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山 航B:2021年年度报告(英文版)2022-03-31  

                        Annual Report 2021




    March 2022
                                                     Shandong Airlines Co., Ltd. Annual Report 2021




        Section I. Important Notice,Contents 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 2021 Annual
Report is authentic, accurate and complete.

All directors have attended the Board Meeting for Report Deliberation.

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
has no share converted from capital reserve either




                                         1
                                                                                   Shandong Airlines Co., Ltd. Annual Report 2021




                                                        Contents




Section I Important Notice, Contents and Interpretation .............................................................. 1

Section II Company Profile and Main Financial Indexes .............................................................. 5

Section III Management Discussion and Analysis ........................................................................ 10

Section IV Corporate Governance ................................................................................................. 33

Section V Enviornmental and Social Responsibillity .................................................................... 62

Section VI Important Events .......................................................................... 错误!未定义书签。

Section VII Changes in shares and particular about shareholders ............. 错误!未定义书签。

Section VIII Preferred Stock ........................................................................... 错误!未定义书签。

Section IX Bonds .............................................................................................. 错误!未定义书签。

Section X Financial Report ........................................................................... 错误!未定义书签。0




                                                                 2
                                                                                   Shandong Airlines Co., Ltd. Annual Report 2021




                                  Documents Available for Reference


1.The Financial Statements containing the signatures and seals of the President, Chief Accountant and Head of the Finance Dept. of
the Company.
2. The original Audit Report containing seal of the Accounting Firms and Signature and Seals of the CPA.
3.All original copies and announcements of the Company publicly released in the newspapers designated by CSRC during the year of
2021.
4.The Company shall provide promptly when required by CSRC and SSE, or when shareholders request to consult in line with
regulations or Article of Association.




                                                                 3
                                                                         Shandong Airlines Co., Ltd. Annual Report 2021




                                          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
Available Seat Kilometers           Refers to
                                                each segment

                                                Sum of products of maximum cargo carrying tonnage and route
Available Freight Tone Kilometers   Refers to
                                                distance for each segment

                                                Sum of products of tonnage of transport and route distance for each
Total Transport Turnover            Refers to
                                                segment actually

                                                Sum of products of passenger traffic volume and route distance for each
Transport turnover                  Refers to
                                                segment actually

                                                Sum of products of freight carrying tonnage and route distance for each
Cargo and Mail Volume               Refers to
                                                segment actually

Overall Flight Carrying Rate        Refers to   RTK/ATK

Passenger Load Factor               Refers to   RPK/ASK

Fright Carrying Rate                Refers to   RFTK/AFTK




                                                       4
                                                                                  Shandong Airlines Co., Ltd. Annual Report 2021




                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

 Historical changes of
                               N/A
 registered address

 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, SDA Office Building, Yaoqiang          3/F, SDA Office Building, 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




                                                                5
                                                                                          Shandong Airlines Co., Ltd. Annual Report 2021

III. Information disclosure and preparation place

 Website of the Stock Exchange where the annual               In China: China Securities Journal, Securities Times
 report of the Company disclosed                              overseas: Hong Kong Commercial Daily(H.K.)

 Media and Website where the annual report of the
                                                              http://www.cninfo.com.cn
 Company disclosed

                                                              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, Guo Yuefeng and 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 in the
                                                   2021                     2020           current year over the          2019
                                                                                            previous year (+,-)

 Operating income (RMB)                      12,515,317,963.16        10,534,403,350.87                 18.80%       18,990,415,024.88

 Net    profit      attributable      to
                                              -1,813,705,307.39       -2,382,015,455.81                 23.86%         361,005,776.31
 shareholders      of    the       listed


                                                                        6
                                                                                          Shandong Airlines Co., Ltd. Annual Report 2021

 company(RMB)

 Net     profit      attributable      to
 shareholders        of      the    listed
 company           after       deducting     -1,998,267,602.91     -2,491,142,998.52                         19.79%             203,107,863.26
 non-recurring             gains      and
 losses(RMB)

 Net cash flow arising from
                                              1,557,321,817.82     -1,699,728,760.80                      191.62%          2,629,812,252.38
 operating activities(RMB)

 Basic earnings per share
                                                          -4.53                  -5.96                       23.99%                       0.90
 (RMB/Share)

 Diluted earnings per share
                                                          -4.53                  -5.96                       23.99%                       0.90
 (RMB/Share)

                                                                                              9,291.62 percentage
 Weighted average ROE                              -9,352.93%                 -61.31%                                                   7.22%
                                                                                                     points down

                                                                                               Changes at end of
                                                                                                the current year
                                             Year-end of 2021     Year-end of 2020            compared with the           Year-end of 2019
                                                                                              end of previous year
                                                                                                     (+,-)

 Total assets (RMB)                          32,643,581,557.18     22,403,505,133.99                         45.71%       17,392,935,986.48

 Net     assets      attributable      to
 shareholder of listed company                 -917,664,639.69        2,570,260,924.21                  -135.70%           5,173,519,005.57
 (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                             2021                                2020                                Note

 Operating income (RMB)                           12,515,317,963.16                   10,534,403,350.87       N/A

                                                                                                              Media      resource      royalty
                                                                                                              income, foreign airline labor
 Amount deducted from
                                                      54,035,710.22                      56,794,107.52        fee     income,     maintenance
 operating income (RMB)
                                                                                                              income and rental income,
                                                                                                              etc.

 Operating income after
                                                  12,461,282,252.94                   10,477,609,243.35       N/A
 deduction (RMB)




                                                                      7
                                                                                              Shandong Airlines Co., Ltd. Annual Report 2021

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)

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)

The Company had no difference of the net profit or net assets disclosed in financial report, under either foreign accounting rules or
Chinese GAAP (Generally Accepted Accounting Principles) in the period.


VIII. Quarterly main financial index

                                                                                                                                    In RMB

                                                    Q1                         Q2                      Q3                     Q4

 Operating income                              2,496,104,347.92          4,139,447,028.96         3,559,150,565.10       2,320,616,021.18

 Net     profit     attributable      to
 shareholders       of      the    listed      -835,090,161.63                39,891,408.85        -337,873,207.21        -680,633,347.40
 company

 Net     profit     attributable      to
 shareholders       of      the    listed
                                               -862,625,616.25               -19,847,424.78        -391,043,448.73        -724,751,113.15
 company          after      deducting
 non-recurring gains and losses

 Net cash flow arising from
                                                 -12,860,482.00              881,484,870.49         435,205,539.67         253,491,889.66
 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                             2021                     2020                2019                 Note

 Gains/losses      from      the    disposal   of
 non-current asset (including the write-off              64,797,810.76               59,471.65        -2,066,959.25
 that accrued for impairment of assets)

 Governmental subsidy calculated into
                                                      155,394,226.24             98,058,606.34      102,684,463.91
 current gains and losses(while closely

                                                                         8
                                                                                        Shandong Airlines Co., Ltd. Annual Report 2021

 related with the normal business of the
 Company, the government subsidy that
 accord with the provision of national
 policies and are continuously enjoyed in
 line with a certain standard quota or
 quantity are excluded)

 Losses/gains from changes of fair values
 occurred in holding trading financial
 assets, trading financial liabilities and
 investment income obtaining from the
 disposal of trading financial assets, trading            6,801.48         -1,565,885.31           -207,436.01
 financial liability and financial assets
 available for sale, excluded effective
 hedging business relevant with normal
 operations of the Company

 Other non-operating income and
 expenditure except for the aforementioned          21,029,660.26         46,338,437.81        105,248,418.17
 items

 Other items of profits/losses that qualified
                                                      4,867,924.92          2,626,332.77          4,954,383.18
 the definition of non-recurring profit/loss
 Less: impact on income tax                         61,534,128.14         36,389,420.55         52,714,956.95
 Total                                             184,562,295.52        109,127,542.71        157,897,913.05               --

Specific information on other items of profits/losses that qualified the definition of non-recurring profit/loss
√Applicable   □Not applicable
Other items of profits/losses that qualified the definition of non-recurring profit/loss mainly refers to the refund of handling charges
for taxes withholding and collection.


There are no items defined as recurring profit (gain)/loss according to the lists of extraordinary profit (gain)/loss in Q&A
Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public --- Extraordinary Profit/loss




                                                                     9
                                                                                    Shandong Airlines Co., Ltd. Annual Report 2021




                    Section III Management Discussion and Analysis

I. Industry of the Company during the reporting period

In 2021, the epidemic continues to spread international-wide, travel demand for passengers is sluggish. In front of
the difficult challenges such as epidemic prevention and controls, operation losses and safety pressure, as a
strategic industry in economic development, the country’s civil aviation industry adheres to seeking a progress in
a stable manner and shows a strong resilience in adversity. By the end of 2021, the national transport aviation
achieved a record of continuous safe flight of “120+16” months and 98.76 million hours, carrying 5050 million
passengers safety, and achieved air defense safety of 19 consecutive years. The flight regularity rate for the whole
year was 88%, remaining above 80% for four consecutive years.
According to the Statistics of Key Performance Indicators for China’s Civil Aviation Industry in December 2021
released by CAAC, the whole industry recorded a total transport turnover of 85670 million tonne-kilometers in
2021, an increase of 7.3% from a year earlier; passenger volume of 441 million, up 5.5% y-o-y; the cargo & mail
volume was 7.318 million tonnes with 8.2% up y-o-y.
                                         Total Transport Turnover of Civil Aviation(2016-2020)




                                          Passenger Turnover of Civil Aviation (2016-2020)




Data sources: Statistical Bulletin of Civil Aviation Industry Development in 2020
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

                                                                 10
                                                                            Shandong Airlines Co., Ltd. Annual Report 2021

August.



II. Main business of the Company during the reporting period

(1)Main business 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.
(2) Business model and industry position
For more than 20 years, the Company consistently giving first priority to “ensure safety, pay close attention to
efficiency, and strive to punctuality and quality service” and to established the industry position with a deep
foundation. By the end of 2021, the Company owns 134 Boeing B737 series aircraft, ranking among the larger
airlines. Currently, 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.
After years of development and accumulation,the Company has a leading safety control capability, cost control
capability and team execution since establishment. We has an adequate allocation of core human resources,
market share of the main base is in a dominant position, and the service standards and flight on-time rate ranked
among the top in domestic airlines all year round according to the authoritative institution.With the evolution of
development stage, there is space for the future development in terms of route network structure and information
supporting capability. Main income of the Company mainly comes from air passenger and cargo transportation
business, performance changes are in conformity with the development status of industry.


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 134


                                                          11
                                                                        Shandong Airlines Co., Ltd. Annual Report 2021

airplanes of Boeing 737 serials with an average age of 8.2 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 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 84.2:1, 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 passengers, 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 seven consecutive years.
The core competence of the Company has no change in the reporting period.



IV Analysis of main business

1. Introduction

(1) Operation data
                      Item                          2021                     2020                   Changes (+,-)
Transport capacity
Available   Tonne-Kilometre     (ATK)   (10      368243.70                363162.17                    1.40%
thousand TK)
Including: Domestic flight                       364311.90                352563.43                    3.33%

      International flight                        3931.81                  10024.66                   -60.78%

      Regional routes                                0                      574.08                    -100.00%

Available      Seat      Kilometers(ASK)(10      3509352.71               3379945.00                   3.83%
thousand PK)


                                                            12
                                                                Shandong Airlines Co., Ltd. Annual Report 2021

Including: Domestic flight                      3506906.32        3332174.98                   5.24%

        International flight                     2446.39           42369.88                   -94.23%

        Regional routes                             0              5400.14                    -100.00%

Available Freight Tone Kilometers(AFTK)          52401.96          58967.12                   -11.13%
(10 thousand ton km)
Including: Domestic flight                       48690.33          52667.68                    -7.55%

        International flight                     3711.63           6211.37                    -40.24%

        Regional routes                             0                88.07                    -100.00%

Carrying capacity
Total     Transport    Turnover   (RTK)   (10   263100.35         255192.97                    3.10%
thousand ton km)
Including: Domestic flight                      261536.96         250338.61                    4.47%

        International flight                     1563.39           4636.04                    -66.28%

        Regional routes                             0               218.31                    -100.00%

Passenger Turnover (RPK)                        2685648.43        2562748.52                   4.80%
(10 thousand passenger km)
Including: Domestic flight                      2684060.55        2532349.27                   5.99%

        International flight                     1587.88           28066.01                   -94.34%

        Regional routes                             0              2333.25                    -100.00%

Cargo and Mail Turnover           (RFTK) (10     24747.58          27966.64                   -11.51%
thousand ton km)
Including: Domestic flight                       23326.52          25743.48                    -9.39%

        International flight                     1421.05           2207.02                    -35.61%

        Regional routes                             0                16.14                    -100.00%

Passenger traffic (10 thousand passengers)       1865.49           1819.49                     2.53%

Including: Domestic flight                       1863.16           1799.74                     3.52%

        International flight                       2.33              18.42                    -87.35%

        Regional routes                             0                1.33                     -100.00%

Cargo & mail traffic      (ton)                 145218.07         165922.33                   -12.48%

Including: Domestic flight                      137644.81         152682.28                    -9.85%

        International flight                     7573.26           13142.78                   -42.38%

        Regional routes                             0                97.27                    -100.00%

Load factor
Overall load factor (%)                           71.45              70.27              1.18 percentage points



                                                           13
                                                                        Shandong Airlines Co., Ltd. Annual Report 2021

Including: Domestic flight                        71.79                      71.01                0.78 percentage points

     International flight                         39.76                      46.25               -6.48 percentage points

     Regional routes                                0                        38.03               -38.03 percentage points

Passenger Load Factor (%)                         76.53                      75.82                0.71 percentage points

Including: Domestic flight                        76.54                      76.00                0.54 percentage points

     International flight                         64.91                      66.24               -1.33 percentage points

     Regional routes                                0                        43.21               -43.21 percentage points

Fright Carrying Rate (%)                          47.23                      47.43               -0.20 percentage points

Including: Domestic flight                        47.91                      48.88               -0.97 percentage points

     International flight                         38.29                      35.53                2.75 percentage points

     Regional routes                                0                        18.33               -18.33 percentage points

Utilization of aircraft on a daily basis           7.34                       7.50                     -0.16 hours
(Daily cycle times per aircraft)


(2) Fleet structure
During the reporting period, totally three B737-800 airplanes are introduced by the Company. Up to 31 December
2021, the Company operates 134 airplanes in total and the fleet distribution below:
                  Model                                 Numbers                       Average service age (Year)

                 737-700                                   3

                 737-800                                  124                                    8.2

                  737-8                                    7
(3)Operation
In 2021, the Company coordinated the epidemic prevention and control and vary works of production and
operation development with positive results yielded.
-- Epidemic prevention and control has stabilized. There is no spread of the epidemic caused by the Company’s
flights; there is no confirmed cases or asymptomatic cases being found among the in-house personnel.


-- The security situation remains stable. The main transportation business guaranteed 334,600 hours of safe flights
and 161,600 sorties, an increase of 2.17% and 1.07% on a y-o-y basis respectively without transport aviation
symptoms, the safety quality evaluation index scored 11.90.


--Running quality is basically stable. The normal rate of flights in main transportation business was 89.6%, 2.1
percentage points declined from a year earlier, and ranked second among major airlines in the industry.
Guaranteed 34 important mission (VVIP) flights, with a flight on-time rate of 91.18%.


--Accomplish the loss reduction in terms of benefit. The Company achieved operating income of 12.515 billion
yuan with 18.80% up on a y-o-y basis, net profit of -1.814 billion yuan, 568 million yuan reduced in loss
                                                          14
                                                                          Shandong Airlines Co., Ltd. Annual Report 2021

reduction from a year earlier; completed a total transport turnover of 2631 million ton-km and 18.65 million
passengers were transported, a y-o-y growth of 3.10% and 2.53% respectively; cargo and mail traffic reached
145200 tons, down 12.48% y-o-y; passenger load factor was 76.5% with 0.7 percentage points up, the fright
carrying rate of 47.23%, a y-o-y declined of 0.2 percentage points.


--Overall stable in service quality. The passenger satisfaction has a score of 93.6, basically unchanged from
previous year. As the comprehensive assessment of passenger complaints forwarded by CAA, the Company
ranked second among major airlines and awarded the CAPSE “Best Domestic Airlines” for seven consecutive
years.


The following work has been carried out.
1. Scientifically and accurately did a good job in pandemic prevention and control, and stuck to the bottom line of
safe production.
The first was to implement safety management responsibilities. Thoroughly implemented General Secretary Xi
Jinping's important expositions on safety production and the spirit of important instructions on civil aviation work,
and sorted out the list of aviation safety responsibilities. The second was to systematically investigate and manage
potential security risks. Formulated key risks and important hazard source management and control measures, and
solidly carried out SMS performance evaluation and rectification. The third was to pay close attention to the
effectiveness of renovation and rectification. Continued to promote the three-year special rectification of safety
and the special rectification of apron operation. The fourth was to solidly promote the construction of the "three
foundations". Deepened the professional construction of the flight training system and security team, and passed
the assessment of the air defense security capability of the Civil Aviation Administration. The fifth was to
strengthen the effectiveness of pandemic prevention and control. We implemented the requirements of "preventing
foreign input, preventing domestic rebound, and preventing both people and objects", strengthened the
closed-loop management of international flights, and strictly implemented the policies for vaccination and nucleic
acid testing.


2. Properly responded to complex operating environments and continuously improved management and control
efficiency
Firstly, improved the operational risk management and control mechanism. Refined the high-frequency key risk
management and control measures, optimized the typical dangerous weather case analysis, complex and severe
weather batch release, flight return and alternate review analysis and other mechanisms, the precision of flight
release control has been improved. Secondly, did a solid job in flight regularity. Actively strengthened the
identification and release, guarantee and coordination, and feedback on problems of early warning flights.
Continued to implement the project to improve the operation efficiency of the apron, shortening the guarantee
time of transit by about 1,600 hours compared with the same period of last year. Thirdly, deepened the
construction of emergency management system. Actively carried out the joint emergency drills,               emergency
drills for SMS effectiveness assessment and family assistance training of airport-stationed units. Clarified the key


                                                         15
                                                                         Shandong Airlines Co., Ltd. Annual Report 2021

points of AOC emergency response and properly responded to emergencies.


3. Made overall plans to survive and seek development, and fought the tough battle for efficiency
The first was to continue to deepen the key work of efficiency. Adhered to capacity investment, dynamic
adjustment of flight plans, implemented quantitative management and control of flights, and promoted the
in-depth application of revenue management and control systems. The second was to optimize the route network.
Built sustainable competitive advantages and continuously increased the market share of main bases. The third
was to strengthen product innovation and business development. Launched the "Jing Lu Fei" domestic
through-way combined transport product and air-rail combined transport product, extending the reach of the route
network. The fourth was to vigorously promote cost reduction. Strengthened the cost saving of jet fuel, the
management and control of maintenance costs and the management and control of resident costs, and coordinated
the expansion of financing channels to ensure the security of funds.


4. Focused on digging deep into service value and continuously optimized passenger experience
Firstly, improved the service quality management system. Strengthened the management of service contact points,
established a service risk management and control system, systematically strengthened the identification,
evaluation and control of service risks, built the company's product development platform and service innovation
incentive platform, and stimulated the vitality of the grassroots. The second was to improve service presentation.
Promoted electronic payment for irregular flights and luggage, improved the process of refunding and changing
for all-channel passenger ticket, accelerated the application of RFID (Radio Frequency Identification Technology),
speeded up the reform of catering mode, and improved service efficiency. The third was to strengthen service
brand building. Attached importance to brand carrier innovation, carried out various on-board special activities,
and created high-standard brand systems such as "Lu Yan Ge".


5. Actively implemented management innovation and steadily promoted key projects
The first was to optimize the design of policies and systems. Carried out innovative design around contract
management and incentive mechanism. The second was to actively promote digital transformation. Explored the
IT sharing and collaboration mode, and solidly carried out the construction of key informatization projects such as
IT infrastructure, mobile flight, and integration of finance, assets and taxation. Independently developed the
aircraft unstable approach determination system, and obtained the invention patent certificate issued by the China
National Intellectual Property Administration. The third was to solidly promote key projects. Completed the
transfer of Qingdao Jiaodong Airport, laying a solid foundation for building a regional hub. Completed the phase
II transfer of Chengdu Tianfu Airport to facilitate business development in the southwest.




                                                        16
                                                                                        Shandong Airlines Co., Ltd. Annual Report 2021

2. Income and cost

(1) Constitute of operation income

                                                                                                                                   In RMB

                                           2021                                          2020
                                                                                                                     Increase/decrease
                                               Ratio in operation                              Ratio in operation
                             Amount                                          Amount                                      y-o-y (+,-)
                                                    income                                          income

 Total operation
                        12,515,317,963.16                    100%        10,534,403,350.87                   100%               18.80%
 income

 According to industries

 Air transport
                        11,818,042,783.95                 94.42%          9,829,874,543.16               93.31%                 20.23%
 service

 Logistics freight
                             32,329,355.79                 0.26%            27,974,801.19                  0.27%                15.57%
 service

 Hotel & catering
                             28,703,206.93                 0.23%            26,515,773.38                  0.25%                   8.25%
 service

 Training service             5,660,361.35                 0.05%              4,497,391.59                 0.04%                25.86%

 Other                     630,582,255.14                  5.04%           645,540,841.55                  6.13%                 -2.32%

 According to region

 Domestic               12,400,868,076.39                 99.09%         10,199,538,957.01               96.82%                 21.58%

 International             114,449,886.77                  0.91%           318,879,147.92                  3.03%               -64.11%

 Region                                 0.00               0.00%            15,985,245.94                  0.15%              -100.00%


(2) The industries, products, regions and sales model accounting for over 10% of the company’s operating
income or operating profit

√ Applicable □ Not applicable
                                                                                                                                   In RMB

                                                                            Increase/decreas    Increase/decreas    Increase/decrease
                        Operating                             Gross
                                         Operating cost                      e of operating      e of operating     of gross profit ratio
                         income                            profit ratio
                                                                              income y-o-y         cost y-o-y              y-o-y

 According to industries

 Air transport       11,818,042,783      13,471,273,743                                                               13.01 percentage
                                                              -13.99%               20.23%                7.90%
 service                          .95               .73                                                                        points up

 According to region

                     12,400,868,076      13,392,836,521                                                               10.82 percentage
 Domestic                                                      -8.00%               21.58%               10.51%
                                  .39               .43                                                                        points up

Under circumstances of adjustment in reporting period for statistic scope of main business data, adjusted main business based on

                                                                    17
                                                                                  Shandong Airlines Co., Ltd. Annual Report 2021

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, major procurement contract signed by the Company till end of
the Period

□ Applicable √ Not applicable


(5) Constitute of operation cost

According to product
                                                                                                                        In RMB

                                                       2021                               2020
                                                                                                                   Y-o-y
        product              Item                             Ratio in                           Ratio in
                                            Amount                             Amount                           changes(+,-)
                                                           operation cost                     operation cost

 Air transport       Aviation fuel       3,538,963,965.                     2,480,650,679.
                                                                  26.27%                             19.87%           42.66%
 service             consumption                     19                                 48

 Air transport       Take-off &          1,778,936,957.                     1,764,458,597.
                                                                  13.21%                             14.13%            0.82%
 service             landing fees                    61                                 80

 Air transport       Employee’s         2,141,258,686.                     1,948,282,428.
                                                                  15.89%                             15.61%            9.90%
 service             salary                          13                                 99

                     Depreciation of
 Air transport                           2,994,530,820.
                     aircraft and                                 22.23%    735,757,435.25            5.89%          307.00%
 service                                             21
                     engine

 Air transport                           3,017,583,314.                     5,555,267,742.
                     Other                                        22.40%                             44.50%          -45.68%
 service                                             59                                 84

 Air transport                           13,471,273,743                     12,484,416,884
                     Total                                       100.00%                            100.00%            7.90%
 service                                             .73                                .36

 Logistics           Employee’s
                                          21,323,646.42           59.03%     19,995,267.47           79.94%            6.64%
 freight service     salary

 Logistics
                     Other                14,798,137.21           40.97%      5,018,161.25           20.06%          194.89%
 freight service

 Logistics
                     Total                36,121,783.63          100.00%     25,013,428.72          100.00%           44.41%
 freight service

 Hotel &
                     Raw materials        19,652,108.54           72.33%     17,836,443.41           71.72%           10.18%
 catering service

 Hotel &             Employee’s           5,616,122.16           20.67%      5,109,291.94           20.54%            9.92%


                                                                 18
                                                                              Shandong Airlines Co., Ltd. Annual Report 2021

 catering service        salary

 Hotel &
                         Other             1,901,513.63      7.00%        1,926,063.95             7.74%              -1.27%
 catering service

 Hotel &
                         Total           27,169,744.33      100.00%    24,871,799.30             100.00%               9.24%
 catering service

 Training
                         Depreciation      4,105,053.76     81.94%        4,105,088.76            25.59%               0.00%
 service

 Training
                         Other               905,005.62     18.06%     11,933,577.85              74.41%             -92.42%
 service

 Training
                         Total             5,010,059.38     100.00%    16,038,666.61             100.00%             -68.76%
 service

Explanation
Nil




(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 clients and main suppliers

Major sales clients of the Company

 Total top five clients in sales (RMB)                                                                       221,074,668.61

 Proportion in total annual sales volume for top five
                                                                                                                       1.56%
 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                                            85,208,799.44                                        0.60%

 2              Unit 2                                            44,521,062.00                                        0.31%

 3              Unit 3                                            37,775,419.80                                        0.27%

 4              Unit 4                                            28,839,387.37                                        0.20%

 5              Unit 5                                            24,730,000.00                                        0.17%

 Total                              --                           221,074,668.61                                        1.56%


                                                            19
                                                                                           Shandong Airlines Co., Ltd. Annual Report 2021

Other explanation on main clients
□ Applicable √ Not applicable


Main suppliers of the Company

 Total purchase amount from top five suppliers (RMB)                                                                   3,132,489,698.71

 Proportion in total annual purchase amount for top five
                                                                                                                                  34.25%
 suppliers

 Ratio of related parties in annual total sales among the
                                                                                                                                  9.08%
 top five suppliers



Information of top five suppliers of the Company

     Serial                       Name                              Purchases (RMB)                Proportion in total annual purchase

 1             Unit 1                                                     1,183,011,223.03                                        12.93%

 2             Unit 2                                                       830,781,877.73                                        9.08%

 3             Unit 3                                                       554,089,829.40                                        6.06%

 4             Unit 4                                                       360,772,104.06                                        3.94%

 5             Unit 5                                                       203,834,664.49                                        2.23%

 Total                               --                                   3,132,489,698.71                                        34.25%

Other explanation on main suppliers
□ Applicable √ Not applicable



3. Expense
                                                                                                                                   In RMB

                                                                              Y-o-y changes
                                      2021                   2020                                                   Note
                                                                                   (+,-)

 Sales expense                      648,675,348.06      613,910,975.53                 5.66%

 Administration
                                    424,010,598.68      493,640,757.37                -14.11%
 expense

                                                                                                   249.80% increase compared with the
                                                                                                   previous period, mainly due to the
 Financial expense                  480,703,891.89      137,423,909.87               249.80%       implementation    of    new    leasing
                                                                                                   standards and new borrowing and
                                                                                                   interest expenses increased.

 R& D expense                        25,042,013.59          22,866,289.98              9.51%


4. R&D investment

√Applicable     □Not applicable


                                                                     20
                                                                                                         Shandong Airlines Co., Ltd. Annual Report 2021

                                                                                                                                  Expected impact on the future
    Projects                    Purpose                            Progress               Goals to be achieved
                                                                                                                                  development of the Company

                                                                              1.Perform the effective integration of 1.Increase                     the      ancillary
                                                                              current     pre-purchase     upgrade,        gate revenue       from          additional
                                                                              upgrade, ground-based upgrade and products of the Company,
                                                                              on-board     upgrade      business,    putting 41.46% up in the value of
                   To further improve utilization                             8-type upgrading sub-products together, revenue per customer in the
                   of the seating resources, meet                             connecting 3 upgrade business scenarios first week online(December
                   the    elastic            demand           of              and establish upgrade business ties with 22 - 28, 2021).
                   passengers       for        higher-class                   the whole chain. 2.Realized the “three 2.To provide passengers with
                   consumption and raising the                                unifies and one new” of unified user an                 upgrade       product        that
                   ancillary    revenue          of        cabin              interface for upgrade, unified online unifies                   the          purchasing,
                   upgrading;     sorting            out     the              charging and settlement mode, unified delivery                       and         service
Information
                   delivery process of upgrade On-line                        offline manual upgrade and new online experience,                     comprehensive
management
                   products         and              services, trial          premium         economy      class.        3.new consideration of the service
system       for
                   integrating the sub-products of operation                  technology application for the offline presentation,                           customer
upgrade
                   cabin upgrades, improving the                              payments, realize the upgrading scenario experience,                           customer
                   experience     of          upgrade        for              in the absence of network in cabin. 4. maintenance and sustainable
                   passengers, creating a unified                             realized the pre-purchase checking front development,                       provide     a
                   platform for each upgrading                                to alleviate the pressure of onsite quality upgrade solutions for
                   sub-products          in      terms        of              checking in cabin, solve the problems the Company.
                   touching, selling, delivering and                          and      business    bottlenecks      such    as 3.Creating           a        centering
                   managing.                                                  collection & settlement of upgrade platform for the upgrading
                                                                              products, standardized management of products, and lay a solid
                                                                              offline manual upgrade and expansion foundation                      for     subsequent
                                                                              of the upgrade business outside the promotion                        of       upgrading
                                                                              station.                                            products, etc.

                   Implementing          a      closed-loop
                   control in a process-oriented,                             1.Establishing a digital qualification

                   standardized      and         visualized                   files;
                                                                                                                                  Promoting                         the
                   manner for the qualification                               2.Realizing the automatic review of
                                                                                                                                  standardization, digitalization,
Qualification information                and          training                qualification       promotion,      automatic
                                                                                                                                  systematization                   and
&      trading process of operation and control                               prediction of qualification alarms and
                                                                                                                                  intelligence of operation &
management professionals,                      use           the              intelligent recommendations for trainers.
                                                                                                                                  control                   personnel
system       for technology to promote the core Completed 3.Coordination of production system
                                                                                                                                  qualification      and      training
operations         business to realized electronic                            and eliminate over-qualification on the
                                                                                                                                  management, further enhance
control            and intelligent transformation,                            job.
                                                                                                                                  the management efficiency
professionals strengthen          the         validity      and               4.Building a qualification capability
                                                                                                                                  and reduced the operational
                   compliance       of        qualifications                  profile,    automatically        analyze      the
                                                                                                                                  risk in the people dimension
                   and   training,           improve         the              shortcomings               and             issue
                   standard of operational risk                               recommendations for improvement
                   prevention and control




                                                                                     21
                                                                                   Shandong Airlines Co., Ltd. Annual Report 2021

R&D personnel

                                               2021                              2020                      Changes in ratio

 Number of R&D personnel
                                                              159                              157                             1.27%
 (Person)

 R&D personnel ratio                                        1.35%                            1.33%     0.02 percentage points up

 Educational background                        ——                              ——                            ——

 Undergraduate                                                 94                               86                             9.30%

 Masters                                                       63                               69                             -8.70%

 Age composition                               ——                              ——                            ——

 Under 30                                                      56                               45                            24.44%

 30~40                                                         80                               88                             -9.09%



Investment of R&D

                                               2021                              2020                      Changes in ratio

 Investment for R&D (RMB)                            25,042,013.59                    22,866,289.98                            9.51%

 R&D investment/Operating
                                                            0.20%                            0.22%    0.02 percentage points down
 revenue

 Capitalization of R&D
                                                              0.00                             0.00                            0.00%
 investment (RMB)

 Capitalization of R&D
                                                            0.00%                            0.00%                             0.00%
 investment/R&D investment

Reasons and effects of significant changes in composition of the R&D personnel
□Applicable    √ Not applicable


Reasons for significant changes in the proportion of total R&D investment in operating revenue from the previous year
□Applicable    √ Not applicable


Reasons and rationality of the major changes of the capitalization rate of R&D investment
□ Applicable √ Not applicable


5. Cash flow

                                                                                                                              In RMB

               Item                           2021                             2020                      Y-o-y changes (+,-)

 Subtotal of cash in-flow from
                                             13,894,175,668.21                11,339,817,878.63                          22.53%
 operation activity

 Subtotal of cash out-flow
                                             12,336,853,850.39                13,039,546,639.43                           -5.39%
 from operation activity

                                                                 22
                                                                                         Shandong Airlines Co., Ltd. Annual Report 2021

 Net cash flow from operation
                                                1,557,321,817.82                   -1,699,728,760.80                             191.62%
 activity

 Subtotal of cash in-flow from
                                                    68,574,927.75                        9,484,166.48                            623.05%
 investment activity

 Subtotal of cash out-flow
                                                2,069,074,544.21                     661,392,213.20                              212.84%
 from investment activity

 Net cash flow from
                                               -2,000,499,616.46                    -651,908,046.72                              -206.87%
 investment activity

 Subtotal of cash in-flow from
                                                4,100,000,000.00                  11,950,000,000.00                               -65.69%
 financing activity

 Subtotal of cash out-flow
                                                5,155,521,549.95                   4,889,620,785.12                                5.44%
 from financing activity

 Net cash flow from financing
                                               -1,055,521,549.95                   7,060,379,214.88                              -114.95%
 activity

 Net increased amount of cash
                                               -1,499,034,012.18                   4,707,613,385.37                              -131.84%
 and cash equivalent



Explain the main influencing factors of significant changes in relevant data on a y-o-y basis
√ Applicable □ Not applicable

    Item of cash flow statement              2021                        2020              Changes +,-              Reason for changes

                                                                                                             The     tax     rebates        from
 Refunds of taxes                                                                                  -73.57% exportation declined over that
                                             15,592,880.52               59,006,545.25
                                                                                                             of last year
                                                                                                             Decrease in the dividends from
Cash received from investment
                                                                                                   -94.81% investment       in     non-trading
income                                          208,728.00                4,019,690.59
                                                                                                             equity instrument
                                                                                                             The    pilot   mobile       money
Net cash received from disposal of                                                                           received this year increased
                                                                                                  1151.10%
fixed,      intangible   and      other      68,366,199.75                5,464,475.89                       over that of last year
long-term assets
                                                                                                             The     land   allocation       and
Cash paid for purchasing fixed
                                                                                                             engineering      payments        of
assets, intangible assets and other                                                                213.11%
                                          2,068,296,938.33           660,563,018.81                          Qingdao Jiaozhou Airport are
long-term assets
                                                                                                             paid in the period
                                                                                                             The borrowings from financing
Cash received from loans                                                                           -58.79% activities decreased over that
                                          4,100,000,000.00          9,950,000,000.00
                                                                                                             of last year
                                                                                                             Issuing medium-term notes last
Cash received from issuing bonds                                                                  -100.00%
                                                           -        2,000,000,000.00                         year
Cash paid for settling debts                                                                       -51.79% Repayment        of     borrowings



                                                                    23
                                                                                                 Shandong Airlines Co., Ltd. Annual Report 2021

                                               2,110,292,372.25            4,376,851,929.66                              decreased over that of previous
                                                                                                                         year
                                                                                                                         The interest repayment on
Cash paid for dividend and profit
                                                                                                             109.93% borrowings increased over that
distributing or interest paying                  319,544,830.00             152,212,442.26
                                                                                                                         of previous year
                                                                                                                         Impact of the implementation
Other     cash     paid    concerning
                                                                                                             655.97% of new leasing standards in the
financing activities                           2,725,684,347.70             360,556,413.20
                                                                                                                         period
Influence     on   cash    and     cash                                                                                  The exchange rate of Renminbi
equivalents due to fluctuation in                                                                                 70.36% against foreign currencies
                                                      -334,663.59               -1,129,021.99
exchange rate


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



V. Analysis of the non-main business
□ Applicable √ Not applicable


VI. Analysis of assets and liabilities

1. Major changes of assets composition

                                                                                                                                             In RMB

                           Year end of 2021                  Year begin of 2021
                                                                                                   Ratio
                                           Ratio in                             Ratio in                                Notes of major changes
                          Amount                           Amount                               changes(+,-)
                                          total assets                       total assets

                                                                                                           3.83
                       3,811,102,68                       5,306,474,45
 Monetary fund                               11.67%                               15.50%          percentage
                                 1.16                               1.06
                                                                                                 points down

                                                                                                           0.01
 Account               340,113,063.                       354,352,296.
                                              1.04%                                1.03%          percentage
 receivable                        11                                99
                                                                                                    points up

                                                                                                           0.02
                       111,785,343.                      110,572,399.5
 Inventory                                    0.34%                                0.32%          percentage
                                   17                                 0
                                                                                                    points up

                                                                                                           0.07     The real estate rented out in
 Investment real       24,226,182.7
                                              0.07%                                               percentage        the period are transferred to
 estate                            4
                                                                                                    points up       investment real estate

                       6,200,939,79                       5,313,062,98                                     3.48
 Fixed assets                                19.00%                               15.52%
                                 4.32                               5.24                          percentage


                                                                           24
                                                                        Shandong Airlines Co., Ltd. Annual Report 2021

                                                                          points up

                                                                               1.96
Construction in   4,862,174,28             5,770,696,95
                                 14.89%                        16.85%    percentage
progress                  3.01                     1.56
                                                                        points down

                                                                               1.33
Right-of-use      12,051,991,4             13,096,845,5
                                 36.92%                        38.25%    percentage
assets                  88.86                    10.69
                                                                        points down

                                                                               2.13
Short-term        2,601,211,11            2,001,111,111
                                 7.97%                         5.84%     percentage
loans                     1.11                      .11
                                                                          points up

                                                                               0.09
Contract          455,346,878.             445,400,801.
                                 1.39%                         1.30%     percentage
liability                  56                       19
                                                                          points up

                                                                               2.65
Long-term         6,697,007,74            6,117,434,899
                                 20.52%                        17.87%    percentage
loans                     7.75                      .32
                                                                          points up

                                                                               3.84
                  9,441,515,10            11,218,614,62
Lease liability                  28.92%                        32.76%    percentage
                          9.42                     8.36
                                                                        points down

                                                                                      Other current asset at end of
                                                                                      the   period        increased     by
                                                                               0.30
Other current     369,977,255.             282,572,739.                               30.93%       compared           with
                                 1.13%                         0.83%     percentage
assets                     76                       73                                beginning      of    the      period,
                                                                          points up
                                                                                      mainly    because       the     VAT
                                                                                      retention tax increased.

