Air China Limited
2010 Annual ResultsUnder IFRS
March 2011
Agenda
Part 1 Highlights
Part 2 Business Overview
Part 3 Financial Overview
Part 4 Outlook
2
Part 1
Highlights
4.9% 5.1% 5.0%3.7% 4.5%
10.2% 10.7%13.0%
9.0% 8.7%10.3%
-0.8%-2.0%0.0%2.0%4.0%6.0%8.0%
10.0%12.0%14.0%
2005 2006 2007 2008 2009 2010Global GDP annual growth rate China GDP annual growth rate
0
50
100
150
200
250
Mar
-08
May
-08
Jul-0
8
Sep-
08
Nov
-08
Jan-
09
Mar
-09
May
-09
Jul-0
9
Sep-
09
Nov
-09
Jan-
10
Mar
-10
May
-10
Jul-1
0
Sep-
10
Nov
-10
Global Airlines Index Asia-Pacific Airlines Index
US Airlines Index Europe and Middle East Airlines Index
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%M
ay-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
RPK RFTK
Chinese Economy Continues Steady Growth
Strong Recovery in Global Airline Industry Rapid Growth in Chinese Airline Industry
Source: IMF, NBS
Source: Bloomberg Source: CAAC
Steady Economic Growth; Asia Pacific Led Global Airline Recovery
E
4
Key Operational Metrics* 2010 YoY Change
ASK (million) 132,074.8 33.92%
RPK (million) 105,695.0 40.04%
ATK (million) 19,740.7 28.06%
RTK (million) 14,294.4 38.87%
Passenger Load Factor (%) 80.0 3.50pts
ATK Load Factor (%) 72.4 5.63pts
Key Financial Metrics 2010 YoY Change
Turnover (RMB million) 82,488 60.50%
Operating Expenses (RMB million) 71,560 55.93%
Net Profit (RMB million) 12,336 156.83%
Profits Attributable to Shareholders (RMB million)
12,005 147.31%
EPS (RMB) 1.03 151.22%
Results Highlights
5
* Note: Including Shenzhen Airlines’ operational figures from April 20 to December 31
Part 2
Business Overview
7
Total 2010 YoYChange
Revenue (RMB million) 55,997.9 34.91%
ASK (million) 107,423.1 12.53%
RPK (million) 86,212.2 17.53%
Load Factor (%) 80.25 3.42pts
Yield (RMB/RPK) 0.65 14.04%
Domestic 2010 YoYChange
Revenue (RMB million) 35,526.9 32.58%
ASK (million) 64,062.3 11.37%
RPK (million) 51,414.5 16.48%
Load Factor (%) 80.26 3.52pts
Yield (RMB/RPK) 0.69 13.11%
International 2010 YoYChange
Revenue (RMB million) 18,199.2 38.02%
ASK (million) 39,566.2 13.55%
RPK (million) 31,897.9 18.07%
Load Factor (%) 80.62 3.09pts
Yield (RMB/RPK) 0.57 16.33%
Regional 2010(HK, Macao and Taiwan)
YoYChange
Revenue (RMB million) 2,271.9 48.92%
ASK (million) 3,794.6 22.61%
RPK (million) 2,899.9 32.15%
Load Factor (%) 76.42 5.51pts
Yield (RMB/RPK) 0.78 11.43%
Passenger Services – Air China
0%
10%
20%
30%
40%
ASK Change RPK Change Passenger Load Factor Change
International Domestic Regional
8
Total (as of December 31, 2009) 262Introduced in 2010 30
B737-800 (12), A321/320 (12), A330 (3), Business Jet (2 under custody), B747-400F (1)
Retired in 2010 10
B757-200 (2), B767-300ER (1), B747-200F freighter (2), B737-300 (4), A321-100 (1)
Total (as of December 31, 2010) 282
Timely adjustments of capacity deployment to achieve the alignment of scale, growth rate and market demand
Retirement of older aircraft to further optimize fleet structure and maintain a more efficient fleet
Demand-orientated Capacity Deployment to Further Improve Efficiency
Passenger Capacity and Traffic Changes (2010 vs 2009)
14% 11%
23%18% 16%
32%
3pts 4pts 6pts
Passenger Capacity Distribution Change (2010 vs 2009) 3.53%
59.64%36.83%
3.24%
60.26%36.50%
International Domestic Regional
2010
2009
*Note: does not include the conversion of a B747-400COMBI passenger jet to a B747-400F freighter
87115
0
60
120
180
2009 2010
9
Improved Hub Operation to Realize Greater Network Effects
