Shandong Airlines Co., Ltd. Annual Report 2020
ANNUAL REPORT 2020
March 2021
Shandong Airlines Co., Ltd. Annual Report 2020
Contents
Section I Important Notice and Interpretation .............................................................................. 1
Section II Company Profile and Main Financial Indexes ............................................................. 4
Section III Summary of Company Business .................................................................................. 9
Section IV Discussion and Analysis of Operation ......................................................................... 12
Section V Important Events ........................................................................................................... 31
Section VI Changes in shares and particular about shareholders ............................................... 47
Section VII Preferred Stock……………………………………………………............................ 55
Section VIII Convertible Bond……………………………………………....................................56
Section IX Particulars about Directors, Supervisors,Senior Executives and Employees .......... 57
Section X Corporate Governance ................................................................................................... 71
Section XI Corporate Bonds ........................................................................................................... 79
Section XII Financial Report .......................................................................................................... 80
Section XIII Docume nts available for reference.......................................................................... 234
Shandong Airlines Co., Ltd. Annual Report 2020
Section I. Important Notice and Interpretation
Board of Directors, Supervisory Committee, all directors, supervisors and senior
executives of Shandong Airlines Co., Ltd. (hereinafter referred to as the
Company) hereby confirm that there are no any fictitious statements, misleading
statements, or important omissions carried in this report, and shall take all
responsibilities, individual and/or joint, for the reality, accuracy and completion
of the whole contents.
Sun Xiujiang, Principal of the Company, Xu Guojian, person in charge of
accounting works and Zhou Shoubin, person in charge of accounting organ
(accounting principal) hereby confirm that the Financial Report of 2020 Annual
Report is authentic, accurate and complete.
Except the followed directors, other directors are attending the meeting for
annual report deliberation in person
Title of the director not
Director not personally attended Reasons for absent Mandatory
personally attended
Wang Mingyuan Director Job-related reason Xu Chuanyu
Li Xiuqin Director Job-related reason Wang Zhifu
Lv Hongbing Independent Director Job-related reason Xu Xiangyi
Duan Yalin Independent Director Job-related reason Hu Yuanmu
Concerning the forward-looking statements with development strategy and
business plans involved in the Report, they do not constitute a substantial
commitment for the investors. Investors are advised to exercise caution of
investment risks.
This report has been prepared in Chinese and English version respectively. In
the event of difference in interpretation between the two versions, Chinese
report shall prevail.
The Company has no plans of cash dividend distributed, no bonus shares and
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Shandong Airlines Co., Ltd. Annual Report 2020
has no share converted from capital reserve either
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Shandong Airlines Co., Ltd. Annual Report 2020
Interpretation
Items Refers to Contents
The Company, Company Refers to Shandong Airlines Co., Ltd.
Shandong Aviation Group, the first largest shareholder and controlling
Shandong Aviation Refers to
shareholder of the Company
Air China Refers to Air China Limited, the second largest shareholder of the Company
ATK (Available Tonne-Kilometre) Refers to Sum of products of payload and route distance for each segment
Sum of products of maximum numbers of seats and route distance for
ASK Refers to
each segment
Sum of products of maximum cargo carrying tonnage and route
AFTK Refers to
distance for each segment
Sum of products of tonnage of transport and route distance for each
RTK Refers to
segment actually
Sum of products of passenger traffic volume and route distance for each
RPK (Revenue Passenger Kilometers) Refers to
segment actually
Sum of products of freight carrying tonnage and route distance for each
RFTK Refers to
segment actually
Integrated carrier rate Refers to RTK/ATK
PLF (Passenger Load Factor) Refers to RPK/ASK
Freight Rate Refers to RFTK/ AFTK
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Shandong Airlines Co., Ltd. Annual Report 2020
Section II Company Profile and Main Financial Indexes
I. Company information
Short form of the stock Shanhang-B Stock code 200152
Stock exchange for listing Shenzhen Stock Exchange
Name of the Company (in
山东航空股份有限公司
Chinese)
Short form of the Company
山东航空
(in Chinese)
Foreign name of the
SHANDONG AIRLINES CO.,LTD.
Company (if applicable)
Short form of foreign name
of the Company (if SDA
applicable)
Legal representative Sun Xiujiang
Registration add. Yaoqiang International Airport, Jinan, Shandong
Code for registrations add. 250107
Offices add. SDA Bldg., No. 5746, Er Huan East Road, Jinan, Shandong
Codes for office add. 250014
Company website www.sda.cn
Email zqb@sda.cn
II. Person/Way to contact
Secretary of the Board Rep. of security affairs
Name Dong Qiantang Fan Peng
1/F, Tiangong Office Building, North of 3/F, Tiangong Office Building, North of
Red-crowed cranes Hotel, Yaoqiang Red-crowed cranes Hotel, Yaoqiang
Contacts add.
International Airlines, Licheng District, International Airlines, Licheng District,
Jinan, Shandong Jinan, Shandong
Tel. 0531-82085939 0531-82085586
Fax. 0531-85698034 0531-85698034
Email dongqt@sda.cn fanp@sda.cn
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Shandong Airlines Co., Ltd. Annual Report 2020
III. Information disclosure and preparation place
In China: China Securities Journal, Securities Times
Newspaper appointed for information disclosure
overseas: Hong Kong Commercial Daily(H.K.)
Website for annual report publish appointed by
http://www.cninfo.com.cn
CSRC
Office of Board (3/F, Tiangong Office Building, North of Red-crowed
Preparation place for annual report cranes Hotel, Yaoqiang International Airlines, Licheng District, Jinan,
Shandong)
IV. Registration changes of the Company
Organization code 91370000720721201F
Changes of main business since listing
No change.
(if applicable)
Previous changes for controlling
No change.
shareholders (if applicable)
V. Other relevant information
CPA engaged by the Company
Name of CPA RSM Certified Public Accountants (special general partnership)
901-22 to 901-26, Foreign Economic & Trade Building, Block 1, No. 22, Fuchengmenwai
Offices add. for CPA
Street, Xichang District, Beijing
Signing Accountants Yang Yunhui, Xu Hong
Sponsor engaged by the Company for performing continuous supervision duties in reporting period
□ Applicable √ Not applicable
Financial consultant engaged by the Company for performing continuous supervision duties in reporting period
□ Applicable √ Not applicable
VI. Main accounting data and financial indexes
Whether the Company needs to retroactively adjust or restate the accounting data of previous years
□Yes √No
Changes over last
2020 2019 2018
year(+,-)
Operating income (RMB) 10,534,403,350.87 18,990,415,024.88 -44.53% 18,765,953,326.74
Net profit attributable to
shareholders of the listed -2,382,015,455.81 361,005,776.31 -759.83% 347,379,314.89
company(RMB)
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Shandong Airlines Co., Ltd. Annual Report 2020
Net profit attributable to
shareholders of the listed
company after deducting -2,491,142,998.52 203,107,863.26 -1,326.51% 132,549,289.96
non-recurring gains and
losses(RMB)
Net cash flow arising from
-1,699,728,760.80 2,629,812,252.38 -164.63% 2,450,017,519.48
operating activities(RMB)
Basic earnings per share
-5.960 0.900 -762.22% 0.87
(RMB/Share)
Diluted earnings per share
-5.960 0.900 -762.22% 0.87
(RMB/Share)
68.53 percentage
Weighted average ROE -61.31% 7.22% 7.94%
points down
Changes over end of
Year end of 2020 Year end of 2019 Year end of 2018
last year (+,-)
Total assets (RMB) 22,403,505,133.99 17,392,935,986.48 28.81% 16,563,979,100.41
Net assets attributable to
shareholder of listed company 2,570,260,924.21 5,173,519,005.57 -50.32% 4,471,325,978.28
(RMB)
The lower one of net profit before and after deducting the non-recurring gains/losses in the last three fiscal years is negative, and the
audit report of last year shows that the ability to continue operating is uncertain
Yes No
The lower one of net profit before and after deducting the non-recurring gains/losses is negative
√Yes No
Item 2020 2019 Note
The operating revenue is mainly from
international and domestic air passenger, cargo
Operating income (RMB) 10,534,403,350.87 18,990,415,024.88
transportation business and other business
license related revenue
The operating revenue is mainly from
Deduction amount from international and domestic air passenger, cargo
0.00 0.00
operating income（RMB） transportation business and other business
license related revenue
The operating revenue is mainly from
Amount of operating
international and domestic air passenger, cargo
income after deduction 10,534,403,350.87 18,990,415,024.88
transportation business and other business
（RMB）
license related revenue
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Shandong Airlines Co., Ltd. Annual Report 2020
VII. Difference of the accounting data under accounting rules in and out of China
1. Difference of the net profit and net assets disclosed in financial report, under both IAS (International
Accounting Standards) and Chinese GAAP (Generally Accepted Accounting Principles)
□ Applicable √ Not applicable
The Company had no difference of the net profit or net assets disclosed in financial report, under either IAS (International
Accounting Standards) or Chinese GAAP (Generally Accepted Accounting Principles) in the period.
2. Difference of the net profit and net assets disclosed in financial report, under both foreign accounting
rules and Chinese GAAP (Generally Accepted Accounting Principles)
□ Applicable √Not applicable
The Company had no difference of the net profit or net assets disclosed in financial report, under either foreign account ing rules or
Chinese GAAP (Generally Accepted Accounting Principles) in the period.
VIII. Quarterly main financial index
In RMB
Q1 Q2 Q3 Q4
Operating income 2,272,051,496.91 1,918,598,299.18 3,175,728,671.98 3,168,024,882.80
Net profit attributable to
shareholders of the listed -593,802,879.77 -702,207,694.13 -387,100,636.29 -698,904,245.62
company
Net profit attributable to
shareholders of the listed
-623,330,188.48 -713,188,779.87 -404,417,235.22 -750,206,794.95
company after deducting
non-recurring gains and losses
Net cash flow arising from
-1,293,435,795.24 -604,312,983.19 574,301,527.34 -376,281,509.71
operating activities
Whether there are significant differences between the above-mentioned financial index or its total number and the relevant financial
index disclosed in the company’s quarterly report and semi-annual report
□Yes √ No
IX. Items and amounts of non-recurring profit (gains)/loss
√ Applicable □ Not applicable
In RMB
Item 2020 2019 2018 Note
Gains/losses from the disposal of
non-current asset (including the write-off 59,471.65 -2,066,959.25 25,187,750.35
that accrued for impairment of assets)
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Shandong Airlines Co., Ltd. Annual Report 2020
Governmental subsidy reckoned into
current gains/losses (not including the
subsidy enjoyed in quota or ration 98,058,606.34 102,684,463.91 210,862,890.39
according to national standards, which are
closely relevant to enterprise’s business)
Losses/gains from changes of fair values
occurred in holding trading financial
assets, derivative financial assets, trading
financial liabilities and derivative
financial liabilities, and investment
income obtaining from the disposal of
-1,565,885.31 -207,436.01 3,789,484.18
trading financial assets, derivative
financial assets, trading financial liability,
derivative financial liability and other debt
investment, excluded effective hedging
business relevant with normal operations
of the Company
Other non-operating income and
expenditure except for the aforementioned 46,338,437.81 105,248,418.17 35,762,795.56
items
Other items of profits/losses that qualified
the definition of non-recurring profit/loss 2,626,332.77 4,954,383.18 10,952,470.45
Less: impact on income tax 36,389,420.55 52,714,956.95 71,725,366.00
Total 109,127,542.71 157,897,913.05 214,830,024.93 --
Concerning the non-recurring profit (gain)/loss defined by Q&A Announcement No.1 on Information Disclosure for Companies
Offering Their Securities to the Public --- Non-recurring Profit/loss, and the items defined as recurring profit (gain)/loss according to
the lists of non-recurring profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their
Securities to the Public --- non-recurring Profit/loss, explain reasons
□ Applicable √ Not applicable
Concerning the non-recurring profit (gain)/loss defined by Q&A Announcement No.1 on Information Disclosure for Companies
Offering Their Securities to the Public --- Non-recurring Profit/loss, and the items defined as recurring profit (gain)/loss according to
the lists of non-recurring profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their
Securities to the Public --- Non-recurring Profit/loss, the Company has no such items in the reporting period for the aforesaid
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Shandong Airlines Co., Ltd. Annual Report 2020
Section III Summary of Company Business
I. Main businesses of the company engaged in during the Period
1.Main business of the Company engaged in during the Period
(i) Main business and business model of the Company
The Company is mainly engaged in international and domestic air passenger and cargo transportation business; hotel catering; aircraft
maintenance; civil aviation personnel training; insurance agency; airline agency business; ground services related to main business;
sales of aviation materials, general merchandise, food, health foods, handicrafts, souvenirs, etc., and retail sales of tobacco; leasing of
aviation materials; leasing of premises, rental of houses; business services; hotel accommodation agents and ticket agents; conference
services; transport agency services, air cargo storage; and labor services. Among them, international and domestic air passenger and
cargo transportation business is the Company's main business.
For more than 20 years, the Company has always been giving first priority to “ensure safety, pay close attention to efficienc y, and
strive to punctuality and quality service”. As of the end of 2020, the Company has 131 airplanes of Boeing B737 series, and striding
into the ranks of large airlines. At present, the Company bases its headquarters in Jinan and has branch offices and flight bases in
Qingdao, Yantai, Xiamen, Chongqing, Beijing, Urumqi and Guiyang. The Company operates more than 200 domestic, and opens
routes to the surrounding countries as South Korea, Japan, Thailand, India and Cambodia as well as the region of Taiwan China and
Hong Kong China.
(ii) Development status of the industry
In 2020, due to the impact of COVID-19 epidemic, the global civil aviation industry's passenger traffic dropped sharply, and China's
civil aviation industry reduced 240 million passengers on a year-on-year basis. The international epidemic continued to spread,
passenger travel demand was sluggish, and industry operations were facing severe challenges. In the face of the impact of the
epidemic, our country’s civil aviation industry continued to maintain a safe operation situation , the national transport aviation
achieved a record of “120+4” months and 89.43 million hours of continuous safe flight , and ensured air defense safety for 18
consecutive years, and the flight regularity rate has exceeded 80% for three successive years, which reached 88.52% in 2020.
According to the “Main Production Index Statistics of CAAC in December 2020” published by the Civil Aviation Administration, the
RTK of entire industry in 2020 reached 79.85 billion ton-km, a decrease of 38.3% on a year-on-year basis; passenger transport volume
reached 418 million persons, a decrease of 36.7% on a year-on-year basis; cargo and mail transport volume reached 6,766,000 tons, a
decrease of 10.2% from a year earlier.
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Shandong Airlines Co., Ltd. Annual Report 2020
Data sources: Civil Aviation Industry Development Statistics Bulletin of 2019
The civil aviation industry is a cyclical industry closely related to the macroeconomic cycle, and also has obvious seasonal and regional
characteristics. Affected by holidays and students' winter and summer vacations, the peak season of China's air passenger transport
generally occurs in Spring Festival and during the time between July and August.
II. Major changes in main assets
1. Major changes in main assets
Major assets Note of major changes
Equity assets No major changes in the period
Fixed assets No major changes in the period
Intangible assets No major changes in the period
Construction in progress No major changes in the period
Amount at period-end has 38.06% declined over that of period-begin, mainly because
Other equity instrument investment
the fair value of the non-tradable equity instruments held declined.
2. Main overseas assets
□ Applicable √ Not applicable
III. Core competence analysis
1. Industry-leading safety management capabilities: The Company has the industry-leading safety management model and safety
management level. Excellent safety management capabilities enable the Company to provide passengers with a safer journey,
effectively reduce the Company’s operational risk, and shape the Company’s safe brand image. At the same time, under the
supervision of “safety first” in the civil aviation industry, the good safety records have also brought opportunities for the Company to
take the lead in applying new technologies in the industry and play a leading role in promoting the safety control level in the industry.
2. Excellent resource allocation and organization & executive capacity: The Company operated a total of 131 airplanes of Boeing 737
serials with an average age of 7.28 years. The single Boeing model can help to enhance the bargaining power of the Company in the
purchase, the aviation materials and the experience and technology of the crew and maintenance team can also be shared, and various
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Shandong Airlines Co., Ltd. Annual Report 2020
resources can be adjusted and deployed flexibly to maximize the efficiency. The Company has outstanding organization and
execution capability, and has man-machine ratio is 85:1, which is far below the industry average. Superior resource allocation and
organizational execution capabilities maintain the Company’s industry-leading level in cost control. Besides, the Company has
formed a Company-specific management mode through continuous innovation and accumulation and by focusing on safety,
efficiency, service and operation. In 2017, the Company won the 17th National Quality Award and became the first and only
award-winning aviation Company in the civil aviation industry; in 2020, successfully passed the confirmation review of National
Quality Award, which proved the Company's management level and execution efficiency.
3. Incentive and competitive corporate culture brand: By many years of practice, the Company has formed the corporate values of
“harmony, safety, innovation, and kindness” and the brand culture of “Honest Shanhang”. Qilu’s Confucianism and Shandong
people’s character of “promise keeping and honor credibility” have been integrated into the Company and widely recognized by the
Company's employees, which has also formed a resonance with the social mainstream’s recognition to honesty and kindness.
Through the promotion of “honest and kind” culture and brand, the Company can better convey the service value to the passenge rs,
gain the trust of customers, constantly enhance the passengers' sense of identity to the Company, and create greater value for the
passengers. According to the passenger complaint rate of airlines published by the Civil Aviation Administration of China, the
Company has maintained the leading level in the industry, and has been honored as the best airline enterprise with civil aviation
services for six consecutive years.
The core competence of the Company has no change in the reporting period.
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Shandong Airlines Co., Ltd. Annual Report 2020
Section IV Discussion and Analysis of Operation
I. Introduction
(i) Operation data summary:
Item 2020 2019 Changes (+,-)
Transport capacity
Available tonnage kilometer (ATK) (10 363162.17 480063.30 -24.35%
thousand TK)
Including: Domestic flight 352563.43 440168.39 -19.90%
International flight 10024.66 32325.42 -68.99%
Regional routes 574.08 7569.49 -92.42%
Available seat km(ASK) (10 thousand 3379945.00 4481197.35 -24.57%
PK)
Including: Domestic flight 3332174.98 4097117.74 -18.67%
International flight 42369.88 313063.28 -86.47%
Regional routes 5400.14 71016.33 -92.40%
Available freight ton-kilometers 58967.12 76755.54 -23.18%
(AFTK) (10 thousand TK)
Including: Domestic flight 52667.68 71427.80 -26.26%
International flight 6211.37 4149.73 49.68%
Regional routes 88.07 1178.02 -92.52%
Carrying capacity
RTK (RTK)（10 thousand TK） 255192.97 362809.20 -29.66%
Including: Domestic flight 250338.61 335661.31 -25.42%
International flight 4636.04 22777.03 -79.65%
Regional routes 218.31 4370.85 -95.01%
Volume of passenger transportation 2562748.52 3765361.44 -31.94%
(RPK)（10 thousand PK）
Including: Domestic flight 2532349.27 3469080.26 -27.00%
International flight 28066.01 249643.85 -88.76%
Regional routes 2333.25 46637.33 -95.00%
Turnover volume of freight 27966.64 30921.21 -9.56%
transportation (RFTK) （ 10 thousand
TK）
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Shandong Airlines Co., Ltd. Annual Report 2020
Including: Domestic flight 25743.48 29878.91 -13.84%
International flight 2207.02 769.61 186.77%
Regional routes 16.14 272.69 -94.08%
Volume of passenger traffic (10 1819.49 2583.76 -29.58%
thousand passengers)
Including: Domestic flight 1799.74 2390.88 -24.72%
International flight 18.42 165.61 -88.87%
Regional routes 1.33 27.27 -95.14%
Cargo & mail traffic volume (ton) 165922.33 182158.12 -8.91%
Including: Domestic flight 152682.28 175578.69 -13.04%
International flight 13142.78 4932.34 166.46%
Regional routes 97.27 1647.09 -94.09%
Load factor
Integrated carrier rate (%) 70.27 75.58 -5.31 percentage points
Including: Domestic flight 71.01 76.26 -5.25 percentage points
International flight 46.25 70.46 -24.22 percentage
points
Regional routes 38.03 57.74 -19.71 percentage
points
PLF (%) 75.82 84.03 -8.2 percentage points
Including: Domestic flight 76.00 84.67 -8.67 percentage points
International flight 66.24 79.74 -13.5 percentage points
Regional routes 43.21 65.67 -22.46 percentage
points
Freight Rate (%) 47.43 40.29 7.14 percentage points
Including: Domestic flight 48.88 41.83 7.05 percentage points
International flight 35.53 18.55 16.99 percentage
points
Regional routes 18.33 23.15 -4.82 percentage points
Utilization of aircraft on a daily basis 7.50 10.08 -2.58 hours
(Daily cycle times per aircraft)
(ii) Fleet structure
In the Period, totally seven B737-8 airplanes are introduced by the Company. Up to 31 December 2020, the Company operates 131
airplanes in total and the fleet distribution below:
Model Numbers Average service age (Year)
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Shandong Airlines Co., Ltd. Annual Report 2020
737-700 3 7.28
737-800 121
737-8 7
(iii) Discussion and analysis of business
The Company coordinate efforts to prevent and control the epidemic and the work of production and operation in 2020 with a
positive achievement resulted.
——The situation of epidemic prevention & control is stable, and the responsibility of an enterprise has been demonstrated. There
was no epidemic spread caused by the company’s flights; and no confirmed or asymptomatic infection among employees of the
company. It has performed 39 epidemic prevention and control transportation charter flights and used the main shift to transport 19
shifts of personnel and materials, transported a total of 3,714 medical personnel, and 159.62 tons of epidemic prevention and control
materials.
——The security situation remains stable. The main business of transportation guarantees a total of 327,400 hours of a safe flight
with 159,900 sorties, a declined of 24.6% and 22.4% on a y-o-y basis respectively without serious symptoms of transport aviation
occurred. The safety quality evaluation index was 12.06, an increase of 0.45 from a year earlier.
——Maintain a high level of operating quality. The normal flight rate of main business of transport was 91.69%, a 6.41 percentage
points up on a y-o-y basis, and ranked the first among the major airlines in civil aviation industry. Guaranteed 27 VVIP flights with a
flight on-time rate of 100%.
——In terms of benefits.The company has an operating income of 10.506 billion yuan, a decrease of 44.7% from a year earlier; total
profit has -3.151 billion yuan, a decrease of 3.632 billion yuan (profit from transport has a y-o-y decrease of 3.654 billion yuan)on a
y-o-y basis; completed RTK of 2.55 billion ton kilometre, a passenger volume of 18.195 million person-time and 166000 tons in
cargo & mail volume, a 29.7%, 29.6% and 8.9% declined respectively on a y-o-y basis; the PLF has a 75.8% with 8.2 percentage
points down from a year earlier, the cargo & mail load rate was 47.4%, a 7.1 percentage point up on a y-o-y basis.
——The service quality is stable on the whole. The passenger satisfaction score is93.7, which is the same as last year basically. The
rate of passenger complaints remained low among the major airlines- forwarded by the Civil Aviation Administration. Won the
CAPSE “Best Domestic Airline” for six consecutive years. Successfully passed the “National Quality Award” confirmation review,
and honor the “Asia Service Awards”, awarded the “Five-Star Service Site” and “Four-Star Service Site” respectively from Lu-Yan
boutique route and 95369customer service center.
The following works have been carried out:
1. Strengthen responsibilities, coordinate & implement policies to combat the COVID-19
Firstly, coordinate and improve the working mechanism of epidemic prevention & control and production & operation. Resolutely
implemented the spirit of General Secretary Xi Jinping’s important speech and instructions on coordinating epidemic prevention &
control and economic growth, clarify the goals and task of fighting the three tough battles of “epidemic prevention & control, safe
production and business efficiency”. Intensive scheduling in terms of material reserves, safety management, production organization,
rush in the harvest & expenditure reduction, fund raising and public opinions responding, implementing the refine management and
control. Secondly, make comprehensive arrangements and do our best to prevent and control the epidemic. We will strictly
implement the requirements of the National Health Commission and Civil Aviation Administration, insist on the air -ground joint
defense and person-material defense, strictly implement the prevention & control measures such as aircraft disinfection & ventilation,
risk investigation for passengers & freight. Thirdly, acting according to the order, serving the overall situation and reflec ting the
responsibility. Resolutely implement the policies of free ticket refunds from the CAA and “Five Ones”; actively implement the task
of ensuring transportation for epidemic prevention & control and the resumption of work & production.
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Shandong Airlines Co., Ltd. Annual Report 2020
2. Grasp the key works, and consolidate the quality foundation for safe operation
Firstly, improve the management system of safe operation continuously. Strengthen safety responsibility, promote the transfor mation
of safety management to “data-driven”, improve the quality-control mechanism for operation assurance. Secondly, work hard to
develop the “primary construction, basic work and basic skills training”. Implement the safe rectification of “grasping work style,
strengthening the three basics and keeping the bottom line”. Comprehensively promote the optimization and reform of flight training
system, improve the management mechanism of teachers and inspectors, standardize the AOC management system, completed the
development of qualification and training management system for transport control professionals. Thirdly, strengthen the capacity
building of emergency management system. Organize and carried out the mirroring exercises and review training. Comprehensively
sort out the external emergency supporting resources of each branch and terminals to enhance the joint force of emergency
supporting. Fourthly, staring closely at risks and hidden dangers, carrying out investigation and governance. To thoroughly identify
the impact of epidemic on production and operation, caring out safety hazard investigation and quality improvement actions.
Carefully study the changes in security risks during the epidemic, conduct in-depth risk assessment to ensure the air defense security
during the important periods such as spring festival, the Two Sessions and National Day.
3. Adhere to alteration according to the changes, seek opportunities in the process of changing and do out best to rush in the harvest
& expenditure reduction
Firstly, scientifically control the production organization rhythm. Promote the formulation of efficiency control plan and strengthen
the synergy of production and marketing. Secondly, strengthen revenue control and product innovation. Strive to improve the
efficiency of market response, grasp the market trends. Innovate the product forms, launch the products of resume work vouche rs and
campus flying people, explore new types of live broadcast sales. Thirdly, actively advance the “passenger-to-cargo” business. Launch
the international scheduled cargo flights of “passenger-to-cargo” , vigorously organizes the cargo sources and develop customers, and
laying a foundation for building a new pattern of passenger and cargo linkage. Fourth, tap the potential of cos t savings in full.
Review various budget reduction and cost reduction measures. Fifthly, actively prevent the capital risks. Focusing on cash flow risks
and enhancing capital reserves through various financing measures. Sixthly, coordinate the needs of epidemic prevention & control,
innovate the passenger services experience. Dynamically adjust transportation service guarantee standards and procedures, acc elerate
the improvement of online channel service function and realize the paperless customs clearance services at general aviation airports.
4. Push forward the capacity building in governance management, improve comprehensive management efficiency
Firstly, continue to optimize the organization and management information construction. Further improve the management efficiency,
strengthen grassroots management & control responsibilities, improve the function of crew resource management system, and
actively promote the construction of remote office carriers. Secondly, promote investment enterprises to take the initiative to respond
to the emergencies and carried out business optimization. Thirdly, promote the key tasks steadily. Advance the formulation of “14th
Five-Year Plan”, completed the construction demand estimation of the first phase of Shandong Airline base- a renovation and
extension project of Jinan Airport, strictly control the costs of aircraft introduction and fully complete the work of transferring
retirees to social management.
II. Main business analysis
1. Introduction
See “I. Introduction” in “Discussion and Analysis of Operation”.
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Shandong Airlines Co., Ltd. Annual Report 2020
2. Revenue and cost
(1) Constitute of operation revenue
In RMB
2020 2019
Increase/decrease
Ratio in operation Ratio in operation
Amount Amount y-o-y (+,-)
revenue revenue
Total operation
10,534,403,350.87 100% 18,990,415,024.88 100% -44.53%
revenue
According to industries
Air transport
9,829,874,543.16 93.31% 18,256,980,628.88 96.14% -46.16%
service
Logistics freight
27,974,801.19 0.27% 26,690,701.39 0.14% 4.81%
service
Hotel & catering
26,515,773.38 0.25% 31,610,469.95 0.17% -16.12%
service
Training service 4,497,391.59 0.04% 4,292,933.20 0.02% 4.76%
Other 645,540,841.55 6.13% 670,840,291.46 3.53% -3.77%
According to region
Domestic 10,199,538,957.01 96.82% 17,095,651,842.88 90.03% -40.34%
International 318,879,147.92 3.03% 1,571,151,462.00 8.27% -79.70%
Region 15,985,245.94 0.15% 323,611,720.00 1.70% -95.06%
(2) The industries, products, or regions accounting for over 10% of the company’s operating income or
operating profit
√ Applicable □ Not applicable
In RMB
Increase/decrea
Increase/decrea Increase/decrea
Operating Gross profit se of gross
Operating cost se of operating se of operating
revenue ratio profit ratio
revenue y-o-y cost y-o-y
y-o-y
According to industries
Air transport 9,829,874,543. 12,484,416,884
-27.00% -46.16% -27.07% -33.24%
service 16 .36
According to region
10,199,538,957 12,118,925,035
Domestic -18.82% -40.34% -19.94% -30.28%
.01 .52
16
Shandong Airlines Co., Ltd. Annual Report 2020
Under circumstances of adjustment in reporting period for statistic scope of main business data, adjusted main business based on
latest one year’s scope of period-end
□ Applicable √ Not applicable
(3) Whether income from physical sales larger than income from labors or not
□Yes √ No
(4) Performance of the major sales contract signed by the Company till end of the Period
□ Applicable √ Not applicable
(5) Constitute of operation cost
Product category
In RMB
2020 2019
Product Y-o-y
Item Ratio in Ratio in
category Amount Amount changes(+,-)
operation cost operation cost
Aviation fuel 2,480,650,679. 5,195,698,126.
19.87% 30.35% -52.26%
consumption 48 98
Take-off & 1,764,458,597. 2,535,562,544.
14.13% 14.81% -30.41%
landing fees 80 63
Employee’s 1,948,282,428. 2,223,185,474.
15.61% 12.99% -12.37%
Air transport salary 99 51
service Depreciation of
aircraft and 735,757,435.25 5.89% 853,476,817.73 4.99% -13.79%
engine
5,555,267,742. 6,309,481,237.
Other 44.50% 36.86% -11.95%
84 49
12,484,416,884 17,117,404,201
Total 100.00% 100.00% -27.07%
.36 .34
Employee’s
Logistics 19,995,267.47 79.94% 22,799,253.36 68.72% -12.30%
salary
freight service
Other 5,018,161.25 20.06% 10,376,450.44 31.28% -51.64%
Total 25,013,428.72 100.00% 33,175,703.80 100.00% -24.60%
Hotel & Raw materials 17,836,443.41 71.71% 15,801,094.38 63.63% 12.88%
catering service Employee’s
5,109,291.94 20.54% 5,973,882.71 24.06% -14.47%
salary
17
Shandong Airlines Co., Ltd. Annual Report 2020
Other 1,926,063.95 7.74% 3,056,748.68 12.31% -36.99%
Total 24,871,799.30 99.99% 24,831,725.77 100.00% 0.16%
Training Depreciation 4,105,088.76 25.59% 4,080,459.72 23.34% 0.60%
service Other 11,933,577.85 74.41% 13,401,825.79 76.66% -10.96%
Total 16,038,666.61 100.00% 17,482,285.51 100.00% -8.26%
Note
(6) Whether has any changes in consolidation scope during the reporting period
□Yes √No
(7)Major changes or adjustment in business, product or service of the Company in Reporting Period
□ Applicable √ Not applicable
(8) Major sales and main suppliers
Major sales of the Company
Total top five clients in sales (RMB) 259,665,669.14
Proportion in total annual sales volume for top five
2.25%
clients
Ratio of related parties in annual total sales among the
0.00%
top five clients
Information of top five clients of the Company
Serial Name Sales (RMB) Proportion in total annual sales
1 Unit 1 89,636,400.34 0.78%
2 Unit 2 56,275,043.50 0.49%
3 Unit 3 54,404,225.30 0.47%
4 Unit 4 33,930,000.00 0.29%
5 Unit 5 25,420,000.00 0.22%
Total -- 259,665,669.14 2.25%
Other explanation on main clients
□ Applicable √ Not applicable
Main suppliers of the Company
Total purchase amount from top five suppliers (RMB) 2,058,431,128.84
Proportion in total annual purchase amount for top five
30.35%
suppliers
18
Shandong Airlines Co., Ltd. Annual Report 2020
Ratio of related parties in annual total sales among the
0.00%
top five suppliers
Information of top five suppliers of the Company
Serial Name Purchases (RMB) Proportion in total annual purchase
1 Unit 1 776,760,905.01 11.45%
2 Unit 2 562,911,756.94 8.30%
3 Unit 3 359,733,804.59 5.30%
4 Unit 4 192,036,368.21 2.83%
5 Unit 5 166,988,294.09 2.46%
Total -- 2,058,431,128.84 30.35%
Other explanation on main suppliers
□ Applicable √ Not applicable
3. Expense
In RMB
Y-o-y changes
2020 2019 Note
(+,-)
No major changes in the reporting
Sales expense 613,910,975.53 851,783,078.83 -27.93%
period
Administration No major changes in the reporting
493,640,757.37 482,684,059.23 2.27%
expense period
No major changes in the reporting
Financial expense 137,423,909.87 148,007,589.73 -7.15%
period
No major changes in the reporting
R& D expense 22,866,289.98 22,442,549.67 1.89%
period
4. R&D investment
√ Applicable □ Not applicable
In 2020, the company independently researched and developed a mobile flight system focusing on flight safety, achieving real-time
online, business mobility, and closed-loop management of the flight crew, and bringing the company's flight management business to
a new level; the research and development of portable electronic flight bags based on operational quality has improved the efficiency
of operation support, integrated the concept of green, low-carbon, and circular development into the development and operation of
the enterprise, it had the honor to win a prize in the “Energy Saving and Consumption Reduction Support Project of Jinan High-Tech
Zone” and the “First Prize of Shandong Internet Innovation and Entrepreneurship Competition in 2020”; focused on passenger
services to make research and development on the comprehensive guarantee platform for refunds for irregular flights and ground
service, and the LuYan trip system; integrated internal and external high-quality resources of the company, created comprehensive
and personalized value-added service products, optimized passenger travel experience, established a good brand image, and made
19
Shandong Airlines Co., Ltd. Annual Report 2020
data run more and users run less.
R&D investment of the Company
2020 2019 Changes in ratio
Number of R&D personnel
157 150 4.67%
(Person)
R&D personnel ratio 1.33% 1.29% 0.04 percentage points up
Amount invested for R&D
22,866,289.98 22,442,549.67 1.89%
( RMB)
Ratio of the R&D investment
0.22% 0.12% 0.10 percentage points up
in operation revenue
Capitalization of R&D
0.00 0.00 0.00%
(RMB)
Ratio of the capitalized R&D
investment in R&D 0.00% 0.00% 0.00%
investment
The reason of great changes in the proportion of total R&D investment accounted for operation income than last year
□ Applicable √ Not applicable
Reason for the great change in R&D investment capitalization rate and rational description
□ Applicable √ Not applicable
5. Cash flow
In RMB
Item 2020 2019 Y-o-y changes (+,-)
Subtotal of cash in-flow from
11,339,817,878.63 21,010,686,546.04 -46.03%
operation activity
Subtotal of cash out-flow
13,039,546,639.43 18,380,874,293.66 -29.06%
from operation activity
Net cash flow from operation
-1,699,728,760.80 2,629,812,252.38 -164.63%
activity
Subtotal of cash in-flow from
9,484,166.48 12,377,704.47 -23.38%
investment activity
Subtotal of cash out-flow
661,392,213.20 1,909,718,530.25 -65.37%
from investment activity
Net cash flow from
-651,908,046.72 -1,897,340,825.78 -65.64%
investment activity
Subtotal of cash in-flow from 11,950,000,000.00 1,385,464,436.83 762.53%
20
Shandong Airlines Co., Ltd. Annual Report 2020
financing activity
Subtotal of cash out-flow
4,889,620,785.12 2,365,798,150.93 106.68%
from financing activity
Net cash flow from financing
7,060,379,214.88 -980,333,714.10 -820.20%
activity
Net increased amount of cash
4,707,613,385.37 -241,999,038.40 -2,045.30%
and cash equivalent
Explain the main influencing factors of significant changes in relevant data on a y-o-y basis
√ Applicable □ Not applicable
Jan.- Dec. of Jan.- Dec. of Changes
Item Reason for changes
2020 2019 +,-
Cash received from sales of the Affected by the epidemic in the Year,
11,087,151,340.18 20,647,602,531.11 -46.30%
goods and providing labor services income is lower than last year
Refunds of taxes Export rebates received in the Year
59,006,545.25 136,223,181.63 -56.68%
less than last year
Cash payment for good purchased Affected by the epidemic, the variable
9,575,470,033.88 13,974,802,792.98 -31.48%
and labor service received cost is lower than last year
Taxes paid The enterprise income tax and civil
201,842,884.10 830,166,097.48 -75.69% aviation development fund paid in the
year are less than last year
Cash received from investment Bonus from investment on
income 4,019,690.59 6,284,357.21 -36.04% non-tradable equity instrument
decreased in the Year
Other cash received concerning Received the actual settlement
investment activities - 9,316.91 -100.00% proceeds for holding the interest rate
swaps last year
Cash paid for purchasing fixed The progress payment for aircraft
assets, intangible assets and other 660,563,018.81 1,909,607,697.75 -65.41% purchase decreased over last year
long-term assets
Net cash paid for obtained the Purchase money for part of the food
subsidiaries and other business - 110,832.50 -100.00% company are paid last year
units
Other cash paid concerning The loss from actual settlement
investment activities 829,194.39 - proceeds for holding the interest rate
swaps was paid in the Year
Cash received from loans Loans received from financing
9,950,000,000.00 890,000,000.00 1017.98%
activities increased in the Year
21
Shandong Airlines Co., Ltd. Annual Report 2020
Cash received from issuing bonds Issued the medium-term notes in the
2,000,000,000.00 -
Year
Other cash paid concerning Received the price of the original
financing activities - 495,464,436.83 -100.00% purchase right for the two leased
aircraft last year
Cash paid for debt payment The loans paid in the year increased
4,376,851,929.66 1,824,791,031.88 139.85%
over that of last year
Impact on cash and cash equivalent Exchange rate of RMB against
-1,129,021.99 5,863,249.10 119.26%
from changes of exchange rate foreign currency changed
Explain the reason for the material difference between net cash flow generated from operating activities in the period and current net
profit
□ Applicable √ Not applicable
III. Analysis of the non-main business
□ Applicable √ Not applicable
IV. Analysis of assets and liabilities
1. Major changes of assets composition
Adjust relevant items of financial statements at the year of fist implementation of the new revenue standards or new leasing standards
since 2020
Applicable
In RMB
Year end of 2020 Year begin of 2020
Ratio
Ratio in
Ratio in changes( Notes of major changes
Amount Amount total
total assets +,-)
assets
The Company has reserved enough
20.25 monetary funds to deal with the
5,306,474,45 598,961,065.
Monetary fund 23.69% 3.44% percenta liquidity risks for the COVID-19
1.06 69
ge points epidemic has not been controlled
completely.
-1.05perc
354,352,296. 456,758,290.
Account receivable 1.58% 2.63% entage
99 60
points
-0.14perc
110,572,399. 109,435,256.
Inventory 0.49% 0.63% entage
50 69
points
22
Shandong Airlines Co., Ltd. Annual Report 2020
Investment real
0.00% 0.00%
estate
Long-term equity
0.00% 0.00%
investment
-11.51
6,904,082,01 7,362,687,43
Fixed assets 30.82% 42.33% percenta
2.35 1.80
ge points
-5.74
Construction in 5,770,696,95 5,479,071,70
25.76% 31.50% percenta
progress 1.56 3.01
ge points
7.20 个 In response to the epidemic, the
2,001,111,11 300,329,083.
Short-term loans 8.93% 1.73% percenta Company increase their short-term
1.11 33
ge points loans to reducing the liquidity risks.
-22.66 In response to the epidemic, the
6,117,434,89 808,001,382.
Long-term loans 27.31% 4.65% percenta Company increase their long-term
9.32 82
ge points loans to reducing the liquidity risks.
-0.62 Collected the customs deposit in the
Other account 159,397,943. 232,147,324.
0.71% 1.33% percenta Year and use the discount from
receivable 13 23
ge points suppliers
0.28
282,572,739. 170,020,416. The VAT on sales declined in the
Other current assets 1.26% 0.98% percenta
73 07 Year due to the revenue drops
ge points
Other equity -2.61
541,789,406. 874,728,633. The fair value of non-tradable equity
instrument 2.42% 5.03% percenta
63 32 instrument investment declined
investment ge points
2.56 The recognition of deferred income
Deferred income tax 1,999,099,48 1,105,378,65
8.92% 6.36% percenta tax assets from uncovered loss
assets 8.87 1.73
ge points increased in the Year
Trading financial Change of the fair value of holding
862,955.67 0.00% 126,264.75 0.00% 0.00%
liability the interest rate swaps in the Year
445,400,801. -2.84 Affected by the epidemic, advance
839,385,426.
Contract liability 1.99% 4.83% percenta ticket from passengers declined in
95
19 ge points the Year
-1.61
346,238,955. 549,061,919. The year-end bonus declined due to
Wages payable 1.55% 3.16% percenta
37 97 the descend in achievement.
ge points
-0.45 The enterprise income tax and civil
102,206,477. 158,334,781.
Taxes payable 0.46% 0.91% percenta aviation development fund paid in
49 87
ge points the year are less than last year
23
Shandong Airlines Co., Ltd. Annual Report 2020
-3.65 Pay back the long-term loans due
Non-current liability 321,577,566. 885,299,947.
1.44% 5.09% percenta within one year and long-term
due within one year 89 83
ge points payable in the Year
Affected by the epidemic, advance
-0.22
Other current 31,100,597.6 61,897,848.3 ticket from passengers declined in
0.14% 0.36% percenta
liability 6 8 the Year, than the corresponding
ge points
other current liability declined
4.46
1,000,000,00 Issued the medium-term notes in the
Bonds payable 4.46% 0.00% percenta
0.00 Year
ge points
0.25
Long-term wages 254,025,000. 152,746,225. Numbers of retirees and the scope of
1.13% 0.88% percenta
payable 00 21 benefits increased in the Year
ge points
-0.63
Deferred income tax 158,137,753. 232,789,494. The fair value of non-tradable equity
0.71% 1.34% percenta
liability 91 25 instrument investment declined
ge points
Other -1.84
322,552,319. 570,487,739. The fair value of non-tradable equity
comprehensive 1.44% 3.28% percenta
90 92 instrument investment declined
income ge points
-15.28 Affected by the epidemic, the
1,233,524,79 3,615,540,25
Retained profit 5.51% 20.79% percenta Company has a declined in
5.64 1.45
ge points performance for the Year
2. Assets and liability measure by fair value
√ Applicable □ Not applicable
In RMB
Accumulati
Gains/losse ve Amount
Impairment
Opening s of changes in purchased Sale Other Closing
Item accrual in
amount changes in fair value in this amount change amount
this period
fair value reckoned period
into equity
Financial
assets
4.Other
equity 874,728,63 -332,939,22 453,437,30 541,789,4
instrument 3.32 6.69 6.63 06.63
investment
Subtotal of 874,728,63 -332,939,22 453,437,30 541,789,4
financial 3.32 6.69 6.63 06.63
24
Shandong Airlines Co., Ltd. Annual Report 2020
assets
The above 874,728,63 -332,939,22 453,437,30 541,789,4
total 3.32 6.69 6.63 06.63
Financial 862,955.6
126,264.75 736,690.92
liability 7
Other changes
Whether there have major changes on measurement attributes for main assets of the Company in report period or not
□ Yes √No
3. Assets right restriction till end of reporting period
Nil
V. Investment
1. Overall situation
□ Applicable √ Not applicable
2. The major equity investment obtained in reporting Period
□ Applicable √ Not applicable
3. The major non-equity investment doing in Reporting Period
□ Applicable √ Not applicable
4. Financial assets investment
(1) Security investment
□ Applicable √ Not applicable
The Company does not have security investment in the period
(2) Derivative investment
□ Applicable √ Not applicable
The Company does not have derivative investment in the period
5. Application of raised proceeds
□ Applicable √ Not applicable
25
Shandong Airlines Co., Ltd. Annual Report 2020
The company had no application of raised proceeds in the reporting period.
VI. Sales of major assets and equity
1. Sales of major assets
□ Applicable √ Not applicable
The Company had no sales of major assets in the reporting period.
2. Sales of major equity
□ Applicable √ Not applicable
VII. Analysis of main holding company and stock-jointly companies
√ Applicable □ Not applicable
Main subsidiary of the Company and stock-jointly enterprise with over 10% impact on net profit
In RMB
Company Main Register Total Operating Operating
Type Net assets Net profit
name business capital assets revenue profit
Agency
service of
land
service for
the air
Shandong
cargo
Airlines 30,000,000 96,093,546 78,139,534 45,095,349 5,047,804. 3,643,681.
Subsidiary station,
Logistic .00 .90 .66 .45 26 25
storage of
Co., Ltd.
goods and
ground
distributio
n service
etc.
Qingdao
Feisheng
Internation
al Aviation
Pilot 51,545,500 66,014,261 65,769,900 2,574,150. -1,902,138. -1,891,660.
Technolog Subsidiary
training .00 .76 .42 95 22 72
y
Developme
nt Training
Co., Ltd.
Shandong Subsidiary Air food 5,094,545. 52,064,015 35,298,277 43,849,928 -614,413.0 -566,451.2
26
Shandong Airlines Co., Ltd. Annual Report 2020
Jinping Air supplying, 00 .35 .40 .53 4 7
Food Co., catering
Ltd. service
Souvenir
processing;
Shandong production
Airline and
3,380,000. 37,026,310 27,088,461 21,769,078
Qingdao Subsidiary processing 95,381.95 60,212.45
00 .12 .05 .52
Food Co., of the air
Ltd. foods and
delivery
service
Shandong
Rainbow
Stock-jointly Air 50,000,000 1,803,800. -165,962,0
Corporate -1,368.86 -20,692.86
enterprise transport .00 67 12.66
Aircraft
Co., Ltd.
Particular about subsidiaries obtained or disposed in report period
□ Applicable √ Not applicable
Explanation on main stock-jointly companies
VIII. Structured vehicle controlled by the Company
□ Applicable √ Not applicable
IX. Prospect for future developme nt of the Company
(i) Industry structure and trend
At present, China's air transport industry has formed a competitive landscape of four major aviation groups including Air China,
China Eastern Airlines, China Southern Airlines and Hainan Airline, and local airlines, private airlines, a nd foreign airlines coexist.
The four major aviation groups have occupied a relatively large share of the domestic air passenger and cargo transportation market,
while other regional airlines and characteristic airlines have strong market competitiveness in their focused market segments.
According to the Civil Aviation Industry Development Statistics Bulletin of 2019, by the end of 2019, China had a total of 62
transport airlines, an increase of two airlines over the previous year, there were 48 state-owned holding companies and 14 private and
private holding companies by different types of ownership; there were 9 cargo airlines, 10 Sino-foreign joint venture airlines, and 8
listed companies among all transport airlines.
The development trend of the civil aviation industry has shown increasingly obvious characteristics in eight aspects: firstly,
competition is fierce, newly established airlines increase, existing companies have increased capacity, and the marketization degree
of transportation prices has gradually improved, and industry competition has become increasingly fierce. Secondly, the high-speed
rail network has increased its impact on civil aviation. The third is the normalization of epidemic prevention and control, a nd the
uncertainty of the end of the global COVID-19 epidemic has severely restricted the recovery and development of the civil aviation
industry. The fourth is the popularization of passengers, consumers' requirements for service quality have increased, and the
27
Shandong Airlines Co., Ltd. Annual Report 2020
proportion of business travelers has decreased. The fifth is the low price of air tickets, the pressure of freight competition, and the
accumulation of capacity in the domestic market under the influence of the epidemic, the freight rate is at a low level, and the
industry has entered an era of meager profit. Sixth, costs are reinforced, and the costs of major items such as aircraft and labor have
increased rigidly. Seventh, sales are electronized, the application of mobile internet technology is rapidly popularized, and the sales
model has undergone a fundamental change. The eighth is that channels are blurred. Under the e-commerce model, the source of
tourists is blurred, which puts higher demands on the company's precise marketing.
(ii) The Company’s development strategy
1. Vision, Mission, Values
Vision of the company – “customer preference, value leading, harmony and peace”
Mission of the company – “set up air bridges, enhance customer value, and serve social development"
Values of the company – “harmony, peace, innovation, kindness"
2. General working idea of the 14th Five-Year Plan
With the theme of promoting high-quality development, we will grasp the relationship between scale and efficiency, speed and
quality. Taking the deepening of the supply-side structural reform as the main line, fully implement the “One Two Three Three Four”
overall civil aviation working ideas during the “14th Five-Year Plan” period. Firmly seize the opportunities of civil aviation
development phase transition period, development quality improvement period and development pattern expansion period, and the
national civil aviation network, world-class airport clusters and modern logistics supply chain system construction, coordinate
epidemic prevention and control and transportation guarantee, rely on the needs of business development, optimize fleet structure,
route structure, and manpower structure, and prepare high-quality "14th Five-Year" strategic planning. Adhere to the three bottom
lines, i.e. flight safety, integrity and safety, and sincere service, improve risk prevention and control capabilities, attach importance to
the improvement of service levels, and promote the scientific allocation of resources and the efficient use of resources. Vigorously
implement concept innovation, system innovation, technological innovation, and product innovation, improve the corporate
governance system and governance capabilities, and increase labor productivity.
Take security control as the base, innovative mechanisms as the core, e-commerce operations, service improvement, brand
establishment and cost control as the guide, and passionate organizational culture as the guarantee to build the competitiveness for
Shandong Airlines' future development.