                                                                                      Intangible asset at end of the
                                                                                      period increased by 272.19%
                                                                               1.00   compared with beginning of
Intangible        441,785,379.            118,699,980.3
                                 1.35%                         0.35%     percentage   the period, mainly because the
assets                     60                        3
                                                                          points up   land use rights in some areas
                                                                                      of Qingdao Jiaodong Airport
                                                                                      were purchased in the year.

                                                                                      Goodwill at end of the period
                                                                                      decreased by 100% compared
                                                                                      with beginning of the period,
Goodwill                         0.00%      454,020.13         0.00%
                                                                                      mainly because the goodwill
                                                                                      are fully impairment at end of
                                                                                      the period

Trading                                                                               Trading financial liability at
financial           78,548.31    0.00%      862,955.67         0.00%                  end of the period decreased by
liability                                                                             90.90%       compared           with


                                                          25
                                                                                 Shandong Airlines Co., Ltd. Annual Report 2021

                                                                                               beginning     of     the      period,
                                                                                               mainly due to the change in
                                                                                               fair value of interest rate swap
                                                                                               contracts held in the period

                                                                                               Note payable at end of the
                                                                                               period decreased by 80.03%
                                                                                        1.09
                     94,287,021.5                   472,095,003.                               compared with beginning of
 Note payable                            0.29%                          1.38%     percentage
                                    3                        24                                the period, mainly due to the
                                                                                 points down
                                                                                               payment of bank acceptance
                                                                                               due in the period

                                                                                               Wages payable at end of the
                                                                                               period increased by 31.22%
                                                                                        0.38   compared with beginning of
                     454,324,256.                   346,238,955.
 Wages payable                           1.39%                          1.01%     percentage   the period, mainly because
                               07                            37
                                                                                   points up   accrual      of      safety      and
                                                                                               performance               incentives
                                                                                               increased in the period

                                                                                               Long-term wages payable at
                                                                                               end of the period decreased by
                                                                                               100%         compared           with
                                                                                               beginning     of     the      period,
                                                                                               mainly because in the period,
                                                                                        0.74
 Long-term                                          254,025,000.                               the Company entered into an
                                         0.00%                          0.74%     percentage
 wages payable                                               00                                agreement with the third party,
                                                                                 points down
                                                                                               for the purpose of substantially
                                                                                               terminated          the        future
                                                                                               obligation of original defined
                                                                                               benefit     plans     through      a
                                                                                               one-time payment.

                                                                                               Deferred income tax liability
                                                                                               at end of the period increased
 Deferred                                                                               0.20
                     216,210,941.                   158,137,753.                               by 36.72% compared with
 income tax                              0.66%                          0.46%     percentage
                               34                            91                                beginning     of     the      period,
 liability                                                                         points up
                                                                                               mainly due to the difference of
                                                                                               depreciation for fixed assets

                                                                                               Retained profit at end of the
                                                                                               period decreased by 481.54%
                                                                                        5.66
                     -2,211,518,7                  -380,287,818.                               compared with beginning of
 Retained profit                         -6.77%                         -1.11%    percentage
                            85.74                            28                                the period, mainly because the
                                                                                 points down
                                                                                               Company continued to lose
                                                                                               money for the epidemic

Foreign assets account for a relatively high proportion
□Applicable     √Not applicable

                                                                   26
                                                                                           Shandong Airlines Co., Ltd. Annual Report 2021

2. Assets and liability measure by fair value

√ Applicable □ Not applicable
                                                                                                                                 In RMB

                                         Gains/losse     Accumulative         Impairme   Amount
                          Opening           s of         changes in fair      nt accrual purchased    Sale    Other
          Item                                                                                                         Closing amount
                           amount        changes in      value reckoned        in this    in this    amount   change
                                         fair value        into equity         period     period

 Financial assets

 4.Other equity
                         541,789,40 -80,543,523
 instrument                                              372,893,783.18                                                  461,245,883.18
                                  6.63             .45
 investment

 Subtotal of financial   541,789,40 -80,543,523
                                                         372,893,783.18                                                  461,245,883.18
 assets                           6.63             .45

                         541,789,40 -80,543,523
 The above total                                         372,893,783.18                                                  461,245,883.18
                                  6.63             .45

 Financial liability     862,955.67 -784,407.36                                                                               78,548.31

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


VII. Investment analysis

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




                                                                         27
                                                                                       Shandong Airlines Co., Ltd. Annual Report 2021

4. Financial assets investment

(1) Security investment

The Company does not have security investment in the period


(2) Derivative investment

The Company does not have derivative investment in the period


5. Application of raised proceeds

The company had no application of raised proceeds in the reporting period.


VIII. Sales of major assets and equity

1. Sales of major assets

The Company had no sales of major assets in the reporting period.


2. Sales of major equity

□ Applicable √ Not applicable


IX. 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                                          Register                                  Operating       Operating
                   Type        Main business                     Total assets   Net assets                                    Net profit
     name                                              capital                                 income          profit

                              Agency service
                              of land service
 Shandong                     for the air cargo
 Airlines                     station, storage 30,000,000.       96,486,373.    77,104,116.   47,217,213. -1,811,282.1 -1,035,418.2
                 Subsidiary
 Logistic Co.,                of goods and 00                              01           44              65                5                2
 Ltd.                         ground
                              distribution
                              service etc.

 Qingdao
 Feisheng
                                                  51,545,500.    64,471,417.    64,357,466.   2,892,556.6 -1,400,632.1 -1,412,433.5
 International Subsidiary Pilot training
                                                  00                       07           90                5               2                2
 Aviation
 Technology

                                                                    28
                                                                                       Shandong Airlines Co., Ltd. Annual Report 2021

 Developmen
 t Training
 Co., Ltd.

 Shandong
                              Air            food
 Jinping Air                                         5,094,545.0   72,799,594.   36,413,361.   68,549,822.   1,689,167.2   1,115,084.1
                Subsidiary supplying,
 Food Co.,                                           0                     65            59            60             8             9
                              catering service
 Ltd.

                              Souvenir
 Shandong                     processing;
 Airline                      production and
                                                     3,380,000.0   28,285,286.   24,137,893.   19,421,754. -3,267,303.1 -2,950,567.1
 Qingdao        Subsidiary processing          of
                                                     0                     61            91            43             2             4
 Food Co.,                    the   air     foods
 Ltd.                         and         delivery
                              service

 Shandong
 Rainbow        Stock-joint
                                                     50,000,000.   1,796,042.0 -165,969,77
 Corporate      ly            Air transport                                                                    -7,758.58     -7,758.58
                                                     00                     9          1.24
 Aircraft Co., enterprise
 Ltd.

Particular about subsidiaries obtained or disposed in report period
□ Applicable √ Not applicable




X. Structured vehicle controlled by the Company

□ Applicable √ Not applicable


XI. Prospect for future development of the Company

(i)Industry patterns and trends
At present, the Chinese air transport industry has a competition landscape of large state-owned aviation groups,
regional airlines, private airlines and foreign airlines co-exist side by side. Lager state-owned aviation groups
including Air China, China Southern Airlines and China Eastern Airlines, occupied a large share of the air
passenger and cargo transport market in China, while other regional airlines and characteristic airlines have strong
market competitiveness in their focused market segments.


According tot he Statistical Bulletin of Civil Aviation Industry Development in 2020, by the end of 2020, there
were a total of 64 transport airlines in China, a net increase of two from that in 2019. By the type of ownership,
there were 49 state-holding airlines and 15 private and privately-holding airlines. Among all the transport airline,
there were 11 all-cargo airlines, 9 joint venture airlines and 8 publicly listed airlines.



                                                                     29
                                                                          Shandong Airlines Co., Ltd. Annual Report 2021

During the "14th Five-Year Plan" period, China will build a new development pattern with the domestic cycle as
the main body and the domestic and international dual cycles promoting each other. The new development pattern
requires the civil aviation industry to strengthen the coupling with modern value chains, supply chains, and
industrial chains to promote circulation to meet the linkage needs of the industry. At present, the development of
the civil aviation industry shows more and more obvious characteristics in eight aspects: firstly, the competition is
fierce, the number of newly established airlines is increasing, the transport capacity of the existing companies
has oversupplied, and the industry competition is becoming increasingly fierce. The second is the normalization of
the pandemic prevention and control. The global COVID-19 pandemic continues, and the end time is uncertain,
which seriously restricts the recovery and development of the civil aviation industry. The third is the high-speed
rail network, which has an increasing impact on the market structure and income effect of the civil aviation
industry. The fourth is the popularity of passengers, the reduction in the proportion of business passengers, and the
diversification of consumer demand for civil aviation services. The fifth is the low prices of air tickets. Under the
influence of the pandemic, a large amount of transport capacity has accumulated in the domestic market, and the
freight rate is at a low level. The degree of marketization of transport prices has gradually increased, the pressure
of freight rate competition is great, and the industry has entered an era of meager profits. Sixth, the cost is rigid,
and the proportion of rigid costs such as aircraft, labor, and aviation fuel continues to rise. The seventh is the
electronic sales, the rapid popularization of mobile Internet technology applications results in the fundamental
changes in the sales model. Eighth, channels are blurred. Under the e-commerce model, the source of passengers
is blurred, which puts forward higher requirements for the company's precise marketing.


(ii)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, adhere to the guidance of strategic thinking, and grasp the
relationship between scale and efficiency, speed and quality. Taking the deepening of supply-side structural reform
as the main line, we will fully implement the "One Two Three Three Four" general work ideas of the civil aviation
during the "14th Five-Year Plan" period. Firmly grasp the development stage transition period, development
quality improvement period and development pattern expansion period of civil aviation, and the opportunities of
the constructions of the national civil aviation network, world-class airport clusters and modern logistics supply
chain, coordinate pandemic prevention and control and transportation guarantee, and optimize fleet structure,
route structure, and manpower structure based on operation and development needs. Adhere to the three bottom
lines of flight safety, clean government safety, and sincere service, improve risk prevention and control
capabilities, attach importance to improving service levels, and promote scientific resource allocation and efficient
resource utilization. Vigorously implement idea innovation, system innovation, technological innovation, and

                                                         30
                                                                        Shandong Airlines Co., Ltd. Annual Report 2021

product innovation, improve the corporate governance system and governance capacity, and raise 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 SDA’s future development.


(iii) Business plan
The Company's work idea for 2022 is as follows: guided by Xi Jinping Thought on Socialism with Chinese
Characteristics for a New Era, fully implement the spirit of the 19th National Congress of the CPC and the spirit
of all previous meetings of the 19th National People’s Congress, carry forward the great spirit of party building,
and adhere to the general principle of seeking progress while keeping performance stable. Adhere to the complete,
accurate and comprehensive implementation of the new development concept, actively serve and integrate into the
new development pattern, adhere to the main line of deepening the supply-side structural reform, coordinate
development and security, coordinate risk prevention and deepen reform, and strive to win the "three tough
battles" for safe production, pandemic prevention and control, and management efficiency, so as to welcome the
victory of the party's 20th National Congress.


To do the specifically works as: 1. Strictly eyes on the responsibility for implementation, firmly upheld safety
production and epidemic prevention & control; 2. Improve operational control efficiency, consolidate the flight
regularity in normal standards; 3. Reinforce the work mechanism of optimized benefit, and made a concentrated
effort to increase revenue & reduce expenditure; 4. Insist on client-oriented, upgrading the service quality; 5.
made comprehensive arrangement and fulfill the task of reform, enhancing the management standards.


(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 domestic major
airlines, 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 capacity hoarding in all industry and 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

                                                         31
                                                                                    Shandong Airlines Co., Ltd. Annual Report 2021

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 Renminbi 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 health incidents, terrorist attacks and international political will affect the normal operations of airlines and
then will adversely affect the company’s production and operations.




XII. Reception of research, communications and interview during the reporting period

√ Applicable □ Not applicable

                                                                                    Main contents of the
                                                                  Reception                                 Basic situation index
      Time             Location         Way         Type                             discussion and the
                                                                     object                                    of investigation
                                                                                    information provided

                   SDA Building,                                                                            Understand            the
                   No.5746,                                                                                 operation      of     the
                                      Field                    Financial            Operation    of   the
 2021-06-09        Erhuan     East               Institution                                                Company, new leases
                                      research                 institution           Company
                   Rd.,      Jinan,                                                                         standards           and
                   Shandong                                                                                 industry trends, etc.

                                                                                                            Receiving the new
                                                                                                            media,       corporate
                   SDA Building,                               New         media,
                                                                                    Operation    of   the   shareholders        and
                   No.5746,                                    corporate
                                      Field                                         Company and Annual      individual investors,
 2021-06-29        Erhuan     East               Other         shareholders
                                      research                                      Report      of    the   communicating         the
                   Rd.,      Jinan,                            and    individual
                                                                                    Company                 operation           and
                   Shandong                                    investors
                                                                                                            providing       Annual
                                                                                                            Report




                                                                32
                                                                           Shandong Airlines Co., Ltd. Annual Report 2021




                              Section IV. 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' general meeting
During the reporting period, the Company convened the 2020 Annual General Meeting and all proposals were
passed after deliberation. The convening, holding, proposal deliberation and decision-making of shareholders’
general 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 further strengthened. The Company have 6
Board Meetings in the year of 2021, deliberated 15 proposals including periodic report, profit distribution, internal
control evaluation report and changes of the 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(BOS)
During the report period, the board of supervisors of the Company convoked 4 meetings and attended all the
general meetings of shareholders and board meetings held in 2021. 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.

                                                          33
                                                                        Shandong Airlines Co., Ltd. Annual Report 2021



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 regular reports, 22 interim announcements and more than 40 working reports and
opinions in 2021. The Company is the first train units for information disclosure of Shenzhen Stock Exchange,
continued to maintain the good information disclosure quality without illegal disclosures occurred.


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,
prevented the disclosure of inside information, and submitted the list of related inside information 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 put an end to irregularities. In 2021, 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 interests 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.




                                                        34
                                                                              Shandong Airlines Co., Ltd. Annual Report 2021

II. Independence of the Company relative to controlling shareholders, actual controllers in
ensuring the Company’s assets, personnel, finance, institution and business

The Company and its controlling shareholders Shandong Aviation has been separated totally in business,
personnel, assets, 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 assets and 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                                              Resolutions in the
 Session of meeting            Type                                 Date           Date of disclosure
                                           participation                                                     Meeting

 Annual General                                                                                         Disclosure index:
                        AGM                        66.36%     June 29, 2021       June 30, 2021
 Meeting of 2020                                                                                        2021-18




                                                             35
                                                                                  Shandong Airlines Co., Ltd. Annual Report 2021

2. Request for extraordinary general meeting by preferred stockholders whose voting rights restore

□ Applicable     √ Not applicable


V. Directors, Supervisors and Senior executives of the Company

1.General information


                                                                                 Increas     Decrea
                                                                      Shares      ing         sing
                                                                                                         Other     Shares      Reaso
                                                   Start              held at    shares      shares
                        Worki                                End                                         change    held at     ns for
                                                   dated              period-    held in     held in
                                                            date of
  Name      Title         ng          Sex   Age      of                                                    s       period-     change
                                                            office    begin       this        this
                                                   office
                         status                              term                                        (Share    end(Sh        in
                                                   term               (Share     period      period
                                                                                                           )        are)       shares
                                                                         )       (Share      (Share
                                                                                    )           )

 Sun                    Curren                     Jan.     Nov.
           Chair
 Xiujia                 tly in    M           59   18,      27,              0           0           0         0           0
           man
 ng                     office                     2016     2022

 Xu        Vice         Curren                     Dec.     Nov.
 Chuan     chairm       tly in    M           57   20,      27,              0           0           0         0           0
 yu        an           office                     2016     2022

           Direct       Curren                     Mar.     Nov.
 Miao
           or,          tly in    M           50   24,      27,              0           0           0         0           0
 Liubin
           GM           office                     2016     2022

           Direct
           or,
 Xu        vice         Curren                     Apr.     Nov.
 Guojia    GM,          tly in    M           57   22,      27,              0           0           0         0           0
 n         Chief        office                     2010     2022
           accoun
           tant

                        Curren                              Nov.
 Li        Direct                                  Jun.29
                        tly in    F           49            27,              0           0           0         0           0
 Dong      or                                      , 2022
                        office                              2022

                        Curren                     Jun.     Nov.
 Li        Direct
                        tly in    F           58   28,      27,              0           0           0         0           0
 Xiuqin    or
                        office                     2012     2022

                        Curren                     Nov.     Nov.
 Wang      Direct
                        tly in    M           49   28,      27,              0           0           0         0           0
 Zhifu     or
                        office                     2019     2022

 Lv        Indepe       Curren    M           55   Mar.     Nov.             0           0           0         0           0


                                                              36
                                                          Shandong Airlines Co., Ltd. Annual Report 2021

Hongb    ndent     tly in            24,       27,
ing      directo   office            2016      2022
         r

         Indepe
                   Curren            Mar.      Nov.
Duan     ndent
                   tly in   M   49   24,       27,    0       0        0         0        0
Yalin    directo
                   office            2016      2022
         r

         Indepe
Xu                 Curren            Jun.      Nov.
         ndent
Xiang              tly in   M   65   15,       27,    0       0        0         0        0
         directo
yi                 office            2017      2022
         r

         Indepe
Hu                 Curren            Jun.      Nov.
         ndent
Yuanm              tly in   M   67   15,       27,    0       0        0         0        0
         directo
u                  office            2017      2022
         r

         Chair
         man of
Wang               Curren            Oct.      Nov.
         Superv
Wupin              tly in   M   56   28,       27,    0       0        0         0        0
         isory
g                  office            2013      2022
         Comm
         ittee

Tang               Curren            Jun.      Nov.
         Superv
Chaox              tly in   M   50   28,       27,    0       0        0         0        0
         isor
u                  office            2018      2022

         Staff     Curren            Aug.      Nov.
Jin
         superv    tly in   M   55   7,        27,    0       0        0         0        0
Xin
         isor      office            2017      2022

Zhou     Staff     Curren            Mar.      Nov.
Qiaoy    superv    tly in   F   46   15,       27,    0       0        0         0        0
an       isor      office            2006      2022

         Secret
Dong               Curren            Jun.      Nov.
         ary of
Qianta             tly in   M   59   26,       27,    0       0        0         0        0
         the
ng                 office            2009      2022
         Board

                   Curren                      Nov.
         vice                        Feb. 4,
Yu Bo              tly in   M   49             27,    0       0        0         0        0
         GM                          2016
                   office                      2022

Dong               Curren            Sept.     Nov.
         vice
Jianmi             tly in   M   52   30,       27,    0       0        0         0        0
         GM
n                  office            2016      2022

Zhou     Securit   Curren   M   59   Sept.     Nov.   0       0        0         0        0


                                                 37
                                                                                           Shandong Airlines Co., Ltd. Annual Report 2021

 Ning       y          tly in                               30,         27,
            directo    office                               2016        2022
            r

                       Curren                               Sept.       Nov.
 Ma         vice
                       tly in      F                   46   30,         27,           0        0        0         0        0
 Xiaoli     GM
                       office                               2016        2022

 Liu        Chief      Curren                               Mar.        Nov.
 Chaole     engine     tly in      M                   51   28,         27,           0        0        0         0        0
 i          er         office                               2017        2022

                       Curren                               Oct.        Nov.
 Liu        Chief
                       tly in      M                   59   10,         27,           0        0        0         0        0
 Jun        pilot
                       office                               2020        2022

 Wang                                                       Mar.        Jun.
            Direct     Leave
 Mingy                             M                   56   15,         16,           0        0        0         0        0
            or         office
 uan                                                        2006        2021

 Total           --       --           --         --          --           --         0        0        0         0        0      --

Whether there were departure of director, supervisor and termination of senior executives during the reporting period
√Yes    □No
Mr. Wang Mingyuan leave the Company as director on June 16, 2021 due to work requirements.


Changes of directors, supervisors and senior executives
√Applicable □ Not applicable

        Name               Title                 Type                   Date                            Reasons

 Wang
                      Director              Leave office           Jun. 16, 2021   Work requirements
 Mingyuan


2. 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 March 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 serves


                                                                           38
                                                                         Shandong Airlines Co., Ltd. Annual Report 2021

as the 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 service 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 officer 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 president, 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
flight 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 October 2007. He
currently serves as a director, party committee member, deputy general manager, and chief accountant of
Shandong Airlines Co., Ltd.


Ms. Li Dong, born in December 1972, a master of business administration. She worked in Air China in July 1994,
and in April 2000, she served as the director of monitoring room in seat control center of Air China’s passenger
marketing dept., and vice GM of the route management dept. of Air China marketing department in December
2002; the vice GM of network revenue department of Air China in March 2009, the GM, party committee member
and deputy secretary of Air China southwest marketing center in March 2014. Currently, she is the member of


                                                        39
                                                                         Shandong Airlines Co., Ltd. Annual Report 2021

Commercial Committee and Standing Committee of the Party Committee of Air China, the GM and secretary of
the Party Committee of the network revenue department, 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 management 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 general 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 Co., Ltd.


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 currently 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 Shanghai
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.



                                                        40
                                                                       Shandong Airlines Co., Ltd. Annual Report 2021

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 served 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
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 School 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

                                                       41
                                                                        Shandong Airlines Co., Ltd. Annual Report 2021

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 supervisory committee 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. He serves as senior GM of the assets management department
especially in investment enterprise management in Air China from August 2018 to June 2021. Now he is the
supervisor of Shandong Airlines Co., Ltd.


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 School 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 department and the chief
of flight team I in October 2014; served as the general manager of the flight technology management department
in March 2016, served 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


                                                        42
                                                                        Shandong Airlines Co., Ltd. Annual Report 2021

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 vice 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
member and vice 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 School 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


                                                       43
                                                                       Shandong Airlines Co., Ltd. Annual Report 2021

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 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 vice 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 as 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. 2009, 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


                                                         44
                                                                              Shandong Airlines Co., Ltd. Annual Report 2021

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 Pilot 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
                                                                                                             remuneration
                                                                        Start dated of   End date of
     Name                 Name of shareholder’s units       Position                                            from
                                                                         office term     office term
                                                                                                             shareholder’s
                                                                                                              units or not
                                                                                                                (Y/N)

                                                         Party
                                                         Secretary,
 Sun Xiujiang      Shandong Aviation                                    May 1, 2015                      Y
                                                         Deputy
                                                         President

                                                         President ,
                                                         Chairman
                                                         and
 Xu Chuanyu        Shandong Aviation                                    Nov. 1, 2016                     N
                                                         Deputy
                                                         Party
                                                         Secretary

                                                         Security
 Xu Chuanyu        Air China                                            Dec., 1, 2012                    Y
                                                         director

                                                         Member of
 Miao Liubin       Shandong Aviation                     the Party      Aug. 1, 2013                     N
                                                         Committee

                                                         GM of
                                                         network
 Li Dong           Air China                                            Dec. 1, 2018                     Y
                                                         revenue
                                                         dept.

 Li Xiuqin         Shandong Aviation                     Director       Apr. 1, 2009                     N

                                                         Chairman
                                                         of
 Wang Zhifu        Shandong Aviation                     Supervisor     Aug. 1, 2019                     N
                                                         y
                                                         Committee



                                                              45
                                                                              Shandong Airlines Co., Ltd. Annual Report 2021

                                                          Member of
                                                          the Party
 Wang
                  Shandong Aviation                       Committee     Sept. 1, 2013                      Y
 Wuping
                                                          、Chief
                                                          accountant

                                                          Senior GM
                                                          of the
 Tang Chaoxu      Air China                               assets        Jul. 1, 2018      Jun. 1, 2021     Y
                                                          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(Y/N)

                  China National Aviation Holding         Chief
 Xu Chuanyu                                                                                                N
                  Company (CNAH)                          pilot

                                                          Chairman
                                                          of
 Xu Guojian       Sichuan Airlines Co., Ltd.                                                               N
                                                          Supervisory
                                                          Committee

 Li Dong          Tibet Airlines Co., Ltd.                Director                                         N

 Li Xiuqin        Shandong Finance Investment Group       vice GM                                          Y

 Wang Zhifu       Shandong Finance Investment Group       CFO                                              Y

                                                          Chief
 Lv Hongbing      Grandall Law Firm                       Executive                                        Y
                                                          Partner

                                                          Independen
 Lv Hongbing      Shimao Real Estate Holding Co., Ltd.                                                     Y
                                                          t director

                  Shanghai Pharmaceutical (Group) Co.,    External
 Lv Hongbing                                                                                               Y
                  Ltd.                                    Director

                  Cambricon Technologies Corporation      Independen
 Lv Hongbing                                                                                               Y
                  Limited                                 t director

                  Shanghai New Huangpu Industrial Group   Independen
 Lv Hongbing                                                                                               Y
                  Co., Ltd.                               t director

                                                          Independen
 Lv Hongbing      Ruihua Health Assurance Co., Ltd.                                                        Y
                                                          t director



                                                            46
                                                                                    Shandong Airlines Co., Ltd. Annual Report 2021

                   Shanghai Chunfu Investment
 Duan Yalin        Management Center (Limited                  President                                          Y
                   Partnership)

                                                               Independen
 Duan Yalin        Western Securities Co., Ltd.                                                                   Y
                                                               t director

                                                               Independen
 Duan Yalin        Yuekai Securities Co., Ltd.                                                                    Y
                                                               t director

 Xu Xiangyi        Shandong University                         Professor                                          Y

                   Shandong State-Owned Assets Investment      External
 Xu Xiangyi                                                                                                       Y
                   Holding Co., Ltd                            Director

                   Shandong University of Fiance and
 Hu Yuanmu                                                     Professor                                          Y
                   Economics

                                                               Independen
 Hu Yuanmu         Lucion Venture Capital Group Co., Ltd.                                                         Y
                                                               t director

                                                               Independen
 Hu Yuanmu         Jinneng Science and Technology Co., Ltd.                                                       Y
                                                               t director

                                                               Independen
 Hu Yuanmu         Yeal Electric Co., Ltd.                                                                        Y
                                                               t director

 Hu Yuanmu         Inspur Group                                Director

 Wang
                   Shandong Airline Newair Media Co., Ltd.     President                                          N
 Wuping

 Wang              Taikoo Shandong Aircraft Engineering
                                                               Director                                           N
 Wuping            Co., Ltd. (STAECO)

 Tang Chaoxu       Zhejiang Airlines Service Co., Ltd.         Director                                           N

                   Air China Shantou Industrial
 Tang Chaoxu                                                   vice GM                                            Y
                   Development Co., Ltd.

 Dong
                   Sichuan Airlines                            Director                                           N
 Qiantang

                   Taikoo Shandong Aircraft Engineering
 Yu Bo                                                         Director                                           N
                   Co., Ltd. (STAECO)

                   Shandong Xiangyu Aviation Technology
 Yu Bo                                                         Supervisor                                         N
                   Services Co., Ltd.

                   Taikoo Shandong Aircraft Engineering
 Liu Chaolei                                                   Supervisor                                         N
                   Co., Ltd. (STAECO)

Punishment of securities regulatory authority in recent three years to the company’s current and outgoing directors, supervisors and
senior management during the reporting period
□ Applicable   √ Not applicable




                                                                 47
                                                                                      Shandong Airlines Co., Ltd. Annual Report 2021

3. 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.


The remuneration of President Mr. Sun Xiujiang and Chairman of Supervisory Committee Mr. Wang Wuping are
paid by controlling shareholder Shandong Aviation instead of the Company; remuneration of Deputy president Mr.
Xu Chuanyu and Director Ms. Li Dong are paid by Air China instead of the Company, remuneration of
Supervisor Mr. Tang Chaoxu is paid by Air China and Air China Shantou Industrial Development Co., Ltd instead
of the Company; remuneration of Director Ms. Li Xiuqin and Mr. Wang Zhifu are paid by 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       obtained from
      Name                Title              Sex                Age
                                                                                    status       obtained from       related party of
                                                                                                  the Company              the
                                                                                                                     Company(Y/N)

                                                                             Currently in
 Miao Liubin        Director, GM       M                               50                                 90.71     N
                                                                             office

                    Director, vice
                                                                             Currently in
 Xu Guojian         GM, Chief          M                               57                                 76.65     N
                                                                             office
                    accountant

                    Independent                                              Currently in
 Lv Hongbing                           M                               55                                    7.1    N
                    director                                                 office

                    Independent                                              Currently in
 Duan Yalin                            M                               49                                    7.1    N
                    director                                                 office

                    Independent                                              Currently in
 Xu Xiangyi                            M                               65                                    7.1    N
                    director                                                 office

                    Independent                                              Currently in
 Hu Yuanmu                             M                               67                                    7.1    N
                    director                                                 office


                                                                 48
                                                                                    Shandong Airlines Co., Ltd. Annual Report 2021

                                                                           Currently in
 Jin Xin           Staff supervisor   M                             55                                    56.26      N
                                                                           office

                                                                           Currently in
 Zhou Qiaoyan      Staff supervisor   F                             46                                    44.83      N
                                                                           office

                   Secretary of the                                        Currently in
 Dong Qiantang                        M                             59                                    73.25      N
                   Board                                                   office

                                                                           Currently in
 Yu Bo             vice GM            M                             49                                    73.38      N
                                                                           office

                                                                           Currently in
 Dong Jianmin      vice GM            M                             52                                    75.64      N
                                                                           office

                   Security                                                Currently in
 Zhou Ning                            M                             59                                    78.02      N
                   director                                                office

                                                                           Currently in
 Ma Xiaoli         vice GM            F                             46                                    70.66      N
                                                                           office

                                                                           Currently in
 Liu Chaolei       Chief engineer     M                             51                                    71.63      N
                                                                           office

                                                                           Currently in
 Liu Jun           Chief pilot        M                             59                                    70.19      N
                                                                           office

 Total                     --                 --            --                      --                   809.62               --


VI. Performance of duties by directors during the reporting period

1.BOD during the reporting period


    Session of the Meeting                Date of Meeting                Disclosure date             Resolution in the Meeting

                                                                                                   Resolution of 10th Session of
                                                                                                   7th BOD (Disclosure Index:
                                                                                                   Notice     No.:       2021-04       at
         th          th
 The 10 Session of 7 BOD         March 25, 2021                  March 27, 2021                    Securities     Times,           China
                                                                                                   Securities     Journal,          Hong
                                                                                                   Kong Commercial Daily and
                                                                                                   Juchao Information Website)

                                                                                                   Only the Q1 Report of 2021
                                                                                                   was      deliberated        without
 The 11th Session of 7th BOD
                                 April 29, 2021                                                    objection or abstentions and
  (temporary)
                                                                                                   was          exempt              from
                                                                                                   announcement.

                                                                                                   Resolution of 12th Session of
 The 12th Session of 7th BOD
                                 June 7, 2021                    June 8, 2021                      7th      BOD          (temporary)
 (temporary)
                                                                                                   (Disclosure       Index:        Notice



                                                            49
                                                                                               Shandong Airlines Co., Ltd. Annual Report 2021

                                                                                                                 No.: 2021-14 at Securities
                                                                                                                 Times,        China        Securities
                                                                                                                 Journal,          Hong           Kong
                                                                                                                 Commercial              Daily      and
                                                                                                                 Juchao Information Website)

                                                                                                                 Only the Semi-Annual Report
                                                                                                                 of     2021       was     deliberated
 The 13th Session of 7th BOD
                                       August 26, 2021                                                           without           objection          or
 (temporary)
                                                                                                                 abstentions and was exempt
                                                                                                                 from announcement.

                                                                                                                 Resolution of 14th Session of
                                                                                                                 7th       BOD            (temporary)
                                                                                                                 (Disclosure        Index:       Notice
       th            th
 The 14 Session of 7 BOD                                                                                         No.: 2021-20 at Securities
                                       September 29, 2021                   September 30, 2021
 (temporary)                                                                                                     Times,        China        Securities
                                                                                                                 Journal,          Hong           Kong
                                                                                                                 Commercial              Daily      and
                                                                                                                 Juchao Information Website)

                                                                                                                 Only the Q3 Report of 2021
                                                                                                                 was       deliberated           without
 The 15th Session of 7th BOD
                                       October 29, 2021                                                          objection or abstentions and
 (temporary)
                                                                                                                 was             exempt            from
                                                                                                                 announcement.


2.Attendance of Directors at the Board Meeting and Shareholders General Meeting


                                  Attendance at the Board Meeting and Shareholders General Meeting

                                                                                                                       Whether
                      Times of
                                                                                                                      absent the           Times of
                          Board                              Times of
                                           Times of                            Times of                           Meeting for            attending the
                      meeting                               attending by                          Times of
     Director                              present in                          entrusted                              the second         shareholders
                    supposed to                             communicati                           Absence
                                            person                             presence                                time in a           general
                    attend in the                               on
                                                                                                                        row or             meeting
                   report period
                                                                                                                       not(Y/N)

 Sun Xiujiang                      6                    1               5                  0                 0    N                                   1

 Xu Chuanyu                        6                    1               5                  0                 0    N                                   1

 Miao Liubin                       6                    0               6                  0                 0    N                                   1

 Xu Guojian                        6                    1               5                  0                 0    N                                   1

 Li Dong                           3                    0               3                  0                 0    N                                   0

 Li Xiuqin                         6                    0               5                  1                 0    N                                   1

 Wang Zhifu                        6                    1               5                  0                 0    N                                   1


                                                                        50
                                                                                             Shandong Airlines Co., Ltd. Annual Report 2021

 Lv Hongbing                          6                 0                 5              1                   0      N                             1

 Duan Yalin                           6                 0                 5              1                   0      N                             1

 Xu Xiangyi                           6                 1                 5              0                   0      N                             1

 Hu Yuanmu                            6                 1                 5              0                   0      N                             1

 Wang Mingyuan
                                      3                 0                 2              1                   0      N                             0
 (Leave office)


3.Directors’ objection to matters relating to the Company

Directors did not raise any objection to the relevant matters of the Company during the reporting period


4.Other explanation on performance of the duties by directors

Whether the directors’ recommendations were adopted
√Yes     □No N
Notes by the directors on relevant recommendations adopted or not adopted
The directors of the company actively offered advice and suggestions around the company's strategic development and production
and operation, studied and submitted major issues in a timely manner, urged the management to adhere to the bottom lines of safe
operation, epidemic prevention and control, and management efficiency, and participated in the deliberation of the company's daily
related transactions, changes in accounting policies and other major matters in accordance with legal procedures and corporate
governance rules, faithfully and diligently performed duties. Independent directors actively played the role in decision-making and
supervision, prudently used the authority conferred by the company, effectively safeguarded the legitimate rights and interests of the
company and all shareholders, especially the small and medium shareholders, and expressed independent directors' opinions as
required. The company actively listened to and adopted reasonable suggestions put forward by the directors.




VII. Subordinate special committees of the Board during the reporting period

                              Numb
  Name of                                                                                Important comments                Other     Objection
                   Member     er of           Date of
        the                                                    Conference Content            and suggestions               duties    matters (if
                        s     Meeti        Meeting
 committee                                                                                      proposed                  perform       any)
                               ngs

                                                                                        The remuneration and
                                                                                        appraisal         committee
                   Duan                                                                 work         in          strict
 Remunera
                   Yalin,                                                               accordance        with     the
 tion and                                                                                                                 Not
                   Xu                     2021-03-2         Remuneration of directors   laws, regulations and                        Not
 Appraisal                           1                                                                                    applicab
                   Xiangyi,               4                 and senior executive        business                 rules,              applicable
 Committe                                                                                                                 le
                   Sun                                                                  reviewing                  the
 e
                   Xiujiang                                                             remuneration               and
                                                                                        appraisal works of the
                                                                                        Company,      formulation


                                                                          51
                                                                               Shandong Airlines Co., Ltd. Annual Report 2021

                                                                         of current remuneration
                                                                         mechanism and payroll
                                                                         of directors and senior
                                                                         executives are comply
                                                                         with the regulations.

