August 2017 1
Part 1 Performance Highlights Part 2 Business Overview Part 3 Financial Review Part 4 Outlook 2 Under IFRS
3 Part 1 Performance Highlights
Performance Highlights - Key Operational Metrics ATK (million) RTK (million) ATK Load Factor (%) 17,142.48 3.77% 12,092.16 6.35% 70.54 1.71pts ASK (million) RPK (million) Passenger Load Factor (%) 118,991.56 4.94% 96,415.02 6.53% 81.02 1.20pts 4
Performance Highlights - Key Financial Metrics In RMB and YoY changes Turnover (million) Operating Expenses (million) Jet Fuel Cost (million) 58,746.47 8.82% 52,938.77 15.12% 13,629.02 40.11% Net Income of Foreign Exchange (million) Profit Before Tax (million ) Net Profit (million) 1,269.68 174.79% 5,173.84 2.67% 3,920.78 3.33% 5
6 Part 2 Business Overview
Air China Total 2017Interim YoY change Domestic 2017Interim YoY change Revenue (RMB million) 36,088.1 7.74% ASK (million) 84,788.7 5.28% RPK (million) 68,565.8 7.64% Load Factor (%) 80.9 1.77pts Yield (RMB/RPK) 0.53 0.09% Revenue (RMB million) 22,199.6 10.59% ASK (million) 42,868.3 4.39% RPK (million) 35,721.6 6.79% Load Factor (%) 83.3 1.88pts Yield (RMB/RPK) 0.62 3.56% International 2017Interim YoY change Regional (HK, Macau and Taiwan) 2017Interim YoY change Revenue (RMB million) 12,401.3 5.14% ASK (million) 39,633.2 7.29% RPK (million) 30,998.6 9.80% Load Factor (%) 78.2 1.78pts Yield (RMB/RPK) 0.40-4.24% Revenue (RMB million) 1,487.1-8.68% ASK (million) 2,287.1-9.63% RPK (million) 1,845.6-8.59% Load Factor (%) 80.7 0.92pts Yield (RMB/RPK) 0.81-0.09% 7
8 Refined Market Strategies with a Balanced Global Network As of June 30, 2017 Air China operates 408 passenger routes across 6 continents covering 39 countries & 184 cities around the world. 287 domestic routes covering 115 domestic destinations 106 international routes covering 66 international destinations 15 regional routes covering 3 regional destinations Through Star Alliance, Air China has an extensive network covering 1,307 destinations in 191 countries.
Further Development of Air Transport Hubs Beijing Hub launched new routes to Zurich, Astana Championed the Shanghai international gateway, Chengdu and Shenzhen regional hub network. The route network will continue to expand, with new international and domestic routes such as, Shanghai to Barcelona, Chengdu to Shihezi to Yining. Update as of v2 9
Leading the industry in yield management Effective execution of price priority strategy with a commanding competitive advantage in domestic yield Increased wide-body aircraft deployment to major domestic markets drives overall domestic yield increase Optimized premium classes pricing of domestic flights, developed the breadth and depth of customers resource and further enhanced overall yield Commenced collaboration with Lufthansa on joint route operations Expanded international to international transit products to achieve a steady increase in passenger traffic. 10
A Passenger Base that is Most Valuable PhoenixMiles Members As of end of June 2017, members reached 46.28 million. The number of active members exceeded 20% increase compare to same period last year. Income from Frequent Flyers Grew 23% YoY Income % from Frequent Flyers Grew 5 pts YoY RMB 100 Million 160 154 1H2016 1H2017 125 120 80 39% 56% 44% 40 61% 0 1H2016 1H2017 Income % 常旅客收入占比 from frequent flyers 其他 Others 11
