SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
March 31, 2015
CHINA SOUTHERN AIRLINES COMPANY LIMITED
(Translation of registrant's name into English)
278 Jichang Road
Guangzhou, Guangdong 510405
People’s Republic of China
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will
file annual reports under cover Form 20-F or Form 40-F.
Form
20-F x Form 40-F o
Indicate by check mark whether the registrant by furnishing
the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b)
under the Securities Exchange Act of 1934.
Yeso
Nox
(If "Yes" is marked, indicate below the file number
assigned to the registrant in connection with Rule 12g3-2(b): 82-________.)
China Southern Airlines Company Limited (the “Company”)
published the following announcements on March 30, 2015 on the Hong Kong Stock Exchange’s website at:
http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0330/LTN201503301778.pdf,
in relation to 2014 Annual Results;
http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0330/LTN201503301244.pdf,
in relation to the announcement of resolutions passed at the sixth meeting of the seventh session of the supervisory committee;
http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0330/LTN201503301218.pdf,
in relation to the announcement on resolutions passed at the sixth meeting of the seventh session of the board; and
http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0330/LTN201503301578.pdf,
in relation to 2014 Social Responsibility Report.
The announcements in English are included
as exhibits to this Form 6-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By: /s/ Liu Wei and Xie Bing
Name: Liu Wei and Xie Bing
Title: Joint Company Secretaries
Date: March 31, 2015
Exhibit 99.1
Hong Kong Exchanges and Clearing
Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation
as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance
upon the whole or any part of the contents of this announcement.
(a joint stock limited company incorporated in
the People’s Republic of China with limited liability)
(Stock Code: 1055)
2014 ANNUAL RESULTS
The board of directors (the “Board”)
of China Southern Airlines Company Limited (the “Company”) hereby announces the audited results of the Company and
its subsidiaries (the “Group”) for the year ended 31 December 2014 together with the comparative figures for 2013:
FINANCIAL RESULTS
| A. | PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”)
|
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2014
|
|
2014 |
|
|
2013 |
|
|
Note |
RMB million |
|
|
RMB million |
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
|
|
Traffic revenue |
|
104,328 |
|
|
94,684 |
|
Other operating revenue |
|
4,256 |
|
|
3,863 |
|
|
|
|
|
|
|
|
Total operating revenue |
4 |
108,584 |
|
|
98,547 |
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
Flight operation expenses |
5 |
58,901 |
|
|
54,010 |
|
Maintenance expenses |
|
8,304 |
|
|
7,805 |
|
Aircraft and transportation service expenses |
|
16,402 |
|
|
15,091 |
|
Promotion and selling expenses |
|
7,841 |
|
|
7,754 |
|
General and administrative expenses |
|
2,337 |
|
|
2,470 |
|
Depreciation and amortisation |
6 |
10,828 |
|
|
9,347 |
|
Impairment on property, plant and equipment |
|
215 |
|
|
536 |
|
Others |
|
1,198 |
|
|
1,267 |
|
|
|
|
|
|
|
|
Total operating expenses |
|
106,026 |
|
|
98,280 |
|
|
|
|
|
|
|
|
Other net income |
7 |
2,190 |
|
|
1,243 |
|
|
|
|
|
|
|
|
Operating profit |
|
4,748 |
|
|
1,510 |
|
| |
| |
2014 | | |
2013 | |
| |
Note | |
RMB million | | |
RMB million | |
| |
| |
| | |
| |
Interest income | |
| |
| 376 | | |
| 307 | |
Interest expense | |
8 | |
| (2,193 | ) | |
| (1,651 | ) |
Share of associates’ results | |
| |
| 261 | | |
| 294 | |
Share of joint ventures’ results | |
| |
| 140 | | |
| 96 | |
Exchange (loss)/gain, net | |
| |
| (292 | ) | |
| 2,903 | |
Other non-operating income | |
9 | |
| 26 | | |
| 25 | |
| |
| |
| | | |
| | |
Profit before income tax | |
| |
| 3,066 | | |
| 3,484 | |
Income tax | |
10 | |
| (668 | ) | |
| (734 | ) |
| |
| |
| | | |
| | |
Profit for the year | |
| |
| 2,398 | | |
| 2,750 | |
| |
| |
| | | |
| | |
Profit attributable to: | |
| |
| | | |
| | |
| |
| | | |
| | |
Equity shareholders of the Company | |
| |
| 1,777 | | |
| 1,986 | |
Non-controlling interests | |
| |
| 621 | | |
| 764 | |
| |
| |
| | | |
| | |
Profit for the year | |
| |
| 2,398 | | |
| 2,750 | |
| |
| |
| | | |
| | |
Earnings per share attributable to equity | |
| |
| | | |
| | |
shareholders of the Company | |
| |
| | | |
| | |
Basic and diluted | |
13 | |
| RMB0.18 | | |
| RMB0.20 | |
| |
| |
| | | |
| | |
Dividends | |
11 | |
| 393 | | |
| 393 | |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2014
|
|
2014 |
|
|
2013 |
|
|
Note |
RMB million |
|
|
RMB million |
|
|
|
|
|
|
|
|
Profit for the year |
|
|
2,398 |
|
|
|
2,750 |
|
|
|
|
|
|
|
|
|
|
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 | |
| 43 | | |
| (8 | ) |
– Share of other comprehensive income/(loss) | |
| | | |
| | |
of an associate | |
| 21 | | |
| (3 | ) |
– Deferred tax relating to above items | |
| (11 | ) | |
| 2 | |
| |
| | | |
| | |
Total comprehensive income for the year | |
| 2,451 | | |
| 2,741 | |
| |
| | | |
| | |
Total comprehensive income attributable to: | |
| | | |
| | |
Equity shareholders of the Company | |
| 1,813 | | |
| 1,981 | |
Non-controlling interests | |
| 638 | | |
| 760 | |
| |
| | | |
| | |
Total comprehensive income for the year | |
| 2,451 | | |
| 2,741 | |
CONSOLIDATED BALANCE SHEET
At 31 December 2014
| |
| |
31 December | | |
31 December | |
| |
| |
2014 | | |
2013 | |
| |
Note | |
| RMB million | | |
| RMB million | |
| |
| |
| | | |
| | |
Non-current assets | |
| |
| | | |
| | |
Property, plant and equipment, net | |
| |
| 134,453 | | |
| 119,777 | |
Construction in progress | |
14 | |
| 19,347 | | |
| 17,459 | |
Lease prepayments | |
| |
| 2,349 | | |
| 2,267 | |
Interest in associates | |
| |
| 1,583 | | |
| 1,305 | |
Interest in joint ventures | |
| |
| 1,338 | | |
| 1,197 | |
Other investments in equity securities | |
| |
| 136 | | |
| 162 | |
Aircraft operating lease deposits | |
| |
| 651 | | |
| 566 | |
Available-for-sale financial assets | |
| |
| 104 | | |
| 61 | |
Deferred tax assets | |
| |
| 966 | | |
| 1,251 | |
Other receivables | |
| |
| 300 | | |
| – | |
Other assets | |
| |
| 920 | | |
| 589 | |
| |
| |
| | | |
| | |
| |
| |
| 162,147 | | |
| 144,634 | |
Current assets | |
| |
| | | |
| | |
Inventories | |
| |
| 1,661 | | |
| 1,647 | |
Trade receivables | |
15 | |
| 2,683 | | |
| 2,173 | |
Other receivables | |
16 | |
| 5,864 | | |
| 3,431 | |
Cash and cash equivalents | |
| |
| 15,414 | | |
| 11,748 | |
Restricted bank deposits | |
| |
| 438 | | |
| 440 | |
Prepaid expenses and other current assets | |
| |
| 995 | | |
| 803 | |
Amounts due from related companies | |
| |
| 486 | | |
| 331 | |
| |
| |
| | | |
| | |
| |
| |
| 27,541 | | |
| 20,573 | |
Current liabilities | |
| |
| | | |
| | |
Borrowings | |
| |
| 20,979 | | |
| 20,242 | |
Current portion of obligations under finance leases | |
| |
| 5,992 | | |
| 3,636 | |
Trade payables | |
17 | |
| 1,657 | | |
| 1,407 | |
Sales in advance of carriage | |
| |
| 6,101 | | |
| 5,815 | |
Deferred revenue | |
| |
| 1,160 | | |
| 1,244 | |
Current income tax | |
| |
| 296 | | |
| 495 | |
Amounts due to related companies | |
| |
| 458 | | |
| 457 | |
Accrued expenses | |
| |
| 12,122 | | |
| 11,898 | |
Other liabilities | |
| |
| 5,321 | | |
| 4,019 | |
| |
| |
| | | |
| | |
| |
| |
| 54,086 | | |
| 49,213 | |
| |
| |
| | | |
| | |
Net current liabilities | |
| |
| (26,545 | ) | |
| (28,640 | ) |
| |
| |
| | | |
| | |
Total assets less current liabilities | |
| |
| 135,602 | | |
| 115,994 | |
| |
31 December | | |
31 December | |
| |
2014 | | |
2013 | |
| Note |
| RMB million | | |
| RMB million | |
| |
| | | |
| | |
Non-current liabilities | |
| | | |
| | |
Borrowings | |
| 42,066 | | |
| 37,246 | |
Obligations under finance leases | |
| 43,919 | | |
| 31,373 | |
Deferred revenue | |
| 1,750 | | |
| 2,069 | |
Provision for major overhauls | |
| 1,623 | | |
| 1,076 | |
Provision for early retirement benefits | |
| 25 | | |
| 41 | |
Deferred benefits and gains | |
| 853 | | |
| 858 | |
Deferred tax liabilities | |
| 873 | | |
| 880 | |
| |
| 91,109 | | |
| 73,543 | |
Net assets | |
| 44,493 | | |
| 42,451 | |
| |
| | | |
| | |
Capital and reserves | |
| | | |
| | |
Share capital | |
| 9,818 | | |
| 9,818 | |
Reserves | |
| 25,930 | | |
| 24,511 | |
| |
| | | |
| | |
Total equity attributable to equity shareholders | |
| | | |
| | |
of the Company | |
| 35,748 | | |
| 34,329 | |
Non-controlling interests | |
| 8,745 | | |
| 8,122 | |
| |
| | | |
| | |
Total equity | |
| 44,493 | | |
| 42,451 | |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014
|
|
|
|
|
Attributable
to equity shareholders of the Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
Share |
|
|
Share |
|
|
Fair value |
|
|
Other |
|
|
Retained |
|
|
|
|
|
controlling |
|
|
|
|
|
|
capital |
|
|
premium |
|
|
reserves |
|
|
reserves |
|
|
earnings |
|
|
Total |
|
|
interests |
|
|
Total equity |
|
|
|
RMB
million |
|
|
RMB
million |
|
|
RMB
million |
|
|
RMB
million |
|
|
RMB
million |
|
|
RMB
million |
|
|
RMB
million |
|
|
RMB
million |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at 1 January 2013 |
|
|
9,818 |
|
|
|
14,131 |
|
|
|
24 |
|
|
|
1,226 |
|
|
|
7,640 |
|
|
|
32,839 |
|
|
|
6,895 |
|
|
|
39,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in equity
for 2013: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the
year |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
1,986 |
|
|
|
1,986 |
|
|
|
764 |
|
|
|
2,750 |
|
Other
comprehensive income |
|
|
– |
|
|
|
– |
|
|
|
(2 |
) |
|
|
(3 |
) |
|
|
– |
|
|
|
(5 |
) |
|
|
(4 |
) |
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income |
|
|
– |
|
|
|
– |
|
|
|
(2 |
) |
|
|
(3 |
) |
|
|
1,986 |
|
|
|
1,981 |
|
|
|
760 |
|
|
|
2,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appropriations
to reserves |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
113 |
|
|
|
(113 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
Dividends relating
to 20112 |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(491 |
) |
|
|
(491 |
) |
|
|
– |
|
|
|
(491 |
) |
Acquisition of
non-controlling interests in a subsidiary |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(6 |
) |
|
|
(6 |
) |
Capital injection
from the non-controlling interest of a subsidiary |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
560 |
|
|
|
560 |
|
Distributions
to non-controlling interests |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(87 |
) |
|
|
(87 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at 31 December 2013 |
|
|
9,818 |
|
|
|
14,131 |
|
|
|
22 |
|
|
|
1,336 |
|
|
|
9,022 |
|
|
|
34,329 |
|
|
|
8,122 |
|
|
|
42,451 |
|
Balance at 1 January 2014 |
|
|
9,818 |
|
|
|
14,131 |
|
|
|
22 |
|
|
|
1,336 |
|
|
|
9,022 |
|
|
|
34,329 |
|
|
|
8,122 |
|
|
|
42,451 |
|
Changes in equity
for 2014: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the
year |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
1,777 |
|
|
|
1,777 |
|
|
|
621 |
|
|
|
2398 |
|
Other comprehensive
income |
|
|
– |
|
|
|
– |
|
|
|
22 |
|
|
|
14 |
|
|
|
– |
|
|
|
36 |
|
|
|
17 |
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income |
|
|
– |
|
|
|
– |
|
|
|
22 |
|
|
|
14 |
|
|
|
1,777 |
|
|
|
1,813 |
|
|
|
628 |
|
|
|
2,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appropriations
to reserves |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
137 |
|
|
|
(137 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
Dividends relating
to 2012 |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(393 |
) |
|
|
(393 |
) |
|
|
– |
|
|
|
(393 |
) |
Capital injection of non-controlling interests
in a subsidiary |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
108 |
|
|
|
108 |
|
Acquisition of
non-controlling interests in a subsidiary |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(1 |
) |
|
|
– |
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(2 |
) |
Non-controlling
interest of a subsidiary |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
6 |
|
|
|
6 |
|
Distributions to
non-controlling interests |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(128 |
) |
|
|
(128 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31
December 2014 |
|
|
9,818 |
|
|
|
14,131 |
|
|
|
44 |
|
|
|
1,486 |
|
|
|
10,269 |
|
|
|
35,748 |
|
|
|
8,745 |
|
|
|
44,493 |
|
Notes to the financial information prepared in
accordance with IFRSs:
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.
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 are also
prepared in accordance with the applicable disclosure requirements of the predecessor Hong Kong Companies Ordinance (Cap. 32) for
this financial year and the comparative period. 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 are
stated at their fair value.
As at 31 December 2014, the
Group’s current liabilities exceeded its current assets by RMB26,545 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 2014, the
Group had banking facilities with several PRC banks and financial institutions for providing bank financing up to approximately
RMB187.1 billion (2013: RMB166.3 billion), of which approximately RMB126.7 billion (2013: RMB120.9 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.
Except as described in note
3(a) below, the accounting policies are consistent with those of the annual financial statements for the year ended 31 December
2013, as described in these financial statements.
| (a) | 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 2014:
| • | Amendment to IAS 32, ‘Financial instruments: Presentation’ on offsetting financial
assets and financial liabilities. This amendment clarifies that the right of set-off must not be contingent on a future event.
It must also be legally enforceable for all counterparties in the normal course of business, as well as in the event of default,
insolvency or bankruptcy. The amendment also considers settlement mechanisms. The amendment did not have a significant effect on
the Group’s financial statements. |
| • | Amendments to IFRS 10, 12 and IAS 27, ‘Consolidation for investment entities’. |
These amendments mean that
many funds and similar entities will be exempt from consolidating most of their subsidiaries. Instead, they will measure them at
fair value through profit or loss. The amendments give an exception to entities that meet an
‘investment
entity’ definition and which display particular characteristics. Changes have also been made to IFRS 12 to introduce disclosures
that an investment entity needs to make. The amendments did not have an impact on the Group’s financial statements.
| • | Amendments to IAS 36, ‘Impairment of assets’, on the recoverable amount disclosures
for non-financial assets. This amendment removed certain disclosures of the recoverable amount of CGUs which had been included
in IAS 36 by the issue of IFRS 13. It also enhanced the disclosures of information about the recoverable amount of impaired assets
if that amount is based on fair value less costs of disposal. The Group has applied the amendment and there has been no significant
impact on the Group’s financial statements as a result. |
| • | Amendment to IAS 39, ‘Financial instruments: Recognition and measurement’ on the novation
of derivatives and the continuation of hedge accounting. This amendment considers legislative changes to ‘over-the-counter’
derivatives and the establishment of central counterparties. Under IAS 39, novation of derivatives to central counterparties would
result in discontinuance of hedge accounting. The amendment provides relief from discontinuing hedge accounting when novation of
a hedging instrument meets specified criteria. The Group has applied the amendment and there has been no significant impact on
the Group financial statements as a result. |
| • | IFRIC 21, ‘Levies’, sets out the accounting for an obligation to pay a levy if that
liability is within the scope of IAS 37 ‘Provisions’. The interpretation addresses what the obligating event is that
gives rise to the payment of a levy and when a liability should be recognised. The Group is not currently subjected to significant
levies so the impact on the Group is not material. |
| • | Annual improvements 2012. These amendments include changes from the 2010- |
2012 cycle of the annual
improvements project, that affect 7 standards, only the below are effective for relevant transactions on or after 1 July
2014. IFRS 2, ‘Share-based payment’, the amendment clarifies the definition of a ‘vesting condition’
and separately defines ‘performance condition’ and ‘service condition’. IFRS 3, ‘Business
combinations’ and consequential amendments to IFRS 9, ‘Financial instruments’, IAS 37, ‘Provisions,
contingent liabilities and contingent assets’, and IAS 39, ‘Financial instruments – Recognition and
measurement’. The standard is amended to clarify that an obligation to pay contingent consideration which meets the
definition of a financial instrument is classified as a financial liability or as equity, on the basis of the definitions in
IAS 32,’Financial instruments: Presentation’. All non-equity contingent consideration, both financial and
non-financial, is measured at fair value at each reporting date, with changes in fair value recognised in profit and loss.
These annual improvements did not have an impact on the Group’s financial statements.
| (b) | 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 as from the Company’s first financial year commencing on or after 3 March 2014 in accordance with section 358
of that Ordinance (i.e. starting from the year ending 31 December 2015). The Group is in the process of making an assessment
of expected impact of the changes in the Companies Ordinance on the consolidated financial statements in the period of
initial application of Part 9 of the new Hong Kong Companies Ordinance (Cap. 622). So far it has concluded that the impact is
unlikely to be significant and only the presentation and the disclosure of information in the consolidated financial
statements will be affected.
| 4 | Revenue and segmental information |
The Group is principally engaged
in the provision of domestic, Hong Kong, Macau and Taiwan and international passenger, cargo and mail airline services. Operating
revenue comprises revenue from airline and airline-related business and is stated net of sales tax.
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 d.
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
2014 are as follows:
|
|
Airline |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
transportation |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
operations |
|
|
segments |
|
|
Elimination |
|
|
Unallocated |
|
|
Total |
|
|
|
RMB
million |
|
|
RMB
million |
|
|
RMB
million |
|
|
RMB
million |
|
|
RMB
million |
|
Revenue from external customers |
|
|
107,790 |
|
|
|
523 |
|
|
|
– |
|
|
|
– |
|
|
|
108,313 |
|
Inter-segment sales |
|
|
– |
|
|
|
1,364 |
|
|
|
(1,364 |
) |
|
|
– |
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable segment revenue |
|
|
107,790 |
|
|
|
1,887 |
|
|
|
(1,364 |
) |
|
|
– |
|
|
|
108,313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable segment profit before taxation |
|
|
2,422 |
|
|
|
257 |
|
|
|
– |
|
|
|
416 |
|
|
|
3,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable segment profit after taxation |
|
|
1,800 |
|
|
|
202 |
|
|
|
– |
|
|
|
416 |
|
|
|
2,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other segment information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax |
|
|
622 |
|
|
|
55 |
|
|
|
– |
|
|
|
– |
|
|
|
677 |
|
Interest income |
|
|
369 |
|
|
|
7 |
|
|
|
– |
|
|
|
– |
|
|
|
376 |
|
Interest expense |
|
|
2,155 |
|
|
|
38 |
|
|
|
– |
|
|
|
– |
|
|
|
2,193 |
|
Depreciation and amortisation |
|
|
10,915 |
|
|
|
88 |
|
|
|
– |
|
|
|
– |
|
|
|
11,003 |
|
Impairment loss |
|
|
205 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
205 |
|
Share of associates’ results |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
263 |
|
|
|
263 |
|
Share of joint ventures’ results |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
140 |
|
|
|
140 |
|
Non-current assets additions during the year |
|
|
29,523 |
|
|
|
98 |
|
|
|
– |
|
|
|
– |
|
|
|
29,621 |
|
The segment results of the Group for the year ended
31 December 2013 are as follows:
|
|
Airline |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
transportation |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
operations |
|
|
segments |
|
|
Elimination |
|
|
Unallocated |
|
|
Total |
|
|
|
RMB
million |
|
|
RMB
million |
|
|
RMB
million |
|
|
RMB
million |
|
|
RMB
million |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers | |
| 97,659 | | |
| 471 | | |
| – | | |
| – | | |
| 98,130 | |
Inter-segment sales | |
| – | | |
| 1,147 | | |
| (1,147 | ) | |
| – | | |
| – | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Reportable segment revenue | |
| 97,659 | | |
| 1,618 | | |
| (1,147 | ) | |
| – | | |
| 98,130 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Reportable segment profit before taxation | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| 2,796 | | |
| 123 | | |
| – | | |
| 431 | | |
| 3,350 | |
Reportable segment profit after taxation | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| 2,118 | | |
| 100 | | |
| – | | |
| 431 | | |
| 2,649 | |
Other segment information | |
| | | |
| | | |
| | | |
| | | |
| | |
Income tax | |
| 678 | | |
| 23 | | |
| – | | |
| – | | |
| 701 | |
Interest income | |
| 300 | | |
| 7 | | |
| – | | |
| – | | |
| 307 | |
Interest expense | |
| 1,611 | | |
| 40 | | |
| – | | |
| – | | |
| 1,651 | |
Depreciation and amortisation | |
| 9,425 | | |
| 80 | | |
| – | | |
| – | | |
| 9,505 | |
Impairment loss | |
| 567 | | |
| 1 | | |
| – | | |
| – | | |
| 568 | |
Share of associates’ results | |
| – | | |
| – | | |
| – | | |
| 296 | | |
| 296 | |
Share of joint ventures’ results | |
| – | | |
| – | | |
| – | | |
| 96 | | |
| 96 | |
Non-current assets | |
| | | |
| | | |
| | | |
| | | |
| | |
additions during the year | |
| 28,780 | | |
| 82 | | |
| – | | |
| – | | |
| 28,862 | |
The segment assets and liabilities
of the Group as at 31 December 2014 and 31 December 2013 are as follows:
|
|
Airline |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
transportation |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
operations |
|
|
segments |
|
|
Elimination |
|
|
Unallocated |
|
|
Total |
|
|
|
RMB
million |
|
|
RMB
million |
|
|
RMB
million |
|
|
RMB
million |
|
|
RMB
million |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 31 December 2014 | |
| | | |
| | | |
| | | |
| | | |
| | |
Reportable segment assets | |
| 184,661 | | |
| 2,427 | | |
| (568 | ) | |
| 3,177 | | |
| 189,697 | |
Reportable segment liabilities | |
| 144,782 | | |
| 1,209 | | |
| (568 | ) | |
| – | | |
| 145,423 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
As at 31 December 2013 | |
| | | |
| | | |
| | | |
| | | |
| | |
Reportable segment assets | |
| 160,759 | | |
| 2,304 | | |
| (658 | ) | |
| 2,740 | | |
| 165,145 | |
Reportable segment liabilities | |
| 122,320 | | |
| 1,271 | | |
| (658 | ) | |
| – | | |
| 122,933 | |
| * | Unallocated assets primarily include investments in associates and joint ventures,
available-for-sale financial assets and other investments in equity securities. Unallocated results primarily include the share
of results of associates and joint ventures, dividend income from available-for-sale financial assets and other investments in
equity securities and interest income from wealth management products. |
| (c) | Geographic information |
The Group’s revenues
by geographical segment are analysed based on the following criteria:
| (1) | Traffic revenues from services within the PRC (excluding Hong Kong Special
Administrative Region, Macau Special Administrative Region and Taiwan (“Hong Kong, Macau and Taiwan”)), is classified
as domestic operations. Traffic revenue from inbound and outbound services between overseas markets, excluding Hong Kong, Macau
and Taiwan, is classified as international operations. |
| (2) | Revenues from commission income, hotel and tour operation, ground services,
cargo handling and other miscellaneous services are classified on the basis of where the services are performed. |
| |
2014 | | |
2013 | |
| |
RMB Million | | |
RMB Million | |
Domestic | |
| 82,764 | | |
| 76,828 | |
International | |
| 22,952 | | |
| 19,053 | |
Hong Kong, Macau and Taiwan | |
| 2,597 | | |
| 2,249 | |
| |
| | | |
| | |
| |
| 108,313 | | |
| 98,130 | |
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.
| (d) | Reconciliation of reportable segment revenues, profit before income tax, assets
and liabilities to the consolidated figures as reported in the consolidated financial statement. |
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
Revenue | |
| | |
| |
Reportable segment revenues | |
108,313 | | |
98,130 | |
Reclassification of expired sales in advance of carriage | |
| 459 | | |
| 684 | |
Reclassification of sales tax | |
| (188 | ) | |
| (267 | ) |
| |
| | | |
| | |
Consolidated revenues | |
| 108,584 | | |
| 98,547 | |
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
Profit before income tax | |
| | |
| |
Reportable segment profit before taxation | |
| 3,095 | | |
| 3,350 | |
Capitalisation of exchange difference of specific loans | |
| (28 | ) | |
| 133 | |
Government grants | |
| 1 | | |
| 3 | |
Others | |
| (2 | ) | |
| (2 | ) |
| |
| | | |
| | |
Consolidated profit before income tax | |
| 3,066 | | |
| 3,484 | |
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
Assets | |
| | |
| |
Reportable segment assets | |
| 189,697 | | |
| 165,145 | |
Capitalisation of exchange difference of specific loans | |
| 323 | | |
| 351 | |
Government grants | |
| (259 | ) | |
| (210 | ) |
Others | |
| (73 | ) | |
| (79 | ) |
| |
| | | |
| | |
Consolidated total assets | |
| 189,688 | | |
| 165,207 | |
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
Liabilities | |
| | |
| |
Reportable segment liabilities | |
| 145,423 | | |
| 122,933 | |
Government grants | |
| (228 | ) | |
| (178 | ) |
Others | |
| – | | |
| 1 | |
| |
| | | |
| | |
Consolidated total liabilities | |
| 145,195 | | |
| 122,756 | |
5 Flight operation expenses
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
| |
| | |
| |
Jet fuel costs | |
| 37,728 | | |
| 35,538 | |
Flight personnel payroll and welfare | |
| 6,803 | | |
| 5,799 | |
Aircraft operating lease charges | |
| 5,383 | | |
| 4,767 | |
Air catering expenses | |
| 2,497 | | |
| 2,295 | |
Civil Aviation Development Fund | |
| 2,279 | | |
| 2,036 | |
Training expenses | |
| 1,003 | | |
| 784 | |
Aircraft insurance | |
| 202 | | |
| 194 | |
Others | |
| 3,006 | | |
| 2,597 | |
| |
| | | |
| | |
| |
| 58,901 | | |
| 54,010 | |
| 6 | Depreciation
and amortisation |
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
| |
| | |
| |
Depreciation | |
| | | |
| | |
– Owned assets | |
| 8,021 | | |
| 6,861 | |
– Assets acquired under finance leases | |
| 2,768 | | |
| 2,477 | |
Amortisation of deferred benefits and gains | |
| (156 | ) | |
| (146 | ) |
Other amortisation | |
| 195 | | |
| 155 | |
| |
| | | |
| | |
| |
| 10,828 | | |
| 9,347 | |
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
Government grants | |
| 1,700 | | |
| 1,155 | |
Gain/(losses) on disposal of property, | |
| | | |
| | |
plant and equipment, net | |
| | | |
| | |
– Aircraft and spare engines | |
| 344 | | |
| (8 | ) |
– Other property, plant and equipment | |
| (77 | ) | |
| (70 | ) |
Others | |
| 223 | | |
| 166 | |
| |
| | | |
| | |
| |
| 2,190 | | |
| 1,243 | |
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
| |
| | |
| |
Interest on borrowings | |
| 1,628 | | |
| 1,275 | |
Interest relating to obligations under finance leases | |
| 978 | | |
| 692 | |
Interest relating to provision for early retirement benefits | |
| 4 | | |
| 5 | |
Less: interest expense capitalised | |
| (417 | ) | |
| (321 | ) |
| |
| | | |
| | |
| |
| 2,193 | | |
| 1,651 | |
| 9 | Other
non-operating income |
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
| |
| | |
| |
Interest income on wealth management products | |
| – | | |
| 25 | |
Gain recognised on acquisition of a subsidiary | |
| 26 | | |
| – | |
| |
| | | |
| | |
| |
| 26 | | |
| 25 | |
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
| |
| | |
| |
PRC income tax | |
| | | |
| | |
– Provision for the year | |
| 430 | | |
| 705 | |
– Over-provision in prior year | |
| (29 | ) | |
| (31 | ) |
| |
| | | |
| | |
| |
| 401 | | |
| 674 | |
Deferred tax | |
| | | |
| | |
Origination and reversal of temporary differences | |
| 267 | | |
| 60 | |
| |
| | | |
| | |
Tax expense | |
| 668 | | |
| 734 | |
In respect of majority of
the Group’s overseas airline operation, 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% (2013: 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.
