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DELIVERING YOUR WORLD
2015 Annual Report
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www.csair.com
Mobile App
WeChat App
H Share Stock Code: 1055
A Share Stock Code: 600029
ADR Coder ZNH
Contents
About Us
Definitions
Important Information
Company Profile
Corporate Information
Company Business Summary
Operating Results
Principal Accounting Information
Summary of Operating Data
Summary of Fleet Data
Highlights of the Year
Management Discussion and Analysis
Significant Events
Corporate Governance
Report of Directors
Changes in the Share Capital, Shareholders’ Profile and Disclosure of
Interests
Directors, Supervisors, Senior Management and Employees
Corporate Governance Report
Corporate Bond
Internal Control
Social Responsibility
Financial Report
Financial Statements Prepared under International
Financial Reporting Standards
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
Supplementary Financial Information
Five Year Summary
2
3
4
5
8
12
14
18
24
26
60
68
80
86
106
114
117
118
122
123
124
125
127
128
129
205
208
Unless the context otherwise requires, the following terms should have the following meanings in this report:
Company
Group
CSAHC
Xiamen Airlines
Guizhou Airlines
Zhuhai Airlines
Shantou Airlines
China Southern Airlines Company Limited
China Southern Airlines Company Limited and its subsidiaries
China Southern Air Holding Company
Xiamen Airlines Company Limited
Guizhou Airlines Company Limited
Zhuhai Airlines Company Limited
Shantou Airlines Company Limited
Chongqing Airlines
Chongqing Airlines Company Limited
Henan Airlines
Hebei Airlines
Jiangxi Airlines
China Southern Airlines Henan Airlines Company Limited
Hebei Airlines Company Limited
Jiangxi Airlines Company Limited
Finance Company
Southern Airlines Group Finance Company Limited
SAIETC
GSC
SACC
SACM
CSAGPMC
SPV
Southern Airlines Group Import and Export Trading Company
China Southern Airlines Group Ground Services Co., Ltd., formerly known as China
Southern Airlines Group Passenger and Cargo Agent Company Limited ("PCACL")
Shenzhen Air Catering Co., Ltd.
Southern Airlines Culture and Media Co., Ltd.
China Southern Airlines Group Property Management Company Limited
China Southern Airlines No. 1 Lease (Tianjin) Limited
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 kilometers flown
Revenue Passenger Kilometers or “RPK”
i.e. passengers traffic volume, the number of passengers carried multiplied by the
kilometers flown
Revenue Tonne Kilometers or “RTK”
i.e. total traffic volume, the load (passengers and cargo) in tonnes multiplied by the
kilometers flown
Revenue Tonne Kilometers – cargo or
“RFTK”
i.e. cargo and mail traffic volume or revenue tonne kilometers for cargo, the load
(cargo) in tonnes multiplied by the kilometers flown
Revenue Tonne Kilometers – passenger
the load (passenger) in tonnes multiplied by the kilometers flown
Passenger Load Factor
Overall Load Factor
Yield per RPK
Yield per RFTK
RPK expressed as a percentage of ASK
RTK expressed as a percentage of ATK
revenue from passenger operations divided by RPK
revenue from cargo operations divided by RFTK
Articles of Association
Articles of Association of China Southern Airlines Company Limited
Stock Exchange
Listing Rules
Model Code
The Stock Exchange of Hong Kong Limited
The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited
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 on The Stock Exchange
of Hong Kong Limited
Corporate Governance Code
Corporate Governance Code as set out in Appendix 14 of The Rules Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited
SFO
PRC
002
Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong)
The People’s Republic of China
Definitions I.
II.
The board of directors (the “Board”) and the supervisory committee (the “Supervisory Committee”) of the Company and its
directors (the “Directors”), supervisors (the “Supervisors”) and senior management warrant the truthfulness, accuracy and
completeness of the content contained in this annual report, and the this annual report does not contain inaccurate or
misleading statements or have any material omission, and jointly and severally accept full legal responsibility.
This annual report was considered and approved at the 10th meeting of the 7th session of the Board on 30 March 2016. 10
Directors were required to attend the meeting and 9 of them attended in person. Director Liu Chang Le did not attend the
meeting because of business reason, and authorized Director Ning Xiang Dong to attend and vote on his behalf.
III.
PricewaterhouseCoopers issued the audit report with unqualified audit opinions to the Company.
IV.
V.
VI.
VII.
Mr. Tan Wan Geng (Vice Chairman and President of the Company), the responsible person of the Company and the finance
work, and the responsible person of the accounting department, Mr. Xiao Li Xin (Chief Financial Officer of the Company)
warrant the truthfulness, accuracy and completeness of the financial statements contained in this annual report.
The Board recommends the payment of a final dividend of RMB0.8 (inclusive of applicable tax) per 10 shares for the year
ended 31 December 2015, totalling approximately RMB785 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 2015 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, and if approved, the
final dividend is expected to be paid to the shareholders on or around Friday, 8 July 2016.
Forward-looking statements included in this report, including future plans and development strategies, do not constitute
a guarantee of the Company to investors. Investors shall be aware of the risks of investment.
During the reporting period, neither the controlling shareholder of the Company, nor any of its connected persons has
utilizied the non-operating funds of the Company.
VIII.
During the reporting period, the Company did not provide external guarantees in violation of any specified decision-making
procedures.
IX.
During the reporting period, the Company did not have any issued or outstanding preference shares and convertible bonds.
X.
During the reporting period, there was no change to the registration of the Company.
003
Important InformationAnnual Report 2015China Southern Airlines Company Limited The Group is one of the largest airlines in the PRC.
In 2015, the Group ranked first among all Chinese airlines in terms of its fleet, network and volume of passenger. As at 31 December
2015, the Group had a fleet of 667 passenger and cargo aircraft, including the Boeing 787,777 and 737 series, as well as the
Airbus 380, 330 and 320 series, ranking first in Asia. The general strategic goal of the Group is to establish itself into an influential
international airlines with an extensive network; to form a developed route network covering China, and the rest of Asia, and
effectively connecting Europe, America, Australasia and Africa. As at 31 December 2015, the Group operated more than 2,500 flights
daily flying to 261 destinations in 38 countries and regions around the world. Through close cooperation with members from the
SKYTEAM, the Group connected 1,057 destinations in 179 countries and regions. In 2015, the Group’s volume of passenger traffic
amounted to nearly 110 million, which has put the Group in a leading position among Chinese airlines for 37 consecutive years,
and also to secure the top position in Asia.
Based in Guangzhou, the Group has 15 branches, including Xinjiang, Beifang, Beijing, Shenzhen, Hainan, Heilongjiang, Jilin, Dalian,
Hubei, Hunan, Guangxi, Xi’an, Taiwan, Zhuhai Helicopter, Shanghai and 6 major subsidiaries, including Xiamen Airlines, Shantou
Airlines, Zhuhai Airlines, Guizhou Airlines, Chongqing Airlines and Henan Airlines. The Group has set up 25 domestic offices in cities
including Chengdu, Hangzhou and Nanjing. It also maintains 67 overseas offices including Tokyo, Los Angeles, New York, London,
Paris, Sydney, Auckland, Singapore, Moscow and Vancouver. Apart from the above, the Company has equity interests in Sichuan
Airlines Co., Ltd.
004
Corporate Profile Chinese Name:
中国南方航空股份有限公司
Chinese Short Name:
南方航空
English Name:
China Southern Airlines Company Limited
English Short Name:
CSN
Company Secretary:
Xie Bing
Securities Affairs Representative:
Xu Yang
Shareholder Enquiry:
Company Secretary office
Telephone:
+86-20-86124462
Fax:
+86-20-86659040
E-mail:
ir@csair.com
Address:
278 Ji Chang Road, Guangzhou, Guangdong Province, PRC
Company Secretary:
Xie Bing
Registered Address:
House 203, No. 233 Kaifa Avenue, Guangzhou Economic &
Technology Development Zone, Luogang District, Guangzhou,
Guangdong Province, PRC
Place of Business:
278 Ji Chang Road, Guangzhou, Guangdong Province, PRC
Place of Business in Hong Kong:
Unit B1, 9th Floor, United Centre, 95 Queensway, Hong Kong
Website of the Company:
www.csair.com
E-mail:
webmaster@csair.com
Authorized Representative under the Listing
Rules:
Tan Wan Geng and Xie Bing
Controlling Shareholder:
China Southern Air Holding Company
Principal Bankers:
China Development Bank
Bank of China
Agricultural Bank of China
China Construction Bank
Industrial & Commercial Bank of China
The Export-Import Bank of China
005
Corporate InformationAnnual Report 2015China Southern Airlines Company Limited Designated Newspapers for Information
Disclosure (A Shares):
China Securities Journal, Shanghai Securities News, Securities
Times
Designated Website for Information
Disclosure (A Shares):
www.sse.com.cn
Designated Website for Information Disclosure
(H Shares):
www.hkexnews.hk
Annual report Available for Inspection:
Company Secretary office
Place of Listing of H Shares:
The Stock Exchange of Hong Kong Limited
Short Name of H Shares:
CHINA SOUTH AIR
Stock Code of H Shares:
01055
H Share Registrar:
Hong Kong Registrars Limited
17M Floor, Hopewell Centre, 183 Queen’s Road East,
Wanchai, Hong Kong
Place of Listing of N Shares:
New York Stock Exchange
Place of Listing of A Shares:
Shanghai Stock Exchange
Short Name of A Shares:
南方航空
Stock Code of A Shares:
600029
A Share Registrar:
China Securities Depository and Clearing Corporation Limited
Shanghai Branch
Floor 36, China Insurance Building, 166 Lu Jia Zui East Road,
Shanghai, PRC
Short Name of N Shares:
China Southern Air
Stock Code of N Shares:
ZNH
N Share Registrar:
BNY Mellon Shareowner Services
P.O.Box 30170, College Station,
TX 77842-3170, U.S.A
006
Corporate Information Domestic Legal Adviser:
Z&T Law Firm
Overseas Legal Adviser:
DLA Piper Hong Kong
Domestic Auditors:
PricewaterhouseCoopers Zhong Tian LLP
11/F PricewaterhouseCoopers Center,
2 Corporate Avenue, 202 Hu Bin Road,
Huangpu District, Shanghai, PRC
Signing Acountants of Domestic Auditors:
Wang Bin and Zhan Yu Feng
Overseas Auditors:
PricewaterhouseCoopers
22/F, Prince Building Central,
10 Chater Road, Hong Kong
007
Annual Report 2015China Southern Airlines Company Limited I.
The Principle Business and Operating Mode of the Company and the Industry
Summary during the Reporting Period
The Company provides services of domestic, international and regional scheduled and unscheduled air transportation of
passenger, cargo, mail and baggage, general aviation, and aircraft maintenance; acts as an agency of domestic and foreign
airlines, and offers airline catering services (operated by subsidiaries and branches only) and other aviation and relevant
business (limited to insurance and agency business: personal accident insurance).
With Guangzhou, Beijing, Urumqi and Chongqing as the core hubs, the Company strives to be a worldwide network-based
airline, forming an advanced flight network which covers China, expands across Asia and connects to Europe, America, Australia
and Africa. Through the close cooperation with the Sky Team, the Company’s flight network has reached 1,057 destinations
all over the world, connecting 179 countries and regions. The Company is committed to building an international aviation
hub with its Canton Route. Guangzhou has become the first portal of mainland China to connect Oceania and Southeast Asia.
In 2015, the aviation safety of China’s civil aviation industry has witnessed steady and has maintained a relatively fast
development. In the past year, the total transport have reached 85 billion tonne kilometers, with passenger capacity of
440 million, and 6.25 million tonnes for cargo and mail, representing an increase of 13.7%, 11.1% and 5.2%, respectively as
compared with the same period of the previous year.
II. Material Changes to Major Assets of the Company during the Reporting Period
During the reporting period, the Group increased 58 aircraft (including 30 under operating lease, 23 under finance lease and 5
under purchase), disposed 3 aircraft (including 1 under operating lease and 2 under purchase) and transferred 11 aircraft from
that under finance lease to purchase. As at the end of the reporting period, the number of aircraft of the Group has reached
667, representing an increase of 55 from the end of the previous year. During the reporting period, due to the increased
numbers of aircraft under finance lease and aircraft purchased, fixed assets of the Group increased by RMB16,436 million.
008
Company Business Summary III. Core Competitiveness
The Company’s core competitiveness has begun to take shape, including its hub operation and management capability with
Guangzhou as the core, its resources interoperability under the matrix management mode and its service brand influence.
(1)
(2)
(3)
Strategic transformation continuously strengthened the hub operation and management capability with Guangzhou
as the core. China Southern Airlines’ strategic transformation mainly focused on developing transit and links with
international long-distant flights in hubs, thereby established a new profit model and development mode, and
gradually became an airline with strong international network. In 2015, the Company further improved its international
layout. The Group opened new international flights from Guangzhou to San Francisco, Christchurch, Nairobi, Rome,
etc, and operated more flights to North America, Australia and New Zealand. The international transit ratio reached
48% in Guangzhou hub, which showed a sound development trend. The Group launched the A380 flights between
Beijing and Amsterdam in summer season and the A380 flights between Guangzhou and Sydney in winter season.
The proportion of international seat kilometer continued to grow. Through years of efforts, the effect of transformation
has become more and more significant, and international routes achieved a substantial profit for the first time in
2015 and made an important contribution to the Company’s good performance.
Resources interoperability under the matrix management mode continued to increase. 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 did not only unified the headquarters’ control over resources, policy and operation
standards but also demonstrated branches’ and subsidiaries’ motivated participation in security, marketing and service
innovation, making good use of the Company’s edge in scale and network. At present, the matrix management mode
has become a normal management practice, under which core resources such as the 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, the Company will further strengthen innovation in systems and mechanisms
to enhance efficiency of resource allocation, system coordination and add value to the advantages it currently enjoys.
Brand service influence was gradually improved. Aiming to become “the best airline in China, a top-class airline in
Asia and a globally renowned airline”, the Company constantly improved its service quality, our brand impact is
spreading both in China and overseas. In 2015, the Company established a customer care center to collectively handle
major complex complaints; the Company focused on improving service shortboards, strengthened the construction
of entertainment system and the promotion of international long-distance flight meals. Furthermore, the Company
reinforced the consciousness of people-oriented service and perfected the standards of special tasks and special
passenger services.
009
Annual Report 2015China Southern Airlines Company Limited AT YOUR
FINGERTIPS
Mobile, Website, WeChat, APP……
Reachable at anytime and anywhere
010
BOARDING PASS 011
CHINA SOUTHERN • AIRLINESAnnual Report 2015China Southern Airlines Company Limited Principal Accounting Information
Operating revenue
(RMB million)
120,000
100,000
90,395
99,514
98,547
108,584
111,652
2011
2012
2013
2014
2015
Total assets
(RMB million)
189,688
185,989
165,207
129,412
142,454
80,000
60,000
40,000
20,000
0
200,000
200,000
200,000
175,000
175,000
175,000
150,000
150,000
150,000
125,000
125,000
125,000
100,000
100,000
100,000
75,000
75,000
75,000
50,000
50,000
50,000
25,000
25,000
25,000
0
0
0
Profit attributable to equity
shareholders of the Company
(RMB million)
5,110
3,736
2,619
1,986
1,777
2011
2012
2013
2014
2015
Earnings per share attributable to
equity shareholders of the Company
(RMB/share)
0.52
0.27
0.20
0.18
0.38
6,000
5,000
4,000
3,000
2,000
1,000
0
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
Operating revenue (RMB million)
Profit attributable to equity
shareholders of the Company
(RMB million)
2011
90,395
2012
99,514
2013
98,547
2014
108,584
5,110
2,619
1,986
1,802
1,802
0.52
0.27
0.20
0.18
0.18
5,110
2,619
1,986
1,777
Total assets (RMB million)
129,412
142,454
165,207
189,688
2015
111,652
3,736
185,989
Earnings per share attributable to
equity shareholders of the
Company (RMB/share)
0.52
0.27
0.20
0.18
0.38
012
Principal Accounting Information
Principal Accounting Information
Operating revenue
Profit attributable to equity shareholders of the Company
2015
RMB million
2014
RMB million
Increase/
(decrease) %
111,652
3,736
108,584
1,777
2.83
110.24
Net asset attributable to Equity shareholders of the Company
Total assets
Basic earnings per share
Diluted earnings per share
31 December
2015
RMB million
31 December
2014
RMB million
39,045
185,989
35,748
189,688
Increase/
(decrease) %
9.22
(1.95)
2015
RMB/share
2014
RMB/share
Increase/
(decrease) %
0.38
0.38
0.18
0.18
111.11
111.11
013
Annual Report 2015China Southern Airlines Company Limited
Traffic
Revenue passenger kilometers (RPK) (million)
Domestic
Hong Kong, Macau and Taiwan
International
Total:
Revenue tonne kilometers (RTK) (million)
Domestic
Hong Kong, Macau and Taiwan
International
Total:
RTK – Passenger (million)
Domestic
Hong Kong, Macau and Taiwan
International
Total:
RTK – Cargo and mail (million)
Domestic
Hong Kong, Macau and Taiwan
International
Total:
Passengers carried (thousand)
Domestic
Hong Kong, Macau and Taiwan
International
Total:
For the year ended 31 December
2015
2014
Increase/
(decrease)
%
138,769.05
3,526.99
47,291.67
189,587.71
13,916.26
331.50
8,140.24
22,388.00
12,253.49
309.91
4,162.66
16,726.06
1,662.78
21.59
3,977.58
5,661.95
95,121.91
2,571.15
11,728.96
127,681.88
3,214.52
35,732.78
166,629.18
12,916.60
300.65
6,562.71
19,779.96
11,287.71
282.65
3,154.04
14,724.40
1,628.89
18.00
3,408.66
5,055.55
89,363.18
2,385.37
9,170.47
109,422.02
100,919.02
8.68
9.72
32.35
13.78
7.74
10.26
24.04
13.19
8.56
9.64
31.98
13.59
2.08
19.94
16.69
11.99
6.44
7.79
27.90
8.43
RPK (million)
RTK (million)
200,000
150,000
122,344
135,535
148,417
166,629
189,588
22,388
19,780
16,160
17,469
14,461
25,000
20,000
20,000
15,000
15,000
10,000
10,000
5,000
5,000
0
0
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
100,000
50,000
0
014
Summary of Operating Data
For the year ended 31 December
2015
2014
Increase/
(decrease)
%
Cargo and mail carried (thousand tonnes)
Domestic
Hong Kong, Macau and Taiwan
International
Total:
Capacity:
Available seat kilometres (ASK) (million)
Domestic
Hong Kong, Macau and Taiwan
International
Total:
Available tonne kilometres (ATK) (million)
Domestic
Hong Kong, Macau and Taiwan
International
Total:
Available tonne kilometres (ATK) – Passenger Traffic (million)
Domestic
Hong Kong, Macau and Taiwan
International
Total:
Available tonne kilometres (ATK) – Cargo and mail (million)
Domestic
Hong Kong, Macau and Taiwan
International
Total:
1,030.10
19.18
462.27
1,511.55
172,104.99
4,762.25
58,749.02
235,616.26
20,055.09
562.65
11,586.92
32,204.66
15,489.45
428.60
5,287.41
21,205.46
4,565.65
134.05
6,299.51
10,999.21
1,014.90
16.40
401.95
1,433.25
160,482.40
4,379.07
44,945.99
209,807.46
18,640.00
497.79
9,315.94
28,453.73
14,443.42
394.12
4,045.14
18,882.68
4,196.59
103.67
5,270.80
9,571.06
ASK (million)
ATK (million)
235,616
209,807
186,800
169,569
151,064
250,000
200,000
150,000
100,000
50,000
0
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
32,205
28,454
23,065
24,952
20,795
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
1.50
16.95
15.01
5.46
7.24
8.75
30.71
12.30
7.59
13.03
24.38
13.18
7.24
8.75
30.71
12.30
8.79
29.30
19.52
14.92
015
Annual Report 2015China Southern Airlines Company Limited
For the year ended 31 December
2015
2014
Increase/
(decrease)
%
80.60
74.10
80.50
80.50
69.40
58.90
70.30
69.50
0.55
0.71
0.45
0.53
1.23
4.49
1.19
1.21
5.65
7.89
3.18
4.78
0.55
0.61
0.35
0.50
79.60
73.40
79.50
79.40
69.30
60.40
70.40
69.50
0.60
0.78
0.50
0.58
1.31
5.56
1.45
1.42
6.10
8.64
3.50
5.27
0.54
0.63
0.39
0.51
1.26
0.95
1.26
1.39
0.14
(2.48)
(0.14)
–
(8.33)
(8.97)
(10.00)
(8.62)
(6.11)
(19.24)
(17.93)
(14.79)
(7.38)
(8.68)
(9.14)
(9.30)
1.85
(3.17)
(10.26)
(1.96)
Load factor
Passenger load factor (RPK/ASK) (%)
Domestic
Hong Kong, Macau and Taiwan
International
Overall:
Total load factor (RTK/ATK) (%)
Domestic
Hong Kong, Macau and Taiwan
International
Overall:
Yield (including fuel surcharges)
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:
Yield (excluding fuel surcharges)
Yield per RPK (RMB)
Domestic
Hong Kong, Macau and Taiwan
International
Overall:
016
Summary of Operating Data
For the year ended 31 December
2015
2014
Increase/
(decrease)
%
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 expenses per ATK (RMB)
Flight Volume
Kilometers flown (million)
Hours flown (thousand)
Domestic
Hong Kong, Macau and Taiwan
International
Total:
Number of flights (thousand)
Domestic
Hong Kong, Macau and Taiwan
International
Total:
1.13
3.89
1.04
1.08
5.61
6.69
2.52
4.50
3.15
1.21
4.39
1.11
1.16
5.48
7.00
2.69
4.58
3.73
1,408.50
1,275.57
1,770.25
44.79
422.69
2,237.73
824.53
20.66
91.56
936.75
1,652.46
41.64
332.06
2,026.16
791.45
19.86
72.76
884.07
(6.61)
(11.39)
(6.31)
(6.90)
2.37
(4.43)
(6.32)
(1.75)
(15.55)
10.42
7.13
7.56
27.29
10.44
4.18
4.03
25.84
5.96
017
Annual Report 2015China Southern Airlines Company Limited
As at 31 December 2015, the size and structure of aircraft fleets and the delivery and disposal of aircraft of the Group were as follows:
Number of
aircraft under
operating
lease
Number of
aircraft under
finance lease
Number
of aircraft
purchased
Delivery
during the
reporting
period
Disposal
during the
reporting
period
Total Number
of aircraft
(unit: number of aircraft)
0
8
2
22
40
29
2
0
0
0
94
9
0
20
2
10
11
25
43
1
14
7
0
0
63
11
0
4
3
1
3
32
45
13
0
0
4
17
83
30
3
2
226
191
236
0
0
0
0
7
7
2
5
7
226
198
243
4
4
6
4
2
33
1
54
4
4
58
5
19
16
79
128
43
16
7
4
17
240
50
3
26
653
2
12
14
667
2
1
3
0
3
Models
Passenger Aircraft
Airbus
A380
A330-300
A330-200
A321
A320
A319
Boeing
B787
B777-300ER
B777-200
B757-200
B737-800
B737-700
B737-300
Other
EMB190
Passenger Aircraft
Sub-total
Freighter
B747-400F
B777-200F
Freighter
Sub-total
Total
As at 31 December 2015, the fleets of the airlines of our Group were as follows:
Company
Xiamen
Airlines
Shantou
Airlines
Zhuhai
Airlines
Guizhou
Airlines
Chongqing
Airlines
Henan
Airlines
Total Number of aircraft
440
146
14
10
18
13
26
Note: As the end of the reporting period, the total number of aircraft of Xiamen Airlines included the number of aircraft of Hebei Airlines and Jiangxi
Airlines.
018
Summary of Fleet Data Composition of Aircraft Introduced in 2015
(Number of aircraft)
226
(33.9%)
2015
243
(36.4%)
198
(29.7%)
Purchased
Under finance lease
Under operating lease
Composition of Passenger Aircraft in 2015
(Number of aircraft)
67
(10.3%)
2015
586
(89.7%)
Wide-body aircraft
Narrow-body aircraft
Distribution of Fleets of the Group in 2015
(Number of aircraft)
18
(2.7%)
10
(1.5%)
14
(2.1%)
146
(21.9%)
13
(1.9%)
26
(3.9%)
440
(66.0%)
Xiamen Airlines
Zhuhai Airlines
Chongqing Airlines
The Company
Shantou Airlines
Guizhou Airlines
Henan Airlines
019
Annual Report 2015China Southern Airlines Company Limited 250
200
150
100
50
0
700
560
420
280
140
0
600
480
360
240
120
0
Structure of Introduced Fleets from 2014 to 2015
(Number of aircraft)
226
197
198
186
243
229
Under operating lease
Under finance lease
Purchased
2014
2015
Structure of Fleets from 2014 to 2015
(Number of aircraft)
653
602
10
14
Cargo aircraft
Passenger aircraft
2014
2015
Structure of Passenger Aircraft from 2014 to 2015
(Number of aircraft)
586
545
57
67
Wide-body
passenger aircraft
Narrow-body
passenger aircraft
2014
2015
020
Summary of Fleet Data As at 31 December 2015, average age and the layout of each model of aircraft of the Group were as follows:
Models
Passenger aircraft
Airbus
A380
A330-300
A330-200
A321
A320
A319
Boeing
B787
B777-300ER
B777-200
B757-200
B737-800
B737-700
B737-300
Other
EMB190
Freighter
B747-400F
B777-200F
Average
Average age
(Year)
3.6
4.1
6.6
6.3
6.8
9.3
1.6
1.1
19.5
17.8
4.8
9.4
17.8
3.5
13.4
3.3
6.3
Layout
(Seat)
506
275/284
218/258
179
152
122/138
228/237
309
360
174/180/192/196/197
159/161/164/170
120/128
126
98
/
/
/
021
Annual Report 2015China Southern Airlines Company Limited During the period from 2016-2018, the plans for delivery and disposal of aircraft of the Group are as follows:
2015
2016
2017
2018
As at the
end of the
period
Delivery Disposal
Estimated
data at the
end of the
period
Delivery Disposal
Estimated
data at the
end of the
period
Delivery Disposal
Estimated
data at the
end of the
period
(unit: number of aircraft)
5
19
16
79
128
43
16
7
4
17
240
50
3
26
653
2
12
14
667
3
10
12
3
29
1
58
0
58
5
18
5
5
22
16
89
140
37
16
10
4
10
269
43
45
3
27
1
72
0
72
6
7
5
18
693
2
12
14
707
0
18
5
12
3
5
27
16
107
145
37
16
10
4
5
312
43
45
0
28
757
2
12
14
771
1
64
0
64
5
3
8
0
8
5
32
16
119
148
37
16
10
4
4
355
45
0
29
820
2
12
14
834
1
1
0
1
Models
Passenger Aircraft
Airbus
A380
A330-300
A330-200
A321
A320
A319
Boeing
B787
B777-200
B777-300ER
B757-200
B737-800
B737-700
B737-300
Other
EMB190
Passenger Aircraft
Sub-total
Freighter
B747-400F
B777-200F
Freighter
Sub-total
Total
022
Summary of Fleet Data Estimated Number of Aircraft at the end
of the Five-Year Period
Estimated Growth of Number of Aircraft at the end
of the Five-Year Period
(%)
667
707
612
771
834
1,000
800
600
400
200
0
16
14
12
10
8
6
4
2
0
9.09
8.99
9.05
8.17
6.00
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
As at 31 December 2015, the fleets for general aviation of the Group were as follows:
Number
of aircraft
under
operating
lease
Number
of aircraft
under
finance
lease
Number
of aircraft
purchased
Number
of aircraft
managed
Delivery
during the
reporting
period
Disposal
during the
reporting
period
Total
number
of aircraft
(unit: number of aircraft)
0
0
0
0
0
0
11
9
20
2
1
3
3
3
0
13
10
23
Models
Sikorsky
S76 Serious
S92A
Total
The delivery and disposal plan of the aircraft for general aviation during 2016 to 2018 are as follows:
(unit: number of aircraft)
2015
2016
2017
2018
Data at
the end of
the period
13
10
23
Models
Sikorsky
S76 Serious
S92A
Total
Delivery
Disposal
1
1
0
Estimated
data at
the end of
the period
13
9
22
Estimated
data at the
end of
the period
13
9
22
Delivery
Disposal
0
0
Estimated
data at the
end of
the period
13
9
22
Delivery
Disposal
0
0
023
Annual Report 2015China Southern Airlines Company Limited
Highlights of the Year
Mar
Feb
On 5 February, the 3rd airstrip of
Guangzhou Baiyun International
A i r p o r t w a s f o r m a l l y p u t i n t o
operation. Flight CZ328 operated
by the Company's A380 was the
first flight which landed the 3rd
airstrip at 8:01 am on the same
day.
On 26 March, in the presence of the
Prime Minister of the Netherlands
Mark Rutte, the Company, Xiamen
Airlines and Royal Dutch Airlines
jointly executed a cooperation
agreement for intensified alliance,
which announced that the three
parties would strengthen cooperation
in terms of Sino-Dutch routes.
Apr
After the M8.1 earthquake occurred
in Nepal on 25 April, the Company
initiated emergency mechanism,
adjusted and restored flights and
safely carried nearly 1,200 stranded
passengers back home.
2015
Mar
Mar
Jun
On 15 March, the 40-day Spring
Festival travel of 2015 ended.
During the Spring Festival travel,
the Company operated over 66,000
flights accumulatively and carried
about 10,000,000 passengers.
S t a r t i n g f r o m 2 9 M a r c h, t h e
Company launched the summer
season flight programs. The new
flight seasons of the Company
fully responded to the national
strategy of “One Belt One Road”,
and launched more than 70 flights
to Southeast Asia, Africa, etc.
S t a r t i n g f r o m 2 0 J u n e, t h e
Company upgraded the roundtrip
f l i g h t b e t w e e n B e i j i n g a n d
Amsterdam to A380, which was the
first time that the Company put
A380 into Europe-bound routes.
024
Jun
O n 2 2 J u n e, t h e C o m p a n y
f o r m a l l y o p e n e d t h e d i r e c t
flight between Guangzhou and
S a n F r a n c i s c o . I t i s t h e t h i r d
intercontinental direct flight from
Guangzhou to America after Los
Angeles and New York, and also
the first direct flight from South
China to San Francisco. During
that month, 70 roundtrip flights
of the Company between China
and North America were recorded
weekly. Guangzhou has become
the first gateway for China civil
aviation between South China and
North America.
Aug
O n 2 0 A u g u s t, t h e C o m p a n y
held the “Choose China Southern
Airlines, Enjoy Auckland Food”
press conference in Guangzhou,
which displayed in-flight meals
especially designed by the New
Zealand famous chef El Brown
for Guangzhou-Auckland flight;
the passengers were provided
with the indigenous food of New
Zealand.
Dec
On 16 December, the Company
formally launched the Guangzhou-
Wuhan-Rome flight, which was
the first international flight to
S o u t h E u r o p e i n S o u t h C h i n a
and Central China and also the
first flight of China civil aviation
over the maritime Silk Road from
Guangzhou (departure) to Rome
(destination).
Jul
Aug
Dec
Dec
On 16 July, the Company
opened Lanzhou-Urumqi-
S t P e t e r s b u r g , t h e 1 7t h
international flight launched
by the Company in Urumqi,
w h i c h w o u l d f u r t h e r
s t r e n g t h e n S i n o - R u s s i a
exchange and promote the
economic construction of the
Silk Road and the prosperity
of the aviation industry of the
Western Regions of China.
O n 5 A u g u s t, C h i n a
Southern Airlines opened
Guangzhou-Nairobi flight, the
first direct flight of China’s
civil aviation to Kenya. The
Company and Kenya Airlines
d e v e l o p e d c o d e - s h a r i n g
cooperation in respect of
multiple routes including
G u a n g z h o u - N a i r o b i ,
Nairobi-Lusaka, Dubai and
Guangzhou-Australia, which
provided transit convenience
for passengers.
O n 1 6 D e c e m b e r, t h e
Company opened Guangzhou-
Christchurch direct flight,
which is the only direct flight
of Chinese Mainland to New
Zealand’s south island so far.
At 22:58 of 31 December,
t h e f l i g h t C Z3 5 8 2 o f t h e
C o m p a n y f r o m S h a n g h a i
Hongqiao International Airport
t o G u a n g z h o u s m o o t h l y
landed the Guangzhou Baiyun
International Airport, marking
successful safe operation in
the whole year of 2015.
025
Annual Report 2015China Southern Airlines Company Limited BUSINESS REVIEW
In 2015, with slowdown in world economic growth, and the ruggedness and
hardship on the road of global recovery, China faced constant downward
economic pressure. Meanwhile, in addition to the grim situation of global
aviation safety, domestic and international civil aviation market confronted with
continuous market competition with drastic fluctuations of the RMB exchange
rate and continuously decreasing aviation fuel price. Facing the intricate external
environment, the Group adhered to the line of steady development. On one
hand, the Group withstood the pressure and made the best efforts to ensure
the aviation safety. On the other hand, the Group seized the opportunity of
decreasing fuel price and increasing outbound tourism, which significantly
improved the profit level. In addition, the Group actively responded to the
depreciation of RMB and other challenges so as to reduce exchange loss. Under
the common efforts of the management and all employees, the Group’s business
achievement hit new high and comprehensive competitive force was constantly
improved. The following achievements were made:
Safety and Efficiency
We continuously laid solid foundation for safety, strengthened safety trainings
and further perfected the development of safety dynamic management and
optimized information system, especially the capability to deal with special
situations. During the reporting period, the Group realized 2,200,000 safe flight
hours, accumulatively 15,720,000 safe flight hours and 10,166 hours of general
aviation service, which maintained over 16 years of aviation safety and 21 years
of aviation security. The Group continued to keep the best safety records among
Chinese airlines.
We exerted ourselves to improve operating efficiency and strengthened
flights, capacity and crew resources management, by which we improved our
capability to respond to complex situation. Throughout the whole year, we
launched extensive delay warning for 216 times and optimized over 10,000
flights in total. We focused on improving comprehensive operating efficiency
of intercontinental routes, continued shortening deviation of flight plan and
saved over 5,000 hours of flying time.
Taking advantage of Hub Control Center, we kept improving the transit process,
by which the hub operation efficiency has been promoted effectively.
I.
026
ACCUMULATED
SAFE FLIGHT
15.72
OPTIMIZED OVER
million hours
10,000
flights
Management Discussion and Analysis 027
Annual Report 2015China Southern Airlines Company Limited SIZE OF FLEET
REACHING
667
aircraft
Fleet and Network
In order to actively respond to market demands, we further enlarged the fleet
size and optimized fleet structure. During the reporting period, the Group
introduced 58 aircraft including B777-300ER and B787 and retired 3 aircraft
including B757. We entered into an agreement with Boeing Company, by which
we proposed to purchase 110 aircraft of B737NG and B737MAX series from
Boeing Company and sell 13 B757 aircraft and 3 B733 aircraft to Boeing Company.
We entered into an agreement with Airbus S.A.S, by which we purchased 10
aircraft of A330-300 series from Airbus Company. By the end of the reporting
period, the Group owned 667 aircraft, ranking top in Asia and fifth in the world
in terms of fleet size.
We constantly deepen the strategic transformation by giving full play to existing
advantages and continuing developing the network layout. During the reporting
period, we focused on key market competitive strengths and leading position
in the domestic market. At the same time, we firmly seized the strategic
opportunity of “One Belt One Road” to perfect international layout. We focused
on strengthening involvement in Europe and North America and appropriately
opened new flights to Australia and New Zealand. During the reporting period,
we launched flights to Nairobi, Christchurch and Rome besides opening more
flights from Guangzhou to Sydney, Melbourne, Perth, Los Angeles, New York,
etc. In addition, we strengthened the Urumqi hub and opened flights from
Urumqi to Tehran, Islamabad, etc.
028
Management Discussion and Analysis THE REVENUE FROM
THE FIRST CLASS AND
BUSINESS CLASS OF
INTERNATIONAL
FLIGHTS INCREASED
BY NEARLY
+20%
OUR OFFICAL
WEBSITE HAD
90.93
million views
029
Market and Service
During the reporting period, the Group closely followed the hot spots of
market and adhered to precision, internationalization and E-commercialization
on passenger service marketing. Based on the market characteristics and
competitive environments of different times and regions, we optimized the
transport capacity input and price strategy in an efficient and precision way.
We leveraged the outbound tourism boom and strengthened international
marketing. Throughout the year, the passenger load factor of international
flights exceeded 80%, and the revenue from the first class and business class of
international flights increased by nearly 20% compared with the same period of
the previous year, and the intercontinental flights realized annual profit-making
for the first time. We continued optimizing the official website and mobile
application of the Company and attached high importance to flow acquisition,
which constantly improved conversion rate of electronic marketing. In the
whole year, our official website had 90,930,000 views, the total number of social
media followers reached as much as 8,050,000, and the APP had 2,170,000 new
downloads, which was leading among domestic airlines. During the reporting
period, the sales volume of mobile application and WeChat nearly doubled, and
the ability of applying “Internet +” was improved efficiently.
During the reporting period, we constantly improved the operation level of
freighter, optimized the capacity input and network layout of Shanghai and
Guangzhou hubs. We explored the market potential of bellyhold, and the
international transit cargo volume of Guangzhou increased by 11% compared
with the same period of the previous year; the transport volume of “China
Southern Airlines Express” increased by 27% compared with the same period
of the previous year. We seized the opportunity of cross-border online retailers
which developed rapidly with a sound trend. During the reporting period,
based on consolidating the marine oil business of the Company, we actively
developed onshore business, and the general aviation business was diversified
gradually, realizing profit-making for 11 consecutive years.
