recorded
in the register maintained by the Company pursuant to section 352 of the SFO, or which were required to be notified to the
Company and the Stock Exchange pursuant to the Model Code.
SERVICE CONTRACTS OF THE DIRECTORS AND SUPERVISORS
None of the Directors or Supervisors has entered or proposed to enter into any service contracts with the Company
or its subsidiaries which are not determinable by the Company or its subsidiaries within one year without payment of
compensation, other than statutory compensation.
SUFFICIENCY OF PUBLIC FLOAT
According to the information publicly available to the Company, and within the knowledge of the Directors as at the latest
practicable date prior to the issue of this Annual Report, the Company had maintained sufficient public float as required by
the Listing Rules throughout the year ended 31 December 2013.
INTERESTS OF DIRECTORS AND SUPERVISORS IN CONTRACTS
During the year ended 31 December 2013, none of the Directors or Supervisors had a material interest in any contract of
significance to which the Company or any of its affiliates was a party.
CONNECTED TRANSACTIONS
The Company entered into certain connected transactions with CSAHC and other connected persons from time to time.
Details of the connected transactions of the Company, as defined under the Listing Rules, conducted in 2013 which are
required to be disclosed herein under the Listing Rules, are as follows:
(1) De-merger Agreement
The De-merger Agreement dated 25 March 1995 (such agreement was amended by the Amendment Agreement No.1
dated 22 May 1997) was entered into between CSAHC and the Company for the purpose of defining and allocating
the assets and liabilities between CSAHC and the Company. Under the De-merger Agreement, CSAHC and the
Company have agreed to indemnify the other party against claims, liabilities and expenses incurred by such other party
relating to the businesses, assets and liabilities held or assumed by CSAHC or the Company pursuant to the De-merger
Agreement.
Neither the Company nor CSAHC has made any payments in respect of such indemnification obligations from the date
of the De-merger Agreement up to the date of this Annual Report.
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CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Directors
(2) Continuing Connected Transactions between the Company and CSAHC (and their respective subsidiaries)
A
Southern Airlines (Group) Import and Export Trading Company Limited (“SAIETC”), a wholly-owned subsidiary of
CSAHC
On 28 January 2011, the Company renewed the import and export agency framework agreement (the “Import
and Export Agency Framework Agreement”) with SAIETC. The scope of cooperation under the agreement covers
import and export services, custom clearing services, customs declaration and inspection services, and tendering
and agency services etc. The agreement is effective for a period from 1 January 2011 to 31 December 2013, with
the annual cap for the commission not exceeding RMB97.2 million.
On 19 April 2013, the Company and SAIETC entered into the Supplemental Agreement to the Import and Export
Agency Framework Agreement, pursuant to which the Company and SAIETC have agreed to revise the annual
cap for services provided by SAIETC for the period from 1 January 2013 to 31 December 2013 from RMB97.2
million to RMB160 million.
For the year ended 31 December 2013, the agency fee incurred by the Group in respect of the above import and
export services was RMB120,876,000.
On 9 January 2014, the Company and SAIETC have entered into a new import and export agency framework
agreement (the “New Import and Export Agency Framework Agreement”) to renew the continuing connected
transactions contemplated therein for a fixed term of three years commencing from 1 January 2014 to 31
December 2016. Pursuant to the New Import and Export Agency Framework Agreement, SAIETC agreed
to provide import and export services and the relevant lease services, customs clearance services, customs
declaration and inspection services, and the relevant storage, transportation and insurance agency services,
and tendering and agency services to the Group. In relation to the service fee charged for import and export
services, both parties agreed that such fee shall not be higher than the prevailing market rate charged by several
trading companies of certain airlines companies in the PRC for similar services. In relation to the service fee
charged for custom clearing, custom declaration and inspection, and the relevant storage, transportation and
insurance services, both parties agreed that such fee charged shall not be higher than the prevailing market rate
charged for similar services provided by independent third party service providers in the flight equipment logistics
transportation market in the PRC. In relation to the service fee charged for the tendering and agency services, it is
required to be determined in accordance with the fee standard prescribed by the State for this kind of tendering
and agency services from time to time. During the period of the New Import and Export Agency Framework
Agreement, the annual cap shall remain at RMB160 million per annum.
B
Southern Airlines Culture and Media Co., Ltd. (“SACM”), which is 40% owned by the Company and 60% owned
by CSAHC
On 19 April 2013, the Company renewed the media services framework agreement (the “Media Services
Framework Agreement”) with SACM, for a term of three years commencing from 1 January 2013. Pursuant
to the agreement, the Company has appointed SACM to provide advertising agency services, the plotting,
purchase and production of in-flight TV and movie program agency services, channel publicity and production
services, public relations services relating to recruitments of airhostess, and services relating to the distribution
of newspapers and magazines. The service fees for the media services to be provided to members of the Group
by SACM and its subsidiaries are determined, among others, the prevailing market price. Pricing are based on
prevailing market price and agreed upon between the parties for each transaction on arm’s length negotiations
in accordance with the following pricing mechanism: (a) if there are prevailing market prices for same or similar
types of services in the same or similar locations of the services being provided, the pricing of the services shall
49
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Directors
follow such prevailing market price; or (b) if there are no such prevailing market price in the same or similar
locations, the service to be provided by SACM Group shall be on terms which are no less favourable than the
terms which can be obtained by the Group from independent third parties within the PRC market. The annual
cap under the agreement for each year is RMB98 million, RMB105 million and RMB113 million, respectively.
For the year ended 31 December 2013, the media fees incurred by the Group for the media services amounted to
RMB77,266,000.
C
Southern Airlines Group Finance Company Limited (“Finance Company”), which is 66% owned by CSAHC, 21%
owned by the Company and 13% owned in aggregate by four subsidiaries of the Company
On 8 November 2010, the Company renewed the financial services framework agreement (the “Financial Services
Framework Agreement”) with the Finance Company for a term of three years starting from 1 January 2011 to 31
December 2013.
Under such agreement, the Finance Company agrees to provide to the Company deposit and loan services. The
Finance Company shall pay interests to the Company regularly at a rate not lower than the current deposit rates
set by the People’s Bank of China. The Group’s deposits placed with the Finance Company were re-deposited in
a number of banks. The Finance Company has agreed that the loans it provided to CSAHC and its subsidiaries
other than the Group should not exceed the sum of the Finance Company’s shareholders’ equity, capital reserves
and total deposits received from other companies (excluding the Group). The rates should be determined
on an arm’s length basis and based on fair market rate, and should not be higher than those available from
independent third parties. The parties agreed that the balance of the Group’s deposits placed with the Finance
Company (including accrued interests) should not at any time exceed RMB4 billion, nor should the balance of
loans borrowed from the Finance Company at any time exceed the above-mentioned level. The annual cap of
fees payable to the Finance Company for the other financial services should not exceed RMB5,000,000.
On 16 March 2012, the Company entered into a supplemental agreement to the Financial Services Framework
Agreement with the Finance Company, for a term effective from 31 May 2012 (the date of passing of the
resolution at the general meeting) to 31 December 2013. In line with the Company’s business requirement,
the parties agreed that deposit balance placed with the Finance Company (including interest payable accrued
thereon) in any day may not exceed RMB6 billion, and the balance for provision of loan service to the Company
by the Finance Company (including total interests paid) in any day may not exceed the above level.
On 31 December 2013, the Group’s deposits placed with the Finance Company amounted to
RMB2,675,443,000.
On 8 November 2013, the Company and the Finance Company entered into a new financial services framework
agreement (the “New Financial Services Framework Agreement”) to renew and extend the term of the provision
of the financial services contemplated under the New Financial Services Framework Agreement for a period
of three years, commencing from 1 January 2014 to 31 December 2016. Each of the maximum daily balance
of deposits (including the corresponding interests accrued thereon) placed by the Company as well as the
maximum amount of the outstanding loan provided by the Finance Company to the Company (including the
corresponding interests payable accrued thereon) at any time during the term of the Financial Services Framework
Agreement shall not exceed the Cap which is set at RMB6 billion on any given day. On 26 December 2013, the
second extraordinary general meeting of 2013 considered and approved the New Financial Services Framework
Agreement.
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CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Directors
D
China Southern Airlines Group Passenger and Cargo Agent Company Limited (“PCACL”), a wholly-owned
subsidiary of CSAHC
The Company and PCACL have entered into a sales agency services framework agreement (the “Sales Agency
Services Framework Agreement”) dated 28 January 2011, which is valid from 1 January 2011 to 31 December
2013. Pursuant to the agreement, the cooperative scope of both parties thereto mainly comprises extended
businesses including air ticket sales agency services, airfreight forwarding sales agency services, chartered flight
and pallets agency services, internal operation services for the inside storage area, and delivery services for the
outside storage area and chartered flight and pallets sales agency business. PCACL charges commission with
reference to the prevailing market rate. Besides, the Company has other air ticket sales agents in China who also
charge commission at the same rates. PCACL also acts as the ticket sales agents of other airlines companies in
China, and charges commission at the same rates offered to the Group. The annual transaction cap of the sales
value shall not exceed RMB250 million.
For the year ended 31 December 2013, the commission expense and goods handling fee paid to PCACL
were RMB19,226,000 and RMB32,739,000, respectively and the income relating to other services was
RMB107,238,000.
On 8 November 2013, the Company and PCACL renewed the Passenger and Cargo Sales Agency Services
Framework Agreement (the “New Passenger and Cargo Sales Agency Services Framework Agreement”) to renew
the continuing connected transactions contemplated therein for a fixed term of three years commencing from 1
January 2014 to 31 December 2016. Pursuant to the New Passenger and Cargo Sales Agency Services Framework
Agreement, PCACL agrees to provide the following services to the Group: domestic and international air ticket
sales agency services; domestic and international airfreight forwarding sales agency services; chartered flight and
pallets sales agency services; internal operation services for the inside storage area (these services include the
areas in Guangzhou, Beijing and Shanghai, etc.); and delivery services for the outside storage area. The agency
fee for sales agency services is determined by reference to the agency fee paid to the agency companies by the
airlines companies of the same types of the industry in the same regions; the service fee for internal operation
services is determined by the fee standard prescribed by the local government. The annual cap for the entire term
of the New Passenger and Cargo Sales Agency Services Framework Agreement is RMB250 million.
E
China Southern Airlines Group Property Management Company Limited (“CSAGPMC”), a wholly-owned
subsidiary of CSAHC
The Company and CSAGPMC (formerly known as Guangzhou China Southern Airlines Group Property
Management Company Limited) renewed the Framework Agreement for the Engagement of Property
Management (the “Existing Property Management Framework Agreement”) on 29 December 2008 for a term of
three years.
The Company has entered into a New Framework Agreement for Engagement of Property Management
(the “New Property Management Framework Agreement”) on 28 December 2012 to renew the property
management transactions for a term of three years from 1 January 2012 to 31 December 2014. Pursuant to the
New Property Management Framework Agreement, the Company has renewed the appointment of CSAGPMC
for provision of property management and maintenance services for the Company’s leased properties in the
airport terminal, the base and the 110KV transformer substation at the new Baiyun International Airport (other
than certain properties in the Company’s headquarter located in the old Baiyun Airport which were covered
in the Existing Property Management Framework Agreement) to ensure the ideal working conditions of the
Company’s production and office facilities and physical environment, and the normal operation of equipment.
51
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Directors
The Company has further entered into the airport property management framework agreement (the “Airport
Property Management Framework Agreement”) on 11 January 2013 to renew the property management at the
old Baiyun Airport for a term of three years from 1 January 2012 to 31 December 2014. Pursuant to the Airport
Property Management Framework Agreement, the Company has renewed the appointment of CSAGPMC for
the provision of property management and maintenance services for the Company’s properties at the old Baiyun
Airport and its surroundings in Guangzhou.
The fee charging schedule (or charge standard) under the New Property Management Framework Agreement
and the Airport Property Management Framework Agreement shall be determined on an arm’s length basis
between both parties, and shall not be higher than the one charged by any independent third parties in the
similar industry. The annual caps for the Property Management Framework Agreement and the Airport Property
Management Framework Agreement are set at RMB32,750,000 and RMB22,250,000, respectively.
On 31 December 2013, the Company entered into the agreement supplemental to the Airport Property
Management Framework Agreement and the agreement supplemental to the New Property Management
Framework Agreement, pursuant to which the annual cap for the New Property Management Framework
Agreement and the Airport Property Management Framework Agreement changed to RMB42,700,000 and
RMB27,300,000, respectively. The revised annual caps under the Airport Property Management Supplemental
Agreement and the New Property Management Supplemental Agreement are determined at an arm’s length
basis between both parties by reference to the original annual caps, the coverage of properties, the increase in
service scope and standard as well as the prevailing services fees charged for similar services on the similar types
of properties provided by independent third parties in the market.
For the year ended 31 December 2013, the property management and maintenance fee incurred by the Group
amounted to RMB63,915,000 pursuant to the New Property Management Framework Agreement and the
Airport Property Management Framework Agreement.
F
Shenzhen Air Catering Co., Ltd. (“SACC”), which is 50.1% owned by CSAHC
On 19 April 2013, the Company entered into the catering services framework agreement (the “Catering
Services Framework Agreement”) with SACC for a term of three years, commencing from 1 January 2013 to
31 December 2015 so as to comply with Rule 14A.41 of the Listing Rules. Pursuant to the Catering Services
Framework Agreement, SACC agrees to provide the in-flight lunch box, and order, supply, allot, recycle, store
and install the in-flight supply with their respective services for the arrival and departure flights designated by the
Group at the airport where SACC is located at. The service fee is determined at an arm’s length basis between
both parties by reference to the state or local prescribed price and based on the prevailing market price taking
into account the assigned flight capacity growth in Shenzhen and the natural market growth according to the
historical figures, provided that the services fee charged by SACC should not be higher than the one charged by
any independent third parties in the similar locations of similar services. The services are priced in accordance with
the following pricing mechanism: (a) if there are applicable State (central and local governments) prescribed price,
the pricing of the services shall follow the State prescribed price; or (b) if there are no applicable State prescribed
price, the pricing of the services shall be determined in accordance with the prevailing market prices. The annual
cap under the agreement for each year is RMB100 million, RMB115 million and RMB132.25 million, respectively
For the year ended 31 December 2013, the service fees paid by the Group to SACC amounted to
RMB83,732,000.
52
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Directors
G MTU Maintenance Zhuhai Co., Ltd. (“Zhuhai MTU”), which is 50% owned by CSAHC
The Company entered into an agreement relating to continuing connected transactions with CSAHC, MTU Aero
Engines GmbH (“MTU GmbH”) and Zhuhai MTU on 28 September 2009, by which Zhuhai MTU shall continue to
provide the Company with engine repair and maintenance services subject to the international competitiveness
and at the net most favourable terms, while the Company shall make relevant payment to Zhuhai MTU according
to related charging standard. The agreement is effective from its date to 5 April 2031.
For the year ended 31 December 2013, the Group’s engine repair and maintenance service fees incurred under
the agreement relating to continuing connected transactions amounted to RMB795,526,000.
(3) Trademark Licence Agreement
The Company and CSAHC entered into a ten year trademark licence agreement dated 22 May 1997. Pursuant to
which CSAHC acknowledges that the Company has the right to use the name “China Southern” and “China Southern
Airlines” in both Chinese and English, and grants the Company a renewable and royalty free licence to use the kapok
logo on a worldwide basis in connection with the Company’s airline and airline-related businesses. Unless CSAHC
gives a written notice of termination three months before the expiration of the agreement, the agreement will be
automatically renewed for another ten-year term. In May 2007, the trademark licence agreement entered into by the
Company and CSAHC was automatically renewed for 10 years.
(4)
Leases
The Group (as lessee) and CSAHC (as lessor) entered into lease agreements as follows:
A
On 29 December 2008, the Company renewed a master asset lease agreement with CSAHC with a term valid
from 1 January 2009 to 31 December 2011 (the “Existing Asset Lease Agreement”).
The Company and CSAHC has entered into the new Asset Lease Agreement (the “New Asset Lease Agreement”)
on 25 September 2012 to renew the leases transactions for a term of three years from 1 January 2012 to
31 December 2014. Pursuant to the New Asset Lease Agreement, CSAHC agrees to continue to lease to the
Company certain parcels of land, properties, and civil aviation structures and facilities at existing locations in
Guangzhou, Haikou, Wuhan, Hengyang, Jingzhou (previously known as “Shashi”), Zhan Jiang and Chang Sha.
The annual rents payable to CSAHC under the New Asset Lease Agreement is RMB35,924,400 for the three years
ending 31 December 2014.
The Company also entered into the individual lease agreement (the “2012 Property Lease Agreement”) with
CSAHC on 25 September 2012 in relation to certain fragmented leases for properties located in Harbin,
Changchun, Dalian, Beijing and Shanghai as originally covered in the Existing Asset Lease Agreement for an
aggregate annual rental of RMB4,437,000 for a term of two years from 1 January 2012 to 31 December 2013.
The Company further entered into the Nanyang Asset Lease Agreement (the “2013 Nanyang Asset Lease
Agreement”) with CSAHC on 19 April 2014 for the leases transaction relating to certain lands and properties
at Nanyang Jiangying Airport as originally covered in the Existing Asset Lease Agreement for the period from
1 January 2013 to 31 December 2013. The rent payable under the Nanyang Asset Lease Agreement was
RMB30,259,100.
For the year ended 31 December 2013, the rent incurred by the Group amounted to RMB70,620,000
pursuant to the New Asset Lease Agreement, 2012 Property Lease Agreements and 2013 Nanyang Asset Lease
Agreement.
53
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Directors
B
The Company and CSAHC entered into an indemnification agreement dated 22 May 1997 in which CSAHC has
agreed to indemnify the Company against any loss or damage caused by or arising from any challenge of, or
interference with, the Company’s right to use certain lands and buildings.
C
On 14 February 2011, in order to ensure normal operation of the Company, the Company, based on the actual
leasing requirement, once again reviewed the land and properties contemplated under the lease, adjusted part of
these projects, and engaged a real estate appraisal company to assess the rent of land, properties, structures and
pipes under the lease. It then determined the rent according to the assessment and re-entered into the land lease
agreement (the “2011 Land Lease Agreement”) and the property lease agreement (the “2011 Property Lease
Agreement”). Pursuant to the 2011 Land Lease Agreement, the parties agreed that the annual rent for land from
2011 to 2013 would be RMB56,329,131 for each year. Pursuant to the 2011 Property Lease Agreement, the
annual rent for properties, structures and pipes leased by the Company from CSAHC from 2011 to 2013 would
be RMB42,975,542.
For the year ended 31 December 2013, the rents for land lease and property lease incurred by the Group
amounted to RMB56,329,000 and RMB42,508,000, respectively pursuant to the lease agreements.
On 9 January 2014, the Company and CSAHC have entered into two new lease agreements (the “Lease
Agreements”), namely, the property lease agreement (the “Property Lease Agreement”) and the land lease
agreement (the “Land Lease Agreement”) to renew the land and property leases transactions contemplated
thereunder for the period from 1 January 2014 to 31 December 2016. Pursuant to the Property Lease
Agreement, CSAHC agreed to lease certain properties, facilities and other infrastructure located in various cities
such as Guangzhou, Shenyang, Dalian, Harbin, Xinjiang, Changchun, Beijing and Shanghai held by CSAHC or its
subsidiaries to the Company for office use related to the civil aviation business development. The property lease
transactions contemplated under the existing 2012 Property Lease Agreements as set out in the above paragraph
(4)A have now been covered under the Property Lease Agreement so as to save resources as well as time of
management of various property leases with CSAHC. Pursuant to the Land Lease Agreement, CSAHC agreed to
lease certain lands located in Xinjiang, Harbin, Changchun, Dalian and Shenyang by leasing the land use rights
of such lands to the Company for the purposes of civil aviation and related businesses of the Company. The
annual rental is determined after arm’s length negotiation between the parties and adjusted with reference to
the rental assessment report prepared by Guangdong Yangcheng Land and Property Appraisal Co., Ltd. taking
into account the prevailing market rental for properties located at similar locations and the historical figures.
The maximum annual aggregate amount of rent payable by the Company to CSAHC under the Property Lease
Agreement and the Land Lease Agreement for each of the three years ending 31 December 2016 shall not
exceed RMB40,114,700 and RMB63,582,200, respectively and such payment shall be made quarterly.
The independent non-executive Directors of the Company have confirmed to the Board that they have reviewed the non-
exempt continuing connected transactions and are of the view that:
(a)
those transactions were conducted in the ordinary and usual course of business of the Group;
(b)
those transactions were entered into on normal commercial terms, or if there are not sufficient comparable
transactions to judge whether they are on normal commercial terms, then in relation to the Group, those transactions
were on terms no less favorable than the terms available to or from (as the case may be) independent third parties; and
54
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Directors
(c)
those transactions were conducted in accordance with the relevant agreement governing them on terms that were fair
and reasonable and in the interests of the shareholders of the Company as a whole.
The auditors of the Company was engaged to report on the Company’s continuing connected transactions in accordance
with Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagement Other Than Audits or Reviews of
Historical Financial Information” and with reference to Practice Note 740 “Auditor’s Letter on Continuing Connected
Transactions under the Hong Kong Listing Rules” issued by Hong Kong Institute of Certified Public Accountants. The auditors
have issued their unqualified letter containing their conclusions in respect of the above-mentioned continuing connected
transactions in accordance with Rule 14A.38 of the Listing Rules, indicating that:
(a)
nothing has come to their attention that causes them to believe that the disclosed continuing connected transactions
have not been approved by the Board;
(b)
for transactions involving the provision of goods or services by the Group, nothing has come to their attention that
causes them to believe that the transactions were not, in all material respects, in accordance with the pricing policies of
the Group;
(c)
nothing has come to their attention that causes them to believe that the transactions were not entered into, in all
material respects, in accordance with the relevant agreements governing such transactions; and
(d) with respect to the aggregate amount of the continuing connected transactions, nothing has come to their attention
that causes them to believe that the disclosed continuing connected transactions have exceeded the maximum
aggregate annual value disclosed in the previous announcements made by the Company in respect of each of the
disclosed continuing connected transactions.
Certain related party transactions as disclosed in note 49 of the financial statements prepared under IFRSs also constituted
connected transactions under the Listing Rules required to be disclosed in accordance with Chapter 14A of the Listing
Rule. The Company has complied with the disclosure requirements of Chapter 14A of Listing Rules in respect of the above
connected transactions or continuing connected transactions.
DONATIONS
For the year ended 31 December 2013, the Group made donations for charitable purposes amounting to RMB9.12 million.
DESIGNATED DEPOSITS AND OVERDUE TIME DEPOSITS
As at 31 December 2013, the Group’s deposits placed with financial institutions or other parties did not include any
designated deposits, or overdue time deposits for which the Group failed to receive repayments.
MATERIAL LITIGATION
Save as disclosed in note 52, as at 31 December 2013, the Group was not involved in any material litigation.
55
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Directors
AUDITORS
A resolution is to be proposed at the forthcoming annual general meeting of the Company for the appointment of
PricewaterhouseCoopers Zhong Tian LLP to provide professional services to the Company for its domestic financial reporting,
U.S. financial reporting and internal control for the year 2014 and PricewaterhouseCoopers to provide professional services
to the Company for its Hong Kong financial reporting for the year 2014.
By order of the Board
Si Xian Min
Chairman
Guangzhou, the PRC
28 March 2014
56
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Supervisory Committee
Dear shareholders:
In 2013, the Supervisory Committee of the Company (the “Supervisory Committee“) diligently performed its duties in
protecting shareholders’ rights and the Company’s interests in compliance with the requirements under the Company Law,
the Securities Law and the Articles of Association of the Company; the members of the Supervisory Committee convened
Supervisory Committee meetings, attended general meetings and Board meetings of the Company and efficiently monitored
major decision making process, financial reports, connected transactions of the Company as well as the conduct of the
Directors and senior management of the Company. The work of the Supervisory Committee in 2013 is hereby reported as
follows:
I. Supervisory Committee meetings
1. An extraordinary meeting of the Sixth Session of the Supervisory Committee was held on 24 January 2013,
details of which were as follows: The connected transactions regarding the renewal of Nanyang Asset Lease
Agreement entered into between the Company and CSAHC were considered and the independent opinion on
such transactions was provided.
2.
The 9th meeting of the Sixth Session of the Supervisory Committee was held on 26 March 2013, the details
of which were as follows: 1) The 2012 annual report (full version and summary) and results announcement
(including the financial statement prepared under the PRC GAAP and IFRSs) were considered and approved;
2) The proposal on profit distribution for 2012 was considered and approved; 3) Report of the Supervisory
Committee for 2012 was considered and passed for approval at the general meeting; 4) Report on deposit and
actual use of fund raised in 2012 was considered and approved; 5) The internal control evaluation report for
2012 was considered and approved; 6) The 2012 Corporate Social Responsibility Report of the Company was
considered and approved;
3. An extraordinary meeting of the Sixth Session of the Supervisory Committee was held on 19 April 2013, details
of which were as follows: 1) The connected transactions regarding the Import and Export Agency Framework
Agreement entered into between the Company and SAIETC were considered and the independent opinion
on such transactions was provided; 2) The connected transactions regarding the Framework Agreement for
Catering Services entered into between the Company and SACC were considered and the independent opinion
on such transactions was provided; 3) The connected transactions regarding the renewal of the Media Services
Framework Agreement entered into between the Company and SACM were considered and the independent
opinion on such transactions was provided;
4. An extraordinary meeting of the Sixth Session of the Supervisory Committee was held on 25 April 2013 to
consider the first quarterly report for 2013 of the Company;
5.
The 10th meeting of the Sixth Session of the Supervisory Committee was held on 26 August 2013, details of
which were as follows: The 2013 interim report (full version and summary) and results announcement (including
the financial statement prepared under the PRC GAAP and IFRSs) were reviewed and approved;
6. An extraordinary meeting of the Sixth Session of the Supervisory Committee was held on 30 October 2013 to
consider the third quarterly report for 2013 of the Company;
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CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Supervisory Committee
7.
The 11th meeting of the Sixth Session of the Supervisory Committee was held on 7 November 2013, details
of which were as follows: 1) The Proposal on Nomination of Supervisor Candidates Representing Shareholders
of the Company for the Seventh Session of the Supervisory Committee was considered; 2) The Proposal on
Amendment to the Procedural Rules of the Supervisory Committee was considered;
8. An extraordinary meeting of the Sixth Session of the Supervisory Committee was held on 8 November 2013,
details of which were as follows: 1) The connected transactions regarding the renewal of Financial Services
Framework Agreement entered into between the Company and Finance Company was considered and the
independent opinion on such transactions was provided; 2) The connected transactions regarding the renewal of
the Passenger and Cargo Sales Services Framework Agreement entered into between the Company and PCACL
were considered and the independent opinion on such transactions was provided;
9.
The 1st meeting of the Seventh Session of the Supervisory Committee was held on 26 December 2013, details of
which were as follows: Pan Fu was elected as the Chairman of the Seventh Session of the Supervisory Committee
of the Company.
II. The Supervisory Committee’s Independent Opinions
During the reporting period, the Supervisory Committee reviewed and provided its opinions on major issues such as
the compliances of the Company, regular reports, connected transactions and internal controls in compliance with the
requirements of the Company Law, the Securities Law and the Articles of Association of the Company.
1.
Independent opinions on the compliance of the Company
In 2013, the Supervisory Committee monitored the decision-making process of the general meetings and the
Board meetings, and reviewed the Board’s implementation of the resolutions of the general meetings and the
performance of duties by the senior management of the Company.
The Supervisory Committee considered that:
1)
The Board conducted its work in 2013 in strict compliance with relevant laws and regulations as well as the
requirements of the Articles of Association of the Company, and carried out its operation in accordance
with laws and efficiently to ensure a healthy, steady and sustainable development of the Company;
2)
The Directors and senior management such as the President performed their duties diligently in accordance
with laws. The Supervisory Committee is not aware of any behaviors in violation of laws, administrative
regulations and the Articles of Association of the Company or which would result in an impairment of the
Company’s benefits and shareholders’ interests in the course of their work; and
3)
The Company disclosed the information in an authentic, accurate, complete and timely and did not provide
any misleading or false information.
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CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Report of the Supervisory Committee
2.
Independent opinions on the financial position of the Company
During the reporting period, the Supervisory Committee implemented continuous monitoring and inspection on
the financial system, financial position and internal controls, and carefully reviewed the regular reports prepared
by the Company.
Upon review, the Supervisory Committee was of the opinion that:
1)
The financial management system and relevant internal control systems of the Company were sound and
complete and implemented effectively. The preparation, review and reporting of the financial reports of the
Company as well as the audit of the financial statements of the Company by its auditors were conducted
effectively in accordance with laws and regulations and the various requirements of the Company. The
contents of the financial reports of the Company completely and truly reflected the financial position and
operating results of the Company for 2013, and there was no material omission of information and false
statements;
2)
T h e u n q u a l i f i e d o p i n i o n s o n t h e f i n a n c i a l r e p o r t o f t h e C o m p a n y f o r 2 0 1 3 i s s u e d b y
PricewaterhouseCoopers Zhong Tian LLP as the domestic auditor and PricewaterhouseCoopers as the
international auditor were objective and fair; the Supervisory Committee approved the audited financial
report and the proposal of profit distribution for 2013 of the Company; and
3) None of the personnel responsible for the preparation and auditing of the Annual Report of the Company
was found to be in violation of relevant provisions of laws and regulations.
3.
Independent opinions on the connected transactions of the Company
During the reporting period, the Supervisory Committee provided independent opinions towards each major
connected transaction pursuant to management system on connected transactions of the Company.
The Supervisory Committee was of the opinion that:
1)
The Company’s connected transactions were conducted in compliance with laws and regulations, the
listing rules of the jurisdictions in which the Company was listed, the Articles of Association of the
Company and relevant systems in managing the Company’s connected transactions. All connected
shareholders and connected directors of the Company had abstained from voting on the related matters in
general meetings and meetings of the Board while independent Directors expressed independent opinions;
and
2)
The connected transactions were conducted at fair market prices without prejudice to the interests of the
Company and its medium to minority shareholders.
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4. Review on independent opinion on the self-evaluation report on internal controls
During the reporting period, the Supervisory Committee actively monitored the establishment and improvement
of internal control system, during which the Supervisory Committee understood the key progress of the
evaluation of internal control as well as reviewed the self-evaluation report on internal controls prepared by the
Company. The details were as follows:
1)
The preliminary meeting for the 9th meeting of the Sixth Session of the Supervisory Committee was held
on 21 March 2013, during which the internal audit reported the evaluation on internal controls of the
Company for 2012.
2)
The 9th meeting of the Sixth Session of the Supervisory Committee was held on 26 March 2013 to review
and approval 2012 internal control appraisal report.
The Supervisory Committee was of the opinion that, the Company formulated a complete, reasonable and efficient
internal control system, and had no objection to the self-evaluation reports of the internal audit of the Company for
2012.
III. Internal construction of the Supervisory Committee.
During the reporting period, the Supervisory Committee focused on self-construction, and enhanced communications
with supervisory committees of excellent listed companies. In August 2013, the Chairman of the Supervisory
Committee led a team to the Supervisory Committee of China Construction Bank for investigation, had a deep
understanding of its operation and made deep discussions with respect to the operation and practice of supervisory
committees with the Supervisory Committee of China Construction Bank. The investigation further confirmed
the development direction for its further steps and established a solid foundation for the work of the Supervisory
Committee in 2014.
In 2014, the Supervisory Committee will enhance its infrastructural construction by enhanced learning and training and
intensified fact finding, and further enhance its foundation by professional construction of the working mechanism of
its work so as to enhance its infrastructural construction of the committee and its working mechanism.
In 2014, the Supervisory Committee will further coordinate the monitoring powers to exercise its monitoring function
more efficiently and highlight the monitoring in terms of compliance, financial control and internal control to practically
perform the function of monitoring.