A dividend in respect of
the year ended 31 December 2014 of RMB0.4 per 10 shares (inclusive of applicable tax), (2013: RMB0.4 per 10 shares (inclusive
of applicable tax)), amounting to a total dividend of RMB393 million (2013: RMB393 million), was proposed by the directors on
30 March 2015. The final dividend proposed after the end of the financial year
has not been recognised as a liability at the end of the financial year.
| 12 | Profit attributable to equity shareholders of the Company |
The consolidated profit attributable
to equity shareholders of the Company for the year ended 31 December 2014 includes a profit of RMB1,064 million (2013: RMB945 million)
which has been dealt with in the financial statements of the Company.
The calculation of basic
earnings per share for the year ended 31 December 2014 is based on the profit attributable to equity shareholders of the Company
of RMB1,777 million (2013: RMB1,986 million) and the weighted average of 9,817,567,000 shares in issue during the year (2013: 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 2014 and 2013.
| 14 | Construction in process |
The construction in progress
as at 31 December 2014 mainly related to advance payments for acquisition of aircraft amounting to RMB17,754 million and progress
payments for other construction projects amounting to RMB1,593 million.
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:
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
| |
| | |
| |
Within 1 month | |
| 2,133 | | |
| 1,810 | |
More than 1 month but less than 3 months | |
| 535 | | |
| 345 | |
More than 3 months but less than 12 months | |
| 25 | | |
| 25 | |
More than 1 year | |
| 23 | | |
| 20 | |
| |
| | | |
| | |
| |
| 2,716 | | |
| 2,200 | |
Less: impairment | |
| (33 | ) | |
| (27 | ) |
| |
| | | |
| | |
| |
| 2,683 | | |
| 2,173 | |
As at 31 December 2014, other
receivables include the VAT recoverable amounting to RMB1,562 million (2013: RMB1,114 million).
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
| |
| | |
| |
Within 1 month | |
| 755 | | |
| 987 | |
More than 1 month but less than 3 months | |
| 633 | | |
| 252 | |
More than 3 months but less than 6 months | |
| 107 | | |
| 79 | |
More than 6 months but less than 1 year | |
| 76 | | |
| 73 | |
More than 1 year | |
| 86 | | |
| 16 | |
| |
| 1,657 | | |
| 1,407 | |
| 18 | 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 was HKD3.92 per unit before 31 December 2011. No
shares will be issued under the Scheme and each SAR is notionally linked to one existing H share of the Company. Upon exercise
of the SARs, a recipient will receive an amount of cash equal to the difference between the market share price of the relevant
H share and the exercise price.
The SARs will have an exercise
period of six years from the date of grant. Upon the satisfaction of certain performance conditions after the second, third and
fourth anniversary of the date of grant, each one third of the SARs will become exercisable.
A dividend of RMB0.2 (equivalent
to HKD0.25) (inclusive of applicable tax), a dividend of RMB0.05 (equivalent to HKD0.06) (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 and 26 June 2014 respectively, therefore, the exercise price for the SARs was adjusted to HKD3.56
per share in accordance with the predetermined formula stipulated in the Scheme. During the year, 8,326,667 units of SARs were
lapsed.
The fair value of the liability
for SARs is measured using the Black-Scholes option pricing model. The risk free rate, expected dividend yield and expected volatility
of the share price are used as the inputs into the model. The fair value of the liability for SARs as at 31 December 2014 was determined
to be 0 (2013: RMB1,893,000) and correspondingly, staff cost of RMB1,893,000 was reversed during the year ended 31 December 2014
(2013: RMB410,000).
| B. | PREPARED IN ACCORDANCE WITH THE PRC GAAP |
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
For the year ended 31 December
2014
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
| |
| | |
| |
Revenue | |
| 108,313 | | |
| 98,130 | |
Less: Cost of operation | |
| 95,151 | | |
| 87,061 | |
Taxes and surcharges | |
| 188 | | |
| 267 | |
Selling and distribution expenses | |
| 7,947 | | |
| 7,855 | |
General and administrative expenses | |
| 2,582 | | |
| 2,689 | |
Financial expenses/(income), net | |
| 2,251 | | |
| (1,294 | ) |
Impairment loss | |
| 205 | | |
| 568 | |
Add: Investment income | |
| 416 | | |
| 431 | |
| |
| | | |
| | |
Operating profit | |
| 405 | | |
| 1,415 | |
Add: Non-operating income | |
| 2,822 | | |
| 2,070 | |
Less: Non-operating expenses | |
| 132 | | |
| 135 | |
| |
| | | |
| | |
Total profit | |
| 3,095 | | |
| 3,350 | |
Less: Income tax | |
| 677 | | |
| 701 | |
| |
| | | |
| | |
Net profit | |
| 2,418 | | |
| 2,649 | |
| |
| | | |
| | |
Net profit | |
| | | |
| | |
– Equity shareholders of the Company | |
| 1,773 | | |
| 1,895 | |
– Minority interests | |
| 645 | | |
| 754 | |
| |
| | | |
| | |
Net profit | |
| 2,418 | | |
| 2,649 | |
CONSOLIDATED BALANCE SHEET
At 31 December 2014
| |
31 December | | |
31 December | |
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
Assets | |
| | |
| |
Current assets | |
| | | |
| | |
Cash at bank and on hand | |
| 18,306 | | |
| 12,610 | |
Accounts receivable | |
| 2,705 | | |
| 2,213 | |
Prepayments | |
| 1,104 | | |
| 947 | |
Dividend receivable | |
| 4 | | |
| 60 | |
Other receivables | |
| 2,474 | | |
| 1,911 | |
Inventories | |
| 1,661 | | |
| 1,647 | |
Other current assets | |
| 1,586 | | |
| 1,183 | |
| |
| | | |
| | |
Total current assets | |
| 27,840 | | |
| 20,571 | |
| |
| | | |
| | |
Non-current assets | |
| | | |
| | |
Available-for-sale financial assets | |
| 240 | | |
| 197 | |
Long-term equity investments | |
| 2,937 | | |
| 2,543 | |
Investment properties | |
| 459 | | |
| 508 | |
Fixed assets | |
| 134,001 | | |
| 119,249 | |
Construction in progress | |
| 19,247 | | |
| 17,314 | |
Intangible assets | |
| 2,544 | | |
| 2,443 | |
Aircraft operating lease deposits | |
| 651 | | |
| 566 | |
Long-term deferred expenses | |
| 733 | | |
| 415 | |
Deferred tax assets | |
| 1,045 | | |
| 1,339 | |
| |
| | | |
| | |
Total non-current assets | |
| 161,857 | | |
| 144,574 | |
| |
| | | |
| | |
Total assets | |
| 189,697 | | |
| 165,145 | |
| |
2014 | | |
2013 | |
| |
31 December | | |
31 December | |
| |
RMB million | | |
RMB million | |
Liabilities and shareholders’ equity | |
| | |
| |
Current liabilities | |
| | | |
| | |
Short-term loans | |
| 7,243 | | |
| 14,412 | |
Bills payable | |
| 11 | | |
| 3 | |
Accounts payable | |
| 11,211 | | |
| 11,035 | |
Sales in advance of carriage | |
| 6,101 | | |
| 5,815 | |
Employee benefits payable | |
| 2,405 | | |
| 2,291 | |
Taxes payable | |
| 436 | | |
| 797 | |
Interest payable | |
| 471 | | |
| 269 | |
Other payables | |
| 5,320 | | |
| 3,881 | |
Non-current liabilities due within one year | |
| 17,888 | | |
| 10,710 | |
Other current liabilities | |
| 3,000 | | |
| – | |
| |
| | | |
| | |
Total current liabilities | |
| 54,086 | | |
| 49,213 | |
| |
| | | |
| | |
Non-current liabilities | |
| | | |
| | |
Long-term bank borrowings | |
| 42,066 | | |
| 37,246 | |
Obligations under finance leases | |
| 43,919 | | |
| 31,373 | |
Provision for major overhauls | |
| 1,623 | | |
| 1,076 | |
Deferred revenue | |
| 2,831 | | |
| 3,104 | |
Provision for early retirement benefits | |
| 25 | | |
| 41 | |
Deferred tax liabilities | |
| 873 | | |
| 880 | |
| |
| | | |
| | |
Total non-current liabilities | |
| 91,337 | | |
| 73,720 | |
| |
| | | |
| | |
Total liabilities | |
| 145,423 | | |
| 122,933 | |
| |
2014 | | |
2013 | |
| |
31 December | | |
31 December | |
| |
RMB million | | |
RMB million | |
Shareholders’ equity | |
| | | |
| | |
Share capital | |
| 9,818 | | |
| 9,818 | |
Capital reserve | |
| 14,388 | | |
| 14,389 | |
Other comprehensive income | |
| 53 | | |
| 17 | |
Surplus reserves | |
| 1,306 | | |
| 1,169 | |
Undistributed profits | |
| 9,989 | | |
| 8,746 | |
| |
| | | |
| | |
Total equity attributable to | |
| | | |
| | |
equity shareholders of the Company | |
| 35,554 | | |
| 34,139 | |
Non-controlling interests | |
| 8,720 | | |
| 8,073 | |
| |
| | | |
| | |
Total equity | |
| 44,274 | | |
| 42,212 | |
| |
| | | |
| | |
Total liabilities and shareholders’ equity | |
| 189,697 | | |
| 165,145 | |
| C. | RECONCILIATION OF DIFFERENCES IN FINANCIAL STATEMENTS PREPARED UNDER PRC
GAAP AND IFRSs |
Difference 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
|
|
|
|
|
|
|
|
Unit: RMB million |
|
|
|
|
|
|
|
|
|
Net asset attributable to: |
|
|
|
|
|
|
|
|
|
Equity shareholders |
|
|
|
Net Profit |
|
|
of the Company |
|
|
|
January – |
|
|
January – |
|
|
31 December |
|
|
31 December |
|
|
|
December 2014 |
|
|
December 2013 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts under PRC GAAP |
|
|
1,773 |
|
|
|
1,895 |
|
|
|
35,554 |
|
|
|
34,139 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government grants |
|
|
1 |
|
|
|
3 |
|
|
|
(31 |
) |
|
|
(32 |
) |
Capitalisation of exchange |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
difference of specific loans |
|
|
(28 |
) |
|
|
133 |
|
|
|
323 |
|
|
|
351 |
|
Accumulated loss attributed to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
non-controlling interests of a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
subsidiary |
|
|
23 |
|
|
|
– |
|
|
|
– |
|
|
|
(23 |
) |
Adjustment arising from an |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
associate’s business |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
combination under common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
control |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
6 |
|
|
|
8 |
|
Tax impact of the above |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustments |
|
|
9 |
|
|
|
(33 |
) |
|
|
(79 |
) |
|
|
(88 |
) |
Effect of the above adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on non-controlling interests |
|
|
1 |
|
|
|
(10 |
) |
|
|
(25 |
) |
|
|
(26 |
) |
Amounts under IFRSs |
|
|
1,777 |
|
|
|
1,986 |
|
|
|
35,748 |
|
|
|
34,329 |
|
2014 REVIEW
During the reporting period, a series of
challenges existed including complex and volatile international economic environment, China’s economic slowdown, the global
aviation accidents, more intense competition in domestic civil aviation industry, the impact of high-speed rail, foreign exchange
losses. Faced with the difficult operating environment, the Company adhered to its stable development philosophy, strengthened
safety management system, enhanced the management level of refined marketing, and steadily promoted strategic transformation and
internationalization, actively enhanced brand service impact, which had effectively resolved adverse factors including complex
and volatile market, shortage of development resources, competitive pressures. The Company’s overall competitiveness continued
to grow.
Operational Safety and Fleet Development
During the reporting period, the Group
further refined safety measures against accident prevention, established air traffic control real-time monitoring and coordination
mechanism, and carried out route optimization. Operational control level was significantly improved. The Group continued to maintain
the best safety record among Chinese airlines. In 2014, we completed 2.02 million hours of flight transportation, accumulated 13.52
million safe flight hours, 12,486 hours of general aviation service, continuously maintained 182 consecutive months of aviation
safety and 246 consecutive months of aviation security.
During the reporting period, the Group
continued to optimize the fleet structure. 64 aircraft were introduced, 17 old aircraft were sold and 7 leased aircraft was disposed.
In August 2014, the Group became the first among Chinese airlines with a fleet of over 600 aircraft, ranked fifth in the world,
first in Asia, creating a new historical starting point.
Hub Network and Services
During the reporting period, the
Group actively expanded route network to further improve global route layout. We launched intercontinental routes including
Guangzhou – New York, Guangzhou – Changsha – Frankfurt, Guangzhou – Wuhan – Moscow, Guangzhou
– Wuhan – San Francisco, and increased frequency of flight to Europe, America, Australia and New Zealand, and
Southeast Asia. Domestic capacity was also optimized. A pattern with domestic and international mutual complement and
mutually supportive hub bases were initially formed.
During the reporting period, the Group
continued to improve hub construction and hub operation service, which further highlighted the results of the strategic transformation.
By the end of 2014, Hub Control Center (HCC) of Guangzhou and Urumqi commenced operation, respectively. Capacity concentration
of the four largest hubs, i.e., Guangzhou, Beijing, Urumqi and Chongqing reached 67.9%. Passengers transit on-time rate increased
two percentage points to 97.8%. Transit ratio of passengers of major international routes exceeded 55%. International transit passengers
increased by 7.3% as compared with last year.
During the reporting period, the Group
increased investment both in hardware and software, continued to create and improve our product and service, so as to constantly
improve passenger experience. We launched a series of personalized services and products, such as the launch of “Mu Mian
Tong Fei” for unaccompanied children, and “Health and Love” series of health travel products for Los Angeles
routes; upgraded pearl economy class service with exclusive Samsung PAD, special tableware and various cuisines; further improved
meal service and launched Auckland chef cooperation projects, to enhance the meal quality of international long-haul routes; continuously
upgraded in-flight entertainment equipments, and updated 10-12 Hollywood movies each month.
Passenger Business
During the reporting period, the Group
actively responded to market changes and focused on matching capacity and revenue, in order to further enhance its level of operations.
In 2014, the total number of passengers reached 101 million, representing an increase of 9.9% as compared with last year, which
was the first airlines in China.
We further strengthened market forecast,
refined procedural management, explored regional management, and implemented differentiated marketing strategy to enhance the matching
between capacity and market. During the reporting period, network & revenue department and E-commerce department were established.
Channel control model was gradually improved, as new marketing tools were familiarized. The company’s direct sale revenue
from website increased 2.2% as compared with last year. The total number in fans of social media has reached 6.28 million, ahead
of our domestic competitors.
We continued to improve marketing services
and strengthened frequent flyer marketing to enhance quality management of the major account. In 2014, our revenue from frequent
flyer was RMB28.54 billion, representing an increase of 5.8% as compared with last year. Call center platform achieved sales revenue
of RMB5.83 billion, representing an increase of 4.1% as compared with last year, with the satisfaction rate reached 97.74%. We
obtained three significant awards, including “Best Call Center Award 2013-2014”, “China’s Best Call Center
Service Marketing Team 2013-2014” and “China’s Call Center Best Solution Award 2013-2014”.
We continued to optimize the structure
of international passengers and enhance the international sales ability. In 2014, the load factor of first class and business class
of the international routes improved 6.6 percentage points as compared with last year, revenue grew 25.3% as compared with last
year, TMC (travel management companies) international sales grew 16.5%, of which high yield revenue grew 12.9%, accounted for 45.5%
of the total revenue.
Freight Business
During the reporting period, domestic demand
for logistics continued to increase due to rapid development of E-commerce. The international freight market also appeared to pick
up. The Group seized the opportunities, improved cost efficiency, strived to improve management level of freight business, and
was awarded the “China Logistics Industry Brand Value Top 100 2014” and the “China’s Top Ten Logistics
Enterprises 2014.”
We actively promoted the E-freight project,
endeavored to promote the “China Southern Express” products, enhanced operational efficiency, and improved management
quality. At present, the domestic application of electronic waybill of the Company ranks second in the global aviation industry.
Annual sales revenue of “China Southern Express” products was RMB210 million, representing an increase of 65% as compared
with last year.
We strengthened cooperation with courier
and E-commerce corporate headquarters, caught the cross-border E-commerce opportunities, actively expanded the transport of international
mail and parcel. Annual volume of cooperation with SF Express amounted to 81,000 tonnes, representing an increase of 15.5% as compared
with last year; international mail traffic revenue grew 99% and 97%, respectively, representing an increase of RMB160 million as
compared with last year. We also further promoted cooperation with major account. Number of international headquarter partners
reached 11, with the revenue of RMB1.3 billion, representing an increase of 19% as compared with last year.
General Aviation
During the reporting period, the Group
completed 98,165 general aviation person-time passengers of transportation, representing an increase of 9.7% as compared with last
year; achieved general aviation revenue of RMB576 million, representing an increase of 19% as compared with last year; and achieved
10 consecutive years of making profit.
During the reporting period, we actively
explored cooperation and research for general aviation projects, including Guangzhou – Macau unscheduled charter flights,
ranger service in the northeast, Lijiang helicopter air tour, Heyuan, Huizhou power line patrol, and also launched the research
of general aviation training business in Nanyang, Henan, travel medical and rescue services and other feasible cooperative projects.
In November 2014, in order to consolidate
our traditional strengths in maritime logistics services, and take advantage of favorable market opportunity to actively develop
other navigation services, and cultivate new business growth chances for the company, the Board approved the restructuring of Zhuhai
Helicopter Branch and established a wholly-owned subsidiary named China Southern Airlines General Aviation Co. Ltd., to promote
the development of the Company’s general aviation operations and enhance its competitiveness in general aviation market.
Strategic Cooperation and Staff Development
During the reporting period, the Group
further strengthened cooperation with different parties to consolidate development foundation. We entered into strategic cooperation
agreements with CITIC Group, the city of Los Angeles and the Oakland Airport, continued to deepen cooperation with airline companies
within or outside the Skyteam Alliance, made use of opportunities including domestic and international forums, sports and cultural
events, to effectively promote the brand of “China Southern”. By the end of 2014, through code sharing with Qantas
and Czech Airlines, we shared codes with 18 domestic and international airlines for 379 routes, increased 109 international destinations.
Through the close cooperation with partners such as Sydney Festival, Melbourne Festival and Melbourne Football Club, our influence
and reputation in the Australian market was effectively raised. By increasing cooperation with foreign rail transport companies,
new products, interline service products were constantly launched.
During the reporting period, the Group
focused on staff development and innovated staff training. By optimizing our training system, implementing key projects and strengthening
process management, etc., we focused on strengthening the Company’s business personnel, management personnel and international
personnel training, to ensure that staff will grow with the Company. In 2014, the Company carried out a variety of 7,529 training
programmes, trained 290,000 person-times, including training frontline operational staff of approximately 230,000 person-times,
achieving about 86% training coverage. The Company also developed staff online learning platform applications, including 159 online
courses and 1,160 micro courses, to facilitate self-enhancement of staff anytime and anywhere.
During the reporting period, the Group
further enhanced internationalization brought by staff, promoted exchanges between domestic and foreign employees. The Company
currently has 90 pilots from 19 countries and 203 cabin crew from six different nationalities including Japanese, Korean, French,
Dutch, Australian and Malay. Hiring foreign crew on one hand gives full play to their home friendly service, on the other hand
promotes cultural understanding as well as dining habits and society features through cooperation between domestic and foreign
staff, so they can better serve our international customers.
OPERATING DATA SUMMARY
The following table sets forth certain financial information
and operating data by geographic regions:
|
|
For the year ended |
|
|
Increase/ |
|
|
|
31 December |
|
|
|
|
|
(decrease) |
|
|
|
2014 |
|
|
2013 |
|
|
% |
|
Traffic: |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passenger kilometers (RPK) (million): |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
|
127,681.88 |
|
|
|
116,105.71 |
|
|
|
9.97 |
|
Hong Kong, Macau and Taiwan |
|
|
3,214.52 |
|
|
|
2,574.27 |
|
|
|
24.87 |
|
International |
|
|
35,732.78 |
|
|
|
29,736.57 |
|
|
|
20.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
166,629.18 |
|
|
|
148,416.55 |
|
|
|
12.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue tonne kilometers (RTK) (million): |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
|
12,916.60 |
|
|
|
11,765.27 |
|
|
|
9.79 |
|
Hong Kong, Macau and Taiwan |
|
|
300.65 |
|
|
|
241.05 |
|
|
|
24.73 |
|
International |
|
|
6,562.71 |
|
|
|
5,462.27 |
|
|
|
20.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
19,779.96 |
|
|
|
17,468.59 |
|
|
|
13.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RTK – Passenger (million) |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
|
11,287.71 |
|
|
|
10,285.77 |
|
|
|
9.74 |
|
Hong Kong, Macau and Taiwan |
|
|
282.65 |
|
|
|
226.65 |
|
|
|
24.71 |
|
International |
|
|
3,154.04 |
|
|
|
2,628.76 |
|
|
|
19.98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
14,724.40 |
|
|
|
13,141.18 |
|
|
|
12.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RTK – Cargo and mail (million) |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
|
1,628.89 |
|
|
|
1,479.50 |
|
|
|
10.10 |
|
Hong Kong, Macau and Taiwan |
|
|
18.00 |
|
|
|
14.40 |
|
|
|
25.00 |
|
International |
|
|
3,408.66 |
|
|
|
2,833.51 |
|
|
|
20.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
5,055.55 |
|
|
|
4,327.41 |
|
|
|
16.83 |
|
|
|
For the year ended |
|
|
Increase/ |
|
|
|
31 December |
|
|
|
|
|
(decrease) |
|
|
|
2014 |
|
|
2013 |
|
|
% |
|
Passengers carried (thousand): | |
| | | |
| | | |
| | |
Domestic | |
| 89,363.18 | | |
| 82,172.28 | | |
| 8.75 | |
Hong Kong, Macau and Taiwan | |
| 2,385.37 | | |
| 2,019.28 | | |
| 18.13 | |
International | |
| 9,170.47 | | |
| 7,599.41 | | |
| 20.67 | |
| |
| | | |
| | | |
| | |
Total: | |
| 100,919.02 | | |
| 91,790.97 | | |
| 9.94 | |
| |
| | | |
| | | |
| | |
Cargo and mail carried (thousand tonnes) | |
| | | |
| | | |
| | |
Domestic | |
| 1,014.90 | | |
| 923.73 | | |
| 9.87 | |
Hong Kong, Macau and Taiwan | |
| 16.40 | | |
| 13.70 | | |
| 19.71 | |
International | |
| 401.95 | | |
| 338.92 | | |
| 18.60 | |
| |
| | | |
| | | |
| | |
Total: | |
| 1,433.25 | | |
| 1,276.35 | | |
| 12.29 | |
| |
| | | |
| | | |
| | |
Capacity: | |
| | | |
| | | |
| | |
Available seat kilometres (ASKs) (million): | |
| | | |
| | | |
| | |
Domestic | |
| 160,482.40 | | |
| 144,732.62 | | |
| 10.88 | |
Hong Kong, Macau and Taiwan | |
| 4,379.07 | | |
| 3,594.29 | | |
| 21.83 | |
International | |
| 44,945.99 | | |
| 38,472.93 | | |
| 16.82 | |
| |
| | | |
| | | |
| | |
Total: | |
| 209,807.46 | | |
| 186,799.84 | | |
| 12.32 | |
| |
| | | |
| | | |
| | |
Available tonne kilometres (ATKs) (million): | |
| | | |
| | | |
| | |
Domestic | |
| 18,640.00 | | |
| 16,486.17 | | |
| 13.06 | |
Hong Kong, Macau and Taiwan | |
| 497.79 | | |
| 407.59 | | |
| 22.13 | |
International | |
| 9,315.94 | | |
| 8,058.23 | | |
| 15.61 | |
| |
| | | |
| | | |
| | |
Total: | |
| 28,453.73 | | |
| 24,951.99 | | |
| 14.03 | |
| |
| | | |
| | | |
| | |
Available tonne kilometres (ATKs) | |
| | | |
| | | |
| | |
– Passenger Traffic (million) | |
| | | |
| | | |
| | |
Domestic | |
| 14,443.42 | | |
| 13,025.94 | | |
| 10.88 | |
Hong Kong, Macau and Taiwan | |
| 394.12 | | |
| 323.49 | | |
| 21.83 | |
International | |
| 4,045.14 | | |
| 3,462.56 | | |
| 16.83 | |
| |
| | | |
| | | |
| | |
Total: | |
| 18,882.68 | | |
| 16,811.99 | | |
| 12.32 | |
|
|
For the year ended |
|
|
Increase/ |
|
|
|
31 December |
|
|
|
|
|
(decrease) |
|
|
|
2014 |
|
|
2013 |
|
|
% |
|
Available tonne kilometres (ATKs) | |
| | | |
| | | |
| | |
– Cargo and mail (million) | |
| | | |
| | | |
| | |
Domestic | |
| 4,196.59 | | |
| 3,460.23 | | |
| 21.28 | |
Hong Kong, Macau and Taiwan | |
| 103.67 | | |
| 84.11 | | |
| 23.26 | |
International | |
| 5,270.80 | | |
| 4,595.67 | | |
| 14.69 | |
| |
| | | |
| | | |
| | |
Total: | |
| 9,571.06 | | |
| 8,140.01 | | |
| 17.58 | |
| |
| | | |
| | | |
| | |
Load factor | |
| | | |
| | | |
| | |
Passenger load factor (RPK/ASK) (%): | |
| | | |
| | | |
| | |
Domestic | |
| 79.60 | | |
| 80.22 | | |
| (0.77 | ) |
Hong Kong, Macau and Taiwan | |
| 73.40 | | |
| 71.62 | | |
| 2.49 | |
International | |
| 79.50 | | |
| 77.29 | | |
| 2.86 | |
| |
| | | |
| | | |
| | |
Overall: | |
| 79.40 | | |
| 79.45 | | |
| (0.06 | ) |
| |
| | | |
| | | |
| | |
Total load factor (RTK/ATK) (%): | |
| | | |
| | | |
| | |
Domestic | |
| 69.30 | | |
| 71.36 | | |
| (2.89 | ) |
Hong Kong, Macau and Taiwan | |
| 60.40 | | |
| 59.14 | | |
| 2.13 | |
International | |
| 70.40 | | |
| 67.78 | | |
| 3.87 | |
| |
| | | |
| | | |
| | |
Overall: | |
| 69.50 | | |
| 70.01 | | |
| (0.73 | ) |
| |
| | | |
| | | |
| | |
Yield | |
| | | |
| | | |
| | |
Yield per RPK (RMB): | |
| | | |
| | | |
| | |
Domestic | |
| 0.60 | | |
| 0.61 | | |
| (1.64 | ) |
Hong Kong, Macau and Taiwan | |
| 0.78 | | |
| 0.84 | | |
| (7.14 | ) |
International | |
| 0.50 | | |
| 0.50 | | |
| – | |
| |
| | | |
| | | |
| | |
Overall: | |
| 0.58 | | |
| 0.59 | | |
| (1.69 | ) |
| |
| | | |
| | | |
| | |
Yield per RFTK (RMB): | |
| | | |
| | | |
| | |
Domestic | |
| 1.31 | | |
| 1.42 | | |
| (7.75 | ) |
Hong Kong, Macau and Taiwan | |
| 5.56 | | |
| 6.02 | | |
| (7.64 | ) |
International | |
| 1.45 | | |
| 1.49 | | |
| (2.68 | ) |
| |
| | | |
| | | |
| | |
Overall: | |
| 1.42 | | |
| 1.48 | | |
| (4.05 | ) |
|
|
For the year ended |
|
|
Increase/ |
|
|
|
31 December |
|
|
|
|
|
(decrease) |
|
|
|
2014 |
|
|
2013 |
|
|
% |
|
Yield per RTK (RMB): | |
| | | |
| | | |
| | |
Domestic | |
| 6.10 | | |
| 6.24 | | |
| (2.24 | ) |
Hong Kong, Macau and Taiwan | |
| 8.64 | | |
| 9.33 | | |
| (7.40 | ) |
International | |
| 3.50 | | |
| 3.49 | | |
| 0.29 | |
| |
| | | |
| | | |
| | |
Overall: | |
| 5.27 | | |
| 5.42 | | |
| (2.77 | ) |
| |
| | | |
| | | |
| | |
Cost | |
| | | |
| | | |
| | |
Operating expense per ATK (RMB) | |
| 3.73 | | |
| 3.94 | | |
| (5.33 | ) |
| |
| | | |
| | | |
| | |
Flight Volume | |
| | | |
| | | |
| | |
Kilometers flown (million) | |
| 1,275.57 | | |
| 1,147.07 | | |
| 11.20 | |
| |
| | | |
| | | |
| | |
Hours flown (thousand) | |
| | | |
| | | |
| | |
Domestic | |
| 1,652.46 | | |
| 1,516.01 | | |
| 9.00 | |
Hong Kong, Macau and Taiwan | |
| 41.64 | | |
| 34.44 | | |
| 20.91 | |
International | |
| 332.06 | | |
| 278.99 | | |
| 19.02 | |
| |
| | | |
| | | |
| | |
Total: | |
| 2,026.16 | | |
| 1,829.44 | | |
| 10.75 | |
| |
| | | |
| | | |
| | |
Number of flights (thousand) | |
| | | |
| | | |
| | |
Domestic | |
| 791.45 | | |
| 731.61 | | |
| 8.18 | |
Hong Kong, Macau and Taiwan | |
| 19.86 | | |
| 17.25 | | |
| 15.13 | |
International | |
| 72.76 | | |
| 61.01 | | |
| 19.26 | |
| |
| | | |
| | | |
| | |
Total: | |
| 884.07 | | |
| 809.87 | | |
| 9.16 | |
MANAGEMENT DISCUSSION AND ANALYSIS
Part of the financial information
presented in this section is derived from the Company’s audited financial statements that have been prepared in accordance
with IFRSs.