Annual Report 2015China Southern Airlines Company Limited During the reporting period, the Group improved services with full series of
service products and whole-process service care and tried to bring passengers
a relaxed and pleasant experience. We spared no effort to push service
electronization, becoming the number one Chinese airlines in the number
of electronic check-ins. We launched Nan Hang Xing and Guan Ai Qing series
products and provided special passengers with warm services. We launched kid’s
gift packs, kid’s meal and in-flight kid’s exclusive channel, creating surprises for
child passengers. We pushed “Fast Pass” service, transit hotel booking on our
official website and a through bill of international transit flight, and perfected
online ordering products. We also realized quarterly Premiere mechanism of
blockbuster on board to make passengers more relaxed. We specially set up
the customer care center, preliminarily realized whole-process customer care
and the complaint ratio of passengers was substantially lower than the industry
average.
Alliance and Cooperation
During the reporting period, we continued deepening the cooperation relationship
with SKYTEAM partners, which enlarged the market coverage and overseas
recognition of the Company in Europe and other regions. We established interaction
mechanism with alliance partners in the pilot cities in China and Europe, the sales
revenue of relevant flights increased remarkably.
During the reporting period, we entered into a strategic cooperation framework
agreement with Capital Airports Holding Company – an indication of the Group’s
status as the leading operation airline of Beijing new airport. We continued acting
as the leading partner and exclusive official airline sponsor of Sydney Festival and
Melbourne Festival and the major partner of Melbourne Football Club which was
the most time-honored sport club in Australia, so as to deepen into the mainstream
market of Australia through sports and culture. Furthermore, we closely cooperated
with key international regional tourism agencies and airports to push the all-round
publicity of the international image brand of the Group.
030
Management Discussion and Analysis TOTAL NUMBER OF THE
MEMBERS OF THE SKY
PEARL CLUB BROKE
THROUGH
25
million
Member and Employee
During the reporting period, Sky Pearl Club had another 4,200,000 new members,
breaking through 25,000,000 in total number. The customer-oriented Group
continued optimizing the exclusive products for members and launched high-
end member exclusive interests, especially improving the experience of high
value members. We actively tried the cooperation projects in the fields of
automobile and real estate, so as to create more values for members. In addition,
we initiated the member’s day activity on the 28th day of every month for
the first time, constantly launched more exclusive preferential products and
services for members and set off the member theme marketing of domestic
airline companies.
During the reporting period, we focused on key issues, optimized the
compensation and welfare policies and motivated the vitality of employees.
We perfected post development channel and realized long-term employee
incentive; we officially launched the “Young Employee Cultivation Program”
which comprehensively promoted the growth of young employees. We
innovated the services for employees, and enhanced employees’ sense of
belonging by providing value-added and creative services. During the reporting
period, the Group was named “National Top 30 Employers of China” and “the
Employer with the Most Woman Concerns of China” of the year.
031
Annual Report 2015China Southern Airlines Company Limited Environment and Society
As a responsible corporate citizen, we have been adhering to the ideas of
“Green Flight, Green Consumption and Green Innovation”, actively responding
to and practising the national policies. The Company’s environmental
protection policies cover various areas, including energy conservation and
emission reduction, improvement of energy efficiency, optimization of waste
disposal, transformation of the airframe for energy conservation, optimization
of flight route, and paperless office. In addition, we have been sharing the
idea of environmental protection with our clients to make them enjoy our
quality services, and at the same time understand our efforts in environmental
protection and become a part of it.
We highly value the opinions and suggestions from all stakeholders such as
investors, governments, clients, employees, industrial associations, partners,
communities, experts, media and peers. We hold the firm belief that only by
establishing a stable, open and transparent mechanism for communication
among the stakeholders can we achieve a win-win situation by promoting
sustainable development of the Company and the construction of a
harmonious society. During the reporting period, we have communicated
with approximately 8,000 stakeholders on matters in relation to our social
responsibilities by ways of questionnaires, group discussions and interviews,
the results of such communication will be used as important references to the
review and promotion of our plans for sustainable development.
032
Management Discussion and Analysis PROFIT ATTRIBUTE TO
EQUITY SHAREHOLDERS
OF THE COMPANY
3,736
(RMB million)
Profit and Distribution of Dividend
In 2015, the Group realised the operating revenue of RMB111,652 million and the
profit attributable to the equity shareholders of the Company of RMB3,736 million.
The Board is pleased to recommend the payment of a final dividend of RMB0.8
(inclusive of applicable tax) per 10 shares for the year ended 31 December 2015,
totalling approximately RMB785 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 2015 annual general meeting of the Company.
PROPOSED
DISTRIBUTION OF
DIVIDEND
785
(RMB million)
033
Annual Report 2015China Southern Airlines Company Limited Tan Wan Geng
President
II. 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 RMB3,736 million was recorded in 2015 as compared to
the profit attributable to equity shareholders of the Company of RMB1,777 million in 2014. The Group’s operating revenue
increased by RMB3,068 million or 2.83% from RMB108,584 million in 2014 to RMB111,652 million in 2015. Passenger load
factor increased by 1.1 percentage point from 79.4% in 2014 to 80.5% in 2015. Passenger yield (in passenger revenue per RPK)
decreased by 8.62% from RMB0.58 in 2014 to RMB0.53 in 2015. Average yield (in traffic revenue per RTK) decreased by 9.30%
from RMB5.27 in 2014 to RMB4.78 in 2015. Operating expenses decreased by RMB4,534 million or 4.28% from RMB106,026
million in 2014 to RMB101,492 million in 2015. As a result of the increase of operating revenues and the decrease in operating
expenses, operating profit of RMB13,438 million was recorded in 2015 as compared to operating profit of RMB4,748 million
in 2014, increased by RMB8,690 million.
034
Management Discussion and Analysis III. OPERATING REVENUE
Traffic revenues
Including: Passenger revenues
－Domestic
－Hong Kong, Macau
and Taiwan
－International
Cargo and mail revenues
Other operating revenues
Mainly including:
Commission income
Hotel and tour operation income
General aviation income
Expired sales in advance of carriage
Ground services income
Total operating revenues
Less: fuel surcharge income
Total operating revenue excluding fuel surcharge
2015
2014
Operating
revenue
RMB Million
Percentage
Operating
revenue
% RMB Million
Percentage
%
107,099
95.92
104,328
96.08
100,238
76,570
2,517
21,151
6,861
4,553
1,545
621
490
459
345
111,652
(6,300)
105,352
4.08
100.00
97,145
76,647
2,497
18,001
7,183
4,256
1,335
508
576
459
293
108,584
(13,746)
94,838
3.92
100.00
Changes in
operating
revenue
%
2.66
3.18
(0.10)
0.80
17.50
(4.48)
6.98
15.73
22.24
(14.93)
–
17.75
2.83
(54.17)
11.09
Traffic Revenues composition
(RMB million)
6,861
(6.41%)
7,183
(6.89%)
2015
2014
100,238
(93.59%)
97,145
(93.11%)
Passenger Revenues
Cargo and Mail Revenues
035
Annual Report 2015China Southern Airlines Company Limited
21,151
(21.10%)
2,517
(2.51%)
Passenger revenues composition
(RMB million)
18,001
(18.53%)
2,497
(2.57%)
2015
2014
International
Hong Kong, Macau and Taiwan
Domestic
76,570
(76.39%)
76,647
(78.90%)
Substantially all of the Group’s operating revenues is attributable to airlines transport operations. Traffic revenues accounted
for 96.08% and 95.92% of total operating revenues in 2014 and 2015, respectively. Passenger revenues and cargo and mail
revenues accounted for 93.59% and 6.41%, respectively of the total traffic revenues in 2015. During the reporting period,
the Group’s total traffic revenues was RMB107,099 million, representing an increase of RMB2,771 million or 2.66% from prior
year, mainly due to the increase of transport capacity and the passenger capacity volume. The other operating revenues is
mainly derived from commission income, hotel and tour operation income, general aviation income, expired sales in advance
of carriage and ground services income.
The increase in operating revenue was primarily due to a 3.18% increase in passenger revenues from RMB97,145 million in
2014 to RMB100,238 million in 2015. The total number of passengers carried increased by 8.43% to 109.42 million passengers
in 2015. RPKs increased by 13.78% from 166,629 million in 2014 to 189,588 million in 2015, primarily as a result of the increase
in number of passengers carried. Passenger yield per RPK decreased from RMB0.58 in 2014 to RMB0.53 in 2015, which is
mainly due to the decrease of average ticket price.
Domestic passenger revenue, which accounted for 76.39% of the total passenger revenues in 2015, decreased by 0.10%
from RMB76,647 million in 2014 to RMB76,570 million in 2015. Domestic passenger traffic in RPKs increased by 8.68%, while
passenger capacity in ASKs increased by 7.24%, resulting in an increase in passenger load factor by 1 percentage points from
79.6% in 2014 to 80.6% in 2015. Domestic passenger yield per RPK decreased from RMB0.60 in 2014 to RMB0.55 in 2015.
Hong Kong, Macau and Taiwan passenger revenue, which accounted for 2.51% of total passenger revenues, increased by
0.80% from RMB2,497 million in 2014 to RMB2,517 million in 2015. For Hong Kong, Macau and Taiwan flights, passenger
traffic in RPKs increased by 9.72%, while passenger capacity in ASKs increased by 8.75%, resulting in an increase in passenger
load factor by 0.7 percentage points from 73.4% in 2014 to 74.1% in 2015. Passenger yield per RPK decreased from RMB0.78
in 2014 to RMB0.71 in 2015.
International passenger revenue, which accounted for 21.10% of total passenger revenues, increased by 17.50% from
RMB18,001 million in 2014 to RMB21,151 million in 2015. For international flights, passenger traffic in RPKs increased by
32.35%, while passenger capacity in ASKs increased by 30.71%, resulting in a 1 percentage points increase in passenger load
factor from 79.5% in 2014 to 80.5% in 2015. Passenger yield per RPK decreased from RMB0.50 in 2014 to RMB0.45 in 2015.
Cargo and mail revenues, which accounted for 6.41% of the Group’s total traffic revenues and 6.14% of total operating
revenues, decreased by 4.48% from RMB7,183 million in 2014 to RMB6,861 million in 2015. The decrease was attributable
to the depression of freight market and decrease of freight rates.
Other operating revenue increased by 6.98% from RMB4,256 million in 2014 to RMB4,553 million in 2015. The increase was
primarily due to the rise of commission income, hotel and tour operation income.
036
Management Discussion and Analysis IV. OPERATING EXPENSES
Total operating expenses in 2015 amounted to RMB101,492 million, representing a decrease of 4.28% or RMB4,534 million
over 2014, primarily due to the decrease of jet fuel cost. Total operating expenses as a percentage of total operating revenues
decreased from 97.64% in 2014 to 90.90% in 2015.
Operating expenses
2015
2014
RMB Million
Percentage
RMB Million
Percentage
Flight operation expenses
50,412
49.67
58,901
55.55
Mainly including:
Jet fuel costs
Aircraft operating lease charges
Flight personnel payroll and welfare
Maintenance expenses
Aircraft and transportation
service expenses
Promotion and selling expenses
General and administrative expenses
Depreciation and amortisation
Impairment on property, plant
and equipment
Others
26,274
6,153
8,070
10,407
17,908
6,976
2,464
11,845
90
1,390
37,728
5,383
6,803
8,304
16,402
7,841
2,337
10,828
215
1,198
10.25
17.64
6.87
2.43
11.67
0.09
1.38
7.83
15.47
7.40
2.20
10.21
0.20
1.14
Total operating expenses
101,492
100.00
106,026
100.00
Composition of operating expenses in 2015
0.09%
11.67%
1.38%
2.43%
6.87%
17.64%
49.67%
10.25%
Flight operation expenses
Aircraft and traffic servicing expenses
General and administrative expenses
Maintenance expenses
Promotion and selling expenses
Depreciation and amortisation
Impairment on property, plant and equipment
Others
037
Annual Report 2015China Southern Airlines Company Limited
Comparison of operating expenses in 2014 and 2015
Flight operation expenses
Maintenance expenses
Aircraft and traffic servicing expenses
Promotion and selling expenses
General and administrative expenses
Depreciation and amortisation
Impairment on property,
plant and equipment
Others
2015
2014
0
(RMB million)
10000
20000
30000
40000
50000
60000
Flight operation expenses, which accounted for 49.67% of total operating expenses, decreased by 14.41% from RMB58,901
million in 2014 to RMB50,412 million in 2015, primarily as a result of decrease in jet fuel costs because of decrease in
international average fuel prices. Jet fuel costs, which accounted for 52.12% of flight operation expenses, decreased by
30.36% from RMB37,728 million in 2014 to RMB26,274 million in 2015.
Maintenance expenses, which accounted for 10.25% of total operating expenses, increased by 25.33% from RMB8,304 million
in 2014 to RMB10,407 million in 2015. The increase was mainly due to fleet expansion.
Aircraft and transportation service expenses, which accounted for 17.64% of total operating expenses, increased by 9.18%
from RMB16,402 million in 2014 to RMB17,908 million in 2015. The increase was primarily due to a 9.66% rise in landing
and navigation fees from RMB10,496 million in 2014 to RMB11,510 million in 2015, resulted from the increase of transport
capacity and the increase in the number of take-off and landings.
Promotional and selling expenses, which accounted for 6.87% of total operating expenses, decreased by 11.03% from
RMB7,841 million in 2014 to RMB6,976 million in 2015.
General and administrative expenses, which accounted for 2.43% of the total operating expenses, increased by 5.43% from
RMB2,337 million in 2014 to RMB2,464 million in 2015.
V. OPERATING PROFIT
Operating profit of RMB13,438 million was recorded in 2015 (2014: RMB4,748 million). The increase in operating profit was
mainly due to the increase of operating income by the RMB3,068 million or 2.83% and the decrease of operating cost by
the RMB4,534 million or the 4.28% compared with 2014.
038
Management Discussion and Analysis VI. OTHER NET INCOME
Other net income increased by RMB1,088 million from RMB2,190 million in 2014 to RMB3,278 million in 2015, mainly due
to the increase of government grants.
Interest expenses decreased by RMB5 million from RMB2,193 million in 2014 to RMB2,188 million in 2015 was mainly due
to the increase in finance lease interests and decrease of loan interests paid.
Net exchange loss of RMB5,953 million was recorded in 2015, an increase of RMB5,661 million from RMB292 million in
2014, mainly due to the relatively large increase in the exchange rate for US dollars against RMB, which was affected by the
reformation of RMB central parity and the raise of interest rates by FED RESERVE.
VII. INCOME TAX
Income tax expense of RMB1,300 million was recorded in 2015, increased by RMB632 million from RMB668 million in 2014,
mainly due to the increase of profit before tax during the reporting period.
VIII. LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE
As at 31 December 2015, the Group’s current liabilities exceeded its current assets by RMB51,422 million. For the year ended
31 December 2015, the Group recorded a net cash inflow from operating activities of RMB23,734 million, a net cash outflow
from investing activities of RMB6,931 million and a net cash outflow from financing activities of RMB27,695 million and a
decrease in cash and cash equivalents of RMB10,892 million.
Net cash generated from operating activities
Net cash used in investing activities
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Exchange gain/(losses) on cash and cash equivalents
Cash and cash equivalents at 31 December
2015
RMB million
2014
RMB million
23,734
(6,931)
(27,695)
(10,892)
15,414
38
4,560
13,570
(9,760)
(131)
3,679
11,748
(13)
15,414
In 2015 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 2015, the Group had banking facilities with several PRC
commercial banks for providing loan facilities up to approximately RMB173,739 million (2014: RMB187,133 million), of which
approximately RMB131,021 million (2014: RMB126,703 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 2016. 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.
039
Annual Report 2015China Southern Airlines Company Limited
The analyses of the Group’s borrowings and lease obligation are as follows:
Composition of borrowings and lease obligation
Total borrowings and lease obligation
Fixed rate borrowings and lease obligation
Floating rate borrowings and lease
obligation
2015
RMB million
2014
RMB million
101,710
112,956
21,810
79,900
8,587
104,369
Change
%
(9.96)
153.99
(23.44)
21,810
(21.44%)
8,587
(7.60%)
2015
2014
79,900
(78.56%)
104,369
(92.40%)
Floating rate borrowings and lease obligation (RMB million)
Fixed rate borrowings and lease obligation (RMB million)
As at 31 December 2015, the notional amount of the outstanding interest rate swap agreements was approximately USD581
million. These agreements will expire between 2016 and 2024.
Analysis of borrowings and lease obligation by currency
2015
RMB million
2014
RMB million
62,592
31,742
7,376
101,710
105,393
5,204
2,359
112,956
2015
RMB million
2014
RMB million
36,418
14,143
25,199
25,950
101,710
26,971
22,713
35,772
27,500
112,956
USD
RMB
Others
Total
Analysis of borrowings and lease obligation by maturity
Within 1 year
After 1 year but within 2 years
After 2 years but within 5 years
After 5 years
Total
040
Management Discussion and Analysis
The Group’s capital structure at the end of the year is as follows:
Total liabilities (RMB million)
Total assets (RMB million)
Debt ratio
2015
136,365
185,989
73%
2014
145,195
189,688
77%
Change
(6.08%)
(1.95%)
Decreased by
4 percentage
points
136,365
145,195
2015
2014
185,989
189,688
Total assets (RMB million)
Total liabilities (RMB million)
The Group monitors capital on the basis of debt ratio, which is calculated as total liabilities divided by total assets. The debt
ratio of the Group at 31 December 2015 was 73%, as compared to 77% at 31 December 2014.
IX. MAJOR CHARGE ON ASSETS
As at 31 December 2015, certain aircraft of the Group with an aggregate carrying value of approximately RMB88,060 million
(2014: RMB99,119 million) were mortgaged under certain borrowings and lease agreements.
X. COMMITMENTS AND CONTINGENCIES
Commitments
As at 31 December 2015, the Group had capital commitments (excluding investment commitment) of approximately
RMB90,160 million (2014: RMB64,589 million). Of such amounts, RMB83,427 million related to the acquisition of aircraft and
related flight equipment and RMB6,733 million for other projects.
As at 31 December 2015, 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
2015
RMB million
2014
RMB million
34
56
90
41
131
70
52
122
–
122
041
Annual Report 2015China Southern Airlines Company Limited
Contingent Liabilities
(a)
The Group leased certain properties and buildings from CSAHC which located in Guangzhou, Wuhan and Haikou, etc.
However, to the knowledge of the Group, 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 such
properties and buildings.
In addition, the Group is applying title certificates for certain of the Group’s properties and land use rights certificates
for certain properties and parcels of land. The Company is of the opinion that the use of and the conduct of operating
activities at these properties and these parcels of land are not affected by the fact that the Group has not yet obtained
the relevant certificates.
(b)
The Company and its subsidiary, Xiamen Airlines, entered into agreements with certain pilot trainees and certain banks to
provide guarantees on personal bank loans amounting to RMB627 million (31 December 2014: RMB646 million) that can
be drawn by the pilot trainees to finance their respective flight training expenses. As at 31 December 2015, total personal
bank loans of RMB454 million (31 December 2014: RMB486 million), under these guarantees, were drawn down from the
banks. During the year, the Group paid RMB4 million (2014: RMB2 million) to the banks due to the default of payments of
certain pilot trainees.
(c)
The Company is engaged in International Court of Arbitration proceedings (“ICC arbitration proceedings”) in London against
a lessor SASOF TR-81 AVIATION IRELAND LIMITED, arising out of the redelivery of two Boeing 737 aircraft. The lessor has
made various claims of approximately USD13 million in the arbitration proceedings relating to the redelivery condition of
the aircraft, and the Company has counterclaimed against the lessor for the recovery of approximately USD9.8 million. The
hearing in the ICC arbitration proceedings commenced in London on 7 March 2016, and will conclude on 19 April 2016,
and the award of the Arbitral Tribunal is awaited. As of the date of this report, the Company cannot reasonably predict the
result and potential financial impact of this pending arbitration, if any. Therefore, no additional provision has been made
against this pending arbitration.
(d)
With regard to the incident of the investigation on the Company’s former chairman as a result of suspected sever
violation of disciplines, management of the Company, including the internal audit of the Company, have carried out
a robust assessment by taking into consideration the fact that the former chairman was a non-executive director
and has not involved in the operation of the Company. Based on the work carried out, we have not identified any
possible material misstatements of the financial statements caused by the incident.
042
Management Discussion and Analysis XI. RECONCILIATION STATEMENTS OF DIFFERENCES IN FINANCIAL REPORT
PREPARED UNDER DIFFERENT GAAPS
Differences in net profit and net asset attributable to equity shareholders of the Company
under consolidated financial information in financial statements between IFRSs and PRC
GAAP
Net profit attributable to
Equity Shareholder
of the Company
Net asset attributable to
Equity shareholders
of the Company
Unit: RMB million
2015
3,851
1
(222)
–
(2)
55
53
31 December
2015
31 December
2014
38,966
35,554
2014
1,773
1
(28)
23
(2)
9
1
(30)
101
–
4
(24)
28
(31)
323
–
6
(79)
(25)
Amounts under PRC GAAP
Adjustments:
Government grants
Capitalisation of exchange difference of
specific loans
Non-controlling interests of a subsidiary
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
Amounts under IFRSs
3,736
1,777
39,045
35,748
1.
2.
3.
4.
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.
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.
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.
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.
043
Annual Report 2015China Southern Airlines Company Limited
XII. CAPITAL NEEDS FOR MAINTAINING THE EXISTING BUSINESS OPERATION
AND COMPLETING THE INVESTMENT PROJECTS UNDER CONSTRUCTION
Capital commitment
Contractual arrangement
Time schedule
Currency: RMB
Financing
instruments
Commitments in
Authorized and contracted
RMB19,074 million within 1 year
Debt financing
respect of aircraft and
flight equipment of
RMB83,427 million
Investment commitments
Authorized and contracted
of RMB90 million
Other commitments of
RMB2,550 million
Operating lease
commitments of
RMB36,109 million
Authorized and contracted
Non-cancellable operating
leases in respect of
properties, aircraft and
flight equipment
(inclusive of 1 year); RMB22,359
million after 1 year but within
2 years (inclusive of 2 years);
RMB18,898 million after 2 years
but within 3 years (inclusive of
3 years); RMB23,096 million after
3 years
Others
Others
RMB6,560 million within 1 year
Others
(inclusive of 1 year); RMB5,654
million after 1 year but within
2 years (inclusive of 2 years);
RMB4,965 million after 2 year
but within 3 years (inclusive of
3 years); RMB18,930 million after
3 years
The Group conducted a forecast on the cash flow for the twelve months ended 31 December 2015 and believed that adequate
liquidity is available to finance the working capital and capital expenditure requirements of the Group during the period.
The Group primarily depended on its net cash inflow from operations and the ability to obtain financing to meet its debt
obligations as they fall due. In respect to the capital commitments and other financing requirements, as at 31 December
2015, the Group has entered into facility agreements with a number of PRC banks, with a provision of loan facilities up to
approximately RMB173,739 million in 2016 and afterwards, and the unused provision of loan facilities was approximately
RMB131,021 million. The Group believes that sufficient financing will be made available to the Group.
XIII. Analysis of Industrial and Operational Information
During the reporting period, the industry has witnessed relatively fast development. The total transport tonne kilometers
have reached 85 billion, with 440 million for passenger capacity, and 6.25 million tonnes for cargo and mail, an increase of
13.7%, 11.1% and 5.2%, respectively as compared with the same period of the previous year.
In recent years, China’s civil aviation industry has been, on one hand challenged by economic downturn, customer diversion
by high-speed rail transport and other unfavorable factors, while on the one hand, opportunities for fast and effective growth
in the future are available with the increase in residents’ incomes and the rapid development of outbound travel market.
The International Air Transport Association estimates that in 2016 the profits of global aviation industry will stand at USD
36.3 billion, representing an increase of 10% as compared with the same period of the previous year; The Civil Aviation
Administration of China estimates that in 2016 air passenger of China’s civil aviation will reach 485 million, representing an
increase of 10.7% as compared with the same period of the previous year.
In conclusion, China’s civil aviation industry is expected to maintain the trend of growth and meet the expectation of
profitability in 2016.
044
Management Discussion and Analysis
XIV. ANALYSIS ON INVESTMENTS
1.
Important equity investment
On 8 December 2015, the Company entered into the Equity Transfer Agreement with Xiamen Jianfa Group Co., Ltd.,
by which the Company agreed to purchase 4% of the equity of Xiamen Airlines at the price of RMB626,666,667.
On 2 February 2016, the Company entered into the Transfer Agreement between CSAHC and the Company on Transferring
100% Equity of SAIETC with CSAHC, our controlling shareholder, by which the Company purchased 100% equity of
SAIETC from CSAHC at the price of RMB400,570,400.00
2.
Important non-equity investment
On 17 December 2015, the Company entered into the Purchase Contract for 80 B737NG/MAX Aircraft with the Boeing
Company, and the transaction is invalid until approvals are obtained from the relevant national departments.
On 17 December 2015, Xiamen Airlines, a subsidiary of the Company, entered into the Purchase Contract for 30
B737MAX Aircraft with the Boeing Company, by which Xiamen Airlines agreed to purchase 30 B737MAX aircraft from
the Boeing Company. The transaction under such contract is invalid until approvals are obtained from the relevant
national departments.
On 23 December 2015, the Company entered into the Purchase Contract for 10 A330 Aircraft with Airbus S.A.S, by
which the Company agreed to purchase 10 A330-300 aircraft from Airbus S.A.S. The transaction under such contract
is invalid until approvals are obtained from the relevant national departments.
3.
Financial assets in fair value
Unit: RMB million
Initial
Investment
cost
Equity
ownership
(%)
Carrying
value at
the end of
the period
Profit and
loss for
the period
9
16
25
0.57
0.013
/
43
61
104
–
–
–
Changes
in owners’
equity during
the reporting
period Accounting item
2 Available-for-sale
financial assets
(2) Available-for-sale
financial assets
Sources of
the shares
Purchase
Purchase
/
/
Stock code
Abbreviation
000099
601328
CITIC Offshore Helicopter
Bank of Communications
Total
045
Annual Report 2015China Southern Airlines Company Limited
4.
Shareholding in non-listed company
Initial
investment
amount
Holding
amount
(shares)
246
246
/
/
Equity
ownership
(%)
33.98
/
Name
Finance Company
Total
Unit: RMB million
Carrying
value at
the end of
the period
261
261
Profit and
loss for
the period
46
46
Changes
in owners’
equity during
the reporting
period
Accounting item
(6)
Interest in
associates
Source of
the shares
Purchase
(6)
/
/
5.
6.
Trust management in respect of non-financial corporations and investment in derivatives
(1)
Trust management
During the reporting period, the Company did not make any trust management.
(2)
Entrusted loan
During the reporting period, the Company did not have any entrusted loan.
Use of proceeds from fund-raising
During the reporting period, the Company did not have any fund-raising activity and there was no application of
fund raised in previous periods that was being applied in this period.
XV. MAJOR ASSETS AND SHAREHOLDING DISPOSAL
On 17 December 2015, the Company entered into the Sales Contract for 7 B757 Aircraft, 5 Standby Engines and Aviation Materials,
Sales Contract for 6 B757 Aircraft and 4 Spare Engines and Sales Contract for 3 B733 Aircrafts, 4 Spare Engines and Aviation Materials
with the Boeing Company, by which the Company agreed to sell 13 B757 aircraft and 9 spare engines, 3 B733 aircraft and
4 standby engines and certain aviation materials to the Boeing Company.
XVI. ANALYSIS ON MAJOR SUBSIDIARIES AND OTHER COMPANIES WITH
SHAREHOLDINGS
1. Main operational information of the six subsidiaries of the Group:
Contribution
to the
Group’s
passengers
carried
(%)
22.7
2.7
1.5
2.6
2.4
4.2
Number of
passengers
carried
(thousand)
24,870.0
2,921.1
1,675.0
2,871.8
2,644.5
4,620.1
Cargo and
mail carried
(tonne)
228,383.7
21,844.0
12,375.7
23,993.3
17,931.7
44,379.5
Contribution
to the
Group’s
cargo and
mail carried
(%)
15.1
1.4
0.8
1.6
1.2
2.9
Contribution
to Group’s
RTK
(%)
15.5
1.5
1.1
1.8
1.4
2.9
RTK
(million)
346,946.6
34,061.2
25,512.3
41,672.5
31,340.6
63,971.2
Contribution
to Group’s
RPK(%)
18.6
1.9
1.4
2.3
1.7
3.5
RPK
(million)
3,521,650.9
351,650.1
266,100.0
430,080.3
328,275.1
654,107.5
Name
Xiaman Airlines
Shantou Airlines
Zhuhai Airlines
Guizhou Airlines
Chongqing Airlines
Henan Airlines
Note:
The operational information of Xiamen Airlines includes operational information of its subsidiary Hebei Airlines.
046
Management Discussion and Analysis
2.
Information of Subsidiaries
(1)
Xiamen Airlines
Xiamen Airlines was established on 25 July 1984 with registered capital of RMB5 billion. The legal representative
is Che Shang Lun. The Company holds 55% of the shares in Xiamen Airlines; Xiamen Jianfa Group Co., Ltd.
and Fujian Investment Group Co., Ltd. also hold 34% and 11% in Xiamen Airlines, respectively.
As at 31 December 2015, Xiamen Airlines (including Hebei Airlines and Jiangxi Airlines) had a fleet of 146
aircraft. During the reporting period, Xiamen Airlines (including Hebei Airlines, Jiangxi Airlines) completed 3,460
million revenue tonne kilometers, representing an increase of 15.1% as compared to the same period of the
previous year. Xiamen Airlines carried 24,870,000 passengers and 228,000 tonnes of cargos, representing an
increase of 11.7% and 1.1%, respectively as compared to the same period of the previous year. The average
passenger load factor was 75.8%, representing an increase of 0.9 percentage point as compared to the same
period of the previous year. The average load factor was 64.5%, representing a decrease of 1.2 percentage
points as compared to the same period of the previous year.
In 2015, Xiamen Airlines earned operating revenue of RMB19,915 million, representing an increase of 11.69%
as compared to the same period of the previous year. And net profit of RMB1,170 million, representing an
increase of 54.97% as compared to the same period of the previous year. As at 31 December 2015, Xiamen
Airlines’ total assets amounted to RMB38,063 million, and net assets amounted to RMB14,579 million.
(2)
Shantou Airlines
Shantou Airlines was established in July 1993 with registered capital of RMB0.28 billion. The legal representative
is Dong Su Guang. The Company holds 60% of the shares in Shantou Airlines; Shantou Aviation Investment
Co., Ltd. holds 40% of the shares in Shantou Airlines.
As at 31 December 2015, Shantou Airlines had a fleet of 14 aircraft. During the reporting period, Shantou
Airlines completed 340 million revenue tonne kilometers, representing a decrease of 3.6% as compared to the
same period of the previous year. Shantou Airlines carried 2,921,000 passengers and 22,000 tonnes of cargos,
representing a decrease of 5.7% and 2.6%, respectively as compared to the same period of the previous year.
The average passenger load factor was 79.2%, representing a decrease of 0.6 percentage point as compared
to the same period of the previous year. The average load factor was 72.5%, representing a decrease of 0.7
percentage point as compared to the same period of the previous year.
047
Annual Report 2015China Southern Airlines Company Limited (3)
Zhuhai Airlines
Zhuhai Airlines was established in May 1995 with registered capital of RMB0.25 billion. The legal representative
is Wang Zhi Xue. The Company holds 60% of the shares in Zhuhai Airlines; Zhuhai Stated-owned Asset
Supervision and Administration Commission holds 40% of the shares in Zhuhai Airlines.
As at 31 December 2015, Zhuhai Airlines had a fleet of 10 aircraft. During the reporting period, Zhuhai Airlines
completed 260 million revenue tonne kilometers, representing an increase of 5.9% as compared to the
same period of the previous year. Zhuhai Airlines carried 1,674,000 passengers and 12,000 tonnes of cargos,
representing an increase of 5.9% and 4.4%, respectively as compared to the same period of the previous year.
The average passenger load factor was 80.6%, representing an increase of 4.9 percentage points as compared
to the same period of the previous year. The average load factor was 72%, representing an increase of 3.4
percentage points as compared to the same period of the previous year.
(4) Guizhou Airlines
Guizhou Airlines was established in November 1991 with registered capital of RMB0.65 billion. The legal
representative is Zhang Sheng. The Company holds 60% of the shares in Guizhou Airlines; Guizhou Industrial
Investment (Group) Co., Ltd. holds 40% of the shares in Guizhou Airlines.
As at 31 December 2015, Guizhou Airlines had a fleet of 18 aircraft. During the reporting period, Guizhou
Airlines completed 410 million revenue tonne kilometers, representing an increase of 16.8% as compared to
the same period of the previous year. Guizhou Airlines carried 2,871,000 passengers and 24,000 tonnes of
cargos, representing an increase of 10.4% and 11.3%, respectively as compared to the same period of the
previous year. The average passenger load factor was 78.8%, representing an increase of 1.4 percentage points
as compared to the same period of the previous year. The average load factor was 70.4%, representing a
decrease of 0.3 percentage point as compared to the same period of the previous year.
(5) Chongqing Airlines
Chongqing Airlines was established in May 2007 with registered capital of RMB1.2 billion. The legal representative
is Liu De Jun. The Company holds 60% of the shares in Chongqing Airlines; Chongqing City Transportation
Development & Investment Group Company Limited holds 40% of the shares in Chongqing Airlines.
As at 31 December 2015, Chongqing Airlines had a fleet of 13 aircraft. During the reporting period, Chongqing
Airlines completed 310 million revenue tonne kilometers, representing an increase of 4.3% as compared to the
same period of the previous year. Chongqing Airlines carried 2,644,000 passengers, representing an increase
of 4.9% as compared to the same period of the previous year. Chongqing Airlines carried 18,000 tonnes of
cargos, representing a decrease of 9.9% as compared to the same period of the previous year. The average
passenger load factor was 83.8%, representing an increase of 1 percentage point as compared to the same
period of the previous year. The average load factor was 77.2%, representing an increase of 2.3 percentage
points as compared to the same period of the previous year.
048
Management Discussion and Analysis (6) Henan Airlines
Henan Airlines was established in September 2013 with registered capital of RMB6 billion. The legal representative
is Pei Ai Zhou. The Company holds 60% of the shares in Henan Airlines; Henan Civil Aviation and Investment
Co., Ltd. holds 40% of the shares in Henan Airlines.
As at 31 December 2015, Henan Airlines had a fleet of 26 aircraft. During the reporting period, Henan Airlines
completed 640 million revenue tonne kilometers, representing an increase of 6.8% as compared to the
same period of the previous year. Henan Airlines carried 4,620,000 passengers and 44,000 tonnes of cargos,
representing an increase of 5.2% and 6.8%, respectively as compared to the same period of the previous year.
The average passenger load factor was 80%, representing a decrease of 0.5 percentage point as compared
to the same period of the previous year. The average load factor was 72.9%, representing a decrease of 0.8
percentage point as compared to the same period of the previous year.
3.
Information of other major subsidiaries and joint stock companies
Name of investee companies
Nature of
business
Registered
capital
(note)
Proportion of shares
held at the
investee companies (%)
Direct
Indirect
1. Joint ventures
Guangzhou Aircraft Maintenance
Engineering Co., Ltd
Zhuhai Xiang Yi Aviation
Technology Company Limited
2. Associates
Finance Company
Sichuan Airlines Co., Ltd.
SACM
Shenyang Konggang Logistic
Company Limited
Aircraft repair and
maintenance services
Flight simulation services
USD65,000,000
USD58,444,760
Financial services
Airline transportation
Advertising agency services
Ground services
724,330,000
1,000,000,000
200,000,000
153,300,000
50
51
21.09
39
40
45
–
–
12.89
–
–
–
Note:
Expressed in Renminbi unless otherwise indicated.
049
Annual Report 2015China Southern Airlines Company Limited
XVII. INFORMATION OF STRUCTURED ENTITY CONTROLLED BY THE COMPANY
During the reporting period, there was no structured entity controlled by the Company.
XVIII. INDUSTRY COMPETITION PATTERN AND DEVELOPMENT TREND
During the “12th Five-year Plan” period, China’ civil aviation industry has achieved rapid and sustainable development with
annual increases of 9.6%, 10.4% and 2.3% in the total transport tonne kilometers, passenger volume and cargo and mail
tonne kilometers, respectively. The industry has maintained continuous profitability and ranked second globally in terms of
transportation scale. The competition in the civil aviation industry is fierce. The Company is in competition with 29 domestic
rivals including Air China, China Eastern Airlines, Hainan Airlines, Spring Airlines, and Juneyao Airlines in respect of domestic
routes, and in direct or indirect competition with airlines of United States, Europe, Australia and Southeast Asian countries etc.
in respect of international routes. In the meantime, the domestic high-speed rail transport which is under rapid development
has gradually turned into a new rival.
We consider that China’s civil aviation industry will develop towards the following directions:
1.
2.
3.
Popularization. By 2020, it is expected that China’s aviation services will cover 93.2% of the prefecture-level cities,
89% of the county-level administrative regions, 95% of the gross national product, and 92% of the population; the
number of international routes and that of the destination cities served will witness multiple increase; China’s annual
air passenger volume will reach 700 million passengers and the number of annual flights per capita will increase to
0.47.
Internationalization. With the continuous increase in residents’ incomes, the outbound travel market will see
accelerated development. It is expected that during the “13th Five-year Plan” period, a growth as high as over 15%
will be maintained in China’s international air transport market. Correspondingly, it is expected that investment in
transport capacity in international market will be further strengthened, intensifying the competition in international
routes.