                                                                         Strategy and nomination
                                                                         committee is diligently
                                                                         perform the duties, and
                                                                         makes full use of the
                                                                         experience                and
Strategy    Lv                                                           expertise in line with
and         Hongbin                                                      the    requirements         of
                                                                                                           Not
Nominatio   g, Xu         2021-06-1   Election of Ms. Li Dong            laws and regulations,                        Not
                      1                                       th
                                                                                                           applicab
n           Chuany        6           as the Director of 7 BOD           reviewing                  the               applicable
                                                                                                           le
Committe    u, Xu                                                        appointment                 of
e           Xiangyi                                                      directors and making
                                                                         reasonable
                                                                         recommendations            for
                                                                         the                strategic
                                                                         development        of      the
                                                                         Company

                                       1. Annual Report of
                                      2020; 2.Financial Report
                                      of        2020;         3.Profit
                                      Distribution Plan of 2020;         The    audit      committee
                                      4. Assessment Report of            work         in          strict
                                                                                                           Not
                          2021-03-2   IC      2020;       5.Routine      accordance        with     the               Not
                                                                                                           applicab
                          4           Related           Transactions     laws, regulations and                        applicable
                                                                                                           le
                                      Prediction for year of             business                 rules,
            Hu                        2021;     6.    Proposal     on    reviewing                  the
            Yuanmu                    Renewal of the CPA; 7.             preparation                and
Audit
            , Lv                      Proposal on Changes of             disclosure        of       the
Committe              4
            Hongbin                   Accounting Policies                periodic               report,
e
            g, Duan                                                      appointment       of audit
                                                                                                           Not
            Yalin         2021-04-2                                      institution and internal                     Not
                                      Report of Q1 of 2021                                                 applicab
                          8                                              control mechanism, and                       applicable
                                                                                                           le
                                                                         unanimously approved
                                                                                                           Not
                          2021-08-2   Semi-Annual Report of              relevant matters with                        Not
                                                                                                           applicab
                          4           2021                               review            comments                   applicable
                                                                                                           le
                                                                         expressed.
                                                                                                           Not
                          2021-10-2                                                                                   Not
                                      Report of Q3 of 2021                                                 applicab
                          7                                                                                           applicable
                                                                                                           le



                                                         52
                                                                                  Shandong Airlines Co., Ltd. Annual Report 2021

VIII. 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


IX. Employees of the Company

1. Numbers of the employee, professional constitution and education background


 Employee in-post of the parent Company at period-end
                                                                                                                       11,783
 (person)

 Total serving staff at period-end(person)                                                                             11,783

 Total staff received remuneration in the period   (person)                                                            11,737

 Retired staff with charges paid by the parent company and
                                                                                                                          297
 main subsidiaries (person)

                                                      Professional constitution

                               Type                                                     Number (person)

 Flight personnel                                                                                                       2,075

 Steward                                                                                                                2,643

 Security guard                                                                                                           735

 Maintenance personnel                                                                                                  1,554

 Transport control personnel                                                                                              358

 Sales personnel                                                                                                          913

 Freight personnel                                                                                                        167

 Ground attendant                                                                                                         963

 Financial personnel                                                                                                      147

 Others personnel                                                                                                       2,228

 Total                                                                                                                 11,783

                                                       Education background

                               Type                                                     Number (person)

 Graduate (Master, doctor) and above                                                                                      546

 Bachelor degree                                                                                                        7,791

 Junior college and below                                                                                               3,446

 Total                                                                                                                 11,783




                                                                 53
                                                                          Shandong Airlines Co., Ltd. Annual Report 2021

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 the 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 2021, there were 150 company-level training plans, 147 of which were actually completed with                  actual
expenditure of 3,401,700 yuan. As of the end of 2021, the company had 690 internal lecturers (including 58
full-time internal lecturers and 632 part-time internal lecturers), with a total of 12,361 hours of lessons throughout
the year, with expenses such as class fee of 648,900 yuan.


In 2021, in the face of the COVID-19 pandemic, the company scientifically formulated training plans, refined cost
control, innovated training paths, strove for government subsidies, and improved the training system, and achieved
positive results in all aspects. The main work was as follows: firstly, actively strove for government subsidies and
refined training cost control. Analyzed the national policy and applied for a subsidy of 2 million yuan for
"work-for-training". Optimized training forms, strictly controlled dispatching training, and reduced training costs.
The second was to optimize and improve the rules and regulations, and improve the training management system.
Revised internal lecturer and course management regulations, refined assessment management, and shared lecturer
and course resources. Sorted out management manuals and special training programs for business department,
improved the "company-department-unit" training management and control system, unified thinking methods,
established a training risk list, and reduced management and control risks. The third was to scientifically arrange
training plans to ensure flight production needs. Arranged 12 initial training sessions for new crew members and
trained 333 trainees, of which 135 order trainees from Civil Aviation University of China and Binzhou University
were accepted and arranged to participate in the training to ensure the company's production. Organized 48 order
trainees to participate in the ground service summer practice, which improved the training quality of order trainees,
and relieved the company's production pressure. The fourth was to innovate the talent training model and
successfully realized the role change. In the new employee training stage, the company covered all new employees


                                                         54
                                                                          Shandong Airlines Co., Ltd. Annual Report 2021

through the combination of self-study and centralized training, offline and online learning, and centralized and
decentralized organizations. In the training stage of newly hired deputy manager-level cadres, the cadres mastered
management concepts and methods through online learning, summarized and published learning experience after
practice, applied what they have learned, and quickly realized the transformation from star employees to team
managers. The fifth was to improve the job learning map and improved the ability and quality of talents. Taking the
human resources department and the operation control center as pilots, built employee learning maps and training
programs, and comprehensively adopted various forms such as classroom teaching, online learning, project-based
training, and application practice to improve employees' ability and quality and build core competitiveness.


In 2022, the company will continue to improve the training management system, take various measures to
cultivate talents, and activate organizational momentum so as to support the company's high-quality development.
The first is to scientifically formulate training plans and implement conscientiously. Sort out the training needs
from the aspects of the company's development strategy, the key tasks of department performance, and the
improvement of employees' post ability, demonstrate the necessity and feasibility of training item by item, and
control the training cost. Carefully implement the training plans once released, and ensure that the training results
are transformed into productivity. The second is to promote the construction of employee career development
system. On the basis of summarizing the learning and empowerment experience of the human resources
department and the operation control center, we will continue to optimize the training plan and cultivate talents at
different levels and stages. At the same time, select the core marketing team, build a learning map and plan with
reasonable post setting, smooth development channel and clear training plan, and implement it. The third is to
continuously optimize the lecturer and curriculum system. Carry out technical training from classroom teaching to
online teaching (recording and broadcasting, microlecture), complete more than 10 high-quality courses from
classroom teaching to online teaching, improve the lecturer's course development ability, and enrich the course
resource library. The fourth is to deepen school-enterprise cooperation to promote the transformation of learning
outcomes. Continue to optimize the training content and learning form of order students, build bridges between
schools and departments, jointly develop civil aviation projects, solve business problems, and play a practical role
in the integration of production and education. The fifth is to continue to promote grassroots leadership training.
Use GE's free resources to carry out excellent leadership improvement training for manager level cadres, and
formulate and implement a third round of retraining programs for cadres by focusing on enhancing "eight skills
and seven abilities". The sixth is to solidly promote the construction of HR information system. Determine the
training management module requirements, complete development, system testing, and online work, etc., and
complete data transmission with the financial system to improve the information management level of the entire
training process.

4. Labor outsourcing

□ Applicable   √ Not applicable




                                                         55
                                                                                            Shandong Airlines Co., Ltd. Annual Report 2021


X. Profit distribution and transfer of public reserve into share capital

Formulation, Implementation and Adjustment of Profit Distribution Policy Especially Cash Dividend policy during the Reporting
Period
□ Applicable     √ Not applicable
The Company is profitable during the reporting period and the parent company has positive profit available for distribution to
shareholders without cash dividend distribution plan proposed
□ Applicable     √ Not applicable
Profit distribution plan and transfer of public reserve into share capital for the Period
The Company has no plan of cash dividends distribution carried out for the Year, no bonus shares or transfer of public reserve into
share capital either.


XI. Implementation of the company’s stock incentive plan, employee stock ownership plan or
other employee incentives

During the reporting period, the company has no stock incentive plan, employee stock ownership plan or other employee incentives
that have not been implemented.


XII. Construction and implementation of internal control system during the reporting period

1. Construction and implementation of internal control

The company attached great importance to the construction of the internal control system. In accordance with the
requirements of relevant laws and regulations and the needs of operation management and risk management and
control, the company has established an internal control system covering all departments and subsidiaries of the
company, and clarified the goals, responsibilities and operation mechanisms of internal control, providing internal
control guidelines for the company’s operation management and business development.


During the reporting period, the overall operation of the company's internal control system was good. The
company timely optimized and improved the internal control system according to the risk status, changes in the
control environment and the actual situation of its own operations, which ensured the effectiveness and timeliness
of the internal control design and improved the company's ability to resist risks. The company's established
internal control system had no major defects in integrity, compliance, effectiveness, etc.


In terms of internal control evaluation, the company has conducted a self-assessment on the effectiveness of the
company's internal control design and operation as of December 31, 2021 in accordance with the Basic Norms for
Enterprise Internal Control and its supporting guidelines and other internal control regulatory requirements, and
issued the 2021 annual internal control evaluation report. According to the identification of major defects in the
internal control of the company's financial reports, there was no major defect in the internal control of financial
reports on the base date of the internal control evaluation report; according to the identification of major defects in


                                                                     56
                                                                                          Shandong Airlines Co., Ltd. Annual Report 2021

the internal control of the company's non-financial reports, there was no major defect in the internal control of
non-financial reports on the base date of the internal control evaluation report. The company has maintained
effective internal control over financial reports in accordance with the requirements of the enterprise internal
control standard system and relevant regulations. From the base date of the internal control evaluation report to
the issuance date of the internal control evaluation report, there was no major change in internal control that had a
substantial impact on the evaluation conclusion.

2. Details of major defects in IC appraisal report that found in reporting period

□Yes   √ No


XIII. Management and controls on the subsidiary during reporting period

   Name of the                                                   Problems in        Measures taken       Progress in         Follow-up
                        Integration plan         Progress
    company                                                       integration         to resolve           solution         solution plan

 N/A                    N/A                N/A                  N/A                 N/A                N/A                N/A


XIV. Internal control self-assessment report or internal control audit report

1. Self-assessment Report of Internal Control


 Disclosure date of the assessment report
                                                   2022-03-31
 of IC (full-text)

 Disclosure index of the assessment                Published on Juchao Information Website (http://www.cninfo.com.cn) dated 31
 report of IC (full-text)                          March 2021

 Disclosure index of the assessment
                                                                                                                                   99.34%
 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                                                                                            99.60%
 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
                                                                                                   (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
 Qualitative criteria                                                                              losses or impacts on the company, such
                                                   found or rectified in a timely manner.
                                                                                                   as major safety or environmental
                                                   Occurrence of the followings will be
                                                                                                   pollution accidents;
                                                   deemed as material defect:
                                                                                                   (2) The decision-making procedures
                                                   (1) inefficiency of environment control;

                                                                      57
                                                                 Shandong Airlines Co., Ltd. Annual Report 2021

                                                                         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) direct property loss:
                        (1) potential wrong reporting in operating
                                                                         Material defect: over RMB 10 million;
                        income:
                                                                         Major defect: RMB 1 million - RMB
                        Material    defect:   0.5%    of   the   total
                                                                         10 million (inclusive);
                        operating income ≤ wrong reporting;
                                                                         General defect: RMB 1 million or
                        Major defect: 0.2% of the total operating
                                                                         below
                        income ≤ wrong reporting<0.5% of the           (2) negative influences:
                                                                         Material      defect:     materially    and
                        total operating income;
Quantitative criteria                                                    adversely affect the Company, and
                        General defect: wrong reporting<0.2% of         disclosed      to       the   public    via
                                                                         announcement;
                        the total operating income.
                                                                         Major defect: receive punishment from
                        (2) potential wrong reporting in total
                                                                         national authorities, while has no
                        profit:
                                                                         material negative influence over the
                        Material defect: 5% of the total profit≤
                                                                         Company;
                        wrong reporting;
                                                                         General defect: receive punishment
                        Major defect: 2% of the total profit≤
                                                                         from provincial or below authorities,

                                              58
                                                                                          Shandong Airlines Co., Ltd. Annual Report 2021

                                                                                                 while has no negative influence over
                                                  wrong reporting<5% of the total profit;
                                                                                                 the Company.

                                                  General defect: wrong reporting<2% of

                                                  the total profit.
                                                  (3) potential wrong reporting in total
                                                  assets:
                                                  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


2. Audit report of internal control (IC)

√Applicable        □ Not applicable

                                                 Deliberation section of auditing report of IC
 To the Shareholders of Shandong Airlines Co., Ltd.:



                                                                       59
                                                                                        Shandong Airlines Co., Ltd. Annual Report 2021

 We have audited the effectiveness of internal control of financial report under the name of Shandong Airlines Co., Ltd. (“the

 Company”) dated 31 December 2021 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
 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 efficiency of

 internal control of financial report, in all major aspects, as of 31 December 2021 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: Guo Yuefeng
                                                                 Certified Public Accountant of China: Xu Hong

 BeijingChina                                                                          29 March 2022


 Disclosure details of audit report
                                        Disclosed
 of IC

 Disclosure date of audit report of
                                        March 31, 2022
 internal control (full-text)

 Disclosure details of audit report
                                        Published on Juchao Information Website (http://www.cninfo.com.cn) dated 31 March 2021
 of IC (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




                                                                       60
                                                                        Shandong Airlines Co., Ltd. Annual Report 2021

XV. Rectification of Self-examination Problems in Special Governance Actions in Listed
Company

In strict accordance with the Company Law, the Governance Guidelines for Listed Companies, the Stock Listing
Rules and other laws and regulations, the company conducted self-inspection on the special action matters of
listed company governance, and filled in the self-inspection checklist as required. The company conscientiously
implemented the requirements of the special action, systematically sorted out the organizational decision-making,
financial management, investment management, and the rules of procedure for the operation of the three meetings,
revised and improved the internal control system, and adjusted the work procedures according to the latest
regulations and guidelines to further improve the company's standard operation level.




                                                        61
                                                                                       Shandong Airlines Co., Ltd. Annual Report 2021




                    Section V. Environmental and Social Responsibility

I. Major environmental

The listed Company and its subsidiary whether belongs to the key sewage units released from environmental protection department
□Yes √ No
Administrative punishment for environmental problems during the reporting period

                                                                                            The impact on the
                                                                                                                   The Company's
 Name of company           Reason for                                                        production and
                                                   Violation            Punishment result                           rectification
    or subsidiary          punishment                                                       operation of listed
                                                                                                                        measures
                                                                                               companies

 N/A                   N/A                   N/A                    N/A                     N/A                   N/A

Other environmental information disclosed refer to key polluters
The company attached great importance to environmental protection and energy conservation and consumption
reduction, and was committed to establishing an environment-friendly and resource-saving enterprise, constantly
optimizing top-level design, adhering to the bottom line of environmental protection law, and unswervingly
following the path of green, environmentally friendly and low-carbon development. The company strive to build a
green operation system, actively promoted fuel-saving management and control of operation, innovated
management methods, and continuously improved the comprehensive utilization level of energy consumption. It
also actively identified the sources of environmental pollution risks, reasonably managed and controlled pollution
risk points, and further promoted the improvement of the use level of APU alternative facilities, the
"oil-to-electricity" of on-site vehicles, and the exhaust modification of on-site vehicles, etc., so as to reduce the
impact of flight operations on the environment, and continue to improve the level of pollution control and
emission reduction and the management level of environmental protection.


Measures taken to reduce carbon emissions during the reporting period and their effects
√ Applicable □ Not applicable
The company firmly adhered to the "dual carbon" goal, made systematic planning and full cooperation, gave full
play to the role of organization and coordination, effectively enhanced the efficiency of fuel utilization, and
continuously improved the level of energy consumption, annually saving fuel of more than 60,000 tons and
reducing carbon emissions of more than 190,000 tons, and achieved positive results in energy conservation and
emission reduction.
The company strengthened investment in environmental protection, and adopted the following measures to reduce
carbon emissions, so as to make the construction of "Green Shandong Airlines" more solid and powerful.
The first was to work hard on energy conservation and efficiency enhancement. Deeply grasped the core essence
of green development, comprehensively coordinated energy-saving measures in all aspects, integrated favorable


                                                                   62
                                                                         Shandong Airlines Co., Ltd. Annual Report 2021

resources and conditions, and realized energy conservation and efficient utilization. Established reasonable
scientific, strict and effective energy-saving policies, encouraged all employees to participate, expanded the depth
and breadth of energy-saving and emission-reduction work, and continuously promoted the coordinated and
efficient development of flight operations and energy-saving and carbon-reduction.


The second was to work hard in seeking truth and innovation. Continued to intensify innovation, focused on
technological innovation and organizational innovation, vigorously promoted the "small but fast and flexible"
projects according to the actual operation, boldly innovated and sought changes, and used new technologies and
new concepts to solve the bottleneck problems in energy conservation and emission reduction.


The third was to work hard on key breakthroughs. Firmly grasped the key links and key projects of energy
conservation, placed key fuel-saving projects in a prominent position, managed key nodes well, and adhered to
all-round, multi-angle, in-depth and wide-ranging energy conservation and emission reduction work.


The company will continue to fulfill its responsibilities as a state-owned enterprise, and give new impetus to the
ecological, environmental and energy conservation work. Steadily promote various energy conservation work,
continue to consolidate and optimize the existing energy conservation and emission reduction measures, adhere to
the working principle of “increase and decrease”, strengthen the application of new technologies, improve the
efficiency of energy utilization, continue to do a good job of reduction and substitution, reduce unit energy
consumption, and form a new situation for energy conservation and emission reduction.


Reasons for not disclosing other environmental information
The company and its subsidiaries strictly abide by the relevant laws and regulations on environmental protection,
and did not belong to the key pollutant discharge units announced by the environmental protection department.
During the reporting period, there was no administrative penalty due to environmental problems.




II. 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, realizing a high degree of unification of company operations and

                                                        63
                                                                            Shandong Airlines Co., Ltd. Annual Report 2021

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
enhance 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 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 2018 to 2020, the accumulated cash dividends amounted to 80 million yuan in three years.


In 2022, 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.




                                                          64
                                                                        Shandong Airlines Co., Ltd. Annual Report 2021

III. Consolidating and expanding the achievements of poverty alleviation and rural
revitalization

The Company actively responds to the strategic deployment of the Party Central Committee to combat poverty,
initiatively undertake the social responsibility, and positively participate in Shandong Aviation-related precision
poverty alleviation to support the development of poverty alleviation works.




                                                        65
                                                                                        Shandong Airlines Co., Ltd. Annual Report 2021




                                            Section VI. Important Events

I. Implementation of commitment

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

                       Comm                                                                                         Comm
                                                                                                     Commitm                  Impleme
  Commitments          itment           Type                          Contents                                      itment
                                                                                                         ent time              ntation
                       party                                                                                        period

 Share reform
 commitment

                                                    In February 2004, China National Aviation
                                  Commitmen         Holding Company (CNAHC) entered into an
                                  t            of   equity transfer agreement with SDA , that is
 Commitments                      horizontal        promise “to avoiding horizontal competition                    Long-t    Strictly
 in   report      of   Air        competition,      with the Company through reasonable business     2004-12-0      erm       impleme
 acquisition      or   China      related           arrangement”; in December, being approved,      6              effecti   nt
 equity change                    transaction       the equity assignee was replaced by Air China,                  ve        timely
                                  and    capital    and all rights and obligations under the
                                  occupying         agreement was transfer to Air China as the
                                                    party who implemented the commitments

 Commitments
 in assets
 reorganization

                                  Commitmen
                                  t            of
                                                    Controlling shareholder—Shandong Aviation
 Commitments           Shand      horizontal                                                                        Long-t    Strictly
                                                    Group provide a commitment letter of avoiding
 make in initial       ong        competition,                                                       2000-09-1      erm       impleme
                                                    horizontal competition to the Company in year
 public offering       Aviati     related                                                            2              effecti   nt
                                                    of 2000 when the Company initial public
 or re-financing       on         transaction                                                                       ve        timely
                                                    offering shares
                                  and    capital
                                  occupying

 Equity incentive
 commitment

 Other
 commitment for
 minority
 shareholders of


                                                                      66
                                                                                    Shandong Airlines Co., Ltd. Annual Report 2021

 the Company

 Completed
 commitments         Y
 on time (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


II. Non-operational fund occupation from controlling shareholders and its related party

□ Applicable √ Not applicable
No non-operational fund occupation from controlling shareholders and its related party in period.


III. External guarantee out of the regulations

No external guarantee out of the regulations occurred in the period.


IV. Statement on the latest “modified audit report” by BOD

□ Applicable √ Not applicable


V. Explanation from Board of Directors, Supervisory Committee and Independent Directors
(if applicable) for “Qualified Opinion” that issued by CPA

□ Applicable √ Not applicable


VI. Explanation of the changes in accounting polices, accounting estimates or correction of
significant accounting errors compared with the financial report of the previous year

The 10th meeting of 7th BOD held on March 25, 2021 reviewed and approved the Proposal on Changes in
Accounting Policies. According to the requirements of "Accounting Standards for Business Enterprises No. 21 -
Lease " (CK [2018] No. 35) revised by the Ministry of Finance on December 7, 2018, the company has
implemented the new lease standards since January 1, 2021. According to the cumulative effect of the first-time
implementation of the standard, amount of the retained earnings and other related items in financial statements at
the beginning of the year of initial implementation is adjusted without adjusting the information for comparable
periods. On the date of first execution, assets of the Company have 11836.6417 million yuan increased, liabilities
increased 13450.4543 million yuan, and the owners’ equity has 1613.8126 million yuan reduced. The change in
accounting policy was made by the Company in accordance with the regulations and requirements of the Ministry
of Finance, and is compliance with the provisions of relevant laws and regulations and actual condition of the
Company, there is no damage to the interests of the Company and its shareholders.


                                                                  67
                                                                                         Shandong Airlines Co., Ltd. Annual Report 2021

VII. Compare with last year’s financial report; explain changes in consolidation statement’s
scope

No changes in consolidation statement scope in the reporting period


VIII. Appointment and non-reappointment (dismissal) of CPA

The accounting firms currently engaged

                                                                       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
                                                                       3
 firm

 Name of domestic CPA                                                  Yang Yunhui, Xu Hong, Guo Yuefeng

 Continuous life of auditing service for domestic CPA                  2

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 2021, and auditing efficiency of internal control and issued the audit report of
internal control of 2021 for the Company. The auditing charge for internal control was RMB 0.45 million.


IX. Particular about delisting after annual report disclosed

□ Applicable √ Not applicable


X. Bankruptcy reorganization

No bankruptcy reorganization for the Company in reporting period


XI. Major litigation and arbitration of the Company

No major litigation and arbitration occurred in the reporting period


XII. Penalty and rectification

No penalty and rectification for the Company in reporting period.


XIII. Integrity of the company and its controlling shareholders and actual controllers

□ Applicable √ Not applicable

                                                                     68
                                                                                           Shandong Airlines Co., Ltd. Annual Report 2021

XIV. 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     1,085,                                                              Marc
 STAEC      first     /offeri     of                          108.5       5.09                         ment     10853             2021-
                                            et       341.2                          185       N                          h 27,
 O          larges    ng          aviati                            3        %                         in       41.26             07
                                            price    6                                                                   2021
            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                                                                         Marc
            first     /offeri     of                 990,0                5.92                         ment     99000             2021-
 utical                                     et                   99                 250       N                          h 27,
            larges    ng          aviati             00.00                   %                         in       0.00              07
 Technol                                    price                                                                        2021
            t         labor       on                                                                   cash
 ogy
            share     servic      materi
 Service
            holder    e           als
 Co.,
 Ltd.

 Shando                           Wareh
            Subsi     Sales
 ng                               ousing
            diary     of
 Airlines                         fee
            of the    goods                                                                            Settle
 Rainbo                           incom     Mark                                                                         Marc
            first     /offeri                        363,2               10.66                         ment     36323             2021-
 w                                e/Prop    et                36.32                  43       N                          h 27,
            larges    ng                             33.85                   %                         in       3.85              07
 Autom                            erty      price                                                                        2021
            t         labor                                                                            cash
 obile                            fee
            share     servic
 Service                          incom
            holder    e
 Co.,                             e


                                                                    69
                                                                               Shandong Airlines Co., Ltd. Annual Report 2021

Ltd

           Sub-s
Shando              Sales
           ubsidi
ng                  of
           ary of             Media
Airlines            goods                                                                 Settle
           the                resour    Mark    13,15                                              13154    Marc
Xinzhih             /offeri                              1,315.    100.0                  ment                       2021-
           first              ce        et      4,530.                     1,200   Y               530.8    h 27,
ang                 ng                                      45       0%                   in                         07
           larges             usage     price   86                                                 6        2021
Media               labor                                                                 cash
           t                  fee
Co.,                servic
           share
Ltd.                e
           holder

                    Sales
           Secon    of        Agenc
           d        goods     y                                                           Settle
                                        Mark                                                                Marc
Air        larges   /offeri   comm              108,8              10.91                  ment     10889             2021-
                                        et               10.89               1.5   Y                        h 27,
China      t        ng        ission            99.62                 %                   in       9.62              07
                                        price                                                               2021
           share    labor     reven                                                       cash
           holder   servic    ue
                    e

                    Sales
           Secon    of        Groun
           d        goods     d                                                           Settle
                                        Mark    5,988,                                                      Marc
Air        larges   /offeri   servic                     598.8     80.74                  ment     59887             2021-
                                        et      750.2                      1,148   N                        h 27,
China      t        ng        es                             8        %                   in       50.26             07
                                        price   6                                                           2021
           share    labor     reven                                                       cash
           holder   servic    ue
                    e

                              Non-r
                              outine
                    Sales     maint
           Secon    of        enanc
           d        goods     e/                                                          Settle
                                        Mark                                                                Marc
Air        larges   /offeri   reven             254,0              10.94                  ment     25405             2021-
                                        et               25.41               24    Y                        h 27,
China      t        ng        ue                52.21                 %                   in       2.21              07
                                        price                                                               2021
           share    labor     from                                                        cash
           holder   servic    aircraf
                    e         t
                              servic
                              e

           Secon    Sales     Sales/l
                                                                                          Settle
           d        of        ease      Mark    4,086,                                                      Marc
Air                                                      408.6     25.59                  ment     40866             2021-
           larges   goods     of air    et      661.2                        35    Y                        h 27,
China                                                        7        %                   in       61.26             07
           t        /offeri   materi    price   6                                                           2021
                                                                                          cash
           share    ng        al

                                                              70
                                                                              Shandong Airlines Co., Ltd. Annual Report 2021

          holder   labor     reven
                   servic    ue
                   e

                                                                                                                    Failu
                                                                                                                    re to
                                                                                                                    meet
                                                                                                                    the
                   Sales                                                                                            criter
          Secon    of                                                                                               ia for
                             Food
          d        goods                                                                 Settle                     subm
                             machi     Mark    1,702,
Air       larges   /offeri                              170.2      4.59                  ment     17021             ission
                             ne        et      185.1                         0    Y
China     t        ng                                       2        %                   in       85.11             to the
                             suppli    price   1
          share    labor                                                                 cash                       Boar
                             es
          holder   servic                                                                                           d for
                   e                                                                                                delib
                                                                                                                    eratio
                                                                                                                    n and
                                                                                                                    discl
                                                                                                                    osure

          Subsi
                   Sales
          diary              Sales/l
                   of
          of the             ease
                   goods                                                                 Settle
          secon              of air    Mark    1,559,                                                      Marc
                   /offeri                              155.9      9.09                  ment     15595             2021-
Ameco     d                  materi    et      510.3                       100    Y                        h 27,
                   ng                                       5        %                   in       10.35             07
          larges             al        price   5                                                           2021
                   labor                                                                 cash
          t                  reven
                   servic
          share              ue
                   e
          holder

                   Purch     Office
          The
                   ase       rent
Shando    first                                                                          Settle
                   goods     and       Mark    39,04                                              39047    Marc
ng        larges                                        3,904.    24.64                  ment                       2021-
                   /Acce     accom     et      7,598.                     4,000   N               598.2    h 27,
Aviatio   t                                                76        %                   in                         07
                   pt        modat     price   20                                                 0        2021
n         share                                                                          cash
                   servic    ion
          holder
                   e         fee

                   Purch
          The
                   ase
Shando    first                                                                          Settle
                   goods     Resid     Mark    5,699,                                                      Marc
ng        larges                                        569.9      3.43                  ment     56993             2021-
                   /Acce     ence      et      366.0                       606    N                        h 27,
Aviatio   t                                                 4        %                   in       66.04             07
                   pt        fee       price   4                                                           2021
n         share                                                                          cash
                   servic
          holder
                   e

STAEC     Subsi    Purch     Aircra    Mark    103,4    10,34     51.07   16,48   N      Settle   10347    Marc     2021-

                                                             71
                                                                              Shandong Airlines Co., Ltd. Annual Report 2021

O          diary    ase      ft        et      74,16     7.42        %       6           ment     4168.    h 27,    07
           of the   goods    maint     price   8.61                                      in       61       2021
           first    /Acce    enanc                                                       cash
           larges   pt       e costs
           t        servic
           share    e
           holder

Shando
ng
           Subsi
Xiangy              Purch
           diary
u                   ase
           of the                                                                        Settle
Aerona              goods    Maint     Mark    91,45                                              91453    Marc
           first                                        9,145.    43.05   10,02          ment                       2021-
utical              /Acce    enanc     et      3,918.                             N               918.3    h 27,
           larges                                          39        %       0           in                         07
Technol             pt       e cost    price   31                                                 1        2021
           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    64,20                                              64201    Marc
w          first             fee                        6,420.    99.68                  ment                       2021-
                    /Acce              et      1,573.                     8,800   N               573.9    h 27,
Autom      larges            and                           16        %                   in                         07
                    pt                 price   93                                                 3        2021
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    3,137,                                                      Marc
w          first                                        313.7      3.25                  ment     31378             2021-
                    /Acce    ence      et      837.3                       400    N                        h 27,
Autom      larges                                           8        %                   in       37.35             07
                    pt       fee       price   5                                                           2021
obile      t                                                                             cash
                    servic
Service    share
                    e
Co.,       holder
Ltd

Shando     Subsi    Purch
                                                                                         Settle
ng         diary    ase      Abnor     Mark                                                                Marc
                                               347,8               0.50                  ment     34780             2021-
Airlines   of the   goods    mal       et               34.78               55    N                        h 27,
                                               07.34                 %                   in       7.34              07
Rainbo     first    /Acce    flights   price                                                               2021
                                                                                         cash
w          larges   pt


                                                             72
                                                                             Shandong Airlines Co., Ltd. Annual Report 2021

Autom      t        servic
obile      share    e
Service    holder
Co.,
Ltd

           Sub-s
Shando
           ubsidi   Purch    Aircra
ng
           ary of   ase      ft
Airlines                                                                                Settle
           the      goods    suppli   Mark    8,839,                                                      Marc
Xinzhih                                                883.9      0.38                  ment     88398             2021-
           first    /Acce    es and   et      830.0                       950    N                        h 27,
ang                                                        8        %                   in       30.00             07
           larges   pt       advert   price   0                                                           2021
Media                                                                                   cash
           t        servic   ising
Co.,
           share    e        fees
Ltd.
           holder

                    Purch
           Secon             Agenc
                    ase
           d                 y                                                          Settle
                    goods             Mark                                                                Marc
Air        larges            comm             50,92               2.91                  ment     50921             2021-
                    /Acce             et                5.09               0.8   Y                        h 27,
China      t                 ission           1.32                  %                   in       .32               07
                    pt                price                                                               2021
           share             expen                                                      cash
                    servic
           holder            diture
                    e

                    Purch
           Secon             Groun
                    ase
           d                 d                                                          Settle
                    goods             Mark    17,79                                              17795    Marc
Air        larges            servic                    1,779.     1.00                  ment                       2021-
                    /Acce             et      5,495.                     2,412   N               495.6    h 27,
China      t                 e                            55        %                   in                         07
                    pt                price   64                                                 4        2021
           share             expen                                                      cash
                    servic
           holder            diture
                    e

                             Abnor
                    Purch    mal
           Secon
                    ase      flight
           d                                                                            Settle
                    goods    and      Mark    20,11                                              20113    Marc
Air        larges                                      2,011.    13.20                  ment                       2021-
                    /Acce    reside   et      3,115.                     2,665   N               115.2    h 27,
China      t                                              31        %                   in                         07
                    pt       nt       price   23                                                 3        2021
           share                                                                        cash
                    servic   group
           holder
                    e        expen
                             ses

           Secon    Purch
           d        ase                                                                 Settle
                             Maint    Mark    7,351,                                                      Marc
Air        larges   goods                              735.1      3.61                  ment     73514             2021-
                             enanc    et      474.5                       880    N                        h 27,
China      t        /Acce                                  5        %                   in       74.56             07
                             e cost   price   6                                                           2021
           share    pt                                                                  cash
           holder   servic

                                                            73
                                                                           Shandong Airlines Co., Ltd. Annual Report 2021

                 e

                          Purch
                 Purch    asing/l
        Secon
                 ase      easing
        d                                                                             Settle
                 goods    aviati    Mark    1,172,                                                      Marc
Air     larges                                       117.2     30.10                  ment     11722             2021-
                 /Acce    on        et      226.6                        30    Y                        h 27,
China   t                                                2        %                   in       26.68             07
                 pt       materi    price   8                                                           2021
        share                                                                         cash
                 servic   al
        holder
                 e        expen
                          diture

                 Purch
        Secon
                 ase
        d                                                                             Settle
                 goods              Mark    1,479,                                                      Marc
Air     larges            Cateri                     147.9      0.73                  ment     14792             2021-
                 /Acce              et      232.2                       160    N                        h 27,
China   t                 ng                             2        %                   in       32.29             07
                 pt                 price   9                                                           2021
        share                                                                         cash
                 servic
        holder
                 e

        Subsi
        diary    Purch
                          Groun
        of the   ase
                          d                                                           Settle
        secon    goods              Mark    18,55                                              18554    Marc
                          servic                     1,855.     0.87                  ment                       2021-
Ameco   d        /Acce              et      4,603.                     4,000   N               603.1    h 27,
                          e                             46        %                   in                         07
        larges   pt                 price   19                                                 9        2021
                          expen                                                       cash
        t        servic
                          ses
        share    e
        holder

        Subsi
        diary    Purch
        of the   ase
                                                                                      Settle
        secon    goods    Maint     Mark    66,53                                              66539    Marc
                                                               20.05                  ment                       2021-
Ameco   d        /Acce    enanc     et      9,965.   6,654             8,200   N               965.2    h 27,
                                                                  %                   in                         07
        larges   pt       e cost    price   28                                                 8        2021
                                                                                      cash
        t        servic
        share    e
        holder

        Subsi             Purch
                 Purch
        diary             asing/l
                 ase
        of the            easing                                                      Settle
                 goods              Mark                                                                Marc
        secon             aviati            119,3               3.06                  ment     11931             2021-
Ameco            /Acce              et               11.93               50    N                        h 27,
        d                 on                13.00                 %                   in       3.00              07
                 pt                 price                                                               2021
        larges            materi                                                      cash
                 servic
        t                 al
                 e
        share             expen

                                                          74
                                                                                        Shandong Airlines Co., Ltd. Annual Report 2021

             holder                diture

             Joint
 Sichuan
             ventur
 Service               Purch
             e of
 s                     ase
             the                                                                                     Settle
 Aero-E                goods       Maint    Mark      900,0                                                    90003    Marc
             secon                                              90,00     10.20     110,0            ment                       2021-
 ngine                 /Acce       enanc    et        31,57                                 N                  1573.    h 27,
             d                                                   3.16           %     00             in                         07
 Mainte                pt          e cost   price     3.93                                                     93       2021
             larges                                                                                  cash
 nance                 servic
             t
 Co.,                  e
             share
 Ltd.
             holder

             Secon     Other       Frequ
             d         relate      ent                                                               Settle
                                            Mark      70,00                                                    70000    Marc
 Air         larges    d           passen                                 100.0     10,00            ment                       2021-
                                            et        0,000.    7,000                       N                  000.0    h 27,
 China       t         party       ger                                      0%         0             in                         07
                                            price     00                                                       0        2021
             share     transa      coope                                                             cash
             holder    ction       ration

                                                                144,8               182,7
 Total                                           --     --                 --                   --        --       --     --     --
                                                                70.32                01.3

 Details of return of sales in
                                            Not applicable
 significant amount

 Report the actual implementation of
 the normal related transactions
 which were projected about their           Not applicable
 total amount by types during the
 reporting period (if applicable)

 Reasons for major difference
 between trading price and market           Not applicable
 reference price (if applicable)


2. Related party transactions of assets/equity acquisition and sold

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

No main related party transactions of mutual investment outside for the Company in the reporting period.


4. Contact of related credit and debt

There are no related credits or liabilities occurred in the reporting period.




                                                                     75
                                                                                     Shandong Airlines Co., Ltd. Annual Report 2021

5. Contact with the related finance companies

There are no deposits, loans, credits or other financial business between the finance companies with associated relationship and
related parties


6. Transactions between the finance company controlled by the Company and related parties



There are no deposits, loans, credits or other financial business between the finance companies controlled by the Company and
related parties


7. Other related party transactions

The Company has no other major related party transaction in the reporting period.


