Air China Limited 2014 Annual Results Under IFRS

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1 Air China Limited 2014 Annual Results Under IFRS March 2015

2 Agenda Part 1 Results Highlights Part 2 Business Overview Part 3 Financial Overview Part 4 Outlook

3 Part 1 Results Highlights

4 Gradual Global Economic Recovery, Slower Economic Growth in China 12.0% 10.0% 10.3% 9.0% 9.2% 8.7% 8.0% 7.8% 7.7% 7.4% 6.0% 5.4% 4.0% 3.0% 4.1% 3.3% 3.3% 24% 18% 12% 6% 0% 2.0% 0.0% 0.0% Steady Growth in Passenger Market 3.4% E Global GDP Growth Rate China's GDP Growth Rate 18% 14% 10% 6% 2% -2% Air Cargo Traffic showed recovery Global RPK China's RPK Sources:IMF, IATA, CEIC, CAAC Global RFTK China's RFTK 4

5 Results Highlights Key Financial Metrics 2014 Annual YoY Change Turnover (RMB million) 105, % Operating Expenses (RMB million) 98, % Profit for the period (RMB million) 4, % Profits Attributable to Shareholders (RMB million) 3, % EPS (RMB/share) % Dividend(RMB/10 shares) % Key Operational Metrics 2014 Annual YoY Change ATK (million) 27, % RTK (million) 19, % ATK Load Factor (%) pts ASK (million) 193, % RPK (million) 154, % Passenger Load Factor (%) pts 5

6 Part 2 Business Overview

7 Air China Total 2014 YoY Change Revenue (RMB million) 67, % ASK (million) 138, % RPK (million) 110, % Load Factor (%) pts Yield (RMB/RPK) % Domestic 2014 YoY Change Revenue (RMB million) 40, % ASK (million) 75, % RPK (million) 61, % Load Factor (%) pts Yield (RMB/RPK) % International 2014 YoY Change Regional (HK, Macau and Taiwan) 2014 YoY Change Revenue (RMB million) 23, % ASK (million) 57, % Revenue (RMB million) 3, % ASK (million) 5, % RPK (million) 45, % Load Factor (%) pts Yield (RMB/RPK) % RPK (million) 4, % Load Factor (%) pts Yield (RMB/RPK) % 7

8 Optimised Capacity Allocation to Align with Market Demands 2014 YoY Change in Capacity & Passenger Traffic Capacity Distribution 18% 14% 16.4% International Domestic Regional 15.7% 14.1% 13.5% % % 10% 6% 2% 3.2% 2.9% -2.0pts -0.3pts 1.1pts 39.06% 57.33% % % -2% Fleet ASK Change RPK Change Passenger Load Factor Change Domestic International Regional Total (as of December 31, 2013) 316 Introduced in B (13) B747-8(4) B ER (4) A321/320(11) A330(8) Retired in B (5) B (5) B (6) B C(4) B ER(1) A340(1) Total (as of December 31, 2014) 334 8

9 Strengthened Hub Construction and Improved Network Value Beijing hub network coverage continued to expand through the launch of new international routes from Beijing to Washington, Vienna (Barcelona), Yangon and Jeju etc.. Flight banks have been optimized to increase the number of connecting flights. The number of transfer passengers reached 4.88 million The Chengdu regional hub introduced a new international route from Kunming to Yangon and several domestic routes including Chengdu-Ghulja/Yulin. Increased capacity in exclusive routes at the hub. The number of transfer passengers reached 620,000 At the Shanghai international gateway, the new Shanghai-Munich long-haul route was introduced, hence increase Shanghai International routes to 14. Through check-in service expanded to 14 routes for international transfers to Europe via Shanghai. The number of transfer passengers reached 270,000 Capacity Change in Beijing, Chengdu & Shanghai Transfer Passengers and Revenue in Different Hubs 50% 40% 30% 20% 10% 0% 11.0% 7.7% 7.4% 7.4% 6.8% 38.2% Beijing Chengdu Shanghai 10 thousand persons Beijing Chengdu Shanghai RMB 100 million ASK YOY Growth AFTK YOY Growth Transfer Passengers Transfer Revenue 9

10 Enhanced Restructuring of Marketing Model and Innovation of Services Upgraded Yield Management (O&D) System and Customer Relationship Management (CRM) System Strengthened marketing management to boost the yield of main base Optimised passenger profile to improve revenue from premium classes Enhanced e-commerce capability, upgraded overseas website and expanded mobile APP functions Proportion of revenue from premium classes in passenger transportation Continuous Revenue Growth of Premium Classes RMB 100 million 40% RMB 100 million 1.4% 14.8% 30% 29.0% 20% 10% 0% 11.9% 11.5% 27.9% 17.6% 18.3% 13.6%