Informatization. It is estimated that during the “13th Five-year Plan” period, the average annual growth of the civil
aviation industry in relation to Internet will increase to 30%. Aviation services will be extended to both ends of the
value chain by transforming from the simple “space selling” to “services selling” with the aid of big data. Further
industrial information and resources sharing will dramatically transform the aviation operating model.
XIX. DEVELOPMENT STRATEGY
Strategic positioning: trying to create an internationalized network airline company with outstanding safety performance,
strong profitability and excellent brand image.
Overall objectives: setting up market-oriented decision-making system, establishing advanced commercial model, forming a
hub network which is accessible to the world, mutually complements at home and abroad and mutually supports the hubs,
creating a leading aviation travel comprehensive service platform in the industry, building a product-service system with
good quality and characteristics, realizing precision marketing, and effectively improving organization and management
efficiencies, so as to become an internationalized network airline company with outstanding safety performance, strong
profitability and excellent brand image.
Strategy of industry development: gradually spin off from the business units which are not highly related to air passenger
business, applying main management, manpower and funds to air passenger business and actively developing the third
party business with strong competitive strength, broad market prospects and large profit margins. Based on the principles
of “beneficial to business development and costs reduction without impairing safety, operation and service guarantee”, the
Company will choose opportunity to industrialize with independent development and shift from cost-orientation, guarantee-
orientation and service-orientation to profit-orientation.
By the end of the “13th Five-year Plan” period, the Group will develop into a large international airlines with an extensive
network and a fleet of nearly 1,000 aircraft. The annual passenger volume, cargo and mail volume and operating revenue
will reach 160 million, 2 million tonnes, and RMB180,000 million, respectively.
050
Management Discussion and Analysis XX. 2016 OPERATION PLAN
It is expected that global economic growth will slightly speed up, but weak
recovery will still be the overall trend. The economy of China will possibly
become steady and slow down, even touch the bottom gradually, forming
the stage bottom of middle and high growth and enter into a relatively stable
growth platform. The civil aviation of the world will keep a sound growing
trend, and it is expected that the passenger volume of civil aviation in China will
continue to grow rapidly. However, it is difficult to forecast the pricing trend of
aviation fuel in the future and there is still great risk of exchange rate fluctuations.
The Group faces rapid development of low cost carriers and high-speed rail and
increasingly fierce competition in markets as well. There are both opportunities
and challenges. Therefore, the following works are necessary:
1.
2.
We shall give full play to safety system with foresight, strengthen data
application, standardize risk management, reinforce the analysis of
typical cases, adhere to closed-loop management, intensify qualification
construction and promote integrated safety flight. In 2016, the Group
will make ensure an aviation safety year.
Oriented on market demands, we will continue optimizing the fleet
structure by combining macro-environment and industrial development
trend. In 2016, the Group plans to introduce 58 aircraft and dispose 18
aircraft. It is expected that the available seats kilometers will increase by
10.6% as compared to the same period of the previous year, representing
an increase of 5.2% and 25.0% in respect of domestic available seats
kilometers and international (including region) available seats kilometers,
respectively.
051
Annual Report 2015China Southern Airlines Company Limited 3.
4.
5.
6.
We will improve comprehensive operation efficiency, refine aviation fuel
management, strengthen resources integration and control, and continue
perfecting contingency plans. We will speed up the construction of
transit hubs, and build high-efficiency flight delay handling system and
hub operation system oriented on passenger experiences.
We will continue enlarging the effect of “Canton Route” and perfecting
domestic and international network layouts. We will leverage key markets
to optimize the structure of domestic capacity, reinforce the advantageous
position of Australia and New Zealand markets and continue increasing
our involvement in the North American market. We will strengthen the
international flights network construction of Urumqi hub and enrich the
network of Central Asia and Western Asia.
We will keep abreast with market and customer demands, leverage the
mainstream trend of Internet, actively respond to the fierce competition
of domestic market and constantly improve the management quality of
international flights. We will strengthen competitive advantages of key
domestic markets and improve market discourse right. We will constantly
improve international marketing capability to develop and attract more
high-end customers, reinforce marketing innovation and actively launch
value-added products, enlarge the scope of coordination with existing
domestic partners, perfect the fixed term interaction mechanism with
alliance partners and constantly increase the synergy value.
We will strengthen the construction of Guangzhou and Shanghai
cargo transportation hubs and constantly improve the management
levels of freighter. We will seize the market opportunities including
courier, cross-border online retailers, and strength the management
of bellyhold. We will actively develop general aviation, and based on
consolidating traditional markets such as offshore energy services. We
052
Management Discussion and Analysis will also vigorously develop onshore business, and actively explore multiple markets, such as flight training, external
maintenance, trust, etc.
7.
8.
We will focus on transit service to improve the convenience, further improve the language, meal and entertainment
experiences of passengers, give play to the customer care center, and facilitate the improvement of services with
complaints. Offline services will be gradually transferred online besides resolving the problems in respect of passenger
experience with the thinking of “Internet +”, and publicizing the electronic channel services in each link. In addition,
we will launch tableware, comfort products, in-flight entertainment brand cooperation, etc, and push on food
specialties, rapid rescheduling, etc.
We will reinforce the achievements of comprehensive budget management, optimize cost standardization management
and benchmarking management, strengthen process control, improve the precision level of management and control
of large projects and greatly reduce operating costs. We will innovate financing tools, broaden financing channels,
reduce financing costs, optimize debt structure, control asset-liability ratio and enhance the ability to resist risks. New
models of transferring overseas lease to domestic lease will be further developed to reduce leasing cost.
053
Annual Report 2015China Southern Airlines Company Limited XXI. RISK FACTORS ANALYSIS
1. 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, and further affects the business and operating results of the Group.
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.
2.
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 domestic routes, the
Company faces the competition from the low-cost airlines such as Spring Airlines. 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.
054
Management Discussion and Analysis 3.
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 certain challenges in its safety operation. In case of any flight accident, it will have an adverse effect
on the normal production and operation and reputation of the Company.
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 fleet structure and reducing the operational cost through introducing more advanced models, dispose
obsolete models and streamlining the number of models. Due to the high fixed costs for the operation of aircraft, if
the operation condition of the Company suffered from a severe downturn, it may lead to the significant drop in the
annual profit, financial distress and other problems.
055
Annual Report 2015China Southern Airlines Company Limited 4.
Financial risks of the Company
Foreign currency risk
Renminbi is not freely convertible into foreign currencies. All foreign exchange transactions involving Renminbi must
take place either through the People’s Bank of China (“PBOC”) or other institutions authorised to buy and sell foreign
exchange or at a swap centre. The Group has significant exposure to foreign currency risk as substantially all of the
Group’s obligations under finance leases, bank and other loans and operating lease commitments are denominated
in foreign currencies, principally US dollars, Euro 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.
Jet fuel price risk
The fuel cost is the most major cost and expenditure for an airline company. 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 impact 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 there is significant fluctuations in the
international oil prices, the operating performance of the Company may be significantly affected.
In addition, 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 of 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 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.
056
Management Discussion and Analysis XXII. ANALYSIS ON MOVEMENTS IN EXCHANGE RATE AND OIL PRICE
Trend of the Average Central Parity of USD to RMB in 2015
6.2176
6.2518
6.2386
6.2009
6.2033
6.2052
6.2083
6.3381
6.3675
6.3492
6.3706
6.4533
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Trend of Brent Crude Oil Futures Prices in 2015
58.80
56.94
61.14
65.61
63.75
56.76
49.76
48.21
48.54
49.29
45.93
38.90
6.5
6.4
6.3
6.2
6.1
6.0
70
60
50
40
30
20
10
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Note: The average central parity of USD to RMB publicized by the PBOC each month is selected as the exchange rate; the average price at each
month is selected as Brent crude oil futures price (USD/barrel).
During the reporting period, influenced by the reform of the central parity system by the central bank of China, and the rise
in interest rate by Federal Reserve, the RMB have dramatically depreciated by 6.2% in the second half of the year, falling from
6.2046 at the beginning of the year to 6.4921. The changes to the exchange rate of USD to RMB have relatively great impacts
on the Company’s financial expenses. Assuming that other risk variables other than the exchange rate remain unchanged,
every 1% appreciation (or depreciation) of the exchange rate of RMB to USD at 31 December 2015 will lead to a decrease
(or an increase) of RMB453 million in the shareholders’ equity and net profit of the Group.
During the reporting period, influenced by excessive oil supply, global economic weakness and the strong USD, the
international oil prices have been trending downward in the second half of the year. Assuming that the consumption of
fuel remains unchanged, an increase or a decrease of every 10% in fuel price will result in the Group’s annual operating
costs increasing or decreasing by approximately RMB2,627 million.
057
Annual Report 2015China Southern Airlines Company Limited AT YOUR
LEISURE
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Everyone can discover the best way to cure their
travel fatigue in our lounge
058
BOARDING PASS 059
CHINA SOUTHERN • AIRLINESAnnual Report 2015China Southern Airlines Company Limited I.
Implementation of Profit Distribution Plan during the Reporting Period
Formulation, implementation and amendment of the cash dividend policy
(I)
At the first extraordinary general meeting of 2013 held on 24 January 2013, the Company considered and approved
the amendments to the Articles of Association, stipulating that “The Company adopts the following profit distribution
policy:
Principles of profit distribution by the Company: Provided that the long-term and sustainable development of
the Company are ensured, the profit distribution policy of the Company should pay close attention to ensuring a
reasonable return of investment to investors and establishing a firm intention of rewarding the shareholders, and
such profit distribution policy should maintain its continuity and stability.
Ways of profit distribution by the Company: The Company may distribute dividends by way of cash, a combination
of cash and shares or in other reasonable manners in compliance with laws and regulations.
Conditions and proportion of distribution of cash dividends by the Company: Conditional upon the Company being
profitable for the year and after allocation to the statutory common reserve fund and discretionary common reserve
fund as required, and there are no exceptional matters including material investment plans or material cash outflows
(material investment plans or material cash outflows refer to proposed external investments, acquisition of assets or
purchase of equipment in the coming 12 months that in aggregate constitute expenditure exceeding 30% of the
net assets of the Company as shown in the latest audited consolidated statements) and there has not incurred any
material losses (losses in the amount exceeding 10% of the net assets of the Company as shown in the latest audited
consolidated statements), the Company shall distribute cash dividends out of profit in an amount not less than 10%
of the distributable profit for the year (i.e. profit realized for the year after making up for losses and allocation to
reserve fund). The accumulated payment of dividend by way of cash for the last three years may not be less than
30% of the Company’s average distributable profit for the last three years. The accumulated payment of dividend
by way of cash for the coming three years may not be less than 30% of the Company’s average distributable profit
for such three years.
Intervals for profit distribution by the Company: Provided that the conditions of profit distribution are met and the
Company’s normal operation and sustainable development are ensured, the Company shall in principle distribute
profit on an annual basis, and interim profit may also be distributed based on the profitability and capital requirement
conditions of the Company.
Conditions of profit distribution by way of share dividends: Provided that the minimum proportion of distribution of
cash dividends is met and reasonable scale of share capital and shareholding structure of the Company are ensured,
and with particular attention paid on keeping the steps of capital expansion in pace with the growth in operation
results, if there are special circumstances which prevent distribution by way of cash, the Company may consider
distributing profit by way of share dividends as a return to investors after consideration of its profitability and cash
flow position and performance of the procedures required by the Articles of Association. Where the Company made
a payment of dividend satisfied by an allotment of new shares or completed conversion of capital common reserve
fund into capital, the Company may elect not to distribute dividend by way of cash in the same year, and that year
is not counted in the three years as stated above in this Articles of Association.”
The profit distribution policy shall comply with the Articles of Association and the requirements of approval procedures
with clear criteria and ratios of dividend distribution to fully protect the legitimate interests of minority investors and
the opinion shall be given by the independent directors. Any adjustment of the policy or any change of the terms
and procedures shall comply with the applicable regulations and be undertaken with transparency.
060
Significant Events (II) Plans and proposals for profit distribution and the conversion of capital reserve
to share capital of the Company in the recent three years (including the reporting
period).
Dividends
distributed
per 10
shares (RMB)
(inclusive of
applicable tax)
Bonus shares
distributed
per 10 shares
(shares)
Transfers
per 10 shares
(shares)
Amount of
cash dividends
(inclusive of
applicable tax)
0
0
0
0.8
0.4
0.4
0
0
0
785
393
393
Year
2015
2014
2013
Unit: RMB million
Net profit
attributable
to the
shareholders
of the listed
company
in the
consolidated
financial
statements
during the
dividend year
3,736
1,777
1,986
Percentage
of net profit
attributable
to the
shareholders
of the listed
company
in the
consolidated
financial
statements (%)
21.01
22.12
19.79
Note:
In 2015, the amount of cash dividends in the financial report (non-consolidated statements) of the Company is 32% of the net
profit.
II. Proposals for Profit Distribution and the Transfer of Capital Reserve to Share
Capital for the Year of 2015
No interim dividend for the year of 2015 was distributed by the Company, and there was no issue of shares by way of
conversion of capital reserve.
The Board recommends the payment of a final dividend of RMB0.8 (inclusive of applicable tax) per 10 shares for the year
ended 31 December 2015, totalling approximately RMB785 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 2015 annual general meeting of the Company.
The dividend will be denominated and declared in RMB and payable in RMB to holders of A shares, and in HKD to holders
of H shares. The profit distribution proposal is subject to shareholders’ approval at the general meeting, and if approved,
the final dividend is expected to be paid to the shareholders on or around Friday, 8 July 2016.
The independent Directors unanimously agreed that the aforesaid proposal for profit distribution not only takes the
shareholders’ interests into consideration, but also meets the actual situation of the Company and is beneficial to the stable
development of the Company. The proposal has hence been approved and submitted to the general meeting for review.
III. Material Litigation, Arbitration and Matters Commonly Questioned by Media
During the reporting period, there was no material litigation, arbitration and matters commonly questioned by media.
IV. Capital Occupied During the Reporting Period and the Clearing Progress
During the reporting period, the Company did not have any capital occupied or clearing progress for the capital.
V. Asset Transaction, Corporate Merger and Acquisition
On 8 December 2015, the Company entered into the Equity Transfer Agreement with Xiamen Jianfa Group Co., Ltd., by
which the Company purchased 4% equity interests of Xiamen Airlines at the price of RMB626,666,667. For details of the
above-mentioned transaction, please refer to the relevant announcements published on China Securities Journal, Shanghai
Securities News, Securities Times and the website of Shanghai Stock Exchange on 9 December 2015.
061
Annual Report 2015China Southern Airlines Company Limited
On 17 December 2015, the Company entered into the Purchase Contract for 80 B737NG/MAX Aircraft, Sales Contract for 7 B757
Aircraft, 5 Spare Engines and Aviation Materials, Sales Contract for 6 B757 Aircraft and 4 Spare Engines, Sales Contract for 3 B733
Aircraft, 4 Spare Engines and Aviation Materials with the Boeing Company, by which the Company agreed to purchase 80
B737NG/MAX aircraft from the Boeing Company and sell 13 B757 aircraft and 9 spare engines, 3 B733 aircraft and 4 spare
engines and certain aviation materials to the Boeing Company. For details of the above-mentioned transactions, please refer
to the relevant announcements published on China Securities Journal, Shanghai Securities News, Securities Times and the
website of Shanghai Stock Exchange on 18 December 2015.
On 17 December 2015, Xiamen Airlines, a subsidiary of the Company, entered into the Purchase Contract for 30 B737MAX Aircraft
with the Boeing Company, by which Xiamen Airlines agreed to purchase 30 B737MAX aircraft from the Boeing Company.
For details of the above-mentioned transaction, please refer to the relevant announcements published on China Securities
Journal, Shanghai Securities News, Securities Times and the website of Shanghai Stock Exchange on 18 December 2015.
On 23 December 2015, the Company entered into the Purchase Contract for 10 A330 Aircraft with Airbus S.A.S, by which the
Company agreed to purchase 10 A330-300 aircraft from Airbus S.A.S. For details of the above-mentioned transaction, please
refer to the relevant announcements published on China Securities Journal, Shanghai Securities News, Securities Times and
the website of Shanghai Stock Exchange on 24 December 2015.
On 2 February 2016, the Company entered into the Equity Transfer Agreement on Transferring 100% of Equity in Southern Airlines
(Group) Import and Export Trading Company between China Southern Air Holding Company and China Southern Airlines Company
Limited with CSAHC, the controlling shareholder of the Company, by which the Company agreed to aquire 100% of equity
in SAIETC with RMB400,570,400. For details of the above-mentioned transaction, please refer to the relevant announcements
published on China Securities Journal, Shanghai Securities News, Securities Times and the website of Shanghai Stock
Exchange on 3 February 2016.
VI. Equity Incentives Plan
In order to establish a long-term incentive mechanism which is closely linked to the results and the long-term strategy of
the Company, as well as optimize the overall remuneration structure and system of the Company and to closely connect the
interests between the shareholders, Directors, senior management and key employees of the Company so as to establish a
foundation for the sustainable development of the Company in long run, the Company considered and passed the H Share
Appreciation Rights Scheme of China Southern Airlines Company Limited and the Initial Grant under the H Share Appreciation
Rights Scheme of China Southern Airlines Company Limited (the “Scheme”) at the 2011 first extraordinary general meeting
of the Company held on 30 November 2011.
Under this Scheme, 24,660,000 units of share appreciation rights were granted to 118 employees of the Group (the “Recipient”)
at the exercise price of HKD3.92 per unit for a term of 6 years prior to 31 December 2011. No shares will be issued under the
Scheme. Upon exercise of the share appreciation rights, a recipient will receive an amount of cash equivalent to the market
value of the shares. Upon the satisfaction of certain performance conditions after the second, third and fourth anniversary
from 22 December 2011, each one third of the share appreciation rights will become exercisable.
Distribution of a cash dividend of RMB0.2, RMB0.05, RMB0.04 and RMB0.04 (equivalent to HKD0.25, HKD0.06, HKD0.05 and
HKD0.05, respectively) per share to H shareholders was approved by the general meeting of the Company on 31 May 2012,
18 June 2013, 26 June 2014 and 30 June 2015, respectively, and the exercise price for the share appreciation rights was
adjusted to HKD3.51 per share in accordance with the requirements under the Scheme.
During the reporting period, there were no granting or exercising of share appreciation rights and 7,013,333 units of H share
appreciation rights were forfeited. As at the end of the reporting period, all 24,660,000 units of H share appreciation rights
granted under the Scheme were forfeited.
062
Significant Events VII. Major Contracts
(I)
Trust, Sub-contracting and Lease
1.
Trust
During the reporting period, the Company did not enter into any trust arrangement.
2.
3.
Contract
During the reporting period, the Company did not enter into any sub-contracting arrangement.
Lease
Save for the connected transactions disclosed above and the lease of certain land parcels and properties of
CSAHC by the Company as a leasee, the Group also acquired aircraft by way of operation lease and finance
lease. As at 31 December 2015, there were 226 and 198 aircrafts under operation lease and under finance
lease, respectively.
(II) Guarantee
1.
Since the training cost is significant, certain trainee pilots of the Company and Xiamen Airlines, its subsidiary,
have to procure personal loans to cover their training costs and miscellaneous expenses in the school. As
such, the Company and Xiamen Airlines applied personal loans for some self-sponsored trainee pilots and
provided joint liability guarantee for such loans, respectively. After such trainee pilots complete their study
and training, the Company and Xiamen Airlines will enter into services contract with them, respectively and
provide them with an option to make early repayment or repay by instalment payment. At the 2006 Annual
General Meeting of the Company held on 28 June 2007, the Board was authorized to approve joint liability
guarantee for the cumulative amount of not more than RMB100 million in each fiscal year. At the 2007 Annual
General Meeting of the Company held on 25 June 2008, the Board was authorized to approve joint liability
guarantee for the cumulative amount of not more than RMB400 million in each fiscal year.
In accordance with the authorization granted at the general meeting, the Board passed the resolutions in 2007,
2008, 2009, 2010 and 2011, respectively, and agreed to provide a joint liability guarantee for the loans applied
by self-sponsored trainee pilots for the purpose of covering their training costs and miscellaneous expenses in
the school who were recruited in 2007, 2008, 2009, 2010 and 2011, with an aggregate amount of RMB90,858,000,
not exceeding RMB213,600,000, not exceeding RMB184,750,000, not exceeding RMB179,269,600 and not
exceeding RMB83,850,000 per annum, respectively for the years 2007, 2008, 2009, 2010 and 2011. The period
of guarantee shall begin on the date when the relevant banks grant a loan to the trainee pilots and ending
two years after the maturity date of such loans. Xiamen Airlines, a subsidiary of the Company, also passed a
resolution on 29 December 2009 to provide a joint liability guarantee for the loans applied by its partial self-
sponsored trainee pilots. The maximum amount of personal loans available to be applied by each trainee
pilot shall be RMB500,000 and the aggregate amount of guarantee provided by Xiamen Airlines shall be not
more than RMB100 million for the period ended 31 December 2011. The guaranteed loan shall be used for
the purpose of pilot training. The scope of the joint liability guarantee covers the principal loan and interests,
liquidated damages, damages and cost incurred for recovering the principal loan applied by the trainee pilot.
The period of guarantee shall begin on the date when the loan is extended to the pilot and ending on the
date of repayment of the principal and interests of the loans.
063
Annual Report 2015China Southern Airlines Company Limited As at 31 December 2015, the banks have granted a loan to certain trainee pilots, of which RMB454 million
has been guaranteed by the Group, in which RMB44 million has been guaranteed by Xiamen Airlines, a
subsidiary of the Company. A small number of trainee pilots had quitted the training programme as they
failed to complete the training programme or due to other reasons, and part of them were unable to repay
the principal and interests of the bank loans, the Company fulfilled its joint liability guarantee obligation for
such trainee pilots, the aggregate amount of which was RMB4 million, and the amount of Xiamen Airlines
was nil. The Group has also tried its best to actively to recover the relevant outstanding bank loans and the
accrued interests through various ways.
2.
3.
On 11 May 2015, in order to broaden financing channels and reduce financing costs of Hebei Airlines, the
Board considered and approved to grant Xiamen Airlines rights to provide loan guarantee for Hebei Airlines
with accumulated guarantee balance not more than RMB3.5 billion during the period commencing from 1
July 2015 to 30 June 2016, it was submitted to the shareholders’ meeting for consideration. On 30 June 2015,
the resolution was passed at the annual general meeting. During the reporting period, Xiamen Airlines had
not provided loan guarantee to Hebei Airlines.
On 29 December 2015, in order to reduce aircraft leasing costs, the Board considered and approved to: 1)
increase 10 aircraft with SPV as sub-leasing model and allow SPV to be the first tenant and sub-lessor of the 10
aircraft; 2) provide external guarantees for SPV, with total guarantee amount not exceeding USD115,435,900.
As at the end of the reporting period, the Company provided the SPV with total guarantee of USD115,435,900.
(III) Aircraft Purchase and Sale Agreements
On 17 December 2015, the Company entered into the Purchase Contract for 80 B737NG/MAX Aircraft, Sales Contract for
7 B757 Aircraft, 5 Spare Engines and Aviation Materials, Sales Contract for 6 B757 Aircraft and 4 Spare Engines, Sales Contract
for 3 B733 Aircraft, 4 Spare Engines and Aviation Materials with the Boeing Company, by which the Company agreed to
purchase 80 B737NG/MAX aircraft from the Boeing Company and sell 13 B757 aircraft and 9 spare engines, 3 B733
aircraft and 4 spare engines and certain aviation materials to the Boeing Company. Such aircraft purchase transaction
can only take effect subject to approval of relevant government authorities.
On 17 December 2015, Xiamen Airlines, a subsidiary of the Company, entered into the Purchase Contract for 30
B737MAX Aircraft with the Boeing Company, by which Xiamen Airlines agreed to purchase 30 B737MAX aircraft
from the Boeing Company. Such aircraft purchase transaction can only take effect subject to approval of relevant
government authorities.
On 23 December 2015, the Company entered into the Purchase Contract for 10 A330 Aircraft with Airbus S.A.S, by
which the Company agreed to purchase 10 A330-300 aircraft from Airbus S.A.S. Such aircraft purchase transaction
can only take effect subject to approval of relevant government authorities.
(IV) Other Major Contract or Transaction
During the reporting period, the Company had no other material contract or transaction.
064
Significant Events VIII. Penalty on the Listed Companies, its Directors, Supervisors and Senior
Management and the Shareholders Holding more than 5% Equity Interests of
the Company and Rectification
On 5 January 2015, Xu Jie Bo, the former Executive Director, Executive Vice President, Chief Financial Officer and Chief
Accountant of the Company and Zhou Yue Hai, the former Executive Vice President of the Company were under investigation
on suspicion of job-related crime. On 16 October 2015, Liu Qian, the former Executive Vice President of the Company was
under investigation by the authorities on suspicion of bribery. On 4 November 2015, Si Xian Min, the former Chairman of
the Board was under investigation on suspicion of serious disciplinary violations. The Company strictly complies with the
listing rules to make timely disclosure after the aforesaid events. The Board and management of the Company attached
great importance to the issues and further improved relevant systems and processes to strengthen constraint mechanism
and accountability mechanism for senior management staff, so as to ensure implementation of compliance management
to meet all requirements. The standardized and scientific level of corporate governance has been improved to effectively
guard against all kinds of risks.
None of the Company nor the current Directors, Supervisors, senior management, controlling shareholders or actual
controllers was subject to any investigation by relevant authorities or enforcement by judicial or disciplinary departments,
or was handed over to judicial departments or subject to criminal liability, or subject to investigation or administrative
penalty by the China Securities Regulatory Commission, or any denial of participation in the securities market or was deemed
unsuitable to act as directors, or was punished by other administrative authorities or was subject to any public criticisms
made by any stock exchange.
IX. Convertible Corporate Bonds
During the reporting period, the Company did not have any issued or outstanding convertible corporate bonds.
065
Annual Report 2015China Southern Airlines Company Limited X. Undertaking
Undertakings given by CSAHC, the controlling shareholder of the Company, during the reporting period or existing to the
reporting period are as follow:
(I) Undertaking Related to Share Reform
Upon completion of the Share Reform Plan, and subject to compliance with the relevant laws and regulations of the
PRC, CSAHC will support the Company in respect of the formulation and implementation of a management equity
incentive system. It has been strictly performed.
(II) Other Undertaking
1.
2.
3.
The Company and CSAHC entered into the “Property Compensation Agreement” on 22 May 1997, pursuant
to which CSAHC agreed to compensate the Company for any losses or damages resulting from any challenge
to or interference with the Company’s rights in the use of the land and buildings leased from CSAHC. It’s a
long-term undertaking, and it has been strictly performed.
In 1995, CSAHC and the Company entered into a Separation Agreement with regard to the definition and
allocation of the assets and liabilities between CSAHC and the Company on 25 March 1995 (the Agreement
was amended on 22 May 1997). According to the Separation Agreement, CSAHC and the Company agreed to
compensate the other party for the claims, liabilities and costs borne by such party as a result of the business,
assets and liabilities held or inherited by CSAHC and the Company pursuant to the Separation Agreement.
It’s a long-term undertaking, and it has been strictly performed.
In respect of the connected transaction entered into between the Company and CSAHC on 14 August 2007
in relation to the sale and purchase of various assets, the application for building title certificates for eight
properties of Air Catering (with a total gross floor area of 8,013.99 square meters) and 11 properties of the
Training Centre (with a total gross floor area of 13,948.25 square meters) have not been made for various reasons.
In this regard, CSAHC has issued an undertaking letter, undertaking that: (1) the above title certificates should
be obtained by CSAHC by the end of 2008; (2) all the costs and expenses arising from the application of the
relevant title certificates would be borne by CSAHC; and (3) CSAHC would be liable for all the losses suffered
by the Company as a result of the above two undertakings, including but not limited to: a) any production
losses arising from the lack of title certificates, b) any other losses occasioned by the potential risk arising
from the outstanding title certificates. The application for the title certificates mentioned above remained
outstanding for various reasons. Therefore, CSAHC issued an undertaking letter, undertaking that it would
attend to and complete the above-mentioned obligation before 31 December 2016 and would compensate
the Company for any losses arising from the undertakings.
Due to such kind of change of ownership title requires compliance with the state and local laws and regulations,
and a series of formalities in relation to the government approval is required to be attended to, CSAHC has
been actively communicating with the government. However, as at the end of the reporting period, such
undertakings are still in the course of being implemented. The performance period of this undertaking is up
to 31 December 2016.
066
Significant Events 4.
The relevant undertakings under the Financial Services Framework Agreement between the Company and
Finance Company: (1) Finance Company is a duly incorporated enterprise group finance company under the
“Administrative Measures for Enterprise Group Finance Companies” and the other relevant rules and regulations,
whose principal business is to provide finance management services, such as deposit and financing for the
members of the Group; and the relevant capital flows are kept within the Group; (2) the operations of Finance
Company are in compliance with the requirements of the relevant laws and regulations and it is running
well, therefore the deposits placed with and loans from Finance Company of the Company are definitely
secure. In future, Finance Company will continue to operate in strict compliance with the requirements of
the relevant laws and regulations; (3) in respect of the Company’s deposits with and borrowings from Finance
Company, the Company will continue to implement its internal procedures in accordance with the relevant
laws and regulations and the Articles of Association, and CSAHC will not intervene in the relevant decision-
making process of the Company; and (4) As the Company is independent from CSAHC in respect of its assets,
businesses, personnel, finance and organizational structures, CSAHC will continue to fully respect the rights
of the Company to manage its own operations, and will not intervene in the daily business operations of the
Company. It’s a long-term undertaking, and it has been strictly performed.
5.
On 8 July 2015, the Company received an undertaking letter from CSAHC, the controlling shareholder of the
Company, details of which are set out as follows:
Given the recent abnormal fluctuation of the stock market and based on its confidence in the development
prospects of the Company as well as the recognition of the values of the Company, CSAHC makes the following
undertakings so as to facilitate the sustainable healthy development of the Company and safeguard the
interests of the investors of the Company: 1. CSAHC will not reduce its shareholding in the Company during
the abnormal fluctuation of the stock market; 2. CSAHC will take measures to increase its shareholding in the
Company in line with market conditions in due course as permitted by relevant laws and regulations; and 3.
CSAHC will continuously extend its support to the operational development of the Company, with an aim to
assist the Company in improving operational results and maximizing investor returns of the Company. It’s a
long-term undertaking, and it has been strictly performed.
067
Annual Report 2015China Southern Airlines Company Limited
The Board hereby presents this annual report and the audited financial statements for the year ended 31 December 2015 of the
Group to the shareholders of the Company (the “Shareholders”).
PRINCIPAL ACTIVITIES, OPERATING RESULTS AND FINANCIAL POSITION
The Group is principally engaged in airline operations. The Group also operates certain airline related businesses, including provision
of aircraft maintenance and air catering services. The Group is one of the largest airlines in China. In 2015, 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 2015
in accordance with IFRSs. Please refer to pages 123 to 204 of this annual report for details.
DIVIDENDS
In 2015, the Group realised the operating revenue of RMB111,652 million and the profit attributable to the equity shareholders of
the Company of RMB3,736 million. The Board is pleased to recommend the payment of a final dividend of RMB0.8 (inclusive of
applicable tax) per 10 shares for the year ended 31 December 2015, totalling approximately RMB785 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 2015 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, and if
approved, the final dividend is expected to be paid to the shareholders on or around Friday, 8 July 2016.
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
2015 are set out on page 208 of this annual report.
BANK LOANS AND OTHER BORROWINGS
Details of the bank loans, short term financing bills and other borrowings of the Company and the Group are set out in note 35 to
the financial statements prepared under IFRSs.
INTEREST CAPITALISATION
For the year ended 31 December 2015, RMB382 million (2014: RMB417 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 2015 are set out in note 20 to the financial statements prepared under IFRSs.
MAJOR CUSTOMERS AND SUPPLIERS
The Group’s aggregate purchases from the five largest suppliers did not exceed 30% of the Group’s total purchases in 2015.
The Group’s aggregate turnover with its five largest customers did not exceed 30% of the Group’s total turnover in 2015.
RELATIONSHIPS WITH CUSTOMERS AND SUPPLIERS
The Group understands that it is important to maintain good relationship with its suppliers and customers to fulfil its long-term
goals and maintain the leading position in the market. To maintain its core competitiveness and brand dominant status, the Group
aims at delivering constantly high standards of quality in the service to its customers. During the reporting period, there was no
material and significant dispute between the Group and its suppliers and/or customers.
068
Report of Directors TAXATION
Details of taxation of the Company and the Group are set out in notes 18 and 29 to the financial statements prepared under IFRSs.
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.
RESERVES
Movements in the reserves of the Company and the Group during the year are set out in note 46 to the financial statements
prepared under IFRSs. As at 31 December 2015, the Group’s reserves available for distribution totalled RMB29,227 million (31
December 2014: RMB25,930 million).
SUBSIDIARIES
Details of the principal subsidiaries of the Company are set out in note 23 to the financial statements prepared under IFRSs.
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 2015.
PRE-EMPTIVE RIGHTS
None of the provisions of the Articles of Association provides for any pre-emptive rights requiring the Company to offer new Shares
to existing shareholders in proportion to their existing shareholdings.
PERMITTED INDEMNITY PROVISION
The Company has arranged for appropriate insurance cover for Directors’ and officers’ liabilities in respect of legal actions against
its Directors and senior management arising out of corporate activities.
AUDIT COMMITTEE
The audit committee of the Company has reviewed and confirmed this annual report.
THE MODEL CODE
Having made specific enquiries with all the Directors, the Directors have for the year ended 31 December 2015 complied with the
Model Code as set out in Appendix 10 of the Listing Rules.
069
Annual Report 2015China Southern Airlines Company Limited 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 CODE PROVISIONS OF THE CORPORATE GOVERNANCE CODE
In the opinion of the Board, 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 2015.
COMPLIANCE WITH LAWS AND REGULATIONS
During the year ended 31 December 2015, the Group has complied with the relevant laws and regulations that have a significant
impact on the operations of the Group.
ENVIRONMENTAL POLICIES AND PERFORMANCE
The Group considers the importance of environmental affairs and believes business development and environment affairs are highly
related. The Company pursued green development, and continued to increase investments and improvement efforts in terms fleet
optimization, aircraft refitting, route optimization, low-carbon travel and new energy application. We vigorously promoted energy
conservation and emission reduction. As a result, 25,000 tonnes of aviation fuel were saved and 78,000 tonnes of CO2 emission
were reduced during the year.
DIRECTORS AND SUPERVISORS’ INTERESTS IN TRANSACTION, ARRANGEMENT
OR CONTRACT OF SIGNIFICANCE
Save as disclosed in the section headed “Connected Transactions” below, neither Director/Supervisors nor entity connected with the
Directors/Supervisors had a material interest, either directly or indirectly, in any transaction, arrangement or contract of significance
to the business of the Group subsisting at any time during the year ended 31 December 2015 or at the end of the year to which
the Company, its holding company, or any of its subsidiaries was a party.
DIRECTORS AND SUPERVISORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES
At no time during the year ended 31 December 2015 was the Company or any of its subsidiaries a party to any arrangement that
would enable the Directors/Supervisors to acquire benefits by means of acquisition of shares in, or debentures of, the Company
or any other body corporate, and none of the Directors/Supervisors or any of their spouses or children under the age of 18 were
granted any right to subscribe for the equity or debt securities of the Company or any other body corporate or had exercised any
such right.
DIRECTORS AND SUPERVISORS’ INTEREST IN COMPETING BUSINESS
As at 31 December 2015, none of the Directors/ Supervisors or any of their respective associates had engaged in or had any interest
in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group.
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 2015.
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 conducted in 2015 which are required to be disclosed herein under the Listing Rules,
are as follows:
070
Report of Directors (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.
(2) Continuing Connected Transactions between the Company and CSAHC (or their respective
subsidiaries)
A
SAIETC, a wholly-owned subsidiary of CSAHC
On 9 January 2014, the Company and SAIETC entered into a new import and export agency framework agreement(the
“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
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 Import and Export Agency
Framework Agreement, the annual cap are set at RMB160 million per annum.
For the year ended 31 December 2015, the agency fee incurred by the Group in respect of the above import and
export services was RMB114 million.
B
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 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.
071
Annual Report 2015China Southern Airlines Company Limited The Company and SACM entered into the Supplemental Agreement to the Media Services Framework Agreement on
29 December 2014 to revise the annual cap for services provided by the SACM Group for the period from 1 January
2015 to 31 December 2015 from RMB113 million to RMB118.5 million. In addition, the following revisions to the Media
Services Framework Agreement were also made and set out in the Supplemental Agreement to the Media Services
Framework Agreement as follows: (a) to clarify the parties referred in the Media Services Framework Agreement shall
include itself and its wholly-owned or controlled subsidiaries; and (b) to clarify the rights and obligations of the SACM
Group, i.e. clarifying the SACM Group will have full discretion for the whole process of the selection of media or
media agent, negotiation, purchase, execution and supervision, and the SACM Group should take the responsibility
to monitor the advertisement, submit the monitoring report and strengthen the supervision on the advertising
effect. Save as the aforesaid revision, all other terms of the Media Services Framework Agreement remain unchanged.
For the year ended 31 December 2015, the media fees incurred by the Group for the media services amounted to
RMB67 million.
On 30 December 2015, the Company entered into a new Media Services Framework Agreement with SACM to
renew the media services transaction and extend the term for an additional term of three years, commencing from
1 January 2016 to 31 December 2018. The annual cap for the new Media Services Framework Agreement will remain
unchanged at RMB118.5 million for each of the financial years ending 31 December 2016, 2017 and 2018, respectively.