By Order of the Supervisory Committee
Pan Fu
Chairman of the Supervisory Committee
Guangzhou, the PRC
28 March 2014
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Corporate Governance Report
It is the firm belief of the Company that a good and solid corporate governance framework is essential to the sustained
development of the Company and the enhancement of shareholders’ value. The Company has always strived to strictly
comply with the regulatory requirements of the China Securities Regulatory Commission, the Shanghai Stock Exchange,
the Stock Exchange, the New York Stock Exchange Inc. and the United States Securities and Exchange Commission, and
is committed to attaining and maintaining high standards of corporate governance and adopts principles of corporate
governance emphasizing a quality board, accountability to all stakeholders, open communication and fair disclosure.
CORPORATE GOVERNANCE CODE
The Board has reviewed the corporate governance practices of the Company, and considers that the Company has applied
the principles of the corporate governance practices and adopted sound governance and disclosure practices accordingly. The
Group has complied with the code provisions of the Corporate Governance Code as set out in Appendix 14 of the Listing
Rules for the year ended 31 December 2013.
The corporate governance practices adopted by the Company are summarized below.
THE BOARD
The Board manages the Company’s affairs on behalf of shareholders with the objective of enhancing the shareholder value.
The Board, headed by the Chairman, is responsible for the formulation and the approval of the Group’s development and
business strategies and policies, approval of annual budgets and business plans, recommendation of dividend, ensuring a
prudent and effective internal control system and monitoring the performance of the management in accordance with the
Articles of Association of the Company, the Procedural Rules of the Shareholders’ General Meeting and the Procedural Rules
of the Board of Directors.
The major issues which were brought before the Board for their decisions included:
1.
Direction of the operational strategies of the Group;
2.
Setting the policies relating to key business and financial objectives of the Company;
3. Monitoring the performance of the management;
4.
Approval of material acquisitions, investments, divestments, disposal of assets or any significant capital expenditure of
the Group;
5.
Ensuring a prudent and effective internal control system; and
6.
Consideration of the financial performance and results of the Company.
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Under the leadership of the President, the management of the Company is responsible for the daily operations of the
Group. The roles of the Chairman are separated from that of the President. Such division of responsibilities allows a balance
of power between the Board and the management of the Group, and ensures their independence and accountability.
The Chairman is the leader of the Board and he oversees the Board so that it acts in the best interests of the Group. The
Chairman is responsible for deciding the agenda for each Board meeting, taking into account, where appropriate, matters
proposed by other Directors for inclusion in the agenda. In addition, the Chairman has an overall responsibility for providing
leadership, vision and direction in the development of the business of the Company. The President, assisted by the Executive
Vice Presidents, is responsible for the daily management of the business of the Group, attends to the formulation and
successful implementation of policies, and assumes full accountability to the Board for all operations of the Group. Working
with the Executive Vice Presidents and the executive management team of each core business division, the President
ensures the effective operations and sustained development of the Group. The President maintains a continuing dialogue
with the Chairman and all Directors to keep them fully informed of all major business development issues. The President is
also responsible for building and maintaining an effective executive team to support him in his role. The Chairman and the
President are not connected with each other. None of the other Directors is connected with one another.
On 26 December 2013, the second extraordinary general meeting for the year 2013 of the Company considered and
approved the re-election and election of Directors for the Seventh Session of the Board. As at 31 December 2013, the
members of the Board comprise four non-executive Directors, four executive Directors and four independent non-executive
Directors. All of the Directors shall hold their offices until the expiry of the terms of the Seventh Session of the Board. The
brief biographical details of the Directors are set out on pages 193 to 199 of this Annual Report.
The Board held 33 meetings in 2013, all of which were convened in accordance with the Articles of Association of the
Company. The Company held three general meetings in 2013, the Directors actively participated general meeting in person
and have been doing their best to develop a balanced understanding of the views of shareholders.
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Corporate Governance Report
The individual attendance of each Director, on a named basis, is as follows:
Name of Directors
Non-Executive Directors
Si Xian Min (Chairman)
Wang Quan Hua
Yuan Xin An
Yang Li Hua (Appointed on 24 January 2013)
Executive Directors
Tan Wan Geng (Vice Chairman and President)
Zhang Zi Fang (Executive Vice President)
Xu Jie Bo (Executive Vice President and Chief Financial Officer)
Li Shao Bin (Appointed on 24 January 2013)
Independent Non-executive Directors (“INED”)
Gong Hua Zhang (Resigned on 26 December 2013)
Wei Jin Cai
Ning Xiang Dong
Liu Chang Le
Tan Jin Song (Appointed on 26 December 2013)
No. of Board
No. of general
meetings
meetings
Attended/Eligible
Attended/Eligible
to attend
to attend
33/33
33/33
33/33
33/33
32/33
33/33
33/33
33/33
30/30
33/33
33/33
33/33
3/3
3/3
1/3
3/3
1/2
1/3
3/3
3/3
2/2
3/3
3/3
3/3
0/3
0/0
The experience and views of our INEDs are held in high regard and serve as an effective guidance for the operation of the
Group. The INEDs provide the Group with a wide range of expertise and experience and bring in independent judgment
on issues relating to the Group’s strategy, performance and management process, taking into account the interests of
all shareholders. The INEDs represent one-third of the Board. One INED, Tan Jin Song, has the appropriate professional
qualifications of accounting or related financial management expertise under Rule 3.10 of the Listing Rules. Pursuant to the
guidelines on independence as set out in Rule 3.13 of the Listing Rules, the Board has received an annual independence
confirmation from each INED and considers that all the INEDs are independent. In addition, their extensive experience in
business and finance are very important to the Company’s successful development. In 2013, the INEDs expressed their views
and opinions about certain matters relevant to the shareholders and the Company as a whole at board meetings.
During the year of 2013, the Board adopted a board diversity policy setting out the approach to diversity of members of
the Board. The Company recognises and embraces the benefits of diversity of Board members. It endeavours to ensure that
the Board has a balance of skills, experience and diversity of perspectives appropriate to the requirements of the Company’s
business.
All Board appointments will continue to be made on a merit basis with due regard for the benefits of diversity of the Board
members. Selection of candidates will be based on a range of diversity perspectives, including but not limited to gender, age,
cultural and educational background, experience (professional or otherwise), skills and knowledge. The ultimate decision will
be made upon the merits and contribution that the selected candidates will bring to the Board.
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Corporate Governance Report
CONTINUOUS PROFESSIONAL DEVELOPMENT OF DIRECTORS
All Directors receive comprehensive, formal and tailored induction on appointment, so as to ensure understanding of the
business and operations of the Group and directors’ responsibilities and obligations under the Listing Rules and relevant
regulatory requirements.
Directors are continually updated on developments in the statutory and regulatory regime, and the business and market
changes to facilitate the discharge of their responsibilities and obligations under the Listing Rules and relevant statutory
requirements. Continuing briefings and professional development for directors will be arranged as necessary.
During the year of 2013, the Company has provided updates and coordinated training on the Listing Rules and relevant
regulatory requirements to all Directors.
All Directors as at 31 December 2013, namely Mr. Si Xian Min, Mr. Tan Wan Geng, Mr. Wang Quan Hua, Ms. Yang Li Hua,
Mr. Yuan Xin An, Mr. Zhang Zi Fang, Mr. Xu Jie Bo, Mr. Li Shao Bin Mr. Wei Jin Cai, Mr. Ning Xiang Dong, Mr. Liu Chang Le
and Mr. Tai Jin Song actively participated in continuous professional development, by attending external seminars, attending
in–house training or reading materials, with the topics covering regulations, corporate governance, finance and business, to
develop their knowledge and skills. The details are as follows:
In May 2013, Mr. Yuan Xin An participated in a senior seminar training course which enhanced business innovation
capability;
In June 2013, Ms. Yang Li Hua participated in a seminar training course for senior management in China;
In July 2013, Mr. Xu Jie Bo participated in the continued education training program for the Company’s accountants for the
year 2013;
In June 2013, Mr. Li Shao Bin participated in the training program for listed company’s directors, supervisors and senior
management held by Guangdong Securities Regulatory Bureau;
In December 2013, the first meeting of the 7th session of the Board was held, and the training courses were provided for the
new session of Directors, Supervisors and senior management of the Company by the domestic and overseas annual legal
adviser of the Company. The courses involved the topics in respect of responsibilities, rights and obligations, legal obligations,
insider trading of directors, supervisors and senior management.
BOARD COMMITTEES
The Company has put in place an Audit Committee, a Remuneration and Assessment Committee, a Nomination Committee
and further details of the roles and functions and the composition of each of these committees are set out below:
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Corporate Governance Report
AUDIT COMMITTEE
The Audit Committee comprises three INEDs, one of whom, Mr. Tan Jin Song, possesses the appropriate professional
qualifications or accounting or financial management expertise to understand financial statements. As at 31 December
2013, the Audit Committee is chaired by Mr. Tan Jin Song with Mr. Wei Jin Cai and Mr. Ning Xiang Dong as the members
of the Audit Committee. The Audit Committee is provided with sufficient resources to discharge its duties and has access to
independent professional advice if necessary.
The terms of reference of the Audit Committee are in compliance with the provision of C.3.3 of the Code, and applicable
policies, rules and regulations that the Company is subject to. The details of the roles and functions of the Audit Committee
are set out in the Terms of Reference of Audit Committee of the Company which has been published on the websites of the
Stock Exchange and the Company at “www.hkexnews.hk” and “www.csair.com”. In 2013, the Audit Committee carried
out the work, amongst other things, to oversee the relationship with the external auditors, to review the Group’s 2013
quarterly results, 2013 interim results and 2012 annual financial statements, to monitor compliance with statutory and listing
requirements, to review the scope, if necessary, to engage independent legal or other advisers as it determines is necessary
and to perform investigations. In addition, the Audit Committee also examined the effectiveness of the Company’s internal
controls, which involves regular reviews of the internal controls of various corporate structures and business processes on
a continuous basis, and takes into account their respective potential risks and severity, in order to ensure the effectiveness
of the Company’s business operations and the realization of its corporate objectives and strategies. The scope of such
examinations and reviews includes finance, operations, regulatory compliance and risk management. The Audit Committee
also reviewed the Company’s internal audit plan, and submitted relevant reports and concrete recommendations to the
Board on a regular basis.
The Audit Committee held eight meetings in 2013. The Audit Committee has performed all its obligations under their terms
of reference. The attendance of each member of the Audit Committee is as follows:
Members of the Audit Committee
Gong Hua Zhang (Chairman) (Resigned on 26 December 2013)
Tan Jin Song (Chairman) (Appointed on 26 December 2013)
Wei Jin Cai
Ning Xiang Dong
No. of meetings
Attended/Eligible to attend
4/4
4/4
8/8
8/8
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EXTERNAL AUDITORS
The Audit Committee reviewed the performance, independence and objectivity of the Company’s auditors and was satisfied
with the results.
The Audit Committee concludes that the independence of the auditors of the Company has not been compromised by non-
audit services provided for the Group.
KPMG Huazhen (Special General Partnership) and KPMG acted as the auditors of the Company in 2011 and 2012. On 18
June 2013, the 2012 annual general meeting considered and approved the appointment of PricewaterhouseCoopers Zhong
Tian LLP to provide professional services to the Company for its domestic financial reporting, U.S. financial reporting and
internal control for the year 2013 and PricewaterhouseCoopers to provide professional services to the Company for its Hong
Kong financial reporting for the year 2013.
The following table sets forth the type of, and fees for, the principal audit services and non-audit services provided by the
Company’s external auditor to the Group in 2012 and 2013:
Audit fees
Non-audit fees
Total
2013
2012
RMB Million
RMB Million
12
4
16
10
4
14
REMUNERATION AND ASSESSMENT COMMITTEE
As at 31 December 2013, the Remuneration and Assessment Committee comprises three members and chaired by Mr. Ning
Xiang Dong (INED) together with Mr. Wang Quan Hua (NED) and Mr. Tan Jin Song (INED) as members.
The main responsibilities of the Remuneration and Assessment Committee are to make recommendations to the Board on
the remuneration policy, structure and packages for Directors and senior management of the Company, and to establish
regular and transparent procedures on remuneration policy development and improvement. In particular, the Remuneration
and Assessment Committee has the duty to ensure that the Directors or any of their associates shall not be involved in
the determination of their own remuneration packages. The details of the roles and functions of the Remuneration and
Assessment Committee are set out in the Terms of Reference of Remuneration and Assessment Committee of the Company
which has been published on the websites of the Stock Exchange and the Company at “www.hkexnews.hk” and “www.
csair.com”.
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The Remuneration and Assessment Committee held one meeting in 2013, which was held according to its rules and
procedures. The attendance of each member is as follows:
Members of Remuneration and Assessment Committee
No. of meetings
Attended/Eligible to attend
Ning Xiang Dong (Chairman)
Gong Hua Zhang (Resigned on 26 December 2013)
Wang Quan Hua
Tan Jin Song (Appointed on 26 December 2013)
1/1
1/1
1/1
0/0
The Remuneration and Assessment Committee consulted, when appropriate, the Chairman and/or the President about
its proposals relating to the remuneration of other executive Directors. The Remuneration and Assessment Committee is
provided with sufficient resources to discharge its duties and professional advice is available if necessary. The Remuneration
and Assessment Committee is also responsible for assessing performance of executive Directors and approving the terms of
executive Directors’ service contracts. The Remuneration and Assessment Committee has performed all its responsibilities
under its terms of reference in 2013.
NOMINATION COMMITTEE
As at 31 December 2013, the Nomination Committee consists of three members, including Mr. Si Xian Min as chairman and
Mr. Wei Jin Cai (INED) and Mr. Tan Jin Song (INED) as members. The responsibilities of the Nomination Committee are to
make recommendations to the Board in respect of the size and composition of the Board based on the operational activities,
assets and shareholding structure of the Company; study the selection criteria and procedures of Directors and executives
and give advice to the Board by consideration of the board diversity policy; identify qualified candidates for Directors and
executives; investigate and propose candidates for Directors and managers and other senior management members to the
Board.
In accordance with relevant laws and regulations as well as the provisions of the Articles of Association of the Company,
the Nomination Committee shall study and resolve on the selection criteria, procedures and terms of office for Directors and
managers with reference to the Company’s actual situation and the board diversity policy. Any resolution made in this regard
shall be filed and proposed to the Board for approval and shall be implemented accordingly. The Nomination Committee
is provided with sufficient resources to discharge its duties and independently engage intermediate agencies to provide
professional advice on its proposals if necessary. The details of the roles and functions of the Nomination Committee are set
out in the Terms of Reference of Nomination Committee of the Company which has been published on the websites of the
Stock Exchange and the Company at “www.hkexnews.hk” and “www.csair.com”.
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The Nomination Committee held one meeting in 2013. The Nomination Committee has performed all its obligations under
their terms of reference in 2013. The attendance of each member of the Nomination Committee is as follows:
Members of the Nomination Committee
Si Xian Min (Chairman)
Gong Hua Zhang (Resigned on 26 December 2013)
Wei Jin Cai
Tan Jin Song (Appointed on 26 December 2013)
(No. of meetings)
Attended/Eligible to attend
1/1
1/1
1/1
0/0
CORPORATE GOVERNANCE FUNCTIONS
The Board is responsible for performing the corporate governance duties set out in the code provision D.3.1 of the revised
Code.
During the year, the Board devised a board diversity policy in accordance with a new Code Provision, and reviewed the
compliance of the Model Code and disclosure in this Corporate Governance Report during the Board meeting to approve the
annual result.
COMPLIANCE WITH THE MODEL CODE
Having made specific enquiries with all the Directors and Supervisors, they confirmed that the Directors and the Supervisors
had for the year ended 31 December 2013 complied with the Model Code. The code of conduct adopted by the Company
regarding securities transactions by Directors and Supervisors is no less stringent than the Model Code.
RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
The following statement, which sets out the responsibilities of the Directors in relation to the financial statements, should be
read in conjunction with, but distinguished from, the reports prepared by the auditors of the Company, which acknowledges
the reporting responsibilities of the Group’s auditors.
The Directors are responsible for the preparation of periodic accounts for each financial year which should give a true and fair
view of the state of affairs, results and cash flows of the Group during that period.
The reporting responsibilities of the Company’s external auditor, PricewaterhouseCoopers, are set out on pages 76 to 77.
The Directors consider that in preparing the financial statements, the Group uses appropriate accounting policies that are
consistently applied, and that all applicable accounting standards are followed.
The Directors are responsible for ensuring that the Group keeps accounting records which disclose with reasonable accuracy
the financial position of the Group and which enable the preparation of financial statements in accordance with PRC
laws and regulations and disclosure requirements of the Hong Kong Companies Ordinance and the applicable accounting
standards.
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INTERNAL CONTROL
The Board has an overall responsibility for the Group’s internal control system and its effectiveness. The Board has existing
process to identify, assess and manage major risks to which Group is exposed. It is part of the process to renew the internal
control system in case of changes in operating environment or regulation.
The Board has conducted a review of, and is satisfied with the effectiveness of the Group’s internal control system for the
financial year ended 31 December 2013.
COMMUNICATIONS WITH SHAREHOLDERS AND INVESTOR RELATIONS
The Board believes that a transparent and timely disclosure of the Group’s information will enable shareholders and investors
to make the best investment decision and to have better understanding on the Group’s business performance and strategies.
It is also vital for developing and maintaining continuing investor relations with the Company’s potential and existing
investors.
The Company has formulated and implemented the Investor Relations Management System which has specified the
basic principles, the functional departments and the work and duties of investor relations management. It facilitates the
Company’s self-disciplined and standardised operation with high integrity, enhances the corporate governance structure,
increases the understanding and recognition of the Company by investors, and strengthens the long-term and sustaining
positive interaction between investors and the Company. All these will ultimately maximize the value of Company and the
return of shareholders while safeguarding investors’ interest.
In accordance with the Investor Relations Management System and through roadshow, conference call, investor relations
website, hotline, receiving visit of investors, investor forum etc., the Company strengthened communication and exchanges
with investors, increased the transparency of the Company and established a good image of the Company in the capital
market.
The Company highly values communication with investors and is committed to maintaining effective two-way
communication with investors for the purpose of enhancing shareholders’ value. The daily contact between the Board and
investors is mainly conducted under the leadership of the Company Secretary.
During the year, the major investor relations activities included:
1. On 24 January 2013, the Company held the first extraordinary general meeting of 2013 in Guangzhou with 26
shareholders or their representatives attended the meeting. On 18 June 2013, the Company held the 2012 annual
general meeting in Guangzhou with 52 shareholders or their representatives attended the meeting. On 26 December
2013, the Company held the second extraordinary general meeting of 2013 in Guangzhou with 24 shareholders or
their representatives attended the meeting;
2.
Prior to the record date for the 2012 annual general meeting, the Company held an online meeting for explaining the
cash dividend distribution for 2012 and briefing key issues relating to the cash dividend distribution proposal for 2012;
3.
During 2013, the Company Secretary and the manager of Investor Relations department received 47 batches of visits
totaling 89 investors/times, and participated in two investment forums organised by brokers;
4.
In March 2013, the Company held press conference and investor conference for 2012 annual results in Hong Kong; in
August, the Company held investor conference for 2013 interim results in Hong Kong;
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CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Corporate Governance Report
5.
In May 2013, the Company organised a non-deal roadshow in London; in November, the Company held non-deal
roadshows in Boston and New York; and the Company also held two regular results roadshows; and
6.
In May 2013, the Company participated in the Investors Reception Day held by Guangdong Securities Regulatory
Bureau and the Listed Companies Association of Guangdong.
There are a number of investment banks who studied and analyzed the business performance of the Company. The
Company also values the views and opinions of investors and the public, and collects their suggestions and opinions which
are reported to the management regularly. We deeply believe that maintaining two-way communication with investors will
add value to the Company and investors.
Investors and the public may refer to the Company’s website (www.csair.com) to understand and obtain details relating to
our corporate governance structure, organizational structure, stock information, operating statistics, results announcement
and other announcements. The procedures are as follows:
1. Open the Home page of the Company’s website and click “Investor Relations”; and
2.
Then click the content you want to read.
For enquiries about shareholders’ meeting and Board meeting, investors may contact our Company Secretary by phone at
(8620)8612-4462, by fax to (8620)8665-9040 or by e-mail to ir@csair.com. Investors may also raise questions directly at
the annual general meeting or extraordinary general meeting. Enquiries about attending any annual general meeting or
extraordinary general and procedures for proposing resolution at such meetings may also be made to the Company Secretary
by the above means.
AMENDMENTS MADE TO ARTICLES OF ASSOCIATION OF THE COMPANY
In 2013, amendments to Articles of Association of the Company were made mainly to the approval procedure of profit
distribution plan, the basic principle of profit distribution policy, the specific policy of profit distribution, the proportion
of cash dividend, the address of the Company and the Board composition. Amendments to the Procedural Rules of the
Shareholders’ General Meeting, the Procedural Rules of the Board of Directors the Procedural Rules of the Supervisory
Committee were made mainly to reflect the amendments to the Articles of Association, the Board Diversity Policy and certain
detailed procedures for the general meeting and meetings of Board and Supervisory Committee. For details, please refer to
the announcements of the Company dated 6 December 2012, 24 April 2013 and 7 November 2013.
SHAREHOLDERS’ RIGHTS
As one of the measures to safeguard shareholders’ interests and rights, separate resolutions are proposed at shareholders’
meetings on each substantial issue, including the election of individual directors, for shareholders’ consideration and voting.
All resolutions put forward at shareholders’ meetings will be voted by poll pursuant to the Listing Rules and the poll results
will be posted on the websites of the Stock Exchange and the Company at “www.hkexnews.hk and “www.csair.com” after
the relevant shareholders’ meetings.
Extraordinary general meetings may be convened by the Board on written requisition of shareholder(s) individually or jointly
holding 10% or more of the Company’s issued and outstanding shares carrying voting rights pursuant to Article 79(3) of the
Articles of Association. Shareholders should follow the requirements and procedures as set out in such Article for convening
an extraordinary general meeting.
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CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Corporate Governance Report
For putting forward any enquiries to the Board, shareholders may send written enquiries to the Company. Shareholders may
send their enquiries or requests in respect of their rights as mentioned above to the Company’s board company secretary
office or via email as set out in the above section headed “Communications with shareholders and investor relations”.
CORPORATE SOCIAL RESPONSIBILITY
As a part of the society, the Company has kept to the promise it solemnly made at its inception – to consider the
development of the Company along with the overall economic and social development of China and the social harmony. It
strived for balance between social responsibility and commercial benefits in order to enhance both economic benefits and
social benefits.
In 2013, the Company combined the concept of social responsibility with its corporate culture. In the process of brand
building, the Company fosted a sense of the social responsibility and promptly announced its social responsibility goal and
activity. The Company set an example to raise the awareness of social responsibility while actively expanding its market share.
In 2013, the Company placed efforts in the following seven aspects:
No. Type
Activity
1
2
Management
Established a code of conduct for its suppliers and put major suppliers to questionnaire.
Safety
Held safety video conferences, safety technology seminars, safety inspections, flight crew
qualification investigation and safety rectification to consolidate safety management
infrastructure.
3
Market
Comprehensively enhanced service, continued enhance quality of flight and ground service
and actively promoted service innovation.
4
Environment
Promoted the green flight idea and implemented energy saving measures to advocate green
consumption and service.
5
Interest of staff
Improved its personnel grading and remuneration system and training system including
training to technical staff such as those of maintenance and flight operations.
6
7
Social welfare
“Ten Cent Care Foundation” donated over RMB7.1 million for the whole year.
Community
Integrated into the community to achieve harmonious development.
In addition to putting the idea of social responsibility in practice, the Company closely communicated with social
responsibility institutions and actively participated in social responsibility survey and research. Through these activities, it
delivered to the public its social responsibility values to call for their participation.
Further details are provided in the 2013 Corporate Social Responsibility Report which has been published on the website of
the Stock Exchange (www.hkexnews.hk).
71
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Corporate Governance Report
SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATE GOVERNANCE PRACTICES OF THE
COMPANY AND THE CORPORATE GOVERNANCE PRACTICES REQUIRED TO BE FOLLOWED BY
U.S. COMPANIES UNDER THE NEW YORK STOCK EXCHANGE’S LISTING STANDARDS
As a company incorporated in the PRC and listed on the Shanghai Stock Exchange, the Stock Exchange and the New York
Stock Exchange (the “NYSE”), the Company is required to comply with the applicable PRC laws and regulations, Hong Kong
laws and regulations, and applicable U.S. federal securities laws and regulations. Based on NYSE’s listing standards, the NYSE
imposes a series of corporate governance standards for companies listed on the NYSE. However, the NYSE permits foreign
private issuers to follow their respective “home country” practices and grants waivers for compliance with certain corporate
governance standards. One of the conditions for such waiver is for the foreign private issuer to disclose in its annual report
how the corporate governance practices in its “home country” differ from those required of U.S. companies under the
NYSE’s listing standards.
Set out below is a summary of any significant ways in which the Company’s corporate governance practices differ from those
followed by domestic companies under the listing standards of the NYSE:
NYSE corporate governance rules
The Company’s governance practices
Director Independence
A listed company must have a majority of independent
The Company has complied with the relevant Chinese
directors on its board of directors. No director qualifies as
corporate governance rules and the Listing Rules. The
“independent” unless the board of directors affirmatively
Company has also implemented internal rules governing the
determines that the director has no material relationship
independence and responsibilities of independent directors.
with the listed company (either directly or as a partner,
The Company determines the independence of INEDs every
shareholder or officer of an organization that has a
year.
relationship with the company). In addition, a director
must meet certain standards to be deemed independent.
For example, a director is not independent if the director
is, or has been within the last three years, an employee of
the listed company, or if the director has received, during
any twelve-month period within the last three years, more
than US$120,000 in direct compensation from the listed
company, other than director and committee fees and
pension or other forms of deferred compensation for prior
service (provided such compensation is not contingent in any
way on continued service).
Executive Sessions
The non-management directors of each listed company
No similar requirements.
must meet at regularly scheduled executive sessions without
management.
72
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Corporate Governance Report
NYSE corporate governance rules
The Company’s governance practices
Nominating/Corporate Governance Committee
Listed companies must have a nominating/corporate
The Company has established a Nomination Committee.
governance committee composed entirely of independent
As of December 31, 2013, the Nomination Committee
directors.
consists of three members, Mr. Si Xian Min, Mr. Wei Jin Cai
(INED) and Mr. Tan Jing Song (INED). Mr. Si Xian Min was
appointed as the chairman of the Nomination Committee on
December 26, 2013. The responsibilities of the Nomination
Committee are to make recommendations to the Board in
respect of the size and composition of the Board based on
the operational activities, assets and shareholding structure
of the Company; study the selection criteria and procedures
of directors and executives and give advice to the Board;
identify qualified candidates for directors and executives;
investigate and propose candidates for directors and
managers and other senior management members to the
Board.
The nominating/corporate governance committee must have
a written charter that addresses the committee’s purposes
and responsibilities which, at minimum, must be to: identify
individuals qualified to become board members, consistent
with criteria approved by the board, and to select, or to
recommend that the board select, the director nominees
for the next annual meeting of shareholders; develop and
recommend to the board a set of corporate governance
guidelines applicable to the corporation; and oversee the
evaluation of the board and management, and evaluate the
performance of the committee every year.
Compensation Committee
Listed companies must have a compensation committee
The Company has established a Remuneration and
composed entirely of independent directors.
Assessment Committee consisting of three members. As
of December 31, 2013, the Remuneration and Assessment
Committee is chaired by Mr. Ning Xiang Dong (INED) with
Mr. Wang Quan Hua (NED) and Mr. Tan Jing Song (INED) as
members.
The written charter of the compensation committee must
state, at least, the following purposes and responsibilities:
73
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Corporate Governance Report
NYSE corporate governance rules
The Company’s governance practices
(1)
review and approve the corporate goals associated
The responsibilities are similar to those stipulated by the
with CEO’s compensation, evaluate the performance
NYSE rules, but the committee is not required to produce
of the CEO in fulfilling these goals, and based on
a report on the executive compensation or make an
such evaluation determine and approve the CEO’s
annual performance evaluation of the committee. The
compensation level;
responsibilities of the Remuneration and Assessment
Committee are to approve the remuneration packages of
Directors and senior management of the Group, and the
Company’s “preliminary proposals on annual emoluments
of the directors and senior management of the Group”.
The Remuneration and Assessment Committee is also
responsible for assessing performance of executive Director.
(2) make recommendations to the board with respect
to non-CEO executive officer compensation, and
incentive-compensation and equity-based plans that
are subject to board approval;
(3) p r o d u c e a c o m m i t t e e r e p o r t o n e x e c u t i v e
compensation as required by the SEC to be included in
the annual proxy statement or annual report filed with
the SEC.
The charter must also include the requirement for an annual
performance evaluation of the compensation committee.
Audit Committee
Listed companies must have an audit committee that
The Board has established an Audit Committee that satisfies
satisfies the requirements of Rule 10A-3 of Exchange
relevant domestic requirements and the Audit Committee
Act. It must have a minimum of three members, and all
has a written charter. As of December 31, 2013, the Audit
audit committee members must satisfy the requirements
Committee consists of three members, Mr. Ning Xiang
for independence set forth in Section 303A.02 of NYSE
Dong, Mr. Wei Jin Cai and Mr. Tan Jing Song, with Mr. Tan
Corporate Governance Rules as well as the requirements of
Jing Song being the Chairman of the Audit Committee.
Rule 10A-3b (1) of the Exchange Act.
The written charter of the audit committee must specify
The responsibilities of the Audit Committee are similar to
that the purpose of the audit committee is to assist the
those stipulated by the NYSE rules, but according to the
board oversight of the integrity of financial statements,
domestic practices, the Company is not required to make
the company’s compliance with legal and regulatory
an annual performance evaluation of the Audit Committee
requirements, qualifications and independence of
and the Audit Committee is not required to prepare an
independent auditors and the performance of the listed
audit report to be included in the Company’s annual proxy
company’s internal audit function and independent auditors.
statement.
74
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Corporate Governance Report
NYSE corporate governance rules
The Company’s governance practices
The written charter must also require the audit committee to
prepare an audit committee report as required by the SEC to
be included in the listed company’s annual proxy statement
as well as an annual performance evaluation of the audit
committee.
Shareholder Approval of Equity Compensation Plans
Shareholders must be given the opportunity to vote on
The relevant regulations of China require the Board to
equity-compensation plans and material revisions thereto,
propose plans and types of director compensation for the
except for employment incentive plans, certain awards and
shareholders’ meeting to approve. The compensation plan
plans in the context of mergers and acquisitions.
of executive officers is subject to approval by the Board and
disclosed to the public upon the approval of the Board.
The approval of director compensation and compensation
plan of executive officers of the Company satisfies relevant
domestic requirements.
Corporate Governance Guidelines
Listed companies must adopt and disclose corporate
China Securities Regulatory Commission has issued the
governance guidelines, involving director qualification
Corporate Governance Rules, with which the Company has
standards, director responsibilities, director access
complied.
to management and, as necessary and appropriate,
independent advisors, director compensation, director
orientation continuing education, management succession
and annual performance evaluation of the board of
directors, etc.
Certification Requirements
Each listed company CEO must certify to the NYSE each year
There are no similar requirements under the domestic
that he or she is not aware of any violation by the company
corporate governance rules in China.
of NYSE corporate governance listing standards and he or
she must promptly notify the NYSE in writing of any material
non-compliance with any applicable provisions of Section
303A.
Each listed company must submit an executed Written
Affirmation annually to the NYSE. In addition, each listed
company must submit an interim Written Affirmation as
and when required by the interim Written Affirmation form
specified by the NYSE.