The profit attributable to
equity shareholders of the Company of RMB1,777 million was recorded in 2014 as compared to the profit attributable to equity shareholders
of the Company of RMB1,986 million in 2013. The Group’s operating revenue increased by RMB10,037 million or 10.18% from RMB98,547
million in 2013 to RMB108,584 million in 2014. Passenger load factor decreased by 0.05 percentage point from 79.45% in 2013 to
79.40% in 2014. Passenger yield (in passenger revenue per RPK) decreased by 1.69% from RMB0.59 in 2013 to RMB0.58 in 2014. Average
yield (in traffic revenue per RTK) decreased by 2.77% from RMB5.42 in 2013 to RMB5.27 in 2014. Operating expenses increased by
RMB7,746 million or 7.88% from RMB98,280 million in 2013 to RMB106,026 million in 2014. As a result of the increase in operating
expenses, operating profit of RMB4,748 million was recorded in 2014 as compared to operating profit of RMB1,510 million in 2013,
increasing by RMB3,238 million.
|
|
|
2014 |
|
|
|
2013 |
|
|
|
|
Operating |
|
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
|
Changes |
|
|
|
|
revenue |
|
|
|
Percentage |
|
|
|
revenue |
|
|
|
Percentage |
|
|
|
in revenue |
|
|
|
|
RMB Million |
|
|
|
% |
|
|
|
RMB Million |
|
|
|
% |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traffic revenues |
|
|
104,328 |
|
|
|
96.08 |
|
|
|
94,684 |
|
|
|
96.08 |
|
|
|
10.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Including: Passenger revenues |
|
|
97,145 |
|
|
|
|
|
|
|
88,271 |
|
|
|
|
|
|
|
10.05 |
|
– Domestic |
|
|
76,647 |
|
|
|
|
|
|
|
71,277 |
|
|
|
|
|
|
|
7.53 |
|
– Hong Kong, Macau and Taiwan |
|
|
2,497 |
|
|
|
|
|
|
|
2,162 |
|
|
|
|
|
|
|
15.49 |
|
– International |
|
|
18,001 |
|
|
|
|
|
|
|
14,832 |
|
|
|
|
|
|
|
21.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cargo and mail revenue |
|
|
7,183 |
|
|
|
|
|
|
|
6,413 |
|
|
|
|
|
|
|
12.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating revenues |
|
|
4,256 |
|
|
|
3.92 |
|
|
|
3,863 |
|
|
|
3.92 |
|
|
|
10.17 |
|
Mainly including: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission income |
|
|
1,335 |
|
|
|
|
|
|
|
1,040 |
|
|
|
|
|
|
|
28.37 |
|
Ground service income |
|
|
293 |
|
|
|
|
|
|
|
349 |
|
|
|
|
|
|
|
(16.05 |
) |
Expired sales in advance of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
carriage |
|
|
459 |
|
|
|
|
|
|
|
684 |
|
|
|
|
|
|
|
(32.89 |
) |
General aviation income |
|
|
576 |
|
|
|
|
|
|
|
484 |
|
|
|
|
|
|
|
19.01 |
|
Hotel and tour operation income |
|
|
508 |
|
|
|
|
|
|
|
565 |
|
|
|
|
|
|
|
(10.09 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
|
108,584 |
|
|
|
100.00 |
|
|
|
98,547 |
|
|
|
100.00 |
|
|
|
10.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: fuel surcharge income |
|
|
(13,746 |
) |
|
|
|
|
|
|
(13,062 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenue excluding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
fuel surcharge |
|
|
94,838 |
|
|
|
|
|
|
|
85,485 |
|
|
|
|
|
|
|
|
|
Passenger Revenue
Cargo and Mail Revenue
Passenger revenue composition (RMB million)
Domestic
Hong Kong, Macau and Taiwan
International
Substantially all of the Group’s
operating revenues is attributable to airlines and airlines related operations. Traffic revenues accounted for 96.08% of total
operating revenue in 2014 and 2013, respectively. Passenger revenues and cargo and mail revenues accounted for 93.11% and 6.89%,
respectively of the total traffic revenue in 2014. During the reporting period, the Group’s total traffic revenues was RMB104,328
million, representing a increase of RMB9,644 million or 10.19% from prior year, mainly due to the increase of RPK by 12.30% which
leads to the increase of passenger revenues. The other operating revenues is mainly derived from commission income, expired sales
in advance of carriage, hotel and tour operation income, general aviation income and ground services income.
The increase in operating revenue
was primarily due to a 10.05% increase in passenger revenue from RMB88,271 million in 2013 to RMB97,145 million in 2014. The total
number of passengers carried increased by 9.94% to 100.92 million passengers in 2014. RPKs increased by 12.27% from 148,417 million
in 2013 to 166,629 million in 2014, primarily as a result of the increase in number of passengers carried. Passenger yield per
RPK decreased from RMB0.59 in 2013 to RMB0.58 in 2014, which is mainly due to a slightly fell of domestic passenger ticket prices.
Domestic passenger revenue,
which accounted for 78.90% of the total passenger revenue in 2014, increase by 7.53% from RMB71,277 million in 2013 to RMB76,647
million in 2014. Domestic passenger traffic in RPKs increased by 9.97%, while passenger capacity in ASKs increased by 10.86%, resulting
in a decrease in passenger load factor by 0.62 percentage points from 80.22% in 2013 to 79.60% in 2014. Domestic passenger yield
per RPK decreased from RMB0.61 in 2013 to RMB0.60 in 2014.
Hong Kong, Macau and Taiwan
passenger revenue, which accounted for 2.57% of total passenger revenue, increased by 15.49% from RMB2,162 million in 2013 to RMB2,497
million in 2014. For Hong Kong, Macau and Taiwan flights, passenger traffic in RPKs increased by 24.87%, while passenger capacity
in ASKs increased by 21.83%, resulting in a increase in passenger load factor by 1.78 percentage points from 71.62% in 2013 to
73.40% in 2014. Passenger yield per RPK decreased from RMB0.84 in 2013 to RMB0.78 in 2014.
International passenger revenue,
which accounted for 18.53% of total passenger revenue, increased by 21.37% from RMB14,832 million in 2013 to RMB18,001 million
in 2014. For international flights, passenger traffic in RPKs increased by 20.16%, while passenger capacity in ASKs increased by
16.82%, resulting in a 2.21 percentage points increase in passenger load factor from 77.29% in 2013 to 79.50% in 2014. Passenger
yield per RPK remained at RMB0.50 in 2013 and 2014.
Cargo and mail revenue, which
accounted for 6.89% of the Group’s total traffic revenue and 6.62% of total operating revenue, increase by 12.01% from RMB6,413
million in 2013 to RMB7,183 million in 2014. The increase was attributable to the increase of cargo and mail in RTKs by 16.80%
as the demand in the cargo market was warming up.
Other operating revenue increased
by 10.17% from RMB3,863 million in 2013 to RMB4,256 million in 2014. The increase was primarily due to the general growth in income
from commission and general aviation.
Total operating expenses in
2014 amounted to RMB106,026 million, representing an increase of 7.88% or RMB7,746 million over 2013, primarily due to the total
effect of increases in jet fuel cost payroll, landing and navigation fees, depreciation and amortisation, and other operating costs.
Total operating expenses as a percentage of total operating revenue decrease from 99.73% in 2013 to 97.64% in 2014.
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
|
RMB Million |
|
|
Percentage |
|
|
RMB Million |
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flight operation expenses |
|
|
58,901 |
|
|
|
55.55 |
% |
|
|
54,010 |
|
|
|
54.96 |
% |
Mainly including: Jet fuel costs |
|
|
37,728 |
|
|
|
|
|
|
|
35,538 |
|
|
|
|
|
Aircraft operating lease charges |
|
|
5,383 |
|
|
|
|
|
|
|
4,767 |
|
|
|
|
|
Flight personnel payroll and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
welfare |
|
|
6,803 |
|
|
|
|
|
|
|
5,799 |
|
|
|
|
|
Maintenance |
|
|
8,304 |
|
|
|
7.83 |
% |
|
|
7,805 |
|
|
|
7.94 |
% |
Aircraft and traffic servicing expenses |
|
|
16,402 |
|
|
|
15.47 |
% |
|
|
15,091 |
|
|
|
15.36 |
% |
Promotion and selling expenses |
|
|
7,841 |
|
|
|
7.40 |
% |
|
|
7,754 |
|
|
|
7.89 |
% |
General and administrative expenses |
|
|
2,337 |
|
|
|
2.20 |
% |
|
|
2,470 |
|
|
|
2.51 |
% |
Depreciation and amortisation |
|
|
10,828 |
|
|
|
10.21 |
% |
|
|
9,347 |
|
|
|
9.51 |
% |
Impairment on property, plant and equipment |
|
|
215 |
|
|
|
0.20 |
% |
|
|
536 |
|
|
|
0.55 |
% |
Others |
|
|
1,198 |
|
|
|
1.14 |
% |
|
|
1,267 |
|
|
|
1.28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
106,026 |
|
|
|
100.00 |
% |
|
|
98,280 |
|
|
|
100.00 |
% |
Composition of operating exepenses in 2014
Comparison of operating expenses
2014
2013
Flight operations expenses, which
accounted for 55.55% of total operating expenses, increased by 9.06% from RMB54,010 million in 2013 to RMB58,901 million in 2014,
primarily as a result of increase in passengers carried. Jet fuel costs, which accounted for 64.05% of flight operations expenses,
increased by 6.16% from RMB35,538 million in 2013 to RMB37,728 million in 2014.
Maintenance expenses, which accounted
for 7.83% of total operating expenses, increased by 6.39% from RMB7,805 million in 2013 to RMB8,304 million in 2014. The increase
was mainly due to fleet expansion.
Aircraft and traffic servicing
expenses, which accounted for 15.47% of total operating expenses, increased by 8.69% from RMB15,091 million in 2013 to RMB16,402
million in 2014. The increase was primarily due to a 10.37% rise in landing and navigation fees from RMB9,510 million in 2013 to
RMB10,496 million in 2014, resulted from the increase in the number of take-off and the increase in passengers carried.
Promotional and selling expenses,
which accounted for 7.40% of total operating expenses, increased by 1.12% from RMB7,754 million in 2013 to RMB7,841 million in
2014.
General and administrative expenses,
which accounted for 2.20% of the total operating expenses, decreased by 5.38% from RMB2,470 million in 2013 to RMB2,337 million
in 2014.
Operating profit of RMB4,748
million was recorded in 2014 (2013: RMB1,510 million). The increase in profit was mainly due to the net effect of increase in operating
revenue by RMB10,037 million or 10.18% in 2014 and increase in operating expenses by RMB7,746 million or 7.88%.
Other net income increased by
RMB947 million from RMB1,243 million in 2013 to RMB2,190 million in 2014,mainly due to the decrease of government grants and gain
on disposal of aircrafts.
Interest expense increased by
RMB542 million from RMB1,651 million in 2013 to RMB2,193 million in 2014 was mainly due to the increase in number of aircraft held
through a finance lease and the increase of interest payment of borrowings.
Net exchange losses of RMB292
million was recorded in 2014 as RMB depreciated slightly against US dollar in 2014. Net exchange gains of RMB2,903 million was
recorded in 2013 mainly due to Renminbi appreciated significantly against US dollar in 2013.
Income tax expense of RMB668 million was recorded
in 2014, decrease by RMB66 million from RMB734 million in 2013, mainly due to the decrease of profit before income tax.
| VII. | LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE |
As at 31 December 2014, the
Group’s current liabilities exceeded its current assets by RMB26,545 million. For the year ended 31 December 2014, the Group
recorded a net cash inflow from operating activities of RMB13,570 million, a net cash outflow from investing activities of RMB9,760
million and a net cash outflow from financing activities of RMB131 million and an increase in cash and cash equivalents of RMB3,679
million.
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
| |
| | |
| |
Net cash generated from operating activities | |
| 13,570 | | |
| 9,703 | |
Net cash used in investing activities | |
| (9,760 | ) | |
| (12,205 | ) |
Net cash (used in)/generated from financing activities | |
| (131 | ) | |
| 4,168 | |
| |
| | | |
| | |
Net increase in cash and cash equivalents | |
| 3,679 | | |
| 1,666 | |
| |
| | | |
| | |
Cash and cash equivalents at 1 January | |
| 11,748 | | |
| 10,082 | |
Exchange losses on cash and cash equivalents | |
| (13 | ) | |
| – | |
| |
| | | |
| | |
Cash and cash equivalents at 31 December | |
| 15,414 | | |
| 11,748 | |
In 2014 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 2014, the Group had banking facilities with several PRC banks and financial institutions for providing bank facilities
up to approximately RMB187,133 million (2013: RMB166,270 million), of which approximately RMB126,703 million (2013: RMB120,904
million) was unutilised. The directors of the Company (the “Directors”) believe that sufficient financing will be available
to the Group when and where needed.
The Directors have carried out
a detailed review of the cash flow forecast of the Group for the twelve months ending 31 December 2015. 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 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.
The analysis of the Group’s borrowings and lease obligation
are as follows:
Composition of borrowings and lease obligation
| |
2014 | | |
2013 | | |
Change | |
| |
RMB million | | |
RMB million | | |
| |
| |
| | |
| | |
| |
Total borrowings and lease obligation | |
| 112,956 | | |
| 92,497 | | |
| 22.12 | % |
Fixed rate borrowings and lease obligation | |
| 8,587 | | |
| 4,974 | | |
| 72.64 | % |
Floating rate borrowings and lease obligation | |
| 104,369 | | |
| 87,523 | | |
| 19.25 | % |
Analysis of borrowings and lease obligation by currency
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
| |
| | |
| |
USD | |
| 105,393 | | |
| 88,970 | |
RMB | |
| 5,204 | | |
| 670 | |
Others | |
| 2,359 | | |
| 2,857 | |
| |
| | | |
| | |
Total | |
| 112,956 | | |
| 92,497 | |
Maturity analysis of borrowings and lease obligation | |
| | |
| |
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
| |
| | |
| |
Within 1 year | |
| 26,971 | | |
| 23,878 | |
After 1 year but within 2 years | |
| 22,713 | | |
| 14,805 | |
After 2 years but within 5 years | |
| 35,772 | | |
| 30,553 | |
After 5 years | |
| 27,500 | | |
| 23,261 | |
| |
| | | |
| | |
Total borrowings | |
| 112,956 | | |
| 92,497 | |
The Group’s capital structure at the end of the
year is as follows:
|
|
2014 |
|
|
2013 |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities (RMB million) |
|
|
145,195 |
|
|
|
122,756 |
|
|
|
18.28 |
% |
Total assets (RMB million) |
|
|
189,688 |
|
|
|
165,207 |
|
|
|
14.82 |
% |
Debt ratio |
|
|
77 |
% |
|
|
74 |
% |
|
|
increased by |
|
|
|
|
|
|
|
|
|
|
3 percentage |
|
|
|
|
|
|
|
|
|
|
|
points |
|
The Group monitors capital on
the basis of the debt ratio, which is calculated as total liabilities divided by total assets. The debt ratio of the Group at 31
December 2014 was 77%, as compared to 74% at 31 December 2013.
| VIII. | MAJOR CHARGE ON ASSETS |
As at 31 December 2014, certain
aircraft of the Group with an aggregate carrying value of approximately RMB99,119 million (2013: RMB80,233 million) were mortgaged
under certain borrowings and lease agreements.
| IX. | COMMITMENTS AND CONTINGENCIES |
Commitments
As at 31 December 2014, the
Group had capital commitments (excluding investment commitment) of approximately RMB64,589 million (2013: RMB51,353 million). Of
such amounts, RMB59,467million related to the acquisition of aircraft and related flight equipment and RMB5,122 million for other
projects.
As at 31 December 2014, the Group had investment commitments
as follows:
| |
2014 | | |
2013 | |
| |
RMB million | | |
RMB million | |
| |
| | |
| |
Authorised and contracted for | |
| | | |
| | |
| |
| | | |
| | |
Capital contributions for acquisition of interests in associates | |
| 70 | | |
| 70 | |
Share of capital commitments of a joint venture | |
| 52 | | |
| 58 | |
| |
| 122 | | |
| 128 | |
Authorised but not contracted for | |
| | | |
| | |
| |
| | | |
| | |
Share of capital commitments of a joint venture | |
| – | | |
| 171 | |
| |
| 122 | | |
| 299 | |
Contingent Liabilities
| (a) | The Group leased certain properties and buildings from CSAHC which located
in Guangzhou, Wuhan and Haikou, etc. However, such properties and buildings lack adequate documentation evidencing CSAHC’s
rights thereto. |
Pursuant to the indemnification
agreement dated 22 May 1997 between the Group and CSAHC, CSAHC has agreed to indemnify the Group against any loss or damage arising
from any challenge of the Group’s right to use such properties and buildings.
| (b) | The Company and its subsidiary, Xiamen Airlines Company Limited, entered into
agreements with their pilot trainees and certain banks to provide guarantees on personal bank loans amounting to RMB646 million
(31 December 2013: RMB656 million) that can be drawn by the pilot trainees to finance their respective flight training expenses.
As at 31 December 2014, total personal bank loans of RMB486 million (31 December 2013: RMB464 million), under these guarantees,
were drawn down from the banks. During the year, the Group paid RMB2 million (2013: RMB6 million) to the banks due to the default
of payments of certain pilot trainees. |
| (c) | The Company received a claim on 11 July 2011 from an overseas entity (the “claimant”)
against the Company for the alleged breach of certain terms and conditions of an aircraft sale agreement for aircraft sold by the
Company to the claimant. The claimant has made a claim against the Company for an indemnity of USD46 million or for the refund
of the down payments of USD12 million, and the interest thereon which is calculated in accordance with Clause 35A, Supreme Court
Act 1981 of the United Kingdom. In 2012, the claimant subsequently changed its claim for the refund of the down payment to USD13
million. As at 25 July 2013, High Court of the United Kingdom announced the sentence of this case, overruled the claim and upheld
the counter claim the Company made, which includes an indemnity of USD28 million, legal costs and the interest thereon. The claimant
appealed and by the date of this report, the Court of Appeal dismissed the claimant’s appeal and varied the award of damages
and interest to the Company from USD28 million to USD18 million. The Court of Appeal also ordered the claimant to pay the Company’s
costs of the appeal. The claimant has made a further appeal against the instance of the Court of Appeal. The Directors are of the
opinion that an outflow of resource embodying economic benefits is not probable to occur. |
| (d) | On 31 May 2014, the Company received a notice from the International Court of Arbitration of International
Chamber of Commerce (“ICC”). The notice states that SASOF TR-81 AVIATION IRELAND LIMITED (the “lessor”)
has applied for arbitration for the alleged breach of certain terms and conditions of an aircraft leasing agreement. The lessor
has made a claim against the Company for an indemnity of approximately USD13 million, including the compensation for engine thrust
upgrade damages, life components of engine, reserves of engines, cost of termination of the lease, external legal counsel’s
remuneration and the interest thereon. On 31 July 2014, the Company has established a team to handle this arbitration and applied
to ICC for a counter claim to request the lessor to compensate the Company for insurance fees amounting to USD8.2 million, deposits,
default penalty, extra technical support fees and legal expenses and the interest thereon. As of the date of this report, the arbitration
is still in early preparation phase and the arbitration session is expected to be held in early 2016. The Company cannot reasonably
predict the result and potential impact of this pending litigation. Therefore, no additional provision has been made against this
pending litigation. |
| (e) | According to publicly available information during the reporting period, certain former members
of the Group’s senior management are subjects of investigation. The Company has assessed the implications on this matter
on the Group’s financial results and financial position. Based on the results of the review, the Company’s directors
consider that there were no material consequential impact on the Group’s financial statements. As of the date of this announcement,
the investigation of these former members of the senior management is ongoing. |
CHANGE IN SHARE CAPITAL STRUCTURE
| |
| |
| | |
| | |
| | |
| | |
| | |
Unit: Share | |
| |
| |
| | |
| | |
Increase/(decrease) during | | |
| | |
| |
| |
| |
31 December 2013 | | |
January to December 2014 | | |
31 December 2014 | |
| |
| |
Number | | |
| | |
Number | | |
| | |
Number | | |
| |
| |
| |
| of Shares | | |
| Percentage | | |
| of Shares | | |
| Percentage | | |
| of Shares | | |
| Percentage | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
I. | |
Shares subject to | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
restrictions on sales | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
II. | |
Shares not subject to | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
restrictions on sales | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
1. | |
RMB ordinary shares | |
| 7,022,650,000 | | |
| 71.53 | % | |
| 0 | | |
| 0 | | |
| 7,022,650,000 | | |
| 71.53 | % |
2. | |
Foreign listed shares | |
| 2,794,917,000 | | |
| 28.47 | % | |
| 0 | | |
| 0 | | |
| 2,794,917,000 | | |
| 28.47 | % |
| |
Total | |
| 9,817,567,000 | | |
| 100 | % | |
| 0 | | |
| 0 | | |
| 9,817,567,000 | | |
| 100 | % |
III. | |
Total number of shares | |
| 9,817,567,000 | | |
| 100 | % | |
| 0 | | |
| 0 | | |
| 9,817,567,000 | | |
| 100 | % |
Note: During the reporting period, there was no change
of the total share number and share capital structure.
PURCHASE, SALE OR REDEMPTION OF SHARES
Neither the Company nor any of its subsidiaries
purchased, sold or redeemed any shares of the Company during the year ended 31 December 2014.
PRE-EMPTIVE RIGHTS
None of the articles of association of
the Company provides for any pre-emptive rights requiring the Company to offer new shares to existing shareholders in proportion
to their existing shareholdings.
AUDIT COMMITTEE
The audit committee of the Company has
reviewed the audited financial statements of the Group for the year ended 31 December 2014.
COMPLIANCE WITH THE MODEL CODE
Having made specific enquiries with all
the Directors, the Directors have for the year ended 31 December 2014 complied with the Model Code (the “Model Code”)
for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Rules (the “Listing Rules”)
Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).
The Company has adopted a code of conduct
which is no less stringent than the Model Code regarding securities transactions of the Directors.
COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
In the opinion of the Board, the Group
has complied with the code provisions of the Corporate Governance Code as set out in Appendix 14 of the Listing Rules for the year
ended 31 December 2014.
DIVIDENDS
The Board recommends the payment of a final
dividend of RMB0.4 (inclusive of applicable tax) per 10 shares for the year ended 31 December 2014, totaling approximately RMB393
million based on the Company’s 9,817,567,000 issued shares. A resolution for the dividend payment will be submitted for consideration
at the 2014 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 share. 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 Thursday, 6 August
2015.
2015 OUTLOOK
Looking ahead to 2015, there may be slight
recovery of global economy, but weak recovery trend is expected to continue. Overall domestic economy will remain stable, but with
higher downward pressure. China’s economy will enter into a “New Normal”, namely, development speed changing
from high-speed growth to mid-high-speed growth; economic structure will continue to be optimized and upgraded, from factor-driven,
investment-driven economic growth to innovation-driven economic growth.
Under this circumstance, the development
of China’s civil aviation industry will also present certain “New Normal”. First, steady growth in demand for
civil aviation transport will become the normal. It is difficult for the entire industry to sustain continuous rapid growth. Second,
affected by factors including relaxed entry barriers, relatively excess capacity, continuing impact of high-speed rail and rapid
development of budget airlines, market competition has been more intense, air transport has been more affordable, and low fares
will become the normal. Third, passengers demanding personalized, diversified service and market competition differentiation will
be the normal. Fourth, affected by mobile Internet, big data and other new technologies, and new business models, market-oriented,
customer-oriented precise marketing as well as differentiated services will gradually become the normal. While China’s economy
and industry development are entering into a “New Normal”, coping with the “New Normal” will be both opportunities
and challenges to the Group.
Therefore, we should strive to do the following areas of work
in 2015:
Operational Safety and Fleet Development
To strengthen the legal concept of safety
management, and pay more attention to the normative and long-term nature of safety management; to increase investment in safety,
strengthen infrastructure construction and application of new technologies and promote the integration of various security systems;
to strengthen the management of staff, improve technological control system and staff qualification training system; to establish
a “platform” of the operational control model, implement regional management, ensure matching of rights and responsibilities;
to establish industry technical standards, improve safety and efficiency levels of operational control system. In 2015, the Group
will continue to save no effort to ensure an aviation safety year.
To continue to optimize the fleet structure,
and ensure matching between fleet size and market demand. In 2015, the Group plans to introduce 57 aircraft and dispose 13 aircraft.
By the end of 2015, the Group’s fleet is expected to reach 656 aircraft, representing an increase of 7.19% as compared with
2014.
Hub Network and Product Service
The Group will tightly seize the strategic
opportunities provided by China’s “One Belt and One Road” strategy and further strengthen hub construction and
make use of its scale and network advantage, expand its market share and increase profitability amid the market competition in
which differentiation is practiced and the construction of an interlinked network, grasp the opportunities provided by the rapid
growth of the central and western market to accelerate the construction of a regional hub so as to materialize an interlinked,
mutually dependent and supportive network layout with the main hub, vigorously develop international routes and focus on international
transit operation to further enrich the product of the Sixth Freedom service, provide better transit service to the passengers
and enhance the quality of transit service gradually in order to continuously optimize customer structure and sales structure.
The Group will improve its E-services and
push forward the construction of the five major self-services of “ticketing, seating, luggage, hotel and catering”,
optimize the design of service content for a more caring service, create a smoother service to provide better experience to the
passengers, constantly improve service environment for better food on international long-haul flights and a better VIP lounge for
the high-end and transit passengers with the pilot launch of the special aroma of China Southern Airlines.
Passenger Service Operation
We will insist on the three development
directions of “Precision, Internationalization and E-commerce” for passenger service marketing with maximizing marginal
contribution as its core to steadily push forward various businesses.
The Group will strengthen the forecasting
ability to enhance the matching of capacity and market, focus on process management to strengthen the whole interlinkage for rapid
reaction to market changes, accelerate the improvement of its international presence to further expand its international market
share, optimize channel management and customer structure to make use of the network and alliance advantage for better international
operation, accelerate the development of E-commerce to optimize the customers’ online experience and vigorously promote E-services,
refine customer management to strengthen major account’s development and retention and to promote precise marketing, standardize
the whole product management process and enrich marketing products while continuing to develop and promote products with auxiliary
revenue, and expand the construction of the E-commerce platform and system through introducing new technology to further support
passenger service marketing.
