Air China Limited Announces 2010 Annual Results Profit reaches record high on strong economic growth Hong Kong March 29, 2011 Air China Limited ( Air China or the Company, together with its subsidiaries, collectively the Group ) (HKEX: 00753; LSE: AIRC; SSE: 601111: ADR OTC: AIRYY), today announced its results 1 for the 12 months ended December 31, 2010 ( the Period ). Results Highlights Turnover was RMB82.49 billion, an increase of 60.50% year-over-year Operating expenses were RMB71.56 billion, an increase of 55.93% year-over-year Fuel cost was RMB24.10 billion, representing a 66.57% increase year-over-year Profit attributable to shareholders was RMB12.01 billion, representing an increase of 147.31% year-over-year Basic earning per share was RMB1.03, an increase of 151.22% year-over-year The Chinese airline industry achieved strong growth in 2010, supported by the recovering global economy, accelerated economic growth in China and increased demand during the Shanghai World Expo and Guangzhou Asian Games. In 2010, Air China continued to execute its strategy, extended network with strengthened hubs, enhanced operational and marketing efforts, strengthened cost control and strived for better integration of resources. As a result of these proactive measures, the Company experienced accelerating growth and achieved record high results and leading yield level within the Chinese airline industry. Financial Highlights In 2010, the Group's turnover was RMB82.49 billion, an increase of 60.50% year-over-year. 1. All figures are stated according to International Financial Reporting Standards ( IFRS ) 1
Passenger revenue was RMB 68.14 billion, a year-over-year increase of 59.59%. Cargo revenue was RMB10.07 billion, a year-over-year increase of 86.64%. The increase in revenue was mainly due to strong demand for air passenger and cargo transportation, as well as the consolidation of Shenzhen Airlines Company Ltd. s ( Shenzhen Airlines ) results. Operating expenses increased by 55.93% to RMB71.56 billion, from RMB45.89 billion in the same period in 2009. Jet fuel cost, which remained the single-largest cost for the Group, reached RMB24.10 billion in 2010, a 66.57% increase, accounting for 33.67% of operating expenses. The surge in jet fuel cost was mainly due to the oil price hike, increased fuel consumption resulting from more flying hours, and the consolidation of Shenzhen Airlines results. During the Period, Air China continued to exploit cost saving measures and maintain its cost advantages. Although jet fuel prices rose almost 40% year-over-year in 2010, the Company maintained a competitive cost-level as compared to its peers within the Chinese airline industry. In 2010, the Company recorded a fair value gain from fuel derivative contracts amounting to RMB1.95 billion, of which RMB1.97 billion related to a fair value write-back. The decrease in fare value write-back was RMB14 million, mainly due to the contracts settlement. In 2010, the Company's exchange gains were RMB1.92 billion, an increase of RMB1.81 billion, or 1650.62% from 2009, primarily due to the appreciation of the Renminbi against the US Dollar. During the Period, the Company recorded an operating profit of RMB10.93 billion, a year-over-year increase of 98.65%. Profit attributable to shareholders was RMB12.01 billion, an increase of 147.31% compared with RMB4.85 billion in 2009. The Board recommends the payment of a final dividend of RMB0.1182 per share for the year ended 31 December 2010, totalling approximately RMB1,523.83 million based on the Company s total issued shares of 12,891,954,673. A resolution for the dividend payment will be submitted for consideration at the 2010 annual general meeting of the Company. The dividend will be denominated and declared in RMB. Operational Highlights Passenger Services In 2010, the Group carried a total of 60.01 million passengers, a year-over-year increase of 45.37%. Passenger capacity, measured by Available Seat Kilometers (ASK), increased 2
by 33.92% to 132.1 billion. Capacity on domestic, international and regional routes increased by 46.67%, 16.16% and 15.47%, respectively. Overall passenger traffic, measured by Revenue Passenger Kilometers (RPK) increased by 40.04% to 105.7 billion. Traffic on domestic, international and regional routes increased by 53.69%, 20.56% and 22.67%, respectively. Passenger load factor improved to 80.03%, an increase of 3.5 percentage points year-over-year. Yield per RPK was RMB0.64, up by 12.28% year-over-year. (Figures of 2010 consolidated Shenzhen Airlines figures from 20 April to 31 December) Air China continued to build up its major hubs, making substantial progress in improving hub operation efficiency. During the Period, the number of transfer passengers at Beijing hub increased by 2%, market share measured by RPK, reached 52.1%. To further building up Chengdu hub and Shanghai international gateway, the Company continued to expand its route network and optimize capacity allocation. The number of transfer passengers at these two locations rose by 40% and 23% respectively, year-over-year. The Company timely increased its capacity in light of the rapid growing demand for air transport in 2010. Capitalizing on opportunities arising from the World Expo, the Company increased capacity at Shanghai market, launching new routes from Shanghai Hongqiao to Taipei SungShan, Yinchuan and other domestic and regional destinations. The Company made capacity adjustments on its Beijing-Shanghai express and Shanghai-Tokyo and Shanghai-Osaka routes by operating more wide-body aircraft. The Company also resumed and moderately increased capacity on international and regional routes, increasing flight frequencies on routes such as Vancouver, Madrid, Stockholm, Australia and Taipei. In 2010, the Company took full advantage of market opportunities and made timely adjustments to its sales and marketing strategy. With growing market controlling power, the company saw a higher revenue from its