75
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Independent Auditor’s Report
To the shareholders of China Southern Airlines Company Limited
(incorporated in the People’s Republic of China with limited liability)
We have audited the consolidated financial statements of China Southern Airlines Company Limited (“the Company”)
and its subsidiaries (together, the “Group”) set out on pages 78 to 185, which comprise the consolidated and
company balance sheets as at 31 December 2013, and the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash
flow statement for the year then ended, and a summary of significant accounting policies and other explanatory
information.
Directors’ Responsibility for the Consolidated Financial Statements
The directors of the Company are responsible for the preparation of consolidated financial statements that give a true
and fair view in accordance with International Financial Reporting Standards and the disclosure requirements of the
Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with International Standards on Auditing. Those standards require that we
comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
of consolidated financial statements that give a true and fair view in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Company
and of the Group as at 31 December 2013, and of the Group’s profit and cash flows for the year then ended in
accordance with International Financial Reporting Standards and have been properly prepared in accordance with the
disclosure requirements of the Hong Kong Companies Ordinance.
76
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Independent Auditor’s Report
Other Matters
This report, including the opinion, has been prepared for and only for you, as a body, and for no other purpose. We
do not assume responsibility towards or accept liability to any other person for the contents of this report.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 28 March 2014
77
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Consolidated Income Statement
For the year ended 31 December 2013
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
Operating revenue
Traffic revenue
Other operating revenue
Total operating revenue
Operating expenses
Flight operation expenses
Maintenance
Aircraft and traffic servicing expenses
Promotion and selling expenses
General and administrative expenses
Depreciation and amortisation
Impairment on property, plant and equipment
Others
Total operating expenses
Other net income
Operating profit
Interest income
Interest expense
Share of associates’ results
Share of joint ventures’ results
Exchange gain, net
Other non-operating income
Profit before income tax
Income tax
Profit for the year
2013
2012
Note
RMB million
RMB million
5
7
8
9
10
11
12
13
22
94,684
3,863
98,547
54,010
7,805
15,091
7,754
2,470
9,347
536
1,267
98,280
96,100
3,414
99,514
54,690
7,971
14,072
7,134
2,425
8,264
–
1,321
95,877
15
1,243
1,462
1,510
5,099
16
26
27
36(e)
17
19
307
(1,651)
294
96
2,903
25
3,484
(734)
235
(1,376)
317
121
267
75
4,738
(954)
2,750
3,784
78
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Consolidated Income Statement (Continued)
For the year ended 31 December 2013
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
2013
2012
Note
RMB million
RMB million
Profit attributable to:
Equity shareholders of the Company
Non-controlling interests
20
1,986
764
2,619
1,165
Profit for the year
2,750
3,784
Earnings per share attributable to equity shareholders
of the Company
Basic and diluted
21
RMB0.20
RMB0.27
Note
2013
2012
RMB million
RMB million
Dividends approved in respect of previous year
47
491
1,964
The notes on pages 88 to 185 form part of these financial statements.
79
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2013
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
2013
2012
Note
RMB million
RMB million
Profit for the year
2,750
3,784
Other comprehensive income for the year:
Items that may be reclassified subsequently to profit or loss
– Fair value movement of available-for-sale financial assets
– Share of other comprehensive loss of an associate
– Deferred tax relating to above items
29
30
(8)
(3)
2
5
–
(1)
Total comprehensive income for the year
2,741
3,788
Total comprehensive income attributable to:
Equity shareholders of the Company
Non-controlling interests
Total comprehensive income for the year
1,981
760
2,622
1,166
2,741
3,788
The notes on pages 88 to 185 form part of these financial statements.
80
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Consolidated Balance Sheet
At 31 December 2013
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
31 December
31 December
2013
2012
Note
RMB million
RMB million
22
23
24
26
27
28
29
30
31
32
33
34
35
40
36
37
38
39
40
41
42
119,777
17,459
100,040
18,689
2,267
1,305
1,197
162
566
61
1,251
589
2,198
1,033
1,103
160
672
69
1,223
480
144,634
125,667
1,647
2,173
3,431
11,748
440
803
331
1,708
1,853
2,139
10,082
–
758
247
20,573
16,787
20,242
21,899
3,636
1,407
5,815
1,244
495
457
11,898
4,019
49,213
2,494
1,825
4,854
1,201
346
308
11,800
4,004
48,731
Non-current assets
Property, plant and equipment, net
Construction in progress
Lease prepayments
Interest in associates
Interest in joint ventures
Other investments in equity securities
Aircraft operating lease deposits
Available-for-sale financial assets
Deferred tax assets
Other assets
Current assets
Inventories
Trade receivables
Other receivables
Cash and cash equivalents
Restricted bank deposits
Prepaid expenses and other current assets
Amounts due from related companies
Current liabilities
Borrowings
Current portion of obligations under finance leases
Trade payables
Sales in advance of carriage
Deferred revenue
Current income tax
Amounts due to related companies
Accrued expenses
Other liabilities
Net current liabilities
2(a(i))
(28,640)
(31,944)
Total assets less current liabilities
115,994
93,723
81
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Consolidated Balance Sheet (Continued)
At 31 December 2013
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
Non-current liabilities
Borrowings
Obligations under finance leases
Deferred revenue
Provision for major overhauls
Provision for early retirement benefits
Deferred benefits and gains
Deferred tax liabilities
NET ASSETS
CAPITAL AND RESERVES
Share capital
Reserves
Total equity attributable to equity
shareholders of the Company
Non-controlling interests
TOTAL EQUITY
31 December
31 December
2013
2012
Note
RMB million
RMB million
36
37
39
43
44
45
30
46
47
37,246
31,373
2,069
1,076
41
858
880
73,543
30,196
19,371
1,649
902
66
1,011
794
53,989
42,451
39,734
9,818
24,511
34,329
8,122
9,818
23,021
32,839
6,895
42,451
39,734
Approved and authorised for issue by the board of directors on 28 March 2014.
Si Xian Min
Director
Tan Wan Geng
Director
Xu Jie Bo
Director
The notes on pages 88 to 185 form part of these financial statements.
82
Non-current assets
Property, plant and equipment, net
Construction in progress
Lease prepayments
Investments in subsidiaries
Interest in associates
Interest in joint ventures
Other investments in equity securities
Aircraft operating lease deposits
Available-for-sale financial assets
Deferred tax assets
Other assets
Current assets
Inventories
Trade receivables
Other receivables
Cash and cash equivalents
Restricted bank deposits
Prepaid expenses and other current assets
Amounts due from related companies
Current liabilities
Borrowings
Current portion of obligations under finance leases
Trade payables
Sales in advance of carriage
Deferred revenue
Current income tax
Amounts due to subsidiaries and other related companies
Accrued expenses
Other liabilities
Net current liabilities
Total assets less current liabilities
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Balance Sheet
At 31 December 2013
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
31 December
31 December
2013
2012
Note
RMB million
RMB million
22
23
24
25
26
27
28
29
30
31
32
33
34
35
40
36
37
38
39
40
41
42
100,399
12,315
1,347
3,036
437
483
100
484
25
1,221
488
82,016
14,809
1,384
2,191
347
483
100
585
22
1,181
404
120,335
103,522
1,251
1,800
2,231
5,467
87
518
449
1,320
1,549
1,167
5,367
–
541
300
11,803
10,244
16,547
18,835
3,558
486
5,153
1,154
480
2,256
10,057
3,004
42,695
2,446
1,026
4,381
1,121
230
2,089
9,402
3,347
42,877
(30,892)
(32,633)
89,443
70,889
83
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Balance Sheet (Continued)
At 31 December 2013
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
Non-current liabilities
Borrowings
Obligations under finance leases
Deferred revenue
Provision for major overhauls
Provision for early retirement benefits
Deferred benefits and gains
NET ASSETS
CAPITAL AND RESERVES
Share capital
Reserves
TOTAL EQUITY
31 December
31 December
2013
2012
Note
RMB million
RMB million
36
37
39
43
44
45
46
47
29,093
30,482
1,860
689
39
808
23,152
18,610
1,466
581
64
998
62,971
44,871
26,472
26,018
9,818
16,654
9,818
16,200
26,472
26,018
Approved and authorised for issue by the board of directors on 28 March 2014.
Si Xian Min
Director
Tan Wan Geng
Director
Xu Jie Bo
Director
The notes on pages 88 to 185 form part of these financial statements.
84
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Consolidated Statement of Changes in Equity
For the year ended 31 December 2013
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
Attributable to equity shareholders of the Company
Share
capital
RMB million
Share
premium
RMB million
Fair value
reserve
RMB million
Other
reserves
RMB million
Retained
earnings
RMB million
Non-controlling
interests
RMB million
Total
RMB million
Total
equity
RMB million
Balance at 1 January 2012
9,818
14,131
21
1,082
7,123
32,175
5,602
37,777
Changes in equity for 2012:
Profit for the year
Other comprehensive income
Total comprehensive income
Appropriations to reserves
Dividends relating to 2011 (Note 47)
Acquisition of non-controlling interests
in a subsidiary
Capital injection from the non–controlling
shareholder of a subsidiary
Government contributions (Note 47(c))
Distributions to non-controlling interests
Share of an associate’s reserves movement
Balance at 31 December 2012
and 1 January 2013
Changes in equity for 2013:
Profit for the year
Other comprehensive income
Total comprehensive income
Appropriations to reserves
Dividends relating to 2012 (Note 47)
Acquisition of non-controlling interests
in a subsidiary
Capital injection from the non–controlling
shareholder of a subsidiary
(Note (25 (a) (i)&(v)))
Distributions to non-controlling interests
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3
3
–
–
–
–
–
–
–
–
–
–
132
–
–
–
10
–
2
2,619
–
2,619
3
1,165
1
3,784
4
2,619
2,622
1,166
3,788
(132)
(1,964)
–
(1,964)
(6)
–
–
–
–
(6)
–
10
–
2
–
–
(11)
140
10
(12)
–
–
(1,964)
(17)
140
20
(12)
2
9,818
14,131
24
1,226
7,640
32,839
6,895
39,734
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2)
(2)
–
–
–
–
–
–
(3)
(3)
113
–
–
–
–
1,986
–
1986
(5)
764
(4)
2,750
(9)
1,986
1,981
760
2,741
(113)
(491)
–
(491)
–
–
–
–
–
–
–
–
(6)
560
(87)
–
(491)
(6)
560
(87)
Balance at 31 December 2013
9,818
14,131
22
1,336
9,022
34,329
8,122
42,451
The notes on pages 88 to 185 form part of these financial statements.
85
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Consolidated Cash Flow Statement
For the year ended 31 December 2013
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
2013
2012
Note
RMB million
RMB million
Operating activities
Cash generated from operating activities
35(b)
Interest received
Interest paid
Income tax paid
Net cash generated from operating activities
Investing activities
Proceeds from disposal of property,
plant and equipment and lease prepayments
Dividends received from associates
Dividends received from a joint venture
Dividends received from other investments in equity securities and
available-for-sale financial assets
Loans repaid by an associate
Payment for wealth management products
and term deposits
Proceed from maturity of wealth management products
Interest received on wealth management products
Additions of property, plant and equipment,
lease prepayments and other assets
Capital injection into associates and other investment
Refund of aircraft lease deposits
Payment for aircraft lease deposits
Proceeds from disposal of a subsidiary
Placement of pledged bank deposits
Net cash used in investing activities
28 & 29
11,546
220
(1,538)
(525)
9,703
14,475
224
(1,758)
(1,237)
11,704
205
33
5
14
–
522
77
–
12
2
(8,402)
8,481
25
(1,100)
4,100
53
(12,308)
(15,733)
(72)
142
(51)
–
(277)
–
10
(101)
5
–
(12,205)
(12,153)
86
Consolidated Cash Flow Statement (Continued)
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
For the year ended 31 December 2013
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
2013
2012
Note
RMB million
RMB million
Financing activities
Dividends paid to equity shareholders of the Company
47(b)
Proceeds from borrowings
Proceeds from ultra-short-term financing bills
Repayment of borrowings
Repayment of principal under finance lease obligations
Repayment of ultra-short-term financing bills
Government contribution
Capital injection from the non-controlling
interests of subsidiaries
Dividends paid to non-controlling interests
Payment for purchase of non-controlling interest
Withdrawal of pledged bank deposits
Net cash generated from financing activities
(491)
38,324
500
(31,243)
(2,895)
(500)
–
560
(87)
–
–
4,168
(1,964)
31,940
–
(27,533)
(1,978)
–
20
140
(12)
(17)
72
668
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 January
1,666
10,082
219
9,863
Cash and cash equivalents at 31 December
11,748
10,082
The notes on pages 88 to 185 form part of these financial statements.
87
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
1 Corporate information
China Southern Airlines Company Limited (the “Company”), a joint stock company limited by shares, was
incorporated in the People’s Republic of China (the “PRC”) on 25 March 1995. The address of the Company’s
registered office is House 203, No. 233 Kaifa Avenue, Guangzhou Economic & Technology Development Zone,
Luogang District. The Company and its subsidiaries (the “Group”) are principally engaged in the operation
of civil aviation, including the provision of passenger, cargo, mail delivery and other extended transportation
services.
The Company’s majority interest is owned by China Southern Air Holding Company (“CSAHC”), a state-owned
enterprise incorporated in the PRC.
The Company’s shares are traded on Shanghai Stock Exchange, The Stock Exchange of Hong Kong Limited and
The New York Stock Exchange.
These consolidated financial statements were approved for issue by the Company’s Board on 28 March 2014.
2
Significant accounting policies
The principal accounting policies applied in the preparation of these consolidated 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 have been prepared in accordance with all applicable International
Financial Reporting Standards (“IFRSs”), which collective term includes all applicable individual IFRSs,
International Accounting Standards (“IASs”) and Interpretations issued by the International Accounting
Standards Board (the “IASB”). The consolidated financial statements also comply with the applicable
disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions
of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The
measurement basis used in the preparation of the financial statements is the historical cost basis except
that available-for-sale equity securities are stated at their fair value as explained in the accounting policies
set out in Note 2(e).
The preparation of financial statements in conformity with IFRSs requires management to make
judgements, estimates and assumptions that affect the application of policies and reported amounts of
assets, liabilities, income and expenses. The estimates and relevant assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstances, the
results of which form the basis of making the judgements about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and relevant assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that
period, or in the period of the revision and future periods if the revision affects both current and future
periods.
88
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (Continued)
(a) Basis of preparation (continued)
Judgements made by management in the application of IFRSs that have significant effect on the financial
statements and major sources of estimation uncertainty are discussed in Note 3.
The consolidated financial statements for the year ended 31 December 2013 comprise the Company and
its subsidiaries and the Group’s interest in associates and joint ventures.
(i) Going concern
As at 31 December 2013, the Group’s current liabilities exceeded its current assets by RMB28,640
million. In preparing the consolidated financial statements, the Board has given careful consideration
to the going concern status of the Group in the context of the Group’s current working capital
deficit and believe that adequate funding is available to fulfil the Group’s short-term obligations and
capital expenditure requirements.
As at 31 December 2013, the Group had banking facilities with several PRC banks and financial
institutions for providing bank financing up to approximately RMB166.3 billion (2012: RMB173.2
billion), of which approximately RMB120.9 billion (2012: RMB112.8 billion) was unutilised. The Board
believes that, based on experience to date, it is likely that these facilities will be rolled over in future
years if required. Accordingly, the Directors believes that it is appropriate to prepare the consolidated
financial statements on a going concern basis without including any adjustments that would be
required should the Company and the Group fail to continue as a going concern.
(ii) New and amended standards adopted by the Group
The Group has adopted the following new standards and amendments to existing standards which
are relevant for the Group’s operation and mandatory for the first time for the financial year
beginning 1 January 2013:
(cid:129)
Amendment to IFRS 7 ‘Financial instruments: Disclosures’ on asset and liability offsetting. The
amendments require new disclosure requirements which focus on quantitative information
about recognised financial instruments that are offset in the balance sheet, as well as those
recognised financial instruments that are subject to master netting or similar arrangements
irrespective of whether they are offset. These amendments have had no material impact on the
Group.
(cid:129)
IFRS 10 “Consolidated financial statements”. The objective of IFRS 10 is to establish principles
for the presentation and preparation of consolidated financial statements when an entity
controls one or more other entity (an entity that controls one or more other entities) to present
consolidated financial statements. Defines the principle of control, and establishes controls as
the basis for consolidation. Set out how to apply the principle of control to identify whether
an investor controls an investee and therefore must consolidate the investee. It also sets out
the accounting requirements for the preparation of consolidated financial statements. The
management has evaluated the impact of IFRS 10, and there is no impact on the Group.
89
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (Continued)
(a) Basis of preparation (continued)
(ii) New and amended standards adopted by the Group (continued)
(cid:129)
IFRS 11, “Joint arrangements”. IFRS 11 is a more realistic reflection of joint arrangements by
focusing on the rights and obligations of the arrangement rather than its legal form. There
are two types of joint arrangement: joint operations and joint ventures. Joint operations arise
where a joint operator has rights to the assets and obligations relating to the arrangement and
therefore accounts for its interest in assets, liabilities, revenue and expenses. Joint ventures
arise where the joint operator has rights to the net assets of the arrangement and therefore
equity accounts for its interest. Proportional consolidation of joint ventures is no longer
allowed. The management has evaluated the impact of IFRS 11, and there is no impact on the
Group.
(cid:129)
IAS 28 (Revised 2011) “Associates and joint ventures”. The amendment includes the
requirements for joint ventures, as well as associates, to be equity accounted following the
issue of IFRS 11. The Group continued follow the equity accounting for joint ventures and
associates in 2013.
(cid:129)
IFRS 12 “Disclosure of interests in other entities”. The amendment includes the disclosure
requirements for all forms of interests in other entities, including joint arrangements,
associates, structured entities and other off balance sheet vehicles. The management has
evaluated the impact of IFRS 12 and made the disclosure accordingly where applicable.
(cid:129)
IFRS 13 “Fair value measurement”. IFRS 13 aims to improve consistency and reduce complexity
by providing a precise definition of fair value and a single source of fair value measurement
and disclosure requirements for use across IFRSs. The requirements, which are largely aligned
between IFRSs and United States Generally Accepted Accounting Principles (“US GAAP”), do
not extend the use of fair value accounting but provide guidance on how it should be applied
where its use is already required or permitted by other standards within IFRSs. The Group has
made the disclosures accordingly where applicable.
(cid:129)
IAS 1(Amendment) “Financial statements presentation” regarding other comprehensive
income. The main change resulting from these amendments is a requirement for entities to
group items presented in “other comprehensive income” (OCI) on the basis of whether they
are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The
Group has presented the required disclosure in the consolidated statement of comprehensive
income.
(cid:129)
IAS 27 (revised 2011) “Separate financial statements”. The control provisions of IAS 27 have
been included in the new IFRS 10. The amendment includes only other provisions on separate
financial statements. This revision has no impact on the Group.
90
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(a) Basis of preparation (continued)
(ii) New and amended standards adopted by the Group (continued)
(cid:129)
Annual improvements 2011, these annual improvements, address six issues in the 2009-2011
reporting cycle. It includes changes to:
–
–
–
–
–
IFRS 1, ‘First time adoption’
IAS 1, ‘Financial statement presentation’
IAS 16, ‘Property plant and equipment’
IAS 32, ‘Financial instruments; Presentation’
IAS 34, ‘Interim financial reporting’
The improvements has no material impact on the Group.
(iii) New and amended standards, and interpretations mandatory for the first time for the financial year
beginning 1 January 2013 but not currently relevant to the Group
Amendment to IFRS 1
‘First time adoption’, on government loans
Amendment to IFRSs 10, 11 and 12
‘Transition guidance’
Amendment to IAS 19,
‘Employee benefits’
(iv) New standards, amendments and interpretations to existing standards have been issued but not yet
effective for the financial year beginning 1 January 2013 and which are relevant for the Group’s
operations
(cid:129)
IFRS 9“Financial Instruments” IFRS 9 is the first standard issued as part of a wider project to
replace IAS 39. IFRS 9 retains but simplifies the mixed measurement model and establishes
two primary measurement categories for financial assets: amortised cost and fair value. The
basis of classification depends on the entity’s business model and the contractual cash flow
characteristics of the financial asset. The guidance in IAS 39 on impairment of financial assets
and hedge accounting continues to apply. The management is in the process of evaluating the
impact of IFRS 9 on the Group and will apply the standard from 1 January 2014.
(cid:129)
Amendment to IAS 32, “Financial instruments: Presentation”, on asset and liability offsetting.
These amendments are to the application guidance in IAS 32 “Financial instruments:
Presentation”, and clarify some of the requirements for offsetting financial assets and financial
liabilities on the balance sheet. The management is in the process of evaluating the impact of
IAS 32 on the Group and will apply the standard from 1 January 2014.
(cid:129)
Amendment to IAS 36, “Impairment of assets” on recoverable amount disclosures. This
amendment addresses the disclosure of information about the recoverable amount of impaired
assets if that amount is based on fair value less costs of disposal. The management is in the
process of evaluating the impact of IAS 36 on the Group and will apply the standard from 1
January 2014.
91
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(a) Basis of preparation (continued)
(iv) New standards, amendments and interpretations to existing standards have been issued but not yet
effective for the financial year beginning 1 January 2013 and which are relevant for the Group’s
operations (continued)
(cid:129)
IFRIC 21, “Levies”. This is an interpretation of IAS 37, ‘Provisions, contingent liabilities and
contingent assets’. IAS 37 sets out criteria for the recognition of a liability, one of which is
the requirement for the entity to have a present obligation as a result of a past event (known
as an obligating event). The interpretation clarifies that the obligating event that gives rise
to a liability to pay a levy is the activity described in the relevant legislation that triggers the
payment of the levy. The management is in the process of evaluating the impact of IFRIC 21 on
the Group and will apply the standard from 1 January 2014.
(b) Subsidiaries and non-controlling interests
Subsidiaries are all entities (including structured entities) over which the group has control. The group
controls an entity when the group is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries
are fully consolidated from the date on which control is transferred to the group. They are deconsolidated
from the date that control ceases.
An investment in a subsidiary is consolidated into the consolidated financial statements from the date that
control commences until the date that control ceases. Intra-group transactions, balances and unrealised
gains on transactions between group companies are eliminated. Unrealised losses are also eliminated.
When necessary, amounts reported by subsidiaries have been adjusted to conform with the group’s
accounting policies.
Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the
Company, and in respect of which the Group has not agreed any additional terms with the holders of
those interests which would result in the Group as a whole having a contractual obligation in respect of
those interests that meets the definition of a financial liability.
Non-controlling interests are presented in the consolidated balance sheet within equity, separately from
equity attributable to the equity shareholders of the Company. Non-controlling interests in the results
of the Group are presented on the face of the consolidated income statement and the consolidated
statement of comprehensive income as an allocation of the total profit or loss and total comprehensive
income for the year between non-controlling interests and the equity shareholders of the Company. Loans
from holders of non-controlling interests and other contractual obligations towards these holders are
presented as financial liabilities in accordance with (Notes 2(n)) or (Note 2(o)) depending on the nature of
the liability.
92
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(b) Subsidiaries and non-controlling interests (continued)
Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for
as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling
interests within consolidated equity to reflect the change in relative interests, but no adjustments are
made to goodwill and no gain or loss is recognised.
When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that
subsidiary, with a resulting gain or loss being recognised in income statement. Any interest retained in that
former subsidiary at the date when control is lost is recognised at fair value and this amount is regarded as
the fair value on initial recognition of a financial asset (Note 2(e)) or, when appropriate, the cost on initial
recognition of an investment in an associate or joint venture (Note 2(c)).
In the Company’s balance sheet, an investment in a subsidiary is stated at cost less impairment losses
(Note 2(k)).
The group applies the acquisition method to account for business combinations. The consideration
transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities
incurred to the former owners of the acquiree and the equity interests issued by the group. The
consideration transferred includes the fair value of any asset or liability resulting from a contingent
consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed
in a business combination are measured initially at their fair values at the acquisition date. The group
recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at
fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s
identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s
previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains
or losses arising from such re-measurement are recognised in profit or loss.
Any contingent consideration to be transferred by the group is recognised at fair value at the acquisition
date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an
asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other
comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its
subsequent settlement is accounted for within equity.
93
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(c) Associates and joint arrangements
An associate is an entity in which the Group or the Company has significant influence, but not control or
joint control, over its management, including participation in the financial and operating policy decisions.
The Group has applied IFRS 11 to all joint arrangements. Under IFRS 11 investments in joint arrangements
are classified as either joint operations or joint ventures depending on the contractual rights and
obligations each investor. The Group has assessed the nature of its joint arrangements and determined
them to be joint ventures.
An investment in an associate or a joint venture is accounted for in the consolidated financial statements
under the equity method and is initially recorded at cost, adjusted for any excess of the Group’s share of
the acquisition-date fair values of the investee’s identifiable net assets over the cost of the investment (if
any). Thereafter, the investment is adjusted for the post acquisition change in the Group’s share of the
investee’s net assets and any impairment loss relating to the investment (Notes 2(e) and 2(k)). The Group’s
share of the post-acquisition, post-tax results of the investees, adjusted for any acquisition-date excess
over cost and any impairment losses for the year are recognised in the consolidated income statement,
whereas the Group’s share of the post-acquisition post-tax items of the investees’ other comprehensive
income is recognised in the consolidated statement of comprehensive income.
When the Group’s share of losses exceeds its interest in the associate or the joint venture, the Group’s
interest is reduced to nil and recognition of further losses is discontinued except to the extent that the
Group has incurred legal or constructive obligations or made payments on behalf of the investee. For this
purpose, the Group’s interest is the carrying amount of the investment under the equity method together
with the Group’s long-term interests that in substance form part of the Group’s net investment in the
associate or the joint venture.
Unrealised profits and losses resulting from transactions between the Group and its associates and joint
ventures are eliminated to the extent of the Group’s interest in the investee, except where unrealised
losses provide evidence of an impairment of the asset transferred, in which case they are recognised
immediately in the consolidated income statement.
In the Company’s balance sheet, investments in associates and joint ventures are stated at cost less
impairment losses (Note 2(k)).
94
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(d) Goodwill
Goodwill represents the excess of
(i)
the aggregate of the fair value of the consideration transferred, the amount of any non-controlling
interest in the acquiree and the fair value of the Group’s previously held equity interest in the
acquiree; over
(ii)
the Group’s interest in the net fair value of the acquiree’s identifiable assets and liabilities measured
as at the acquisition date.
When (ii) is greater than (i), then this excess is recognised immediately in the consolidated income
statement as a gain on a bargain purchase.
Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination
is allocated to each cash-generating unit, or groups of cash generating units, that is expected to benefit
from the synergies of the combination and is tested annually for impairment (Note 2(k)).
(e) Other investments in equity securities
The Group’s and the Company’s policies for investments in equity securities, other than investments in
subsidiaries, associates and joint ventures, are as follows:
Investments in equity securities are initially stated at fair value, which is their transaction price unless fair
value can be more reliably estimated using valuation techniques whose variables include only data from
observable markets. Cost includes attributable transaction costs, except where indicated otherwise below.
These investments are subsequently accounted for as follows, depending on their classification:
Available-for-sale equity securities are those non-derivative financial assets that are designated as available
for sale. At the end of each financial year the fair value is remeasured, with any resultant gain or loss
being recognised in other comprehensive income and accumulated separately in equity in the fair value
reserve. Dividend income from these investments is recognised in the consolidated income statement
in accordance with the policy set out in Note (2(w)(iv)). When these investments are derecognised or
impaired (Note 2(k)), the cumulative gain or loss is reclassified from equity to profit or loss.
The Group’s other investments in equity securities represent unlisted equity securities of companies
established in the PRC. These securities do not have a quoted market price in an active market and their
fair values cannot be reliably measured. Accordingly, they are recognised in the consolidated balance sheet
at cost less impairment losses (Note 2(k)).
Investments are recognised/derecognised on the date the Group commits to purchase/sell the investments
or they expire.
95
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(f)
Investment properties
Investment properties are buildings which are owned to earn rental income and/or for capital appreciation.
Investment properties are stated at cost, less accumulated depreciation and impairment losses (Note 2(k)).
Depreciation is calculated to write off the cost of items of investment properties, less their estimated
residual value, if any, using the straight line method over their estimated useful lives. Rental income from
investment properties is accounted for as described in Note 2(w)(iii).
(g) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses
(Note 2(k)).
The cost of self-constructed items of property, plant and equipment includes the cost of materials,
direct labor, the initial estimate, where relevant, of the costs of dismantling and removing the items and
restoring the site on which they are located, and an appropriate proportion of production overheads and
borrowing costs (Note 2(z)).
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is
derecognised. All other repairs and maintenance are charged to the income statement during the financial
period in which they are incurred.
Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are
determined as the difference between the net disposal proceeds and the carrying amount of the item and
are recognised in income statement on the date of retirement or disposal.
When each major aircraft overhaul is performed, its cost is recognised in the carrying amount of the
component of aircraft and is depreciated over the appropriate maintenance cycles. Components related to
overhaul cost, are depreciated on a straight-line basis over 3 to 12 years. Upon completion of an overhaul,
any remaining carrying amount of the cost of the previous overhaul is derecognised and charged to the
income statement.
96
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(g) Property, plant and equipment (continued)
Except for components related to overhaul costs, the depreciation method of which has been described
in the preceding paragraph, depreciation of other property, plant and equipment is calculated to write
off the cost of items less their estimated residual value, if any, using the straight line method over their
estimated useful lives as follows:
Buildings
Owned and finance leased aircraft
Other flight equipment
– Jet engines
– Others, including rotable spares
Machinery and equipment
Vehicles
5 to 35 years
15 to 20 years
15 to 20 years
3 to 15 years
4 to 10 years
6 to 8 years
Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is
allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful
life of an asset and its residual value, if any, are reviewed annually.
(h) Construction in progress
Construction in progress represents aircraft prepayment, office buildings, various infrastructure projects
under construction and equipment pending for installation, and is stated at cost less impairment losses
(Note 2(k)). Capitalisation of these costs ceases and the construction in progress is transferred to property,
plant and equipment when the asset is substantially ready for its intended use, notwithstanding any delay
in the issue of the relevant commissioning certificates by the relevant PRC authorities.
No depreciation is provided in respect of construction in progress.
(i)
Leased assets
An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group
determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of
time in return for a payment or a series of payments. Such a determination is made based on an evaluation
of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of
a lease.
(i)
Classification of assets leased to the Group
Assets that are held by the Group under leases which transfer to the Group substantially all the risks
and rewards of ownership are classified as being held under finance leases. Leases which do not
transfer substantially all the risks and rewards of ownership to the Group are classified as operating
leases, except for land held for own use under an operating lease, the fair value of which cannot be
measured separately from the fair value of a building situated thereon at the inception of the lease,
is accounted for as being held under a finance lease, unless the building is also clearly held under
an operating lease. For these purposes, the inception of the lease is the time that the lease was first
entered into by the Group, or taken over from the previous lessee.
97
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(i)
Leased assets (continued)
(ii) Assets acquired under finance leases
Where the Group acquires the use of assets under finance leases, the amounts representing the
fair value of the leased asset, or, if lower, the present value of the minimum lease payments, of
such assets are included in property, plant and equipment and the corresponding liabilities, net of
finance charges, are recorded as obligations under finance leases. Depreciation is provided at rates
which write off the cost or valuation of the assets over the term of the relevant lease or, where
it is likely the Group will obtain ownership of the asset, the life of the asset, as set out in (Note
2(g)). Impairment losses are accounted for in accordance with the accounting policy as set out in
(Note 2(k)). Finance charges implicit in the lease payments are charged to income statement over
the period of the leases so as to produce an approximately constant periodic rate of charge on the
remaining balance of the obligations for each accounting period. Contingent rentals are charged to
income statement in the accounting period in which they are incurred.
(iii) Operating lease charges
Where the Group has the use of assets held under operating leases, payments made under the leases
are charged to income statement in equal instalments over the accounting periods covered by the
lease term, except where an alternative basis is more representative of the pattern of benefits to be
derived from the leased asset. Lease incentives received are recognised in income statement as an
integral part of the aggregate net lease payments made. Contingent rentals are charged to income
statement in the accounting period in which they are incurred.