A Passenger Base that is Most Valuable RMB 100 Million Revenue from Premium Classes Continued to Increase 35 28 21 14 23% 8% 7 0 1% 国内 Domestic International 国际 Regional 地区 1H2016 1H2017 Passenger Load Factor of Premium Classes Continued to Increase 80 % 60 9pts 8pts 4pts 40 20 0 国内 Domestic International 国际 Regional 地区 1H2016 1H2017 12
Business Model Transformation & Upgrade : Ancillary Income Ancillary Income Continued to Grow Year-on-Year RMB Ten Thousand 8000 68% 6000 4000 2000 0 1H2016 1H2016 1H2017 1H2017 RMB Ten Thousand 73% 4000 3000 2000 190% 1000 0 Paid 付费升舱 Upgrades 1H2016 1H2017 Seat 付费选座 Selection Fees 13
Air China Cargo 1H2017 YoY Change AFTK (million) 5,841.9 0.50% Freighter AFTK (million) 1,553.0-10.59% RFTK (million) 3,236.5 6.43% Freighter RFTK (million) 1,332.0-3.67% Tonnage Carried (tonne) 692,834.9 5.35% Freighter Tonnage Carried (tonne) 215,512.9-0.36% Load Factor (%) 55.4 3.09pts Freighter Load Factor (%) 85.8 6.16pts Yield (RMB/RFTK) 1.33 13.16% 14
Shenzhen Airlines 1H2017 YoY Change ASK (million) 29,065.0 4.12% RPK (million) 23,910.0 3.74% ATK (million) 3,097.8 6.50% As of June 30, 2017, the total fleet size of Shenzhen Airline (including Kunming Airline) was 187 aircraft, with an average age of 6.2 years. In 1H 2017, revenue reached RMB 13.3 billion, representing an increase of 7.20% compared to the same period last year RTK (million) 2,380.4 3.54% Passenger Load Factor(%) 82.3-0.30pts Net profits attributable to equity shareholders achieved RMB 851 million, representing an increase of 10.04% compared to the same period last year ATK Load Factor(%) 76.8-2.20pts Passenger Yield (RMB/RPK) 0.52 4.84% 15
16 Part 3 Financial Review
17 Industry Leading Profitability Maintained Despite Intensified Competition RMB million 1H2017 1H2016 YoY Change Turnover 58,746 53,984 8.82% Air Traffic Revenue 55,539 51,013 8.87% Operating Expenses 52,939 45,987 15.12% Operating Expenses ex-fuel cost 39,310 36,260 8.41% Profit from Operations 5,808 7,997-27.38% Finance Income 1,359 65 1,999.83% Finance Cost 1,592 3,282-51.48% Net Income of Foreign Exchange 1,270-1,698 174.79% Share of Profit of Associates -401 259-254.49% Profit for the Period 3,921 3,794 3.33% Profit Attributable to Shareholders 3,341 3,468-3.68% EPS (RMB Yuan/share) 0.2532 0.2821-10.24%
18 Interest Bearing Debt (1) (RMB million) 30 June 2017 Percentage(%) 31 December 2016 Percentage(%) USD 42,577 44.44 52,170 49.12 RMB 51,873 54.14 52,435 49.37 EURO 120 0.13 113 0.11 JPY 1,234 1.29 1,278 1.20 MOP - - 207 0.20 Total 95,804 100.00 106,204 100.00 Sensitivity Analysis RMB/USD 1% Fluctuation of exchange rate Impact on Net Profit: 291 million (RMB)
Interest Bearing Debt (2) 31 December 2016 30 June 2017 30.20% 29.34% 69.80% 70.66% Short term Interest 短期带息负债 Bearing Debt Long term Interest 长期带息负债 Bearing Debt 31 December 2016 30 June 2017 Sensitivity Analysis 45.93% 54.07% 40.60% 59.40% Change of Interest rate- 50bp Impact on Interest Expense: 1.09 million (RMB) Fixed rate debt Floating rate debt 19