Transfer passenger traffic at Beijing hub rose 2% year-over-year. Number of effective connecting flights within two hours rose 12.5% year-over-year. New routes from Beijing to Manila, Ulanhot, Jiuzhaigou valley and seven other cities launchedTransfer traffic rose by 40% year-over-year at Chengdu hub, excluding domestic-to-domestic transfers. Through check-in service established in 35 cities, and new routes from Chengdu to Bangalore, Nagoya, Ngari and four other cities launchedShanghai gateway saw transfer traffic increase by 23%. New routes from Shanghai to Taipei Sungshan, Yinchuan and one other city launched. More wide-body aircraft were put into service on Beijing-Shanghai express and Shanghai-Tokyo and Shanghai-Osaka routesTake majority shareholding Shenzhen Airlines boosted the Company’s foothold in Southern China, resulting in a more balanced networkRevenue from transfer passenger rose 32% year-over-year
Changes in Capacity Input in Beijing, Chengdu and Shanghai Transfer Passenger Revenue Rose 32%
RMB 100 million
8.8%15.2% 17.6%
39.9%
3.7%13.0%
0%
20%
40%
60%
Beijing Chengdu Shanghai
ASK YoY Growth AFTK YoY Growth
50
89
0
20
40
60
80
100
2009 2010
99
157
0
60
120
180
2009 2010
33
63
0
20
40
60
80
2009 2010012345678
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0%
20%
40%
60%
80%
100%
2010 2009International YoY Change Domestic YoY ChangeRegional YoY Change
10
Sustained Improvement in Yield Quality
Premium Class Continued GrowthRMB 100 million RMB 100million
RMB 100 million RMB 100 million
92% Growth in E-commerce Revenue
Frequent Flyer Revenue Rose 59%
Corporate Customer Revenue Grew 78%
Revenue from Star Alliance Carriers Cooperation Rose 91%
9
18
0
5
10
15
20
25
2009 2010
RMB 100 million
11
Cargo Traffic Maintained Rapid Growth
2010 2009 YoY Change
AFTK (million) 7,428.9 6,449.0 15.20%
Freighter AFTK (million) 2,791.1 2,003.9 39.28%
RFTK (million) 4,530.8 3,496.2 29.59%
Freighter RFTK (million) 2,296.2 1,536.7 49.42%
Tonnage Carried (tonne) 1,148,157.3 943,341.3 21.71%
Freighter Tonnage Carried (tonne) 385,193.2 264,882.7 45.42%
Load Factor (%) 60.99% 54.21% 6.78pts
Yield (RMB/RFTK) 1.81 1.51 19.87%
Air China Cargo – Optimizing Operational Efficiency to Significantly Increase Yield
0.050.0
100.0150.0200.0250.0300.0350.0400.0450.0500.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Million
0%
10%
20%
30%
40%
50%
60%
70%
80%
RTK in 2010 YoY GrowthInternational YoY Growth Cargo Load FactorInternational Cargo Load Factor
2010 YoY Change
ASK (million) 30,400.4 11.27%
RPK (million) 24,386.8 14.68%
ATK (million) 3,220.1 8.32%
RTK (million) 2,539.87 15.00%
Passengers carried (thousand) 17,568.1 12.25%
Passenger load factor (%) 80.22% 2.38pts
ATK load factor (%) 78.88% 4.58pts
Passenger Yield (RMB/RPK) 0.61 -
Shenzhen Airlines
12
13
2010 YoY Change
ASK (million) 3,106.0 -1.71%
RPK (million) 2,184.9 2.96%
ATK (million) 386.3 3.3%
RTK (million) 257.7 5.4%
Passengers carried (thousand) 1,364.5 -5.7%
Passenger load factor (%) 70.35% 3.19pts
ATK load factor (%) 66.71% 1.34pts
Passenger Yield (RMB/RPK) 0.74 32.14%
Air Macao
Part 3
Financial Overview
15
Record High Net ProfitBenefited from industry recovery and operational efficiency
(RMB million) 2010 2009 YoY Growth
Turnover 82,488 51,393 60.50%
Air traffic revenue 78,209 48,092 62.63%
Operating expenses 71,560 45,892 55.93%
Operating expenses ex-fuel cost 47,464 31,426 51.03%
Gain from change in fair value of fuel derivative contracts 1,954 2,758 -29.15%
Profit/(loss) from operations 10,928 5,501 98.65%
Finance costs -531 1,059 150.14%
Share of profit/(loss) of associates 3,375 624 440.92%
Profit/(loss) before tax 14,834 5,066 192.79%
Net profit/(loss) 12,336 4,803 156.83%
Profit/(loss) attributable to equity holders 12,005 4,854 147.31%
EPS (RMB) 1.03 0.41 151.22%
010,00020,00030,00040,00050,00060,00070,00080,00090,000
2009 2010Passenger Cargo
16
Optimizing Capacity Deployment and Enhancing Passenger and Cargo Services Synergy
Revenue Breakdown: RMB millionRevenue
BreakdownPassenger Services
YoYChange
Cargo Services
YoYChange Total YoY
Change
Domestic 45,515 69.85% 2,648 109.66% 48,163 71.64%(%) 66.80 4.04pts 26.29 2.88pts 61.58 3.23pts