The cost of acquiring land held under an operating lease is amortised on a straight-line basis over the
respective periods of lease terms which range from 30 to 70 years.
(iv) Sale and leaseback transactions
Gains or losses on aircraft sale and leaseback transactions which result in finance leases are deferred
and amortised over the terms of the related leases.
Gains or losses on aircraft sale and leaseback transactions which result in operating leases are
recognised immediately if the transactions are established at fair value. If the sale price is below
fair value then the gain or loss is recognised immediately. However, if a loss is compensated for by
future rentals at a below-market price, then the loss is deferred and amortised over the period that
the aircraft is expected to be used. If the sale price is above fair value, then any gain is deferred and
amortised over the useful life of the assets.
(j) Deferred expenditure
Lump sum housing benefits payable to employees of the Group are deferred and amortised on a straight-
line basis over beneficial period.
Deferred expenditure is stated at cost less impairment losses (Note 2(k)).
98
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(k)
Impairment of assets
(i)
Impairment of investments in equity securities and receivables
Investments in equity securities and current and non-current receivables that are stated at cost or
amortised cost or are classified as available-for-sale equity securities are reviewed at the end of each
financial year to determine whether there is objective evidence of impairment. Objective evidence of
impairment includes observable data that comes to the attention of the Group about one or more of
the following loss events:
–
–
–
–
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significant financial difficulty of the debtor;
a breach of contract, such as a default or delinquency in interest or principal payments;
it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
significant changes in the technological, market, economic or legal environment that have an
adverse effect on the debtor; and
a significant or prolonged declined in the fair value of an investment in an equity instrument
below its cost.
If any such evidence exists, any impairment loss is determined and recognised as follows:
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For investments in subsidiaries, associates and joint ventures (including those recognised using
the equity method (Note 2(c)), the impairment loss is measured by comparing the recoverable
amount of the investment with its carrying amount in accordance with (Note 2(k(ii))). The
impairment loss is reversed if there has been a favourable change in the estimates used to
determine the recoverable amount in accordance with (Note 2(k(ii)).
–
For unquoted equity securities carried at cost, the impairment loss is measured as the difference
between the carrying amount of the financial asset and the estimated future cash flows,
discounted at the current market rate of return for a similar financial asset where the effect of
discounting is material. Impairment losses for equity securities carried at cost are not reversed.
–
For trade and other current receivables and other financial assets carried at amortised cost,
the impairment loss is measured as the difference between the asset’s carrying amount and
the present value of estimated future cash flows, discounted at the financial asset’s original
effective interest rate (i.e. the effective interest rate computed at initial recognition of these
assets), where the effect of discounting is material. This assessment is made collectively where
these financial assets share similar risk characteristics, such as similar past due status, and have
not been individually assessed as impaired. Future cash flows for financial assets which are
assessed for impairment collectively are based on historical loss experience for assets with credit
risk characteristics similar to the collective group.
If in a subsequent period the amount of an impairment loss decreases and the decrease can
be linked objectively to an event occurring after the impairment loss was recognised, the
impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not
result in the asset’s carrying amount exceeding that which would have been determined had no
impairment loss been recognised in prior years.
99
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(k)
Impairment of assets (continued)
(i)
Impairment of investments in equity securities and other receivables (continued)
–
For available-for-sale securities, the cumulative loss that has been recognised in the fair value
reserve is reclassified to profit or loss. The amount of the cumulative loss that is recognised
in income statement is the difference between the acquisition cost (net of any principal
repayment and amortisation) and current fair value, less any impairment loss on that asset
previously recognised in income statement.
Impairment losses recognised in income statement in respect of available-for-sale equity
securities are not reversed through profit or loss. Any subsequent increase in the fair value of
such assets is recognised directly in other comprehensive income.
Impairment losses are written off against the corresponding asset directly, except for impairment
losses recognised in respect of trade and other receivables, whose recovery is considered doubtful
but not remote. In this case, the impairment losses for doubtful debts are recorded using an
allowance account. When the Group is satisfied that recovery is remote, the amount considered
irrecoverable is written off against trade and other receivables directly and any amounts held in the
allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously
charged to the allowance account are reversed against the allowance account. Other changes in
the allowance account and subsequent recoveries of amounts previously written off directly are
recognised in income statement.
(ii)
Impairment of other assets
Internal and external sources of information are reviewed at the end of each financial year to
identify indications that the following assets may be impaired or, except in the case of goodwill, an
impairment loss previously recognised no longer exists or may have decreased:
–
–
–
–
–
–
–
Property, plant and equipment;
Investment properties;
Construction in progress;
Lease deposits;
Lease prepayments;
Other assets; and
Goodwill.
100
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(k)
Impairment of assets (continued)
(ii)
Impairment of other assets (continued)
If any such indication exists, the asset’s recoverable amount is estimated. The recoverable amount of
goodwill is estimated annually whether or not there is any indication of impairment.
–
Calculation of recoverable amount
The recoverable amount of an asset is the greater of its fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset. Where an asset does not generate cash inflows
largely independent of those from other assets, the recoverable amount is determined for the
smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).
–
Recognition of impairment losses
An impairment loss is recognised in income statement if the carrying amount of an asset, or the
cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses
recognised in respect of cash-generating units are allocated first to reduce the carrying amount
of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce
the carrying amount of the other assets in the unit (or group of units) on a pro rata basis,
except that the carrying value of an asset will not be reduced below its individual fair value less
costs to sell, or value in use, if determinable.
–
Reversals of impairment losses
In respect of assets other than goodwill, an impairment loss is reversed if there has been a
favourable change in the estimates used to determine the recoverable amount. An impairment
loss in respect of goodwill is not reversed.
A reversal of an impairment loss is limited to the asset’s carrying amount that would have been
determined had no impairment loss been recognised in prior years. Reversals of impairment
losses are credited to income statement in the year in which the reversals are recognised.
101
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(k)
Impairment of assets (continued)
(iii)
Interim financial reporting and impairment
Under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited,
the Group is required to prepare an interim financial report in compliance with IAS 34, Interim
financial reporting, in respect of the first six months of the financial year. At the end of the interim
period, the Group applies the same impairment testing, recognition, and reversal criteria as it would
at the end of the financial year (Notes 2(k)(i) and (ii)).
Impairment losses recognised in an interim period in respect of goodwill, available-for-sale equity
securities and unquoted equity securities carried at cost are not reversed in a subsequent period. This
is the case even if no loss, or a smaller loss, would have been recognised had the impairment been
assessed only at the end of the financial year to which the interim period relates. Consequently, if
the fair value of an available-for-sale equity security increases in the remainder of the annual period,
or in any other period subsequently, the increase is recognised in other comprehensive income and
not profit or loss.
(l)
Inventories
Inventories, which consist primarily of consumable spare parts and supplies, are stated at cost less any
applicable provision for obsolescence, and are charged to income statement when used in operations.
Cost represents the average unit cost.
Inventories held for sale or disposal are carried at the lower of cost and net realisable value. Net
realisable value is the estimated selling price in the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the sale.
When inventories are sold, the carrying amount of those inventories is recognised as an expense in the
period in which the related revenue is recognised. The amount of any write-down of inventories to net
realisable value and all losses of inventories are recognised as an expense in the period the write-down or
loss occurs. The amount of any reversal of any write-down of inventories is recognised as a reduction in
the amount of inventories recognised as an expense in the period in which the reversal occurs.
(m) Trade and other receivables
Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost
less allowance for impairment of doubtful debts (Note 2(k)), except where the effect of discounting would
be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of bad and
doubtful debts.
(n)
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs.
Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any
difference between the amount initially recognised and redemption value being recognised in income
statement over the period of the borrowings, together with any interest and fees payable, using the
102
effective interest method.
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(o) Trade and other payables
Trade and other payables are initially recognised at fair value. Except for financial guarantee liabilities
measured in accordance with (Note 2(q(i)), trade and other payables are subsequently stated at amortised
cost unless the effect of discounting would be immaterial, in which case they are stated at cost.
(p) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other
financial institutions, and short-term, highly liquid investments that are readily convertible into known
amounts of cash and which are subject to an insignificant risk of changes in value, having been generally
within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form
an integral part of the Group’s cash management are also included as a component of cash and cash
equivalents for the purpose of the consolidated cash flow statement.
(q) Financial guarantees issued, provisions and contingent liabilities
(i)
Financial guarantees issued
Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified
payments to reimburse the beneficiary of the guarantee (the “holder”) for a loss the holder incurs
because a specified debtor fails to make payment when due in accordance with the terms of a debt
instrument.
Where the Group issues a financial guarantee, the fair value of the guarantee (being the transaction
price, unless the fair value can otherwise be reliably estimated) is initially recognised as deferred
income within trade and other payables.
The amount of the guarantee initially recognised as deferred income is amortised in income
statement over the term of the guarantee as income from financial guarantees issued. In addition,
provisions are recognised in accordance with (Note 2(q)(ii)) if and when (i) it becomes probable
that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount
of that claim on the Group is expected to exceed the amount currently carried in trade and
other payables in respect of that guarantee i.e. the amount initially recognised, less accumulated
amortisation.
(ii)
Provision and contingent liabilities
Provisions are recognised for other liabilities of uncertain timing or amount when the Group or the
Company has a legal or constructive obligation arising as a result of a past event, it is probable that
an outflow of economic benefits will be required to settle the obligation and a reliable estimate can
be made. Where the time value of money is material, provisions are stated at the present value of
the expenditures expected to settle the obligation.
Where it is not probable that an outflow of economic benefits will be required, or the amount
cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the
probability of outflow of economic benefits is remote. Possible obligations, whose existence will only
be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as
contingent liabilities unless the probability of outflow of economic benefits is remote.
103
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(r) Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s consolidated
financial statements in the period in which the dividends are approved by the Company’s shareholders.
(s) Share Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
(t) Defeasance of long-term liabilities
Where long-term liabilities have been defeased by the placement of security deposits, those liabilities
and deposits (and income and charge arising therefrom) are netted off in order to reflect the overall
commercial effect of the arrangements. Such netting off has been effected where a right is held by the
Group to insist on net settlement of the liability and deposit including in all situations of default and
where that right is assured beyond doubt.
(u) Deferred benefits and gains
In connection with the acquisitions or leases of certain aircraft and engines, the Group receives various
credits. Such credits are deferred until the aircraft and engines are delivered, at which time they are either
applied as a reduction of the cost of acquiring the aircraft and engines, resulting in a reduction of future
depreciation, or amortised as a reduction of rental expense for aircraft and engines under leases.
(v)
Income tax
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the end of the financial year, and any adjustment to tax payable in respect of
previous years.
Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively,
being the differences between the carrying amounts of assets and liabilities for financial reporting
purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.
Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent
that it is probable that future taxable profits will be available against which the asset can be utilised,
are recognised. Future taxable profits that may support the recognition of deferred tax assets arising
from deductible temporary differences include those that will arise from the reversal of existing taxable
temporary differences, provided those differences relate to the same taxation authority and the same
taxable entity, and are expected to reverse either in the same period as the expected reversal of the
deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can
be carried back or forward. The same criteria are adopted when determining whether existing taxable
temporary differences support the recognition of deferred tax assets arising from unused tax losses and
credits, that is, those differences are taken into account if they relate to the same taxation authority and
the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit
104
can be utilised.
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(v)
Income tax (continued)
The limited exception to the recognition of deferred tax assets and liabilities are those temporary
differences arising from goodwill, the initial recognition of assets or liabilities that affect neither
accounting nor taxable profit (provided they are not part of a business combination), and temporary
differences relating to investments in subsidiaries to the extent that, in the case of taxable differences,
the Group controls the timing of the reversal and it is probable that the differences will not reverse in
the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse
in the future and it is probable that future taxable profit will be available against which the temporary
difference can be utilised.
The amount of deferred tax recognised is measured based on the expected manner of realisation or
settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively
enacted at the end of the financial year and are expected to apply when related deferred tax asset is
realised or the deferred tax liability is settled. Deferred tax assets and liabilities are not discounted.
Current tax balances and deferred tax balances, and movements therein, are presented separately from
each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax
assets against deferred tax liabilities, if the Company or the Group has the legally enforceable right to set
off current tax assets against current tax liabilities and the following additional conditions are met:
–
in the case of current tax assets and liabilities, the Company or the Group intends either to settle on
a net basis, or to realise the asset and settle the liability simultaneously; or
–
in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same
taxation authority on either:
–
–
the same taxable entity; or
different taxable entities, which, in each future period in which significant amounts of deferred
tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax
assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.
105
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(w) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable
that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be
measured reliably, revenue is recognised in income statement as follows:
(i)
Passenger, cargo and mail revenues
Passenger revenue is recognised at the fair value of the consideration received when the
transportation is provided or when an unused ticket expires rather than a ticket is sold. Ticket sales
for transportation not yet provided are included in current liabilities as sales in advance of carriage.
Cargo and mail revenues are recognised when the transportation is provided.
Revenues from airline-related business are recognised when services are rendered.
Revenue is stated net of sales tax.
(ii)
Frequent flyer revenue
The Group maintains two frequent flyer award programmes, namely, the China Southern Airlines Sky
Pearl Club and the Xiamen Airlines’ Egret Card Frequent Flyer Programme, which provide travel and
other awards to members based on accumulated mileages.
Amount received in relation to mileage earning flights is allocated, based on fair value, between
the flight and mileages earned by members of the Group’s frequent flyer award programmes. The
value attributed to the awarded mileages is deferred as a liability, within deferred revenue, until the
mileages are redeemed or expired.
Amount received from third parties for the issue of mileages under the frequent flyer award
programmes is also deferred as a liability, within deferred revenue.
As members of the frequent flyer award programmes redeem mileages for an award, revenue
is recorded in income statement. Revenue in relation to flight awards is recognised when the
transportation is provided. Revenue in relation to non-flight rewards is recognised at the point of
redemption where non-flight rewards are selected.
(iii) Operating rental income
Receivable under operating leases is recognised in income statement in equal instalments over the
periods covered by the lease term, except where an alternative basis is more representative of the
pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are
recognised in income statement as an integral part of the aggregate net lease payments receivables.
Contingent rentals are recognised as income in the accounting period in which they are earned.
106
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(w) Revenue recognition (continued)
(iv) Dividends
–
Dividend income from unlisted investments is recognised when the shareholder’s right to
receive payment is established.
–
Dividend income from listed investments is recognised when the share price of the investment
goes ex-dividend.
(v) Government grants are recognised in consolidated balance sheet initially when there is reasonable
assurance that they will be received and that the Group will comply with the conditions attaching to
them. Grants that compensate the Group for expenses incurred are recognised as revenue in income
statement on a systematic basis in the same periods in which the expenses are incurred. Grants that
compensate the Group for the cost of an asset are deducted from the carrying amount of the asset
and consequently are effectively recognised in income statement over the useful life of the asset by
way of reduced depreciation expense.
(vi)
Interest income is recognised as it accrues using the effective interest method.
(x) Traffic commissions
Traffic commissions are expensed in income statement when the transportation is provided and the
related revenue is recognised. Traffic commissions for transportation not yet provided are recorded on the
consolidated balance sheet as prepaid expense.
(y) Maintenance and overhaul costs
Routine maintenance, repairs and overhauls are charged to income statement as and when incurred.
In respect of owned and finance leased aircraft, components within the aircraft subject to replacement
during major overhauls are depreciated over the average expected life between major overhauls. When
each major overhaul is performed, its cost is recognised in the carrying amount of property, plant and
equipment and is depreciated over the estimated period between major overhauls. Any remaining carrying
amount of cost of previous major overhaul is derecognised and charged to income statement.
In respect of aircraft held under operating leases, the Group has responsibility to fulfil certain return
conditions under relevant lease agreements. In order to fulfil these return conditions, major overhauls are
required to be conducted on a regular basis. Accordingly, estimated costs of major overhauls are accrued
and charged to income statement over the estimated period between overhauls. After the aircraft has
completed its last overhaul cycle prior to being returned, expected cost of overhaul to be incurred at the
end of the lease is estimated and accrued over the remaining period of the lease. Differences between the
estimated costs and the actual costs of overhauls are charged to income statement in the period when the
overhaul is performed.
107
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(z) Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of an asset
which necessarily takes a substantial period of time to get ready for its intended use are capitalised as part
of the cost of that asset. Other borrowing costs are expensed in the period in which they are incurred.
The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when
expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are
necessary to prepare the asset for its intended use are in progress. Capitalisation of borrowing costs is
suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its
intended use are interrupted or complete.
(aa) Employee benefits
(i)
Short term employee benefits and contributions to defined contribution retirement schemes
Salaries, annual bonuses and contributions to defined contribution retirement schemes are accrued in
the year in which the associated services are rendered by employees. Where payment or settlement is
deferred and the effect would be material, these amounts are stated at their present values.
(ii)
Termination benefits
Termination benefits are recognised when, and only when, the Group demonstrably commits itself to
terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed
formal plan which is without realistic possibility of withdrawal.
(iii) Share-based payment
The fair value of the amount payable to employee in respect of share appreciation rights (“SARs”),
which are settled in cash, is recognised as an expense with a corresponding increase in liabilities,
over the vesting period. The liability is remeasured at each reporting date and at settlement date.
Any changes in the fair value of the liability are recognised as staff cost in the consolidated income
statement.
(ab) Translation of foreign currencies
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 Renminbi, which is the company’s functional and the
group’s presentation currency.
Foreign currencies transactions during the year are translated into Renminbi at the applicable rates of
exchange quoted by the People’s Bank of China (“PBOC”) prevailing at the transaction dates. Monetary
assets and liabilities denominated in foreign currencies are translated into Renminbi at the PBOC exchange
rates prevailing at the end of the financial year. Exchange gains and losses are recognised in income
statement.
108
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(ab) Translation of foreign currencies (continued)
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are
translated into Renminbi at the PBOC exchange rates prevailing at the transaction dates. Non-monetary
assets and liabilities denominated in foreign currencies that are stated at fair value are translated into
Renminbi at the PBOC exchange rates prevailing at the dates the fair value was determined.
(ac) Related parties
(a) A person, or a close member of that person’s family, is related to the Group if that person:
(i)
has control or joint control over the Group;
(ii)
has significant influence over the Group; or
(iii)
is a member of the key management personnel of the Group or the Group’s parent.
(b) An entity is related to the Group if any of the following conditions applies:
(i)
The entity and the Group are members of the same Group (which means that each parent,
subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of
a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third
entity.
(v)
The entity is a post-employment benefit plan for the benefit of employees of either the Group
or an entity related to the Group.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key
management personnel of the entity (or of a parent of the entity).
Close members of the family of a person are those family members who may be expected to influence, or
be influenced by, that person in their dealings with the entity.
109
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2
Significant accounting policies (continued)
(ad) Segmental information
Operating segments, and the amounts of each segment item reported in the financial statements,
are identified from the financial information provided regularly to the Group’s most senior executive
management, who is the chief operating decision maker, for the purposes of allocating resources to, and
assessing the performance of, the Group’s various lines of business and geographical locations.
Individually material operating segments are not aggregated for financial reporting purposes unless
the segments have similar economic characteristics and are similar in respect of the nature of products
and services, the nature of production processes, the type or class of customers, the methods used to
distribute the products or provide the services, and the nature of the regulatory environment. Operating
segments which are not individually material may be aggregated if they share a majority of these criteria.
3 Accounting judgements and estimates
The Groups’ financial position and results of operations are sensitive to accounting methods, assumptions and
estimates that underlie the preparation of the financial statements. The Group bases the assumptions and
estimates on historical experience and on various other assumptions that the Group believes to be reasonable
and which form the basis for making judgements about matters that are not readily apparent from other
sources. On an ongoing basis, management evaluates its estimates. Actual results may differ from those
estimates as facts, circumstances and conditions change.
The selection of critical accounting policies, the judgements and other uncertainties affecting application of
those policies and the sensitivity of reported results to changes in condition and assumptions are factors to be
considered when reviewing the financial statements. In addition to the assumptions and estimates regarding
provision for early retirement benefits and fair value measurements of financial instruments disclosed in (Note
44) and (Note 4(g)) respectively, the Group believes the following critical accounting policies also involve the
most significant judgements and estimates used in the preparation of the financial statements.
(a)
Impairment of account 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 provision account for trade
receivables. Subsequent recoveries of amounts previously written off are credited in the income statement.
110
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
3 Accounting judgements and estimates (continued)
(b)
Impairment of long-lived assets
If circumstances indicate that the carrying amount of a long-lived asset may not be recoverable, the
asset may be considered “impaired”, and an impairment loss may be recognised in accordance with IAS
36, Impairment of Assets. The carrying amounts of long-lived assets are reviewed periodically in order
to assess whether the recoverable amounts have declined below the carrying amounts. These assets are
tested for impairment whenever events or changes in circumstances indicate that their recorded carrying
amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced
to the recoverable amount. The recoverable amount is the greater of the fair value less costs to sell and
value in use. In determining the value in use, expected cash flows generated by the asset are discounted
to their present value, which requires significant judgement relating to the level of traffic revenue and
the amount of operating costs. The Group uses all readily available information in determining an amount
that is a reasonable approximation of recoverable amount, including estimates based on reasonable and
supportable assumptions for projections of traffic revenue and amount of operating costs.
(c) Depreciation
Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives, after
taking into account the estimated residual value. The Group reviews the estimated useful lives of assets
annually in order to determine the amount of depreciation expense to be recorded during any financial
year. The useful lives are based on the Group’s historical experience with similar assets and take into
account anticipated technological changes. The depreciation expense for future periods is adjusted if there
are significant changes from previous estimates.
(d) Provision for major overhauls
Provision for the cost of major overhauls to fulfil certain return condition for airframes and engines under
operating leases is accrued and charged to the income statement over the estimated overhaul period. This
requires estimation of the expected overhaul cycle and overhaul cost, which are based on the historical
experience of actual cost incurred for overhauls of airframes and engines of the same or similar types.
Different estimates could significantly affect the estimated provision and the results of operations.
(e) Frequent flyer revenue
The amount of revenue attributable to the mileages earned by the members of the Group’s frequent
flyer award programmes is estimated based on the fair value of the mileages awarded and the expected
redemption rate. The fair value of the mileages awarded is estimated by reference to external sales. The
expected redemption rate was estimated based on historical experience, anticipated redemption pattern
and the frequent flyer programme design.
(f) Provision for consumable spare parts and maintenance materials
Provision for consumable spare parts and maintenance materials is made based on the difference between
the carrying amount and the net realisable value. The net realisable value is estimated based on current
market condition, historical experience and Company’s future operation plan for the consumable spare
parts and maintenance materials. The net realisable value may be adjusted significantly due to the change
of market condition and the future plan for the consumable spare parts and maintenance materials.
111
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
4
Financial risk management and fair values
The Group is exposed to liquidity, interest rate, currency, credit risks and commodity jet fuel price risk in the
normal course of business. The Group’s overall risk management programme focuses on the unpredictability
of financial market seeks to minimize the adverse effects on the Group’s financial performance. The Group’s
exposure to these risks and the financial risk management policies and practices used by the Group to manage
these risks are described below.
(a) Liquidity risk
As at 31 December 2013, the Group’s current liabilities exceeded its current assets by RMB28,640 million.
For the year ended 31 December 2013, the Group recorded a net cash inflow from operating activities of
RMB9,703 million, a net cash outflow from investing activities of RMB12,205 million and a net cash inflow
from financing activities of RMB4,168 million, which in total resulted in a net increase in cash and cash
equivalents of RMB1,666 million.
The Group is primarily dependent on its ability to maintain adequate cash inflow from operations to
meet its debt obligations as they fall due, and its ability to obtain adequate external financing to meet its
committed future capital expenditures. As at 31 December 2013, the Group had banking facilities with
several PRC banks and financial institutions for providing bank financing up to approximately RMB166,270
million (2012: RMB173,162 million), of which approximately RMB120,904 million (2012: RMB112,793
million) was unutilised. The Directors of the Company believe that sufficient financing will be available to
the Group when and where needed.
The Directors of the Company have carried out a detailed review of the cash flow forecast of the Group
for the twelve months ended 31 December 2014. Based on such forecast, the Directors have determined
that adequate liquidity exists to finance the working capital, capital expenditure requirements and
dividend payments of the Group during that period. In preparing the cash flow forecast, the Directors
have considered historical cash requirements of the Group as well as other key factors, including the
availability of the above-mentioned bank facilities, which may impact the operations of the Group during
the next twelve-month period. The Directors of the Company are of the opinion that the assumptions and
sensitivities which are included in the cash flow forecast are reasonable. However, as with all assumptions
in regard to future events, these are subject to inherent limitations and uncertainties and some or all of
these assumptions may not be realised.
As at 31 December 2013, the contractual maturities at the end of financial years of the Group’s
borrowings and obligations under finance leases are disclosed in Notes 36, 37 respectively.
112
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
4
Financial risk management and fair values (continued)
(b)
Interest rate risk
The interest rates and maturity information of the Group’s borrowings and obligations under finance
leases are disclosed in Notes 36 and Note 37, respectively.
At 31 December 2013, it is estimated that a general increase/decrease of 100 basis points in interest
rates, with all other variables held constant, would have decreased/increased the Group’s profit after tax
and retained profits by approximately RMB443 million (2012: RMB307 million). Other components of
consolidated equity would not be affected (2012: Nil) by the changes in interest rates.
The sensitivity analysis above indicates the instantaneous change in the Group’s profit after tax and
retained profits and other components of consolidated equity that would arise assuming that the change
in interest rates had occurred at the end of the reporting period and had been applied to re-measure those
financial instruments held by the Group which expose the Group to fair value interest rate risk at the end
of the reporting period. In respect of the exposure to cash flow interest rate risk arising from floating
rate non-derivative instruments held by the Group at the end of the reporting period, the impact on the
Group’s profit after tax (and retained profits) and other components of consolidated equity is estimated
as an annualised impact on interest expense or income of such a change in interest rates. This analysis is
performed on the same basis as that for 2012.
(c)
Foreign currency risk
Renminbi is not freely convertible into foreign currencies. All foreign exchange transactions involving
Renminbi must take place either through the PBOC or other institutions authorised to buy and sell foreign
exchange or at a swap centre.
The Group has significant exposure to foreign currency risk as substantially all of the Group’s obligations
under finance leases (Note 37), borrowings (Note 36) and operating lease commitments (Note 48(b))
are denominated in foreign currencies, principally US dollars, Singapore dollars and Japanese Yen.
Depreciation or appreciation of Renminbi against foreign currencies affects the Group’s results significantly
because the Group’s foreign currency liabilities generally exceed its foreign currency assets.
Since 21 July 2005, a managed floating exchange rate regime based on market supply and demand with
reference to a basket of foreign currencies has been used and the US dollar exchange rate has gradually
declined against Renminbi.
113
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
4
Financial risk management and fair values (continued)
(c)
Foreign currency risk (continued)
The following table indicates the instantaneous change in Group’s profit after tax and retained profits that
would arise if foreign exchange rates to which the Group has significant exposure at the beginning of the
financial year had changed at that date, assuming all other risk variables remained constant.
2013
2012
Appreciation/
Increase/
Appreciation/
(depreciation)
(decrease)
(depreciation)
of Renminbi
on profit
of Renminbi
Increase/
(decrease)
on profit
against
after tax and
against
after tax and
foreign retained profits
foreign
retained profits
currency
RMB million
currency
RMB million
2%
(2%)
2%
(2%)
10%
(10%)
1,308
(1,308)
7
(7)
177
(177)
2%
(2%)
2%
(2%)
10%
(10%)
1,033
(1,033)
8
(8)
125
(125)
United States Dollars
Singapore Dollars
Japanese Yen
Results of the analysis as presented in the above table represent an aggregation of the instantaneous
effects on each of the Group entities’ profit after tax and retained profits measured in the respective
functional currencies, translated into Renminbi at the exchange rate ruling at the end of the financial year
for presentation purposes.
The sensitivity analysis assumes that the change in foreign exchange rates had been applied to re-measure
those financial instruments, borrowings, and lease obligations held by the Group which expose the Group
to foreign currency risk at the end of the financial year, including inter-company payables and receivables
within the Group which are denominated in a currency other than the functional currencies of the lender
or the borrower. The analysis excludes differences that would result from the translation of the financial
statements of foreign operations into the Group’s presentation currency. The analysis is performed on the
same basis for 2012.
114
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
4
Financial risk management and fair values (continued)
(d) Credit risk
The Group’s credit risk is primarily attributable to cash and cash equivalents and trade receivables.
Substantially all of the Group’s cash and cash equivalents are deposited with PRC financial institutions,
which management believes are of high credit quality.
A significant portion of the Group’s air tickets are sold by agents participating in the Billing and Settlement
Plan (“BSP”), a clearing scheme between airlines and sales agents organised by International Air
Transportation Association. The use of the BSP reduces credit risk to the Group. As at 31 December 2013,
the balance due from BSP agents amounted to RMB1,046 million (2012: RMB887 million). The credit risk
exposure to BSP and the remaining trade receivables balance are monitored by the Group on an ongoing
basis and the allowance for impairment of doubtful debts is within management’s expectations. Further
quantitative disclosures in respect of the Group’s exposure to credit risk arising from trade receivables is
set out in (Note 33).
(e)
Jet fuel price risk
The Group’s results of operations may be significantly affected by fluctuations in fuel prices since the jet
fuel expenses are a significant cost for the Group. A reasonable possible increase/decrease of 10% (2012:
10%) in jet fuel price, with volume of fuel consumed and all other variables held constant, would have
increased/decreased the fuel costs by approximately RMB3,554 million (2012: RMB3,740 million). The
sensitivity analysis indicates the instantaneous change in the Group’s fuel cost that would arise assuming
that the change in fuel price had occurred at the beginning of the financial year.
(f) Capital management
The Group’s primary objectives in managing capital are to safeguard the Group’s ability to continue
as a going concern, and to generate sufficient profit to maintain growth and provide returns to its
shareholders, by securing access to finance at a reasonable cost.
The Group manages the amount of capital in proportion to risk and manages its debt portfolio in
conjunction with projected financing requirements. The Group monitors capital on the basis of the debt to
equity ratio, which is calculated as net debt as a percentage of total equity where net debt is represented
by the aggregate of borrowings, obligations under finance leases, trade payables, sales in advance of
carriage, amounts due to related companies, accrued expenses and other liabilities less cash and cash
equivalents.
There was no change in the Group’s approach to capital management during 2013 as compared with
previous years. Neither the Company nor any of its subsidiaries are subject to externally imposed capital
requirements. The Group’s debt to equity ratio is 246% at 31 December 2013 (2012: 218%).
115
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
4
Financial risk management and fair values (continued)
(g) Fair value
(i)
Financial instruments carried at fair value
The following table presents the carrying value of financial instruments measured at fair value at the
end of financial period across the three levels of the fair value hierarchy defined in IFRS 7, Financial
Instruments: Disclosures, with the fair value of each financial instrument categorised in its entirety
based on the lowest level of input that is significant to that fair value measurement. The levels are
defined as follows:
–
Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active markets
for identical financial instruments
–
Level 2: fair values measured using quoted prices in active markets for similar financial
instruments, or using valuation techniques in which all significant inputs are directly or
indirectly based on observable market data
–
Level 3 (lowest level): fair values measured using valuation techniques in which any significant
input is not based on observable market data
The following table presents the group’s financial assets that are measured at fair value at 31
December 2013.
The Group
The Company
Level 1
Level 2
Level 3
RMB
RMB
RMB
Total
RMB
Level 1
Level 2
Level 3
RMB
RMB
RMB
Total
RMB
million
million
million
million
million
million
million
million
61
–
–
61
25
–
–
25
69
–
–
69
22
–
–
22
2013
Assets
Available-for-sale
equity securities:
– Listed
2012
Assets
Available-for-sale
equity securities:
– Listed
During the years ended 31 December 2013 and 2012, there were no significant transfers between
instruments in Level 1 and Level 2.