(iii) Business plan
The Company has determined that the work ideas for 2021 are adhering to the guidance of socialism with Chinese characteristics in
Xi Jinping's new era, thoroughly implementing the spirit of the party’s 19th National Congress, the spirit of the 2nd , 3 rd , 4th and 5th
Plenary Sessions of the 19th Central Committee and the spirit of important instructions of General Secretary Xi Jinping to civil
aviation. We will continue to fully implement the guiding principles of General Secretary Xi Jinping's series of important speeches,
directives and instructions on the overall promotion of epidemic prevention and control and economic and social development. Under
the premise of normalization of epidemic prevention and control, adhere to the general keynote of the work of seeking progress while
maintaining stability, and adhere to the new development concept. Taking the deepening of supply-side structural reform as the main
line and the theme of high-quality development, we will focus on consolidating the foundation for development, preventing major
risks, resolutely fighting the battle against profitability, and striving to open up a new situation for sustainable and healthy
development during the 14th Five-Year Plan.
The following specific tasks should be done well: 1. Strengthen responsibility and bottom-line thinking, pay close attention to
28
Shandong Airlines Co., Ltd. Annual Report 2020
epidemic prevention and control and ensure safe production; 2. Continue to improve the quality of operation management and control,
consolidate and improve the normality of flights; 3. Strengthen joint efforts, tap the potential, and make every effort to fight the battle
for efficiency; 4 , Continue to improve service presentation, and focus on stimulating service value; 5. Strengthen strategic guidance
and improve the level of comprehensive governance and management.
(iv) Possible risks
1. The risk of macroeconomic fluctuations
The prosperity of civil aviation industry is closely related to the domestic and international macroeconomic development. The
macroeconomic prosperity directly affects the development of economic activities, the disposable income of residents and the
increase or decrease of import and export trade volume, and thus affects the demand for air passenger transport and air cargo
transport.
2. Competition risk
With the gradual opening of the domestic civil aviation market, the competition among the four major aviation groups, foreign
airlines, and small and medium-sized airlines in terms of scale, flight schedules, prices, and services has become increasingly fierce,
the contradiction between the expansion of the industry's fleet and the lack of market resources needs to be digested, which poses
greater challenges to the company's business model and management level.
3. The risk of aviation oil price fluctuations
The aviation oil cost is the company's most important cost expenditure. The fluctuations in the international crude oil price and the
adjustment to the domestic aviation oil price of the National Development and Reform Commission will have a greater impact on the
company’s profitability.
4. The risk of exchange rate fluctuations
The debt structure of the company is mainly in U.S. dollars, and the aircraft rents, aircraft maintenance, and other major costs are
mainly paid in U.S. dollars, the RMB devaluation shall increase the company's costs and exchange losses.
5. Other force majeure risks
The external environment has a great influence on the civil aviation transportation, the natural disasters, sudden public hea lth
incidents, terrorist attacks and political turmoil will affect the normal operations of airlines and then will adversely affect the
company’s production and operations.
X. Reception of research, communication and interview
1. In the report period, reception of research, communication and interview
√ Applicable □ Not applicable
Main contents
of the
Reception discussion and Basic situation index
Time Location Way Type
object the of investigation
information
provided
SDA Building, Corporate operation Received the new
2020-03-18 Field research Other
No.5746, shareholder condition of media, corporate
29
Shandong Airlines Co., Ltd. Annual Report 2020
Erhuan East the shareholders and
Rd., Jinan, Company individual investors,
Shandong knowing operation
condition of the
Company and
provided the Annual
Report
Received the new
News media, corporate
operation
SDA Building, media,corpo shareholders and
condition of
No.5746, rate individual investors,
the
2020-06-18 Erhuan East Field research Other shareholder knowing operation
Company,Ann
Rd., Jinan, and condition of the
ual Report of
Shandong individual Company and
the Company
investors, provided the Annual
Report
Reception (times) 2
Number of hospitality 0
Number of individual reception 0
Number of other reception 2
Disclosed, released or let out major undisclosed
N
information
30
Shandong Airlines Co., Ltd. Annual Report 2020
Section V. Important Events
I. Profit distribution plan of common stock and capitalizing of common reserves plan
Formulation, Implementation and Adjustment of common stock Profit Distribution Policy Especially Cash Dividend policy during
the Reporting Period
√ Applicable □ Not applicable
The company's 2019 annual general meeting of shareholders held on June 18, 2020 reviewed and approved the company's 2019
equity distribution plan. Comprehensively consider ing the company's production and operation conditions in the future under the
influence of the COVID-19 epidemic, as well as the company's medium and long-term development plans and short-term business
development practices, combined with the macroeconomic situation, especially the capital situation, in order to ensure the stability of
the company's cash flow and the long-term development, enhance the ability to resist risks, achieve the company's sustainable, stable
and healthy development, and better safeguard the long-term interests of all shareholders, the company would not distribute cash
dividends in 2019, or give bonus shares, or use reserve funds to increase share capital.
Specific statement of cash bonus policy
Whether or not it corresponds to regulation of Article of
Y
Association or requirement of AGM:
Whether or not the bonus standards and ratio are clear and
Y
well-defined:
Whether or not relevant decision-making procedures and
Y
mechanism are perfect:
Whether or not independent directors fulfill their duties and
Y
play corresponding roles:
Whether or not minority shareholders have opportunity to
express their views and demands, legal interest of minority has Y
been protected or not:
As for the cash bonus policy adjusted or changed, conditions
and procedures whether exercise regulated and transparency or Not applicable
not:
Profit distribution plan (pre-plan) of common stock and capitalizing of common reserves plan (pre-plan) in latest three years
(including the reporting period)
2018: distributed 2.0 Yuan (tax included) bonus for every 10 shares in cash based on total stock issued 400,000,000 shares ended as
31 December 2018;
2019: The Company has no plans of cash dividend distributed, no bonus shares and has no share converted from capital reserve either
2020: The Company has no plans of cash dividend distributed, no bonus shares and has no share converted from capital reserve either
Cash dividend of common stock in latest three years (including the reporting period)
In RMB
Year for Amount for Net profit Ratio of the Proportion Ratio of the Total cash Ratio of the
bonus shares cash bonus attributable cash bonus in for cash cash bonus bonus total cash
31
Shandong Airlines Co., Ltd. Annual Report 2020
(tax to common net profit bonus by by other (including bonus (other
included) stock attributable other ways in net other ways) ways
shareholders to common ways(i.e. profit included) in
of listed stock share attributable net profit
company in shareholders buy-backs) to common attributable
consolidation of listed stock to common
statement for company shareholders stock
bonus year contained in of listed shareholders
consolidation company of listed
statement contained in company
consolidation contained in
statement consolidation
statement
-2,382,015,4
2020 0.00 0.00% 0.00 0.00% 0.00 0.00%
55.81
361,005,776.
2019 0.00 0.00% 0.00 0.00% 0.00 0.00%
31
80,000,000.0 347,379,314. 80,000,000.0
2018 23.03% 0.00 0.00% 23.03%
0 89 0
The Company gains profits in reporting period and the retained profit of common stock shareholders provided by parent company is
positive but no plan of cash dividend proposed of common stock
□ Applicable √ Not applicable
II. Profit distribution plan and capitalizing of common reserves plan for the Period
□ Applicable √ Not applicable
The Company has no plans of cash dividend distributed, no bonus shares and has no share converted from capital reserve either
III. Imple mentation of commitme nt
1. Commitments completed in Period and those without completed till end of the Period from actual
controller, shareholders, related parties, purchaser and companies
√ Applicable □ Not applicable
Commit
Commitmen Commitmen Implementa
Commitments Type Contents ment
t party t period tion
time
Share reform
commitment
Commitments in Commitment In February 2004, China Strictly
2004-12 Long-term
report of Air China of horizontal National Aviation Holding implement
-06 effective
acquisition or equity competition, Company (CNAHC) timely
32
Shandong Airlines Co., Ltd. Annual Report 2020
change related entered into an equity
transaction transfer agreement with
and capital SDA , that is promise “to
occupying avoiding horizontal
competition with the
Company through
reasonable business
arrangement”; in December,
being approved, the equity
assignee was replaced by
Air China, and all rights and
obligations under the
agreement was transfer to
Air China as the party who
implemented the
commitments
Commitments in
assets reorganization
Controlling
Commitment shareholder—Shandong
of horizontal Aviation Group provide a
Commitments make
competition, commitment letter of Strictly
in initial public Shandong 2000-09 Long-term
related avoiding horizontal implement
offering or Aviation -12 effective
transaction competition to the timely
re-financing
and capital Company in year of 2000
occupying when the Company initial
public offering shares
Equity incentive
commitment
Other commitment for
minority shareholders
of the Company
Completed
commitments on time Y
(Y/N)
2. Concerning assets or project of the Company, which has profit forecast, and reporting period still in
forecasting period, explain reasons of reaching the original profit forecast
□ Applicable √ Not applicable
IV. Non-operational fund occupation from controlling shareholders and its related party
33
Shandong Airlines Co., Ltd. Annual Report 2020
□ Applicable √ Not applicable
No non-operational fund occupation from controlling shareholders and its related party in period.
V. Explanation from Board of Directors, Supervisory Committee and Independent Directors
(if applicable) for “Qualified Opinion” that issued by CPA
□ Applicable √ Not applicable
VI. Particulars about the changes in aspect of accounting policy, estimates and calculation
method compared with the financial report of last year
√ Applicable □ Not applicable
The third meeting of the company’s seventh board of directors held on March 26, 2020 reviewed and approved the Proposal on
Changes in Accounting Policies. According to the requirements of "Accounting Standards for Business Enterprises No. 14 -
Revenue" (CK [2017] No. 22) revised by the Ministry of Finance on July 5, 2017, the company has implemented the new revenue
standards since January 1, 2020, adjusted the amount of retained earnings at the beginning of the period and other related items in the
financial statements according to the cumulative impact of the first implementation of the standards, and did not adjust the
information for comparable periods. The implementation of the new revenue standards would not cause a major change in the
company's revenue recognition method, and did not have a significant impact on the company's financial status, operating results and
cash flow.
The fourth (temporary) meeting of the seventh board of directors of the company held on April 28, 2020 reviewed and approved the
Proposal on Changes in Accounting Estimates. According to the "Accounting Standards for Business Enterprises No. 4 - Fixed
Assets", the company reviewed the useful life, estimated net residual value and depreciation method of fixed assets, and adjusted the
depreciation method of engine replacement parts from the straight-line depreciation method to the workload method; the depreciation
period of high-priced turnover parts was adjusted from 15-18 years to 3-15 years, which would be implemented from January 1, 2020.
The revised accounting estimates can more objectively and truly reflect the company's financial status and operating results. Changes
in accounting estimates adopt future applicable methods for accounting treatment, and there is no need to retrospectively adjust the
disclosed financial reports, and will not affect the company's financial status and operating results in previous years.
VII. Major accounting errors within reporting period that needs retrospective restatement
□ Applicable √ Not applicable
No major accounting errors within reporting period that needs retrospective restatement for the Company in the period.
VIII. Compare with last year’s financial report; explain changes in consolidation statement’
s scope
□ Applicable √ Not applicable
No changes in consolidation statement scope in the reporting period
IX. Appointme nt and non-reappointme nt (dismissal) of CPA
The accounting firms currently engaged
34
Shandong Airlines Co., Ltd. Annual Report 2020
RSM Certified Public Accountants (special general
Name of domestic accounting firm
partnership)
Remuneration for domestic accounting firm (in 10 thousand
110
Yuan)
Continuous life of auditing service for domestic accounting
2
firm
Name of domestic CPA Yang Yunhui, Xu Hong
Continuous life of auditing service for domestic CPA 1
Whether re-appointed accounting firms in this period or not
□Yes √No
Appointment of internal control auditing accounting firm, financial consultant or sponsor
√ Applicable □ Not applicable
Take consistency into consideration, the Company also engaged RSM Certified Public Accountants (special general partnership) as
the audit institution for internal control for year of 2020, and auditing efficiency of internal control and issued the audit report of
internal control of 2020 for the Company. The auditing charge for internal control was RMB 0.45 million.
X. Facing delisting after disclosure of the annual report
□ Applicable √ Not applicable
XI. Bankruptcy reorganization
□ Applicable √ Not applicable
No bankruptcy reorganization for the Company in reporting period
XII. Major litigation and arbitration of the Company
□ Applicable √ Not applicable
No major litigation and arbitration occurred in the reporting period
XIII. Penalty and rectification
□ Applicable √ Not applicable
No penalty and rectification for the Company in reporting period.
XIV Integrity of the company and its controlling shareholders and actual controllers
□ Applicable √ Not applicable
35
Shandong Airlines Co., Ltd. Annual Report 2020
XV. Imple mentation of the company’s stock incentive plan, e mployee stock ownership plan
or other employee incentives
□ Applicable √ Not applicable
During the reporting period, the company has no stock incentive plan, employee stock ownership plan or other employee incentives
that have not been implemented.
XVI. Material related party transactions
1. Related party transaction with daily operation concerned
√ Applicable □ Not applicable
Appr Mark
Propo
Tradi oved Whet et
rtion
ng transa her to price
in the
Related Pricin amou ction excee Mean of Date Index
Relati Deali amou
transact Conte g nt (in amou d the s of simila of of
onshi Type ng nt of
ion nt princi 10 nt (in appro paym r disclo discl
p price the
parties ple thous 10 ved ents transa sure osure
same
and thous amou ction
transa
Yuan) and nt availa
ction
Yuan) ble
Subsi Sales Incom
diary of e from
of the goods sales Settle
Mark 1,873,
STAEC first /offeri of 187.3 11.60 ment 18738 2020- 2020-
et 816.3 118 Y
O larges ng aviati 8 % in 16.36 03-28 12
price 6
t labor on cash
share servic materi
holder e als
Shando
ng
Subsi Sales Incom
Xiangy
diary of e from
u
of the goods sales Settle
Aerona Mark 1,820,
first /offeri of 182.0 13.54 ment 18209 2020- 2020-
utical et 932.9 100 Y
larges ng aviati 9 % in 32.96 03-28 12
Technol price 6
t labor on cash
ogy
share servic materi
Service
holder e als
Co.,
Ltd.
Shando Subsi Sales Wareh Mark 421,3 9.82 Settle 42134 2020- 2020-
42.13 42.75 N
ng diary of ousing et 40.17 % ment 0.17 03-28 12
36
Shandong Airlines Co., Ltd. Annual Report 2020
Airlines of the goods fee price in
Rainbo first /offeri incom cash
w larges ng e/Prop
Autom t labor erty
obile share servic fee
Service holder e incom
Co., e
Ltd
Sub-s
Shando Sales
ubsidi
ng of
ary of Media
Airlines goods Settle
the resour Mark 16,06 16065
Xinzhih /offeri 1,606. 100.0 ment 2020- 2020-
first ce et 5,789. 1,200 Y 789.7
ang ng 58 0% in 03-28 12
larges usage price 77 7
Media labor cash
t fee
Co., servic
share
Ltd. e
holder
Sales
Secon of Agenc
d goods y Settle
Mark
Air larges /offeri comm 513,0 51.40 ment 51306 2020- 2020-
et 51.31 88.5 N
China t ng ission 60.75 % in 0.75 03-28 12
price
share labor reven cash
holder servic ue
e
Sales
Secon of Groun
d goods d Settle
Mark 6,212,
Air larges /offeri servic 621.2 91.19 ment 62122 2020- 2020-
et 264.0 1,001 N
China t ng es 3 % in 64.01 03-28 12
price 1
share labor reven cash
holder servic ue
e
Non-r
Sales outine
Secon of maint
d goods enanc Settle
Mark
Air larges /offeri e/ 88,86 3.13 ment 88866 2020- 2020-
et 8.89 43 N
China t ng reven 6.85 % in .85 03-28 12
price
share labor ue cash
holder servic from
e aircraf
t
37
Shandong Airlines Co., Ltd. Annual Report 2020
servic
e
Sales
Sales/l
Secon of
ease
d goods Settle
of air Mark
Air larges /offeri 896,7 6.66 ment 89678 2020- 2020-
materi et 89.68 32 Y
China t ng 89.23 % in 9.23 03-28 12
al price
share labor cash
reven
holder servic
ue
e
Simul
Sales ator
Secon of maint
d goods enanc Settle
Mark 4,111,
Air larges /offeri e/hous 411.1 100.0 224.2 ment 41116 2020- 2020-
et 642.8 Y
China t ng e 6 0% 7 in 42.86 03-28 12
price 6
share labor leasin cash
holder servic g
e reven
ue
Subsi
Sales
diary Sales/l
of
of the ease
goods Settle
secon of air Mark
/offeri 410,6 3.05 ment 41065 2021- 2020-
Ameco d materi et 41.07 180 N
ng 50.36 % in 0.36 03-28 12
larges al price
labor cash
t reven
servic
share ue
e
holder
Purch Office
The
ase rent
Shando first Settle
goods and Mark 37,26 37260
ng larges 30.24 ment 2020- 2020-
/Acce accom et 0,027. 3,726 4,000 N 027.2
Aviatio t % in 03-28 12
pt modat price 24 4
n share cash
servic ion
holder
e fee
Purch
The
ase
Shando first Settle
goods Resid Mark 8,690,
ng larges 869.0 5.98 ment 86902 2020- 2020-
/Acce ence et 206.1 1,206 N
Aviatio t 2 % in 06.19 03-28 12
pt fee price 9
n share cash
servic
holder
e
38
Shandong Airlines Co., Ltd. Annual Report 2020
Subsi
Purch
diary
ase Aircra
of the Settle
goods ft Mark 97,48 97481
STAEC first 9,748. 7.98 19,03 ment 2020- 2020-
/Acce maint et 1,530. N 530.5
O larges 15 % 0 in 03-28 12
pt enanc price 56 6
t cash
servic e costs
share
e
holder
Shando
ng
Subsi
Xiangy Purch
diary
u ase
of the Settle
Aerona goods Maint Mark 78,01 78012
first 7,801. 6.36 12,02 ment 2020- 2020-
utical /Acce enanc et 2,005. N 005.1
larges 2 % 0 in 03-28 12
Technol pt e cost price 16 6
t cash
ogy servic
share
Service e
holder
Co.,
Ltd.
Shando
ng Subsi Vehicl
Purch
Airlines diary e
ase
Rainbo of the rental Settle
goods Mark 67,13 67139
w first fee 6,713. 93.77 ment 2020- 2020-
/Acce et 9,779. 8,496 N 779.1
Autom larges and 98 % in 03-28 12
pt price 12 2
obile t maint cash
servic
Service share enanc
e
Co., holder e fee
Ltd
Shando
ng Subsi
Purch
Airlines diary
ase
Rainbo of the Settle
goods Resid Mark 2,533,
w first 253.3 2.84 ment 25332 2020- 2020-
/Acce ence et 255.9 500 N
Autom larges 3 % in 55.98 03-28 12
pt fee price 8
obile t cash
servic
Service share
e
Co., holder
Ltd
Shando Subsi Purch Settle
Abnor Mark
ng diary ase 362,4 0.62 ment 36244 2020- 2020-
mal et 36.24 55 N
Airlines of the goods 40.37 % in 0.37 03-28 12
flights price
Rainbo first /Acce cash
39
Shandong Airlines Co., Ltd. Annual Report 2020
w larges pt
Autom t servic
obile share e
Service holder
Co.,
Ltd
Sub-s
Shando Aircra
ubsidi Purch
ng ft
ary of ase
Airlines suppli Settle
the goods Mark 7,452,
Xinzhih es and 745.2 0.40 ment 74526 2020- 2020-
first /Acce et 691.2 950 N
ang and 7 % in 91.29 03-28 12
larges pt price 9
Media advert cash
t servic
Co., ising
share e
Ltd. fees
holder
Purch
Secon Agenc
ase
d y Settle
goods Mark
Air larges comm 759,5 56.02 ment 75953 2020- 2020-
/Acce et 75.95 136.6 N
China t ission 35.17 % in 5.17 03-28 12
pt price
share expen cash
servic
holder diture
e
Purch
Secon Groun
ase
d d Settle
goods Mark 15,42 15426
Air larges servic 1,542. 0.74 1,956. ment 2020- 2020-
/Acce et 6,754. N 754.3
China t e 68 % 63 in 03-28 12
pt price 31 1
share expen cash
servic
holder diture
e
Abnor
Purch mal
Secon
ase flight
d Settle
goods and Mark 22,30 22307
Air larges 2,230. 15.14 ment 2020- 2020-
/Acce reside et 7,588. 2,357 N 588.6
China t 76 % in 03-28 12
pt nt price 66 6
share cash
servic group
holder
e expen
ses
Secon Purch
Settle
d ase Maint Mark 6,183, 61835
Air 618.3 0.51 ment 2020- 2020-
larges goods enanc et 500.0 750 N 00.06
China 5 % in 03-28 12
t /Acce e cost price 6 3
cash
share pt
40
Shandong Airlines Co., Ltd. Annual Report 2020
holder servic
e
Purch
Purch asing/l
Secon
ase easing
d Settle
goods aviati Mark
Air larges 245,0 9.04 ment 245,0 2020- 2020-
/Acce on et 24.5 55 N
China t 17.06 % in 17.06 03-28 12
pt materi price
share cash
servic al
holder
e expen
diture
Purch
Secon
ase
d Settle
goods Mark
Air larges Cateri 758,7 0.39 ment 75870 2020- 2020-
/Acce et 75.87 160 N
China t ng 02.77 % in 2.77 03-28 12
pt price
share cash
servic
holder
e
Subsi
diary Purch
Groun
of the ase
d Settle
secon goods Mark 25,03 25036
servic 2,503. 1.35 ment 2020- 2020-
Ameco d /Acce et 6,782. 3,600 N 782.7
e 68 % in 03-28 12
larges pt price 78 8
expen cash
t servic
ses
share e
holder
Subsi
diary Purch
of the ase
Settle
secon goods Maint Mark 59,91 59917
5,991. 4.90 ment 2020- 2020-
Ameco d /Acce enanc et 7,514. 8,200 N 514.3
75 % in 03-28 12
larges pt e cost price 33 3
cash
t servic
share e
holder
Subsi Purch Purch
diary ase asing/l
Settle
of the goods easing Mark
283,7 10.47 ment 28378 2020- 2020-
Ameco secon /Acce aviati et 28.38 20 Y
89.14 % in 9.14 03-28 12
d pt on price
cash
larges servic materi
t e al
41
Shandong Airlines Co., Ltd. Annual Report 2020
share expen
holder diture
Joint
Sichuan
ventur
Service Purch
e of
s ase
the Settle
Aero-E goods Maint Mark 82,95 82956
secon 8,295. 6.78 14,00 ment 2020- 2020-
ngine /Acce enanc et 6,535. N 535.7
d 65 % 0 in 03-28 12
Mainte pt e cost price 74 4
larges cash
nance servic
t
Co., e
share
Ltd.
holder
Secon Other Frequ
d relate ent Settle
Agree 60,00
Air larges d passen 100.0 10,00 ment 60000 2020- 2020-
ment 0,000. 6,000 N
China t party ger 0% 0 in 000 03-28 12
price 00
share transa coope cash
holder ction ration
60,52 90,52
Total
2.28 1.75
Details of return of sales in
N/A
significant amount
Report the actual implementation of
the normal related transactions
which were projected about their N/A
total amount by types during the
reporting period (if any)
Reasons for major difference
between trading price and market N/A
reference price (if applicable)
2. Related party transactions of assets/equity acquisition and sold
□ Applicable √ Not applicable
No related party transactions of assets/equity acquisition and sold for the Company in the reporting period.
3. Main related party transactions of mutual investment outside
□ Applicable √ Not applicable
No main related party transactions of mutual investment outside for the Company in the reporting period.
42
Shandong Airlines Co., Ltd. Annual Report 2020
4. Contact of related credit and debt
□ Applicable √ Not applicable
There are no related credits or liabilities occurred in the reporting period.
5. Other related party transactions
□ Applicable √ Not applicable
The Company has no other major related party transaction in the reporting period.
XVII. Major contract and implantation
1. Trusteeship, contract and leasing
(1) Trusteeship
□ Applicable √ Not applicable
The Company does not have trusteeship in the period
(2) Contract
□ Applicable √ Not applicable
The Company do not have contract in the period
(3)Leasing
□ Applicable √ Not applicable
The Company do not have contract in the period
2. Major guarantee
□ Applicable √ Not applicable
No guarantee for the Company in reporting period
3. Entrust others to cash asset management
(1) Entrust financing
□ Applicable √ Not applicable
No entrust financing in the period
43
Shandong Airlines Co., Ltd. Annual Report 2020
(2) Entrust loans
□ Applicable √ Not applicable
No entrust loans in the period
4.Material contract with daily operation concerned
□Applicable √ Not applicable
5. Other material contracts
□ Applicable √ Not applicable
No other material contracts for the Company in reporting period
XVIII. Social responsibility
1. Execution of social responsibility
The Company pays high attention to the construction of social responsibility, and adheres to the organic unity of "three
responsibilities"- economy, politics, and society, blends the social responsibility into the Company's development strategy and
management process. Standing on the height of promoting the Company's sustainable development, the Company positively takes
social responsibilities, gives full play to the role of state-owned enterprises; create value and return to the society; create service and
give back to the traveler and create opportunities and reward the employees. Meanwhile, we will vigorously protect the environment,
carrying out energy conservation and emission reduction as well as guarantee the transport security for COVID-19. Since the
outbreak of the COVID-19 epidemic, Shandong Airlines has taken the initiative and consciously fulfilled the social responsibilities of
state-owned enterprises, went all out to provide emergency transportation support for Shandong Province to assist Hubei in fighting
the epidemic. It has performed 39 epidemic prevention and control transportation charter flights and used the main shift to transport
19 shifts of personnel and materials, transported a total of 3,714 medical personnel, and 159.62 tons of epidemic prevention and
control materials, realizing a high degree of unification of company operations and social responsibilities.
In terms of safety production, the company further deepened the construction of safety production system, constantly pursued the safety
and reliability of various elements such as people, machines, and objects in the production process , actively prevented in advance,
strengthened the process control, improve the aviation safety responsibility list, strengthen emergency management capabilities and
brought various insecurity factors under control. Based on the state’s laws, regulations, and standards concerning safe production and
combining with the own business scope, degree of danger, nature of work, and actual conditions , the company established and
improved the safety production rules and regulations system by taking the safety production responsibility system as the core.
In terms of service quality management, in order to truly implement the Three Sincerity service concept and e nhance the travel
experience of passengers, we have practiced and summarized the honest and sincere Shandong Airlines service quality management
model of empathy, insight and affinity, active & inclusive & altruistic services, and exceeding customer expectations. Based on the
unique regional culture and brand genes of Shandong Airlines, continued to promote the construction of aerial Confucius Classrooms,
actively promoted traditional culture, and strive to create a new situation of high-quality development of service work, increase the
R&D and investment of new technology and advance service hardware facilities and equipment, promote simplified business
44
Shandong Airlines Co., Ltd. Annual Report 2020
applications, improve the service efficiency, enhance the passenger’s sense of gain and created greater value for passengers.
As a listed company, protecting the interests of shareholders, especially the small and medium shareholders, is the company’s most
basic social responsibility. According to the Company Law, Securities Law, and Corporate Governance Guidelines for Listed
Companies, the company continuously improved its corporate governance structure, established a sound internal control system, and
effectively protected the legitimate rights and interests of all shareholders, especially the small and medium shareholders. The company
attached importance to the reasonable investment returns to investors and also gave consideration to the sustainable development of
enterprise. From 2017 to 2019, the accumulated cash dividends amounted to 180 million Yuan in three years.
In 2021, the Company will continue to uphold the people-oriented business philosophy, and strive to create the core values of harmony,
peace, innovation, and kindness. The Company will also attach importance to the fulfillment of social responsibilities, while creating
value for shareholders, actively undertake social responsibilities in the process of production and operation and business development,
establish a green and low-carbon concept, strengthen the awareness of energy conservation and emission reduction, and realize the
health and harmonious development between Company and employees, Company and society, and Company and environment.
2. Execution of social responsibility of targeted poverty alleviation
The Company did not has targeted poverty alleviation occurred in the period and no further plans either temporary
3. Environmental protection
The listed company and its subsidiaries whether belong to the key pollutant discharge units announced by the environmental protection
department
□Yes √No
No
The company has strictly implemented the requirements of the Party Central Committee to fight a tough battle against pollution and
the requirements of the Civil Aviation Administration to win the blue sky defense war, continuously tapped the endogenous power,
and further promoted environmental protection, pollution prevention and energy saving and emission reduction work, and carr ied out
ecological environmental protection and energy saving inspections , proposed and established a list of pollution risk points, and
strengthened internal management and control. The company also continued to do a good job in the use and management of on-site
equipment and vehicles, and carried out the transforming and upgrading of on-site vehicle exhaust gas standards, actively promoted
new energy vehicles, promoted the utilization rate of APU alternative facilities, and organize d new technology research and
development; further standardized the company's ecological, environmental protection and energy-saving work methods and
standardized management standards for hazardous waste, and defined the management of the entire chain from information
maintenance, flight monitoring to data accounting and verification reports.
XIX. Explanation on other significant events
□ Applicable √ Not applicable
No other significant events needs explanation during the period
45
Shandong Airlines Co., Ltd. Annual Report 2020
XX. Significant event of subsidiary of the Company
□ Applicable √ Not applicable
46
Shandong Airlines Co., Ltd. Annual Report 2020
Section VI. Changes in Shares and Particulars about Shareholders
I. Changes in shares
1. Changes in shares
In Share
Before changes Changes (+,-) After changes
Capitali
zation
New Bonus
Amount Ratio of Other Subtotal Amount Ratio
issue shares
public
reserve
260,000 260,000
I. Unlisted shares 65.00% 65.00%
,000 ,000
168,601 168,601
1. Sponsor shares 42.15% 42.15%
,000 ,000
Including: State-owned 168,402 168,402
42.10% 42.10%
shares ,000 ,000
Domestic
199,000 0.05% 199,000 0.05%
corporate shares
91,399, 91,399,
4. Preferred stock or other 22.85% 22.85%
000 000
140,000 140,000
II. Listed shares 35.00% 35.00%
,000 ,000
2.Domestically listed 140,000 140,000
35.00% 35.00%
foreign shares ,000 ,000
400,000 100.00 400,000 100.00
III. Total shares
,000 % ,000 %
Reasons for share changed
□ Applicable √ Not applicable
Approval of share changed
□ Applicable √ Not applicable
Ownership transfer of share changed
□ Applicable √ Not applicable
Implementation progress of the share repurchases
□ Applicable √ Not applicable
Implementation progress of the reduction of repurchases shares by centralized bidding
□ Applicable √ Not applicable
47
Shandong Airlines Co., Ltd. Annual Report 2020
Influence on the basic EPS and diluted EPS as well as other financial indexes of net assets per share attributable to common
shareholders of Company in latest year and period
□ Applicable √ Not applicable
Other information necessary to disclose for the Company or need to disclosed under requirement from security regulators
□ Applicable √ Not applicable
2. Changes of restricted shares
□ Applicable √ Not applicable
II. Securities issue and listing
1. Security offering (without preferred stock) in Reporting Period
□ Applicable √ Not applicable
2. Changes of total shares and shareholders structure as well as explanation on changes of assets and
liability structure
□ Applicable √ Not applicable
3. Existing internal staff shares
□ Applicable √ Not applicable
III. Shareholders and actual controller
1. Number of shareholders of the Company and share-holding
In share
Total
Total
preference
preference
shareholders
shareholders
Total common with voting
with voting
Total common stock rights
rights
stock shareholders at recovered at
recovered at
shareholders in 13,793 end of last 13,541 0 end of last 0
end of
reporting month before month before
reporting
period-end annual report annual report
period (if
disclosed disclosed (if
applicable)
applicable)
(found in note
(found in note
8)
8)
Particulars about shares held above 5% by shareholders or top ten shareholders
48
Shandong Airlines Co., Ltd. Annual Report 2020
Total Amount of Number of shares
Change Amount of
shareholders listed pledged/frozen
Proportion s in unlisted
Full name of Nature of
of shares at the end outstandin
Shareholders shareholder report outstanding
held State of
of report g shares Amount
period shares held share
period held
State-owne
Shandong
d legal 42.00% 168,004,000 0 168,004,000 0
Aviation Group
person
State-owne
Air China
d legal 22.80% 91,200,000 0 91,200,000 0
Limited
person
NORGES Foreign
0.87% 3,498,479 0 0 3,498,479
BANK legal person
VANGUARD
TOTAL
Foreign
INTERNATIO 0.75% 3,000,895 732244 0 3,000,895
legal person
NAL STOCK
INDEX FUND
WANXIANG
INTERNATIO
NAL Foreign
0.66% 2,658,100 0 0 2,658,100
INVESTMENT legal person
CORPORATIO
N
VANGUARD
EMERGING
Foreign
MARKETS 0.52% 2,075,717 -885200 0 2,075,717
legal person
STOCK
INDEX FUND
ISHARES
CORE MSCI
Foreign
EMERGING 0.48% 1,920,380 -143538 0 1,920,380
legal person
MARKETS
ETF
Domestic
Hou Chunhu nature 0.45% 1,796,145 45800 0 1,796,145
person
Domestic
Chen Jingjian nature 0.40% 1,595,200 0 0 1,595,200
person
Wang Jingqing Domestic 0.33% 1,319,653 100 0 1,319,653
49
Shandong Airlines Co., Ltd. Annual Report 2020
nature
person
1. Shandong Aviation Group is the first largest shareholder of the Company, who holds the
shares of the Company on behalf of the State with unlisted shares;
2. Air China Limited is the second largest shareholder of the Company, who holds the shares of
Explanation on related
the Company on behalf of the State with unlisted shares;
relationship or concerted
3. Among the above top ten shareholders, Air China Limited is the first largest shareholder of
action among the above
the Shandong Aviation Group, and there exists no associated relationship between Shandong
mentioned shareholders
Aviation Group, Air China and the other shareholders, and they don’t belong to the persons
acting in concert regulated by the Management Regulation of Information Disclosure on
Change of Shareholding for Listed Companies with the other shareholders.
Shareholding of top 10 circulated shareholders
Type of shares
Shareholders Amount of listed shares held at end of the Period
Type Amount
Domestic
ally listed 3,498,4
NORGES BANK 3,498,479
foreign 79
shares
Domestic
VANGUARD TOTAL
ally listed 3,000,8
INTERNATIONAL STOCK 3,000,895
foreign 95
INDEX FUND
shares
WANXIANG Domestic
INTERNATIONAL ally listed 2,658,1
2,658,100
INVESTMENT foreign 00
CORPORATION shares
Domestic
VANGUARD EMERGING
ally listed 2,075,7
MARKETS STOCK INDEX 2,075,717
foreign 17
FUND
shares
Domestic
ISHARES CORE MSCI ally listed 1,920,3
1,920,380
EMERGING MARKETS ETF foreign 80
shares
Domestic
ally listed 1,796,1
Hou Chunhu 1,796,145
foreign 45
shares
Domestic
1,595,2
Chen Jingjian 1,595,200 ally listed
00
foreign
50
Shandong Airlines Co., Ltd. Annual Report 2020
shares
Domestic
ally listed 1,319,6
Wang Jingqing 1,319,653
foreign 53
shares
Domestic
ally listed
Wang Hui 802,800 802,800
foreign
shares
Domestic
ally listed
Ou Yanping 777,699 777,699
foreign
shares
Expiation on associated
relationship or consistent
The Company is not aware of their associated relationship among the top ten shareholders of
actors within the top 10
circulation share, and is unknown whether other circulation shareholders belong to the persons
un-restrict shareholders and
acting in concert regulated by the Management Regulation of Information Disclosure on Change
between top 10 un-restrict
of Shareholding for Listed Companies.
shareholders and top 10
shareholders
Whether top ten common stock shareholders or top ten common stock shareholders with un-restrict shares held have a buy-back
agreement dealing in reporting period
□ Yes √ No
The top ten common stock shareholders or top ten common stock shareholders with un-restrict shares held of the Company have no
buy-back agreement dealing in reporting period.
2. Controlling shareholders
Nature of controlling shareholders: local state-owned holding
Type of controlling shareholders: legal person
Legal
Controlling shareholders person/person in Date of foundation Organization code Main operation business
charge of the unit
Accommodation, catering
services, and retail of
tobacco product; (the
above is limited to branch
91370000614071647
Shandong Aviation Group Xu Chuanyu February 9, 1995 offices); investment and
W
management of air
transport and aviation
maintenance; conference
and exhibition services;
51
Shandong Airlines Co., Ltd. Annual Report 2020
office services; sales of
daily necessities,
handicrafts, and
souvenirs, and rental of
houses.
Equity of other
domestic/oversea listed
company control by
N/A
controlling shareholder as
well as stock-joint in report
period
Change of controlling shareholder in reporting period
□Applicable √Not applicable
No changes of controlling shareholder for the Company in reporting period
3. Actual controller and persons acting in concert
Nature of actual controller: local state-owned assets management
Type of actual controller: legal person
Legal
person/person Date of
Actual controller Organization code Main operation business
in charge of the foundation
unit
Accommodation, catering
services, and retail of tobacco
product; (the above is limited
to branch offices); investment
and management of air
91370000614071647 transport and aviation
Shandong Aviation Group Xu Chuanyu February 9, 1995
W maintenance; conference and
exhibition services; office
services; sales of daily
necessities, handicrafts, and
souvenirs, and rental of
houses.
Equity of other
foreign/domestic listed
company that controlled by N/A
actual controller in reporting
period
Change of actual controller in the period
□Applicable √Not applicable
Actual controller of the Company has no changes in the reporting period
52
Shandong Airlines Co., Ltd. Annual Report 2020
Property right and controlling relationship between the actual controller and the Company is as follow
Shandong Aviation Group
42%
Shandong Airlines Co., Ltd.
Actual controller controlling the Company by entrust or other assets management
□ Applicable √ Not applicable
4. Particulars about other legal person shareholders with over 10% shares held
√Applicable □ Not applicable
Legal person/person Date of Main operation business
Legal person shareholder Register capital
in charge of the unit foundation or management activities
Domestic and overseas
transportation business
such as periodic and
un-periodic aviation
passenger, cargo, letter
and baggage; domestic
and overseas official
flight business; airplane
management business;
repairing of aerostat;
business agent among air
September 30,
Air China Limited Song Zhiyong 14.525 billion yuan companies; ground
2004
service and air courier
services related with the
main operations
(excluding letter and
articles with the nature of
letters); tax-free
commodities in airplane;
retail business of the
aircraft goods; selling
agent of aviation accident
insurance
53
Shandong Airlines Co., Ltd. Annual Report 2020
5. Limitation and reducing the holdings of shares of controlling shareholders, actual controllers,
restructuring side and other commitment subjects
□ Applicable √ Not applicable
54
Shandong Airlines Co., Ltd. Annual Report 2020
Section VII. Preferred Stock
□ Applicable √ Not applicable
The Company had no preferred stock in the reporting.
55
Shandong Airlines Co., Ltd. Annual Report 2020
Section VIII. Convertible Bonds
□ Applicable √ Not applicable
The Company had no convertible bonds in the Period.
56
Shandong Airlines Co., Ltd. Annual Report 2020
Section IX. Particulars about Directors, Supervisors and Senior
Executives and Employees
I. Changes of shares held by directors, supervisors and senior executives
Increasi Decreas
Shares ng ing Shares
Start
End held at shares shares Other held at
Workin dated
date of
Name Title Sex Age of period- held in held in changes period-
g status office
office
term begin this this (Share) end(Sh
term
(Share) period period are)
(Share) (Share)
Sun Current January Novem
Preside
Xiujian ly in M 58 18, ber 27, 0 0 0 0 0
nt
g office 2016 2022
Xu Deputy Current Decem Novem
Chuany Preside ly in M 56 ber 20, ber 27, 0 0 0 0 0
u nt office 2016 2022
Current March Novem
Miao Directo
ly in M 49 24, ber 27, 0 0 0 0 0
Liubin r, GM
office 2016 2022
Directo
r,
deputy Current April Novem
Xu
GM & ly in M 56 22, ber 27, 0 0 0 0 0
Guojian
Chief office 2010 2022
account
ant
Wang Current March Novem
Directo
MingY ly in M 55 15, ber 27, 0 0 0 0 0
r
uan office 2006 2022
Current June Novem
Li Directo
ly in F 57 28, ber 27, 0 0 0 0 0
Xiuqin r
office 2012 2022
Current Novem Novem
Wang Directo
ly in M 48 ber 28, ber 27, 0 0 0 0 0
Zhifu r
office 2019 2022
Lv Indepen Current M 54 March Novem 0 0 0 0 0
57
Shandong Airlines Co., Ltd. Annual Report 2020
Hongbi dent ly in 24, ber 27,
ng director office 2016 2022
Indepen Current March Novem
Duan
dent ly in M 48 24, ber 27, 0 0 0 0 0
Yalin
director office 2016 2022
Indepen Current June Novem
Xu
dent ly in M 64 15, ber 27, 0 0 0 0 0
Xiangyi
director office 2017 2022
Hu Indepen Current June Novem
Yuanm dent ly in M 66 15, ber 27, 0 0 0 0 0
u director office 2017 2022
Chairm
an of
Current October Novem
Wang Supervi
ly in M 55 28, ber 27, 0 0 0 0 0
Wuping sory
office 2013 2022
Commi
ttee
Current June Novem
Tang Supervi
ly in M 49 28, ber 27, 0 0 0 0 0
Chaoxu sor
office 2018 2022
Staff Current Novem
August
Jin Xin supervi ly in M 54 ber 27, 0 0 0 0 0
7, 2017
sor office 2022
Zhou Staff Current March Novem
Qiaoya supervi ly in F 45 15, ber 27, 0 0 0 0 0
n sor office 2006 2022
Secreta
Dong Current June Novem
ry of
Qiantan ly in M 58 26, ber 27, 0 0 0 0 0
the
g office 2009 2022
Board
Current Februar Novem
Deputy
Yu Bo ly in M 48 y 4, ber 27, 0 0 0 0 0
GM
office 2016 2022
Current Septem Novem
Dong Deputy
ly in M 51 ber 30, ber 27, 0 0 0 0 0
Jianmin GM
office 2016 2022
Securit Current Septem Novem
Zhou
y ly in M 58 ber 30, ber 27, 0 0 0 0 0
Ning
director office 2016 2022
Ma Deputy Current Septem Novem
F 45 0 0 0 0 0
Xiaoli GM ly in ber 30, ber 27,
58
Shandong Airlines Co., Ltd. Annual Report 2020
office 2016 2022
Chief Current March Novem
Liu
enginee ly in M 50 28, ber 27, 0 0 0 0 0
Chaolei
r office 2017 2022
Current October Novem
Chief
Liu Jun ly in M 58 10, ber 27, 0 0 0 0 0
pilot
office 2020 2022
Jiang March
Directo Leave March
Chengd M 61 24, 0 0 0 0 0
r office 2, 2020
a 2016
June March
Xue Supervi Leave
M 59 26, 12, 0 0 0 0 0
Ruitao sor office
2009 2020
Deputy
Zhang October August
GM, Leave
Qingsh M 62 28, 27, 0 0 0 0 0
Chief office
e 2013 2020
pilot
Total -- -- -- -- -- -- 0 0 0 0 0
II. Changes of directors, supervisors and senior executives
√Applicable □ Not applicable
Name Title Type Date Reasons
Jiang Chengda Director Leave office March 2, 2020 For reasons of age
March 12,
Xue Ruitao Supervisor Leave office For reasons of age
2020
Deputy GM, August 27,
Zhang Qingshe Dismiss For reasons of age
Chief pilot 2020
III. Post-holding
Professional background, major working experience and present main responsibilities in Company of directors, supervisors and
senior executive at the present
1. Director
Mr. Sun Xiujiang, born in February 1962, bachelor of economics of Shandong Economic University. He worked in the general
office of the provincial government from July 1984 to March 1993; worked in the provincial foreign trade corporation from Mar ch
1993 to December 1996 and from December 1996 to December 1998, worked in the provincial foreign trade group co., ltd. Mr. Sun
served as deputy general manager of Shandong Hualu Group Co., Ltd. in April 1988, and served as deputy general manager of
Shandong Hualu Group Co., Ltd. and deputy general manager of Hualu Group (Hong Kong) in July 1988, and served as director and
deputy general manager of Hualu Holding Co., Ltd. in December 2004, and served as the deputy secretary of the party committee
and the secretary of committee for discipline inspection of Shandong Aviation Group in August 2013. He currently s erves as the
59
Shandong Airlines Co., Ltd. Annual Report 2020
secretary of the party committee and vice president of Shandong Aviation Group and the chairman of Shandong Airlines Co., Ltd.
Mr. Xu Chuanyu, born in May 1964, he graduated from China Civil Aviation Flight Institute, major in aircraft pilot, a Master of
Business Administration from Tsinghua University. He worked in Air China in July 1985, served as the deputy flight director of the
third battalion in Air China in March 1992, the flight safety supervisor of the flight safety supervision servic e of Air China in April
1994, and the capital of the third battalion of the flight command in Air China in March 1997. Mr. Xu served as the deputy captain of
the flying corps Air China in December 2001, served as the general manager of the Air China Tianjin Branch in March 2006, served
as the chief pilot and deputy chief operating officer of Air China in January 2009, served as the vice president and chief operating
officer of Air China, served as vice chairman, the security director and chief operating off icer of Air China in March 2012. He
currently serves as the chief pilot of China National Aviation Holding Company, the security director of Air China, the presi dent,
chairman and deputy secretary of the party committee of Shandong Aviation Group, and the vice chairman of Shandong Airlines Co.,
Ltd.
Mr. Miao Liubin, born in February 1971, master of engineering of the China Civil Aviation University. He worked in August 1993
and joined the Company in August 1994, he worked as the deputy squadron leader of f light No. 2 squadron on the flight department
in SDA and as the squadron leader of flight No. 6 squadron in SDA. Mr Miao served as the deputy captain of the flying team I in
October 2010, the captain of the flying team I in April 2004 of SDA. He served as the general manager of flight department of
Shandong Airlines Co., Ltd. in August 2007, served as the general manager of Shandong Airlines Co., Ltd. in March 2011. He
currently serves as the party committee member of Shandong Aviation Group, and director, the general manager and deputy party
secretary of Shandong Airlines Co., Ltd.
Mr. Xu Guojian, born in November 1964, a master of Engineering of Northeastern University of Technology and doctor of
engineering of Beijing University of Aeronautics and Astronautics. Mr Xu worked since September 1980 and from May 1993 to July
2001, he worked in the Beijing Aircraft Maintenance Engineering Co., Ltd; he served as the director of operations of Founder Digital
Co., Ltd. in July 2001, served as the director of administration and finance of Macau Airport Management Co., Ltd. in September
2002, and served as the general manager of finance department of Engineering Technology Branch of Air China Limited in Octobe r
2007. He currently serves as a director, party committee member, deputy general manager, and chief accountant of Shandong
Airlines Co., Ltd.
Mr. Wang MingYuan, born in September 1965, graduated from the School of Economics of Xiamen University, majoring in
statistics. He served as an assistant at planning department, an assistant at marketing department, manager of the production planing
in market sales department, vice manager of the market sales department, vice manager and manager of the market department; and
worked as vice manager of the market sales department in Air China Limited in November 2002; member of the commerce
committee and general manager of the network revenue department in Air China in June 2005, the director of commerce committee
of Air China in July 2008. He currently serves as the vice president and a member of the standing committee of Air China Limited
and a director of Shandong Airlines Co., Ltd.
Ms. Li Xiuqin, born in May 1963, holds a postgraduate degree and is a senior economist. She served as secretary of youth league
committee of the Bureau of Finance of Tai’an City, Shandong Province in September 1994, served as chief of personnel education
section of the Bureau of Finance of Tai’an City in March 1997, served as deputy director of the housing provident fund manage ment
center of Tai’an City in December 1998, the vice director of HR dept. of Shandong Economic Development and Investment
Company in June 2002, the deputy director of audit dept. of Shandong Economic Development and Investment Company in Feb.
2003; served as the director of asset management department of Shandong Economic Development Investment Co., Ltd. in March
2010, served as an independent of Shandong Airlines Co., Ltd. from May 2003 to March 2006. She is currently the deputy genera l
60
Shandong Airlines Co., Ltd. Annual Report 2020
manager of Shandong Finance Investment Group Co., Ltd. and a director of Shandong Aviation Group, and a director of Shandong
Airlines Co., Ltd.
Mr. Wang Zhifu, born in March 1972, a master of public management, senior accountant, the high-end accountant of Shandong
province and “Qilu Financial Star”. In September 2012, served as the vice investigator of the enterprise dept. of Shandong Province
Finance Bureau, vice director of the Shandong financial bill management center in July 2014, the director of Shandong Economic
Development and Investment Company in July 2015, the GM of the financial management dept. of Shandong Financial Investment
Group Co., Ltd in August 2016. Now Mr. Wang serves as the CFO of Shandong Financial Investment Group Co., Ltd, chairman of
supervisory committee of Shandong Aviation Group and Director of Shandong Airlines.
Mr. Lv Hongbing, born in December 1966, graduated from East China University of Political Science and Law in 1988 and 1991,
respectively, with a bachelor's degree in law and a master's degree in law. He graduated with a doctorate in management from the
University of Science and Technology of China in June 2019 and holds a Chinese lawyer’s qualification certificate. He is curr ently
the Chief Executive Partner of Grandall Law Firm. He is also a member of the Party Committee of the National Lawyer Industry, the
vice chairman of the All China Lawyers Association and the director of the Rights Protection Committee. He is a member of the 13th
National Committee of CPPCC and a member of the Social and Legal Affairs Committee of CPPCC. He is also an advisory member
of the list companies M & A and Restructuring Committee of China Securities Regulatory Commission, a member of the Listing
Committee of Shanghai Stock Exchange, a member and arbitrator of Shangha i International Economic and Trade Arbitration
Commission, and a member and arbitrator of Shanghai Arbitration Commission. He is concurrently the part-time or visiting professor
at Fudan University, Renmin University of China, East China University of Political Science and Law, Shanghai International
Studies University, Shanghai University of International Business and Economics, and Shanghai University of Finance. He once
served as director of Shanghai Wanguo Law Firm, chairman of Shanghai Bar Association, and member of the sixth session of the
Issuance Examination Committee of China Securities Regulatory Commission.