C
Finance Company, which is 66% owned by CSAHC, 21% owned by the Company and 13%
owned in aggregate by four subsidiaries of the Company
(a)
On 8 November 2013, 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
2014 to 31 December 2016.
Under such agreement, the Finance Company agrees to provide to the Company deposit (the “Provision
of Deposit Services”) and loan services (the “Provision of 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. 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. The annual cap of fees payable to the Finance Company by the Group for
the other financial services should not exceed RMB5 million. On 26 December 2013, the second extraordinary
general meeting of 2013 considered and approved the Financial Services Framework Agreement.
The Company and the Finance Company entered into the Supplemental Agreement to the Financial Services
Framework Agreement on 4 May 2015 to revise each of the annual cap in relation to the Provision of Deposit
Services and the Provision of the Loan Services for the period from the effective date of Supplemental
Agreement to 31 December 2016 from RMB6 billion to RMB8 billion. On 30 June 2015, 2014 annual general
meeting of the Company considered and approved the Supplemental Agreement to the Financial Services
Framework Agreement.
As of 31 December 2015, the Group’s deposits placed with the Finance Company amounted to RMB2,934
million.
072
Report of Directors (b)
On 21 November 2014, the Board approved Guangdong CSA E-commerce Co., Ltd. (the “E-commerce Company”,
a wholly-owned subsidiary of the Company), to enter into the four electronic aviation passenger comprehensive
insurance four parties cooperation agreements (the “Cooperation Agreements”) with the Finance Company,
Insurance Brokers (Beijing) Co., Ltd. (the “Air Union”) and each of the four insurance companies, respectively,
for a period of three years commencing from 12 June 2014 to 31 May 2017.
Pursuant to the Cooperation Agreements, the E-commerce Company agreed to authorize other parties to use
the B2C website, the mobile terminal air tickets sale platform and VOS sale system of the Company for sales of
online insurances in consideration for a fixed service fees for each policy sold through its electronic platform.
The Group will charge a fixed service fee of RMB5 for each insurance policy sold through its electronic platforms.
There has not been any comparative market prices due to the specific nature of such transaction and the
above pricing model has been agreed on an arm’s length basis among the parties and has been adopted
since the commencement of cooperation in 2008.
The annual caps in relation to the service fees to be charged by the Group are RMB14.24 million, RMB30.27
million, RMB42.38 million and RMB24.72 million for the seven months ended 31 December 2014, for the two
years ending 31 December 2016 and the five months ending 31 May 2017.
As a result of the increase in aviation insurance purchase demand from travellers and the various cooperation
between the Company and the Finance Company on the sale of aviation insurance, on 19 November 2015, the
Company and the Finance Company entered into the cooperation framework agreement (the “Cooperation
Framework Agreement”) for two years commencing from 1 January 2015 to 31 December 2016.
Pursuant to the insurance business platform cooperation arrangements under the Cooperation Framework
Agreement, the Company as the platform service provider, agreed to cooperate with the Finance Company,
and authorize Finance Company to use the various platforms of the Group including online channels and
ground service counter channels as the sales platforms for sale of various insurances relating to aviation
transportation including baggage insurance and aviation passenger accident insurance. The scope of the
Cooperation Framework Agreement shall also cover the electronic platform as contemplated under the
Cooperation Agreements. In addition, the Company agreed to further authorize the Finance Company to use
the Group’s ground service counter channels as the sales platform for sale of baggage insurance and aviation
passenger accident insurance.
For the sale of insurance policies through the Group’s ground service counter channels and its electronic
platforms, the Group is currently charging a fixed ratio of the insurance premium of each of the different
kinds of insurance policies. The pricing model has been agreed on an arm’s length basis by the Company
and the Finance Company with reference to the determination basis as set out in a table disclosed in the
announcement of the Company dated 19 November 2015.
The annual caps in relation to the service fees to be charged by the Group under the Cooperation Framework
Agreement are RMB40 million and RMB60 million for the two years ending 31 December 2016, respectively.
For the year ended 31 December 2015, the service fee charged by the Group were RMB16 million.
073
Annual Report 2015China Southern Airlines Company Limited D
E
GSC (formerly known as PCACL), a wholly-owned subsidiary of CSAHC
On 8 November 2013, the Company and GSC renewed the Passenger and Cargo Sales Agency Services
Framework Agreement (the “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, GSC 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 ratio paid to the agency
companies by the airline 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 shall maintain RMB250 million per annum for the entire term of the New Passenger and Cargo
Sales Agency Services Framework Agreement.
For the year ended 31 December 2015, the commission expense and goods handling fee paid to GSC were
RMB98 million and RMB109 million, respectively, and the income relating to other services was RMB20 million.
CSAGPMC, a wholly-owned subsidiary of CSAHC
On 29 December 2014, the Company entered into the new property management framework agreement
(the “Property Management Framework Agreement”) with CSAGPMC to renew the property management
transactions for a term of three years from 1 January 2015 to 31 December 2017. Pursuant to the 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 the new Baiyun International Airport and surrounding in Guangzhou, the Company’s leased
properties in the airport terminal at New Baiyun International Airport, the base and the 110KV transformer
substation at the new Baiyun International Airport to ensure the ideal working conditions of the Company’s
production and office facilities and physical environment, and the normal operation of equipment. In addition,
CSAGPMC has also been appointed for the provision of the property management and maintenance services
for the power transformation and distribution equipment at Guangzhou cargo terminal, and the provision
of the electricity charge agency services to the Group, which are newly added services to be provided by
CSAGPMC to the Group. The annual cap for the Property Management Framework Agreement is set at RMB90
million, RMB92 million and RMB96 million for each of the three years ending 31 December 2015, 2016 and
2017, respectively.
The management and maintenance services fee shall be determined at an arm’s length basis between both
parties and according to the market prices, which shall be determined with the consultation by the Company
in the property management market, taking into account the location, areas and types of the properties of the
Company at the new Baiyun Airport and old Baiyun International Airport. The management and maintenance
services fee charged should not be higher than the one charged by any independent third parties in the
similar industries.
For the year ended 31 December 2015, the property management and maintenance fee incurred by the Group
amounted to RMB73 million pursuant to the Property Management Framework Agreement.
074
Report of Directors F
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 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 annual cap
under the agreement for each year is RMB100 million, RMB115 million and RMB132.25 million, respectively.
For the year ended 31 December 2015, the service fees paid by the Group to SACC amounted to RMB100 million.
On 30 December 2015, the Company entered into a new Catering Services Framework Agreement with SACC to
renew the catering services transaction and extend the term for an additional term of three years, commencing
from 1 January 2016 to 31 December 2018. The service fees for catering services transaction mainly include
three parts, i.e. in-flight lunch boxes fees, operating services fees and storage management fees. The in-flight
lunch boxes fees will be determined on the raw material cost, productive labor cost and tax, the operating
services fees will be determined on the labor cost and facility cost, and the storage management fees will be
determined on the rental and labor cost. For the labor cost, it will be determined by reference to the average
wage of last year issued by the local government authority. 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
annual cap for the new Catering Services Framework Agreement is set at RMB152 million, RMB175 million
and RMB201 million for each of the financial years ending 31 December 2016, 2017 and 2018, respectively.
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 effective date to 5
April 2031.
For the year ended 31 December 2015, the Group’s engine repair and maintenance service fees incurred under
the agreement relating to continuing connected transactions amounted to RMB1,324 million.
075
Annual Report 2015China Southern Airlines Company Limited (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
B
C
The Company and CSAHC entered into the new asset lease agreement (the “Asset Lease Agreement”) on 29 December
2014 for a term of three years from 1 January 2015 to 31 December 2017 to renew lease transactions. Pursuant to
the 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,
Zhanjiang, Changsha and Nanyang (mainly referred to Jiangying Airport) for a term of three years commencing
from 1 January 2015 to 31 December 2017. The annual rent payable pursuant to the Asset Lease Agreement of
RMB86,268,700 is determined after arm’s length negotiation by the parties with reference to the historical figures
and rental assessment report prepared by Zhonghuan Songde(Beijing) Assets Appraisal Co., Ltd. taking into account
the prevailing market rental for properties located at similar locations.
For the year ended 31 December 2015, the rent incurred by the Group amounted to RMB86,268,700 pursuant to the
Asset Lease Agreement.
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.
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. 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 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.
In view of the expected increase in the areas of the leased property under the Property Lease Agreement, the annual
caps under the Property Lease Agreement in respect of the two years ending 31 December 2016 will become
insufficient. Accordingly, the Company and CSAHC entered into a supplemental agreement to the Property Lease
Agreement to slightly revise the annual caps for the two years ending 31 December 2016 to RMB40,270,700 (original
cap of RMB40,114,700) and RMB40,348,700 (original cap of RMB40,114,700), respectively.
076
Report of Directors
For the year ended 31 December 2015, the rents for property lease and land lease incurred by the Group amounted
to RMB40,270,700 and RMB63,582,200, respectively pursuant to the Lease Agreements.
(5) Acquisition of 4% equity interests in Xiamen Airlines
On 14 July 2015, the Company and Xiamen Jianfa Group Co., Ltd. (“Xiamen Jianfa”) entered into the share transfer agreement
(the “Share Transfer Agreement”), pursuant to which the Company agreed to purchase and Xiamen Jianfa agreed to sell
4% equity interests in Xiamen Airlines at the consideration of RMB586,666,670. The consideration of RMB586,666,670 is
determined after an arm’s length negotiation between the parties in accordance with prevailing market conditions and
after taking into account, inter alia, the net asset value of Xiamen Airlines and the appraisal value of 4% equity interests in
Xiamen Airlines as of 31December 2014.
On 8 December 2015, the Company and Xiamen Jianfa entered into a supplemental agreement to the Share Transfer
Agreement, pursuant to which the parties agreed to adjust the consideration from RMB586,666,667 to RMB626,666,667 so
as to reflect the profit attribution arrangement.
The Company believes that the increase of 4% equity interests in Xiamen Airlines held by the Company can help further
enhance its control over the Xiamen Airlines, help the Xiamen Airlines to maintain a stable shareholding structure, further
improve the strategic synergy effect of the Company and Xiamen Airlines and improve the overall operating results of the
Company.
Xiamen Jianfa is a substantial shareholder of Xiamen Airlines, thus Xiamen Jianfa is a connected person at the subsidiary
level of the Company.
The Company has confirmed that the execution and enforcement of the implementation agreements under the continuing
connected transactions set above for the year ended 31 December 2015 has followed the pricing principles of such continuing
connected transactions.
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 better; and
(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 the Rule
14A.38 of the Listing Rules, indicating that:
(a)
(b)
nothing has come to their attention that causes them to believe that the disclosed continuing connected transactions have
not been approved by the Board.
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.
077
Annual Report 2015China Southern Airlines Company Limited
(c)
(d)
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.
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 48 to 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 2015, the Group made donations for charitable purposes amounting to RMB12.6 million.
DESIGNATED DEPOSITS AND OVERDUE TIME DEPOSITS
As at 31 December 2015, 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 51 to the financial statements, as at 31 December 2015, the Group was not involved in any material litigation.
SUBSEQUENT EVENTS
(a)
On 2 February 2016, the Company entered into the “Equity Transfer Agreement between China Southern Airlines Company
Limited and China Southern Air Holding Company in relation to transfer of 100% equity interest in Southern Airlines Group
Import and Export Trading Company” with CSAHC, a controlling shareholder of the Company, pursuant to which the Company
agreed to acquire 100% equity interest in SAIETC at the consideration of RMB400,570,400.
(b)
On 7 March 2016, the Company has completed the issuance of the 2016 Corporate Bonds (First Tranche) with nominal value
of RMB5 billion for a term of three years and at nominal interest rate of 2.97%.
(c)
On 8 March 2016, the Board approved that, Xiamen Airlines shall make an application to the National Association of Financial
Market Institutional Investors for the registration and issuance of ultra-short-term financing bills with the aggregate maximum
principal amount of RMB10 billion. The issuance of ultra-short-term financing bills is subject to the registration with the
National Association of Financial Market Institutional Investors.
(d)
On 15 January 2016, the Board received a letter of resignation from Si Xian Min as the Chairman of the Board. Due to personal
reason, Si Xian Min tendered his resignation from the posts of Chairman of the Board, Non executive Director of the Company,
the member of the Strategic Decision-making Committee under the Board and the chairman of the Nomination Committee
under the Board. Si Xian Min confirms that he has no disagreement in any respect with the Board and the Company, and
there is no matter relating to his resignation that should be brought to the attention of the shareholders of the Company.
078
Report of Directors AUDITORS
A resolution is to be proposed at the forthcoming annual general meeting of the Company for the appointment of KPMG Huazhen
(Special General Partnership) to provide professional services to the Company for its domestic financial reporting, U.S. financial
reporting and internal control reporting for the year 2016 and KPMG to provide professional services to the Company for its Hong
Kong financial reporting for the year 2016.
By order of the Board
Tan Wan Geng
Vice Chairman
Guangzhou, the PRC
30 March 2016
079
Annual Report 2015China Southern Airlines Company Limited I. CHANGE IN SHARE CAPITAL
(I) Changes in Shareholdings
31 December 2014
Number of
Shares
Percentage
(%)
Increase/(decrease) during 2015
Percentage
(%)
Number of
Shares
31 December 2015
Number of
Shares
Percentage
(%)
Unit: Share
I.
Shares subject to trading
restrictions
II.
Shares not subject to trading
restrictions
1. RMB ordinary shares
2. Foreign listed shares
Total
III. Total number of shares
0
0
7,022,650,000
2,794,917,000
9,817,567,000
9,817,567,000
71.53
28.47
100
100
(II) Description of change in shares
0
0
0
0
0
0
0
0
0
0
0
0
7,022,650,000
2,794,917,000
9,817,567,000
9,817,567,000
71.53
28.47
100
100
During the reporting period, there were no changes in the total number of shares and share structure of the Company.
II.
ISSUANCE AND LISTING OF SHARES
(I)
Securities issuance of the past three years up to the end of the reporting period
Types of shares and its
derivative securities
Issuance date
Unit: Million Currency: Renminbi
Issuance
price (or
interest
rate)
Amount
issued
Listing date
Amount
approved
for public
trading
Ending date of
transaction
2015 Corporate Bonds of
20 November 2015
3.63%
3,000
1 December 2015
3,000
18 November 2020
the China Southern Airlines
Company Limited
(First Tranche)
(II) Changes in the total number of shares, shareholder structure and assets and liabilities
structure of the Company
During the reporting period, there were no bonus shares, rationed shares or such other reasons leading to a change
in the total number of shares and shareholder structure of the Company.
(III) Existing internal staff shares
As at the end of the reporting period, the Company had no internal staff shares.
080
Changes in the Share Capital, Shareholders’ Profile and Disclosure of Interests
III. PARTICULARS OF SHAREHOLDERS
(I) Number of shareholders and particulars of shareholdings
Total number of shareholders at the end of the reporting period: 309,426
Particulars of the top ten shareholders
Name of the shareholder
Capacity
Increase/
(decrease)
during the
reporting
period
Number of
shares held at
the end of
reporting
period
Shareholding
percentage at
the end of
reporting
period
Number of
shares subject
to trading
restrictions
CSAHC
Stated-owned legal
(169,357,613)
4,039,228,665
entity
HKSCC (Nominees) Limited
Overseas legal entity
3,517,791
1,749,166,988
Nan Lung Holding Limited
Stated-owned legal
0
1,033,650,000
entity
China Securities Finance
Corporation Limited
Stated-owned legal
237,610,358
237,610,358
entity
Zhong Hang Xin Gang Guarantee Co., Ltd. Domestic Non-state-
owned legal entity
(84,000,000)
75,000,000
Central Huijin Investment Ltd.
Stated-owned legal
64,510,900
64,510,900
entity
China National Aviation Corporation
Stated-owned legal
49,253,400
49,253,400
(Group) Limited
Zhao Xiao Dong
entity
Domestic Individual
(91,019,998)
32,000,026
29,999,916
29,999,916
China Construction Bank Corporation –
Boshi Industry Mixed Securities
Investment Fun (LOF)
China Merchants Bank Co., Ltd.
Domestic Non-state-
owned legal entity
Domestic Non-state-
owned legal entity
41.14
17.82
10.53
2.42
0.76
0.66
0.50
0.33
0.31
26,862,225
26,862,225
0.27
0
0
0
0
0
0
0
0
0
0
Unit: Share
Number of
shares
pledged
or frozen
None
Unknown
None
Unknown
Unknown
Unknown
Unknown
Unknown
Unknown
Unknown
081
Annual Report 2015China Southern Airlines Company Limited
(II) Particulars of the top ten shareholders holding the Company’s tradable shares not
subject to trading restrictions
Name of Shareholder
CSAHC
HKSCC (Nominees) Limited
Nan Lung Holding Limited
Unit: Share
Number of
tradable shares
not subject
to trading
restrictions
Type of shares
4,039,228,665
RMB-denominated ordinary shares
1,749,166,988
Overseas listed foreign shares
1,033,650,000
Overseas listed foreign shares
China Securities Finance Corporation Limited
237,610,358
RMB-denominated ordinary shares
Zhong Hang Xin Gang Guarantee Co., Ltd.
75,000,000
RMB-denominated ordinary shares
Central Huijin Investment Ltd.
64,510,900
RMB-denominated ordinary shares
China National Aviation Corporation (Group) Limited
49,253,400
RMB-denominated ordinary shares
Zhao Xiao Dong
China Construction Bank Corporation –
Boshi Industry Mixed Securities
Investment Fun (LOF)
32,000,026
RMB-denominated ordinary shares
29,999,916
RMB-denominated ordinary shares
China Merchants Bank Co., Ltd.
26,862,225
RMB-denominated ordinary shares
Explanation of the
connected relationship
or acting in concert
relationship of the
above shareholders
Nan Lung Holding Limited (“Nan Lung”) is incorporated in Hong Kong and a wholly-
owned subsidiary of CSAHC. The Company is not aware of any other connected
relationship between other shareholders. The H shares held by HKSCC Nominees
Limited include the 31,120,000 H shares of the Company held by Yazhou Travel
Investment Company Limited, a fourth level subsidiary of CSAHC incorporated in
Hong Kong.
082
Changes in the Share Capital, Shareholders’ Profile and Disclosure of Interests
(III) The controlling shareholder or actual controller
1.
Information of the controlling shareholders
During the reporting period, there were no changes in the controlling shareholder or actual controller of the
Company.
Name
China Southern Air Holding Company
Responsible person or legal
Wang Chang Shun
representative
Date of Establishment
Organisation code
Registered capital
11 October 2002
10000589-6
RMB11,196,046,000
Major business operation
To operate all the state-owned assets and state-owned
Future development strategies
equities being invested into CSAHC and its joint stock
companies
Taking air transportation as its core business, to interoperate
and develop in hand with related industries, and become
a large-scale air transportation group with comprehensive
competitiveness and strong capability in creating values.
Ownership of other domestic
TravelSky Technology Limited (shareholding of 11.94%)
and overseas listed companies
controlled or invested during the
reporting period
2.
Information of de facto controllers
The chart below indicates the ownership and controlling relationship between the Company and de facto
controllers:
State-owned Assets Supervision and Administration Commission of the State Council
100%
China Southern Air Holding Company
100%
Nan Lung Holding Limited
100%
41.14%
TravelSky Technology (Hong Kong) Limited
10.53%
100%
Yazhou Travel Investment Company Limited
0.32%
China Southern Airlines Company Limited
083
Annual Report 2015China Southern Airlines Company Limited
3.
Other information of the controlling shareholder and actual controllers
CSAHC was established on 11 October 2002 and is a large-scale state-owned air transportation group with
China Southern Airlines (Group) Company as its main core entity, together with Xinjiang Airlines Company and
China Northern Airlines Company. CSAHC is one of the three core air transportation groups directly managed
by the State-owned Assets Supervision and Administration Commission which specializes in relevant industries
including air transportation and cargo logistics, aero engines maintenance, import & export trading, financing,
construction and development and media and advertising.
The strategic position of the CSAHC is to put the aviation transportation as the core, to develop the related
industries synergies to maintain an aviation industry group with comprehensive competitiveness and
sustainable profitability. Insisting on maintaining its core values of “Customer First, Respecting Talents, Pursuit
of Excellence, Continuous Innovation and Favourable Return” while maintaining its vibrant vision and mission
of becoming a major world-class airline, the number one choice for travellers and highly respected by its
staff and employees, CSAHC works to continually enhance its service brand to be the very best in China and
the first-rate across Asia.
(IV) Other corporate shareholders with more than 10% shareholding
Name of corporate
shareholders
Responsible
person or legal
representative
Date of
Establishment
Organisation
code
Registered
capital
Currency: HKD
Major business
operation or
management
activities
Nan Lung Holding Limited
Wang Jian Jun
September 1992 Not applicable
1,674,497,600
Investment holding
084
Changes in the Share Capital, Shareholders’ Profile and Disclosure of Interests
IV. DISCLOSURE OF INTERESTS
As at 31 December 2015, to the best knowledge of the Directors, chief executive and Supervisors of the Company, the
following persons (other than the Directors, chief executive or Supervisors of the Company) had interests and short positions
in the shares (the “Shares”) and underlying shares of the Company which are required to be recorded in the register of the
Company required to be kept under section 336 of the SFO:
Types of
Shares
A Shares
H Shares
8064Number of
Shares held
4,039,228,665 (L)
1,064,770,000 (L)
Sub-total
5,103,998,665 (L)
H Shares
1,064,770,000 (L)
% of the
total issued
A Shares of
the Company
% of the
total issued
H Shares of
the Company
% of the
total issued
share capital of
the Company
57.52%
–
–
–
–
38.10%
–
38.10%
41.14%
10.85%
51.99%
10.85%
Name of shareholders
Capacity
CSAHC (Note)
Nan Lung (Note)
Note:
Beneficial owner
Interest of controlled
corporations
Beneficial owner
Interest of controlled
corporations
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.
Save as disclosed above, as at 31 December 2015, 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 or underlying shares of the Company recorded in the register of the Company required to
be kept under section 336 of the SFO.
085
Annual Report 2015China Southern Airlines Company Limited
I. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
(I) Directors, supervisors and senior management
As at the end of the reporting period, the directors, supervisors and senior management of the Company were as
follows:
Name
Position
Gender Age
Appointment date
for the term of
office
Expiry date for
the term of office
Male
Female
Male
Vice Chairman of the Board Male
Executive Director
President
Non-executive Director
Non-executive Director
Executive Director
Executive Vice President
Executive Director
Independent Non-executive
Director
Independent Non-executive
Director
Independent Non-executive
Director
Independent Non-executive
Director
Independent Non-executive
Director
Male
Male
Male
Male
Male
Male
51 24 January 2013
15 June 2006
13 January 2009
59 30 November 2011
60 24 January 2013
57 30 June 2009
27 December 2007
51 24 January 2013
50 29 December 2010
26 December 2016
26 December 2016
26 December 2016
26 December 2016
26 December 2016
26 December 2016
26 December 2016
26 December 2016
26 December 2016
64 30 November 2011
26 December 2016
51 26 December 2013
26 December 2016
53 30 June 2015
26 December 2016
50 30 June 2015
26 December 2016
Chairman of the Supervisory
Committee
Supervisor
Supervisor
Supervisor
Supervisor
Male
53 29 December 2010
26 December 2016
Male
Female
Female
Male
54 30 June 2009
49 25 June 2008
55 16 June 2004
57 26 December 2013
26 December 2016
26 December 2016
26 December 2016
26 December 2016
Executive Vice President
Executive Vice President
Executive Vice President
Chief Engineer
Chief Economist
Chief Legal Adviser
COO Marketing & Sales
Secretary to the Board
COO Flight Safety
Chief Accountant
Chief Financial Officer
Male
Male
Male
Male
Male
Male
Male
Male
Male
51 7 May 2009
55 3 August 2012
54 30 April 2014
26 December 2016
26 December 2016
26 December 2016
14 September 2015 26 December 2016
26 December 2016
53 27 December 2007
49 16 June 2004
26 December 2016
52 27 September 2012 26 December 2016
26 December 2016
42 26 November 2007
26 December 2016
53 15 August 2014
26 December 2016
49 27 March 2015
26 December 2016
27 March 2015
Directors
Tan Wan Geng
Yuan Xin An
Yang Li Hua
Zhang Zi Fang
Li Shao Bin
Ning Xiang Dong
Liu Chang Le
Tan Jin Song
Guo Wei
Jiao Shu Ge
Supervisors
Pan Fu
Li Jia Shi
Zhang Wei
Yang Yi Hua
Wu De Ming
Senior Management
Ren Ji Dong
Wang Zhi Xue
Li Tong Bin
Su Liang
Chen Wei Hua
Guo Zhi Qiang
Xie Bing
Feng Hua Nan
Xiao Li Xin
086
Directors, Supervisors, Senior Management and Employees
(II) Other positions held in other Companies by Directors, Supervisors and Senior
Management
1.
Positions held in shareholder entities
Name
Name of entities
Position
Appointment date
Expiry date
Yuan Xin An China Southern Air Holding Company
Yang Li Hua China Southern Air Holding Company
China Southern Air Holding Company
Pan Fu
Zhang Wei
China Southern Air Holding Company
2.
Positions held in other entities
Name of
position holder Name of other entities
Executive Vice President 28 September 2007
Executive Vice President 22 May 2009
Team Leader of the
Discipline Inspection
Commission
Director of the Audit
Division
27 October 2010
8 October 2007
To date
To date
To date
To date
Yuan Xin An
Yang Li Hua
Li Shao Bin
TravelSky Technology Limited
Guangzhou Southern Airlines Construction Company Limited
MTU Maintenance Zhuhai Company Limited
Shenzhen Air Catering Company Limited
China Aircraft Services Limited
Southern Airlines Culture and Media Company Limited
China Southern Airlines Group Property Management Company Limited
China Southern Airlines Group Ground Services Company Limited
Southern Airlines Group Import and Export Trading Company Limited
Guangzhou Southern Airlines Supervision of Construction Company
Limited
Southern Airlines Guangdong Pearl Company Limited
Ning Xiang Dong Sichuan Changhong Electric Company Limited
Liu Chang Le
Tan Jin Song
Guo Wei
Aerospace Hi-Tech Holding Group Company Limited
Yango Group Company Limited
Weichai Power Company Limited
Sinopec Sales Company Limited
Phoenix Satellite Television Holdings Limited
Guangzhou Hengyun Enterprises Holdings Limited
Poly Real Estate Company Limited
Welling Holding Limited
Zhuhai Huafa Industrial Company Limited
Digital China Holdings Limited
Digital China Information Service Company Limited
HC International, Inc.
Shanghai Pudong Development Bank Company Limited
Kosalaki Investments Limited
Position(s) held in
other entities
Non-executive director
Chairman
Chairman
Chairman
Director
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Independent director
Independent director
Independent director
Independent director
Independent director
Chairman and Chief
Executive Officer
Independent director
Independent director
Independent non-
executive director
Independent director
Chairman of Board
Chairman
Non-executive director
Independent director
Director
087
Annual Report 2015China Southern Airlines Company Limited
Name of
position holder Name of other entities
Jiao Shu Ge
Li Jia Shi
Zhang Wei
CDH CHINA MANAGEMENT COMPANY LIMITED
Fujian Nanping Nanfu Battery Company Limited
Hainan Clear water Bay Tourism Company Limited
Hainan Aloha Hotels Company Limited
Shanghai Qing Chen Real Estate Development Company Limited
Shanghai Bai An Yi Xing Investment Company Limited
Shanghai Hightech Pharmaceutical Company Limited
Shanghai Zhangjiang Biotechnology Company Limited
Shanghai Mai Tai Ya Bo Biotechnology Company Limited
Henan Shuanghui Investment & Development Company Limited
Inner Mongolia Hetao Spirit Group Company Limited
CDH Equity Investment Management (Tianjin) Company Limited
Beijing Taiyang Pharmaceutical Industry Company Limited
Henan Luohe Shineway Industry Group Company Limited
Shine C Holding Limited
WH Group Limited
United Global Food (US) Holdings, Inc.
Smithfield Foods, Inc.
Rotary Vortex Ltd
Joyoung Company Limited
Chery Automobile Company Limited
Mabtech Limited
Mabtech Holdings Limited
GeneMab Limited
China Mengniu Dairy Company Limited
Tianjin Guan Jing Investment Advisory Company Limited
Plymouth Hainan Pharmaceutical Company Limited
Shanghai Haimozexin Pharmaceutical Technology Development
Company Limited
Shanghai Haimo Biotechnology Company Limited
Tianjin Wei Yuan Investment Management Company Limited
Wei Jun Investment Advisory Company Limited
Ningbo Economic and Technological Development Zone Xu Bo
Investment Advisory Company Limited
Beijing Yuan Bo Heng Rui Investment Advisory Company Limited
Shenzhen CDH Venture Capital Management Company Limited
Southern Airlines Culture and Media Company Limited
Southern Airlines Group Finance Company Limited
Southern Airlines Culture and Media Company Limited
Southern Airlines Group Import and Export Trading Company Limited
Guangzhou Southern Airline Construction Company Limited
Position(s) held in
other entities
President
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Vice Chairman
Vice Chairman
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Independent director
Chairman
Director
Director
Director
Executive director
Executive Director and
General Manager
Executive Director and
General Manager
Director and Manager
Director
Vice Chairman
Chairman of
Supervisory
Committee
Chairman of
Supervisory
Committee
Chairman of
Supervisory
Committee
Director
088
Directors, Supervisors, Senior Management and Employees
Name of
position holder Name of other entities
Yang Yi Hua
Xiamen Airlines Company Limited
Guizhou Airlines Company Limited
Zhuhai Airlines Company Limited
Chongqing Airlines Company Limited
Guangzhou Baiyun International Logistic Company Limited
Southern Airlines Group Finance Company Limited
Beijing China Southern Airlines Ground Service Company Limited
Nan Lung International Freight Limited
Guangzhou Southern Airlines Supervision of Construction Company
Limited
Guangzhou Air Cargo Terminals Company Limited
Wang Zhi Xue
Su Liang
Chen Wei Hua
Guo Zhi Qiang
Li Tong Bin
Feng Hua Nan
Xiao Li Xin
Zhuhai Airlines Company Limited
Sichuan Airlines Company Limited
Xiamen Airlines Company Limited
Xiamen Airlines Company Limited
Xiamen Airlines Company Limited
Guangzhou Nanland Air Catering Company Limited
Guangzhou Baiyun International Logistic Company Limited
Guangzhou Aircraft Maintenance Engineering Company Limited
Shenyang Northern Aircraft Maintenance Engineering Co., Ltd.
Zhuhai Xiang Yi Aviation Technology Company Limited
China Southern West Australian Flying College Pty Ltd.
Guangzhou Air Cargo Terminals Company Limited
China Southern Airlines Overseas (Hong Kong) Company Limited
Guizhou Airlines Company Limited
Xiamen Airlines Company Limited
Position(s) held in
other entities
Supervisor
Chairman of
Supervisory
Committee
Convener of
Supervisory
Committee
Supervisor
Chairman of
Supervisory
Committee
Supervisor
Convener of
Supervisory
Committee
Chairman of
Supervisory
Committee
Supervisor
Chairman of
Supervisory
Committee
Chairman
Director
Director
Director
Director
Chairman
Chairman
Chairman
Chairman
Chairman
Chairman
Director
Director
Chairman
Director
089
Annual Report 2015China Southern Airlines Company Limited
(III) Changes in Directors, Supervisors and Senior management
During the reporting period, changes in the directors, supervisors and senior management were as follows:
Name
Xu Jie Bo
Position
Change
Reason of change
Executive Director
Resigned
On 5 January 2015, Mr. Xu Jie Bo tendered his
resignation as a director to the Board as
he was under investigation on suspicion of
job-related crimes.
Xu Jie Bo
Executive Vice President,
Removed
Under investigation
Zhou Yue Hai
Hu Chen Jie
Wang Quan Hua
Chief Financial Officer and
and Chief Accountant
Executive Vice President
Chief Information Officer
Non-executive Director
Removed
Removed
Resigned
Under investigation
Change of job nature.
On 25 March 2015, Mr. Wang Quan Hua
tendered his resignation as the non-
executive Director due to retirement.
Xiao Li Xin
Chief Financial Officer and
Appointed
Newly appointed
Chief Accountant
Wei Jin Cai
Independent Non-executive
Resigned
On 9 April 2015, Pursuant to relevant
Director
requirements of Opinions on Further
Regulation on Party and Political Leaders
and Cadres Working Part-time (Holding
Office) in Enterprises (《關於進一步 規
範黨政領導幹部在企業兼職（任職）
問題的意見》), Mr. Wei Jin Cai tendered
his resignation as an independent non-
executive director of the Company to the
Board which took effect upon the date of
30 June 2015.
Guo Wei
Independent Non-executive
Elected
On 30 June 2015, Mr. Guo Wei was elected
Director
Jiao Shu Ge
Independent Non-executive
Elected
Director
Li Tong Bin
Executive Vice President and
Appointed
Liu Qian
Si Xian Min
Chief Engineer
Executive Vice President
Chairman of the Board and
Non-executive Director
Removed
Resigned
as an independent non-executive Director
at the 2014 annual general meeting of the
Company.
On 30 June 2015, Mr. Jiao Shu Ge was elected
as an independent non-executive Director
at the 2014 annual general meeting of the
Company.
Newly appointed
Under investigation
On 15 January 2016, Mr. Si Xian Min tendered
his resignation as a Director due to personal
reason.
(IV) Changes of Information of Directors and Supervisors under Rule 13.51B(1) of Listing
Rules
Below are the information relating to the changes of Directors and Supervisors required to be disclosed pursuant to
Rule 13.51B(1) of the Listing Rules since the date of 2015 interim report:
1.
Mr. Yuan Xin An, the Non-executive Director, resigned as the chairman of Dalian Acacia Town Villa Co., Ltd.,
SAIETC and China Southern Airlines Group Construction and Development Company Limited. He was appointed
as the chairman of Guangzhou Southern Airline Construction Company Limited and non-executive director
of TravelSky Technology Limited.
2.
Ms. Yang Li Hua, the Non-executive Director, was appointed as the chairman of SAIETC.
090
Directors, Supervisors, Senior Management and Employees
3.
4.
Mr. Tan Jin Song, the Independent Non-executive Director, resigned as Guangzhou Zhongda Holding Co.,
Ltd., and was appointed as the independent director of Zhuhai Huafa Industrial Co., Ltd.
Mr. Ning Xiang Dong, the Independent Non-executive Director, was appointed as the independent director
of Sinopec Marketing Co., Ltd.
Save as disclosed above, there is no other information required to be disclosed pursuant to Rule 13.51B(1) of the
Listing Rules.
(V) Changes in the number of Share held by Directors, Supervisors and Senior
Management and their remuneration
Number of
Shares held
as at the
beginning
of the
reporting
period
(shares)
Number of
Shares held
as at the
end of the
reporting
period
(shares)
Increase or
Decrease of
Shares
during
the year
(shares)
Currency: RMB
The total
remuneration
before tax
received
from the
Company
during the
reporting
period
(RMB’000)
Had received
remuneration
from related
party of the
Company
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
773
150
150
150
75
75
0
775
0
332
591
774
1,377
636
134
705
701
701
1,134
317
Yes
Yes
Yes
Yes
No
No
No
No
No
No
Yes
No
Yes
No
No
No
No
No
No
No
No
No
No
No
091
Name
Directors
Tan Wan Geng
Yuan Xin An
Yang Li Hua
Zhang Zi Fang
Li Shao Bin
Ning Xiang Dong
Position
Vice Chairman, Executive
Director and President
Non-executive Director
Non-executive Director
Executive Director and Executive
Vice President
Executive Director
Independent Non-executive
Director
Liu Chang Le
Independent Non-executive
Director
Tan Jin Song
Independent Non-executive
Guo Wei1
Independent Non-executive
Director
Jiao Shu Ge1
Independent Non-executive
Director
Director
Supervisors
Pan Fu
Li Jia Shi
Zhang Wei
Yang Yi Hua
Wu De Ming
Senior Management
Ren Ji Dong
Wang Zhi Xue2
Li Tong Bin
Su Liang3
Chen Wei Hua
Guo Zhi Qiang
Xie Bing
Feng Hua Nan2
Xiao Li Xin4
Chairman of the Supervisory
Committee
Supervisor
Supervisor
Supervisor
Supervisor
Executive Vice President
Executive Vice President
Executive Vice President and
Chief Engineer
Chief Economist
Chief Legal Adviser
COO Marketing & Sales
Company Secretary
COO Flight Safety
Chief Accountant and Chief
Financial Officer
Annual Report 2015China Southern Airlines Company Limited
Note:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Mr. Guo Wei and Mr. Jiao Shu Ge, both are Independent Non-executive Directors, had taken office since 30 June 2015 and their
remuneration disclosure period started from July 2015 to December 2015;
Mr. Wang Zhi Xue, an Executive Vice President and Mr. Feng Hua Nan, the COO Flight Safety also served as pilots, and their
remunerations were inclusive of crew allowance;
Mr. Su Liang, the Chief Economist, was designated to Skyteam, therefore he didn’t receive any remuneration from the Company,
and the Company paid applicable insurance and housing fund for him;
Mr. Xiao Li Xin, the Chief Accountant and Chief Financial Officer, had taken office since 27 March 2015 and his remuneration
disclosure period starting from April 2015 to December 2015;
Mr. Wei Jin Cai, a former Independent Non-executive Director, had resigned since 30 June 2015 and his received remuneration
before tax was RMB75,000 during the terms of office;
Mr. Hu Chen Jie, the former Chief Information Officer, was a publicly recruited senior management staff who had no longer held
the position since 27 February 2015. His received remuneration before tax was RMB542,000 during the terms of office;
Liu Qian, the former Executive Vice President, had no longer held the position since 16 October 2015. His received remuneration
before tax was RMB1,282,000 during the terms of office and his remuneration were inclusive of crew allowance;
Xu Jie Bo, the former Executive Director, Executive Vice President, Chief Accountant and Chief Financial Officer of the Company,
and Zhou Yue Hai, the former Executive Vice President, had no longer held the positions since 5 January 2015 and they received
no remuneration during their terms of office.