116
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
4
Financial risk management and fair values (continued)
(g) Fair value (continued)
(i)
Financial instruments carried at fair value (continued)
(a)
Financial instruments in level 1
The fair value of financial instruments traded in active markets is based on quoted market
prices at the balance sheet date without any deduction for transaction costs. A market is
regarded as active if quoted prices are readily and regularly available from an exchange, dealer,
broker, industry group, pricing service, or regulatory agency, and those prices represent actual
and regularly occurring market transactions on an arm’s length basis. The quoted market
price used for financial assets held by the group is the current bid price. These instruments
are included in level 1. Instruments included in level 1 comprise primarily A share equity
investments classified as trading securities or available-for-sale.
(b) Other investments in equity securities represent unlisted equity securities of companies
established in the PRC. There is no quoted market price for such equity securities and
accordingly a reasonable estimate of the fair value could not be measured reliably.
(c) Amounts due from/to related companies are unsecured, interest-free and have no fixed terms
of repayment. Given these terms, it is not meaningful to disclose fair values of these balances.
(d) All other financial instruments, including trade and other receivables, trade and other payables,
are carried at amounts not materially different from their fair values as at 31 December 2013
and 31 December 2012.
5
Traffic revenue
Passenger
Cargo and mail
2013
2012
RMB million
RMB million
88,271
6,413
89,544
6,556
94,684
96,100
117
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
5
Traffic revenue (continued)
Before 1 November 2012, pursuant to the sales tax rules and regulations, the Group was required to pay
sales tax (mainly business tax) to national and local tax authorities at a rate of approximately 3% of the traffic
revenues in respect of domestic flights. Pursuant to the “Notice of exemption of sales tax on international
traffic revenue” issued jointly by the PRC Ministry of Finance (“MoF”) and the State Administration of Taxation
(“SAT”) in 2010, the Group is exempted from sales tax on traffic revenues from international, including Hong
Kong, Macau and Taiwan, from 1 January 2010.
Pursuant to Cai Shui [2012] No. 71 jointly issued by the MoF and the SAT on 31 July 2012, the pilot program
regarding the transition from business tax to Value Added Tax (“VAT”) was launched in certain provinces
since 1 November 2012, which is applicable to the Company and certain subsidiaries. Pursuant to Cai Shui
[2013] No.37 joint issued by the MoF and the SAT on 27 May 2013, the pilot program was extended to all the
provinces in China since 1 August 2013. Under the pilot program, all traffic revenues and the other revenues,
including ground service income, cargo handling income and others that fall into the scope of the pilot program
are subjected to VAT levied at applicable tax rates of 17%, 11% or 6%; while the other revenues continue
to be subject to business tax at applicable tax rates. The VAT input, generated from purchase of aircraft fuel,
aircraft and transportation servicing, property, plant and equipment, and certain business tax paid by the
branches and subsidiaries outside of the aforementioned Cai Shui [2012] No.71 can be used to deduct the VAT
payable relating to taxable revenues.
Sales tax incurred by the Group for the year ended 31 December 2013, which were net off against revenue,
amounted to RMB267 million (2012: RMB2,464 million).
6
Segmental information
(a) Business segments
The Group’s network passenger and cargo transportation are managed as a single business unit. The
Group’s chief operating decision maker (“CODM”), which is the senior executive management, makes
resource allocation decisions based on route profitability, which considers aircraft type and route
economics. The objective in making resource allocation decisions is to optimise consolidated financial
results. Therefore, based on the way the Group manages the network passenger and cargo operations,
and the manner in which resource allocation decisions are made, the Group has only one reportable
operating segment for financial reporting purposes, reported as the “airline transportation operations”.
Other operating segments consist primarily of business segments of hotel and tour operation, ground
services, cargo handling and other miscellaneous services. These other operating segments are combined
and reported as “other segments”.
Inter-segment sales are based on prices set on an arm’s length basis.
For the purposes of assessing segment performance and allocating resources between segments, the
Group’s CODM monitors the results, assets and liabilities attributable to each reportable segment based
on financial results prepared under the People’s Republic of China Accounting Standards for Business
Enterprises (“PRC GAAP”). As such, the amount of each material reconciling item from the Group’s
reportable segment revenue, profit before tax, assets and liabilities arising from different accounting
policies are set out in Note 6(c).
118
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
6
Segmental information (continued)
(a) Business segments (continued)
Information regarding the Group’s reportable segments as provided to the Group’s CODM for the
purposes of resource allocation and assessment of segment performance is set out below.
The segment results for the year ended 31 December 2013 are as follows:
Airline
transportation
Other
operations
segments
Elimination
Unallocated*
Total
RMB million
RMB million
RMB million
RMB million
RMB million
Revenue from external customers
Inter-segment sales
97,659
–
471
1,147
–
(1,147)
Reportable segment revenue
97,659
1,618
(1,147)
Reportable segment profit
before taxation
Reportable segment
profit after taxation
Other segment information
Income tax
Interest income
Interest expense
Depreciation and amortisation
Impairment loss
Share of associates’ results
Share of joint ventures’ results
Non-current assets
additions during the year
2,796
123
2,118
100
678
300
1,611
9,425
567
–
–
28,780
23
7
40
80
1
–
–
82
–
–
–
–
–
–
–
–
–
–
–
–
–
98,130
–
98,130
431
3,350
431
2,649
–
–
–
–
–
296
96
701
307
1,651
9,505
568
296
96
–
28,862
119
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
6
Segmental information (continued)
(a) Business segments (continued)
The segment results for the year ended 31 December 2012 are as follows:
Airline
transportation
Other
operations
segments
Elimination
Unallocated*
Total
RMB million
RMB million
RMB million
RMB million
RMB million
Revenue from external customers
Inter-segment sales
101,007
–
476
1,159
–
(1,159)
Reportable segment revenue
101,007
1,635
(1,159)
Reportable segment
profit before taxation
Reportable segment
Profit after taxation
Other segment information
Income tax
Interest income
Interest expense
Depreciation and amortisation
Impairment loss
Share of associates’ results
Share of joint ventures’ results
Non-current assets
additions during the year
4,120
102
3,179
941
230
1,329
8,204
(7)
–
–
24,316
90
12
5
47
80
1
–
–
57
–
–
–
–
–
–
–
–
–
–
–
–
–
101,483
–
101,483
526
4,748
526
3,795
–
–
–
–
–
318
121
953
235
1,376
8,284
(6)
318
121
–
24,373
120
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
6
Segmental information (continued)
(a) Business segments (continued)
The segment assets and liabilities as at 31 December 2013 and 31 December 2012 are as follows:
Airline
transportation
Other
operations
segments
Elimination
Unallocated*
Total
RMB million
RMB million
RMB million
RMB million
RMB million
160,759
2,304
(658)
2,740
165,145
122,320
1,271
(658)
–
122,933
138,023
1,905
(313)
2,879
142,494
102,011
1,200
(313)
–
102,898
As at 31 December 2013
Reportable segment assets
Reportable segment
liabilities
As at 31 December 2012
Reportable segment assets
Reportable segment
liabilities
*
Unallocated assets primarily include investments in associates and joint ventures, available-for-sale financial
assets, investment on wealth management products and other investments. Unallocated results primarily include
the share of results of associates and joint ventures, gain on disposal of a subsidiary, the interest income on
wealth management products and dividend income from other investments.
(b) The Group’s business segments operate in three main geographical areas, even though they are
managed on a worldwide basis
The Group’s revenues by geographical segment are analysed based on the following criteria:
(1)
Traffic revenues from services within the PRC (excluding Hong Kong Special Administrative Region,
Macau Special Administrative Region and Taiwan (“Hong Kong, Macau and Taiwan”)) is classified
as domestic operations. Traffic revenues from inbound and outbound services between overseas
markets excluding Hong Kong, Macau and Taiwan is classified as international operations.
(2) Revenues from commission income, hotel and tour operation, ground services, cargo handling and
other miscellaneous services are classified on the basis of where the services are performed.
Domestic
International
Hong Kong, Macau and Taiwan
2013
2012
RMB million
RMB million
76,828
19,053
2,249
81,322
17,821
2,340
98,130
101,483
121
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
6
Segmental information (continued)
(b) The Group’s business segments operate in three main geographical areas, even though they are
managed on a worldwide basis. (continued)
The major revenue earning assets of the Group are its aircraft fleet which is registered in the People’s
Republic of China (“PRC”) and is deployed across its worldwide route network. Majority of the Group’s
other assets are also located in the PRC. The CODM considers that there is no suitable basis for allocating
such assets and related liabilities to geographical locations. Accordingly, geographical segment assets and
liabilities are not disclosed.
(c) Reconciliation of reportable segment revenues, profit before income tax, assets and liabilities to
the consolidated figures as reported in the consolidated financial statement
2013
2012
Note
RMB million
RMB million
Revenues
Reportable segment revenues
Reclassification of expired sales in advance of carriage
Reclassification of sales tax
(i)
(ii)
Consolidated revenues
98,130
101,483
684
(267)
495
(2,464)
98,547
99,514
2013
2012
Note
RMB million
RMB million
Profit before income tax
Reportable segment profit before taxation
Losses on housing benefits
Capitalisation of exchange difference of specific loans
Government grants
Others
(iii)
(iv)
3,350
–
133
3
(2)
4,748
(14)
3
2
(1)
Consolidated profit before income tax
3,484
4,738
122
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
6
Segmental information (continued)
(c) Reconciliation of reportable segment revenue, profit before income tax, assets and liabilities to
the consolidated figures as reported in the consolidated financial statement (continued)
2013
2012
Note
RMB million
RMB million
Assets
Reportable segment assets
Capitalisation of exchange difference of specific loans
Government grants
Others
(iii)
(iv)
165,145
142,494
351
(210)
(79)
218
(225)
(33)
Consolidated total assets
165,207
142,454
Liabilities
Reportable segment liabilities
Government grants
Others
2013
2012
Note
RMB million
RMB million
(iv)
122,933
102,898
(178)
1
(190)
12
Consolidated total liabilities
122,756
102,720
Notes:
(i)
In accordance with the PRC GAAP, expired sales in advance of carriage are recorded under non-operating income.
Under IFRSs, such income is recognised as other operating revenue.
(ii)
In accordance with the PRC GAAP, sales tax is separately disclosed rather than deducted from revenue under
IFRSs.
(iii)
In accordance with the PRC GAAP, exchange difference arising on translation of specific loans and related
interest denominated in a foreign currency is capitalised as part of the cost of qualifying assets. Under IFRSs, such
exchange difference is recognised in income statement unless the exchange difference represents an adjustment
to interest.
(iv)
In accordance with the PRC GAAP, special funds such as investment grants allocated by the government, if clearly
defined on official documents as part of “capital reserve”, are credited to capital reserve. Otherwise, government
grants related to assets are recognised as deferred income and amortised to profit or loss on a straight line basis
over the useful life of the related assets. Under IFRSs, government grants relating to purchase of fixed assets are
deducted from the cost of the related fixed assets.
123
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
7 Other operating revenue
Commission income
Expired sales in advance of carriage
Hotel and tour operation income
General aviation income
Ground services income
Air catering income
Cargo handling income
Rental income
Others
8
Flight operation expenses
Jet fuel costs
Flight personnel payroll and welfare
Aircraft operating lease charges
Air catering expenses
Civil Aviation Development Fund
Training expenses
Aircraft insurance
Others
9 Maintenance expenses
Aviation repair and maintenance charges
Staff payroll and welfare
Maintenance materials
124
2013
2012
RMB million
RMB million
1,040
684
565
484
349
226
176
137
202
757
495
647
445
350
176
109
125
310
3,863
3,414
2013
2012
RMB million
RMB million
35,538
37,401
5,799
4,767
2,295
2,036
784
194
2,597
5,051
4,897
2,352
1,868
660
203
2,258
54,010
54,690
2013
2012
RMB million
RMB million
5,334
1,712
759
5,633
1,584
754
7,805
7,971
10 Aircraft and traffic servicing expenses
Landing and navigation fees
Ground service and other charges
11 Promotion and selling expenses
Sales commissions
Ticket office expenses
Computer reservation services
Advertising and promotion
Others
12 General and administrative expenses
General corporate expenses
Auditors’ remuneration
Other taxes and levies
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
2013
2012
RMB million
RMB million
9,510
5,581
8,984
5,088
15,091
14,072
2013
2012
RMB million
RMB million
4,356
2,303
526
118
451
3,865
2,183
458
260
368
7,754
7,134
2013
2012
RMB million
RMB million
2,334
16
120
2,327
14
84
2,470
2,425
125
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
13 Depreciation and amortisation
Depreciation
– Owned assets
– Assets acquired under finance leases
Amortisation of deferred benefits and gains
Other amortisation
14 Staff costs
Salaries, wages and welfare
Retirement scheme contributions
Early retirement benefits (Note 44)
2013
2012
RMB million
RMB million
6,861
2,477
(146)
155
6,328
1,874
(74)
136
9,347
8,264
2013
2012
RMB million
RMB million
13,113
1,324
12
11,953
939
20
14,449
12,912
Staff costs relating to flight operations, maintenance, aircraft and traffic servicing, promotion and sales and
general and administrative expenses are also included in the respective total amounts disclosed separately in
Note 8 to Note 12 above.
Details of staff costs arising from cash-settled share appreciation rights are disclosed in Note 50(c).
15 Other net income
Government grants (Note)
(Loss)/gain on disposal of property,
plant and equipment, net and lease prepayments
– Aircraft and spare engines
– Other property, plant and equipment
Others
126
2013
2012
RMB million
RMB million
1,155
1,243
(8)
(70)
166
9
7
203
1,243
1,462
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
15 Other net income (continued)
Note:
Government subsidies mainly represent (i) subsidies based on certain amount of tax paid granted by governments to the
Group; (ii) subsidies granted by various local governments to encourage the Group to operate certain routes to cities where
these governments are located.
There are no unfulfilled conditions and other contingencies related to subsidies that have been recognised for the year ended
31 December 2013.
16
Interest expense
Interest on borrowings
Interest relating to obligations under finance leases
Interest relating to provision for early retirement benefits (Note 44)
Less: interest expense capitalised (Note)
2013
2012
RMB million
RMB million
1,275
692
5
(321)
1,289
468
8
(389)
1,651
1,376
Note:
The interest rates used for interest capitalisation ranged from 2.06% to 2.81% per annum in 2013 (2012: 2.25% to 3.23%).
17 Other non-operating income
Interest income on wealth management products
Gain on disposal of a subsidiary
2013
2012
RMB million
RMB million
25
–
25
21
54
75
127
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
18 Remuneration of directors, supervisors and senior management
(a) Directors’ and supervisors’ remuneration
Details of directors’ and supervisors’ remuneration for the year ended 31 December 2013 are set out
below:
Name
Non-executive directors
Si Xian Min (Note (i))
Wang Quan Hua (Note (i)
Yuan Xin An (Note (i))
Yang Li Hua (Note (i) & (ii))
Executive directors
Tan Wan Geng (Note (i))
Zhang Zi Fang (Note (i))
Xu Jie Bo
Li Shao Bin (Note (ii))
Supervisors
Pan Fu (Note (i))
Li Jia Shi
Zhang Wei (Note (i))
Yang Yi Hua
Liang Zhong Gao (Note (iii))
Wu De Ming (Note (iv))
Independent
non-executive directors
Gong Hua Zhang (Note (iii))
Wei Jin Cai
Ning Xiang Dong
Liu Chang Le
Tan Jin song (Note(iv))
Salaries,
wages
Retirement
Directors’
and
scheme
fees
welfare
contributions
Total
RMB’000
RMB’000
RMB’000
RMB’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
150
150
150
150
–
–
–
–
–
–
–
636
639
–
636
–
291
300
–
–
–
–
–
–
–
–
–
–
–
–
121
120
–
120
–
122
122
–
–
–
–
–
–
–
–
–
–
–
–
757
759
–
756
–
413
422
–
150
150
150
150
–
600
2,502
605
3,707
128
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
18 Remuneration of directors, supervisors and senior management (continued)
(a) Directors’ and supervisors’ remuneration (continued)
Details of directors’ and supervisors’ remuneration for the year ended 31 December 2012 are set out
below:
Name
Non-executive directors
Si Xian Min (Note (i))
Wang Quan Hua (Note (i))
Yuan Xin An (Note (i))
Executive directors
Tan Wan Geng (Note (i))
Zhang Zi Fang
Xu Jie Bo
Chen Zhen You (Note (v))
Supervisors
Pan Fu (Note (i))
Li Jia Shi
Zhang Wei (Note (i))
Yang Yi Hua
Liang Zhong Gao (Note (iii))
Independent
non-executive directors
Gong Hua Zhang (Note (iii))
Wei Jin Cai
Ning Xiang Dong
Liu Chang Le
Salaries,
wages
Retirement
Directors’
and
scheme
fees
welfare
contributions
Total
RMB’000
RMB’000
RMB’000
RMB’000
–
–
–
–
–
–
–
–
–
–
–
–
150
150
150
150
–
–
–
–
743
710
576
–
710
–
346
352
–
–
–
–
–
–
–
–
70
70
44
–
69
–
68
69
–
–
–
–
–
–
–
–
813
780
620
–
779
–
414
421
150
150
150
150
600
3,437
390
4,427
In addition to the above, certain directors have been granted SARs in respect of their services to the
Group, further details of which are set out in Note 50(c).
129
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
18 Remuneration of directors, supervisors and senior management (continued)
(a) Directors’ and supervisors’ remuneration (continued)
Notes:
(i)
These directors or supervisors did not receive any remuneration for their services in the capacity of the directors
or supervisors of the Company. They also held management positions in CSAHC and their salaries were borne by
CSAHC.
(ii)
Appointed on 24 January 2013
(iii)
Resigned on 26 December 2013.
(iv) Appointed on 26 December 2013.
(v)
Resigned on 6 December 2012.
(b)
Individuals with highest emoluments
None of the directors (2012: none), whose emoluments are reflected in the above analysis, was among
the five highest paid individuals in the Group for 2013. The aggregate emoluments in respect of the five
(2012: five) individuals during the year are as follows:
Salaries, wages and welfare
Retirement scheme contributions
2013
2012
RMB’000
RMB’000
6,268
595
6,166
338
6,863
6,504
The emoluments of the five (2012: five) individuals with the highest emoluments are within the following
bands:
HK$1,000,000 to HK$1,500,000
(RMB 786,200 to RMB 1,179,300 equivalent)
HK$1,500,000 to HK$2,000,000
(RMB 1,179,300 to RMB 1,572,400 equivalent)
2013
2012
Number of
Number of
individuals
individuals
–
5
–
5
130
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
19
Income tax
(a)
Income tax expense in the consolidated income statement
PRC income tax
– Provision for the year
– Over-provision in prior year
Deferred tax (Note 30)
Origination and reversal of temporary differences
Tax expense
2013
2012
RMB million
RMB million
705
(31)
674
60
734
774
(61)
713
241
954
In respect of majority of the Group’s airline operation outside mainland China, the Group has either
obtained exemptions from overseas taxation pursuant to the bilateral aviation agreements between the
overseas governments and the PRC government, or has sustained tax losses in those overseas jurisdictions.
Accordingly, no provision for overseas tax has been made for overseas airlines operation in the current and
prior years.
Under the Corporate Income Tax Law of the PRC, the Company and majority of its subsidiaries are subject
to PRC income tax at 25% (2012: 25%). Certain subsidiaries of the Company are subject to preferential
income tax rate at 15% according to the preferential tax policy in locations, where those subsidiaries are
located.
131
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
19
Income tax (continued)
(b) Reconciliation between actual tax expense and calculated tax based on accounting profit at
applicable tax rates
Profit before taxation
3,484
4,738
2013
2012
RMB million
RMB million
Notional tax on profit before taxation, calculated
at the rates applicable to profits
in the tax jurisdictions concerned (Note)
Adjustments for tax effect of:
Non-deductible expenses
Non-taxable income
Share of results of associates and joint ventures
Unused tax losses and deductible
temporary differences not recognised
Utilisation of unused tax losses and deductible
temporary differences not recognised in prior years
Over-provision in prior year
Tax rates differential
Tax expense
Note:
863
1,157
19
–
(108)
32
(41)
(31)
–
26
(9)
(110)
3
(29)
(61)
(23)
734
954
The headquarters of the Company and its branches are taxed at rate at 25% (2012: 25%). The subsidiaries of the
Group are taxed at rates ranging from 15% to 25% (2012: 15% to 25%).
20 Profit attributable to equity shareholders of the Company
The consolidated profit attributable to equity shareholders of the Company for the year ended 31 December
2013 includes a profit of RMB945 million (2012: RMB902 million) which has been dealt with in the financial
statements of the Company.
21 Earnings per share
The calculation of basic earnings per share for the year ended 31 December 2013 is based on the profit
attributable to equity shareholders of the Company of RMB1,986 million (2012: RMB2,619 million) and the
weighted average of 9,817,567,000 shares in issue during the year (2012: 9,817,567,000 shares).
The amounts of diluted earnings per share are the same as basic earnings per share as there were no dilutive
potential ordinary shares in existence for the year ended 31 December 2013 and 2012.
132
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
22 Property, plant and equipment, net
(a) The Group
Aircraft
Other
Acquired
flight Machinery,
under equipment, equipment
finance
including
and
Investment
properties
Buildings
Owned
leases
rotables
vehicles
RMB
million
RMB
million
RMB
million
RMB
million
RMB
million
RMB
million
Total
RMB
million
Cost:
At 1 January 2012
Additions
Transfer from construction
in progress (Note 23)
Transfer to investment properties
upon lease out
Reclassification on exercise
of purchase options
Disposals
611
–
–
56
–
–
8,031
72
75,522
2,676
29,932
4,106
15,090
1,311
4,636
133,822
488
8,653
610
5,526
5,525
476
102
12,239
(56)
–
(58)
–
–
764
(1,477)
(764)
(132)
–
–
–
–
–
–
(307)
(150)
(2,124)
At 31 December 2012
667
8,599
83,011
38,667
16,570
5,076
152,590
At 1 January 2013
Additions
Transfer from construction
in progress (Note 23)
Transfer to buildings upon cease of
lease intention
Transfer to investment properties
upon lease out
Reclassification on exercise
of purchase options
Disposals
667
17
–
(72)
8,599
41
68
72
69
(69)
83,011
2,772
38,667
10,935
16,570
1,120
5,076
152,590
507
15,392
4,707
9,363
353
11
14,502
–
–
–
–
–
–
–
–
–
–
–
–
–
(566)
(248)
(3,126)
–
–
–
(39)
327
(1,953)
(327)
(320)
At 31 December 2013
681
8,672
88,864
58,318
17,477
5,346
179,358
133
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
22 Property, plant and equipment, net (continued)
(a) The Group (continued)
Aircraft
Investment
properties
RMB
million
Buildings
RMB
million
Owned
RMB
million
Acquired
Other
flight Machinery,
under equipment, equipment
and
vehicles
RMB
million
including
rotables
RMB
million
finance
leases
RMB
million
Total
RMB
million
Accumulated depreciation
and impairment losses:
At 1 January 2012
Depreciation charge for the year
Transfer to investment properties
upon lease out
Reclassification on exercise
of purchase options
Disposals
Impairment losses written
off on disposal (Note 22(f))
157
21
2,148
343
25,229
4,732
6,685
1,874
8,881
892
3,011
340
46,111
8,202
8
–
–
–
(8)
–
(43)
–
–
–
–
–
329
(1,133)
(329)
(132)
–
(258)
–
(149)
–
(1,715)
–
(48)
–
–
–
(48)
At 31 December 2012
186
2,440
29,109
8,098
9,515
3,202
52,550
At 1 January 2013
Depreciation charge for the year
Transfer to buildings upon cease
of lease intention
Transfer to investment properties
upon lease out
Reclassification on exercise
of purchase options
Disposals
Provision for impairment loss
(Note 22(g))
Impairment losses written
off on disposal (Note 22(f))
186
22
(39)
4
–
–
–
–
2,440
339
29,109
5,023
8,098
2,477
9,515
1,106
3,202
371
52,550
9,338
39
(4)
–
(20)
–
–
–
–
–
–
15
(1,665)
(15)
(320)
500
(170)
–
–
–
–
–
(346)
36
(95)
–
–
–
–
–
(227)
–
(2,578)
–
–
536
(265)
At 31 December 2013
173
2,794
32,812
10,240
10,216
3,346
59,581
Net book value:
At 31 December 2013
508
5,878
56,052
48,078
7,261
2,000
119,777
At 31 December 2012
481
6,159
53,902
30,569
7,055
1,874
100,040
134
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
22 Property, plant and equipment, net (continued)
(b) The Company
Aircraft
Other
Acquired
flight Machinery,
under equipment, equipment
finance
including
and
Investment
properties
Buildings
Owned
leases
rotables
vehicles
RMB
million
RMB
million
RMB
million
RMB
million
RMB
million
RMB
million
Total
RMB
million
Cost:
At 1 January 2012
Additions
Transfer from construction
in progress (Note 23)
Transfer to buildings
upon cease of lease intention
Reclassification on exercise of
purchase options
Disposals
245
87
5,280
24
59,553
2,600
28,695
4,106
13,711
1,136
3,303
110,787
327
8,280
–
324
2,109
5,525
415
47
8,420
(3)
–
–
3
–
(4)
–
–
764
(1,090)
(764)
(132)
–
–
–
–
–
–
(202)
(98)
(1,526)
At 31 December 2012
329
5,627
63,936
37,430
15,060
3,579
125,961
At 1 January 2013
Additions
Transfer from construction
in progress (Note 23)
Transfer to buildings
329
5,627
63,936
2,724
37,430
10,933
15,060
1,022
3,579
125,961
349
15,050
2,212
9,058
353
–
–
22
52
67
9
–
–
11,684
–
–
upon cease of lease intention
(67)
–
–
Reclassification on exercise of
purchase options
Disposals
–
–
–
(11)
327
(1,908)
(327)
(320)
–
–
(555)
(163)
(2,957)
At 31 December 2013
262
5,757
67,291
56,774
15,880
3,774
149,738
135
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
22 Property, plant and equipment, net (continued)
(b) The Company (continued)
Aircraft
Other
Acquired
flight Machinery,
under equipment, equipment
finance
including
and
Investment
properties
Buildings
Owned
leases
rotables
vehicles
RMB
million
RMB
million
RMB
million
RMB
million
RMB
million
RMB
million
Total
RMB
million
Accumulated depreciation
and impairment losses:
At 1 January 2012
Depreciation charge for the year
Transfer to buildings upon cease
of lease intention
Reclassification on exercise of
purchase options
Disposals
Impairment losses written
off on disposal (Note 22(f))
87
12
(3)
–
–
–
1,414
207
20,482
3,607
6,306
1,792
8,236
775
2,214
268
38,739
6,661
3
–
(2)
–
–
–
329
(992)
(329)
(132)
–
–
–
–
–
–
(177)
(104)
(1,407)
(48)
–
–
–
(48)
At 31 December 2012
96
1,622
23,378
7,637
8,834
2,378
43,945
At 1 January 2013
Depreciation charge for the year
Transfer to buildings upon cease
of lease intention
Reclassification on exercise of
purchase options
Disposals
Provision for impairment loss
(Note 22(g))
Impairment losses written
off on disposal (Note 22(f))
96
11
1,622
260
23,378
3,747
7,637
2,410
8,834
934
2,378
213
43,945
7,575
(38)
38
–
–
–
–
–
(8)
–
–
–
15
(1,621)
500
(170)
–
(15)
(320)
–
–
–
–
–
–
–
–
(346)
(157)
(2,452)
36
(95)
–
–
536
(265)
At 31 December 2013
69
1,912
25,849
9,712
9,363
2,434
49,339
Net book value:
At 31 December 2013
193
3,845
41,442
47,062
6,517
1,340
100,399
At 31 December 2012
233
4,005
40,558
29,793
6,226
1,201
82,016
136
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
22 Property, plant and equipment, net (continued)
(c) As at 31 December 2013, the accumulated impairment loss of aircraft and flight equipment of the Group
is RMB1,764 million and RMB120 million respectively (2012: RMB1,434 million and RMB179 million
respectively).
As at 31 December 2013, the accumulated impairment loss of aircraft and flight equipment of the
Company is RMB1,656 million and RMB120 million respectively (2012: RMB1,326 million and RMB179
million respectively).
(d) As at 31 December 2013, certain aircraft of the Group and the Company with an aggregate carrying value
of approximately RMB80,233 million and RMB69,620 million, respectively (2012: RMB60,538 million and
RMB50,190 million, respectively) were mortgaged under certain loans or certain lease agreements (Notes
36 and 37).
(e) As at 31 December 2012, certain buildings of the Group with an aggregate carrying value of
approximately RMB17 million were mortgaged for certain banking facilities granted by a PRC commercial
bank. The loan has been repaid in 2013.
(f)
In view of the age of the Group’s fleet of Boeing B737-300 aircraft, the Group had plans to dispose of 21
aircraft and commenced the process of seeking buyers in 2011. These aircraft and related assets’ carrying
amounts were written down to their estimated recoverable amounts and impairment losses of RMB544
million were recorded as at 31 December 2011. During the year ended 31 December 2012, 3 Boeing
737-300 aircraft were disposed of and the impairment provision of RMB48 million for the three aircraft
was written off on disposal. During the year ended 31 December 2013, 8 Boeing 737-300 aircraft were
disposed of and the impairment provision of RMB170 million for the eight aircraft was written off on
disposal.
(g)
In view of the operating result of Group’s fleet of Boeing B747-400F aircraft and EMB 145 aircraft, the
Group ceased the operation of these aircraft in August 2013 and September 2013, respectively, and has
plans to dispose these aircraft. These aircraft and related assets’ carrying amounts were written down
to their estimated recoverable amounts and impairment losses of RMB536 million were made as at 31
December 2013. The estimates of recoverable amounts were based on the greater of the assets’ fair value
less costs to sell and the value in use. The fair value was determined by reference to the recent observable
market prices for the aircraft fleet. As at 31 December 2013, there is no sale agreement has been entered
into for these aircraft.
As at 31 December 2013, the Group reviewed the recoverable amounts of the other aircraft and related
assets and concluded no further impairment or reversal of impairment was required.
137
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
22 Property, plant and equipment, net (continued)
(h) As at 31 December 2013 and up to the date of approval of these financial statements, the Group is
in the process of applying for the land use right certificates and property title certificates in respect
of the properties located in Guangzhou (including Guangzhou Baiyun International Airport), Xiamen,
Heilongjiang, Jilin, Dalian, Guangxi, Hunan, Beijing, Shanghai, Zhuhai, Shenzhen, Shenyang, Xinjiang,
Henan, Chengdu, Guizhou, Hainan, Hubei and Shantou, in which the Group has interests and for which
such certificates have not been granted. As at 31 December 2013, carrying value of such properties of
the Group and the Company amounted to RMB3,557 million and RMB2,646 million, respectively (2012:
RMB3,669 million and RMB2,516 million, respectively). The Directors of the Company are of the opinion
that the use of and the conduct of operating activities at the properties referred to above are not affected
by the fact that the Group has not yet obtained the relevant land use right certificates and property title
certificates.
(i)
The Group leased out investment properties and certain flight training facilities under operating leases.
The leases typically run for an initial period of one to fourteen years, with an option to renew the leases
after that date at which time all terms are renegotiated. None of the leases includes contingent rentals. In
this connection, rental income totalling RMB85 million (2012: RMB80 million) was received by the Group
during the year in respect of the leases. Directors estimated the fair value of these investment properties
approximate the carrying amount.
The properties are reclassified between investment properties and property, plant and equipment, upon
the intention of commencement or cease of lease.