Mr. Duan Yalin was born in April 1972, Doctor of Management, the first batch of postdoctoral fellows at Shenzhen Stock Exchange.
He currently serves as chairman of Shanghai Chunfu Investment Management Center, and independent director of Western Securities
Co., Ltd., Lianxun Securities Co., Ltd., Shanghai Jinjiang International Industrial Investment Co., Ltd., and Dare Power Dekor Home
Co., Ltd. He once served as the deputy director of the company management department of Shenzhen Stock Exchange, the vice
president of Donghai Securities Co., Ltd., and the chairman of Donghai Innovative Product Investment Co., Ltd. He has also se rved
as a member of the first session of the M & A and Reorganization Committee of China Securities Regulatory Commission, a member
of the first session of the Fixed Income Professional Committee of Securities Association of China, the executive director of the
National Debt Association of China, and the executive director of the Chinese Institute of Business Administration.
Mr. Xu Xiangyi, born in January 1956, holds a doctorate degree. He is currently a second-level professor and distinguished professor
at Shandong University and a doctoral supervisor of the School of Management. He is a state-level teaching master, a leading talent
of the National Ten-Thousand Person Plan (Teaching Masters), an expert who enjoys special allowances from the State Council, a
young and middle-aged expert in Shandong Province who have made outstanding contributions, an expert in high-end think tanks in
Shandong, a master of Shandong Social Sciences at the 40th anniversary of the reform and opening-up policy. He is concurrently
executive vice-chairman of the Chinese Institute of Business Administration and chief expert of Corporate Governance Research
Center of Shandong University in the 13th Five-Year Plan for the Humanities and Social Sciences Research Platform of Colleges and
Universities in Shandong Province. From July 1982 to April 1998, he was a lecturer, associate professor, associate dean, and
professor at the Department of Economics and School of Management of Shandong University; from April 1998 to January 2004, he
was the director of the Office of Academic Affairs and a professor of management at Shandong University; from January 2004 to
December 2012, he was the dean of School of Management and a professor of management at Shandong University. He serves the
61
Shandong Airlines Co., Ltd. Annual Report 2020
current post since December 2012.
Mr. Hu Yuanmu, born in November 1954, is a doctor of management. He is currently the director of teaching steering committee, a
professor and a doctoral tutor of accounting at Shandong University of Finance and Economics. He graduated from the School of
Accounting of Shandong Economics College in July 1983 and stayed for teaching until now. He used to be the director of the Sc hool
of Accounting of Shandong Economics College, the director of the academic affairs division of Shandong Economics College ,
assistant to the dean of Shandong Economics College, and deputy dean of Yanshan School of Shandong Economics College. Social
duty: Member of Chinese Education Accounting Association and President of Shandong Education Accounting Association.
2. Supervisor
Mr. Wang Wuping, born in March 1965, is a senior accountant. He working in July 1987 and joined the company in December
1992, He successively served as the deputy director of finance office of the finance and accounting division of Shandong Airlines in
July 1994, served as the director of finance office of the finance and accounting division of Shandong Airlines in August 1996,
served as deputy director of finance department of Shandong Aviation Group in June 1999, served as director of finance department
of Shandong Aviation Group in January 2003, served as the general manager of finance department of Shandong Airlines Co., Ltd.
in February 2009. He is currently a party committee member and the chief accountant of Shandong Aviation Group , chairman of the
Shandong Airlines Xinzhihang Media Co., Ltd and the chairman of the board of supervisors of Shandong Airlines Co., Ltd.
Mr. Tang Chaoxu, born in October 1971, graduated from college of Mechanical Engineering of Beijing Union University, major in
mechanical design & manufacturing. He worked in Air China since July 1996, and served as the related transaction manager in
enterprise management dept. Of Air China in June 2006; the protocol management specialist of related transactions in assets
management dept. of Air China in March 2008, the senior deputy GM of related transaction management in assets management dept.
of Air China in June 2016, served as senior deputy GM of the assets management department especially in investment enterprise
management in CNAirHolding (CNAH) in October 2017. Currently, he serves as senior deputy GM of the assets management
department especially in investment enterprise management in China National Aviation Holding Company（Air China Limited） and
the supervisor of Shandong Airlines.
Mr. Jin Xin, born in March 1966, graduated from the First Flight School of the Chinese People's Liberation Army Air Force,
majoring in airplane piloting. Mr. Jin engaged in flight training respectively in First and Second Air Force Flying Sch ool from June
1985 to August 1990; from August 1990 to September 1998, he was engaged in flight training at the aircraftman transportation
regiment of Jinan Air Force; entered the company in September 1998; served as the deputy squadron leader of squadron B737 in the
flight team I in April 2004; and was appointed as the squadron leader of squadron B737 II of flight team I in November 2004; served
as the deputy chief of flight team I in August 2007, served as the deputy general manager of the flight departme nt and the chief of
flight team I in October 2014; served as the general manager of the flight technology management department in March 2016, se rved
as the general manager of flight department in February 2017. He currently serves as the staff supervisor and general manager of the
Operation Control Center and the deputy party secretary of Shandong Airlines Co., Ltd.
Ms. Zhou Qiaoyan, born in January 1975, earned a bachelor degree. She joined the company in October 1994, served as the deputy
squadron leader of Qingdao crew cabin of cabin department of Shandong Airlines in August 1997, served as the squadron leader of
Qingdao cabin crew of passenger cabin department in February 2002, served as the deputy director of passenger cabin service
department in March 2003. She is currently serves as staff supervisor of Shandong Airlines as well as the party committee secretary,
and deputy general manager of the passenger cabin service department, secretary of the Party Branch and staff supervisor.
3. Senior executives
62
Shandong Airlines Co., Ltd. Annual Report 2020
Mr. Dong Qiantang, born in January 1962, graduated from the 3rd Ground Artillery School of PLA, major in communication
engineering, a MBA from Shandong University. Mr Dong working in the army from November 1980 to August 1992, he joined the
company in August 1992, served as the deputy director of office secretariat of Shandong Airlines in July 1994, served as the director
of accessory office of passenger cabin department of Shandong Airlines in May 1996, served as the deputy director of office in
January 1997, served as deputy director of planning department of Shandong Airlines Group Co., Ltd in August 1998, the deputy
director of planning & finance department of Shandong Airlines in October 2001, served as director of planning department of
Shandong Airlines Group Co., Ltd in January 2003, served as the general manager of enterprise management department of
Shandong Airlines Co., Ltd. in February 2009, the secretary of the Board and GM of the enterprise management department of
Shandong Airlines in June 2009. He currently serves as the party committee member, secretary of the board, and secretary of the
Party Committee of Shandong Airlines.
Mr. Yu Bo, born in March 1972, Master of Engineering of the Nanjing University of Aeronautics and Astronautics. He joined the
company in April 1998,served as the deputy chief of Qingdao airplane maintenance department of maintenance engineering
department in January 2000, served as the deputy director of maintenance engineering department and concurrently the squadron
leader of maintenance team I in January 2001, served as the deputy director of operation center in January 2003, served as the deputy
director of maintenance engineering department in April 2004, served as the deputy general manager of Engineering Technology
Company and concurrently the manager of quality department in June 2008, served as the general manager of Engineering
Technology Company in January 2010, served as the deputy chief engineer Shandong Airlines Co., Ltd. in September 2013, served
as the chief engineer of Shandong Airlines Co., Ltd. in October 2014. He currently serves as the party committee member and deputy
general manager of Shandong Airlines Co., Ltd.
Mr. Dong Jianmin, born in April 1969, graduated from the 12th Air Force Flight School of the People’s Liberation Army, major in
aircraft pilot. From July 1992 to March 2003, he was engaged in flight training at the Civil Aviation Flight School; in March 2003,
he was appointed as an assistant researcher at the safety supervision division of the security office of the Civil Aviation
Administration of China; in March 2007, he joined the company as the deputy general manager of Qingdao Branch; served as the
deputy general manager of flight department and the chief of flight team II and the deputy general manager of Qingdao Branch in
August 2007, served as the general manager of flight department in May 2012; He currently serves as the party committee membe r
and deputy general manager of Shandong Airlines Co., Ltd.
Mr. Zhou Ning, born in June 1962, graduated from the Second Aviation School of the People's Liberation Army Air Force,
majoring in bomber piloting. From January 1981 to September 1988, he was engaged in flight training at the Second Aviation Sc hool
of the Air Force, Mr. Zhou worked in Shandong United Airlines from September 1988 to June 1994, he joined the company in June
1994, in August 1997, he served as the director at the flight standards division of the flight department; in December 1999; in April
2004, he was appointed as the deputy team leader of flight team I; he served as the deputy director of operation standard management
department in August 2007 and the general manager of operation standard management department in March 2009, served as the
director of operation standard management department and the general manager of the aviation safety management department in
March 2013. He currently serves as the security director and member of the party committee of Shandong Airlines Co., Ltd., the
general manager and party branch secretary of the aviation safety management department, and a member of the party committee of
the share office.
Ms. Ma Xiaoli, born in March 1975, Bachelor of Engineering of Nanjing University of Aeronautics and Astronautics, MBA of the
Xi'an Jiaotong University. She entered the company in July 1997, served as the deputy manager at Qingdao sales department of
marketing department in June 1999, served as the manager at Xi’an sales department of marketing department in December 1999,
and served as the manager at Qingdao sales department of marketing department in July 2002,served as deputy director at the ground
63
Shandong Airlines Co., Ltd. Annual Report 2020
service department in January 2006, and served as the deputy general manager of marketing committee in June 2008, served as the
general manager of marketing committee in January 2010. She currently serves as the deputy general manager in Shandong Airlines
Co., Ltd.
Mr. Liu Chaolei, born in October 1970, Bachelor of Engineering of the Beijing University of Aeronautics and Astronautics, MBA
of the Wright State University. He worked for the company in July 1994, served as the assistant director at maintenance engineering
department in February 1996, and served as deputy director at maintenance engineering department in August 1996, and served a s
the head of technology division at maintenance engineering department in September 1999, and served as the deputy director at
maintenance engineering department in January 2001, and served as deputy general manager in STAECO in May 2004, and served
as the general manager at planning and investment management department of Shandong Aviation Group in Feb. 20 09, he
temporarily transfer to Qingdao Airline from September 2013 to July 2015, and served as the general manager at the engineering
technology company in July 2015, and served as deputy chief engineer and general manager at the engineering technology company
in January 2016. He currently serves as the chief engineer and member of the party committee in Shandong Airlines Co., Ltd., and
the general manager and deputy party secretary at the engineering technology company.
Mr. Liu Jun, born in September 1962, graduated from the No.10 Aviation School of the Chinese People’s Liberation Army Air Force
with a major in airplane piloting. In April 1995, he transferred from the army to Shandong Airlines, from December 1996, he served
as the deputy squadron leader of the second squadron of the flight department of Shandong Airlines, from August 1997, he served as
the deputy squadron leader of the SAAB first squadron of Shandong Airlines, from June 1998, he served as the squadron leader of
the second squadron of the flight department of Shandong Airlines. He was appointed as the squadron leader of the fifth squadron of
the flight department of Shandong Airlines in January 2001, and he was appointed as the deputy director of the safety technology
department of Shandong Airlines in January 2003, he was appointed as the deputy director of the flight technology management
department of Shandong Airlines in April 2004, he was appointed as the deputy director of the aviation safety operation supervision
department of Shandong Airlines in May 2005, he was appointed as the director of the aviation safety operation supervision
department of Shandong Airlines in August 2007, he was appointed as the general manager of the aviation safety management
department of Shandong Airlines in February 2009, and he was appointed as the general manager of Chongqing Branch of Shandong
Airlines in March 2013. He is currently a member of the Party Committee and Chief P ilot of Shandong Airlines Co., Ltd., and
concurrently serves as the general manager of the flight department and deputy secretary of the Party Committee.
Post-holding in shareholder’s unit
√Applicable □ Not applicable
Whether
receiving
Start dated of End date of remuneration
Name Name of shareholder’s units Position office term office term from
shareholder’s
units or not
Party
Secretary,
Sun Xiujiang Shandong Aviation Group May , 2015 Yes
Deputy
President
Chairman, November ,
Xu Chuanyu Shandong Aviation Group No
President 2016
64
Shandong Airlines Co., Ltd. Annual Report 2020
and Deputy
Party
Secretary
Security December ,
Xu Chuanyu Air China Yes
director 2012
Member of
August ,
Miao Liubin Shandong Aviation Group the Party No
2013
Committee,
Member of
the Party
Wang December ,
Air China Committee, Yes
MingYuan 2011
Deputy
President
Li Xiuqin Shandong Aviation Group Director April , 2009 No
Chairman
of
August ,
Wang Zhifu Shandong Aviation Group Supervisor No
2019
y
Committee
Member of
the Party
Wang September ,
Shandong Aviation Group Committee, Yes
Wuping 2013
Chief
Accountant
Senior GM
of the
Tang Chaoxu Air China assets July , 2018 Yes
manageme
nt dept.
Post-holding in other unit
√Applicable □ Not applicable
Whether
receiving
Start dated of End date of
Name Name of other units Position remuneration
office term office term
from other units
or not
China National Aviation Holding
Xu Chuanyu Chief pilot No
Company (CNAH)
Chairman
Xu Guojian Sichuan Airlines Co., Ltd. of the No
Supervisory
65
Shandong Airlines Co., Ltd. Annual Report 2020
Board
Wang
Air Macau Director No
MingYuan
Wang Air China Hong Kong Development Co.,
Chairman No
MingYuan Ltd.
Li Xiuqin Shandong Finance Investment Group Deputy GM Yes
Wang Zhifu Shandong Finance Investment Group CFO Yes
Punishment of securities regulatory authority in recent three years to the company’s current and outgoing directors, supervis ors and
senior management during the reporting period
□ Applicable √ Not applicable
IV. Remuneration for directors, supervisors and senior executives
Decision-making procedures, recognition basis and payment for directors, supervisors and senior executives
The remuneration for directors, supervisors and senior management is paid according to relevant rules on time, and the remuneration
of directors and supervisors holding a post in shareholder units or other units is paid by relevant units; allowances standard for
independent directors is deliberated and approved by shareholders’ general meeting and will determine based on actual working days;
Remuneration of the senior management is approved by the remuneration and appraisal committee of the board, the Company will
pay to senior management with their owned working situation and performance appraisal results based on the evaluation on
individual performance from internal “temporary method of performance appraisal” of the Company.
Director Mr. Sun Xiujiang, and Chairman of Supervisory Committee Mr. Wang Wuping drew their remunerations from Shandong
Aviation Group (SDA), the controlling shareholder of the Company, not from the Company; Deputy Chairman Mr. Xu Chuanyu,
Director Mr. Wang MingYuan and Supervisor Mr. Tang Chaoxu received remuneration from Air China instead of the Company;
Director Ms. Li Xiuqin and Mr. Wang Zhifu drew their remunerations from Shandong Finance Investment Group instead of the
Company.
Remuneration for directors, supervisors and senior executives in reporting period
In 10 thousand Yuan
Whether
Total
remuneration
Post-holding remuneration
Name Title Sex Age obtained from
status obtained from
related party of
the Company
the Company
Currently in
Miao Liubin Director, GM M 49 92.77 No
office
Director,
Deputy GM, Currently in
Xu Guojian M 56 77.86 No
Chief office
accountant
Independent Currently in
Lv Hongbing M 54 7.16 No
director office
66
Shandong Airlines Co., Ltd. Annual Report 2020
Independent Currently in
Duan Yalin M 48 7.16 No
director office
Independent Currently in
Xu Xiangyi M 64 7.16 No
director office
Independent Currently in
Hu Yuanmu M 66 7.16 No
director office
Currently in
Jin Xin Staff supervisor M 54 55.61 No
office
Currently in
Zhou Qiaoyan Staff supervisor F 45 45.26 No
office
Secretary of the Currently in
Dong Qiantang M 58 74.01 No
Board office
Currently in
Yu Bo Deputy GM M 48 72.94 No
office
Currently in
Dong Jianmin Deputy GM M 51 77.03 No
office
Security Currently in
Zhou Ning M 58 77.92 No
director office
Currently in
Ma Xiaoli Deputy GM F 45 70.55 No
office
Currently in
Liu Chaolei Chief engineer M 50 72.4 No
office
Currently in
Liu Jun Chief Pilot M 58 65.05 No
office
Jiang Chengda Director M 61 Leave office 8.18 No
Deputy GM,
Zhang Qingshe M 62 Leave office 60.3 No
Chief Pilot
Total -- -- -- -- 878.52 --
Delegated equity incentive for directors, supervisors and senior executives in reporting period
□ Applicable √ Not applicable
V. Employees of the Company
1. Numbers of the employee, professional constitution and education background
Employee in-post of the parent Company (person) 11,784
Total serving staff (person) 11,784
Total staff received remuneration in the period (person) 12,001
Retired staff with charges paid by the parent company and 267
67
Shandong Airlines Co., Ltd. Annual Report 2020
main subsidiaries (person)
Professional constitution
Type Number (person)
Flight personnel 2,040
Steward 2,717
Security guard 763
Maintenance personnel 1,575
Transport control personnel 359
Sales personnel 905
Freight personnel 346
Ground attendant 964
Financial personnel 146
Others personnel 1,969
Total 11,784
Education background
Type Number (person)
Graduate (Master, doctor) and above 542
Bachelor degree 7,688
Junior college and below 3,554
Total 11,784
2. Remuneration policy
In order to meet the needs of the development strategy of the Company, establish the income distribution system which is compatible
with the modern enterprise system, establish effective incentive and restraint mechanisms, improve the internal fairness of income
distribution, gradually improve the market competitiveness, further stimulate the enthusiasm of staff, and promote the Company’s
sustainable development, the Company has developed a pay policy which is suitable for the Company’s development status by
combining with the actual situation of the Company.
The pay policy follows three basic principles: adhere to the principle of unity of incentives and constraints; adhere to the principle of
efficiency growth matching with wage growth; insist on taking post value as the basis, reflect the principle of "pay the post value,
pay the individual ability, and pay the performance contribution".
Combining with the industry characteristics and taking the employee on ground positions, pilots, and stewards (security) as t he basis,
the Company has respectively set up pay policies suitable for these three types of personnel, and established the job performance
wage system with performance contribution as the core on the basis of respecting the post value.
3. Training plan
In 2020, there were 159 company-level training plans (including 1 special training). During the epidemic, the number of training
plans was adjusted to 83 through the change of training methods, postponement or cancellation, etc., and 83 plans have been actually
completed. The annual staff education budget was 6.5 million yuan (after the adjustment), the actual expenditure was 3.795 million
68
Shandong Airlines Co., Ltd. Annual Report 2020
yuan. By the end of 2020, the Company totally engaged 659 lecturers (including 61 full-time lecturers and 598 part-time lecturers). a
total of 8,269 class-hour were taught throughout the year, 394,300 yuan of expenses such as class fees.
In 2020, facing the special test of the epidemic risk, the company adjusted and optimized training plans, refined training cos t control,
deeply explored training resources, actively sought subsidy support, innovated employee training paths, improved and optimized
training system, and achieved positive results. The main tasks were as follows: the first was to strive for subsidies and refine training
cost control. Made in-depth analysis of national policies, strived for subsidy support, and applied for a training subsidy of 2 million
yuan for replacing training with work. Reasonably coordinated the annual training plan, reduced the budget by 12.334 million yuan
through online learning, postponement, and cancellation, and strictly controlled budget expenditures. The second was to tap the
potential of resources and deepen the talent training model. During the epidemic, actively sought and tapped free and high-quality
online learning resources to provide diversified learning content. Completed the development of 7 internal standardized courses in
the department, and continued to tap the potential of lecturers' course development capabilities. Continue d to innovate the talent
training model, expanded the scope of school-enterprise cooperation, won the title of the first batch of "integrated enterprises of
production and education" in Shandong Province, formulate d the company's three-year plan for industry-education integration and
school-enterprise cooperation, and jointly built a professional talent training base with civil aviation colleges to jointly develop civil
aviation business technology research and development projects so as to support the company's strategic development. The third was
to optimize the system and improve the training management system. Updated 7 training management regulations, including training
management responsibilities, internally hired lecturers, training courses, class fee standards and incentive constraints, external
training resources, training procedures, and employee education funds, clarif ied management and control responsibilities,
standardized management procedures, improved supervision and assessment, and improved the company training management
system. Sorted out internal course resources, optimize d course content, and formed a course resource library. Matched the courses
with the lecturers, realized one teacher with multiple lessons and one lesson with multiple teachers, which laid a good foundation for
the company's internal training. The fourth was to reserve talents and promote the company's high-quality development. Improved
the new employee training model, scientifically designed the curriculum system, created the "Honest Shandong Airlines" brand
curriculum, implemented online and offline integration, and effectively linked company-level and department-level training to ensure
learning effects, guided new employees to quickly integrate into the company, and enhanced the sense of belonging and identity so as
to realize the role change. The fifth was to innovate and energize to build soft power of human resources. Took the human resources
department as a pilot, built a learning map with career planning and development paths as the main axis, and established a scientific
and systematic learning path by sorting out the knowledge, abilities, and qualities required by each job level to help employees grow
and meet job competency requirements. In addition, the two-month "Shandong Airlines Learn it" online learning project was
launched to formulate learning regulations, select high-quality courses, and form an atmosphere of "compar ing learning, surpassing,
and sharing", which improved employee skills and stimulated work potential.
In 2021, the company will continue to improve the training management system, and actively reserve talents so as to support the
company's high-quality development. The first is to build an employee career development training system. Taking the human
resources department as a pilot, formulate and implement an annual learning plan according to the requirements of the employee
learning and development manual, record the learning ledger, and apply it in the promotion of middle and senior positions. At the
same time, select a business department to build an employee training system, differentiate learning priorities for different job levels,
and form a learning map. The second is to continue to optimize the lecturer and curriculum system. Improve the company's
curriculum and lecturer resource database; carry out lecturer grade evaluation and continue to optimize the lecturer team. The third is
to apply for training subsidies. Interpret national, provincial and municipal policies, and actively seek training subsid ies for the
company. The fourth is grassroots leadership training. Use GE's free training resources to complete manager-level cadre promotion
training; find online learning resources for personnel in the green and blue areas of the company’s talent pool to help them improve
their management knowledge and capabilities; improve the cadre training mechanism, focus on enhancing "eight skills, seven
abilities", optimize the course content and form of initial training, re-training, and promotion training for managers, and form the
69
Shandong Airlines Co., Ltd. Annual Report 2020
third round of manager-level cadre training programs. The fifth is HR system construction. Form the training management module
requirements manual, after the entrance of developers, assist the developers to complete the needs research and adjustment, process
combing and development, system online testing, etc., and improve the information management level of the entire training process.
4. Labor outsourcing
□ Applicable √ Not applicable
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Shandong Airlines Co., Ltd. Annual Report 2020
Section X. Corporate Governance
I. Basic state of corporate governance
During the report period, the Company constantly completes the corporate governance structure, standardize the company operation
in accordance with “Corporation Law”, “Security Law”, “Governance Principles of Listed Company”, “Rules Governing the Listing
of Stocks in Shenzhen Stock Exchange”, “Basic Norms of Enterprise internal control” and requirements of other related laws and
regulations, feasibly gives play to guidance and supervisory role of “Three meetings” in corporate governance and information
disclosure so as to further improve the corporate governance level.
1. Shareholders and shareholders' meeting
During the reporting period, the Company convened the 2019 Annual General Meeting and The first extraordinary general meeting
of shareholders in 2020, and all deliberations and proposals were passed. The convening, proposal deliberation and decision-making
of shareholders’ meetings were conducted strictly in accordance with the procedures stipulated in the Articles of Association and
Rules of Procedure of the Shareholders’ Meeting, ensuring that all shareholders, especially the small and medium-sized shareholders,
have equal status and fully exercise their rights. The general meeting of shareholders hired the lawyer to witness on the spot and issue
a legal opinion on its legality.
2. Directors and the board of directors (BOD)
During the report period, BOD conscientiously implemented the resolutions of the shareholders’ meeting by taking the principles of
being responsible for all stockholders, deliberating major events of the Company in accordance with statutory procedures and Article
of Association, routine works of the Company are being implemented in an order way, foundation of corporate governance is fur ther
strengthened. The Company have 8 Board Meetings in the year of 2020, deliberated 21 proposals including periodic repor t, register
to issue medium-term notes, profit distribution, and changes in accounting policies. Convening of the meetings and voting procedures
are legally effective, and the resolution notices are being released on time in order to guarantee the right-to-known and supervise of
the shareholders, promote the standard operation for the Company.
3. Supervisors and board of supervisors
During the report period, the board of supervisors of the Company convoked 5 meetings and attended all the general meetings of
stockholders and board meetings the Company convoked in 2020. The convening, convoking and motion consideration and
decision-making of the supervisor meeting were implemented in strict accordance with the procedures ruled by the Articles of
Association and Rules of Procedure for Board of Supervisors, all supervisors attended the board of supervisors as required, seriously
performed their duties, supervised and made opinions on duty performance of the Board and management team, financial status,
related transaction and internal control of the Company, and maintained the legitimate rights and interests of the Company and the
shareholders.
4. Information disclosure management
The Company attached great importance to the information disclosure, strictly supervised all layers to disclose information timely
and fairly as required so as to ensure that the disclosure is true, accurate and complete, the Company totally disclosed 4 re gular
reports, 33 interim announcements and more than 30 working reports and opinions in 2020. The Company is the first train units for
information disclosure of Shenzhen Stock Exchange, continued to maintain the good information disclosure quality without ille gal
disclosures occurred. For the period of 2019-2020, we awarded the “Excellent” for six years in a row in aspect of information
disclosure evaluation of the Shenzhen Stock Exchange.
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Shandong Airlines Co., Ltd. Annual Report 2020
5. Registration management of inside information insider
The board of directors of the company has been fully aware of the seriousness and complexity of preventing the insider trading,
taking various measures to implement various regulatory requirements, comprehensively strengthening the inside information
management, perfecting the registration management system of inside information, and effectively guarding against various types of
insider trading behaviors of relevant insider at the sources. During the reporting period, the company faithfully and completely
recorded the list of inside information insiders, covered the entire chain of insiders involved in the process of inside information
transfer, strengthened the registration and records of information submitted by the business department to the outside, preve nted the
disclosure of inside information, and submitted the list of related inside inf ormation insiders to Shandong Securities Regulatory
Bureau and Shenzhen Stock Exchange for filing. The company did not find any relevant personnel used inside information to engage
in insider trading or suggested others to use inside information to conduct transactions; the situation that inside information
disclosure caused serious impact or losses to the company and investors did not exist; the situation that supervisory authorities took
supervision measures did not occur.
6. Related transactions management
The company established a dynamic related party roster, discerned the related transactions as early as possible, and made timely
decisions in accordance with the procedures; strictly prevented the non-operating funds from being used by controlling shareholders
and related parties, and eliminated the risk of violations of the “red line”. In 2020, the decision-making procedures for the company's
related transactions were legal and the price was fair, which had no adverse impact on the company or on the in terests of small and
medium shareholders, there was no external guarantee, and there was no occupation of non-operating funds by the controlling
shareholders or other related parties.
There was no major difference between the actual status of corporate governance and the regulatory documents regarding the
governance of listed companies issued by China Securities Regulatory Commission.
Is there any difference between the actual condition of corporate governance and relevant regulations about corporate governance for
listed Company from CSRC?
□Yes √ No
There are no differences between the actual condition of corporate governance and relevant regulations about corporate governance
for listed Company from CSRC.
II. Independence of the Company relative to controlling shareholders’ in aspect of businesses,
personnel, assets, institution and finance
The company and its controlling shareholders Shandong Aviation Group has been separated totally in business, personnel, a ssets,
institution and finance, possessing independent complete business and independent operation ability.
1. In business aspect: The Company’s business has difference with its controlling shareholders. The Company engaged in
manufacturing management independently without dependency with controlling shareholders and other related enterprise.
2. In personnel aspect: The Company is totally independent with its controlling shareholders in labor, personnel and salary
management. Directors, supervisors and senior management in accordance with the Articles of Association and relevant laws and
regulations, and through the legal procedures of election or employment, no situation of the controlling shareholders in accordance
with legal procedures intervention Company’s personnel appointment and removing. The senior management is not in double office
performance in the listed company and the controlling shareholders and they all get salaries from the Company.
3. In asset aspect: The property right relationship between the Company and controlling shareholders is clear and the assets of a
corporation are totally independent of the controlling shareholders. The Company has full control and domination without asse ts and
72
Shandong Airlines Co., Ltd. Annual Report 2020
funds occupied by controlling shareholders and interests of the Company being damaged.
4. In institution aspect: The Company established an organization totally independent with the controlling shareholders, the board of
directors and the supervisory committee operated independently without superior and subordinate relationship with the organization
established in controlling shareholders and affiliate enterprises.
5. In finance aspect: The Company has an independent financial department and independent financial accounting system. Owns
standard and independent accounting mechanism and financial management system as well as independent bank account,
furthermore, paying tax in accordance with the law.
III. Horizontal Competition
□ Applicable √ Not applicable
IV. In the report period, the Company held annual shareholders’ general meeting and
extraordinary shareholders’ general meeting
1. Annual Shareholders’ General Meeting in the report period
Ratio of investor Index of
Session of meeting Type Date Date of disclosure
participation disclosure
The first
extraordinary Extraordinary
general meeting of general meeting of 68.54% March 18, 2020 March 19, 2020 2020-08
shareholders in shareholders
2020
Annual General
AGM 68.65% June 18, 2020 June 19, 2020 2020-24
Meeting 2019
2. Request for extraordinary general meeting by preferred stockholders whose voting rights restore
□ Applicable √ Not applicable
V. Responsibility performance of independent directors in report period
1. The attending of independent directors to Board meetings and shareholders’ general meeting
The attending of independent directors in Board meetings and shareholders’ general meeting
Times of Whether
Times of
Board Times of absent the
Times of Times of attending the
Independent meeting attending by Times of Meeting for
present in entrusted shareholders
director supposed to communicati Absence the second
person presence general
attend in the on time in a
meeting
report period row or not
Lv Hongbing 8 1 7 0 0 No 1
Duan Yalin 8 1 7 0 0 No 1
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Shandong Airlines Co., Ltd. Annual Report 2020
Xu Xiangyi 8 1 7 0 0 No 1
Hu Yuanmu 8 1 7 0 0 No 1
Explanation of absent the Board Meeting for the second time in a row
2. Objection for relevant events from independent directors
Independent directors come up with objection about Company’s relevant matters
□ Yes √ No
No independent directors come up with objection about Company’s relevant matters in the Period
3. Other explanation about responsibility performance of independent directors
The opinions from independent directors have been adopted
√ Yes □ No
Explanation on advice that accepted/not accepted from independent directors
During the reporting period, independent directors of the Company conscientiously fulfilled relevant laws and relevant rules of
Article of Association; they independently participate in the decision-making of major events objectively, fulfill their duties faithfully
and diligently, and maintaining the interest of the Company and small & medium shareholders effectively, give full play to the role of
independent directors.
VI. Responsibility performance of subordinate special committee of the Board in report
period
The Board set up three specialized committees: the Audit Committee, the Remuneration and Appraisal Committee, and the Strategy
and Nomination Committee. In 2020, all specialized committees held four meetings, therein to, two meetings of the Audit Committee
and one meeting of the Remuneration and Appraisal Committee and one meeting of strategy and nomination committee. The
specialized committees of the Board performed their duties by strictly following the requirements of China Securities Regulatory
Commission and Shenzhen Stock Exchange, the "Articles of Association", and the rules of procedure of the committees, and played
an important role in the scientific decision-making of the board of directors.
1. Duty performing of the audit committee of the board
During the reporting period, the audit committee of the board paid close attention to the internal control system construction and the
related transaction; made opinion on reappointing the accounting firm; regularly checked the financial report of the company; the
audit committee of the board of directors effectively performed the responsibilities, diligently did their duties in the annual financial
report audit work, gave full play to the supervisory role, and maintained the independence of audit in auditing of the 2020 a nnual
financial report.
2. Duty performing of the remuneration and appraisal committee of the board
During the reporting period, the remuneration and appraisal committee of the board investigated the remuneration policy and
program for the directors and senior management, did annual performance appraisal to the duty performing of directors and sen ior
management according to related assessment criterion; checked and approved the 2020 annual report about the remuneration
disclosure of the directors and the senior management, and thought the remuneration amount of relevant personnel disclosed in the
2020 annual report was true and accurate.
3. Duty performing of the strategy and nomination committee of the board
During the reporting period, the strategy & nomination committee take serious research and analysis on development plans and
operation targets of the Company, they actively participate in discussion and propose reasonable suggestions. And expressed opinions
74
Shandong Airlines Co., Ltd. Annual Report 2020
on the changes of senior management members of the company, and reviewed the qualifications of relevant personnel, and found no
situations in which senior executives of listed companies did not meet the requirements of laws, regulations and the Articles of
Association.
VII. Works from Supervisory Committee
The Company has risks in reporting period that found in supervisory activity from supervisory committee
□ Yes √ No
Supervisory committee has no objection about supervision events in reporting period
VIII. Appraisal and incentive mechanism for senior executives
In accordance with the “Performance Management Manual”, the Company checks and evaluated the individual performance, and
paid merit based on appraisal results to enhance the incentive efficiency.
IX. Internal Control
1. Details of major defects in IC appraisal report that found in reporting period
□Yes √ No
2. Self assessment report of the Internal Control (IC)
Disclosure date of the assessment report
March 27, 2021
of IC (full-text)
Disclosure index of the assessment
Published on Juchao Website (http://www.cninfo.com.cn) dated 27 March 2021
report of IC (full-text)
The ratio of the total assets of units
included in the scope of assessment
accounting for the total assets on the 100.55%
company's consolidated financial
statements
The ratio of the operating income of
units included in the scope of assessment
accounting for the operating income on 100.39%
the company's consolidated financial
statements
Defects Identification Standards
Category Financial Reports Non-financial Reports
Material defect: defect that, severally or
Material defect:
jointly with other defects, will lead to
Qualitative criteria (1) In case of serious violation of laws
material wrong reporting in financial
and regulations and causing major
reports being not able to prevented or
75
Shandong Airlines Co., Ltd. Annual Report 2020
found or rectified in a timely manner. losses or impacts on the company, such
Occurrence of the followings will be as major safety or environmental
deemed as material defect: pollution accidents;
(1) inefficiency of environment control; (2) The decision-making procedures
are unscientific and have a significant
(2) Directors, supervisors and senior
impact on the company's operations;
management engaged in fraud and cause
(3) Major defects or important defects
major losses or impacts to the Company;
of internal control have not been
(3) The external auditor finds material
rectified;
wrong reporting in current financial
(4) Important business is lack of
statement, while the Company has not
institutional control or systemic failure
found such reporting during its operation;
of institution;
(4) The material defect identified and
(5) Other situations have a significant
reported to the management fails to be
impact on the company.
rectified in a reasonable time period;
Important defects: In addition to major
(5) The audit committee and audit
defects, other circumstances are
department of the Company exercise
respectively determined as important
invalid supervision upon internal control;
defects or general defects according to
(6) Other defects which may affect
the degree of influence.
financial statement users to make correct
General defects: In addition to major
judgment.
defects, other circumstances are
Major defect: defect that, severally or
respectively determined as important
jointly with other defects, will lead to
defects or general defects according to
wrong reporting in financial reports being
the degree of influence.
not able to prevented or found or rectified
in a timely manner which still needs
attention from the management though it
doesn’t reach or exceed material defect as
described above.
General defect: other internal control
related defects that do not constitute
material defects or major defect
(1) potential wrong reporting in operating (1) direct property loss:
income: Material defect: over RMB 10 million;
Material defect: 0.5% of the total Major defect: RMB 1 million - RMB
operating income ≤ wrong reporting; 10 million (inclusive);
Major defect: 0.2% of the total operating General defect: RMB 1 million or
income ≤ wrong reporting＜0.5% of the below
Quantitative criteria total operating income; (2) negative influences:
General defect: wrong reporting＜0.2% of Material defect: materially and
the total operating income. adversely affect the Company, and
(2) potential wrong reporting in total disclosed to the public via
profit: announcement;
Material defect: 5% of the total profit≤ Major defect: receive punishment from
wrong reporting; national authorities, while has no
76
Shandong Airlines Co., Ltd. Annual Report 2020
Major defect: 2% of the total profit≤ material negative influence over the
wrong reporting＜5% of the total profit; Company;
General defect: wrong reporting＜2% of General defect: receive punishment
the total profit. from provincial or below authorities,
(3) potential wrong reporting in total while has no negative influence over
assets: the Company.
Material defect: 0.5% of the total assets ≤
wrong reporting;
Major defect: 0.2% of the total assets ≤
wrong reporting＜0.5% of the total assets;
General defect: wrong reporting＜0.2% of
the total assets.
(4) potential wrong reporting in owners’
equity:
Material defect: 0.5% of the total owners’
equity ≤ wrong reporting;
Major defect: 0.2% of the total owners’
equity ≤ wrong reporting＜0.5% of the
total owners’ equity;
General defect: wrong reporting＜0.2% of
the total owners’ equity.
Amount of significant defects in
0
financial reports
Amount of significant defects in
0
non-financial reports
Amount of important defects in financial
0
reports
Amount of important defects in
0
non-financial reports
X. Auditing report of internal control (IC)
√Applicable □ Not applicable
Deliberation section of auditing report of IC
To the Shareholders of Shandong Airlines Co., Ltd.:
We have audited the effectiveness of internal control of financial report under the name of Shandong Airlines Co., Ltd. (“the
Company”) dated 31 December 2020 in accordance with relevant requirements of “Internal Control Audit Guideline for
Enterprises” and China Standards on Auditing and Quality Control
I. Company's responsibility for internal control: The Company is responsible for the establishment & perfection and efficiency
implementation of internal control as well as evaluated its effectiveness, regulated by “Basic Standard of Internal Control for
Enterprises”, “Application Guidelines of Internal Control for Enterprises” and “Evaluation Guidelines of Internal Control for
77
Shandong Airlines Co., Ltd. Annual Report 2020
Enterprises”.
II. Auditor's responsibility: Our responsibility is to express an audit opinion on effectiveness of internal control of financial report
based on our audit. And disclosed the major defects noted in internal control of non-financial report.
III. Inherent limitations of internal control: Internal control has an inherent limitations, and there is possibility of in-prevention
and false reported. Furthermore, internal control will comes to inappropriate due to the changes of circumstances, or the
controlling policy and procedure maintenance will fail in implementation; there has a certain risk in presuming the efficiency of
future internal control based on internal control’s audit results.
IV. Audit opinions on internal control of financial report: In our opinion, Shandong Airlines Co., Ltd. maintain an efficienc y of
internal control of financial report, in all major aspects, as of 31 December 2020 based on relevant regulations and “Basic
Standard of Internal Control for Enterprises”.
RSM Certified Public Accountants Certified Public Accountant of China: Yang Yunhui
(special general partnership)
Certified Public Accountant of China : Xu Hong
BeijingChina 25 March 2021
Disclosure details of audit report
Disclosed
of IC
Disclosure date of audit report of
March 27, 2021
internal control (full-text)
Index of audit report of internal
Published on Juchao Website (http://www.cninfo.com.cn) dated 27 March 2021
control (full-text)
Opinion type of auditing report of
Standard unqualified
IC
whether the non-financial report
No
had major defects
Issued a modified audit opinions for internal control
□Yes √ No
Auditing report of internal control issued by CPA shows the same opinion as self-evaluation report issued by the Board
√ Yes □ No
78
Shandong Airlines Co., Ltd. Annual Report 2020
Section XI. Corporate bonds
Whether or not the Company public offering corporation bonds in stock exchange, which undue or without payment in full at
maturity on the approval date for annual report disclosed
No
79
Shandong Airlines Co., Ltd. Annual Report 2020
Section XII. Financial Report
I. Audit report
Type of audit opinion Standard unqualified
Date for audited report signed 25 March 2020
RSM Certified Public Accountants (special general
Name of audit institution
partnership)
Document No. of the Auditing Report RSM Shen Zi [2021] No.518Z0168
Name of CPA Yang Yunhui, Xu Hong
Auditor’s Report
To the Shareholders of Shandong Airlines Co., Ltd.,
I. Audit Opinion
We have audited the accompanying financial statements of Shandong Airlines Co., Ltd. (hereafter, Shandong Airlines or
the Company), which comprise the consolidated and the parent company’s statements of financial position as at December
31, 2020, the consolidated and the parent company’s statements of comprehensive income, the consolidated and the parent
company’s statements of cash flows and the consolidated and the parent company’s statements of changes in equity for the
year then ended and the notes to the financial statements.
In our opinion, the accompanying financial statements of Shandong Airlines have been prepared in accordance with the
requirements of the Enterprises Accounting Standards of China and presented fairly, in all material respects, the
consolidated and the parent company’s financial positions as at December 31, 2020, and the consolidated and the parent
company’s financial performance and the consolidated and the parent company’s cash flows for the year then ended.
II. Basis of Forming the Audit Opinion
We conducted our audit in accordance with the Chinese Certified Public Accountant Auditing Standards. The section
“Auditors’ Responsibility for the Financial Statements” in the audit report further describes our responsibilities in
accordance with these standards. According to the Code of Ethics for Chinese Certified Public Accountants, we are
independent of the Company and have fulfilled other responsibilities of code of ethics. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
III. Key Audit Items
Key audit items are the items which we believe, based on our professional judgment, to be significant in the audit of
financial statements for the current period. Audit response to these items has been designed and implemented in the context
of auditing the financial statements as a whole for the purpose of expressing an audit opinion on the financial statements;
and we do not express an opinion on each of these items individually.
1. Recognition of Passenger Service Revenue
1.1 Description
The revenue of passenger service of the Company is recognized when the service is provided. At the balance sheet date, the
amount collected by the Company for transportation service which has been sold but not yet provided is included in the
balance sheet as ticket settlement. The Company uses complex information technology system, through the system the
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Shandong Airlines Co., Ltd. Annual Report 2020
company automatically processes large amounts of data to keep track of ticket sales and transportation services provided,
to confirm the timing and the exact amount of revenue of passenger service. Since the recognition of passenger service
revenue involves using complex information technology system, it will lead to the inherent risk of inaccurate recognition
of passenger service revenue or inappropriateness recognition of the accounting period. Therefore, we identify revenue
recognition of passenger service as a key audit item.
Please refer to accounting policies described in Note 3.23 Revenue recognition principles and measurement methods under
Note 3 Important Accounting Principles and Accounting Estimates. Please refer to Note 5.20 Contract liabilities and Note
5.36 Operating revenues and costs under Note 5 Notes to significant elements of the consolidated financial statements.
Please refer to Note 14.4 Operating revenues and costs under Note 14 Notes to elements of the parent company’s financial
statements for details.
1.2 Audit Response
The relevant procedures we implemented for the recognition of passenger service revenue mainly include:
1.2.1 We assessed the design, operation and effectiveness of the internal controls related to the company's revenue
recognition and assessed the effectiveness of the design and operation of information technology controls related to the
revenue system.
1.2.2 We assessed the key manual controls related to the track and treatment of the identified difference between the
information output from the information technology system and the company's financial and operational data.
1.2.3 We compared the opening and closing balance of ticket settlement during the period, and analyzed the reasonableness
of amount changes.
1.2.4 We examined the relevant supporting documents of the journal entries with significant amounts or other specific risk.
2. Overhaul Repair Fee of Aircrafts and related Engines under Operating Lease
2.1 Description
As at December 31, 2020, the payables of overhaul repair fee of aircrafts and the related engines under operating lease
(including that due within one year) amounted to CNY 4.75 billion. According to the terms of the operating lease
agreement, the Company shall return the aircrafts in accordance with the agreed conditions at the end of the lease period.
In order to ensure the agreed conditions of the aircraft upon returning, accrual for the overhaul of the fuselage and engine
under operating lease is recognized during the estimated overhaul period, and the overhaul repair expenses are included in
the current profit and loss. Management estimates the expected overhaul cycle and overhaul cost based on the previous
maintenance cost experience of the same or similar fuselage and engine, current economic and aviation related
development, and taking into account the predicted flight hours, flight cycles, and other variables. Due to the inherent
uncertainty of the forecast of the overhaul period and the future overhaul cost for different types of fuselages and engines,
there is a risk of inaccurate accrual of cost. Therefore, we identify the recognition of overhaul fee for aircrafts and related
engines under operating lease as a key audit matter.
Please refer to accounting policies described in Note 3.27 Regular repair and overhaul repair under Note 3 Major
81
Shandong Airlines Co., Ltd. Annual Report 2020
Accounting Principles and Accounting Estimates. Please refer to Note 5.18 Accounts payable and Note 5.28 Long-term
payables under Note 5 Notes to significant elements of the consolidated financial statements for the details.
2.2 Audit Response
The relevant procedures we implemented for overhaul repair fee of aircrafts and related engines under operating lease
mainly include:
2.2.1 We assessed the effectiveness of the design and operation of the key internal controls related to the overhaul repa ir
fee accruals for the aircraft under operating lease.
2.2.2 We discussed with the engineering department managers of the Company responsible for aircraft maintenance,
obtained the information of the overhaul repair cycle, overhaul repair cost estimated by engineering department, and the
actual maintenance cost, compared the information to that used by financial executives when calculating the accruals for
the overhaul repair fee.
2.2.3 Based on the terms of operation lease agreement and the historical maintenance experience of the Company, we
compared the assumptions adopted by the management in the previous year with the actual situation and the assumptions
of this year, and evaluated the key assumptions adopted by the management in estimating the overhaul cycle and the future
overhaul cost.
2.2.4 We compared the actual overhaul repair cost of the returned aircraft in the current year to the corresponding overhaul
accruals in the previous year, analyzed the difference to evaluate the rationality of management accounting estimates.
IV. Other Information
The management of the Company is responsible for other information, which includes the information contained in the
Company’s 2020 annual report except for the financial statements and our auditor report.
Our audit opinion on the financial statements does not cover other information, and we do not express assurance opinion in
any form on the other information.
In parallel to our audit of the financial statements, our responsibilities include reading other information to assess if the
information included in other information is significantly inconsistent with the financial statements or information obtained
during the audit, and if there is possible material misstatement in other information.
Where we identify material misstatement in other information on the basis of our work, we shall report such fact. Based on
our work, we have no such matter to be reported.
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Shandong Airlines Co., Ltd. Annual Report 2020
V. Responsibilities of Management and those Charged with Governance for the Financial Statements
Management of the Company (hereafter, the management) is responsible for the preparation and fair presentation of the
financial statements in accordance with Enterprise Accounting Standards of China, and for the design, implementation and
maintenance of such internal control to ensure the financial statements are free from material misstatements, whether due
to fraud or error.
During the preparation of the financial statements, the management is responsible for assessing the Company’s
going-concern capability, disclosing matters in relation to the going-concern status (if applicate), and applying the
going-concern assumption, unless the management plans to liquidate the Company, terminates operation of the Company
or has no other practical alternative choice.
Those charged with governance are responsible for monitoring the Company’s financial reporting process.
VI. Auditor’ Responsibility for the Audit of Financial Statements
Our objective is to obtain reasonable assurance as to whether the financial statements are free from material misstatement,
whether due to frauds or errors, and issue an audit report with audit opinion. Reasonable assurance is a high-level
assurance, but there is no guarantee that a material misstatement will always be found in the audit performed in accordance
with the auditing standards. Misstatements may be caused by fraud or error. Misstatements are considered to be material if
they, individually or in aggregate, could reasonably be expected to influence the economic decisions of users based on the
financial statements.
During the performance of our audit in accordance with the auditing standards, we use professional judgment and maintain
professional skepticism. We also perform the following procedures:
A. Identify and assess the risks of material misstatement of the financial statements due to fraud and error, design and
implement audit procedures to address these risks, and obtain sufficient and appropriate audit evidence as a basis for
forming the audit opinion. As fraud may involve collusion, forgery, willful omission, misrepresentation or override of
internal control, the risk of not discovering a material misstatement due to fraud is higher than the risk of failing to dete ct a
material misstatement resulting from a mistake.
B. Understand the internal controls related to auditing in order to design appropriate audit procedures.
C. Evaluate the appropriateness of accounting policies adopted by the management and the reasonableness of accounting
estimates and relevant disclosures made by management.
D. Conclude on the appropriateness of management’s application of the going concern assumption. Meanwhile, based on
the audit evidence obtained, conclude whether there is material uncertainty about the Company’s ability t o continue as a
going-concern. If we conclude that there is material uncertainty, the auditing standards require us to draw attention of the
users of the financial statements to the relevant disclosures in the financial statements. If the disclosure is ina dequate, we
shall express a qualified opinion. Our conclusion is based on information available as of the date of the audit report.
However, future events or circumstances may cause the Company not being able to continue as a going-concern.
E. Evaluate the overall presentation, structure and content of financial statements and evaluate whether the financial
statements present fairly the relevant transactions and events.
83
Shandong Airlines Co., Ltd. Annual Report 2020
F. Obtain sufficient and appropriate audit evidence regarding to the Company’s financial information of the entities or
business activities in order to express audit opinion on the financial statements. We are responsible for the guidance,
supervision and execution of the group audit, and take full responsibility for the audit opinion.
We communicate with those charged with governance on the scope and time schedule of the audit, and significant audit
findings, etc., including deficiency of internal control that we identified during the audit which warrants attention.
