air china limited · 2009 annual results (ifrs) 2010 1q results (prc gaap) april 2010 air china...

2009 Annual Results(IFRS)

2010 1Q Results(PRC GAAP)

April 2010

Air China Limited

2009 Annual Results

Overview

Business Review

Financial Review

2010 1Q Results and Outlook

2010 1Q Results

Outlook

2

Agenda

2009 Annual Results

2009 Annual Results Overview

4

5

Steady Economic Growth Drives Recovery of Chinese A viation Industry

5% 5% 5%4%

10% 11%

13%

9% 9%

-1%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

2005 2006 2007 2008 2009

World GDP annual growth rate China GDP annual growth rate

-40%

-20%

0%

20%

40%

60%

Jan Mar May Jul Sep Nov

2007年 2008年 2009年

2

-20%

0%

20%

40%


2007 2008 2009

Source：IMF、National Bureau of Statistics of China Source：WIND

Source：Civil Aviation Administration of China Source：Civil Aviation Administration of China

45

50

55

60

65

70

75

80

85

1/2 1/28 2/23 3/19 4/15 5/11 6/4 6/30 7/24 8/19 9/14 10/8 11/3 11/27 12/23

WIT原油价(美元/桶)WTI crude oil price (USD/bb)

Solid Chinese Economic Recovery, GDP Growth Exceeding 8%

Domestic Airlines Saw Strong Rebound in Cargo Traffic in Second Half

Oil Prices Started to Climb from Second Quarter

Domestic Airlines Recorded Progressive Passenger Traffic Recovery

2007 2008 2009

Key Operational Metrics 2009 YoY Change

ASK (million) 98,624.7 7.42%

RPK (million) 75,473.8 9.78%

ATK (million) 15,414.7 5.18%

RTK (million) 10,293.6 5.17%

Passenger load factor (%) 76.53% 1.65pts

ATK load factor (%) 66.78% 0

Aircraft utilization (hours per day) 9.65 0.17

Key Financial Metrics 2009 YoY Change

Turnover (RMB million) 51,393 -2.86%

Operating expenses (RMB million) 45,892 -26.82%

Profit from operations (RMB million) 5,501 156.09%

Profit attributable to equity holders (RMB million) 4,854 152.44%

EPS (RMB) 0.41 152.56%

6

Highlights

Business Review

7

8

Total (2009)

YoYChange

Traffic revenue (RMB million)

41,508.1 -0.39%

ASK (million) 95,464.6 8.36%

RPK (million) 73,351.7 10.87%

Load factor (%) 76.84% 1.74 pts

Yield (RMB/RPK) 0.57 -10.16%

Domestic(2009)

YoYChange


26,796.9 14.04%

ASK (million) 57,524.6 18.46%

RPK (million) 44,140.4 19.26%


Yield (RMB/RPK) 0.61 -4.38%

International(2009)

YoYChange


13,185.6 -20.95%

ASK (million) 34,845.2 -5.30%

RPK (million) 27,016.7 -0.89%


Yield (RBM/RPK) 0.49 -20.24%

Regional (HK, Macau and Taiwan)(2009)

YoYChange


1,525.6 2.08

ASK (million) 3,094.8 12.66%

RPK (million) 2,194.5 16.20%


Yield (RMB/RPK) 0.70 -12.15%

Passenger Services

9

� Optimization of capacity redeployment: raising domestic capacity by 18% while RPK increased by 19%; reducing international capacity by 5% while RPK declined by 1%

� Across-the-board improvements in efficiency

Total (as of Dec 31, 2008) 243

Introduced in 2009 31

B737-800(14), A321/200(16), business jet (1)

Retired in 2009 12

B767-200ER(1),B767-200ER(2),B747-200F freighter(1),B737-600(4),B737-300(4)

Total (as of Dec 31, 2009) 262

� New deliveries all narrow-body aircraft, mostly deployed in stronger markets

� Accelerated retirement of older aircraft, resulting in younger, more efficient fleet