Cargo Operation
In 2015, the Group will introduce four
B777 freighters, bringing the total number of freighters to 14 for the fleet. Therefore, we must seize the opportunity provided
by the rebound of international air freight market, improve the route network and step up expansion in emerging markets for better
freight operation.
The Group will advance the expansion of
marketing channels and explore in-depth the market demand for air transportation to improve the hub network layout, strengthen
the exploration of the international market and explore in-depth the popular sources for broader sales channels, strengthen international
transit operation and the transit business from Guangzhou to Southeast Asia and Australia around the Guangzhou and Shanghai freight
hub, continue to explore the domestic operational potential of bellyhold cargo spaces and accelerate the promotion of bulk reservation,
strengthen cooperation with core customers including the post office and couriers to explore more domestic transit transportation
channels, constantly improve the construction of high-end product system to further increase the proportion of high-end product
business scale.
General Aviation
In 2015, the Group will receive three Sikorsky
S92A aircraft, bringing the total number of aircrafts in the fleet of S92A to 10 and general aviation fleet to 23. We will put
special efforts in the guarantee of first-aid flights, VIP flights and typhoon evacuation flights and strengthen its competitive
advantages through enhancing service quality, actively expand business on land through integrating self-operation and joint operation,
make use of technical advantages to strive to be the industry’s benchmark through focusing on areas including agency, modification,
maintenance outsourcing as well as import and export.
Costs Control
The Group will continue to push forward
the comprehensive budget management and strictly estimate the target management for higher utilization efficiency of the Company’s
resources, strengthen the organic integration of the comprehensive budget management and long-term development strategy as well
as organizing the key resources for stronger mid-long-term cost
management, focus on strengthening the
precise management on significant costs and practically cut cost expenses, and strengthen the integration of finance and business
to push forward each of the cost unit to reduce cost and increase efficiency at the source.
PUBLICATION OF ANNUAL REPORT ON THE
WEBSITES OF THE STOCK EXCHANGE AND THE COMPANY
The 2014 annual report of the Company,
which contains consolidated financial statements for the year ended 31 December 2014, with an unqualified auditor’s report,
and all other information required under Appendix 16 of the Listing Rules will be despatched to shareholders of the Company and
published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.csair.com) in due course.
By order of the Board
China Southern Airlines Company Limited
Xie Bing and Liu Wei
Joint Company Secretaries
Guangzhou, the People’s Republic of China
30 March 2015
As at the date of this announcement,
the Directors include Si Xian Min, Yuan Xin An and Yang Li Hua as non-executive Directors, Tan Wan Geng, Zhang Zi Fang and Li Shao
Bin as executive Directors; and Wei Jin Cai, Ning Xiang Dong, Liu Chang Le and Tan Jin Song as independent non executive Directors.
Exhibit 99.2
Hong Kong Exchanges and Clearing Limited
and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation
as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance
upon the whole or any part of the contents of this announcement.
OVERSEAS REGULATORY ANNOUNCEMENT
This announcement is published pursuant
to Rule 13.10B of The Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited.
As China Southern Airlines Company Limited
has published the “Announcement on Resolutions passed at the Sixth Meeting of the Seventh Session of the Supervisory Committee
of China Southern Airlines Company Limited” on the Shanghai Stock Exchange, the full text of the announcement is set out
below for information purpose.
By order of the Board
China Southern Airlines Company Limited
Xie Bing and Liu Wei
Joint Company Secretaries
Guangzhou, the People’s Republic of
China
30 March 2015
As at the date of this announcement,
the Directors include Si Xian Min, Yuan Xin An and Yang Li Hua as non-executive Directors, Tan Wan Geng, Zhang Zi Fang and Li Shao
Bin as executive Directors; and Wei Jin Cai, Ning Xiang Dong, Liu Chang Le and Tan Jin Song as independent non-executive Directors.
Stock short name: China South Air |
Stock Code: 600029 |
Notice No.: Lin 2015-008 |
ANNOUNCEMENT
on resolutions passed at
the
sixth MEETING of the Seventh SESSION OF
tHE
SUPERVISORY COMMITTEE OF
China
Southern Airlines Company Limited
The supervisory committee
(the “Supervisory Committee”) of China Southern Airlines Company Limited and all of its members confirm that
the contents of this announcement do not contain misrepresentations, misleading statements or material omission, and jointly and
severally accept full responsibilities for the truthfulness, accuracy and completeness of the information contained in this announcement.
On 30 March 2015, China
Southern Airlines Company Limited (the "Company") held the second meeting of the seventh session of the Supervisory
Committee at the No. 3 Conference Room, 4th Floor, Pearl Hotel CSN, Baiyun International Airport, Guangzhou. Five supervisors (the
"Supervisors") of the Company are eligible to attend the meeting and five Supervisors attended the meeting. The
meeting was held in compliance with the relevant provisions of the Company Law of the People's Republic of China (the "Company
Law"), the Articles of Association of the Company and the Working Procedures of the Supervisory Committee.
The following resolutions
were passed at the meeting:
I. considered and approved
the full text and summary of the 2014 annual report and results announcement for the year 2013 (including financial statements
prepared under the PRC accounting standards and the International Financial Reporting Standards (the "IFRSs"));
II. considered and approved
the profit distribution proposal of the year 2013;
Under the PRC accounting
standards, as at 31 December 2014, the Company realised the net profit of RMB1,378 million (excluding the undistributed revenue
of the subsidiaries). According to the Company Law, after withdrawing 10% of the net profits of the Company as the statutory surplus
reserve amounting to RMB138 million, the remaining distributable profits of the Company amounted to RMB1,240 million. Under the
IFRSs, the Company realised the net profit of RMB1,064 million (excluding the undistributed revenue of the investment entities),
and after withdrawing the statutory surplus reserve amounting to RMB138 million, the distributable profits of the Company amounted
to RMB926 million.
The board of directors
of the Company hereby proposed to declare a cash dividend of RMB393 million, or RMB0.4 per 10 shares (inclusive of applicable tax)
based on the total share capital of 9,817,567,000 shares of the Company. The cash dividend is 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 approval
by shareholders at the general meeting.
III. considered and
approved the "2014 Internal Control Appraisal Report of China Southern Airlines Company Limited";
IV. considered and approved
the "2014 Corporate Social Responsibility Report of China Southern Airlines Company Limited".
V. considered and approved
the "Report of the Supervisory Committee for the Year 2014";
The proposal is to be
submitted to the annual general meeting for the year 2014 for approval.
The Supervisory Committee
reviewed the 2014 annual report prepared by the board of directors of the Company and formed the following opinions:
a. the preparation and
approval procedures of the annual report were in compliance with the requirements under the applicable laws and regulations, articles
of association of the Company and the relevant internal corporate governance rules and regulations of the Company;
b. the contents and
format of the annual report were in compliance with the relevant requirements of China Securities Regulatory Commission and Shanghai
Stock Exchange, and information disclosed therein reflected correctly the operational, management and financial status of the Company,
without any false representation, misleading statement or material omission; and
c. none of the persons
involved in the preparation and approval of the annual report has committed any action in breach of confidentiality requirements
in respect of the annual report.
The Supervisory
Committee of
China Southern Airlines
Company Limited
30 March 2015
Exhibit 99.3
Hong Kong Exchanges and Clearing Limited
and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation
as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance
upon the whole or any part of the contents of this announcement.
OVERSEAS REGULATORY ANNOUNCEMENT
This announcement is published pursuant
to Rules 13.09 and 13.10B of The Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited.
As China Southern Airlines Company Limited
has published the “Announcement on Resolutions passed at the Sixth Meeting of the Seventh Session of the Board of China Southern
Airlines Company Limited” on the Shanghai Stock Exchange, the full text of the announcement is set out below for information
purpose.
By order of the Board
China Southern Airlines Company Limited
Xie Bing and Liu Wei
Joint Company Secretaries
Guangzhou, the People’s Republic of
China
30 March 2015
As at the date of this announcement,
the Directors include Si Xian Min, Yuan Xin An and Yang Li Hua as non-executive Directors, Tan Wan Geng, Zhang Zi Fang and Li Shao
Bin as executive Directors; and Wei Jin Cai, Ning Xiang Dong, Liu Chang Le and Tan Jin Song as independent non-executive Directors.
Stock short name: China South Air |
Stock Code: 600029 |
Notice No.: Lin 2015-007 |
ANNOUNCEMENT
on resolutions passed at
the
sixth MEETING of the Seventh SESSION OF THE board OF
China
Southern Airlines Company Limited
The board (the “Board”)
of directors (the “Directors”) of China Southern Airlines Company Limited and all of its members confirm that
the contents of this announcement do not contain misrepresentations, misleading statements or material omission, and jointly and
severally accept full responsibilities for the truthfulness, accuracy and completeness of the information contained in this announcement.
The convening of
the Board meeting
On 30 March 2015, China
Southern Airlines Company Limited (the "Company") held the sixth meeting of the seventh session of the Board at
the No.1 Conference Room, 4th Floor, Pearl Hotel CSN, Baiyun International Airport, Guangzhou. The number of Directors supposed
to be present was 10, of which 9 attended in person. Director Zhang Zi Fang, who did not attend the meeting because of business
reasons, authorized Director Tan Wan Geng to attend the meeting and vote on his behalf. Mr. Si Xian Min chaired the meeting. The
meeting was held in compliance with the relevant provisions of the Company Law of the People's Republic of China (the "Company
Law") and the Articles of Association of the Company.
The consideration
and approval on the Board meeting
The following resolutions
were considered by the Directors who attended the meeting and passed unanimously at the meeting:
I. considered and approved
the full text and summary of the 2014 annual report and results announcement for the year 2014 (including financial statements
prepared under the PRC accounting standards and the International Financial Reporting Standards (the "IFRSs")
as well as the Report of the Directors);
II. considered and approved
the profit distribution proposal of the year 2014;
Under the PRC accounting
standards, as at 31 December 2014, the Company realised the net profit of RMB1,378 million (excluding the undistributed revenue
of the subsidiaries). According to the Company Law, after withdrawing 10% of the net profits of the Company as the statutory surplus
reserve amounting to RMB138 million, the remaining distributable profits of the Company amounted to RMB1,240 million. Under the
IFRSs, the Company realised the net profit of RMB1,064 million (excluding the undistributed revenue of the investment entities),
and after withdrawing the statutory surplus reserve amounting to RMB138 million, the distributable profits of the Company amounted
to RMB926 million.
The Board hereby proposed
to declare a cash dividend of RMB393 million, or RMB0.4 per 10 shares (inclusive of applicable tax) based on the total share capital
of 9,817,567,000 shares of the Company. The cash dividend is 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 approval by shareholders at the general
meeting.
III. 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 of financial reporting for the year 2015 and PricewaterhouseCoopers
to provide professional services to the Company for its Hong Kong financial reporting for the year 2015, and the authorization
to the Board to fix their remuneration according to actual work conditions.
IV. considered and approved
"The Performance of Duties Report of Independent Directors of China Southern Airlines Company Limited for the Year 2014";
The full text of the
"The Performance of Duties Report of Independent Directors of China Southern Airlines Company Limited for the Year 2014"
is published on the website of Shanghai Stock Exchange (www.sse.com.cn).
V. considered and approved
the resolution regarding the renewal of the liability insurance for the Directors, supervisors and senior management of the Company;
VI. considered and approved
the "2014 Internal Control Appraisal Report of China Southern Airlines Company Limited";
The full text of the
"2014 Internal Control Appraisal Report of China Southern Airlines Company Limited" is published on the website of Shanghai
Stock Exchange (www.sse.com.cn).
VII. considered and
approved the "2014 Corporate Social Responsibility Report of China Southern Airlines Company Limited";
The full text of the
"2014 Corporate Social Responsibility Report of China Southern Airlines Company Limited" is published on the website
of Shanghai Stock Exchange (www.sse.com.cn).
VIII. considered and
approved the proposal to be submitted to the general meeting to authorise the Board to allot, issue and deal with additional shares
of the Company, and authorize the Board to increase the registered capital of the Company to reflect the issue of shares authorised
under the foresaid authorisation;
As a special reminder,
according to relevant laws and regulation of mainland China, given the foresaid authorisation, the Company is still subject to
approval at the general meeting for issuing new A shares.
IX. considered and approved
the proposal to be submitted to the general meeting to authorize the Board to issue the debt financing instruments;
X. approved the convening
of the Annual General Meeting for the year 2014 (the "AGM") to consider and approve, inter alia, the aforesaid resolutions
I, II, III, VIII, IX and the Report of Supervisory Committee for the year 2014. The Company Secretary Office is hereby designated
to attend to the relevant matters regarding the AGM. Further details of the arrangement of the AGM with timing, place, agenda and
proposals will be announced separately.
The Board of
China Southern Airlines
Company Limited
30 March 2015
Exhibit
99.4
2014
Social Responsibility Report of China Southern Airlines Company Limited
ABOUT THIS REPORT
This is the 8th Social Responsibility Report
of China Southern Airlines Company Limited (the “Company”). This report is for the period from January 1, 2014 to December
31, 2014. The content of this report covers the Company and its subsidiaries.
In this report, the use of "we",
"the company", "China Southern" or "CSA" refers to China Southern Airlines Company Limited, and its
wholly-owned and controlled subsidiaries.
This report has been prepared in accordance
with the Guidelines Concerning State-owned Enterprises’ Fulfilling Social Responsibilities published by the State-owned
Assets Supervision and Administration Commission (SASAC); the Guidelines on Sustainable Development Information Disclosure for
Companies Listed in the Shanghai Stock Exchange published by the Shanghai Stock Exchange; the Environmental, Social and
Governance Reporting Guide published by the HKEx, and the Sustainable Development Reporting Guideline issued by the
Global Reporting Initiative (GRI).
Data used in this report were sourced from
internal statistics, documents and materials. The Board of Directors of the company and all directors hereby guarantee that this
report contains no false records, misleading statements or major omission. The directors accept joint and several liabilities for
the truthfulness, accuracy and completeness of this report. This report is certified by Bureau Veritas.
This report is published in both Chinese
and English, and in both print and digital format. In the event of any conflict between the Chinese version and other language
versions, the Chinese version shall prevail. For more information on our corporate social responsibilities, please visit:www.csair.com/en/about/static/shehuizerenbaogao.shtml
[CAPTION]: The publication of China Southern’s
corporate social responsibility (CSR) report started in 2007. We were the first airline company in China to publishCSR report.
We at China Southern believe that CSR will help the general public to better understand our views and actions in the area of corporate
social responsibility, and will promote communication and interaction between China Southern and the wider public, which in turn
will help both China Southern and the society in materializing a harmonious win-win situation and sustainable development.
TABLE OF CONTENT
CHAIRMAN’S STATEMENT
ABOUT US
Corporate Profile
Corporate Governance
Corporate Culture
Highlights in 2014
RESPONSIBILITIES
Concept of Responsibility
Management of Responsibility
Stakeholder Engagement
SAFETY
Safety Systems
Safety Components
Safety Performances
ENVIRONMENT
Environmental Policies
Use of Resources
Flying Green
Lowering Carbon Footprint
Innovative Development
SERVICES
Understanding Needs
Product Design
Quality Promotion
Service Innovation
EMPLOYEES
Work Environment
Training and Development
Health and Safety
Balance of Work and
Life
COMMUNITIES
Special Flights
Caring for People
Culture and Education
Volunteer Services
APPENDICES
CHAIRMAN’S STATEMENT
For many years since 2008, we have been
endeavoring in establishing a social responsibility system that tally with our own characteristics and visions. We are grateful
to the people, and are bringing our gratefulness back to the society with our increased investment to the passengers, employees,
communities and the environment. Fulfilling our social responsibility is the foundation to our development, which entails dedication
to people in need, devotion to social welfare, commitment to ethical business practices and perseverance in environmentally conscious
operations. Contributing to the society with our gratitude shapes the character of China Southern, and accomplishes the heritage
of China Southern.
The external environment was exceptionally
difficult and arduous in 2014. Nevertheless, we have upheld our responsibilities and successfully achieved our objectives through
innovating systems, seizing opportunities and tackling the challenges.
In terms of safety management, we have
overcome the difficulties risen from the scarce availability of air space and the complexity of operational environment while maintaining
a smooth operation throughout. We completed 2.03 million flight hours that accumulated to a total safe flight operation of 13.52
million hours; and 182 consecutive months of flight safety and 246 consecutive months of aviation security. Furthermore, we have
also achieved our goals in fire safety and public health management. Our safety standard reached international level, and continues
to hold the highest safety record among all Chinese airlines.
In terms of business operations, the 600th
aircraft joined us in 2014, and this fleet has completed a total turnover of 19.78 billion ton-kilometer, a growth of 13.23% over
2013. Our annual passenger throughput has for the first time in China’s civil aviation history, exceeded the 100-million
landmark, representing an increase of 9.94%. Our company has achieved a substantial economic growth of 10.38% this year to an annual
revenue of 108.31 billion RMB with a profit of 1.77 billion RMB, hence meeting the goal we set at the beginning of the year.
We are continuing our efforts in lowering
carbon footprint. By exploiting the latest technology innovation and management means, we have increased our investment and intensified
our actions in terms of fleet optimization, aircraft retrofitting, route optimization, low-carbon travel and the use of renewable
energy source. Our efforts in reducing energy consumption and emission have resulted in the reduction of 40,000 tons of CO2
emission in 2014.
In terms of our return to the society,
we have completed our missions in the rescue of Xinjiang and Yunnan earthquakes, evacuation of Chinese nationals from Vietnam and
the emergency transportation of freshwater to the Maldives. Our contribution of duties and taxes this year has amounted to 5.36
billion RMB, with provision of over 3000 new job opportunities. Our “Ten-fen” Care Foundation has delivered donations
of 6.4 million RMB, in which 2.2 million RMB were made to education funds in 10 universities.
Our fulfillment of responsibility has been
acknowledged across the communities where we are operating in. In 2014, we were awarded Best Contribution Award for Air Service
in New Zealand, Best Airlines Company in the Global Finance Stars of China Award, FORTUNE CHINA’s ranking of Most Recognized
Companies in China – Communication, Transportation and Logistics Sector and many more. These accolades are the recognition
and encouragement from various fields of the society, and are our motivation to persevere and move forward.
China’s economy and the aviation
sector today have both entered into the so-called “New Normal”. This is a new opportunity for us to reform and to develop,
and moreover an exciting platform for us to strive and to excel. Looking into 2015, we at China Southern will embrace the “New
Normal” while driving to a new state and undertaking new actions. We will fulfill our every role of being a socially responsible
state-owned enterpriseas we continue to being fully devoted to our missions and living up to the society’s expectation.
1. ABOUT US
[OPENING]: China Southern was founded in
1995, it is the largest airline company in China in terms of fleet size, number of routes and annual passenger throughput. China
Southern became listed company in both HKEx and NYSE in 1997. In 2003, it was also listed in Shanghai Stock Exchange.
1.1 Corporate Profile
1.1.1 At a glance
China Southern is headquartered in Guangzhou,
its company logo is a blue tail embedded with red kapok. In 2014, the fleet size of China Southern ranked the first in Asia and
the fifth amongst all 240 member airlines of the International Air Transport Association (IATA). It is also the first airline in
the world that operates both the Boeing 787 Dreamliner and the Airbus A380.
Every day, there are over 2000 flights
operated by China Southern to210 destinations in nearly 40 countries and regions in the world providing close to 300,000 seats.
Through close cooperation with other SkyTEAM member airlines, our route network expands to 1052 global destinations connecting
177 countries and regions.
|
2013 |
2014 |
Change |
Passenger Traffic (,000) |
91,791 |
100,919 |
9.94% |
Freight Traffic (,000 tons) |
1,276 |
1,433 |
12.30% |
Total Turnover
(million ton-kilometer) |
17,469 |
19,780 |
13.23% |
China Southern at a Glance
Name: China Southern Airlines Company
Limited
Time of Establishment:March, 1995
Chairman: Si Xianmin
Main areas of Business: Scheduled and
non-scheduled domestic, regional and international passengers, cargo, mail and baggage transportation
Address of Headquarter: 278 Jichang
Road, Guangzhou, China
Post Code: 510406
Website: www.csair.com
1.1.2 Vision and mission
Vision: Let China Southern become customers’
first choice and employees’ favorite
Missions: Based in China, Focus on Asia-Pacific,
Connect the World
To deliver sustainable
economic value and international influence
Best in China,
Top in Asia and Well-known in the World
1.1.3 Organizational structure
China Southern operates 15 branches of
Xinjiang, Northern, Beijing, Shenzhen, Hainan, Heilongjiang, Jilin, Dalian, Hubei, Hunan, Guangxi,Xi’an, Taiwan, Zhuhai Helicopter
and Shanghai; as well as 6 controlled subsidiaries of Xiamen Airlines, Shantou Airlines, Zhuhai Airlines, Guizhou Airlines, Chongqing
Airlines and Henan Airlines. In addition, 25 domestic sales offices can be found in major Chinese cities such as Chengdu, Hangzhou
and Nanjing; and 64 overseas sales offices located in cities including New York, San Francisco, Los Angeles, Paris, London, Amsterdam,
Dubai, Sydney, Vancouver, Tokyo and Seoul.
|
2014 |
Latest Additions |
Branches |
15 |
Shanghai |
Domestic Sales Offices |
25 |
Xining, Yinchuan |
Oversea Sales Offices |
64 |
Astana, San Francisco |
1.1.4 Fleet size
Growth of fleet size from 2010 to 2014
Year |
Number of Aircraft |
2010 |
422 |
2011 |
444 |
2012 |
491 |
2013 |
561 |
2014 |
612 |
China Southern Fleet in 2014
Aircraft Type |
Number of Aircraft |
Passenger Aircraft |
602 |
A380 |
5 |
A330-300 |
15 |
A330-200 |
16 |
A321 |
75 |
A320 |
122 |
A319 |
43 |
B787 |
12 |
B777 |
9 |
B757 |
19 |
B737-800 |
208 |
B737-700 |
50 |
B737-300 |
3 |
E190 |
25 |
Freighter |
10 |
B747F |
2 |
B777F |
8 |
Total |
612 |
*As of December 31, 2014
1.1.5 Route network
China Southern operates an extensive route
network with its key hubs at Guangzhou, Beijing, Ürümqi and Chongqing. Its network development strategies focus on the
strengthening of domestic services, expanding coverage in Asia and increasing connections to Europe, America, Oceania and Africa.
China Southern is committed to improving the connections of its “Canton Route” global hub; numerous new routes have
been added to the network in 2014. Intercontinental services including Guangzhou-Changsha-Frankfurt, Guangzhou-Wuhan-Moscow, Guangzhou-New
York and Guangzhou-Wuhan-San Francisco were launched; services between Guangzhou and the Southeast Asia, Australia and New Zealand
were also optimized and increased in their frequencies. In 2014, China Southern operates a network of over 800 passenger and freight
routes that consist of 600 domestic routes, 160 international and regional routes, and 13 freighter routes. Our continuingly growing
network provides passengers with added choices and more convenient services. China Southern serves 191 destinations in Asia, 8
in Europe, 5 in North America, 5 in Oceania and 1 in Africa; and the total number of destinations: 210
[LINK]: Guangzhou to New York, the longest
route in the history of China’s civil aviation
China Southern launched a four-times-weekly
non-stop service connecting Guangzhou and New York on August 6, 2014. This service is operated by the latest 777-300ER, covers
a distance of 13,500km with a flight time of approximately 16 hours. This route is the longest non-stop service in the history
of China’s civil aviation, and the only direct service that links south China with the US East Coast. With New York service
being added to the network, China Southern has now completed its triangular positioning strategy in the North America of Vancouver-Los
Angeles-New York.
1.2 Corporate Governance
Since its foundation, China Southern has
strictly abided by relevant national and local laws and regulations and has continued its effort in improving the governance structures.
It has regulated and specified duties and obligations for different parties in addition to the setting up of a sound internal control
system. These measures have all been included in corporate documents and regulations such as the Articles of Association, Rules
of the Shareholders Meeting, Rules of the Board of Directors, and Rules of the Supervisory Committee.
China Southern has formulated its Articles
of Association and corporate governance policies based on the regulations in Hong Kong, New York and Shanghai where the Company
is listed. Its internal control regulations and practices are also in line with relevant laws, regulations and standards, including
the Sarbanes-Oxley Act of the United States of America.
The Shareholders Meeting is the highest
governing body of the Company; it is the decision making body of major issues including the rules of operations and plans for investments;
approval for profit distribution and loss make-up proposals; election and replacement of directors and supervisors and the determination
of their remunerations; and the amendments to the Articles of Association.
The Board of Directors of the Company answers
to the Shareholders Meeting. The duties of the Board of Directors include the preparation of annual financial budget and account;
proposal of profit distribution and loss make-up; decision on acquisition and disposal of assets and venture investment projects
as authorized by the Shareholders Meeting.
Audit Committee, Remuneration and Appraisal
Committee, Nomination Committee and Strategic Decision-making Committee are operating under the Board of Directors. More than half
of the members of the aforementioned committees are independent and non-executive directors. Particularly, the Audit Committee
is composed entirely of non-executive directors. All committees under the Board of Directors are established and operated in full
compliance with their governing rules and regulations.
The Supervisory Committee is formed by
representatives of the shareholders and the employees. Representatives of the shareholders are elected and recalled by the Shareholders
Meeting; representatives of the employees are elected by the employees democratically.
1.3 Corporate Culture
On the basis of the shared wisdom and values
of all members of China Southern, we defined our core value as ‘CSAIR’ culture. ‘CSAIR’ consists of five
elements, these are: Customer First (C for Customer); Respecting Talents (S for Staff); Striving for Excellence (A for Advancement);
Continuous Innovation (I for Innovation); and Return to Society (R for Return). Our mission of “Let China Southern become
customers’ first choice and employees’ favorite” is also embedded in such values. The ‘CSAIR’ culture
is created as the conceptual support to the company’s strategic transformation and improvement of its overall level of management.
Our corporate culture enhances the solidarity of our colleagues while fostering a harmonious work environment. It is the reflection
of today’s accomplishment and an expression of driving force, and alsomirrors the direction of our development into the future.
[LINK]: The theme of China
Southern’s corporate culture event was “Respecting Talents, Gathering Strength”
In order to boost recognition to the core
concept of “CSAIR” among our colleagues, we launched a writing contest themed “Respecting Talents, Gathering
Strength”. 541 pieces of articles were received during the contest; these articles shared the true experiences from our front
line teams, depicting their stories of growing with the bigger China Southern family.
1.4 Highlights in 2014
1.4.1 China Southern launched non-stop
service to New York
2014 marked the 35th Anniversary
of the Sino-US diplomatic relations. On August 6th, the inaugural flight to New York took off from Guangzhou Baiyun
International Airport and landed at John F. Kennedy International Airport 15 hours later. The launch of this service is a reflection
of China Southern’s constant effort in international strategic transition and its endeavor to transform itself to becoming
a world-class airline.
1.4.2 Strategic cooperation with the City
Government of Los Angeles
China Southern and the City Government
of Los Angeles signed a Strategic Cooperation Agreement in Guangzhou on November 17th. The two parties will launch a
“Health Care” product targeting at a growing market of Chinese medical travelers to the US. This shows a significant
attempt of China Southern to reinvent itself from a transportation service provider to a comprehensive service provider.
1.4.3 Continuation of cooperation between
China Southern and the Tourism Bureau of Australia
Witnessed by the Chinese President Xi Jinping
and the Australian Prime Minister Tony Abbott, China Southern and the Tourism Bureau of Australia signed a Supplementary Protocol
to the Strategic Cooperation Agreement on November 17th. As an extension of the existing strategic cooperation, China
Southern and Tourism Bureau of Australia have agreed to continue joint-investment in brand promotion of China Southern’s
Australian services, hence deepening China Southern’s brand impact in the Australian market.
1.4.4 Strategic cooperation with Tourism
New Zealand
Witnessed by the Chinese President Xi Jinping
and the New Zealand Prime Minister John Key, China Southern and the Tourism New Zealand signed a Strategic Cooperation Agreement
on November 21st, marking the strengthening of further cooperation between China Southernand Tourism New Zealand. This
will bring the bilateral relationship and the aviation market in both countries to the next level.