We also provide a statement to those charged with governance regarding the fact that we comply with the requirements of
professional ethics relating to independence, and also communicate with them about all relationships and other matters that
may be reasonably deemed to affect our independence，as well as, where applicable, the relevant precautions (if
applicable).
Through the matters we communicate with those charged with governance, we identify matters that are significant in the
audit of the financial statements for the current period, which therefore become the key audit items. We disclose these
items in the audit report, unless public disclosure of such items is prohibited by laws and regulations; in exceptional
circumstances, where the benefit arising from public disclosure of certain matters is outweighed by the negative
consequence brought by such disclosure in consideration of public interest. We do not disclose such items in the audit
report.
RSM China LLP Chinese CPA (Engagement Partner): Yang Yunhui
Beijing, China Chinese CPA: Xu Hong
25 March 2021
II. Financial Statement
Statement in Financial Notes are carried in RMB/CNY
1. Consolidated Balance Sheet
Prepared by Shandong Airlines Co., Ltd.
December 31, 2020
In RMB
Item December 31, 2020 December 31, 2019
Current assets:
Monetary funds 5,306,474,451.06 598,961,065.69
Settlement provisions
Capital lent
Trading financial assets
Derivative financial assets
Note receivable
Account receivable 354,352,296.99 456,758,290.60
Receivable financing
Accounts paid in advance 213,530,865.28 232,061,479.78
Insurance receivable
Reinsurance receivables
Contract reserve of reinsurance
84
Shandong Airlines Co., Ltd. Annual Report 2020
receivable
Other account receivable 159,397,943.13 232,147,324.23
Including: Interest receivable
Dividend receivable
Buying back the sale of financial
assets
Inventories 110,572,399.50 109,435,256.69
Contractual assets
Assets held for sale
Non-current asset due within one
year
Other current assets 282,572,739.73 170,020,416.07
Total current assets 6,426,900,695.69 1,799,383,833.06
Non-current assets:
Loans and payments on behalf
Debt investment
Other debt investment
Long-term account receivable
Long-term equity investment
Investment in other equity
541,789,406.63 874,728,633.32
instrument
Other non-current financial
assets
Investment real estate
Fixed assets 6,904,082,012.35 7,362,687,431.80
Construction in progress 5,770,696,951.56 5,479,071,703.01
Productive biological asset
Oil and gas asset
Right-of-use assets
Intangible assets 118,699,980.33 113,459,129.62
Expense on Research and
Development
Goodwill 454,020.13 454,020.13
Long-term expenses to be
641,782,578.43 657,772,583.81
apportioned
Deferred income tax asset 1,999,099,488.87 1,105,378,651.73
Other non-current asset
Total non-current asset 15,976,604,438.30 15,593,552,153.42
Total assets 22,403,505,133.99 17,392,935,986.48
Current liabilities:
Short-term loans 2,001,111,111.11 300,329,083.33
Loan from central bank
Capital borrowed
Trading financial liability 862,955.67 126,264.75
Derivative financial liability
Note payable 472,095,003.24 402,996,891.30
Account payable 2,543,319,300.31 2,482,248,514.51
Accounts received in advance 936,873,667.96
Contractual liability 445,400,801.19
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Shandong Airlines Co., Ltd. Annual Report 2020
Selling financial asset of
repurchase
Absorbing deposit and interbank
deposit
Security trading of agency
Security sales of agency
Wage payable 346,238,955.37 549,061,919.97
Taxes payable 102,206,477.49 149,437,183.71
Other account payable 635,865,961.62 586,143,459.66
Including: Interest payable
Dividend payable 602,306.96 602,306.96
Commission charge and
commission payable
Reinsurance payable
Liability held for sale
Non-current liabilities due
321,577,566.89 885,299,947.83
within one year
Other current liabilities 31,100,597.66
Total current liabilities 6,899,778,730.55 6,292,516,933.02
Non-current liabilities:
Insurance contract reserve
Long-term loans 6,117,434,899.32 808,001,382.82
Bonds payable 1,000,000,000.00
Including: Preferred stock
Perpetual capital
securities
Lease liability
Long-term account payable 5,303,354,015.63 4,623,939,875.40
Long-term wages payable 254,025,000.00 152,746,225.21
Accrual liability
Deferred income 100,513,810.37 109,423,070.21
Deferred income tax liabilities 158,137,753.91 232,789,494.25
Other non-current liabilities
Total non-current liabilities 12,933,465,479.23 5,926,900,047.89
Total liabilities 19,833,244,209.78 12,219,416,980.91
Owner’s equity:
Share capital 400,000,000.00 400,000,000.00
Other equity instrument
Including: Preferred stock
Perpetual capital
securities
Capital public reserve 75,410,363.70 75,410,363.70
Less: Inventory shares
Other comprehensive income 322,552,319.90 570,487,739.92
Reasonable reserve
Surplus public reserve 538,773,444.97 538,773,444.97
Provision of general risk
Retained profit 1,233,524,795.64 3,588,847,456.98
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Shandong Airlines Co., Ltd. Annual Report 2020
Total owner’ s equity attributable to
2,570,260,924.21 5,173,519,005.57
parent company
Minority interests
Total owner’ s equity 2,570,260,924.21 5,173,519,005.57
Total liabilities and owner’ s equity 22,403,505,133.99 17,392,935,986.48
Legal Representative: Sun Xiujiang
Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Zhou Shoubin
2. Balance Sheet of Parent Company
In RMB
Item December 31, 2020 December 31, 2019
Current assets:
Monetary funds 5,302,302,306.13 563,534,831.81
Trading financial assets
Derivative financial assets
Note receivable
Account receivable 350,673,304.20 456,602,459.51
Receivable financing
Accounts paid in advance 213,297,372.67 231,804,126.69
Other account receivable 165,544,964.64 237,966,773.59
Including: Interest receivable
Dividend
receivable
Inventories 108,682,699.25 108,006,448.04
Contractual assets
Assets held for sale
Non-current assets maturing
within one year
Other current assets 282,309,117.39 169,612,615.24
Total current assets 6,422,809,764.28 1,767,527,254.88
Non-current assets:
Debt investment
Other debt investment
Long-term receivables
Long-term equity investments 144,101,285.43 144,101,285.43
Investment in other equity
541,789,406.63 874,728,633.32
instrument
Other non-current financial
assets
Investment real estate
Fixed assets 6,812,145,764.90 7,265,719,146.41
Construction in progress 5,770,696,951.56 5,479,071,703.01
Productive biological assets
Oil and natural gas assets
87
Shandong Airlines Co., Ltd. Annual Report 2020
Right-of-use assets
Intangible assets 106,310,248.22 100,681,207.47
Research and development costs
Goodwill
Long-term deferred expenses 641,779,766.13 657,569,167.99
Deferred income tax assets 1,998,341,086.43 1,104,641,386.20
Other non-current assets
Total non-current assets 16,015,164,509.30 15,626,512,529.83
Total assets 22,437,974,273.58 17,394,039,784.71
Current liabilities
Short-term borrowings 2,001,111,111.11 300,329,083.33
Trading financial liability 862,955.67 126,264.75
Derivative financial liability
Notes payable 472,095,003.24 402,996,891.30
Account payable 2,560,482,401.82 2,494,426,631.18
Accounts received in advance 935,722,229.11
Contractual liability 443,746,099.43
Wage payable 341,473,984.67 539,824,147.52
Taxes payable 99,360,041.47 147,060,509.11
Other accounts payable 726,704,906.20 649,376,495.57
Including: Interest payable
Dividend payable 11,940.00 11,940.00
Liability held for sale
Non-current liabilities due
321,577,566.89 885,299,947.83
within one year
Other current liabilities 31,100,597.66
Total current liabilities 6,998,514,668.16 6,355,162,199.70
Non-current liabilities:
Long-term loans 6,117,434,899.32 808,001,382.82
Bonds payable 1,000,000,000.00
Including: preferred stock
Perpetual capital
securities
Lease liability
Long-term account payable 5,303,354,015.63 4,623,939,875.40
Long term employee
254,025,000.00 152,746,225.21
compensation payable
Accrued liabilities
Deferred income 100,513,810.37 109,423,070.21
Deferred income tax liabilities 157,224,899.02 231,746,231.52
Other non-current liabilities
Total non-current liabilities 12,932,552,624.34 5,925,856,785.16
Total liabilities 19,931,067,292.50 12,281,018,984.86
Owners’ equity:
Share capital 400,000,000.00 400,000,000.00
Other equity instrument
Including: preferred stock
Perpetual capital
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Shandong Airlines Co., Ltd. Annual Report 2020
securities
Capital public reserve 86,911,168.71 86,911,168.71
Less: Inventory shares
Other comprehensive income 322,552,319.90 570,487,739.92
Special reserve
Surplus reserve 538,112,740.44 538,112,740.44
Retained profit 1,159,330,752.03 3,517,509,150.78
Total owner’s equity 2,506,906,981.08 5,113,020,799.85
Total liabilities and owner’s equity 22,437,974,273.58 17,394,039,784.71
3. Consolidated Profit Statement
In RMB
Item 2020 2019
I. Total operating income 10,534,403,350.87 18,990,415,024.88
Including: Operating income 10,534,403,350.87 18,990,415,024.88
Interest income
Insurance gained
Commission charge and
commission income
II. Total operating cost 13,833,221,113.61 18,719,010,870.08
Including: Operating cost 12,554,900,116.09 17,198,527,408.30
Interest expense
Commission charge and
commission expense
Cash surrender value
Net amount of expense of
compensation
Net amount of withdrawal of
insurance contract reserve
Bonus expense of guarantee slip
Reinsurance expense
Tax and extras 10,479,064.77 15,566,184.32
Sales expense 613,910,975.53 851,783,078.83
Administrative expense 493,640,757.37 482,684,059.23
R&D expense 22,866,289.98 22,442,549.67
Financial expense 137,423,909.87 148,007,589.73
Including: Interest
230,831,883.77 124,509,494.05
expenses
Interest
45,680,277.19 10,691,861.94
income
Add: other income 100,684,939.11 107,638,847.09
Investment income (Loss is
3,190,496.20 6,293,674.12
listed with “-”)
Including: Investment
income on affiliated company and joint
venture
The termination of
income recognition for financial assets
measured by amortized cost(Loss is
listed with “-”)
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Shandong Airlines Co., Ltd. Annual Report 2020
Exchange income (Loss is
listed with “-”)
Net exposure hedging
income (Loss is listed with “-”)
Income from change of fair
-736,690.92 -216,752.92
value (Loss is listed with “-”)
Loss of credit impairment
3,388,382.43 -2,937,990.94
(Loss is listed with “-”)
Losses of devaluation of
-4,469,223.84
asset (Loss is listed with “-”)
Income from assets disposal
603,734.58 116,645.48
(Loss is listed with “-”)
III. Operating profit (Loss is listed with
-3,191,686,901.34 377,829,353.79
“-”)
Add: Non-operating income 46,593,143.85 106,408,051.60
Less: Non-operating expense 798,968.97 3,343,238.16
IV. Total profit (Loss is listed with “-”) -3,145,892,726.46 480,894,167.23
Less: Income tax expense -763,877,270.65 119,888,390.92
V. Net profit (Net loss is listed with
-2,382,015,455.81 361,005,776.31
“-”)
(i) Classify by business continuity
1.continuous operating net profit
-2,382,015,455.81 361,005,776.31
(net loss listed with ‘-”)
2.termination of net profit (net
loss listed with ‘-”)
(ii) Classify by ownership
1.Net profit attributable to
-2,382,015,455.81 361,005,776.31
owner’s of parent company
2.Minority shareholders’ gains
and losses
VI. Net after-tax of other
-247,935,420.02 61,700,929.17
comprehensive income
Net after-tax of other comprehensive
income attributable to owners of parent -247,935,420.02 61,700,929.17
company
(I) Other comprehensive income
items which will not be reclassified -247,935,420.02 61,700,929.17
subsequently to profit of loss
1.Changes of the defined
1,769,000.00 -1,727,000.00
benefit plans that re-measured
2.Other comprehensive
income under equity method that
cannot be transfer to gain/loss
3.Change of fair value of
-249,704,420.02 63,427,929.17
investment in other equity instrument
4.Fair value change of
enterprise's credit risk
5. Other
(ii) Other comprehensive income
items which will be reclassified
subsequently to profit or loss
1.Other comprehensive
income under equity method that can
transfer to gain/loss
2.Change of fair value of
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Shandong Airlines Co., Ltd. Annual Report 2020
other debt investment
3.Amount of financial
assets re-classify to other
comprehensive income
4.Credit impairment
provision for other debt investment
5.Cash flow hedging
reserve
6.Translation differences
arising on translation of foreign
currency financial statements
7.Other
Net after-tax of other comprehensive
income attributable to minority
shareholders
VII. Total comprehensive income -2,629,950,875.83 422,706,705.48
Total comprehensive income
attributable to owners of parent -2,629,950,875.83 422,706,705.48
Company
Total comprehensive income
attributable to minority shareholders
VIII. Earnings per share:
(i) Basic earnings per share -5.960 0.900
(ii) Diluted earnings per share -5.960 0.900
Enterprise combine under the same control in the Period, the combined party realized net profit of 0 Yuan before
combination, and realized 0 Yuan at last period for combined party
Legal Representative: Sun Xiujiang
Person in charge of Accounting Works: Xu Guojian
Person in charge of Accounting Institution: Zhou Shoubin
4. Profit Statement of Parent Company
In RMB
Item 2020 2019
I. Operating income 10,510,004,302.71 18,962,765,329.89
Less: Operating cost 12,555,099,599.57 17,211,456,987.80
Taxes and surcharge 8,539,807.74 13,484,089.20
Sales expenses 611,539,386.64 848,969,881.93
Administration expenses 477,280,905.62 464,015,327.87
R&D expenses 22,866,289.98 22,442,549.67
Financial expenses 137,421,750.46 148,076,246.70
Including: interest
230,831,883.77 124,509,494.05
expenses
Interest income 45,641,728.82 10,579,287.12
Add: other income 100,419,883.27 107,576,270.88
Investment income (Loss is
3,190,496.20 6,293,674.12
listed with “-”)
Including: Investment
income on affiliated Company and
91
Shandong Airlines Co., Ltd. Annual Report 2020
joint venture
The termination of
income recognition for financial
assets measured by amortized cost
(Loss is listed with “-”)
Net exposure hedging
income (Loss is listed with “-”)
Changing income of fair
-736,690.92 -216,752.92
value (Loss is listed with “-”)
Loss of credit impairment
3,472,930.02 -2,871,828.27
(Loss is listed with “-”)
Losses of devaluation of
-4,469,223.84
asset (Loss is listed with “-”)
Income on disposal of
603,734.58 116,645.48
assets (Loss is listed with “-”)
II. Operating profit (Loss is listed
-3,195,793,084.15 360,749,032.17
with “-”)
Add: Non-operating income 46,368,092.53 106,239,635.93
Less: Non-operating expense 800,154.63 3,300,015.44
III. Total Profit (Loss is listed with
-3,150,225,146.25 463,688,652.66
“-”)
Less: Income tax -765,353,953.03 115,953,978.74
IV. Net profit (Net loss is listed with
-2,384,871,193.22 347,734,673.92
“-”)
(i)continuous operating net
-2,384,871,193.22 347,734,673.92
profit (net loss listed with ‘-”)
(ii) termination of net profit (net
loss listed with ‘-”)
V. Net after-tax of other
-247,935,420.02 61,700,929.17
comprehensive income
(I) Other comprehensive income
items which will not be reclassified -247,935,420.02 61,700,929.17
subsequently to profit of loss
1.Changes of the defined
1,769,000.00 -1,727,000.00
benefit plans that re-measured
2.Other comprehensive
income under equity method that
cannot be transfer to gain/loss
3.Change of fair value of
-249,704,420.02 63,427,929.17
investment in other equity instrument
4.Fair value change of
enterprise's credit risk
5. Other
(II) Other comprehensive
income items which will be
reclassified subsequently to profit or
loss
1.Other comprehensive
income under equity method that can
transfer to gain/loss
2.Change of fair value of
other debt investment
3.Amount of financial
assets re-classify to other
comprehensive income
4.Credit impairment
provision for other debt investment
92
Shandong Airlines Co., Ltd. Annual Report 2020
5.Cash flow hedging
reserve
6.Translation differences
arising on translation of foreign
currency financial statements
7.Other
VI. Total comprehensive income -2,632,806,613.24 409,435,603.09
VII. Earnings per share:
(i) Basic earnings per share
(ii) Diluted earnings per share
5. Consolidated Cash Flow Statement
In RMB
Item 2020 2019
I. Cash flows arising from operating
activities:
Cash received from selling
commodities and providing labor 11,042,083,759.34 20,647,602,531.11
services
Net increase of customer deposit
and interbank deposit
Net increase of loan from
central bank
Net increase of capital borrowed
from other financial institution
Cash received from original
insurance contract fee
Net cash received from
reinsurance business
Net increase of insured savings
and investment
Cash received from interest,
commission charge and commission
Net increase of capital borrowed
Net increase of returned business
capital
Net cash received by agents in
sale and purchase of securities
Write-back of tax received 59,006,545.25 136,223,181.63
Other cash received concerning
238,727,574.04 226,860,833.30
operating activities
Subtotal of cash inflow arising from
11,339,817,878.63 21,010,686,546.04
operating activities
Cash paid for purchasing
commodities and receiving labor 9,575,117,855.40 13,974,802,792.98
service
Net increase of customer loans
and advances
Net increase of deposits in
central bank and interbank
Cash paid for original insurance
contract compensation
93
Shandong Airlines Co., Ltd. Annual Report 2020
Net increase of capital lent
Cash paid for interest,
commission charge and commission
Cash paid for bonus of
guarantee slip
Cash paid to/for staff and
2,965,393,711.37 3,214,582,261.75
workers
Taxes paid 201,842,884.10 830,166,097.48
Other cash paid concerning
297,192,188.56 361,323,141.45
operating activities
Subtotal of cash outflow arising from
13,039,546,639.43 18,380,874,293.66
operating activities
Net cash flows arising from operating
-1,699,728,760.80 2,629,812,252.38
activities
II. Cash flows arising from investing
activities:
Cash received from recovering
investment
Cash received from investment
4,019,690.59 6,284,357.21
income
Net cash received from disposal
of fixed, intangible and other 5,464,475.89 6,084,030.35
long-term assets
Net cash received from disposal
of subsidiaries and other units
Other cash received concerning
9,316.91
investing activities
Subtotal of cash inflow from
9,484,166.48 12,377,704.47
investing activities
Cash paid for purchasing fixed,
660,563,018.81 1,909,607,697.75
intangible and other long-term assets
Cash paid for investment
Net increase of mortgaged loans
Net cash received from
110,832.50
subsidiaries and other units obtained
Other cash paid concerning
829,194.39
investing activities
Subtotal of cash outflow from
661,392,213.20 1,909,718,530.25
investing activities
Net cash flows arising from investing
-651,908,046.72 -1,897,340,825.78
activities
III. Cash flows arising from financing
activities
Cash received from absorbing
investment
Including: Cash received from
absorbing minority shareholders’
investment by subsidiaries
Cash received from loans 9,950,000,000.00 890,000,000.00
Cash received from bond
2,000,000,000.00
issuance
Other cash received concerning
495,464,436.83
financing activities
Subtotal of cash inflow from 11,950,000,000.00 1,385,464,436.83
94
Shandong Airlines Co., Ltd. Annual Report 2020
financing activities
Cash paid for settling debts 4,376,851,929.66 1,824,791,031.88
Cash paid for dividend and
152,212,442.26 173,707,282.61
profit distributing or interest paying
Including: Dividend and profit
of minority shareholder paid by
subsidiaries
Other cash paid concerning
360,556,413.20 367,299,836.44
financing activities
Subtotal of cash outflow from
4,889,620,785.12 2,365,798,150.93
financing activities
Net cash flows arising from financing
7,060,379,214.88 -980,333,714.10
activities
IV. Influence on cash and cash
equivalents due to fluctuation in -1,129,021.99 5,863,249.10
exchange rate
V. Net increase of cash and cash
4,707,613,385.37 -241,999,038.40
equivalents
Add: Balance of cash and cash
598,861,065.69 840,860,104.09
equivalents at the period -begin
VI. Balance of cash and cash
5,306,474,451.06 598,861,065.69
equivalents at the period -end
6. Cash Flow Statement of Parent Company
In RMB
Item 2020 2019
I. Cash flows arising from operating
activities:
Cash received from selling
commodities and providing labor 11,009,882,324.49 20,604,455,339.52
services
Write-back of tax received 59,006,545.25 136,223,181.63
Other cash received concerning
248,160,175.85 220,791,697.95
operating activities
Subtotal of cash inflow arising from
11,317,049,045.59 20,961,470,219.10
operating activities
Cash paid for purchasing
commodities and receiving labor 9,605,312,325.28 14,033,321,787.89
service
Cash paid to/for staff and
2,920,147,365.43 3,160,139,543.10
workers
Taxes paid 194,509,236.96 814,335,271.26
Other cash paid concerning
269,257,710.91 324,257,252.74
operating activities
Subtotal of cash outflow arising from
12,989,226,638.58 18,332,053,854.99
operating activities
Net cash flows arising from operating
-1,672,177,592.99 2,629,416,364.11
activities
II. Cash flows arising from investing
activities:
Cash received from recovering
investment
Cash received from investment
4,019,690.59 6,284,357.21
income
95
Shandong Airlines Co., Ltd. Annual Report 2020
Net cash received from disposal
of fixed, intangible and other 5,453,274.22 6,084,030.35
long-term assets
Net cash received from disposal
of subsidiaries and other units
Other cash received concerning
18,633.82
investing activities
Subtotal of cash inflow from
9,472,964.81 12,387,021.38
investing activities
Cash paid for purchasing fixed,
656,948,896.00 1,908,271,068.75
intangible and other long-term assets
Cash paid for investment
Net cash received from
110,832.50
subsidiaries and other units obtained
Other cash paid concerning
829,194.39
investing activities
Subtotal of cash outflow from
657,778,090.39 1,908,381,901.25
investing activities
Net cash flows arising from investing
-648,305,125.58 -1,895,994,879.87
activities
III. Cash flows arising from financing
activities
Cash received from absorbing
investment
Cash received from loans 9,950,000,000.00 890,000,000.00
Other cash received concerning
2,000,000,000.00 495,464,436.83
financing activities
Subtotal of cash inflow from
11,950,000,000.00 1,385,464,436.83
financing activities
Cash paid for settling debts 4,376,851,929.66 1,824,791,031.88
Cash paid for dividend and
152,212,442.26 173,707,282.61
profit distributing or interest paying
Other cash paid concerning
360,556,413.20 367,299,836.44
financing activities
Subtotal of cash outflow from
4,889,620,785.12 2,365,798,150.93
financing activities
Net cash flows arising from financing
7,060,379,214.88 -980,333,714.10
activities
IV. Influence on cash and cash
equivalents due to fluctuation in -1,129,021.99 5,863,249.10
exchange rate
V. Net increase of cash and cash
4,738,767,474.32 -241,048,980.76
equivalents
Add: Balance of cash and cash
563,534,831.81 804,583,812.57
equivalents at the period -begin
VI. Balance of cash and cash
5,302,302,306.13 563,534,831.81
equivalents at the period -end
7. Statement of Changes in Owners’ Equity (Consolidated)
This Period
In RMB
2020
Item
Owners’ equity attributable to the parent Company Min Tota
96
Shandong Airlines Co., Ltd. Annual Report 2020
Other ority l
equity inter own
Othe
instrument Less ests ers’
r Prov
Per : Reas equit
Sha Capi com Surp ision Reta
pet Inve onab y
re Pre tal preh lus of ined Othe Subt
ual ntor le
cap fer reser ensi reser gene profi r otal
cap Ot y reser
ital red ve ve ve ral t
ital her shar ve
sto inco risk
sec es
ck me
urit
ies
400
I. Balance at 75,4 570, 538, 3,58 5,17 5,17
,00
10,3 487, 773, 8,84 3,51 3,51
the end of the 0,0
63.7 739. 444. 7,45 9,00 9,00
last year 00.
0 92 97 6.98 5.57 5.57
00
Add: 26,6 26,6 26,6
Changes of 92,7 92,7 92,7
accounting 94.4 94.4 94.4
7 7 7
policy
Error
correction of
the last period
Enterprise
combine
under the
same control
Other
400
II. Balance at 75,4 570, 538, 3,61 5,20 5,20
,00
10,3 487, 773, 5,54 0,21 0,21
the beginning 0,0
63.7 739. 444. 0,25 1,80 1,80
of this year 00.
0 92 97 1.45 0.04 0.04
00
III. Increase/
Decrease in -2,3 -2,6 -2,6
-247
82,0 29,9 29,9
this year ,935,
15,4 50,8 50,8
(Decrease is 420.
55.8 75.8 75.8
02
listed with 1 3 3
“-”)
-2,3 -2,6 -2,6
(i) Total -247
82,0 29,9 29,9
,935,
comprehensiv 15,4 50,8 50,8
420.
e income 55.8 75.8 75.8
02
1 3 3
(ii) Owners’
devoted and
decreased
capital
1.Common
shares
invested by
shareholders
2. Capital
97
Shandong Airlines Co., Ltd. Annual Report 2020
invested by
holders of
other equity
instruments
3. Amount
reckoned into
owners equity
with
share-based
payment
4. Other
(III) Profit
distribution
1. Withdrawal
of surplus
reserves
2. Withdrawal
of general
risk
provisions
3.
Distribution
for owners (or
shareholders)
4. Other
(IV) Carrying
forward
internal
owners’
equity
1. Capital
reserves
conversed to
capital (share
capital)
2. Surplus
reserves
conversed to
capital (share
capital)
3. Remedying
loss with
surplus
reserve
4．Carry-over
retained
earnings from
the defined
benefit plans
5．Carry-over
retained
earnings from
other
98
Shandong Airlines Co., Ltd. Annual Report 2020
comprehensiv
e income
6. Other
(V)
Reasonable
reserve
1. Withdrawal
in the report
period
2. Usage in
the report
period
(VI)Others
400
IV. Balance at 75,4 322, 538, 1,23 2,57 2,57
,00
10,3 552, 773, 3,52 0,26 0,26
the end of the 0,0
63.7 319. 444. 4,79 0,92 0,92
report period 00.
0 90 97 5.64 4.21 4.21
00
Last Period
In RMB
2019
Owners’ equity attributable to the parent Company
Other
equity
instrument
Pe Othe
Less
rpe r Prov Total
: Reas Mino
Sha tua Capi com Surp ision Reta owne
Item Pr Inve onab rity
re l tal preh lus of ined Othe Subt rs’
efe ntor le intere
cap ca reser ensi reser gene profi r otal equit
rre Oth y reser sts
ital pit ve ve ve ral t y
d er shar ve
al inco risk
sto es
sec me
ck
uri
tie
s
400
I. Balance at 75,4 149, 503, 3,34 4,47 4,471
,00
10,3 300, 999, 2,61 1,32 ,325,
the end of the 0,0
63.7 488. 977. 5,14 5,97 978.2
last year 00.
0 94 58 8.06 8.28 8
00
Add: 359, 359,
359,4
Changes of 486, 486,
86,32
accounting 321. 321.
1.81
81 81
policy
Error
correction of
the last
period
Enterprise
combine
under the
same
99
Shandong Airlines Co., Ltd. Annual Report 2020
control
Other
400
II. Balance at 75,4 508, 503, 3,34 4,83 4,830
,00
10,3 786, 999, 2,61 0,81 ,812,
the beginning 0,0
63.7 810. 977. 5,14 2,30 300.0
of this year 00.
0 75 58 8.06 0.09 9
00
III. Increase/
Decrease in 61,7 34,7 246, 342,
342,7
this year 00,9 73,4 232, 706,
06,70
(Decrease is 29.1 67.3 308. 705.
5.48
7 9 92 48
listed with
“-”)
(i) Total 61,7 361, 422,
422,7
00,9 005, 706,
comprehensi 06,70
29.1 776. 705.
ve income 5.48
7 31 48
(ii) Owners’
devoted and
decreased
capital
1.Common
shares
invested by
shareholders
2. Capital
invested by
holders of
other equity
instruments
3. Amount
reckoned into
owners
equity with
share-based
payment
4. Other
34,7 -114, -80,
-80,0
(III) Profit 73,4 773, 000,
00,00
distribution 67.3 467. 000.
0.00
9 39 00
1. 34,7 -34,
Withdrawal 73,4 773,
of surplus 67.3 467.
9 39
reserves
2.
Withdrawal -80, -80,
-80,0
000, 000,
of general 00,00
000. 000.
risk 0.00
00 00
provisions
3.
Distribution
for owners
(or
100
Shandong Airlines Co., Ltd. Annual Report 2020
shareholders)
4. Other
(IV) Carrying
forward
internal
owners’
equity
1. Capital
reserves
conversed to
capital (share
capital)
2. Surplus
reserves
conversed to
capital (share
capital)
3.
Remedying
loss with
surplus
reserve
4．Carry-over
retained
earnings
from the
defined
benefit plans
5．Carry-over
retained
earnings
from other
comprehensi
ve income
6. Other
(V)
Reasonable
reserve
1.
Withdrawal
in the report
period
2. Usage in
the report
period
(VI)Others
IV. Balance 400
75,4 570, 538, 3,58 5,17 5,173
,00
at the end of 10,3 487, 773, 8,84 3,51 ,519,
0,0
the report 63.7 739. 444. 7,45 9,00 005.5
00.
0 92 97 6.98 5.57 7
period 00
8. Statement of Changes in Owners’ Equity (Parent Company)
This Period
101
Shandong Airlines Co., Ltd. Annual Report 2020
In RMB
2020
Other equity
instrument Other
Capita
Perp Less: compr Reaso Surplu Retai
Item Share l Total
etual Invent ehensi nable s ned
capit Prefe public Other owners’
capit Othe ory ve reserv reserv profi
al rred reserv equity
al r shares incom e e t
stock e
secur e
ities
I. Balance at 3,51
400,0 86,911 570,48 538,11
7,50 5,113,02
the end of the 00,00 ,168.7 7,739. 2,740.
9,15 0,799.85
last year 0.00 1 92 44
0.78
Add: 26,6
Changes of 92,7 26,692,7
accounting 94.4 94.47
7
policy
Error
correction of
the last period
Other
II. Balance at 3,54
400,0 86,911 570,48 538,11
4,20 5,139,71
the beginning 00,00 ,168.7 7,739. 2,740.
1,94 3,594.32
of this year 0.00 1 92 44
5.25
III. Increase/
Decrease in -2,38
-247,9 -2,632,8
4,87
this year 35,420 06,613.2
1,19
(Decrease is .02 4
3.22
listed with “-”)
(i) Total -2,38
-247,9 -2,632,8
4,87
comprehensive 35,420 06,613.2
1,19
income .02 4
3.22
(ii) Owners’
devoted and
decreased
capital
1.Common
shares
invested by
shareholders
2. Capital
invested by
holders of
other equity
instruments
3. Amount
reckoned into
owners equity
with
share-based
102
Shandong Airlines Co., Ltd. Annual Report 2020
payment
4. Other
(III) Profit
distribution
1. Withdrawal
of surplus
reserves
2. Distribution
for owners (or
shareholders)
3. Other
(IV) Carrying
forward
internal
owners’ equity
1. Capital
reserves
conversed to
capital (share
capital)
2. Surplus
reserves
conversed to
capital (share
capital)
3. Remedying
loss with
surplus reserve
4．Carry-over
retained
earnings from
the defined
benefit plans
5．Carry-over
retained
earnings from
other
comprehensive
income
6. Other
(V)
Reasonable
reserve
1. Withdrawal
in the report
period
2. Usage in the
report period
(VI)Others
IV. Balance at 1,15
400,0 86,911 322,55 538,11
9,33 2,506,90
the end of the 00,00 ,168.7 2,319. 2,740.
0,75 6,981.08
report period 0.00 1 90 44
2.03
Last period
103
Shandong Airlines Co., Ltd. Annual Report 2020
In RMB
2019
Other equity
instrument
Other
Perp Capit
Shar Less: compr Surpl
Pref etual al Reason Total
Item e Invent ehensi us Retaine
erre capit public able Other owners’
capit Othe ory ve reserv d profit
d al reserv reserve equity
al r shares incom e
stoc secu e
e
k ritie
s
I. Balance at 400,
86,91 149,3 503,3 3,284,5
000, 4,424,09
the end of the 1,168. 00,48 39,27 47,944.
000. 8,874.95
last year 71 8.94 3.05 25
00
Add:
359,4
Changes of 359,486,
86,32
accounting 321.81
1.81
policy
Error
correction of
the last
period
Other
II. Balance at 400,
86,91 508,7 503,3 3,284,5
000, 4,783,58
the beginning 1,168. 86,81 39,27 47,944.
000. 5,196.76
of this year 71 0.75 3.05 25
00
III. Increase/
Decrease in
61,70 34,77 232,96
this year 329,435,
0,929. 3,467 1,206.5
(Decrease is 603.09
17 .39 3
listed with
“-”)
(i) Total 61,70 347,73
409,435,
comprehensiv 0,929. 4,673.9
603.09
e income 17 2
(ii) Owners’
devoted and
decreased
capital
1.Common
shares
invested by
shareholders
2. Capital
invested by
holders of
other equity
instruments
3. Amount
reckoned into
owners equity
104
Shandong Airlines Co., Ltd. Annual Report 2020
with
share-based
payment
4. Other
34,77 -114,77
(III) Profit -80,000,0
3,467 3,467.3
distribution 00.00
.39 9
1.
34,77
Withdrawal -34,773
3,467
of surplus ,467.39
.39
reserves
2.
Distribution
-80,000 -80,000,0
for owners ,000.00 00.00
(or
shareholders)
3. Other
(IV) Carrying
forward
internal
owners’
equity
1. Capital
reserves
conversed to
capital (share
capital)
2. Surplus
reserves
conversed to
capital (share
capital)
3. Remedying
loss with
surplus
reserve
4．Carry-over
retained
earnings from
the defined
benefit plans
5．Carry-over
retained
earnings from
other
comprehensiv
e income
6. Other
(V)
Reasonable
reserve
1.
Withdrawal
in the report
105
Shandong Airlines Co., Ltd. Annual Report 2020
period
2. Usage in
the report
period
(VI)Others
IV. Balance at 400,
86,91 570,4 538,1 3,517,5
000, 5,113,020
the end of the 1,168. 87,73 12,74 09,150.
000. ,799.85
report period 71 9.92 0.44 78
00
106
Shandong Airlines Co., Ltd. Annual Report 2020
Shandong Airlines Co., Ltd.
Notes to the Financial Statements
for the Year Ended 31 December 2020
(All amounts are expressed in CNY unless otherwise stated)
Note 1 BASIC INFORMATION ABOUT THE COMPANY
1.1 Corporation Information
Shandong Airlines Co., Ltd. (hereafter, the Company) is a foreign-invested limited liability
company incorporated in the People’s Republic of China. The Company was incorporated
through the restructuring project jointly initiated by Shandong Airlines Group Co., Ltd.
(hereafter, SDA Group), Inspur Co., Ltd. (previously known as Inspur Electronic
Information Industry Group Company (浪潮电子信息产业集团公司), Shandong Hualu
Group Co., Ltd, Shandong Group Corp. of Fisheries Enterprises and Luyin Investment
Group (鲁银投资集团股份有限公司) following the approval (LuTiGaiQiZi(1999)No.88
(鲁体改企字(1999)第 88 号)) granted by the Economic Reform Commission of Shandong
Province (山东省经济体制改革委员会) on July 29, 1999.
Shandong Airlines Group Co., Ltd. acquired 259,204,000 state-owned corporate shares (国
有法人股), with CNY 1.00 at par, of the Company by transferring its air transportation
operation and the related assets and liabilities to the Company on November 25, 1999.
Inspur Co., Ltd., Shandong Hualu Group Co., Ltd. and Shandong Group Corp. of Fisheries
Enterprises each acquired 199,000 state-owned corporate shares, with CNY 1.00 at par, by
cash investment of CNY 200,000.00 each on November 26, 1999. Luyin Investment Group
acquired 199,000 domestic corporate shares (国内法人股), with CNY 1.00 at par, by cash
investment of CNY 200,000.00 on November 26, 1999.
The Company issued 140,000,000 domestically listed shares denominated in foreign
currency (境内上市外资股) (hereafter, B share(s)), with par value at CNY 1.00 each and
issue price at HKD 1.58 each, on August 28 2000 upon the approval
(ZhengJianFaXingZi[2000]No.116 ( 证 监 发 行 字[2000]116 号 )) granted by the China
Securities Regulatory Commission on August 22 2000; and the Company was listed on the
Shenzhen Stock Exchange on September 12, 2000. Immediately after the issuance of t he B
shares, the capital of the Company increased to CNY 400,000,000.00.
The Agreement of Share Transfer (《股份转让协议》) signed by SDA Group and China
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National Aviation Holding Company (hereafter, China Aviation Group) on February 28,
2004 authorized the transfer of 91,200,000 shares of the Company, equal to 22.8%
shareholding, from SDA Group to China Aviation Group. Immediately after the share
transfer, SDA Group’s shareholding in the Company was 42.00%. In November 2004, the
Board of Directors of the Company, in accordance with the approval
(GuoZiChanQuan[2004]No.956 (国资产权[2004]956 号：《关于中国航空集团公司将受让
山东航 空股份 有限 公司国 有股 的合 同实施 转让 有关问 题的 批复》)) issued by the
State-owned Assets Supervision and Administration Commission of the State Council,
authorized China Aviation Group to transfer the state-owned corporate shares received from
SDA Group to Air China Co., Ltd. (hereafter, Air China). As so provided in
GuoZiChanQuan[2004]No.956, the rights and obligation attributable to China Aviation
Group as specified in the Agreement of Share Transfer shall be afforded by Air China. The
change of share ownership was registered at the China Securities Depository and Clearing
Corporation Limited Shenzhen Office by SDA Group and Air China on December 3, 2004;
And, 91,200,000 shares of the Company then became held by Air China.
Legal representative of the Company: SUN, Xiujiang
Place of registration: Shandong Jinan Yaoqiang International Airport
Address of headquarter: Shandong Airlines Centre, 5746 – East 2nd Ring Road, Jinan,
Shandong
The main operating activities of the Company include: undertake international and domestic
passenger and cargo transportation, hotel and beverage related operation (limited to
operation through branch); provision of aircraft maintenance, training of civil aviation pilots
and air crew, insurance brokerage; inter-airline agenting, and principal operation related
ground services; sales of airborne material and equipment, grocery, food, health food, art
work, souvenir, etc.; retailing of tobacco products (limited to Qingdao Red-Crowned Crane
Hotel); lease of airborne material and equipment; venue rental, private house rental,
business services, hotel accommodation agents and ticket agents; conference services;
transportation agency; air cargo storage; and aviation pilot provision (for other domestic
airlines). (The operating activities listed herein does not involve operation related to
commodity that are subject to State Administered Trading (国营贸易管理),but involve
operation related to commodity that are subject to quotas , license requirements, which are
restricted to obtain permission before the operation)(the project that subjects to the approval
in accordance with the law, can carry out business activities only after the approval of the
relevant departments to carry out business activities).
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The Company and the subsidiaries mainly operate in the industry of air transportation.
Financial Statement Approval Reporting Date: The financial statements were approved for
publication by the board of directors of the Company on March 25, 2021.
1.2 Scope and Changes of Consolidation
The scope of consolidation includes 4 subsidiaries in total. There is no change in the scope
of consolidation compared to last financial year. For details of the subsidiaries, please refer
to Note 7 INTEREST IN OTHER ENTITIES.
Note 2 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS
2.1 Basis for Preparation
Based on going concern, according to actually occurred transactions and events, the
Company prepares its financial statements in accordance with the Accounting Standards for
Business Enterprises – Basic standards and concrete accounting standards, Accounting
Standards for Business Enterprises – Application Guidelines, Accounting Standards for
Business Enterprises – Interpretations and other relevant provisions (collectively known as
“Accounting Standards for Business Enterprises, issued by Ministry of Finance of PRC”).
Besides, the Company has disclosed related financial information in conformity with the
Compilation Rules for Information Disclosure by Companies Offering Securities to the
Public No.15 – General Provisions on Financial Reports (2014 Revision) issued by the
China Securities Regulatory Commission (CSRC).
2.2 Going Concern
The Company has assessed its ability to continually operate for the next twelve months from
the end of the reporting period, and no any matters that may result in doubt on its ability as a
going concern were noted. Therefore, it is reasonable for the Company to prepare fi nancial
statements on the going concern basis.
Note 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES
The following significant accounting policies and accounting estimates of the Company are
formulated in accordance with the Accounting Standards for Business Enterprises.
Businesses not mentioned are complied with relevant accounting policies of the Accounting
Standards for Business Enterprises.
3.1 Statement of Compliance with The Accounting Standards for Business Enterprises
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The Company prepares its financial statements in accordance with the requirements of the
Accounting Standards for Business Enterprises, truly and completely reflecting the
Company’s financial position as at 31 December 2020, and its operating results, changes in
shareholders' equity, cash flows and other related information for the year then ended.
3.2 Accounting Period
The accounting period of the Company is classified as interim period and annual period.
Interim period refers to the reporting period shorter than a complete annual period. The
accounting period of the Company is the calendar year from January 1 to December 31.
3.3 Operating Cycle
Normal business cycle is realized by the Company in cash or cash equivalents from the
purchase of assets for processing until. The Company has a 12 -month operating cycle, and
its assets and liabilities as liquidity criteria for the classification.
3.4 Functional Currency
Yuan (CNY) is the currency of the primary economic environment in which the Company
and its domestic subsidiaries operate. Therefore, the Company and its domestic subsidiaries
choose CNY as their functional currency. The Company adopts CNY to prepare its
functional statements.
3.5 Accounting Treatment of Business Combinations Under and Not Under Common
Control
3.5.1 Business Combinations Under Common Control
The assets and liabilities that the Company obtains in a business combination under
common control shall be measured at their carrying amount of the acquired entity at the
combination date. If the accounting policy adopted by the acquired entity is different from
that adopted by the acquiring entity, the acquiring entity shall, according to accounting
policy it adopts, adjust the relevant items in the financial statements of the acquired party
based on the principal of materiality. As for the difference between the carrying amount of
the net assets obtained by the acquiring entity and the carrying amount of the consideration
paid by it, the capital reserve (capital premium or share premium) shall be adjusted. If the
capital reserve (capital premium or share premium) is not sufficient to absorb the difference,
any excess shall be adjusted against retained earnings.
For the accounting treatment of business combination under common control by step
acquisitions, please refer to Note 3.6 (6).
3.5.2 Business combinations not under common control
The assets and liabilities that the Company obtains in a business combination not under
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common control shall be measured at their fair value at the acquisition date. If the
accounting policy adopted by the acquired entity is different from that adopted by the
acquiring entity, the acquiring entity shall, according to accounting policy it adopts, adjust
the relevant items in the financial statements of the acquired entity based on the principal of
materiality. The acquiring entity shall recognise the positive balance between the
combination costs and the fair value of the identifiable net assets it obtains from the
acquired entity as goodwill. The acquiring entity shall, pursuant to the following provisions,
treat the negative balance between the combination costs and the fair value of the
identifiable net assets it obtains from the acquired entity:
(i) It shall review the measurement of the fair values of the identifiable assets, liabilities and
contingent liabilities it obtains from the acquired entity as well as the combination costs;
(ii) If, after the review, the combination costs are still less than the fair value of the
identifiable net assets it obtains from the acquired entity, the balance shall be recognised in
profit or loss of the reporting period. For the accounting treatment of business combination
under common control by step acquisitions, please refer to Note 3.6 (6).
3.5.3 Treatment of Business Combination Related Costs
The intermediary costs such as audit, legal services and valuation consulting and other
related management costs that are directly attributable to the business combination shall be
charged in profit or loss in the period in which they are incurred. The costs to issue equity or
debt securities for the consideration of business combination shall be recorded as a part of
the value of the respect equity or debt securities upon initial recognition.
3.6 Method of Preparing the Consolidated Financial Statements
3.6.1 Scope of Consolidation
The scope of consolidated financial statements shall be determined on the basis of control. It
not only includes subsidiaries determined based on voting power (or similar) or other
arrangement, but also structured entities under one or several contract arrangements.
Control exists when the Company has all the following: power over the investee; exposure,
or rights to variable returns from the Company’s involvement with the investee; and the
ability to use its power over the investee to affect the amount of the investor’s returns.
Subsidiaries are the entities that controlled by the Company (including enterprise, a divisible
part of the investee, and structured entity controlled by the enterprise). A structured entity
(sometimes called a Special Purpose Entity) is an entity that has been designed so that
voting or similar rights are not the dominant factor in deciding who controls the entity.
3.6.2 Special provisions on the parent company being an investment subject
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If the parent company is an investment entity, it should measure its investments in particular
subsidiaries as financial assets at fair value through profit or loss instead of consolidating
those subsidiaries in its consolidated and separate financial statements. However, as an
exception to this requirement, if a subsidiary provides investment-related services or
activities to the investment entity, it should be consolidated.
The parent company is defined as investment entity when meets following conditions:
①Obtains funds from one or more investors for the purpose of providing those investors
with investment management services;
②Commits to its investors that its business purpose is to invest funds solely for returns from
capital appreciation, investment income or both; and
③Measures and evaluates the performance of substantially all of its investments on a fair
value basis.
If the parent company becomes an investment entity, it shall cease to consolidate its
subsidiaries at the date of the change in status, except for any subsidiary which provides
investment-related services or activities to the investment entity shall be continued to be
consolidated. The deconsolidation of subsidiaries is accounted for as though the investment
entity partially disposed subsidiaries without loss of control.
When the parent company previously classified as an investment entity ceases to be an
investment entity, subsidiary that was previously measured at fair value through profit or
loss shall be included in the scope of consolidated financial statements at the date of the
change in status. The fair value of the subsidiary at the date of change represents the
transferred deemed consideration in accordance with the accounting for business
combination not under common control.
3.6.3 Method of Preparing the Consolidated Financial Statements
The consolidated financial statements shall be prepared by the Company based on the
financial statements of the Company and its subsidiaries, and using other related
information.
When preparing consolidated financial statements, the Company shall consider the entire
group as an accounting entity, adopt uniform accounting policies and apply the requirements
of Accounting Standard for Business Enterprises related to recognition, measurement and
presentation. The consolidated financial statements shall reflect the overall financial
position, operating results and cash flows of the group.
①Like items of assets, liabilities, equity, income, expenses and cash flows of the parent are
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combined with those of the subsidiaries.
②The carrying amount of the parent’s investment in each subsidiary is eliminated (off-set)
against the parent’s portion of equity of each subsidiary.
③ Eliminate the impact of intragroup transactions between the Company and the
subsidiaries or between subsidiaries, and when intragroup transactions indicate an
impairment of related assets, the losses shall be recognised in full.
④Make adjustments to special transactions from the perspective of the group.
3.6.4Method of preparation of the consolidated financial statements when subsidiaries
are acquired or disposed in the reporting period
①Acquisition of subsidiaries or business
A. Subsidiaries or business acquired through business combination under common control
(a) When preparing consolidated statements of financial position, the opening balance of the
consolidated balance sheet shall be adjusted. Related items of comparative financial
statements shall be adjusted as well, deeming that the combined entity has always existed
ever since the ultimate controlling party began to control.
(b) Incomes, expenses and profits of the subsidiary incurred from the beginning of the
reporting period to the end of the reporting period shall be included into the consolidated
statement of profit or loss. Related items of comparative financial statements shall be
adjusted as well, deeming that the combined entity has always existed ever since the
ultimate controlling party began to control.
(c) Cash flows from the beginning of the reporting period to the end of the reporting period
shall be included into the consolidated statement of cash flows. Related items of
comparative financial statements shall be adjusted as well, deeming that the combined entity
has always existed ever since the ultimate controlling party began to control.
B. Subsidiaries or business acquired through business combination not under common
control
(a) When preparing the consolidated statements of financial position, the opening balance of
the consolidated statements of financial position shall not be adjusted.
(b) Incomes, expenses and profits of the subsidiary incurred from the acquisition date to the
end of the reporting period shall be included into the consolidated statement of profit or
loss.
(c) Cash flows from the acquisition date to the end of the reporting period shall be included
into the consolidated statement of cash flows.
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②Disposal of subsidiaries or business
A. When preparing the consolidated statements of financial position, the opening balance of
the consolidated statements of financial position shall not be adjusted.
B. Incomes, expenses and profits incurred from the beginning of the subsidiary to the
disposal date shall be included into the consolidated statement of profit or loss.
C. Cash flows from the beginning of the subsidiary to the disposal date shall be included
into the consolidated statement of cash flows.
3.6.5 Special consideration in consolidation elimination
①Long-term equity investment held by the subsidiaries to the Company shall be recognised
as treasury stock of the Company, which is offset with the owner’s equity, represented as
“treasury stock” under “owner’s equity” in the consolidated statement of financial position.
Long-term equity investment held by subsidiaries between each other is accounted for
taking long-term equity investment held by the Company to its subsidiaries as reference.
That is, the long-term equity investment is eliminated (off- set) against the portion of the
corresponding subsidiary’s equity.
②Due to not belonging to paid-in capital (or share capital) and capital reserve, and being
different from retained earnings and undistributed profit, “Specific reserves” and “General
risk provision” shall be recovered based on the proportion attributable to owners of the
parent company after long-term equity investment to the subsidiaries is eliminated with the
subsidiaries’ equity.
③If temporary timing difference between the book value of the assets and liabilities in the
consolidated statement of financial position and their tax basis is generated as a result of
elimination of unrealized inter-company transaction profit or loss, deferred tax assets of
deferred tax liabilities shall be recognised, and income tax expense in the consolidated
statement of profit or loss shall be adjusted simultaneously, excluding deferred taxes related
to transactions or events directly recognised in owner’s equity or business combination.