� Aircraft utilization rate improved by 0.15 hours/day YoY

Demand-oriented Capacity Deployment

-5% -1%

3%

18% 19%

1%

13%

16%

2%

-10%

-5%

0%

5%

10%

15%

20%

25%

ASK Change RPK Change Passenger Load Factor Change

Internat ional Domest ic Regional

Passenger Capacity and Traffic Changes (2009 vs 2008)

0

100

200

300

400

500

600

Beijing Chengdu Shanghai

2008 2009

10

� Increased Beijing-based capacity, with Beijing market share (RPK) reaching 52.2%

� Set up Hubei subsidiary to extend network coverage in Central China

� Formed Shanghai subsidiary to establish strong foothold in Eastern China

� Strengthened competitiveness in Southern China with increased holdings in Cathay Pacific and Shenzhen Airlines

� Collaborated with Chengdu municipal government and Sichuan Airport to further enhance Chengduhub development

34%

growth

74%

growth10%

growth

Strengthened Hub Position

10,000 ppl

8.9%

21.7%

1.7%

7.0%

26.4%

-2.8%

-5%

0%

5%

10%

15%

20%

25%

30%

Beijing Chengdu Shanghai

ASK YoY Growth AFTK YoY Growth

Rise in Number of Transfer Passengers Changes in Capacity Input

85

99

75

80

85

90

95

100

2008 2009

RMB 100 Mmillion

43

50

38

40

42

44

46

48

50

52

2008 2009

RMB 100 million

24

33

0

5

10

15

20

25

30

35

2008 2009

RMB 100 million

Sustained Improvement in Yield Quality

11

0

50

100

150

200

250

300

350

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

RMB million

Domestic International Regional

Premium Class Resumed Growth 35.5% Growth in E-commerce Revenue

Frequent Flyer Sales Rose 16.2% Corporate Customer Sales Grew 15.7%

12

Strong Rebound in Cargo Services Leveraging on Market Recovery

0

50

100

150

200

250

300

350

400

1月 2月 3月 4月 5月 6月 7月 8月 9月 10月 11月 12月

Million

-40%-30%-20%-10%0%10%20%30%40%50%

2009年收入货运吨公里同比增长2009 RFTK YoY growth

2009 2008 YoY Change

AFTK (million) 6,449.0 6,217.1 3.73%

Freighter AFTK (million) 2,003.9 2,061.6 -2.80%

RFTK (million) 3,496.2 3,512.5 -0.47%

Freighter RFTK (million) 1,536.7 1,554.3 -1.13%

Tonnage carried (tonne) 943,341.3 899,780.8 4.84%

Freighter tonnage carried (tonne) 264,882.7 253,053.4 4.67%

Load factor (%) 54.21% 56.50% -2.28pts

Yield (RMB/RFTK) 1.49 1.87 -19.99%

Strong Rebound in Cargo Traffic from August 2009

13

2009 YoY Change

ASK (million) 3,160.1 -14.8%

RPK (million) 2,122.1 -18.0%

ATK (million) 373.9 -26.6%

RTK (million) 244.4 -31.5%

Passengers carried (thousand) 1,446.6 -23.0%

Passenger load factor (%) 67.15% -2.6pts

ATK load factor (%) 65.36% -4.6pts

Passenger yield (RMB/RPK) 0.56 -13.85%

Air Macau

Financial Review

14

15

(RMB million) 2009 2008 YoY Change

Turnover 51,393 52,908 -2.86%

Operating expenses 45,892 62,715 -26.82%

Operating expenses ex-fuel cost 31,426 40,101 -21.63%

Profit/(loss) from operations 5,501 -9,807 156.09%

Finance costs 1,059 465 127.73%

Gain from change in fair value of fuel derivativescontracts

2,758 -7,899 -134.92%

Share of profit/(loss) of associates 624 -1,184 152.72%

Profit/(loss) before tax 5,066 -10,978 146.15%

Net profit/(loss) 4,803 -9,367 151.28%

Profit/(loss) attributable to equity holders 4,854 -9,256 152.45%

EPS (RMB) 0.41 -0.78 152.56%

Record Net Profit Benefited from industry recovery and management efforts

16

Revenue Breakdown

(RBM million)