International 18,961 41.48% 6,873 79.40% 25,834 49.91%
(%) 27.83 -3.65pts 68.24 -2.75pts 33.03 -2.8pts Regional 3,661 46.62% 551.41 82.45% 4,212 50.48%(%) 5.37 -0.48pts 5.47 -0.13pts 5.39 -0.43pts
RMB million 2010 Passenger Revenue Breakdown
Domestic International Regional2009 2010
12.88%
88.78%
11.22%87.12% 35.83% 58.35%
5.82%
33.03%61.58%
5.39%
17
2010
Take-off,Landing and
Depotcharges10.8%
Depreciation12.0%
Maintenance3.6%
Staff13.8%
Leasing4.9%
Other flightoperationexpenses
11.5%Catering
2.9%Others
(includinggain from
change in fairvalue)7.0%
Jet Fuel33.7%
Cost Pressure from Jet Fuel Price Surge
(RMB million) 2010 2009 YoYChange
Jet fuel 24,096 14,466 66.57%
Gain/loss from change in fair value -1,954 -2,758 -29.15%
Take-off, landing and depot charges 7,707 5,789 33.14%
Depreciation 8,569 7,051 21.53%
Maintenance 2,577 1,768 45.78%
Staff 9,852 6,627 48.65%
Leasing 3,488 2,319 50.40%
Air Catering 2,044 1,519 34.59%
Other flight operation expenses 8,228 4,532 81.54%
Others 6,953 4,579 51.84%
Total 71,560 45,892 55.93%
0
1,000
2,000
3,000
4,000
5,000
6,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010 2009
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010 2009
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010 2009
05
1015202530
2005 2006 2007 2008 2009 2010
Fuel Costs Jet Fuel Surcharge
Higher Jet Fuel Cost with Uncertainties in Future Price Trend
Fuel Costs and Jet Fuel Surcharge
RMB/Tonne RMB/Tonne
Average Domestic International
2010 Average: 5,740
2009 Average: 4,728
2010 Average: 5,082
2009 Average: 4,069
Changes in Jet Fuel Purchase Price
RMB million
RMB/Tonne
2010 Average: 5,588
2009 Average: 4,583
18
26,700 30,28440,101 31,426
47,464
15,716 17,201
22,614
14,466
24,096
0
20,000
40,000
60,000
80,000
2006 2007 2008 2009 2010
Operating cost excluding fuel cost Fuel cost
0.51 0.53 0.68 0.47 0.54
3.04 3.18
4.28
2.983.46
0
1
2
3
4
5
2006 2007 2008 2009 2010Cost per ATK Cost per ASK
0.32 0.35 0.44 0.32 0.36
1.91 2.072.74
2.04 2.3
0
1
2
3
4
5
2006 2007 2008 2009 2010Ex-fuel cost per ATK Ex-fuel cost per ASK
19
Enhanced Cost Efficiency
42,41647,485
62,715
45,892
71,560
92.53%86.75%89.30%
118.54%94.40%
59.42%59.01%
75.79%61.15% 57.54%
40%
60%
80%
100%
120%
2006 2007 2008 2009 2010
Operating cost as % of revenueEx-fuel operating cost as % of revenue
Ex-fuel Unit Cost
Unit Cost
Cost as Percentage of Revenue
Fuel Cost and Non-fuel CostRMB million RMB
RMB
Margins and Returns
20
2010 2009 YoY Change
EBITDA (RMB million) 19,497 12,552 55.33%
EBITDA margin (%) 23.64% 24.42% -0.78pts
EBITDAR (RMB million) 23,697 15,349 54.39%
EBITDAR margin (%) 28.73% 29.87% -1.14pts
Operating profit margin (%) 13.25% 10.70% 2.55pts
Pre-tax profit margin (%) 17.98% 9.86% 8.12pts
Net profit margin (%) 14.55% 9.45% 5.1pts
ROE (%) 36.74% 22.14% 14.6pts
62.4 66.3279.63 77.8 73.94
0
20
40
60
80
100
2006 2007 2008 2009 2010
4.15 4.80
8.89
12.12
-1.63
-4
0
4
8
12
16
2006 2007 2008 2009 2010
0.941.15
2.50 2.54
1.72
0
1
2
3
2006 2007 2008 2009 2010
21
%
31,736 31,507
23,916
41,438
19,943
0
7,000
14,000
21,000
28,000
35,000
42,000
2006 2007 2008 2009 2010
Financial Strength and Healthy Capital Structure
Net Debt to Equity Ratio
Net Assets(Excludes minority interest)
Total Debt to Asset Ratio
EBITDA Interest Cover Ratio
(x)
(x) (RMB million)
Part 4
Outlook
23
Opportunities Challenges
Sustained global economic recovery and continued rapid economic growth in China
Continued growth in air travel, balancing capacity and demand
Increased market concentration; stabilizing and improving yield
Synergies created by member airlines within Air China Group
Accelerated consolidation in global airline industry; intensified competition
Impacts from high-speed rail with full HSR coverage in near future
Insufficiency of core aviation resources
Uncertainties from fluctuations in jet fuel prices, exchange rates and interest rates