④Unrealised inter-company transactions profit or loss generated from the Company selling
assets to its subsidiaries shall be eliminated against “net profit attributed to the owners of the
parent company” in full. Unrealized inter-company transactions profit or loss generated
from the subsidiaries selling assets to the Company shall be eliminated between “net profit
attributed to the owners of the parent company” and “non-controlling interests” pursuant to
the proportion of the Company in the related subsidiaries. Unrealized inter-company
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transactions profit or loss generated from the assets sales between the subsidiaries shall be
eliminated between “net profit attributed to the owners of the parent company” and
“non-controlling interests” pursuant to the proportion of the Company in the selling
subsidiaries.
⑤If loss attributed to the minority shareholders of a subsidiary in current period is more
than the proportion of non-controlling interest in this subsidiary at the beginning of the
period, non-controlling interest is still to be written down.
3.6.6 Accounting for Special Transactions
①Purchasing of non-controlling interests
Where, the Company purchases non-controlling interests of its subsidiary, in the separate
financial statements of the Company, the cost of the long-term equity investment obtained in
purchasing non-controlling interests is measured at the fair value of the consideration paid.
In the consolidated financial statements, difference between the cost of the long-term equity
investment newly obtained in purchasing non-controlling interests and share of the
subsidiary’s net assets from the acquisition date or combination date continuingly calculated
pursuant to the newly acquired shareholding proportion shall be adjusted into capital reserve
(capital premium or share premium). If capital reserve is not enough to be offset, surplus
reserve and undistributed profit shall be offset in turn.
②Gaining control over the subsidiary in stages through multiple transactions
A. Business combination under common control in stages through multiple transactions
On the combination date, in the separate financial statement, initial cost of the long-ter m
equity investment is determined according to the share of carrying amount of the acquiree’s
net assets in the ultimate controlling entity’s consolidated financial statements after
combination. The difference between the initial cost of the long-term equity investment and
the carrying amount of the long -term investment held prior of control plus book value of
additional consideration paid at acquisition date is adjusted into capital reserve (capital
premium or share premium). If the capital reserve is not enough to absorb the difference,
any excess shall be adjusted against surplus reserve and undistributed profit in turn.
In the consolidated financial statements, the assets and liabilities acquired during the
combination should be recognized at their carrying amount in the ultimate controlling
entity’s consolidated financial statements on the combination date unless any adjustment is
resulted from the difference in accounting policies. The difference between the carrying
amount of the investment held prior of control plus book value of additional consideration
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paid on the acquisition date and the net assets acquired through the combination is adjusted
into capital reserve (capital premium or share premium). If the capital reserve is not enough
to absorb the difference, any excess shall be adjusted against retained earnings.
If the acquiring entity holds equity investment in the acquired entity prior to the
combination date and the equity investment is accounted for under the equity method,
related profit or loss, other comprehensive income and other changes in equity which have
been recognised during the period from the later of the date of the Company obtaining
original equity interest and the date of both the acquirer and the acquiree under common
control of the same ultimate controlling party to the combination date should be offset
against the opening balance of retained earnings at the comparative financial statements
period respectively.
B. Realize the combination of enterprises under different control step by step through
multiple transactions
On the consolidation date, in the separate financial statements, the initial cost of long-ter m
equity investment is determined according to the carrying amount of the original long-ter m
investment plus the cost of new investment.
In the consolidated financial statements, the equity interest of the acquired entity held prior
to the acquisition date shall be re-measured at its fair value on the acquisition date.
Difference between the fair value of the equity interest and its book value is recognised as
investment income. The other comprehensive income related to the equity interest held prior
to the acquisition date calculated through equity method, should be transferred to current
investment income of the acquisition period, excluding other comprehensive income
resulted from the remeasurement of the net assets or net liabilities under defined benefit
plan. The Company shall disclose acquisition-date fair value of the equity interest held prior
to the acquisition date, and the related gains or losses due to the remeasurement based on
fair value.
③Disposal of investment in subsidiaries without a loss of control
For partial disposal of the long-term equity investment in the subsidiaries without a loss of
control, when the Company prepares consolidated financial statements, difference between
consideration received from the disposal and the corresponding share of subsidiary’s net
assets cumulatively calculated from the acquisition date or combination date shall be
adjusted into capital reserve (capital premium or share premium). If the capital reserve is not
enough to absorb the difference, any excess shall be offset against retained earnings.
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④ Disposal of investment in subsidiaries with a loss of control
A. Disposal through one transaction
If the Company loses control in an investee through partial disposal of the equity investment,
when the consolidated financial statements are prepared, the retained equity interest should
be re-measured at fair value at the date of loss of control. The difference between i) the fair
value of consideration received from the disposal plus non-controlling interest retained; ii)
share of the former subsidiary’s net assets cumulatively calculated from the acquisition date
or combination date according to the original proportion of equity interest, shall be
recognised in current investment income when control is lost.
Moreover, other comprehensive income and other changes in equity related to the equity
investment in the former subsidiary shall be transferred into current investment income
when control is lost, excluding other comprehensive income resulted from the
remeasurement of the movement of net assets or net liabilities under defined benefit plan.
B. Disposal in stages
In the consolidated financial statements, whether the transactions should be accounted for as
“a single transaction” needs to be decided firstly.
If the disposal in stages should not be classified as “a single transaction”, in the separate
financial statements, for transactions prior of the date of loss of control, carrying amount of
each disposal of long-term equity investment need to be recognized, and the difference
between consideration received and the carrying amount of long-term equity investment
corresponding to the equity interest disposed should be recognized in current investment
income; in the consolidated financial statements, the disposal transaction should be
accounted for according to related policy in “Disposal of long-term equity investment in
subsidiaries without a loss of control”.
If the disposal in stages should be classified as “a single transaction”, these transactions
should be accounted for as a single transaction of disposal of subsidiary resulting in loss of
control. In the separate financial statements, for each transaction prior of the date of loss of
control, difference between consideration received and the carrying amount of long-ter m
equity investment corresponding to the equity interest disposed should be recognised as
other comprehensive income firstly, and transferred to profit or loss as a whole when control
is lost; in the consolidated financial statements, for each transaction prior of the date of loss
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of control, difference between consideration received and proportion of the subsidiary’s net
assets corresponding to the equity interest disposed should be recognised in profit or loss as
a whole when control is lost.
In considering of the terms and conditions of the transactions as well as their economic
impact, the presence of one or more of the following indicators may lead to account for
multiple transactions as a single transaction:
(a) The transactions are entered into simultaneously or in contemplation of one another.
(b) The transactions form a single transaction designed to achieve an overall commercial
effect.
(c) The occurrence of one transaction depends on the occurrence of at least one other
transaction.
(d) One transaction, when considered on its own merits, does not make economic sense, but
when considered together with the other transaction or transactions would be considered
economically justifiable.
⑤ Diluting equity share of parent company in its subsidiaries due to additional capital
injection by the subsidiaries’ minority shareholders.
Other shareholders (minority shareholders) of the subsidiaries inject additional capital in the
subsidiaries, which resulted in the dilution of equity interest of parent company in these
subsidiaries. In the consolidated financial statements, difference between share of the
corresponding subsidiaries’ net assets calculated based on the parent’s equity interest before
and after the capital injection shall be adjusted into capital reserve (capital premium or share
premium). If the capital reserve is not enough to absorb the difference, any excess shall be
adjusted against retained earnings.
3.7 Classification of Joint Arrangements and Accounting for Joint Operation
A joint arrangement is an arrangement of which two or more parties have joint control. Joint
arrangement of the Company is classified as either a joint operation or a joint venture.
（1）Joint operation
A joint operation is a joint arrangement whereby the parties that have joint control of the
arrangement have rights to the assets, and obligations for the liabilities, relating to the
arrangement.
The Company shall recognise the following items in relation to shared interest in a joint
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operation, and account for them in accordance with relevant accounting standards of the
Accounting Standards for Business Enterprises:
① its assets, including its share of any assets held jointly;
② its liabilities, including its share of any liabilities incurred jointly;
③ its revenue from the sale of its share of the output arising from the joint operation;
④ its share of the revenue from the sale of the output by the joint operation; and
⑤ its expenses, including its share of any expenses incurred jointly.
(2) Joint venture
A joint venture is a joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the arrangement.
The Company accounts for its investment in the joint venture by applying the equity method
of long-term equity investment.
3.8 Cash and Cash Equivalents
Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash
equivalents include short-term (generally within three months of maturity at acquisition),
highly liquid investments that are readily convertible into known amounts of cash and which
are subject to an insignificant risk of changes in value.
3.9 Foreign Currency Transactions and Translation of Foreign Currency Financial
Statements
(2) Determination of the exchange rate for foreign currency transactions
At the time of initial recognition of a foreign currency transaction, the amount in the foreign
currency shall be translated into the amount in the functional currency at the spot exchange
rate of the transaction date, or at an exchange rate which is determined through a systematic
and reasonable method and is approximate to the spot exchange rate of the transaction date
(hereinafter referred to as the approximate exchange rate).
(1) Translation of monetary items denominated in foreign currency on the balance
sheet date
The foreign currency monetary items shall be translated at the spot exchange rate on the
balance sheet date. The balance of exchange arising from the difference between the spot
exchange rate on the balance sheet date and the spot exchange rate at the time of initial
recognition or prior to the balance sheet date shall be recorded into the profits and losses at
the current period. The foreign currency non-monetary items measured at the historical cost
shall still be translated at the spot exchange rate on the transaction date; for the foreign
currency non-monetary items restated to a fair value measurement, shall be translated into
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the at the spot exchange rate at the date when the fair value was determined, the difference
between the restated functional currency amount and the original functional currency
amount shall be recorded into the profits and losses at the current period.
(3) Translation of foreign currency financial statements
Before translating the financial statements of foreign operations, the accounting period and
accounting policy shall be adjusted so as to conform to the Company. The adjusted foreign
operation financial statements denominated in foreign currency (other than functional
currency) shall be translated in accordance with the following method:
①The asset and liability items in the statement of financial position shall be translated at the
spot exchange rates at the date of that statement of financial position.. The owners’ equity
items except undistributed profit shall be translated at the spot exchange rates when they are
incurred.
②The income and expense items in the statement of profit and other comprehensive income
shall be translated at the spot exchange rates or approximate exchange rate at the date of
transaction.
③Foreign currency cash flows and cash flows of foreign subsidiaries shall be translated at
the spot exchange rate or approximate exchange rate when the cash flows are incurred. The
effect of exchange rate changes on cash is presented separately in the statement of cash
flows as an adjustment item.
④The differences arising from the translation of foreign currency financial statements shall
be presented separately as “other comprehensive income” under the owners’ equity items of
the consolidated statement of financial position.
When disposing a foreign operation involving loss of control, the cumulative amount of the
exchange differences relating to that foreign operation recognised under other
comprehensive income in the statement of financial position, shall be reclassifi ed into
current profit or loss according to the proportion disposed.
3.10 Financial Instrume nts
Financial instrument is any contract which gives rise to both a financial asset of one entity
and a financial liability or equity instrument of another entity.
(1) Recognition and derecognition of financial instrume nt
A financial asset or a financial liability should be recognised in the statement of financial
position when, and only when, an entity becomes party to the contractual provisions of the
instrument.
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A financial asset can only be derecognised when meets one of the following conditions:
①The rights to the contractual cash flows from a financial asset expire; and
②The financial asset has been transferred and meets one of the following derecognition
conditions.
Financial liabilities (or part thereof) are derecognised only when the liability is
extinguished—i.e., when the obligation specified in the contract is discharged or cancelled
or expires. An exchange of the Company (borrower) and lender of debt instr uments that
carry significantly different terms or a substantial modification of the terms of an existing
liability are both accounted for as an extinguishment of the original financial liability and
the recognition of a new financial liability.
Purchase or sale of financial assets in a regular-way shall be recognised and derecognised
using trade date accounting. A regular-way purchase or sale of financial assets is a
transaction under a contract whose terms require delivery of the asset within the time fra me
established generally by regulations or convention in the market place concerned. Trade
date is the date at which the entity commits itself to purchase or sell an asset.
(2) Classification and measure ment of financial assets
At initial recognition, the Company classified its financial asset based on both the business
model for managing the financial asset and the contractual cash flow characteristics of the
financial asset: financial asset at amortised cost, financial asset at fair value through profit or
loss (FVTPL) and financial asset at fair value through other comprehensive income
(FVTOCI). Reclassification of financial assets is permitted if, and only if, the objective of
the entity’s business model for managing those financial assets changes. In this
circumstance, all affected financial assets shall be reclassified on the first day of the first
reporting period after the changes in business model; otherwise the financial assets cannot
be reclassified after initial recognition.
Financial assets shall be measured at initial recognition at fair value. For financial assets
measured at FVTPL, transaction costs are recognised in current profit or loss. For financial
assets not measured at FVTPL, transaction costs should be included in the initial
measurement. Notes receivable or accounts receivable that arise from sales of goods or
rendering of services are initially measured at the transaction price defined in the accounting
standard of revenue where the transaction does not include a significant financing
component.
Subsequent measurement of financial assets will be based on their categories:
①Financial asset at amortised cost
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The financial asset at amortised cost category of classification applies when both the
following conditions are met: the financial asset is held within the business model whose
objective is to hold financial assets in order to collect contractual cash flows, and the
contractual term of the financial asset gives rise on specified dates to cash flows that are
solely payment of principal and interest on the principal amount outstanding. These
financial assets are subsequently measured at amortised cost by adopting the effective
interest rate method. Any gain or loss arising from derecognition according to the
amortization under effective interest rate method or impairment are recognised in current
profit or loss.
②Financial asset at fair value through other comprehensive income (FVTOCI)
The financial asset at FVTOCI category of classification applies when both the following
conditions are met: the financial asset is held within the business model whose objective is
achieved by both collecting contractual cash flows and selling financial assets, and the
contractual term of the financial asset gives rise on specified dates to cash flows that are
solely payment of principle and interest on the principal amount outstanding. All changes in
fair value are recognised in other comprehensive income except for gain or loss arising from
impairment or exchange differences, which should be recognised in current profit or loss. At
derecognition, cumulative gain or loss previously recognised under OCI is reclassified to
current profit or loss. However, interest income calculated based on the effective interest
rate is included in current profit or loss.
The Company make an irrevocable decision to designate part of non-trading equity
instrument investments as measured through FVTOCI. All changes in fair value are
recognised in other comprehensive income except for dividend income recognised in current
profit or loss. At derecognition, cumulative gain or loss are reclassified to retained earnings.
③Financial asset at fair value through profit or loss (FVTPL)
Financial asset except for above mentioned financial asset at amortised cost or financial
asset at fair value through other comprehensive income (FVTOCI), should be classified as
financial asset at fair value through profit or loss (FVTPL). These financial assets should be
subsequently measured at fair value. All the changes in fair value are included in current
profit or loss.
（3）Classification and measure ment of financial liabilities
The Company classified the financial liabilities as financial liabilities at fair value through
profit or loss (FVTPL), loan commitments at a below-market interest rate and financial
guarantee contracts and financial asset at amortised cost.
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Subsequent measurement of financial assets will be based on the classification:
①Financial liabilities at fair value through profit or loss (FVTPL)
Held-for-trading financial liabilities (including derivatives that are financial liabilities) and
financial liabilities designated at FVTPL are classified as financial liabilities at FVTP. After
initial recognition, any gain or loss (including interest expense) are recognised in current
profit or loss except for those hedge accounting is applied. For financial liability that is
designated as at FVTPL, changes in the fair value of the financial liability that is attributable
to changes in the own credit risk of the issuer shall be presented in other comprehensive
income. At derecognition, cumulative gain or loss previously recognised under OCI is
reclassified to retained earnings.
②Loan commitments and financial guarantee contracts
Loan commitment is a commitment by the Company to provide a loan to customer under
specified contract terms. The provision of impairment losses of loan commitments shall be
recognised based on expected credit losses model.
Financial guarantee contract is a contract that requires the Company to make specified
payments to reimburse the holder for a loss it incurs because a specified debtor fails to make
payment when due in accordance with the original or modified terms of a debt instrument.
Financial guarantee contracts liability shall be subsequently measured at the higher of: The
amount of the loss allowance recognised according to the impairment principles of financial
instruments; and the amount initially recognised less the c umulative amount of income
recognised in accordance with the revenue principles.
③Financial liabilities at amortised cost
After initial recognition, the Company measured other financial liabilities at amortised cost
using the effective interest method.
Except for special situation, financial liabilities and equity instrument should be classified in
accordance with the following principles:
①If the Company has no unconditional right to avoid delivering cash or another financial
instrument to fulfill a contractual obligation, this contractual obligation meet the definition
of financial liabilities. Some financial instruments do not comprise terms and conditions
related to obligations of delivering cash or another financial instrument explicitly, they ma y
include contractual obligation indirectly through other terms and conditions.
②If a financial instrument must or may be settled in the Company's own equity instruments,
it should be considered that the Company’s own equity instruments are alternatives of cash
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or another financial instrument, or to entitle the holder of the equity instruments to sharing
the remaining rights over the net assets of the issuer. If the former is the case, the instrument
is a liability of the issuer; otherwise, it is an equity instrument of the issuer. Under some
circumstances, it is regulated in the contract that the financial instrument must or may be
settled in the Company's own equity instruments, where, amount of contractual rights and
obligations are calculated by multiplying the number of the equity instruments to be
available or delivered by its fair value upon settlement. Such contracts shall be classified as
financial liabilities, regardless that the amount of contractual rights and liabilities is fixed, or
fluctuate totally or partially with variables other than market price of the entity’s own equity
instruments (such as interest rate, price of some kind of goods or some kind of financial
instrument).
（4）Derivatives and embe dded derivatives
At initial recognition, derivatives shall be measured at fair value at the date of derivative
contracts are signed and subsequently measured at fair value. The derivative with a positive
fair value shall be recognized as an asset, and with a negative fair value shall be recognised
as a liability.
Gains or losses arising from the changes in fair value of derivatives shall be recognised
directly into current profit or loss except for the effective portion of cash flow hedges which
shall be recognised in other comprehensive income and reclassified into current profit or
loss when the hedged items affect profit or loss.
An embedded derivative is a component of a hybrid contract with a financial asset as a host,
the Company shall apply the requirements of financial asset classification to the entire
hybrid contract. If a host that is not a financial asset and the hybrid contract is not measured
at fair value with changes in fair value recognised in profit or loss, and the economic
characteristics and risks of the embedded derivative are not closely related to the economic
characteristics and risks of the host, and a separate instrument with the same terms as the
embedded derivative would meet the definition of a derivative, the embedded derivative
shall be separated from the hybrid instrument a nd accounted for as a separate derivative
instrument. If the Company is unable to measure the fair value of the embedded derivative
at the acquisition date or subsequently at the balance sheet date, the entire hybrid contract is
designated as financial assets or financial liabilities at fair value through profit or loss.
（5）Impairme nt of financial instrume nt
The Company shall recognise a loss allowance based on expected credit losses on a
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financial asset that is measured at amortised cost, a debt investment at fair value through
other comprehensive income, a contract asset, a lease receivable, a loan commitment and a
financial guarantee contract.
①Measurement of expected credit losses
Expected credit losses are the weighted average of credit losses of the financial instruments
with the respective risks of a default occurring as the weights. Credit loss is the difference
between all contractual cash flows that are due to the Company in accordance with the
contract and all the cash flows that the Company expects to receive (ie all cash shortfalls),
discounted at the original effective interest rate or credit- adjusted effective interest rate for
purchased or originated credit-impaired financial assets.
Lifetime expected credit losses are the expected credit losses that result from all possible
default events over the expected life of a financial instrument.
12-month expected credit losses are the portion of lifetime expected credit losses that
represent the expected credit losses that result from default events on a financial instrument
that are possible within the 12 months after the reporting date (or the expected lifetime, if
the expected life of a financial instrument is less than 12 months).
At each reporting date, the Company classifies financial instruments into three stages and
makes provisions for expected credit losses accordingly. A financial instrument of which the
credit risk has not significantly increased since initial recognition is at stage 1. The
Company shall measure the loss allowance for that financial instrument at an amount equal
to 12-month expected credit losses. A financial instrument with a significant increase in
credit risk since initial recognition but is not considered to be credit-impaired is at stage 2.
The Company shall measure the loss allowance for that financial instrument at an amount
equal to the lifetime expected credit losses. A financial instrument is considered to be
credit-impaired as at the end of the reporting period is at stage 3. The Company shall
measure the loss allowance for that financial instrument at an amount equal to the lifetime
expected credit losses.
The Company may assume that the credit risk on a financial instrument has not increased
significantly since initial recognition if the financial instrument is determined to have low
credit risk at the reporting date and measure the loss allowance for that financial instrument
at an amount equal to 12-month expected credit losses.
For financial instrument at stage 1, stage 2 and those have low credit risk, the interest
revenue shall be calculated by applying the effective interest rate to the gross carrying
amount of a financial asset (ie, impairment loss not been deducted). For financial instrument
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at stage 3, interest revenue shall be calculated by applying the effective interest rate to the
amortised cost after deducting of impairment loss.
For notes receivable, accounts receivable and accounts receivable financing, no matter it
contains a significant financing component or not, the Company shall measure the loss
allowance at an amount equal to the lifetime expected credit losses.
A.Receivables
For the notes receivable, accounts receivable, other receivables, accounts receivable
financing and long-term receivables which are demonstrated to be impaired by any
objective evidence, or applicable for individual assessment, the Company shall individually
assess for impairment and recognise the loss allowance for expected credit losses. If the
Company determines that no objective evidence of impairment exists for notes receivable,
accounts receivable, other receivables, accounts receivable financing and long-ter m
receivables, or the expected credit loss of a single financial asset cannot be assessed at
reasonable cost, such notes receivable, accounts receivable, other receivables, accounts
receivable financing and long-term receivables shall be divided into several groups with
similar credit risk characteristics and collectively calculated the expected credit loss. The
determination basis of groups is as following:
a. Determination basis of notes receivable is as following:
The Company shall measure the credit loss for notes receivable at an amount equal to the
lifetime expected credit losses. Based on the credit risk characteristics of notes receivable, it
is divided into different groups:
Item Characteristics of the group
Banker’s acceptable bill Acceptor who is a bank with less credit risk
b.Determination basis of accounts receivable is as following:
For accounts receivable and contract assets without the existence of a significant financing
component, the Company shall measure the loss allowance at the amount equal to the
lifetime expected credit losses.
For accounts receivable, contract assets and lease receivable with the existence of a
significant financing component, the Company chooses to always measure its losses
allowance at the amount equal to the lifetime expected credit losses.
Except for accounts receivable and contract assets which are individually assessed for credit
risk, accounts receivable and contract assets shall be divided into different groups based on
its credit risk characteristics:
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Item Characteristics of the group
Amounts due from the clearing center The receivables are due from the clearing center.
Amounts due from the aviation association The receivables are due from the aviation association.
The receivables are business operating receivables due
Amounts due from related parties
from related parties.
The receivables are business operating receivables which
Other receivables
are not included in the above categories.
c. Determination basis of other receivables is as following:
For each group, the Company calculates expected credit losses through default exposure and
the 12-months or lifetime expected credit losses rate, taking reference to historical
experience for credit losses and considering current condition and expectation for the future
economic situation.
Item Determine basis of the combination
Deposits receivable The receivables are deposits receivables daily activities.
The receivables are receivables due from related parties in
Amounts due from related parties
daily activities.
Other receivables The receivables are other receivables in daily activities.
d.Determination basis of long-term receivables financing is as following (except for
receivables with a material financing component and lease receivables):
The Company calculates expected credit losses through default exposure and the lifetime
expected credit losses rate, taking reference to historical experience for credit losses and
considering current condition and expectation for the future economic situation.
B.Debt investment and other debt investment
For debt investment and other debt investment, the Company shall calculate the expected
credit loss through the default exposure and the 12-month or lifetime expected credit loss
rate based on the nature of the investment, counterparty and the type of risk exposure.
②Low credit risk
If the financial instrument has a low risk of default, the borrower has a strong capacity to
meet its contractual cash flow obligations in the near term and adverse changes in economic
and business conditions in the longer term may, but will not necessarily, reduce the ability of
the borrower to fulfill its contractual cash flow obligations.
③Significant increase in credit risk
The Company shall assess whether the credit risk on a financial instrument has increased
significantly since initial recognition, using the change in the risk of a default occurring over
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the expected life of the financial instrument, through the comparison of the risk of a default
occurring on the financial instrument as at the reporting date with the risk of a default
occurring on the financial instrument as at the date of initial recognition.
To make that assessment, the Company shall consider reasonable and supportable
information, that is available without undue cost or effort, and that is indicative of
significant increases in credit risk since initial recognition, including forward-looking
information. The information considered by the Company are as following:
A.Significant changes in internal price indicators of credit risk as a result of a change in
credit risk since inception；and
B.Existing or forecast adverse change in the business, financial or economic conditions of
the borrower that results in a significant change in the borrower’s ability to meet its debt
obligations；and
C.An actual or expected significant change in the operating results of the borrower; An
actual or expected significant adverse change in the regulatory, economic, or technological
environment of the borrower；and
D.Significant changes in the value of the collateral supporting the obligation or in the
quality of third-party guarantees or credit enhancements, which are expected to reduce the
borrower’s economic incentive to make scheduled contractual payments or to otherwise
have an effect on the probability of a default occurring；and
F.Expected changes in the loan documentation including an expected breach of contract that
may lead to covenant waivers or amendments, interest payment holidays, interest rate
step-ups, requiring additional collateral or guarantees, or other changes to the contractual
framework of the instrument；and
G.Significant changes in the expected performance and behaviour of the borrower；and
H.Contractual payments are more than 30 days past due.
Depending on the nature of the financial instruments, the Company shall assess whether the
credit risk has increased significantly since initial recognition on an individual financial
instrument or a group of financial instruments. When assessed based on a group of financial
instruments, the Company can group financial instruments on the basis of shared credit risk
characteristics, for example, past due information and credit risk rating.
Generally, the Company shall determine the credit risk on a financial asset has increased
significantly since initial recognition when contractual payments are more than 30 days past
due. The Company can only rebut this presumption if the Company has reasonable and
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supportable information that is available without undue cost or effort, that demonstrates that
the credit risk has not increased significantly since initial recognition even though the
contractual payments are more than 30 days past due.
④Credit-impaired financial asset
The Company shall assess at each reporting date whether the credit impairment has occurred
for financial asset at amortised cost and debt investment at fair value through other
comprehensive income. A financial asset is credit-impaired when one or more events that
have a detrimental impact on the estimated future cash flows of that financial asset have
occurred. Evidences that a financial asset is credit-impaired include observable data about
the following events:
Significant financial difficulty of the issuer or the borrower；a breach of contract, such as a
default or past due event; the lender(s) of the borrower, for economic or contractual reasons
relating to the borrower’s financial difficulty, having granted to the borrower a concession(s)
that the lender(s) would not otherwise consider；it is becoming probable that the borrower
will enter bankruptcy or other financial reorganisation；the disappearance of an active
market for that financial asset because of financial difficulties；the purchase or origination of
a financial asset at a deep discount that reflects the incurred credit losses.
⑤Presentation of impairment of expected credit loss
In order to reflect the changes of credit risk of financial instrument since initial recognition,
the Company shall at each reporting date remeasure the expected credit loss and recognise
in profit or loss, as an impairment gain or loss, the amount of expected credit losses
addition(or reversal). For financial asset at amortised cost, the loss allowance shall reduce
the carrying amount of the financial asset in the statement of financial position; for debt
investment at fair value through other comprehensive income, the loss allowance shall be
recognised in other comprehensive income and shall not reduce the carrying amount o f the
financial asset in the statement of financial position.
⑥Write-off
The Company shall directly reduce the gross carrying amount of a financial asset when the
Company has no reasonable expectations of recovering the contractual cash flow of a
financial asset in its entirety or a portion thereof. Such write-off constitutes a derecognition
of the financial asset. This circumstance usually occurs when the Company determines that
the debtor has no assets or sources of income that could generate sufficient cash flow to
repay the write-off amount.
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Recovery of financial asset written off shall be recognised in profit or loss as reversal of
impairment loss.
（6）Transfer of financial assets
Transfer of financial assets refers to following two situations:
A.Transfers the contractual rights to receive the cash flows of the financial asset; and
B.Transfers the entire or a part of a financial asset and retains the contractual rights to
receive the cash flows of the financial asset, but assumes a contractual obligation to pay the
cash flows to one or more recipients.
①Derecognition of transferred assets
If the Company transfers substantially all the risks and rewards of ownership of the financial
asset, or neither transfers nor retains substantially all the risks and rewards of ownership of
the financial asset but has not retained control of the financial asset, the financial asset shall
be derecognised.
Whether the Company has retained control of the transferred asset depends on the
transferee’s ability to sell the asset. If the transferee has the practical ability to sell the asset
in its entirety to an unrelated third party and is able to exercise that ability unilaterally and
without needing to impose additional restrictions on the transfer, the Company has not
retained control.
The Company judges whether the transfer of financial asset qualifies for derecognition
based on the substance of the transfer.
If the transfer of financial asset qualifies for derecognition in its entirety, the difference
between the following shall be recognised in profit or loss:
A.The carrying amount of transferred financial asset;
B.The sum of consideration received and the part derecognised of the cumulative changes in
fair value previously recognised in other comprehensive income (The financial assets
involved in the transfer are classified as financial assets at fair value thro ugh other
comprehensive income in accordance with Article 18 of the Accounting Standards for
Business Enterprises - Recognition and Measurement of Financial Instruments).
If the transferred asset is a part of a larger financial asset and the part transferr ed qualifies
for derecognition, the previous carrying amount of the larger financial asset shall be
allocated between the part that continues to be recognised (For this purpose, a retained
servicing asset shall be treated as a part that continues to be recognised) and the part that is
derecognised, based on the relative fair values of those parts on the date of the transfer. The
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difference between following two amounts shall be recognised in profit or loss:
A.The carrying amount (measured at the date of derecognition) allocated to the part
derecognised；
B.The sum of the consideration received for the part derecognised and part derecognised of
the cumulative changes in fair value previously recognised in other comprehensive income
(The financial assets involved in the transfer are classified as financial assets at fair value
through other comprehensive income in accordance with Article 18 of the Accounting
Standards for Business Enterprises - Recognition and Measurement of Financial
Instruments).
②Continuing involvement in transferred assets
If the Company neither transfers nor retains substantially all the risks and rewards of
ownership of a transferred asset, and retains control of the transferred asset, the Company
shall continue to recognise the transferred asset to the extent of its continuing involvement
and also recognise an associated liability.
The extent of the Company’s continuing involvement in the transferred asset is the extent to
which it is exposed to changes in the value of the transferred asset.
③Continue to recognise the transferred assets
If the Company retains substantially all the risks and rewards of ownership of the
transferred financial asset, the Company shall continue to recognise the transferred asset in
its entirety and the consideration received shall be recognised as a financial liability.
The financial asset and the associated financial liability shall not be offset. In subsequent
accounting period, the Company shall continuously recognise any income (gain) arising
from the transferred asset and any expense (loss) incurred on the associated liability.
（7）Offsetting financial assets and financial liabilities
Financial assets and financial liabilities shall be presented separately in the statement of
financial position and shall not be offset. When meets the following conditions, financial
assets and financial liabilities shall be offset and the net amount presented in the statement
of financial position:
The Company currently has a legally enforceable right to set off the recognised amounts;
The Company intends either to settle on a net basis, or to realise the asset and settle the
liability simultaneously.
In accounting for a transfer of a financial asset that does not qualify for derecognition, the
Company shall not offset the transferred asset and the associated liability.
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（8）Determination of fair value of financial instrume nts
Determination of financial assets and financial liabilities please refer to Note 3.11
3.11Fair Value Measure ment
Fair value refers to the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date.
The Company determines fair value of the related assets and liabilities based on market
value in the principal market, or in the absence of a principal market, in the most
advantageous market price for the related asset or liability. The fair value of an asset or a
liability is measured using the assumptions that market participants would use when pricing
the asset or liability, assuming that market participants act in their economic best interest.
The principal market is the market in which transactions for an asset or liability take place
with the greatest volume and frequency. The most advantageous market is the market w hich
maximizes the value that could be received from selling the asset and minimizes the value
which is needed to be paid in order to transfer a liability, considering the effect of transport
costs and transaction costs both.
If the active market of the fi nancial asset or financial liability exists, the Company shall
measure the fair value using the quoted price in the active market. If the active market of the
financial instrument is not available, the Company shall measure the fair value using
valuation techniques.
A fair value measurement of a non-financial asset takes into account a market participant’s
ability to generate economic benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset in its highest and best use.
① Valuation techniques
The Company uses valuation techniques that are appropriate in the circumstances and for
which sufficient data are available to measure fair value, including the market approach, the
income approach and the cost approach. The Company shall use valuation techniques
consistent with one or more of those approaches to measure fair value. If multiple valuation
techniques are used to measure fair value, the results shall be evaluated considering the
reasonableness of the range of values indicated by those results. A fair value measurement is
the point within that range that is most representative of fair value in the circumstances.
When using the valuation technique, the Company shall give the priority to relevant
observable inputs. The unobservable inputs can only be used when relevant observable
inputs is not available or practically would not be obtained. Observable inputs refer to the
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information which is available from market and reflects the assumptions that market
participants would use when pricing the asset or liability. Unobservable Inputs refer to the
information which is not available from market and it has to be developed using the best
information available in the circumstances from the assumptio ns that market participants
would use when pricing the asset or liability.
② Fair value hierarchy
To Company establishes a fair value hierarchy that categorises into three levels the inputs to
valuation techniques used to measure fair value. The fair value hierarchy gives the highest
priority to Level 1 inputs and second to the Level 2 inputs and the lowest priority to Level 3
inputs. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity can access at the measurement date. Level 2 inputs are inputs other
than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.
3.12 Inventory
3.12.1 Classification of Inventory
The Company’s inventories mainly includes air materials and low-value consumables.
3.12.2 Measurement Method of Cost of Inventories Sold or Used
Inventories are initially carried at the actual cost. The actual cost of inventories transferred
out is assigned by using weighted average method.
3.12.3 Inventory System
The perpetual inventory system is adopted. The inventories should be counted at least once
a year, and surplus or losses of inventory stocktaking shall be included in current profit and
loss.
3.12.4 Provision for Impairment of Inventory
Inventories are stated at the lower of cost and net realizable value. The excess of cost over
net realizable value of the inventories is recognized as provision for impairment of
inventory, and recognized in current profit or loss.
Net realizable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion, the estimated costs necessary to make the sale and relevant
taxes. Net realizable value is determined on the basis of clear evidence obtained and takes
into consideration the purpose of holding inventories and effect of post balance sheet events.
At the balance sheet date, inventories are measured at the lower of the cost a nd net
realizable value. If the net realizable value is below the cost of inventories, a provision for
decline in value of inventories is made. The provision for inventories declines in value is
determined normally by the difference of the cost of individual item less its realizable value.
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For large quantity and low value items of inventories, provision for decline in value is made
based on categories of inventories. For items of inventories relating to a product line that are
produced and marketed in the same geographical area, have the same or similar end users or
purposes, and cannot be practicably evaluated separately from other items in that product
line provision for decline in value is determined on an aggregate basis.
After the provision for decline in value of inventories is made, if the circumstances that
previously caused inventories to be written down below cost no longer exist so that the net
realizable value of inventories is higher than their cost, the original provision for decline in
value is reversed and the reversal is included in profit or loss for the period.
3.12.5 Amortization Method for Low-Value Consumables
Low cost and short-lived consumable items are amortized using immediate write-off method;
packaging materials are amortized using immediate write-off method.
3.13 Contract assets and contract liabilities
Adopted from 1 January 2020
Contract assets and contract liabilities are reocgnised on the basis of fulfilment of
performance obligations and payment received from clients. A right to receive a promised
consideration from a client resulting from goods transferred to or services provided to the
client (where the right to consideration is dependent on factors other than the passage of
time) is reocgnised a contract asset. A payment received from a client for which goods shall
be transferred to or services shall be provided to the client is recognised as a contract
liability.
See Note 3.10 for impairment of contract assets.
Contract assets and contract liabilities are presented as line items on the statement of
financial position. A contract asset and contract liability arising from one contract are
presented in net; while the net amount is a debit balance, it is presented in contract assets or
other non-current assets depending on liquidity; while the net amount is a credit balance, it
is presented in contract liabilities or other non-current liabilities depending on liquidity.
Contract assets and contract liabilities arising from different contracts are not be offset.
3.14 Contract costs
Adopted from 1 January 2020
Costs for a contract include costs to fulfill the contract and costs to obtain the contract.
An asset is recognised for the costs incurred to fulfill a contract on if those costs meet all of
the following criteria:
I. the costs are directly associated with a contract or an anticipated contract, explicitly
chargeable to the client under the contract, incurred only for the contract;
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II. the costs generate or enhance resources of the Company that will be used in satisfying
performance obligations in the future; and
III. the costs are expected to be recovered.
An asset is recognised for the costs incurred to obtained a contract with a client if those
costs are expected to be recovered.
An asset recognised for the costs of a contract are amortised on a systematic basis that is
consistent with recognition of revenue arising from the contract. Where the costs incurred to
obtain a contract would be amortised for a period less than one year should they be
recognised as an asset, the costs are recognised in the current profit or loss as incurred.
An impairment is recognised for an asset recognised for the costs of a contract to the extent
that the carrying amount of the asset exceeds:
I. the remaining amount of consideration that is expected to be received in exchange for the
goods or services to which the asset relates; less
II. the costs that relate directly to providing those goods or services and that have not been
recognised as expenses.
Upon recognition of the impairment, further consideration is given for provision for an
onerous contract, in necessary.
A reversal of some or all of an impairment loss previously recognised for an asset for the
costs of a contract when the impairment conditions no longer exist or have improved. The
increased carrying amount of the asset is cappted by the amount that would have been
determined (net of amortisation) if no impairment loss had been recognised previously.
An asset recognised for the costs to fulfill a contract is presented in inventories if its
amortisation is not longer than 1 year or an operating cycle upon initial recognition;
otherwise, it is presented in other non-current assets.
An asset recognised for the costs to obtain a contract is presented in other current assets if
its amortisation is not longer than 1 year or an operating cycle upon initial recognition;
otherwise, it is presented in other non-current assets.
3.15 Long-term Equity Investments
Long-term equity investments refer to equity investments where an investor has control of,
or significant influence over, an investee, as well as equity investments in joint ventures.
Associates of the Company are those entities over which the Company has significant
influence.
（1）Determination basis of joint control or significant influence over the investee
Joint control is the relevant agreed sharing of control over an arrangement, and the arranged
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relevant activity must be decided under unanimous consent of the parties sharing control. In
assessing whether the Company has joint control of an arrangement, the Company shall
assess first whether all the parties, or a group of the parties, control the arrangement. When
all the parties, or a group of the parties, considered collectively, are able to direct the
activities of the arrangement, the parties control the arrangement collectively. Then the
Company shall assess whether decisions about the relevant activities require the unanimous
consent of the parties that collectively control the arrangement. If two or more groups of the
parties could control the arrangement collectively, it shall not be assessed as have joint
control of the arrangement. When assessing the joint control, the protective rights are not
considered.
Significant influence is the power to participate in the financial and operating policy
decisions of the investee but is not control or joint control of those policies. In determination
of significant influence over an investee, the Company should consider not only the existing
voting rights directly or indirectly held but also the effect of potential voting rights held by
the Company and other entities that could be currently exercised or converted, including the
effect of share warrants, share options and convertible corporate bonds that issued by the
investee and could be converted in current period.
If the Company holds, directly or indirectly 20% or more but less than 50% of the voting
power of the investee, it is presumed that the Company has significant influence of the
investee, unless it can be clearly demonstrated that in such circumstance, the Company
cannot participate in the decision-making in the production and operating of the investee.
（2）Determination of initial investment cost
① Long-term equity investments generated in business combinations
A. For a business combination involving enterprises under common control, if the Company
makes payment in cash, transfers non-cash assets or bears liabilities as the consideration for
the business combination, the share of carrying amount of the owners’ equity of the acquiree
in the consolidated financial statements of the ultimate controlling party is recognised as the
initial cost of the long-term equity investment on the combination date. The difference
between the initial investment cost and the carrying amount of cash paid, non-cash assets
transferred and liabilities assumed shall be adjusted against the capital reserve; if capital
reserve is not enough to be offset, undistributed profit shall be offset in turn; and
B. For a business combination involvi ng enterprises under common control, if the
Company issues equity securities as the consideration for the business combination, the
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share of carrying amount of the owners’ equity of the acquiree in the consolidated financial
statements of the ultimate controlling party is recognised as the initial cost of the long-ter m
equity investment on the combination date. The total par value of the shares issued is
recognised as the share capital. The difference between the initial investment cost and the
carrying amount of the total par value of the shares issued shall be adjusted against the
capital reserve; if capital reserve is not enough to be offset, undistributed profit shall be
offset in turn；and
C. For business combination not under common control, the assets paid, liabilities incurred
or assumed and the fair value of equity securities issued to obtain the control of the acquiree
at the acquisition date shall be determined as the cost of the business combination and
recognised as the initial cost of the long-term equity investment. The audit, legal, valuation
and advisory fees, other intermediary fees, and other relevant general administrative costs
incurred for the business combination, shall be recognised in profit or loss as incurred.
② Long-term equity investments acquired not through the business combination, the
investment cost shall be determined based on the following requirements:
A. For long-term equity investments acquired by payments in cash, the initial cost is the
actually paid purchase cost, including the expenses, taxes and other necessary expenditures
directly related to the acquisition of long-term equity investments; and
B. For long-term equity investments acquired through issuance of equity securities, the
initial cost is the fair value of the issued equity securities; and
C. For the long-term equity investments obtained through exchange of non-monetary assets,
if the exchange has commercial substance, and the fair values of assets traded out and traded
in can be measured reliably, the initial cost of long-term equity investment traded in with
non-monetary assets are determined based on the fair values of the assets traded out together
with relevant taxes. Difference between fair value and book value of the assets traded out is
recorded in current profit or loss. If the exchange of non-monetary assets does not meet the
above criterion, the book value of the assets traded out and relevant taxes are recognised as
the initial investment cost; and
D.For long-term equity investment acquired through debt restructuring, the book value is
determined based on the fair value of waived debts and the taxes and other costs directly
attributable to the assets. Difference between fair value and carrying amount of waived
debts shall be recorded in current profit or loss.
（3）Subsequent measure ment and recognition of profit or loss
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Long-term equity investment to an entity over which the Company has ability of control
shall be accounted for at cost method. Long-term equity investment to a joint venture or an
associate shall be accounted for at equity method.
①Cost method
For Long-term equity investment at cost method, cost of the long-term equity investment
shall be adjusted when additional amount is invested or a part of it is withdrawn. The
Company recognises its share of cash dividends or profits which have been declared to
distribute by the investee as current investment income.
②Equity method
For long-term equity investment at equity method, the general accounting treatment is as
follows:
If the initial cost of the investment is in excess of the share of the fair value of the net
identifiable assets in the investee at the date of investment, the difference shall not be
adjusted to the initial cost of long-term equity investment; if the initial cost of the
investment is in short of the share of the fair value of the net identifiable assets in the
investee at the date investment, the difference shall be included in the current profit or loss
and the initial cost of the long-term equity investment shall be adjusted accordingly.
The Company recognises the share of the investee’s net profits or losses, as well as its share
of the investee’s other comprehensive income, as investment income or losses and other
comprehensive income respectively, and adjusts the carrying amount of the investment
accordingly. The carrying amount of the investment shall be reduced by the share of any
profit or cash dividends declared to distribute by the investee. The investor’s share of the
investee’s owners’ equity changes, other than those arising from the investee’s net profit or
loss, other comprehensive income or profit distribution, shall be recognised in the investor’s
equity, and the carrying amount of the long-term equity investment shall be adjusted
accordingly. The Company recognises its share of the investee’s net profits or losses after
making appropriate adjustments of investee’s net profit based on the fair values of the
investee’s identifiable net assets at the investment date. If the accounting policy and
accounting period adopted by the investee is not in consistency with the Company, the
financial statements of the investee shall be adjusted according to the Company’s
accounting policies and accounting period, based on which, investment income or loss and
other comprehensive income, etc., shall be adjusted. The unrealized profits or losses
resulting from inter-company transactions between the company and its associate or joint
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venture are eliminated in proportion to the company’s equity interest in the investee, based
on which investment income or losses shall be recognised. Any losses resulting from
inter-company transactions between the investor and the investee, which belong to asset
impairment, shall be recognised in full.
Where the Company obtains the power of joint control or significant influence, but not
control, over the investee, due to additional investment or other reason, the relevant
long-term equity investment shall be accounted for by using the equity method, initial cost
of which shall be the fair value of the original investment plus the additional investment.
Where the original investment is classified as available-for sale investment, difference
between its fair value and the carrying value, in addition to the cumulative changes in fair
value previously recorded in other comprehensive income, shall be recogised into current
profit or loss using equity method.
If the Company loses the joint control or significant influence of the investee for some
reasons such as disposal of equity investment, the retained interest shall be measured at fair
value and the difference between the carrying amount and the fair value at the date of loss
the joint control or significant influence shall be recognised in profit or loss. When the
Company discontinues the use of the equity method, the Company shall account for all
amounts previously recognised in other comprehensive income under equity method in
relation to that investment on the same basis as would have been required if the investee had
directly disposed of the related assets or liabilities.
（4）Equity investment classified as held for sale
For an equity investment, or a portion of an equity investment, in an associate or a joint
venture is classified as held for sale, the relevant accounting treatment please refer to Note
3.20.
3.16Fixed Assets
Fixed assets refer to the tangible assets with higher unit price held for the purpose of
producing commodities, rendering services, renting or business management with useful
lives exceeding one year.
（1）Recognition criteria of fixed assets
Fixed assets will only be recognised at the actual cost paid when obtaining as all the
following criteria are satisfied:
①It is probable that the economic benefits relating to the fixed assets will flow into the
Company;
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②The costs of the fixed assets can be measured reliably.
Subsequent expenditure for fixed assets shall be recorded in cost of fixed assets, if
recognition criteria of fixed assets are satisfied, otherwise the expenditure shall be recorded
in current profit or loss when incurred.
（2）Depreciation methods of fixed assets
Fixed assets are initially measured at cost and taking into account the impact of expected
disposal costs. The Company begins to depreciate the fixed asset from the next month after
it is available for intended use by the straight-line-method, except for the replacement parts
of the engine, which is depreciated by units of production method based on flight hours. The
useful life, estimated net residual value and annual depreciation rate of various types of
fixed assets are as follows:
Estimated useful life(Year)/ Residual Annual depreciation
Category
Estimated flight hours (KHrs) rates (%) rates/KHrs (%)
Buildings and constructions 20-33 5.00 2.88-4.75
Aircraft engine core parts and engine
15-20 0.00-5.00 4.75-6.67
auxiliary power unit
Engine replacement parts (KHrs) 17-23 0.00 4.35-5.88
High-priced revolving parts 3-15 0.00 6.67-33.33
Transportation equipment and others 4-20 5.00 4.75-23.75
For the fixed assets with impairment provided, the impairment provision should be excluded
from the cost when calculating depreciation.
At the end of reporting period, the Company shall review the useful life, estimated net
residual value and depreciation method of the fixed assets. Estimated useful life o f the fixed
assets shall be adjusted if it is changed compared to the original estimation.
（3）Recognition criteria, valuation and depreciation methods of fixed assets obtaine d
through a finance lease
If the entire risk and rewards related to the leased assets have been substantially transferred,
the Company shall recognise the lease as a finance lease. The cost of the fixed assets
obtained through a finance lease is determined at the lower of the fair value of the leased
assets and the present value of the minimum lease payment on the date of the lease. The
fixed assets obtained by a finance lease are depreciated in the method which is consistent
with the self-owned fixed assets of the Company. For fixed assets obtained through a
finance lease, if it is reasonably certain that the ownership of the leased assets will be
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transferred to the lessee by the end of the lease term, they shall be depreciated over their
remaining useful lives; otherwise, the leased assets shall be depreciated over the shorter of
the lease terms or their remaining useful lives.
3. 17 Construction in Progress
The initial book values of the fixed assets are stated at total expenditures incurred before
they are ready for their intended use, including construction costs, original price of
machinery equipment, other necessary expenses incurred to bring the construction in
progress to get ready for its intended use and borrowing costs of the specific loan for the
construction or the proportion of the general loan used for the constructions incurred before
they are ready for their intended use. The construction in progress shall be transferred to
fixed asset when the installation or construction is ready for the intended use. For
construction in progress that has been ready for their intended use but relevant budgets for
the completion of projects have not been completed, the estimated values of project budgets,
prices, or actual costs should be included in the costs of relevant fixed assets, and
depreciation should be provided according to relevant policies of the Company when the
fixed assets are ready for intended use. After the completion of budgets needed for the
completion of projects, the estimated values should be substituted by actual costs, but
depreciation already provided is not adjusted.
3.18 Borrowing Costs
（1）Recognition criteria and period for capitalization of borrowing costs
The Company shall capitalize the borrowing costs that are directly attributable to the
acquisition, construction or production of qualifying assets when meet the following
conditions:
①Expenditures for the asset are being incurred;
②Borrowing costs are being incurred; and
③Acquisition, construction or production activities that are necessary to prepare the assets
for their intended use or sale are in progress.
Other borrowing cost, discounts or premiums on borrowings and exchange differences on
foreign currency borrowings shall be recognized into current profit or loss when incurred.
Capitalization of borrowing costs is suspended during periods in which the acquisition,
construction or production of a qualifying asset is interrupted abnormally and the
interruption is for a continuous period of more than 3 months.
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Capitalization of such borrowing costs ceases when the qualifying assets being acquired,
constructed or produced become ready for their intended use or sale. The expenditure
incurred subsequently shall be recognised as expenses when incurred.