Passenger Services

YoYChange

Cargo Services

YoYChange Total

YoYChange

Domestic 26,797 14.04% 1,263 -9.95% 28,060 12.69%

(%) 62.76 8.56pts 23.41 3.89pts 58.35 9.07pts

International 13,401 -21.08% 3,831 -24.80% 17,232 -21.94%

(%) 31.39 -7.78pts 70.99 0.08pts 35.83 -7.85pts

Regional 2,497 -13.06% 302 -56.06% 2,799 -21.36%

(%) 5.85 -0.78pts 5.60 -3.97pts 5.82 -1.22pts

0

10,000

20,000

30,000

40,000

50,000

60,000

2008年 2009年Passenger Cargo

85.78%

14.22%

88.78%

11.22%

RMB million

Domestic International Regional

39.17% 54.20%

6.63%

31.39% 62.76%

5.85%

2008 2009

Timely Adjustment of Capacity to Capture Domestic Gr owth Opportunities

Passenger Revenue Breakdown

17

(RMB million) 2009 2008(Restated)

YoY Change

Jet fuel 14,466 22,614 -36.03%

Gain/loss from change in fair value

-2,758 7,899 -134.92%

Take-off, landing and depot charges

5,789 5,538 4.52%

Depreciation 7,051 6,365 10.78%

Maintenance 1,768 1,804 -2.03%

Staff 6,627 5,844 13.41%

Leasing 2,319 2,400 -3.37%

Air Catering 1,519 1,444 5.20%

Other flight operation expenses

4,532 4,666 -2.86%

Others 4,579 4,141 10.58%

TOTAL 45,892 62,715 -26.82%

Drop in Jet Fuel Prices Drives Down Costs

2009200920092009

Take-off, landing and

depot charges12.6%

Depreciation15.4%

Maintenance3.9% Staff

14.4%

Leasing5.1%

Other flight operation expenses

3.3%

Catering9.9%

Others (including gain from change in

fair value)4.0%

Jet fuel31.5%

0

10

20

2005 2006 2007 2008 2009

Fuel Costs Jet Fuel Surcharge

Fuel Costs and Jet Fuel Surcharge

RMB billion

Lower Jet Fuel Purchase Price with Upward Pressure

-1,0002,0003,0004,0005,0006,0007,0008,0009,000

10,000


2009 2008

-1,0002,0003,0004,0005,0006,0007,0008,0009,000

10,000

Jan Mar May Jul Sep Nov2009 2008

-1,0002,0003,0004,0005,0006,0007,0008,0009,000

10,000

Jan Mar May Jul Sep Nov2009 2008

RMB/tonne

Average Domestic International

18

RMB/tonne RMB/tonne

2008 average: RMB7,486






Changes in Jet Fuel Purchase Prices

19

16,932 20,682 22,840 26,700 30,284 40,101

31,426 5,425

8,354 11,777

15,716 17,201

22,614

14,466

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2003 2004 2005 2006 2007 2008 2009