Enhanced Operational Efficiency, Disciplined Cost Management 1H2017 Depreciation 12.4% Take-off, landing and depot charges 13.6% Jet Fuel 25.7% Maintenance 5.9% Staff 19.9% Others 15.2% Air Catering 3.1% Sales and marketing expenses 4.1% General and administrative expenses 1.2% (RMB million) 1H2017 1H2016 YoY Change Jet Fuel 13,629 9,727 40.11% Take-off, landing and depot charges 6,657 6,167 7.95% Depreciation 6,538 6,673-2.02% Maintenance 3,112 2,515 23.73% Staff 10,526 9,416 11.78% 1H2016 Depreciation 14.5% Take-off, landing and depot charges 13.4% Maintenance 5.5% Jet Fuel 21.2% Staff 20.5% Air Catering 3.4% Sales and marketing expenses 4.5% Others 16.0% General and administrative expenses 1.1% Air Catering 1,639 1,564 4.80% Sales and marketing expenses General and administrative expenses 2,166 2,068 4.77% 649 521 24.64% Others 8,023 7,337 9.35% Total 52,939 45,987 15.12% 20
Jet Fuel Unit Cost Increased Year-on-Year Jet Fuel Cost and Jet Fuel Surcharge RMB billion 400 356 337 345 300 240 220 200 151 145 152 136 100 86 97 80 41 41 0 2012 2013 2014 2015 2016 1H2016 1H2017 Fuel Cost 燃油成本 Jet 燃油附加费 Fuel Surcharge Changes in Jet Fuel Purchase Price Jet Fuel Consumption Amount Ten Thousand Tonnes 700 619 666 600 559 485 500 500 400 322 343 300 200 100 0 2012 2013 2014 2015 2016 1H2016 1H2017 Sensitivity Analysis RMB / Tonne 6,000 1H2017 4,500 3,000 1,500 1H2016 Oil Price Changes: 1USD/Barrel Impact on Jet Fuel Cost: 346 million (RMB) 0 1 Jan 月 Feb 2 月 3 Mar 月 Apr 4 月 May 5 月 May Jun 6 月 21
Strengthened Cost Controls Fuel Cost and Non-fuel Operating Cost Unit Cost RMB million 100,000 98,708 97,612 91,064 94,062 94,505 21,982 80,000 34,542 24,043 35,640 33,722 60,000 40,000 55,424 60,340 64,165 70,463 75,630 20,000 52,939 45,987 13,629 9,727 36,260 39,310 RMB Yuan 5 3.96 3.84 4 3.57 3.01 2.89 3.09 3 2.78 2 1 0.56 0.54 0.51 0.44 0.42 0.41 0.44 120% 100% 0 2012 2013 2014 2015 2016 1H2016 1H2017 Fuel 燃油成本 Cost Operating 去除燃油成本的营业成本 Cost exclude Fuel Cost Cost as Percentage of Revenue 91.55% 95.81% 93.15% 85.87% 84.77% 85.19% 90.11% 0 2012 2013 2014 2015 2016 1H2016 1H2017 可用客公里单位成本 Cost per ASK 可用吨公里单位成本 Cost per ATK Ex-fuel Unit Cost RMB Yuan 3 2.41 2.46 2.32 2.25 2.24 2.19 2.29 80% 60% 55.72% 61.46% 60.55% 64.02% 65.68% 67.17% 66.91% 2 1 40% 2012 2013 2014 2015 2016 1H2016 1H2017 Operating Cost as % of 经营费用所占收入的比重 Revenue Ex-fuel Operating Cost as % of Revenue 0 0.34 0.34 0.33 0.33 0.32 0.32 0.33 2012 2013 2014 2015 2016 1H2016 1H2017 可用客公里单位成本 Cost per ASK 可用吨公里单位成本 Cost per ATK 22
23 Healthy Financial Position Times Net Debt-to-Equity Ratio 1.8 1.7 1.67 1.66 1.5 1.38 1.29 1.2 0.96 0.9 0.6 0.3 0 2012 2013 2014 2015 2016 1H2017 Times EBITDA Interest Coverage Ratio 10 8.98 8.94 8.38 8 6.88 6.47 6 5.62 4.75 4 2 80 60 40 20 0 90,000 60,000 30,000 % RMB million Gearing Ratio 71.23 71.94 71.76 68.86 65.90 Net Assets (Excluding Minority shareholder Interests) 49,944 53,757 54,274 59,748 68,799 61.11 2012 2013 2014 2015 2016 1H2017 81,053 0 2012 2013 2014 2015 2016 1H2016 1H2017 0 2012 2013 2014 2015 2016 1H2017
24 Part 4 Outlook