XV. Major contract and implantation

1. Trusteeship, contract and leasing

(1) Trusteeship

The Company does not have trusteeship in the period


(2) Contract

The Company do not have contract in the period


(3) Leasing

The Company do not have leasing in the period


2. Major guarantee

No major guarantee for the Company in reporting period


3. Entrust others to cash asset management

(1) Entrust financing

No entrust financing in the period


(2) Entrust loans

No entrust loans in the period



                                                                  76
                                                                       Shandong Airlines Co., Ltd. Annual Report 2021

4. Other material contracts

No other material contracts for the Company in reporting period


XVI. Explanation on other significant events

No other significant events need explanation during the period


XVII. Significant event of subsidiary of the Company

□ Applicable √ Not applicable




                                                                  77
                                                                               Shandong Airlines Co., Ltd. Annual Report 2021




  Section VII. 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:              168,402                                                                   168,402
                                        42.10%                                                                     42.10%
 State-owned shares              ,000                                                                      ,000

           Domestic
                              199,000    0.05%                                                          199,000     0.05%
 corporate shares

           Overseas legal
 person shares

           Other

   2. Raising legal person
 shares

   3. Internal employee
 shares

   4. Preferred stock or      91,399,                                                                   91,399,
                                        22.85%                                                                     22.85%
 other                           000                                                                        000

                              140,000                                                                   140,000
 II. Listed shares                      35.00%                                                                     35.00%
                                 ,000                                                                      ,000

   1. RMB Ordinary
 shares

   2.Domestically listed      140,000                                                                   140,000
                                        35.00%                                                                     35.00%
 foreign shares                  ,000                                                                      ,000

   3. Foreign shares listed
 abroad



                                                         78
                                                                                      Shandong Airlines Co., Ltd. Annual Report 2021

    4. Other

                                  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
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 common                   Total preferred                  Total preferred
 common                           shareholders as of             shareholders whose               shareholders whose
                      13,032                            12,743                                0                                 0
 shareholders                     the end of the                 voting rights were               voting rights were
 at end of the                    month preceding                restored at end of               restored at end of the



                                                                  79
                                                                                       Shandong Airlines Co., Ltd. Annual Report 2021

Period                      the date of annual                the Period(if                          month prior to the date
                            report disclosed                  applicable) (found                     of annual report
                                                              in note 8)                             disclosed        (if
                                                                                                     applicable) (found in
                                                                                                     note 8)

                     Particulars about shares held above 5% by shareholders or top ten shareholders

                                                                                                      Amount                Information of
                                    Proportio    Amount of                           Amount of
                    Nature of                                       Changes                           of listed             shares pledged,
   Full name of                        n of      shares held                          unlisted
                    shareholde                                      in report                        outstandin             tagged or frozen
   Shareholders                       shares       at the                            outstanding
                            r                                           period                        g shares              State of    Amo
                                       held      period-end                          shares held
                                                                                                        held                 share       unt

                    State-owne
Shandong Aviation
                    d legal            42.00%    168,004,000        0                168,004,000                  0
Group
                    person

                    State-owne
Air China Limited   d legal            22.80%     91,200,000        0                 91,200,000                  0
                    person

WANXIANG
                    Foreign
INTERNATIONAL
                    legal               0.66%      2,658,100                     0               0   2,658,100
INVESTMENT
                    person
CORPORATION

VANGUARD
TOTAL               Foreign
INTERNATIONAL       legal               0.58%      2,312,677            -123,000                 0   2,312,677
STOCK INDEX         person
FUND

                    Domestic
Yang Ming           nature              0.51%      2,020,421                     0               0   2,020,421
                    person

                    Domestic
Hou Chunhu          nature              0.45%      1,796,145                     0               0   1,796,145
                    person

                    Domestic
Chen Jingjian       nature              0.40%      1,595,200                     0               0   1,595,200
                    person

                    Domestic
Wang Jinjun         nature              0.37%      1,484,600            428,431                  0   1,484,600
                    person

VANGUARD            Foreign
EMERGING            legal               0.36%      1,442,841            -123,000                 0   1,442,841
MARKETS             person

                                                               80
                                                                                     Shandong Airlines Co., Ltd. Annual Report 2021

STOCK INDEX
FUND

                        Domestic
Wang Hui                nature            0.30%       1,187,700                 0            0       1,187,700
                        person
                                      1. Shandong Aviation Group (SDA) 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
Explanation      on      associated
                                      shares of the Company on behalf of the State with unlisted shares;
relationship among the aforesaid
shareholders                          3. Among the above top ten shareholders, Air China Limited is the first largest shareholder
                                      of the SDA; there is no relationship between SDA, Air China and other shareholders, and
                                      they are not the parties acting in concert.

Description of the above
shareholders in relation to
                                      N/A
delegate/entrusted voting rights
and abstention from voting rights.

                                         Shareholding of top 10 circulated shareholders

                                                    Amount of listed shares held at end                   Type of shares
                  Shareholders
                                                                of the Period                    Type                Amount

                                                                                            Domestically
WANXIANG INTERNATIONAL
                                                                                2,658,100   listed foreign                 2,658,100
INVESTMENT CORPORATION
                                                                                            shares

                                                                                            Domestically
VANGUARD TOTAL INTERNATIONAL
                                                                                2,312,677   listed foreign                 2,312,677
STOCK INDEX FUND
                                                                                            shares

                                                                                            Domestically
Yang Ming                                                                       2,020,421   listed foreign                 2,020,421
                                                                                            shares

                                                                                            Domestically
Hou Chunhu                                                                      1,796,145   listed foreign                 1,796,145
                                                                                            shares

                                                                                            Domestically
Chen Jingjian                                                                   1,595,200   listed foreign                 1,595,200
                                                                                            shares

                                                                                            Domestically
Wang Jinjun                                                                     1,484,600   listed foreign                 1,484,600
                                                                                            shares

                                                                                            Domestically
VANGUARD EMERGING MARKETS
                                                                                1,442,841   listed foreign                 1,442,841
STOCK INDEX FUND
                                                                                            shares



                                                                  81
                                                                                                  Shandong Airlines Co., Ltd. Annual Report 2021

                                                                                                        Domestically
 Wang Hui                                                                                1,187,700      listed foreign                    1,187,700
                                                                                                        shares

                                                                                                        Domestically
 Ou Yanping                                                                                  777,699    listed foreign                      777,699
                                                                                                        shares

                                                                                                        RMB ordinary
 Xing Yongkai                                                                                749,888                                        749,888
                                                                                                        shares

                                                               The Company is not aware of their associated relationship among the top ten
 Expiation      on      associated    relationship   or
                                                               shareholders of circulation share, and is unknown whether other circulation
 consistent actors within the top 10 un-restrict
                                                               shareholders belong to the persons acting in concert regulated by the
 shareholders and between top 10 un-restrict
                                                               Management       Regulation   of    Information    Disclosure        on   Change    of
 shareholders and top 10 shareholders
                                                               Shareholding for Listed Companies.

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
                                                     Date of
          Controlling           person/person in
                                                     foundati          Organization code                     Main operation business
      shareholders               charge of the
                                                          on
                                      unit

                                                                                                   Accommodation,        catering    services,    and
                                                                                                   retail of tobacco product; (the above is
                                                                                                   limited to branch offices); investment and
                                                     Februar
 Shandong Aviation                                                                                 management of air transport and aviation
                                Xu Chuanyu           y 9,           91370000614071647W
 Group                                                                                             maintenance; conference and exhibition
                                                     1995
                                                                                                   services; office services; sales of daily
                                                                                                   necessities, handicrafts, and souvenirs, and
                                                                                                   rental of houses.

 Equity        of       other
 domestic/oversea
 listed             company
 control by controlling         N/A
 shareholder as well as
 stock-joint in report
 period


                                                                           82
                                                                                       Shandong Airlines Co., Ltd. Annual Report 2021

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    foundation
                                    the unit

                                                                                           Accommodation, catering services, and
                                                                                           retail of tobacco product; (the above is
                                                                                           limited to branch offices); investment
 Shandong Aviation                               February 9,                               and management of air transport and
                             Xu Chuanyu                          91370000614071647W
 Group                                           1995                                      aviation 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     N/A
 by actual controller in
 reporting period

Actual controller of the Company has no changes in the reporting period
A block diagram of the ownership and control relationship between the Company and actual controller




                                    Shandong Aviation Group


                                                   42%


                                   Shandong Airlines Co., Ltd.




Actual controller controlling the Company by entrust or other assets management

□ Applicable √ Not applicable


4.The total number of shares pledged by controlling shareholders or the first majority shareholder and its
persons acting in concert accounts for 80% of the shares held by them

□ Applicable √ Not applicable


                                                                   83
                                                                                    Shandong Airlines Co., Ltd. Annual Report 2021

5. Particulars about other legal person shareholders with over 10% shares held

√ Applicable □ Not applicable

                             Legal
    Legal person       person/person in      Date of      Register
                                                                            Main operation business or management activities
     shareholder         charge of the     foundation      capital
                              unit

                                                                        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
                                                         14.525
                                          September                     aerostat; business agent among air companies; ground
 Air China Limited     Song Zhiyong                      billion
                                          30, 2004                      service and air courier services related with the main
                                                         yuan
                                                                        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

6. Limitation and reducing the holdings of shares of controlling shareholders, actual controllers,
restructuring side and other commitment subjects

□ Applicable √ Not applicable


IV. The specific implementation of shares buy-back during the reporting period

Implementation progress of shares buy-back
□ Applicable √ Not applicable
Implementation progress of the reduction of repurchases shares by centralized bidding
□ Applicable √ Not applicable




                                                                   84
                                                            Shandong Airlines Co., Ltd. Annual Report 2021



                                     Section VIII. Preferred Stock

□ Applicable √ Not applicable
The Company had no preferred stock in the reporting.




                                                       85
                                                                                      Shandong Airlines Co., Ltd. Annual Report 2021




                                                    Section IX. Bonds

√ Applicable □ Not applicable


I. Enterprise bonds

During the reporting period, the company did not have enterprise bonds.


2. Corporate bonds

During the reporting period, the company did not have corporate bonds.


III. Debt financing tools for non-financial enterprises

√ Applicable □ Not applicable


1. Basic information on debt financing instruments of non-financial enterprises

                                                                                                                             In RMB

                 Bond                                                                                           Debt
    Bond                          Bond     Issuing       Value                      Bond         Interest                  Trading
               abbreviati                                               Due date                               service
    name                          code       date         date                     balance         rate                     place
                    on                                                                                         mode

                                                                                                             Annual
                                                                                                              interest
 Shandong
                                                                                                              payment
 Airlines
               20                                                                                             s,
 Co., Ltd.                                                                                                                Shanghai
               Shandong       10200081    April 22,    April 24,    April 24,      1,020,514                  principal
 2020 first                                                                                    2.99%                      Clearing
               Airlines       4           2020         2020         2023             ,722.25                  and
 phase of                                                                                                                 House
               MTN001                                                                                         interest
 medium-t
                                                                                                              repayme
 erm notes
                                                                                                              nts at
                                                                                                              maturity

 Investor suitability arrangements (if
                                          N/A
 applicable)

 Applicable trading mechanism             In line with the relevant regulations of the national interbank bond market

 Whether there is a risk of
 termination of listing and trading (if   N/A
 any) and countermeasures

Overdue and outstanding bonds
□ Applicable √ Not applicable


                                                                   86
                                                                                     Shandong Airlines Co., Ltd. Annual Report 2021

2. The triggering and implementation of the issuer's or investor's option clauses and investor protection
clauses

□ Applicable √ Not applicable


3. The intermediaries


                           Name of the                               Name of signing           Intermediary
    Bond project                               Office address                                                              Tel.
                           intermediary                                accountant                contact

 Shandong Airlines
 Co., Ltd. 2020 first   China
                                            No.25, Financial
 phase of               Construction Bank                         Not applicable           Ding Yangpeng           0531-82089505
                                            Street, Beijing
 medium-term            Corporation
 notes

Whether the above institutions have changed during the reporting period
□ Yes √ No


4. Use of proceeds

                                                                                                                                  In RMB

                                                                                                                        Whether it is
                                                                             Operation of                            consistent with
                                                                                                  Rectification
                                                                              the special                           the purpose, use
                         Total amount of                         Unused                           of illegal use
    Bond project                              Used amount                     account for                            plan and other
                           funds raised                          amount                             of raised
                                                                            raised funds (if                            agreements
                                                                                                  funds (if any)
                                                                                    any)                             promised in the
                                                                                                                         prospectus

 Shandong Airlines
 Co., Ltd. 2020
 first phase of         1,000,000,000.00     1,000,000,000.00        0.00   N/A                   N/A               Y
 medium-term
 notes

Raised funds for construction projects
□ Applicable √ Not applicable


During the reporting period, the company changed the use of the funds raised from the above bonds
□ Applicable √ Not applicable


5. Adjustment of credit rating results during the reporting period

√ Applicable □ Not applicable
As a local airline company with strong comprehensive competitive strength in China, the company has a certain


                                                                87
                                                                                Shandong Airlines Co., Ltd. Annual Report 2021

competitive advantage in the eastern coastal and surrounding international areas with Shandong province as the
core, and has obtained favorable external support. During the tracking period, China Lianhe Credit Rating Co.,
Ltd. noticed that the Company’s credit level was adversely affected by the impact of epidemic, operation losses,
decline of owners’ equity and debt burden, etc. With the gradual control of the pandemic and the promotion of
vaccines, the company's business situation is expected to improve. In conclusion, after tracking analysis and
evaluation of the credit status of the Company and its related bonds, downgraded the long-term credit rating of the
main body from AAA to AA, and the credit rating of “20MTN001" from AAA to AA with stable outlook.


6. The implementation and changes of guarantees, debt repayment plans and other debt repayment
safeguard measures during the reporting period, and their impact on the rights and interests of bond
investors

□ Applicable √ Not applicable


IV. Convertible Bonds

The Company had no convertible bonds in the Period.


V. The loss in the scope of consolidated statements during the reporting period exceeded 10%
of the net assets at the end of the previous year

√ Applicable □ Not applicable

                                                                                                 Impact on the Company's
               Item                           Loss                     Reason for loss         production and operation and
                                                                                                         solvency

                                                                                               Facing a more severe and
                                                                                               complex     production   and
 Air transport service            Loss of 2.402 billion yuan    Affected by the epidemic
                                                                                               operation environment and
                                                                                               financial pressure


VI.Overdue interest-bearing debts other than bonds at period-end

□ Applicable √ Not applicable


VII. Whether there was any violation of rues and regulations during the reporting period

□ Yes √ No


VIII. The company’s main accounting data and financial indicators for the past two years as
of the end of the reporting period

                                                                                                         In 10 thousand yuan



                                                               88
                                                                        Shandong Airlines Co., Ltd. Annual Report 2021

                                                                                            Increase or decrease at the
              Item           The Period-end                 The end of last year           period-end compared with the
                                                                                                 end of last year

Current ratio                                 0.4899                          0.9315                            -47.41%

Debt-to-asset ratio                         102.81%                          88.53%          14.28percentage points up

Quick ratio                                   0.4785                          0.9154                            -47.73%

                                                                                           Increased or decreased in the
                               The Period                   Same period last year            period compared with the
                                                                                               same period last year

Net profit after deducting
non-recurring gains and               -199,826.76                         -249,114.3                             19.79%
losses

EBITDA total debt ratio                       6.98%                         -18.21%           25.19 percentage points up

Interest coverage multiple                     -1.93                          -12.63                             84.75%

Cash interest protection
                                                5.86                               -8.42                       169.62%
multiple

EBITDA interest protection
                                                2.05                               -8.63                       123.73%
multiple

Loan repayment rate                         100.00%                         100.00%                                 0.00%

Interest repayment rate                     100.00%                         100.00%                                 0.00%




                                                       89
                                                                                      Shandong Airlines Co., Ltd. Annual Report 2021




                                         Section X. Financial Report

I. Audit report

 Type of audit opinion                                               Standard unqualified

 Date for audited report signed                                      29   March 2021

                                                                     RSM Certified Public Accountants (special general
 Name of audit institution
                                                                     partnership)

 Document No. of the Auditing Report                                 RSM Shen Zi [2022] No. 518Z0027

 Name of CPA                                                         Yang Yunhui,    Guo Yuefeng.    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, 2021, 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’ 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, 2021, 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


                                                                  90
                                                                                     Shandong Airlines Co., Ltd. Annual Report 2021

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 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 3.13 Contract assets and contract liabilities under Note 3 Important Accounting

Principles and Accounting Estimates. Please refer to Note 5.21 Contract liabilities and Note 5.39 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. Impairment provisions for owned and leased aircrafts and engines

2.1 Description

As at December 31, 2021, the amount of owned and leased aircrafts and engines is CNY 20,763,616,394.54, accounting for 63.61%



                                                                  91
                                                                                       Shandong Airlines Co., Ltd. Annual Report 2021

of the total assets of the consolidated statement. The Company evaluated the recoverable amount of the asset group when there is any

indication that the asset group may be impaired at the balance sheet date to recognize loss of asset impairments. The recoverable

amount is the higher of the fair value of the asset group less disposal costs and the present value of the estimated future cash flows of

the asset group. According to the result of the impairment test, there is no impairment among owned and leased aircrafts and engines

of the Company.

Since significant judgement is required to assess the assumptions of the forecast growth rate and discount rate involved in the

estimation of the present value of the estimated future cash flows of the aircraft assets by the Company, we identified the assessment

of the present value of the estimated future cash flows of the aircraft assets as the key Audit Matters.

Please refer to accounting policies described in Note 3.21 Long-term assets impairment and Note 3.28 Lease under Note 3 Important

Accounting Principles and Accounting Estimates. Please refer to accounting policies described in Note 5.10 Fixed asset, Note 5.11

Construction in process and Note 5.12 Right of use asset under Note 5 Notes to significant elements of the consolidated financial

statements.

2.2 Audit Response

The relevant procedures we implemented for impairment provisions for owned and leased aircrafts and engines mainly including:

2.2.1 Assess the effectiveness of the design and operation of internal controls related to current value of estimated future cash flows

of aircrafts.

2.2.2 Assess the reasonableness of estimated growth ratio based on the future business plan of the Company.

2.2.3 Understand and assess the testing measure of recoverable amount used and material judgment and estimate made by the

Management and review the calculation of impairment test with the assistance of our professionals with valuation skills and

knowledge.

2.2.4 Analyze the sensitivity of estimated growth rate and discount rate to evaluate the influence on the impairment test result of the

Company.

IV. Other Information

The management of the Company is responsible for other information, which includes the information contained in the Company’s

2021 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




                                                                   92
                                                                                      Shandong Airlines Co., Ltd. Annual Report 2021

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.

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 detect 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 to continue as a going-concern. If we




                                                                   93
                                                                                      Shandong Airlines Co., Ltd. Annual Report 2021

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 inadequate, 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.

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 Certified Public Accountants                              Certified Public Accountant of China: Yang Yunhui
 (special general partnership)
                                                               Certified Public Accountant of China: Guo Yuefeng
                                                               Certified Public Accountant of China: Xu Hong

BeijingChina                                                                        29 March 2022




II. Financial Statement

Statement in Financial Notes are carried in RMB/CNY


1. Consolidated Balance Sheet

Prepared by Shandong Airlines Co., Ltd.


                                                                      94
                                                                       Shandong Airlines Co., Ltd. Annual Report 2021

                                              December 31, 2021
                                                                                                             In RMB

                      Item                  December 31, 2021                        December 31, 2020

Current assets:

       Monetary funds                                  3,811,102,681.16                           5,306,474,451.06

       Settlement provisions

       Capital lent

       Trading financial assets

       Derivative financial assets

       Note receivable

       Account receivable                                 340,113,063.11                            354,352,296.99

       Receivable financing

       Accounts paid in advance                             4,685,949.55                            213,530,865.28

       Insurance receivable

       Reinsurance receivables

       Contract reserve of reinsurance
receivable

       Other account receivable                           171,734,868.85                            159,397,943.13

         Including: Interest receivable

                      Dividend receivable

       Buying back the sale of financial
assets

       Inventories                                        111,785,343.17                            110,572,399.50

       Contractual assets

       Assets held for sale

       Non-current asset due within one
year

       Other current assets                               369,977,255.76                            282,572,739.73

Total current assets                                   4,809,399,161.60                           6,426,900,695.69

Non-current assets:

       Loans and payments on behalf

       Debt investment

       Other debt investment

       Long-term account receivable

       Long-term equity investment



                                                     95
                                                           Shandong Airlines Co., Ltd. Annual Report 2021

     Investment in other equity
                                             461,245,883.18                             541,789,406.63
instrument

     Other non-current financial
assets

     Investment real estate                   24,226,182.74

     Fixed assets                       6,200,939,794.32                              6,904,082,012.35

     Construction in progress           4,862,174,283.01                              5,770,696,951.56

     Productive biological asset

     Oil and gas asset

     Right-of-use assets               12,051,991,488.86                                           N/a

     Intangible assets                       441,785,379.60                             118,699,980.33

     Expense on Research and
Development

     Goodwill                                                                               454,020.13

     Long-term expenses to be
                                             587,815,156.73                             641,782,578.43
apportioned

     Deferred income tax asset          3,204,004,227.14                              1,999,099,488.87

     Other non-current asset

Total non-current asset                27,834,182,395.58                             15,976,604,438.30

Total assets                           32,643,581,557.18                             22,403,505,133.99

Current liabilities:

     Short-term loans                       2,601,211,111.11                          2,001,111,111.11

     Loan from central bank

     Capital borrowed

     Trading financial liability                  78,548.31                                 862,955.67

     Derivative financial liability

Note payable                                  94,287,021.53                             472,095,003.24

Account payable                         2,220,194,249.13                              2,543,319,300.31

     Accounts received in advance

     Contractual liability                   455,346,878.56                             445,400,801.19

     Selling financial asset of
repurchase

     Absorbing deposit and interbank
deposit

Security trading of agency

     Security sales of agency

                                       96
                                                           Shandong Airlines Co., Ltd. Annual Report 2021

     Wage payable                             454,324,256.07                            346,238,955.37

     Taxes payable                             73,278,520.98                            102,206,477.49

     Other account payable                    667,515,022.58                            635,865,961.62

        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
                                          3,219,248,211.06                              321,577,566.89
within one year

     Other current liabilities                 32,096,585.80                             31,100,597.66

Total current liabilities                 9,817,580,405.13                            6,899,778,730.55

Non-current liabilities:

Insurance contract reserve

     Long-term loans                      6,697,007,747.75                            6,117,434,899.32

     Bonds payable                        1,000,000,000.00                            1,000,000,000.00

        Including: Preferred stock

                     Perpetual capital
securities

     Lease liability                      9,441,515,109.42                                         N/a

     Long-term account payable            5,230,688,729.19                            5,303,354,015.63

     Long-term wages payable                                                            254,025,000.00

     Accrual liability                    1,060,428,713.51

     Deferred income                           97,814,550.53                            100,513,810.37

     Deferred income tax liabilities          216,210,941.34                            158,137,753.91

     Other non-current liabilities

Total non-current liabilities            23,743,665,791.74                           12,933,465,479.23

Total liabilities                        33,561,246,196.87                           19,833,244,209.78

Owner’s equity:

     Share capital                            400,000,000.00                            400,000,000.00

     Other equity instrument

        Including: Preferred stock

                     Perpetual capital
securities



                                         97
                                                                                Shandong Airlines Co., Ltd. Annual Report 2021

      Capital public reserve                                       75,410,363.70                              75,410,363.70

      Less: Inventory shares

      Other comprehensive income                                  279,670,337.38                             322,552,319.90

      Reasonable reserve

      Surplus public reserve                                      538,773,444.97                             538,773,444.97

      Provision of general risk

      Retained profit                                          -2,211,518,785.74                           1,233,524,795.64

 Total owner’ s equity attributable to
                                                                  -917,664,639.69                          2,570,260,924.21
 parent company

      Minority interests

 Total owner’ s equity                                           -917,664,639.69                          2,570,260,924.21

 Total liabilities and owner’ s equity                       32,643,581,557.18                           22,403,505,133.99


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, 2021                         December 31, 2020

 Current assets:

      Monetary funds                                           3,799,124,518.37                            5,302,302,306.13

      Trading financial assets

      Derivative financial assets

      Note receivable

      Account receivable                                          338,296,131.65                             350,673,304.20

      Receivable financing

      Accounts paid in advance                                       4,409,314.22                            213,297,372.67

      Other account receivable                                    179,708,210.51                             165,544,964.64

         Including: Interest receivable

                     Dividend
 receivable

      Inventories                                                 108,129,200.65                             108,682,699.25

      Contractual assets


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                                                          Shandong Airlines Co., Ltd. Annual Report 2021

     Assets held for sale

     Non-current assets maturing
within one year

     Other current assets                   369,478,051.10                             282,309,117.39

Total current assets                   4,799,145,426.50                              6,422,809,764.28

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
                                            461,245,883.18                             541,789,406.63
instrument

     Other non-current financial
assets

     Investment real estate                  24,226,182.74

     Fixed assets                      6,110,155,029.14                              6,812,145,764.90

     Construction in progress              4,854,111,226.65                          5,770,696,951.56

     Productive biological assets

     Oil and natural gas assets

     Right-of-use assets              12,051,991,488.86                                           N/a

     Intangible assets                      429,783,837.53                             106,310,248.22

     Research and development costs

     Goodwill

     Long-term deferred expenses            587,815,156.73                             641,779,766.13

     Deferred income tax assets        3,202,709,890.47                              1,998,341,086.43

     Other non-current assets

Total non-current assets              27,866,139,980.73                             16,015,164,509.30

Total assets                          32,665,285,407.23                             22,437,974,273.58

Current liabilities:

     Short-term borrowings                 2,601,211,111.11                          2,001,111,111.11

     Trading financial liability                 78,548.31                                 862,955.67

     Derivative financial liability

     Notes payable                           94,287,021.53                             472,095,003.24

     Account payable                   2,224,880,206.89                              2,560,482,401.82

     Accounts received in advance


                                      99
                                                            Shandong Airlines Co., Ltd. Annual Report 2021

     Contractual liability                     453,677,991.84                            443,746,099.43

     Wage payable                              449,645,567.63                            341,473,984.67

     Taxes payable                              70,542,724.73                             99,360,041.47

     Other accounts payable                    752,957,627.89                            726,704,906.20

        Including: Interest payable

                     Dividend payable               11,940.00                                 11,940.00

     Liability held for sale

     Non-current liabilities due
                                           3,219,248,211.06                              321,577,566.89
within one year

     Other current liabilities                  32,096,585.80                             31,100,597.66

Total current liabilities                  9,898,625,596.79                            6,998,514,668.16

Non-current liabilities:

     Long-term loans                       6,697,007,747.75                            6,117,434,899.32

     Bonds payable                         1,000,000,000.00                            1,000,000,000.00

        Including: Preferred stock

                     Perpetual capital
securities

     Lease liability                       9,441,515,109.42                                         N/a

     Long-term account payable             5,230,688,729.19                            5,303,354,015.63

Long term employee compensation
                                                                                         254,025,000.00
payable

     Accrued liabilities                   1,060,428,713.51

     Deferred income                            97,814,550.53                            100,513,810.37

     Deferred income tax liabilities           215,428,494.29                            157,224,899.02

     Other non-current liabilities

Total non-current liabilities             23,742,883,344.69                           12,932,552,624.34

Total liabilities                         33,641,508,941.48                           19,931,067,292.50

Owners’ equity:

     Share capital                             400,000,000.00                            400,000,000.00

     Other equity instrument

        Including: Preferred stock

                    Perpetual capital
securities

     Capital public reserve                     86,911,168.71                             86,911,168.71

     Less: Inventory shares



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                                                                                Shandong Airlines Co., Ltd. Annual Report 2021

      Other comprehensive income                                  279,670,337.38                              322,552,319.90

 Special reserve

      Surplus reserve                                             538,112,740.44                              538,112,740.44

      Retained profit                                         -2,280,917,780.78                              1,159,330,752.03

 Total owner’s equity                                            -976,223,534.25                            2,506,906,981.08

 Total liabilities and owner’s equity                        32,665,285,407.23                             22,437,974,273.58


Legal Representative: Sun Xiujiang


Person in charge of Accounting Works: Xu Guojian


Person in charge of Accounting Institution: Zhou Shoubin


3. Consolidated Profit Statement

                                                                                                                       In RMB

                    Item                                   2021                                      2020

 I. Total operating income                                    12,515,317,963.16                           10,534,403,350.87

      Including: Operating income                             12,515,317,963.16                           10,534,403,350.87

              Interest income

              Insurance gained

              Commission charge and
 commission income

 II. Total operating cost                                     15,147,394,074.67                             13,833,221,113.61

      Including: Operating cost                               13,550,590,002.11                             12,554,900,116.09

              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                                        18,372,220.34                              10,479,064.77

              Sales expense                                        648,675,348.06                             613,910,975.53



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                                                                   Shandong Airlines Co., Ltd. Annual Report 2021

                Administrative expense               424,010,598.68                            493,640,757.37

                R&D expense                           25,042,013.59                              22,866,289.98

                Financial expense                    480,703,891.89                            137,423,909.87

                     Including: Interest
                                                     821,081,133.14                            230,831,883.77
expenses

                                Interest
                                                      96,757,343.73                              45,680,277.19
income

         Add: Other income                           160,262,151.16                             100,684,939.11

              Investment income (Loss is
                                                        -568,877.88                               3,190,496.20
listed with “-”)

              Including: Investment
income on affiliated company and joint
venture

                     The termination of
income recognition for financial assets
measured by amortized cost

              Exchange income (Loss is
listed with “-”)

              Net exposure hedging
income (Loss is listed with “-”)

              Income from change of fair
                                                         784,407.36                                -736,690.92
value (Loss is listed with “-”)

              Loss of credit impairment
                                                      -16,030,897.16                              3,388,382.43
(Loss is listed with “-”)

              Losses of devaluation of
                                                        -454,020.13
asset (Loss is listed with “-”)

              Income from assets disposal
                                                         162,594.11                                 603,734.58
(Loss is listed with “-”)

III. Operating profit (Loss is listed with
                                                -2,487,920,754.05                            -3,191,686,901.34
“-”)

         Add: Non-operating income                    88,322,895.53                              46,593,143.85

         Less: Non-operating expense                    2,658,018.62                                798,968.97

IV. Total profit (Loss is listed with “-”)    -2,402,255,877.14                            -3,145,892,726.46

         Less: Income tax expense                    -588,550,569.75                           -763,877,270.65

V. Net profit (Net loss is listed with
                                                -1,813,705,307.39                            -2,382,015,455.81
“-”)

   (i) Classify by business continuity

         1.continuous operating net profit      -1,813,705,307.39                            -2,382,015,455.81

                                               102
                                                             Shandong Airlines Co., Ltd. Annual Report 2021

(net loss listed with ‘-”)

     2.termination of net profit (net
loss listed with ‘-”)

  (ii) Classify by ownership

     1.Net profit attributable to
                                           -1,813,705,307.39                           -2,382,015,455.81
owner’s of parent company

     2.Minority shareholders’ gains
and losses

VI. Net after-tax of other
                                                -60,407,642.59                           -247,935,420.02
comprehensive income

  Net after-tax of other comprehensive
income attributable to owners of parent         -60,407,642.59                           -247,935,420.02
company

     (I) Other comprehensive income
items which will not be reclassified            -60,407,642.59                           -247,935,420.02
subsequently to profit of loss

              1.Changes of the defined
                                                                                            1,769,000.00
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
                                                -60,407,642.59                           -249,704,420.02
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


                                          103
                                                                                  Shandong Airlines Co., Ltd. Annual Report 2021

              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                                  -1,874,112,949.98                           -2,629,950,875.83

      Total comprehensive income
 attributable to owners of parent                                 -1,874,112,949.98                           -2,629,950,875.83
 Company

      Total comprehensive income
 attributable to minority shareholders

 VIII. Earnings per share:

      (i) Basic earnings per share                                            -4.53                                       -5.96

      (ii) Diluted earnings per share                                         -4.53                                       -5.96


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                                     2021                                        2020

 I. Operating income                                              12,469,239,340.59                           10,510,004,302.71

      Less: Operating cost                                        13,524,184,156.03                           12,555,099,599.57

            Taxes and surcharge                                      16,273,798.24                                 8,539,807.74

            Sales expenses                                          645,370,725.69                              611,539,386.64

            Administration expenses                                 404,404,768.11                              477,280,905.62

            R&D expenses                                             25,042,013.59                               22,866,289.98

            Financial expenses                                      480,707,287.41                              137,421,750.46

                Including: Interest
                                                                    230,831,883.77                                 5,554,390.21
 expenses



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                                                                   Shandong Airlines Co., Ltd. Annual Report 2021

                               Interest
                                                      45,641,728.82                                       0.60
income

         Add: Other income                           160,031,682.63                             100,419,883.27

              Investment income (Loss is
                                                        -568,877.88                               3,190,496.20
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 “-”)

              Net exposure hedging
income (Loss is listed with “-”)

              Changing income of fair
                                                         784,407.36                                -736,690.92
value (Loss is listed with “-”)

              Loss of credit impairment
                                                      -16,154,979.96                              3,472,930.02
(Loss is listed with “-”)

              Losses of devaluation of
asset (Loss is listed with “-”)

              Income on disposal of
                                                         162,594.11                                 603,734.58
assets (Loss is listed with “-”)

II. Operating profit (Loss is listed
                                                -2,482,488,582.22                            -3,195,793,084.15
with “-”)

         Add: Non-operating income                    88,174,781.11                              46,368,092.53

         Less: Non-operating expense                    2,653,546.07                                800,154.63

III. Total Profit (Loss is listed with
                                                -2,396,967,347.18                            -3,150,225,146.25
“-”)

         Less: Income tax                            -588,057,088.36                           -765,353,953.03

IV. Net profit (Net loss is listed with
                                                -1,808,910,258.82                            -2,384,871,193.22
“-”)

(i) continuous operating net profit
                                                -1,808,910,258.82                            -2,384,871,193.22
(net loss listed with ‘-”)

         (ii) termination of net profit (net
loss listed with ‘-”)

V. Net after-tax of other
                                                      -60,407,642.59                           -247,935,420.02
comprehensive income

(i) Other comprehensive income
                                                      -60,407,642.59                           -247,935,420.02
items which will not be reclassified

                                               105
                                                                      Shandong Airlines Co., Ltd. Annual Report 2021

 subsequently to profit of loss

              1.Changes of the defined
                                                                                                     1,769,000.00
 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
                                                         -60,407,642.59                           -249,704,420.02
 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

              5.Cash flow hedging
 reserve

              6.Translation differences
 arising on translation of foreign
 currency financial statements

              7.Other

 VI. Total comprehensive income                     -1,869,317,901.41                           -2,632,806,613.24

 VII. Earnings per share:

      (i) Basic earnings per share

      (ii) Diluted earnings per share


Legal Representative: Sun Xiujiang


Person in charge of Accounting Works: Xu Guojian




                                                   106
                                                                                  Shandong Airlines Co., Ltd. Annual Report 2021

Person in charge of Accounting Institution: Zhou Shoubin


5. Consolidated Cash Flow Statement

                                                                                                                         In RMB

                   Item                                    2021                                        2020

 I. Cash flows arising from operating
 activities:

        Cash received from selling
 commodities and providing labor                                  13,597,307,085.68                           11,042,083,759.34
 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                                   15,592,880.52                               59,006,545.25

        Other cash received concerning
                                                                    281,275,702.01                              238,727,574.04
 operating activities

 Subtotal of cash inflow arising from
                                                                  13,894,175,668.21                           11,339,817,878.63
 operating activities

        Cash paid for purchasing
 commodities and receiving labor                                   8,594,911,906.26                            9,575,117,855.40
 service

        Net increase of customer loans


                                                             107
                                                             Shandong Airlines Co., Ltd. Annual Report 2021

and advances

       Net increase of deposits in
central bank and interbank

       Cash paid for original insurance
contract compensation

       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
                                            3,167,172,577.54                            2,965,393,711.37
workers

       Taxes paid                               207,751,817.71                            201,842,884.10

       Other cash paid concerning
                                                367,017,548.88                            297,192,188.56
operating activities

Subtotal of cash outflow arising from
                                           12,336,853,850.39                           13,039,546,639.43
operating activities

Net cash flows arising from operating
                                            1,557,321,817.82                           -1,699,728,760.80
activities

II. Cash flows arising from investing
activities:

       Cash received from recovering
investment

       Cash received from investment
                                                   208,728.00                               4,019,690.59
income

       Net cash received from disposal
of fixed, intangible and other                   68,366,199.75                              5,464,475.89
long-term assets

       Net cash received from disposal
of subsidiaries and other units

       Other cash received concerning
investing activities

Subtotal of cash inflow from
                                                 68,574,927.75                              9,484,166.48
investing activities

       Cash paid for purchasing fixed,
                                            2,068,296,938.33                              660,563,018.81
intangible and other long-term assets

       Cash paid for investment

       Net increase of mortgaged loans



                                          108
                                                            Shandong Airlines Co., Ltd. Annual Report 2021

     Net cash received from
subsidiaries and other units obtained

     Other cash paid concerning
                                                  777,605.88                                 829,194.39
investing activities

Subtotal of cash outflow from
                                           2,069,074,544.21                              661,392,213.20
investing activities

Net cash flows arising from investing
                                          -2,000,499,616.46                             -651,908,046.72
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              4,100,000,000.00                            9,950,000,000.00

     Other cash received concerning
                                                                                       2,000,000,000.00
financing activities

     Cash received from issuing
bonds

Subtotal of cash inflow from
                                           4,100,000,000.00                           11,950,000,000.00
financing activities

     Cash paid for debt repayment          2,110,292,372.25                            4,376,851,929.66

     Cash paid for distribution of
dividends, profits or repayment of             319,544,830.00                            152,212,442.26
interest

     Including: Dividend and profit
of minority shareholder paid by
subsidiaries

     Other cash paid in connection
                                           2,725,684,347.70                              360,556,413.20
with financing activities

Subtotal of cash outflow from
                                           5,155,521,549.95                            4,889,620,785.12
financing activities

Net cash flows arising from financing
                                          -1,055,521,549.95                            7,060,379,214.88
activities

IV. Influence on cash and cash
equivalents due to fluctuation in                 -334,663.59                             -1,129,021.99
exchange rate

V. Net increase of cash and cash          -1,499,034,012.18                            4,707,613,385.37


                                         109
                                                                                  Shandong Airlines Co., Ltd. Annual Report 2021

 equivalents

      Add: Balance of cash and cash
                                                                   5,306,474,451.06                             598,861,065.69
 equivalents at the period -begin

 VI. Balance of cash and cash
                                                                   3,807,440,438.88                            5,306,474,451.06
 equivalents at the period -end


Legal Representative: Sun Xiujiang


Person in charge of Accounting Works: Xu Guojian


Person in charge of Accounting Institution: Zhou Shoubin


6. Cash Flow Statement of Parent Company

                                                                                                                         In RMB

                   Item                                    2021                                        2020

 I. Cash flows arising from operating
 activities:

      Cash received from selling
 commodities and providing labor                                  13,535,433,001.45                           11,009,882,324.49
 services

      Write-back of tax received                                     15,592,880.52                               59,006,545.25

      Other cash received in
                                                                    285,000,578.38                              248,160,175.85
 connection with operating activities

 Subtotal of cash inflow arising from
                                                                  13,836,026,460.35                           11,317,049,045.59
 operating activities

      Cash paid for purchasing
 commodities and receiving labor                                   8,619,388,427.50                            9,605,312,325.28
 service

      Cash paid to/for staff and
                                                                   3,118,574,378.18                            2,920,147,365.43
 workers

      Taxes paid                                                    200,653,861.40                              194,509,236.96

      Other cash paid in connection
                                                                    364,919,237.63                              269,257,710.91
 with operating activities

 Subtotal of cash outflow arising from
                                                                  12,303,535,904.71                           12,989,226,638.58
 operating activities