RMB million

Fuel cost Operating cost excluding fuel cost

0.33 0.32 0.31 0.32 0.35 0.44 0.32

1.97 1.94 1.90 1.91 2.07

2.74

2.04

0

1

2

3

2003 2004 2005 2006 2007 2008 2009

RMB

Ex-fuel Cost per ATK Ex-fuel Cost per ASK

Enhanced Cost Efficiency

Fuel Cost and Non-fuel Cost Unit Cost

Cost per Percentage of Revenue Ex-fuel Unit Cost

0.41 0.42 0.45 0.51 0.53 0.68 0.47

2.41 2.54 2.78 3.04

4.28

2.983.18

0

1

2

3

4

5

2003 2004 2005 2006 2007 2008 2009

RMB

Cost per ATK Cost per ASK

90.7% 86.6% 90.4% 94.4% 92.5%

118.5%

89.3%75.8%

61.1%59.0%59.4%68.7% 61.7% 59.6%

0%20%40%60%80%

100%120%140%

2003 2004 2005 2006 2007 2008 2009Operating cost as % of revenue

Ex-fuel operating cost as % of revenue

20092008

(Restated)YoY

Change

EBITDA (RMB million) 12,552.2 -3,441.7 464.71%

EBITDA margin (%) 24.42 -6.51 30.93pts

EBITDAR (RMB million) 15,349.2 -593.2 2687.39%

EBITDAR margin (%) 29.87 -1.12 30.99pts

Operating profit margin (%) 10.70 -18.54 29.24pts

Pre-tax profit margin (%) 9.86 -20.75 30.61pts

Net profit margin (%) 9.45 -17.49 26.94pts

ROE (%) 22.14 -36.94 59.08pts

20

Significant Margin Improvement

21

Net Debt to Equity Ratio

Net Asset

Total Debt to Asset Ratio

EBITDA Interest Cover Ratio

(Times)(RMB million)

%

2.54

0.94

2.50

1.151.351.51

4.81

0

2

4

6

2003 2004 2005 2006 2007 2008 2009

8.9

4.2

(1.6)

4.84.64.42.5

-4

-2

0

2

4

6

8

10

2003 2004 2005 2006 2007 2008 2009

77.862.4

79.666.368.473.0

85.0

0

20

40

60

80

100

2003 2004 2005 2006 2007 2008 2009

19,94323,916

20,092

31,50731,736

16,548

6,8935,020

05,000

10,00015,00020,00025,00030,00035,000

2002 2003 2004 2005 2006 2007 2008 2009

Strengthened Financial Strength and Capital Structu re

(excludes minority interest)

(Times)

2010 1Q Results and Outlook

2010 1Q Results (PRC GAAP)

23

24

Domestic International Regional Total

1Q 2010 YoY 1Q 2010 YoY 1Q 2010 YoY 1Q 2010 YoY

Capacity

ASK (million) 15,694.4 11.61% 9,498.1 9.53% 1,401.1 7.60% 26,593.7 10.64%

AFTK (million) 547.6 7.82% 1,196.9 28.69% 51.4 4.33% 1,795.9 20.76%

Traffic

RPK (million) 12,084.1 12.40% 7,785.5 19.04% 1,033.6 16.35% 20,903.3 14.98%

RFTK (million) 215.3 20.27% 796.5 63.25% 23.3 35.33% 1,035.1 51.28%

Load factor

Passenger load factor (%)

77.00% 0.55pts 81.97% 6.55pts 73.77% 5.54pts 78.60% 2.97pt s

AFTK load factor (%) 39.31% 4.07pts 66.55% 14.09pts 45.36% 10.39pts 57.64% 11.6 3pts

Operating Results

25

Domestic International Regional Total

1Q 2010 QoQ 1Q 2010 QoQ 1Q 2010 QoQ 1Q 2010 QoQ

Capacity

ASK (million) 15,694.4 8.09% 9,498.1 1.81% 1,401.1 -4.63% 26,593.7 5.04%

AFTK (million) 547.6 6.16% 1,196.9 -0.49% 51.4 -22.00% 1,795.9 0.64%

Traffic

RPK (million) 12,084.1 6.34% 7,785.5 4.17% 1,033.6 -3.18% 20,903.3 5.01%

RFTK (million) 215.3 -3.97% 796.5 0.19% 23.3 -34.20% 1,035.1 -1.85%

Load factor


77.00% -1.27pts 81.97% 1.86pts 73.77% 1.11pts 78.60% -0.02 pts

AFTK load factor (%) 39.31% -4.15pts 66.55% 0.45pts 45.36% -8.41pts 57.64% -1.4 6pts

Operating Results (Continued)