2011: Business Environment
2011: New Developments
Business
Improving operational efficiency of hubs
Enhancing sales and marketing efforts in international market
Speeding up introduction of wide-body aircraft, delivery of five A330 and four B777 wide-body aircraft in 2011
Annual capital expenditure RMB23.6 billion; 86% invested in aircraft
Shenzhen Airlines
Optimizing market structure and layout and improving efficiency
Improving marketing collaboration to strengthen market controlling power
Creating comprehensive synergy with Air China
CargoOperation model: “air network + hub cargo terminal + truck network”
Improving marketing and service standards
ServiceCustomer-oriented service promoting Customer Service Management solutions
Service upgrade for e-commerce, irregular flight information transfer and seven other service projects
24
2011-2015 Five-year Plan
Strategic Positioning: Large-scale network carrier with sustained growth
Strategic Objective: Top-tier international airline with strong competitive edge for further developmentOffer customers with exceptional experience, catering to the interest of all relevant parties
Targets for Development Objectives:Become one of the world’s top six airlines with significantly increased international competitiveness Balance domestic and international development, building a network with a composite hub in Beijing, a regional hub in Chengdu, an international gateway in Shanghai, and Shenzhen as a supportive hub in southern ChinaBuild three main businesses: passenger, cargo and aircraft maintenance
25
Appendix
Other Financial and Operational Data
*Wet lease aircraft excluded in calculation of average ages
2010 Delivery
Sub-total Owned Finance Lease
Operating Lease
Average Age 2011 2012 2013
A319 33 21 9 3 5.7 0 0 0
A320/A321 44 8 24 12 2.8 * 14 14 10
A330 23 3 17 3 3.1 5 6 9
A340 6 5 1 0 12.6 0 0 0
B737 127 56 22 49 7.2 * 9 9 11
B747 9 7 2 0 13.7 0 0 0
B757 11 11 0 0 16.0 0 0 0
B767 5 5 0 0 15.9 0 0 0
B777 10 6 4 0 10.9 4 6 6
TU204 1 1 0 0 2.2 0 0 0
B747F 9 7 0 2 16.0 1 2 0
Business jet 4 0 0 4 1.4 3 0 0
TOTAL 282 130 79 73 7.4 36 37 36
1 Fleet – Air China
27
2 Fleet – Shenzhen Airlines
2010 Delivery
Sub-total Owned Financial Lease
Operating Lease
Average Age 2011 2012 2013
A319 5 3 0 2 4.7 0 0 0
A320 38 28 0 10 2.4 9 12 7
B737 56 22 5 29 7.6 10 6 10
TOTAL 99 53 5 41 5.2 19 18 17
28
3 Consolidated Balance Sheet (Condensed)
(RMB million) As of Dec 31, 2010 As of Dec 31, 2009 YoY Change
Non-current assets 96,153 75,045 28.13%
– Aircraft 82,655 65,007 27.15%
– Property 5,876 3,676 59.85%
Current assets 22,979 8,551 168.74%
– Cash and cash equivalents 14,402 2,707 432.07%
Total assets 158,774 107,919 47.12%
Current liabilities 52,389 37,199 40.84%
Non-current liabilities 65,014 46,766 39.02%
Total liabilities 117,403 83,965 39.82%
Shareholders’ equity 41,371 23,954 72.71%
29
4 Consolidated Cash Flow Statement (Condensed)
(RMB million) 2010 2009 YoY Change
Net cash flow from operating activities 18,366 5,465 236.07%
Net cash flow from investing activities -14,058 -12,666 10.99%
Net cash flow from financing activities 7,463 6,948 7.41%
Net increase/(decrease) in cash and cash equivalents 11,771 -252 4671.03%
Cash and cash equivalents at beginning of year 2,676 2,949 -9.26%
Effect of exchange rate changes on cash and cash equivalents -71 -20 255.00%
Cash and cash equivalents 14,376 2,676 437.22%
30
5 Consolidated Borrowings and Obligations
31
RMB million(as of Dec 31, 2010)
Sub-total RMB denominated
USD denominated
HKDK denominated
EUR denominated
Bank loans and notes 59,029 8,801 44,177 5,846 206
Finance lease obligation 18,285 829 17,456
Bond 9,000 9,000
Total 86,314 18,629 61,633 5,846 206
Weight (%) 100 21.6 71.4 6.8 0.2
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