1.4.5 China Southern launched San Francisco
service
China Southern inaugurated Guangzhou –
Wuhan – San Francisco service on December 16th. This service is not only the first non-stop service connecting
Central China with the U.S., but also the fourth services to destinations in North America operated by China Southern. With the
opening of this service, China Southern will grasp the opportunity created by the relaxing of visa regulations in both countries,
and further exploit the North America market. In celebration of the inauguration, the municipality of San Francisco announced that
December 12, 2014 as China Southern day.
1.4.6 China Southern became China’s
first airline that carried over 100 million passengers
Flight CZ3582 landed safely at Guangzhou Baiyun
International Airport at 22:58 on December 31, marking another year of safe operation.
In 2014, China Southern carried 100.92
million passengers, a growth of 9.94%, thus became the first airline in China with an annual passenger throughput that exceeded
100 million. Meanwhile, China Southern’sremarkable accumulation of 13.52 million safe flight hours and 246 consecutive months
of aviation security have maintained its position of keeping the highest safety performance record in the country.
Key Performance
Total number of passenger carried: 100.92
million
Total cargo and mail carried: 1.43 million
tons
Accumulated safe flight hours: 13.52 million
Number of passengers carried on international
routes increased by: 20.70%
Key Awards
Best Contribution Award for Air Service in
New Zealand, 2013/14
Best Airlines Company in the Global FinanceStars
of China Awards, 2014
Top 10 Logistics Companies in the 2014 China
International Logistics Fair
Top in FORTUNE CHINA’s ranking of Most
Recognized Companies in China – Communication, Transportation and Logistics Sector
Best First Class Service Award 2014 in Now
Travel Asia
2. RESPONSIBILITIES
[OPENING]: Through continuous exploration
and refinement, we have integrated the management of social responsibility with our wider business strategies, corporate culture
and day-to-day operations. We strive to engage with our stakeholders responsibly, continue to drive the harmonious development
between the corporate and the society, as well as the environment. We also endeavor to maximize social value with a sustainable
development.
A total amount of 5.36 billion RMB of taxes,
duties to the state in 2014
6.4 million RMB donation made by the “Ten-fen”
Care Foundation in 2014
2.1 Concept of responsibility
China Southern’s conceptual framework
of responsibility:
Delivering economic benefits for shareholders
Creating social values for the society
Delivering services for customers
Creating opportunities for employees
Flying green for the environment
China Southern has been consolidating social
responsibility with corporate strategy, constructing a social responsibility conceptual framework that is based on delivering economic
benefits for shareholders; creating social values for the society; delivering services for customers; creating opportunities for
employees; and flying green for the environment.
As a proud member of SkyTEAM, China Southern
along with other member airlines have drafted a Corporate Social Responsibility Statement. This statement sets out the SkyTEAMcommitments.
China Southern as part of the alliance is committed to ensuring that our development aims for high performance not only from a
financial standpoint, but also from a social and environmental perspective.For more information on the statement, please visit:
http://www.skyteam.com/en/About-us/People-and-planet/
As the foundation to the fulfillment of
social responsibility, China Southern perseveres in complying with the business ethics of lawful employment, lawful operation,
honesty and faithfulness, adhesion to publicly recognized business code of conduct and the respect to business credibility. As
a main representation of fulfilling our social responsibility, weare persistently building a harmonious and mutually beneficial
relationship with our communities. Asa key target of social responsibility, we strive to reduce our impact to the environment,
and are participating in the global attempt to resolve the dilemma of environment and development.
2.2 Management of Responsibility
China Southern attaches great importance
to the management of social responsibility. A complete framework of corporate social responsibility (CSR) management that tallies
with China Southern’s objectives has been established. This framework contains concept of CSR, CSR strategies, annual plan,
projects implementation, audit and assessment. CSR overall planning has been included in the drawing of China Southern’s
five-year plan, and is being reviewed and adjusted in the three-year dynamic plan. The CSR annual planning is reflected in the
annual assignments of various functions such as safety, service, sales and marking, and operations, and is assessed by the audit
office at the end of each year. The establishment of our CSR management framework is key to improving the level of CSR management
and the realization of CSR strategic goals.
Concept of CSR – CSR strategies –
CSR annual plan – CSR project implementation – Audit and assessment
Strategies of responsibilities:
Ensure safe flight operation; improve operational
quality
Reinforce environmental protection; achieve
sustainable development
Enhance social harmony; increase corporate
value
Plans of responsibilities:
Drawing of annual plan; Specification of objectives;
Clarification of responsible bodies
Project Implementation:
Reduction in energy consumption and emission;
Reduction in cost and increase of efficiency; Strategic cooperation; Stable business operation; Technology innovation; Service
improvement; Caring for the employees; Charity and social work.
Performance assessment:
Post-factum assessment; End-of-year assessment;
Results feedback; “Carrot-and-Stick” measures
2.2.1 Risk management
An effective risk management system is
the intrinsic requirement of China Southern’s healthy and sustainable development, and an extrinsic presentation of China
Southern’s fulfillment of its social responsibility and its commitment to stakeholders. Targeting at the external risks that
we are facing, we have established and implemented a comprehensive risk management system based on the framework of The Committee
of Sponsoring Organizations of the Treadway Commission of the National Commission on Fraudulent Financial Reporting.
In terms of organizational structure, China
Southern has established a 3-tier risk management system that comprises individual departments responsible for their respective
risks, Office for Comprehensive Risk Management and Internal Audit Division.
In terms of risk identification, we focus
primarily on the strategic, market, operational, financial and legal risks that are closely related to the internal and external
business environment, especially in the areas of fleet planning, internationalization, oil market, rate of exchange, high-speed
rail, anti-trust and labor policies.
In terms of implementation, we have formed
a risk management close-loop structure through a corporate level process of risk identification, assessment, mitigation, improvement
and feedback.
In terms of culture building, we focus
on consistent risk management training and a reporting system to the management of change of risk and requirement, aiming to raise
the awareness of risk among the entire workplace.
Risk Management:
Strategic risks, market risks, operational
risks, financial risks, legal risks
2.2.2 Business Ethics
In order to regulate the business conduct
and support a just and fair market, China Southern sees compliance to antitrust regulations as an important corporate policy. As
the internationalization of our business deepens, the assessment of compliance to antitrust regulations has been integrated to
our operation and has become an essential part to our business.
China Southern has established the Office
for Antitrust Risk Prevention, which is in charge of formulating preventive measures, assessing legal risks associated with antitrust
regulations, and the works on exemption declaration. We have issued the Regulation of Antitrust Legal Risk Management, which
has further clarified the responsibilities and authorities of relevant departments, risk assessment process and responsive procedures.
We have issued the Guideline of the Compliance with Antitrust Regulations, which has identified prohibited actions and suggested
issues that worth noting, hence providing a clear guide to conduct for relevant departments. Last but not least, we have also consolidated
trainings on compliance with antitrust regulations and made such training a yearly routine session, which covers key personnel
at pricing, sales and alliance cooperation.
Through refining mechanisms and institutions,
we have proliferated our policies on the compliance with antitrust regulations to all key positions and have embedded the assessment
of compliance with antitrust regulations in our day-to-day operations. We ensure that the company participates in market competition
in a fair and lawful manner with the system of antitrust risk management.
2.2.3 Work without corruption
China Southern sees highly of uncorrupted
practices at the workplace, and has formulated a number of regulations. These include the Detailed Rules of Implementation of
the Responsibility System for the Building of a Fine Party Culture and the Keeping of a Clean Organization; Detailed Rules
of Implementation of Work without Corruption; and Management Accountability Regulations (Interim Provisions). These
regulations have defined the standards, responsible bodies, preventive actions, supervision and inspection, as well as the actions
to be taken when breach of regulations occurs. In 2014, the following tasks have been completed:
| · | 462 regulations on anti-corruption and
corruption risk control have been formulated and reviewed. Detailed action plans for reducing meetings and documents, as well as
improving frontline research, self-discipline and strengthening supervision and inspection have been raised. |
| · | Work without corruption training and education
have been carried out. 1420 copies of Combat Corruption and Uphold Integritybrochure have been distributed; 349 anti-corruption
lecturing sessions have been held with 11882 attendees; 599 sessions of anti-corruption educational film have been shown to 20585
attendees. |
| · | Innovative anti-corruption education means
have been implemented, such as business integrity questionnaire on employee intranet portal, business integrity SMS messages, and
the publication of Combat Corruption and Uphold Integrity Digest. |
[DATA]:
Refinement of regulations: 462
Educational sessions: 599
Management self-check: 100%
The First Inspection Team of the Central
Leading Group for Inspection Work of the Central Commission for Discipline Inspection (CCDI) of the Communist Party of China (CPC)
conducted a month-long special inspection at China Southern from November 26th to December 30th, 2014. China
Southern worked closely and actively with the inspection team during this period. The inspection team identified a number of issues
in the operational areas of sales and marketing, purchasing, maintenance, construction projects and financial management, as well
as deficiencies in the act of cleaning up four forms of undesirable working styles of formalism, bureaucratism, hedonism and extravagance,
and on the facet of selection and appointment of management. China Southern attaches the greatest importance to being strict in
Party discipline and to the "Two Responsibilities" required by the Central Committee of the CPC. By checking against
the feedbacks from the Inspection Team, China Southern took immediate and serious remedial measures. Personnel and cases identified
during the inspection period were taken to disciplinary and/or legal actions, information of such personnel and cases were disclosed
to the general public in accordance with the regulations of the Inspection Team and the rules governing public listed companies.
China Southern strives to build a fine Party culture and keep its organization clean through these remedial measures, and will
further transform the working style of its employees, further refine rules and regulations and further standardize the operation
of the company in order to eliminate the soil that breeds corruption and to create an upstanding environment for the deepening
of reform and the sustainable and healthy development of the company. China Southern with its results welcome supervision and inspection
from all fields of the society.
2.3 Stakeholder Engagement
China Southern’s stakeholders include
investors, government authorities, customers, industry associations, employees, suppliers, partners, communities, specialists,
media, and other players in theindustry. Engaging with stakeholders is the foundation of CSR. China Southern aims to promote corporate
progression along with a harmonious development of the society through establishing a stable and transparent communication mechanism
with stakeholders, so as to increase the understanding and participation, deepening consensus and enforcing improvement.
With government authorities –
Development of e-ticketing website for business travel
The Ministry of Finance and the Civil Aviation
Administration of China (CAAC) have jointly issued the Guideline to Strengthening the Administration of Air Ticket Purchase of
Civil Servants in 2014. In order to coordinate with this guideline, China Southern was commissioned to develop an e-ticketing and
administration platform for governmental purchases. Civil servants may now use this platform to purchase airline tickets for their
business travel from various participating airlines. This platform will promote the disclosure of business ticket information and
make it more convenient for civil servants to purchase tickets.
With partners – China Southern
inaugurated WeChat’sCardPack servlet
Through cooperation with Tecent Group,
China Southern became the first airline company that launched its own service on the WeChatCardPack platform. “CS95539
CardPack” provides an additional mode of mobile check-in and real-time flight information on top of China Southern’s
existing mobile App. CS95539 also provides instant notification to passengers in case of flight change and cancellation.
[CAPTION]: China Southern treasures a mutually
supportive and beneficial cooperation relationship with the stakeholders.
With industry associations –Greater
China Connection
The Greater China Connection brand, which
was created by fourSkyTEAM member airlines of China Airlines, China Eastern (with Shanghai Airlines), China Southern and Xiamen
Airlines in the greater China region, achieved an 8.8% growth of annual capacity and a 79.5% increase in the number of codeshare
flights in 2014. This cooperation maintained the absolute dominance in cross-strait air transportation. Senior management of the
member airlines participated in the Greater China Connection Summit on October 18th, further boosting the cooperation
among alliance members in the greater China region, providing more streamlined services to passengers.
With other players in the industry –
KLM senior management served temporary positions at China Southern
A delegation of five headed by the Vice
CEO and COO Mr. Pieter Elbers served temporary positions at China Southern in May 2014. The delegation visited a number of division
including the System Operation Center (SOC), Maintenance and Engineering, Ground handling and IT Center. The KLM team exchanged
extensively the views and experiences in the aspects of management concept, day-to-day operation, hub building, service quality
promotion and strategic planning. This was the first time that China Southern had invited senior management of world leading airlines
to serve temporary positions, and has proven to be a valuable experience. This has also been a reflection of China Southern’s
“reaching out, bringing in” strategy.
[CAPTION]: China Southern works closely
with other airline companies aiming to provide more convenient services to passengers.
Communication mechanism between China
Southern and stakeholders
1. Investors
Publication of annual reports and quarterly
interim reports.Convocation of General Meeting of Shareholders, Board Meeting and Board of Supervisors Meeting. Routine Road-shows.
2. Government authorities
Continuation of cooperation with Tourism
Bureau of Australia.Strategic cooperation with Tourism New Zealand, the City Government of Los Angeles and the Australian Consulate-General
Guangzhou. Selected by the Ministry of Industry and Information Technology to be a trial enterprise for Internet innovation.
3. Customers
Conduction of passenger satisfaction surveys.Introduction
of cabin service quality SMS feedback system and the implementation of consumer service consultation. Launch of the official “China
Southern EU” account on Facebook.
4. Industry associations
Hosted the 2014 SkyTEAM China Conference
of Strategy and SkyTEAM Conference of Anti-Fraudulent. Participated in the IATA 2014 Cargo Annual Meeting. Accepted to be a full
member of Cargo 2000.
5. Employees
Initiation of Employee Assistance Program
(EAP).Provision of Mother’s Room and Flight Attendants’ Amenity Center.Introduction placement for oversea employees.
Held legal, IT and culinary technique contests.
6. Suppliers
Issue of the Guideline of Supply and
Service Procurement, refinement of procurement internal process and increase supervision on suppliers’ compliance to
regulations. New Procurement Management Regulation will be introduced.
7. Partners:
New ticketing platform in cooperation with
China Unicom. Expansion of global distribution system in cooperation with TravelSky.Strategic cooperation with Guizhou Airport
Group.
8. Communities
Participation in Ludian and Hotan earthquake
rescue missions. Transportation of Peacekeeping Force to countries such as Mali and Liberia. Charity and social activities such
as Poverty-relief Donation Day, “Bookcase of Dreams” Charity Sale, Guangzhou city tour for school children of western
Hunan. Donation to Jinan University, Guizhou University and Zhengzhou University.
9. Specialists
Meteorological radar training by Rockwell-Collins.Symposiums
and conferences of Free-trade-zone and the development of airport regions, Cross-border logistics at Guangzhou hub and English
proficiency improvement of service providers at airline companies. Air Catering celebrity chef seminars.
10. Media
Media and publicity events such as inviting
Xinhua News to Comprehensive Tax-bonded Zones; inviting local and international journalists to China Southern headquarter; inviting
Hainan media to China Southern. Accepted exclusive interviews by CCTV, Forbes, Russia Today and joint German media.
11. Other players in the industry
Additional codeshare flights with Delta
Air Lines. Extended codeshare network with Air France. KLM senior management’s exchange visit to China Southern.
3. SAFETY
Safety is the paramount mission and the
most important social responsibility of an airline company. We at China Southern have been adhering to our safety philosophy of
“Safety first, People foremost”, and have been striving to fulfill our safety values of being “scientific, people-oriented,
standardized and sustainable”. In 2014, we recorded 2.03 million safe flight hours and the accumulated safe flight hour reached
13.52 million; continue to maintain the highest safety record among all Chinese airlines.
Accumulated safe flight hours of 13.52million
Consecutive aviation security of 246 months
3.1 Safety System
The goal of China Southern’s safety
system is the continuous implementation of risk identification, analysis, appraisal and control. Such system was founded on the
premise of focusing on preventive actions, preventing oversight and opposing violation of regulations. Through measures including
perfection of regulatory framework, consistent technology innovation, introduction ofexcellent talents, strengthening ofperformance
management, we aim to uphold an active control of safety management, clarify and allocate safety management responsibilities to
every level so as to reduce safety risk to the minimal, control incident errors to within the target range, consistently reinforce
safety foundation hence becoming an airline that is in forever pursuit of safety.
3.1.1 Safety organizational structure
China Southern has formulated a relatively
comprehensive safety management system, covering operation, business and management elements. China Southern holds the following
principles:
| l | Level of authority matches level of responsibility; |
| l | Responsibility allocated to each position; |
| l | Responsibility fully assumed; |
| l | Collaboration in ensuring safety. |
The Safety Management Committee (SMC) is
the highest authority over safety management, the Safety and Quality Supervision Division is the functioning body in charge of
safety management and safety supervision. Each department takes full responsibility for its own safety performance. The General
Manager of each department is the principle person-in-charge who assumes full responsibility for the safety performance; the head
of safety management in each department is the representative of safety and quality management, and each employee is accountable
for the safe operation at his/her own post.
2014 was the “Year of Regulation
Implementation”, stressing that the foreground of safety management implementation is on the operational front line. The
center statement of 2014 was to cohere to the awareness of issues in safety management issues exposed among front line staff and
management team, so as to ensure continuous safety.
Safeguarding over 2000 flights per day
Safety carrying over 270,000 passengers
per day
24-hour round-the-clock operation
3.1.2 Safety institutional system
In full compliance with relevant policies
and regulations issued by CAAC and ICAO, China Southern has established a complete array of safety management structure, and has
constantly been revising and updating such structure pursuant to the evolvement of industry and technology, ensuring that the standards
and regulations are up-to-date to the latest operational practices. We have always been in a leading role amongst Chinese airlines
in terms of the establishment and refinement of operation standards, policies and regulations, as well as operation procedures.
Our operation manuals cover all components ranging from flight operation, flight training, maintenance and engineering, operation
control to cabin safety, aviation security, ground service, cargo and baggage handling, and safety management, involving all operation
positions including flight crew, cabin crew, dispatcher, maintenance engineers and ground handlers.
China Southern has gradually formulated
a structure of operation standards through codeshare operation audits by oversea partner airlines, IOSA safety audit and various
inspections by experts in safety operation management and safety audit. Not only that all of China Southern’s operation manuals
are in full compliance with CAAC regulations, the standard applied in a number of manuals are in fact higher than that of the CAAC,
ensuring a more robust safety management system.
Structure of China Southern’s operation
manuals
[CASE STUDY]: Revision of manuals and regulations
In 2014, after extensive internal consultation
process, the System Operation Control (SOC) of China Southern identified 34 defective clauses in the operation control manual,
collected over 630 suggestions and evaluated nearly 90 day-to-day safety risks. The SOC has complete manual revision in response
to these issues and suggestions raised.
3.1.3 Safety cultural system
During years of practices, China Southern
concluded the safety value of “Scientific, People-oriented, Standardized and Sustainable” that consists of the understanding
of the philosophy of safety responsibility, behavior standards and target expectations.
[FIGURE]: Safety cultural system
Criterion |
Expectation of Behavior |
Dissemination of Safety Culture |
Safety Awareness |
Safety
Action |
Scientific |
System engineering |
To be more comprehensive |
To be more and more strict and meticulous |
Formulation of safety management system |
Technique control |
Higher and more stringent standard |
-To establish a hierarchical release and clearance
standard;
-To ensure a balanced operation environment |
-Operation standard management;
-Flight technique management |
People
-Oriented |
Voluntary reporting |
- Exempt from disciplinary action for minor
incidents;
-Reduced disciplinary action for major incidents |
-Constant alert of unsafe events;
-Overall fine-tuning;
-Proactive prevention |
-Safety information reporting system;
-Safety responsibility assessment |
Full-crew participation |
-Safety ensured by all employee;
-Safety assured at all times |
-Transform from “safety is a requirement
to me” to “safety is what I require”;
-Transform from a top-down safety approach
to a universal safety culture |
-Events such as “Ankang Cup” series of contests; 100-day safety contest and Safe Operation Forum; |
Standardized |
Compliance |
-Reasonable regulations;
-Practicable applications |
Conform to principle and regulations |
Regulations and manuals |
Implementation |
-3-tier accountability system
-2-way assessment system |
-Responsibility of leadership;
-Responsibility of management;
-Responsibility on job |
-Assessment instructions of aviation security responsibility |
Sustainable |
Process surveillance |
-Quality assurance at every link
-Proficient supervision |
-Target responsibility assignment: detailed
and strict;
-System employ and execution: steady and solid;
-Performance tracking and assessment: thorough
and accurate |
-Safety management implementation guideline;
-Genetic mapping and safety roadmap;
-Incident tracking and investigation;
-Safety audit |
Review and optimization |
Learn from useful experience and new methodology |
Long-term safekeeping keeps long-term safety |
-Management assessment;
-Performance audit |
Staff force is the direct executor and
the master of safe operation. In safety management, weare striving to centerourselves on the core of “people”, basing
upon the staff, ensuring that an awareness of risk and bottom-line is among the entire workforce while enhancing the sense of responsibility
throughout.
On the one hand, China Southern cultivates
and develops its safety culture through various safety promotion activities such as safety contests, safety training and safety
lecturing, aiming to embed the safety value of “scientific, people-oriented, standardized and sustainable” to the staff
and their work. We have created special columns in our internal media in order to encourage our staff to actively participate,
to provide suggestions and recommendations, and to contemplate improvement measures, creating an atmosphere that safety is ensured
by all staff and assured at all times.
On the other hand, China Southern has established
a safety incident communication and reporting mechanism. We were the pioneer in the industry to have created a liability exemption/reduction
scheme for active reporting, as well as an reward system for voluntary reporting, so that our employee can be encouraged to provide
suggestions and support to our safe operation proactively and voluntarily, assisting the company to identify safety risks and incidents
in a timely manner. We have designed dedicated channel for our employee to report potential safety hazards, safety advices and
unsafe actions, and have been promoting a voluntary reporting system together with the building of the principle of good faith,
in order to continuously optimize the safety management system.
June 1, 2014 to June 30, 2014
Safety philosophy publicity and implementation
week
Safety education based on case studies
week
Safe operation consultation day
Contingency plan rehearsal week
Safety culture building week
China Southern held its first Knowledge
of Regulation Contest for the flight operation line of staff in 2014. Contest questions were selected from regulatory documents
and manuals such as Corporate Operation Manual and Aviation Safety Management Manual, closely related to the year’s safety
theme of “Regulation Implementation”. Such contest had proved effective in promoting learning initiative among our
employees and enhancing operational techniques of employees at key positions.
3.2 Safety Components
3.2.1 Flight safety
Flight safety is the core of safety management
of any airline company. In 2014, China Southern emphasized on the operation and training aspects of flight safety management through
means of innovative mechanism, team-building and team-management in order to advance on progress and ensure flight safety. Our
key focus was on the following four fronts:
| a. | Define annual safety targets;continuous application of process surveillance. |
In accordance with Aviation Safety Management
Manual, safety responsibilities were broken down to the front line staff tier by tier. Precaution was emphasized and process
management was reinforced, in order to ensure that safety operation was on the target track.
| b. | Tighten safety responsibility assessment;comprehensive implementation of safety responsibility. |
Responsibilities of managerial positions
were included in safety assessment; the ascertainment of accountability ofincidents above certain grade and incidents of regulation
violation were strictly enforced; level of disciplinary actions taken to violations were increased, the awareness of bottom-line
was increased.
| c. | Implement 3-tier inspection mechanism; strengthen close-loop safety management. |
Each division was required to carry out
regular inspection according to the standardized checklist. Headquarter carried out supervisory inspection by ways of spot-check
and covert investigations to key divisions, systems and posts, and provided comments and appraisals according to issues collected.
All issues were required to be tackled within a prescribed limit of time in order to effectively resolve the weakest links and
practical problems that affect operational safety.
| d. | Devote efforts to quality and competence training; strengthen team building of flight crew. |
Quality and competence building, safe operation
training and team spirit management are the three key elements in flight crew safety assurance. Directed by existing issues, we
guaranteed all trainings were performed properly through a systematic approach, and fostered leadership models in management, enabling
our flight crew to be a proficient, upright and high-spirited team.
Close-loop safety management
Tasks were assigned during meeting at the
beginning of every month – Execution and implementation after the meeting – Interim inspection and supervision –
Comments and appraisal at thebeginning of next month – Rectification and improvement – Mitigation of safety hazard
Investigation of source of risk and
formulation of preventive actions
| a. | Source of risk: adverse weather condition |
Counter-measure:
Strict execution of the “Eight guidelines to follow and one action to oppose” principle
Trainings
on operation under adverse weather condition, the use of communication radar and performance of contaminated runway were carried
out. Reiteration of the “Eight guidelines to follow and one behavior to oppose” principle:
Go-around
if condition requires;
Cloud-hopping
if condition requires;
Turn-back
if condition requires;
Alternate
if condition requires;
Divert if
condition requires;
Hold if condition
requires;
Remind if
condition requires;
Act if condition
requires;
Object aimless
and reckless actions.
| b. | Source of risk: new routes and new airport |
Counter-measure: Improve quality
of pre-flight briefing
Unfamiliar airport environment
may invoke risk to safe operation. China Southern requires all flight crew to carefully go through flight chart and NOTAM; to familiarize
themselves with approach and departure procedures, waypoints, limits on altitude and speed before flight operation so as to reinforce
safe operation on new routes.
| c. | Source of risk: newly-certified captains |
Counter-measure:
Rational pairing of flight crew
In order to
ensure a rational pairing of human resources on the flight deck, China Southern has performed crew resource management (CRM) training,
and has improvedpairing of captain and co-pilot hence optimizing the rationality of flight crew capability. In the mean time, China
Southern requires all flight crew on duty to strengthen their pre-flight collaboration of aviation security and collaboration during
flight, identifying respective responsibilities and ensuring flight safety.
[LINK]: Captain
He, the most honorable captain
Flight CZ3739
took off from Zhuhai headed toward Beijing in the evening of November 10, 2014. The aircraft encountered technical problem midway,
and the situation was rather critical. As all passengers onboard were panicking, Cap. He’s voice rose in the speaker: I have
undergone the most stringent training. I am capable of taking the situation and control. I am capable of bringing all of us safely
back on ground. His confident tone successfully calmed the cabin down. After just over an hour, flight CZ3739 landed safely at
Guangzhou Baiyun International Airport with no injuries. Cap. He was praised as “The most honorable captain in China”.
Cap. He said
at the press interview that he indeed had the confidence of landing the aircraft safely, and it was his obligation to convey this
confidence to the passengers. He pointed out that it was their duty as pilots to ensure safety of every flight.
3.2.2 Aviation security
Aviation security is systemengineering,
involving a range of components such as flight, ground support, cargo and maintenance. Flaws at any one component could affect
the safe operation of flights. In the realm of aviation security, China Southern follows the principle of “guard in air,
prevention on ground and internal elimination”. We have adopted aviation security measures on many fronts, notably:
Perfection of contingency plan and procedure.Aviation
Security Program, Aviation Security Training Plan,Aviation Security Quality Control Plan, Aviation Security Management Structure
Manual and Cargo Security Working Manual had been issued in year 2014.
Bringing forward the aviation security
controlling point. In 2014, the Cargo Division carried out special rectification programs addressing violations in air freight
and mail transportation, enforcing stringent inspection of dangerous goods and forbidden items. The Ground Service Division intensified
inspection on passenger identity and baggage, all hazardous baggage and passengers with invalid identification would be denied
boarding.
Consistent security evaluation.Safety
risk appraisal was a main area of work in 2014. We reinforced information collection and collation, carried out pointed route analysis
and published risk evaluation bulletin. We have achieved an integrated aviation security information management system of information
collection, analysis, determination and measure formulation, publication and implementation.
Attaching greater importance to aviation
security enforcement team. Weorganized theoretical, physical and practical trainings for all air marshals and guards, improving
the general proficiency and the ability to handle emergency situations of air marshals and guards.
China Southern achieved 20 years of
aviation security
2014 witnessed a number of terrorist attacks
in various cities of China. Aviation security is also under considerable threat. In order to ensure aviation security in this challenging
time, China Southern raised its standard of airborne safeguarding, ground prevention, elimination of internal risk factors and
emergency information management, and met the year’s aviation security target. June 6, 2014 marked China Southern’s
20 consecutive years of aviation security, an industry record that we proudly created.
3.2.3 Maintenance safety
In 2014, China Southern used anti-violation
as the breakthrough point and launched a “100-day of anti-violation” campaign themed “consolidating awareness,
opposing violation, eliminating potential hazards, assuring safety”. This campaigned raised the safety awareness of compliance
to regulations, established the thinking, practice and culture of anti-violation among all maintenance staff. Meanwhile, safety
management system (SMS) was emphasized, risk management was deepened and preventive actions were brought forward. We have targeted
repetitive breakdown on key systems and key links, analyzed loopholes, identified points of risk and materialized a risk proactive
analysis and warning, as well as a complete process control. In 2014, the Maintenance and Engineering (M&E) Division accomplished
69 risk identification and management project, especially in terms of engine management, the M&E Division identified 80 potential
defects that may cause engine in-flight shut down (IFSD), applied24 emergency engine changes and carried out 310 troubleshooting
procedures which havesuccessfully prevented the occurrence of IFSD, thus laid a solid cornerstone to a year of safe operation.