The Group’s total future minimum lease income under non-cancellable operating leases are as follows:
Within 1 year
After 1 year but within 5 years
After 5 years
2013
2012
RMB million
RMB million
45
54
2
79
46
5
101
130
138
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
Advance payment for
aircraft and flight equipment
Others
Total
RMB million
RMB million
RMB million
15,238
14,404
702
886
15,940
15,290
(11,527)
(712)
(12,239)
23 Construction in progress
The Group
At 1 January 2012
Additions
Transferred to property, plant and
equipment (Note 22)
Transfer to lease prepayments and
other assets completion of development
–
(302)
(302)
At 31 December 2012
18,115
574
18,689
At 1 January 2013
Additions
Transferred to property, plant and
equipment (Note 22)
Transfer to lease prepayments and
18,115
12,721
574
795
18,689
13,516
(14,423)
(79)
(14,502)
other assets completion of development
–
(244)
(244)
At 31 December 2013
16,413
1,046
17,459
139
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
23 Construction in progress (continued)
The Company
Advance payment for
aircraft and flight equipment
Others
Total
RMB million
RMB million
RMB million
11,359
11,151
306
464
11,665
11,615
(8,049)
(371)
(8,420)
At 1 January 2012
Additions
Transferred to property, plant and
equipment (Note 22)
Transfer to lease prepayments and
other assets completion of development
–
(51)
(51)
At 31 December 2012
14,461
348
14,809
At 1 January 2013
Additions
Transferred to property, plant and
equipment (Note 22)
Transfer to lease prepayments and
14,461
8,761
348
581
14,809
9,342
(11,623)
(61)
(11,684)
other assets completion of development
–
(152)
(152)
At 31 December 2013
11,599
716
12,315
24 Lease prepayments
In 2013, the amount of amortisation charged to consolidated income statement was RMB58 million (2012:
RMB47 million).
The Group was formally granted the rights to use certain parcels of land in Guangzhou, Shenzhen, Zhuhai,
Beihai, Changsha, Shantou, Haikou, Zhengzhou, Jilin, Guiyang and other PRC cities by the relevant PRC
authorities for periods of 30 to 70 years, which expire between 2020 and 2073.
140
25
Investments in subsidiaries
(a)
Investments in subsidiaries
Unlisted capital contributions, at cost
Less: impairment loss
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
The Company
2013
2012
RMB million
RMB million
3,079
(43)
2,234
(43)
3,036
2,191
During the year, the management assessed the recoverable amounts of the loss-making subsidiaries and
determined that the carrying amounts does not exceed their recoverable amounts thus no additional
impairment loss is needed as of 31 December 2013 in the Company’s balance sheet (2012: RMB43
million).
All the subsidiaries of the Company are unlisted. The following list contains only the particulars of
subsidiaries which principally affect the results, assets or liabilities of the Group.
Place of
Proportion of
ownership
interest
Name of company
operation
capital
Company
activity
establishment/
Registered
held by the
Principal
Henan Airlines Company
PRC
RMB6,000,000,000
60%
Airline
Limited (“China Southern
Henan Airlines”) (i)&(ii)
transportation
Xiamen Airlines Company
PRC
RMB5,000,000,000
51%
Airline
Limited (“Xiaman Airlines”) (ii)
transportation
Chongqing Airlines Company
PRC
RMB1,200,000,000
60%
Airline
Limited (ii)
transportation
Shantou Airlines Company
PRC
RMB280,000,000
60%
Airline
Limited (ii)
transportation
Xinjiang Civil Aviation Property
PRC
RMB251,332,832
51.84%
Property
Management Limited (ii)
management
Zhuhai Airlines Company
PRC
RMB250,000,000
60%
Airline
Limited (ii)
transportation
141
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
25
Investments in subsidiaries (continued)
(a)
Investments in subsidiaries (continued)
Place of
Proportion of
ownership
interest
Name of company
operation
capital
Company
activity
establishment/
Registered
held by the
Principal
Guizhou Airlines Company
PRC
RMB380,000,000
60%
Airline
Limited (“Guizhou Airlines”)
(ii)&(v)
transportation
Guangzhou Nanland Air
PRC
RMB120,000,000
55%
Air catering
Catering Company
Limited (iii)
Guangzhou Baiyun International
PRC
RMB50,000,000
61%
Logistics
Logistic Company Limited (ii)
operations
Beijing Southern Airlines Ground
PRC
RMB18,000,000
100%
Airport ground
Services Company Limited (ii)
services
China Southern Airlines Group
PRC
RMB10,200,000
100%
Air catering
Air Catering Company Limited (ii)
Nan Lung International
Hong Kong
HKD3,270,000
51%
Freight services
Freight Limited
(i) As at 8 July 2013, Civil Aviation Administration of China (“CAAC”) approved the establishment
of China Southern Henan Airlines, a joint venture between the Company and Henan Civil Aviation
Development and Investment Co., Ltd. Pursuant to the joint venture agreement, the registered
capital of China Southern Henan Airlines is RMB6 billion. The Company will invest RMB3.6 billion
cash and property, plant and equipment in total for 60% of total interests of China Southern
Henan Airlines. As at 31 December 2013, the Company and Henan Civil Aviation Development and
Investment Co., Ltd contributed RMB720 million and RMB480 billion in cash respectively and held
60% and 40% of the interests of China Southern Henan Airlines respectively.
(ii)
These subsidiaries are PRC limited liability companies.
(iii) This subsidiary is a Sino-foreign equity joint venture company established in the PRC.
(iv) Certain subsidiaries of the Group are PRC joint ventures which have limited terms pursuant to the
PRC law.
142
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
25
Investments in subsidiaries (continued)
(a)
Investments in subsidiaries (continued)
(v)
Pursuant to an agreement entered into by the equity holders of Guizhou Airlines, a subsidiary of
the Company, in May 2011, the equity holders of Guizhou Airlines agreed to further inject capital
of RMB300 million in cash into Guizhou Airlines by the end of 2013 based on their existing equity
percentages. In 2011, the Company and the non-controlling interest injected RMB60 million and
RMB40 million in cash, respectively, into Guizhou Airlines. In 2013, the Company and the non-
controlling interest injected RMB120 million and RMB80 million in cash, respectively, into Guizhou
Airlines.
(b) Material non-controlling interests
As at 31 December 2013, the balance of total non-controlling interests is RMB8,122 million, of which
RMB6,056 million is for Xiamen Airlines. The total non-controlling interests for the year ended 31
December 2013 is RMB764 million, of which RMB639 million is for Xiamen Airlines. The rest of non-
controlling interests are not material.
Set out below are the summarised financial information for Xiamen Airlines that has non-controlling
interests that are material to the group.
Summarised balance sheet
Current
Assets
Liabilities
Xiamen Airlines
2013
2012
RMB million
RMB million
5,517
(6,974)
5,162
(6,167)
Total current net liabilities
(1,457)
(1,005)
Non-current
Assets
Liabilities
23,574
(9,757)
20,849
(8,626)
Total non-current net assets
13,817
12,223
Net assets
12,360
11,218
143
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
25
Investments in subsidiaries (continued)
(b) Material non-controlling interests (continued)
Summarised statement of comprehensive income
Xiamen Airlines
2013
2012
RMB million
RMB million
Revenue
16,598
16,674
Profit before income tax
Income tax expense
Post-tax profit from continuing operations
Other comprehensive (loss)/income
1,750
(438)
1,312
(8)
2,520
(618)
1,902
3
Total comprehensive income
1,304
1,905
Dividends paid to non-controlling interests
74
–
Summarised cash flows
Cash flows from operating activities
Cash generated from operations
Interest received
Interest paid
Income tax paid
Net cash generated from operating activities
Net cash used in investing activities
Net cash generated/(used) in financing activities
Xiamen Airlines
2013
2012
RMB million
RMB million
3,152
86
(209)
(477)
2,552
(4,171)
1,833
3,558
108
(209)
(857)
2,600
(634)
(880)
Net increase in cash and cash equivalents
214
1,086
Cash and cash equivalents at beginning of year
3,595
2,509
Cash and cash equivalents at end of year
3,809
3,595
The information above is the amount before inter-company eliminations.
144
26
Interest in associates
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
The Group
2013
2012
RMB million
RMB million
Share of net assets
1,305
1,033
Unlisted shares/capital contributions, at cost
Less: impairment losses
The Company
2013
2012
RMB million
RMB million
474
(37)
437
405
(58)
347
In the Company’s balance sheet, a provision for impairment losses of RMB37 million (2012: RMB58 million) was
recorded as of 31 December 2013 in respect of investments in certain associate in which their carrying amounts
were determined to be not fully recoverable.
All the Group’s associates are unlisted without quoted market price. The particulars of the Group’s principal
associates as of 31 December 2013 are as follows:
Proportion of ownership
interest held by
Proportion
Place of
Group’s
establishment/
effective
The
of voting
rights held
operation
interest
Company Subsidiaries by the Group
Principal activity
PRC
33.98%
21.09%
12.89%
33.98%
Provision of
financial services
China Southern
Airlines Group
Finance Co., Ltd
(“SA Finance”)
Sichuan Airlines
Co., Ltd
(“Sichuan Airlines”)
PRC
39%
39%
China Southern Air
PRC
40%
40%
Holding Media Co., Ltd
(“CSA Culture”)
There is no associate that is individually material to the Group.
–
–
39%
Airline transportation
40%
Advertising services
145
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
26
Interest in associates (continued)
The Group has interests in a number of individually immaterial associates that are accounted for using the
equity method. The aggregate financial information of these associates is summarized as following:
2013
2012
RMB million
RMB million
Aggregate carrying amount of individually immaterial associates
1,305
1,033
Aggregate amounts of the reporting entity’s share of:
Profit from continuing activities
Other comprehensive loss
Total comprehensive income
27
Interest in joint ventures
294
(3)
291
317
–
317
The Group
2013
2012
RMB million
RMB million
Share of net assets
1,197
1,103
Unlisted capital contributions, at cost
483
483
The Company
2013
2012
RMB million
RMB million
146
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
27
Interest in joint ventures (continued)
All the Group’s joint ventures are unlisted without quoted market price. The particulars of the Group’s principal
joint ventures as of 31 December 2013 are as follows:
Proportion of ownership
interest held by
Proportion
Place of
Group’s
establishment/
effective
The
of voting
rights held
operation
interest
Company Subsidiaries by the Group
Principal activity
Guangzhou Aircraft
PRC
50%
50%
–
50%
Aircraft repair and
Maintenance
Engineering Co., Ltd
(”GAMECO”)
maintenance services
Zhuhai Xiang Yi
PRC
51%
51%
–
50%
Flight simulation services
Aviation Technology
Company Limited
(“Zhuhai Xiang Yi”)
Guangzhou China Southern
PRC
50%
50%
Zhongmian Dutyfree Store
Co., Limited
China Southern West
Australia
48.12%
48.12%
–
–
50%
Sales of duty free
goods in flight
50%
Pilot training services
Australian Flying College
Pty Ltd (“Flying College”)
There is no joint venture that is individually material to the Group.
The group has interest in a number of individually immaterial joint ventures that are amounted for using the
equity method. The aggregate financial information of these associates is summarized as following:
2013
2012
RMB million
RMB million
Aggregate carrying amount of individually immaterial joint venture
1,197
1,103
Aggregate amounts of the reporting entity’s share of:
Profit from continuing activities
Other comprehensive income
Total comprehensive income
96
–
96
121
–
121
147
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
28 Other investments in equity securities
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
Unlisted equity securities, at cost
162
160
100
100
Dividend income from unlisted equity securities of the Group amounted to RMB11 million during the year ended
31 December 2013 (2012: RMB11 million).
29 Available-for-sale financial assets
The Group
The Company
2013
RMB million
2012
RMB million
2013
RMB million
2012
RMB million
Available-for-sale financial assets
– Listed in the PRC
Quoted market value of listed securities
61
61
69
69
25
25
22
22
Dividend income from listed securities of the Group amounted to RMB3 million during the year ended 31
December 2013 (2012: RMB1 million).
30 Deferred tax assets/(liabilities)
(a) The analysis of deferred tax assets and deferred tax liabilities is as follows:
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
443
808
404
819
413
808
362
819
1,251
1,223
1,221
1,181
Deferred tax assets
– Deferred tax asset to be utilised
after 12 months
– Deferred tax asset to be utilised
within 12 months
Deferred tax liabilities
– Deferred tax liability to be
realised after 12 months
(880)
(794)
–
–
Net deferred tax assets
371
429
1,221
1,181
148
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
30 Deferred tax assets/(liabilities) (continued)
(b) Movements of net deferred tax assets of the Group are as follows:
(Charged)/
(Charged)/
credited to
At the
credited to
other
beginning
income comprehensive
At the end
of the year
statement
income
of the year
RMB million
RMB million
RMB million
RMB million
For the year ended
31 December 2013
Deferred tax assets:
Accrued expenses
Provision for major overhauls
Deferred revenue
Provision for impairment losses
Others
870
145
106
345
47
1,513
(23)
28
(31)
48
22
44
Deferred tax liabilities:
Provision for major overhauls
(319)
(44)
Depreciation allowances
under tax in excess of the
related depreciation
under accounting
Change in fair value of
available-for-sale
equity securities
Others
(643)
(64)
(11)
(111)
–
4
(1,084)
(104)
Net deferred tax assets
429
(60)
–
–
–
–
–
–
–
–
2
–
2
2
847
173
75
393
69
1,557
(363)
(707)
(9)
(107)
(1,186)
371
149
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
30 Deferred tax assets/(liabilities) (continued)
(b) Movements of net deferred tax assets of the Group are as follows (continued):
(Charged)/
(Charged)/
credited to
At the
credited to
Other
beginning
income comprehensive
At the end
of the year
statement
income
of the year
RMB million
RMB million
RMB million
RMB million
For the year ended
31 December 2012
Deferred tax assets:
Accrued expenses
Provision for major overhauls
Deferred revenue
Provision for impairment losses
Others
822
223
127
443
29
48
(78)
(21)
(98)
18
1,644
(131)
Deferred tax liabilities:
Provision for major overhauls
(270)
(49)
Depreciation allowances
under tax in excess of the
related depreciation
under accounting
Change in fair value of
available-for-sale
equity securities
Others
(591)
(52)
(10)
(102)
–
(9)
(973)
(110)
Net deferred tax assets
671
(241)
–
–
–
–
–
–
–
–
(1)
–
(1)
(1)
870
145
106
345
47
1,513
(319)
(643)
(11)
(111)
(1,084)
429
150
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
30 Deferred tax assets/(liabilities) (continued)
(c) Movements of net deferred tax assets of the Company are as follows:
(Charged)/
(Charged)/
credited to
At the
credited to
Other
beginning
income comprehensive
At the end
of the year
statement
income
of the year
RMB million
RMB million
RMB million
RMB million
For the year ended
31 December 2013
Deferred tax assets:
Accrued expenses
Provision for major overhauls
Deferred revenue
Provision for impairment losses
Others
Deferred tax liabilities:
Change in fair value of
available-for-sale
equity securities
Others
724
145
40
320
15
1,244
(3)
(60)
(63)
Net deferred tax assets
1,181
17
27
(40)
53
15
72
–
(31)
(31)
41
–
–
–
–
–
–
(1)
–
(1)
(1)
741
172
–
373
30
1,316
(4)
(91)
(95)
1,221
151
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
30 Deferred tax assets/(liabilities) (continued)
(c) Movements of net deferred tax assets of the Company are as follows (continued):
(Charged)/
(Charged)/
credited to
At the
credited to
Other
beginning
income comprehensive
At the end
of the year
statement
income
of the year
RMB million
RMB million
RMB million
RMB million
For the year ended
31 December 2012
Deferred tax assets:
Accrued expenses
Provision for major overhauls
Deferred revenue
Provision for impairment losses
Others
Deferred tax liabilities:
Change in fair value of
available-for-sale
equity securities
Others
583
223
77
412
8
1,303
(3)
(49)
(52)
Net deferred tax assets
1,251
141
(78)
(37)
(92)
7
(59)
–
(11)
(11)
(70)
–
–
–
–
–
–
–
–
–
–
724
145
40
320
15
1,244
(3)
(60)
(63)
1,181
152
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
30 Deferred tax assets/(liabilities) (continued)
(d) Deferred tax assets not recognised
At 31 December 2013, the Group’s deductible temporary differences amounting to RMB29 million (2012:
RMB97 million) have not been recognised as deferred tax assets as it was determined by management that
it is not probable that future taxable profits will be available for these deductible temporary differences to
reverse in the foreseeable future.
Tax losses in the PRC are available for carrying forward to set off future assessable income for a maximum
period of five years. The Group’s unused tax losses of RMB236 million (2012: RMB240 million) have not
been recognised as deferred tax assets, as it was determined by management that it is not probable that
future taxable profits against which the losses can be utilised will be available before they expire. The
expiry dates of unrecognised unused tax losses are analysed as follows:
Expiring in:
2013
2014
2015
2016
2017
2018
The Group
2013
2012
RMB million
RMB million
–
32
–
4
–
200
236
92
131
–
11
6
–
240
153
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
31 Other assets
The Group
Prepayment
for exclusive
Lump sum
use right of
housing
benefits
an airport
terminal
Others
Total
RMB million
RMB million
RMB million
RMB million
14
–
–
(14)
–
–
–
–
–
–
–
280
–
–
(10)
–
206
36
56
(82)
(6)
270
210
270
–
–
(10)
210
24
182
(87)
260
329
500
36
56
(106)
(6)
480
480
24
182
(97)
589
At 1 January 2012
Additions
Transferred from construction
in progress
Amortisation for the year
Disposals
At 31 December 2012
At 1 January 2013
Additions
Transferred from construction
in progress
Amortisation for the year
At 31 December 2013
154
31 Other assets (continued)
At 1 January 2012
Additions
Transferred from construction
in progress
Amortisation for the year
Disposals
At 31 December 2012
At 1 January 2013
Additions
Transferred from construction
in progress
Amortisation for the year
At 31 December 2013
32
Inventories
Consumable spare parts
and maintenance materials
Other supplies
Less: impairment
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
The Company
Prepayment
for exclusive
Lump sum
use right of
housing
benefits
an airport
terminal
Others
Total
RMB million
RMB million
RMB million
RMB million
14
–
–
(14)
–
–
–
–
–
–
–
280
–
–
(10)
–
153
5
42
(60)
(6)
270
134
270
–
–
(10)
134
4
152
(62)
260
228
447
5
42
(84)
(6)
404
404
4
152
(72)
488
The Group
The Company
2013
RMB
million
2012
RMB
million
2013
RMB
million
1,799
153
1,952
(305)
1,914
166
2,080
(372)
1,455
74
1,529
(278)
2012
RMB
million
1,580
85
1,665
(345)
1,647
1,708
1,251
1,320
155
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
32
Inventories (continued)
Impairment of inventory is shown as below:
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
At 1 January
Provision for impairment of
inventories
Provision written off in relation
to disposal of inventories
372
21
405
–
345
21
(88)
(33)
(88)
At 31 December
305
372
278
378
–
(33)
345
33 Trade receivables
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
Trade receivables
Less: impairment
2,200
(27)
1,879
(26)
1,821
(21)
1,571
(22)
2,173
1,853
1,800
1,549
156
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
33 Trade receivables (continued)
(a) Ageing analysis
Credit terms granted by the Group to sales agents and other customers generally range from one to three
months. Ageing analysis of trade receivables is set out below:
Within 1 month
More than 1 month but
less than 3 months
More than 3 months but
less than 12 months
More than 1 year
Less: impairment
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
1,810
1,519
1,513
1,291
345
25
20
304
38
18
274
21
13
253
10
17
2,200
(27)
1,879
(26)
1,821
(21)
1,571
(22)
2,173
1,853
1,800
1,549
All of the trade receivables are expected to be recovered within one year.
(b)
Impairment of trade receivables
(i)
Impairment loss in respect of trade receivables is recorded using an allowance account unless the
Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written
off against trade receivables directly (Note 2(k)).
The movements in the allowance for doubtful debts during the year are as follows:
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
At 1 January
Impairment loss recognised
Impairment loss written back
Uncollectible amounts written off
At 31 December
26
13
–
(12)
27
29
8
(7)
(4)
26
22
11
–
(12)
21
25
7
(7)
(3)
22
157
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
33 Trade receivables (continued)
(b)
Impairment of trade receivables (continued)
(ii) As of 31 December 2013, trade receivables of RMB11 million (2012: RMB22 million) were past
due but not impaired. These relate to a number of independent customers for whom there is no
significant financial difficulty and based on past experience, the overdue amounts can be recovered.
The ageing analysis of these trade receivables is as follows:
2013
2012
RMB million
RMB million
3 to 12 months
11
22
(iii) As of 31 December 2013, trade receivables of RMB34 million (2012: RMB34 million) were impaired.
The amount of the provision was RMB27 million as of 31 December 2013 (2012: RMB26 million).
The individually impaired receivables mainly relate to customers, which are in unexpectedly difficult
economic situations. It was assessed that a portion of the receivables is expected to be recovered.
The ageing of these receivables is as follows:
3 to 12 months
Over 12 months
2013
2012
RMB million
RMB million
14
20
34
16
18
34
(c) Trade receivables that are not impaired
The ageing analysis of trade receivables that are neither individually nor collectively considered to be
impaired is as follows:
2013
2012
RMB million
RMB million
Neither past due nor impaired
2,155
1,823
Trade receivables that were neither past due nor impaired relate to customers for whom there was no
recent history of default.
158
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
33 Trade receivables (continued)
(d) Trade receivables by currencies
The carrying amounts of the group’s trade receivables are denominated in the following currencies:
Renminbi
Euro
US dollar
Australian dollar
Taiwan dollar
UK pound
Other currencies
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
1,795
135
73
38
18
30
111
1,314
142
184
35
24
25
155
1,443
135
73
38
18
30
84
1,038
142
182
35
18
25
131
2,200
1,879
1,821
1,571
As as 31 December 2013, the fair value of trade receivable approximate its carrying amount.
34 Other receivables
VAT recoverable
Rebate receivables on
aircraft acquisitions
Short-term wealth management product
and term deposit (Note)
Deposits for aircraft purchase
Interest receivables
Other rental deposits
Others
Subtotal
Less: impairment
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
1,114
–
1,095
919
422
215
110
79
574
981
500
–
23
87
551
862
–
–
11
40
223
–
911
–
–
16
59
183
3,433
(2)
2,142
(3)
2,231
–
1,169
(2)
3,431
2,139
2,231
1,167
159
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
34 Other receivables (continued)
Note:
As at 31 December 2012, the short-term wealth management product was purchased by Xiamen Airlines from a state-owned
commercial bank, which subsequently matured in 2013.
As at 31 December 2013, the balance represents the term deposit amounting to RMB422 million at bank with maturity over 3
months.
35 Cash and cash equivalents
(a) Cash and cash equivalents comprise:
The Group
The Company
2013
2012
2013
2012
RMB Million
RMB Million
RMB Million
RMB Million
4,844
6,904
6,454
3,628
982
4,485
2,379
2,988
Deposits in banks and
other financial institution
Cash at bank and in hand
Cash and cash equivalents
in the statement of balance sheet
11,748
10,082
5,467
5,367
As at 31 December 2013, the Group’s and the Company’s deposits with SA Finance amounted to RMB
2,675 million and RMB 2,550 million, respectively (2012: RMB2,307 million and RMB2,215 million,
respectively) (Note 49(d)(iii)).
The carrying amounts of the group’s cash and cash equivalents are denominated in the following
currencies:
The Group
The Company
2013
2012
2013
2012
RMB Million
RMB Million
RMB Million
RMB Million
10,976
401
80
17
26
248
9,092
610
98
74
19
189
4,655
375
80
17
11
329
4,410
597
98
74
8
180
11,748
10,082
5,467
5,367
Renminbi
US Dollars
Euro
Japanese Yen
Hong Kong Dollars
Others
160
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi unless otherwise indicated)
35 Cash and cash equivalents (continued)
(b) Reconciliation of profit before income tax to cash generated from operating activities:
2013
2012
Note
RMB million
RMB million
13
13
13
22(a)
26
27
15
17
16
28 & 29
Profit before income tax
Depreciation charges
Other amortisation
Amortisation of deferred benefits and gains
Impairment losses on property, plant,
equipment
Share of profits of associates
Share of profits of joint ventures
Losses/(gain) on sale of property,
plant and equipment, net and
lease prepayments
Other non-operating income
Interest income
Interest expense
Dividend income from other investments
in equity securities and available-for-sale
financial assets
Exchange gain, net
Decrease/(increase) in inventories
(Increase)/decrease in trade receivables
Increase in other receivables
Increase in prepaid expenses and other current assets
Increase in net amounts due to related companies
Decrease in trade payables
Increase/(decrease) in sales in advance of carriage
Increase in accrued expenses
Increase/(decrease) in other liabilities
Increase in deferred revenue
Decrease in provision for major overhauls
Decrease in provision for early retirement benefits
(Decrease)/increase in deferred benefits and gains
3,484
9,338
155
(146)
536
(294)
(96)
78
(25)
(307)
1,651
(14)
(2,903)
61
(321)
(959)
(205)
118
(418)
961
648
200
463
(421)
(31)
(7)
4,738
8,202
136
(74)
–
(317)
(121)
(16)
(75)
(235)
1,376
(12)
(308)
(90)
292
(206)
(42)
114
(1,022)
(445)
2,325
(314)
765
(276)
(31)
111
Cash generated from operating activities
11,546
14,475
161
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
36 Borrowings
(a) As at 31 December 2013, borrowings are analysed as follows:
Non-current
Long-term bank borrowings
–secured (Note (i))
–unsecured
Current
Long-term bank borrowings
–secured (Note (i))
–unsecured
Short-term bank borrowings
–secured (Note (ii))
–unsecured
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
21,888
15,358
20,435
9,761
14,767
14,326
13,767
9,385
37,246
30,196
29,093
23,152
2,867
2,963
265
14,147
3,620
7,560
1,803
2,371
–
–
10,719
12,373
3,067
6,308
–
9,460
20,242
21,899
16,547
18,835
Total borrowings
57,488
52,095
45,640
41,987
The borrowings are repayable
as follows:
Within one year
In the second year
In the third to fifth year inclusive
After the fifth year
20,242
10,666
19,479
7,101
21,899
7,317
14,833
8,046
16,547
9,245
15,167
4,681
18,835
5,806
11,455
5,891
Total borrowings
57,488
52,095
45,640
41,987
Notes:
(i)
As at 31 December 2013, borrowings of the Group and the Company totalling RMB 24,755 million and RMB
16,570 million, respectively (2012: RMB24,055 million and RMB16,834 million, respectively) were secured
by mortgages over certain of the Group’s and the Company’s aircraft with aggregate carrying amounts of
RMB32,155 million and RMB22,558 million, respectively (2012: RMB29,969 million and RMB20,397 million,
respectively).
162
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
36 Borrowings (continued)
(a) As at 31 December 2013, borrowings are analysed as follows: (continued)
(ii)
As at 31 December 2013, a short-term loan the Group amounting to RMB265 million was secured by pledged
bank deposits of RMB277 million.
(iii)
The following borrowings secured by certain aircraft mentioned in Note (i) are also guaranteed by CSAHC:
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
Guarantor
CSAHC (Note 49(e))
–
94
–
94
(b) As at 31 December 2013, the Group’s and the Company’s weighted average interest rates on short-
term borrowings were 2.10% and 2.45% per annum, respectively (2012: 2.47% and 2.52% per annum,
respectively).
163
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
36 Borrowings (continued)
(c) Details of borrowings with original maturity over one year are as follows:
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
Renminbi denominated loans
Non-interest bearing loan from a
municipal government authority
Fixed interest rate at 4.86%
per annum as at 31 December
2012, with maturities through 2013
Floating interest rates
90%, 95%,100% of benchmark
interest rate (stipulated by PBOC)
as at 31 December 2013, with
–
–
3
60
maturities through 2016
640
635
–
–
–
United States Dollars
denominated loans
Fixed interest rates ranging from
3.00% to 3.23% per annum as
at 31 December 2013, with
maturities through 2017
Floating interest rates ranging
from one-month LIBOR + 0.80%
to one-month LIBOR + 2.20% per
annum as at 31 December 2013,
311
423
–
–
–
–
–
with maturities through 2021
2,149
2,156
1,810
2,156
Floating interest rates ranging
from three-month LIBOR + 0.59%
to three-month LIBOR + 3.01% per
annum as at31 December 2013,
with maturities through 2023
33,758
31,018
28,337
27,120
Floating interest rates ranging
from six-month LIBOR + 0.5%
to six-month LIBOR + 2.8% per
annum as at 31 December 2013,
with maturities through 2023
6,218
7,081
3,120
3,251
Less: loans due within one year
classified as current
liabilities
43,076
41,376
33,267
32,527
(5,830)
(11,180)
(4,174)
(9,375)
37,246
30,196
29,093
23,152
164
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
36 Borrowings (continued)
(d)
The remaining contractual maturities at the end of the financial year of the Group’s and the Company’s
borrowings, which are based on contractual undiscounted cash flows (including interest payments
computed using contractual rates, or if floating, based on rates current at the end of the financial year)
and the earliest date the Group and the Company can be required to pay, are as follows:
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
Contractual undiscounted
cash flows
Within 1 year
After 1 year but within 2 years
After 2 years but within 5 years
After 5 years
21,528
11,603
20,711
7,454
22,865
7,906
15,779
8,386
17,517
9,944
15,988
4,885
19,532
6,202
12,064
6,074
61,296
54,936
48,334
43,872
(e)
The carrying amounts of the borrowings are denominated in the following currencies:
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
Renminbi
US Dollars
670
56,818
807
51,288
–
45,640
105
41,882
57,488
52,095
45,640
41,987
The Group has significant borrowings balances as well as obligations under finance leases (Note 37) which
are denominated in US dollars as at 31 December 2013. The net exchange gain of RMB2,903 million
(2012: RMB267 million) recorded by the Group was mainly attributable to the exchange gain arising from
translation of borrowings balances and finance lease obligations denominated in US dollars.
(f) As at 31 December 2013, loans to the Group from SA finance amounted to RMB520 million (2012:
RMB426 million) (Note 49(d)(i)).
(g) As at 31 December 2013, the fair value of borrowings approximate their carrying amount. The fair value is
within level 2 of the fair value hierarchy.