（2）Capitalization rate and measure ment of capitalized amounts of borrowing costs
When funds are borrowed specifically for purchase, construction or manufacturing of assets
eligible for capitalization, the Company shall determine the amount of borrowing costs
eligible for capitalisation as the actual borrowing costs incurred on that borrowing during
the period less any interest income on bank deposit or investment income on the temporary
investment of those borrowings.
Where funds allocated for purchase, construction or manufacturing of assets eligible for
capitalization are part of a general borrowing, the eligible amounts are determined by the
weighted-average of the cumulative capital expenditures in excess of the specific borrowing
multiplied by the general borrowing capitalization rate. The capitalization rate will be the
weighted average of the borrowing costs applicable to the general borrowing.
During the capitalization period, all the exchange differences of special foreign currency
loans shall be capitalized. The exchange difference of foreign currency general borrowings
is carried to the current profit and loss.
3.19 Intangible Assets
(1) Measurement method of intangible assets
Intangible assets are recognised at actual cost at acquisition.
(2) The useful life and amortisation of intangible assets
①The estimated useful lives of the intangible assets with finite useful lives are as follows:
Category Estimated useful life
Land use right Legal life
The service life is determined by reference to the period that can bring
Software
economic benefits to the Company
For intangible assets with finite useful life, the estimated useful life and amortisation
method are reviewed annually at the end of each reporting period and adjusted when
necessary. No change incur in current year in the estimated useful life and amortisation
method upon review.
② Assets of which the period to bring economic benefits to the Company are unforeseeable
are regarded as intangible assets with indefinite useful lives. The Company reassesses the
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useful lives of those assets at every year end. If the useful lives of those assets are still
indefinite, impairment test should be performed on those assets at the balance sheet date.
③Amortisation of the intangible assets
For intangible assets with finite useful lives, their useful lives should be determined upon
their acquisition and systematically amortised on a straight-line basis [units of production
method] over the useful life. The amortisation amount shall be recognized into current profit
or loss according to the beneficial items. The amount to be amortised is cost deducting
residual value. For intangible assets which has impaired, the cumulative impairment
provision shall be deducted as well. The residual value of an intangible asset with a finite
useful life shall be assumed to be zero unless: there is a commitment by a third party to
purchase the asset at the end of its useful life; or there is an active market for the asset and
residual value can be determined by reference to that market; and it is probable that such a
market will exist at the end of the asset’s useful life.
Intangible assets with indefinite useful lives shall not be amortised. The Company
reassesses the useful lives of those assets at every year end. If there is evidence to indicate
that the useful lives of those assets become finite, the useful lives shall be estimated and the
intangible assets shall be amortised systematically and reasonably within the estimated
useful lives.
(3) Criteria of classifying expenditures on internal research and developme nt projects
into research phase and development phase
①Preparation activities related to materials and other relevant aspects undertaken by the
Company for the purpose of further development shall be treated as research phase.
②Development activities after the research phase of the Company shall be treated as
development phase.
(4) Criteria for capitalization of qualifying expenditures during the development phase
Expenditures arising from development phase on internal research and development projects
shall be recognised as intangible assets only if all of the following conditions have been
met:
A.Technical feasibility of completing the intangible assets so that they will be available for
use or sale; and
B.Its intention to complete the intangible asset and use or sell it; and
C.The method that the intangible assets generate economic benefits, including the Company
can demonstrate the existence of a market for the output of the intangible assets or the
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intangible assets themselves or, if it is to be used internally, the usefulness of the intangible
assets; and
D. The availability of adequate technical, financial and other resources to complete the
development and to use or sell the intangible asset; and
E. Its ability to measure reliably the expenditure attributable to the intangible asset.
3.20 Impairme nt of Long-Term Assets
Impairment loss of long-term equity investment in subsidiaries, associates and joint ventures,
investment properties, fixed assets and constructions in progress subsequently measured at
cost, productive biological assets, intangible assets, goodwill, the rights and interests of
proved mining areas of petroleum and natural gas and wells and other relevant facilities
measured at cost (excluding inventories, investment properties measured at fair value,
deferred tax assets, financial assets), shall be determined according to following method:
The Company shall assess at the end of each reporting period whether there is any
indication that an asset may be impaired. If any such indication exists, the Company shall
estimate the recoverable amount of the asset and test for impairment. Irrespective of
whether there is any indication of impairment, the Compa ny shall test for impairment of
goodwill acquired in a business combination, intangible assets with an indefinite useful life
or intangible assets not yet available for use annually.
The recoverable amounts of the long-term assets are the higher of their fair values less costs
to dispose and the present values of the estimated future cash flows of the long-term assets.
The Company estimate the recoverable amounts on an individual basis. If it is difficult to
estimate the recoverable amount of the individual asset, the Company estimates the
recoverable amount of the groups of assets that the individual asset belongs to.
Identification of a group of asset is based on whether the cash inflows from it are largely
independent of the cash inflows from other assets or groups of assets.
If, and only if, the recoverable amount of an asset or a group of assets is less than its
carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount
and the provision for impairment loss shall be recognised accordingly.
For the purpose of impairment testing, goodwill acquired in a business combination shall,
from the acquisition date, be allocated to relevant group of assets based on reasonable
method; if it is difficult to allocate to relevant group of assets, good will shall be allocated to
relevant combination of asset groups. The relevant group of assets or combination of asset
groups is a group of assets or combination of asset groups that is benefit from the synergies
of the business combination and is not larger than the reporting segment determined by the
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Company.
When test for impairment, if there is an indication that relevant group of assets or
combination of asset groups may be impaired, impairment testing for group of assets or
combination of asset groups excluding goodwill shall be conducted first, and calculate the
recoverable amount and recognize the impairment loss. Then the group of assets or
combination of asset groups including goodwill shall be tested for impairment, by
comparing the carrying amount with its recoverable amount. If the recoverable amount is
less than the carrying amount, the Company shall recognise the impairment loss.
The mentioned impairment loss will not be reversed in subsequent accounting period once it
had been recognised.
3.21 Long-term Deferred Expenses
Long-term deferred expenses are various expenses already incurred, which shall be
amortised over current and subsequent periods with the amortisation period exceeding one
year. Long-term prepaid expenses are amortized on a straight-line basis over the period of
expected benefit. In the case of pilot training expenses, they shall be amortized on an
average basis of 10 years according to the period of benefit of the expense items.
3.22 Employee Benefits
Employee benefits refer to all forms of consideration or compensation given by the
Company in exchange for service rendered by employees or for the termination of
employment relationship. Employee benefits include short-term employee benefits,
post-employment benefits, termination benefits and other long-term employee benefits.
Benefits provided to an employee's spouse, children, dependents, family members of
decreased employees, or other beneficiaries are also employee benefits.
According to liquidity, employee benefits are presented in the statement of financial position
as “Employee benefits payable” and “Long-term employee benefits payable”.
(1) Short-term e mployee benefits
①Employee basic salary (salary, bonus, allowance, subsidy)
The Company recognises, in the accounting period in which an employee provides service,
actually occurred short-term employee benefits as a liability, with a corresponding charge to
current profit except for those recognised as capital expenditure based on the requirement of
accounting standards.
②Employee welfare
The Company shall recognise the employee welfare based on actual amount when incurred
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into current profit or loss or related capital expenditure. Employee welfare shall be
measured at fair value as it is a non-monetary benefits.
③ Social insurance such as medical insurance, work injury insurance and maternity
insurance, housing funds, labor union fund and employee education fund.
Payments made by the Company of social insurance for employees, such as medical
insurance, work injury insurance and maternity insurance, payments of housing funds, and
labor union fund and employee education fund accrued in accordance with relevant
requirements, in the accounting period in which employees provide services, is calculated
according to required accrual bases and accrual ratio in determining the amount of employee
benefits and the related liabilities, which shall be recognised in current profit or loss or the
cost of relevant asset.
④Short-term paid absences
The company shall recognise the related employee benefits arising from accumulating paid
absences when the employees render service that increases their entitlement to future paid
absences. The additional payable amounts shall be measured at the expected additional
payments as a result of the unused entitlement that has accumulated. The Company shall
recognise relevant employee benefit of non-accumulating paid absences when the absences
actually occurred.
⑤Short-term profit-sharing plan
The Company shall recognise the related employee benefits payable under a profit-sharing
plan when all of the following conditions are satisfied:
A.The Company has a present legal or constructive obligation to make such payments as a
result of past events; and
B.A reliable estimate of the amounts of employee benefits obligation arising from the profit-
sharing plan can be made.
(b) Post-employment benefits
①Defined contribution plans
The Company shall recognise, in the accounting period in which an employee provides
service, the contribution payable to a defined contribution plan as a liability, with a
corresponding charge to the current profit or loss or the cost of a relevant asset.
When contributions to a defined contribution plan are not expected to be settled wholly
before twelve months after the end of the annual reporting period in which the employees
render the related service, they shall be discounted using relevant discount rate (market
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yields at the end of the reporting period on high quality corporate bonds in active market or
government bonds with the currency and term which shall be consistent with the currency
and estimated term of the defined contribution obligations) to measure employee benefits
payable.
②Defined benefit plan
A.The present value of defined benefit obligation and current service costs
Based on the expected accumulative welfare unit method, the Company shall make
estimates about demographic variables and financial variables in adopting the unbiased and
consistent actuarial assumptions and measure defined benefit obligation, and determine the
obligation period. The Company shall discount the obligation arising from defined benefit
plan using relevant discount rate (market yields at the end of the reporting period on high
quality corporate bonds in active market or government bonds with the currency and ter m
which shall be consistent with the currency and estimated term of the defined benefit
obligations) in order to determine the present value of the defined benefit obligation and the
current service cost.
B.The net defined benefit liability or asset
The net defined benefit liability (asset) is the deficit or surplus recognised as the present
value of the defined benefit obligation less the fair value of plan assets (if any).
When the Company has a surplus in a defined benefit plan, it shall measure the net defined
benefit asset at the lower of the surplus in the defined benefit plan and the asset ceiling.
C.The amount recognised in the cost of asset or current profit or loss
Service cost comprises current service cost, past service cost and any gain or loss on
settlement. Other service cost shall be recognised in profit or loss unless accounting
standards require or allow the inclusion of current service cost within the cost of assets.
Net interest on the net defined benefit liability (asset) comprising interest income on plan
assets, interest cost on the defined benefit obligation and interest on the effect of the asset
ceiling, shall be included in profit or loss.
D.The amount recognised in other comprehensive income
Changes in the net liability or asset of the defined benefit plan resulting from the
remeasurements including:
(a) Actuarial gains and losses, the changes in the present value of the defined benefit
obligation resulting from experience adjustments or the effects of changes in actuarial
assumptions; and
(b) Return on plan assets, excluding amounts included in net interest on the net defined
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benefit liability or asset; and
(c) Any change in the effect of the asset ceiling, excluding amounts included in net interest
on the net defined benefit liability (asset).
Remeasurements of the net defined benefit liability (asset) recognised in other
comprehensive income shall not be reclassified to profit or loss in a subsequent period.
However, the Company may transfer those amounts recognised in other comprehensive
income within equity.
(3) Termination benefits
The Company providing termination benefits to employees shall recognise an employee
benefits liability for termination benefits, with a corresponding charge to the profit or loss of
the reporting period, at the earlier of the following dates:
① When the Company cannot unilaterally withdraw the offer of termination benefits
because of an employment termination plan or a curtailment proposal.
②When the Company recognises costs or expenses related to a restructuring that involves
the payment of termination benefits.
If the termination benefits are not expected to be settled wholly before twelve months after
the end of the annual reporting period, the Company shall discount the termination benefits
using relevant discount rate (market yields at the end of the reporting period on high quality
corporate bonds in active market or government bonds with the currency and term which
shall be consistent with the currency and estimated term of the defined benefit obligations)
to measure the employee benefits.
(4) Other long-term e mployee benefits
①Meet the conditions of the defined contribution plan
When other long-term employee benefits provided by the Company to the employees
satisfies the conditions for classifying as a defined contribution plan, all those benefits
payable shall be accounted for as employee benefits payable at their discounted value.
②Meet the conditions of the defined benefit plan
At the end of the reporting period, the Company recognised the cost of employee benefit
from other long-term employee benefits as the following components:
A.Service costs; and
B.Net interest cost for net liability or asset of other long-term employee benefits; and
C.Changes resulting from the remeasurements of the net liability or asset of other long-ter m
employee benefits.
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In order to simplify the accounting treatment, the net amount of above items shall be
recognised in profit or loss or relevant cost of assets.
3.23 Revenue
Adopted from 1 January 2020
3.23.1 General principle
Revenue is the gross inflow of economic benefits arising from the ordinary operating
activities of the Company that will result in an increase in Stockholders' equity and is
unrelated to the capital invested by Stockholders.
The company recognises revenue when the performance obligation of the contract with the
customer is fulfilled, that is, when the customer obtains control of the relevant commodity.
Control of the relevant commodity refers to the ability to direct the use of, and obtain
substantially all of the remaining benefits from the commodity.
If the contract contains two or more performance obligations, the Company shall, on the
commencement date of the contract, allocate the contract price in proportion to the
stand-alone selling prices of the distinct good or service underlying each performance
obligation in the contract and recognize revenue according to the transaction price
apportioned to each individual performance obligation.
The transaction price is the amount of consideration the Company is expected to be entitled
to receive for the transfer of goods or services to a Customer, excluding payments received
on behalf of third parties. When determining the transaction price of the contract, if there is
a variable consideration, the Company shall determine the best estimate of the variable
consideration according to the expected value or the most likely amount, and shall include
in the transaction price some or all of an amount of variable consideration estimated to the
extent that it is highly probable that a significant reversal in the amount of cumulative
revenue recognised will not occur when the uncertainty associated with the variable
consideration is subsequently resolved. In the circumstances where the contract contains a
significant financing component, the Company shall recognise revenue at an amount that
reflects the price that a customer would have paid for the promised goods or services if the
customer had paid cash for those goods or services when the customer obtains the control of
the commodity. The difference between the transaction price and the contract consideration
is amortised in the contract period using effective rate method. The Company does not
consider the financing component if the period between when the entity transfers a promised
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good or service to a customer and when the customer pays for that good or service is one
year or less.
If one of the following conditions is met, the performance obligation is satisfied over time.
Otherwise, the performance obligation is satisfied at a certain point:
I. the client simultaneously receives and consumes the benefits provided by the entity’s
performance as the entity performs;
II. the entity’s performance creates or enhances an asset that the customer controls as the
asset is created or enhanced; or
III. the entity’s performance does not create an asset with an alternative use to the entity
and the entity has an enforceable right to payment for performance completed to date.
For the performance obligations over time, the Company shall recognize revenue in
accordance with the performance progress during that period, except where the performance
progress cannot be reasonably determined. The progress of completion can be measured
using either the input method or output method. Where the progress of completion cannot be
reliably measured but the entity expects to recover the costs incurred, revenue is measured
to the extent of the costs incurred until such time that the progress of completion can be
reliably measured.
For performance obligations performed at a certain point, the Company recognizes revenue
at the point when the Customer obtains control of the relevant commodity. In determining
whether a customer has acquired control of goods or services, the Company will consider
the following indications:
I. the entity has a present right to payment for the asset, ie. the client is presently obliged
to pay for an asset;
II. the legal title to the asset has been transferred to the client, ie. the client has the legal
title to the asset;
III. the entity has transferred physical possession of the asset to the client, ie. the client
has physical possession of the asset;
IV. the entity has transferred substantially significant risks and rewards of ownership of
the asset, ie. the client has the significant risks and rewards of ownership of the asset;
V. the client has accepted the asset;
When the Company receives payment for goods or services from the customer in advance,
such payment shall first be recognized as a liability and shall be transferred to revenue when
the relevant performance obligations are fulfilled. Where the Company does not need to
refund the advance payment and the Client may waive all or part of its contractual rights,
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the Company expects to be entitled to an amount related to the waiver of the Contract rights
by the Client, such amount shall be recognized as revenue pro rata in accordance with the
mode in which the Client exercises the contractual rights; Otherwise, the company will only
convert the relevant balance of the aforesaid liability into revenue when the possibility of
the client’s request to fulfill the remaining performance obligations is extremely low.
3.23.2 Specific methods
The specific methods of revenue recognition of the Company are as follows:
① Revenue from providing services
A. The Company recognises passenger revenue based on the provision of transport services
and not on ticket sales. The airline tickets sold by the Company shall be included in current
liabilities when they have not been carried out, and recognized as contract liabilities. In
addition, the Company has entered into code-sharing agreements with other airlines, under
which the flight number of one carrier can use the code specified by the other carrier's
airline. Code sharing revenue is apportioned among code sharing standard partners i n
accordance with the contractual agreements entered into and the proportional apportionment
standards of the aviation industry, and is also recognized as passenger revenue when
transportation services are provided.
An overdue ticket is an unexercised contractual right. When the company sells air tickets
without refund and the customer may waive all or part of its contractual rights, the company
expects to be entitled to the amount related to the contractual rights waived by the customer,
the aforesaid amount shall be recognized as revenue on a pro rata basis; otherwise, the
company will only convert the relevant balance of the aforesaid liability into revenue when
the possibility of the client’s request to fulfill the remaining performance obligations is
extremely low.
B. The Company recognised freight transportation revenue based on the provision of
transportation services.
C. Other revenues from providing labor services and selling goods. Other revenue mainly
includes revenues from ground services and aircraft maintenance, and revenues from selling
goods on board, which shall be recognized when the customer obtains control over relevant
goods or services.
3.24 Governme nt Grants
(1) Recognition of governme nt grants
A government grant shall not be recgonised until there is reasonable assurance that:
①The Company will comply with the conditions attaching to them; and
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②The grants will be received.
(2) Measurement of government grants
Monetary grants from the government shall be measured at amount received or receivable,
and non-monetary grants from the government shall be measured at their fair value or at a
nominal value of RMB 1.00 when reliable fair value is not available.
(3) Accounting for governme nt grants
①Government grants related to assets
Government grants pertinent to assets mean the government grants that are obtained by the
Company used for purchase or construction, or forming the long-term assets by other ways.
Government grants pertinent to assets shall be recognised as deferred income, and should be
recognised in profit or loss on a systematic basis over the useful lives of the relevant assets.
Grants measured at their nominal value shall be directly recognised in profit or loss of the
period when the grants are received. When the relevant assets are sold, transferred, written
off or damaged before the assets are terminated, the remaining deferred income shall be
transferred into profit or loss of the period of disposing relevant assets.
②Government grants related to income
Government grants other than related to assets are classified as government grants related to
income. Government grants related to income are accounted for in accordance with the
following principles:
If the government grants related to income are used to compensate the enterprise’s relevant
expenses or losses in future periods, such government grants shall be recognised as deferred
income and included into profit or loss in the same period as the relevant expenses or losses
are recognised;
If the government grants related to income are used to compensate the enterprise’s relevant
expenses or losses incurred, such government grants are directly recognised into current
profit or loss.
For government grants comprised of part related to assets as well as part related to income,
each part is accounted for separately; if it is difficult to identify different part, the
government grants are accounted for as government grants related to income as a whole.
Government grants related to daily operation activities are recognised in other income in
accordance with the nature of the activities, and government grants irrelevant to daily
operation activities are recognised in non-operating income.
③Loan interest subsidy
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When loan interest subsidy is directly allocated to the Company, the subsidy shall be
recognised as offsetting the relevant borrowing cost.
④Repayment of the government grants
Repayment of the government grants shall be recorded by increasing the carrying amount of
the asset if the book value of the asset has been written down, or reducing the balance of
relevant deferred income if deferred income balance exists, any excess will be recognised
into current profit or loss; or directly recognised into current profit or loss for other
circumstances.
3.25 Deferred Tax Assets and Deferred Tax Liabilities
Temporary differences are differences between the carrying amount of an asset or liability
in the statement of financial position and its tax base at the balance sheet date. The
Company recognise and measure the effect of taxable temporary differences and deductible
temporary differences on income tax as deferred tax liabilities or deferred tax assets using
liability method. Deferred tax assets and deferred tax liabilities shall not be discounted.
(1) Recognition of deferred tax asset
Deferred tax assets should be recognised for deductible temporary differences, the
carryforward of unused tax losses and the carryforward of unused tax credits to the extent
that it is probable that taxable profit will be available against which the deductible
temporary differences, the carryforward of unused tax losses and the carryforward of unused
tax credits can be utilised at the tax rates that are expected to apply to the period when the
asset is realised, unless the deferred tax asset arises from the initial recognition of an asset or
liability in a transaction that:
A. Is not a business combination; and
B.At the time of the transaction, affects neither accounting profit nor taxable profit (tax
loss).
The Company shall recognise a deferred tax asset for all deductible temporary differences
arising from investments in subsidiaries, associates and joint ventures, only to the extent that,
it is probable that:
A.The temporary difference will reverse in the foreseeable future; and
B.Taxable profit will be available against which the deductible temporary difference can be
utilised.
At the end of each reporting period, if there is sufficient evidence that it is probable that
taxable profit will be available against which the deductible temporary difference can be
utilized, the Company recognises a previously unrecognised deferred tax asset.
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The carrying amount of a deferred tax asset shall be reviewed at the end of each reporting
period. The Company shall reduce the carrying amount of a deferred tax asset to the extent
that it is no longer probable that sufficient taxable profit will be available to allow the
benefit of part or all of that deferred tax asset to be utilised. Any such reduction shall be
reversed to the extent that it becomes probable that s ufficient taxable profit will be
available.
(2) Recognition of deferred tax liabilities
A deferred tax liability shall be recognised for all taxable temporary differences at the tax
rate that are expected to apply to the period when the liability is settled.
①No deferred tax liability shall be recognised for taxable temporary differences arising
from:
A.The initial recognition of goodwill; or
B.The initial recognition of an asset or liability in a transaction which: is not a business
combination; and at the time of the transaction, affects neither accounting profit nor taxable
profit (tax loss).
②An entity shall recognise a deferred tax liability for all taxable temporary differences
associated with investments in subsidiaries, associates, and joint ventures, except to the
extent that both of the following conditions are satisfied:
A.The Company is able to control the timing of the reversal of the temporary difference;
and
B.It is probable that the temporary difference will not reverse in the foreseeable future.
(3) Recognition of deferred tax liabilities or assets involved in special transactions or
events
①Deferred tax liabilities or assets related to business combination
For the taxable temporary difference or deductible temporary difference arising from a
business combination not under common control, a deferred tax liability or a deferred tax
asset shall be recognised, and simultaneously, goodwill recognised in the business
combination shall be adjusted based on relevant deferred tax expense (income).
②Items directly recognised in equity
Current tax and deferred tax related to items that are recognised directly in equity shall be
recognised in equity. Such items include: other comprehensive income generated from fair
value fluctuation of available for sale investments; an adjustment to the opening balance of
retained earnings resulting from either a change in accounting policy that is applied
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Shandong Airlines Co., Ltd. Annual Report 2020
retrospectively or the correction of a prior period (significant) error; amounts arising on
initial recognition of the equity component of a compound financial instrument that contains
both liability and equity component.
③Unused tax losses and unused tax credits
A.Unsused tax losses and unused tax credits generated from daily operation of the Company
itself
Deductible loss refers to the loss calculated and permitted according to the requirement of
tax law that can be offset against taxable income in future periods. The criteria for
recognising deferred tax assets arising from the carryforward of unused tax losses and tax
credits are the same as the criteria for recognising deferred tax assets arising from
deductible temporary differences. The Company recognises a deferred tax asset arising from
unused tax losses or tax credits only to the extent that there is convincing other evidence
that sufficient taxable profit will be available against which the unused tax losses or unused
tax credits can be utilised by the Company. Income taxes in current profit or loss shall be
deducted as well.
BUnsused tax losses and unused tax credits arising from a business combination
Under a business combination, the acquiree’s deductible temporary differences which do
not satisfy the criteria at the acquisition date for recognition of deferred tax asset shall not
be recognised. Within 12 months after the acquisition date, if new information regarding the
facts and circumstances exists at the acquisition date and the economic benefit of the
acquiree’s deductible temporary differences at the acquisition is expected to be realised, the
Company shall recognise acquired deferred tax benefits and reduce the carrying amount of
any goodwill related to this acquisition. If goodwill is reduced to zero, any remaining
deferred tax benefits shall be recognised in profit or loss. All other acquired deferred tax
benefits realised shall be recognised in profit or loss.
④Temporary difference generated in consolidation elimination
When preparing consolidated financial statements, if temporary difference between carrying
value of the assets and liabilities in the consolidated financial statements and their taxable
bases is generated from elimination of inter-company unrealized profit or loss, deferred tax
assets or deferred tax liabilities shall be recognised in the consolidated financial statements,
and income taxes expense in current profit or loss shall be adjusted as well except for
deferred tax related to transactions or events recognised directly in equity and business
combination.
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Shandong Airlines Co., Ltd. Annual Report 2020
⑤Share-based payment settled by equity
If tax authority permits tax deduction that relates to share-based payment, during the period
in which the expenses are recognised according to the accounting standards, the Company
estimates the tax base in accordance with available information at the end of the accounting
period and the temporary difference arising from it. Deferred tax shall be recognised when
criteria of recognition are satisfied. If the amount of estimated future tax deduction exceeds
the amount of the cumulative expenses related to share-based payment recognised according
to the accounting standards, the tax effect of the excess amount shall be recognised directly
in equity.
3.26Operating Leases and Finance Leases
The Company classifies the lease that substantially transfers all the risks and rewards
incidental to ownership of an underlying asset as a finance lease. Other lease shall be
classified as an operating lease.
(1) Accounting for operating leases
①When the Company as a lessee, the lease payments should be recognised into profit or
loss of the reporting period over the lease terms on a straight-line basis or the amount of
usage. If the lessor provides the rent-free period, the Company shall allocate total lease
payment over the entire lease terms including the rent-free period using straight-line basis or
other reasonable method. Lease expense and the corresponding liabilities shall be
recognised during the rent-free period. If expenses relating to lease which should be borne
by the Company are paid by the lessor of the assets, they shall be deducted from the total
lease expenses and the balances shall be amortised over the lease terms by the Company.
Initial direct costs relating to lease transactions incurred by the Company shall be
recognised into current profit or loss. Contingent rental, if included in the lease contract,
shall be recognised into profit or loss upon occurrence.
②When the Company as a lessor, lease income should be recognised over the lease terms
on a straight-line basis. If the lessor provides the rent-free period, the Company shall
allocate total lease income over the entire lease terms including the rent-free period using
straight-line basis or other reasonable method. Lease income shall be recognised during the
rent-free period. If expenses relating to leases which should be borne by the lessee of the
assets are paid by the Company, they shall be deducted from the total lease income and the
balances shall be amortised over the lease terms by the Company.
Initial direct costs relating to lease transactions incurred by the Company shall be
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Shandong Airlines Co., Ltd. Annual Report 2020
recognised into current profit or loss ; if the amounts are material, they shall be capitalise d
and amortised over the lease terms on the same basis as the recognition of lease income.
Contingent rental, if included in the lease contract, shall be recognised into profit or loss
upon occurrence.
(2) Accounting for finance leases
(i) When the Company as a lessee, at commencement of the lease, assets obtained through
finance leases should be recorded at the lower of their fair values and the present values of
the minimum lease payments. The Company shall recognise long-term payables at amounts
equal to the minimum lease payments, and the differences shall be recognised as
unrecognised finance charges, which shall be amortised over the lease terms as finance
expenses by using effective interest rate method and recognised into finance cost.
Initial direct costs are recorded in the value of the leased assets.
The Company adopts the same depreciation policy for the leased assets as its self-owned
fixed assets. Depreciation period is determined according to the lease contract. If it is
reasonably certain that the Company will obtain the ownership of the assets at the expiration
of the lease, the depreciation period will be the useful lives of the leased assets. If it is not
certain that the Company will obtain the ownership of the asset at the expiration of the lease,
the depreciation period is the shorter of the lease period and their useful lives.
② When the Company as a lessor, at commencement of the lease, lease receivables shall be
measured at minimum lease receivables plus initial direct costs relating to lease transactions
and recognised as long-term receivable in the statement of financial position. Unguaranteed
residual values are recorded simultaneously. The differences between the total of minimum
lease receivable, initial direct cost and unguaranteed residual values and their present value
shall be recognised as unearned finance income, and shall amortised over the lease terms as
lease income at the effective interest rate method.
3.27 Regular Repair and Substantial Repair
Regular repair expenditure of own aircrafts and aircrafts acquired under a financial lease is
accounted for through profit or loss for the period in which it is incurred. Substantial repair
expenditure eligible for capitalization is capitalized when incurred and recognized as
replacement cost of non-current assets and depreciated over a reasonable length of time.
Substantial repair expenditure of aircrafts under an operating lease incurred before the lease
expiry date is amortized on the basis of air hours over the lease period.
3.28 Changes in Significant Accounting Policies and Accounting Estimates
(1) Changes in accounting polices
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Shandong Airlines Co., Ltd. Annual Report 2020
The Ministry of Finance issued the revised Accounting Standards for Business Enterprises
No. 14 -- Revenue (Caikuai [2017] No. 22) on July 5, 2017 (hereinafter referred to as the
"new revenue standards"), requiring domestic listed enterprises to implement the new
revenue standards from January 1, 2020.
According to the resolution of the Third Meeting of the Seventh Board of Directors on
March 26, 2020, the Company will implement the aforementioned new revenue standards
from January 1, 2020.
Under the new revenue criteria, the original revenue and construction contract criteria are
included into the unified revenue recognition model, the transfer of risk reward is replaced
by the transfer of control as the judgment standard of revenue recognition point, and more
clear guidances are provided on the accounting treatment of contracts involving multiple
transaction arrangements and for revenue recognition for some specific transactions.
The Company applies the new revenue standards retroactively, but the Company chooses
not to restate if the data of the comparative financial statements in the previous period are
inconsistent with the new revenue standards in the classification and measurement.
Therefore, for the cumulative impact of the first implementation of the standard, the
Company adjusted the retained earnings at the beginning of 2020 and the amount of items
related to the financial statements, and the financial statements for the year 2019 are not
restated. The Company only adjusts the cumulative impact number of outstanding contracts
on the first execution date.
The main changes and impacts of the implementation of the new revenue standards to the
company are as follows:
A. Under the new revenue standards, contract liabilities are the obligations of the Company
to transfer goods or services to a customer for consideration received or receivable by the
Company. Therefore, on January 1, 2020, the Company will transfer the balance of the
invoice settlement amount received in advance to contract liabilities.
B. Under the original revenue standard, the Company will only transfer the unused expired
tickets into revenue. According to the new revenue standards, an overdue ticket is an
unexercised contractual right. When the payment of the ticket sold by the company does not
need to be refunded and the customer may waive all or part of its contractual rights, the
company expects to be entitled to obtain the contract rights related to the contractual rights
waived by the customer. In case of the amount, the above amount shall be recognized as
income in proportion to the customer’s exercise of contract rights. Otherwise, the relevant
balance of the above liability will be converted to income only when the possibility of the
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Shandong Airlines Co., Ltd. Annual Report 2020
customer’s request to fulfill the remaining performance obligations is extremely low.
(2) Significant changes in accounting estimates
In order to estimate the depreciation of fixed assets more reasonably, and reflect the
Company's financial position and operating results fairly, in accordance with the accounting
standards, comparing other public companies in the same industry and combining the actual
situation, on April 28, 2020, the Company’s seventh session of the board of directors for the
fourth time (temporary) meeting examined and approved the Proposal on Accounting
Estimate Changes of the Company, decided to implement new accounting estimates since
January 1, 2020, adjusted the depreciation method of engine from the straight-line method
to unit of production method, adjusted the depreciable year of high-priced revolving parts
from 15-18 years to 3-15 years. This accounting estimate change increases the current
consolidated net profit by CNY 69,134,850.88 and the net profit of the parent company of
the current period by CNY 69,134,850.88.
(3)Adjustments of the Financial Statements at the Beginning of the Reporting Period
for the First-Year Adoption of New Revenue Standards
Consolidated Statement of Financial Position
Unit: Yuan, Currency: CNY
Items 31 December 2019 1 January 2020 Adjustment
Current assets:
Monetary funds 598,961,065.69 598,961,065.69
Held-for-trading financial assets
Derivative financial assets
Notes receivable
Accounts receivable 456,758,290.60 456,758,290.60
Accounts receivable financing
Prepayments 232,061,479.78 232,061,479.78
Other receivables 232,147,324.23 232,147,324.23
Including: Interests receivable
Dividend receivables
Inventories 109,435,256.69 109,435,256.69
Contract assets Not applicable
Held-for-sale assets
Non-current assets maturing within one
year
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Shandong Airlines Co., Ltd. Annual Report 2020
Items 31 December 2019 1 January 2020 Adjustment
Other current assets 170,020,416.07 170,020,416.07
Total current assets 1,799,383,833.06 1,799,383,833.06
Non-current assets:
Debt investments
Other debt investments
Long-term receivables
Long-term equity investments
Other equity instrument investment 874,728,633.32 874,728,633.32
Other non-current financial assets
Investment property
Fixed assets 7,362,687,431.80 7,362,687,431.80
Construction in progress 5,479,071,703.01 5,479,071,703.01
Biological assets held for production
Oil and gas assets
Intangible assets 113,459,129.62 113,459,129.62
Development expenditure
Goodwill 454,020.13 454,020.13
Deferred charges 657,772,583.81 657,772,583.81
Deferred tax assets 1,105,378,651.73 1,105,378,651.73
Other non-current assets
Total non-current assets 15,593,552,153.42 15,593,552,153.42
Total assets 17,392,935,986.48 17,392,935,986.48
Current liabilities
Short-term borrowings 300,329,083.33 300,329,083.33
Held-for-trading financial liabilities 126,264.75 126,264.75
Derivative financial liabilities
Notes payable 402,996,891.30 402,996,891.30
Accounts payable 2,482,248,514.51 2,482,248,514.51
Advance from customers 936,873,667.96 -936,873,667.96
Employee benefits payable 549,061,919.97 549,061,919.97
Taxes and fees payable 149,437,183.71 158,334,781.87 8,897,598.16
Other payables 586,143,459.66 586,143,459.66
Including: Interests payables
Dividend payables 602,306.96 602,306.96
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Shandong Airlines Co., Ltd. Annual Report 2020
Items 31 December 2019 1 January 2020 Adjustment
Contract liabilities Not applicable 839,385,426.95 839,385,426.95
Held-for-sale liabilities
Non-current liabilities due within one
885,299,947.83 885,299,947.83
year
Other current liabilities 61,897,848.38 61,897,848.38
Total current liabilities 6,292,516,933.02 6,265,824,138.55 -26,692,794.47
Non-current liabilities:
Long-term borrowings 808,001,382.82 808,001,382.82
Bonds payable
Including: Preference share
Perpetual capital
securities
Long-term payables 4,623,939,875.40 4,623,939,875.40
Long-term employee benefits payable 152,746,225.21 152,746,225.21
Accrued liabilities
Deferred income 109,423,070.21 109,423,070.21
Deferred tax liabilities 232,789,494.25 232,789,494.25
Other non-current liabilities
Total non-current liabilities 5,926,900,047.89 5,926,900,047.89
Total liabilities 12,219,416,980.91 12,192,724,186.44 -26,692,794.47
Shareholders' equity 400,000,000.00 400,000,000.00
Share capital
Other equity instruments
Including: Preference shares
Perpetual capital
securities
Capital reserves 75,410,363.70 75,410,363.70
Less: Treasury stock
Other comprehensive income 570,487,739.92 570,487,739.92
Specific reserves
Surplus reserves 538,773,444.97 538,773,444.97
General risk reserves
Retained earnings 3,588,847,456.98 3,615,540,251.45 26,692,794.47
Equity attributable to shareholders of the
5,173,519,005.57 5,200,211,800.04 26,692,794.47
parent
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Shandong Airlines Co., Ltd. Annual Report 2020
Items 31 December 2019 1 January 2020 Adjustment
Minority interests
Total owners’ equity 5,173,519,005.57 5,200,211,800.04 26,692,794.47
Total liabilities and owners' equity 17,392,935,986.48 17,392,935,986.48
Statement of Financial Position of the Parent Company
Unit: Yuan Currency: CNY
Items 31 December 2019 1 January 2020 Adjustment
Current assets:
Monetary funds 563,534,831.81 563,534,831.81
Held-for-trading financial assets
Derivative financial assets
Notes receivable
Accounts receivable 456,602,459.51 456,602,459.51
Accounts receivable financing
Prepayments 231,804,126.69 231,804,126.69
Other receivables 237,966,773.59 237,966,773.59
Including: Interests receivable
Dividend receivables
Inventories 108,006,448.04 108,006,448.04
Contract assets Not applicable
Held-for-sale assets
Non-current assets maturing within one
year
Other current assets 169,612,615.24 169,612,615.24
Total current assets 1,767,527,254.88 1,767,527,254.88
Non-current assets:
Debt investments
Other debt investments
Long-term receivables
Long-term equity investments 144,101,285.43 144,101,285.43
Other equity instrument investment 874,728,633.32 874,728,633.32
Other non-current financial assets
Investment property
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Shandong Airlines Co., Ltd. Annual Report 2020
Items 31 December 2019 1 January 2020 Adjustment
Fixed assets 7,265,719,146.41 7,265,719,146.41
Construction in progress 5,479,071,703.01 5,479,071,703.01
Biological assets held for production
Oil and gas assets
Intangible assets 100,681,207.47 100,681,207.47
Development expenditure
Goodwill
Deferred charges 657,569,167.99 657,569,167.99
Deferred tax assets 1,104,641,386.20 1,104,641,386.20
Other non-current assets
Total non-current assets 15,626,512,529.83 15,626,512,529.83
Total assets 17,394,039,784.71 17,394,039,784.71
Current liabilities
Short-term borrowings 300,329,083.33 300,329,083.33
Held-for-trading financial liabilities 126,264.75 126,264.75
Derivative financial liabilities
Notes payable 402,996,891.30 402,996,891.30
Accounts payable 2,494,426,631.18 2,494,426,631.18
Advance from customers 935,722,229.11 -935,722,229.11
Employee benefits payable 539,824,147.52 539,824,147.52
Taxes and fees payable 147,060,509.11 155,958,107.27 8,897,598.16
Other payables 649,376,495.57 649,376,495.57
Including: Interests payables
Dividend payables 11,940.00 11,940.00
Contract liabilities Not applicable 838,233,988.10 838,233,988.10
Held-for-sale liabilities
Non-current liabilities due within one
885,299,947.83 885,299,947.83
year
Other current liabilities 61,897,848.38 61,897,848.38
Total current liabilities 6,355,162,199.70 6,328,469,405.23 -26,692,794.47
Non-current liabilities:
Long-term borrowings 808,001,382.82 808,001,382.82
Bonds payable
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Shandong Airlines Co., Ltd. Annual Report 2020
Items 31 December 2019 1 January 2020 Adjustment
Including: Preference share
Perpetual capital securities
Long-term payables 4,623,939,875.40 4,623,939,875.40
Long-term employee benefits payable 152,746,225.21 152,746,225.21
Accrued liabilities
Deferred income 109,423,070.21 109,423,070.21
Deferred tax liabilities 231,746,231.52 231,746,231.52
Other non-current liabilities
Total non-current liabilities 5,925,856,785.16 5,925,856,785.16
Total liabilities 12,281,018,984.86 12,254,326,190.39 -26,692,794.47
Shareholders' equity
Share capital 400,000,000.00 400,000,000.00
Other equity instruments
Including: Preference shares
Perpetual capital securities
Capital reserves 86,911,168.71 86,911,168.71
Less: Treasury stock
Other comprehensive income 570,487,739.92 570,487,739.92
Specific reserves
Surplus reserves 538,112,740.44 538,112,740.44
Retained earnings 3,517,509,150.78 3,544,201,945.25 26,692,794.47
Total owners’ equity 5,113,020,799.85 5,139,713,594.32 26,692,794.47
Total liabilities and owners' equity 17,394,039,784.71 17,394,039,784.71
(4) Retrospective Restatement of Previous Comparative Data for the First Adoption of
New Financial Instrume nts Standards
A．Consolidated Financial Statements
December 31 Re-classificati Re-measureme
Items 1 January 2020
2019 on nt
-936,873.667.9
Prepayments 936,873.667.96
6
874,975,819.5
Contract liabilities -35,590,392.63 839,385,426.95
8
Taxes and fees 149,437,183.71 8,897,598.16 158,334,781.87
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Shandong Airlines Co., Ltd. Annual Report 2020
payable
Other current
61,897,848.38 61,897,848.38
liabilities
3,615,540,251.
Retained earnings 3,588,847,456.98 26,692,794.47
45
B．Financial Statements of Parent Company
December 31 Re-classificati Re-measureme
Items 1 January 2020
2019 on nt
Prepayments -935,722.229.1
935,722.229.11
1
Contract liabilities 873,824,380.7
-35,590,392.63 838,233,988.10
3
Taxes and fees
147,060,509.11 8,897,598.16 155,958,107.27
payable
Other current
61,897,848.38 61,897,848.38
liabilities
Retained earnings 3,544,201,945.
3,517,509,150.78 26,692,794.47
25
3.29 Correction of Prior Period Errors
There is no significant correction of prior period errors for the Company during the
reporting period.
3.30Significant Account Judge ment and Estimates
The Company is required to make judgments, estimates and assumptions about the carrying
amounts of items in the financial statements that cannot be measured accurately, due to the
internal uncertainties of operation activities. These judgments, estimates and assumptions
are based on historical experiences of the Company’s management as well as other factors
that are considered to be relevant. These judgements, estimates and assumptions may affect
value of the financial statements in revenue, expenses, assets and liabilities and the
disclosure of contingency at the balance sheet date. However, the actual result derived from
those uncertainties in estimates may be different from the management estimates, which
may lead significant adjustments to the carrying amounts of the assets or liabilities affected
in the future.
The Company has reviewed the judgments, estimates and assumptions regularly on the basis
of going concern. Where the changes in accounting estimates only affect the period when
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changes occurred, and they are recognized within the same period. Where the changes in
accounting estimates affect both current period and future period, the changes are
recognized within the period of change and future period.
At the balance sheet date, the followings are the significant areas where the Company needs
to make judgement, estimates and assumptions over the value of items in the financial
statements:
(1) Classification of Lease
The Company classifies leases as operating lease and finance lease according to the rule
stipulated in the Accounting Standard for Business Enterprises No. 21--Leasing. The
management shall make analysis and judgment on whether the risks and rewards related to
the title of leased assets has been transferred to the leaser, or whether the Company has
substantially held the risks and rewards related to the ownership of leased assets.
(2) Impairment of Financial Assets
The Company uses the expected credit loss model to assess the impairment of fi nancial
instruments. The application of the expected credit loss model requires significant judgment
and estimation, and all reasonable and evidenced information, including forward-looking
information, needs to be considered. In making such judgments and estimates, the Company
infers the expected changes in the debtor's credit risk based on historical data combined with
economic policies, macroeconomic indicators, industry risks, external market environment,
technological environment, and changes in customer circumstances.
(3) Impairment of Inventories
The Company measures inventories by the lower of cost and realizable net value according
to the accounting policies in regard of inventories and provisions for decline in value of
inventories is made if the cost is higher than their net realizable value, and obsolete and
slow-movement inventories. Inventories decline in value to net realizable value is the
estimated selling price in the ordinary course of business. Net realizable value is determined
on the basis of clear evidence obtained and takes into consideration the purposes of holding
inventories and effect of post balance sheet events. The difference between the actual result
and the original estimates shall have impact on reverse of the carrying amount of the
inventories and their decline in value or provisions during the period of change.
(4) The Fair Value of Financial Instruments
For a financial instrument which has no active market, the Company establishes fair value
by using various valuation methods, including of discounted cash flow analysis model. The
Company needs to estimate future cash flow, credit risk, volatility and relationship during
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the valuation and choose appropriate discount rate. Such assumptions have uncertainties and
their changes shall have impact on the fair value of financial instruments. If an equity
instrument investment or contract has a public offer, the Company does not use cost as the
best estimate of its fair value.
(5) Impairment of Non-Financial, Non-Current Assets
The Company assesses whether there are any indicators of impairment for all non-current
assets other than financial assets at the balance sheet date. For an intangible asset that has
indefinite useful life, impairment test is made in addition to the annual impairment test if
there is any indication of impairment. For non-current assets other than financial assets,
impairment test is made when there is any indication that its account balance cannot be
recovered.
Impairment exists when the recoverable amount of a n asset is the higher of its fair value less
cost of disposal and present value of the future cash flows expected to be derived from the
asset.
Net value between the difference of fair value and disposal cost is determined by reference
of the price of similar product in a sale agreement in an arm’s length transaction or an
observable market price less the additional cost directly attributable to the disposal of the
asset.
When estimating the present value of future cash flow, significant judgments are made over
the asset’s production, selling price and relevant operating expenses, and discount rate used
to calculate present value. All available materials that are considered to be relevant shall be
used in the estimation of recoverable value. These materials include estimations of
production, selling price and operating expenses based on reasonable and supportable
assumptions.
The Company makes an impairment test for goodwill at least at each year end. This requires
an estimation of present value of future cash flow of the assets or assets group where
goodwill has been allocated. The Company shall makes estimation on the future cash flow
derived from assets or assets group and determine an appropriate discount rate for the
present value of future cash flow when the estimation of present value of future cash flow is
made.
(6) Depreciation and Amortization
Investment property, fixed assets and intangible assets are depreciated and amortized using
the straight-line method over their useful lives after taking into account residual value. The
useful lives are regularly reviewed to determine the depreciation and amortization costs
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charged in each reporting period. The useful lives are determined based on historical
experience of similar assets and the estimated technical changes. If there is an indication
that there has been a change in the factor used to determine the depreciation or amortization,
the rate of depreciation or amortization is revised.
(7) Deferred Tax Assets
The Company shall recognize all unused tax losses as deferred tax assets to the extent that it
is probable that future taxable profit will be available against which the unused tax losses
and unused tax credits can be utilized. This requires the management of the Company make
a lot of judgments over the estimation of time period, value and tax planning strategies
when future taxable profit incurs so that the value of deferred tax assets can be determined.
(8) Income Tax
There are some transactions where ultimate tax treatments and calculations have
uncertainties in the Company’s everyday operation. Whether it is possible for some items to
make expenditure before tax needs approval from competent tax authorities. If there is any
difference between finalized determination value and their initial estimations value, the
difference shall have the impact on the income tax and deferred income tax of the current
period during the final determination.
(9) Aircraft Operating Lease and Engine Overhaul Expenses
Aircraft operating lease and engine overhaul expenses are accrued and charged to profit or
loss in accordance with the expected maintenance cycle, based on flight hours, flight cycles
overhaul period and the amount of the cost of repairs which may occur. T hese estimates are
largely based on past historical data about the same or similar types of aircraft and engines
repairance. The withholding amount and overhaul costs may be affected by different
judgments and estimates and affect current profit or loss.
(10) Defined Benefit Plan
The defined benefit plan implemented and maintained by the Company includes
post-employment benefits plan. The provided welfare costs under the above defined benefit
plan was calculated by expected cumulative unit credit method according to various
actuarial assumptions and were recognized during the employee service providing period.
Actuarial Assumptions include but not limited to discount rate, mortality rate, and etc. The
discount rate is on the basis of management's review of national debt, and mortality rate
depends on the mortality rate adopted by the China life insurance industry. Supplemental
information of defined benefit plan refers to Note 5.29.
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Note 4 TAXATION
4.1 Major Taxes and Tax Rate
Tax Tax rate (%)
Enterprise income tax Business tax is calculated according to the taxable income (note1)
Value added tax The VAT is calculated as the difference between output tax and deductible input tax for
the period, and the tax rates are 6%, 9%, 13% (Note 2). The output tax is calculated
using the sales of goods and taxable services income (including transportation and
ground services revenue).
Property tax Property tax is calculated by the nature of house property and is collected by ad
valorem or specific duties according to the tax rules.
Urban maintenance and Urban maintenance and construction tax are calculated at 7% of turnover tax.
construction tax
Education surcharge Education surcharge is calculated at 3% of turnover tax.
Local education surcharge Local education surcharge is calculated at 2% of turnover tax.
Civil aviation development Civil aviation development fund shall be calculated using the collection standard of
Fund the relevant category of flight routes, maximum departure weight and flight distance
adopted by the civil aviation industry. According to “Interim measures for the
administration of the administration of civil aviation development fund”《民航发展基
金征收使用管理暂行办法》.
Note 1: According to the provision of National Development and Reform Commission ([2014]15) and Announcement of
the State Administration of Taxation on the enterprise income tax on the in-depth implementation of the development
strategy of the western region of China"(《国家税务总局关于深入实施西部大开发战略有关企业所得税问题的公告》)
(State Administration of Taxation [2012]12), the Chongqing branch of the Company can get a reduced rate of 15% to pay
corporate income tax, when its international and domestic air passenger and cargo transport projects are in line with the "
Catalogue of Encouraged Industries in Western Region”(《西部地区鼓励类产业目录》). All companies in mainland China
are subject to a corporate income tax rate of 25%.
Note 2: As a taxpayer in production and living service industry, from 1 April 2019 to 31 December 2021, the Company can
deduct the taxable amount according to the current deductible input tax plus 10% of the current deductible input tax.
4.2 Tax Incentives
4.2.1. Zero VAT rate applies to entities and individuals within the Chinese territory that
provide international transportation services, research and development services and
designing services provided to foreign entities, roundtrip transportation services between
Hongkong, Macao, and Taiwan, as well as transportation services provided in Hongkong,
Macao, and Taiwan per the Notice of Pilot Conversion of Sales-tax-to-VAT for the
Transportation Sector and Certain Contemporary Service Sectors by the Ministr y of Finance
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and State Administration of Taxation (Caishui [2013] No.37)(财税[2013]37 号《财政部、
国家税务总局关于在全国开展交通运输业和部分现代服务业营业税改征增值税试点税
收政策的通知》)..
