Form 20-F

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM

20-F

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number

1-14550

中国东方航空股份有限公司

(Exact Name of Registrant as Specified in Its Charter)


China Eastern Airlines Corporation Limited		The People’s Republic of China
(Translation of Registrant’s Name Into English)		(Jurisdiction of Incorporation or Organization)

5/F, Block A2, Northern District, CEA Building

36 Hongxiang 3rd Road, Minhang District, Shanghai

People’s Republic of China

Tel: (8621) 6268-6268

Fax: (8621) 6268-6116

(Address and Contact Details of the Board Secretariat’s Office)

Zhou Qimin, Chief Financial Officer

Email: ir@ceair.com

5/F, Block A2, Northern District, CEA Building

36 Hongxiang 3rd Road, Minhang District, Shanghai 201100

People’s Republic of China

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on which Registered
American Depositary Shares	CEA	The New York Stock Exchange
Ordinary H Shares, par value RMB1.00 per share		The New York Stock Exchange*

*	Not for trading, but only in connection with the registration of American Depositary Shares. The Ordinary H Shares are also listed and traded on The Stock Exchange of Hong Kong Limited.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of December 31,

2021

, 13,697,662,301 Ordinary Domestic Shares, par value RMB1.00 per share, were issued and outstanding, and 5,176,777,777 Ordinary H Shares par value RMB1.00 per share, were issued and outstanding. H Shares are Ordinary Shares of the Company listed on The Stock Exchange of Hong Kong Limited. Each American Depositary Share represents 50 Ordinary H Shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐

☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

. Yes ☐ No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the

Securities Exchange Act of

1934

during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such

filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of

Regulation

S-T

during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer” and “emerging growth company” in Rule

12b-2

of the Exchange

Act.



Large Accelerated Filer ☒	Accelerated Filer ☐	Non-Accelerated Filer ☐	Emerging Growth Company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit

report. ☒

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAP ☐		International Financial Reporting Standards as issued by the International Accounting Standards Board ☒			Other	☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐

No ☒

SUPPLEMENTAL INFORMATION

In this Annual Report, unless otherwise specified, the term “dollars”, “U.S. dollars” or “US$” refers to United States dollars, the lawful currency of the United States of America, or the United States or the U.S.; the term “Renminbi” or “RMB” refers to Renminbi, the lawful currency of The People’s Republic of China, or China or the PRC; the term “Hong Kong dollars” or “HK$” refers to Hong Kong dollars, the lawful currency of the Hong Kong Special Administrative Region of China, or Hong Kong; the term “SGD” refers to Singapore dollars, the lawful currency of the Republic of Singapore; the term “JPY” refers to Japan Yen, the lawful currency of Japan; the term “EUR” refers to EURO, the lawful currency of EMU member countries and the term “KRW” refers to Korea Won, the lawful currency of the Republic of Korea. Any discrepancies in the tables included herein between the amounts listed and the totals are due to rounding.

In this Annual Report, the term “we”, “us”, “our”, “our/the Company”, or “our/the Group” refers to China Eastern Airlines Corporation Limited, a joint stock limited company incorporated under the laws of the PRC on April 14, 1995, and our subsidiaries, or, in respect of references to any time prior to the incorporation of China Eastern Airlines Corporation Limited, the core airline business carried on by its predecessor, China Eastern Airlines, which was assumed by China Eastern Airlines Corporation Limited pursuant to the restructuring described in this Annual Report. The term “CEA Holding” refers to our parent, China Eastern Air Holding Company, which was established on October 11, 2002 as a result of the merger of our former controlling shareholder, Eastern Air Group Company, or EA Group, with China Northwest Airlines Company and Yunnan Airlines Company.

For the purpose of this Annual Report, references to The People’s Republic of China, China and the PRC do not include Hong Kong, Taiwan, or the Macau Special Administrative Region of China, or Macau.

CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS

Certain information contained in this Annual Report may be deemed to constitute forward-looking statements. These forward-looking statements include, without limitation, statements relating to:

•

the impact of changes in the policies of the Civil Aviation Administration of China, or the CAAC, regarding route rights;

•

the impact of the CAAC policies regarding the restructuring of the airline industry in China;

•

the impact of macroeconomic fluctuations (including the fluctuations of oil prices, and interest and exchange rates);

•

certain statements with respect to trends in prices, volumes, operations, margins, risk management, overall market trends and exchange rates;

•

our fleet development plans, including, without limitation, related financing, schedule, intended use and planned disposition;

•

our expansion plan of the cargo operations;

•

our expansion plans, including possible acquisition of other airlines;

•

our marketing plans, including the establishment of additional sales offices;

•

our plan to add new pilots; and

•

the impact of unusual events on our business and operations.