 Net cash flows arising from operating
                                                                   1,532,490,555.64                           -1,672,177,592.99
 activities

 II. Cash flows arising from investing
 activities:


                                                             110
                                                            Shandong Airlines Co., Ltd. Annual Report 2021

     Cash received from recovering
investment

     Cash received from investment
                                                  208,728.00                               4,019,690.59
income

     Net cash received from disposal
of fixed assets, intangible assets and          68,365,703.35                              5,453,274.22
other long-term assets

     Net cash received from disposal
of subsidiaries and other units

     Other cash received concerning
investing activities

Subtotal of cash inflow from
                                                68,574,431.35                              9,472,964.81
investing activities

     Cash paid for purchasing fixed
assets, intangible assets and other        2,051,271,197.61                              656,948,896.00
long-term assets

     Cash paid for investment

     Net cash received from
subsidiaries and other units obtained

     Other cash paid in connection
                                                  777,605.88                                 829,194.39
with investment activities

Subtotal of cash outflow from
                                           2,052,048,803.49                              657,778,090.39
investing activities

Net cash flows arising from
                                          -1,983,474,372.14                             -648,305,125.58
investment activities

III. Cash flows arising from financing
activities:

     Cash received from absorbing
investment

     Cash received from loans              4,100,000,000.00                            9,950,000,000.00

     Other cash received concerning
                                                                                       2,000,000,000.00
financing activities

     Cash received from issuing
bonds

Subtotal of cash inflow from
                                           4,100,000,000.00                           11,950,000,000.00
financing activities

     Cash paid for debt repayment          2,110,292,372.25                            4,376,851,929.66

     Cash paid for distribution of
                                               319,544,830.00                            152,212,442.26
dividends, profits or repayment of

                                         111
                                                                                               Shandong Airlines Co., Ltd. Annual Report 2021

 interest

      Other cash paid in connection
                                                                         2,725,684,347.70                                      360,556,413.20
 with financing activities

 Subtotal of cash outflow from
                                                                         5,155,521,549.95                                  4,889,620,785.12
 financing activities

 Net cash flows arising from financing
                                                                         -1,055,521,549.95                                 7,060,379,214.88
 activities

 IV. Influence on cash and cash
 equivalents due to fluctuation in                                                 -334,663.59                                  -1,129,021.99
 exchange rate

 V. Net increase of cash and cash
                                                                         -1,506,840,030.04                                 4,738,767,474.32
 equivalents

      Add: Balance of cash and cash
                                                                         5,302,302,306.13                                      563,534,831.81
 equivalents at the period -begin

 VI. Balance of cash and cash
                                                                         3,795,462,276.09                                  5,302,302,306.13
 equivalents at the period -end


Legal Representative: Sun Xiujiang


Person in charge of Accounting Works: Xu Guojian


Person in charge of Accounting Institution: Zhou Shoubin


7. Statement of Changes in Owners’ Equity (Consolidated)

Current Amount
                                                                                                                                         In RMB

                                                                                2021

                                              Owners’ equity attributable to the parent Company
                                   Other
                                   equity
                               instrument                        Othe
                                                          Less                                                                           Tota
                                                                   r                             Prov
                                    Per                    :                 Reas                                                Min       l
      Item         Sha                            Capi           com                   Surp      ision   Reta
                                    pet                   Inve               onab                                                ority   own
                    re       Pre                   tal           preh                   lus       of     ined    Othe   Subt
                                    ual                   ntor                le                                                 inter    ers’
                   cap       fer                  reser          ensi                  reser     gene    profi    r     otal
                                    cap     Ot             y                 reser                                               ests    equit
                   ital      red                   ve             ve                    ve        ral      t
                                    ital    her           shar                ve                                                           y
                             sto                                 inco                            risk
                                    sec                    es
                             ck                                   me
                                    urit
                                    ies

 I. The ending     400                            75,4            322,                 538,              1,23           2,57             2,57

                                                                       112
                                              Shandong Airlines Co., Ltd. Annual Report 2021

balance of the    ,00   10,3   552,    773,            3,52           0,26           0,26
previous year     0,0   63.7   319.    444.            4,79           0,92           0,92
                  00.     0     90      97             5.64           4.21           4.21
                   00

                                                       -1,6           -1,6           -1,6
Add: Changes                                           13,8           13,8           13,8
of accounting                                          12,6           12,6           12,6
policy                                                 13.9           13.9           13.9
                                                          2              2              2

Error
correction of
the last period

Enterprise
combine
under the
same control

Other

                  400
II. The                 75,4   322,    538,           -380            956,           956,
                  ,00
beginning               10,3   552,    773,           ,287,           448,           448,
                  0,0
balance of the          63.7   319.    444.            818.           310.           310.
                  00.
current year              0     90      97              28              29             29
                   00

III. Increase/
                                                       -1,8           -1,8           -1,8
Decrease in                    -42,
                                                       31,2           74,1           74,1
the period                     881,
                                                       30,9           12,9           12,9
(Decrease is                   982.
                                                       67.4           49.9           49.9
listed with                     52
                                                          6              8              8
“-”)

                                                       -1,8           -1,8           -1,8
                               -60,
(i) Total                                              13,7           74,1           74,1
                               407,
comprehensiv                                           05,3           12,9           12,9
                               642.
e income                                               07.3           49.9           49.9
                                59
                                                          9              8              8

(ii) Owners’
devoted and
decreased
capital

1.Common
shares
invested by
shareholders



                                 113
                         Shandong Airlines Co., Ltd. Annual Report 2021

2. Capital
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
                 17,5             -17,
forward
                 25,6             525,
internal
                 60.0             660.
owners’
                   7               07
equity

1. Capital
reserves
conversed to
capital (share
capital)

2. Surplus
reserves
conversed to
capital (share
capital)


                   114
                                                                                                    Shandong Airlines Co., Ltd. Annual Report 2021

 3. Remedying
 loss with
 surplus
 reserve

 4. Carry-over
                                                                  17,5                                        -17,
 retained
                                                                  25,6                                        525,
 earnings from
                                                                  60.0                                        660.
 the defined
                                                                        7                                         07
 benefit plans

 5. Carry-over
 retained
 earnings from
 other
 comprehensiv
 e income

 6. Other

 (v)
 Reasonable
 reserve

 1. Withdrawal
 in the report
 period

 2. Usage in
 the report
 period

 (vi) Others

                  400                                                                                         -2,2
                                                75,4              279,                    538,                                  -917             -917
 IV. Balance at    ,00                                                                                        11,5
                                                10,3              670,                    773,                                  ,664,            ,664,
 the end of the    0,0                                                                                        18,7
                                                63.7              337.                    444.                                  639.              639.
 period            00.                                                                                        85.7
                                                      0               38                       97                                 69                69
                    00                                                                                              4

Amount of the previous period
                                                                                                                                                 In RMB

                                                                                   2020

                                           Owners’ equity attributable to the parent Company
                                                                                                                                                 Total
                                Other                     Less   Othe       Reas                    Prov                                Mino
                  Sha                          Capi                                   Surp                  Reta                                 owne
       Item                     equity                                      onab                                                         rity
                                                           :      r                                 ision
                  re                            tal                                       lus               ined        Othe   Subt               rs’
                              instrument                                      le                                                        intere
                                                          Inve   com                                 of
                  cap                          reser                                  reser                 profi        r     otal              equit
                         Pr      Pe      Oth              ntor   preh       reser                   gene                                 sts
                  ital                          ve                                        ve                  t                                   y
                         efe     rpe     er                y     ensi         ve                     ral



                                                                        115
                                                                    Shandong Airlines Co., Ltd. Annual Report 2021

                       rre   tua          shar    ve                risk
                       d      l            es    inco
                       sto   ca                  me
                       ck    pit
                             al
                             sec
                             uri
                             tie
                              s

                 400
I. The ending                      75,4          570,        538,          3,58           5,17            5,173
                 ,00
balance of                         10,3          487,        773,          8,84           3,51            ,519,
                 0,0
the previous                       63.7          739.        444.          7,45           9,00            005.5
                 00.
year                                 0             92         97           6.98           5.57                7
                  00

Add:                                                                       26,6           26,6
                                                                                                          26,69
Changes of                                                                 92,7           92,7
                                                                                                          2,794
accounting                                                                 94.4           94.4
                                                                                                            .47
policy                                                                        7              7

Error
correction of
the last
period

Enterprise
combine
under the
same control

Other

II. The          400
                                   75,4          570,        538,          3,61           5,20            5,200
beginning        ,00
                                   10,3          487,        773,          5,54           0,21             ,211,
balance of       0,0
                                   63.7          739.        444.          0,25           1,80            800.0
the current      00.
                                     0             92         97           1.45           0.04                4
year              00

III. Increase/
                                                                            -2,3           -2,6
Decrease in                                      -247                                                     -2,62
                                                                           82,0           29,9
the period                                       ,935,                                                    9,950
                                                                           15,4           50,8
(Decrease is                                     420.                                                     ,875.
                                                                           55.8           75.8
listed with                                        02                                                        83
                                                                              1              3
“-”)

                                                 -247                       -2,3           -2,6           -2,62
(i) Total
                                                 ,935,                     82,0           29,9            9,950
comprehensi
                                                 420.                      15,4           50,8            ,875.
ve income
                                                   02                      55.8           75.8               83


                                                       116
                      Shandong Airlines Co., Ltd. Annual Report 2021

                                1              3

(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

(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


                117
                       Shandong Airlines Co., Ltd. Annual Report 2021

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


                 118
                                                                                        Shandong Airlines Co., Ltd. Annual Report 2021

                   400
                                             75,4              322,            538,              1,23              2,57         2,570
 IV. Balance       ,00
                                             10,3              552,            773,              3,52              0,26          ,260,
 at the end of     0,0
                                             63.7              319.            444.              4,79              0,92         924.2
 the period        00.
                                               0                90                 97            5.64              4.21                 1
                    00


Legal Representative: Sun Xiujiang


Person in charge of Accounting Works: Xu Guojian


Person in charge of Accounting Institution: Zhou Shoubin


8. Statement of Changes in Owners’ Equity (Parent Company)

Current Amount
                                                                                                                                In RMB

                                                                            2021
                                     Other
                              equity instrument                              Other
                                     Perp           Capita        Less:     compr       Reaso    Surplu      Retai
                    Share                                                                                                      Total
      Item                           etual            l          Invent     ehensi      nable       s        ned
                    capit   Prefe                                                                                     Other   owners’
                                     capit   Othe   reserv            ory     ve        reserv    reserv     profi
                     al     rred                                                                                               equity
                                      al       r      e          shares     incom         e         e          t
                            stock
                                     secur                                     e
                                     ities

                                                                                                             1,15
 I. The ending      400,0                           86,911                  322,55               538,11
                                                                                                             9,33             2,506,90
 balance of the     00,00                           ,168.7                   2,319.               2,740.
                                                                                                             0,75             6,981.08
 previous year       0.00                                  1                       90                   44
                                                                                                             2.03

                                                                                                             -1,61
 Add: Changes                                                                                                                 -1,613,8
                                                                                                             3,81
 of accounting                                                                                                                12,613.9
                                                                                                             2,61
 policy                                                                                                                                 2
                                                                                                             3.92

 Error
 correction of
 the last period

 Other

 II. The                                                                                                     -454,
                    400,0                           86,911                  322,55               538,11
 beginning                                                                                                   481,             893,094,
                    00,00                           ,168.7                   2,319.               2,740.
 balance of the                                                                                              861.              367.16
                     0.00                                  1                       90                   44
 current year                                                                                                  89



                                                                  119
                                    Shandong Airlines Co., Ltd. Annual Report 2021

III. Increase/
                                                      -1,82
Decrease in                -42,88                                      -1,869,3
                                                       6,43
the period                 1,982.                                      17,901.4
                                                       5,91
(Decrease is                  52                                              1
                                                       8.89
listed with “-”)

                                                      -1,80
(i) Total                  -60,40                                      -1,869,3
                                                       8,91
comprehensive              7,642.                                      17,901.4
                                                       0,25
income                        59                                              1
                                                       8.82

(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

(iii) Profit
distribution

1. Withdrawal
of surplus
reserves

2. Distribution
for owners (or
shareholders)

3. Other

(iv) Carrying              17,525                     -17,5
forward                    ,660.0                      25,6
internal                       7                       60.0


                     120
                                                        Shandong Airlines Co., Ltd. Annual Report 2021

 owners’ equity                                                             7

 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
                                                                          -17,5
 retained                                      17,525
                                                                           25,6
 earnings from                                 ,660.0
                                                                           60.0
 the defined                                       7
                                                                             7
 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

                                                                          -2,28
 IV. Balance at    400,0        86,911         279,67           538,11
                                                                           0,91            -976,223
 the end of the    00,00        ,168.7         0,337.            2,740.
                                                                           7,78             ,534.25
 period             0.00            1             38                44
                                                                           0.78

Amount of the previous period
                                                                                              In RMB



                                         121
                                                                                  Shandong Airlines Co., Ltd. Annual Report 2021

                                                                      2020
                                Other
                          equity instrument
                                                                    Other
                                Perp
                 Shar                          Capit      Less:     compr              Surpl
                         Pref   etual                                        Reason                                   Total
         Item     e                              al       Invent    ehensi              us      Retaine
                         erre   capit                                         able                         Other     owners’
                 capit                  Othe   reserv      ory       ve                reserv   d profit
                          d      al                                          reserve                                  equity
                  al                     r       e        shares    incom                e
                         stoc   secu
                                                                      e
                          k     ritie
                                  s

                 400,
I. The ending                                  86,91                570,4              538,1    3,517,5
                 000,                                                                                               5,113,020
balance of the                                 1,168.               87,73              12,74    09,150.
                 000.                                                                                                 ,799.85
previous year                                        71              9.92               0.44         78
                   00

Add:
Changes of                                                                                      26,692,              26,692,7
accounting                                                                                      794.47                  94.47
policy

Error
correction of
the last
period

Other

II. The          400,
                                               86,91                570,4              538,1    3,544,2
beginning        000,                                                                                                5,139,71
                                               1,168.               87,73              12,74    01,945.
balance of the   000.                                                                                                3,594.32
                                                     71              9.92               0.44         25
current year       00

III. Increase/
Decrease in
                                                                    -247,9                      -2,384,
the period                                                                                                          -2,632,80
                                                                    35,42                       871,19
(Decrease is                                                                                                         6,613.24
                                                                     0.02                          3.22
listed with
“-”)

(i) Total                                                           -247,9                      -2,384,
                                                                                                                    -2,632,80
comprehensiv                                                        35,42                       871,19
                                                                                                                     6,613.24
e income                                                             0.02                          3.22

(ii) Owners’
devoted and
decreased
capital

1.Common


                                                              122
                       Shandong Airlines Co., Ltd. Annual Report 2021

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

(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


                 123
                                                                         Shandong Airlines Co., Ltd. Annual Report 2021

 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
 period

 2. Usage in
 the report
 period

 (vi) Others

                  400,
 IV. Balance at                                    86,91         322,5        538,1    1,159,3
                  000,                                                                                      2,506,90
 the end of the                                  1,168.          52,31        12,74    30,752.
                  000.                                                                                      6,981.08
 period                                              71           9.90         0.44        03
                    00


Legal Representative: Sun Xiujiang


Person in charge of Accounting Works: Xu Guojian


Person in charge of Accounting Institution: Zhou Shoubin




                                                           124
                                                                                   Shandong Airlines Co., Ltd. Annual Report 2021




                                           Shandong Airlines Co., Ltd.
                                      Notes to the Financial Statements
                                  for the Year Ended December 31, 2021
                                  (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 the

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 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


                                                                125
                                                                                    Shandong Airlines Co., Ltd. Annual Report 2021

(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).

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 29, 2022.

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

                                                                126
                                                                                        Shandong Airlines Co., Ltd. Annual Report 2021

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 financial 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

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 December 31, 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.




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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 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:

①It 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;

②If, 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

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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

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

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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 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.

③Eliminate 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



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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.

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



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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 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’ 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-term equity investment is determined according

to the share of carrying amount of the acquiree’ net assets in the ultimate controlling entity’ 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.


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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 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-term equity investment is determined according

to the carrying amount of the original long-term 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.

④ Disposal of investment in subsidiaries with a loss of control

A. Disposal through one transaction


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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-term 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 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.


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(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.

3.7.1 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 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.

3.7.2 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


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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

3.9.1 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).

3.9.2 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 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.

3.9.3 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

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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 reclassified into

current profit or loss according to the proportion disposed.

3.10 Financial Instruments

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.

3.10.1 Recognition and derecognition of financial instrument

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.

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 instruments 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 frame

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.

3.10.2 Classification and measurement 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.




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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

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.

3.10.3 Classification and measurement of financial liabilities


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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.

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 cumulative

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 may 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 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

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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).

3.10.4 Derivatives and embedded 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 and 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.

3.10.5 Impairment of financial instrument

The Company shall recognise a loss allowance based on expected credit losses on a 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 (i.e. all cash shortfalls), discounted at the original


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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 (i.e., impairment loss not been deducted). For financial

instrument 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-term 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


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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:


                                  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 from
       Amounts due from related parties
                                                                                                related parties.

                                                                      The receivables are business operating receivables which are
       Other receivables
                                                                                   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 daily
       Amounts due from related parties
                                                                                               activities.


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                              Item                                            Determine basis of the combination

       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.

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 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



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otherwise have an effect on the probability of a default occurring; and

E. Significant change that are expected to reduce the borrower’s economic incentive to make scheduled contractual payments ; 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 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

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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 of 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.

Recovery of financial asset written off shall be recognised in profit or loss as reversal of impairment loss.


3.10.6 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 through other

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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 transferred 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 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 derecognized;


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.


3.10.7 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:


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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.


3.10.8 Determination of fair value of financial instruments


Determination of financial assets and financial liabilities please refer to Note 3.11


3.11 Fair Value Measurement


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 which 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 financial 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


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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

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 assumptions 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



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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 and 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. 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


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




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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;


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 capped 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


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influence.


3.15.1 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 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.


3.15.2 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 involving enterprises under common control, if the Company issues equity securities as the

consideration for the business combination, the share of carrying amount of the owners’ equity of the acquiree in the consolidated



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financial statements of the ultimate controlling party is recognised as the initial cost of the long-term 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.


②Long-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.


3.15.3 Subsequent measurement and recognition of profit or loss


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



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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 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 recognised 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,


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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.


3.15.4 Impairment test method and provision for impairment


For investments in subsidiaries, associates and joint ventures, see Note 3.21 for the method of recognizing asset impairment.


3.16 Investment properties


3.16.1 Categories of investment properties


Investment property is property held to earn rentals or for capital appreciation or both. Investment properties mainly include:


①Land use right leased out


②Land held for transfer upon appreciation


③Buildings leased out.


3.16.2 The measurement model of investment properties


The Company adopts cost model for subsequent measurement of investment properties. For provision for impairment please refer to

Note 3.21.


The Company calculates the depreciation or amortization based on the net amount of investment property cost less the accumulated

impairment and the net residual value using straight-line method. The estimated useful life and annual depreciation rates which are

determined according to the categories, estimated economic useful lives and estimated net residual rates are listed as followings:

                                                Estimated useful life                                  Annual depreciation rates
                      Category                                                Residual rates (%)
                                                        (Year)                                                    (%)

     Buildings and constructions                                   20-33                        5.00                    2.88-4.75

     Land use right                                   Legal life                                0.00              N/a


3.17 Fixed 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.




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(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;


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

                                             Depreciation                 (Year)/              Residual        Annual depreciation
                  Category
                                                method            Estimated flight hours       rates (%)         rates/KHrs (%)

                                                                          (KHrs)

                                             Straight-line
      Buildings and constructions                                                   20-33              5.00                 2.88-4.75
                                                method

      Aircraft engine core parts and         Straight-line
                                                                                    15-20          0.00-5.00                4.75-6.67
      engine auxiliary power unit               method

      Engine replacement parts            Units-of-productio                        17-23              0.00                 4.35-5.88

      (KHrs)                                   n method

                                             Straight-line
      High-priced revolving parts                                                    3-15              0.00                6.67-33.33
                                                method

      Transportation equipment and           Straight-line
                                                                                     4-20              5.00                4.75-23.75
      others                                    method


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



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fixed assets. Estimated useful life of the fixed assets shall be adjusted if it is changed compared to the original estimation.


3.18 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.


3.19 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.


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 measurement of capitalized amounts of borrowing costs


When funds are borrowed specifically for purchase, construction or manufacturing of assets eligible for capitalization, the Company


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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.


3.20 Intangible Assets


3.20.1 Measurement method of intangible assets


Intangible assets are recognised at actual cost at acquisition.


3.20.2 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 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


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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 development 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 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.


3.21 Impairment of Long-Term Assets


Impairment loss of fixed assets, constructions in progress, Intangible assets with finite useful lives, investment properties



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subsequently measured at cost, right-of-use assets, long-term equity investment in subsidiaries, associates and joint ventures,

goodwill, etc. 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 Company 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 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.


3.22 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


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period of benefit of the expense items.


3.23 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 employee 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 into current profit or loss or related

capital expenditure. Employee welfare shall be measured at fair value as it is a non-monetary benefits.


③Social 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


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                                                                                          Shandong Airlines Co., Ltd. Annual Report 2021


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.


(2)   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 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 term 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).



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                                                                                           Shandong Airlines Co., Ltd. Annual Report 2021


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 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:


①When 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.

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(4)   Other long-term employee 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-term employee benefits.


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.


3.24 Estimated liabilities


3.24.1 Recognition criteria for contingent liabilities


Estimated liabilities are recognized by the Company if obligations related to contingencies if all following criteria are met:


① That obligation is a current obligation of the Company; and


② The settle of that obligation is probable to result in an outflow of economic benefits from the Company; and


③ The amount of that obligation can be estimated reliably.


3.24.2 Measurement method of estimated liabilities


The estimated liabilities of the Company are initially measured at the best estimate of expenses required for the performance of

relevant present obligations. The Company, when determining the best estimate, has had a comprehensive consideration of risks with

respect to contingencies, uncertainties and the time value of money. The carrying amount of the estimated liabilities shall be

reviewed at the end of every reporting period. If conclusive evidences indicate that the carrying amount fails to be the best estimate

of the estimated liabilities, the carrying amount shall be adjusted based on the updated best estimate.


3.25 Revenue


3.25.1 General principle


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                                                                                      Shandong Airlines Co., Ltd. Annual Report 2021


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 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


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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, i.e.. the client is presently obliged to pay for an asset;


II. the legal title to the asset has been transferred to the client, i.e.. the client has the legal title to the asset;


III. the entity has transferred physical possession of the asset to the client, i.e.. the client has physical possession of the asset;


IV. the entity has transferred substantially significant risks and rewards of ownership of the asset, i.e.. 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, 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.


3.25.2 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 in


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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.


3.26 Government Grants


(1) Recognition of government 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


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 government 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



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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’ 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


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.


3.27 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



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                                                                                         Shandong Airlines Co., Ltd. Annual Report 2021


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.


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 sufficient 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:




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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 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. Unused 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.


B. Unused 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.

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                                                                                       Shandong Airlines Co., Ltd. Annual Report 2021


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.


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.


3.28 Leases


Adopted from January 1, 2021


3.28.1 Identifying a lease


At inception of a contract, the Company shall assess whether the contract is, or contains, a lease. A contract is, or contains, a lease if

the contract conveys the right to control the use of one or more identified assets for a period of time in exchange for consideration. To

assess whether a contract conveys the right to control the use of an identified asset for a period of time, the Company shall assess

whether, throughout the period of use, the customer has the right to obtain substantially all of the economic benefits from use of the

identified asset and to direct the use of the identified asset.


3.28.2 Identifying a separate lease component


When a contract includes more than one separate lease components, the Company shall separate components of the contract and

account for each lease component separately. The right to use an underlying asset is a separate lease component if both conditions

have been satisfied: ①the lessee can benefit from use of the underlying asset either on its own or together with other resources that

are readily available to the lessee; ②the underlying asset is neither highly dependent on, nor highly interrelated with, the other

underlying assets in the contract.


3.28.3 The Company as a lessee



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At the commencement date, the Company identifies the lease that has a lease term of 12 months or less and does not contain a

purchase option as a short-term lease. A lease qualifies as a lease of a low-value asset if the nature of the asset is such that, when new,

the asset is typically of low value. If the Company subleases an asset, or expects to sublease an asset, the head lease does not qualify

as a lease of a low-value asset.


For all asset included in short-term leases or leases for which the underlying asset is of low value/ all the short-term leases or leases

for which the underlying asset is of low value, the Company shall recognise the lease payments associated with those leases as cost

of relevant asset or expenses in current profit or loss on a straight-line basis over the lease term.


Except for the election of simple treatment as short-term lease or lease of a low-value asset as mentioned above, at the

commencement date, the Company shall recognise a right-of-use asset and a lease liability.


① Right-of-use assets


A right-of-use asset represents the right of the Company to use an asset over the life of a lease.


At the commencement date, the Company shall initially measure the right-of-use asset at cost. The cost of the right-of-use asset shall

comprise:


(a) the amount of the initial measurement of the lease liability;


(b) any lease payments made at or before the commencement date, less any lease incentives received;


(c) any initial direct costs incurred by the lessee; and


(d) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it

     is located or restoring the underlying asset to the condition required by the terms and conditions of the lease. The Company

     recognises and measures the cost in accordance with the recognition criteria and measurement method for estimated liabilities,

     details please refer to Notes 3.24. Those costs incurred to produce inventories shall be included in the cost of inventories.


The right-of-use asset shall be depreciated according to the categories using straight‐line method or units of production method. If it

is reasonably certain that the ownership of the underlying asset shall be transferred to the lessee by the end of the lease term, the

depreciation rate shall be determined based on the classification of the right-of- use asset and estimated residual value rate from the

commencement date to the end of the useful life of the underlying asset. Otherwise, the depreciation rate shall be determined based

on the classification of the right-of-use asset from the commencement date to the earlier of the end of the useful life of the

right-of-use asset or the end of the lease term.


The depreciation method, estimated useful life, residual rates and annual depreciation rates which are determined according to the

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categories of right-of-use asset are listed as followings:

                                                                     Estimated useful
                                                                                                                          Annual
                                                 Depreciation            life (Year)/               Residual
                    Category                                                                                            depreciation
                                                    method           Estimated flight               rates (%)
                                                                                                                       rates/KHrs (%)
                                                                      hours (KHrs)

                                                 Straight-line
     Buildings and constructions                                                        1-5                     0.00            20-100
                                                    method

     Aircraft engine core parts and              Straight-line
                                                                                    5-20                0.00-5.00               4.75-20
     engine auxiliary power unit                    method

                                              Units-of-productio
     Engine replacement parts                                                      17-23                        0.00          4.35-5.88
                                                   n method


②Lease liability


A lease liability shall be measured at the present value of the lease payments that are not paid at the commencement date. The lease

payments include the followings:


(a) Fixed payments and in-substance fixed payments, less any lease incentives if exist; and


(b) Variable lease payments that depend on an index or a rate; and


(c) The exercise price of a purchase option if the Company is reasonably certain to exercise that option; and


(d) Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease; and


(e) Amounts expected to be payable by the lessee under residual value guarantees.


The Company uses the interest rate implicit in the lease to discount the lease payments. If that rate cannot be readily determined, the

Company uses the lessee’s incremental borrowing rate as discount rate.


The difference between the lease payment and its present value shall be recognized as unrecognised financial charges, calculated

bases on the discount rate of the present value of the lease payments in each period within the lease term and recorded as interest

expense in current profit or loss. Variable lease payments not included in the measurement of lease liabilities shall be recognised in

current profit or loss when incurred.


After the commencement date, the Company shall remeasure the lease liability based on the revised present value of the lease

payments and adjust the carrying amount of the right-of-use asset if there is a change in the in-substance fixed payments, or change

in the amounts expected to be payable under a residual value guarantee, or change in an index or a rate used to determine lease

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payments, or change in the assessment or exercising of an option to purchase the underlying asset, or an option to extend or terminate

the lease.


3.28.4 The Company as a lessor


At the commencement date, the Company shall classify a lease as a finance lease if it transfers substantially all the risks and rewards

incidental to ownership of an underlying asset, otherwise it shall be classified as an operating lease.


①Operating leases


The Company shall recognise lease payments from operating leases as income on a straight-line basis / units of production method

(or other systematic and rational basis) over the term of the relevant lease and the initial direct costs incurred in obtaining an

operating lease shall be capitalised and recognised as an expense over the lease term on the same basis as the lease income. The

Company shall recognise the variable lease payments relating to the operating lease but not included in the measurement of the lease

receivables into current profit or loss when incurred.


②Finance leases


At the commencement date, the Company shall recognise the lease receivables at an account equal to the net investment in the lease

(the sum of the present value of the unguaranteed residual values and the lease payment that are not received at the commencement

date discounted at the interest rate implicit in the lease) and derecognise the asset relating to the finance lease. The Company shall

recognise interest income using the interest rate implicit in the lease over the lease term.


The Company shall recognise the variable lease payments relating to the finance lease but not included in the measurement of the net

investment in the lease into current profit or loss when incurred.


3.28.5 Lease modifications


Where there is a modification on operating lease, the Company considers it to be a new lease from the effective date of the

modification, and the advances from customer and receivables related to lease payments before the modification shall be considered

as payments for new lease.


3.28.6 Sale and leaseback transactions


The Company shall determine whether the transfer of an asset under the sale and leaseback transaction is a sale of that asset

according to the policies in Note 3.25.


①The Company as a seller (lessee)




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If the transfer of the asset is not a sale, the Company shall continue to recognise the transferred asset and shall recognise a financial

liability equal to the transfer proceeds. It shall account for the financial liability according to Note 3.10. If the transfer of the asset is a

sale, the Company shall measure the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount

of the asset that relates to the right of use retained by the Company. Accordingly, the Company shall recognise only the amount of

any gain or loss that relates to the rights transferred to the buyer-lessor.


②The Company as a buyer (lessor)


If the transfer of the asset is not a sale, the Company shall not recognise the transferred asset and shall recognise a financial asset

equal to the transfer proceeds. It shall account for the financial asset according to Note 3.10. If the transfer of the asset is a sale, the

Company shall account for the purchase of the asset applying applicable Accounting Standards of Business Enterprises, and for the

lease applying the lessor accounting requirements.


The following accounting policies for operating leases and finance leases apply to the year 2020 or before


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.




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                                                                                        Shandong Airlines Co., Ltd. Annual Report 2021


Initial direct costs relating to lease transactions incurred by the Company shall be recognised into current profit or loss ; if the

amounts are material, they shall be capitalised 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


①When 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.


②When 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.


3.29 Routine maintenance and overhaul costs


According to the relevant lease agreement, the company needs to carry out regular maintenance work on certain aircraft held by the

company by lease, so as to ensure that the aircraft is returned to the agreed state. Except for the provision for lease termination

compensation reserve recognized in the initial measurement of the right-of-use assts on the commence date in Note 3.28.3, other

overhaul costs related to the lease termination shall be accrued during the lease term. The difference between the provision and actual

expense for overhaul shall be included in the current profits and losses in the overhaul period.


Eligible overhaul costs are capitalized as incurred and depreciated by the straight-line method or units-of-production method over a

reasonable period. Expenses for routine maintenance and repair shall be carried to the current profits and losses when incurred.


3.30 Changes in Significant Accounting Policies and Accounting Estimates


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                                                                                        Shandong Airlines Co., Ltd. Annual Report 2021


3.30.1 Changes in Significant Accounting Policies


The Ministry of Finance issued the revised Accounting Standards for Business Enterprises No. 21 -- Lease (Caikuai [2018] No. 35)

on December 7, 2018 (hereinafter referred to as the "new lease standards"), requiring domestic listed enterprises to implement the

new revenue standards from January 1, 2021.


According to the resolution of the Tenth Meeting of the Seventh Board of Directors on March 25, 2021, the Company will implement

the aforementioned new lease standards from January 1, 2021. Please see details in Note 3.28.


①     The Company as a lessee


The Company chooses to recognise the cumulative impact of initially applying this standard as an adjustment to the opening balance

of retained earnings and other related accounts of the financial statements at the date of initial application (January 1, 2021), not

restating comparative information:


A. For leases previously classified as finance leases, the carrying amount of the right-of-use asset and the lease liability at the date of

initial application shall be the carrying amount of the lease asset and finance lease payable immediately before that date measured

applying previous standard;


B. For leases previously classified as operating leases, the Company adopts the following method to measure the right-of-use asset:


I. For aircraft and engine lease, the Company measures that right-of-use asset at its carrying amount as if the standard had been

applied since the commencement date, but discounted using the lessee’s incremental borrowing rate at the date of initial application;


II. For lease other than aircraft and engine, the Company measures the right-of-use asset at an amount equal to the lease liability, with

necessary adjustments for lease prepayment.


C. At the first implementation date, the Company conducts impairment test on right-of-use assets and performs corresponding

accounting treatment in accordance with Note 3.21.


For operating leases that are classified as low value assets before the first implementation date, the Company adopts simplified

treatments, not recognising right-of-use assets and lease liabilities.


② The Company as a lessor


The Company does not make any adjustments on transition for leases in which it is a lessor and accounts for those leases applying

this Standard from the date of initial application .


③Sale and leaseback transactions


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                                                                                         Shandong Airlines Co., Ltd. Annual Report 2021


The Company does not reassess sale and leaseback transactions entered into before the date of initial application to determine

whether the transfer of the underlying asset satisfies the requirements in Note 3.25 to be accounted for as a sale. For sale and

leaseback transactions after the first implementation date, as a seller and a lessor, the Company assesses whether the transfer of assets

in sale and leaseback transactions is a sale in accordance with the revenue standards.


Please refer to Note 3.30.3 for the cumulative effect of the above accounting standards.


3.30.2 Significant changes in accounting estimates


The Company has no change in accounting estimates for the current period.


3.30.3 Adjustments of the Financial Statements at the Beginning of the Reporting Period for the First-Year Adoption of New

Lease Standards


                                            Consolidated Statement of Financial Position


                                                                                                            Unit: Yuan, Currency: CNY

                       Items                       December 31, 2020             January 1, 2021               Adjustment

     Current assets:

     Prepayments                                          213,530,865.28                  6,408,523.03           -207,122,342.25

                Total current assets                    6,426,900,695.69            6,219,778,353.44             -207,122,342.25

     Non-current assets:

     Fixed assets                                       6,904,082,012.35            5,313,062,985.24           -1,591,019,027.11

     Right-of-use assets                                                N/a        13,096,845,510.69           13,096,845,510.69

     Deferred tax assets                                1,999,099,488.87            2,537,037,026.88              537,937,538.01

              Total non-current assets                 15,976,604,438.30           28,020,368,459.89           12,043,764,021.59

                    Total assets                       22,403,505,133.99           34,240,146,813.33           11,836,641,679.34

     Current liabilities

     Accounts payable                                   2,543,319,300.31            2,137,248,727.24             -406,070,573.07

     Non-current liabilities due within one
                                                          321,577,566.89            2,804,980,819.75            2,483,403,252.86
     year

              Total current liabilities                 6,899,778,730.55            8,977,111,410.34            2,077,332,679.79

     Non-current liabilities:




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                                                                                        Shandong Airlines Co., Ltd. Annual Report 2021


                         Items                      December 31, 2020             January 1, 2021                Adjustment

     Lease liabilities                                                    N/a        11,218,614,628.36           11,218,614,628.36

     Long-term payables                                  5,303,354,015.63             4,464,861,000.74             -838,493,014.89

     Accrued liabilities                                                                993,000,000.00              993,000,000.00

            Total non-current liabilities               12,933,465,479.23            24,306,587,092.70           11,373,121,613.47

                   Total liabilities                    19,833,244,209.78            33,283,698,503.04           13,450,454,293.26

     Shareholders' equity

     Retained earnings                                    1,233,524,795.64             -380,287,818.28           -1,613,812,613.92

     Equity attributable to shareholders of
                                                         2,570,260,924.21               956,448,310.29           -1,613,812,613.92
     the parent

              Total owners’ equity                       2,570,260,924.21              956,448,310.29           -1,613,812,613.92

        Total liabilities and owners' equity            22,403,505,133.99            34,240,146,813.33           11,836,641,679.34


On January 1, 2021, for financial lease prior to the first implementation date, the Company reclassified the book value of fixed assets

of financial leases amounted to CNY 1,591,019,027.11 from fixed assets to right-of-use assets. Finance lease payable amounted to

CNY 1,048,235,448.82 were reclassified from long-term payable to lease liabilities. Finance lease payable under non-current

liabilities due within one year amounted to CNY 181,264,490.05 were reclassified to lease liabilities under non-current liabilities due

within one year.


On January 1, 2021, for operating lease prior to the first implementation date, for aircraft and engine lease, the Company measured

the right-of-use asset, lease liabilities, and estimated liabilities at their carrying amounts as if the standard had been applied since the

commencement date. The amount of right-of-use assets is CNY 11,484,632,839.77, the amount of lease liabilities and lease liabilities

under non-current liabilities due within one year is CNY 12,632,588,788.59, the amount of estimated liabilities is CNY

993,000,000.00, and prepayment amount decreases CNY 207,122,342.25. For lease of buildings and constructions, the Company

measures the right-of-use asset at an amount equal to the lease liability, which is CNY 21,193,643.81.


On January 1, 2021, payable of overhaul expense of operating lease of aircraft and engine under long-term payable and accounts

payable were written back, and payables of lease termination compensation of operating lease of aircraft and engine were recognised,

decreasing accounts payables by CNY 406,070,573.07 and increasing long-term payables by CNY 209,742,433.93.


On January 1, 2021, the deferred tax assets was adjusted for the book-tax difference in relation with new lease standards and accrued

expenses, the deferred tax assets was increased by CNY 537,937,538.01.