11 Fine tuning Marketing initiatives and making Innovation of Services Developed and implemented Advance Check-in, Security check with ID card only, as well as full self-service offerings such as Check-in, Baggage Check-in, and Boarding. Introduced a number of new products, such as Upgrade Coupon, Seat Selection Fee, Prepaid Luggage service, and thus established a product system generating ancillary revenue 11

12 Enhanced Restructuring of Marketing Model and Innovation of Services Initiated and rolled out new cabin interior designs Successful trial flight with in-flight internet connection 12

13 Air China Cargo 2014 YoY Change AFTK (million) 9, % Freighter AFTK (million) 2, % RFTK (million) 5, % Freighter RFTK (million) 2, % Tonnage Carried (tonne) 1,230, % Freighter Tonnage Carried (tonne) 355, % Load Factor (%) 54.9% -1.69pts Freighter Load Factor (%) 81.1% -0.62pts Yield (RMB/RFTK) % Change in air cargo fleet (aircraft) 747F F 1 4 Change in freighter utilisation rate Hour/ aircraft, day F

14 Shenzhen Airlines 2014 YoY Change ASK (million) 47, % RPK (million) 38, % ATK (million) 4, % RTK (million) 3, % Passengers carried (thousand) 26, % Passenger load factor (%) 80.8% -0.85pts ATK load factor (%) 79.5% -1.06pts Passenger Yield (RMB/RPK) % 14

15 Air Macau 2014 YoY Change ASK (million) 5, % RPK (million) 3, % ATK (million) % RTK (million) % Passengers carried (thousand) 2, % Passenger load factor (%) 68.2% 0.29pts ATK load factor (%) 63.0% 0.18pts Passenger Yield (RMB/RPK) % 15

16 Part 3 Financial Overview

17 Operating Performance Recorded Growth, Profit Improved RMB million YoY Change Turnover 105,884 98, % Air traffic revenue 101,385 94, % Operating expenses 98,623 94, % Operating expenses ex-fuel cost 64,080 60, % Profit from operations 7,262 4, % Finance cost 3, % Share of profit of associates % Profit before tax 5,065 4, % Profit for the period 4,285 3, % Profit attributable to shareholders 3,817 3, % EPS (RMB /share) % 17

18 Operating Performance Recorded Growth, Profit Improved , , , , ,772 5,

19 Steady Revenue Growth in Air Passenger Business and Turnaround in Air Cargo Business (RMB million) Passenger Services YoY Change Cargo Services YoY Change Total YoY Change Domestic 61, % 2, % 63, % (%) pts pts pts International 25, % 6, % 31, % (%) pts pts pts Regional 5, % % 6, % (%) pts pts pts Changes on Passenger and Cargo Revenue RMB Million 120, ,000 80,000 60, % 91.17% 8.67% 91.33% 5.80% 29.75% 64.45% 6.10% 31.07% 62.83% 40,000 20, Passenger Revenue Cargo Revenue Domestic International Regional 19

20 Managed Pace of Operation to Control Costs Take-off, landing and depot charges 10.7% Take-off, landing and depot charges 10.2% Depreciation 11.5% Jet Fuel 35.0% Depreciation 11.6% Jet Fuel 35.9% Maintenance 3.6% Maintenance 3.3% Staff 15.7% Lease expenses 4.6% Other flight operation expenses 8.5% Air Catering 2.8% Others 7.9% Staff 14.9% Lease expenses 4.3% Other flight operation expenses 8.8% Air Catering 2.7% Others 7.9% (RMB million) YoY Change Jet Fuel 34,542 33, % Take-off, landing and depot charges 10,566 9, % Depreciation 11,323 10, % Maintenance 3,588 3, % Staff 15,513 14, % Aircraft and engine operating lease expenses 4,537 4, % Air Catering 2,756 2, % Other flight operation expenses 8,390 8, % Others 7,408 7, % Total 98,623 94, % 20

21 YoY Drop in Procurement Cost for Jet Fuel RMB Billion 40 Fuel Cost and Jet Fuel Surcharge Fuel Cost Jet Fuel Surcharge Changes in Jet Fuel Purchase Price 9,000 RMB/Tonne Average Domestic International 2013 Average:7,210 RMB/Tonne RMB/Tonne Average:7, Average:6,327 7, ,000 4, Average:6, Domestic:7, Average:5,931 3, , Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

