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
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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
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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.
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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
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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
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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
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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)
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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
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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
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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
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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
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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)
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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
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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
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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
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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.
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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
98
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
100
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
101
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
104
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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Shandong Airlines Co., Ltd. Annual Report 2021
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
128
Shandong Airlines Co., Ltd. Annual Report 2021
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
129
Shandong Airlines Co., Ltd. Annual Report 2021
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
130
Shandong Airlines Co., Ltd. Annual Report 2021
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
131
Shandong Airlines Co., Ltd. Annual Report 2021
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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Shandong Airlines Co., Ltd. Annual Report 2021
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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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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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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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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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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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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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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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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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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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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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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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
189
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:
192
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
193
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
196
Shandong Airlines Co., Ltd. Annual Report 2021
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
197
Shandong Airlines Co., Ltd. Annual Report 2021
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
199
Shandong Airlines Co., Ltd. Annual Report 2021
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
200
Shandong Airlines Co., Ltd. Annual Report 2021
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
201
Shandong Airlines Co., Ltd. Annual Report 2021
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
202
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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
203
Shandong Airlines Co., Ltd. Annual Report 2021
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
204
Shandong Airlines Co., Ltd. Annual Report 2021
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
205
Shandong Airlines Co., Ltd. Annual Report 2021
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
206
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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
207
Shandong Airlines Co., Ltd. Annual Report 2021
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
208
Shandong Airlines Co., Ltd. Annual Report 2021
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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Shandong Airlines Co., Ltd. Annual Report 2021
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
210
Shandong Airlines Co., Ltd. Annual Report 2021
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
211
Shandong Airlines Co., Ltd. Annual Report 2021
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
212
Shandong Airlines Co., Ltd. Annual Report 2021
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.
213
Shandong Airlines Co., Ltd. Annual Report 2021
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
214
Shandong Airlines Co., Ltd. Annual Report 2021
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
215
Shandong Airlines Co., Ltd. Annual Report 2021
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
216
Shandong Airlines Co., Ltd. Annual Report 2021
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
217
Shandong Airlines Co., Ltd. Annual Report 2021
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
218
Shandong Airlines Co., Ltd. Annual Report 2021
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
219
Shandong Airlines Co., Ltd. Annual Report 2021
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
220
Shandong Airlines Co., Ltd. Annual Report 2021
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
221
Shandong Airlines Co., Ltd. Annual Report 2021
（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
222
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
259