A comparison of dispatch rate between China
Southern’s fleet and world average
[LINK]:
China Southern had once again achieved 18 consecutive months of zero IFSD
Under the circumstances where the number
of aircraft was constantly expanding and flight hours are rapidly growing, China Southern had once again achieved the record of
18 consecutive months of zero IFSD in June 2014.
3.2.4 Cabin safety
China Southern fully adopted SMS throughout
its Cabin Division in 2014, completed safety information collection, analysis and commenting, perfected monthly SMS and unsafe
information prompts system, and thoroughly disseminated the Cabin Safe Operation and Protection Guidelinefocusing on developing
the competence in areas of cabin door operation, emergency medical support, turbulence handling and emergency evacuation. The Cabin
Division combined internal and external audit, carried out regular source of risk examination hence have materialized the transformation
from “handle after occurrence” to “prevent before occurrence”. In the meantime, Cabin Division enforced
certification training management, enhanced safety emergency training and improved emergency handling capability of cabin crew
members. Pass-at-first-attempt rate, attendance record and violation record have been included into the performance assessment
of Cabin Division. Furthermore, the Cabin Division has been vigorously building a safe cabin culture, surrounding various aspects
of safety knowledge, certification and competence, team management and spirit building. Cabin Safety Forum was also held in order
to further raise safety awareness of cabin crew, and improve their ability of cabin safety management and control.
[LINK]: China Southern introduced new version
of safety demonstration
According to regulation, airlines are obliged
to perform safety demonstration to all passengers before take-off, explaining the position and use of emergency equipment such
as emergency exits, seat belt and oxygen masks. However, some passengers may consider such safety demonstration dispensable, and
very few would pay close attention. In order to increase passengers’ attention, China Southern as the first of all Chinese
airlines, introduced an elaborately designed new safety demonstration video with Chinese painting elements –the China
Southern Airlines Safety Demonstration, a Verse of Ink and Brush. This version gently delivers safety information on the background
of a refreshing fusion of air transport and Chinese ink and brush painting techniques.
Promoting competence of cabin safety
management and control
Consistent cabin safety supervision and
inspection
Vigorous cabin crew certification training
management
Up-to-date new aircraft type and new route
risk examination
Diversified safe cabin culture education
3.2.5 Ground safety
Ground safety consists of ground operational
component of vehicular movement, fire control and public health. China Southern initiated IATA’s Ground Operation Safety
Audit in 2014, covering every process, component and stage of ground operation, emphasizing on key components in fire control,
vehicle safety, lithium battery transportation and alcohol monitor, boosting the execution of multiple measures through auditing,
and ensuring all potential hazards were examined and mitigated. In response to issues revealed at audit, our safety management
team followed on the rectification process and inspected the outcome. Rectification results after safety audit were brought into
assessment criterion of relevant departments. Regarding ineffective rectification and repetitive issues, we have formulated more
stringent assessment standards ensuring a close-loop management.
3.2.6 Food safety
Air catering is specialized in providing
food and drinks to the particular field of air transportation, which is also a key component on the chain of safety management
of an airline company. In 2014, China Southern commenced trainings specifically in the areas of safe production, post operational
proficiency, food safety surveillance and food safety risk management. In which, over 60 safety-targeted trainings were held, more
than 5000 employees were involved. Employees’ safety awareness and adherence to regulations were both enhanced through training,
therefore had effectively increased level of safety risk management and control.
3.2.7 Transportation of dangerous goods
China Southern introduced a new version
of Dangerous Goods Transportation Manual in October, 2014. This manual is the policy, standard and procedure basis that
all employees have to adhere to in order to carry out dangerous goods (DG) transportation duties legally, safely and effectively.
This manual is applicable to both international and domestic transportation businesses.
China Southern introduced new version of
Dangerous Goods Transportation Manual. On employee interface, China Southern extends trainings on DG transportation among
its freight, passenger and ground service departments. China Southern has issued DG checklists, enhanced dissemination of latest
regulations and propagated safety management requirements.
On client interface, China Southern standardized
baggage-accepted-at-gate procedures, and is constantly working on spreading information of DG acceptance to passengers, perfecting
supplementary agreements of DG with its agents and respective inspections, and ensuring the notification and management of DG acceptance.
3.3 Safety Performance
We have completed 2.03 million flight hours
in 2014, and the accumulated safe flight hours reached 13.52 million. In total, 182 months of flight safety and 246 months of aviation
security have been recorded. In addition, we have also ensured fire and public health safety in 2014, achieved an excellent result
of safety management.
Category |
Item |
Year 2014 |
Safety Indicators of 2014 |
Incident per 10,000 flight hour |
0.012 |
Maintenance incident per 10,000 flight hour |
0 |
Serious maintenance incident per 10,000 flight hour |
0.012 |
N.B. For definitions of indicators used
in this table, please refer to CAAC’s Civil Aircraft Flight Incident (MH/T 2001-2013) standards.
Category |
Flight hour (million) |
Date of Completion |
Number of each million-safe-flight-hour and their date of completion |
3 |
April, 2006 |
4 |
May, 2007 |
5 |
June, 2008 |
6 |
July, 2009 |
8 |
March, 2011 |
10 |
September, 2012 |
12 |
January, 2014 |
13 |
October, 2014 |
Category |
Year |
China Southern |
National average |
Incident per 10,000 flight hour |
2005 |
0.130 |
0.390 |
2006 |
0.064 |
0.340 |
2007 |
0.065 |
0.300 |
2008 |
0.064 |
0.280 |
2009 |
0.089 |
0.320 |
2010 |
0.008 |
0.384 |
2011 |
0.000 |
0.374 |
2012 |
0.036 |
0.425 |
2013 |
0.020 |
0.383 |
2014 |
0.012 |
0.051 |
N.B. The above is only inclusive of incidents
caused directly by China Southern, excludes manufacturer and accident reasons. The above does not include Xiamen Airlines.
4. ENVIRONMENT
Protecting the environment that we are
living in is vital to the development and future of the human race. As a responsible enterprise, we are committed to standing by
our values of “Green flying, green consumption and green innovation”. We are persevering in pushing reduction in energy
consumption and emission, taking green development as a critical means of addressing our environmental responsibilities and the
sustainable development of the company.
4.1 Environmental Policy
4.1.1 Environmental philosophy
Environmental issues are crucial to the
sustainable development of the human society. We are closely following the adverse impact that a sharp increase in Greenhouse Gas
(GHG) emission has on climate change and biodiversity. We are actively responsive to interim goals and actions advocated by the
United Nation, ICAO, IATA and SkyTEAM with regard to sustainable business development, as well as policies on energy saving and
emission reduction formulated by the Chinese government. We are taking proactive measures in addressing our environmental impacts
by increasing efficiency of energy utilization and reducing emission of GHG, undertaking our responsibilities in environmental
protection, ecological balance and sustainable development.
As part of our wider environment strategy,
in 2014, we deployed multiple innovative and technical means to the areas of fleet modernization, aircraft retrofit, route optimization,
low-carbon air travel and the use of new energy in order to achieve energy saving and emission reduction.
4.1.2 Environmental policies
China Southern published its Corporate
Policy of Environmental Protection in 2007, aiming to continuously increase the level of environmental management.
| a. | Fully comply with environmental codes of practice set by national authorities, meeting the goal
of low emission, and low energy consumption. |
| b. | Our commitment to environmental protection is based on pragmatic practices and achievable objectives. |
| c. | Actively raising environmental awareness of the employees, encouraging employees’ participation
in environmental protection actions. |
| d. | Ensure the transparency and accessibility of our action plans, and disclose internal environmental
protection information to stakeholders. |
| e. | Working closely with the expectation of stakeholders. |
| f. | Inclusion and supervision of the environmental performance of subsidiaries. |
4.2 Use of Resources
4.2.1 Energy consumption
The consumption of resources in China Southern’s
operations are split across two categories, namely energy and water. Energy consumption consists of fossil-based jet fuel and fuel
used on ground operation, such as gasoline, diesel and electricity. In 2014, jet fuel accounted for over 98% of all energy consumed.
| l | China Southernconsumed 6.01 million metric
tons of jet fuel in 2014; direct emission of carbon dioxide from the burning of jet fuel was 18.94 million metric tons. |
| l | Ground energy consumption: 1.39% |
| l | Water consumption: 6.42 million metric
tons. |
2014 energy consumption statistics by category
Category |
Quantity
(metric tons) |
Equivalent Standard Coal (metric tons) |
Share |
Jet-fuel |
6,013,504.90 |
8,848,271.11 |
98.61% |
Gasoline |
6,935.39 |
10,204.73 |
0.11% |
Diesel |
7,988.11 |
11,639.48 |
0.13% |
Coal |
40,036.00 |
28,597.71 |
0.32% |
Electricity |
185,982.10
(thousand kWh) |
22,857.20 |
0.26% |
Natural gas |
30,422.90
(thousand m3) |
40,462.46 |
0.45% |
Liquefied gas |
641.59 |
1,099.88 |
0.01% |
Others |
6,610.00 |
9,725.95 |
0.01% |
Total |
—— |
8,972,858.52 |
100% |
4.2.2 Energy efficiency
The main energy efficiency indicators of
China Southern in 2014 are listed below:
| l | Total energy consumption was equivalent
to 8.97 million metric tons of standard coal. |
| l | Energy consumption of every 10,000RMB
revenue made was equivalent to 0.83 metric tons of standard coal. |
| l | Collective fuel-burn of all aircraft type
was 0.30kg per ton-kilometer |
Year |
Energy Consumption per 10,000RMB revenue
(tonequivalent standard coal) |
Collective ton-kilometer Fuel-burn (kg) |
2010 |
0.76 |
0.30 |
2011 |
0.69 |
0.29 |
2012 |
0.71 |
0.30 |
2013 |
0.81 |
0.30 |
2014 |
0.83 |
0.30 |
|
0.80 |
0.30 |
4.2.3 Waste disposal management
Rigorous measures are in place for cabin
waste management.
Firstly, specialized service providers
are commissioned to handle cabin waste. We have commissioned certified service providers to handle waste. It is clearly stated
in the commission agreement that the service provider must be in possession of place (landfills that are approved by regulatory
authorities or agreement with such landfills), equipment and professionals. It is also stated that waste collected are only permitted
to be reused as raw materials and not to be sold as final products.
Secondly, separate waste collection and
disposal is in place. After sterilization, solid wastes are sorted for reusing and recycling. Liquid-solid separation process are
applied to non-solid wastes, solidified wastes are then transported for specialized handling while liquid wastes are fully treated
before allowing to be discharged.
4.3 Flying Green
4.3.1 Fleet modernization
Fleet modernization is one of the most
important measures in materializing our environmental goals. Over the years we have been replacing aged aircraft with newer ones,
increasing fuel efficiency hence reducing adverse impact to the environment. Newer aircraft enjoy a greater safety margin, higher
fuel efficiency and lower noise emission. In 2014, China Southern introduced 75 aircraft(including 11 of Hebei Airlines),
retired 24 aged aircraft. The average age of our fleet was 6 years as of December 31, 2014.
Age of aircraft |
Number of aircraft in 2014 |
Share |
0-3 |
218 |
35.62% |
3-6 |
149 |
24.35% |
6-9 |
113 |
18.43% |
9-12 |
60 |
9.81% |
12-15 |
31 |
5.07% |
Over 15 |
41 |
6.71% |
4.3.2 Retrofitting of winglets
One of the measures in reducing fuel-burn
and CO2 emission is the installation of winglets. 2014 saw the completion of 17 737NG aircraft with winglets retrofitted
while 6 newly delivered 737NG aircraft were all configured with winglets ex-factory. According to actual operational data, aircraft
with retrofitted winglets may achieve an increase of fuel efficiency of up to 1.32%, translated to a reduction of 110 tons of fuel
per aircraft per year, and a subsequent reduction in CO2 emission of 350 tons per aircraft per year.
[LINK]: A winglet is a usually upward bending
vertical extension of the wing tips. The primary function of a winglet is to lower drag, increase lift and improve fuel efficiency
of fixed-wing aircraft. Retrofitting winglets has become an effective means for airlines to further reduce fuel-burn and improve
performance, and is widely used by airlines in the world. China Southern started winglet retrofit in 2011. 89 737NG aircraft have
undergone the retrofitting process at the end of 2014.
4.3.3 Engine upgrades
China Southern started upgrade on 14 Rolls-Royce
Trent 900 engines in 2014. It is expected that a 1% reduction in fuel-burn will be achieved, which means a saving of over 100 tons
of fuel and a reduction of 315 tons of CO2 emission per engine per year. China Southern plans to complete another 31
upgrades on Rolls-Royce Trent 700 engines, achieving a 1% fuel-burn reduction, 95 tons of fuel savings and 300 tons less CO2
emission per engine per year.
4.3.4 Accurate payload reporting and
submission
Accurate payload reporting and submission
can effectively reduce fuel-burn. We launched an accurate payload reporting and submission scheme in 2014 with clarified methods
of submission, refined function of the reporting system and promoted our new weight and balance (W&B) system. We have also
published The Notice on Standardizing Flight Pre-stowage Payload Data Reporting and Submission, as well as a payload reporting
and submission operation manual for the W&B line of staff. Through a series of measures, as of November 2014, the deviation
of expected payload had been lowered by 15.48%, resulted in a consequent fuel saving of 294 tons.
China Southernretracted W&B operations
at eight airports including Brisbane, Melbourne, Perth, London Heathrow and Frankfurt, which have unified operational standards
and increased payload reporting and submission accuracy.
4.3.5 Optimization of aircraft center-of-gravity
According to studies and recommendations
from Airbus and Boeing, sectional fuel-burn may be reduced by 0.5% if the center-of-gravity (COG) of an aircraft is kept within
the fuel-saving zone. China Southern initiated a research program in July 2014 further studying this particular means of fuel-saving.
In August, E190 was selected as the trial aircraft type for COG control. 777 and A330 series was added to the trial soon after.
In September, fuel-saving COG control was officially launched on the three aircraft types of E190, 777 and A330. Our W&B specialists
exercised precision balancing technique ensuring the COG of each aircraft was safely located within the fuel-saving zone. This
technique has proved to be effective in increasing fuel-savings.
4.3.6 Route optimization
Reasonable and optimal distribution and
path of flight route is critical to the overall fuel efficiency of the company.
In 2014, China Southern initiated Xinjiang
G470, Changsha, Kunming, Shantou, Heilongjiang, and Dalian approach and departure route optimization program. Starting from June
23, 2014, the optimized routes in these six navigation zones were progressively deployed. After optimization, a flight time saving
of 20 minutes could be achieved for flights using the new Xinjiang G470 route, which was the greatesttime-saving of all optimized
routes. The optimized routes in Heilongjiang navigation zones were incorporated into flight plans resulting in a long-term fuel-saving
for flights operating across this zone. These measures that have significantly increased route operating efficiency is a highlight
in 2014’s route optimization program.
Moreover, the statistics of operational
outcome of using optimized routes were done manually in the past, which meant a real-time display of optimization outcome was not
possible. Started with the use of Quick Access Recorder (QAR), China Southern developed a route optimization automatic decision
program. Through statistical analysis of mass data obtained from QAR, decisions on whether to deploy optimized route can be made
automatically. This program is now able to perform decision-making for operations in Xinjiang G470, Kunming, Shantou and Changsha
navigation zones.
Highlights of 2014’s route optimization
program
Optimized Xinjiang G470 route reduces flight
time by 20 minutes, produces significant fuel saving;
Optimized Heilongjiang route incorporated
into flight plan, resulting in long-term fuel saving
Developed route optimization automatic
decision program that provides real-time route optimization outcome;
Route optimization in 2014
Type of Route |
Number of flights with optimization potential |
Number of flights optimized |
Percentage of optimization |
Flight time saving (hrs) |
Temporary Route |
103,890 |
48,644 |
46.82% |
2,851 |
Optimized route |
67,821 |
28,383 |
41.85% |
2,257 |
Total |
171,681 |
77,027 |
44.87% |
5,108 |
4.3.7 Emission Trading
The European Parliament passed the motion
of incorporating the aviation sector into the European Union (EU) Emission Trading Scheme (ETS) in 2008. Henceforth, the global
aviation companies have been paying close attention to the industrial impact of ETS. While complying with domestic and international
laws, we have been proactively studying and preparing the basics of ETS by classification and summarization of emission source
and emission data. We have worked closely with Guangzhou Property Exchange Group with regard to the standards and rules of carbon
trading market. We understand that a carbon emission trading mechanism is one of the effective means of addressing global climate
change, and we will actively meet our responsibilities and obligations, contributing our share of effort to the sustainable development
of the human society.
4.4 Lowering Carbon Footprint
4.4.1 Volunteering in environmental
protection actions
Involvement of the corporate and the employee
is vital to the practice of green development and low-carbon society. We actively advocate an environmentally-conscious lifestyle,
encourage our employee to participate in environmental campaigns and actions, aiming to raise awareness and concern to environmental
protection creating an atmosphere that everyone is caring for our environment, hence promoting the progression of environmental
protection in both global and local context.
China Southern launched its first large-scale
charity walk campaign, dubbed “Walk for Love” onJune 15, 2014. The 13km-long walk started from Conghua County
of Guangzhou, advocating a concept of “leave no trace”, promoting healthier and more environmentallyfriendly lifestyle.
4.4.2 Energy saving week
As an attempt to promote energy saving,
low-carbon living and environmental consciousness to our colleagues and friends, we organize Energy Saving Week on a yearly basis.
The theme of 2014’s campaign was “Join hands in energy saving and low-carbon living, together we will bring back clear
water and blue sky”. During this year’s Energy Saving Week, we made every use of new media channels including our official
Weibo page, Corporate Social Responsibility Weibo page, official WeChatplatform to convey our concepts and
actions, advocating greener travel and that every little action helps with energy saving, so that a low-carbon footprint lifestyle
would become a self-conscious behavior.
4.5 Innovative Development
4.5.1 Paperless air travel
Starting from August 12, 2014, passengers
traveling from Guangzhou on domestic flights operated by China Southern who are in possession of the second generation ID card
and have completed online check-in may choose to use their ID cards for security check and boarding. With this new addition, China
Southern is now able to provide a complete paperless travel experience covering ticketing, payment, check-in, security check and
boarding.
4.5.2 Paperless flight deck
Electronic flight bags (EFB) store information
and data of every flight stage into a tablet device. Compare to traditional paper flight manuals, EFB are smaller in size, lighter
in weight, easier to update and more efficient in information acquisition. Members of the flight crew are only required to input
the basics of operation such as temperature, air pressure and take-off data before accurate information can be produced.
China Southern introduced a trial program
across its flight crews of Guangzhou base in 2014. China Southern’s EFB version covers 90% of traditional paper documents,
including flight manual, performance materials and dispatch materials.
Each tablet device with EFB weighs only
1kg, compare to approximately 60kg of traditional paper manuals. The application of EFB means a saving of 59kg of aircraft Operating
Empty Weight (OEW).
4.5.3 Application of new energy
Over the years we have been paying close
attention to the use of new energy. The CAAC has grantedSINOPEC with the Chinese Technical Standard Order Authorization (CTSOA)
to its No. 1 Aviation Biofuel. We follow closely with the recent development of biofuel in China, and have launched research program
on the market prospects of biofuel. In terms of application, we have taken initiatives in selecting more energy efficient product
in our ground operations. In 2014, 11 electric forklift, 5 electric baggage tractor, 6 ground power vehicles, 1 electric ground
air condition truck and 1 air source trailer were put into use, which have reduced the use of crude oil on ground, reduced the
use of jet fuel on APU and effectively reduced energy consumption and CO2 emission.
[LINK]: Use of energy-saving products
Xinjiang Civil Aviation Industrial Co.,
Ltd replaced 10 diesel coaches with CNG coaches in 2014 for transporting passengers between airport and Ürümqi city.
This could reduce 10 tons of CO2 emission every year.
5. SERVICES
China Southern is committed to the service
concept of “beginning with customers’ feelings and cherishing every opportunity to serve”, enhancing communications
and interactions with our customers and seeking opportunities to improve service quality. We also make use of advanced technologies
to help us in delighting customers with our services, providing them with good value-for-money, hence creating a win-win situation
and harmonious development.
In 2014, our flight punctuality rate was
72.61% and the complaints rate was 0.034%.
2014 marked China Southern’s“International
Brand Service Expansion Year”. Guided by our service concept of “beginning with customers’ feelings and cherishing
every opportunity to serve”, we consistently increased our investment in service, improving in-flight service quality and
service niche, creating our competitive edge. Through various internal campaigns and initiatives, we have brought our service awareness
and service standard to a new level.
A consistent focus on service strategy
and promotion of service quality
2007, Year of Quality Service
2008, Year of Brand Service
2009, Year of Brand Service Promotion
2010, Year of Brand Service Expansion
2011, Year of Brand Service Innovation
2012, Year of International Brand Service
2013, Year of International Brand Service
Promotion
2014, Year of International Brand Service
Expansion
Service Indicators |
2014 |
2013 |
2012 |
Flight punctuality rate* |
72.61% |
74.13% |
77.16% |
Malignant delay rate |
1.14% |
-- |
-- |
Complaint rate# |
0.034% |
0.034% |
0.033% |
Through check-in rate |
98.77% |
97.10% |
98.71% |
Baggage error rate |
0.090% |
0.089% |
0.027% |
* For definition and reference data, please
refer to materials issued by the CAAC.
# Weighted average based on CAAC’s
monthly report.
5.1 Understanding Needs
Homogenization of product is common in
the aviation sector. With this increasingly competitive market, our industry has entered into the “buyer’s market”.
In response, we are constantly transforming ourselves alongside the change of market trend. We focus on the principle of being
customer-oriented, and endeavor to explore customers’ needs and preferences, rationalize our distribution of resources and
deliver just the right service. We aim to realize customers’ values while realizing our own values at the same time.
5.1.1 SMS evaluation program
China Southern launched post-flight passenger
SMS evaluation program in January 2014 on flights between Beijing, Shanghai, Guangzhou and Shenzhen, as well as long-haul services
to Los Angeles, Sydney, London Heathrow and Vancouver. SMS messages are sent to passengers after the flight collecting feedback
and suggestions based on their travel experience. In August, we added follow-up SMS asking passengers to provide further comments
to our weaknesses so that real-time issues may be collected immediately after every flight for analysis and improvement purposes.
5.1.2 Obtainpassenger feedback through
multiple channels
Cherishing criticism from our passengers.
In February, a passenger posted a critique online, with comments on our service, onboard catering and cabin interior in first class
after traveling with us from Los Angeles to Guangzhou. We treated this comment highly seriously and immediately launched investigation
into the case. Improvement measures were soon been executed across all international cabin services onboard A380. In the meantime,
a one-month cabin service improvement program was initiated that included identifying service shortcomings of each service component,
rectifying insufficiencies and improving overall customer satisfaction.
Installing passenger service evaluators.In
March, electronic evaluators were installed at our premium passenger check-in area in Beijing Capital International Airport, inviting
passengers to provide authentic and real-time feedback to our premium services. Feedback choices include “Satisfied”,
“Dissatisfied”, “Baggage impeded”, “Service defect” and etc. We will commence the installation
of second generation evaluators to other check-in and ticketing counters, expanding feedback collection channel, assisting our
constant optimization of service and quality.
Inviting suggestions from passengers.
In August, we started to reach out and invite passengers who had traveling experience on our premium economy class to fill out
feedback forms via our official WeChat platform. All passengers who have shared their experiences and comments with us are
entered into a prize draw of a free one-way premium economy class ticket. We will incorporate the comments and suggestions collected
into our service revamp and reinvention in order to create a more delightful travel experience for our premium economy class passengers.
5.2 Product Design
5.2.1 Introduction of “Kapok Kids”product
Unaccompanied Minors traveling by air alone
is not an uncommon sight nowadays, especially during summer school holidays. China Southern launched a new “Kapok Kids”
product on 2014’s International Children’s Day. With this product, parents of the Unaccompanied Minors are provided
with memorable moments of their children’s traveling experience by the visualization recording done by our ground and cabin
staff throughout their trips.
Our staff would photograph playing, traveling,
dining and interacting scenes in children’s play area, waiting hall, gate and onboard for the Unaccompanied Minors whose
parents have signed up for this product. These images would then be uploaded to designated portal after the flight for parents
to view and download. This product could ease the anxiety parents may have when their children are traveling alone, and could also
provide a valuable visual memory as part of children’s growth. This service is free-of-charge to all parents of Unaccompanied
Minors.
In the months from June to December 2014,
over 20,000 Unaccompanied Minors have taken advantage of this product.
[CASE]: Due to her demanding job, Miss
Wang of Guangzhou is a frequent user of China Southern’s Unaccompanied Minor service. Her daughter Yuanyuan has been traveling
alone on our flights back to her family home in Sichuan province several times. Miss Wang was one of the early users of the “Kapok
Kids” products. She said that this product not only could help ease parents’ anxiety, but also leave us with image
records of Yuanyuan’s travel experience that will be priceless recollections of her growth. Yuanyuan herself was also very
cheerful, and said that with “Kapok Kids”, her mother no longer worried about her traveling alone.
5.2.2 Free travel package for transit
passengers traveling via Guangzhou
Pre-declaration procedure was waived in
May 2014 for foreign transit passengers using the 72-hour visa-free service in Guangzhou, and can now be processed at immigration
counters at the airport. In order to grasp this opportunity and promote the impact of our transit brand hence meeting passengers’
needs, we launched free travel package in September for transit passengers traveling via Guangzhou. Transit passengers who are
originally eligible for free accommodations now have a choice between free accommodations or free Guangzhou day-trip package. We
have designed several sightseeing plans to enrich transit passengers’ experience in Guangzhou. For instance, our “Economy
Plan” now consists of a 24-hour free travel card and admissions to main tourist attractions.
5.2.3 “Traveling with us, caring
for you” Project
Targeting at passengers who need special
assistance during travel, China Southern introduced the “Traveling with us, caring for you” project across domestic
flights departing from Guangzhou.
[FIGURE]: Passengers who need special assistance
and passengers with illness or disability, visually impaired passengers, female passengers traveling alone with infant, pregnant
women between 24 and 36 weeks of pregnancy, unaccompanied elderly over the age of 65, unaccompanied minors and passengers with
reduced mobility.
Additional caring services provided include:
| l | Priority check-in. Passengers are invited
to proceed to dedicated counters for priority check-in service. Our ground staff will allocate appropriate seating according to
passengers’ special needs. |
| l | Priority security check. Passengers may
use the dedicated express lane at security check. |
| l | Priority boarding. Passengers are invited
to board the aircraft before others. |
| l | Priority baggage handling. Passengers’
checked baggagewill be handled and delivered at destination with priority. |
5.3 Quality Promotion
5.3.1 Service at flight delay
Flight delay is the last thing any passenger
would want to encounter. Though the causes to flight delay are manifold, it is the airlines’ responsibility to improve proposition
to passengers in terms of providing adequate support and serviceafter flight delay occurs.
Information disclosure. We
make effective use of Wechat Instant Messages, SMS and telephone to reach passengers with latest flight status. Flight status
update information boards are installed at notable locations inside the airport terminal, along with rolling information broadcast
of rebooking, accommodation arrangement and baggage claim, directing passengers to respective counters for different procedures.
Service counter arrangement.
We aim to refine our delay service provisions and improve the support we offer to passengers during flight delay. Therefore, flight
rebooking, accommodation arrangement and baggage claim counters have been set up with added number of counters for flight rebooking;
and fixed passenger accommodation assembly points were also created.
Transit procedure. We have
increased our focus on transit passengers. When flight delay is anticipated, transit passengers who are likely to be affected will
be rebooked to new connecting flights and their information will be transmitted to destination airport in a timely manner. Constant
communication and coordination are maintained with origin airport, information of transit passengers are pre-processed and new
connecting plans are made before the arrival of the delayed inbound flight.
Baggage claim. In response
to the issue that passengers on delayed flights are often facing a prolonged waiting time to retrieve their checked baggage, we
have reconfigured our baggage handling system so that in the case of large number of delays, the average sorting time for each
baggage has been reduced from 10 minutes to just 2 minutes, hence significantly saves passenger waiting time.