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                                                                                     Shandong Airlines Co., Ltd. Annual Report 2021


                                        Statement of Financial Position of the Parent Company


                                                                                                           Unit: Yuan Currency: CNY

                           Items                     December 31, 2020           January 1, 2021             Adjustment

     Current assets:

     Prepayments                                           213,297,372.67               6,175,030.42           -207,122,342.25

                 Total current assets                    6,422,809,764.28          6,215,687,422.03            -207,122,342.25

     Non-current assets:

     Fixed assets                                        6,812,145,764.90          5,221,126,737.79          -1,591,019,027.11

     Right-of-use assets                                                N/a       13,096,845,510.69          13,096,845,510.69

     Deferred tax assets                                 1,998,341,086.43          2,536,278,624.44             537,937,538.01

               Total non-current assets                 16,015,164,509.30         28,058,928,530.89          12,043,764,021.59

                       Total assets                     22,437,974,273.58         34,274,615,952.92          11,836,641,679.34

     Current liabilities

     Accounts payable                                    2,560,482,401.82           2,154,411,828.75           -406,070,573.07

     Non-current liabilities due within one year           321,577,566.89          2,804,980,819.75           2,483,403,252.86

               Total current liabilities                 6,998,514,668.16          9,075,847,347.95           2,077,332,679.79

     Non-current liabilities:

     Lease liabilities                                      N/a                   11,218,614,628.36          11,218,614,628.36

     Long-term payables                                  5,303,354,015.63          4,464,861,000.74            -838,493,014.89

     Accrued liabilities                                                             993,000,000.00             993,000,000.00

             Total non-current liabilities              12,932,552,624.34         24,305,674,237.81          11,373,121,613.47

                    Total liabilities                   19,931,067,292.50         33,381,521,585.76          13,450,454,293.26

     Shareholders' equity

     Retained earnings                                   1,159,330,752.03            -454,481,861.89         -1,613,812,613.92

                 Total owners' equity                    2,506,906,981.08            893,094,367.16          -1,613,812,613.92

         Total liabilities and owners' equity           22,437,974,273.58         34,274,615,952.92          11,836,641,679.34


On January 1, 2021, for financial lease prior to the first implementation date, the Company reclassified the book value of fixed assets

of financial leases amounted to CNY 1,591,019,027.11 from fixed assets to right-of-use assets. Finance lease payable amounted to


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                                                                                        Shandong Airlines Co., Ltd. Annual Report 2021


CNY 1,048,235,448.82 were reclassified from long-term payable to lease liabilities. Finance lease payable under non-current

liabilities due within one year amounted to CNY 181,264,490.05 were reclassified to lease liabilities under non-current liabilities due

within one year.


On January 1, 2021, for operating lease prior to the first implementation date, for aircraft and engine lease, the Company measured

the right-of-use asset, lease liabilities, and estimated liabilities at their carrying amounts as if the standard had been applied since the

commencement date. The amount of right-of-use assets is CNY 11,484,632,839.77, the amount of lease liabilities and lease liabilities

under non-current liabilities due within one year is CNY 12,632,588,788.59, the amount of accrued liabilities is CNY 993,000,000.00,

and prepayment amount decreases CNY 207,122,342.25. For lease of buildings and constructions, the Company measures the

right-of-use asset at an amount equal to the lease liability , which is CNY 21,193,643.81.


On January 1, 2021, payable of overhaul expense of operating lease of aircraft and engine under long-term payable and accounts

payable were written back, and payables of lease termination compensation of operating lease of aircraft and engine were recognised,

decreasing accounts payables by CNY 406,070,573.07 and increasing long-term payables by CNY 209,742,433.93.


On January 1, 2021, the deferred tax assets was adjusted for the book-tax difference in relation with new lease standards and accrued

expenses, the deferred tax assets was increased by CNY 537,937,538.01.


3.31 Correction of Prior Period Errors


There is no significant correction of prior period errors for the Company during the reporting period.


3.32 Significant Account Judgement 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 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.




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                                                                                       Shandong Airlines Co., Ltd. Annual Report 2021


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) Impairment of Financial Assets


The Company uses the expected credit loss model to assess the impairment of financial 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.


(2) 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.


(3) 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 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.


(4) 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 an asset is the higher of its fair value less cost of disposal and present value of the

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                                                                                       Shandong Airlines Co., Ltd. Annual Report 2021


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.


(5) 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 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.


(6) 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.


(7) 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




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                                                                                     Shandong Airlines Co., Ltd. Annual Report 2021


income tax and deferred income tax of the current period during the final determination.


(8) Overhaul Expenses and lease termination compensations for leased aircraft and engine


Aircraft overhaul expenses and lease termination compensations are accrued and charged to profit or loss during the lease period. The

calculation of the provision for overhaul expenses and lease termination compensations involves a number of variable factors and

assumptions, including the expected use of the aircraft and the estimated maintenance cost. These estimates are largely based on past

historical data about the same or similar types of aircraft and engines overhaul. The overhaul expenses and lease termination

compensations may be affected by different judgments and estimates and affect current profit or loss.




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)

                                      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
      Value added tax
                                        the sales of goods and taxable services income (including transportation and ground

                                                                         services revenue).

                                      Property tax is calculated by the nature of house property and is collected by ad valorem
      Property tax
                                                            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 fund shall be calculated using the collection standard of the

                                     relevant category of flight routes, maximum departure weight and flight distance adopted
      Civil aviation development
                                     by the civil aviation industry. According to “Interim measures for the administration of
      Fund
                                     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


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                                                                                      Shandong Airlines Co., Ltd. Annual Report 2021


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 December 31, 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 Ministry of Finance

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》). After the comprehensive “replacement of business tax with

VAT” in 2016, the relevant policies will continue to apply in accordance with the requirements of the Notice of the Ministry of

Finance and the State Administration of Taxation on Fully Implementing the Pilot Program of Replacing Business Tax with VAT”

(Cai Shui [2016] No. 36). (财税[2016]36 号《财政部、国家税务总局关于全面推开营业税改征增值税试点的通知》).


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) (国家税务总局[2012]12 号)and Announcement on

Continuing the Enterprise Income Tax Policy for the Great Western Development" (Announcement No. 23 [2020] of the Ministry of

Finance, the State Administration of Taxation, and the National Development and Reform Commission) (财政部、税务总局、国家

发展改革委公告 2020 年第 23 号《关于延续西部大开发企业所得税政策的公告》), 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 Announcement on Cancellation of Port Construction Fees and Adjustment of Civil Aviation Development

Fund Relevant Policies (《关于取消港口建设费和调整民航发展基金有关政策的公告》) (Ministry of Finance Announcement No.

8, 2021), from April 1, 2021, the civil aviation development funds shall be paid by the airlines followed by a further 20% reduction

based on the original 50% reduction in accordance with the Notice of the Ministry of Finance on Adjusting Some Government Funds

Relevant Policies (Cai Shui [2019] No. 46) (财税〔2019〕46 号《财政部关于调整部分政府性基金有关政策的通知》).

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                                                                                     Shandong Airlines Co., Ltd. Annual Report 2021




Note 5 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


For the following annotated items (including the annotated major items in the parent Company's financial statements), unless

otherwise indicated, "end of the previous period " refers to December 31, 2020 and "end of the period" refers to December 31, 2021;

"Current period" refers to the year 2021 and "Previous period" refers to the year 2020.


5.1   Monetary funds

                       Item                             December 31, 2021                       December 31, 2020

      Cash at hand:                                                        159,608.70                             225,522.11

      Bank deposit:                                                  3,810,943,072.46                       5,306,248,928.95

      Other monetary funds

                       Total                                         3,811,102,681.16                       5,306,474,451.06

      Including: the total amount of deposit
                                                                         1,109,732.99                            5,411,252.96
      abroad


As of the end of the period, CNY 3,662,242.28 of bank deposit of the Company is interest receivable on notice deposits.


5.2   Accounts receivable


5.2.1 Disclosure by Age

                        Age                             December 31, 2021                       December 31, 2020

      Within 1 year                                                    296,273,001.48                         283,442,317.86

      1 to 2 years                                                      26,836,339.62                          52,253,563.71

      2 to 3 years                                                      15,955,262.91                          34,123,063.16

      3 to 4 years                                                      32,120,000.00

      4 to 5 years

      Over 5 years                                                       3,186,437.70                            3,186,437.70

                      Subtotal                                         374,371,041.71                         373,005,382.43

      Less: provision for bad debt                                      34,257,978.60                          18,653,085.44

                       Total                                           340,113,063.11                         354,352,296.99




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                                                                                         Shandong Airlines Co., Ltd. Annual Report 2021




5.2.2 Disclosure by Category


① December 31, 2021

                                                                              December 31, 2021

                                                  Book balance                     Provision for bad debt
               Category
                                                             Proportion                            Provision       Carrying amount
                                           Amount                                   Amount
                                                                 (%)                                ratio (%)

     Accounts receivable subject

     to individual impairment               50,258,874.92          13.42           20,883,150.81        41.55          29,375,724.11

     assessment

     Accounts receivable subject

     to group impairment                   324,112,166.79          86.58           13,374,827.79            4.13     310,737,339.00

     assessment

                  Total                   374,371,041.71          100.00           34,257,978.60            9.15      340,113,063.11


(Continued)

                                                                              December 31, 2020

                                                  Book balance                     Provision for bad debt
               Category
                                                             Proportion                            Proportion      Carrying amount
                                          Amount                                   Amount
                                                                 (%)                                  (%)

     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


Detailed explanation of provision for bad debt:


② Accounts receivable subject to individual impairment assessment as of December 31, 2021

               Category                                                       December 31, 2021


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                                                                                   Shandong Airlines Co., Ltd. Annual Report 2021


                                                          Provision for bad
                                      Book balance                              Provision ratio (%)         Reason
                                                                 debt

                                                                                                        Impairment upon
       Debtor #1                         32,120,000.00        12,773,220.82                  39.77
                                                                                                      individual assessment

                                                                                                        Impairment upon
       Debtor #2                         15,372,966.87           5,344,021.94                34.76
                                                                                                      individual assessment

                                                                                                        Impairment upon
       Kun Peng Airlines Co., Ltd         1,849,400.00           1,849,400.00               100.00
                                                                                                      individual assessment

                                                                                                        Impairment upon
       CR Airways                           916,508.05            916,508.05                100.00
                                                                                                      individual assessment

                     Total               50,258,874.92        20,883,150.81                  41.55


③ Accounts receivable subject to group impairment assessment as of December 31, 2021

                                                                        December 31, 2021
                    Category
                                           Book balance                 Provision for bad debt         Provision ratio (%)

        Amounts due from the
                                                 16,263,740.96
        clearing center

        Amounts due from the
                                                 34,671,136.84
        aviation association

        Amounts due from related
                                                  5,680,733.40
        parties

        Other receivables                       267,496,555.59                      13,374,827.79                       5.00

                     Total                      324,112,166.79                      13,374,827.79                       4.13


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 December 31,

2020

                                                                        December 31, 2020

                  Entity name         Book balance        Provision for bad     Provision ratio (%)         Reason

                                                                 debt

                                                                                                        Impairment upon
       Kun Peng Airlines Co., Ltd         1,849,400.00           1,849,400.00               100.00
                                                                                                      individual assessment


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                                                                                         Shandong Airlines Co., Ltd. Annual Report 2021


                                                                            December 31, 2020

                  Entity name          Book balance         Provision for bad        Provision ratio (%)               Reason

                                                                     debt

                                                                                                                   Impairment upon
       CRAirways                            916,508.05                916,508.05                     100.00
                                                                                                              individual assessment

                     Total                 2,765,908.05          2,765,908.05                        100.00


⑤Accounts receivable with individually insignificant balance but provision for bad debt recognized individually as of December 31,

2020

                                                                             December 31, 2020
                  Entity name
                                            Book balance                    Provision for bad debt                 Book balance

        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.


5.2.3 Changes of Provision for Bad Debt During the Reporting Period

                                                                Changes during the reporting period
                                                                                                                       December 31,
                  Category         December 31, 2020                               Recovery or
                                                             Provision                                 Write-off           2021
                                                                                     reversal

        Accounts receivable

        subject to individual        2,765,908.05          18,117,242.76                                               20,883,150.81

        impairment assessment

        Accounts receivable

        subject to impairment        15,887,177.39                                2,512,349.60                         13,374,827.79

        assessment by group

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                                                                                    Shandong Airlines Co., Ltd. Annual Report 2021


                Total                 18,653,085.44        18,117,242.76       2,512,349.60                   34,257,978.60


5.2.4 The Company has no accounts receivable actually written-off in the current period.


5.2.5 According to the ending balance collected by the debtor, the summary amount of the top five accounts receivable is CNY

174,838,477.71, accounting for 46.70% of the total ending balance of accounts receivable, and the corresponding summary amount

of the ending balance of bad debt provision is CNY 19,909,144.71.


5.2.6 The Company has no receivables terminated due to the transfer of financial assets.


5.2.7 The Company has no assets or liabilities arising from continuing involvement in transferred accounts receivable.


5.3 Prepayments


5.3.1 Disclosure by Age

                                                         December 31, 2021                       December 31, 2020
                        Age
                                                      Amount               %                  Amount                %

     Within 1 year                                    4,314,603.85              92.08      213,189,480.25                 99.84

     1 to 2 years                                      280,226.14                 5.98         151,385.03                  0.07

     2 to 3 years                                       61,119.56                 1.30         120,000.00                  0.06

     Over 3 years                                       30,000.00                 0.64          70,000.00                  0.03

                        Total                         4,685,949.55             100.00      213,530,865.28                100.00


The Company has no significant prepayments over 1 year.


5.3.2 The total amount of the top five prepayments of the company is CNY 4,362,157.29, accounting for 93.09% of the total ending

balance of prepayments.


5.3.3 The ending balance of prepayments decreases by 97.81% compared with the end of the previous period, mainly due to the

implementation of the new lease standards in the current period.


5.4 Other receivables


5.4.1 Other Receivables by Category

                        Items                            December 31, 2021                       December 31, 2020

     Interest receivable

     Dividend receivable



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                                                                                  Shandong Airlines Co., Ltd. Annual Report 2021


                      Items                           December 31, 2021                         December 31, 2020

    Other receivables                                                171,734,868.85                         159,397,943.13

                      Total                                          171,734,868.85                         159,397,943.13


5.4.2 Other Receivables


① Other receivables by age

                        Age                           December 31, 2021                         December 31, 2020

    Within one year                                                  136,102,606.78                         129,289,406.75

    1-2 years                                                         17,401,910.52                           5,366,941.18

    2-3 years                                                           3,653,219.68                         12,340,149.83

    3-4 years                                                           9,370,949.83                          4,004,091.99

    4-5 years                                                           1,980,964.96                           803,055.01

    Over 5 years                                                     109,130,160.41                         113,073,237.70

                    Subtotal                                         277,639,812.18                         264,876,882.46

    Less: provision for bad debt                                     105,904,943.33                         105,478,939.33

                      Total                                          171,734,868.85                         159,397,943.13


②Other receivables by nature

                      Nature                          December 31, 2021                         December 31, 2020

    Deposits receivable                                               66,697,664.53                          63,646,894.09

    Amounts due from related parties                                 123,877,633.81                         122,685,554.68

    Other receivables                                                 87,064,513.84                          78,544,433.69

                    Subtotal                                         277,639,812.18                         264,876,882.46

    Less: provision for bad debt                                     105,904,943.33                         105,478,939.33

                      Total                                          171,734,868.85                         159,397,943.13


③ Other receivables by bad debt provision method


A.Provision for bad debts recognized based on three stages model as of December 31, 2021 is as follows:

                        Stage                       Book balance           Provision for bad debt      Carrying amount

      First stage                                      176,088,094.53                  4,353,225.68         171,734,868.85


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                                                                                          Shandong Airlines Co., Ltd. Annual Report 2021


      Second stage

      Third stage                                        101,551,717.65                   101,551,717.65

                           Total                         277,639,812.18                   105,904,943.33             171,734,868.85


Provision for bad debt in the first stage as of December 31, 2021:

                                                           Lifetime
                                                                            Provision for bad
                Category             Book balance       expected credit                           Carrying amount        Reason
                                                                                   debt
                                                        losses rate (%)

     Oher receivables subject to

     individual impairment

     assessment

     Oher receivables subject to

     impairment assessment by         176,088,094.53                 2.47        4,353,225.68       171,734,868.85

     group

                                                                                                                      No significant
     Including: Deposits
                                       66,697,664.53                                                 66,697,664.53     increase on
     receivable
                                                                                                                        credit risk

                                                                                                                      No significant
     Amounts due from related
                                       22,325,916.16                                                 22,325,916.16     increase on
     parties
                                                                                                                        credit risk

                                                                                                                      No significant

     Other receivables                 87,064,513.84                 5.00        4,353,225.68        82,711,288.16     increase on

                                                                                                                        credit risk

                  Total               176,088,094.53                 2.47        4,353,225.68       171,734,868.85


As of December 31, 2021, 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 December 31, 2021:

                                                         Lifetime expected         Provision for bad    Carrying
                Category             Book balance                                                                       Reason
                                                        credit losses rate (%)             debt            amount

     Other receivables subject
                                      101,551,717.65                      100.00     101,551,717.65
     to individual impairment


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                                                                                          Shandong Airlines Co., Ltd. Annual Report 2021


                                                         Lifetime expected         Provision for bad    Carrying
                Category             Book balance                                                                        Reason
                                                        credit losses rate (%)             debt         amount

     assessment

     Shandong Rainbow
                                      101,551,717.65                      100.00     101,551,717.65                  Credit impaired
     Commercial Jet Co., Ltd

                  Total               101,551,717.65                      100.00     101,551,717.65


B.Provision for bad debt using incurred loss model as of December 31, 2020:


Provision for bad debt in the first stage as of December 31, 2020:

                                                           Lifetime
                                                                            Provision for bad
                Category             Book balance       expected credit                           Carrying amount        Reason
                                                                                   debt
                                                        losses rate (%)

     Other receivables subject

     to individual impairment

     assessment

     Other receivables subject

     to impairment assessment         163,325,164.81                 2.40        3,927,221.68       159,397,943.13

     by group

                                                                                                                      No significant
     Including: Deposits
                                       63,646,894.09                                                 63,646,894.09     increase on
     receivable
                                                                                                                        credit risk

                                                                                                                      No significant
     Amounts due from related
                                       21,133,837.03                                                 21,133,837.03     increase on
     parties
                                                                                                                        credit risk

                                                                                                                      No significant

     Other receivables                 78,544,433.69                 5.00        3,927,221.68        74,617,212.01     increase on

                                                                                                                        credit risk

                  Total               163,325,164.81                 2.40        3,927,221.68       159,397,943.13


As of December 31, 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 December 31, 2020:


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                                                                                             Shandong Airlines Co., Ltd. Annual Report 2021


                                                               Lifetime expected         Provision for bad      Carrying
                 Category                Book balance                                                                            Reason
                                                              credit losses rate (%)              debt           amount

     Other receivables subject to

     individual impairment                   101,551,717.65                    100.00       101,551,717.65

     assessment

     Shandong Rainbow                                                                                                            Credit
                                             101,551,717.65                    100.00       101,551,717.65
     Commercial Jet Co., Ltd                                                                                                    impaired

                  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
                                        December 31,
               Category                                                            Recovery or                           December 31, 2021
                                               2020                Provision                             Write-off
                                                                                       reversal

      Other receivables subject

      to individual impairment           101,551,717.65                                                                     101,551,717.65

      assessment

      Other receivables subject

      to impairment assessment
                                              3,927,221.68         426,004.00                                                  4,353,225.68
      by credit risk

      characteristics of a group

                  Total                  105,478,939.33            426,004.00                                               105,904,943.33


⑤There are no other receivables written off during the reporting period.


⑥Top five closing balances by entity

                                                                                                  Proportion of the

                                                      Balance at                                  balance to the total    Provision for bad
            Entity name             Nature                                       Age
                                                 December 31, 2021                                 other receivables            debt

                                                                                                          (%)

     Shandong Rainbow               Related

     Commercial Jet Co.,             party            101,551,717.65         Over 5 years                       36.58       101,551,717.65

     Ltd.

     Debtor #1                     Deposits            31,257,853.34      Within 1 year                         11.26



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                                                                                             Shandong Airlines Co., Ltd. Annual Report 2021


                                                                                               Proportion of the

                                                    Balance at                                balance to the total       Provision for bad
            Entity name           Nature                                         Age
                                                December 31, 2021                              other receivables               debt

                                                                                                        (%)

     Debtor #2                    Deposits           14,567,356.48        Within 1 year                        5.25

     Debtor #3                     Others            14,129,792.80        Within 1 year                        5.09             706,489.64

     Debtor #4                    Deposits           10,503,492.40       Within 3 years                        3.78

               Total                               172,010,212.67                                             61.96        102,258,207.29


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.


5.5 Inventories


5.5.1 Inventories by Category

                                         December 31, 2021                                            December 31, 2020

            Items                            Provision for         Carrying                              Provision for         Carrying
                          Book balance                                                 Book balance
                                             impairment            amount                                impairment            amount

      Consumable

      air                 108,880,783.95     4,227,205.99      104,653,577.96      109,543,973.05        4,227,205.99      105,316,767.06

      equipment

      Low-value
                            2,388,064.47                          2,388,064.47          2,325,185.14                          2,325,185.14
      consumables

      Materials             4,743,700.74                          4,743,700.74          2,930,447.30                          2,930,447.30

            Total         116,012,549.16     4,227,205.99      111,785,343.17      114,799,605.49        4,227,205.99      110,572,399.50


5.5.2 Provision for Impairment

                                                             Increase during the            Decrease during the

                                   December 31,               reporting period               reporting period               December 31,
                Items
                                         2020                                             Reversal or                           2021
                                                        Provision         Others                              Others
                                                                                         written-down



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      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                         December 31, 2021                       December 31, 2020

     VAT deductible                                                 369,977,255.76                         282,572,739.73

                        Total                                       369,977,255.76                         282,572,739.73

Other current assets at the end of the period increases by 30.93% compared with the end of the previous period, mainly due to the
increase of tax credit as of the reporting date




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 5.7 Long-term equity investment

                                                                                                                         Changes in the current period (+, -)

                                                                                                                         Investment gains and losses
            Investees             December 31, 2020           Provision b/f            Additional           Investment                                  Other comprehensive     Other changes in
                                                                                                                         recognized under the equity
                                                                                       investment            reduction                                   income 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 December
                        Investees                         Declared cash dividends            Provision                                          December 31, 2021
                                                                                                                          Others                                                 31, 2021
                                                                 or profits                 recognized

 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 instrument investment


 5.8.1 General Information of Other Equity Instrument Investment

                                  Items                                                    December 31, 2021                                               December 31, 2020

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                              Items                                                December 31, 2021                                              December 31, 2020

Non-trading equity instrument investment                                                                   461,245,883.18                                                  541,789,406.63

                              Total                                                                        461,245,883.18                                                  541,789,406.63


 5.8.2 General Information of Non-Trading Equity Instrument Investment

                                                                                                                                                                      Reasons for other
                                                                                                                                 Reasons for being measured at
                                                                                                       Other comprehensive                                             comprehensive
                                      Dividend income in                                                                         fair value and its changes are
              Item                                          Cumulative gain         Cumulative loss    income transferred into                                        income transferred
                                        current period                                                                                  included in other
                                                                                                          retained earnings                                             into retained
                                                                                                                                    comprehensive income
                                                                                                                                                                          earnings

TravelSky Technology Limited                   208,728.00         133,247,930.50                                                    Non-trading financial assets

Sichuan Airlines                                                  239,823,105.34                                                    Non-trading financial assets

Jinan International Airport                                                               177,252.66                                Non-trading financial assets

              Total                            208,728.00         373,071,035.84          177,252.66




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5.9 Investment properties


5.9.1 Investment properties adopt the cost model

                                                                   Buildings and
                                 Items                                                  Land use right          Total
                                                                   constructions

      1. Cost:

      1.1 Balance as at December 31, 2020

      1.2 Increased in current period                               26,263,754.60          8,480,000.00      34,743,754.60

      (1) Purchase

      (2) Transferred from fixed assets/ intangible assets          26,263,754.60          8,480,000.00      34,743,754.60

      (3) Transferred from merger and acquisitions

      1.3 Decreased in current period

      (1) Disposal

      (2) Others

      1.4 Balance as at December 31, 2021                           26,263,754.60          8,480,000.00      34,743,754.60

      2. Accumulated depreciation and amortization

      2.1 Balance as at December 31, 2020

      1.2 Increased in current period                                8,488,388.04          2,029,183.82      10,517,571.86

      (1) amortization                                                 774,690.77           242,663.93        1,017,354.70

      (2) Others                                                     7,713,697.27          1,786,519.89       9,500,217.16

      2.3 Decreased in current period

      (1) Disposal

      (2) Others

      2.4 Balance as at December 31, 2021                            8,488,388.04          2,029,183.82      10,517,571.86

      3. Impairment provision

      3.1 Balance as at December 31, 2020

      3.2 Increased in current period

      (1) Accrual

      3.3 Decreased in current period



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                                                                       Buildings and
                                  Items                                                     Land use right          Total
                                                                       constructions

      (1) Disposal

      (2) Others

      3.4 Balance as at December 31, 2021

      4. Carrying amount of investment properties

      4.1 Carrying amount as at December 31, 2021                       17,775,366.56          6,450,816.18      24,226,182.74

      4.2 Carrying amount as at December 31, 2020


5.9.2 The Company has no investment properties without certificate of title.


5.10 Fixed assets


5.10.1 Fixed Assets by Category

                      Items                             December 31, 2021                         December 31, 2020

     Fixed assets                                                   6,200,939,794.32                          6,904,082,012.35

     Disposal of fixed assets

                      Total                                         6,200,939,794.32                          6,904,082,012.35




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 5.10.2 Fixed Assets


 ①General information of fixed assets

                                                Houses and                                                       Transportation
                        Category                                   Aircrafts and engines   High-value rotables                              Others                 Total
                                                 buildings                                                          vehicles

1. Cost:

1.1 Balance as at December 31, 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

Changes in accounting policies                                        -2,128,488,287.78                                                                       -2,128,488,287.78

Balance as at 1 January 2021                     572,253,146.88      10,250,800,137.89          764,930,369.31     73,914,807.79          240,054,880.79      11,901,953,342.66

1.2 Increased in current period                 1,072,904,127.53        477,545,283.00           16,590,708.06     12,116,539.39            28,802,356.47      1,607,959,014.45

(1) Purchase                                         268,112.00         477,545,283.00           16,590,708.06     12,116,539.39            28,802,356.47        535,322,998.92

(2) Transferred from construction-in-progress   1,072,636,015.53                                                                                               1,072,636,015.53

(3) Transferred from merger and acquisitions

(4) Others

1.3 Decreased in current period                   26,263,754.60          311,786,603.06             897,482.54       1,529,400.03            9,570,789.42        350,048,029.65

(1) Disposal or scrap                                                    311,786,603.06             897,482.54       1,529,400.03            9,570,789.42        323,784,275.05

(2) Others                                        26,263,754.60                                                                                                   26,263,754.60

1.4. Balance as at December 31, 2021            1,618,893,519.81     10,416,558,817.83          780,623,594.83     84,501,947.15          259,286,447.84      13,159,864,327.46

2. Accumulated depreciation

2.1 Balance as at December 31, 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



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                                               Houses and                                                       Transportation
                        Category                                 Aircrafts and engines   High-value rotables                               Others                 Total
                                                buildings                                                          vehicles

Changes in accounting policies                                        -537,469,260.67                                                                          -537,469,260.67

Balance as at 1 January 2021                    150,076,855.72       5,808,037,579.49         422,221,950.34      48,373,090.74          157,983,058.20       6,586,692,534.49

2.2 Increased in current period                  39,729,638.22        554,952,780.08           79,116,993.17        5,138,685.80           21,261,510.85        700,199,608.12

(1) Accrual                                      39,729,638.22        554,952,780.08           79,116,993.17        5,138,685.80           21,261,510.85        700,199,608.12

(2) Transferred from merger and acquisitions

2.3 Decreased in current period                   7,713,697.27         311,786,603.06             893,325.73        1,365,919.16            8,401,730.37        330,161,275.59

(1) Disposal or scrap                                                  311,786,603.06             893,325.73        1,365,919.16            8,401,730.37        322,447,578.32

(2) Others                                        7,713,697.27                                                                                                    7,713,697.27

2.4 Balance as at December 31, 2021             182,092,796.67       6,051,203,756.51         500,445,617.78      52,145,857.38          170,842,838.68       6,956,730,867.02

3. Impairment provision

3.1 Balance as at December 31, 2020                                                             2,197,822.93                                                      2,197,822.93

Changes in accounting policies

Balance as at 1 January 2021                                                                    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                                                                      4,156.81                                                         4,156.81

(1) Disposal or scrap                                                                                4,156.81                                                         4,156.81


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                                                          Houses and                                                            Transportation
                        Category                                             Aircrafts and engines   High-value rotables                                    Others                   Total
                                                            buildings                                                              vehicles

(2) Others

3.4 Balance as at December 31, 2021                                                                         2,193,666.12                                                             2,193,666.12

4 Carrying amount of fixed assets

4.1 Carrying amount as at December 31, 2021               1,436,800,723.14       4,365,355,061.32         277,984,310.93           32,356,089.77            88,443,609.16         6,200,939,794.32

4.2 Carrying amount as at December 31, 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


 ② The Company has no fixed assets leased out through operating lease.


 ③Fixed assets without certificate of title

                             Items                                        Carrying amount                                                          Reason

Buildings of Shandong Airline Base of Qingdao Jiaodong
                                                                                     1,044,322,513.69                      Related procedures of land use right are in progress
International Airport

                                                                                                           Land use rights belonging to Shandong SDA Group, not eligible for ownership
Buildings of Jinping Food Co., Ltd.                                                      9,001,313.36
                                                                                                                                                 registration

Jinan cargo arrival and departure warehouses                                            10,535,903.63        Land rented from Jinan Air Control, not eligible for ownership registration


 5.11 Construction in progress


 5.11.1 Construction in Progress by Category

                              Items                                                 December 31, 2021                                                    December 31, 2020

Construction in progress                                                                                   4,862,174,283.01                                                       5,770,696,951.56

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                             Items                                                  December 31, 2021                                                  December 31, 2020

Construction material

                             Total                                                                           4,862,174,283.01                                                 5,770,696,951.56


 5.11.2 Construction in Progress


 ① General Information of Construction in Progress

                                                                         December 31, 2021                                                         December 31, 2020

                    Items                                                  Provision for                                                              Provision for
                                                   Book balance                                    Carrying amount          Book balance                                    Carrying amount
                                                                            impairment                                                                 impairment

Factory building project                                  2,944,905.67                                   2,944,905.67           920,262,448.04                                  920,262,448.04

Prepayment for aircrafts introduction project         4,845,889,181.13                               4,845,889,181.13        4,845,805,623.68                                 4,845,805,623.68

Construction of information system                        1,355,171.97                                   1,355,171.97              706,911.96                                       706,911.96

Simulator                                                 3,921,967.88                                   3,921,967.88             3,921,967.88                                    3,921,967.88

Others                                                    8,063,056.36                                   8,063,056.36

                    Total                             4,862,174,283.01                               4,862,174,283.01        5,770,696,951.56                                 5,770,696,951.56


 ② Changes in significant projects of construction in progress

                                                                                             Increase during the                                  Decrease during the
                Projects                         Budget             December 31, 2020                                Transfer to fixed asset                               December 31, 2021
                                                                                              reporting period                                     reporting period

Jiaodong airport project                        1,265,803,800.00          907,818,189.40            159,513,121.56        1,067,331,310.96



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                                                                                                  Increase during the                                  Decrease during the
                   Projects                         Budget            December 31, 2020                                     Transfer to fixed asset                              December 31, 2021
                                                                                                      reporting period                                   reporting period

Aircraft asset introduction project               9,937,456,340.04           4,845,805,623.68                   83,557.45                                                               4,845,889,181.13

                    Total                        11,203,260,140.04           5,753,623,813.08             159,596,679.01          1,067,331,310.96                                      4,845,889,181.13


 (Continued)

                                                              Cumulative
                               Weight of cost    Stage of                       Including: Transferred into Including: Transferred        Including: cost of      Capitalisation rate
                                                                 cost of                                                                                                                    Source of
           Items                 to date in     completion                      leaseback assets during the       into fixed assets     borrowing capitalized      applicable to the
                                                               borrowing                                                                                                                     finance
                               budgeted cost                                           current year            during the current year during the current year       current year
                                                               capitalized

Jiaodong airport project                                                                                                                                                                     Working
                                        84.32   Completed
                                                                                                                                                                                              capital

                                                                                                                                                                                           Loans from
Aircraft               asset
                                        48.76      N/a       134,270,401.12                                                                                                                  financial
introduction project
                                                                                                                                                                                            institution

           Total                                             134,270,401.12




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5.12 Right-of-use assets

                           Category               Houses and
                                                                  Aircrafts and engines           Total
                                                   buildings

      1. Cost:

      1.1 Balance as at December 31, 2020            —                    —                      —

      Changes in accounting policies              21,193,643.81      27,956,907,834.86        27,978,101,478.67

      Balance as at 1 January 2021                21,193,643.81      27,956,907,834.86        27,978,101,478.67

      1.2 Increased in current period              2,902,094.59       1,382,424,923.85         1,385,327,018.44

      1.3 Decreased in current period                                   499,392,441.07           499,392,441.07

      1.4. Balance as at December 31, 2021        24,095,738.40      28,839,940,317.64        28,864,036,056.04

      2. Accumulated depreciation

      2.1 Balance as at December 31, 2020            —                    —                      —

      Changes in accounting policies                                 14,881,255,967.98        14,881,255,967.98

      Balance as at 1 January 2021                                   14,881,255,967.98        14,881,255,967.98

      2.2 Increased in current period             10,977,757.22       2,419,203,283.05         2,430,181,040.27

      2.3 Decreased in current period                                   499,392,441.07           499,392,441.07

      2.4. Balance as at December 31, 2021        10,977,757.22      16,801,066,809.96        16,812,044,567.18

      3. Impairment provision

      3.1 Balance as at December 31, 2020            —                    —                      —

      Changes in accounting policies

      Balance as at 1 January 2021

      3.2 Increased in current period

      3.3 Decreased in current period

      3.4 Balance as at December 31, 2021

      4. Carrying amount of right-of-use assets

      4.1 Carrying amount as at December 31,
                                                  13,117,981.18      12,038,873,507.68        12,051,991,488.86
      2021

      4.2 Carrying amount as at December 31,      21,193,643.81      13,075,651,866.88        13,096,845,510.69



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      2020

5.13 Intangible assets

5.13.1 General Information of Intangible Assets

                               Items                  Land rights              Software              Total

     1. Cost:

     1.1 Balance as at December 31, 2020              108,347,341.13           70,177,954.74       178,525,295.87

     1.2 Increased in current year                    344,688,942.00            3,473,035.65       348,161,977.65

     (1) Purchase                                     344,688,942.00                               344,688,942.00

     (2) Transferred from construction-in-progress                              3,473,035.65         3,473,035.65

     (3) Increased from business combination

     1.3 Decreased in current year                         8,480,000.00                              8,480,000.00

     (1) Disposal

     (2) Others                                            8,480,000.00                              8,480,000.00

     1.4 Balance as at December 31, 2021              444,556,283.13           73,650,990.39       518,207,273.52

     2. Accumulated amortization

     2.1 Balance as at December 31, 2020               23,199,141.01           36,626,174.53        59,825,315.54

     2.2 Increased in current year                         6,182,289.92        12,200,808.35        18,383,098.27

     (1) Accrual                                           6,182,289.92        12,200,808.35        18,383,098.27

     2.3 Decreased in current year                         1,786,519.89                              1,786,519.89

     (1) Disposal

     (2) Others                                            1,786,519.89                              1,786,519.89

     2.4 Balance as at December 31, 2021               27,594,911.04           48,826,982.88        76,421,893.92

     3. Impairment provision

     3.1 Balance as at December 31, 2020

     3.2 Increased in current year

     (1) Accrual

     3.3 Decreased in current year

     (1) Disposal

     3.4 Balance as at December 31, 2021


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                                  Items                               Land rights            Software                  Total

     4. Carrying amount

     4.1 Carrying amount as at December 31, 2021                      416,961,372.09         24,824,007.51         441,785,379.60

     4.2 Carrying amount as at December 31, 2020                        85,148,200.12        33,551,780.21         118,699,980.33

5.13.2 The Company has no intangible assets arising from internal research and development project as at the end of reporting

period.

5.13.3 The general information of land use of right without certificate of title

                         Items                                 Book value                                    Reason

                                                                                             Related procedures of land use right
      Land of Qingdao Jiaozhou                                           340,667,571.01
                                                                                                        are in progress

                         Total                                           340,667,571.01


5.13.4 Intangible assets at the end of this period increases 272.19% compared with the end of the previous period, mainly due to the

purchase of land use rights in some areas of Qingdao Jiaodong Airport this year.

5.14 Goodwill

5.14.1 Initial Recognition of Goodwill

                                                            Increase during the         Decrease during the
          Investees or matters
                                     December 31,            reporting period             reporting period        December 31,
          that goodwill arising
                                            2020           Business                                                       2021
                  from                                                      Others      Disposal     Others
                                                          combination

      Qingdao Feisheng                    10,220,816.22                                                               10,220,816.22

      Shandong Jinping
                                            454,020.13                                                                    454,020.13
      Food Co., Ltd.

                 Total                    10,674,836.35                                                               10,674,836.35


5.14.2 Provision for Impairment

                                                            Increase during the         Decrease during the
          Investees or matters
                                     December 31,            reporting period             reporting period        December 31,
          that goodwill arising
                                            2020           Business                                                       2021
                  from                                                      Others      Disposal     Others
                                                          combination

      Qingdao Feisheng                    10,220,816.22                                                               10,220,816.22

      Shandong Jinping                                      454,020.13                                                    454,020.13


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      Food Co., Ltd.