26

(RMB million) 1Q 20101Q 2009

(Restated)YoY

Change

Turnover 14,696 11,244 30.71%

Total cost 13,500 11,023 22.47%

Gain/loss from change in fair value 938 44 2010.98%

Investment income 406 -9 4639.61%

- Gain from investment in associated companies and joint-ventures

406 -9 4639.61%

Profit from operations 2,540 256 894.20%

Non-operating income 72 686 -89.43%

Net profit 2,608 939 177.63%

Profit attributable to parent company 2,172 981 121.33%

EPS (RMB/share) 0.19 0.08 137.50%

Financial Results

Outlook

27

28

Opportunities Challenges

Strategic Priorities

� Optimize hub and network development, strengthen leadership in strategic markets

� Enhance sales and marketing initiatives

� Rationalize resource allocation and improve efficiency

� Continue to improve cost management

� Sustain improvements in services and product delivery

2010 – Opportunities and Challenges

� Recovery of global economy and sustained growth in China’s economy supporting growth trend in aviation industry

� Sustainable recovery in international passenger market

� Cargo market emerging as a growth area

� New business opportunities in domestic market driven by Shanghai Expo and Asian Games

� Supply and demand pressure in domestic market

� Uncertainties from fluctuations in oil prices, exchange rates and interest rates, as well as impact from high-speed rail

� Slow recovery from premium international travelers limits yield enhancement

� Scarcity of timeslots and other strategic resources

29

Realign Capacity in Line with Market Changes

2009 Deliveries

Sub-total Owned Financing Lease

Operating Lease

Average Ages

2010 2011 2012

A319 33 21 9 3 4.7

A320/A321 33 6 16 11 2.2* 12 14 10

A330 20 3 17 0 2.4 3 5 6

A340 6 3 3 0 11.6

B737 119 51 21 47 7.1* 12 10 8

B747 10 6 4 0 13.4

B757 13 13 0 0 15.2

B767 6 5 0 1 14.3

B777 10 3 7 0 9.9 4 6

B787

TU204 1 1 0 1.2 2

B747F 9 7 0 2 15.8 2

Business jet

2 0 0 2 1.5 2

TOTAL 262 119 77 66 7.4 33 33 30

*Wet leased aircraft excluded in calculation of average ages

30

2009

ASK (million) 26,453

RPK (million) 20,552

ATK (million) 507

RTK (million) 306

Passengers carried (thousand) 15,109

Total cargo tonne carried 195

Passenger load factor (%) 77.69%

ATK load factor (%) 60.45%

� Shenzhen Airlines: established in 1992, commenced operations in 1993

� Serving 160 domestic, regional and international routes, including 17 international and regional routes, connecting nine countries and regions

� Staff: over 8,000; Fleet: 83, with one in wet-lease

Fleet (as of Dec 31, 2009)

Sub-total Owned

Financing Lease

Operating Lease

Average Ages

A319 5 3 2 3.5

A320 25 15 10 2.0

B737 52* 23 4 25 6.6

Total 82 41 4 37 5.0

*Excludes one B737-700 in wet-lease

Increase Stake in Shenzhen Airlines: Strengthen Southern China Foothold

31

Increase Stake in Shenzhen Airlines: Strengthen Southern China Foothold

Maximize Synergy with Full-scale Business Co-operation

To become a premium-market-focused, national carrie r serving domestic, regional and short-haul internati onal markets

Trademark / Logo unchanged

Corporate goals unchanged:serving local economic and

social development

Place of Registration unchanged

Marketing

Cargo

… ...