5.3.2 SMS notification of flight status
change
Starting from June 2014, flight delay and
cancellation notifications are sent to passengers via SMS and email. Passengers affected may obtain information on change to their
bookings in advance through SMS, or email if preferred. Apart from flight delay and cancellation, the notification also contains
supplementary information that passengers may find useful, such as traffic alert of airport expressway, meals, accommodation, gate
number, issuance of new boarding pass, compensation, rebooking and refund. This service ensures passengers’ right to information
and could help passengers in making arrangements in advance, as well as alleviating the airport from overcrowding when mass delay
is expected.
[LINK]: Typhoon “Hagibis” landed
near Shantou, Guangdong on June 15, 2014. As of June 18, over 40,000 passengers received notification of flight status change.
In which, around 3,000 passengers received notification of flight cancellation and 40,000 received notification of flight delay.
5.3.3 Upgrade of in-flight entertainment
system
According to survey, high-quality in-flight
entertainment (IFE) system can effectively increase customer satisfaction of passengers, especially those traveling on long-haul
flights. We are consistently revamping and enriching our IFE system to provide an improved travel experience to our passengers.
Three highlights of 2014:
| a. | Enriched IFE contents. Our IFE program library is updated regularly. New programs
are now being added on a monthly basis. We have also introduced OutlookTV into our IFE system, further expanding the range of selection.
In addition, the number of movies stored in our IFE systemhas been increased to 70. |
| b. | Diversified content of programs. We added a Micrio-Film channel on our handheld tablet
IFE devices. Micro-films are short in length but complete with all elements of a motion picture, which makes them ideal for the
use on short-haul flights. |
| c. | More advanced devices. Handheld tablet IFE devices are distributed to passengers
in premium cabins where seatback IFE devices are not installed. Each device is loaded with movies, TV programs, music, games, books
and service directory. Over 20 movies are updated on a monthly basis. |
[LINK]: China Southern released its first
Micro-Film, Dream from the Heart, in November, 2014. This film was based on a true story of the children of a primary school
football team of Moyu County, Hotan Region in Xinjiang. They all shared a great passion for football but had never left their village
and played in a real match. With the help of China Southern, they flew to Ürümqi for the first time and were able to
compete on a real football field with a U15 team who just won an international champion’s title. With the realization of
their football dream, they began to understand the meaning of dream from the heart.
5.3.4 Upgrade of service in Premium
Economy Class
In 2010, China Southern became the first
airlines in China who introduced Premium Economy Class across its fleet. In order to meet increasing demand from our passengers,
we carried out a complete reinvention of our service in Premium Economy Class in June 2014, once again became the first airlines
in China that had an upgraded Premium Economy product.
We are rolling out refurbished Premium
Economy cabin across our fleet. Our Premium Economy passengers can now enjoy priority check-in, services at flight delay equivalent
to silver and gold card members, as well as additionalamenitiesonboard including pillow, blanket, newspaper, bottled water, snacks,
hot towels and complimentary sweets.
5.3.5 Introduction of online meal pre-ordering
service
To provide passengers onboard long-haul
international services the choice of food that they would prefer has always been our quest. In June 2014, China Southern launched
an online meal pre-ordering service on its official website. This service is open for all First and Business Class passengers traveling
between Guangzhou and Europe, North America, Australia and the Middle East. The first stage covers 18 flights to 12 destinations.
Passengers traveling on outbound flights
have the choice of 20 main course dishes such as our signature Noodle Soup with Beef, Stewed Rice with Cure Meat in Claypot and
Hakka-style Stuffed Tofu. On inbound flights passengers have the choice of 6-8 Chinese and western main course dishes. SMS and
email confirmations of meal pre-ordering and change will also be sent to passengers.
To provide passengers with more personalized
and tailor-made service is a major concern behind this new service. Based on our concept of providing a full-flow service, we are
committed in providing our passengers with a comfortable and thoughtful service. Our next step is to launch meal pre-ordering function
on our official WeChat platform and mobile App. China Southern will become the first Chinese airlines that allow passengers
to pre-order meals via WeChat and mobile App.
5.3.6 Expansion of assistance to passengers
with special needs
China Southern officially launched
in-flight wheelchair service onboard our flights from Guangzhou to Sydney, Melbourne, Perth and Brisbane in July 2014.
Aircraft operated on these services are all equipped with accessible lavatories and seats with movable armrests for
passengers with reduced mobility. Our cabin crew are also happy to assist passengers in accessing the lavatories with
in-flight wheelchair if needed.
[CASE]: China Southern’s Jilin Branch
introduced an “Amber Alert” service to elderly passengers travelling on flights delayed for more than 1 hour. A dedicated
service team will assist our senior passengers with their baggage and help to arrange resting areas and meals. An “Amber
Alert” service counter has also been set up and stored with presbyopic glasses, magnifier, cotton buds, bandages and other
sundry items that elderly passengers may find useful.
5.3.7 Focusing on details in ground
service
Check-in: Number of passengers
often increases during the summer holidays. China Southern installed additional message boards with prompts of baggage security,
cabin baggage allowance and expected waiting time at queuing areas in the check-in hall so that passengers may familiarize themselves
with relevant information in advance while queuing.
Checked baggage: The first
International Excessive Babbage Electronic Miscellaneous Document (EMD) of China was issued at a China Southern counter on June5th.
This marked that the handling of international excessive baggage at China Southern had entered into the electronic era. The conventional
paper-based procedure requires passengers to rush from counter to counter in order to make payments for excessive baggage. With
EMD in place, all procedures can now be completed at the check-in counter. In the future, China Southern will replace all miscellaneous
documents and invoices with EMD hence realizing a paperless ancillary service.
Boarding: We have introduced
newly designed final-call signage across our international boarding gates that are more distinct and recognizable. These new signage
are clearly marked with destination names in both Chinese and English. Our staff at gates would seek remaining passengers with
these signage 20 minutes before departure time.
5.4 Service Innovation
5.4.1 Optimization of SkyPearl Club
Terms and Conditions
In response to customers’ feedback
on issues regarding mileage accruals and gift redemption, China Southern revised its mileage accrual system, upgrade, and redemption
experience in October 2014.
We have adopted a number of optimization
measures. Firstly, we significantly increased the number of mileage that can be accrued when travelling in First and Business Class;
secondly, we increased the number of qualifying booking classes; thirdly, we increased the chance of achieving higher membership
status; and fourthly, we created more opportunities for upgrade. These measures would improve our membership experience, allocating
more resources to our premium passengers, and are in keeping with our wider business strategy.
The membership number exceeded the milestone
of 20 million in November 2014, the 16thAnniversary of Sky Pearl Club.
5.4.2 Establishing Guangzhou Hub Control
Center
Guangzhou Hub Control Center (HCC) was
established in March, 2014. It is the primary organization for improving passenger on ground experience with a centralized control
of passenger flow, baggage flow and aircraft flow, and is responsible for the regularity of all flight. The HCC is a critical supporting
element of background operation systems.
HCC operation mechanism during flight
delay
| l | ATC: Inform dispatchers to coordinate
with ATC to give priority clearance to flights with passengers onboard. |
| l | Hotels: Collect available rooms and arrange
accommodation for eligible affected passengers. |
| l | Airport Authority: Broadcast updated information
on flight status, arrange ground transportation for traveling between airport and hotels. |
| l | Operation Control: Gather on-the-spot
support requirements, advice on and obtain flight schedules. |
| l | Check-in: Rebooking and accommodation
arrangement and assembly. |
| l | Baggage Handler: Identify baggage of affected
passenger and arrange centralized delivery. |
| l | Other operation bases and stations: Provide
advance notice of delayed flights, ensure connecting passenger service plan is in place. |
[CASE]:
March 30, 2014, mass delay at Guangzhou
due to adverse weather condition
08:00. Alltake-offs and landings
were halted
09:00. Yellow warning signal was
issued by China Southern
10:00. Flight and passenger diversion
plan was formulated by the HCC.
11:00. China Southern started passenger
interception so as to avoid additional passenger arriving at the airport.
12:00. HCC in coordination with
ATC, gave priority clear-for-take-off to flights with passenger onboard, and requested origin airports to rebookpassengers traveling
on international connecting flights via Guangzhou to direct services.
15:00. HCC coordinated with baggage
handlers to centralize baggage delivery and couriered all baggage to departed passengers.
19:00-22:00. HCC pre-arranged passenger
flow, baggage flow and aircraft flow for the following day.
March 31, 2014
00:00. Early opening of check-in
counters
20:00. Majority of stranded passengers
cleared, normal operation gradually resumed.
5.4.3 Simplification of web-based telephone
payment procedure
In 2014, csair.com launched the simplified
UnionPay telephone payment method, which has significantly reduced the complexity of previous telephone payment procedure,
enhanced payment experience for customers who prefer to use telephone payment when booking online.
The difference between two payment procedures
is that customers are no longer required to make telephone calls to our service hotline with their booking information, and no
longer required to input card number and PIN number on keypads. The new procedure allows customers to submit their credit/debit
card number and mobile phone number online, and simply input their PIN number on the handset when prompted. Banks will clear payments
after verification.
5.4.4 Expansion of oversea online payment
system
Over the years, customers booking on our
oversea websites may only make online payments via WorldPay,PayPal or QuickPay. As an attempt to accustom to payment
practice of oversea passengers and increase user experience, in January 2014, China Southern, in partnership with the largest Korean
third party payment platformINICIS, launched local online payment on China Southern’sKorean website. This was the first oversea
website of China Southern where local online payment was enabled. Customers based in Korea can now choose to pay with their major
third-party payment platform. Subsequently, in partnership with Westpac Bank of Australia, our Australian website became the second
oversea website that allows local online payment. China Southern will continue to expand local online payment channels with more
local partners.
5.4.5 First in-flight WIFI in China
As authorized by the Ministry of Industry
and Information Technology of the People’s Republic of China, the CAAC issued its decree No. 736 inJuly 2014permitting China
Southern the use of Ku frequency band for its in-flight satellite high-speed broadband Internet connection product, and its technical
test flight between Guangzhou and Beijing. This technology provides up to 50 megabyte of bandwidth for in-flight connection. It
was its first application in China, and the first application on wide-body aircraft. China Southern was also the first airlines
that applied for satellite high-speed Internet connection modification on its fleet.
Passengers onboard flight CZ3161 from Guangzhou
to Beijing on September 6thexperienced in-flight WIFI connection. After the aircraft had reached cruising altitude,
passengers were informed that the flight was offering complimentary in-flight WIFI service. Network could be found when WIFI function
was enabled on passengers’ devices. The average bandwidth on the day was 5M/s, which was sufficient for web browsing and
email exchanges. China Southern will perform modification on 10 A330 aircraft after evaluation of the test flight.
5.4.6 Innovative WeChat services
The IT system of China Southern has always
been in a leading position in China. We have remained in the top 15 of China’s 500 Most Informationized Enterprises, and
had created a number of “first” in China’s airlines business.
[FIGURE]:
First e-ticket
First self-service boarding pass
First web boarding pass
First e-boarding pass
First e-cargo waybill
First WeChat check-in
Ever since the launch of our official WeChat
platform (CS95539) in 2013, we have been using this convenient way of communication to improve our service interface with passengers.
As of now, services provided on our WeChat
platform cover ticketing, check-in, flight status, and membership service, passengers can complete the entire service flow on WeChat.
At the end of 2014, the number of followers of our WeChat account exceeded 3.5 million.
[FIGURE]:China Southern added the following
new service to its WeChat platform in 2014
Starting from
June, passengers can check-in up to 6 passengers at a time. This function reduced repetitive operations, especially for passengers
traveling together in a group.
The Tecent
Group introduced CardPack function to WeChat in September. Businesses can now display and distribute coupons and tickets
in CardPack. China Southern has become the first airlines that joined CardPack.
China Southern’s“WeChat
operator service” was inaugurated in August. After membership verification, passengers can select “Operator Service”
from the menu or simply enter “Operator Service”, “Operator”, or “Customer Service” to interact
directly with one of our customer service representatives.
[LINK]: China Southern Online – The
founding of E-Commerce Division
The E-Commerce Division was founded on
October 27, 2014. The establishment of this new division enabled China Southern’s transformation from a transportation provider
to a comprehensive service provider. The E-Commerce Division unifies platform planning, business design, operation management,
web promotion and system building functions, further integrating internal and external resources, reinventing product flow. Its
objective is to consolidate and generate China Southern Online through the provision of full-flow air transport sales and service
products, as well as the networking of marketing, service and brand image.
6. EMPLOYEES
“Respecting talent and rewarding
employee” is one of the connotations of a company’s corporate social responsibilities. China Southern sees its employees
as the foundation and key to its development. We believe that everyone has its merit, everyone can excel and everyone will rise
above. For this, we have established a comprehensive human resource management system that covers various aspects of salary, recruitment,
promotion and vacation leave, ensuring that the system is transparent, fair and just, so that our employees can growth with the
company.
Number of employee: 82132
Number of trainings: 7529
6.1Work Environment
In order to adapt to the needs of strategic
transformation and internationalization, China Southern has established a post-based human resource policy structure. China Southern
is exploring and establishing strategies of human resource planning, performance evaluation, training, career paths and salary
policy, aiming to formulate a close-loop management system, enabling the transformation of role of human resource management.
6.1.1 Salary and welfare policy
The salary and welfare policy of China
Southern is founded upon the principle of “legal, fair, efficient, and harmonious”, based on post value, guided by
labor market average and centered on performance evaluation.
Post wage. Post wage consists
of basic wage and performance-related pay. Basic wage reflects the difference between critical posts and general posts, as well
as core posts and non-core posts; whereas performance-related pay matches the financial performance of the company as well as performance
of individual employee. Furthermore, China Southern has also set incentives to different posts.
Insurances and pension. In
compliance with rules and practices imposed by local authorities in different operating region, China Southern contributes to compulsory
medical insurance, work-related injury insurance, unemployment insurance, maternity insurance and endowment insurance, as well
as mandatory Housing Provident Fund (HPF). China Southern has also provided corporate annuity fund and supplementary commercial
accident and medical insurances.
Welfare. In accordance with
national and local regulations, China Southern has provided its employees a welfare package consists of annual leave, home leave,
marital leave and maternity leave.
[LINK]: Corporate Annuity Fund is a supplementary
pension scheme for added protection to employees after their retirement. China Southern’s Corporate Annuity Fund was founded
in 2014. Corporate Annuity Fund is managed into individual account, and the contribution is determined according to length of service
at China Southern and total length of employment.
6.1.2 Protection of rights
Full compliance to all laws and regulations.
We are strictly obedient to international treaties and national laws, respect and protect human rights that are recognized by international
standards, and are not involved in any such behaviors that are in violation and disregard to human rights.
Systematic protection of employees’
statutory rights. We strict abide by the Employment Contract Law and corporateregulations, endeavor to eliminate
all kinds of forced labor, child labor and employment related discriminations. We treat each one of our colleagues with fairness,
standardized employment management procedure, and have executed employment contract extension management program.
Active formation of a fair working
environment. As society progresses and develops, we actively study and reform our approach to employment. In 2014, a trial
equal pay for equal work initiative was commenced at the entire Ground Service Division, accelerating the transition to a post-based
employment system, bring all employee under a unified post structure and wage structure.
6.1.3 Key indicators
Total number of employees: 82132
Composition:
Flight and cabin crew 26.43%
Maintenance and engineering 14.59%
Operation control 2.80%
Passenger service 10.74%
Cargo 6.77%
Ground service 11.02%
IT 1.11%
Financial 2.83%
Others 23.70%
Distribution by gender:
Male: 59.16%
Female: 40.84%
Level of education
Postgraduate degree or above 2.91%
University degree 37.13%
Associate degree/diploma 32.25%
Vocational school diploma or below 27.71%
6.2 Training and Development
We have established a proficiency-oriented
training management system that is compliant with ISO10015 standard, and have formulated strict Training Management Manual
and Training Procedure Control Documents. Training plans are designed for front line staff, middle management and senior
management in aspects of corporate culture, professional skills and managerial knowledge.
Our annual expenditure on training exceeds
50 million RMB. We send outstanding technicians to oversea training programs; bring professional training institution and specialists
in house for our employees and launched online e-learning platform, aiming to establish a people-oriented and post-based training
system, fully implement the company’s talent development plan.
The strengthening of internal training
is reflected in the four areas of management training for junior, middle and senior management based on managerial staff career
path; professional skill training based on post; training based on employee career path or positional growth; and comprehensive
training for all employees.
A total number of 7529 training sessions
were held in 2014 that recorded 290,000 training person-time, nearly 230,000 front line training person-time and a training coverage
of approximately 86% of all employees.
[LINK]: Expansion of part-time instructor
In addition to full-time instructors, we
have close to 3,500 part-time instructors. They are responsible for professional and managerial training tasks within each operation
division. China Southern is gradually fine-tuning the qualification training and management system for internal part-time instructors.
6.2.1 Employee training
Quality promotion. In August
2014, we initiated the “Self-promotion and make your dream come true at China Southern” program. In cooperation with
Beihang University, East China Jiaotong University and Guangdong Network of Workers’ Education, we encourage our colleagues
to take advantage of part-time MBA courses offered by these institutions. The tuition fee is co-funded by government, the company,
the university and the registered employee him/herself.
Employee localization strategy.
In line with company’s internationalization strategy, increase overall competence of our oversea offices; we launched a Southeast
Asia Management Trainee program. This MT program is split into local training and headquarter training, so that management trainees
will have better understandings of the business flow of sales and marketing, as well as local operating procedure and rules, hence
build up a solid foundation to future positions at our oversea offices.
English training. We attach
great importance to improving our colleagues’ English proficiency. A language learning atmosphere has been created through
our English Clubs and “Hundred-and-hundred English Camp”. 11 training sessions were held by the English Club in 2014
alone, activities organized in these sessions included seminars, English movie appreciation, sharing of learning experiences, circulation
of English literatures. Nearly 500 employees took part in these activities. The English Club also posts learning resources on our
internal e-learning platform and WeChat learning platform on a regular basis covering all of our colleagues. The second “Hundred-and-hundred
English Camp” took place from March to June, 293 participants took part in 54 hours of intensive seminars during their free
times.
Team leadership training.China
Southern inaugurated Excellence in Leadership training camp for outstanding team leaders in 2009. Selected team leaders from each
front line divisions were sent to training camps in Tsinghua University. Three camps are organized every year, and each camp consists
of 100 team leaders. In 2014, over 200 team leaders from various operational premises attended this training camp. The senior management
team of China Southern and the team leaders had face-to-face interactions on a number of topics included corporate strategic planning,
career development path for each individuals, a new phase of state-owned enterprise reform, and the promotion of service quality.
Professional training. We
conduct multiple trainings to specialists on various levels of different operational systems, these include middle and senior management
training, part-time instructor teaching skills training, flight crew English training, cabin crew training, maintenance and engineering
training, sales and marketing training, operational control training, ground service operational training and other professional
training as well as certificate training, in order to further increase professional standing of our specialists.
[LINK]: E-learning platform is an important
means for our colleagues’self-improvement. This platform not only provides round-the-clock and fully accessible learning
opportunities, but can also meet personalized learning needs for different posts and management knowledge. Multimedia learning
resources are accessible via major web browsers.
[CAPTION]: China Southern pursues the strategy
that talents are the backbone of a company. Guided by the policy of “training serves production, training creates value”,
China Southern sees highly of employee quality promotion, and is consistently increasing investment on employee training.
6.2.2 Management training
Job rotation. In an attempt
to broaden the horizon of managerial staff, increase their competence in management, in accordance with the principle of “improve
what is lacking”, China Southernis intentionally assigning its managerial staff to relevant positions to serve temporary
duties and gain experiences. Managerial staff are assigned to frontline departments in order to gain frontline practical skills.
Managerial staff are assigned to higher authority departments in order to gain executive experience; assigned to leading departments
in terms of performance in order to have innovative thinking; assigned to critical positions in order to enhance abilities in handling
complex situation. In 2014, 99 managerial staff had been on job rotation to other departments.
Training in rotation. China
Southern organized 52 sessions of centralized training in 2014, 3301 managerial staff attended training in rotation. Through such
trainings, the thinking of the managerial staff had been unified to the corporate reform and development front, providing a foundation
of common understanding for the execution of corporate reform.
Selection. A “380 Talent
Scheme” had been formulated in 2014. This plan stated a strategic objective on the cultivation of management team for the
next five years. 300 members from the middle management and 80 members from the senior management will be selected through this
scheme for intensive focal training, aiming to have a highly qualified, sufficient and reasonably structured management team.
Exchange. China Southern
invited senior management team of KLM to an exchange visit at China Southern in May 2014. KLM’s senior management team served
temporary positions at China Southern and conducted extensive communications and exchange with China Southern’s teams on
various topics of human resource management, strategic transformation, corporate culture, operational support, ground service and
alliance cooperation. This was the first time that China Southern invited world renowned network carrier to and extensive exchange
visit. China Southern had previously assigned two teams of management to serve temporary positions at KLM. This is a significant
step that China Southern took toward internationalization.
[LINK]: China Southern and KLM have had
long standing cooperation. China Southern and KLM launched flights to the Netherlands and China respectively in 1996, and have
established collaborations in passenger transportation. The cooperation of the two carriers have continuously expanded over the
years.
6.2.3 Engineering training
May 6, 2014. The Maintenance Technical
Training Center (MTTC) of China Southern Airlines was official unveiled. The new MTTC has integrated technical training, operational
training, certification training and other professional trainings, and is equipped with classrooms for theoretical training as
well as spaces for practical training. International leading simulators, training equipment and teaching materials were imported
at the same time. This MTTC can accommodate up to 300 trainees at a time, which could improve the insufficient space available
for engineering training, and prepare more outstanding talents for China Southern.
6.2.4 Acceleration in introducing talents
China Southern is experiencing rapid growth,
and has an exceptionally high demand of talents with various backgrounds. We increased our pace of bringing in new talents and
alleviating the shortage in human resource by the following measures while ensuring both quantity and quality.
We made use of innovative recruitment channels
of our official WeChat platform, Weibo account and recruitment webpage, in order to reach further and increase impact.
We continued to carry out regular cabin crew, maintenance and operational control recruitment scheme with the aim to bring in mature
talents hence optimizing talent structure.Intensive graduate recruitment schemes were implemented and greater focus was given to
meet the requirement of the acceptance department. We have also launched innovative internship program in collaboration with higher
education institutions in order to secure excellent talents before their graduation and improve relationships between the company
and the institutions. Last but not least, we explored training provisions to newly recruited flight attendants and have added work-shadowing
training element.
a. Early commencement of 2015 graduate
recruitment scheme. In order to secure quality graduates, we initiated Kapok Camp ground internship scheme, recruited 22
outstanding graduates from various prestigious universities. In addition, we have also recruited 159 maintenance and engineering
interns and 6 operational control interns ahead of time.
b. Commencement of “Sky Pearl
Growth Scheme”. Through the creation of “Sky Pearl Blue” multi-lingual flight attendant recruitment program,
we are transforming our flight attendant training pattern, creating a supply chain of quality flight attendant. In particular,
we conducted recruitment fairs at foreign language schools and normal universities and colleges in order to attract service talents
with strong foreign language background. In 2014, we introduced 221 multi-lingual flight attendants to our cabin service team.
c. Wider implementation of recruitment
of foreign employees. In order to promote international service standard, China Southern had further clarified the positioning
of non-Chinese flight attendants, formulated recruitment plans of foreign employees. We hope to better meet the demand of our increasing
number of international flights through the continuous influx of “Sky Pearl Blue” flight attendants, foreign flight
attendants and foreign pilots.
In terms of foreign pilot recruitment,
in 2014, we had recruited 39 foreign pilots, bringing the total number of foreign pilots at China Southern to 90. Our foreign pilots
come from 19 different countries, such as Japan, Australia, South Korea, Canada, USA, UK, France and Spain.
In terms of foreign flight attendants recruitment,
we further streamlined our foreign flight attendant recruitment planning in 2014, introduced service talents with international
background, aiming to promote our international service level. We have a standing Japanese and Korean flight attendant recruitment
plan. This year, 20 Japanese and 73 Korean flight attendants joined our team. We also conducted our first ever Overseas Chinese
flight attendant recruitment in Malaysia, 31 candidates were selected through interview. In addition, 22 Dutch flight attendants
and 10 Australian flight attendants began serving after successful completion of trainings.
d. Key Performance Indicators:
Flight crew:China Southern
completed initial training for 467 cadet pilots in 2014.
Cabin crew:1818 flight attendant
and security guards were recruited, including 221 “Sky Pearl Blue” attendants with outstanding foreign language proficiency.
Specialists:A number of specialists
were introduced to engineering and operational control divisions through open recruitment schemes.
Ground staff:668 ground staff
were recruitment through graduate recruitment scheme in 2014.
6.2.5 Revitalization of internal human
resource
Taking the lead in establishing career
development path for pilots.China Southern reformed and adjusted its pilot wage structure, formulated a pilot grading scheme
and introduced the initial grading plan. We took a leading role in the industry to have established a career development path for
pilots, adopted a “the more you fly, the more you earn” incentive mechanism, enhancing the sense of honor of pilots
which is beneficial to the stability of our team of pilots.
Establishing an internal human resource
pool. China Southern provides its employees with diversified development opportunities and channels through an internal
human resource pool. In 2014, 26 office positions, 38 ground support positions and 168 flight/cabin crew positions were filled
through an open selection and transfer process. 100 specialists of various departmental backgrounds were selected and transfer
to the newly founded Shanghai Branch from this pool. In the future, we will implement public selection and transfer process on
the human resource platform, progressively formulate an open, fair, and competitiveness-based selection environment, creating a
new selection method for departments that are in need of human resources.
Creating a diversified development platform
Flight crew – establishment of career
development path
Ground staff –opportunities to transfer
to cabin service
New subsidiaries – company-wide public
selection procedure
Managerial staff – combination of
competition and selection
6.3 Health and Safety
6.3.1 Physical health management
a. Health check
Having a good health is fundamental to
everyone’s life and work. China Southern promotes health check across its employees.
Flight crew: In 2014, China Southern completed
over 50,000 annual physical examinations for certification renewal, pilot recruitment physical examinations and flight attendant
physical examinations. Guangzhou headquarter performed 6304 alcohol checks and 2918 physical examinations before ultra-high elevation
airport operations.
Cabin crew: In 2014, aviation
medical practitioners conducted over 100 medical seminars and health seminars. 1895 in-flight medical equipment were installed
across our fleet.
Ground staff: In 2014, we
provided complimentary health check services to 18,953 ground staff; completed 29000diagnostic checks and 2787 gynecological examinations;
and organized 145 blood donations. We have also fully implemented the family planning policy, achieved all relevant family planning
indicators.
b.Health education
China Southern carries out extensive wellbeing
programs to its employees. We organized 10 seminars on basic health insurance, supplementary health insurance, and prevention against
common health issues throughout 2014 in order to raise our colleagues’ awareness in healthy lifestyle. We have also provided
seminars to female colleagues and new colleagues in particular.
[LINK]: Pilot sick-leave management system
launched on SOC portal
Trial of the pilot sick-leave management
system was commenced on SOC portal in May 2014. This system greatly improves the digital management level, expedited the sick-leave
application procedure for pilots and materialized real-time information transmission. This system is also equipped with basic statistical
functions that help operation and business departments of the company to have the most up-to-date information on pilot availability.
6.3.2 Counseling service
In collaboration with specialized service
provider, China Southern initiated an Employee Assistance Program (EAP) in 2013. Through the implementation of EAP, we encourage
our colleagues to respond to external pressure with a positive and optimistic attitude. The EAP achieved a 96% user satisfaction
rate.
[FIGURE]: In 2014, 1173 colleagues and
their family members made use of telephone counseling service, and a total face-to-face counseling service hour of 811. Major issues
raised were work pressure, children, marriage, mental health and inter-personal relationships.
6.3.3 Public health
Strict inspection of hygiene.China
Southern conducts non-scheduled food hygiene and safety spot checks every month to all catering providers in Guangzhou. 360 inspectors
conducted 132 inspections, issued 132 on-the-spot inspector’s opinions, and released hygiene inspection reports in a timely
manner.
Ensuring safety of drinking water.
China Southern conducts consistent monitoring of water onboard. We commissioned the Guangdong Entry-exit Inspection and
Quarantine Bureau to perform monthly hygienist examination to China Southern’s water station. In 2014, 12 water quality monitor
reports were issued. China Southern also actively participates in IATA’s water quality audit program. As authorized and appointed
by IATA, China Southern conducted water quality audit to 9 airport in China and overseas.