core markets as well as rise in international route and premium class sales. Sales from e-commerce reached RMB6.26 billion, a year-over-year increase of 92%. Corporate customers contributed revenue of RMB8.86 billion, a year-over-year increase of 78%, while frequent flyers contributed revenue of RMB15.71 billion, a rise of 59% year-over-year. Revenue contribution from Star Alliance carriers rose by 91% compared to 2009. During the year, the Company managed the fleet expansion in a rational manner and continued to optimize the fleet structure and establish better route alignment. During the Period, the Company added 30 new aircraft, including A321/320 and B737-800 narrow-body aircraft, while phasing out 10 aircraft, including older models B767, B737-300/600, and B747/200F. Continuous optimization of its fleet structure enabled the Company to better cope with market changes and improve operational efficiency. As of end-december 2010, the Company operated a fleet of 282 aircraft. The Company s 3
network covered 32 countries and regions, including 47 international, 91 domestic, and 3 regional cities. In 2010, the Company made further progress on strategic resources integration. After increasing its shareholdings in Shenzhen Airlines and becoming the majority shareholder, Air China established its foothold in the South China market and further improved its network coverage. The Company also raised RMB6.5 billion from its non-public share issuance, thus becoming better positioned to pursue growth opportunities. In addition, the strong performance of the Company s strategic partner, Cathay Pacific Airways Ltd. ( Cathay Pacific ) also contributed to the Company s profitability. Cargo Services The Company seized the opportunities presented by the uptrend of the cargo market. Significant improvements in operating efficiency and profitability were achieved by integrating various operational functions and improving handling capability. During the Period, cargo capacity, measured by Available Freight Tonne Kilometers ( AFTK ), increased by 20.68% to 7.85 billion. Cargo traffic, measured by Revenue Freight Tonne Kilometers ( RFTK ), increased by 37.20% to 4.84 billion. The cargo and mail load factor was 61.65%, an increase of 7.42 percentage points. Cargo yield was RMB1.85, up by 20.92% year-over-year. (Figures of 2010 consolidated Shenzhen Airlines figures from 20 April to 31 December) Government approval was obtained for the Company s cargo joint venture with Cathay Pacific. All the preparations have been in place for the commencement of operation the joint venture. Outlook Thanks to the favorable economic environment in both domestic and international markets, the effective implementation of the Company s strategy and the hard work of our entire workforce, Air China achieved record high profits in 2010. Mr. Kong Dong, Chairman of Air China said. Looking ahead on 2011, we believe the rapid yet steady development of China s economy will continue to boost Chinese airline industry, and we expect the worldwide economic recovery to herald new market opportunities for the global airline industry. Air China is well positioned to capitalize on these opportunities. However, the international market seems to become more competitive as the global economy recovery continues. The volatility of jet fuel price, the uncertainties of future trends of interest rate and 4
foreign exchange rate will bring operational pressures and management challenges. The inefficiency of strategic resources will become one of the most critical factors affecting our development. In addition, the expanding operation of High Speed Rail may affect some of our domestic markets. In light of these opportunities and challenges ahead, the Company will continue to execute its prudent strategy, while actively seeking new areas for growth, improving the service quality and continuously increasing operational efficiency. Our ever-deepening strategic relationship with Cathay Pacific will also produce even greater synergies. Aiming at developing the Company into a large competitive international network carrier, we will continue to effectively execute our strategy and achieve sustainable healthy growth. About Air China Air China Limited (Air China) is the national flag carrier of China and a leading provider of air passenger, air cargo and airline-related services and products in China. Its operational headquarters is in Beijing, a major domestic and international hub in China. It also provides airline-related services, including aircraft maintenance, ground handling services in Beijing, Chengdu, and other locations. As of 31 December, 2010, the Company operated a fleet of 282 aircraft. The Company s network covers 32 countries and regions, including 47 international, 91 domestic, and 3 regional cities. Air China was listed on Hong Kong Stock Exchange and London Stock Exchange on December 15, 2004 under codes 00753 and AIRC respectively. On August 18, 2006, Air China was listed on Shanghai Stock Exchange under code 601111. For further details, please visit Air China s website: www.airchina.com.cn. Safe Harbor Statement This press release contains projections and forward-looking statements that reflect the company s current views with respect to future events and financial performance. These views are based on current assumptions which are subject to various risks and which may change over time. No assurance can be given that future events will occur that projections will be achieved, or that the company s assumptions are correct. Actual results may differ materially from those projected. 5
Contact: Air China: Rao Xinyu, General Manager of IR Air China Limited +86 (10) 6146 2777 raoxinyu@airchina.com Joyce Zhang Air China Limited +86 (10) 6146 2560 joycezhang@airchina.com Investor Relations: Mahmoud Siddig Taylor Rafferty, New York +1 212 889 4350 AirChina@taylor-rafferty.com Kelly Gawlik Taylor Rafferty, New York +1 212 889 4350 AirChina@taylor-rafferty.com 6