4.2.2. According to the Announcement of the State Administration of Taxation on the
enterprise income tax on the in-depth implementation of the development strategy of the
western region of China"(《国家税务总局关于深入实施西部大开发战略有关企业所得税
问题的公告》) (State Administration of Taxation [2012]12), Chongqing Branch of the
Company meets the conditions for reduction and exemption in the development of the
western region, could enjoy the preferential policy of reducing enterprise income tax by
15% in 2020.
4.2.3. According to the Notice of Civil Aviation Administration of China on Supporting
Policies for Actively Coping with COVID-19 ( 《民航局关于积极应对新冠肺炎疫情有关
支持政策的通知》) (CAAC Letter [2020] No. 145), the civil aviation development fund
paid by civil aviation enterprises will be temporarily exempted from January 1, 2020.
Note 5 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the following annotated items (including the annotated major items in the Company's
financial statements), unless otherwise indicated, "beginning of the period" refers to 31
December 2019 and "end of the period" refers to 31 December 2020;"Current period" refers
to the year 2020 and "Previous period" refers to the year 2019.
5.1 Monetary funds
Item 31 December 2020 31 December 2019
Cash at hand: 225,522.11 285,508.32
Bank deposit: 5,306,248,928.95 598,575,557.37
Other monetary funds 100,000.00
Total 5,306,474,451.06 598,961,065.69
Including: the total amount of deposit 5,411,252.96 8,525,480.55
abroad
The monetary funds at the end of the period increased by 785.95% compared with the
beginning of the period, mainly because the COVID-19 epidemic has not been completely
controlled, and the Company reserved enough monetary funds to deal with liquidity risks.
5.2 Accounts receivable
5.2.1 Disclosure by Age
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Age 31 December 2020 31 December 2019
Within 1 year 283,442,317.86 437,769,605.78
1 to 2 years 52,253,563.71 35,123,064.16
2 to 3 years 34,123,063.16
3 to 4 years
4 to 5 years
Over 5 years 3,186,437.70 11,243,647.55
Subtotal 373,005,382.43 484,136,317.49
Less: provision for bad debt 18,653,085.44 27,378,026.89
Total 354,352,296.99 456,758,290.60
5.2.2 Disclosure by Category
① 31 December 2020 (Provision using simple model)
31 December 2020
Book balance Provision for bad debt
Category
Proportion Provision Carrying amount
Amount Amount
(%) ratio (%)
Accounts receivable subject
to individual impairment 2,765,908.05 0.74 2,765,908.05 100.00
assessment
Accounts receivable subject
to group impairment 370,239,474.38 99.26 15,887,177.39 4.29 354,352,296.99
assessment
Total 373,005,382.43 100.00 18,653,085.44 5.00 354,352,296.99
(Continued)
31 December 2019
Book balance Provision for bad debt
Category
Proportion Provision Carrying amount
Amount Amount
(%) ratio (%)
Accounts receivable subject
to individual impairment 10,823,117.90 2.24 10,823,117.90 100.00
assessment
Accounts receivable subject
473,313,199.59 97.76 16,554,908.99 3.50 456,758,290.60
to group impairment
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31 December 2019
Book balance Provision for bad debt
Category
Proportion Provision Carrying amount
Amount Amount
(%) ratio (%)
assessment
Total 484,136,317.49 100.00 27,378,026.89 5.66 456,758,290.60
Detailed explanation of provision for bad debt:
② Accounts receivable subject to individual impairment assessment as of 31 December
2020
31 December 2020
Category Probision for bad
Book balance Provision ratio (%) Reason
debt
Impairment upon
Kun Peng Airlines Co., Ltd 1,849,400.00 1,849,400.00 100.00
individual assessment
Impairment upon
CRAirways 916,508.05 916,508.05 100.00
individual assessment
Total 2,765,908.05 2,765,908.05 100.00
③ Accounts receivable subject to group impairment assessment as of 31 December 2020
Category 31 December 2020
Book balance Probision for bad debt Provision ratio (%)
Amounts due from the
10,455,297.15
clearing center
Amounts due from the
31,724,360.89
aviation association
Amounts due from related
10,316,268.77
parties
Other receivables 317,743,547.57 15,887,177.39 5.00
Total 370,239,474.38 15,887,177.39 4.29
The Company calculate provision of bad debt according to the combination of credit risk
characteristics and the expected loss amount.
④ Accounts receivable with individually significant balance and provision for bad debt
recognized individually as of 31 December 2019,
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31 December 2019
Entity name Book balance Provision for bad Provision ratio Reason
debt (%)
Impairment upon individual
Debtor #1 8,057,209.85 8,057,209.85 100.00
assessment
Impairment upon individual
Kun Peng Airlines Co., Ltd 1,849,400.00 1,849,400.00 100.00
assessment
Impairment upon individual
CRAirways 916,508.05 916,508.05 100.00
assessment
Total 10,823,117.90 10,823,117.90 100.00
⑤Accounts receivable with individually insignificant balance but provision for bad debt
recognized individually as of 31 December 2019
31 December 2019
Entity name
Book balance Provision for bad debt Book balance
Amounts due from the
42,716,664.57
clearing center
Amounts due from the
93,939,923.14
aviation association
Amounts due from related
5,558,432.20
parties
Other receivables 331,098,179.68 16,554,908.99 5.00
Total 473,313,199.59 16,554,908.99 3.50
The Company calculate provision of bad debt according to the combination of credit risk
characteristics and the expected loss amount.
5.2.3 Changes of Provision for Bad Debt During the Reporting Period
Changes of Changes during the reporting period
31 December 31 December
Category accounting 1 January 2020 Recovery or
2019 Provision Write-off 2020
policy reversal
Accounts
receivable
subject to
10,823,117.90 10,823,117.90 8,057,209.85 2,765,908.05
individual
impairment
assessment
Accounts
16,554,908.99 16,554,908.99 667,731.60 15,887,177.39
receivable
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Changes of Changes during the reporting period
31 December 31 December
Category accounting 1 January 2020 Recovery or
2019 Provision Write-off 2020
policy reversal
subject to
impairment
assessment
by group
Total 27,378,026.89 27,378,026.89 667,731.60 8,057,209.85 18,653,085.44
5.2.4 Actual accounts receivable written off by the Company in the current period are as
follows:
Opening Closing
Entity name Write-off Reason
balance balance
The person subjected to
Debtor #1 8,057,209.85 8,057,209.85 execution has no property
for execution
Total 8,057,209.85 8,057,209.85
5.2.5 According to the ending balance collected by the debtor, the summary amount of the
top five accounts receivable is CNY 143,951,274.02, accounting for 38.59% of the total
ending balance of accounts receivable, and the corresponding summary amount of the
ending balance of bad debt provision is CNY 7,197,563.70. The Company has no
receivables terminated due to the transfer of financial assets.
5.2.6 The Company has no assets or liabilities arising from continuing involvement in
transferred accounts receivable.
5.3 Prepayments
5.3.1 Disclosure by Age
31 December 2020 31 December 2019
Age
Amount % Amount %
Within 1 year 213,189,480.25 99.84 231,299,824.20 99.67
1 to 2 years 151,385.03 0.07 269,211.97 0.12
2 to 3 years 120,000.00 0.06
Over 3 years 70,000.00 0.03 492,443.61 0.21
Total 213,530,865.28 100.00 232,061,479.78 100.00
The Company has no prepayments with an age of over 1 year and significant amounts.
5.3.2 The total amount of the top five prepayments of the company is CNY 74,262,774.32,
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Shandong Airlines Co., Ltd. Annual Report 2020
accounting for 34.78% of the total ending balance of prepayments.
5.4 Other receivables
5.4.1 Other Receivables by Category
Items 31 December 2020 31 December 2019
Interest receivable
Dividend receivable
Other receivables 159,397,943.13 232,147,324.23
Total 159,397,943.13 232,147,324.23
5.4.2 Other Receivables
① Other receivables by age
Age 31 December 2020 31 December 2019
Within one year 129,289,406.75 205,811,193.91
1-2 years 5,366,941.18 13,480,887.91
2-3 years 12,340,149.83 5,048,559.92
3-4 years 4,004,091.99 870,414.71
4-5 years 803,055.01 4,254,714.36
Over 5 years 113,073,237.70 110,881,143.58
Subtotal 264,876,882.46 340,346,914.39
Less: provision for bad debt 105,478,939.33 108,199,590.16
Total 159,397,943.13 232,147,324.23
②Other receivables by nature
Nature 31 December 2020 31 December 2019
Deposits receivable 63,646,894.09 87,059,915.18
Amounts due from related parties 122,685,554.68 120,329,549.24
Other receivables 78,544,433.69 132,957,449.97
Subtotal 264,876,882.46 340,346,914.39
Less: provision for bad debt 105,478,939.33 108,199,590.16
Total 159,397,943.13 232,147,324.23
③ Other receivables by bad debt provision method
A．Provision for bad debts recognized based on three stages model as of 31 December 2020
is as follows:
Provision for bad debt in the first stage as of 31 December 2020:
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Lifetime
Provision for Carrying
Category Book balance expected credit Reason
bad debt amount
losses rate (%)
Provision for bad debt
recognized individually
Provision for bad debt
163,325,164.81 2.40 3,927,221.68 159,397,943.13
recognized collectively
Including: Deposits No significant increase
63,646,894.09 63,646,894.09
receivable on credit risk
Amounts due from No significant increase
21,133,837.03 21,133,837.03
related parties on credit risk
No significant increase
Other receivables 78,544,433.69 5.00 3,927,221.68 74,617,212.01
on credit risk
Total 163,325,164.81 2.40 3,927,221.68 159,397,943.13
As of 31 December 2020, the Company have no interest receivable, dividends receivable
and other receivables recognized in the second Stage.
Provision for bad debt in the third stage as of 31 December 2020:
Lifetime expected Provision for bad Carrying
Category Book balance Reason
credit losses rate (%) debt amount
Provision for bad debt
101,551,717.65 100.00 101,551,717.65
recognized individually
Shandong Rainbow Credit
Commercial Jet Co., Ltd 101,551,717.65 100.00 101,551,717.65 impairment has
occurred
Total 101,551,717.65 100.00 101,551,717.65
B．Provision for bad debt using incurred loss model as of 31 December 2019:
Provision for bad debt in the first stage as of 31 December 2019:
Lifetime
Provision for bad
Category Book balance expected credit Carrying amount Reason
debt
losses rate (%)
Provision for bad debt
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Lifetime
Provision for bad
Category Book balance expected credit Carrying amount Reason
debt
losses rate (%)
recognized individually
Provision for bad debt
238,795,196.74 2.78 6,647,872.51 232,147,324.23
recognized collectively
No significant
Including: Deposits
87,059,915.18 87,059,915.18 increase on
receivable
credit risk
No significant
Amounts due from
18,777,831.59 18,777,831.59 increase on
related parties
credit risk
No significant
Other receivables 132,957,449.97 5.00 6,647,872.51 126,309,577.46 increase on
credit risk
Total 238,795,196.74 2.78 6,647,872.51 232,147,324.23
As of 31 December 2019, the Company have no interest receivable, dividends receivable
and other receivables recognized in the second Stage.
Provision for bad debt in the third stage as of 31 December 2019:
Lifetime expected Provision for bad Carrying
Category Book balance Reason
credit losses rate (%) debt amount
Provision for bad debt
101,551,717.65 100.00 101,551,717.65
recognized individually
Credit
Shandong Rainbow
101,551,717.65 100.00 101,551,717.65 impairment
Commercial Jet Co., Ltd
has occurred
Total 101,551,717.65 100.00 101,551,717.65
④ Changes of provision for bad debt during the reporting period
Changes during the reporting period
Category 31 December 2019 Recovery or 31 December 2019
Provision Write-off
reversal
Other receivables of
101,551,717.65 101,551,717.65
individual significance and
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Shandong Airlines Co., Ltd. Annual Report 2020
Changes during the reporting period
Category 31 December 2019 Recovery or 31 December 2019
Provision Write-off
reversal
subject to individual
impairment assessment
Other receivables subject to
impairment assessment by
6,647,872.51 2,720,650.83 3,927,221.68
credit risk characteristics of a
group
Total 108,199,590.16 2,720,650.83 105,478,939.33
⑤There are no written off to other receivables during the reporting period.
⑥Top five closing balances by entity
Proportion of the
Balance at 31 balance to the total Provision for bad
Entity name Nature Age
December 2020 other receivables debt
(%)
Shandong Rainbow Related party
Commercial Jet Co., 101,551,717.65 Over 5 years 38.34 101,551,717.65
Ltd.
Debtor #1 Deposits 30,685,981.57 Within 2 year 11.58
Debtor #2 Others 27,297,543.26 Within 1 year 10.31 1,364,877.16
Shandong Air New
Related party 13,212,795.39 Within 1 year 4.99
Media Co., Ltd.
Debtor #3 Others 11,284,362.57 Within 1 year 4.26 564,218.13
Total 184,032,400.44 69.48 103,480,812.94
⑦ The Company has no other receivables relating to government grants.
⑧ The Company has no other receivables relating to derecognition of other receivables for
transfer of financial assets.
⑨ The Company has no assets or liabilities arising from continuing involvement in
transferred other receivables.
5.4.3 Other receivables at the end of the period were 31.34% lower than those at the
beginning of the period, mainly due to the collection of customs deposits and the use of
supplier discounts.
5.5 Inventories
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Shandong Airlines Co., Ltd. Annual Report 2020
5.5.1 Inventories by Category
31 December 2020 31 December 2019
Items Provision for Carrying Provision for Carrying
Book balance Book balance
impairment amount impairment amount
Consumable
109,543,973.05 4,227,205.99 105,316,767.06 107,636,197.57 4,227,205.99 103,408,991.58
air equipment
Low-value
2,325,185.14 2,325,185.14 3,144,185.37 3,144,185.37
consumables
Materials 2,930,447.30 2,930,447.30 2,882,079.74 2,882,079.74
Total 114,799,605.49 4,227,205.99 110,572,399.50 113,662,462.68 4,227,205.99 109,435,256.69
5.5.2 Provision for Impairment
Increase during the Decrease during the reporting
31 December reporting period period 31 December
Items
2019 Reversal or 2020
Provision Others Others
written-down
Consumable air
4,227,205.99 4,227,205.99
equipment
Total 4,227,205.99 4,227,205.99
5.6 Other current assets
Items 31 December 2020 31 December 2019
VAT deductible 282,572,739.73 170,020,416.07
Total 282,572,739.73 170,020,416.07
Other current assets at the end of the period increased by 66.20% compared with the
beginning of the period, mainly due to the decrease in output tax resulted from the decrease
in current income.
5.7 Long-term equity investment
Investees 31 December Provision b/f Changes in the current period (+, -)
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Shandong Airlines Co., Ltd. Annual Report 2020
2019 Investment
gains and
Other
losses Other
Additional Investment comprehensive
recognized changes in
investment reduction income
under the equity
adjustment
equity
method
Associates
Shandong Air
New Media 22,500,000.00 22,500,000.00
Co., Ltd.
Total 22,500,000.00 22,500,000.00
(Continued)
Changes in the current period (+, -)
Provision as at
Declared cash 31 December
Investees Provision 31 December
dividends or Others 2020
recognized 2020
profits
Associates
Shandong Air New Media Co., Ltd. 22,500,000.00 22,500,000.00
Total 22,500,000.00 22,500,000.00
5.8 Other equity instrume nt investment
5.8.1 General Information of Other Equity Instrument Investment
Items 31 December 2020 31 December 2019
Non-trading equity instrument investment 541,789,406.63 874,728,633.32
Total 541,789,406.63 874,728,633.32
5.8.2 General Information of Non-Trading Equity Instrument Investment
Reasons for being Reasons for
Other
measured at fair other
comprehensiv
Cumu value and its comprehensi
Dividend income e income
Item Cumulative gain lative changes are ve income
in current period transferred
loss included in other transferred
into retained
comprehensive into retained
earnings
income earnings
TravelSky
Non-trading
Technology 3,770,149.50 198,628,793.39
financial assets
Limited
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Shandong Airlines Co., Ltd. Annual Report 2020
Reasons for being Reasons for
Other
measured at fair other
comprehensiv
Cumu value and its comprehensi
Dividend income e income
Item Cumulative gain lative changes are ve income
in current period transferred
loss included in other transferred
into retained
comprehensive into retained
earnings
income earnings
Non-trading
Sichuan Airlines 246,461,970.61
financial assets
Jinan International Non-trading
249,541.09 8,346,542.63
Airport financial assets
Total 4,019,690.59 453,437,306.63
5.8.3 Investment in other equity instruments at the end of the period was 38.06% lower than
that at the beginning of the period, mainly due to the decline in the fair value of
non-tradable equity instruments
5.9 Fixed assets
5.9.1 Fixed Assets by Category
Items 31 December 2020 31 December 2019
Fixed assets 6,904,082,012.35 7,362,687,431.80
Disposal of fixed assets
Total 6,904,082,012.35 7,362,687,431.80
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Shandong Airlines Co., Ltd. Annual Report 2020
5.9.2 Fixed Assets
①General information of fixed assets
Category Houses and Transportation
Aircrafts and engines High-value rotables Others Total
buildings vehicles
1. Cost:
1.1 Balance as at 31 December 2019 571,848,400.29 12,255,970,191.94 729,536,676.94 78,651,864.68 238,776,353.69 13,874,783,487.54
1.2 Increased in current period 452,276.59 293,066,263.32 41,654,953.50 5,661,466.70 4,887,216.49 345,722,176.60
(1) Purchase 452,276.59 269,753,057.18 41,654,953.50 5,661,466.70 4,887,216.49 322,408,970.46
(2) Transferred from construction-in-progress 23,313,206.14 23,313,206.14
（(3) Transferred from merger and acquisitions
(4) Others
1.3 Decreased in current period 47,530.00 169,748,029.59 6,261,261.13 10,398,523.59 3,608,689.39 190,064,033.70
(1) Disposal or scrap 47,530.00 169,748,029.59 6,261,261.13 10,398,523.59 3,608,689.39 190,064,033.70
(2) Others
1.4. Balance as at 31 December 2020 572,253,146.88 12,379,288,425.67 764,930,369.31 73,914,807.79 240,054,880.79 14,030,441,630.44
2. Accumulated depreciation
2.1 Balance as at 31 December 2019 132,056,909.46 5,906,532,292.82 279,229,046.49 51,589,634.91 140,490,349.13 6,509,898,232.81
2.2 Increased in current period 18,067,476.26 608,722,576.68 143,568,613.35 5,758,334.98 20,821,225.20 796,938,226.47
(1) Accrual 18,067,476.26 608,722,576.68 143,568,613.35 5,758,334.98 20,821,225.20 796,938,226.47
(2) Transferred from merger and acquisitions
2.3 Decreased in current period 47,530.00 169,748,029.34 575,709.50 8,974,879.15 3,328,516.13 182,674,664.12
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Category Houses and Transportation
Aircrafts and engines High-value rotables Others Total
buildings vehicles
(1) Disposal or scrap 47,530.00 169,748,029.34 575,709.50 8,974,879.15 3,328,516.13 182,674,664.12
(2) Others
2.4 Balance as at 31 December 2020 150,076,855.72 6,345,506,840.16 422,221,950.34 48,373,090.74 157,983,058.20 7,124,161,795.16
3. Impairment provision
3.1 Balance as at 31 December 2019 2,197,822.93 2,197,822.93
3.2 Increased in current period
(1) Accrual
(2) Transferred from merger and acquisitions
3.3 Decreased in current period
(1) Disposal or scrap
(2) Others
3.4 Balance as at 31 December 2019 2,197,822.93 2,197,822.93
4 Carrying amount of fixed assets
4.1 Carrying amount as at 31 December 2020 422,176,291.16 6,033,781,585.51 340,510,596.04 25,541,717.05 82,071,822.59 6,904,082,012.35
4.2 Carrying amount as at 31 December 2019 439,791,490.83 6,349,437,899.12 448,109,807.52 27,062,229.77 98,286,004.56 7,362,687,431.80
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②Fixed assets acquired under finance leases
Accumulated Provision for
Item Initial cost Carrying amount
depreciation impairment
Aircrafts and engines 3,688,854,696.25 1,653,632,661.54 2,035,222,034.71
Total 3,688,854,696.25 1,653,632,661.54 2,035,222,034.71
③Fixed assets leased out under operating leases.
Item Carrying value as at 31 December 2020
Yantai operation comprehensive building 18,550,057.33
Total 18,550,057.33
④Fixed assets without certificate of title
Items Carrying amount Reason
Jinan cargo arrival and departure Land rented from Jinan Air Control,
10,999,629.21
warehouses not eligible for ownership registration
Land use rights belonging to Shandong
Buildings of Jinping Food Co., Ltd. 10,281,404.97 SDA Group, not eligible for ownership
registration
5.10 Construction in progress
5.10.1 Construction in Progress by Category
Items 31 December 2020 31 December 2019
Construction in progress 5,770,696,951.56 5,479,071,703.01
Construction material
Total 5,770,696,951.56 5,479,071,703.01
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5.10.2 Construction in Progress
① General Information of Construction in Progress
31 December 2020 31 December 2019
Items Provision for Provision for
Book balance Carrying amount Book balance Carrying amount
impairment impairment
Factory building project 920,262,448.04 920,262,448.04 643,681,520.42 643,681,520.42
Prepayment for aircrafts introduction
4,845,805,623.68 4,845,805,623.68 4,828,576,000.04 4,828,576,000.04
project
Construction of information system 706,911.96 706,911.96 2,892,214.67 2,892,214.67
Simulator 3,921,967.88 3,921,967.88 3,921,967.88 3,921,967.88
Total 5,770,696,951.56 5,770,696,951.56 5,479,071,703.01 5,479,071,703.01
② Changes in significant projects of construction in progress
Increase during the reporting Transfer to fixed Decrease during the
Projects Budget 31 December 2018 31 December 2020
period asset reporting period
Jiaodong airport project 970,526,720.00 640,090,970.85 267,727,218.55 907,818,189.40
Aircraft asset introduction project 9,937,456,340.04 4,828,576,000.04 17,229,623.64 4,845,805,623.68
Total 10,907,983,060.04 5,468,666,970.89 284,956,842.19 5,753,623,813.08
(Continued）
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Including:
Including:
Weight of cost to Cumulative Transferred into Including: cost of Capitalisation rate
Stage of completion Transferred into Source of
Items date in budgeted cost of borrowing leaseback assets borrowing capitalized applicable to the current
fixed assets during finance
cost capitalized during the current during the current year year
the current year
year
Jiaodong airport
93.54 Not yet completed Working capital
project
Aircraft asset Loans from
introduction project 48.76 Not applicable 134,270,401.12 -606,276.27 1.7745-4.2750 financial
institution
Total 134,270,401.12 -606,276.27
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5.11 Intangible assets
5.11.1 General Information of Intangible Assets
Items Land rights Software Total
1. Cost:
1.1 Balance as at 31 December 2019 108,347,341.13 53,292,238.70 161,639,579.83
1.2 Increased in current year 16,885,716.04 16,885,716.04
(1) Purchase
(2) Diversion of construction 16,885,716.04 16,885,716.04
(3) Increased from business combination
1.3 Decreased in current year
(1) Disposal
1.4 Balance as at 31 December 2020 108,347,341.13 70,177,954.74 178,525,295.87
2. Accumulated amortization
2.1 Balance as at 31 December 2019 20,795,558.15 27,384,892.06 48,180,450.21
2.2 Increased in current year 2,403,582.86 9,241,282.47 11,644,865.33
(1) Accrual 2,403,582.86 9,241,282.47 11,644,865.33
2.3 Decreased in current year
(1) Disposal
2.4 Balance as at 31 December 2020 23,199,141.01 36,626,174.53 59,825,315.54
3. Impairment provision
3.1 Balance as at 31 December 2019
3.2 Increased in current year
(1) Accrual
3.3 Decreased in current year
(1) Disposal
3.4 Balance as at 31 December 2020
4. Carrying amount
4.1 Carrying amount as at 31 December 2020 85,148,200.12 33,551,780.21 118,699,980.33
4.2 Carrying amount as at 31 December 2019 87,551,782.98 25,907,346.64 113,459,129.62
5.11.2 The Company has no intangible assets arising from internal research and
development project as at the end of reporting period.
5.11.3 The Company has no land use rights without certificate of title as at the end of
reporting period.
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5.12 Goodwill
5.12.1 Initial Recognition of Goodwill
Increase during the Decrease during the
Investees or matters that 31 December reporting period reporting period 31 December
goodwill arising from 2019 Business 2020
Others Disposal Others
combination
Qingdao Feisheng 10,220,816.22 10,220,816.22
Shandong Jinping Food Co.,
454,020.13 454,020.13
Ltd.
Total 10,674,836.35 10,674,836.35
5.12.2 Provision for Impairment
Increase during the Decrease during the
Investees or matters that 31 December 31 December
reporting period reporting period
goodwill arising from 2019 2020
Provision Others Disposal Others
Qingdao Feisheng 10,220,816.22 10,220,816.22
Total 10,220,816.22 10,220,816.22
5.13 Deferred charges
Decrease during the reporting
Increase during
period 31 December
Items 31 December 2019 the reporting
Other 2020
period Amortization
decrease
Pilot training 628,796,231.56 97,992,861.03 106,387,739.80 620,401,352.79
Decoration expenditure 3,283,501.74 2,876,224.54 407,277.20
Modification costs for
25,692,850.51 4,718,902.07 20,973,948.44
aircraft leasing
Total 657,772,583.81 97,992,861.03 113,982,866.41 641,782,578.43
5.14 Deferred tax assets and deferred tax liabilities
5.14.1 Deferred Tax Assets Before Offsetting
31 December 2020 31 December 2019
Items Deductible temporary Deductible temporary
Deferred tax assets Deferred tax assets
differences differences
Provision for bad debt 124,132,024.77 31,033,006.20 135,577,617.05 33,894,404.26
Impairment provision for
4,227,205.99 1,056,801.50 4,227,205.99 1,056,801.50
inventories
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31 December 2020 31 December 2019
Items Deductible temporary Deductible temporary
Deferred tax assets Deferred tax assets
differences differences
Impairment provision for
2,197,822.93 549,455.73 2,197,822.93 549,455.73
fixed assets
Fair value movement of
financial liabilities held for 862,955.67 215,738.92 126,264.75 31,566.19
trading
Provisions 5,022,551,127.92 1,255,637,781.98 4,234,796,893.54 1,058,699,223.39
Employment benefits
39,140,304.16 9,785,076.04 22,851,931.68 5,712,982.92
payable
Deferred income 19,074,728.93 4,768,682.23 21,736,870.97 5,434,217.74
Deductible losses 2,784,211,785.04 696,052,946.27
Total 7,996,397,955.41 1,999,099,488.87 4,421,514,606.91 1,105,378,651.73
5.14.2 Deferred Tax Liabilities Before Offsetting
31 December 2020 31 December 2019
Deductible
Items Deferred tax Deductible temporary Deferred tax
temporary
liabilities differences liabilities
differences
Asset evaluation increment
from Enterprise merger 3,651,419.57 912,854.89 4,173,050.93 1,043,262.73
under the different control
Changes in fair value of
other equity instruments 453,437,306.63 113,359,326.66 786,376,533.32 196,594,133.33
investment
Others (Note) 175,462,289.43 43,865,572.36 140,608,392.76 35,152,098.19
Total 632,551,015.63 158,137,753.91 931,157,977.01 232,789,494.25
Note: According to Caishui [2018] No. 54, the equipment and equipment newly purchased
by the Company from January 1 2018 to December 31 2020, with a unit value of less than 5
million yuan, are allowed to be included in the current profit and loss. The cost is deducted
when calculating the taxable income.
5.14.3 Deferred income tax assets at the end of the period increased by 80.85% compared
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Shandong Airlines Co., Ltd. Annual Report 2020
with the beginning of the period, mainly due to the increase in deferred income tax assets on
loss carryforward at the end of the period. Deferred income tax liabilities at the end of the
period decreased by 32.07% compared with the beginning of the period, mainly due to the
decline in the fair value of non-tradable equity instrument investment
5.15 Short-term borrowings
5.15.1 Disclosure of Short-Term Borrowings by Category
Items 31 December 2020 31 December 2019
Credit loan 2,001,111,111.11 300,329,083.33
Total 2,001,111,111.11 300,329,083.33
5.15.2 The Company has no overdue short-term borrowings.
5.15.3 Short-term borrowings at the end of the period increased by 566.31% compared with
those at the beginning of the period, mainly due to the fact that the epidemic has not been
completely controlled in the current period, the company increased short-term borrowings to
reduce liquidity risks.
5.16 Held-for-trading financial liabilities
Increase Decrease
during the during the
Items 31 December 2019 31 December 2020
reporting reporting
period period
Financial liabilities designated at fair
126,264.75 736,690.92 862,955.67
value through profit or loss
Including: Interest rate swaps 126,264.75 736,690.92 862,955.67
Total 126,264.75 736,690.92 862,955.67
5.17 Notes payable
Category 31 December 2020 31 December 2019
Bank acceptance bills 49,605,767.94 8,500,000.00
Commercial acceptance bills 422,489,235.30 394,496,891.30
Total 472,095,003.24 402,996,891.30
The Company has no notes payable matured but not yet paid as at the reporting date.
5.18 Accounts payable
5.18.1 Accounts Payable by Nature
Items 31 December 2020 31 December 2019
Aircraft maintenance costs 492,193,935.93 689,822,992.66
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Shandong Airlines Co., Ltd. Annual Report 2020
Items 31 December 2020 31 December 2019
Fuel cost 197,183,769.59 253,885,753.63
Landing fee 478,496,820.67 465,517,353.92
Aircraft service cost 549,082,156.02 504,230,134.03
Flight catering 125,530,208.70 91,996,252.04
Computer booking fee 325,614,566.13 261,849,848.30
Lease rental 96,262,308.48 7,552,869.30
Others 278,955,534.79 207,393,310.63
Total 2,543,319,300.31 2,482,248,514.51
5.18.2 Significant Accounts Payable with Age of Over One Year
Items 31 December 2020 Reason
Computer booking fee 231,013,865.07 No payment due
Total 231,013,865.07
5.19 Advance from customers
5.19.1 Details of Advance from Customers
Items 31 December 2020 31 December 2019
Ticket clearing 918,437,701.34
Advanced payment for tickets 4,180,237.06
Others 14,255,729.56
Total 936,873,667.96
5.20 Contract liabilities
Items 31 December 2020 31 December 2019
Ticket clearing 314,216,701.60 —
Advanced payment for tickets 99,366,787.75 —
Others 31,817,311.84 —
Total 445,400,801.19 —
The Company has no significant contract liabilities with aging of over one year as at the
reporting date.
5.21 Employee benefits payable
5.21.1 Details of Employee Benefits Payable
31 December Increase during the Decrease during the 31 December
Items
2019 reporting period reporting period 2020
1. Short-term employee benefits 549,061,919.97 2,440,661,193.89 2,643,484,158.49 346,238,955.37
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Shandong Airlines Co., Ltd. Annual Report 2020
31 December Increase during the Decrease during the 31 December
Items
2019 reporting period reporting period 2020
2. Post-employment benefits –
307,817,213.97 307,817,213.97
defined contribution plans
3. Termination benefits 624,614.85 624,614.85
4. Other long-term employee benefits
within one year
Total 549,061,919.97 2,749,103,022.71 2,951,925,987.31 346,238,955.37
5.21.2 Short-Term Employee Benefits
31 December Increase during the Decrease during the 31 December
Items
2019 reporting period reporting period 2020
1. Wages, salaries and subsidies 491,371,818.04 2,120,573,034.50 2,305,109,120.96 306,835,731.58
2. Employee welfare 24,131,895.37 24,131,895.37
3. Social insurance: 117,503,178.19 117,503,178.19
Including: Medical insurance 105,365,661.78 105,365,661.78
Employment injury 3,491,066.24 3,491,066.24
insurance
Maternity insurance 8,646,450.17 8,646,450.17
4. Housing provident fund 114,864,413.76 114,864,413.76
5. Labour union fee and employee 23,020,993.78 63,588,672.07 47,206,442.06 39,403,223.79
education fee
6. Short-term paid absences 34,669,108.15 34,669,108.15
7. Short-term profit-sharing plan
Total 549,061,919.97 2,440,661,193.89 2,643,484,158.49 346,238,955.37
5.21.3 Defined Contribution Plans
Decrease during
Increase during the
Items 31 December 2019 the reporting 31 December 2020
reporting period
period
Post-employment benefits:
1. Basic pension 149,252,278.72 149,252,278.72
2. Unemployment insurance 6,375,777.13 6,375,777.13
3. Annuity payment 152,189,158.12 152,189,158.12
Total 307,817,213.97 307,817,213.97
5.21.4 The employee compensation payable at the end of the period was reduced by 36.94%
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Shandong Airlines Co., Ltd. Annual Report 2020
compared with that at the beginning of the period, mainly due to the reduction of year -end
bonus resulted from the decline in performance of the current period.
5.22 Taxes and fees payable
Items 31 December 2020 31 December 2019
VAT 1,476,083.36 1,457,921.43
Urban construction and 160,601.55 214,935.06
maintenance tax
Education surcharge 118,517.68 151,647.82
Enterprise income tax 944,983.82 18,719,845.92
Property tax 172,992.36 169,094.44
Land tax 179,311.20 89,655.60
Personal income tax 9,353,560.27 11,458,059.11
Stamp duty 1,380,000.00 991,505.53
Civil aviation development fund 88,404,867.39 116,161,969.13
Others 15,559.86 22,549.67
Total 102,206,477.49 149,437,183.71
The tax payable at the end of the period was 31.61% lower than that at the beginning of the
period, mainly due to the decrease in corporate income tax payable and Civil aviation development
fund.
5.23 Other payables
5.23.1 Other Payables by Category
Items 31 December 2020 31 December 2019
Interests payable
Dividends payable 602,306.96 602,306.96
Other payables 635,263,654.66 585,541,152.70
Total 635,865,961.62 586,143,459.66
5.23.2 Dividends Payable
Items 31 December 2020 31 December 2019
Dividend on common shares 602,306.96 602,306.96
Total 602,306.96 602,306.96
The Company has no significant dividends payable over one year as at the reporting date.
5.23.3 Other Payables
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① Other Payables by Nature
Items 31 December 2020 31 December 2019
Payables for construction projects 225,955,475.65 172,005,523.84
Payables for construction projects 180,641,018.52 146,354,708.31
Taxes deducted at source 70,763,959.51 122,250,153.03
Others 157,903,200.98 144,930,767.52
Total 635,263,654.66 585,541,152.70
②The Company has no other payables with a significant amount and an age of more than
one year as at the reporting date.
5.24 Non-current liabilities due within one year
Items 31 December 2020 31 December 2019
Long-term borrowings due within one
103,186,354.59 567,350,817.16
year
Bond payables due within one year 20,514,722.25
Long-term payables due within one year 181,264,490.05 307,786,130.67
Long-term employee benefits payable
16,612,000.00 10,163,000.00
due within one year
Total 321,577,566.89 885,299,947.83
Non-current liabilities due within one year at the end of the period decreased by 63.68%
from the beginning of the period, mainly due to the repayment of long-term borrowings due
within one year and long-term payables.
5.25 Other current liabilities
Items 31 December 2020 31 December 2019
VAT to be recognised 31,100,597.66
Total 31,100,597.66
5.26 Long-term borrowings
5.26.1 Long-Term Borrowings by Category
Items 31 December 2020 31 December 2019 Range of interest rates
Secured loans 464,796,466.93 811,423,255.68 0.9585%-3.3463%
Credit loans 5,755,824,786.98 563,928,944.30 3.250%-4.275%
Subtotal 6,220,621,253.91 1,375,352,199.98
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Items 31 December 2020 31 December 2019 Range of interest rates
Less: Long-term borrowings due
103,186,354.59 567,350,817.16
within one year (Note 5.24)
Total 6,117,434,899.32 808,001,382.82
Long-term borrowings at the end of the period increased by 657.11% compared with those
at the beginning of the period, mainly due to the fact that the COVID-19 has not been
completely controlled in the current period, and the Company increased long-ter m
borrowings to reduce liquidity risks.
5.27Bonds payable
5.27.1 Bonds Payable by Category
Items 31 December 2020 31 December 2019
Medium-term notes 1,020,514,722.25
Subtotal 1,020,514,722.25
Less: Bonds payable due within one
20,514,722.25
year (Note 5.24)
Total 1,000,000,000.00
5.27.2 Changes in increase or decrease of bonds payable
Maturity of
Bond name Face value Issue date Issue price 31 December 2019
bond
20 Shandong Airlines
1,000,000,000.00 2020/4/22 3years 1,000,000,000.00
MTN001
Total 1,000,000,000.00 1,000,000,000.00
(Continued)
Interest accured at Amortization of Payback this
Bond name Issued this period 31 December 2020
face value excess discount period
20 Shandong Airlines
1,000,000,000.00 20,514,722.25 1,020,514,722.25
MTN001
Total 1,000,000,000.00 20,514,722.25 1,020,514,722.25
5.28 Long-term payables
5.28.1 Long-Term Payables by Category
Items 31 December 2020 31 December 2019
Long-term payables 5,976,812,441.61 5,621,548,998.73
Specific payables
Subtotal 5,976,812,441.61 5,621,548,998.73
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Shandong Airlines Co., Ltd. Annual Report 2020
Items 31 December 2020 31 December 2019
Less: Long-term payables due within one year (Note 5.24) 673,458,425.98 997,609,123.33
Total 5,303,354,015.63 4,623,939,875.40
5.28.2 Long-Term Payables by Nature
Items 31 December 2020 31 December 2019
Financial lease rental payables 1,229,499,938.87 1,558,752,105.19
Maintenance payables for aircrafts and engines held under
4,747,312,502.74 4,062,796,893.54
operating lease
Subtotal 5,976,812,441.61 5,621,548,998.73
Less: Financial lease rental payables due within one year
181,264,490.05 307,786,130.67
(Note 5.24)
Less: Maintenance payables for aircrafts and engines held
492,193,935.93 689,822,992.66
under operating lease due within one year (Note 1)
Total 5,303,354,015.63 4,623,939,875.40
Note 1: Maintenance payables for aircrafts and engines held under operating lease due
within one year had been included in accounts payable.
5.29 Long-term e mployee benefits payable
5.29.1 General Information of Long-Term Employee Benefits Payable
Items 31 December 2020 31 December 2019
1. Post-employment benefits-net defined benefit liability 270,637,000.00 162,909,225.21
Less: long-term staff remuneration payable due within one
16,612,000.00 10,163,000.00
year (Note 5.24)
Total- 254,025,000.00 152,746,225.21
5.29.2 Changes in Defined Benefit Plans
Present value of the defined benefit obligation:
Items 31 December 2020 31 December 2019
1. Balance at the beginning of the reporting period 162,909,225.21 144,434,119.11
2. Cost recognized in current profit or loss: 120,860,000.00 26,706,000.00
2.1 Current service cost
2.2 Past service cost 115,723,000.00 22,161,000.00
2.3 Gains /(losses) on settlement (loss presented with "-"
prefix)
2.4 Net interest 5,137,000.00 4,545,000.00
3. Cost recognized in other comprehensive income: 1,769,000.00 -1,727,000.00
3.1 Actuarial gains /(losses) (loss presented with "-" prefix) 1,769,000.00 -1,727,000.00
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Items 31 December 2020 31 December 2019
4. Other changes: 11,363,225.21 9,957,893.90
4.1 Consideration paid in settlements
4.2 Payment of benefits 11,363,225.21 9,957,893.90
5. Balance at the end of the reporting period 270,637,000.00 162,909,225.21
5.29.3 Significant Actuarial Assumptions of Defined Benefit Plans
Items 31 December 2020 31 December 2019
Discount Rate 3.25% 3.25%
Mortality Rate China Life Insurance Mortality Rate 2010-2013 (Annuity)
Cost of Living Adjustments for Retired Cadres and
0.00%
Retirees
Cost of Living Adjustments for Internal Retirees 0.00%
Cost of Living Adjustments for Dependents 0.00%
Long-term employee compensation payable at the end of the period increased by 66.31%
compared with that at the beginning of the period, mainly due to the increase in the number
of retirees and the range of benefits during the period.
5.30 Deferred income
5.30.1 General Information of Deferred Income
Increase during Decrease during
Items 31 December 2019 the reporting the reporting 31 December 2020 Reason
period period
Unrealized gains and The aircraft
losses of operating sale-leaseback
87,686,199.24 6,247,117.80 81,439,081.44
lease from aircraft disposal profits
leaseback and losses
Designated subsidy
for civil aviation Asset related
9,899,565.28 976,500.12 8,923,065.16
energy-saving subsidies
program
Designated subsidy
Asset related
for HUD and 11,837,305.69 1,685,641.92 10,151,663.77
subsidies
repackage project
Total 109,423,070.21 8,909,259.84 100,513,810.37
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5.30.2 Items Related to Government Grants
Increase Recognized in
Recognized in Related to
during non-operating
31 December other income Other 31 December assets/Related
Items the income during
2019 during the changes 2020 to profit or
reporting the reporting
reporting period loss
period period
Designated
subsidy for
Asset related
civil aviation 9,899,565.28 976,500.12 8,923,065.16
subsidies
energy-saving
program
Designated
subsidy for
Asset related
HUD and 11,837,305.69 1,685,641.92 10,151,663.77
subsidies
repackage
project
Total 21,736,870.97 2,662,142.04 19,074,728.93
5.31 Share capital
Changes during the reporting period (+, -)
31 December 31 December
Item Bonus Capitalisation
2019 New issues Others Subtotal 3030
issues of reserves
Number of
400,000,000.00 400,000,000.00
total shares
5.32 Capital reserves
Increase Decrease
during the during the
Items 31 December 2019 31 December 2020
reporting reporting
period period
Share premium 67,618,282.54 67,618,282.54
Other capital reserves 7,792,081.16 7,792,081.16
Total 75,410,363.70 75,410,363.70
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Shandong Airlines Co., Ltd. Annual Report 2020
5.33 Other comprehensive income
Changes during the reporting period
Changes
Less: Items previously recognized
31 December of Attributable to Attributable 31 December
Items 1 January 2020 Amount before in other comprehensive income Less: Income
2019 accounting owners of the to minority 2019
tax being reclassified to current profit tax expenses
policy Company interests
or loss
1.Other comprehensive income
that cannot be reclassified into 570,487,739.92 570,487,739.92 -331,170,226.69 -83,234,806.67 -247,935,420.02 322,552,319.90
profit or loss
Including: remeasurement of
net assets or net liabilities of -19,294,660.07 -19,294,660.07 1,769,000.00 1,769,000.00 -17,525,660.07
defined benefit plans
Fair value change of the equity
589,782,399.99 589,782,399.99 -332,939,226.69 -83,234,806.67 -249,704,420.02 340,077,979.97
instruments
Total of other comprehensive
570,487,739.92 570,487,739.92 -331,170,226.69 -83,234,806.67 -247,935,420.02 322,552,319.90
income
Other comprehensive income at the end of period was 43.46% lower than at the beginning of the period, mainly due to a decline in the fair value
of investments held in non-tradable equity instruments.
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5.34 Surplus reserves
Increase Decrease
Changes of
31 December during the during the 31 December
Items accounting 1 January 2019
2019 reporting reporting 2020
policy
period period
Statutory
538,773,444.97 538,773,444.97 538,773,444.97
surplus reserve
Total 538,773,444.97 538,773,444.97 538,773,444.97
The Company may make allocations to the discretionary surplus reserve from the after -tax
profits after making allocations to the statutory surplus reserve from the after-tax profits.
Approved surplus reserves can be released to recover losses or for conversion into share
capital.
5.35 Retained earnings
Items 2020 2019
Pre-adjustment balance brought forward 3,588,847,456.98 3,342,615,148.06
Total adjustment to retained earnings b/f (+, -) 26,692,794.47
Retained earnings b/f after adjustment 3,615,540,251.45 3,342,615,148.06
Add: Net profit attributable to shareholders of the parent -2,382,015,455.81 361,005,776.31
Less: Appropriation to statutory surplus reserve 34,773,467.39
Appropriation to discretionary surplus reserve
General reserve
Ordinary dividends declared 80,000,000.00
Bonus issue
Closing balance as of 31 December 2020 1,233,524,795.64 3,588,847,456.98
The retained earnings at the end of the period decreased by 65.63% compared with the
beginning of the period, mainly due to the impact of COVID-19, the Company suffered a
substantial loss in the current period.
5.36 Operating revenues and operating costs
2020 2019
Items
Operating revenues Operating costs Operating revenues Operating costs
Principal activities 9,881,777,998.48 12,550,178,248.90 18,305,340,983.17 17,191,495,691.30
Other activities 652,625,352.39 4,721,867.19 685,074,041.71 7,031,717.00
Total 10,534,403,350.87 12,554,900,116.09 18,990,415,024.88 17,198,527,408.30
Operating revenue in the current period decreased by 44.53% compared with the previous
period, and operating costs in the current period decreased by 27.00% compared with the
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Shandong Airlines Co., Ltd. Annual Report 2020
previous period, mainly due to the impact of COVID-19.
5.37 Tax and surcharges
Items 2020 2019
Urban maintenance and construction tax 1,646,287.30 3,732,107.23
Education surcharge and others 8,832,777.47 11,834,077.09
Total 10,479,064.77 15,566,184.32
The tax and surcharge of the current period decreased by 32.68% compared with the
previous period, mainly due to the decrease of the actual payment of VAT in the current
period, and the corresponding decrease of the surcharge.
5.38 Sales expenses
Items 2020 2019
Agency fees 138,402,370.07 230,584,259.38
Employment benefits 238,062,702.66 243,608,478.56
Computer booking fees 101,239,667.49 203,336,534.34
Online payment fees 22,746,819.32 39,163,326.74
Lease rental 20,950,099.16 21,060,731.55
Advertisement fees 12,139,670.83 23,977,435.60
Administrative office expenses 5,935,784.08 3,438,623.62
Travel expenses 3,768,427.11 6,781,596.05
System and network fees 39,289,807.51 31,644,027.06
BSP data processing fees 3,193,912.84 12,391,871.26
Depreciation 1,521,642.25 1,488,505.62
Others 26,660,072.21 34,307,689.05
Total 613,910,975.53 851,783,078.83
5.39 General and administrative expenses
Items 2020 2019
Employment benefits 325,886,133.31 278,063,116.02
Lease rental fees 27,737,933.24 26,558,484.48
Business entertainment costs 2,235,917.06 5,754,251.60
Depreciation 21,093,013.51 21,622,225.50
Administrative office expenses 11,545,974.78 11,811,000.12
Technology development costs 1,574,714.11
Amortization of intangibles 11,644,865.33 9,181,377.57
Water, electricity charges 10,576,962.96 11,740,503.56
201
Shandong Airlines Co., Ltd. Annual Report 2020
Items 2020 2019
Outsourcing fees 34,055,410.64 30,210,462.91
Others 48,864,546.54 86,167,923.36
Total 493,640,757.37 482,684,059.23
5.40 Research and development expenses
Items 2020 2019
Employment benefits 22,514,111.50 22,084,483.33
Others 352,178.48 358,066.34
Total 22,866,289.98 22,442,549.67
5.41 Financial costs
Items 2020 2019
Interest expenses 230,831,883.77 124,509,494.05
Less: Interest income 45,680,277.19 10,691,861.94
Net interest expenses 185,151,606.58 113,817,632.11
Foreign exchange losses 52,422,557.01 182,018,862.19
Less: Foreign exchange gains 102,518,814.24 149,848,886.61
Net foreign exchange losses -50,096,257.23 32,169,975.58
Bank charges 2,368,560.52 2,019,982.04
Total 137,423,909.87 148,007,589.73
5.42 Other income
Category Included in current
2020 2019 period non-recurring
profit and loss
1. Government grant recognized in
98,058,606.34 102,684,463.91 98,058,606.34
other income
Including: Government grant related to
2,662,142.04 3,153,600.38 2,662,142.04
deferred income (related to assets)
Government grant related to
deferred income (related to income)
Government grant directly
recognized in current profit or loss 95,396,464.30 99,530,863.53 95,396,464.30
(related to income)
2. Others related to daily operation
2,626,332.77 4,954,383.18 2,626,332.77
activities and recognized in other
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Shandong Airlines Co., Ltd. Annual Report 2020
Category Included in current
2020 2019 period non-recurring
profit and loss
income
Including: Charges of withholding
2,598,570.59 4,844,126.48 2,598,570.59
individual income tax
Including: Input tax deduction 27,762.18 110,256.70 27,762.18
Total 100,684,939.11 107,638,847.09 100,684,939.11
5.43 Investment income
Items 2020 2019
Investment income from held-for-trading financial assets during
-829,194.39 9,316.91
holding period
Dividend income from other equity instrument income during
4,019,690.59 6,284,357.21
holding period
Total 3,190,496.20 6,293,674.12
The investment income in the current period decreased by 49.31% compared with the
previous period, mainly due to the dividends paid from non-trading equity instruments
investment in the current period.
5.44 Gains/(losses) from changes in fair values
Sources of gains on changes in fair value 2020 2019
Interest rate swaps -736,690.92 -216,752.92
Total -736,690.92 -216,752.92
5.45 Impairme nt loss of credit
Items 2020 2019
Provision for bad debt for accounts receivable 667,731.60 -3,719,780.18
Provision for bad debt for other receivables 2,720,650.83 781,789.24
Total 3,388,382.43 -2,937,990.94
5.46 Impairme nt loss of asset
Items 2020 2019
1. Impairment of inventories -4,227,205.99
2. Impairment of fixed assets -242,017.85
Total -4,469,223.84
5.47 Gains/(losses) from disposal of assets
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Shandong Airlines Co., Ltd. Annual Report 2020
Included in current
Category 2020 2019 period non-recurring
profit and loss
Gains/(losses) from disposal of fixed
assets, construction in progress,
productive biological assets and 603,734.58 116,645.48 603,734.58
intangible assets not classified as held for
sale
Including: Fixed assets 603,734.58 116,645.48 603,734.58
Total 603,734.58 116,645.48 603,734.58
5.48 Non-operating income
5.48.1 Details of Non-operating income
Included in current
Category 2020 2019 period non-recurring
profit and loss
Transferred income from pilot 24,999,999.99 59,386,792.51 24,999,999.99
Others 21,593,143.86 47,021,259.09 21,593,143.86
Total 46,593,143.85 106,408,051.60 46,593,143.85
5.48.2 The Company has no government grants irrelevant to daily operation activities
during the reporting period.