165
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
37 Obligations under finance leases
The Group and the Company have commitments under finance lease agreements in respect of aircraft and
related equipment. The majority of these leases have terms of 10 to 12 years expiring during the years 2015 to
2025. As at 31 December 2013, future payments under these finance leases are as follows:
2013
Present
value of the
Total
minimum
minimum
The Group
2012
Present
value of the
Total
minimum
minimum
lease
lease
Future
lease
lease
payments
payments
interest
payments
payments
Interest
RMB million RMB million RMB million
RMB million
RMB million
RMB million
Within 1 year
After 1 year but within 2 years
After 2 years but within 5 years
After 5 years
3,636
4,139
11,074
16,160
4,498
4,887
12,690
17,356
862
748
1,616
1,196
2,494
2,322
8,279
8,770
3,021
2,793
9,255
9,527
527
471
976
757
35,009
39,431
4,422
21,865
24,596
2,731
Less: balance due within
one year classified as
current liabilities
(3,636)
31,373
(2,494)
19,371
2013
Present
value of the
Total
minimum
minimum
The Company
2012
Present
value of the
Total
minimum
minimum
lease
lease
Future
lease
lease
payments
payments
interest
payments
payments
Interest
RMB million RMB million RMB million
RMB million
RMB million
RMB million
Within 1 year
After 1 year but within 2 years
After 2 years but within 5 years
After 5 years
3,558
4,058
10,346
16,078
4,379
4,770
11,894
17,271
821
712
1,548
1,193
2,446
2,273
7,856
8,481
2,935
2,707
8,746
9,232
489
434
890
751
34,040
38,314
4,274
21,056
23,620
2,564
Less: balance due within
one year classified as
current liabilities
166
(3,558)
30,482
(2,446)
18,610
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
37 Obligations under finance leases (continued)
Details of obligations under finance leases are as follows:
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
4,431
4,962
3,693
4,153
United States Dollars
denominated obligations
Fixed interest rates ranging from
4.25% to 6.01% per annum as
at 31 December 2013
Floating interest rates ranging from
three-month LIBOR + 0.55%
to three-month LIBOR + 3.30%
per annum as at 31 December 2013
15,946
8,724
15,715
8,724
Floating interest rates ranging from
six-month LIBOR + 0.03%
to six-month LIBOR + 3.30%
per annum as at 31 December 2013
11,775
5,891
11,775
5,891
Singapore Dollars
denominated obligations
Floating interest rate at
six-month SIBOR + 1.44%
per annum as at 31 December 2013
476
553
476
553
Japanese Yen
denominated obligations
Floating interest rate at
three-month TIBOR + 0.75%
to three-month TIBOR + 1.90%
per annum as at 31 December 2013
1,985
1,213
1,985
1,213
Floating interest rate at
six-month TIBOR + 3.00%
per annum as at 31 December 2013
396
522
396
522
35,009
21,865
34,040
21,056
167
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
37 Obligations under finance leases (continued)
Charges over the assets concerned and relevant insurance policies are provided to the lessors as collateral and
security. As at 31 December 2013, certain of the Group’s and the Company’s aircraft with carrying amounts of
RMB48,078 million and RMB47,062 million (2012: RMB30,569 million and RMB29,793 million) secured finance
lease obligations totalling RMB35,009 million and RMB34,040 million, respectively (2012: RMB21,865 million
and RMB21,056 million, respectively).
As at 31 December 2013, the fair value of obligation under finance leases approximate their carrying amount.
The fair value is within level 2 of the fair value hierarchy.
38 Trade payables
The following is the ageing analysis of trade payables:
Within 1 month
More than 1 month but less than 3 months
More than 3 months but less than 6 months
More than 6 months but less than 1 year
More than 1 year
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
987
252
79
73
16
1,287
309
185
8
36
1,407
1,825
386
37
20
40
3
486
750
132
139
5
–
1,026
As at 31 December 2013, the fair value of trade payable approximate its carrying amount.
The carrying amounts of the Group’s and Company’s trade payable are denominated in the following
currencies:
Renminbi
US Dollars
Others
168
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
1,066
329
12
1,303
522
–
1,407
1,825
225
257
4
486
695
331
–
1,026
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
39 Deferred Revenue
Deferred revenue represents the unredeemed credits under the frequent flyer award programme.
40 Amounts due from/to subsidiaries and other related companies
(a) Amounts due from subsidiaries and other related companies
The Group
The Company
2013
2012
2013
2012
Note
RMB million
RMB million
RMB million
RMB million
CSAHC and its affiliates
Associates
Joint ventures
Other related company
Subsidiaries
49(c)
74
95
162
–
–
331
100
51
90
6
–
247
74
89
162
–
124
449
100
37
90
–
73
300
The amounts due from subsidiaries and other related companies are unsecured, interest free and have no
fixed terms of repayment. They are expected to be recovered within one year.
(b) Amounts due to subsidiaries and other related companies
The Group
The Company
2013
2012
2013
2012
Note
RMB million
RMB million
RMB million
RMB million
CSAHC and its affiliates
A joint venture of CSAHC
An associate
Joint ventures
Other related company
Subsidiaries
49(c)
168
78
15
96
100
–
457
109
188
–
11
–
–
308
168
51
11
93
–
106
186
–
10
–
1,933
1,787
2,256
2,089
The amounts due to subsidiaries and related companies are unsecured, interest free and have no fixed
terms of repayment. They are expected to be settled within one year.
169
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
41 Accrued expenses
Repairs and maintenance
Jet fuel costs
Salaries and welfare
Landing and navigation fees
Computer reservation services
Provision for major overhauls (Note 43)
Interest expense
Air catering expenses
Provision for early retirement
benefits (Note 44)
Others
42 Other liabilities
Civil Aviation Development Fund
and airport tax payable
Payable for purchase of property,
plant and equipment
Sales agent deposits
Other taxes payable
Deposit received for chartered flights
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
3,286
2,337
2,259
2,128
462
415
269
215
32
495
2,845
2,217
2,222
2,084
596
1,010
156
293
38
339
3,052
1,924
1,679
1,674
308
348
224
331
31
486
2,481
1,722
1,577
1,438
418
857
122
432
38
317
11,898
11,800
10,057
9,402
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
1,213
1,137
1,092
1,023
573
390
377
103
763
321
351
110
515
333
179
92
793
505
268
259
91
1,201
Others
1,363
1,322
4,019
4,004
3,004
3,347
170
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
43 Provision for major overhauls
Details of provision for major overhauls in respect of aircraft held under operating leases are as follows:
At 1 January
Additional provision
Utilisation
At 31 December
Less: current portion (Note 41)
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
1,912
300
(721)
1,491
(415)
1,753
562
(403)
1,912
(1,010)
1,438
251
(652)
1,037
(348)
1,372
459
(393)
1,438
(857)
1,076
902
689
581
44 Provision for early retirement benefits
Details of provision for early retirement benefits in respect of obligations to early retired employees are as
follows:
At 1 January
Provision for the year (Note 14)
Financial cost (Note 16)
Payments made during the year
Effect of changes in discount rates
At 31 December
Less: current portion (Note 41)
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
104
12
5
(48)
–
73
(32)
41
136
20
8
(62)
2
104
(38)
66
102
11
5
(48)
–
70
(31)
39
132
20
8
(60)
2
102
(38)
64
The Group has implemented an early retirement plan for certain employees. The benefits of the early retirement
plan are calculated based on factors including the remaining number of years of service from the date of
early retirement to the normal retirement date and the salary amount on the date of early retirement of the
employees. The present value of the future cash flows expected to be required to settle the obligations is
recognised as provision for early retirement benefits.
171
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
45 Deferred benefits and gains
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
249
319
121
144
25
858
343
371
146
121
30
1,011
249
319
121
97
22
808
343
371
146
113
25
998
Leases rebates (Note (i))
Maintenance rebates (Note (ii))
Gains relating to sale and
leaseback (Note (iii))
Government grants
Others
Notes:
(i)
The Company was granted rebates by the lessors under certain lease arrangements when it fulfilled certain
requirements. The rebates are deferred and amortised using the straight line method over the remaining lease terms.
(ii)
The Company was granted rebates by the engine suppliers under certain arrangements when it fulfilled certain
requirements. The rebates are deferred and amortised using the straight line method over the beneficial period.
(iii)
The Company entered into sale and leaseback transactions with certain third parties under operating leases. The gains
are deferred and amortised over the lease terms of the aircraft.
46 Share capital
Registered, issued and paid up capital:
Domestic state-owned shares with selling restrictions
(2012: 123,900,000 shares of RMB1.00 each)
4,150,050,000 domestic state-owned shares of RMB 1.00 each
(2012: 4,026,150,000 of RMB 1.00 each)
A shares of RMB1.00 each
(2012: 2,872,600,000 shares of RMB1.00 each)
H shares of RMB1.00 each
(2012: 2,794,917,000 shares of RMB1.00 each)
The Group and
the Company
2013
2012
RMB million
RMB million
–
4,150
2,873
2,795
124
4,026
2,873
2,795
9,818
9,818
On 29 October 2010, the Company issued 123,900,000 A shares to CSAHC for net cash considerations of
RMB812 million. The A shares issued to CSAHC was unlocked at 1 November 2013.
All the domestic state-owned, H and A shares rank pari passu in all material respects.
172
47 Reserves
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
Share premium
At 1 January and 31 December
14,131
14,131
13,878
13,878
Fair value reserve
At 1 January
Change in fair value of available-for-sale
equity securities
At 31 December
Statutory and discretionary
surplus reserve
At 1 January
Appropriations to reserves (Note (a))
24
(2)
22
21
3
24
11
2
13
1,056
113
924
132
1,056
113
10
1
11
924
132
At 31 December
1,169
1,056
1,169
1,056
Other reserve
At 1 January
Share of an associate’s reserves movement
Government contributions (Note (c))
At 31 December
Retained profits
At 1 January
Profit for the year
Appropriations to reserves
Dividends approved in respect of the
170
(3)
–
167
158
2
10
170
146
(2)
–
144
146
–
–
146
7,640
1,986
(113)
7,123
2,619
(132)
1,109
945
(113)
2,215
990
(132)
previous year
(491)
(1,964)
(491)
(1,964)
Acquisition of non-controlling interests
in a subsidiary
–
(6)
–
–
At 31 December
9,022
7,640
1,450
1,109
Total
24,511
23,021
16,654
16,200
173
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
47 Reserves (continued)
(a) Appropriations to reserves
According to the PRC Company Law and the Articles of Association of the Company and certain of its
subsidiaries, the Company and the relevant subsidiaries are required to transfer 10% of their annual net
profits after taxation, as determined under the PRC accounting rules and regulations, to a statutory surplus
reserve until the reserve balance reaches 50% of the registered capital. The transfer to this reserve must
be made before distribution of dividend to shareholders and when there are retained profits at the end of
the financial year.
Statutory surplus reserve can be used to offset prior years’ losses, if any, and may be converted into
share capital by the issue of new shares to shareholders in proportion to their existing shareholding or by
increasing 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.
(b) Dividends
Dividends payable to equity shareholders of the Company attributable to the year
The Group and
the Company
2013
2012
RMB million
RMB million
Final dividend proposed after the end of the reporting year
of RMB0.4 per 10 ordinary shares (2012: RMB0.5 per 10 ordinary shares)
(inclusive of applicable tax)
393
491
A dividend in respect of the year ended 31 December 2013 of RMB0.4 per 10 shares (inclusive of
applicable tax), amounting to a total dividend of RMB393 million, has been proposed at Board meeting on
28 March 2014. These financial statements do not reflect this dividend payable.
(c) Government contributions
Pursuant to the “Grants approval for Civil Aviation Development Fund for Safety Management System
(“SMS”) projects of Xiamen Airlines”, national funds amounting to RMB20 million were contributed
during year 2012 by the PRC government to Xiamen Airlines. Such funds are to be used specifically for
the SMS projects. Pursuant to the requirements of the relevant notice, the national funds were designated
as capital contribution and vested solely by the PRC government and accounted for as other reserves.
These amounts can be converted to share capital of the entities receiving the funds upon approval by their
shareholders and completion of relevant procedures.
174
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
48 Commitments
(a) Capital commitments
Capital commitments outstanding at 31 December 2013 not provided for in the financial statements were
as follows:
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
Commitments in respect of aircraft
and flight equipment
– authorised and contracted for
47,651
71,309
24,875
44,340
47,651
71,309
24,875
44,340
Investment commitments
– authorised and contracted for
– capital contributions to
a subsidiary
– capital contributions for
acquisition of interests
in associates
– share of capital commitments
of a joint venture
– authorised but not contracted for
– share of capital commitments
of a joint venture
Commitments for other property,
plant and equipment
–
70
58
128
171
299
–
2,880
120
119
113
232
218
450
70
58
3,008
171
3,179
119
113
352
218
570
– authorised and contracted for
– authorised but not contracted for
1,411
2,291
1,406
2,414
1,097
1,431
1,228
1,462
3,702
3,820
2,528
2,690
51,652
75,579
30,582
47,600
175
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
48 Commitments (continued)
(a) Capital commitments (continued)
As at 31 December 2013, the approximate total future payments, including estimated amounts for price
escalation through anticipated delivery dates for aircraft and flight equipment are as follows:
2013
2014
2015
2016
2017 and afterwards
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
–
20,945
14,417
6,365
5,924
23,671
19,951
14,990
6,589
6,108
–
14,388
7,835
2,567
85
20,256
13,491
7,964
2,629
–
47,651
71,309
24,875
44,340
(b) Operating lease commitments
As at 31 December 2013, the total future minimum lease payments under non-cancellable operating
leases in respect of properties, aircraft and flight equipment are as follows:
Payments due
Within 1 year
After 1 year but within 5 years
After 5 years
The Group
The Company
2013
2012
2013
2012
RMB million
RMB million
RMB million
RMB million
4,608
14,740
6,874
4,110
12,532
5,519
3,844
12,779
6,274
3,357
10,657
5,160
26,222
22,161
22,897
19,174
176
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
49 Material related party transactions
(a) Key management personnel remuneration
Remuneration for key management personnel of the Group, including amounts paid to the Company’s
directors and certain of the highest paid employees as disclosed in Note 18, is as follows:
Short-term employees benefits
Post-employment benefits
Directors and supervisors (Note 18(a))
Senior management
2013
2012
RMB ’000
RMB ’000
12,412
2,074
14,124
1,303
14,486
15,427
2013
2012
RMB ’000
RMB ’000
3,108
11,378
4,615
11,342
14,486
15,957
Total remuneration is included in “staff costs” (Note 14).
(b) Transactions with CSAHC and its affiliates (the “CSAHC Group”), associates, joint ventures and
other related company of the Group
The Group provided or received various operational services to or by the CSAHC Group, associates, joint
ventures and other related company of the Group during the normal course of its business.
Details of the significant transactions carried out by the Group are as follows:
Note
RMB million
RMB million
2013
2012
Income received from the CSAHC Group
Charter flight and pallet income
Cargo handling income
Income received from other related company
Aircraft sales income
Aircraft purchase right transfer income
(i)
(i)
(ii)
(ii)
107
1
–
–
82
7
257
16
177
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
49 Material related party transactions (continued)
(b) Transactions with CSAHC and its affiliates (the “CSAHC Group”), associates, joint ventures and
other related company of the Group (continued)
Note
RMB million
RMB million
2013
2012
Expenses paid to the CSAHC Group
Repairing charges
Handling charges
Commission expenses
Cargo handling charges
Lease charges for land and buildings
Property management fee
Air catering supplies
Expenses paid to joint ventures and an associate
Repairing charges
Flight simulation service charges
Advertising expenses
Training expenses
Ground service expenses
Income received from a joint venture and associates
Rental income
Repairing income
Entrustment income for advertising media business
Commission income
Air cratering supplies
Ground service income
Expenses paid to other related company
(iii)
(iv)
(v)
(i)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xv)
(x)
(xiii)
(xi)
(xiv)
(xvi)
(xvii)
796
121
19
33
169
63
84
830
96
18
18
152
50
79
1,783
1,468
270
77
120
14
31
14
32
12
18
7
257
49
118
–
36
22
17
8
–
–
Computer reservation services
(xviii)
444
440
Disposal to the CSAHC Group
Disposal and losing control of a subsidiary
(xi)
–
43
178
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
49 Material related party transactions (continued)
(b) Transactions with CSAHC and its affiliates (the “CSAHC Group”), associates, joint ventures and
other related company of the Group (continued)
(i)
China Southern Airlines Group Passenger and Cargo Agent Company Limited (“PCACL”), a wholly-
owned subsidiary of CSAHC, purchases cargo spaces and charter flights from the Group. In addition,
cargo handling income/charges are earned/payable by the Group in respect of the cargo handling
services with PCACL.
(ii) Hebei Airlines Company Limited (“Hebei Airlines”) is a subsidiary of a non-controlling interest of
Xiamen Airlines.
On 27 August 2010, Xiamen Airlines and Hebei Airlines entered into an Aircraft Wet Lease
Agreement to wet lease three aircraft to Hebei Airlines. The agreement was terminated in December
2011.
During the year 2012, Xiamen Airlines and Hebei Airlines entered into an aircraft sale agreement,
pursuant to which Xiamen Airlines sold and Hebei Airlines purchased one B737-800 aircraft at the
consideration of approximately RMB257 million.
In addition, Xiamen Airlines transferred the purchase right of one B737-800 aircraft to Hebei Airlines
at the consideration of approximately RMB16 million.
(iii) MTU Maintenance Zhuhai Co., Ltd, a joint venture of CSAHC, provides comprehensive maintenance
services to the Group.
(iv) The Group acquires aircraft, flight equipment and other airline-related facilities through Southern
Airlines (Group) Import and Export Trading Company Limited (“SAIETC”), a wholly-owned subsidiary
of CSAHC, and pays handling charges to SAIETC.
(v) Commission is earned by certain subsidiaries of CSAHC in connection with the air tickets sold by
them on behalf of the Group. Commission is calculated based on the rates stipulated by the CAAC
and International Air Transportation Association.
(vi) The Group leases certain land and buildings in the PRC from CSAHC. The amount represents rental
payments for land and buildings paid or payable to CSAHC.
(vii) Guangzhou China Southern Airlines Property Management Company Limited, a subsidiary of CSAHC,
provides property management services to the Group.
(viii) Shenzhen Air Catering Company Limited (“SZ Catering”) became a related party of the Group
since its Chairman, Mr. Yuan Xin An was appointed as a non-executive Director of the Company in
November 2011. Certain in-flight meals and related services were provided by SZ Catering to the
Group.
179
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
49 Material related party transactions (continued)
(b) Transactions with CSAHC and its affiliates (the “CSAHC Group”), associates, joint ventures and
other related company of the Group (continued)
(ix) Guangzhou Aircraft Maintenance Engineering Company Limited (“GAMECO”), a joint venture of the
Group, provides comprehensive maintenance services to the Group.
(x)
Zhuhai Xiang Yi Aviation Technology Company Limited (“Zhuhai Xiang Yi”), a joint venture of the
Group, provides flight simulation services to the Group.
In addition, the Group leased certain flight training facilities and buildings to Zhuhai Xiang Yi under
operating lease agreements.
(xi) CSA Culture, an associate of the Group, provides advertising services to the Group.
In addition, Xiamen Airlines provides certain media resources to Xiamen Media, a subsidiary of CSA
Culture since 29 June 2012.
(xii) China Southern West Australian Flying College Pty Limited (“Flying College”), a joint venture of the
Group, provides training services to the Group.
(xiii) The Company provides aircraft maintenance services to Sichuan Airlines Corporation Limited
(“Sichuan Airlines”), which is an associate of the Group.
(xiv) The Group provided certain website resources to SA Finance for the sales of air insurance to
passengers.
(xv) Shenyang Konggang logistic Company Limited provides ground services to the Group.
(xvi) The Group provides air catering services to Sichuan Airlines.
(xvii) The Group provides ground services to Sichuan Airlines.
(xviii) China Travel Sky Holding Company provides computer reservation services to the Group.
180
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
49 Material related party transactions (continued)
(c) Balances with the CSAHC Group, associates, joint ventures and other related company of the
Group
Details of amounts due from/to the CSAHC Group, associates, joint ventures and other related company of
the Group:
Receivables:
The CSAHC Group
Associates
Joint ventures
Other related company
Payables:
The CSAHC Group
An associate
Joint ventures
Other related company
Accrual expense:
The CSAHC Group
Associates
Joint ventures
Other related company
Note
RMB million
RMB million
2013
2012
74
95
162
–
331
100
51
90
6
247
40(a)
Note
RMB million
RMB million
2013
2012
246
15
96
100
457
297
–
11
–
308
40(b)
Note
RMB million
RMB million
2013
2012
498
31
772
330
419
46
679
494
1,631
1,638
The amounts due from/to the CSAHC Group, associates, joint ventures and other related company of the
Group are unsecured, interest free and have no fixed terms of repayment.
181
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
49 Material related party transactions (continued)
(d) Loans from and deposits placed with SA Finance
(i)
Loans from SA Finance
At 31 December 2013, loans from SA Finance to the Group amounted to RMB520 million (2012:
RMB426 million).
The unsecured loans are repayable as follows:
Within 1 year
After 1 year but within 2 years
After 2 years but within 5 years
Note
RMB million
RMB million
2013
2012
56
8
456
520
406
20
–
426
36(f)
Interest expense paid on such loans amounted to RMB28 million (2012: RMB30 million) and the
interest rates ranged from 5.54% to 5.84% per annum during the year ended 31 December 2013
(2012: 4.86% to 5.84%per annum).
(ii)
Entrusted loan from CSAHC
At 31 December 2012, CSAHC, SA Finance and the Group entered into an entrusted loan
agreement, pursuant to which, CSAHC, as the lender, entrusted SA Finance to lend RMB105 million
to the Group from 31 December 2012 to 31 December 2013. The interest rate is 90% of benchmark
interest rate stipulated by PBOC per annum. The entrusted loan was repaid in 2013.
(iii) Deposits placed with SA Finance
At 31 December 2013, the Group’s deposits with SA Finance amounted to RMB 2,675 million(2012:
RMB2,307 million). The applicable interest rates are determined in accordance with the rates
published by the PBOC.
Interest income received on such deposits amounted to RMB66 million during the year ended 31
December 2013(2012: RMB61 million).
(e) Guarantees from CSAHC
Certain bank loans of the Group amounting to RMB94 million were guaranteed by CSAHC in 2012, which
were repaid in 2013.
(f) Commitments to CSAHC
At 31 December 2013, the Group had operating lease commitments to CSAHC in respect of lease
payments for land and buildings of RMB66 million (2012: RMB175 million).
182
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
50 Employee benefits plan
(a) Retirement benefits
Employees of the Group participate in several defined contribution retirement schemes organised
separately by the PRC municipal and provincial governments in regions where the major operations of
the Group are located. The Group is required to contribute to these schemes at rates ranging from 10%
to 22% (2012: 8% to 25%) of salary costs including certain allowances. A member of the retirement
schemes is entitled to pension benefits from the Local Labour and Social Security Bureau upon his/her
retirement. The retirement benefit obligations of all retired staff of the Group are assumed by these
schemes.
In addition, the Group has established a supplementary defined contribution retirement scheme for
the benefit of employees in accordance with relevant regulations in the PRC. Employees of the Group
participate in a supplementary defined contribution retirement scheme whereby the Group is required to
make contributions not exceeding one-twelfth of the prior year’s total salaries.
(b) Housing benefits
The Group contributes on a monthly basis to housing funds organised by municipal and provincial
governments based on certain percentages of the salaries of employees. The Group’s liability in respect of
these funds is limited to the contributions payable in each year.
In addition to the housing funds, certain employees of the Group are eligible to one of the following
housing benefit schemes:
(i)
Pursuant to a staff housing benefit scheme effective on September 2002, the Group agreed to pay
lump sum housing allowances to certain employees who have not received quarters from CSAHC
or the Group according to the relevant PRC housing reform policy. An employee who leaves the
Company prior to the end of the vesting benefit period is required to pay back a portion of the lump
sum housing benefits determined on a pro rata basis of the vesting benefit period. The Group has
the right to effect a charge on the employee’s house and to enforce repayment through the sale
of the house in the event of default in repayment. Any remaining shortfall is charged to income
statement. The amount was fully amortised in 2012.
(ii)
The Group also pays cash housing subsidies on a monthly basis to eligible employees. The monthly
cash housing subsidies are charged to income statement.
183
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
50 Employee benefits plan (continued)
(c) Share Appreciation Rights Scheme
On 30 November 2011, the Company’s General Meeting approved the “H Share Appreciation Rights
Scheme of China Southern Airlines Company Limited” and “Initial Grant under the H Share Appreciation
Rights Scheme of China Southern Airlines Company Limited” (“the Scheme”).
Under the Scheme, 24,660,000 units of SARs were granted to 118 employees of the Group at the exercise
price of HKD3.92 per unit prior to 31 December 2011. No shares will be issued under the Scheme and
each SAR is notionally linked to one existing H share of the Company. Upon exercise of the SARs, a
recipient will receive an amount of cash equal to the difference between the market share price of the
relevant H share and the exercise price.
The SARs will have an exercise period of six years from the date of grant. Upon the satisfaction of certain
performance conditions after the second, third and fourth anniversary of the date of grant, each one third
of the SARs will become exercisable.
A dividend of RMB0.2 (equivalent to HKD0.25) (inclusive of applicable tax) and a dividend of RMB
0.05(equivalent to HKD0.06) per share was approved by the Company’s General Meeting on 31 May 2012
and 18 June 2013 respectively (Note 47(b)(ii)), therefore, the exercise price for the SARs was adjusted to
HKD3.61 per share in accordance with the predetermined formula stipulated in the Scheme. During the
year, 8,380,000 units of SARs were lasped.
The fair value of the liability for SARs is measured using the Black-Scholes option pricing model. The risk
free rate, expected dividend yield and expected volatility of the share price are used as the inputs into
the model. The fair value of the liability for SARs as at 31 December 2013 was RMB 1,893,000 (2012:
RMB2,303,000) and a corresponding staff costs of RMB 410,000 was reversed for the year ended 31
December 2013 (2012: RMB 2,072,000).
51 Supplementary information to the consolidated cash flow statement
Non-cash transactions-acquisition of aircraft
During the year ended 31 December 2013, aircraft acquired under finance leases amounted to RMB17,268
million (2012: RMB8,178 million).
184
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Notes to the Financial Statements
(Prepared in accordance with International Financial Reporting Standards)
(Expressed in Renminbi)
52 Contingent liabilities
(a)
The Group leased certain properties and buildings from CSAHC which located in Guangzhou, Wuhan and
Haikou, etc. However, such properties and buildings lack adequate documentation evidencing CSAHC’s
rights thereto.
Pursuant to the indemnification agreement dated 22 May 1997 between the Group and CSAHC, CSAHC
has agreed to indemnify the Group against any loss or damage arising from any challenge of the Group’s
right to use the certain properties and buildings.
(b)
The Company and its subsidiary, Xiamen Airlines, entered into agreements with their pilot trainees and
certain banks to provide guarantees on personal bank loans amounting to RMB656 million (31 December
2012: RMB581 million) that can be drawn by the pilot trainees to finance their respective flight training
expenses. As at 31 December 2013, total personal bank loans of RMB464 million (31 December 2012:
RMB398 million), under these guarantees, were drawn down from the banks. During the year, the Group
has paid RMB6 million (2012: RMB3 million) to the banks due to the default of payments of certain pilot
trainees.
(c)
The Company received a claim on 11 July 2011 from an overseas entity (the “claimant”) against the
Company for the alleged breach of certain terms and conditions of an aircraft sale agreement. The
claimant has made a claim against the Company for an indemnity of USD46 million or for the refund of
the down payments of USD12 million, and the interest thereon which is calculated in accordance with
Clause 35A, Supreme Court Act 1981 of the United Kingdom. In 2012, the claimant subsequently changed
its claim for the refund of the down payment to USD13 million. As at 25 July 2013, High Court of the
United Kingdom announced the sentence of this case, overruled the claim and upheld the counter claim
the Company made, which include an indemnity of USD28 million, legal costs and the interest thereon. As
of the date of issuance of this financial information, the claimant has appealed. The directors are of the
opinion that an outflow of resource embodying economic benefits is not probable to occur.
53
Immediate and ultimate controlling party
As at 31 December 2013, the Directors of the Company consider the immediate parent and ultimate controlling
party of the Group to be CSAHC, a state-owned enterprise established in the PRC. CSAHC does not produce
financial statements available for public use.
54 Subsequent events
(a) On 22 January 2014, CSAHC increased its shares in the Company by 1,175,267 A shares via the trading
system of the Shanghai Stock Exchange. Immediately prior to the increase in shares, CSAHC held
4,150,050,000 A shares of the Company, representing 42.27% of the total issued A share capital of
the Company. Immediately following the increase in shares, CSAHC held 4,151,225,267 A shares of the
Company, representing 42.28% of the total issued A share capital of the Company. Immediately following
the increase in shares, the A shares and H shares of the Company directly and indirectly held by CSAHC
represents 53.13% of the total issued share capital of the Company.
(b) On 21 March 2014, The Company has completed the issuance of the first tranche of ultra-short-term
financing bills for the year 2014 of China Southern Airlines Company Limited (the “First Tranche Financing
Bills”). The total issuance amount of the First Tranche Financing Bills was RMB3 billion, with a maturity
period of 180 days, a par value per unit of RMB100 and a nominal interest rate of 5.1%.
185
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Supplementary Financial Information
For the year ended 31 December 2013
(Prepared in accordance with PRC Accounting Standards)
Condensed Consolidated Income Statement
The following consolidated financial information is extracted from the consolidated financial statements of the Group,
prepared under the PRC Accounting Standards.
2013
2012
RMB million
RMB million
98,130
87,061
267
7,855
2,689
(1,294)
568
431
1,415
2,070
135
3,350
701
101,483
85,932
2,464
7,204
2,603
1,027
(6)
526
2,785
2,027
64
4,748
953
2,649
3,795
1,895
754
2,628
1,167
2,649
3,795
Revenue
Less: Cost of operation
Taxes and surcharges
Selling and distribution expenses
General and administrative expense
Finance (income)/expenses, net
Impairment loss
Add: Investment income
Operating profit
Add: Non-operating income
Less: Non-operating expenses
Total profit
Less: Income tax
Net profit
Attribute to:
– Equity shareholders of the Company
– Non-controlling interests
186
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Supplementary Financial Information
For the year ended 31 December 2013
(Prepared in accordance with PRC Accounting Standards)
2013
2012
RMB million
RMB million
20,571
2,679
136,563
3,993
1,339
16,787
2,309
118,229
3,903
1,266
165,145
142,494
49,213
880
72,840
48,731
782
53,385
122,933
102,898
34,139
8,073
32,740
6,856
42,212
39,596
Condensed Consolidated Balance sheet
Assets
Total current assets
Long-term equity investment
Fixed assets and construction in progress
Intangible assets and other non-current assets
Deferred tax assets
Total assets
Liabilities and equity
Current liabilities
Deferred tax liabilities
Other non-current liabilities
Total Liabilities
Equity shareholders of the Company
Non-controlling interests
Total equity
Total liabilities and equity
165,145
142,494
187
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Supplementary Financial Information
For the year ended 31 December 2013
(Prepared in accordance with PRC Accounting Standards)
Reconciliation Statements of Differences in Financial Statements Prepared Under
Different GAAPs
(1)
The effect of the differences between PRC GAAP and IFRSs on net profit attributable to equity shareholders of
the Company is analysed as follows:
Amounts under PRC GAAP
Adjustments:
Losses on housing benefits
Government grants
Capitalisation of exchange difference of specific loans
Adjustments arising from an associate’s
business combination under common control
Tax impact of the above adjustments
Effect of the above adjustments on non-controlling interests
Note
RMB million
RMB million
2013
2012
1,895
2,628
(a)
(d)
(b)
(e)
–
3
133
(2)
(33)
(10)
(14)
2
3
(1)
(1)
2
Amounts under IFRSs
1,986
2,619
188
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Supplementary Financial Information
For the year ended 31 December 2013
(Prepared in accordance with PRC Accounting Standards)
Reconciliation Statements of Differences in Financial Statements Prepared Under
Different GAAPs (Continued)
(2)
The effect of the differences between PRC GAAP and IFRSs on equity attributable to equity shareholders of the
Company is analysed as follows:
As at
As at
31 December
31 December
2013
2012
Note
RMB million
RMB million
Amounts under PRC GAAP
Adjustments:
Capitalisation of exchange difference of specific loans
Accumulated loss attributed to
non-controlling interests of a subsidiary
Government grants
Adjustment arising from an associate’s business
combination under common control
Tax impact of the above adjustments
Effect of the above adjustments on non-controlling interests
(b)
(c)
(d)
(e)
34,139
32,740
351
218
(23)
(32)
8
(88)
(26)
(23)
(35)
10
(55)
(16)
Amounts under IFRSs
34,329
32,839
Notes:
(a)
In accordance with the PRC GAAP, losses on the housing benefits executed by CSAHC are charged to
retained profits as of 1 January 2001 pursuant to the relevant regulations. Under IFRSs, losses on housing
benefits are initially deferred and charged to the income statement, over the vesting benefit periods
stipulated by the relevant contracts.
(b)
In accordance with the PRC GAAP, exchange difference arising on translation of specific loans and related
interest denominated in a foreign currency is capitalised as part of the cost of qualifying assets. Under
IFRSs, such exchange difference should be recognised in income statement unless the exchange difference
represents an adjustment to interest.