Sourcing

IT

Goal

Ground

� Introduce four B747 freighters over next two years to expand fleet to 12 B747 freighters

� Optimize resource allocation, build Shanghai as major operating base in addition to Beijing

� Place operational priorities on long haul services to Europe and North America, supplemented by regional services

� Enhance marketing capabilities, improve inbound load factor

� Strengthen tie-up with Cathay Pacific to achieve better synergy, efficiency and return

32

Development Plan

� Air China and Cathay Pacific to use current Air China Cargo as platform to set up cargo joint venture in Shanghai

� With operating bases in Beijing and Shanghai, the joint venture aims to become China’s number one cargo carrier

� Air China delegates its existing cargo business (freighters plus bellyhold) to the new cargo joint venture

Set Up Cargo Joint Venture: Strengthen Cargo Business

33

New Shares Issuance to Enhance Financial Strength

Share Issue Plan

A Shares H Shares

Target subscribers

CNAHCQualified investors(Max. 9)

CNACG

Issue Price(Per share)

Min. RMB9.58 Min. RMB9.58 Min. HK$6.62

Share Issue Max. 157 mn Max. 428 mn Max. 157 mn

Lock-up 36 months 12 months 12 months

Proceeds Min. RMB1.5 bn Max. RMB4.1 bn Max. HK$1.04 bn

Shareholders’ meeting

Date: 2010.4.29Time: 2 p.m.

Shareholders’ online vote

Date: 2010.4.29

Time: 9:30 - 11:30 a.m.

& 1:00 - 3:00 p.m.

Appendix

34


Non-current assets 75,045 71,821 4.49%

– Aircraft 65,007 61,940 4.95%

– Property 3,676 3,630 1.27%

Current assets 8,551 10,418 -17.92%

– Cash & cash equivalents 2,707 2,987 -9.37%

Total assets 107,919 100,401 7.49%

Current liabilities 37,199 42,725 -12.93%

Non-current liabilities 46,766 37,219 25.65%

Total liabilities 83,965 79,945 5.03%

Shareholders’ equity 23,954 20,457 17.09%

35

1. Balance Sheet (Condensed)


Net cash flow from operating activities

5,465 4,994 9.43%

Net cash flow from investing activities

-12,666 -7,202 75.87%

Net cash flow from financing activities

6,948 2,870 142.09%

Net increase/(decrease) in cash and cash equivalents

-252 662 -138.07%

Cash and cash equivalents at beginning of year

2,949 2,477 19.06%

Effect of exchange rate changes on cash and cash equivalents

-20 -190 -89.47%

Cash and cash equivalents (at end of the year)

2,676 2,949 -9.26%

36

2. Cash Flow Statement (Condensed)

RMB million(as of Dec 31

2009)

Sub-total

RMB denominated

USD denominated

JPY denominated

HKD denominated

EUR denominated

MOPdenominated

Bank loans 36,245 2,333 27,124 0 6,542 229 17

Finance lease obligation

18,821 0 17,897 924 0 0 0

Bond 9,000 9,000 0 0 0 0 0

Total 64,065 11,333 45,020 924 6,542 229 17

Weight (%) 100% 17.69% 70.27% 1.44% 10.21% 0.36% 0.03%

37

3. Borrowings and Obligations

38

Air China CEA CSA


- Domestic 76.7% 74.9% 76.6%

- International 77.5% 65.4% 67.9%

- Regional 70.9% 67.1% 69.8%

Passenger yield (RMB/RPK)

- Domestic 0.61 0.54 0.53

- International 0.49 0.51 0.55

- Regional 0.66 0.63 0.75

Profit from operations (RMB million) 5,501 1,821 1,440

Unit cost per ATK (RMB) 2.98 3.08 3.58

Ex-fuel unit cost per ATK (RMB) 2.04 2.10 2.52

Operating net cash inflow (RMB million) 5,465 2,856 8, 959

Gearing ratio (%) 77.80% 97.67% 86.00%

Net assets (excludes minority interest) (RMB million)

23,916 1,235 10,351

4. Comparison with Domestic Peers

Investor Relations - BeijingRao Xinyu

Tel: +8610-6146 2777

Fax: +8610-6146 2805

E-mail: [email protected]

Wang Kai

Tel: +8610-6146 2799

Fax: +8610-6146 2805

E-mail: [email protected]

Website: www.airchina.com.cn

air china limited · 2009 annual results (ifrs) 2010 1q results (prc gaap) april 2010 air china...

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