22 Strengthened Cost Control 100,000 80,000 60,000 40,000 20,000 0 RMB Million 62,715 22,614 40,101 Fuel Cost and Non-fuel Operating Cost 45,892 14,466 31,426 71,560 24,096 47,464 92,151 91,064 94,063 34,703 35,640 33,722 98,623 34,542 57,447 55,424 60,340 64, Operating Cost excluded Fuel Cost Fuel Cost Unit Cost RMB Cost per ASK Cost per ATK 120% % Cost as Percentage of Revenue RMB 5 Ex-fuel Unit Cost 100% 80% 60% 75.79% 95.81% 93.64% 93.18% 89.30% 91.55% 86.75% 61.15% 61.46% 57.54% 58.38% 60.56% 55.72% % Operating Cost as % of Revenue Cost per ASK Cost per ATK Ex-fuel Operating Cost as % of Revenue 22

23 Healthy Financial Position (X) Net Debt-to-Equity Ratio % Asset to Liability Ratio (X) EBITDA Interest Protection Multiples RMB Million 60,000 50,000 40,000 30,000 20,000 10, ,943 Net Assets (Excludes minority interest) 23,916 41,438 46,203 49,944 53,757 53,

24 Interest Bearing Debt (RMB Million) 2014 % 2013 % USD 83, , RMB 30, , EUR JPY Total 114, , Dec, Dec, % % 70.13% % Short term Interest 短期带息负债 Bearing Debt Long term Interest 长期带息负债 Bearing Debt 24

25 Part 4 Outlook

26 2015: New Normal New Normal in China s Aviation Industry New Normal in China s Economy Shift from high-speed growth to mid-speed growth Structural changes in the economy Development mode focuses more on quality and efficiency Slower industry growth Structural changes in the market -Higher growth rate in international markets than in domestic market -Number of travelers from government organizations decreased while business travellers and general leisure travellers have huge growth potential Diverse growth drivers -Mobile internet drives innovation and transformation of business models adopted by the airlines -Upgraded consumption, outbound travel became a key driver 26

27 2015: New Business Focus Enhance competitiveness of the hubs in order to maximise value of the network; Focus on customers needs to implement innovative marketing strategy and activities; Strengthen service management and boost product competitiveness to improve customer experience; Maintain industry-leading cost structure; Improve capability of informatisation; Enhance business synergies with associated corporations in the Group 27

28 Appendix 2014 Other Financial and Operational Data

29 1. Fleet the Group Subtotal Owned 31 December 2014 Delivery Finance Lease Operating Lease Average Age A A320/A A A B B B B B B747F B757F B777F Business Jets TOTAL *Wet lease aircraft excluded in calculation of average ages 29

30 2. Fleet Air China Subtotal Owned 31 December 2014 Delivery Finance Lease Operating Lease Average Age A A320/A A A B B B B B Total *Wet lease aircraft excluded in calculation of average ages 30

31 3. Profitability Ratio 同比 EBITDA (RMB million) 18,651 15, % EBITDA margin 17.61% 15.42% 2.19pts EBITDAR (RMB million) 24,128 20, % EBITDAR margin 22.79% 20.43% 2.36pts Operating profit margin 6.86% 4.19% 2.66pts Pre-tax profit margin 4.78% 4.60% 0.18pts Net profit margin 3.61% 3.32% 0.29pts ROE 7.09% 6.29% 0.80pts 31

32 4. Consolidated Balance Sheet (Condensed) (RMB million) 31 Dec Dec 2013 Change Non-current assets 148, , % - Aircraft and flight equipment 130, , % - Property and plant 5,549 5, % Current assets 21,053 25, % - Cash and cash equivalents 9,660 14, % Total assets 209, , % Current liabilities 60,843 70, % Non- Current liabilities 89,358 77, % Total liabilities 150, , % Total equity attributable to equity Shareholders of the Company 53,978 53, % 32

33 5. Consolidated Cash Flow Statement (RMB million) YoY Change Net cash flow from operating activities 14,064 14, % Net cash flow from investing activities 10,313 20, % Net cash flow from financing activities -8,859 9, % Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at 31 December -5,108 3, % 14,762 11, % % 9,660 14, % 33

34 Investor Relations - Beijing Fan Heyun Tel: Fax: Cao Yu Tel: Fax: 公司网址 :