The words or phrases “aim”, “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “going forward”, “intend”, “may”, “ought to”, “plan”, “potential”, “predict”, “project”, “seek”, “should”, “will”, “would”, and similar expressions or the negatives thereof, as they relate to our Company or its management, are intended to identify “forward-looking statements” within the meaning of Section 27A of the

Securities Act of 1933

, as amended, and Section 21E of the

Securities and Exchange Act of 1934

, as amended, or the Exchange Act. These forward-looking statements are based on current plans and estimates, and speak only as of the date they are made. We undertake no obligation to update or revise any forward-looking statement in light of new information, future events or otherwise. Forward-looking statements are, by their nature, subject to inherent risks and uncertainties, some of which are beyond our control, and are based on assumptions and analyzes made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in particular circumstances. We caution you that a number of important factors could cause actual outcomes to differ, or to differ materially, from those expressed in any forward-looking statement, including, without limitation:

(1)

changes in political, economic, legal and social conditions in China;

(2)

any changes in the regulatory policies of the CAAC;

(3)

the development of the high-speed rail network in the PRC;

(4)

fluctuations of interest rates and foreign exchange rates;

(5)

the availability of qualified flight personnel and airport facilities;

(6)

the effects of competition on the demand for and price of our services;

(7)

the availability and cost of aviation fuel, including but not limited to pricing trends and risks associated with fuel hedging;

(8)

any significant depreciation of Renminbi or Hong Kong dollars against U.S. dollars, Japanese yen, Singapore dollar, Korea Won or Euro, the currencies in which the majority of our borrowings are denominated;

(9)

our ability to obtain adequate financing, including any required external debt and acceptable bank guarantees; and

(10)

general economic conditions in markets where we operate.

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A.	[Reserved]

B.	Capitalization and Indebtedness

Not applicable.

C.	Reasons for the Offer and Use of Proceeds

Not applicable.

D.	Risk Factors

Risks Relating to our Business

The COVID-19 pandemic and measures to reduce its spread have had, and will likely continue to have, a material adverse impact on our business, results of operations and financial condition.

The outbreak of the COVID-19 pandemic and implementation of measures to reduce its spread have adversely impacted our business and continue to adversely impact our business in a number of ways. Multiple countries have responded to the virus with air travel restrictions and closures, testing requirements or recommendations against air travel. We experienced a significant decline in domestic and international demand due to the decreased willingness to travel and the implementation of the “Five-One” policy for international flights by the Civil Aviation Administration. For the year ended December 31, 2021, our total ASK and total number of passengers carried increased by 5.7% and 6.0%, respectively, while our passenger load factors decreased by 2.8 percentage points, as compared to the same period of 2020. The decline in demand for worldwide air travel services caused a material deterioration in our revenues in 2020 and 2021, and our net loss attributable to shareholders increased from RMB11.8 billion in 2020 to RMB12.2 billion in 2021.

The extent of the impact of the COVID-19 pandemic on our business, results of operations and financial condition will depend on future developments, including the currently unknowable duration of the COVID-19 pandemic; the efficacy of, ability to administer and extent of adoption of any COVID-19 vaccines domestically and globally; the impact of existing and future governmental regulations, travel restrictions that are imposed in response to the pandemic and the impact of the COVID-19 pandemic on consumer behavior, such as a reduction in the demand for air travel. The total potential economic impact brought on by the COVID-19 pandemic is difficult to assess or predict, and it has already caused, and is likely to result in further, significant disruptions to global financial markets, which may reduce our ability to access capital on favorable terms or at all, and increase the cost of capital.

In addition, a recession, depression or other sustained adverse economic event resulting from the spread of the coronavirus would materially adversely impact our business and our medium- and long-term financial condition and operations. Unfavorable economic conditions have driven changes in travel patterns, including reduced spending for both leisure and business travel. Unfavorable economic conditions, when low fares are often used to stimulate traffic, have also historically hampered the ability of airlines to raise fares to counteract any increases in fuel, labor, and other costs.