Si Xian Min, the former Chairman of the Board and Non-executive Director, received no remuneration from the Company during
the reporting period;
During the reporting period, the current Directors, Supervisors and Senior Management or the Directors, Supervisors
and Senior Management who resigned during the reporting period has not held or dealt with shares of the Company.
As at 31 December 2015, none of the Directors, Chief Executive or Supervisors of the Company had interests or
short positions in the shares, underlying shares and/or debentures (as the case may be) of the Company or any of
its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the
Company and the Stock Exchange pursuant to the SFO (including interests or short positions which are taken or
deemed to have under such provisions of the SFO), or which were required to be recorded in the register maintained
by the Company pursuant to Section 352 of the SFO, or which were required to be notified to the Company and the
Stock Exchange pursuant to the Model Code as set out in Appendix 10 of the Listing Rules.
(VI) Emolument Policy of Directors, Supervisors and Senior Management
The Directors, Supervisors and Senior Management of the Company received remuneration annually. Remuneration
of Directors and Supervisors are adjusted and paid pursuant to Administrative Measures on Remuneration of Directors
of China Southern Airlines Company Limited approved at the shareholders’ meeting. Remuneration of Senior
Management are adjusted and paid pursuant to Administrative Measures on Remuneration of Senior Management
and approval of the Board.
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 above-mentioned rules of the Group.
092
Directors, Supervisors, Senior Management and Employees 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 a 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 49(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
56 to the financial statements prepared under IFRSs.
Details of other employees’ retirement and housing benefits are set out in notes 14 and 49 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
2015
2014
3
6
3
0
12
1
7
2
3
13
(VII) 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.
(VIII) Profiles of Current Directors, Supervisors and Senior Management
Directors
Tan Wan Geng, male, born in August 1964, 51, graduated from Zhongshan University, majoring in regional geography,
with qualification of Master postgraduate degree. He is an economist and a member of Communist Party of China
(CPC). Mr. Tan began his career in August 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
from 1992 to 1996. He served as the Deputy Director General of Human Resources Division of the Civil Aviation
Administration of China (CAAC) from May 1996 to September 1998. Subsequently, Mr. Tan served as the Deputy
Director General of Personnel and Education Division of the CAAC from September 1998 to December 2000. He had
been the Director General and Party Secretary of the CAAC Northeastern Region from December 2000 to January
2006, and became the Party Secretary and Executive Vice President of the Company from January 2006 to February
2007. He has been the Director of the Company since June 2006. He had been the Party Member of CSAHC and
the Party Secretary and Executive Vice President and Director of the Company from February 2007 to January 2009.
He had been the Party Member of CSAHC and the President, the Party Secretary and the Director of the Company
from January 2009 to February 2009. He had been the Party Member of CSAHC and the President, the Deputy Party
Secretary and the Director of the Company from February 2009 to May 2011. He was the Party Member of CSAHC
and the President, the Deputy Party Secretary and the Director of the Company from May 2011 to January 2013. Since
January 2013, Mr. Tan has been the Party Member of CSAHC and the President, the Deputy Party Secretary and the
Vice Chairman of the Board of the Company. (Mr. Tan has been a member of the 11th CPC Guangdong Provincial
Committee since January 2016.)
093
Annual Report 2015China Southern Airlines Company Limited
Yuan Xin An, male, born in February 1957, 59, received university education in Aeronautical Machinery from Air Force
Engineer University in Xi’an and is a senior engineer. Mr. Yuan is a CPC member and began his career in December
1976. He served as the Chief Inspection of Quality Supervision Division of Maintenance Factory of Guangzhou Bureau
of the Civil Aviation Administration, the Manager of Inspection and Vice Director of Guangzhou Aircraft Maintenance
Engineering Co., Ltd. from 1987 to 1997. He was the Vice President of Engineering Department of the Company
from April 1997 to October 1998. Mr. Yuan then served as the Vice President of the Guangzhou Aircraft Maintenance
Engineering Co., Ltd. from October 1998 to November 2000. He became the Chief Engineer and the General Manager
of Engineering Department of the Company from November 2000 to April 2002. He was then the Standing Member
of Party Committee and the Executive Vice President of the Company from April 2002 to February 2007. He served as
the Assistant of President of CSAHC and was also the Standing member of Party Committee and the Executive Vice
President of the Company from February 2007 to December 2007. He has been the Party Member and the Executive
Vice President of CSAHC since September 2007, and has held a concurrent post of Chief Legal Adviser of CSAHC since
July 2008. Since November 2011, Mr. Yuan has been the Director of the Company. For now, he is also appointed as
the Chairman of MTU Maintenance Zhuhai Co., Ltd., Guangzhou Southern Airlines Construction Company Limited
and Shenzhen Air Catering Co., Ltd., Non-executive Director of TravelSky Technology Limited and Director of China
Aircraft Services Limited.
Yang Li Hua, female, born in November 1955, 60, graduated with a Master degree from the Party School of the
Central Committee of CPC majoring in economics. Ms. Yang is a CPC member who began her career in February
1973. She served as the Deputy Head of In-flight Service Team of the Chief Flight Corps Team of the Beijing Bureau
of Civil Aviation Administration and the Head of the In-flight Service Team, Manager of In-flight Service Division of
Air China International Corporation from 1984 to 1995. She served as the Deputy Head of the Chief Flight Team of
Air China International Corporation from July 1995 to September 2000. Subsequently, she was appointed as the
General Manager of the Passenger Cabin Service Division and Party Secretary of Air China International Corporation
from September 2000 to October 2002. She was the Vice President of Air China International Corporation from
October 2002 to September 2004. After that, she served as Standing Member of Party Committee and the Executive
Vice President of Air China Limited from September 2004 to May 2009. Since May 2009, Ms. Yang has been the Party
Member and Executive Vice President of CSAHC. From July 2010 to August 2012, Ms. Yang also acted as the Chairman
of the Labour Union of CSAHC. Since January 2013, Ms. Yang has been the Director of the Company. For now, she
also acts as President of China Southern Airlines Group Import and Export Trading Co., Ltd., China Southern Airlines
Group Property Management Company Limited, Southern Airlines Culture and Media Co., Ltd. and China Southern
Airlines Group Ground Services Co., Ltd.
Zhang Zi Fang, male, born in October 1958, 57, graduated with a college degree from foundation science profession
for Party administrative cadres of Liaoning University. While Mr. Zhang was at work, he obtained an Executive Master of
Business Administration (EMBA) degree from Tsinghua University and is a senior expert of political science. Mr. Zhang
is a CPC member and began his career in February 1976. He served as the Deputy Commissar of the Office, Deputy
Commissar of Shenyang Flight Team, as well as Director and Commissar of Political Department of the China Northern
Airlines Company from 1993 to 2000. He served as the Party Secretary of the Jilin Branch of China Northern Airlines
Company and the General Manager of Dalian Branch from 2000 to 2003. He had been the Director of Political Works
Department of CSAHC from October 2003 to February 2005. Subsequently, Mr. Zhang was appointed as the Deputy
Party Secretary and Secretary of the Commission for Discipline of the Company from February 2005 to December
2007. He had been the Executive Vice President and the Deputy Party Secretary of the Company from December
2007 to February 2009. He was the Deputy Party Secretary and the Executive Vice President of the Company from
February 2009 to August 2011. Mr. Zhang has been the Director of the Company since June 2009. He has been the
Party member of CSAHC and the Party Secretary, the Executive Vice President and the Director of the Company since
August 2011. (For now, he also serves as Vice Director General of China Air Transport Association and Guangdong
Lingnan Culture Development Foundation.)
094
Directors, Supervisors, Senior Management and Employees Li Shao Bin, male, born in April 1964, 51, graduated with a college degree from Chinese Language and Literature
of Xiangtan Teachers’ College. While Mr. Li was at work, he obtained 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 is a
CPC member and began his career in July 1984. He served as the Deputy Director of Promotion Division of Political
Department of the Guangzhou Bureau of Civil Aviation Administration, the Director of Promotion Department of the
Company and the Deputy Director of Promotion Department of the China Southern Airlines (Group) Company from
1992 to 1999. He had been the Director of Political Division of Flight Department of the Company from December
1999 to May 2002. Mr. Li was the Deputy Party Secretary of Flight Department and Director of Political Division of the
Company from May 2002 to May 2004. Subsequently, he was appointed as the Party Secretary of Guangzhou Flight
Operations Division of the Company from May 2004 to March 2006. Mr. Li served as the Party Secretary and Deputy
General Manager of Guangzhou Flight Operations Division of the Company from March 2006 to July 2012. Mr. Li
has been the Chairman of the Labour Union of the Company since July 2012 and the Director of the the Company
since January 2013. For now, Mr. Li also serves as the Chairman of Guangzhou Southern Airline Project Supervision
Co., Ltd. and Guangdong Southern Airline Pearl Service Co., Ltd.
Ning Xiang Dong, male, born in May 1965, 50, 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 the Chinese University
of Hong Kong, and the independent director of a number of listed companies including Datang Telecom Technology
Co., Ltd., Shantui Construction Machine Co., Ltd., Hong Yuan Securities Co., Ltd. and Goer Tek Inc. 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 China
Petroleum & Chemical Corporation and a number of listed companies including Aerospace Hi-Tech Holding Group
Co., Ltd., Sichuan Changhong Electric Company Limited, Yango Group Co., Ltd. and Weichai Power Co., Ltd.
Liu Chang Le, male, born in November 1951, aged 64, was conferred an honorary doctoral degree in literature by
the City University of Hong Kong and an honorary fellow by the United International College, 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”, the “Person of the Year”
award of the Chinese Business Leaders Annual Meeting and the “Business Person of the Year” award of DHL/SCMP
Hong Kong Business Awards 2012. Since 2005, Mr. Liu has been the Chairman of the iEMMYs Festival. In 2008, Mr. Liu
received the International Emmy Directorate Award granted by International Academy of Television Arts & Sciences.
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. In 2014, he was
appointed as Vice President of the 6th council of The Buddha’s Light International Association, Board of Directors
of Headquarters. Mr. Liu was a member of the Tenth and the Eleventh 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 government of the Hong
Kong Special Administrative Region. Mr. Liu has been the independent non-executive director of the Company since
30 November 2011.
095
Annual Report 2015China Southern Airlines Company Limited Tan Jin Song, male, born in January 1965, aged 51, graduated from Renmin University of China with an on-job
doctor degree in Accounting. Mr. Tan is a Chinese Certified Public Accountant. 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 is currently a professor and a doctorate-tutor of the School
of Management of Zhongshan University. He is also a member of the MPAcc Education Instruction Committee, a
member of China Institute of Internal Audit, Vice President of Guangdong Institute of Certified Public Accountants
and a member of China Audit Society. Currently, Mr. Tan also serves as the independent director of Poly Real Estate
Company Limited, Guangzhou Hengyun Enterprises Holdings Limited and Huafa Industrial Co., Ltd. Zhuhai. In
addition, Mr. Tan also acts as the independent non-executive director of Welling Holding Limited. Mr. Tan has been
the independent non-executive director of the Company since 26 December 2013.
Guo Wei, male, born in February 1963, aged 53, graduated from the Management Faculty of the Management
Department of Graduate School of Chinese Academy of Social Sciences (formerly the Graduate School of University of
Science and Technology of China) with a master degree in Engineering. Mr. Guo has extensive experience in business
strategy development and business management. Mr. Guo was an executive director and Senior Vice President of
Lenovo Group, Vice Chairman, President and the Chief Executive Officer of Digital China Holdings Limited (Digital
China), director of Digiwin Software Co., Ltd. Currently, Mr. Guo serves as board chairman of Digital China and directors
of a number of subsidiary and associated companies of Digital China. Mr. Guo also acts as the president of Digital China
Information Service Company Ltd., the non-executive director of HC International Inc., the independent director of
Shanghai Pudong Development Bank Co., Ltd. and the director of Kosalaki Investments Limited. In addition, Mr. Guo
was also a member of the Twelfth National Committee of the Chinese People’s Political Consultative Conference, a
member of the Fourth Committee of the Advisory Committee for State Informatization and the president of the Sixth
Council of Chinese Private Technology Entrepreneur Association. Mr. Guo was the recipient of numerous titles and
important awards, among which include Top Ten Outstanding Youths in China (2002), the Future Economic Leaders
in China (2003) and the First Session of China Youth Entrepreneurs Management Innovation award (2005), and was
rated as one of the TOP 50 Most Influential Business Leaders in China consecutively for 2011, 2012 and 2013. Mr Guo
has been the Non-executive Director of this company since 30 June, 2015.
Jiao Shu Ge, male, born in February 1966, aged 50, with a master degree, first graduated from the Control Theory
Faculty of the Department of Mathematics of Shangdong University with a bachelor degree, and then graduated
from the Systems Engineering Faculty of No. 2 Research Institute of the Ministry of Aerospace Industry with a master
degree in Engineering. Mr. Jiao has extensive experience in funds management and equity management. Currently,
Mr. Jiao is the Director and President of CDH China Management Company Limited (CDH Investments). He was a
computer researcher of 710 Research Institute of the former Ministry of Aerospace Industry of China, the Deputy
General Manager of China International Capital Corporation Ltd. (CICC) and is the founder of CDH Investments. Mr.
Jiao was the non-executive directors of China Yurun Food Group Limited and China Shanshui Cement Group Limited.
Currently, he is also the Director of the associated companies of CDH Investments, the independent non-executive
director of China Mengniu Dairy Company Limited, the independent non-executive director and Vice Chairman of WH
Group Limited, the director of Joyoung Co., Ltd., the Vice President of Henan Shuanghui Investment & Development
Co.,Ltd. and the directors of a number of companies including Beijing TaiYang Pharmaceutical Industry Company
Limited, Chery Automobile Co., Ltd., Inner Mongolia Hetao Spirit Group Co., Ltd., Fujian Nanping Nanfu Battery
Co.,Ltd. and Shanghai Qingchen Real Estate Development Co., Ltd. Mr Jiao has been the company’s Independent
Non-executive Director since 30 June, 2015.
096
Directors, Supervisors, Senior Management and Employees Supervisors
Pan Fu, male, born in February 1963, 53, graduated with a master degree from Chongqing University majoring in
Power Systems and Automation, and is a senior engineer. Mr. Pan is a CPC member and began his career in July 1986,
and served successively as the Deputy Head of the Planning Department of Electric Power Industry Bureau of Yunnan
Province, 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 from 1994 to 2003. He served as the deputy director (work as chair) and Director of the
Department of Security Supervision of China Southern Power Grid Company Ltd. from February 2003 to April 2004;
served as the Director of the China Southern Power Grid Technology and Research Center from April 2004 to January
2005, and served as the General Manager (legal representative) and Deputy Party Secretary of the Guizhou Power
Grid Corporation from January 2005 to November 2007. Mr. Pan 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 party member and team leader of the Discipline Inspection Commission of CSAHC since November 2010 and the
supervisor & chairman of the Supervisory Committee of the Company since December 2010.
Li Jia Shi, male, born in May 1961, 54, graduated from Guangdong Polytechnic Normal University majoring in
Economics and Mathematics, and obtained an Economic Administration bachelor degree from Correspondence School
under the Party School of the CPC Central Committee and an Executive Master of Business Administration (EMBA)
degree from Tsinghua University and is an expert of political science. Mr. Li is a CPC member and began his career
in August 1976. He served as the Deputy Head (work as chair) of the Organization Division of the Party Committee
of the China Southern Airlines (Group) Company, the party secretary of Guangzhou Nanland Air Catering Company
Limited from 1994 to 1999. Mr. Li served as the head of the Organization Division of the Party Committee of CSAHC
from December 1999 to December 2003; and 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
served as a member of the Standing Committee of the CPC, the Secretary of the Disciplinary Committee and the
Director of the Disciplinary Committee Office of the Company from December 2007 to February 2012. Mr. Li has been
the supervisor of the Company since June 2009. He has been the team deputy leader of the Discipline Inspection
Commission of CSAHC, and member of the Standing Committee of the CPC, Secretary of the Disciplinary Committee
and Director of the Disciplinary Committee Office, and supervisor of the Company since February 2012. He also serves
as the Vice Chairman of Southern Airlines Culture and Media Co., Ltd.
Zhang Wei, female, born September 1966, 49, has a master degree. She graduated from Tianjin University majoring
in Investment Skills and Economics and is a senior accountant. Ms. Zhang is a CPC member and began her career
in September 1988. She successively served as the General Manager Assistant of China Southern Airlines (Group)
Company, the Deputy General Manager of the Finance Department of the Company, and the Deputy Director of
the Supervisory Bureau and the Director of the Audit Division of CSAHC from 1999 to 2006. Ms. Zhang served as the
General Manager and the Secretary of CPC General Branch of Southern Airlines Group Finance Company Limited
from August 2006 to October 2007; 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 and the Supervisor of the Company since June 2008. Ms. Zhang has been a part-time
Supervisor of the Board of Supervisors of Stated-owned Enterprises dispatched by SASAC on behalf of the State
Council to CSAHC since January 2010, and has been a member of the Discipline Inspection Commission of CSAHC
since February 2012. For now, she also acts as the Chairman of the Board of Supervisors of China Southern Airlines
Group Import and Export Trading Co., Ltd., Southern Airlines Group Finance Company Limited, Southern Airlines
Culture and Media Co., Ltd., Supervisor of MTU Maintenance Zhuhai Co., Ltd. and the Director of Guangzhou Southern
Airline Construction Co., Ltd.
097
Annual Report 2015China Southern Airlines Company Limited Yang Yi Hua, female, born in August 1960, 55, has an Economic Administration bachelor degree from Correspondence
School under the Party School of the CPC Central Committee. She is an accountant and also a CPC member who
began her career in August 1977. From 1996 to 2002, she first acted as Financial Manager of the Company and then
Deputy General Manager of CSAHC’s Audit Department. Ms. Yang has been the General Manager of the Company’s
Audit Department from May 2002 to September 2015, and the Supervisor of the Company since June 2004. For now,
she is also appointed as Chairman of the Board of Supervisors of Guizhou Airlines and Nanlong International Freight
Ltd., Convener of the Board of Supervisors of Beijing Southern Airline Ground Services Co., Ltd. and Zhuhai Airlines
and Supervisor of Xiamen Airlines, Guangzhou Baiyun International Logistics Co., Ltd., Southern Airlines Group Finance
Company Limited, Chongqing Airlines and Guangzhou Southern Airline Project Supervision Co., Ltd.
Wu De Ming, male, born in April 1958, 57, obtained a university bachelor degree from South China Normal University
College of Continuing Education majoring in Political Administration, and is an Administration Engineer. He is a CPC
member and began his career in February 1976. From 1991 to 2001, he was first appointed as political section’s deputy
director of the operation department of the Company, then member of the Party Committee, Deputy Secretary of the
Party Committee and secretary of Committee for Discipline Inspection of Guangzhou ticket office of the Company,
then Deputy Secretary and Secretary of Party General Branch of the ticket office at the Transportaion Department
of the Company, and then Secretary of Party General Branch at Passenger Traffic Department of the Transportation
Department of the Company. He was appointed as Director of the Disciplinary Supervision Department of CSAHC
from March 2001 to December 2003, and General Director of the Supervision Bureau and Chief Officer of Disciplinary
Committee Office of CSAHC from December 2003 to April 2009. He has been a member of Party Committee of the
Marketing Management Committee of the Company, secretary to the Disciplinary Committee and Chairman of the
Labour Union from April 2009 to November 2015, a member of Party Committee of the Marketing Management
Committee of the Company, secretary to the Disciplinary Committee since November 2015 and has been the
Supervisor of the Company since December 2013.
Senior Management
Ren Ji Dong, male, born in January 1965, 51, 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 is a CPC member and began his career in August 1986. Mr.
Ren served as the No. 2 Workshop Manager, Deputy Plant Manager and Deputy General Manager of Engineering
Department of the aircraft maintenance factory of Urumqi Civil Aviation Administration (Xinjiang Airlines) from 1995
to 2000. He served as the Deputy Director (deputy general manager) and a member of the Standing Committee of the
CPC of Urumqi Civil Aviation Administration (Xinjiang Airlines) from January 2000 to December 2001, and a member
of the party committee and the Deputy General Manager of Xinjiang Airlines from December 2001 to June 2004, and
the Party Secretary and Deputy General Manager of CSAHC Xinjiang Company from June 2004 to December 2004,
the Party Secretary and Deputy General Manager of Xinjiang Branch of the Company from January 2005 to February
2015, a member of the Standing Committee of the CPC and the Executive Vice President of the Company from March
2005 to February 2007; a member of the Standing Committee of the CPC of the Company and the General Manager
and Deputy Party Secretary of Xinjiang Branch from January 2007 to April 2009. Mr. Ren has been a member of the
Standing Committee of the CPC of the Company and the Executive Vice President of the Company since May 2009.
098
Directors, Supervisors, Senior Management and Employees Wang Zhi Xue, male, born in January 1961, 55, has a college degree from Civil Aviation Flight University of China
majoring in Aircraft Piloting, and obtained an on-job university degree from Civil Aviation Flight University of China
majoring in Wingmanship, and is a command pilot. Mr. Wang is a CPC member, and began his career in February
1981. Mr. Wang successively served as the Deputy General Manager and Manager of the Flight Safety Technology
Division of Zhuhai Airlines Company Limited, the Senior Flight Instructor of Model B737, Deputy Chief Pilot and
Director of the Flight Safety Technology Division as well as the Deputy Chief Pilot and Manager of the Flight Safety
Technology Management Division from 1995 to 2002 of Shantou Airlines Company Limited of CSAHC. He also acted
as the Deputy General Manager of Shantou Airlines Company Limited from June 2002 to October 2004, and the
General Manager of the Flight Management Division of the Company from October 2004 to February 2009, and the
General Manager and Deputy Party Secretary of Guangzhou Flight Division of the Company from February 2009 to
July 2012. Mr. Wang has been a member of the Standing Committee of the CPC, Executive Vice President and chief
pilot of the Company since August 2012. For now, he also serves as Chairman of Zhuhai Airlines.
Li Tong Bin, male, born in December 1961, 54, has college qualification and graduated from Civil Aviation Institute of
China majoring in Maintenance of Aircraft Electrical Equipment. He obtained on-job Master of Business Administration
(MBA) from Hainan University and Executive Master of Business Administration (EMBA) form Tsinghua University, and is
a senior engineer. Mr. Li is a CPC member and began his career in August 1983, and successively served as the Deputy
Head of Technical Division of Aircraft Maintenance Plant, the head of Maintenance Plant and the deputy director of
Aircraft Engineering Department (aircraft maintenance base), the Director of Aircraft Engineering Department (aircraft
maintenance base) of China Northern Airlines Company, the General Manager of Jilin branch of China Northern Airlines
Company from 1994 to 2003. He also acted as the Deputy General Manager and Deputy Party Secretary of Zhuhai
Airlines Company Limited from September 2004 to January 2005, the General Manager and Deputy Party Secretary
of Zhuhai Airlines Company Limited from January 2005 to April 2012, and the party secretary and Deputy General
Manager of Northern Branch of the Company from April 2012 to April 2014. Mr. Li was the Chief Engineer, General
Manager and Deputy Party Secretary of Aircraft Engineering Department of the Company from April 2014 to August
2015. Mr. Li has been a member of the Standing Committee of the CPC, Executive Vice President and Chief Manager,
as well as General Manager and Deputy Party Secretary of Aircraft Engineering Department of the Company since
September 2015. For now, Mr Li also serves as Chairman of Guangzhou Aircraft Maintenance Engineering Co., Ltd.
and Shenyang Northern Aircraft Maintenance Co., Ltd.
Su Liang, male, born in April 1962, 53, graduated from the University of Cranfield, United Kingdom with a master
degree majoring in Air Transport Management, and is an engineer. Mr. Su is a CPC member and began his career
in December 1981. From 1998 to 2000, he successively served as Deputy General Manager of the Flight Operations
Division, Deputy General Manager and Manager of Planning and Management Division of CSAHC Shenzhen Company.
Mr. Su was the Secretary to the Board of the Company from July 2000 to December 2003, the Secretary to the Board
and Director of Board Secretariat of the Company from December 2003 to November 2005, the Secretary to the Board
and Vice Director of Commercial Steering Committee of the Company from November 2005 to February 2006, the
Company Secretary and director of Company Secretary Office and Vice Director of Commercial Steering Committee
of the Company from February 2006 to January 2007, and the Secretary to the Board and Director of Company
Secretary Office from January 2007 to December 2007. Mr. Su has been the Chief Economist of the Company since
December 2007. For now, he also serves as Director of Sichuan Airlines.
Chen Wei Hua, male, born in October 1966, 49, graduated from the School of Law of Peking University with a
bachelor degree, who is an economist, a qualified lawyer in the PRC and a qualified corporate legal counselor. Mr. Chen
is a CPC member and joined the aviation industry in July 1988. He successively served as Deputy Director of CSAHC,
Deputy Director of the Office (director of the Legal Department) of the Company and CSAHC from 1997 to 2004.
Mr. Chen was the Chief Legal Adviser of the Company and Director of the Legal Department of the Company from
June 2004 to October 2008. Mr. Chen has been the General Counsel and General Manager of the Legal Department
of the Company since October 2008. For now, he also acts as Director of Xiamen Airlines.
099
Annual Report 2015China Southern Airlines Company Limited Guo Zhi Qiang, male, born in July 1963, 52, is an economist who graduated with a master degree from Party
School of Xinjiang Uyghur Autonomous Region majoring in Business Administration. Mr. Guo is a CPC member
and began his career in January 1981. He successively served as the Xi’an Office manager, Beijing Office manager
and General Manager of Transportation Department of Xinjiang Airlines Manager; the Deputy General Manager of
Xinjiang Airlines; the Beijing Office Director of CSAHC, the General Manager and the Party Secretary of China Southern
Airlines Beijing Office from 1995 to 2004. He served as a member of the Standing Committee of the CPC and the
Deputy General Manager of CSAHC Xinjiang Branch from June 2004 to December 2004, a member of the Standing
Committee of the CPC and the Deputy General Manager of China Southern Airlines Xinjiang Branch from January
2005 to December 2005. Mr. Guo served as a member of Party Committee and the Deputy General Manager of the
Shenzhen Branch of the Company from December 2005 to February 2008 and the President and Chief Executive
Officer as well as Deputy Party Secretary of Chongqing Airlines Company Limited from February 2008 to May 2009.
He served as a member of Party Committee and the Deputy Director of the Commercial Steering Committee of the
Company from May 2009 to September 2009, the Director and Deputy Party Secretary of the Commercial Steering
Committee of the Company from September 2009 to September 2012. Mr. Guo acted as the COO Marketing and
Sales of the Company, the Director and the Deputy Party Secretary of the Commercial Steering Committee of the
Company from September 2012 to July 2014. Mr. Guo has been the COO Marketing and Sales of the Company since
July 2014. For now, he also serves as President of Guangzhou Nanland Air Catering Co., Ltd. and Guangzhou Baiyun
International Logistics Co., Ltd.
Xie Bing, male, born in September 1973, 42, with a university degree, 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 business administration (international banking and 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, has the qualification for Company Secretary of companies listed
on Shanghai Stock Exchange. Mr. Xie is a CPC member and began his career in July 1995. He successively served as
the Assistant of Company Secretary of the Company, and the Executive Secretary of the General Office of CSAHC
from 2003 to 2007. Mr. Xie has been the Company Secretary and Deputy Director of the Company Secretary Office
from November 2007 to December 2009. Mr. Xie has been the Company Secretary and Director of the Company
Secretary Office since December 2009.
Feng Hua Nan, male, born in November 1962, 53, graduated with a college degree from China Civil Aviation Flying
College, majoring in Aircraft Piloting, and obtained an on-job master degree in Aeronautical Engineering from Beijing
University of Aeronautics and Astronautics and an Executive Master of Business Administration (EMBA) from the School
of Economics and Management of Tsinghua University. He is a commanding pilot. Mr. Feng is a CPC member and
began his career in January 1983. He successively served as the Director of Zhuhai Flight Training Centre of China
Southern Airlines (Group) Company and the Deputy General Manager of Flight Operation Division of the Company
from 1994 to 1999. He was the General Manager of Flight Safety Technology Department from December 1999
to October 2002, and the General Manager of Flight Technology Management Department of the Company from
November 2002 to September 2004. Mr. Feng also served as the Party Secretary and Deputy General Manager of
Guizhou Airlines Company Limited from September 2004 to February 2006, and then served as the General Manager
and Deputy Party Secretary of Guizhou Airlines Company Limited from February 2006 to July 2014. He has been the
COO Flight Safety of the Company since August 2014. For now, he also serves as President of Zhuhai Xiang Yi Aviation
Technology Co., Ltd. and China Southern West Australia Flight College.
100
Directors, Supervisors, Senior Management and Employees Xiao Li Xin, male, born in June 1966, 49, graduated from Guangdong Academy of Social Sciences with a master
degree in Economics and then obtained an on-job Executive Master of Business Administration (EMBA) degree from
Tsinghua University. He is a qualified senior accountant and a certified public accountant. Mr. Xiao is a CPC member
and began his career in July 1991. He served as the General Manager Assistant and Deputy General Manager of the
Finance Department of the Company from 1999 to 2002, and served as the General Manager and Deputy Secretary
of the General Party Branch of the Finance Department of the Company from January 2002 to February 2007. Mr.
Xiao served as the deputy chief accountant and general manager of the Finance Department of the Company from
February 2007 to October 2007, and served as the General Manager and Secretary of the General Party Branch of
Southern Airlines Group Finance Company Limited from October 2007 to February 2008. He served as the General
Manager and Party Secretary of Southern Airlines Group Finance Company Limited from February 2008 to March
2015. Mr. Xiao has been the Chief Accountant and Chief Financial Officer of the Company since March 2015. For now,
he also serves as Chairman of Guizhou Airlines, Director of Xiamen Airlines and China Southern Airlines Overseas
(Hong Kong) Co. Ltd.
Save as disclosed above, none of the above Directors, Supervisors or senior management of the Company has any
relationship with any Directors, Supervisors, senior management, substantial shareholders of the Company.
II. PARENT COMPANY AND EMPLOYEES OF THE MAJOR SUBSIDIARIES
(I)
Employees
As at 31 December 2015, the Group had an aggregate of 87,202 employees (31 December 2014: 82,132).
Number of current staff in the Company
Number of current staff in major subsidiaries
Total number of current staff
Professions composition
Categories by profession
Pilots
Cabin attendants (including part-time security personnel)
Air marshals
Engineering unit
Navigation unit
Passenger transportation unit
Cargo transportation unit
Ground services unit
Information unit
Financial unit
Others
Total
Educational level
Categories by education levels
Postgraduates
Undergraduates
Junior college
Technical School or below
Total
65,205
21,997
87,202
Number of professionals
7,465
16,505
1,065
12,108
2,343
7,321
6,197
9,146
1,391
2,366
21,295
87,202
Number (by person)
2,702
34,836
27,169
22,495
87,202
101
Annual Report 2015China Southern Airlines Company Limited
(II) Professions Composition Chart and Education Composition Chart
Professions composition
Educational composition
7,465
2,702
21,295
2,366
1,391
9,146
6,197
Pilots
Air marshals
Navigation unit
22,495
16,505
1,065
12,108
34,836
2,343
7,321
Cabin attendants
(including part-time security personnel)
Engineering unit
27,169
Postgraduates
Junior college
Undergraduates
Technical School or below
Cargo transportation unit
Passenger transportation unit
Information unit
Ground services unit
Others
Financial unit
(III) Emolument Policy of Employees
“Respect talents, and reward employees” is important connotation of the Company. The Company has gradually
formed adaptable compensation strategy during its development, namely the industry-leading compensation
distribution system directed by the market price of labor force, centered on performance management which is
established with post values as the basis and “legality, fair, efficient and harmony” as the principle, in order to share
corporate development with the staff. During the reporting period, the Group constantly improved remuneration
and labor management, strived to push ahead the management process of “integrated employment” taking “post
management” as the guiding ideology, included various temporary workers and contract workers into a unified
salary system, and gradually unify the compensation & benefit policies of all posts while establishing various career
development channels based on characteristics of posts, which increased the employee’s enthusiasm and enhanced
the Company’s cohesive force, producing positive impact on safety production and operation of the Company.
(IV) Training Plan
The Company’s training plan for 2016 is as follows:
The first is to do well the key training programs. In respect of training for cabin attendants, we are planning to train
3,500 new recruited cabin attendants and air marshals, 1,000 first-class and business-class cabins attendants and 875
directors/chief attendants. In order to continuously optimize the operation structure of passenger cabin. In respect
of meals and drinks, we will expedite the development and promotion of on-board brand means and drinks, brand
new onboard wine and other excellent online courses, so as to promote the improvement of quality service levels
in key fields. In aspect of leadership training, we are to complete with high quality the Company’s 380 talents plan
and the training of deputy posts at second tier organizations, develop case teaching for training of senior executives,
with the coverage of online management training courses exceeding over 50%. In aspect of language training, we are
to complete service English training for 190 attendants, English training for 230 pilots, and provide English training
programs for ground service and security staffs.
102
Directors, Supervisors, Senior Management and Employees The second is to do well the system establishment of course contents. We are to improve the standard of face-to-
face teaching standards, strictly implement the improve plan, and improve the standardization level of courses; carry
out precise analysis of development needs, and continuously develop excellent face-to-face courses; vigorously
develop online courses, and provide at least 150 online E-learning courses, at least 200 online App micro courses,
and at least 1,000 micro courses on We-Chat platform; we must, by closely adhering to the flight attendant course
system, support the development of the contents which are to be integrated in the flight attendant courses, so as
to promote implementation of the flight attendant course system.
The third is to do well the optimization of online learning platform. We will realize the connectivity among data
from various platforms based on user feedbacks and in accordance with the functions and interface experience of
iteration PC platform, mobile APP and WeChat public numbers, in an attempt to try the functions, performance and
learning data of multi-dimensional analysis platform, locate trainees precisely, and provide targeted learning services.
103
Annual Report 2015China Southern Airlines Company Limited 104
BOARDING PASS AT YOUR EASE
SpongeBob SquarePants, Duty-free shopping,
Blockbusters…
In our clean and comfortable cabins, everyone can discover
the best way to fly with China Southern Airlines.
105
CHINA SOUTHERN • AIRLINESAnnual Report 2015China Southern Airlines Company Limited 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.
CODE ON CORPORATE GOVERNANCE PRACTICES
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 2015.
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,
the rules and procedures of shareholders’ general meeting and the rules and procedures of board meeting.
The major issues which were brought before the Board for their decisions included:
1.
2.
3.
4.
5.
6.
Direction of the operational strategies of the Group;
Setting the policies relating to key business and financial objectives of the Company;
Monitoring the performance of the management;
Approval of material acquisitions, investments, divestments, disposal of assets or any significant capital expenditure of the
Group;
Ensuring a prudent and effective internal control system; and
Review of the financial performance and results of the Company.
Under the leadership of the President, the management of the Company is responsible for the day-to-day 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. 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 day-to-day 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. He maintains
a continuing dialogue with the Chairman and all Directors to keep them fully informed of all major business development issues.
He 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.
106
Corporate Governance Report As at 31 December 2015, the members of the Seventh Session of the Board comprise three non-executive Directors, three executive
Directors and five independent non-executive Directors. Save as Mr. Si Xian Min resigned as an non-executive Director on 15
January 2016, 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 93 to 101 of this Annual Report.
The Board held 34 meetings in 2015, all of which were convened in accordance with the Articles of Association. The Company
held one general meeting in 2015, the Directors actively participated general meeting in person and have been doing their best
to develop a balanced understanding of the views of shareholders.
The individual attendance of each Director, on a named basis, is as follows:
Name of Directors
Non-Executive Directors (“NED”)
Si Xian Min (Chairman) (resigned on 15 January 2016)
Wang Quan Hua (resigned on 25 March 2015)
Yuan Xin An
Yang Li Hua
Executive Directors
Tan Wan Geng (Vice Chairman and President)
Zhang Zi Fang (Executive Vice President)
Li Shao Bin
Independent non-executive Directors (“INED”)
Wei Jin Cai (resigned on 30 June 2015)
Ning Xiang Dong
Liu Chang Le
Tan Jin Song
Guo Wei (appointed on 30 June 2015)
Jiao Shu Ge (appointed on 30 June 2015)
(No. of
Board
Attended/
Eligible to attend
(No. of
general
meetings)
Attended/
Eligible to attend
24/34
2/2
34/34
34/34
34/34
34/34
34/34
11/11
34/34
34/34
34/34
23/23
23/23
1/1
0/0
0/1
1/1
1/1
0/1
1/1
0/1
1/1
0/1
1/1
0/1
1/1
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 experiences in business and finance are very important to the Company’s
successful development. In 2015, the INEDs expressed their views and opinions about certain matters relevant to the shareholders
and the Company as a whole at board meetings.
The Board has 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.
107
Annual Report 2015China Southern Airlines Company Limited
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.
CONTINUOUS PROFESSIONAL DEVELOPMENT OF DIRECTORS
All Directors of the Company 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 of the Company 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 2015, the Company has provided updates and coordinated training on the Listing Rules and relevant regulatory
requirements to all Directors.