5.48.3 Non-operating income decreased by 56.21% during the period compared to the
previous period, mainly due to decreased pilot turnover during the period.
5.49 Non-operating expenses
Included in current period non-recurring
Category 2020 2019
profit and loss
Loss on non-current asset disposals 544,262.93 2,183,604.73 544,262.93
Others 254,706.04 1,159,633.43 254,706.04
Total 798,968.97 3,343,238.16 798,968.97
5.50 Income tax expenses
5.50.1 Details of Income Tax Expenses
Items 2020 2019
Current tax expenses 121,260,500.16 276,036,631.10
Deferred tax expenses -885,137,770.81 -156,148,240.18
204
Shandong Airlines Co., Ltd. Annual Report 2020
Items 2020 2019
Total -763,877,270.65 119,888,390.92
5.50.2 Reconciliation of Accounting Profit and Income Tax Expenses
Items 2020 2019
Profit before tax -3,145,892,726.46 480,894,167.23
Income tax expense at the statutory /applicable tax rate -786,473,181.62 120,223,541.81
Adjustments of impact from prior period income tax -6,811,830.61 -6,543,317.50
Effect of income that is exempt from taxation -1,004,922.65 -1,571,089.30
Effect of non-deductible costs, expenses or losses 30,450,823.64 7,285,612.18
Effect of previously unrecognized deductible losses recognized as
-38,159.41
deferred tax assets
Effect of deductible temporary differences or tax losses which no
493,643.73
deferred income tax asset was recognised
Income tax expenses -763,877,270.65 119,888,390.92
The income tax expense in this period was CNY 883,765,661.57 less than that in the
previous period. The company suffered a substantial loss in this period mainly due to the
impact of COVID-19.
5.51 Other comprehensive income
For details of the other comprehensive income and related tax effect, transfer to profit or
loss and adjustment of other comprehensive income, please refer to Note 5.33Other
Comprehensive Income.
5.52 Notes to the Statement of Cash Flow
5.52.1 Other cash received relating to operating activities
Items 2020 2019
Government grants 95,396,464.30 99,530,863.53
Cash received other than government grants which is recognized in 2,626,332.77 4,954,383.18
other income
Interest income on bank deposit 45,680,277.19 10,691,861.94
Cash receipts from non-operating income 46,593,143.85 77,999,771.01
Cash receipts from current account 48,431,355.93 33,683,953.64
Total 238,727,574.04 226,860,833.30
5.52.2 Other cash payments relating to operating activities
205
Shandong Airlines Co., Ltd. Annual Report 2020
Items 2020 2019
Bank charges 25,115,379.84 41,183,308.78
Cash payments for non-operating expenses 254,706.04 1,159,532.87
Cash payments for current account 23,517,158.20 32,387,504.48
Cash payments for sales and general and administrative expenses 248,304,944.48 286,592,795.32
Total 297,192,188.56 361,323,141.45
5.52.3 Other cash received relating to investing activities
Items 2020 2019
Cash receipts from settlement of interest rate swaps 9,316.91
Total 9,316.91
5.52.4 Other cash payment relating to financing activities
Items 2020 2019
Cash payment for settlement of interest rate swaps 829,194.39
Total 829,194.39
5.52.5 Other cash receipts relating to financing activities
Items 2020 2019
Cash receipts for aircraft transfer of sale and leaseback deals 495,464,436.83
Total 495,464,436.83
5.52.6 Other cash payments relating to financing activities
Items 2020 2019
Cash payment for the financing lease of the aircraft 360,556,413.20 367,299,836.44
Total 360,556,413.20 367,299,836.44
5.53 Supple mentary information to the Statement of Cash Flows
5.53.1 Supplementary Information to the Statement of Cash Flows
Supplementary information 2020 2019
1．Adjustments of net profit to cash flows from operating
activities:
Net profit -2,382,015,455.81 361,005,776.31
Add: Provisions for impairment of assets 4,469,223.84
Impairment loss of credit -3,388,382.43 2,937,990.94
Depreciation of fixed assets, investment properties, oil and gas
796,938,226.47 909,782,226.00
assets and biological assets held for production
Amortization of intangible assets 11,644,865.33 9,569,567.61
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Shandong Airlines Co., Ltd. Annual Report 2020
Supplementary information 2020 2019
Amortization of deferred charges 113,982,866.41 103,278,470.80
Loss on non-current assets disposal (gain presented by "-" prefix) -603,734.58 -116,645.48
Loss on scrap of fixed assets (gain presented by "-" prefix) 544,262.93 2,183,604.73
Loss on fair value changes (gain presented by "-" prefix) 736,690.92 216,752.92
Financial costs (gain presented by "-" prefix) 183,792,301.57 138,281,693.30
Investment loss (gain presented by "-" prefix) -3,190,496.20 -6,293,674.12
Decrease of deferred tax assets (increase presented by "-" prefix) -893,720,837.14 -191,147,308.48
Increase of deferred tax liabilities (increase presented by "-"
8,583,066.33 34,999,068.30
prefix)
Decrease of inventories (increase presented by "-" prefix) -1,137,142.81 -8,036,943.26
Decrease of operating receivables (increase presented by "-"
158,681,830.15 -72,129,006.40
prefix)
Increase of operating payables (decrease presented by "-" prefix) 199,926,403.27 1,328,608,349.26
Others 109,496,774.79 12,203,106.10
Net cash flows generated from operating activities -1,699,728,760.80 2,629,812,252.38
2．Significant investing and financing activities involve no cash:
Debt-to-capital conversion
Convertible loan due within one year
Fixed assets acquired under financial lease
3．Movement of cash and cash equivalents:
Cash at the end of the reporting period 5,306,474,451.06 598,861,065.69
Less: Cash at the beginning of the reporting period 598,861,065.69 840,860,104.09
Add: Cash equivalents at the end of the reporting period
Less: Cash equivalents at the beginning of the reporting period
Net increase in cash and cash equivalents 4,707,613,385.37 -241,999,038.40
5.53.2 Net Cash Received from Disposals of Subsidiaries
Item 31 December 2020 31 December 2019
①Cash 5,306,474,451.06 598,861,065.69
Including: Cash at hand 225,522.11 285,508.32
Demand bank deposit 5,306,248,928.95 598,575,557.37
Demand other monetary funds
Demand deposit in the Central Bank
207
Shandong Airlines Co., Ltd. Annual Report 2020
Item 31 December 2020 31 December 2019
Deposit in peer firms
Loan to peer firms
②Cash equivalents
Including: Debt instrument matured within three
5,306,474,451.06 598,861,065.69
months
③Cash and cash equivalents at the end of the
reporting period
5.54 Assets with Imposed Restriction on Ownership
Closing balance as of 31
Category Reason of restriction
December 2020
Assets pledged as security 1,014,355,958.74
Aircrafts and engines 1,014,355,958.74 Pledge as security for borrowings
Other form of restriction: 2,035,222,034.71
Assets acquired under financial
Aircrafts and engines 2,035,222,034.71
lease
Total 3,049,577,993.45
5.55 Foreign Currency Monetary Items
Carrying amount at Carrying amount at
Items Exchange rate
foreign currency CNY
Monetary funds
Including: -USD 703,422.92 6.5249 4,589,764.22
-EUR 5,042.00 8.025 40,462.05
-CAD 10.00 5.1161 51.16
-JPY 27,797,397.00 0.0632 1,756,795.49
-TWD 11,670,866.00 0.2289 2,671,461.23
-KRW 85,597,815.00 0.006 513,586.89
-THB 2,206,410.86 0.2179 480,776.93
Other receivables
Including: -USD 20,954,878.50 6.5249 136,728,486.72
Accounts payable
Including: -USD 5,674,018.59 6.5249 37,022,403.92
-JPY 2,618,255.00 0.0632 165,473.72
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Shandong Airlines Co., Ltd. Annual Report 2020
Carrying amount at Carrying amount at
Items Exchange rate
foreign currency CNY
-GBP 1,747.53 8.8903 15,536.07
Other payables
Including: -USD 11,138.56 6.5249 72,677.99
Non-current liabilities due within one year
Including: -USD 18,440,794.43 6.5249 120,324,339.58
Long-term borrowings
Including: -USD 60,603,978.50 6.5249 395,434,899.31
Long-term payables
Including: -USD 32,322,917.14 6.5249 210,903,802.03
5.56 Governme nt Grants
5.56.1 Government Grants Related to Assets
Recognized in current profit or Presented items
loss or directly as deduct of that recognized in
Items presented in the related cost current profit or
Items Amount
Financial Statements loss or directly as
2020 2019 deduct of related
cost
Designated subsidy for
Deferred income 491,458.34 Other income
snow disaster
Designated subsidy for
civil aviation 976,500.12 Deferred income 976,500.12 976,500.12 Other income
energy-saving program
Designated subsidy for
HUD and repackage 1,685,641.92 Deferred income 1,685,641.92 1,685,641.92 Other income
project
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Shandong Airlines Co., Ltd. Annual Report 2020
Recognized in current profit or Presented items
loss or directly as deduct of that recognized in
Items presented in the related cost current profit or
Items Amount
Financial Statements loss or directly as
2020 2019 deduct of related
cost
Total 2,662,142.04 2,662,142.04 3,153,600.38
5.56.2 Government grants related to income
Recognized in current profit or Presented items
loss or directly as deduct of related that recognized in
Items presented in
cost current profit or
Items Amount the Financial
loss or directly as
Statements
2020 2019 deduct of related
cost
Airline grants 59,753,929.58 Other income 59,753,929.58 86,647,196.97 Other income
Other government grants 35,642,534.72 Other income 35,642,534.72 12,883,666.56 Other income
Total 95,396,464.30 95,396,464.30 99,530,863.53
5.56.3 The Company has no return of government grants during the reporting period.
Note 6 CHANGES IN THE SCOPE OF CONSOLIDATION
The consolidation scope of the financial statements for the current year is consistent with
the previous year.
Note 7 INTERESTS IN OTHER ENTITIES
7.1 Interests in Subsidiaries
Place of Place Nature Holding proportion(%)
Subsidiaries Acquired method
operation of registration of business Directly Indirectly
Shandong aviation Logistics Acquired through
Ltd Qingdao, Qingdao, Logistics and investment
100.00
(hereafter, Qingdao Shandong Shandong storage
Logistics)
Qingdao Feisheng Acquired through
International Aviation business
Qingdao, Qingdao,
Training Technology Pilot training 100.00 combination not
Shandong Shandong
Development Co., Ltd under common
(hereafter, Qingdao control
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Shandong Airlines Co., Ltd. Annual Report 2020
Subsidiaries Place of Place Nature Holding proportion(%) Acquired method
Feisheng) operation of registration of business
Acquired through
Shandong Jinping Air
Aeronautical business
Catering Co., Ltd. Jinan, Jinan,
food 100.00 combination not
(hereinafter referred to as Shandong Shandong
processing under common
"Jinping food")
control
Acquired through
Shandong Airlines Qingdao
Aeronautical business
Food Co., Ltd. (hereinafter Qingdao, Qingdao,
food 49.70 50.30 combination not
referred to as "Qingdao Shandong Shandong
processing under common
Food")
control
7.2 The Equity in Joint Ventures and Associates
7.2.1 Significant Joint Ventures and Associates
Place Holding proportion(%)
Place of Nature Holding
Subsidiaries of
operation of business Directly Indirectly proportion(%)
registration
Shandong Rainbow
Jinan, Jinan, Aero
Commercial Jet Co., 45.00 Equity method
Shandong Shandong transportation
Ltd.
7.2.2 Key Financial Information of Significant Associate - Shandong Rainbow Commercial
Jet Co., Ltd.
31 December 2020 31 December 2020
Item
/Year 2020 /Year 2020
Current assets 1,803,440.67 1,802,740.67
Non-current assets 360.00 21,752.86
Total assets 1,803,800.67 1,824,493.53
Current liabilities 167,765,813.33 167,765,813.33
Non-current liabilities
Total liabilities 167,765,813.33 167,765,813.33
Minority interests
Equity attributable to shareholders of the parent -165,962,012.66 -165,941,319.80
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Shandong Airlines Co., Ltd. Annual Report 2020
31 December 2020 31 December 2020
Item
/Year 2020 /Year 2020
Pro rata shares of the net assets calculated
Adjusting events
- Goodwill
-Unrealized profits from internal transaction
-Others
Book value of equity investments in associates
Fair value of publicly quoted equity investments in
associates
Operating income
Net profit -20,692.86 -7,643.46
Net profit from discontinued operations
Other comprehensive income
Total comprehensive income
Dividends received from associates during the year
7.2.8 Excess Loss Occurred by Joint Ventures and Associates
Cumulative unrecognized Unrecognized losses of current Cumulative unrecognized
Name of joint ventures and
losses as of 31 December year (Share of net profit of losses as of 31 December
associates
2019 current year) 2020
Shandong Rainbow Commercial
-74,676,385.20 -9,311.79 -74,685,696.99
Jet Co., Ltd.
Note 8 RISKS RELATED TO FINANCIAL INSTRUMENTS
The main financial instruments of the Company include equity investments, loans, accounts
receivable, and accounts payable etc. Please see Note 5 for details of related items. The risks
associated with financial instruments, and risk management policies which the Company
use to reduce these risks are described below. The management of the Company manages
and supervises the risks to ensure that the risks can be controlled within a limited range.
Sensitivity analysis techniques are adopted by the Company to analyze the impact of
reasonable and possible changes of risk variables on the profit and loss or shareholders'
equity for the current period. While risk variables seldomly change individually, the
correlation among variables has a significant effect on the ultimate impact of the change of
one risk variable. Therefore, the following content is based on the assumption that changes
in each variable is independent.
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Shandong Airlines Co., Ltd. Annual Report 2020
8.1 The Targets and Policies of Risks Manage ment
The target of risks management is to obtain the proper balance between the risks and
benefits, to reduce the negative impact that caused by the risk of the Company to the lowest
level, and to maximize the benefits of shareholders and other equity investors. Based on the
targets of risk management, the basic strategy of the Company’s risk management is to
identify and analyze the risks which are faced by the Company, to establish suitable risk
tolerance baseline and proceed the risk management, and to supervise a variety of risks
timely and reliably, and control the risk within a limited range.
8.1.1 Market Risk
(1) Foreign exchange risk
Foreign exchange risk refers to the risk of loss due to exchange rate fluctuations. The
Company bears the foreign exchange risk primarily concerned with USD, and uses USD
settlement in main financing transactions, operating leases, and financing leasing. On 31
December 2020, except the following assets or liabilities in Note 5.55 are recorded in
foreign currency, the others are recorded in CNY. Foreign exchange risk of the assets and
liabilities in foreign currencies may have an impact on the Company's performance of
operation.
(2) Interest rate risk - the risk of changes in cash flow
The risk of changes in cash flows of a financial instrument due to interest rate is mainly
concerned with the floating rate of bank borrowings (see Note 5.15, 5.24, 5.26, 5.28). The
Company's policy is to maintain a floating interest rate on the borrowings.
(3) Other price risk
Financial assets available for sale and financial assets held-for-trade held by the Company
are measured at fair value on the balance sheet date. Hence, the Company bears the risk of
changes in the stock market.
8.1.2 Credit Risk
As of 31 December 2020, the maximum risk that could cause the Company’s financial
losses mainly comes from default of the other party of the contract, which includes:
The carrying amount of financial assets recognized in the consolidated statement of
financial position; for financial instruments measured by fair value, the book value reflects
its risk exposure but not the maximum risk exposure, which will vary with changes in the
fair value in the future.
In order to reduce credit risk, the Company sets up a team responsible for determination of
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Shandong Airlines Co., Ltd. Annual Report 2020
credit limits, credit approvals and other monitoring procedures to ensure that the necessary
measures be taken to recover overdue debts. In addition, the Company reviews the
recoverable amount of each individual trade debt at each balance sheet date to ensure fully
provision for bad debts recognized for the money that cannot be recovered. Therefore the
Company's management believes the Company’s credit risk has been greatly reduced.
The Company's working capital was deposited in banks with high credit ratings, so that the
credit risk of working capital was low.
8.1.3 Liquidity Risk
When managing liquidity risk, the Company’s management believes maintaining adequate
cash and cash equivalents, and monitoring that at same time, meets the needs of operation of
the Company, and reduces the impact of fluctuations in cash flows. The management of the
Company monitors the use of bank borrowings and ensures to abide by loan agreements.
Note 9 FAIR VALUE DISCLOSURES
The inputs used in the fair value measurement in its entirety are to be classified in the level
of the hierarchy in which the lowest level input that is significant to the measurement is
classified.
Level 1: Inputs consist of unadjusted quoted prices in active markets for identical assets or
liabilities
Level 2: Inputs for the assets or liabilities (other than those included in Level 1) that are
either directly or indirectly observable.
Level 3: Inputs are unobservable inputs for the assets or liabilities
9.1 Assets and Liabilities Measured at Fair Value as at 31 December 2020
The fair value at 30 December 2020
The 1st level The 2nd level The 3rd level
Item
measured by fair measured by fair measured by fair Total
value value value
1. Continuous measurement by fair
value
1.1 Other equity instrument
205,318,793.39 336,470,613.24 541,789,406.63
investments
Total amount of assets continuous
205,318,793.39 336,470,613.24 541,789,406.63
measurement by fair value
1.2 Financial liabilities at fair value 862,955.67 862,955.67
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Shandong Airlines Co., Ltd. Annual Report 2020
The fair value at 30 December 2020
The 1st level The 2nd level The 3rd level
Item
measured by fair measured by fair measured by fair Total
value value value
through profit or loss
Interest rate swaps 862,955.67 862,955.67
Total amount of liabilities
continuous measurement by fair 862,955.67 862,955.67
value
The fair value of financial instruments traded in an active market is based on quoted market
prices at the reporting date. The fair value of financial instruments not traded in an active
market is determined by using valuation techniques. Specific valuatio n techniques used to
value the above financial instruments include discounted cash flow and market approach to
comparable company model. Inputs in the valuation technique include risk-free interest
rates, benchmark interest rates, exchange rates, credit spreads, liquidity premiums, discount
for lack of liquidity.
9.2 Determined on the Basis of Continuous and Noncontinuous First Level for Fair
Value Measure ment of the Market of Project
Investment in other equity instruments for continued fair value measurement is an
investment in TravelSky Technology Limited, of which fair value was determined based on
the closing price for the stock market in Hong Kong Stock Exchange on balance sheet date.
9.3 Continuous and Noncontinuous Second Level for Fair Value Measure ment of the
Market of Project, the Qualitative and Quantitative Information of the Valuation
Techniques and Important Parameters
Fair value measurement basis of interest rate swaps which was continuously measured by
fair value is quotes from counterparty banks on the fair value of interest rate swaps.
9.4 Continuous and Noncontinuous Third Level for Fair Value Measure ment of the
Market of Project, the Qualitative and Quantitative Information of the Valuation
Techniques and Important Parameters
Other equity instrument investments that continue to be measured at fair value are
investments in Sichuan Airlines and Jinan International Airport. Unlisted equity instrument
investments which using comparable company multiplier models to estimate fair value, their
assumptions adopted are not supported by observable market prices or interest rates. The
Company needs to make an estimate of the liquidity discount. The Company believes that
215
Shandong Airlines Co., Ltd. Annual Report 2020
the fair value and its changes estimated by valuation techniques are reasonable and are also
the most appropriate value on the balance sheet date.
Note 10 RELATED PARTIES AND RELATED PARTY TRANSACTIONS
Recognition of related parties: The Company has control or joint control of, or exercise
significant influence over another party; or the Company is controlled or jointly controlled,
or significant influenced by another party.
10.1 Major Parent Companies
Shareholding in the Voting right in
Parent Place of
Nature of operation Registered capital Company the Company
companies registration
(%) (%)
Investment and management of
SDA Group Jinan 580,000,000.00 42.00 42.00
aero transportation
Air China Beijing Aero transportation 14,524,815,185.00 22.80 22.80
Note: SDA Group and Air China is the first and second largest shareholders of the Company
respectively. Air China is the largest shareholder of SDA Group; Air China’s shareholding
and voting right in SDA Group is 49.406% and 49.406% respectively.
10.2 Subsidiaries
See Note 7 for subsidiaries.
10.3 Joint Ventures and Associates
See Note 7 for joint ventures and associates.
1. Other related parties
Other related parties Relationship to the Company
Taikoo (Shandong) Aircraft Engineering Company Limited Controlled by major investors
Shandong XiangYu Air Technology Co., Ltd. Controlled by major investors
Shandong Rainbow Commercial Jet Co., Ltd. Controlled by major investors
Shandong Air New Media Co., Ltd. Controlled by major investors
Air China Import & Export Co., Ltd. Controlled by major investors
Zhejiang Aviation Service Co., Ltd. Controlled by major investors
Air China Shanghai Aviation Service Co., Ltd. Controlled by major investors
Beijing Golden Phoenix Human Resources Service Co., Ltd. Controlled by major investors
CATIC Industrial Co., Ltd. Controlled by major investors
Air Macau Corporation Controlled by major investors
Air China Offshore Holding Company Controlled by major investors
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Other related parties Relationship to the Company
Air China Hongkong Development Limited Controlled by major investors
Beijing Airlines Co., Ltd. Controlled by major investors
China International Aviation Shantou Industrial Development Corporation Controlled by major investors
Chengdu Fukai Aircraft Engineering Services Limited Controlled by major investors
Beijing Aircraft Maintenance and Engineering Corporation Controlled by major investors
China Aviation Group Finance Co., Ltd. Controlled by major investors
Shenzhen Airlines Co., Ltd. Controlled by major investors
Dalian Airlines Co., Ltd. Controlled by major investors
China International Airlines Inner Mongolia Co., Ltd. Controlled by major investors
Kunming Airlines Ltd Controlled by major investors
Sichuan international aero engine maintenance Co., Ltd. Jointly operated by major investors
Shanghai Pudong International Airport West Public Cargo Terminal Co., Ltd. Jointly operated by major investors
Ji'an Beijing Aviation Asset Management Co., Ltd. Jointly operated by major investors
Shanghai International Airport Ground Service Co., Ltd. Jointly operated by major investors
Shandong Airlines Rainbow Auto Service Co., Ltd. Controlled by major investors
Chongqing Golden Phoenix Aviation Service Co., Ltd. Controlled by major investors
Note: On December 28, 2018, the major investor of the Company has disposed of the subsidiary Air China Cargo Co., Ltd.
and since January 1, 2020, Air China Cargo Co., Ltd. is no longer a related party of the company.
10.5 Related Party Transactions
10.5.1 Purchases or Sales of Goods, Rendering or Receiving of Services
Purchase of goods and services
Related party Transaction Current year Prior year
Beijing Aircraft Maintenance and
Repairment 59,917,514.33 116,116,748.68
Engineering Corporation
Beijing Aircraft Maintenance and Purchase / lease of aircraft
283,789.14 92,482.10
Engineering Corporation materials
Beijing Aircraft Maintenance and
Ground service 25,036,782.78 18,179,004.78
Engineering Corporation
Beijing Golden Phoenix Human Resources
Ground service 1,572,810.30 1,799,775.84
Service Co., Ltd.
Chengdu Fukai Aircraft Engineering
Repairment 6,183,500.06 7,008,038.49
Services Limited
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Shandong Airlines Co., Ltd. Annual Report 2020
Related party Transaction Current year Prior year
Aircraft offerings and
Shandong Air New Media Co., Ltd. 7,105,576.24 9,560,365.94
advertising fees
Shandong Air New Media Co., Ltd. Ground service 347,115.05 390,345.13
Taikoo (Shandong) Aircraft Engineering
Aircraft maintenance 94,693,380.12 122,396,133.28
Company Limited
Taikoo (Shandong) Aircraft Engineering
Aircraft meal offerings 75,548.23
Company Limited
Taikoo (Shandong) Aircraft Engineering Purchase of aircraft 2,788,150.44
Company Limited materials
Shandong XiangYu Air Technology Co.,
Repairment 77,999,772.25 103,903,114.32
Ltd.
Shandong XiangYu Air Technology Co., Purchase / lease of aircraft
12,232.91 114,999.43
Ltd. materials
Office lease rental and
SDA Group 37,260,027.24 39,875,357.20
catering
SDA Group Group fee 8,645,366.19 8,807,487.39
SDA Group Irregular flight 44,840.00 50,560.00
Shandong Airlines Rainbow Auto Service Vehicle rental fee and
67,139,779.12 75,928,882.21
Co., Ltd. maintenance fee
Shandong Airlines Rainbow Auto Service
Group fee 2,533,255.98 3,364,092.04
Co., Ltd.
Shandong Airlines Rainbow Auto Service
Irregular flight 362,440.37 538,690.00
Co., Ltd.
Shandong Airlines Rainbow Auto Service
Ground service 14,630.00
Co., Ltd.
Shenzhen Airlines Co., Ltd. Ground service 964,552.14 9,904.49
Shenzhen Airlines Co., Ltd. Agency service 205,627.68 1,378,901.00
Purchase / lease of aircraft
Shenzhen Airlines Co., Ltd. 147,389.16 58,422.10
materials
Shenzhen Airlines Co., Ltd. Catering 758,702.77 1,550,231.72
Shenzhen Airlines Co., Ltd. Irregular flight 290,943.40 271,698.11
Sichuan International Aero Engine
Repairment 82,956,535.74
Maintenance Co., Ltd.
218
Shandong Airlines Co., Ltd. Annual Report 2020
Related party Transaction Current year Prior year
Air China Ground service 12,714,204.38 15,716,089.93
Purchase / lease of aircraft
Air China 97,627.90 161,556.60
materials
Air China Agency service 548,692.50 881,070.68
Air China Irregular flight expenditure 21,782,305.64 18,223,211.35
Air China Cargo Co., Ltd. Ground service 2,369,147.87
Kunming Airlines Co., Ltd Agency service 5,214.99 8,465.66
Dalian Airlines Co., Ltd. Irregular flight 234,339.62 251,094.34
Shanghai International Airport Ground
Ground service 175,187.49 204,195.79
Service Co., Ltd.
Air Macau Corporation Agency service 39.06
Total 512,807,655.93 549,300,283.76
Sales of goods and rendering of services
Related party Transaction Current year Prior year
Beijing Aircraft Maintenance and
Sale /rent of aircraft materials 410,650.36 1,200,284.95
Engineering Corporation
Dalian Airlines Co., Ltd. Ground service 1,112,129.34 1,186,801.33
Non-routine
Dalian Airlines Co., Ltd. maintenance/machinery 54,619.72 154,949.57
service
Kunming Airlines Co., Ltd Ground service 6,947.13 53,396.23
Kunming Airlines Co., Ltd Locomotive service income 4,132.08 146,742.19
Kunming Airlines Co., Ltd Agency service 6,722.40 18,957.39
Shandong Air New Media Co., Ltd. Media resource fee 16,065,789.77 9,416,790.90
Shandong Air New Media Co., Ltd. Media freight 471,698.10
Taikoo (Shandong) Aircraft Engineering
Sale of aircraft materials 882,671.27 236,238.67
Company Limited
Taikoo (Shandong) Aircraft Engineering
Training fee 51,556.60 76,839.62
Company Limited
Taikoo (Shandong) Aircraft Engineering
Maintenance fee 939,588.49 84,391.51
Company Limited
Shandong XiangYu Air Technology Co.,
Sale of aircraft materials 1,820,932.96 779,378.54
Ltd.
Shenzhen Airlines Co., Ltd. Agency service 201,448.80 1,302,625.14
219
Shandong Airlines Co., Ltd. Annual Report 2020
Related party Transaction Current year Prior year
Shenzhen Airlines Co., Ltd. Ground service 29,150.94
Shenzhen Airlines Co., Ltd. Sale /rent of aircraft materials 214,448.00 271,360.52
Irregular flight
Shenzhen Airlines Co., Ltd. maintenance/locomotive 495.58 6,210.11
service income
Air China Ground service 4,961,303.96 7,811,955.83
Simulator maintenance /
Air China 4,111,642.86 4,485,428.61
House rental income
Air China Sale /rent of aircraft materials 682,341.23
Irregular flight
Air China maintenance/locomotive 29,619.47 24,741.68
service income
Air China Agency service 304,889.55 251,630.49
Beijing Airlines Co., Ltd. Ground service 3,698.11 51,647.17
China International Airlines Inner
Ground service 128,185.47 6,713.20
Mongolia Co., Ltd.
Shandong Airlines Rainbow Auto Service
Storage income 392,919.42 359,082.82
Co., Ltd.
Shandong Airlines Rainbow Auto Service
Property fee income 28,420.75 27,509.43
Co., Ltd.
Shandong Airlines Rainbow Auto Service
Rentals 17,142.86
Co., Ltd.
Total 32,415,153.32 28,471,667.80
10.5.2 Borrowing of funds from related parties
Related Party Borrowing money Beginning date Due date Description
Borrowing:
China Aviation Group
296,000,000.00 2016-6-20 2026-6-20 Paid off by year-end
Finance Co., Ltd.
SDA Group 150,000,000.00 2019-11-11 2020-10-19 Paid off by year-end
10.5.3 Remuneration to Key Management Personnel
Item Current year Prior year
Key management personnel compensation CNY 878.52 million CNY 1,270.84 million
10.5.4 Other Related Party Transactions
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Shandong Airlines Co., Ltd. Annual Report 2020
Related party Transaction Current year Prior year
Air China Frequent flyer cooperation 60,000,000.00 72,000,000.00
Air China Cargo Co., Ltd. Code sharing for cargo 1,005,335.71
Total 60,000,000.00 73,005,335.71
10.6 Related Party Balances
10.6.1 Receivables
31 December 2020 31 December 2019
Related party Provision for bad Provision for bad
Carrying amount Carrying amount
debt debt
Accounts receivable
Air China 9,869,517.17 5,441,837.40
Air China Inner Mongolia Co., Ltd. 69,220.80
Dalian Airlines Co., Ltd. 2,530.80 16,894.80
Taikoo (Shandong) Aircraft
24,700.00
Engineering Company Limited
Shandong Air New Media Co., Ltd. 375,000.00 75,000.00
Total 10,316,268.77 5,558,432.20
Other receivables
Air China 6,284,099.27 5,134,920.42
Shenzhen Airlines Co., Ltd. 9,991.75 75,988.90
Shandong Rainbow Commercial Jet
101,551,717.65 101,551,717.65 101,551,717.65 101,551,717.65
Co., Ltd.
Shandong XiangYu Air Technology
158,519.78 1,835,674.33
Co., Ltd.
Taikoo (Shandong) Aircraft
32,760.70 180,217.72
Engineering Company Limited
Shandong Air New Media Co., Ltd. 13,212,795.39 10,095,530.78
Beijing Aircraft Maintenance and 1,061,799.39 1,224,188.64
Dalian Airlines Co., Ltd. 321,199.10 56,450.80
Kunming Airlines Co., Ltd 48,640.00 174,620.00
Shandong Airlines Rainbow Auto
4,031.65 240.00
Service Co., Ltd.
Total 122,685,554.68 101,551,717.65 120,329,549.24 101,551,717.65
10.6.2 Payables
221
Shandong Airlines Co., Ltd. Annual Report 2020
Related party 31 December 2020 31 December 2019
Accounts payable
Shandong XiangYu Air Technology Co., Ltd. 62,612,200.70 24,885,130.73
Taikoo (Shandong) Aircraft Engineering Company Limited 71,170,122.15 60,317,020.35
Air China 288,157,344.35 216,889,212.07
Air China Cargo Co., Ltd. 483,782.83
Beijing Golden Phoenix Human Resources Service Co., Ltd. 468,107.35 316,512.86
Shenzhen Airlines Co., Ltd. 1,575,214.82 352,836.71
Aircraft Maintenance and Engineering Corporation (Ameco) 69,550,487.95 33,686,285.52
Sichuan International Aero Engine Maintenance Co., Ltd. 40,552,088.72 88,209.29
Shandong Air New Media Co., Ltd. 4,310,391.38 4,691,884.84
Shandong Airlines Rainbow Auto Service Co., Ltd. 45,500,000.00 6,375,000.00
Chengdu Fukai Aircraft Engineering Service Co., Ltd. 2,407,193.88 3,494,468.69
Shanghai International Airport Ground Service Co., Ltd. 53,210.80 54,398.40
Total 586,356,362.10 351,634,742.29
Other payables
SDA Group 20,892,072.83 14,933,120.85
Taikoo (Shandong) Aircraft Engineering Company Limited 641,414.74 484,291.74
Shandong Air New Media Co., Ltd. 3,138,323.91 6,368,095.92
Shandong Rainbow Commercial Jet Co., Ltd. 1,257,646.00 7,798.95
Total 25,929,457.48 21,793,307.46
Note 11 COMMITMENTS AND CONTINGENCIES
11.1 Significant Commitme nts
The nature and amount of significant commitments existing at the balance sheet date:
11.1.1 Capital Commitment
Capital commitments signed but not yet recognized in the
31 December 2020 31 December 2019
financial statements
Commitment for purchase long-term assets 6,327,478,302.14 7,036,492,465.21
Large contract
Commitment for external investment
11.1.2 Operating Lease Commitment
Minimum lease payments under non-cancellable operating
31 December 2020 31 December 2019
leases
222
Shandong Airlines Co., Ltd. Annual Report 2020
Minimum lease payments under non-cancellable operating
31 December 2020 31 December 2019
leases
1 year after the balance sheet date 2,800,228,500.64 3,014,893,635.26
2 year after the balance sheet date 2,698,464,761.43 2,842,138,245.44
3 year after the balance sheet date 2,551,871,018.05 2,672,068,066.30
Over 3 year after the balance sheet date 7,551,765,750.49 9,875,497,392.11
Total 15,602,330,030.61 18,404,597,339.11
11.1.3 Other Commitment
The Company has no other significant commitment needed to be disclosed as of 31
December 2020.
11.2 Contingencies
The Company has no other significant contingencies needed to be disclosed as of 31
December 2020.
Note 12 EVENTS AFTER THE REPORTING PERIOD
As of this reporting date, the Company has no post-balance sheet events that should be
disclosed.
Note 13 OTHER SIGNIFICANT MATTERS
13.1 Pension Plan
No significant change of the annuity program occurred for current year, see Note 5.21, 5.29.
Note 14 NOTES TO ELEMENTS OF THE PARENT COMPANY’S FINANCIAL
STATEMENTS
14.1 Accounts receivable
14.1.1 Disclosure by Age
Age 31 December 2020 31 December 2019
Within 1 year 279,757,208.36 437,495,880.93
1 to 2 years 52,098,250.31 35,122,001.00
2 to 3 years 34,122,000.00
3 to 4 years
4 to 5 years
Over 5 years 420,529.65 8,477,739.50
223
Shandong Airlines Co., Ltd. Annual Report 2020
Subtotal 366,397,988.32 481,095,621.43
Less: provision for bad debt 15,724,684.12 24,493,161.92
Total 350,673,304.20 456,602,459.51
14.1.2 Disclosure by Category
31 December 2020
Book balance Provision for bad debt
Category
Proportion Provision Carrying amount
Amount Amount
(%) ratio (%)
Accounts receivable subject
to individual impairment
assessment
Accounts receivable subject
to group impairment 366,397,988.32 100.00 15,724,684.12 4.29 350,673,304.20
assessment
Total 366,397,988.32 100.00 15,724,684.12 4.29 350,673,304.20
(Continued)
31 December 2019
Book balance Provision for bad debt
Category
Proportion Provision Carrying amount
Amount Amount
(%) ratio (%)
Accounts receivable subject
to individual impairment 8,057,209.85 1.67 8,057,209.85 100.00
assessment
Accounts receivable subject
to group impairment 473,038,411.58 98.33 16,435,952.07 3.47 456,602,459.51
assessment
Total 481,095,621.43 100.00 24,493,161.92 5.09 456,602,459.51
14.1.3 As at December 31, 2020, there is no provision for bad debts subject to individual
impairment assessment.
14.1.4 Accounts receivable subject to impairment assessment by credit risk characteristics
of a group as of 31 December 2020
31 December 2020
Project
Book value Provision for bad debt Provision ratio (%)
Amounts due from the 10,455,297.15
224
Shandong Airlines Co., Ltd. Annual Report 2020
clearing center
Amounts due from the
31,724,360.89
aviation association
Amounts due from related
9,724,648.00
parties
Other receivables 314,493,682.28 15,724,684.12 5.00
Total 366,397,988.32 15,724,684.12 4.29
14.1.5 Accounts receivable with individually significant balance and provision for bad debt
recognized individually as of 31 December 2019
31 December 2019
Entity name Provision for bad Provision ratio
Book value Reason
debt (%)
Debtor #1 8,057,209.85 8,057,209.85 100.00 Impairment upon individual assessment
Total 8,057,209.85 8,057,209.85 100.00
14.1.6 Accounts receivable subject to impairment assessment by credit risk characteristics
of a group as of 31 December 2019
31 December 2019
Entity name Provision
Book value Provision for bad debt
ratio (%)
Amounts due from the clearing center 42,716,664.57
Amounts due from the aviation association 93,939,923.14
Amounts due from related parties 7,662,782.50
Other receivables 328,719,041.37 16,435,952.07 5.00
Total 473,038,411.58 16,435,952.07 3.47
The Company calculate provision of bad debt according to the combination of credit risk
characteristics and the expected loss amount.
14.1.7 Changes of Provision for Bad Debt During the Reporting Period
Changes of Changes during the reporting period
31 December 31 December
Category accounting 1 January 2020 Recovery
2019 Provision Write-off 2020
policy or reversal
Accounts
receivable
8,057,209.85 8,057,209.85 8,057,209.85
subject to
individual
225
Shandong Airlines Co., Ltd. Annual Report 2020
Changes of Changes during the reporting period
31 December 31 December
Category accounting 1 January 2020 Recovery
2019 Provision Write-off 2020
policy or reversal
impairment
assessment
Accounts
receivable
subject to
16,435,952.07 16,435,952.07 711,267.95 15,724,684.12
impairment
assessment by
group
Total 24,493,161.92 24,493,161.92 711,267.95 8,057,209.85 15,724,684.12
14.1.8 Actual accounts receivable written off in this period are as follows
Written off during this Closing
Entity name Opening balance Reason
period balance
The person subjected to execution has
Debtor #1 8,057,209.85 8,057,209.85
no property for execution
Total 8,057,209.85 8,057,209.85
14.1.9 As of December 31, 2020, the top five accounts receivable amounted to CNY
143,951,274.02, accounting for 39.29% of the total ending balance of accounts receivable,
and the corresponding summary amount of the ending balance of bad debt provision is CNY
7,197,563.70.
14.1.10 The Company has no derecognition of accounts receivable due to the transfer of
financial assets.
14.1.11 The Company has no assets or liabilities arising from continuing involvement in
transferred accounts receivable.
14.2 Other receivables
14.2.1 Other receivables by category
Items 31 December 2020 31 December 2019
Interests receivable
Dividends receivable
Other receivables 165,544,964.64 237,966,773.59
Total 165,544,964.64 237,966,773.59
14.2.2 Other Receivables
226
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① Other receivables by age
Age 31 December 2020 31 December 2019
Within one year 136,305,404.11 206,592,316.53
1-2 years 4,690,877.26 18,721,168.79
2-3 years 12,288,561.13 4,917,213.36
3-4 years 3,882,745.43 830,749.97
4-5 years 773,009.94 4,163,874.36
Over 5 years 112,978,097.70 110,876,843.58
Subtotal 270,918,695.57 346,102,166.59
Less: provision for bad debt 105,373,730.93 108,135,393.00
Total 165,544,964.64 237,966,773.59
② Other receivables by nature
Nature 31 December 2020 31 December 2019
Deposits receivable 63,646,894.09 87,059,915.18
Amounts due from related parties 130,831,535.85 127,368,744.43
Other receivables 76,440,265.63 131,673,506.98
Subtotal 270,918,695.57 346,102,166.59
Less: provision for bad debt 105,373,730.93 108,135,393.00
Total 165,544,964.64 237,966,773.59
③ Other receivables by bad debt provision method
A．Provision for bad debts recognized based on three stages model as of 31 December 2020
is as follows:
Provision for bad debt in the first stage as of 31 December 2020:
Lifetime expected Provision for
Category Book balance Carrying amount Reason
credit losses rate (%) bad debt
Provision for bad
debt recognized
individually
Provision for bad
debt recognized 169,366,977.92 2.26 3,822,013.28 165,544,964.64
collectively
Including: Deposits No significant
63,646,894.09 63,646,894.09
receivable increase on
227
Shandong Airlines Co., Ltd. Annual Report 2020
Lifetime expected Provision for
Category Book balance Carrying amount Reason
credit losses rate (%) bad debt
credit risk
No significant
Amounts due from
29,279,818.20 29,279,818.20 increase on
related parties
credit risk
No significant
Other receivables 76,440,265.63 5.00 3,822,013.28 72,618,252.35 increase on
credit risk
Total 169,366,977.92 2.26 3,822,013.28 165,544,964.64
As of 31 December 2020, the Company has no interest receivable, dividends receivable or
other receivables recognized in the second stage.
Provision for bad debt in the third stage as of 31 December 2020:
Lifetime expected
Provision for bad Carrying
Category Book balance credit losses rate Reason
debt amount
(%)
Provision for bad debt Credit impairment
101,551,717.65 100.00 101,551,717.65
recognized individually has occurred
Shandong Rainbow Credit impairment
101,551,717.65 100.00 101,551,717.65
Commercial Jet Co., Ltd has occurred
Total 101,551,717.65 100.00 101,551,717.65
B．Provision for bad debts based on incurred loss model as of 31 December 2019 is as
follows:
Provision for bad debt in the first stage as of 31 December 2019:
Lifetime expected Provision for
Category Book balance Carrying amount Reason
credit losses rate (%) bad debt
Provision for bad
debt recognized
individually
Provision for bad
244,550,448.94 2.69 6,583,675.35 237,966,773.59
debt recognized
228
Shandong Airlines Co., Ltd. Annual Report 2020
Lifetime expected Provision for
Category Book balance Carrying amount Reason
credit losses rate (%) bad debt
collectively
No significant
Including: Deposits
87,059,915.18 87,059,915.18 increase on
receivable
credit risk
No significant
Amounts due from
25,817,026.78 25,817,026.78 increase on
related parties
credit risk
No significant
Other receivables 131,673,506.98 5.00 6,583,675.35 125,089,831.63 increase on
credit risk
Total 244,550,448.94 2.69 6,583,675.35 237,966,773.59
As of 31 December 2019, the Company has no interest receivable, dividends receivable or
other receivables recognized in the second stage.
Provision for bad debt in the third stage as of 31 December 2019:
Lifetime expected
Provision for bad Carrying
Category Book balance credit losses rate Reason
debt amount
(%)
Provision for bad debt Credit impairment
101,551,717.65 100.00 101,551,717.65
recognized individually has occurred
Shandong Rainbow Credit impairment
101,551,717.65 100.00 101,551,717.65
Commercial Jet Co., Ltd has occurred
Total 101,551,717.65 100.00 101,551,717.65
④ Changes of provision for bad debt during the reporting period
Changes during the reporting period
Category 31 December 2019 Recovery or 31 December 2020
Provision Write-off
reversal
Other receivables of
individual significance and
101,551,717.65 101,551,717.65
subject to individual
impairment assessment
Other receivables subject to
6,583,675.35 2,761,662.07 3,822,013.28
impairment assessment by
229
Shandong Airlines Co., Ltd. Annual Report 2020
Changes during the reporting period
Category 31 December 2019 Recovery or 31 December 2020
Provision Write-off
reversal
credit risk characteristics of a
group
Total 108,135,393.00 2,761,662.07 105,373,730.93
⑤ There are no written off to other receivables during the reporting period.
⑥ Top five closing balances by entity
Proportion of the balance
Balance as at 31 Provision for bad
Entity name Nature Age to the total other
December 2020 debt
receivables (%)
Shandong Rainbow
Over 5
Commercial Jet Related party 101,551,717.65 37.48 101,551,717.65
years
Co., Ltd.
Within 2
Debtor #1 Deposits 30,685,981.57 11.33
year
Within 1
Debtor #2 Others 27,297,543.26 10.08 1,364,877.16
year
Shandong Air New Within 1
Related party 13,212,795.39 4.88
Media Co., Ltd. year
Debtor #3 Within 1
Others 11,284,362.57 4.17 564,218.13
year
Total 184,032,400.44 67.94 103,480,812.94
⑦The Company has no other receivables relating to government grants.
⑧The Company has no other receivables relating to derecognition of other receivables for
transfer of financial assets.
⑨ The Company has no assets or liabilities arising from continuing involvement in
transferred other receivables.
14.3 Long-term equity investments
14.3.1 Investments in Subsidiaries
230
Shandong Airlines Co., Ltd. Annual Report 2020
31 December Current year Current year 31 December Provision Year-end
Investee
2019 increase decrease 2020 recognized provision
Shandong aviation
48,323,205.97 48,323,205.97
Logistics Ltd
Qingdao Feisheng
International
Aviation Training
57,677,479.46 57,677,479.46
Technology
Development Co.,
Ltd
Shandong Jinping
aviation food Co., 30,310,200.00 30,310,200.00
Ltd.
Shandong Airlines
Qingdao Food Co., 7,790,400.00 7,790,400.00
Ltd.
Total 144,101,285.43 144,101,285.43
14.3.2 Investments in Joint Ventures and Associates
Changes in the current period (+, -)
Investment
gains
Other Other
31 December Impairment and losses
Investee Additional Investment comprehensive changes
2019 provision recognized
investment reduction income in
under
adjustment equity
the equity
method
Associates
Shandong Rainbow
Commercial Jet 22,500,000.00 22,500,000.00
Co., Ltd.
Total 22,500,000.00 22,500,000.00
(Continued)
231
Shandong Airlines Co., Ltd. Annual Report 2020
Changes in the current period (+, -)
Declared cash
Investee Provision 31 December 2020 Year-end provision
dividends or Others
recognized
profits
Associates
Shandong Rainbow Commercial
22,500,000.00 22,500,000.00
Jet Co., Ltd.
Total 22,500,000.00 22,500,000.00
14.4 Operating revenues and operating costs
2020 2019
Items
Operating revenues Operating costs Operating revenues Operating costs
Principal
9,854,672,423.67 12,550,540,262.47 18,277,680,628.43 17,204,720,972.91
activities
Other activities 655,331,879.04 4,559,337.10 685,084,701.46 6,736,014.89
Total 10,510,004,302.71 12,555,099,599.57 18,962,765,329.89 17,211,456,987.80
14.5 Investment Income
Items 2020 2019
Investment income from held-for-trading financial assets during
-829,194.39 9,316.91
holding period
Dividend income from other equity instrument income during
4,019,690.59 6,284,357.21
holding period
Total 3,190,496.20 6,293,674.12
Note 15 SUPPLEMENTARY INFORMATION
15.1 Current non-recurring statement of profit and loss
Items 2020 2019 Description
Gains /(losses) on disposal of non-current assets 59,471.65 -2,066,959.25
Government grants recognized in current profit or loss
(except government grants that is closely related to operations
98,058,606.34 102,684,463.91
and determined based on a fixed scale according to the national
unified standard)
Gains /(losses) arising from changes in fair value of
held-for-trading financial assets, derivative financial assets, -1,565,885.31 -207,436.01
held-for-trading financial liabilities and derivative financial
232
Shandong Airlines Co., Ltd. Annual Report 2020
Items 2020 2019 Description
liabilities during the holding period and investment income
arising from disposal of held-for-trading financial assets,
derivative financial assets, held-for-trading financial liabilities,
derivative financial liabilities and other debt investment except
effective hedging transactions related to the Company's
principal activities
Other non-operating income/expenses except for items
46,338,437.81 105,248,418.17
mentioned above
Other gains or losses satisfying the definition of extraordinary
2,626,332.77 4,954,383.18
gains or losses
Total extraordinary gains/(losses) 145,516,963.26 210,612,870.00
Less: tax effect 36,389,420.55 52,714,956.95
Net extraordinary gains/(losses) 109,127,542.71 157,897,913.05
Less: net extraordinary gains/(losses) attributable to minority
interests
Net extraordinary gains/(losses) attributable to ordinary
109,127,542.71 157,897,913.05
shareholders
15.2 Return on Net Assets and Earnings Per Share (‘EPS’)
15.2.1 2020
Profit for the reporting period Weighted average return EPS
on net assets (%) Basic Diluted
Net profit attributable to ordinary shareholders -61.31 -5.96 -5.96
Net profit attributable to ordinary shareholders
-64.12 -6.23 -6.23
after extraordinary gains and losses
15.2.2 2019
Weighted average return EPS
Profit for the reporting period
on net assets (%) Basic Diluted
Net profit attributable to ordinary shareholders 7.22 0.90 0.90
Net profit attributable to ordinary shareholders
4.06 0.51 0.51
after extraordinary gains and losses
233
Shandong Airlines Co., Ltd. Annual Report 2020
Section XIII. Documents available for Reference
1. Financial statements carrying the personal signatures and seals of Chairman of the Board, Chief Accountant and Person
in Charge of Accounting Department;
2. Original of Auditors’ Report carrying the seals of Certified Public Accountants as well as personal signatures and seals
of certified public accountants;
3. Originals of all documents and notices publicly disclosed on newspapers designated by CSRC in the report period in
2019;
4. The Company will offer above documents for reference timely provided that CSRC or Stock Exchange demands or
shareholders requires according to the regulations and Articles of Association.
Shandong Airlines Co., Ltd.
Legal representative: Sun Xiujiang
27 March 2021
234