                Total                  10,220,816.22        454,020.13                                                  10,674,836.35


5.15 Deferred charges


                                                                Increase            Decrease during the reporting

                                       December 31,             during the                      period                  December 31,
                Items
                                           2020                 reporting                                  Other            2021
                                                                                   Amortization
                                                                 period                                   decrease

      Pilot training                   620,401,352.79      64,644,551.34          108,020,568.53      17,362,500.71    559,662,834.89

      Decoration expenditure               407,277.20      12,573,308.06             1,664,608.01                       11,315,977.25

      Modification costs for
                                        20,973,948.44            693,983.22          4,831,587.07                       16,836,344.59
      aircraft leasing

                 Total                 641,782,578.43      77,911,842.62          114,516,763.61      17,362,500.71    587,815,156.73


5.16 Deferred tax assets and deferred tax liabilities


5.16.1 Deferred Tax Assets Before Offsetting

                                                        December 31, 2021                                  December 31, 2020

                                                  Deductible                                        Deductible
                       Items                                                 Deferred tax                               Deferred tax
                                                  temporary                                         temporary
                                                                                assets                                     assets
                                                  differences                                       differences

      Provision for bad debt                      140,162,821.93              35,040,705.48         124,132,024.77      31,033,006.20

      Impairment provision for
                                                    4,227,205.99               1,056,801.50           4,227,205.99        1,056,801.50
      inventories

      Impairment provision for fixed
                                                    2,193,666.12                 548,416.53           2,197,822.93         549,455.73
      assets

      Fair value movement of

      financial liabilities held for                   78,548.31                  19,637.08              862,955.67        215,738.92

      trading

      Provisions                               5,844,514,155.98           1,461,128,539.00        5,022,551,127.92    1,255,637,781.98

      Employment benefits payable                  43,815,617.86              10,953,904.47          39,140,304.16        9,785,076.04

      Deferred income                              22,622,586.89               5,655,646.72          19,074,728.93        4,768,682.23



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      New lease standards related            1,197,120,612.68          299,280,153.17

      Deductible losses                      5,561,281,692.78     1,390,320,423.19         2,784,211,785.04      696,052,946.27

                       Total                12,816,016,908.54     3,204,004,227.14         7,996,397,955.41    1,999,099,488.87


5.16.2 Deferred Tax Liabilities Before Offsetting

                                                    December 31, 2021                             December 31, 2020

                                          Deductible                                       Deductible
                   Items                                        Deferred tax                                   Deferred tax
                                           temporary                                       temporary
                                                                  liabilities                                    liabilities
                                          differences                                      differences

     Asset evaluation increment

     from business combination               3,129,788.20               782,447.05            3,651,419.57            912,854.89

     not under same control

     Depreciation and amortization
                                           488,820,193.96         122,205,048.49           175,462,289.43         43,865,572.36
     of fixed assets

     Changes in fair value of other
                                           372,893,783.18          93,223,445.80           453,437,306.63        113,359,326.66
     equity instruments investment

                   Total                   864,843,765.34         216,210,941.34           632,551,015.63        158,137,753.91


5.16.3 Deferred income tax assets at the end of the period increased by 60.27% compared with the end of the previous period ,

mainly due to the book-tax difference treatment in relation with the new lease standards and 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 increased by 36.72%

compared with the end of the previous period , mainly due to the increase in the book-tax difference in relation with fixed assets

depreciation.


5.17 Short-term borrowings


5.17.1 Disclosure of Short-Term Borrowings by Category

                        Items                            December 31, 2021                          December 31, 2020

     Credit loan                                                       2,601,211,111.11                        2,001,111,111.11

                         Total                                         2,601,211,111.11                        2,001,111,111.11


5.17.2 The Company has no overdue short-term borrowings.




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5.18 Held-for-trading financial liabilities

                                                                       Increase during      Decrease during
                                                December 31,                                                     December 31,
                        Items                                           the reporting         the reporting
                                                     2020                                                            2021
                                                                           period                period

     Financial liabilities designated at fair
                                                     862,955.67                                   784,407.36            78,548.31
     value through profit or loss

     Including: Interest rate swaps                  862,955.67                                   784,407.36            78,548.31

                        Total                        862,955.67                                   784,407.36            78,548.31


5.19 Notes payable

                     Category                          December 31, 2021                            December 31, 2020

     Commercial acceptance bills                                                                                   49,605,767.94

     Bank acceptance bills                                               94,287,021.53                            422,489,235.30

                        Total                                            94,287,021.53                            472,095,003.24


5.19.1 The Company has no notes payable matured but not yet paid as at the reporting date.


5.19.2 Notes payable at the end of this period decreases 80.03% compared with the end of pervious period, mainly due to the

payment of matured bank acceptance bills in this period.


5.20 Accounts payable


5.20.1 Accounts Payable by Nature

                        Items                              December 31, 2021                         December 31, 2020

      Aircraft maintenance costs                                        117,074,446.80                            492,193,935.93

      Engine lease return compensation                                  102,385,814.48

      Fuel cost                                                         187,084,901.39                            197,183,769.59

      Landing fee                                                       290,843,996.33                            466,711,569.27

      Aircraft service cost                                             805,652,196.57                            549,082,156.02

      Flight catering                                                    95,577,041.54                            113,233,126.31

      Computer booking fee                                              191,836,041.64                            325,614,566.13

      Lease rental                                                          573,761.49                             96,262,308.48


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      Others                                                            429,166,048.89                          303,037,868.58

                        Total                                        2,220,194,249.13                         2,543,319,300.31


5.20.2 The Company has no significant accounts payable with age of over one year as at the reporting date.


5.21 Contract liabilities

                       Items                             December 31, 2021                         December 31, 2020

     Ticket clearing                                                    297,337,814.74                          314,216,701.60

     Advanced payment for tickets                                       137,783,246.87                           99,366,787.75

     Others                                                              20,225,816.95                           31,817,311.84

                       Total                                            455,346,878.56                          445,400,801.19


The Company has no significant contract liabilities with aging of over one year as at the reporting date.


5.22 Employee benefits payable


5.22.1 Details of Employee Benefits Payable

                                               December 31,       Increase during the Decrease during the      December 31,
                       Items
                                                    2020            reporting period      reporting period         2021

     1. Short-term employee benefits            346,238,955.37      2,578,803,687.93       2,470,718,387.23     454,324,256.07

     2. Post-employment benefits –
                                                                        424,927,901.20       424,927,901.20
     defined contribution plans

     3. Termination benefits

     4. Other long-term employee benefits

     within one year

                       Total                    346,238,955.37      3,003,731,589.13       2,895,646,288.43     454,324,256.07


5.22.2 Short-Term Employee Benefits

                                               December 31,       Increase during the Decrease during the      December 31,
                       Items
                                                    2020            reporting period      reporting period         2021

     1. Wages, salaries and subsidies           306,835,731.58       2,212,101,959.24      2,139,735,339.60     379,202,351.22

     2. Employee welfare                                                 24,993,935.79        24,993,935.79

     3. Social insurance:                                               125,114,737.05       125,114,737.05

     Including: Medical insurance                                       103,311,874.70       103,311,874.70



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                                               December 31,     Increase during the Decrease during the         December 31,
                     Items
                                                   2020          reporting period       reporting period           2021

       Employment injury insurance                                      7,281,362.08         7,281,362.08

       Maternity insurance                                             14,521,500.27        14,521,500.27

     4. Housing provident fund                                        120,496,666.31       120,496,666.31

     5. Labour union fee and employee           39,403,223.79          65,096,389.54        60,377,708.48        44,121,904.85

     education fee

     6. Short-term paid absences                                       31,000,000.00                             31,000,000.00

     7. Short-term profit-sharing plan

                        Total                  346,238,955.37     2,578,803,687.93       2,470,718,387.23       454,324,256.07


5.22.3 Defined Contribution Plans

                                                                                       Decrease during
                                               December 31,     Increase during the                            December 31,
                     Items                                                               the reporting
                                                   2020          reporting period                                  2021
                                                                                            period

     Post-employment benefits:

     1. Basic pension                                                 246,774,078.60     246,774,078.60

     2. Unemployment insurance                                         10,535,007.40       10,535,007.40

     3. Annuity payment                                               167,618,815.20     167,618,815.20

                     Total                                            424,927,901.20     424,927,901.20


The employee benefits payable at the end of the period increases 31.22% compared with the end of pervious period, mainly due to

the increase of accrual of safety and performance reward.


5.23 Taxes and fees payable

                                 Items                                 December 31, 2021                 December 31, 2020

      VAT                                                                        1,773,763.50                     1,476,083.36

      Urban construction and maintenance tax                                        139,135.62                      160,601.55

      Education surcharge                                                           102,412.92                      118,517.68

      Enterprise income tax                                                         539,381.28                      944,983.82

      Property tax                                                               2,986,370.57                       172,992.36

      Land tax                                                                      979,311.20                      179,311.20

      Personal income tax                                                        8,464,616.24                     9,353,560.27


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                                 Items                               December 31, 2021               December 31, 2020

      Stamp duty                                                                  700,000.00                   1,380,000.00

      Civil aviation development fund                                          57,593,529.65                  88,404,867.39

      Others                                                                                                       15,559.86

                                 Total                                         73,278,520.98                 102,206,477.49


5.24 Other payables


5.24.1 Other Payables by Category

                         Items                         December 31, 2021                       December 31, 2020

     Interests payable

     Dividends payable                                                   602,306.96                             602,306.96

     Other payables                                                  666,912,715.62                          635,263,654.66

                         Total                                       667,515,022.58                          635,865,961.62


5.23.2 Dividends Payable

                         Items                         December 31, 2021                       December 31, 2020

     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.


5.24.3 Other Payables


① Other Payables by Nature

                         Items                         December 31, 2021                       December 31, 2020

     Payables for construction projects                              270,620,233.42                          225,955,475.65

     Payables for deposits                                           144,432,403.45                          180,641,018.52

     Taxes deducted at source                                         67,166,197.85                           70,763,959.51

     Others                                                          184,693,880.90                          157,903,200.98

                         Total                                       666,912,715.62                          635,263,654.66


②The Company has no significant other payables with aging of more than one year as at the reporting date.




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5.25 Non-current liabilities due within one year

                                     Items                                    December 31, 2021            December 31, 2020

     Long-term borrowings due within one year                                        903,784,357.84               103,186,354.59

     Bonds payables due within one year                                                 20,514,722.25              20,514,722.25

     Long-term payables due within one year                                                                       181,264,490.05

     Long-term employee benefits payable due within one year                                                       16,612,000.00

     Lease liabilities due within one year                                         2,294,949,130.97

                                     Total                                          3,219,248,211.06              321,577,566.89


The non-current liabilities due within one year at the end of this period increases 901.08% compared with the end of the pervious

period, mainly due to the increase of lease liabilities due within one year from the implementation of new lease standards.


5.26 Other current liabilities

                      Items                             December 31, 2021                         December 31, 2020

     VAT to be recognised                                               32,096,585.80                              31,100,597.66

                      Total                                             32,096,585.80                              31,100,597.66


5.27 Long-term borrowings


5.27.1 Long-Term Borrowings by Category

                                                                                                        Range of interest rates in
                      Items                        December 31, 2021          December 31, 2020
                                                                                                                  2021

     Secured loans                                       379,162,550.65              464,796,466.93           0.8554%~1.2650%

     Credit loans                                       7,221,629,554.94           5,755,824,786.98           3.3200%~3.5000%

                     Subtotal                           7,600,792,105.59           6,220,621,253.91

     Less: Long-term borrowings due within
                                                         903,784,357.84              103,186,354.59
     one year (Note 5.25)

                       Total                            6,697,007,747.75           6,117,434,899.32


5.28 Bonds payable


5.28.1 Bonds Payable by Category

                                     Items                                    December 31, 2021           December 31, 2020


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                                    Items                                        December 31, 2021            December 31, 2020

     Medium-term notes                                                                 1,020,514,722.25            1,020,514,722.25

                                   Subtotal                                            1,020,514,722.25            1,020,514,722.25

     Less: Bonds payable due within one year (Note 5.25)                                    20,514,722.25             20,514,722.25

                                    Total                                              1,000,000,000.00            1,000,000,000.00


5.28.2 Changes in increase or decrease of bonds payable

                                                                           Maturity of
          Bond name             Face value            Issue date                                Issue price      December 31, 2020
                                                                              bond

     20 Shandong
                             1,000,000,000.00         2020-4-22              3 years          1,000,000,000.00    1,020,514,722.25
     Airlines MTN001

              Total          1,000,000,000.00                                                 1,000,000,000.00     1,020,514,722.25


(Continued)

                                Issued this     Interest accrued at Amortization of            Payback this
           Bond name                                                                                             December 31, 2021
                                  period            face value           excess discount          period

     20 Shandong Airlines
                                                     27,989,722.26                              27,989,722.26      1,020,514,722.25
     MTN001

              Total                                  27,989,722.26                              27,989,722.26      1,020,514,722.25


5.29 Lease liabilities

                                      Items                                        December 31, 2021            December 31, 2020

      Lease payments                                                                   12,968,955,180.10                          —

      Less: Unrealised finance expenses                                                  1,232,490,939.71                         —

                                     Subtotal                                          11,736,464,240.39                          —

      Less: lease liabilities due within one year (Note 5.25)                            2,294,949,130.97                         —

                                      Total                                              9,441,515,109.42                         —


5.30 Long-term payables


5.30.1 Long-Term Payables by Category

                                     Items                                         December 31, 2021          December 31, 2020

     Long-term payables                                                                  5,450,148,990.47          5,976,812,441.61



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                                        Items                                December 31, 2021       December 31, 2020

                                       Subtotal                                 5,450,148,990.47         5,976,812,441.61

     Less: Long-term payables due within one year (Note 5.25)                     219,460,261.28           673,458,425.98

                                        Total                                   5,230,688,729.19         5,303,354,015.63


5.30.2 Long-Term Payables by Nature

                                        Items                                December 31, 2021       December 31, 2020

     Financial lease rental payables                                                                     1,229,499,938.87

     Payables of lease termination compensation of aircraft and engine
                                                                                4,887,007,912.24
     held under operating lease

     Overhaul payables for aircrafts and engines held under operating
                                                                                                         4,747,312,502.74
     lease

     Others                                                                       563,141,078.23

                                       Subtotal                                 5,450,148,990.47         5,976,812,441.61

     Less: Financial lease rental payables due within one year (Note 5.25)                                 181,264,490.05

     Less: Payables of lease termination compensation of aircraft and
                                                                                  102,385,814.48
     engine held under operating lease due within one year (Note 1)

     Less: Overhaul payables for aircrafts and engines held under
                                                                                                           492,193,935.93
     operating lease due within one year

     Others due within one year                                                   117,074,446.80

                                        Total                                   5,230,688,729.19         5,303,354,015.63


Note 1: Payables of lease termination compensation of aircraft and engine held under operating lease due within one year had been

included in accounts payable.


5.31 Long-term employee benefits payable


5.31.1 General information of long-term employee benefits payable

                                         Items                                December 31, 2021      December 31, 2020

     1. Post-employment benefits-net defined benefit liability                                             270,637,000.00

     Less: long-term staff remuneration payable due within one year (Note
                                                                                                            16,612,000.00
     5.25)

                                         Total                                                             254,025,000.00



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5.31.2 Changes in Defined Benefit Plans


Present value of the defined benefit obligation:

                                       Items                                             2021                    2020

     1. Balance at the beginning of the reporting period                                270,637,000.00         162,909,225.21

     2. Cost recognized in current profit or loss:                                                             120,860,000.00

     2.1 Current service cost

     2.2 Past service cost                                                                                     115,723,000.00

     2.3 Gains /(losses) on settlement (loss presented with "-" prefix)

     2.4 Net interest                                                                                             5,137,000.00

     3. Cost recognized in other comprehensive income:                                                            1,769,000.00

     3.1 Actuarial gains /(losses) (loss presented with "-" prefix)                                               1,769,000.00

     4. Other changes:                                                                  270,637,000.00           11,363,225.21

     4.1 Consideration paid in settlements                                              264,723,621.69

     4.2 Payment of benefits                                                              5,913,378.31           11,363,225.21

     5. Balance at the end of the reporting period                                                             270,637,000.00


Note: The long-term employee benefits payable at the end of this period decreases 100% compared with the end of the previous

period, mainly because in this period, the Company enters into an agreement with a third party to materially terminate the future

obligations of the original defined benefit plan through a one-time payment.


5.32 Accrued liabilities

                  Items                    December 31, 2021                December 31, 2020                Reason

      Restoration costs of                                                                         Restoration costs of
                                                   1,060,428,713.51
      aircrafts under leases                                                                       aircrafts under leases

                  Total                            1,060,428,713.51




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 5.33 Deferred income


 5.33.1 General information of deferred income

                                                                          Increase during the reporting     Decrease during the
                    Items                      December 31, 2020                                                                        December 31, 2021                  Reason
                                                                                     period                  reporting period

Unrealized gains and losses of operating                                                                                                                          The aircraft sale-leaseback
                                                          81,439,081.44                                               6,247,117.80                75,191,963.64
lease from aircraft leaseback                                                                                                                                     disposal profits and losses

Designated subsidy for civil aviation
                                                           8,923,065.16                                                 976,500.12                 7,946,565.04     Asset related subsidies
energy-saving program

Designated subsidy for HUD and
                                                          10,151,663.77                  6,480,000.00                 1,955,641.92                14,676,021.85     Asset related subsidies
repackage project

                    Total                               100,513,810.37                   6,480,000.00                 9,179,259.84                97,814,550.53


 5.33.2 Items Related to Government Grants

                                                                                    Recognized in non-operating Recognized in other                                            Related to
                                           December 31,      Increase during the                                                         Other
                    Items                                                            income during the reporting   income during the                 December 31, 2021     assets/Related to
                                                 2020          reporting period                                                         changes
                                                                                                period              reporting period                                         profit or loss

Designated subsidy for civil aviation                                                                                                                                        Asset related
                                              8,923,065.16                                                                 976,500.12                       7,946,565.04
energy-saving program                                                                                                                                                          subsidies

Designated subsidy for HUD and                                                                                                                                               Asset related
                                             10,151,663.77          6,480,000.00                                         1,955,641.92                     14,676,021.85
repackage project                                                                                                                                                              subsidies

                    Total                    19,074,728.93          6,480,000.00                                         2,932,142.04                     22,622,586.89


 5.34 Share capital


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                                                                                                 Changes during the reporting period (+, -)
              Item                 December 31, 2020                                                                                                                                    December 31, 2021
                                                               New issues              Bonus issues            Capitalisation of reserves           Others            Subtotal

Number of total shares                  400,000,000.00                                                                                                                                       400,000,000.00


 5.35 Capital reserves

              Items                        December 31, 2020                  Increase during the reporting period             Decrease during the reporting period               December 31, 2021

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


 5.36 Other comprehensive income

                                                                                                   Changes during the reporting period

                                December 31,                            Less: Items previously recognized in                             Attributable to      Attributable to    Amount       December 31,
            Items                                                                                                     Less: Income
                                    2020         Amount before tax          other comprehensive income being                                owners of the        minority        before          2021
                                                                                                                       tax expenses
                                                                            reclassified to current profit or loss                           Company             interests        tax

 Other comprehensive

 income that cannot be
                                322,552,319.90      -80,543,523.45                                                    -17,525,660.07    -20,135,880.86        -42,881,982.52                 279,670,337.38
 reclassified into profit or

 loss

 Including:

 remeasurement of net           -17,525,660.07                                                                        -17,525,660.07                           17,525,660.07

 assets or net liabilities of

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                                                                                       Changes during the reporting period

                           December 31,                         Less: Items previously recognized in                         Attributable to     Attributable to   Amount      December 31,
         Items                                                                                           Less: Income
                               2020         Amount before tax   other comprehensive income being                             owners of the          minority       before          2021
                                                                                                          tax expenses
                                                                reclassified to current profit or loss                         Company              interests        tax

defined benefit plans

Fair value change of the
                           340,077,979.97      -80,543,523.45                                                             -20,135,880.86         -60,407,642.59               279,670,337.38
equity instruments

     Total of other
                           322,552,319.90      -80,543,523.45                                            -17,525,660.07   -20,135,880.86         -42,881,982.52               279,670,337.38
 comprehensive income




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5.37 Surplus reserves

                                                                                     Increase     Decrease

                        December 31,         Changes of                             during the    during the     December 31,
        Items                                                    January 1, 2021
                            2020          accounting policy                         reporting     reporting           2021

                                                                                     period         period

     Statutory

     surplus            538,773,444.97                            538,773,444.97                                  538,773,444.97

     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.


5.38 Retained earnings

                                          Items                                            2021                     2020

     Pre-adjustment balance brought forward                                            1,233,524,795.64         3,588,847,456.98

     Total adjustment to retained earnings b/f (+, -)                                 -1,613,812,613.92            26,692,794.47

     Retained earnings b/f after adjustment                                             -380,287,818.28         3,615,540,251.45

     Add: Net profit attributable to shareholders of the parent                       -1,813,705,307.39        -2,382,015,455.81

     Changes in the defined benefit plan transferred to retained earnings                -17,525,660.07

     Less: Appropriation to statutory surplus reserve

     Appropriation to discretionary surplus reserve

     General reserve

     Ordinary dividends declared

     Bonus issue

     Closing balance as of December 31, 2021                                          -2,211,518,785.74         1,233,524,795.64


5.39 Operating revenues and operating costs

                                                   2021                                              2020
               Items
                              Operating revenues          Operating costs          Operating revenues          Operating costs

     Principal activities          11,870,164,619.98          13,539,575,331.07        9,881,777,998.48        12,550,178,248.90

     Other activities                  645,153,343.18             11,014,671.04          652,625,352.39             4,721,867.19

               Total               12,515,317,963.16          13,550,590,002.11       10,534,403,350.87        12,554,900,116.09



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(1)Operating revenue deductions

                                                                                             2021                                               2020
                                    Items
                                                                              Amount                        Details             Amount                         Details

Operating revenue                                                            12,515,317,963.16                                 10,534,403,350.87

Total amount of operating revenue deductions                                    54,035,710.22                                      56,794,107.52

Proportion of operating revenue deductions to operating revenues                        0.43%                                              0.54%

1. Revenues unrelated to principal activities                                   —                            —                   —                            —

1.1 Revenues from other operating revenue than normal operations. i.e.                                Revenue of media                                   Revenue of media

revenues from renting out fixed assets, intangible assets, or packaging,                            resource fee, revenue of                           resource fee, revenue of

sales of materials, exchange of non-monetary assets with materials, income                       labor expenses for foreign                         labor expenses for foreign
                                                                                54,035,710.22                                      56,794,107.52
from operation of entrusted management business, as well as income other                             flights, maintenance                               flights, maintenance

than the normal operation of the listed company although it is included in                          revenue, lease revenue,                            revenue, lease revenue,

the main business income                                                                                     etc..                                              etc..

Subtotal of revenues unrelated to principal activities                          54,035,710.22                                      56,794,107.52

2. Revenue without commercial substance

3. Other revenues unrelated to principal activities or without commercial

substance

Operating revenues after deductions                                          12,461,282,252.94                                 10,477,609,243.35




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Shandong Airlines Co., Ltd.                                                          Notes to the Financial Statements


5.40 Tax and surcharges

                            Items                                       2021                               2020

     Urban maintenance and construction tax                                     2,307,862.32                       1,646,287.30

     Housing property tax                                                       7,650,120.45                       2,731,914.23

     Land use tax                                                               2,750,614.23                       1,056,036.38

     Education surcharge and others                                             5,663,623.34                       5,044,826.86

                            Total                                              18,372,220.34                      10,479,064.77


Tax and surcharges at the end of this period increases 75.32% compared with the end of the previous period, mainly because Qingdao

Jiaodong Airport was put into use in this period, increasing the housing property tax and land use tax.


5.41 Sales expenses

                       Items                                    2021                                      2020

     Agency fees                                                        173,831,486.42                           138,402,370.07

     Employment benefits                                                239,187,806.97                           238,062,702.66

     Computer booking fees                                               94,593,727.35                           101,239,667.49

     Online payment fees                                                 33,394,218.76                            22,746,819.32

     Lease rental                                                        13,782,104.29                            20,950,099.16

     Advertisement fees                                                  13,927,077.73                            12,139,670.83

     Administrative office expenses                                       2,014,325.10                             5,935,784.08

     Travel expenses                                                      3,556,627.44                             3,768,427.11

     System and network fees                                             38,709,108.84                            39,289,807.51

     BSP data processing fees                                             2,697,402.50                             3,193,912.84

     Depreciation                                                        12,376,891.41                             1,521,642.25

     Others                                                              20,604,571.25                            26,660,072.21

                       Total                                            648,675,348.06                           613,910,975.53


5.42 General and administrative expenses

                       Items                                    2021                                      2020

     Employment benefits                                                221,608,067.44                           325,886,133.31



                                                                  223
Shandong Airlines Co., Ltd.                                                        Notes to the Financial Statements


                         Items                                 2021                                     2020

     Lease rental fees                                                  20,065,677.92                            27,737,933.24

     Business entertainment costs                                        4,051,190.96                             2,235,917.06

     Depreciation                                                       29,187,469.98                            21,093,013.51

     Administrative office expenses                                     13,121,623.02                            11,545,974.78

     Amortization of intangibles                                        15,930,482.48                            11,644,865.33

     Water, electricity charges                                         13,257,526.33                            10,576,962.96

     Outsourcing fees                                                   36,383,509.89                            34,055,410.64

     Others                                                             70,405,050.66                            48,864,546.54

                         Total                                         424,010,598.68                           493,640,757.37


5.43 Research and development expenses

                         Items                                 2021                                     2020

     Employment benefits                                                24,703,588.89                            22,514,111.50

     Others                                                               338,424.70                                  352,178.48

                         Total                                          25,042,013.59                            22,866,289.98


5.44 Financial costs

                                   Items                                        2021                           2020

     Interest expenses                                                           821,081,133.14                 230,831,883.77

     Including: interest expenses for lease liabilities                          463,855,802.08

     Less: Interest income                                                        96,757,343.73                  45,680,277.19

     Net interest expenses                                                       724,323,789.41                 185,151,606.58

     Foreign exchange losses                                                     465,682,517.79                  52,422,557.01

     Less: Foreign exchange gains                                                710,634,788.47                 102,518,814.24

     Net foreign exchange losses                                                -244,952,270.68                 -50,096,257.23

     Bank charges                                                                  1,332,373.16                   2,368,560.52

                                   Total                                         480,703,891.89                 137,423,909.87


Financial costs of this period increase 249.80% compared with the previous period, mainly due to the increase of the interest

expenses resulting from the adoption of new lease standards and the increase of borrowings in this period.



                                                                 224
Shandong Airlines Co., Ltd.                                                        Notes to the Financial Statements


5.45 Other income

                                                                                                 Included in current period
                     Category                             2021              2020
                                                                                                non-recurring profit and loss

    1. Government grant recognized in other
                                                        155,394,226.24    98,058,606.34                          155,394,226.24
    income

    Including: Government grant related to
                                                          2,932,142.04     2,662,142.04                              2,932,142.04
    deferred income (related to assets)

             Government grant related to

    deferred income (related to income)

             Government grant directly

    recognized in current profit or loss                152,462,084.20    95,396,464.30                          152,462,084.20

    (related to income)

    2. Others related to daily operation
                                                          4,867,924.92     2,626,332.77                              4,867,924.92
    activities and recognized in other income

    Including: Charges of withholding
                                                          4,598,970.36     2,598,570.59                              4,598,970.36
    individual income tax

    Including: Input tax deduction                         268,954.56        27,762.18                                268,954.56

                       Total                            160,262,151.16   100,684,939.11                          160,262,151.16


Other income of this period increases 59.17% compared with the previous period, mainly due to the increase of navigation subsidies

received by the Company in this period.


5.46 Investment income

                            Category                                      2021                                2020

    Investment income from held-for-trading financial
                                                                                 -777,605.88                         -829,194.39
    assets during holding period

    Dividend income from other equity instrument income
                                                                                   208,728.00                        4,019,690.59
    during holding period

                               Total                                             -568,877.88                         3,190,496.20


5.47 Gains/(losses) from changes in fair values

            Sources of gains on changes in fair value                     2021                                2020

    Interest rate swaps                                                            784,407.36                        -736,690.92



                                                                  225
Shandong Airlines Co., Ltd.                                                        Notes to the Financial Statements


              Sources of gains on changes in fair value                     2021                              2020

                                 Total                                             784,407.36                        -736,690.92


5.48 Impairment loss of credit

                               Category                                     2021                              2020

     Provision for bad debt for accounts receivable                            -15,604,893.16                         667,731.60

     Provision for bad debt for other receivables                                  -426,004.00                       2,720,650.83

                                 Total                                         -16,030,897.16                        3,388,382.43


5.49 Impairment loss of asset

                       Category                                    2021                                   2020

     Goodwill impairment loss                                              -454,020.13

                        Total                                              -454,020.13


5.50 Gains/(losses) from disposal of assets

                                                                                                          Included in current

                            Category                                2021                 2020            period non-recurring

                                                                                                             profit and loss

     Gains/(losses) from disposal of fixed assets,

     construction in progress, productive biological
                                                                     162,594.11          603,734.58                   162,594.11
     assets and intangible assets not classified as held for

     sale

     Including: Fixed assets                                         162,594.11          603,734.58                   162,594.11

                                Total                                162,594.11          603,734.58                   162,594.11


5.51 Non-operating income


5.51.1 Details of Non-operating income

                                                                                                  Included in current period
                       Category                            2021               2020
                                                                                                 non-recurring profit and loss

     Transferred income from pilot                        66,044,171.38      24,999,999.99                        66,044,171.38

     Others                                               22,278,724.15      21,593,143.86                        22,278,724.15

                        Total                             88,322,895.53      46,593,143.85                        88,322,895.53




                                                                   226
Shandong Airlines Co., Ltd.                                                          Notes to the Financial Statements


5.51.2 The Company has no government grants irrelevant to daily operation activities during the reporting period.


5.51.3 The non-operating income of this period increases 89.56% compared with the previous period, mainly due to the increase of

pilot compensation received by the Company.


5.52 Non-operating expenses

                                                                                                 Included in current period
                         Category                         2021              2020
                                                                                                non-recurring profit and loss

     Loss on non-current asset damage and
                                                      1,408,954.73          544,262.93                               1,408,954.73
     scrap

     Others                                           1,249,063.89          254,706.04                               1,249,063.89

                          Total                       2,658,018.62          798,968.97                               2,658,018.62


The non-operating expense of this period increases 232.68% compared with the previous period, mainly due to the increase of loss on

asset damage and scrap.


5.53 Income tax expenses


5.53.1 Details of Income Tax Expenses

                    Category                                     2021                                      2020

     Current tax expenses                                                   207,562.22                            121,260,500.16

     Deferred tax expenses                                              -588,758,131.97                           -885,137,770.81

                         Total                                          -588,550,569.75                           -763,877,270.65


5.53.2 Reconciliation of Accounting Profit and Income Tax Expenses

                                    Category                                         2021                         2020

     Profit before tax                                                             -2,402,255,877.14            -3,145,892,726.46

     Income tax expense at the statutory /applicable tax rate                       -600,563,969.28               -786,473,181.62

     Adjustments of impact from prior period income tax                                   -380,809.13               -6,811,830.61

     Effect of income that is exempt from taxation                                          -52,182.00              -1,004,922.65

     Effect of non-deductible costs, expenses or losses                               11,249,317.80                 30,450,823.64

     Effect of previously unrecognized deductible losses recognized
                                                                                                                         -38,159.41
     as deferred tax assets

     Effect of deductible temporary differences or tax losses which no                 1,197,072.86


                                                                  227
Shandong Airlines Co., Ltd.                                                        Notes to the Financial Statements


                                  Category                                         2021                        2020

     deferred income tax asset was recognised

     Income tax expenses                                                          -588,550,569.75              -763,877,270.65


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 5.36 Other Comprehensive Income.


5.55 Notes to the Statement of Cash Flow


5.55.1 Other cash received relating to operating activities

                                   Category                                         2021                        2020

      Government grants                                                            158,942,084.20                95,396,464.30

      Cash received other than government grants which is recognized
                                                                                      4,867,924.92                2,626,332.77
      in other income

      Interest income on bank deposit                                                93,095,101.45               45,680,277.19

      Cash receipts from non-operating income                                        22,278,724.15               46,593,143.85

      Cash receipts from current account                                              2,091,867.29               48,431,355.93

                                     Total                                         281,275,702.01              238,727,574.04


5.55.2 Other cash payments relating to operating activities

                                        Category                                            2021                  2020

     Bank charges                                                                          34,726,591.92         25,115,379.84

     Cash payments for non-operating expenses                                               1,249,063.89            254,706.04

     Cash payments for current account                                                     73,532,858.30         23,517,158.20

     Cash payments for sales and general and administrative expenses                      257,509,034.77       248,304,944.48

                                          Total                                           367,017,548.88       297,192,188.56


5.55.3 Other cash payment relating to financing activities

                                        Category                                            2021                   2020

      Cash receipts from settlement of interest rate swaps                                    777,605.88            829,194.39

                                          Total                                               777,605.88            829,194.39


                                                                 228
Shandong Airlines Co., Ltd.                                                    Notes to the Financial Statements


5.55.4 Other cash payments relating to financing activities

                                         Category                                    2021                2020

     Cash payments for lease liabilities                                          2,725,684,347.70     360,556,413.20

                                           Total                                  2,725,684,347.70     360,556,413.20


5.56 Supplementary information to the Statement of Cash Flows


5.56.1 Supplementary Information to the Statement of Cash Flows

                             Supplementary information                             2021                 2020

     1.Adjustments of net profit to cash flows from operating activities:

     Net profit                                                                -1,813,705,307.39     -2,382,015,455.81

     Add: Provisions for impairment of assets                                        454,020.13

     Impairment loss of credit                                                     16,030,897.16         -3,388,382.43

     Depreciation of fixed assets, investment properties, oil and gas assets
                                                                                  701,216,962.82       796,938,226.47
     and biological assets held for production

     Depreciation of right-of-use asset                                         2,430,181,040.27

     Amortization of intangible assets                                             18,383,098.27        11,644,865.33

     Amortization of deferred charges                                             114,516,763.61       113,982,866.41

     Loss on non-current assets disposal (gain presented by "-" prefix)           -66,206,765.49          -603,734.58

     Loss on scrap of fixed assets (gain presented by "-" prefix)                   1,408,954.73           544,262.93

     Loss on fair value changes (gain presented by "-" prefix)                       -784,407.36           736,690.92

     Financial costs (gain presented by "-" prefix)                               575,294,023.28       183,792,301.57

     Investment loss (gain presented by "-" prefix)                                  568,877.88          -3,190,496.20

     Decrease of deferred tax assets (increase presented by "-" prefix)          -666,967,200.26      -893,720,837.14

     Increase of deferred tax liabilities (increase presented by "-" prefix)       78,209,068.29         8,583,066.33

     Decrease of inventories (increase presented by "-" prefix)                    -1,212,943.67         -1,137,142.81

     Decrease of operating receivables (increase presented by "-" prefix)         -36,250,837.43       158,681,830.15

     Increase of operating payables (decrease presented by "-" prefix)            206,185,572.98       309,423,178.06

     Others

     Net cash flows generated from operating activities                         1,557,321,817.82     -1,699,728,760.80


                                                                    229
Shandong Airlines Co., Ltd.                                                       Notes to the Financial Statements


                           Supplementary information                                      2021                    2020

    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                                            3,807,440,438.88        5,306,474,451.06

    Less: Cash at the beginning of the reporting period                                5,306,474,451.06          598,861,065.69

    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                                      -1,499,034,012.18           4,707,613,385.37


5.56.2 Net Cash Received from Disposals of Subsidiaries

                                 Category                                 December 31, 2021               December 31, 2020

    ①Cash                                                                     3,807,440,438.88                5,306,474,451.06

          Including: Cash at hand                                                      159,608.70                    225,522.11

          Demand bank deposit                                                  3,807,280,830.18                5,306,248,928.95

          Demand other monetary funds

          Demand deposit in the Central Bank

          Deposit in peer firms

          Loan to peer firms

    ②Cash equivalents

    Including: Debt instrument matured within three months

    ③Cash and cash equivalents at the end of the reporting period             3,807,440,438.88                5,306,474,451.06

    Including: Restricted cash and cash equivalents used by parent

    companies or subsidiaries within the group


5.57 Assets with Imposed Restriction on Ownership

                                                  Closing balance as of December 31,
                   Category                                                                       Reason of restriction
                                                                2021


                                                                 230
Shandong Airlines Co., Ltd.                                             Notes to the Financial Statements


                                       Closing balance as of December 31,
                   Category                                                          Reason of restriction
                                                     2021

    Assets pledged as security                              806,930,433.54

    Aircrafts and engines                                   806,930,433.54     Pledge as security for borrowings

    Other form of restriction:                                 3,662,242.28

    Bank deposit                                               3,662,242.28   Interest on notice deposit receivable

                      Total                                 810,592,675.82


5.58 Foreign Currency Monetary Items

                                       Carrying amount at                                     Carrying amount at
                      Items                                         Exchange rate
                                        foreign currency                                             CNY

     Monetary funds

     Including:    -USD                          391,106.17                     6.3757                 2,493,575.61

     -EUR                                           5,042.00                    7.2197                    36,401.73

     -CAD                                              10.00                    5.0050                         50.05

     -JPY                                       3,251,069.00                    0.0554                   180,109.22

     -TWD                                       2,779,463.00                    0.2302                   639,832.38

     -KRW                                      35,702,109.00                    0.0054                   192,791.39

     -THB                                        507,280.52                     0.1912                    96,992.04




     Other receivables

     Including:    -USD                         6,340,014.96                    6.3757                40,422,033.38




     Accounts payable

     Including:    -USD                        16,871,273.87                    6.3757              107,566,180.81

     -JPY                                       2,618,255.00                    0.0554                   145,051.33




     Other payables

     Including:    -USD                            21,076.05                    6.3757                   134,374.57



                                                      231
Shandong Airlines Co., Ltd.                                                          Notes to the Financial Statements


                                               Carrying amount at                                           Carrying amount at
                         Items                                                  Exchange rate
                                                   foreign currency                                               CNY




      Non-current liabilities due within

      one year

      Including:    -USD                                353,103,282.91                       6.3757             2,251,280,600.85

      -JPY                                               22,861,813.96                       0.0554                 1,266,544.49

      -THB                                                1,226,522.44                       0.1912                    234,511.09

      -TWD                                                4,459,378.32                       0.2302                 1,026,548.89




      Long-term borrowings

      Including:    -USD                                  5,490,808.50                       6.3757                35,007,747.75




      Lease liabilities

      Including:    -USD                              1,155,017,186.70                       6.3757             7,364,043,077.24

      -JPY                                               14,044,486.37                       0.0554                   778,064.54

      -TWD                                                6,092,655.25                       0.2302                 1,402,529.24


5.59 Government Grants


5.59.1 Government Grants Related to Assets

                                                                          Recognized in current profit       Presented items that

                                                     Items presented     or loss or directly as deduct of   recognized in current

                 Items               Amount          in the Financial             related cost                 profit or loss or

                                                        Statements                                           directly as deduct of
                                                                              2021               2020
                                                                                                                 related cost

      Designated subsidy for
                                                         Deferred
      civil aviation                  976,500.12                            976,500.12                          Other income
                                                         income
      energy-saving program

      Designated subsidy for                             Deferred
                                    1,955,641.92                          1,955,641.92                          Other income
      HUD and repackage                                  income



                                                                  232
Shandong Airlines Co., Ltd.                                                           Notes to the Financial Statements

      project

                 Total                 2,932,142.04                         2,932,142.04


5.59.2 Government grants related to income

                                                                     Recognized in current profit or loss    Presented items that
                                                          Items
                                                                     or directly as deduct of related cost   recognized in current
                                                     presented in
           Items                  Amount                                                                       profit or loss or
                                                    the Financial
                                                                          2021                2020           directly as deduct of
                                                      Statements
                                                                                                                 related cost

      Airline grants             105,322,923.29     Other income     105,322,923.29                             Other income

      Other

      government                  47,139,160.91     Other income      47,139,160.91                             Other income

      grants

             Total               152,462,084.20                      152,462,084.20


5.59.3 The Company has no return of government grants during the reporting period.


5.60 Lease


5.60.1 The Company as a lessee


①Short-term lease expenses and low-value asset lease expenses of this period included in the current profits and losses:




                                              Category                                                         2021

      Short-term lease expenses                                                                                    53,641,137.12

      Low-value asset lease expenses (except for short-term lease)

                                                  Total                                                            53,641,137.12


②Current profit and loss and cash flow related to lease

                                              Category                                                         2021

      Interest expenses of lease payments                                                                         463,855,802.08

      Variable lease payments included in the current profits and losses and not included
                                                                                                                   56,500,633.59
      in the lease liabilities

      Revenue of sublease right-of-use assets



                                                                    233
Shandong Airlines Co., Ltd.                                                          Notes to the Financial Statements

      Total cash outflow related to leases                                                                        2,835,826,118.41

      Profit and loss related to sale and leaseback transaction


5.60.2 The Company as a lessor


①Operating lease


A. Lease revenue

                                             Category                                                            2021

     Lease revenue                                                                                                      2,935,401.85

     Including: Revenue related to variable lease payments not included in lease payments


B. Undiscounted lease receivables to be received in each of the five consecutive financial years followings the balance sheet date

                                               Year                                                         Amount

     2022                                                                                                               2,452,592.00

     2023                                                                                                               2,452,592.00

     2024                                                                                                               2,452,592.00

     2025                                                                                                                507,500.00

     2026                                                                                                                522,725.00

                                                Total                                                                   8,388,001.00


C. The total undiscounted lease receivables related to irrevocable lease that will be received in the future according to the lease

contracts signed with the lessee.