All Directors of the Company as at 31 December 2015 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.
BOARD COMMITTEES
The Company has put in place a Strategic Decision-making Committee, 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 the committees
are set out below:
STRATEGIC DECISION-MAKING COMMITTEE
The Strategic Decision-making Committee comprises four members and is chaired by Tan Wan Geng. The other three members
are Ning Xiang Dong (INED), Liu Chang Le (INED) and Guo Wei (INED).
AUDIT COMMITTEE
The Audit Committee comprises three INEDs, one of whom, Tan Jin Song, possesses the appropriate professional qualifications or
accounting or financial management expertise to understand financial statements. As at 31 December 2015, the Audit Committee
was chaired by Tan Jin Song with Ning Xiang Dong and Jiao Shu Ge as the members of the Audit Committee. The Audit Committee
has been 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 2015, the Audit Committee carried out the work, amongst other
things, to oversee the relationship with the external auditors, to review the Group’s 2015 quarterly results, 2015 interim results and
2014 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. In 2015, the Audit Committee also proposed to revise its terms of reference to
reflect the amendments to the Corporate Governance Code, and the revised terms of reference of the Audit Committee has been
approved by the Board.
108
Corporate Governance Report The Audit Committee held 22 meetings in 2015. 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
Tan Jin Song (Chairman)
Wei Jin Cai (resigned on 30 June 2015)
Ning Xiang Dong
Jiao Shu Ge (appointed on 30 June 2015)
(No. of meetings)
Attended/
Eligible to attend
22/22
10/10
22/22
12/12
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. The Company hasn’t change in its auditors in any of the preceding three years.
The 2013 and 2014 annual general meetings 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 2014 and year 2015, respectively and and PricewaterhouseCoopers to provide professional services to the Company
for its Hong Kong financial reporting for the year 2014 and year 2015, respectively.
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 2014 and 2015:
Audit fees
Non-audit fees
Total
2015
RMB Million
2014
RMB Million
15
0
15
18
0
18
REMUNERATION AND ASSESSMENT COMMITTEE
As at 31 December 2015, the Remuneration and Assessment Committee comprises three members and chaired by Ning Xiang
Dong (INED) together with Tan Jin Song (INED) and Yuan Xin An (NED) 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”.
109
Annual Report 2015China Southern Airlines Company Limited
The Remuneration and Assessment Committee held 1 meeting in 2015, which was held according to its rules and procedures. The
meeting reviewed the total remuneration accounts for the year 2013, the total remuneration budgets and accounts for the year
2014 and the total remuneration budget for the year 2015. The attendance of each member is as follows.
Members of Remuneration and Assessment Committee
Ning Xiang Dong (Chairman)
Tan Jin Song
Yuan Xin An
Wang Quan Hua (resigned on 25 March 2015)
(No. of meeting)
Attended/Eligible
to attend
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 2015.
NOMINATION COMMITTEE
As at 31 December 2015, the Nomination Committee consists of three members, including Si Xian Min as chairman and Tan Jin
Song (INED) and Jiao Shu Ge (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, 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”.
The Nomination Committee held 3 meetings in 2015, to nominate Mr. Xiao Li Xin as the Chief Accountant and Chief Financial
Officer of the Company, Mr. Guo Wei and Mr. Jiao Shu Ge as the INEDs and Mr. Li Tong Bin as the Executive Vice President and
Chief Engineer of the Company, respectively. The Nomination Committee has performed all its obligations under their terms of
reference in 2015. The attendance of each member of the Nomination Committee is as follows:
Members of the Nomination Committee
Si Xian Min (Chairman)
Wei Jin Cai (resigned on 30 June 2015)
Tan Jin Song
Jiao Shu Ge (appointed on 30 June 2015)
110
(No. of meetings)
Attended/Eligible
to attend
3/3
2/2
3/3
1/1
Corporate Governance Report
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 Corporate
Governance 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.
MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS AND
SUPERVISORS OF LISTED ISSUERS
Having made specific enquiries with all the Directors and Supervisors, they confirmed that the Directors had for the year ended 31
December 2015 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 responsibilities of the Company’s external auditor, PricewaterhouseCoopers, are set out on page 122. 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.
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.
During the reporting period, the Company enhanced communications with investors by holding results presentations and roadshows,
and participating in investor meetings, etc. The Company carried out in-depth exchanges with investors, considered extensive
suggestions from investors and kept its management team abreast of market feedback in a timely manner, thereby effectively
achieving a two-way communication between the capital market and the listed company. The Company also enhanced daily
communication with its shareholders through telephone, e-mail, and online meetings for explaining cash dividend distribution, etc,
so as to effectively safeguard the interests of minority shareholders. In addition, the Company continuously improved its investor
relations website and enhanced positive interaction with the capital market, thus creating more opportunities for face-to-face
communication with investors.
111
Annual Report 2015China Southern Airlines Company Limited During the reporting period, the Company’s investor relations management focused on establishing the Company’s capital market
image of internationalization strategy and differential management. In light of the different needs of investors, we pay attention
to pertinence and speciality in communication content, enabling the investors to better understand the Company’s management
status and future development strategy. In 2015, the Company continued the positive and frank communication with investors
and analysts through multiple ways including results announcement and roadshows, and completed more than 940 person-time
exchanges with investors, analysts and fund managers, among which more than 130 person-time exchanges were completed
through results announcement and roadshows; more than 300 person-time exchanges were completed through participation of
securities trader investment forums and strategy meetings held at home and abroad, and more than 510 person-time exchanges
were completed through company visits and teleconferences.
The Company also attained high importance on interaction via network platforms, organized online cash bonus seminar via
“e-interaction” communication platform of Shanghai Stock Exchange, and disclosed the receptions of investor surveys on
“e-interaction”, so as to facilitate the investors to inquire and understand the latest trends of the Company. We participated the
collective investor reception day activity organized by China Securities Regulatory Commission Guangdong Bureau and the Listed
Companies Association of Guangdong, and made online communication and exchanges with investors. In addition, the Company’s
investor relations management team, centering on the hot topics in capital market, stepped up the feedback efforts in capital
market, collected opinions from investors, timely summarized the impact brought about by market change to the Company, and
made reasonable proposals to the management based on this.
In 2016, the Company will further deepen communication & exchanges with investors, enhance the construction of website
for investor relations, endlessly expand the communication channels with investors, and do a good job in thematic research of
capital market, realizing the two-way communication between capital market and listed companies. We will increase the investors’
understanding of the Company, uninterruptedly strengthen the protection of the rights and interests of medium and small investors,
and meanwhile, more concern and support from the investors are also to be expected.
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, organisational structure, stock information, production statistics, results announcement and other
announcements. The procedures are as follows:
1.
2.
Open the Home page of the Company’s website and click “Investor Relations”; and
Click the content you want to read.
For enquiries about shareholders’ general meetings and Board meetings, investors may contact the 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 meetings or extraordinary general meetings. Enquiries about attending annual general meetings or extraordinary general
meetings and the procedures for proposing resolutions at such meetings may also be made to the Company Secretary by the
above means.
INFORMATION DISCLOSURE
The Company has strictly complied with the relevant listing rules of all the listing places to perform its information disclosure
obligation truthfully, accurately, completely, timely and fair.
During the reporting period, the Company, in accordance with the supervision requirements of regulators at the listing locations,
continued to implement the management systems in relative to information disclosure, enhanced internal control over information
disclosure, which resulted in further improvement of efficiency and quality in information disclosure. The Company also further
enriched and optimized the contents and formats of Annual Report 2014 and Interim Report 2015 from the aspect of investors,
making them even easier to understand. The Company intends to actively transmit Company information to investors through
information disclosure, strengthen two-way interaction with investors, so as to make corporate governance more transparent and
open.
112
Corporate Governance Report In August 2015, the Annual Report 2014 for H shares of the Company won the 29th international ARC (Annual Report Competition)
Award.
AMENDMENTS MADE TO ARTICLES OF ASSOCIATION
According to the relevant requirements regarding the online voting and separately counting votes of minority shareholders as set
out in the Guidance on the Articles of Association of Listed Companies (Revised in 2014) (Zheng Jian Hui Gong Gao [2014] No. 47)
issued by China Securities Regulatory Commission, and in order to satisfy the operation and management needs, on 28 August
2015, the Board proposed to make amendments to the Articles of Association (the “Proposed Amendment”). For details, please
refer to the announcement of the Company dated 28 August 2015. The Proposed Amendement is still subject to the approval of
the shareholders of the Company.
Save as disclosed above, during the 2015, there was no other amendments made to the Articles of Association.
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.
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 investors and investor relations”.
OTHERS
As a company incorporated in the PRC and listed on the Shanghai Stock Exchange, the Stock Exchange and the New York Stock
Exchange, 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.
113
Annual Report 2015China Southern Airlines Company Limited I.
Basic situation of corporate bonds
Name
Abbreviation
Code
Issue date
Outstanding
balance of
corporate
bonds
Mature
Date
Interest
rate
Corporate bonds 2015 of the
Company (First Tranche)
15 China Southern
Airlines 01
136053
November
20 2015
November
20 2020
3,000
3.63%
Corporate bonds 2016 of the
Company (First Tranche)
16 China Southern
Airlines 01
136256 March 03,
2016
March 03,
2019
5,000
2.97%
Unit: RMB million
Repayment of
principal and
interest
Pay interests once
a year, pay back
principal plus
interests when
due
Pay interests once
a year, pay back
principal plus
interests when
due
Trading floor
Shanghai Stock
Exchange
Shanghai Stock
Exchange
II. Contact person & information for trustee management of corporate bonds and
the contact information of credit rating agency
Trustee of bonds
Name
Office business
Contact persons
Contact numbers
Guosen Securities Co., Ltd.
Floors 16-26, Guosen Securities Tower, No. 1012 Hongling Middle Road,
Luohu District, Shenzhen
Zhou Lei, Ke Fangyu
(86)13501582885, (86)18688983432
Credit rating agency
Name
Office business
Lianhe Credit Information Service Co., Ltd.
No. 80 Qufu Avenue, Heping District, Tianjin
III. Application of fund raised by corporate bonds
The fund raised by the Company through issuing Corporate bonds 2015 (latest period) on November 20, 2015 has a balance
of RMB2,998.50 million after deduction of the issuance cost, RMB1,690 million was used for repayment of bank loans, and
the remaining fund raised was used to supplement the working capital.
The fund raised by the Company through issuing Corporate bonds 2016 (latest period) on March 03, 2016 has a balance of
RMB4,999.75 million after deduction of the issuance cost, the fund raised was completely used for repayment of bank loans.
IV. Credit rating agency of corporate bonds
The Company’s credit rating agency of corporate bonds is Lianhe Credit Information Service Co., Ltd., which was established
in May 2002 with a registered capital of RMB30 million, and is one of the national companies engaged in credit rating
business in capital market. Lianhe Credit Information Service Co., Ltd. obtained administrative license from China Securities
Regulatory Commission to carry out credit rating business in securities market in May 2008.
114
Corporate Bond
V. Credit enhancement mechanism, debt repayment plan and other related
information of corporate bonds during the reporting period
During the report period, there was no credit enhancement mechanism existing with corporate bonds of the Company.
Debt repayment plan: during the reporting period, the interest date of 15 China Southern Airlines No.01 corporate bonds
was the date of issuance, namely 20 November 2015. The interests of the bonds of the Company was paid once each year
since the interest date, the last period interest was paid together with the repayment of principal, the interest date is 20
November of each year from 2016 to 2018, respectively. If the investors exercise the option for redemption, then the interest
date to redeem a portion of the bonds will be on November 20 annually from 2019 to 2020. If the interest date is a legal
holiday day or rest day, it shall be postponed to the first following trading day; no interest is calculated separately for each
payment of interests.
VI. Meetings held by holders of corporate bonds
During the reporting period, the Company did not hold any meeting of holders of corporate bonds.
VII. Performance of duties by trustee of corporate bonds
In October 2015, the Company engaged Guosen Securities to act as the trustee of the current bonds, and signed Agreement
for Trustee Management of Bonds.
In accordance with Measures for Management on Issuance and Transaction of Corporate Bonds, Prospectus for Public
Offering of Corporate Bonds 2015 (First Tranche) of China Southern Airlines Company Limited (Intended for Eligible Investors),
Agreement for Trustee Management, Rules for Meetings of Holders of Corporate Bonds Publicly Offered by China Southern
Airlines Company Limited in 2015 and other related regulations, Guosen Securities actively performed the duties as a trustee
to safeguard the legal rights and interests of holders of corporate bonds.
VIII. Company’s assets as at the end of the reporting period
As at 31 December 2015, the Group’s limited monetary capital was about RMB123 million.
As at 31 December 2015, the Group took investment property worth about RMB50 million (in terms of book value) and
land-use right worth about RMB66 million as the mortgage of its borrowings worth about RMB415 million (Note 35 to the
financial statements).
As at 31 December 2015, certain aircraft and other flight equipment of the Group with an aggregate carrying value of
approximately RMB88,060 million (2014: RMB99,119 million) were mortgaged under certain loans or certain lease agreements
(Notes 35 and 36 to the financial statements).
Besides, the Group has no other restricted assets.
115
Annual Report 2015China Southern Airlines Company Limited IX.
Interest payment and encashment of other bonds and debt financing
instruments of the Company
As at 12 January 2015, the Company completed repayment of principal of RMB3 billion Ultra-short-term financing bills and
the payment of the interests there of RMB113,178,082.19.
X. Bank credit-granting of the Company during the reporting period
As at 31 December 2015, the Company has gained from many domestic banks the line of credit with a ceiling of RMB173,739
million for 2016 and future years, among which the used bank line of credit is about RMB42,718 million and the unused
is about RMB131,021 million. During the reporting period, the Company has paid off about RMB62,135 million bank loans.
XI. Company’s implementation of the relevant agreements or commitments as
specified in bond prospectus during the reporting period
During the reporting period, the Company, in accordance with the provisions in Prospectus for Public Offering of Corporate
Bonds 2015 (First Tranche) of China Southern Airlines Company Limited (Intended for Eligible Investors) (hereinafter referred
to as “Prospectus”), utilized the fund raised by the current bonds deducted by the issuance expenses for repayment of bank
loans and supplement of working capital. The Company accepted the supervision by investors in strict accordance with the
Prospectus and the related rules for information disclosure, and strictly complied with the agreements and commitments
made by the Company.
XII. Impact of major events on the Company’s operation and debt-paying ability
During the reporting period, no major events producing great impact on operation and debt-paying ability of the Company
happened.
116
Corporate Bond 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 2015.
I. DISCLAIMER ON INTERNAL CONTROL AND THE ESTABLISHMENT OF
INTERNAL CONTROL SYSTEM
The board of directors of the Company is responsible for establishing and maintaining an internal control system to ensure
the adequacy of financial reporting. The objectives of the internal control system for financial reporting are to ensure the
truthfulness, completeness and reliability of the information contained in the financial report, and to prevent the risk of
making material misstatements. Given the inherent limitations of the internal control system, only reasonable assurance can
be provided for the above objectives. The board of directors has carried out assessment on the relevant internal control for
financial reporting in accordance with the “Basic Standard for Enterprise Internal Control”, and has considered it effective as
at 31 December 2015 (being the base date).
During the course of the Company’s self-evaluation regarding internal control, no significant or important deficiencies in
internal control on non-financial reporting were identified.
PricewaterhouseCoopers Zhong Tian LLP was engaged by the Company to conduct an audit on the effectiveness of the
Company’s internal control over financial reporting in accordance with Internal Control Audit Guidance and relevant
requirements from the practising guidances of the China Institute of Certified Public Accountants and issued an unqualified
audit report. For details of the assessment report on the Company’s internal control, please visit the website of the Shanghai
Stock Exchange.
II. PARTICULARS OF THE AUDIT REPORT ON THE COMPANY’S INTERNAL
CONTROL
For details of the audit report on the Company’s internal control, please visit the website of the Shanghai Stock Exchange.
III. PARTICULARS OF THE ACCOUNTABILITY SYSTEMS FOR MAJOR ERRORS IN
ANNUAL REPORTS AND THEIR IMPLEMENTATIONS
The Company established the “Information Disclosure Management System” in June 2007, the “Material Inside Information
Reporting System” in April 2008, and the “Insider Information Management System” in December 2009, and also made
amendments in accordance with requirements of the regulatory bodies. With these systems in place, the Company regulated
its work on the dissemination and disclosure of inside information, and clearly defined the requirements of accountability
for major errors in disclosure of information, including those in annual reports.
During the reporting period, no major errors were found in the Company’s annual report.
117
Internal ControlAnnual Report 2015China Southern Airlines Company Limited Starting from 2007, the Company began to voluntarily publish a report on social responsibilities to the public. We are the first
enterprise in the civil aviation industry of China which publishes a report on social responsibilities. We believe that through such
reports, the public can better understand the ideologies and actions of the Company in respect of social responsibilities. This will
promote communication and interaction between the Company and the public and facilitate the harmony, win-win and sustainable
development of enterprise and society.
In 2015, the Company performed its responsibilities seriously and carried out reforms and innovations to effectively fulfill its corporate
social responsibilities.
Protecting the environment
The Company pursued green development, and continued to increase investments and improvement efforts in terms of fleet
optimization, aircraft refitting, route optimization, low-carbon travel and new energy application. We vigorously promoted energy
conservation and emission reduction. As a result, 25,000 tonnes of aviation fuel were saved and 78,000 tonnes of CO2 emission
were reduced during the year.
Serving the passengers
We responded in good faith with typical incidents as cases, established and improved special task guarantee and standardized
service process for special passengers and enhanced service guarantee capability for special incidents and groups.
Caring the employees
We put more investments and efforts in perfecting the employee welfare and vacation policies and actively improving work and
living facilities and conditions. We implemented the “three-year cultivation” work for young employees and emphasized on creating
the united and harmonious working atmosphere.
Social duties
We successfully honored our guarantee for the 70th anniversary of Victory in the War against Japanese Aggression and “the NPC
and CPPCC sessions”, as well as the important support tasks for peacekeeping and troop-carrying, earthquake relief and evacuation
of overseas personnel.
The China Southern Airlines Volunteer Association provided 57,000 hours of service; more than 300,000 people have been served
in our voluntary service. In past two years, 3,800 volunteers and functionaries had participated in the “happy travel, warm home”
volunteer service program, which provided more than 30,000 hours of service, served more than 350,000 passengers and guaranteed
for 4,500 special passengers including unaccompanied children, old people and pregnant women.
A large-scale survey had been conducted. Nearly ten thousand opinions and advices were collected from passengers, investors,
partners, suppliers, non-profit-making organizations, governments, media, etc. In addition, we held the first China Southern Airlines
public Open Day as a way to constantly strengthening communication with stakeholders and increasing the transparency of
business operation.
In 2015, the Ten Cent Care Foundation donated RMB200,000 for education to Guangzhou Civil Aviation College, Guangdong
University of Foreign Studies, Chongqing University, Hunan University, Civil Aviation Flight University of China, Jilin University,
Tianjin University, Dalian Maritime University, Jinan University, Guizhou University, Zhengzhou University and Northeast Forestry
University respectively, and donated RMB1,000,000 in total for disaster-relief to Xinjiang Pishan earthquake and Moyu earthquake.
Awards received by the Company in 2015:
“Cross-strait Excellent Contribution Corporate Award”
“Most Rapid Business Growth Award” by Chinese Chamber of Commerce in New Zealand
“Ming Shan Public Welfare List•Listed Company with Best Public Welfare Practice in the Year”
The first “Humanitarian Care Excellent Employer” of Guangdong Province
“Global Airbus A330 Airlines with Outstanding Operation”
“Aisa Outstanding Airline Award” by Now Travel Asia
“Pegasus Award” the highest award in logistics industry of China and “Top 100 Companies with Valuable Brand in Logistics
Industry of China”
(1)
(2)
(3)
(4)
(5)
(6)
(7)
118
Social Responsibility 119
Annual Report 2015China Southern Airlines Company Limited 120
BOARDING PASS WITHIN REACH
New York, London, Paris, Sydney…
Wherever you wish to go, we will take you there with safety and comfort
121
CHINA SOUTHERN • AIRLINESAnnual Report 2015China Southern Airlines Company Limited 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 set out on pages 123 to 204, which comprise the consolidated balance sheet as at 31 December 2015, 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 financial position of the Company and its
subsidiaries as at 31 December 2015, and of their financial performance and cash flows for the year then ended in accordance with
International Financial Reporting Standards and have been properly prepared in compliance with the disclosure requirements of
the Hong Kong Companies Ordinance.
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, 30 March 2016
PricewaterhouseCoopers, 22/F Prince’s Building, Central, Hong Kong
T: +852 2289 8888, F: +852 2810 9888, www.pwchk.com
122
Annual Report 2015China Southern Airlines Company LimitedIndependent Auditor’s Report Operating revenue
Traffic revenue
Other operating revenue
Total operating revenue
Operating expenses
Flight operation expenses
Maintenance expenses
Aircraft and transportation service 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 loss, net
Other non-operating income
Profit before income tax
Income tax
Profit for the year
Profit attributable to:
Equity shareholders of the Company
Non-controlling interests
Profit for the year
Note
2015
RMB million
2014
RMB million
5
7
8
9
10
11
12
13
20
15
16
24
25
35(e)
17
18
19
107,099
4,553
111,652
50,412
10,407
17,908
6,976
2,464
11,845
90
1,390
101,492
3,278
13,438
253
(2,188)
460
108
(5,953)
–
6,118
(1,300)
4,818
3,736
1,082
4,818
104,328
4,256
108,584
58,901
8,304
16,402
7,841
2,337
10,828
215
1,198
106,026
2,190
4,748
376
(2,193)
261
140
(292)
26
3,066
(668)
2,398
1,777
621
2,398
Earnings per share attributable to equity shareholders
of the Company
Basic and diluted
19
RMB0.38
RMB0.18
The accompanying notes form part of these financial statements.
123
Annual Report 2015China Southern Airlines Company LimitedConsolidated Income StatementFor the year ended 31 December 2015(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi)
Profit for the year
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
– Fair value movement of derivative financial instruments
– Share of other comprehensive (loss)/income
of an associate
– Deferred tax relating to above items
Total comprehensive income for the year
Total comprehensive income attributable to:
Equity shareholders of the Company
Non-controlling interests
Total comprehensive income for the year
Note
2015
RMB million
2014
RMB million
4,818
2,398
27
28
24
29
–
13
(7)
(3)
4,821
3,742
1,079
4,821
43
–
21
(11)
2,451
1,813
638
2,451
The accompanying notes form part of these financial statements.
124
Annual Report 2015China Southern Airlines Company LimitedConsolidated Statement of Comprehensive IncomeFor the year ended 31 December 2015(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi)
31 December
2015
RMB million
31 December
2014
RMB million
Note
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
Derivative financial instruments
Deferred tax assets
Other receivables
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
20
21
22
24
25
26
27
28
29
33
30
31
32
33
34
39
35
36
37
38
39
40
41
142,870
19,433
2,637
1,995
1,440
136
669
104
13
1,387
304
888
171,876
1,606
2,580
3,720
4,560
123
1,191
333
14,113
30,002
6,416
2,500
7,131
1,029
66
152
13,081
5,158
65,535
134,453
19,347
2,349
1,583
1,338
136
651
104
–
966
300
920
162,147
1,661
2,683
5,864
15,414
438
995
486
27,541
20,979
5,992
1,657
6,101
1,160
296
458
12,122
5,321
54,086
125
Annual Report 2015China Southern Airlines Company LimitedConsolidated Balance SheetAt 31 December 2015(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
2015
RMB million
31 December
2014
RMB million
Note
35
36
38
42
43
44
29
45
46
15,884
49,408
1,806
1,895
13
886
938
70,830
49,624
9,818
29,227
39,045
10,579
49,624
42,066
43,919
1,750
1,623
25
853
873
91,109
44,493
9,818
25,930
35,748
8,745
44,493
The financial statements on pages 123 to 204 were approved by the Board of Directors on 30 March 2016 and were signed on its
behalf.
Tan Wan Geng
Director
Zhang Zi Fang
Director
The accompanying notes form part of these financial statements.
126
Annual Report 2015China Southern Airlines Company LimitedAt 31 December 2015(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi)Consolidated Balance Sheet (continued)
Attributable to equity shareholders of the Company
Other
reserves
RMB
million
Retained
earnings
RMB
million
1,336
9,022
Non-
controlling
interests
RMB
million
8,122
Total
RMB
million
34,329
Total
equity
RMB
million
42,451
Share
capital
RMB
million
Share
premium
RMB
million
Fair value
reserves
RMB
million
Balance at 1 January 2014
9,818
14,131
Changes in equity for 2014:
Profit for the year
Other comprehensive income
Total comprehensive income
Appropriations to reserves
Dividends relating to 2013
Capital injection of non-controlling
interests in a subsidiary
Acquisition of non-controlling
interests in a subsidiary
Non-controlling interest arising on
business combination
Distributions to non-controlling interests
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 December 2014
Balance at 1 January 2015
9,818
9,818
14,131
14,131
Changes in equity for 2015:
Profit for the year
Other comprehensive income
Total comprehensive income
Appropriations to reserves
Dividends relating to 2014 (note 46)
Capital injection of non-controlling
interests in a subsidiary
Acquisition of non-controlling
interests in a subsidiary
Distributions to non-controlling interests
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 December 2015
9,818
14,131
22
–
22
22
–
–
–
–
–
–
44
44
–
11
11
–
–
–
–
–
55
621
17
638
–
–
108
(1)
6
(128)
8,745
8,745
1,082
(3)
1,079
–
–
2,398
53
2,451
–
(393)
108
(2)
6
(128)
44,493
44,493
4,818
3
4,821
–
(393)
–
14
14
137
–
–
(1)
–
–
1,777
–
1,777
(137)
(393)
–
–
–
–
1,777
36
1,813
–
(393)
–
(1)
–
–
1,486
1,486
10,269
10,269
35,748
35,748
3,736
6
3,742
–
(393)
–
(5)
(5)
246
–
–
(52)
–
3,736
–
3,736
(246)
(393)
–
–
–
–
1,360
1,360
(52)
–
(574)
(31)
(626)
(31)
1,675
13,366
39,045
10,579
49,624
The accompanying notes form part of these financial statements.
127
Annual Report 2015China Southern Airlines Company LimitedConsolidated Statement of Changes In EquityFor the year ended 31 December 2015(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi)
Note
34(b)
2015
RMB million
2014
RMB million
27,857
313
(2,274)
(2,162)
23,734
(69)
3,196
67
6
13
(278)
1,971
(12,139)
(40)
(123)
141
–
324
(6,931)
(393)
34,170
8,000
3,000
(62,212)
(8,209)
(3,000)
1,360
(23)
(388)
(27,695)
(10,892)
15,414
38
4,560
15,826
360
(1,991)
(625)
13,570
(657)
1,611
86
–
13
(3,286)
1,254
(8,649)
–
(172)
87
(1,656)
1,609
(9,760)
(393)
32,488
6,000
–
(31,126)
(4,072)
(3,000)
108
(128)
(8)
(131)
3,679
11,748
(13)
15,414
Operating activities
Cash generated from operating activities
Interest received
Interest paid
Income tax paid
Net cash generated from operating activities
Investing activities
Acquisition of subsidiaries, net of cash acquired
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
Acquisition of term deposits and wealth management products
Proceeds from maturity of term deposits and wealth
management products
Additions of property, plant and equipment, lease prepayments
and other assets
Capital injection into associates
Payment for aircraft lease deposits
Refund of aircraft lease deposits
Placement of pledged bank deposits
Withdrawal of pledged bank deposits
Net cash used in investing activities
Financing activities
Dividends paid to equity shareholders of the Company
Proceeds from borrowings
Proceeds from ultra-short-term financing bills
Proceeds from corporate bond
Repayment of borrowings
Repayment of principal under finance lease obligations
Repayment of ultra-short-term financing bills
Capital injection from the non-controlling interests of subsidiaries
Dividends paid to non-controlling interests
Payment for purchase of non-controlling interest
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Exchange gain/(losses) on cash and cash equivalents
Cash and cash equivalents at 31 December
The accompanying notes form part of these financial statements.
128
Annual Report 2015China Southern Airlines Company LimitedConsolidated Cash Flow StatementFor the year ended 31 December 2015(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi)
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, Guangzhou, Guangdong
Province, the PRC. 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 the Shanghai Stock Exchange, the Stock Exchange of Hong Kong Limited and the New
York Stock Exchange.
These financial statements are presented in RMB, unless otherwise stated.
These consolidated financial statements were approved for issue by the Company’s Board on 30 March 2016.
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 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 and derivative
financial instruments are stated at their fair value as explained in the accounting policies set out in Note 2(e) and
Notes 2(f).
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.
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 comprise the Company and its subsidiaries and the Group’s interest in associates
and joint ventures.
129
Annual Report 2015China Southern Airlines Company LimitedNotes 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)
(i) Going concern
As at 31 December 2015, the Group’s current liabilities exceeded its current assets by RMB51,422 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 2015, the Group had banking facilities with several PRC banks and financial institutions for
providing bank financing up to approximately RMB173.7 billion (2014: RMB187.1 billion), of which approximately
RMB131.0 billion (2014: RMB126.7 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 Board 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 following standards have been adopted by the Group for the first time for the financial year beginning
on or after 1 January 2015:
•
•
•
Amendment to IAS 19 on contributions from employees or third parties to defined benefit plans. The
amendment distinguishes between contributions that are linked to service only in the period in which
they arise and those linked to service in more than one period. The amendment allows contributions
that are linked to service, and do not vary with the length of employee service, to be deducted from
the cost of benefits earned in the period that the service is provided. Contributions that are linked to
service, and vary according to the length of employee service, must be spread over the service period
using the same attribution method that is applied to the benefits.
Amendments from annual improvements to IFRSs – 2010-2012 Cycle, on IFRS 8, ‘Operating segments’,
IAS 16, ‘Property, plant and equipment’ and IAS 38, ‘Intangible assets’ and IAS 24, ‘Related party
disclosures’.
Amendments from annual improvements to IFRSs – 2011-2013 Cycle, on IFRS 3, ‘Business combinations’,
IFRS 13, ‘Fair value measurement’ and IAS 40, ‘Investment property’.
The adoption of the improvements made in the 2010-2012 Cycle has required additional disclosures in the
segment note. Other than that, the remaining amendments are not material to the Group.
(iii) New Hong Kong Companies Ordinance (Cap 622)
In addition, the requirements of Part 9 “Accounts and Audit” of the new Hong Kong Companies Ordinance
(Cap. 622) come into operation during the financial year, as a result, there are changes to presentation and
disclosures of certain information in the consolidated financial statements.
130
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 2
Significant accounting policies (Continued)
(a) Basis of preparation (Continued)
(iv) New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual
periods beginning after 1 January 2015, and have not been applied in preparing these consolidated financial
statements. None of these is expected to have a significant effect on the consolidated financial statements
of the Group, except the following set out below:
•
•
•
•
IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial
assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the
guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS
9 retains but simplifies the mixed measurement model and establishes three primary measurement
categories for financial assets: amortised cost, fair value through OCI and fair value through P&L.
The basis of classification depends on the entity’s business model and the contractual cash flow
characteristics of the financial asset. Investments in equity instruments are required to be measured
at fair value through profit or loss with the irrevocable option at inception to present changes in fair
value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred
loss impairment model used in IAS 39. For financial liabilities there were no changes to classification
and measurement except for the recognition of changes in own credit risk in other comprehensive
income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements
for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic
relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the
same as the one management actually use for risk management purposes.
Contemporaneous documentation is still required but is different to that currently prepared under
IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early
adoption is permitted. The Group is yet to assess IFRS 9’s full impact.
IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes
principles for reporting useful information to users of financial statements about the nature, amount,
timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.
Revenue is recognised when a customer obtains control of a good or service and thus has the ability
to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18
‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for
annual periods beginning on or after 1 January 2017 and earlier application is permitted. The Group
is assessing the impact of IFRS 15.
IFRS 16, ‘Leases’ addresses the definition of a lease, recognition and measurement of leases and
establishes principles for reporting useful information to users of financial statements about the leasing
activities of both lessees and lessors. A key change arising from IFRS 16 is that most operating leases
will be accounted for on balance sheet for lessees. The standard replaces IAS 17 ‘Leases’, and related
interpretations. The standard is effective for annual periods beginning on or after 1 January 2019 and
earlier application is permitted subject to the entity adopting IFRS 15 ‘Revenue from contracts with
customers’ at the same time. The group is currently assessing the impact of IFRS 16.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a
material impact on the Group.
131
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 2
Significant accounting policies (Continued)
(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 unless the transaction provides
evidence of an impairment of the transferred asset. 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. With regards to each business combination, the Group recognised non-controlling
interests based on the proportion of the net identifiable assets of the subsidiary owned by the non-controlling interests.
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.
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(j)).
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.
132
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 2
Significant accounting policies (Continued)
(b) Subsidiaries and non-controlling interests (Continued)
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.
(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 of 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)).
133
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 2
Significant accounting policies (Continued)
(d) Goodwill
Goodwill represents the excess of
(i)
(ii)
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
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(j)).
(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(j)), 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(j)).
Investments are recognised/derecognised on the date the Group commits to purchase/sell the investments or they
expire.
134
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 2
Significant accounting policies (Continued)
(f) Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
re-measured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative
is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged
items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group
also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are
used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.
Derivative financial instruments that do not qualify for hedge accounting are accounted for as trading instruments
and any unrealised gains or losses, being changes in fair value of the derivatives, are recognised in the profit or loss
immediately.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges and that are highly
effective, are recorded in the profit or loss, along with any changes in the fair value of the hedged assets or liabilities
that are attributable to the hedged risk.
Derivative financial instruments that qualify for hedge accounting and which are designated as a specific hedge of
the variability in cash flows of a highly probable forecast transaction, are accounted for as follows:
(i)
The effective portion of any change in fair value of the derivative financial instrument is recognised directly in
equity. Where the forecast transaction or firm commitment results in the recognition of an asset or a liability,
the gains and losses previously deferred in equity are included in the initial measurement of the cost of the
asset or liability. Otherwise, the cumulative gain or loss on the derivative financial instrument is removed from
equity and recognized in the profit or loss in the same period during which the hedged forecast transaction
affects net profit or loss.
(ii)
The ineffective portion of any change in fair value is recognised in the profit or loss immediately.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time remains in equity and is recognised in the profit or loss
when the committed or forecast transaction ultimately occurs. When a committed or forecast transaction is no
longer expected to occur, the cumulative gain or loss that was recorded in equity is immediately transferred to the
profit or loss.
(g)
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).
135
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 2
Significant accounting policies (Continued)
(h) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (Note 2(j)).
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(y)).
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.
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.
(i) 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(j)).
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.
136
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 2
Significant accounting policies (Continued)
(j)
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.
(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(h). 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 installments 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.
137
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 2
Significant accounting policies (Continued)
(j)
Leased assets (Continued)
(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.
(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:
–
–
–
–
–
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 decline 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:
–
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(j(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(j(ii)).
138
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 2
Significant accounting policies (Continued)
(k)
Impairment of assets (Continued)
(i)
Impairment of investments in equity securities and receivables (continued)
–
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.
–
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.
139
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 2
Significant accounting policies (Continued)
(k)
Impairment of assets (Continued)
Impairment of other assets
(ii)
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
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.
140
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 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 effective interest method.
(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.
141
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 2
Significant accounting policies (Continued)
(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.
The amount of the guarantee initially recognised 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(p)(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.
(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.
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Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 2
Significant accounting policies (Continued)
(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 can be utilised.
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:
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Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements Significant accounting policies (Continued)
(v)
Income tax (Continued)
–
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.
(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.
2
144
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 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.
(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.
145
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 2
Significant accounting policies (Continued)
(aa) Employee benefits
(i)
(ii)
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.
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.
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)
(ii)
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).
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.
146
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 2
Significant accounting policies (Continued)
(ac) Related parties (Continued)
(b)
An entity is related to the Group if any of the following conditions applies: (Continued)
(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.
(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 estimates and judgements
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 43 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) Accounting estimates
(i)
Impairment of trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using
the effective interest method, less provision for impairment. A provision for impairment of trade receivables
is established when there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivables. Significant financial difficulties of the debtor, probability
that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments
are considered indicators that the trade receivable is impaired. The amount of the provision is the difference
between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the
original effective interest rate. The carrying amount of the assets is reduced through the use of an allowance
account, and the amount of the loss is recognised in the income statement. When a trade receivable is
uncollectible, it is written off against the provision account for trade receivables. Subsequent recoveries of
amounts previously written off are credited in the income statement.
147
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 3
(ii)
Accounting estimates and judgements (Continued)
(a) Accounting estimates (Continued)
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 IAS36, 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.
(iii) 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.
(iv) 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.
(v)
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.
(vi) 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.
148
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 3
Accounting estimates and judgements (Continued)
(a) Accounting estimates (Continued)
(vii) Income tax
Significant judgment is required in determining the provision for income tax. There are many transactions
and calculations for which the ultimate tax determination is uncertain during the ordinary course of business.
The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional tax
will be due. Where the final tax outcome of these matters is different from the amounts that were initially
recorded, such differences will impact the current and deferred income tax assets and liabilities in the year
in which such determination is made.
(i)
(b) Accounting judgements
Retirement benefits
According to IAS 19, an entity shall account not only for its legal obligation under the formal terms of a defined
benefit plan, but also for any constructive obligation that arises from the entity’s informal practices where
the entity has no realistic alternative but to pay the employee benefits. The Company believes the payments
of welfare subsidy to those retirees who retired before the establishment of Pension Scheme (as defined in
Note 49(a)) are discretionary and have not created a legal or constructive obligation. Such payments are made
according to the Group’s business performance, and can be suspended at any time (Note 14).