(c)
For both PRC GAAP and IFRSs, from 1 January 2010, any losses incurred by a non-wholly owned subsidiary
will be allocated between the controlling and non-controlling interests in proportion to their interests in
that entity, even if this results in a deficit balance within consolidated equity being attributed to the non-
controlling interests. Under PRC GAAP, this new accounting policy is being applied retrospectively with
previous periods figures restated. Under IFRSs, this new accounting policy is being applied prospectively
and therefore previous periods have not been restated.
189
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Supplementary Financial Information
For the year ended 31 December 2013
(Prepared in accordance with PRC Accounting Standards)
Reconciliation Statements of Differences in Financial Statements Prepared Under
Different GAAPs (Continued)
(2)
The effect of the differences between PRC GAAP and IFRSs on equity attributable to equity shareholders of the
Company is analysed as follows: (continued)
Notes: (continued)
(d)
In accordance with the PRC GAAP, special funds such as investment grants allocated by the government,
if clearly defined in official documents as part of “capital reserve”, are credited to capital reserve. Under
IFRSs, government grants relating to purchase of fixed assets are deducted from the cost of the related
fixed assets.
(e)
In accordance with the PRC GAAP, the Company and its associate account for the business combination
under common control by applying the pooling-of-interest method. Under the pooling-of-interest
method, the difference between the historical carrying amount of the acquiree and the consideration
paid is accounted for as an equity transaction. Under IFRSs, the Company adopts the purchase accounting
method for acquisition of business under common control. Accordingly, adjustments are made to make
the associate’s accounting policy of business combination under common control conform to the policy of
the Company when the associate’s financial statements are used by the Company in applying the equity
method when preparing its financial statements in accordance with IFRSs.
190
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Five Year Summary
The following consolidated financial information is extracted from the consolidated financial statements of the Group,
prepared under International Financial Reporting Standards.
CONSOLIDATED INCOME STATEMENT SUMMARY
Year ended 31 December
2013
2012
2011
2010
2009
RMB million
RMB million
RMB million
RMB million
RMB million
Operating revenue
Operating expenses
Other net income
Operating profit
Interest income
Interest expense
Share of associates’ results
Share of joint ventures’ results
Gain on sale of a jointly
controlled entity classified
as held for sale, net
Exchange gain, net
Other non-operating income
98,547
99,514
90,395
76,495
(98,280)
(95,877)
(87,063)
(70,689)
1,243
1,462
1,021
476
1,510
307
5,099
235
4,353
179
6,282
93
(1,651)
(1,376)
(1,067)
(1,265)
294
96
–
2,903
25
317
121
–
267
75
456
125
56
112
–
2,755
129
1,078
1,746
(13)
Profit before income tax
Income tax
3,484
(734)
4,738
(954)
6,930
(840)
8,089
(1,677)
Profit for the year
2,750
3,784
6,090
6,412
Profit attributable to:
Equity shareholders of
the Company
Non-controlling interests
1,986
764
2,619
1,165
5,110
980
5,792
620
Profit for the year
2,750
3,784
6,090
6,412
54,802
(55,355)
1,989
1,436
68
(1,497)
69
214
–
93
45
428
96
524
327
197
524
Earnings per share attributable to
equity shareholders of the Company
Basic and diluted
RMB0.20
RMB0.27
RMB0.52
RMB0.70
RMB0.05
191
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Five Year Summary
CONSOLIDATED STATEMENT OF FINANCIAL POSITION SUMMARY
Non-current assets
Net current liabilities
Non-current liabilities
Total equity attributable
to equity shareholders
of the Company
Non-controlling interests
At 31 December
2013
2012
2011
2010
2009
RMB million
RMB million
RMB million
RMB million
RMB million
144,634
28,640
125,667
109,927
31,944
24,928
95,476
16,466
85,199
28,441
73,543
53,989
47,222
48,694
43,390
34,329
8,122
32,839
6,895
32,175
5,602
26,817
3,499
10,457
2,911
192
The Board of Directors, Supervisory Committee and Senior Management
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
BOARD OF DIRECTORS
Si Xian Min, aged 56, graduated with an Executive Master of Business Administration (EMBA) degree from Tsinghua
University. He began his career in 1975. Mr. Si served as the director of the political division of China Southern Airlines Henan
Branch; as the party secretary and vice president of Guizhou Airlines Company Limited; as the Deputy Party Secretary and
Secretary of the Disciplinary Committee of the Company; and as the Party Secretary of CSAHC Northern Division. He has
been the President of the Company from October 2004 to January 2009. Since 31 December 2004, Mr. Si has been the
Director of the Company. Since January 2009, Mr. Si has been the President and Deputy Party Secretary of CSAHC and the
Chairman of the Board.
Tan Wan Geng, aged 49, graduated from Zhongshan University, majoring in economic geography, with qualification
of postgraduate degree. Mr. Tan began his career in civil aviation in 1990 and served as the head of the Infrastructure
Department and Director of Human Resources and Administration Department of the Beijing Aircraft Maintenance and
Engineering Corporation, the Deputy Director General of Human Resources Division (Personnel and Education Division) of
the Civil Aviation Administration of China (CAAC), and has been the Director General and Party Secretary of Civil Aviation
Administration of China Northeastern Region. He has been the Party Secretary and Executive Vice President of the Company
from January 2006 to February 2007; the Party Member of CSAHC and the Party Secretary and Executive Vice President
of the Company from February 2007 to January 2009; the Party Member of CSAHC and the President and Party Secretary
of the Company from January 2009 to February 2009; the Party Member of CSAHC and the President and Deputy Party
Secretary of the Company from February 2009 to May 2011. Since May 2011, Mr. Tan has been the Party Secretary of
CSAHC and the President of the Company. Mr. Tan has been the Director of the Company since 15 June 2006 and has been
the Vice Chairman of the Board since 24 January 2013.
Wang Quan Hua, aged 59, graduated with a university degree from the Party School of the Central Committee of CPC
majoring in economic management. Mr. Wang began his career in 1972. Mr. Wang served as the Director of the Planning
and Operation Division of China Southern Airlines Company; the General Manager of Strategy and Development Department
of CSAHC; the Assistant to the President and the Director of the Strategy and Development Department and the Vice
President of CSAHC. Mr. Wang has served as the Executive Vice President of CSAHC since September 2002. Since 13 May
2003, Mr. Wang has been the Director of the Company. Currently, Mr. Wang is also the Chairman of Nan Lung Holding
Limited, Guangzhou Southern Airline Construction Company Limited, the director of TravelSky Technology Limited, Solar
Insurance Group Company Limited, Yazhou Travel Investment Company Limited and China National Aviation Corp (HK) Ltd..
Yuan Xin An, aged 57, received university education in Aeronautical Machinery from Air Force Engineer University and is a
senior engineer. Mr. Yuan began his career in December 1976 and served as the Vice President of Engineering Department
of China Southern Airlines Company, the Vice President of Guangzhou Aircraft Maintenance Engineering Co., Ltd., the
Chief Engineer and the General Manager of Engineering Department of the Company. Mr. Yuan served as the Executive
Vice President of the Company from April 2002 to September 2007; the Executive Vice President of CSAHC since September
2007; the Executive Vice President and Chief Legal Adviser of CSAHC since July 2008. Since 30 November 2011, Mr. Yuan
has been the Director of the Company. Currently, Mr. Yuan is also the Chairman of Southern Airlines (Group) Import and
Export Trading Company Limited, China Southern Airlines Group Construction and Development Company Limited, MTU
Maintenance Zhuhai Co., Ltd., Dalian Acacia Town Villa Co., Ltd. and Shenzhen Air Catering Co., Ltd, and a director of China
Aircraft Services Limited.
193
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
The Board of Directors, Supervisory Committee and Senior Management
Yang Li Hua, aged 58, graduated with a master degree from the Party School of the Central Committee of CPC majoring in
economics and management and is a senior expert of political science. Ms. Yang began her career in Air China International
Corporation in 1973, and served as the head of the in-flight service team, manager of in-flight service division and deputy
head of the Chief Flight Team of Air China International Corporation. Subsequently, she was appointed as the General
Manager of the Passenger Cabin Service Division of Air China International Corporation in September 2000, the Vice
President of Air China International Corporation in October 2002, the Vice President of Air China Limited in September 2004,
and Executive Vice President of CSAHC in May 2009. From July 2010 to August 2012, Ms. Yang also acted as the Chairman
of the Labour Union of CSAHC. Since January 24, 2013, Ms. Yang has been the Director of the Company. Currently, Ms.
Yang is also the Chairman of Southern Airlines Culture and Media Co., Ltd. and China Southern Airlines Group Property
Management Company Limited.
Zhang Zi Fang, aged 55, graduated with an Executive Master of Business Administration (EMBA) degree from Tsinghua
University and is a senior expert of political science. Mr. Zhang began his career in 1976. He served as the Deputy Commissar
and subsequently the Commissar of the pilot corps of China Northern Airlines Company; as the Party Secretary of the Jilin
Branch of China Northern Airlines Company; as the General Manager of Dalian Branch of CSAHC Northern Airlines; as the
Director of Political Works Department of CSAHC. Mr. Zhang has been the Deputy Party Secretary and Secretary of the
Disciplinary Committee of the Company from February 2005 to December 2007. He has been the Executive Vice President
and the Deputy Party Secretary of the Company from December 2007 to February 2009. Since February 2009, he has been
the Party Secretary and Executive Vice President of the Company. Mr. Zhang has been the Director of the Company since 30
June 2009.
Xu Jie Bo, aged 48, graduated with a university degree from Tianjin University majoring in infrastructure and engineering
management, and was subsequently awarded with a master degree in Business Administration from Hong Kong Baptist
University and an Executive Master of Business Administration (EMBA) degree from Tsinghua University and is a qualified
senior accountant. Mr. Xu began his career in 1986. He served as the Director of the Financial Department of Central and
Southern Administration of CAAC; as the Chief Accountant and General Manager of the Financial Department of the
Company. Mr. Xu served as the Director, Chief Financial Officer and Chief Accountant of the Company since April 2001
and as the Director, Executive Vice President, Chief Financial Officer and Chief Accountant of the Company since August
2003. Currently, Mr. Xu is also the Chairman of Guizhou Airlines Company Limited, China Southern Airlines Henan Airlines
Company Limited and the Vice Chairman of Sichuan Airlines Corporation Limited.
Li Shao Bin, aged 48, graduated with a university degree from the Party School of the Central Committee of CPC
majoring in economics and management and is an expert of political science. Mr. Li began his career in 1984, and served
as the Deputy Head of Promotion Department of the Company, the Director of Political Department of Guangzhou Flight
Operations Division of the Company, and the Director of Political Department and Deputy Party Secretary of Guangzhou
Flight Operations Division of the Company. Subsequently, he was appointed as Party Secretary of Guangzhou Flight
Operations Division of the Company in May 2004. Mr. Li served as the Party Secretary and Deputy General Manager of
Guangzhou Flight Operations Division of the Company from March 2006 to August 2012. Mr. Li has been the Chairman of
the Labour Union of the Company since August 2012 and the Director of the Company since 24 January 2013.
Wei Jin Cai, aged 64, graduated from the Party School of the Central Committee of CPC majoring in economics and
management. Mr. Wei has many years of experiences in civil aviation. He conducted an in-depth study on the operation and
management of civil aviation and is influential in the civil aviation industry. Mr. Wei served as the Deputy Party Secretary of
the Party Committee of the headquarter of CAAC, the Party Secretary of Civil Aviation Management Institute of China from
March 1993 to November 2008, the President of Civil Aviation Management Institute of China from November 2008 to
August 2010 and the independent director of Shandong Airlines Co., Ltd. Mr. Wei has been the Independent Non-executive
Director of the Company since 29 December 2010. Currently, he is also the independent director of Xiamen International
Airport Co., Ltd., the independent non-executive director of ASR Holdings Limited and the independent director of E-Food
Group Co., Ltd..
194
The Board of Directors, Supervisory Committee and Senior Management
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Ning Xiang Dong, aged 48, graduated from the Quantitative Economics Faculty of the School of Economics and
Management of Tsinghua University with a doctor degree. Mr. Ning began his career in 1990 and served as the assistant,
lecturer and associate professor at Tsinghua University and the Executive Deputy Director of the National Center for
Economic Research (NCER) at Tsinghua University. He was also a visiting scholar at Harvard Business School, University of
Illinois, University of New South Wales, University of Sydney and Chinese University of Hong Kong. Currently, he serves as
the professor and the doctorate-tutor of the School of Economics and Management of Tsinghua University and the executive
director of Centre for Corporate Governance of Tsinghua University. Mr. Ning has been the Independent Non-executive
Director of the Company since 29 December 2010. He is also the independent director of Aerospace Hi-Tech Holding Group
Co., Ltd. and Sichuan ChangHong Electric Company Limited.
Liu Chang Le, aged 62, was conferred an honorary doctoral degree in literature by the City University of Hong Kong and
is a founder of Phoenix Satellite Television. Mr. Liu has been the Chairman and Chief Executive Officer of Phoenix Satellite
Television Company Limited since 1996 and the Chairman and Chief Executive Officer of Phoenix Satellite Television
Holdings Limited, a company listed on the Stock Exchange since 2000. Mr. Liu gained widespread recognition both locally
and overseas for his enthusiasm for and achievements in the media industry. Mr. Liu is the recipient of numerous titles and
awards, among which include “Wiseman of the Media Industry”, “the Most Innovative Chinese Business Leaders in the
Asia Pacific Region”, “the Most Entrepreneurial Chinese Business Leaders”, and has been awarded the “Robert Mundell
Successful World CEO Award”, the “Man of Year for Asia Brand Innovation Award” and the “Person of the Year” award
of the Chinese Business Leaders Annual Meeting. Since 2005, Mr. Liu has been the Chairman of the iEMMYs Festival,
which is run by the International Academy of Television Arts & Sciences. In 2008, Mr. Liu received the International Emmy®
Directorate Award. Mr. Liu was appointed as honorary chairman of “World Chinese-language Media Cooperation Alliance”
in 2009 and appointed as special consultant to the 8th Council of the Buddhist Association of China in 2010. Mr. Liu was
a member of the Tenth, the Eleventh and the Twelfth National Committee of the Chinese People’s Political Consultative
Conference, served as the Vice Chairman of the sub-committee on Education, Science, Culture, Health and Sport of the
Eleventh National Committee of the Chinese People’s Political Consultative Conference, and is serving as a member of
standing committee of the Twelfth National Committee of the Chinese People’s Political Consultative Conference. Mr. Liu
has been appointed a Justice of the Peace by the government of the Hong Kong Special Administrative Region. In 2010, Mr.
Liu was awarded the Silver Bauhinia Star by the Hong Kong Special Administrative Region. Mr. Liu has been the Independent
Non-executive Director of the Company since 30 November 2011.
Tan Jin Song, aged 49, graduated from Renmin University of China with an on-job doctor degree in Accounting. Mr.
Tan began his career in 1985 and was a teacher in Shaoyang School of Finance and Accounting of Hunan Province and
the Deputy Dean of the School of Management of Zhongshan University; Mr. Tan acted as a professor of the School
of Management of Zhongshan University from October to December 2008; and as the Party Secretary of the School of
Management of Zhongshan University since December 2008. Currently, he is the independent director of Sundiro Holding
Co., Ltd., Grandhope Biotech Co., Ltd. and Poly Real Estate Company Limited. Mr. Tan also acts as the independent non-
executive director of Welling Holding Limited, the external supervisor of China Guangfa Bank and the independent supervisor
of Sino-Singapore Guangzhou Knowledge City Investment and Development Co., Ltd.. Mr. Tan has been the Independent
Non-executive Director of the Company since 26 December 2013.
195
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
The Board of Directors, Supervisory Committee and Senior Management
SUPERVISORY COMMITTEE
Pan Fu, aged 51, graduated with a master degree from Chongqing University majoring in power systems and automation,
and is a senior engineer. Mr. Pan began his career in 1986, and served successively as the Deputy Chief Engineer of Test
Research Institute of Electric Power Bureau of Yunnan Province and the Deputy Head of the Planning Department of
Electric Power Industry Bureau of Yunnan Province (Group Company), the Deputy Director of the Planning & Development
Department of Yunnan Electric Power Group Co., Ltd., the Deputy Director and Director of Kunming Power Plant, the
Deputy Chief Engineer and Chief Engineer of Yunnan Electric Power Corporation, the Deputy Director and Director of
the Department of Security Supervision of China Southern Power Grid Company Ltd., the Director of the China Southern
Power Grid Technology and Research Center. He served as the General Manager and Deputy Party Secretary of the Guizhou
Power Grid Corporation from January 2005 to November 2007, and served as the Director of the Planning Development
Department of China Southern Power Grid Company Ltd. from November 2007 to November 2010. Mr. Pan has been the
Team Leader of the Discipline Inspection Commission of CSAHC since November 2010 and the Chairman of the Supervisory
Committee of the Company since 29 December 2010. Currently, he is also the Chairman of China Southern Airlines Group
Passenger and Cargo Agent Company Limited.
Li Jia Shi, aged 52, graduated from Guangdong Polytechnic Normal University majoring in economics and mathematics
and obtained an Executive Master of Business Administration (EMBA) degree from Tsinghua University and is an expert
of political science. Mr. Li began his career in 1976. He served as the Deputy Head of the Organization Division of the
Party Committee of the Company, Deputy General Manager of Guangzhou Nanland Air Catering Company Limited, the
Head of the Organization Division of the Party Committee of the Company, the Chairman of Southern Airlines Ka Yuen
(Guangzhou) Aviation Supply Company Limited and Guangzhou Nanland Air Catering Company Limited. He served as the
Deputy Secretary of the Disciplinary Committee and the Director of the Disciplinary Committee Office of the Company from
December 2003 to December 2007. Mr. Li has been the Secretary of the Disciplinary Committee of the Company since
December 2007 and has been the Team Deputy Leader of the Discipline Inspection Commission of CSAHC and the Secretary
of Disciplinary Committee of the Company since February 2012. Mr. Li has been the Supervisor of the Company since 30
June 2009. Mr. Li is the Vice Chairman of Southern Airlines Culture and Media Co., Ltd.
Zhang Wei, aged 47, graduated with a master degree from Tianjin University majoring in investment skills and economics
and obtained an Executive Master of Business Administration (EMBA) degree from Tsinghua University and is a senior
accountant. Ms. Zhang began her career in 1988 and served as the General Manager Assistant and Deputy General
Manager of the Finance Department of the Company, the Deputy Director of the Supervisory Bureau and the Director of the
Audit Division of CSAHC and the General Manager of Finance Company. Ms. Zhang served as the Deputy Director of the
Supervisory Bureau and the Director of the Audit Division of CSAHC from October 2007 to October 2008. Since October
2008, she has been the Director of the Audit Division of CSAHC. Ms. Zhang has been the Supervisor of the Company since
June 2008. Currently, Ms. Zhang is also the Chairman of Supervisory Committee of Southern Airlines Culture and Media
Co., Ltd., Finance Company, Southern Airlines (Group) Import and Export Trading Company Limited, China Southern Airlines
Group Construction and Development Company Limited, the Supervisor of MTU Maintenance Zhuhai Co., Ltd. and the
Director of Guangzhou Southern Airline Construction Company Limited.
Yang Yi Hua, aged 53, has a university degree, and is an accountant and an International Certified Internal Auditor. Ms.
Yang served as the Manager of the Financial Office of the Company’s Financial Division, and Deputy General Manager of
the Company’s Audit Department. Ms. Yang has been the General Manager of the Company’s Audit Department since
May 2002 and the Supervisor of the Company since June 2004. Currently, Ms. Yang is also the Chairman of the Supervisory
Committee of Guizhou Airlines, Guangzhou Baiyun International Logistic Company Limited, Nan Lung International Freight
Limited, Beijing China Southern Airlines Ground Service Company Limited and the supervisor convener of the supervisory
committee of Xiamen Airlines, Finance Company and Chongqing Airlines.
196
The Board of Directors, Supervisory Committee and Senior Management
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Wu De Ming, aged 55, graduated from South China Normal University majoring in political management. He obtained a
degree after beginning his career from 1976. Mr. Wu served as the Director of the political division of Operation Department
of China Southern Airlines, as the Deputy Party Secretary and Secretary of Disciplinary Committee of Guangzhou ticket
office of China Southern Airlines, and as the Deputy Secretary and Secretary of the party general branch of ticket office
of Transportation Department of China Southern Airlines. Mr. Wu served as the Director of the Disciplinary Supervision
Department of CSAHC from March 2001 to December 2003; and as the General Director of the Supervision Bureau
and Chief Officer of Disciplinary Committee Office from December 2003 to April 2009. He has been a member of Party
Committee of Commercial Steering Committee of the Company, Secretary to the Disciplinary Committee and President of
the Labour Union since April 2009. Mr. Wu has been the Supervisor of the Company since 26 December 2013.
SENIOR MANAGEMENT
Ren Ji Dong, aged 49, graduated from Nanjing University of Aeronautics and Astronautics, majoring in aircraft engine
design and obtained an Executive Master of Business Administration (EMBA) degree from Tsinghua University, and he is a
senior engineer. Mr. Ren began his career in 1986 and served as the Deputy Director of Urumqi Civil Aviation Administration,
the Vice President of Xinjiang Airlines, the Party Secretary and the Vice President of the Xinjiang branch of the Company, the
Executive Vice President of the Company from March 2005 to January 2007, and the President of the Xinjiang branch of the
Company from January 2007 to April 2009. He has been the Executive Vice President of the Company since May 2009.
Liu Qian, aged 49, graduated from China Civil Aviation Flying College majoring in aircraft piloting and obtained an Executive
Master of Business Administration (EMBA) degree from Tsinghua University. Mr. Liu served the CAAC as an assistant
researcher of the Piloting Skills Supervision Division of the Piloting Standards Department, an assistant researcher of the
Operation Supervision Division, an assistant researcher and the Deputy Head of the Piloting Standards Division, and the
Deputy Chief Pilot and Chief Pilot of the Company. He has been the Executive Vice President of the Company since August
2007. Currently, Mr. Liu is also the Chairman of Zhuhai Xiang Yi Aviation Technology Company Limited and China Southern
West Australian Flying College Pty Ltd.
Dong Su Guang, aged 60, graduated from Northwestern Polytechnical University majoring in aircraft design. Mr. Dong
began his career in 1970 and served as the Vice President of Guangzhou Aircraft Maintaining and Engineering Co., Ltd.
(“GAMECO”), the Chief Engineer and the General Manager of Engineering Department of the Company. He has been
the Executive Vice President of the Company since December 2007. Currently, Mr. Dong is also the Chairman of Shantou
Airlines, GAMECO and Shenyang Northern Aircraft Maintenance Engineering Co., Ltd.
Chen Gang, aged 48, graduated from Zhongnan Finance and Economics University majoring in industrial enterprise
management and obtained an Executive Master of Business Administration (EMBA) degree from Tsinghua University. He
began his career in 1987 and served as the Vice President of Henan branch of the Company, the President of Hubei branch
of the Company and the Director General of Commercial Steering Committee of the Company. He has been the Executive
Vice President of the Company since August 2009.
Zhou Yue Hai, aged 53, has a university degree and obtained an Executive Master of Business Administration (EMBA)
degree from Tsinghua University on-the-job. Mr. Zhou began his career in 1980. He served as the Deputy Director of the
Flight Safety Technology Division, the Deputy Director of the Flight Technology Management Division, the Deputy General
Manager of the Flight Safety Technology Department, the Deputy General Manager of the Flight Operation Division of the
Company, the Party Secretary and Vice President of Guizhou Airlines Company Limited. Mr. Zhou served as the General
Manager of China Southern Airlines Jilin Branch from September 2004 to January 2009 and the General Manager of China
Southern Airlines Northern Branch from January 2009 to July 2012. Mr. Zhou has been the Executive Vice President of the
Company since August 2012. Currently, Mr. Zhou is also the Chairman of Southern Airlines Ka Yuen (Guangzhou) Aviation
Supply Company Limited, Guangzhou Nanland Air Catering Company Limited and Guangzhou China Southern Airlines
In-flight Duty Free Co., Ltd.
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CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
The Board of Directors, Supervisory Committee and Senior Management
Wang Zhi Xue, aged 52, has a university degree. Mr. Wang began his career in 1981. He served as the Manager of the
Flight Safety Technology Inspection Division of Zhuhai Airlines Company Limited, Deputy Chief Pilot and Director of the Flight
Safety Technology Division as well as the Vice President of Shantou Airlines Company Limited. He served as the General
Manager of the Flight Management Division of the Company from October 2004 to February 2009 and the General Manager
of the Flight Operation Division of the Company in Guangzhou from February 2009 to July 2012. Mr. Wang has been the
Executive Vice President and Chief Pilot of the Company since August 2012. Mr. Wang is also the chairman of Zhuhai Airlines
Company Limited.
Hu Chen Jie, aged 45, graduated from Beijing University Aeronautics and Astronautics majoring in information
management. Mr. Hu served as a software engineer in the IT Center of CAAC, senior software engineer in Wei Hong
International Technology Company (Singapore), the Deputy Director of the IT Center of the Company, the senior project
manager of SITA INC. (US) and the General Manager of CSNETC e-Commerce Limited. He has been the director of the IT
center since March 2007 and the Chief Information Officer of the Company since June 2007. Currently, Mr. Hu is also the
Chairman of Guangzhou Aircraft Hang Yi Information Technology Co., Ltd. and Chairman of THITC.
Su Liang, aged 51, graduated from the University of Cranfield, United Kingdom with a master degree in Air Transport
Management and obtained an Executive Master of Business Administration (EMBA) degree from Tsinghua University. Mr.
Su was in charge of the flight operations, planning and international cargo project of the Company. From July 2000 to
November 2007, Mr. Su was the Company Secretary of the Company. He has been the Chief Economist of the Company
since December 2007. Currently, Mr. Su is also the director of Xiamen Airlines and Sichuan Airlines Corporation Limited.
Chen Wei Hua, aged 47, graduated from the School of Law of Peking University and obtained an Executive Master of
Business Administration (EMBA) degree from Tsinghua University. He is a qualified lawyer in the PRC and a qualified
corporate legal counselor. Mr. Chen joined the aviation industry in 1988. He served as Deputy Director, Director of the
Legal Affairs Office of the Company. Mr. Chen has been the Chief Legal Adviser of the Company and Director of the Legal
Department of the Company since January 2004. Currently, Mr. Chen is also the director of Xiamen Airlines.
Yuan Xi Fan, aged 51, graduated from Civil Aviation Institute of China majoring in Aviation Radio, and was subsequently
awarded with a master degree in Aviation Safety Management from the École Nationaledel’ Aviation Civile (ENAC) and
Ecole Nationale Superieure d’Ingenieurs de Construction Aeronautique (ENSICA) in France and an Executive Master of
Business Administration (EMBA) degree from Tsinghua University, and is a senior engineer. Mr. Yuan began his career in
1982. Mr. Yuan served as the Deputy Director of Repair and Maintenance Workshop of Guangzhou Aircraft Maintenance
Engineering Co., Ltd., the Deputy General Manager of the Aircraft Maintenance Engineering Division, the Director of
Quality Management and Director of Integrated Business Management of Aircraft Maintenance Engineering Division of the
Company, and the Deputy General Manager of MTU Maintenance Zhuhai Co., Ltd. Mr. Yuan served as the Deputy General
Manager of Guangzhou Aircraft Maintenance Engineering Co., Ltd. from March 2009 to January 2011. Mr. Yuan served as
the General Manager of the Aircraft Engineering Division of the Company since 2011. Mr. Yuan has been the Chief Engineer
of the Company and the General Manager of the Aircraft Engineering Division of the Company since April 2012. Currently,
Mr. Yuan is also the director of Guangzhou Aircraft Maintenance Engineering Co., Ltd..
Tian Xiao Dong, aged 44, graduated from Beijing Institute of Meteorology majoring in aviation meteorology, and was
subsequently awarded with a master degree in Aeronautical Engineering from Beijing University of Aeronautics and
Astronautics and obtained an Executive Master of Business Administration (EMBA) degree from Tsinghua University, and is
a senior engineer. Mr. Tian began his career in 1989. Mr. Tian served as the Deputy Manager of Flight Operation Office of
General Dispatching Office, the Manager of Planning and Dispatch Office of System Operation Control Center (SOC), the
Deputy Director of Operation Control Division and the Deputy General Manager of SOC. Mr. Tian has been served as the
general manager of SOC from December 2006 to January 2014. He has been the director of the General On-Duty Manager
Office since January 2014, he has been the COO Flight Operations of the Company since June 2012.
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The Board of Directors, Supervisory Committee and Senior Management
CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Guo Zhi Qiang, aged 50, economist, graduated with a master degree from Party School of Xinjiang Uyghur Autonomous
Region majoring in Business Administration. Mr. Guo began his career in 1980 and served as the Manager of Transportation
Department of Xinjiang Airlines; the Deputy General Manager of Xinjiang Company of China Southern Air Holding
Company; the General Manager of China Southern Airlines Beijing Office; the Deputy General Manager of China Southern
Airlines Xinjiang Branch. Mr. Guo served as the Deputy General Manager of the Shenzhen Branch of the Company from
December 2005 to February 2008 and the President and Chief Executive Officer of Chongqing Airlines Company Limited
from February 2008 to May 2009, and served as the Deputy Director General of the Commercial Steering Committee of the
Company since May 2009 and the Director General of the Commercial Steering Committee of the Company from September
2009 to September 2012. Mr. Guo has been the COO Marketing & Sales of the Company and the Director General of the
Commercial Steering Committee of the Company since September 2012. Currently, Mr. Guo is also the director of Xiamen
Airlines Company Limited.
Xie Bing, aged 41, graduated from Nanjing University of Aeronautics and Astronautics, majoring in civil aviation
management. He subsequently received a master degree of business administration, a master degree of international finance
and an Executive Master of Business Administration (EMBA) degree from Jinan University, the University of Birmingham,
Britain and Tsinghua University, respectively. Mr. Xie is a senior economist. Mr. Xie used to work in the Planning and
Development Department, Company Secretary Office of the Company and General Office of CSAHC. He has been the
Company Secretary of the Company since November 2007.
Save as disclosed above, none of the above Directors or Supervisors or senior management of the Company has any
relationship with any Directors, Supervisors, senior management, substantial shareholders of the Company.
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CHINA SOUTHERN AIRLINES COMPANY LIMITED (cid:129) ANNUAL REPORT 2013
Glossary
In this Annual Report, unless the context otherwise requires, the following terms shall have the meanings indicated:
Capacity
“available seat kilometers” or “ASK”
the number of seats made available for sale multiplied by the kilometers flown
“available tonne kilometers” or “ATK”
the tonnes of capacity available for the transportation of revenue load
(passengers and cargo) multiplied by the kilometres flown
Traffic
“revenue passenger kilometers”
the number of passengers carried multiplied by the kilometers flown
or “RPK”
“revenue tonne kilometers”
the load (passengers and cargo) in tonnes multiplied by the kilometers flown
or “RTK”
“revenue tonne kilometers-cargo”
i.e. revenue freight tonne kilometers (RFTK), the load (cargo) in tonnes multiplied
by the kilometers flown
“revenue tonne kilometers-passenger”
the load (passenger) in tonnes multiplied by the kilometers flown
Yield
“yield per RPK”
revenue from passenger operations divided by RPK
“yield per RFTK”
revenue from cargo operations divided by RFTK
“yield per RTK”
revenue from airline operations (passenger and cargo) divided by RTK
“tonne”
Cost
a metric ton, equivalent to 2,204.6 pounds
“operating cost per ATK”
operating expenses divided by ATK
Load Factors
“passenger load factor”
RPK expressed as a percentage of ASK
“overall load factor”
RTK expressed as a percentage of ATK
Utilisation
“utilisation rates”
the actual number of flight and taxi hours per aircraft per operating day
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