Combating the Dengue Fever. The
epidemic of the Dengue Fever in Guangdong was severe in the summer of 2014. China Southern responded immediately with regional
authorities in the eradication of mosquitoes, distributed eradication kits and carried out target eradication in staff dormitory
area, office area and airport periphery, safeguarding the health of our colleagues.
Responding to Ebola Virus.
The epidemic of Ebola Virus began to intensify in February 2014, and was showing an increasing trend of global spread. China Southern
promptly issued Notices on the Prevention and Control of the Epidemic of Ebola Hemorrhagic Fever and the Trial Contingency
Plan of Ebola Hemorrhagic Fever Prevention and Control. China Southern had also promptly printed and distributed 20,000 pamphlets
onEbola Hemorrhagic Fever to front line departments. In the mean time, disinfectant spray, disposable gloves and face masks had
been distributed to customer-facing departments in Guangzhou, provided added protection to our frontline colleagues.
6.4 Balance of Work and Life
China Southern takes active measures in
promotingcreativity, enthusiasm and the sense of ownership to the company, and to create a friendly and compassionate internal
working atmosphere, so as to collectively contribute to the development of the company and to be collectively benefited from the
growth of the company.
6.4.1 Mutual fund for serious illness
As a reflection of the warmth and the spirit
of caring for each other in the China Southern family, and to increase cohesion force in the company, we founded the Mutual Fund
for Serious Illness in 2012, which had positive response from all of our colleagues. In 2014, continued with the commitment to
“helping the weak, saving the sick and assisting the difficult”, the Mutual Fund carried on its mission in providing
care and needed help to our colleagues.
[FIGURE]: In 2014, 162 colleagues received
subsidy from the Mutual Fund with a total amount of 847,742RMB. As of December 31, 2014, the balance of the Mutual Fund was 2,646,400RMB.
6.4.2 Dating platform for younger employees
The care for our employees is not only
reflected in work, but also in life. Currently, China Southern employs over 50,000 youth; over 10,000 of them are single. As the
pace of work and life are speeding up, in order to help our young colleagues in finding a suitable other half, China Southern founded
an internal dating website dubbed “Destiny at China Southern”, aiming to provide more opportunities for our single
colleagues in meeting new friends.
6.4.3 Group purchase
China Southern founded a Group Purchase
Committee to make the most of China Southern’s scale and brand to provided discounted products to its employees, hence bringing
the best products at the best prices.
Display of group-purchase items.
In 2014, 150 group purchase information were disseminated on our group purchase website, which attracted over 130,000 hits from
our colleagues. Contract negotiation wereheld with over 120 providers, 55 group purchase agreements were signed and 15 agreements
were renewed. 102 roll-up banners were displayed at canteens and clubs for the attention of colleagues.
Addition to group-purchase items.
Cooperation with online shopping websites, enabling online group order of fruits, vegetables and rice at discounted price. Cooperation
with travel agencies, organizing Europe, Mauritius and Turkey tours along the launch of new services.
Cost-saving for employees.
In 2014, 1093 private vehicles, 280 apartments, 100 PCs, over 120,000 movie tickets and 1000 travel packages were completed under
various group purchase schemes, which saved over 30 million RMB for our colleagues.
6.4.4 Employee feedback
China Southern sees interactions with employees
importantly, and listens to employees’needs through various means. Suggestions to corporate management, operations, human
resources and career development can be expressed through multiple channels. China Southern keeps an open and clear communication
channel for employees’ feedback in order to construct a harmonious and healthy relationship between labor management.
We encourage our colleagues to speak up
with the provision of the following channels: Employee feedback mailbox, Email accountsof top management, dedicated telephone number,
distribution of feedback questionnaires and feedback symposium.
In 2014, over 1000 suggestions were collected
from employees covering issues of salary and welfare, work environment, meals, transportations and many more.
6.4.5 Rich cultural and physical activities
Aside from work, we also care about the
recreational and cultural side of our colleagues’ life. We encourage the founding of cultural and sports associations, and
assist them in the organization of various activities. In 2014, we organized a variety of contests using our long standing “Ankang
Cup” as a carrier to raise operational skills and discover outstanding talents, promoting employees’self-development.
Air Chef Culinary Skills Contest
China Southern organized and Air Chef Culinary
Skills Contest from July to November 2014. The contest consisted of three stages of try-out, quarter final and final. Chief Judge
to the contest Mr. Wagner Hannes, head chef of Gate Gourmet Air Catering Co., Ltd said after the final that all contestant showed
excellent skills and work, and the passengers of China Southern were the ultimatewinner of this contest.
Run-For-Fun
Run-For-Fun is a community based charity
5km running competition targeting the growing working population who lack regular exercises. 2014’s Run-For-Fun were held
in 60 cities of China, and Guangzhou was its 57th stop. Run-For-Fun in Guangzhou officially kicked-off on December12th,
China Southern as a sponsor to this year’s run, also participated with a group of 218 runners, showcasing a positive and
healthy image of the members of the widerChina Southern family.
7. COMMUNITIES
Air transport is the fastest mode of transport
that reduces the temporal distance between two places, hence increases the efficiency of dealing with major events. This means
that the aviation sector must be highly socially responsible. Embracing the advantage of being in the aviation sector, China Southerntakes
and active role in social development and meet its commitment to social responsibilities.
China Southern’s Youth Volunteering
Program accumulated a total service hour of 54650;
Number of persons received volunteering
services in 2014 was 286321.
7.1 Special Flights
While maintaining a sound financial performance,
we are also committed to fulfilling our responsibilities to the society. For many years, China Southern undertook a number of major
emergency air transport mission, such as emergency evacuation of Chinese nationals, earthquake rescue, repatriation of suspects,
and received wide public recognition and respect.
7.1.1 Earthquake rescue missions
Earthquake rescue is a race with time.
The catastrophes of earthquake are everyone’s concern at China Southern. We are highly responsive and rapid in contributing
our efforts to the actions of rescue mission and post-disaster relief, formulating support plan and prepare aircraft for rescue
operations in the first instance. Our most experienced flight crew are assigned to such mission, relevant departments are working
together seamlessly to create the most synergy in order make sure that no time is wasted before our rescue flights can take-off
to the sites of disaster.
a. Xinjiang earthquake
February12th, a magnitude-7.3
earthquake hit Yutian County of Hotan District in Xinjiang. China Southern responded quickly supporting the logistics of the rescue
mission. One of our aircraft was dispatched to Hotan along with 24 rescuers, and an additional aircraft with crew was arranged
on stand-by.
b. Yunnan earthquake
August3rd, a magnitude-6.5 earthquake
struck Ludian County of Zhaotong City in Yunnan Province. The epicenter was 12km deep, 1335 aftershocks were recorded and had caused
tremendous loss. A contingency meeting was immediately launched, rescue charter plan was soon settled, and rescue flight express
channel was formed ensuring the priority of aircraft, crew, support and clearance, in order to guarantee the free flow of the life-saving
air link to Yunnan.
Ludian earthquake rescue, China Southern
in action
August3rd, a major earthquake
hit Ludian County, Zhaotong City, Yunnan Province. China Southern launched contingency meeting, kept close contact with the CAAC
and Emergency Management Office, requested that everyone at China Southern should make the best effort in supporting the emergency
rescue mission.
August4th, China Southern assigned
a flight from Wuhan to Kunming transporting 523 pieces of rescue materials with a total weight of 5901kg. Additional flights from
Beijing and Guangzhou with advance rescue teams and medical kits onboard followed.
August5th, we delivered 122
rescue materials weighed at 758kg as well as other daily necessities such astents, folding beds, lightings to Yunnan.2395kg of
flu vaccination were transported from Shanghai.
August7th, we delivered another326
rescue materials weighed at 3.2 tons to Kunming.
7.1.2 Transporting peacekeeping force
China Southern has successfully transported
Chinese peacekeeping force to African countries such as Liberia, Sudan, South Sudan and Rwanda. In 2014, China Southernsafely operated
peacekeeping charter flights with Chinese forces to countries of Mali, Democratic Republic of Congo, Liberia, Sudan and Burundi,
contributing our share to world peace.
[CAPTION]: January 15, 2014. One of our
777-200ER operated its first charter flight carrying Chinese peacekeeping force to Mali. This flight was long in distance, flew
over a large number of countries with complex terrain, unfamiliar operational region and limited alternate airports. In order to
ensure a smooth operation of this flight, we organized a selected team with top expertise and designed the most optimized flight
route, and carried out full-range real-time surveillance and monitoring throughout the operation. After a 20-hour flight time,
the flight landed safely in Mali.
7.1.3 Emergency evacuation flights
China Southern sees highly of the logistics
tasks for rescue missions, and strives to formulate operation and support plansin the first instance, requesting stand-by of all
relevant operational departments with back-up capacity prepared in advance, which have ensured our safeguarding of numerous emergency
air transportation tasks.
a. Emergency evacuations of Chinese
nationals in Vietnam
A number of serious violent attacks to
foreign entities occurred in several places in Vietnam, causing deaths, injuries and monetary losses to Chinese national. The Chinese
government decided to evacuate part of Chinese living in working in Vietnam back to China. Atnoon May17th, we received
an order from the CAAC requesting China Southern to operate evacuation flights bringing the injured Chinese in Vietnam back to
safety. We responded immediately dispatched two aircraft from Guangzhou in the early morning on May18th, safely brought
back 291 Chinese nationals.
b. Emergency response to Typhoon “Rammasun”
Super Severe Typhoon “Rammasun”
struck off the Hainan coast on July18th, which was the most damaging typhoon in the last 41 years, its sustained wind
speed exceeded 200km/h. 6 early warnings were issued by China Southern between July 17th and 20th. After
immediate review of affected flights, operations at Sanya, Haikou and Zhanjiang airports were adjusted. At the same time, information
about flight cancellation were released to the general public via official Weibo account and SMS messages in order to avoid
accumulation of stranded passengers at airports. We had also prepared A330 and 777 aircraft on a backup capacity.
c. Emergency transportation of freshwater
to the Maldives
A desalination plant in Male, the Maldives
was damaged due to fire on December4th, 150,000 local residents were left with serious lack of freshwater. As requested
by the Maldivian government, the Chinese government agreed to provide emergency aid. At noon on the 6th December, a
letter from the Ministry of Foreign Affairs of China requesting China Southern’s assistance in transporting freshwater reached
China Southern. Immediately afterwards, we reorganized cargo holds on our next flight to Male, 15 tons of drinking water arrived
Male the same night, and another 23 tons followed on the following day.
7.1.4 Safeguarding passenger transportation
during Chinese New Year
Chinese New Year is the busiest season
of China Southern’s operation. During the 40-day long passenger transportation peak from January 16thto February24th,China
Southern operated over 62,000 flights, and carried over 9.1 million passengers. On the busiest day of February5th, China
Southern carried 265,000 passengers on a single day, the highest number recorded in all years’ Chinese New Year operations.
Family reunion is an important tradition
in Chinese culture. During Chinese New Year 2014, China Southern took several measures in terms of fleet allocation, pricing and
services, including increase in flights, additional wide-body operations, reinforced customer service representatives and extended
check-in hours.China Southern launched a “Family is priceless – Free tickets for Spring Festival Reunion” activity,
sending out 32,000 free tickets to migrant workers in Guangzhou and Shenzhen for bringing their family members from nine provinces
such as Hunan, Hubei, Jiangxi over to their place of work and celebrate the new year with their family. This activity reflects
the human touch in China Southern’s corporate culture.
During Chinese New Year, China Southernimplemented
additional measures in terms of fleet allocation and service support; assigned wide-body aircraft to key and popular routes; introduced
a series of discounted and convenient family reunion products; increased the number of customer service representatives on our
95539 hotline; communicated with passengers through new media such as WeChat; introduced 48-hour advance check-in; provided
32,000 free tickets for family reunion.
China Southern added Changchun, Zhengzhou,
Wuhan and Changsha to its list of airports that support 48-hour advance check-in in January, 2014. This had brought the total number
of airports that allow 48-hour advance check-in to 11. These four new additions are all popular destinations during Chinese New
Year, this service improvement was able to make our passengers’ travel smoother and more convenient.
7.2 Caring for People
China Southern feels eternal gratitude
to the communities that it operates with. China Southern owes its existence and development to the society. Giving back to the
society is therefore and natural choice and an incumbent commitment of China Southern. Taking the advantage of the aviation sector,
we focus our efforts on helping the communities, especially on the groups that require extra attention, assisting them in their
challenging situations.
7.2.1 A relay of love – helping
a girl with empyrosis
A 4-year-old girl Tian Yu from Guiyang,
whose parents were working far away from home, was seriously burnt in an accident on January13th. Her life was saved
after emergency procedures; however she had to be transferred to a hospital in Chongqing for follow-up dermepenthesis procedures.
Upon receipt of this information, China Southern immediately offered free tickets to Tian Yu and her family, and escorted them
to Chongqing. China Southern arranged dedicated security check channel at Guiyang airport and priority boarding for the family.
During the flight, our cabin crew had prepared soft pillows and blankets for Tianyu, and raised close to 10,000RMB on the flight.
7.2.2 Green-wave for the “heart”
A special request reached China Southern’s
Guangxi Branch at 10pm on May1st. This request was sent by 181 Hospital of Guilin, with respect to the immediate and
safe transportation of a donor’s cardiac organ from Guilin to Beijing. It was written in the request that “A heart
transplant procedure must be performed within 6 hours of the cardiectomy of the donor’s cardiac organ. For the successful
completion of the transplant procedure, we sincerely hope that China Southern could help us, and help the recipient, by ensuring
the absolute punctuality of a flight from Guilin to Beijing.”
The story began with a 12-year-old patient
with acute heart failure at Anzhen Hospital in Beijing, who was in urgent need of a heart transplant. Coincidentally, Xiao Ye,
a patient who had been declared brain death in 181 Hospital of Guilin was able to be the donor.
After receiving the request from the hospital,
China Southern immediately formulated an action plan for flight CZ3287 on the following day.
Time is life, not one second could be wasted
in delivering this heart.
8:05am, May2nd, China Southern
filed an application of priority operation to the dispatch office of the CAAC, requesting air control centers of East China, North
China, Central and South China, and Northeast China to give priority clearance to the routes of CZ3287.
4:00pm, cardiectomy commenced.
4:55pm, the procedure was completed successfully,
the donor’s cardiac organ was removed and placed in a special hold, and delivered to Guilin Airport at once. At the same
time, China Southern commenced boarding and application to an early departure.
5:25pm, an ambulance with Xiao Ye’s
heart arrived at Guilin Airport. China Southern’sground staff immediately presented the medical team with boarding passes
and guided them through pre-arranged security check channel and boarding gate.
5:35pm, medical team onboard flight CZ3287.
5:51pm, boarding completed and gate closed
6:00pm, CZ3287 took-off, 15 minutes ahead
of schedule.
8:20pm, CZ3287 landed safety at Beijing
Capital International Airport, 35 minutes ahead of schedule.
8:39pm, medical team escorted by China
Southern staff onboard police helicopter and took-off to Anzhen Hospital.
7.2.3 A life-saving emergency landing
On December2nd, a 19-month infant suddenly became unconscious onboard our flight from Vancouver to Guangzhou, the situation
was desperate. Due to the severity of the case, limited onboard medical equipment could not help the child. The flight crew of
the flight was facing three options: first, to continue flying to Guangzhou, second, to return to Vancouver, and third, to divert
to the nearest airport. Considering the critical situation, making an emergency landing was the best option for the baby. Anchorage
was the nearest airport at the time, however diverting to Anchorage was not an easy option since China Southern did not have any
representation in Anchorage which made ground support issues tremendously complicated. Furthermore, the maximum landing weight
of the 787 operating this flight must not exceed 173 tons, while the actual weight was over 200 tons at that time.
The situation was becoming more critical.
After receiving an emergency landing request from the captain, China Southern headquarter immediately approved and initiated the
contingency procedure: our dispatcher was racing against time in preparing data required and contacting Anchorage Airport for the
arrangement of ambulance as well as other ground support; the flight crew started dumping 30 tons of fuel while preparing for a
safe landing; the flight crew was patiently explaining reasons for this diversion to passengers onboard.
The flight landed safely at Anchorage,
a medical team waited on the apron boarded the aircraft with equipment, the child and the family were safely taken to the ambulance
after 2 minutes. As the child received timely treatment, he was able to be discharged from the hospital not long after. This story
appeared with a title of “30 tons of airborne defuel, China Southern’semergency landing saves a child”
in CCTV’s mainline programs such as 7pm News, Focus, Oriental Times, andNews Live.
[FIGURE]:
a. A life-saving 25 minutes
Three options to China Southern: continue
flying to Guangzhou, return to Vancouver, or divertto the nearest airport
China Southern’s choice: Divert to
Anchorage, the nearest alternative airport
b. 30 tons of defuel
China Southern had neither office nor ground
technical staff at Anchorage, passenger service and support after landing would be very difficult. The maximum landing weight of
an 787 aircraft must not exceed 173 tons, the 787 operating the flight weighted over 200 tons at the time, which meant a airborne
defuel was required before landing.
China Southern’s choice: defuel for
a safe landing
c. Life saved
With seamless cooperation of all parties,
the flight landed safely and the child received immediate treatment, and has been discharged already.
China Southern’s response: Life is
above all. We appreciate the understanding of all passengers and the support from all parties.
7.3 Culture and Education
Contributing to the culture and education
in the communities that we are operating in is our engagement to our stakeholders, and is our respect to global code of conduct
and our commitment to preserve community character and culture diversity. We highly focus on the development of culture and education.
The Youth League Committee of CSN actively
encourages its sub-committees to organize and implement social projects such as anti-poverty, schooling aids, caring for the elderly
and environmental conservations, enriching the aspect of “return to society” in our corporate culture and social responsibilities.
7.3.1 Supporting education with our
“10-Fen” Care Foundation
Our “10-Fen” CareFoundation
was founded on May 13th, 2005. The name of this foundation has two meanings: on the one hand, “10-Fen” indicates
that we inject 10 Fen (0.1RMB) with every ticket sold into the foundation; on the other hand, it also represents our full commitment
to our social responsibilities and our support to charity work.
The “10-Fen” Care Foundation
was awarded the Outstanding Volunteering Project of State-owned Enterprises. Throughout 2014, the foundation has funded numerous
educational projects, such as:
A donation of ¥1,000,000RMB to Jinan
University was made on May 9thfor the funding of students in financial hardship with outstanding academic performance.
Jinan University has hence become the fifth university in Guangzhou that the “10-Fen” Care Foundation had contributed.
We continue working with Jinan University in supporting their extra-curriculum activities such as the Undergraduate Innovation
Contest and Oversea-Chinese students Chinese Language Contest.
A donation of ¥1,000,000RMB to Zhengzhou
University was made on September 18thfor the funding of students in financial hardship with outstanding academic performance.
A donation of ¥1,000,000RMB to Guizhou
University was made on October20th. Meanwhile, China Southern has signed a strategic cooperation agreement with Guizhou
University to establish a comprehensive partnership in the areas of science, education, training and youth exchange.
Three donations of ¥200,000RMB were
made to Chongqing University, Guangdong University of Foreign Studies and Guangzhou Civil Aviation College for the third consecutive
year. Five donations of ¥200,000RMB were made to Jilin University, Tianjin University, Hunan University, Dalian Maritime University
and Civil Aviation Flight University of China for the second consecutive year.
7.3.2 “Bookcase of Dreams”
Charity Sale
The new building of Cenyin Primary School
in Long’e Village, Liping County of Guizhou Province was inaugurated on January 4, 2014. This new building has replaced the
old and dilapidated building that the school had been using for years.
It all started with Mr. XieJieping, one
of China Southern’s young volunteers. In 2012, Mr. Xie assisted Cenyin Primary School as a voluntary teacher. After his returning
from service, he successfully collected 100 pairs of shoes from his colleagues and friends for the children at this school. His
act of goodwill was widely spread in the company, with the help of all sides,China Southernhas subsequently raised 1.5 million
RMB for the renovation ofCenyinPrimary School. The new campus occupies a land of 1150m2 with a new school building with
a floor area of 831m2.
In the meantime, our ongoing “Bookcase
of Dreams” program was also extended to Cenyin Primary School. Our volunteers brought 1181 books that were suitable for children
as well as 30 point-reading machines (smart learning devices).
In addition, our volunteers have also visited
other primary schools and impoverished families, and planned to broaden their service scope by providing one-to-one assistance
to children in families with difficulties.
7.4.3 Advancing cultural exchange
CSN added 5 destinations in Australia and
New Zealand to its network since 2009; namely Sydney, Melbourne, Brisbane, Perth and Auckland, with up to 52 flights a week. While
developing air travel between China and the Australasia, We are also committed to being a bridge of cultural exchange to this region,
which demonstrates our goodwill in connecting the world, connecting culture, and connecting a future together.
China Southern became the Leadership Partner
and the Official Airline Partner of the Sydney Festival for the third year in 2014. Sydney Festival’s much celebrated “Symphony
in the Domain” as well as a number of performances in the Sydney Opera House were sponsor by China Southern. In addition,
we also sponsored the Australia Day in Sydney Harbour Parade. On 11th January, a speech was delivered to the 60,000
audiences by China Southern on the grand opening of Sydney Festival 2014.
We were also the proud Leadership Partner
and the Official Airline Partner of the Melbourne Festival in 2014. The Annual China Southern Airlines Concert in the Sidney Myer
Music Bowl was held on October 18thwith the great performance ofMihalisHatzigiannis with Melbourne Symphony Orchestra.
MihalisHatzigiannis is one of the most important and influential Greek singer/songwriters; this concert provided a platform for
intercultural awareness and interaction for the wider public who joined the Melbourne Festival.
| c. | Melbourne Football Club |
China Southern signed an agreement with
the Melbourne FC in 2014, become a Platinum Plus Partner to “The Dees”. The game on the Queen’s Official Birthday,
which was the most important game in Australian Football League (AFL) of the season, was co-sponsored by China Southern and AHG,
the official sponsor of Melbourne FC. Along with the game, China Southern hosted a Paper Airplane Contest, attracted the participation
of over 2,000 Melbourne FC fans.
7.3.4 Transportation of historical relics
A seemingly ordinary China Southern flight
landed at Guangzhou Baiyun International Airport on July 2nd, onboard this flight was a group of rather extraordinary
“passengers” – 133 Native American historical relics. China Southern was the sponsoring airline for the transportation
of this batch of precious relics that departed 15 hours ago from Los Angeles.
These relics are the exhibits of the “First
Americans: Tribal Art of North America” exhibition co-organized by Guangdong Provincial Museum and the Bowers Museum of California,
USA. China was the first stop of their first ever trip away from the USA. Due to the values of the exhibits, all information had
been kept strictly confidential and China Southern was provided the exact transportation plan only 24 hours prior to its departure.
In order to guarantee the safety of the historical relics, China Southern took the initiative of keeping in close communication
with Bowers Museum, specifying the shipping requirement and arranged special vehicles and dedicated team to oversee key stages
of acceptance, dispatch, loading and unloading of the relics, hence ensuring the safe and smooth transportation of these relics
with short notice.
China Southern is strongly willing to participate
in the cultural exchange between the east and the west through its global route network. With our consistently expanding network,
we wish to play a more important role in cultural exchange in the future.
7.3.5 World Travel and Tourism Council
Global Summit 2014
China Southern official became a member
of the World Travel and Tourism Council (WTTC) in 2012. The WTTC Global Summit 2014 was held in Sanya, Hainan Province in April
2014, China Southern was invited as the Platinum Sponsor to the Summit, and joined other leaders of the travel and tourism industry
in the discussion and exploration of future development. 580 guests attended this Summit, over 70% of them chose to fly with us
to Sanya. We established a dedicated ticketing counter at the Summit venue for booking, refund, endorsement and rebooking, and
arranged special transit assistance service at GuangzhouBaiyun International Airport for those who had to transit via Guangzhou.
[LINK]: The President & CEO of WTTC
praises China Southern service
The President and CEO of WTTC, Mr. David
Scowsill arrived in Sanya via Guangzhou onboard one of our 787 Dreamliner on April 21st. After his trip, Mr. Scowsill
commented that he had had a perfect trip onboard a nice aircraft with excellent service, and that he managed to enjoy a long sleep
during the flight. Mr. Scowsill further added that he had heard a lot of discussions on the “China Dream”, flying with
China Southern and travel around to see the world may also be a China Dream.
7.3.6 Promotion of tea culture
China is the birthplace of tea, and the
country with the longest history in tea planting. Tea-making is a form of art, and a culture. The art of tea-making is presented
through performing the boiling, brewing and infusing of water and tea leaves, it is a lively and artistic performance of the various
techniques used in tea-making as well as tea tasting.
Our Sky Pearl Lounges in Guangzhou Baiyun
International Airport offers performance of tea-makingpresented by professional tea-making artists to our premium passengers at
regular intervals throughout the day. Tea-making as an oriental culture, is being accepted by more and more of our world travelers.
We at China Southern embrace our cultural heritage and are willing to extend Chinese tea-making culture to the greater world.
7.4 Volunteer Services
China Southern attaches great importance
to volunteering activities. Divisions such as Flight, Cabin, Maintenance & Engineering and Ground Service have all set up their
sub-associations of volunteers, forming a young volunteering service network for both within the company and the society.
China Southern Young Volunteers Association
(CSYVA) was founded over 10 years ago. The association finds its foothold in China Southern and reaches out to the society providing
a wide variety of charity works.
Guangzhou: Helping family reunion for
left-behind children
January30thwas Chinese New Year’s
Eve, Yang Yaqin, a left-behind child whose parents were migrant workers in Guangzhou, boarded a flight to Guangzhou, after just
a few hours, she had met with her family and her little brother. This was the first New Year’s Eve in years that the family
had spent together. Yang Yaqin was just one of the many left-behind children whom China Southern funded through its “Courier
for families” program. This program has been helping many children in joining their family reunions before Chinese New Year.
Beijing: Establishing a long-term partnership
with Yanjing Little Swan Charity School for Children of Migrant Workers
Xinjiang: Love in the depth of the desert
Pinaxi Village in Pishan County, Hotan
District of Xinjiang is one of China Southern’s coordinated poverty relief areas. The disadvantaged school children in Pinaxi
Village could not afford some of the basic necessities such as school uniforms, bags or even stationary. CSYVA carried out fund
raising events in the company, on March 31st, 208 kids in a local primary school received new bags, stationary and uniforms
for the new semester.
Shenzhen: Social etiquette in school
May 25th, a group of flight
attendants from China Southern Shenzhen branch held two seminars in Hongya Primary School and Bao’an Middle School, introducing
aviation safety and traditional Chinese social etiquette based on their training and experience.
Shanghai: Assisting the medical transportation
of an orphan
August 12th, Manman, a 6-month
old baby girl at a charity institution in the city of Karamay who was diagnosed with Hiatus Hernia, flew to Shanghai with the company
and assistance of China Southern’s young volunteers. The social workers who escorted Manman along the trip said to us while
waiting at the airport that the good time was coming for their little baby.
Guizhou: Donation of a fresh-water service
reservoir
March 17th, a team of volunteers
of CSYVA visited Weimin Primary School in Xinghe Village, Dafang County of Bijie City in Guizhou Province with packages of stationary
and clothing items. After learning that the supply of fresh water was extremely difficult during dry season, the CSYVA held fund-raising
events and donated a fresh water service reservoir to Weimin Primary School. The reservoir was completed and put in use in September
the same year.
Hunan: Guangzhou city tour for school
children of western Hunan
“Under the same sky” summer
camp was organized by China Southern Volunteer Association and Guangdong TV for school children of western Hunan. During the 5-day
period from August 27th to 31st, the school children participated in a series of activities such as tours
to our aircraft maintenance sites, Pearl River Night Cruise, and visits to the Canton Tower.
Guangxi: Poverty relief for underprivileged
children
A long-term volunteering service partnership
was established between CSYVA and the underprivileged children in Jianfeng Village, Ningwu Town, Wuming County of Nanning City.
Shenzhen: Visits to Nanshan Special
Child Care Center
Harbin: Visits to elderly homes
Zhuhai: Blood donation
Hubei: Free tickets for newly admitted
university students from the earthquake-stricken area of Ludian, Yunan
Tibet: Donation of school necessities
to Pingguo Primary School, Derqin, Ngari Region
Henan: Visits to charity institutions
Shenyang: “Learning from Lei Feng
and help others” events
Dalian: Onboard awareness raising events
Xiamen: Advocating civilized travel
in tourist attractions
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