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 2015, the Group’s current liabilities exceeded its current assets by RMB51,422 million. For the
year ended 31 December 2015, the Group recorded a net cash inflow from operating activities of RMB23,734 million,
a net cash outflow from investing activities of RMB6,931 million and a net cash outflow from financing activities
of RMB27,695 million, which in total resulted in a net decrease in cash and cash equivalents of RMB10,892 million.
The Group is dependent on its ability to maintain adequate cash inflow from operations, its ability to maintain existing
external financing, and its ability to obtain new external financing to meet its debt obligations as they fall due and
to meet its committed future capital expenditures. As at 31 December 2015, the Group had banking facilities with
several PRC banks and financial institutions for providing bank financing up to approximately RMB173,739 million
(2014: RMB187,133 million), of which approximately RMB131,021 million (2014: RMB126,703 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 ending 31 December 2016. 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.
149
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 4
Financial risk management and fair values (Continued)
(a)
Liquidity risk (Continued)
As at 31 December 2015, the contractual maturities at the end of financial years of the Group’s borrowings and
obligations under finance leases are disclosed in Notes 35, 36 respectively.
(b)
Interest rate risk
The interest rates and maturity information of the Group’s borrowings and obligations under finance leases are
disclosed in Note 35 and Note 36, respectively. Majority of the Group’s borrowing are at floating interest rates which
expose the Group to cash flow interest rate risk. Borrowings at fixed interest rates expose the Group to fair value interest
risk. The Group has entered into interest rate swap contracts to mitigate its cash flow and fair value interest rate risk.
Based on the various scenarios, the Group manages its cash flow interest rate risk by using floating-to-fixed interest
rate swaps. Such interest rate swaps have the economic effect of converting borrowings or obligations under finance
leases from floating rates to fixed rates. Generally, the Group raises long-term borrowings or obligations under finance
leases at floating rates and swaps them into fixed rates that are lower than those available if the Group borrowed
at fixed rates directly. Under the interest rate swaps, the Group agrees with other parties to exchange, at specified
intervals (primarily quarterly), the difference between fixed contract rates and floating-rate interest amounts calculated
by reference to the agreed notional amounts.
At 31 December 2015, 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 RMB416 million (2014: RMB569 million). Other components of consolidated equity would not be
affected (2014: 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 2014.
150
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 4
Financial risk management and fair values (Continued)
(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 36), borrowings (Note 35) and operating lease commitments (Note 47(b)) are denominated in
foreign currencies, principally US dollars, Euro 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.
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.
United States Dollars
Euro
Japanese Yen
United States Dollars
Singapore Dollars
Japanese Yen
2015
Appreciation/
(depreciation) of
Renminbi against
foreign currency
Increase/
(decrease) on
profit after tax
and retained
profits RMB
million
1%
(1%)
1%
(1%)
10%
(10%)
2014
453
(453)
38
(38)
135
(135)
Appreciation/
(depreciation) of
Renminbi against
foreign currency
Increase/
(decrease) on
profit after tax
and retained
profits RMB
million
1%
(1%)
2%
(2%)
10%
(10%)
767
(767)
6
(6)
145
(145)
151
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
4
Financial risk management and fair values (Continued)
(c)
Foreign currency risk (Continued)
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 2014.
(d) Credit risk
The Group’s credit risk is primarily attributable to cash and cash equivalents, trade receivables and the guarantees
on personal bank loans provided to the Group’s pilot trainees.
Substantially all of the Group’s cash and cash equivalents are deposited with major reputable 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 2015, the balance due from BSP agents amounted
to RMB1,054 million (2014: RMB990 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 32.
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 RMB627 million (31 December 2014: RMB646 million)
that can be drawn by the pilot trainees to finance their respective flight training expenses. As at 31 December 2015,
total personal bank loans of RMB454 million (31 December 2014: RMB486million), under these guarantees, were
drawn down from the banks. During the year, the Group has paid RMB4 million (2014: RMB2 million) to the banks
due to the default of payments of certain pilot trainees.
(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% (2014:10%) in jet fuel price, with
volume of fuel consumed and all other variables held constant, would have increased/decreased the fuel costs by
approximately RMB2,627 million (2014: RMB3,773 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.
152
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 4
Financial risk management and fair values (Continued)
(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 ratio, which is calculated as
total liabilities divided by total assets.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. The Group’s
debt ratio was 73% at 31 December 2015 (2014: 77%).
(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 2015.
2015
Assets
Available-for-sale equity
securities:
- Listed
Derivative financial instruments
- Interest rate swap
Total
2014
Assets
Available-for-sale equity
securities:
- Listed
Level 1
RMB million
Level 2
RMB million
Level 3
RMB million
Total
RMB million
104
–
104
–
13
13
104
–
–
–
–
–
104
13
117
104
153
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
4
Financial risk management and fair values (Continued)
(g) Fair value (Continued)
(i)
Financial instruments carried at fair value (Continued)
During the years ended 31 December 2015 and 2014, there were no significant transfers between instruments
in Level 1 and Level 2.
(a)
(b)
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.
Financial instruments in level 2
The fair value of financial instruments that are not traded in an active market (for example, over-the-
counter derivatives) is determined by using valuation techniques. These valuation techniques maximise
the use of observable market data where it is available and rely as little as possible on entity specific
estimates. If all significant inputs required to fair value an instrument are observable, the instrument
is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is
included in level 3.
(ii)
Financial instruments not carried at fair value
(a)
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. Accordingly, they are recognized in the
consolidated balance sheet at cost less impairment losses.
(b)
All other financial instruments, including amounts due from/to related companies, trade and other
receivables, trade and other payables, borrowings and obligation under finance leases are carried at
amounts not materially different from their fair values as at 31 December 2015 and 31 December 2014.
2015
RMB million
2014
RMB million
100,238
6,861
107,099
97,145
7,183
104,328
5
Traffic revenue
Passenger
Cargo and mail
154
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
6
Segmental information
(a) Business segments
The Group’s network passenger, cargo and mail 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).
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 of the Group for the year ended 31 December 2015 are as follows:
Airline
transportation
operations
RMB million
Other
segments
RMB million
Elimination
RMB million
Unallocated*
RMB million
Total
RMB million
Revenue from external customers
Inter-segment sales
Reportable segment revenue
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
110,067
114
110,181
5,480
4,199
1,281
244
2,156
11,915
105
–
–
24,242
1,400
1,528
2,928
279
205
74
9
32
97
3
–
–
98
–
(1,642)
(1,642)
–
–
–
–
–
–
–
–
–
–
–
–
–
582
582
–
–
–
–
–
462
107
–
111,467
–
111,467
6,341
4,986
1,355
253
2,188
12,012
108
462
107
24,340
155
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
6
Segmental information (Continued)
(a) Business segments (Continued)
The segment results of the Group for the year ended 31 December 2014 are as follows:
Airline
transportation
operations
RMB million
Other
segments
RMB million
Elimination
RMB million
Unallocated*
RMB million
Total
RMB million
Revenue from external customers
Inter-segment sales
Reportable segment revenue
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
107,790
–
107,790
2,422
1,800
622
369
2,155
10,915
205
–
–
29,523
523
1,364
1,887
257
202
55
7
38
88
–
–
–
98
–
(1,364)
(1,364)
–
–
–
–
–
–
–
–
–
–
–
–
–
416
416
–
–
–
–
–
263
140
–
108,313
–
108,313
3,095
2,418
677
376
2,193
11,003
205
263
140
29,621
The segment assets and liabilities of the Group as at 31 December 2015 and 31 December 2014 are as follows:
Airline
transportation
operations
RMB million
Other
segments
RMB million
Elimination
RMB million
Unallocated*
RMB million
Total
RMB million
180,753
136,391
184,661
144,782
2,795
1,290
2,427
1,209
(1,004)
(1,004)
(568)
(568)
3,706
–
3,177
–
186,250
136,677
189,697
145,423
As at 31 December 2015
Reportable segment assets
Reportable segment liabilities
As at 31 December 2014
Reportable segment assets
Reportable segment liabilities
*
Unallocated assets primarily include investments in associates and joint ventures, available-for-sale financial assets, derivative
financial instruments and other investments in equity securities. Unallocated results primarily include the share of results of
associates and joint ventures, dividend income from available-for-sales financial assets and other investments in equity securities.
156
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
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.
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 revenues. Traffic revenue from inbound and outbound services between overseas markets, excluding
Hong Kong, Macau and Taiwan, is classified as international operations revenues.
(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
2015
RMB Million
2014
RMB Million
82,981
25,872
2,614
111,467
82,764
22,952
2,597
108,313
The major revenue earning assets of the Group are its aircraft fleet which is registered in the PRC and is
deployed across its worldwide route network. Majority of the Group’s other assets are located in the PRC.
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.
Revenue
Reportable segment revenues
Reclassification of expired sales in advance of carriage
Reclassification of sales tax
Consolidated revenues
Profit before income tax
Reportable segment profit before taxation
Capitalisation of exchange difference of specific loans
Government grants
Others
Consolidated profit before income tax
Note
(i)
(ii)
Note
(iii)
(iv)
2015
RMB million
2014
RMB million
111,467
459
(274)
111,652
108,313
459
(188)
108,584
2015
RMB million
2014
RMB million
6,341
(222)
1
(2)
6,118
3,095
(28)
1
(2)
3,066
157
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
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)
Assets
Reportable segment assets
Capitalisation of exchange difference of specific loans
Government grants
Others
Consolidated total assets
Liabilities
Reportable segment liabilities
Government grants
Consolidated total liabilities
Note
(iii)
(iv)
Note
(iv)
2015
RMB million
2014
RMB million
186,250
101
(342)
(20)
185,989
189,697
323
(259)
(73)
189,688
2015
RMB million
2014
RMB million
136,677
(312)
136,365
145,423
(228)
145,195
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 income.
(ii)
In accordance with the PRC GAAP, sales tax is separately disclosed rather than deducted from revenue under IFRSs.
(iii)
(iv)
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.
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.
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
158
2015
RMB million
2014
RMB million
1,545
459
621
490
345
239
230
182
442
4,553
1,335
459
508
576
293
272
236
156
421
4,256
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
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
10 Aircraft and transportation service 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
– Audit services
– Non-audit services
Other taxes and levies
2015
RMB million
2014
RMB million
26,274
8,070
6,153
2,680
2,482
1,003
168
3,582
50,412
37,728
6,803
5,383
2,497
2,279
1,003
202
3,006
58,901
2015
RMB million
2014
RMB million
7,396
2,131
880
10,407
5,525
1,966
813
8,304
2015
RMB million
2014
RMB million
11,510
6,398
17,908
10,496
5,906
16,402
2015
RMB million
2014
RMB million
3,150
2,605
605
122
494
6,976
4,263
2,465
542
116
455
7,841
2015
RMB million
2014
RMB million
2,325
15
15
–
124
2,464
2,195
18
18
–
124
2,337
159
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
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
Defined contribution retirement scheme
Other retirement welfare subsidy
Early retirement benefits (Note 43)
2015
RMB million
2014
RMB million
7,082
4,684
(148)
227
11,845
8,021
2,768
(156)
195
10,828
2015
RMB million
2014
RMB million
16,636
1,726
177
3
18,542
14,667
1,554
167
7
16,395
Staff costs relating to flight operations and maintenance are also included in the respective total amounts disclosed separately
in Note 8 to Note 9 above.
Details of staff costs arising from cash-settled share appreciation rights are disclosed in Note 49(c). Such costs have been
included in “salaries, wages and welfare” above.
(a)
Five highest paid individual
None of the directors (2014: none), whose emoluments are reflected in Note 56, is among the five highest paid
individuals in the Group for 2015. The aggregate emoluments in respect of the five (2014: five) individuals during
the year are as follows:
Salaries, wages and welfare
Retirement scheme contributions
2015
RMB ’000
2014
RMB ’000
7,856
617
8,473
7,180
661
7,841
The emoluments of the five (2014: five) individuals with the highest emoluments are within the following bands:
HK$1,500,000 to HK$2,000,000
(RMB1,256,670 to RMB1,675,560 equivalent)
HK$2,000,000 to HK$2,500,000
(RMB1,675,560 to RMB2,094,450 equivalent)
2015
Number of
individuals
2014
Number of
individuals
3
2
5
–
160
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
15 Other net income
Government grants (Note)
Gain/(losses) on disposal of property,
plant and equipment, net
– Aircraft and spare engines
– Other property, plant and equipment
Others
Note:
2015
RMB million
2014
RMB million
2,331
1,700
414
(102)
635
3,278
344
(77)
223
2,190
Government grants 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. The government
grants are recognised when fulfilling the requirements and when cash is received.
There are no unfulfilled conditions and other contingencies related to subsidies that have been recognised during the year ended 31 December 2015.
16
Interest expense
Interest on borrowings
Interest relating to obligations under finance leases
Interest relating to provision for early retirement benefits(Note 43)
Less: interest expense capitalised (Note)
2015
RMB million
2014
RMB million
1,320
1,248
2
(382)
2,188
1,628
978
4
(417)
2,193
Note:
The weighted average interest rate used for interest capitalisation was 2.77% per annum in 2015 (2014: 2.37%).
17 Other non-operating income
Gain recognised on acquisition of a subsidiary
2015
RMB million
2014
RMB million
–
26
161
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
18
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 29)
Origination and reversal of temporary differences
Tax expense
2015
RMB million
2014
RMB million
1,700
(41)
1,659
(359)
1,300
430
(29)
401
267
668
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% (2014: 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.
(b) Reconciliation between actual tax expense and calculated tax based on accounting
profit at applicable tax rates
Profit before taxation
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
Share of results of associates and joint ventures
Unused tax losses and deductible temporary differences for
which no deferred tax assets were recognised
Utilisation of unused tax losses and deductible temporary differences
for which no deferred tax assets were recognised in prior years
Over-provision in prior year
Others
Tax expense
Note:
2015
RMB million
2014
RMB million
6,118
3,066
1,482
3
(144)
23
(18)
(41)
(5)
1,300
738
11
(104)
63
(11)
(29)
–
668
The headquarters of the Company and its branches are taxed at rate at 25% (2014: 25%). The subsidiaries of the Group are taxed at rates
ranging from 15% to 25% (2014: 15% to 25%).
162
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
19 Earnings per share
The calculation of basic earnings per share for the year ended 31 December 2015 is based on the profit attributable to equity
shareholders of the Company of RMB3,736 million (2014: RMB1,777 million) and the weighted average of 9,817,567,000 shares
in issue during the year (2014: 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 2015 and 2014.
20 Property, plant and equipment, net
Aircraft
Investment
properties
Total
RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Buildings
Owned
Acquired
under
finance
leases
Other flight
equipment
including
rotables
Machinery,
equipment
and vehicles
Cost:
At 1 January 2014
Additions
Transfer from construction
in progress (Note 21)
Transfer to buildings upon cease
of lease intention
Transfer to lease prepayments upon
cease of lease intention
Transfer to investment properties
upon lease out
Acquisition of a subsidiary
Disposals
At 31 December 2014
At 1 January 2015
Additions
Transfer from construction
in progress (Note 21)
Transfer from lease
prepayments
Transfer to buildings upon cease
of lease intention
Transfer to investment properties
upon lease out
Reclassification on exercise of
purchase option
Disposals
681
–
1
(99)
(21)
84
–
–
646
646
–
–
6
(8)
88
–
(2)
At 31 December 2015
730
10,074
8,672
151
88,864
726
58,318
8,521
17,477
821
444
99
–
(84)
–
(77)
9,205
9,205
138
382
11,546
957
–
–
–
539
(5,390)
85,121
85,121
1,564
–
–
–
1,931
(443)
79,873
79,873
5,901
–
–
–
261
(946)
18,570
18,570
660
5,346
608
133
–
–
–
23
(227)
5,883
5,883
353
179,358
10,827
13,463
–
(21)
–
2,754
(7,083)
199,298
199,298
8,616
849
1,777
8,174
896
103
11,799
–
8
(88)
–
(38)
–
–
–
–
–
–
–
–
–
–
–
–
6
–
–
6,700
(1,454)
93,708
(6,700)
(416)
86,832
–
(1,156)
18,970
–
(230)
6,109
–
(3,296)
216,423
163
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
20 Property, plant and equipment, net (Continued)
Aircraft
Investment
properties
Total
RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Buildings
Owned
Acquired
under
finance
leases
Other flight
equipment
including
rotables
Machinery,
equipment
and vehicles
2,794
292
32,812
6,095
10,240
2,768
10,216
1,063
–
–
–
(429)
–
–
12,579
12,579
4,684
–
–
–
–
–
–
(701)
39
(51)
10,566
10,566
1,104
–
–
–
(2,301)
(416)
–
(1,087)
40
–
35
(18)
22
–
(19)
(61)
–
–
3,028
3,028
351
2
(18)
–
–
(14)
–
–
3,349
6,725
6,177
–
–
–
(3,966)
176
(317)
34,800
34,800
5,089
–
–
–
2,301
(1,315)
15
(108)
40,782
52,926
50,321
3,346
550
–
–
–
(211)
–
–
3,685
3,685
519
–
–
–
–
(191)
–
–
59,581
10,789
–
(4)
–
(5,368)
215
(368)
64,845
64,845
11,766
–
–
2
–
(3,024)
90
(126)
73,553
14,586
10,600
4,013
72,246
67,294
8,370
8,004
2,096
2,198
142,870
134,453
Accumulated depreciation and
impairment losses:
At 1 January 2014
Depreciation charge for the year
Transfer to buildings upon cease
of lease intention
Transfer to lease prepayments
upon cease of lease intention
Transfer to investment properties
upon lease out
Disposals
Provision for impairment loss
Impairment losses written
off on disposal
At 31 December 2014
At 1 January 2015
Depreciation charge for the year
Transfer to buildings upon cease
of lease intention
Transfer to investment properties
upon lease out
Transfer from lease prepayments
Reclassification on exercise of
purchase options
Disposals
Provision for impairment
loss (Note 20(d))
Impairment losses written off on
disposal (Note 20(c))
At 31 December 2015
Net book value
At 31 December 2015
At 31 December 2014
173
21
(22)
(4)
19
–
–
–
187
187
19
(2)
18
2
–
(1)
–
–
223
507
459
164
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
20 Property, plant and equipment, net (Continued)
(a)
(b)
(c)
(d)
(e)
(f)
As at 31 December 2015, the accumulated impairment provision of aircraft and flight equipment of the Group is
RMB1,570 million and RMB125 million respectively (2014: RMB1,623 million and RMB108 million respectively).
As at 31 December 2015, certain aircraft and other flight equipment of the Group with an aggregate carrying value
of approximately RMB88,060 million (2014: RMB99,119 million) were mortgaged under certain loans or certain lease
agreements (Notes 35 and 36).
During the year ended 31 December 2015, 2 Boeing 757-200 aircraft against which impairment provision had been
provided in previous years were disposed of and the impairment provision of RMB108 million for these aircraft was
written off on disposal.
As at 31 December 2015, the Group reviewed the recoverable amounts of the aircrafts and related assets and made
an additional impairment provision of RMB55 million for 5 EMB 145 aircraft and 2 EMB 190 aircraft against which
impairment provision had been provided in previous years. 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 and flight equipment.
As at 31 December 2015 and up to the date of approval of these financial statements, the Group is in the process of
applying for the 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, Xi’an, Xinjiang, Henan, Chengdu, Guizhou, Hainan, Hubei, Sanya and Shantou, in which the Group has
interests and for which such certificates have not been granted. As at 31 December 2015, carrying value of such
properties of the Group amounted to RMB3,615 million (2014: RMB3,572 million). 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 property title certificates.
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 RMB182 million (2014: RMB156 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:
2015
RMB million
2014
RMB million
Within 1 year
After 1 year but within 5 years
After 5 years
53
77
20
150
54
72
11
137
165
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
21 Construction in progress
At 1 January 2014
Additions
Acquisition of a subsidiary
Transferred to property, plant and equipment (Note 20)
Transferred to lease prepayments and other assets
upon completion of development
At 31 December 2014
At 1 January 2015
Additions
Transferred to property, plant and equipment (Note 20)
Transferred to lease prepayments and other assets
upon completion of development
Disposals
At 31 December 2015
22 Lease prepayments
Advance
payment for
aircraft and
flight
equipment
RMB million
16,413
13,742
484
(12,885)
–
17,754
17,754
13,671
(10,787)
–
(2,938)
17,700
Others
RMB million
Total
RMB million
1,046
1,342
2
(578)
(219)
1,593
1,593
1,287
(1,012)
(123)
(12)
1,733
17,459
15,084
486
(13,463)
(219)
19,347
19,347
14,958
(11,799)
(123)
(2,950)
19,433
Lease prepayments relate to the Group’s land use rights. In 2015, the amount of amortisation charged to consolidated
income statement was RMB64 million (2014: RMB61 million).
A majority of the Group’s properties are located in the PRC. 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.
As at 31 December 2015 and up to the date of approval of these financial statements, the Group is in the process of applying
for certain land use right certificates. As at 31 December 2015, carrying value of such land use rights of the Group amounted
to RMB1,359 million (2014: RMB1,038 million). The Directors of the Company are of the opinion that the use of and the
conduct of operating activities at the land use rights referred to above are not affected by the fact that the Group has not
yet obtained the relevant land use right certificates.
166
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
23 Subsidiaries
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.
Name of company
Place of
establishment/
operation
Henan Airlines Company Limited
PRC
(“China Southern Henan Airlines”) (i)&(ii)
Proportion
of ownership
interest held
by the
Company
Principal activity
60% Airline transportation
Registered capital
RMB6,000,000,000
Xiamen Airlines Company Limited
PRC
RMB5,000,000,000
55% Airline transportation
(“Xiaman Airlines”) (ii)&(v)
Chongqing Airlines Company Limited (ii)
PRC
RMB1,200,000,000
60% Airline transportation
Shantou Airlines Company Limited (ii)
Xinjiang Civil Aviation Property
Management Limited (ii)
Zhuhai Airlines Company Limited (ii)
Guizhou Airlines Company Limited
(“Guizhou Airlines”) (ii)
Guangzhou Nanland Air Catering
Company Limited (iii)
Guangzhou Baiyun International Logistic
Company Limited (ii)
Beijing Southern Airlines Ground Services
Company Limited (ii)
PRC
PRC
PRC
PRC
PRC
PRC
PRC
RMB280,000,000
60% Airline transportation
RMB251,332,832
51.84% Property management
RMB250,000,000
60% Airline transportation
RMB650,000,000
60% Airline transportation
RMB120,000,000
55% Air catering
RMB50,000,000
61% Logistics operations
RMB18,000,000
100% Airport ground services
China Southern Airlines Group Air Catering
Company Limited (ii)
PRC
RMB10,200,000
100% Air catering
Nan Lung International Freight Limited
Hong Kong
HKD3,270,000
51% Freight services
(i)
Pursuant to an agreement entered into in 2014 by the equity holders of China Southern Henan Airlines, a subsidiary of the Company, the
equity holders of China Southern Henan Airlines agreed to further inject capital of RMB 2.8 billion into the company based on their equity
percentage. The Company’s capital injection of RMB1.68 billion comprises of RMB1.33 billion in cash and RMB0.35 billion in the form of
property, plant and equipment and lease prepayments. The non-controlling shareholder’s capital injection of RMB1.12 billion is in the form
of cash contribution. As at 31 December 2015, the above capital injection was fully completed.
(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.
(v)
The Company held 51% equity interests in Xiamen Airlines since its incorporation. In December 2015, the Company acquired additional
4% equity interests in Xiamen Airlines from its non-controlling shareholders at a consideration of RMB 626 million.
167
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
23 Subsidiaries (Continued)
(a) Material non-controlling interests
As at 31 December 2015, the balance of total non-controlling interests is RMB10,579 million, of which RMB6,706
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
Total current net liabilities
Non-current
Assets
Liabilities
Total non-current net assets
Net assets
Summarised statement of comprehensive income
Revenue
Profit before income tax
Income tax expense
Post-tax profit from continuing operations
Other comprehensive (loss)/income
Total comprehensive income
Dividends paid to non-controlling interests
Xiamen Airlines
2015
RMB million
2014
RMB million
2,435
(12,148)
(9,713)
35,628
(11,336)
24,292
14,579
6,397
(8,527)
(2,130)
32,883
(17,579)
15,304
13,174
Xiamen Airlines
2015
RMB million
19,915
1,576
(406)
1,170
(5)
1,165
–
2014
RMB million
17,831
993
(238)
755
32
787
3
168
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
23 Subsidiaries (Continued)
(a) Material non-controlling interests (Continued)
Summarised cash flows
Cash generated 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 (used in)/generated from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange gain on cash and cash equivalents
Cash and cash equivalents at end of year
The information above is the amount before inter-company eliminations.
24
Interest in associates
Share of net assets
Xiamen Airlines
2015
RMB million
2014
RMB million
5,035
162
(312)
(473)
4,412
(3,521)
(3,296)
(2,405)
3,036
13
644
2,660
140
(377)
(180)
2,243
(4,866)
1,850
(773)
3,809
–
3,036
2015
RMB million
2014
RMB million
1,995
1,583
All the Group’s associates are unlisted without quoted market price. The particulars of the Group’s principal associates as
of 31 December 2015 are as follows:
Place of
establishment /
operation
Southern Airlines Group
Finance Co.,Ltd (“SA Finance”)
Sichuan Airlines Co.,Ltd
(“Sichuan Airlines”)
Southern Airlines Culture and
Media Co., Ltd. (“SACM“)
PRC
PRC
PRC
Proportion of ownership
interest held by
Group’s
effective
interest
33.98%
The
Company
21.09%
Proportion of
voting rights held
by the Group
Principal
activity
Subsidiaries
12.89%
33.98%
Provision of Airlines
financial services
39%
40%
39%
40%
–
–
39%
Airline
transportation
40%
Advertising services
There is no associate that is individually material to the Group.
169
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
24
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:
Aggregate carrying amount of individually immaterial associates
Aggregate amounts of the Group’s share of: Profit
from continuing activities
Other comprehensive (loss)/income
Total comprehensive income
25
Interest in joint ventures
Share of net assets
2015
RMB million
2014
RMB million
1,995
460
(7)
453
1,583
261
21
282
2015
RMB million
2014
RMB million
1,440
1,338
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 2015 are as follows:
Proportion of ownership
interest held by
Place of
establishment/
operation
PRC
PRC
PRC
Group’s
effective
interest
50%
The
Company
50%
51%
50%
51%
50%
Australia
48.12%
48.12%
Proportion of
voting rights held
by the Group
Subsidiaries
Principal activity
–
–
–
–
50% Aircraft repair and
maintenance
services
50% Flight simulation
services
50% Sales of duty free
goods in flight
50% Pilot training services
Guangzhou Aircraft Maintenance
Engineering Co.,Ltd (”GAMECO”)
Zhuhai Xiang Yi Aviation Technology
Company Limited (“Zhuhai Xiang Yi”)
Guangzhou China Southern PRC
Zhongmian Dutyfree
Store Co., Limited
China Southern West Australian Flying
College Pty Ltd (“Flying College”)
There is no joint venture that is individually material to the Group.
170
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
25
Interest in joint ventures (Continued)
The Group has interest in a number of individually immaterial joint ventures that are accounted for using the equity method.
The aggregate financial information of these joint ventures is summarized as following:
Aggregate carrying amount of individually immaterial joint venture
Aggregate amounts of the Group’s share of:
Profit from continuing activities
Total comprehensive income
26 Other investments in equity securities
Unlisted equity securities, at cost
2015
RMB million
2014
RMB million
1,440
108
108
1,338
140
140
2015
RMB million
2014
RMB million
136
136
Dividend income from unlisted equity securities of the Group amounted to RMB10 million during the year ended 31
December 2015 (2014: RMB10 million).
27 Available-for-sale financial assets
Available-for-sale financial assets
– Listed in the PRC
2015
RMB million
2014
RMB million
104
104
104
104
Dividend income from listed securities of the Group amounted to RMB3 million during the year ended 31 December 2015
(2014: RMB3 million).
28 Derivative financial instruments
Interest rate swaps
2015
RMB million
2014
RMB million
13
–
The Group uses interest rate swap to mitigate the risk of changes in market interest rates. At 31 December 2015, the fixed
interest rates vary from 1.64% to 1.72%, and the main floating rates are LIBOR. As at 31 December 2015, the notional principal
of the outstanding interest rate swap contracts at 31 December 2015 amounted to USD581 million.
171
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
29 Deferred tax assets/(liabilities)
(a) The analysis of deferred tax assets and deferred tax liabilities is as follows:
Deferred tax assets
– Deferred tax asset to be utilized after 12 months
– Deferred tax asset to be utilized within 12 months
Deferred tax liabilities
– Deferred tax liability to be realized after 12 months
Net deferred tax assets
(b) Movements of net deferred tax assets are as follows:
2015
RMB million
2014
RMB million
525
862
1,387
(938)
449
390
576
966
(873)
93
At the beginning
of the year
RMB million
(Charged)/
credited to
income
statement
RMB million
Charged to
other
comprehensive
income
RMB million
At the end
of the year
RMB million
For the year ended 31 December 2015
Deferred tax assets:
Accrued expenses
Provision for major overhauls
Deferred revenue
Provision for impairment losses
Others
Deferred tax liabilities:
Provision for major overhauls
Depreciation allowances under tax in excess
of the related depreciation
under accounting
Change in fair value of derivative
financial instruments
Change in fair value of available-
for-sale equity securities
Others
Net deferred tax assets
561
296
76
235
82
1,250
(363)
(689)
–
(20)
(85)
(1,157)
93
190
176
6
(34)
(20)
318
(21)
2
–
–
60
41
359
–
–
–
–
–
–
–
–
(3)
–
–
(3)
(3)
751
472
82
201
62
1,568
(384)
(687)
(3)
(20)
(25)
(1,119)
449
172
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
29 Deferred tax assets/(liabilities) (Continued)
(b) Movements of net deferred tax assets are as follows: (Continued)
At the beginning
of the year
RMB million
(Charged)/
credited to
income
statement
RMB million
Charged to
other
comprehensive
income
RMB million
At the end
of the year
RMB million
For the year ended 31 December 2014
Deferred tax assets:
Accrued expenses
Provision for major overhauls
Deferred revenue
Provision for impairment losses
Others
Deferred tax liabilities:
Provision for major overhauls
Depreciation allowances under tax in excess
of the related depreciation under
accounting
Change in fair value of available-
for-sale equity securities
Others
Net deferred tax assets
847
173
75
393
69
1,557
(363)
(707)
(9)
(107)
(1,186)
371
(286)
123
1
(158)
13
(307)
–
18
–
22
40
(267)
–
–
–
–
–
–
–
–
(11)
–
(11)
(11)
561
296
76
235
82
1,250
(363)
(689)
(20)
(85)
(1,157)
93
(c) Deferred tax assets not recognized
At 31 December 2015, the Group’s deductible temporary differences amounting to RMB371 million (2014: RMB272
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. At 31 December 2015, the Group’s unused tax losses of RMB843 million (2014: RMB970 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:
2015
2016
2017
2018
2019
2020
2015
RMB million
2014
RMB million
–
230
200
214
194
5
843
95
230
201
250
194
–
970
173
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
30 Other assets
Prepayment
for exclusive
use right of an
airport terminal
RMB million
Software
RMB million
Leasehold
improvement
RMB million
Others
RMB million
Total
RMB million
At 1 January 2014
Additions
Acquisition of a subsidiary
Transferred from construction in progress
Disposal
Amortisation for the year
At 31 December 2014
At 1 January 2015
Additions
Transferred from construction in progress
Disposal
Amortisation for the year
At 31 December 2015
260
–
–
–
–
(10)
250
250
–
–
–
(10)
240
174
18
5
63
(1)
(72)
187
187
29
106
–
(75)
247
91
37
–
45
–
(36)
137
137
3
17
–
(39)
118
64
8
290
–
–
(16)
346
346
7
–
(31)
(39)
283
589
63
295
108
(1)
(134)
920
920
39
123
(31)
(163)
888
31
Inventories
Consumable spare parts and maintenance materials
Other supplies
Less: impairment
Impairment of inventory is shown as below:
At 1 January
Provision for impairment of inventories
Provision for impairment written back
Provision written off in relation to disposal of inventories
At 31 December
2015
RMB million
2014
RMB million
1,519
197
1,716
(110)
1,606
1,587
178
1,765
(104)
1,661
2015
RMB million
2014
RMB million
104
13
–
(7)
110
305
–
(22)
(179)
104
174
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
32 Trade receivables
Trade receivables
Less: bad-debt provision
(a) Ageing analysis
2015
RMB million
2014
RMB million
2,613
(33)
2,580
2,716
(33)
2,683
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: bad-debt provision
2015
RMB million
2014
RMB million
2,157
383
30
43
2,613
(33)
2,580
2,133
535
25
23
2,716
(33)
2,683
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:
At 1 January
Impairment loss recognised
Impairment loss written back
Uncollectible amounts written off
At 31 December
2015
RMB million
2014
RMB million
33
4
–
(4)
33
27
12
(2)
(4)
33
(ii)
As of 31 December 2015, trade receivables of RMB47 million (2014: RMB5 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:
3 to 12 months
Over 12 months
2015
RMB million
2014
RMB million
19
28
47
5
–
5
175
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
32 Trade receivables (Continued)
(b)
Impairment of trade receivables (Continued)
(iii)
As of 31 December 2015, trade receivables of RMB48 million (2014: RMB43 million) were impaired. The amount
of the provision was RMB33 million as of 31 December 2015 (2014: RMB33 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
2015
RMB million
2014
RMB million
30
18
48
20
23
43
(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:
Neither past due nor impaired
2015
RMB million
2014
RMB million
2,518
2,668
Trade receivables that were neither past due nor impaired relate to customers for whom there was no recent history
of default.
(d) Trade receivables by currencies
The carrying amounts of the Group’s trade receivables are denominated in the following currencies:
Renminbi
US dollar
Euro
Australian dollar
Taiwan dollar
UK pound
Other currencies
2015
RMB million
2014
RMB million
2,016
218
129
49
33
28
140
2,613
2,231
118
134
36
30
38
129
2,716
As at 31 December 2015, the fair value of trade receivables approximate its carrying amount.
176
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
33 Other receivables
VAT recoverable
Rebate receivables on aircraft acquisitions
Term deposit (Note)
Deposits for aircraft purchase
Interest receivables
Other rental deposits
Others
Subtotal
Less: impairment
Less: non-current portion of term deposit recognized
as non-current assets (Note)
Current portion of other receivables
Note:
2015
RMB million
2014
RMB million
1,596
901
761
–
66
119
583
4,026
(2)
4,024
(304)
3,720
1,562
1,018
2,454
239
126
73
695
6,167
(3)
6,164
(300)
5,864
As at 31 December 2015, the balance represents the term deposit amounting to RMB761 million at bank with maturity over 3 months (2014:
RMB2,454 million). Term deposit with maturity over 1 years amounting to RMB304 million is classified as non-current asset (2014: RMB300 million).
The weighted average annualized interest rate of term deposits as of 31 December 2015 is 3.26% (2014: 3.06%).
As at 31 December 2015, the fair value of other receivables approximates its carrying amount.
34 Cash and cash equivalents
(a) Cash and cash equivalents comprise:
Deposits in banks and other financial institution
Cash at bank and in hand
Cash and cash equivalents in the statement of balance sheet
2015
RMB million
2014
RMB million
98
4,462
4,560
4,445
10,969
15,414
As at 31 December 2015, the Group’s deposits with SA Finance, which is a qualified financial institution, amounted
to RMB2,934 million (2014: RMB4,264 million) (Note 48(d)(ii)).
As at 31 December 2015, the fair value of cash and cash equivalents approximate its carrying amount.
The carrying amounts of the Group’s cash and cash equivalents are denominated in the following currencies:
Renminbi
US dollar
Euro
Japanese Yen
Hong Kong Dollars
Others
2015
RMB million
2014
RMB million
3,756
587
69
15
12
121
4,560
13,649
1,296
136
5
60
268
15,414
177
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
34 Cash and cash equivalents (Continued)
(b) Reconciliation of profit before income tax to cash generated from operating activities:
Note
2015
RMB million
2014
RMB million
13
13
13
20
24
25
15
17
16
26 & 27
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
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 losses, net
Decrease in inventories
Decrease/(Increase) in trade receivables
Decrease in other receivables
Increase in prepaid expenses and other current assets
Decrease in net amounts due to related companies
Increase in trade payables
Increase in sales in advance of carriage
Increase in accrued expenses
(Decrease)/Increase in other liabilities
Decrease in deferred revenue
Increase in provision for major overhauls
Decrease in provision for early retirement benefits
Increase in deferred benefits and gains
6,118
11,766
227
(148)
90
(460)
(108)
(312)
–
(253)
2,188
(13)
5,516
55
103
418
(184)
(153)
843
1,030
695
(277)
(75)
630
(20)
181
3,066
10,789
195
(156)
215
(261)
(140)
(267)
(26)
(376)
2,193
(13)
292
15
(391)
108
(203)
(154)
45
261
308
369
(410)
244
(28)
151
Cash generated from operating activities
27,857
15,826
178
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
35 Borrowings
(a) As at 31 December 2015, borrowings are analysed as follows:
2015
RMB million
2014
RMB million
Non-current
Long-term bank
borrowings
– secured (Note (i)(iii))
– unsecured
Corporate Bond
–unsecured (Note (iv))
Current
Current portion of long-term bank borrowings
– secured (Note (i)(ii)(iii))
– unsecured
Short-term bank borrowings
– secured (Note (ii))
– unsecured
Ultra short-term financing bills
– unsecured (Note (v))
Total borrowings
The borrowings are repayable:
Within one year
In the second year
In the third to fifth year inclusive
After the fifth year
Total borrowings
7,819
5,065
12,884
3,000
15,884
1,696
823
–
19,483
8,000
30,002
45,886
30,002
6,774
8,381
729
45,886
19,846
22,220
42,066
–
42,066
3,834
6,902
232
7,011
3,000
20,979
63,045
20,979
17,226
19,991
4,849
63,045
Notes:
(i)
(ii)
(iii)
(iv)
(v)
As at 31 December 2015, borrowings of the Group totalling RMB9,100 million (2014: RMB22,946 million) were secured by mortgages
over certain of the Group’s aircraft and other flight equipment with aggregate carrying amounts of RMB15,814 million (2014:
RMB31,825 million).