2017 Outlook Passenger travel demands to grow steadily Industry competition will progressively intensify Emerging signs of growth pick-up in air cargo market Jet Fuel price continues to be volatile Stay focus on hub network strategy Upgrade business model transformation Deepen the advancement of State-owned Enterprise reform Continue to Heighten cost control 25
Appendix Other Financial and Operational Data 1H2017 26
1. Fleet - The Group Sub-total Selfowned 30 June 2017 Delivery Finance Lease Operating Lease Average Age 2017 2018 2019 A319 43 28 6 9 11.13 5 3 A320/A321 199 67 74 58 5.58 12 13 19 A330 56 17 13 26 6.06 6 4 - A350 - - - - - 1 5 4 B737 261 101 63 97 6.59 24 25 35 B747 11 9 2 0 9.46 - - B777 27 8 13 6 5.89 3 - - B787 9 7 0 2 0.76 6 2 - B747F 3 3 0 0 15.02 - - - B757F 4 4 0 0 20.85 - - - B777F 8 3 5 0 2.76 - - - Business Jet 7 1 0 6 4.77 - - - TOTAL 628 248 176 204 6.53 57 49 61 *Wet lease aircraft excluded in calculation of average ages 27
2. Fleet - Air China Sub-total Selfowned 30 June 2017 Delivery Finance Lease Operating Lease Average Age 2017 2018 2019 A319 33 28 5 0 11.03 - - 3 A320/A321 105 18 60 27 5.37 10 8 9 A330 56 17 13 26 6.06 4 - - A350 - - - - - 1 5 4 B737 144 53 30 61 6.90 13 11 16 B747 11 9 2 0 9.46 - - - B777 27 8 13 6 5.89 3 - - B787 9 7 0 2 0.76 6 2 - Total 385 140 123 122 6.57 37 26 32 *Wet lease aircraft excluded in calculation of average ages 28
3. Profit Index 1H2017 1H2016 YoY Change EBITDA (RMB million) 12,346 14,670-15.84% EBITDA Profit Margin 21.02% 27.17% -6.16pts EBITDAR (RMB million) 16,502 18,173-9.19% EBITDAR Profit Margin 28.09% 33.66% -5.57pts Net Profit Margin 5.69% 6.42% -0.74pts Return on Net Assets 4.46% 5.65% -1.19pts 29
4. Consolidated Balance Sheet (Condensed) (RMB million) 30 June 2017 31 December 2016 YoY Change Non-current Assets 155,735 158,013-1.44% Current Assets 24,822 19,986 24.20% - Cash and Cash Equivalents 11,135 6,848 62.61% Total Assets 229,051 224,051 2.23% Current Liabilities 64,012 64,180-0.26% Non-current Liabilities 75,968 83,474-8.99% Total Liabilities 139,980 147,655-5.20% Total Equity Attributable to Shareholders of the Company 81,053 68,799 17.81% 30
5. Consolidated Cash Flow Statement (Condensed) (RMB million) 1H2017 1H2016 Net cash generated from operating activities YoY Change 9,087 11,285-19.48% Net cash used in investing activities 5,185 14,669 64.66% Net cash used in financing activities 446 4,035-88.95% Net increase in cash and cash equivalents 4,348 650 568.62% Cash and cash equivalents at beginning of the period Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the period 6,848 7,138-4.06% -61 75-180.53% 11,135 7,864 41.60% 31
6. Subsidiaries Air Macau 1H2017 YoY Change ASK (million) 3,016.4-6.17% RPK (million) 2,170.7-6.97% ATK (million) 349.7-6.24% RTK (million) 233.0-5.59% Passenger Load Factor(%) 72.0-0.62pt ATK Load Factor(%) 66.6 0.46pts Passenger Yield (RMB/RPK) 0.61 15.78% 32
Investor Relations-Beijing Bian Hong Tel: +8610-6146 1049 Fax: +8610-6146 2805 E-mail: bianhong@airchina.com Fan Heyun Tel: +8610-6146 2799 Fax: +8610-6146 2805 E-mail: fanheyun@airchina.com Air China Website: www.airchina.com.cn Air China Mobile APP: Cao Yu Tel: +8610-6146 2788 Fax: +8610-6146 2805 E-mail: caoyu@airchina.com 33