                                       Residual maturity                                                    Amount

     Within 1 year (including 1 year, same as below)                                                                     500,000.00

     1-2 years                                                                                                           500,000.00

     2-3 years                                                                                                           500,000.00

     Over 3 years                                                                                                       6,153,897.85

                                              Total                                                                     7,653,897.85


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.




                                                                  234
Shandong Airlines Co., Ltd.                                                          Notes to the Financial Statements
Note 7 INTERESTS IN OTHER ENTITIES
7.1 Interests in Subsidiaries
                                                                                    Place                          Nature                    Holding proportion (%)
                Subsidiaries                      Place of operation                                                                                                               Acquired method
                                                                                of registration                  of business               Directly         Indirectly

Shandong aviation Logistics Ltd                                                                                                                                                    Acquired through
                                                 Qingdao, Shandong         Qingdao, Shandong             Logistics and storage             100.00
(hereafter, Qingdao Logistics)                                                                                                                                                        investment

Qingdao Feisheng International Aviation                                                                                                                                       Acquired through business

Training Technology Development Co., Ltd         Qingdao, Shandong         Qingdao, Shandong                    Pilot training             100.00                                combination not under

(hereafter, Qingdao Feisheng)                                                                                                                                                       common control

                                                                                                                                                                              Acquired through business
Shandong Jinping Air Catering Co., Ltd.                                                                      Aeronautical food
                                                   Jinan, Shandong             Jinan, Shandong                                             100.00                                combination not under
(hereinafter referred to as "Jinping food")                                                                      processing
                                                                                                                                                                                    common control

                                                                                                                                                                              Acquired through business
Shandong Airlines Qingdao Food Co., Ltd.                                                                     Aeronautical food
                                                 Qingdao, Shandong         Qingdao, Shandong                                                49.70             50.30              combination not under
(hereinafter referred to as "Qingdao Food")                                                                      processing
                                                                                                                                                                                    common control

7.2 The Equity in Joint Ventures and Associates

7.2.1 Significant Joint Ventures and Associates

                                                                       Place                        Nature                     Holding proportion (%)          Accounting treatment for investment of
           Subsidiaries                 Place of operation
                                                                  of registration                 of business               Directly          Indirectly              joint ventures and associates

Shandong Rainbow Commercial                                                                          Aero
                                         Jinan, Shandong         Jinan, Shandong                                                   45.00                                    Equity method
Jet Co., Ltd.                                                                                 transportation


                                                                                                   235
Shandong Airlines Co., Ltd.                                                             Notes to the Financial Statements


7.2.2 Key Financial Information of the Significant Associate - Shandong Rainbow Commercial Jet Co., Ltd.

                                                                               December 31, 2021                 December 31, 2020
                                    Item
                                                                                   /Year 2021                        /Year 2020

     Current assets                                                                       1,795,682.09                        1,803,440.67

     Non-current assets                                                                             360.00                         360.00

                                Total assets                                              1,796,042.09                        1,803,800.67

     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                                -165,969,771.24                    -165,962,012.66

     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                                                                               -7,758.58                         -20,692.86

     Net profit from discontinued operations

     Other comprehensive income

                        Total comprehensive income                                            -7,758.58                         -20,692.86

     Dividends received from associates during the year


7.2.8 Excess Loss Occurred by Joint Ventures and Associates

                                                   Cumulative             Unrecognized losses of             Cumulative unrecognized
       Name of joint ventures and
                                           unrecognized losses as     current year (Share of net             losses as of December 31,
                  associates
                                            of December 31, 2020          profit of current year)                      2021



                                                                    236
Shandong Airlines Co., Ltd.                                                              Notes to the Financial Statements


                                                 Cumulative                Unrecognized losses of      Cumulative unrecognized
        Name of joint ventures and
                                           unrecognized losses as      current year (Share of net      losses as of December 31,
                 associates
                                           of December 31, 2020            profit of current year)               2021

     Shandong Rainbow Commercial
                                                    -74,685,696.99                         -3,491.36               -74,689,188.35
     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.


8.1 The Targets and Policies of Risks Management


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

December 31, 2021, except the assets or liabilities in Note 5.58 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


                                                                     237
Shandong Airlines Co., Ltd.                                                             Notes to the Financial Statements


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 5.17, 5.25, 5.27, 5.28, 5.29). 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 December 31, 2021, 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 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

                                                                    238
Shandong Airlines Co., Ltd.                                                                Notes to the Financial Statements


9.1 Assets and Liabilities Measured at Fair Value as at December 31, 2021

                                                                       The fair value at December 31, 2021

                                                    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
                                                      139,937,930.50                            321,307,952.68     461,245,883.18
        investments

        Total amount of assets continuous
                                                      139,937,930.50                            321,307,952.68     461,245,883.18
        measurement by fair value

        1.2 Financial liabilities at fair value
                                                                                78,548.31                               78,548.31
        through profit or loss

        Interest rate swaps                                                     78,548.31                               78,548.31

        Total amount of liabilities

        continuous measurement by fair                                          78,548.31                               78,548.31

        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 valuation

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 Measurement 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 Measurement of the Market of Project, the Qualitative and

Quantitative Information of the Valuation Techniques and Important Parameters



                                                                     239
Shandong Airlines Co., Ltd.                                                         Notes to the Financial Statements


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 Measurement 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 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    Voting right in
          Parent        Place of
                                       Nature of operation         Registered capital           the Company       the Company
       companies      registration
                                                                                                    (%)                (%)

                                     Investment            and

     SDA Group            Jinan      management       of   aero            580,000,000.00                 42.00              42.00

                                     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.



                                                                  240
Shandong Airlines Co., Ltd.                                                        Notes to the Financial Statements


10.4 Other related parties that have transactions with the company

                                 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 Air New Media Co., Ltd.                                                   Controlled by major investors

    Beijing Airlines Co., Ltd.                                                         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 International Airport Ground Service Co., Ltd.                          Jointly operated by major investors

    Shandong Airlines Rainbow Auto Service Co., Ltd.                                   Controlled by major investors

    Beijing Golden Phoenix Human Resources Service Co., Ltd.                           Controlled by major investors

    Chongqing Golden Phoenix Aviation Service Co., Ltd.                                Controlled by major investors


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                2021                  2020

    Beijing Aircraft Maintenance and Engineering
                                                                Repairment                66,539,965.28         59,917,514.33
    Corporation

    Beijing Aircraft Maintenance and Engineering            Purchase / lease of
                                                                                             119,313.00            283,789.14
    Corporation                                               aircraft materials

    Beijing Aircraft Maintenance and Engineering
                                                              Ground service              18,554,603.19         25,036,782.78
    Corporation



                                                                 241
Shandong Airlines Co., Ltd.                                                Notes to the Financial Statements


                       Related party                  Transaction                 2021               2020

   Beijing Golden Phoenix Human Resources
                                                    Ground service                1,476,891.93       1,572,810.30
   Service Co., Ltd.

   Chengdu Fukai Aircraft Engineering Services
                                                      Repairment                  7,351,474.56       6,183,500.06
   Limited

                                                 Aircraft offerings and
   Shandong Air New Media Co., Ltd.                                               8,290,715.38       7,105,576.24
                                                    advertising fees

   Shandong Air New Media Co., Ltd.                 Ground service                  549,114.62        347,115.05

   Taikoo (Shandong) Aircraft Engineering
                                                 Aircraft maintenance            99,603,645.09      94,693,380.12
   Company Limited

   Taikoo (Shandong) Aircraft Engineering         Purchase of aircraft
                                                                                  3,870,523.52       2,788,150.44
   Company Limited                                     materials

   Shandong XiangYu Air Technology Co., Ltd.          Repairment                 91,453,918.31      77,999,772.25

                                                  Purchase / lease of
   Shandong XiangYu Air Technology Co., Ltd.                                                           12,232.91
                                                   aircraft materials

                                                 Office lease rental and
   SDA Group                                                                     39,047,598.20      37,260,027.24
                                                        catering

   SDA Group                                           Group fee                  5,647,026.04       8,645,366.19

   SDA Group                                        Irregular flight                 52,340.00         44,840.00

   Shandong Airlines Rainbow Auto Service Co.,
                                                   Vehicle rental fee            64,201,573.93      67,139,779.12
   Ltd.

   Shandong Airlines Rainbow Auto Service Co.,
                                                       Group fee                  3,137,837.35       2,533,255.98
   Ltd.

   Shandong Airlines Rainbow Auto Service Co.,
                                                    Irregular flight                347,807.34        362,440.37
   Ltd.

   Shenzhen Airlines Co., Ltd.                      Ground service                3,898,859.27        964,552.14

   Shenzhen Airlines Co., Ltd.                      Agency service                       56.13        205,627.68

                                                  Purchase / lease of
   Shenzhen Airlines Co., Ltd.                                                      256,415.09        147,389.16
                                                   aircraft materials

   Shenzhen Airlines Co., Ltd.                          Catering                  1,479,232.29        758,702.77



                                                       242
Shandong Airlines Co., Ltd.                                                   Notes to the Financial Statements


                     Related party                      Transaction                  2021               2020

   Shenzhen Airlines Co., Ltd.                         Irregular flight              1,233,845.02        290,943.40

   Sichuan International Aero Engine Maintenance
                                                        Repairment                 900,031,573.93      82,956,535.74
   Co., Ltd.

   Air China                                           Ground service               12,406,355.24      12,714,204.38

                                                     Purchase / lease of
   Air China                                                                           915,811.59          97,627.90
                                                      aircraft materials

   Air China                                          Agency service                    35,238.87        548,692.50

                                                   Irregular flight / Group
   Air China                                                                        18,414,723.04      21,782,305.64
                                                             fee

   Kunming Airlines Co., Ltd                          Agency service                    15,626.32           5,214.99

   Dalian Airlines Co., Ltd.                           Irregular flight                464,547.17        234,339.62

   Shanghai International Airport Ground Service
                                                       Ground service                   13,389.20        175,187.49
   Co., Ltd.

                         Total                                                   1,349,410,020.90     512,807,655.93




                                                         243
Shandong Airlines Co., Ltd.                                                      Notes to the Financial Statements




Sales of goods and rendering of services

                       Related party                      Transaction                   2021               2020

     Beijing Aircraft Maintenance and Engineering     Sale /rent of aircraft
                                                                                        1,559,510.35        410,650.36
     Corporation                                            materials

     Dalian Airlines Co., Ltd.                          Ground service                    928,188.86       1,112,129.34

                                                          Non-routine

     Dalian Airlines Co., Ltd.                      maintenance/machinery                 177,560.85         54,619.72

                                                             service

     Kunming Airlines Co., Ltd                          Ground service                                         6,947.13

                                                      Locomotive service
     Kunming Airlines Co., Ltd                                                             53,803.77           4,132.08
                                                             income

     Kunming Airlines Co., Ltd                          Agency service                     12,952.36           6,722.40

     Shandong Air New Media Co., Ltd.                 Media resource fee               13,154,530.86      16,065,789.77

     Taikoo (Shandong) Aircraft Engineering
                                                    Sale of aircraft materials            797,845.00        882,671.27
     Company Limited

     Taikoo (Shandong) Aircraft Engineering
                                                          Training fee                    114,100.00         51,556.60
     Company Limited

     Taikoo (Shandong) Aircraft Engineering
                                                        Maintenance fee                   173,396.26        939,588.49
     Company Limited

     Shandong XiangYu Air Technology Co., Ltd.      Sale of aircraft materials            990,000.00       1,820,932.96

     Shenzhen Airlines Co., Ltd.                        Agency service                                      201,448.80

                                                      Sale /rent of aircraft
     Shenzhen Airlines Co., Ltd.                                                          303,405.10        214,448.00
                                                            materials

                                                         Irregular flight

     Shenzhen Airlines Co., Ltd.                    maintenance/locomotive                 10,475.20              495.58

                                                         service income

     Shenzhen Airlines Co., Ltd.                     Aircraft food offerings            1,701,343.43

     Air China                                          Ground service                  5,037,122.40       4,961,303.96

                                                    Simulator maintenance /
     Air China                                                                                             4,111,642.86
                                                      House rental income


                                                           244
Shandong Airlines Co., Ltd.                                                             Notes to the Financial Statements


                          Related party                            Transaction                    2021                    2020

                                                               Sale /rent of aircraft
     Air China                                                                                   3,783,256.16              682,341.23
                                                                    materials

                                                                 Irregular flight

     Air China                                             maintenance/locomotive                   12,212.39               29,619.47

                                                                 service income

     Air China                                                   Agency service                     95,947.26              304,889.55

     Beijing Airlines Co., Ltd.                                  Ground service                     19,547.17                 3,698.11

     China International Airlines Inner Mongolia Co.,
                                                                 Ground service                      3,891.83              128,185.47
     Ltd.

     China International Airlines Inner Mongolia Co.,
                                                            Aircraft food offerings                      841.68
     Ltd.

     Shandong Airlines Rainbow Auto Service Co.,
                                                                 Storage income                    341,430.08              392,919.42
     Ltd.

     Shandong Airlines Rainbow Auto Service Co.,
                                                               Property fee income                  21,803.77               28,420.75
     Ltd.

                              Total                                                             29,293,164.78            32,415,153.32


10.5.2 Remuneration to Key Management Personnel

                              Item                                         2021                                   2020

     Key management personnel compensation                         CNY 8.0962 million                      CNY 8.7852 million


10.5.3 Other Related Party Transactions

             Related party                       Transaction                            2021                        2020

     Air China                            Frequent flyer cooperation                    70,000,000.00                    60,000,000.00

                  Total                                                                 70,000,000.00                    60,000,000.00


10.6 Related Party Balances


10.6.1 Receivables

                                                         December 31, 2021                               December 31, 2020

                 Related party                                         Provision for bad                           Provision for bad
                                               Carrying amount                                 Carrying amount
                                                                              debt                                         debt


                                                                    245
Shandong Airlines Co., Ltd.                                                          Notes to the Financial Statements


                                                       December 31, 2021                          December 31, 2020

                  Related party                                      Provision for bad                       Provision for bad
                                             Carrying amount                              Carrying amount
                                                                            debt                                   debt

    Accounts receivable

    Air China                                       5,235,402.60                              9,869,517.17

    Air China Inner Mongolia Co., Ltd.                   684.00                                  69,220.80

    Dalian Airlines Co., Ltd.                          36,046.80                                  2,530.80

    Taikoo        (Shandong)      Aircraft
                                                       33,600.00
    Engineering Company Limited

    Shandong Air New Media Co., Ltd.                 375,000.00                                 375,000.00

                      Total                         5,680,733.40                             10,316,268.77

    Other receivables

    Air China                                       8,487,948.47                              6,284,099.27

    Shenzhen Airlines Co., Ltd.                      261,861.69                                   9,991.75

    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
                                                     867,437.30                                 158,519.78
    Co., Ltd.

    Taikoo        (Shandong)      Aircraft
                                                    1,158,659.95                                 32,760.70
    Engineering Company Limited

    Shandong Air New Media Co., Ltd.                9,228,235.91                             13,212,795.39

    Beijing Aircraft Maintenance and                2,186,215.64                              1,061,799.39

    Dalian Airlines Co., Ltd.                          93,625.20                                321,199.10

    Kunming Airlines Co., Ltd                          35,312.00                                 48,640.00

    Shandong Airlines Rainbow Auto
                                                        4,060.00                                  4,031.65
    Service Co., Ltd.

    Beijing Airlines Co., Ltd.                          2,560.00

                      Total                       123,877,633.81         101,551,717.65     122,685,554.68     101,551,717.65


10.6.2 Payables

                                  Related party                                    December 31, 2021    December 31, 2020

    Accounts payable

                                                                   246
Shandong Airlines Co., Ltd.                                                      Notes to the Financial Statements


                                   Related party                              December 31, 2021         December 31, 2020

     Shandong XiangYu Air Technology Co., Ltd.                                          66,504,135.32          62,612,200.70

     Taikoo (Shandong) Aircraft Engineering Company Limited                             46,130,817.29          71,170,122.15

     Air China                                                                         363,886,555.24         288,157,344.35

     Beijing Golden Phoenix Human Resources Service Co., Ltd.                                                     468,107.35

     Shenzhen Airlines Co., Ltd.                                                         1,348,606.03           1,575,214.82

     Aircraft Maintenance and Engineering Corporation (Ameco)                           41,299,730.06          69,550,487.95

     Sichuan International Aero Engine Maintenance Co., Ltd.                           188,855,298.97          40,552,088.72

     Shandong Air New Media Co., Ltd.                                                     842,384.00            4,310,391.38

     Shandong Airlines Rainbow Auto Service Co., Ltd.                                   40,392,244.33          45,500,000.00

     Chengdu Fukai Aircraft Engineering Service Co., Ltd.                                3,421,933.08           2,407,193.88

     Shanghai International Airport Ground Service Co., Ltd.                                                       53,210.80

     Dalian Airlines Co., Ltd.                                                              38,160.00

                                      Total                                            752,719,864.32         586,356,362.10

     Other payables

     SDA Group                                                                          37,087,354.58          20,892,072.83

     Taikoo (Shandong) Aircraft Engineering Company Limited                                 80,022.00             641,414.74

     Shandong Air New Media Co., Ltd.                                                    1,772,290.91           3,138,323.91

     Shandong Rainbow Commercial Jet Co., Ltd.                                           1,889,871.66           1,257,646.00

                                      Total                                             40,829,539.15          25,929,457.48


Note 11 COMMITMENTS AND CONTINGENCIES


11.1 Significant Commitments


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
                                                                          December31, 2021              December 31, 2020
                           financial statements

     Commitment for purchase long-term assets                                   4,744,085,049.45            6,327,478,302.14

     Large contract




                                                                247
Shandong Airlines Co., Ltd.                                                         Notes to the Financial Statements


          Capital commitments signed but not yet recognized in the
                                                                            December31, 2021              December 31, 2020
                            financial statements

     Commitment for external investment


11.1.2 Other Commitment


The Company has no other significant commitment needed to be disclosed as of December 31, 2021.


11.2 Contingencies


The Company has no other significant contingencies needed to be disclosed as of December 31, 2021.


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 And Defined Benefit Plan


The Company enters into an agreement with a third party to materially terminate the future obligations of the original defined benefit

plan through a one-time payment. The net liability of defined benefit plan under post-employment benefits after termination of

obligation is zero. In addition to the above, no significant change of the annuity program occurred for the current year, see Note 5.22,

5.31 for details.




Note 14 NOTES TO ELEMENTS OF THE PARENT COMPANY’S FINANCIAL STATEMENTS


14.1 Accounts receivable


14.1.1        Disclosure by Age

                         Age                              December 31, 2021                         December 31, 2020

         Within 1 year                                                  294,841,782.04                           279,757,208.36

         1 to 2 years                                                    26,374,321.46                            52,098,250.31

         2 to 3 years                                                    15,955,262.91                            34,122,000.00

         3 to 4 years                                                    32,120,000.00

         4 to 5 years


                                                                  248
Shandong Airlines Co., Ltd.                                                        Notes to the Financial Statements


         Over 5 years                                                     420,529.65                             420,529.65

                         Subtotal                                     369,711,896.06                          366,397,988.32

         Less: provision for bad debt                                  31,415,764.41                           15,724,684.12

                          Total                                       338,296,131.65                          350,673,304.20


14.1.2        Disclosure by Category

                                                                              December 31, 2021

                                                    Book balance                   Provision for bad debt
                        Category                                                                                Carrying
                                                               Proportion                         Provision
                                                Amount                             Amount                        amount
                                                                ratio (%)                         ratio (%)

         Accounts receivable subject to
                                              47,492,966.87           12.85      18,117,242.76        38.15    29,375,724.11
         individual impairment assessment

         Accounts receivable subject to
                                             322,218,929.19           87.15      13,298,521.65         4.13   308,920,407.54
         group impairment assessment

                         Total               369,711,896.06          100.00      31,415,764.41         8.50   338,296,131.65


(Continued)

                                                                              December 31, 2020

                                                    Book balance                   Provision for bad debt
                        Category                                                                                Carrying
                                                                Provision                         Provision
                                                Amount                             Amount                        amount
                                                                ratio (%)                         ratio (%)

         Accounts receivable subject to

         individual impairment assessment

         Accounts receivable subject to
                                             366,397,988.32          100.00      15,724,684.12         4.29   350,673,304.20
         group impairment assessment

                         Total               366,397,988.32          100.00      15,724,684.12         4.29   350,673,304.20


①Provisions for bad debts subject to individual impairment assessment as of December 31, 2021.

                                                              December 31, 2021

          Category                                                   Provision
                          Carrying amount       Provision                                            Reason
                                                                   ratio(%)




                                                               249
Shandong Airlines Co., Ltd.                                                         Notes to the Financial Statements


      Debtor #1             32,120,000.00         12,773,220.82            39.77     Impairment upon individual assessment

      Debtor #2             15,372,966.87          5,344,021.94            34.76     Impairment upon individual assessment

          Total             47,492,966.87         18,117,242.76            38.15


②Accounts receivable subject to impairment assessment by credit risk characteristics group as of December 31, 2021.

                                                                                   December 31, 2021

                          Category                                                 Provision for bad
                                                            Book value                                    Provision ratio (%)
                                                                                         debt

      Amounts due from the clearing center                    16,263,740.96

      Amounts due from the aviation association               34,671,136.84

      Amounts due from related parties                         5,313,618.50

      Other receivables                                      265,970,432.89             13,298,521.65                      5.00

                           Total                             322,218,929.19             13,298,521.65                      4.13


③As at December 31, 2020, there is no provision for bad debts subject to individual impairment assessment.


④Accounts receivable subject to impairment assessment by credit risk characteristics group as of December 31, 2020

                                                                                   December 31,2021

                          Category                                                 Provision for bad
                                                            Book value                                    Provision ratio (%)
                                                                                         debt

      Amounts due from the clearing center                    10,455,297.15

      Amounts due from the aviation association               31,724,360.89

      Amounts due from related parties                         9,724,648.00

      Other receivables                                      314,493,682.28             15,724,684.12                      5.00

                           Total                             366,397,988.32             15,724,684.12                      4.29


The Company calculate provision of bad debt according to the combination of credit risk characteristics and the expected loss

amount.


14.1.3 Changes of Provision for Bad Debt During the Reporting Period

                                                                    Changes during the reporting period
                                             December 31,                                                      December 31,
                  Category                                                          Recovery or
                                                  2020             Provision                       Write-off        2021
                                                                                      reversal


                                                                  250
Shandong Airlines Co., Ltd.                                                          Notes to the Financial Statements


                                                                   Changes during the reporting period
                                             December 31,                                                        December 31,
                   Category                                                          Recovery or
                                                 2020             Provision                          Write-off       2021
                                                                                      reversal

      Accounts receivable subject to
                                                                18,117,242.76                                     18,117,242.76
      individual impairment assessment

      Accounts receivable subject to
                                              15,724,684.12                          2,426,162.47                 13,298,521.65
      impairment assessment by group

                       Total                  15,724,684.12     18,117,242.76        2,426,162.47                 31,415,764.41


14.1.4 The Company has no accounts receivable actually written off in this period.


14.1.5 As of December 31, 2021, the top five accounts receivable amounted to CNY 174,838,477.71, accounting for 47.29% of the

total ending balance of accounts receivable, and the corresponding bad debt provision amounted to CNY 19,909,144.71 collectively.


14.1.6 The Company has no derecognition of accounts receivable due to the transfer of financial assets.


14.1.7 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                            December 31, 2021                           December 31, 2020

     Interests receivable

     Dividends receivable

     Other receivables                                                179,708,210.51                             165,544,964.64

                        Total                                         179,708,210.51                             165,544,964.64


14.2.2 Other Receivables


① Other receivables by age

                         Age                            December 31, 2021                           December 31, 2020

     Within one year                                                  144,296,475.71                             136,305,404.11

     1-2 years                                                         17,370,290.85                               4,690,877.26

     2-3 years                                                          3,644,719.68                              12,288,561.13

     3-4 years                                                          9,319,361.13                               3,882,745.43

     4-5 years                                                          1,859,618.40                                773,009.94


                                                                251
Shandong Airlines Co., Ltd.                                                             Notes to the Financial Statements


                         Age                               December 31, 2021                         December 31, 2020

     Over 5 years                                                            109,055,375.34                        112,978,097.70

                       Subtotal                                              285,545,841.11                        270,918,695.57

     Less: provision for bad debt                                            105,837,630.60                        105,373,730.93

                        Total                                                179,708,210.51                        165,544,964.64


② Other receivables by nature

                       Nature                              December 31, 2021                         December 31, 2020

     Deposits receivable                                                      66,697,664.53                         63,646,894.09

     Amounts due from related parties                                        133,129,917.60                        130,831,535.85

     Other receivables                                                        85,718,258.98                         76,440,265.63

                       Subtotal                                              285,545,841.11                        270,918,695.57

     Less: provision for bad debt                                            105,837,630.60                        105,373,730.93

                        Total                                                179,708,210.51                        165,544,964.64


③ Other receivables by bad debt provision method


A.Provision for bad debts recognized based on three stages model as of December 31, 2021 is as follows:


Provision for bad debt in the first stage as of December 31, 2021:

                                                     Lifetime expected         Provision for
           Category               Book balance                                                  Carrying amount       Reason
                                                    credit losses rate (%)       bad debt

     Oher receivables

     subject to individual

     impairment

     assessment

     Oher receivables

     subject to impairment        183,994,123.46                     2.33        4,285,912.95     179,708,210.51

     assessment by group

                                                                                                                   No significant
     Including: Deposits
                                    66,697,664.53                                                  66,697,664.53    increase on
     receivable
                                                                                                                     credit risk

     Amounts due from                                                                                              No significant
                                    31,578,199.95                                                  31,578,199.95
     related parties                                                                                                increase on



                                                                    252
Shandong Airlines Co., Ltd.                                                          Notes to the Financial Statements

                                                   Lifetime expected        Provision for
           Category            Book balance                                                  Carrying amount           Reason
                                                 credit losses rate (%)       bad debt

                                                                                                                      credit risk

                                                                                                                    No significant

     Other receivables           85,718,258.98                       5.00     4,285,912.95         81,432,346.03     increase on

                                                                                                                      credit risk

                Total           183,994,123.46                       2.33     4,285,912.95        179,708,210.51


As of December 31, 2021, 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 December 31, 2021:

                                                      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 debt using incurred loss model as of December 31, 2020:


Provision for bad debt in the first stage as of December 31, 2020:

                                                   Lifetime expected        Provision for
           Category            Book balance                                                  Carrying amount           Reason
                                                 credit losses rate (%)       bad debt

     Other receivables

     subject to individual

     impairment

     assessment

     Other receivables

     subject to impairment      169,366,977.92                       2.26     3,822,013.28        165,544,964.64

     assessment by group

                                                                                                                    No significant
     Including: Deposits
                                 63,646,894.09                                                     63,646,894.09     increase on
     receivable
                                                                                                                      credit risk

                                                                 253
Shandong Airlines Co., Ltd.                                                              Notes to the Financial Statements

                                                      Lifetime expected         Provision for
           Category             Book balance                                                      Carrying amount           Reason
                                                     credit losses rate (%)       bad debt

                                                                                                                         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 December 31, 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 December 31, 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


④ Changes of provision for bad debt during the reporting period

                                                                    Changes during the reporting period
                                           December 31,
                  Category                                                          Recovery                       December 31, 2021
                                               2020               Provision                           Write-off
                                                                                    or reversal

      Other receivables of

      individual significance and
                                            101,551,717.65                                                              101,551,717.65
      subject to individual

      impairment assessment

      Other receivables subject to

      impairment assessment by                3,822,013.28         463,899.67                                              4,285,912.95

      credit risk characteristics


                                                                     254
Shandong Airlines Co., Ltd.                                                              Notes to the Financial Statements


                                                                   Changes during the reporting period
                                          December 31,
                 Category                                                            Recovery                          December 31, 2021
                                              2020             Provision                               Write-off
                                                                                    or reversal

      group

                   Total                   105,373,730.93          463,899.67                                              105,837,630.60


⑤ There are no written off of other receivables during the reporting period.


⑥ Top five closing balances by entity

                                                                                           Proportion of the
                                               Balance as at                                                            Provision for bad
            Entity name         Nature                                    Age             balance to the total
                                            December 31, 2021                                                                  debt
                                                                                         other receivables (%)

     Shandong Rainbow
                               Related
     Commercial Jet Co.,                      101,551,717.65         Over 5 years                            35.56      101,551,717.65
                                 party
     Ltd.

     Debtor #1                 Deposits        31,257,853.34         Within 1 year                           10.95

     Debtor #2                 Deposits        14,567,356.48         Within 1 year                            5.10

     Debtor #3                  Others         14,129,792.80         Within 1 year                            4.95             706,489.64

     Debtor #4                 Deposits        10,503,492.40        Within 3 years                            3.68

               Total                          172,010,212.67                                                 60.24         102,258,207.29


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.


⑨The 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

                                                         Current          Current
                                     December 31,                                        December 31,              Provision    Year-end
                Investee                                    year            year
                                           2020                                                 2021           recognized       provision
                                                         increase         decrease

     Shandong aviation
                                         48,323,205.97                                     48,323,205.97
     Logistics Ltd

     Qingdao Feisheng                    57,677,479.46                                     57,677,479.46



                                                                    255
Shandong Airlines Co., Ltd.                                                                 Notes to the Financial Statements

                                                             Current          Current
                                        December 31,                                            December 31,     Provision        Year-end
                 Investee                                      year             year
                                            2020                                                   2021          recognized       provision
                                                             increase         decrease

     International Aviation

     Training Technology

     Development Co., Ltd

     Shandong Jinping aviation
                                           7,790,400.00                                           7,790,400.00
     food Co., Ltd.

     Shandong Airlines Qingdao
                                          30,310,200.00                                          30,310,200.00
     Food Co., 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
                            December 31,       Impairment                                          and losses
         Investee                                               Additional Investment                            comprehensive changes
                               2020             provision                                          recognized
                                                                investment reduction                                 income            in
                                                                                                     under
                                                                                                                    adjustment       equity
                                                                                                   the equity

                                                                                                    method

     Associates

     Shandong

     Rainbow
                            22,500,000.00      22,500,000.00
     Commercial Jet

     Co., Ltd.

          Total             22,500,000.00      22,500,000.00


(Continued)

                                            Changes in the current period       (+, -)
                                                                                                     December 31,              Year-end
                 Investee               Declared cash           Provision
                                                                                       Others             2021                 provision
                                      dividends or profits      recognized

      Associates


                                                                        256
Shandong Airlines Co., Ltd.                                                                     Notes to the Financial Statements


                                               Changes in the current period    (+, -)
                                                                                                     December 31,             Year-end
              Investee                   Declared cash            Provision
                                                                                      Others             2021                 provision
                                       dividends or profits      recognized

      Shandong Rainbow

      Commercial Jet Co.,                                                                            22,500,000.00          22,500,000.00

      Ltd.

               Total                                                                                 22,500,000.00          22,500,000.00


14.4 Operating revenues and operating costs

                                                         2021                                                   2020
             Items
                                   Operating revenues           Operating costs            Operating revenues          Operating costs

    Principal activities               11,825,926,931.05         13,513,169,484.99               9,854,672,423.67      12,550,540,262.47

    Other activities                      643,312,409.54               11,014,671.04               655,331,879.04             4,559,337.10

              Total                    12,469,239,340.59         13,524,184,156.03              10,510,004,302.71      12,555,099,599.57




14.5 Investment Income

                               Items                                           2021                                    2020

    Investment income from held-for-trading
                                                                                         -777,605.88                           -829,194.39
    financial assets during holding period

    Dividend income from other equity instrument
                                                                                          208,728.00                          4,019,690.59
    income during holding period

                               Total                                                     -568,877.88                          3,190,496.20




Note 15 SUPPLEMENTARY INFORMATION


15.1 Current non-recurring statement of profit and loss

                                       Items                                             2021                2020             Description

    Gains /(losses) on disposal of non-current assets                              64,797,810.76                59,471.65

    Government        grants    recognized in current profit or loss
                                                                                  155,394,226.24           98,058,606.34
    (except government grants that is closely related to operations


                                                                        257
Shandong Airlines Co., Ltd.                                                                Notes to the Financial Statements


                                   Items                                            2021                      2020          Description

    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,

    held-for-trading financial liabilities and derivative financial

    liabilities during the holding period and investment income

    arising from disposal of held-for-trading financial assets,                          6,801.48           -1,565,885.31

    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
                                                                                 21,029,660.26              46,338,437.81
    mentioned above

    Other gains or losses satisfying the definition of extraordinary
                                                                                   4,867,924.92              2,626,332.77
    gains or losses

    Total extraordinary gains/(losses)                                          246,096,423.66          145,516,963.26

    Less: tax effect                                                             61,534,128.14              36,389,420.55

    Net extraordinary gains/(losses)                                            184,562,295.52          109,127,542.71

    Less: net extraordinary gains/(losses) attributable to minority

    interests

    Net extraordinary gains/(losses) attributable to ordinary
                                                                                184,562,295.52          109,127,542.71
    shareholders


15.2 Return on Net Assets and Earnings Per Share (‘EPS’)


15.2.1 Year 2021

            Profit for the reporting period           Weighted average return on                                 EPS

                                                             net assets (%)                         Basic                   Diluted

    Net profit attributable to ordinary
                                                                             -9,352.93                         -4.53                  -4.53
    shareholders

    Net profit attributable to ordinary                                     -10,304.69                         -5.00                  -5.00



                                                                      258
Shandong Airlines Co., Ltd.                                                      Notes to the Financial Statements


             Profit for the reporting period     Weighted average return on                        EPS

                                                       net assets (%)                  Basic                   Diluted

    shareholders after extraordinary gains and

    losses


15.2.2 Year 2020


                                                 Weighted average return on                        EPS
             Profit for the reporting period
                                                       net assets (%)                  Basic                   Diluted

    Net profit attributable to ordinary
                                                                        -61.31                   -5.96                   -5.96
    shareholders

    Net profit attributable to ordinary

    shareholders after extraordinary gains and                          -64.12                   -6.23                   -6.23

    losses




                                                                                                         Shandong Airlines Co., Ltd


                                                                                               Legal representative: Sun Xiujiang


                                                                                                                   March 31, 2022




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