As at 31 December 2015, none of the borrowings of the Group (2014: RMB532 million) were secured by pledged bank deposits
(2014: RMB324 million).
As at 31 December 2015, borrowings of the Group amounting to RMB415 million (2014: RMB434 million) was secured by land use
rights of RMB66 million (2014: RMB68 million) and investment property of RMB50 million (2014: RMB51 million).
The Group issued corporate bonds with aggregate nominal value of RMB 3,000 million on 20 November 2015 at a bond rate
of 3.63%. The corporate bonds mature in five years. The Company will be entitled at its option to adjust its bond rate and the
investors will be entitled to request the Company to redeem all or a portion of the bonds after three years of the issue date.
The Group issued the first tranche of Ultra-short-term Financing Bills for the year 2015 with an amount of RMB 3,000 million on
19 November 2015 at a bond rate of 3.20%, with a maturity period of 270 days.
The Group issued the second tranche of Ultra-short-term Financing Bills for the year 2015 with an amount of RMB 2,000 million
on 24 November 2015 at a bond rate of 3.04%, with a maturity period of 180 days.
The Group issued the third tranche of Ultra-short-term Financing Bills for the year 2015 with an amount of RMB 3,000 million on
30 November 2015 at a bond rate of 3.16%, with a maturity period of 268 days.
179
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
35 Borrowings (Continued)
(b) As at 31 December 2015, the Group’s weighted average interest rates on short-term borrowings were 3.66% per
annum (2014: 3.30% per annum).
(c) Details of borrowings with original maturity over one year are as follows:
Renminbi denominated loans
Fixed interest rate at 1.20% per annum as at 31 December 2015,
with maturities through 2027
Corporate Bond – Fixed bond rate at 3.63%
Floating interest rates 90%, 95%, 100% of benchmark interest rate
(stipulated by PBOC) as at 31 December 2015,
with maturities through 2022
United States Dollars denominated loans
Fixed interest rates ranging from 1.89% to 3.30% per annum
as at 31 December 2014
Floating interest rates ranging from one-month LIBOR + 1.20% to
one-month LIBOR + 2.20% per annum as at 31 December 2015,
with maturities through 2021
Floating interest rates ranging from three-month LIBOR + 0.59% to
three-month LIBOR + 2.80% per annum as at 31 December 2015,
with maturities through 2024
Floating interest rates at six-month LIBOR + 0.45% to
six-month LIBOR + 2.55% per annum
as at 31 December 2015, with maturities through 2022
Less: loans due within one year classified as current liabilities
2015
RMB million
2014
RMB million
20
3,000
783
–
226
–
570
927
1,097
1,832
10,327
38,546
3,176
18,403
(2,519)
15,884
10,701
52,802
(10,736)
42,066
(d)
The remaining contractual maturities at the end of the financial year of the Group’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 can be required to pay, are
as follows:
Contractual undiscounted cash flows
Within 1 year
After 1 year but within 2 years
After 2 years but within 5 years
After 5 years
2015
RMB million
2014
RMB million
30,789
7,110
8,700
744
47,343
22,293
18,098
20,758
5,040
66,189
180
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
35 Borrowings (Continued)
(e) The carrying amounts of the borrowings are denominated in the following currencies:
Renminbi
US Dollars
Euro
2015
RMB million
2014
RMB million
30,145
15,110
631
45,886
4,444
58,601
–
63,045
The Group has significant borrowings balances as well as obligations under finance leases (Note 36) which are
denominated in US dollars as at 31 December 2015. The net exchange loss of RMB5,953 million (2014: net exchange
loss of RMB292 million) recorded by the Group was mainly attributable to the exchange loss/gain arising from
translation of borrowings balances and finance lease obligations denominated in US dollars.
(f)
(g)
As at 31 December 2015, loans to the Group from SA finance amounted to RMB105 million (2014: RMB105 million)
(Note 48(d)(i)).
As at 31 December 2015, the fair value of borrowings approximate their carrying amount. The fair value is within
level 2 of the fair value hierarchy.
181
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
36 Obligations under finance leases
The Group has 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 2016 to 2027. The Group has made careful assessment
on the classification of leased aircraft pursuant to IAS 17 and believes all leased aircraft classified as finance lease meet one
or more of the criteria as set out in IAS 17 that would lead to a lease being classified as a finance lease (i.e. the lease transfers
ownership of the asset to the lessee by the end of the lease term; the lessee has the option to purchase the asset at a price
that is expected to be sufficiently lower than the fair value at the date the option becomes exercisable for it to be reasonably
certain, at the inception of the lease, that the option will be exercised; at the inception of the lease the present value of the
minimum lease payments amounts to at least substantially all of the fair value of the leased asset).
As at 31 December 2015, future payments under these finance leases are as follows:
2015
2014
Present
value of the
minimum
lease
payments
Total
minimum
lease
payments
Present
value of the
minimum
lease
payments
Total
minimum
lease
payments
Future
interest
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
Less: ba lance due within one year
classified as current liabilities
6,416
7,369
16,818
25,221
55,824
(6,416)
49,408
7,864
8,613
19,515
26,731
62,723
1,448
1,244
2,697
1,510
6,899
5,992
5,487
15,781
22,651
49,911
(5,992)
43,919
7,312
6,643
18,277
24,345
56,577
1,320
1,156
2,496
1,694
6,666
182
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
36 Obligations under finance leases (continued)
Details of obligations under finance leases are as follows:
United States Dollars denominated obligations
Fixed interest rates ranging from 2.09% to 6.01%
per annum as at 31 December 2015
2015
RMB million
2014
RMB million
9,570
4,176
Floating interest rates ranging from three-month LIBOR + 0.18% to three-
month LIBOR + 3.30% per annum as at 31 December 2015
21,168
25,819
Floating interest rates ranging from six-month LIBOR + 0.03%
to six-month LIBOR + 3.30% per annum as at 31 December 2015
16,744
16,797
Singapore Dollars denominated obligations
Floating interest rate at six-month SIBOR + 1.44%
per annum as at 31 December 2015
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 2015
Floating interest rate at six-month TIBOR
+ 3.00% per annum as at 31 December 2015
Renminbi denominated obligations
Floating interest rate at 130% of five-year RMB loan benchmark
interest rate announced by the PBOC per annum as at 31 December 2015
Floating interest rate at 100% of five-year RMB loan benchmark interest
rate announced by the PBOC per annum as at 31 December 2015
Floating interest rate at 95% of five-year RMB loan benchmark interest
rate announced by the PBOC per annum as at 31 December 2015
Floating interest rate at three-month CHN HIBOR + 0.38%
Euro denominated obligations
Floating interest rate ranging from three-month EURIBOR + 0.32%
to three-month EURIBOR + 2.70% per annum as at 31 December 2015
Floating interest rate ranging from six-month EURIBOR + 1.45%
to six-month EURIBOR + 1.80% per annum as at 31 December 2015
368
418
1,524
1,610
325
369
242
435
551
2,951
1,577
55,824
331
438
322
–
–
–
–
49,911
Charges over the assets concerned and relevant insurance policies are provided to the lessors as collateral and security. As
at 31 December 2015, certain of the Group’s aircraft with carrying amounts of RMB72,246 million (2014: RMB67,294 million)
secured finance lease obligations totaling RMB55,824 million (2014: RMB49,911 million).
As at 31 December 2015, the fair value of obligation under finance leases approximate their carrying amount. The fair value
is within level 2 of the fair value hierarchy.
183
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
37 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
2015
RMB million
2014
RMB million
735
504
843
314
104
2,500
755
633
107
76
86
1,657
As at 31 December 2015, the fair value of trade payable approximate their carrying amounts.
The carrying amounts of the Group’s trade payable are denominated in the following currencies:
Renminbi
US Dollars
Others
2015
RMB million
2014
RMB million
2,418
69
13
2,500
1,558
86
13
1,657
38 Deferred revenue
Deferred revenue represents the unredeemed credits under the frequent flyer award programme.
39 Amounts due from/to related companies
(a) Amounts due from related companies
CSAHC and its affiliates
Associates
Joint ventures
Note
2015
RMB million
2014
RMB million
21
226
86
333
78
284
124
486
48(c)
The amounts due from related companies are unsecured, interest free and have no fixed terms of repayment. They
are expected to be recovered within one year.
184
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
39 Amounts due from/to related companies (Continued)
(b) Amounts due to related companies
CSAHC and its affiliates
A joint venture of CSAHC
An associate
Joint ventures
Other related company
Note
2015
RMB million
2014
RMB million
59
18
13
60
2
152
144
112
13
119
70
458
48(c)
The amounts due to related companies are unsecured, interest free and have no fixed terms of repayment. They are
expected to be settled within one year.
40 Accrued expenses
Repairs and maintenance
Jet fuel costs
Salaries and welfare
Landing and navigation fees
Computer reservation services
Provision for major overhauls (Note 42)
Interest expense
Air catering expenses
Provision for early retirement benefits (Note 43)
Others
41 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
Payable due to the former shareholder of a subsidiary (Note (a))
Others
2015
RMB million
2014
RMB million
5,179
1,179
2,434
2,003
340
470
385
307
12
772
3,518
1,814
2,385
2,240
338
112
471
311
20
913
13,081
12,122
2015
RMB million
2014
RMB million
1,335
767
384
395
103
658
1,516
5,158
1,379
703
418
397
188
758
1,478
5,321
(a)
Balance represented a loan of a subsidiary acquired by the Group in 2014 due to its former shareholder, which was interest-free previously
and has started to bear interest with an annual rate of 6% since 1 March 2015. As at 31 December 2015, the fair value of the balance
approximate their carrying amount.
185
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
42 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 40)
2015
RMB million
2014
RMB million
1,735
823
(193)
2,365
(470)
1,895
1,491
682
(438)
1,735
(112)
1,623
43 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
At 31 December
Less: current portion (Note 40)
2015
RMB million
2014
RMB million
45
3
2
(25)
25
(12)
13
73
7
4
(39)
45
(20)
25
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.
186
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
44 Deferred benefits and gains
Leases rebates (Note (i))
Maintenance rebates (Note (ii))
Gains relating to sale and leaseback (Note (iii))
Government grants
Others
2015
RMB million
2014
RMB million
145
455
77
190
19
886
184
367
103
177
22
853
Notes:
(i)
(ii)
(iii)
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.
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.
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.
45 Share capital
Registered, issued and paid up capital:
4,039,228,665 domestic state-owned shares of RMB1.00 each
(2014: 4,208,586,278 shares of RMB1.00 each)
2,983,421,335 A shares of RMB1.00 each
(2014: 2,814,063,722 shares of RMB1.00 each)
2,794,917,000 H shares of RMB1.00 each
(2014: 2,794,917,000 shares of RMB1.00 each)
2015
RMB million
2014
RMB million
4,039
2,984
2,795
9,818
4,209
2,814
2,795
9,818
All the domestic state-owned, H and A shares rank pari passu in all material respects.
187
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
46 Reserves
Share premium
At 1 January and 31 December
Fair value reserve
At 1 January
Change in fair value of available-for-sale equity securities
Change in fair value of derivative financial instruments
At 31 December
Statutory and discretionary surplus reserve
At 1 January
Appropriations to reserves (Note (a))
At 31 December
Other reserve
At 1 January
Share of an associate’s reserves movement
Acquisition of non-controlling interests in a subsidiary
At 31 December
Retained profits
At 1 January
Profit for the year
Appropriations to reserves (Note (a))
Dividends approved in respect of the previous year
At 31 December
Total
2015
RMB million
2014
RMB million
14,131
14,131
44
1
10
55
1,306
246
1,552
180
(5)
(52)
123
10,269
3,736
(246)
(393)
13,366
29,227
22
22
–
44
1,169
137
1,306
167
14
(1)
180
9,022
1,777
(137)
(393)
10,269
25,930
188
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
46 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:
2015
RMB million
2014
RMB million
Final dividend proposed after the end of the reporting year of
RMB0.8 per 10 ordinary shares (2014: RMB0.4 per 10 ordinary
shares) (inclusive of applicable tax)
785
393
A dividend in respect of the year ended 31 December 2015 of RMB0.8 per 10 shares (inclusive of applicable tax) (2014:
RMB0.4 per 10 shares (inclusive of applicable tax)), amounting to a total dividend of RMB785 million (2014: RMB393
million), was proposed by the directors on 30 March 2016. The dividend proposed after the end of the financial year
has not been recognized as a liability at the end of the financial year.
189
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
47 Commitments
(a) Capital commitments
Capital commitments outstanding at 31 December 2015 not provided for in the financial statements were as follows:
Commitments in respect of aircraft and flight equipment
– authorised and contracted for
Investment commitments
– 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
Commitments for other property, plant and equipment
– authorised and contracted for
– authorised but not contracted for
2015
RMB million
2014
RMB million
83,427
59,467
34
56
90
41
131
2,550
4,183
6,733
90,291
70
52
122
–
122
1,512
3,610
5,122
64,711
As at 31 December 2015, the approximate total future payments, including estimated amounts for price escalation
through anticipated delivery dates for aircraft and flight equipment are as follows:
2015
2016
2017
2018
2019 and afterwards
2015
RMB million
2014
RMB million
–
19,074
22,359
18,898
23,096
83,427
18,146
11,628
10,081
7,552
12,060
59,467
190
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
47 Commitments (Continued)
(b) Operating lease commitments
As at 31 December 2015, 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
2015
RMB million
2014
RMB million
6,560
18,582
10,967
36,109
5,072
15,496
8,230
28,798
48 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
(excluding independent non-executive directors) and certain of the highest paid employees as disclosed in Note
56, is as follows:
Salaries, wages and welfare
Retirement scheme contributions
Directors and supervisors (Note 56)
Senior management
Total remuneration is included in “staff costs” (Note 14).
2015
RMB ’000
8,907
1,868
10,775
2015
RMB ’000
2,471
8,304
10,775
2014
RMB ’000
13,013
2,359
15,372
2014
RMB ’000
3,241
12,131
15,372
191
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
48 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
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
2015
RMB million
2014
RMB million
Income received from the CSAHC Group
Charter flight and pallet income
Air catering supplies income
Cargo handling income
Aircraft material sales
Expenses paid to the CSAHC Group
Repairing charges
Lease charges for land and buildings
Handling charges
Property management fee
Air catering supplies expenses
Cargo handling charges
Commission expenses
Printing expenses
Construction supervision expenses
Expenses paid to joint ventures and associates
Repairing charges
Flight simulation service charges
Training expenses
Ground service expenses
Air catering supplies
Advertising expenses
Commission expense
Maintenance material purchase expenses
Intercom rental expenses
Rental expenses
Income received from joint ventures and associates
Entrustment income for advertising media business
Rental income
Commission income
Repairing income
Air catering supplies
Ground service income
Air ticket Income
Maintenance material sales revenue
Air catering supplies income
Income received from other related company
Air tickets income
Expenses paid to other related company
Computer reservation services
Advertising expenses
(i)
(ii)
(i)
(iii)
(iii)
(iv)
(v)
(vi)
(ii)
(i)
(i)
(vii)
(xx)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(viii)
(xxi)
(xxii)
(xiii)
(ix)
(xv)
(xiv)
(xiv)
(xvi)
(xv)
(xvii)
(xii)
(xviii)
(xix)
(xviii)
19
1
1
1
1,324
193
114
73
100
109
98
4
2
1,714
324
112
119
108
67
1
29
2
1
21
37
17
12
23
8
1
1
1
10
515
–
32
1
–
–
780
173
119
61
89
46
8
4
–
1,335
316
169
111
102
75
29
24
–
–
34
33
40
17
10
8
2
2
1
12
435
20
192
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
48 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 air holding ground services CO.,LTD (“CSA Ground Services”), 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 CSA Ground Services.
Commission is earned by CSA Ground Services 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.
(ii)
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.
In addition, air catering supplies income/expenses are earned/payable by the group in respect of certain in-flight meals and
related services with SZ catering.
(iii)
MTU Maintenance Zhuhai Co., Ltd, a joint venture of CSAHC, provides comprehensive maintenance services to the Group.
(iv)
(v)
(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.
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.
Guangzhou China Southern Airlines Property Management Company Limited, a wholly-owned subsidiary of CSAHC, provides
property management services to the Group.
(vii)
Printing Plant of China Northern Airlines Vestibule School provides printing services for the Group.
(viii)
Guangzhou Aircraft Maintenance Engineering Company Limited (“GAMECO”) and Shenyang Northern Aircraft Maintenance Limited,
joint ventures of the Group, provide comprehensive maintenance services to the Group.
The Group purchases maintenance material from GAMECO.
(ix)
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.
(x)
(xi)
(xii)
China Southern West Australian Flying College Pty Limited (“Flying College”), a joint venture of the Group, provides training services
to the Group.
Beijing Aviation Ground Services Co.,Ltd., and Shenyang Konggang Logistic Co. Ltd., associates of the Group provide ground service
to the Group.
Air catering supplies income/expenses are earned/payable by the Group in respect of certain in-flight meals and related services
with Beijing Airport Inflight Kitchen Co.,Ltd., which is an associate of the Group.
193
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 48 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)
(xiii)
SACM, 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 SACM.
(xiv)
Sichuan Airlines Corporation Limited (“Sichuan Airlines”), an associate of the Group, provides commissions service to the Group.
The charge is determined according to the market price.
In addition, The Company provides aircraft maintenance services to Sichuan Airlines. The Group provides air catering services and
repairing services to Sichuan Airlines.
(xv)
The Group provides certain website resources to SA Finance for the sales of air insurance to passengers and provides commission
service to Sichuan Airlines.
In addition, the Group sells tickets to SA Finance as a gift to passengers for the sales of insurance.
(xvi)
The Group provides ground services to Shenyang Konggang Logistic Co.,Ltd and Sichuan Airlines, which are associates of the
Group.
(xvii)
The Group sells maintenance materials to Shenyang Northern Aircraft Maintenance Ltd., which is a joint venture of the Group.
(xviii)
Phoenix Satellite Television Holdings Limited (“the Phoenix Group”) is a related party of the Group as the board chairman of the
Phoenix Group was appointed as a non-executive director of the Group. It provides advertising services to the Group.
In addition, the Group Sells tickets to the Phoenix Group on market price.
(xix)
China Travel Sky Holding Company is a related party of the Group as a director of the Group was appointed as the director of
China Travel Sky Holding Company. It provides computer reservation services to the Group.
(xx)
CSA Construction Supervision Co. Ltd., an associate of the CSAHC, provides supervision services to the Group.
(xxi)
Guangzhou Tuokang Communication Technology Co. Ltd., an associate of the Group, provides intercom rental services to the
Group.
(xxii)
Shenyang Konggang Logistic Co. Ltd., an associate of the Group, provides facilities and buildings to the Group under operating
lease agreements.
194
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 48 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
Payables:
The CSAHC Group
Associates
Joint ventures
Other related company
Accrued expenses:
The CSAHC Group
Associates
Joint ventures
Other related company
Note
2015
RMB million
2014
RMB million
39(a)
Note
39(b)
21
226
86
333
78
284
124
486
2015
RMB million
2014
RMB million
77
13
60
2
152
256
13
119
70
458
2015
RMB million
2014
RMB million
571
97
931
282
1,881
451
92
836
269
1,648
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.
195
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
48 Material related party transactions (Continued)
(d) Loans from and deposits placed with related parties
(i)
Loans from related parties
At 31 December 2015, loans from SA Finance to the Group amounted to RMB105 million (2014: RMB105 million).
In 2015, 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 27 April 2015 to 27
April 2016. The interest rate is 90% of benchmark interest rate stipulated by PBOC per annum.
The unsecured loans are repayable as follows:
Within 1 year
Note
35(f)
2015
RMB million
2014
RMB million
105
105
105
105
Interest expense paid on such loans amounted to RMB4 million (2014: RMB11 million) and the interest rates
ranged from 3.92% to 4.14% per annum during the year ended 31 December 2015 (2014: 5.04% to 5.70%
per annum).
(ii) Deposits placed with SA Finance
At 31 December 2015 the Group’s deposits with SA Finance are presented in the table below. The applicable
interest rates are determined in accordance with the rates published by the PBOC.
Deposits placed with SA Finance
Note
34
2015
RMB million
2014
RMB million
2,934
4,264
Interest income received on such deposits amounted to RMB70 million during the year ended 31 December
2015 (2014: RMB68 million).
(e) Commitments to CSAHC
At 31 December 2015, the Group had operating lease commitments to CSAHC in respect of lease payments for land
and buildings of RMB320 million (2014: RMB207 million).
49 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 13% to 21% (2014: 11% to 21%) 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. The Group, at its sole discretion, had made certain welfare subsidy
payments to these retirees.
In 2014, The Company and its major subsidiaries joined a new defined contribution retirement scheme (“Pension
Scheme”) that was implemented by CSAHC. The annual contribution to the Pension Scheme is based on a fixed
specified percentage of prior year’s annual wage. There will be no further obligation beyond the annual contribution
according to the Pension Scheme. The total contribution into the Pension Scheme in 2015 was approximately
RMB438,000,000.
196
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
49 Employee benefits plan (Continued)
(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.
(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 in 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), a dividend of RMB0.05(equivalent to
HKD0.06) (inclusive of applicable tax), a dividend of RMB0.04 (equivalent to HKD0.05) (inclusive of applicable tax) and
a dividend of RMB0.04 (equivalent to HKD0.05) (inclusive of applicable tax) per share was approved by the Company’s
General Meeting on 31 May 2012, 18 June 2013, 26 June 2014 and 30 June 2015 respectively (Note 46(b)), therefore,
the exercise price for the SARs was adjusted to HKD3.51 per share in accordance with the predetermined formula
stipulated in the Scheme.
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. As at 31
December 2015, 24,660,000 units of SARs granted by the Company have all expired and correspondingly, the liability
for SARs was RMB0.
197
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 50 Supplementary information to the consolidated cash flow statement
Non-cash transactions-acquisition of aircraft
During the year ended 31 December 2015, aircraft acquired under finance leases amounted to RMB11,251 million (2014:
RMB19,163 million).
51 Contingent liabilities
(a)
The Group leased certain properties and buildings from CSAHC which located in Guangzhou, Wuhan and Haikou, etc.
However, to the knowledge of the Group, 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 such
properties and buildings.
In addition, as disclosed in notes 20 and 22, the Group is applying title certificates for certain of the Group’s properties
and land use rights certificates for certain properties and parcels of land. The Company is of the opinion that the use
of and the conduct of operating activities at these properties and these parcels of land are not affected by the fact
that the Group has not yet obtained the relevant certificates.
The Company and its subsidiary, Xiamen Airlines, entered into agreements with certain pilot trainees and certain banks
to provide guarantees on personal bank loans amounting to RMB627 million (31 December 2014: RMB646 million)
that can be drawn by the pilot trainees to finance their respective flight training expenses. As at 31 December 2015,
total personal bank loans of RMB454 million (31 December 2014: RMB486 million), under these guarantees, were
drawn down from the banks. During the year, the Group paid RMB4 million (2014: RMB2 million) to the banks due
to the default of payments of certain pilot trainees.
The Company is engaged in International Court of Arbitration proceedings (“ICC arbitration proceedings”) in London
against a lessor SASOF TR-81 AVIATION IRELAND LIMITED, arising out of the redelivery of two Boeing 737 aircraft.
The lessor has made various claims of approximately USD13 million in the arbitration proceedings relating to the
redelivery condition of the aircraft, and the Company has counterclaimed against the lessor for the recovery of
approximately USD9.8 million. The hearing in the ICC arbitration proceedings commenced in London on 7 March
2016, and will conclude on 19 April 2016, and the award of the Arbitral Tribunal is awaited. As of the date of this
report, the Company cannot reasonably predict the result and potential financial impact of this pending arbitration,
if any. Therefore, no additional provision has been made against this pending arbitration.
With regard to the incident of the investigation on the Company’s former chairman as a result of suspected sever
violation of disciplines, management of the Company, including the internal audit of the Company, have carried out
a robust assessment by taking into consideration the fact that the former chairman was a non-executive director
and has not involved in the operation of the Company. Based on the work carried out, we have not identified any
possible material misstatements of the financial statements caused by the incident.
(b)
(c)
(d)
198
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 52
Immediate and ultimate controlling party
As at 31 December 2015, 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.
53 Subsequent events
(a)
(b)
(c)
On 2 February 2016, the Company entered into the “Equity Transfer Agreement between China Southern Airlines
Company Limited and China Southern Air Holding Company in relation to transfer of 100% equity interest in Southern
Airlines (Group) Import and Export Trading Company” with CSAHC, the controlling shareholder of the Company,
pursuant to which the Company agreed to acquire 100% equity interest in Southern Airlines (Group) Import and
Export Trading Company at a consideration of RMB400,570,400.
On 7 March 2016, the Group has completed the issuance of the 2016 Corporate Bonds (Frist Tranche) with nominal
value of RMB5 billion for a term of three years and at nominal interest rate of 2.97%.
On 8 March 2016, the Board approved that, Xiamen Airlines shall make an application to the National Association of
Financial Market Institutional Investors for the registration and issuance of ultra-short-term financing bills with the
aggregate maximum principal amount of RMB10 billion. The term of this issuance shall be no more than one year.
The issuance of ultra-short-term financing is subject to the registration with the National Association of Financial
Market Institutional Investors.
199
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 54 Balance sheet of the Company
31 December
2015
RMB million
31 December
2014
RMB million
Note
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
Derivative financial instruments
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 lease
Trade payables
Sales in advance of carriage
Deferred revenue
Current income tax
Amounts due to subsidiaries and other related companies
Accrued expenses
Other liabilities
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
55
112,207
11,704
1,310
5,504
513
482
100
619
43
13
1,331
503
134,329
1,115
2,162
2,620
3,079
102
685
206
9,969
24,028
5,349
466
6,123
964
–
5,335
11,181
3,445
56,891
13,216
41,740
1,516
1,468
11
742
58,693
28,714
9,818
18,896
28,714
105,495
12,030
1,348
3,549
467
483
100
600
40
–
939
478
125,529
1,179
2,160
3,402
10,060
93
606
3,463
20,963
17,811
5,277
338
5,413
1,072
220
3,171
10,024
3,293
46,619
30,844
38,357
1,525
1,184
23
786
72,719
27,154
9,818
17,336
27,154
The balance sheet of the Company was approved by the Board of Directors on 30 March 2016 and was signed on its behalf.
Tan Wan Geng
Director
200
Zhang Zi Fang
Director
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
55 Reserve movement of the Company
Share premium
At 1 January and 31 December
Fair value reserve
At 1 January
Change in fair value of available-for-sale equity securities
Change in fair value of derivative financial instruments
At 31 December
Statutory and discretionary
surplus reserve
At 1 January
Appropriations to reserves (Note (a))
At 31 December
Other reserve
At 1 January and 31 December
Retained profits
At 1 January
Profit for the year
Appropriations to reserves (Note(a))
Dividends approved in respect of the previous year
At 31 December
Total
(a)
Appropriations to reserves
2015
RMB million
2014
RMB million
13,878
13,878
22
2
10
34
1,306
246
1,552
146
1,984
1,941
(246)
(393)
3,286
18,896
11
11
–
22
1,169
137
1,306
146
1,450
1,064
(137)
(393)
1,984
17,336
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.
201
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
56 Benefits and interests of directors and supervisors
(a) Directors’ and supervisors’ emoluments
The remuneration of every director and supervisor for the year ended 31 December 2015 is set out below:
Emoluments paid or receivable in respect of a person’s services as a director or supervisor, whether of the Company
or its subsidiary undertaking:
Emoluments
paid or
receivable
in respect of
director’s or
supervisor’s
other services
in connection
with the
management
of the affairs
of the Company
or its subsidiary
undertaking
RMB’000
Remunerations
paid or
receivable
in respect
of accepting
office as
director or
supervisor
RMB’000
Employer’s
contribution
to a retirement
benefit
scheme
RMB’000
Directors’
fees
RMB’000
Salaries,
wages and
welfare
RMB’000
Housing
allowance
RMB’000
–
–
–
–
–
–
–
–
–
–
–
150
150
150
75
75
75
–
–
–
–
–
636
–
636
–
240
451
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
137
–
139
–
92
140
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
RMB’000
–
–
–
–
–
773
–
775
–
332
591
150
150
150
75
75
75
Name
Non-executive directors
Wang Quan Hua (Note (i) & (ii))
Yuan Xin An (Note (i))
Yang Li Hua (Note (i))
Executive directors
Tan Wan Geng (Note (i))
Zhang Zi Fang (Note (i))
Li Shao Bin
Supervisors
Pan Fu (Note (i))
Li Jia Shi
Zhang Wei (Note (i))
Yang Yi Hua
Wu De Ming
Independent non-executive
directors
Ning Xiang Dong
Liu Chang Le
Tan Jin Song
Wei Jin Cai (Note (iii))
Guo Wei (Note (iv))
Jiao Shu Ge (Note (iv))
202
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
56 Benefits and interests of directors and supervisors (Continued)
(a) Directors’ and supervisors’ emoluments (Continued)
For the year ended 31 December 2014 (Restated):
Emoluments paid or receivable in respect of a person’s services as a director or supervisor, whether of the Company
or its subsidiary undertaking
Emoluments
paid or
receivable
in respect of
director’s or
supervisor’s
other services
in connection
with the
management
of the affairs
of the Company
or its subsidiary
undertaking
RMB’000
Remunerations
paid or
receivable
in respect
of accepting
office as
director or
supervisor
RMB’000
Employer’s
contribution
to a retirement
benefit
scheme
RMB’000
Directors’
fees
RMB’000
Salaries,
wages and
welfare
RMB’000
Housing
allowance
RMB’000
–
–
–
–
–
–
–
–
–
–
–
150
150
150
150
–
–
–
–
–
636
–
636
–
294
367
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
130
–
132
–
140
140
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Name
Non-executive directors
Wang Quan Hua (Note (i) & (ii))
Yuan Xin An (Note (i))
Yang Li Hua (Note (i))
Executive directors
Tan Wan Geng (Note (i))
Zhang Zi Fang (Note (i))
Li Shao Bin
Supervisors
Pan Fu (Note (i))
Li Jia Shi
Zhang Wei (Note (i))
Yang Yi Hua
Wu De Ming
Independent non-executive
directors
Wei Jin Cai (Note (iii))
Ning Xiang Dong
Liu Chang Le
Tan Jin Song
Total
RMB’000
–
–
–
–
–
766
–
768
–
434
507
150
150
150
150
203
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements
56 Benefits and interests of directors and supervisors (Continued)
(a) Directors’ and supervisors’ emoluments (continued)
Save as disclosed above, the Company’s non-executive director, Mr. Si Xian Min resigned on 15 January 2016. For
the year ended 31 December 2015 and 31 December 2014, Mr. Si Xian Min did not receive any remuneration for his
service in the capacity of the non-executive director of the Company. He also held management positions in CSAHC
and his salary were borne by CSAHC. The Company’s executive director, Mr. Xu Jie Bo resigned on 5 January 2015.
For the year ended 31 December 2014, Mr. Xu Jie Bo’s total remuneration was RMB766 thousand, including salaries,
wages and welfare of RMB636 thousand and retirement scheme of RMB130 thousand.
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)
Resigned on 25 March 2015.
(iii)
Resigned on 30 June 2015.
(iv)
Appointed on 30 June 2015.
(b) Directors’ and supervisors’ termination benefits
None of the directors and supervisors received or will receive any termination benefits for the year ended 31 December
2015 (2014: Nil).
(c) Consideration provided to third parties for making available directors’ and supervisors’
services
For the year ended 31 December 2015, the Group did not pay consideration to any third parties for making available
directors’ and supervisors’ services (2014: Nil).
(d)
Information about loans, quasi-loans and other dealings in favour of directors
and supervisors, controlled bodies corporate by and connected entities with such
directors and supervisors
As at 31 December 2015, there is no loans, quasi-loans and other dealing arrangements in favour of directors and
supervisors, controlled bodies corporate by and connected entities with such directors and supervisors (2014: Nil).
(e) Directors’ and supervisors’ material interests in transactions, arrangements or
contracts
No significant transactions, arrangements and contracts in relation to the Group’s business to which the Company was
a party and in which a director or supervisor of the Company had a material interest, whether directly or indirectly,
subsisted at the end of the year or at any time during the year (2014: Nil).
204
Annual Report 2015China Southern Airlines Company Limited(Prepared in accordance with International Financial Reporting Standards)(Expressed in Renminbi unless otherwise indicated)Notes to the Financial Statements 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.
Revenue
Less: Cost of operation
Taxes and surcharges
Selling and distribution expenses
General and administrative expense
Finance expense, 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
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
Derivative financial instruments
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
2015
RMB million
2014
RMB million
111,467
91,382
274
7,081
2,754
7,826
108
582
2,624
3,814
97
6,341
1,355
4,986
3,851
1,135
4,986
108,313
95,151
188
7,947
2,582
2,251
205
416
405
2,822
132
3,095
677
2,418
1,773
645
2,418
31 December
2015
RMB million
31 December
2014
RMB million
14,418
3,453
162,010
4,945
13
1,411
186,250
65,536
938
70,203
136,677
38,966
10,607
49,573
186,250
27,840
2,937
153,248
4,627
–
1,045
189,697
54,086
873
90,464
145,423
35,554
8,720
44,274
189,697
205
Annual Report 2015China Southern Airlines Company LimitedSupplementary Financial InformationFor the year ended 31 December 2015(Prepared in accordance with PRC Accounting Standards)
Reconciliation of Differences in Financial Statements Prepared Under Different
GAAPs
(1)
The effect of the differences between PRC GAAP and IFRSs on profit attributable to equity shareholders of the Company is
analysed as follows:
Note
2015
RMB million
2014
RMB million
Amounts under PRC GAAP
Adjustments:
Government grants
Capitalisation of exchange difference of specific loans
Accumulated loss attributed to non-controlling
interests of a subsidiary
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
(c)
(a)
(b)
(d)
3,851
1
(222)
–
(2)
55
53
1,773
1
(28)
23
(2)
9
1
Amounts under IFRSs
3,736
1,777
(2)
The effect of the differences between PRC GAAP and IFRSs on equity attributable to equity shareholders of the Company is
analysed as follows:
Amounts under PRC GAAP
Adjustments:
Capitalisation of exchange difference of specific loans
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
Note
2015
RMB million
2014
RMB million
38,966
35,554
(a)
(c)
(d)
101
(30)
4
(24)
28
323
(31)
6
(79)
(25)
Amounts under IFRSs
39,045
35,748
206
Annual Report 2015China Southern Airlines Company LimitedFor the year ended 31 December 2015Supplementary Financial Information (continued)
Reconciliation of Differences in Financial Statements Prepared Under Different
GAAPs (Continued)
Notes:
(a)
(b)
(c)
(d)
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.
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.
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.
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.
207
Annual Report 2015China Southern Airlines Company LimitedFor the year ended 31 December 2015Supplementary Financial Information (continued) 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
2015
2011
RMB million RMB million RMB million RMB million RMB million
2012
Year ended 31 December
2014
2013
Operating revenue
Operating expenses
Other net income
Operating profit
Interest income
Interest expense
Share of associates’ results
Share of joint ventures’ results
Exchange (loss)/gain, net
Other non-operating income
Profit before income tax
Income tax
Profit for the year
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
111,652
(101,492)
3,278
108,584
(106,026)
2,190
13,438
253
(2,188)
460
108
(5,953)
–
6,118
(1,300)
4,818
3,736
1,082
4,818
4,748
376
(2,193)
261
140
(292)
26
3,066
(668)
2,398
1,777
621
2,398
98,547
(98,280)
1,243
1,510
307
(1,651)
294
96
2,903
25
3,484
(734)
2,750
1,986
764
2,750
99,514
(95,877)
1,462
5,099
235
(1,376)
317
121
267
75
4,738
(954)
3,784
2,619
1,165
3,784
90,395
(87,063)
1,021
4,353
179
(1,067)
456
125
2,755
129
6,930
(840)
6,090
5,110
980
6,090
RMB0.38
RMB0.18
RMB0.20
RMB0.27
RMB0.52
Consolidated Statement of Financial Position Summary
As at 31 December
2015
2011
RMB million RMB million RMB million RMB million RMB million
2013
2014
2012
Non-current assets
Net current liabilities
Non-current liabilities
Total equity attributable to equity
shareholders of the Company
Non-controlling interests
171,876
51,422
70,830
39,045
10,579
162,147
26,545
144,634
28,640
125,667
31,944
109,927
24,928
91,109
73,543
53,989
47,222
35,748
8,745
34,329
8,122
32,839
6,895
32,175
5,602
208
Annual Report 2015China Southern Airlines Company LimitedFive Year SummaryFor the year ended 31 December 2015(Prepared in accordance with International Financial Reporting Standards)
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DELIVERING YOUR WORLD
2015 Annual Report
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H Share Stock Code: 1055
A Share Stock Code: 600029
ADR Coder ZNH