Recent developments with respect to the COVID-19 vaccines have the potential to affect the scope and duration of the pandemic. While a number of the COVID-19 vaccines have received regulatory approval and are available in the PRC and other parts of the world, a degree of uncertainty exists with respect to the distribution, utilization, and long-term efficacy of vaccinations among the general population. The impact of the COVID-19 vaccines on the pandemic, demand for air travel, and our business remain unknown. Even once the pandemic and fears of travel subside, demand for air travel may remain weak for a significant period of time. In particular, consumer behavior related to traveling may be negatively impacted by adverse changes in the perceived or actual economic climate, including higher unemployment rates, declines in income levels, and loss of wealth resulting from the impact of the COVID-19 pandemic. The ultimate impact of the COVID-19 pandemic is still highly uncertain and subject to change, and the extent to which COVID-19 impacts our business, results of operations and financial condition in future periods will depend on the future developments of the pandemic, including the outbreak of Delta and Omicron and potential future variants of the virus.

Moreover, any other adverse public health developments, including SARS, Ebola, Avian Flu or Influenza A (H1N1), and the occurrence of natural disasters may, among other things, also lead to travel restrictions and reduced levels of economic activity in the affected areas, which may in turn significantly reduce demand for our services and have a material adverse effect on our financial condition and results of operations.

Our reputation, business prospects, results of operations, financial condition as well as our fleet availability may be materially and adversely affected in the event of an accident or incident involving our flight.

As an airline company, we’re operating a large fleet, an accident or incident involving our aircraft could result in delays and require repair or replacement of a damaged aircraft, which could result in consequential temporary or permanent losses from disruption of service and/or significant liability to injured passengers and others. Unforeseeable or unpredictable events such as inclement weather, mechanical failures, human error, aircraft defects and other force majeure events may affect flight safety, which could result in accidents and/or incidents of passenger injuries or deaths that could lead to significant injury and loss claims, and the amount of such coverage may not be adequate to cover the costs related to an accident or incident in full, which could damage our results of operations and financial condition. In addition, any aircraft accident or incident, even if fully insured, could harm our reputation, competitive position and result in a decrease in our operating revenues. The occurrence of any of the foregoing could adversely affect our results of operations and financial condition. On March 21, 2022, a Boeing 737-800 passenger plane with flight number MU5735 of China Eastern Airlines Yunnan Co., Ltd. crashed in Wuzhou, Guangxi, China. The investigation of the cause of the accident is still in progress. The Company will further evaluate the impact of the accident, and the current and future impact of the accident on the Company remain uncertain.

Our indebtedness and other financial obligations may have a material adverse effect on our liquidity and operations.

We have a substantial amount of debt, lease and other financial obligations, and will continue to do so in the future. As of December 31, 2021, our total liabilities were approximately RMB231,638 million and our current liabilities exceeded our current assets by approximately RMB57,981 million. Our total interest-bearing liabilities (including long-term and short-term bank borrowings, lease liabilities, bonds payable and super short-term debentures) as of December 31, 2020 and 2021 were approximately RMB184,168 million and RMB193,765 million, respectively, of which short-term interest-bearing liabilities accounted for approximately 38.7% and 31.1%, respectively. Our substantial indebtedness and other financial obligations could materially and adversely affect our business and operations, including being required to dedicate additional cash flow from operations to the payment of principal and interest on our indebtedness, thereby reducing the funds available for operations, maintenance and service improvements and future business opportunities, increasing our vulnerability to economic recessions, reducing our flexibility in responding to changing business and economic conditions, placing us at a disadvantage compared to competitors with lower debt, limiting our ability to arrange for additional financing for working capital, capital expenditures and other general corporate purposes, at all or on terms that are acceptable to us.

Moreover, we are largely dependent upon cash flows generated from our operations and external financing to meet our debt repayment obligations and working capital requirements, which may reduce the funds available for other business purposes. However, the widespread and continuous COVID-19 pandemic has materially decreased passenger demand, thereby adversely affecting operating income and cash flows from operations. In 2021, the passenger traffic (as measured in RPKs) was 108,804 million passenger-kilometres, representing an increase of 1.4% from 2020. In 2021, our passenger revenue amounted to RMB54,105 million, representing an increase of 9.9% from 2020. If our operating cash flow is under continuous adverse impact of factors such as increased competition, a significant decrease in demand for our services resulting from worldwide epidemic such as the COVID-19 pandemic as well as a significant increase in jet fuel prices, our liquidity would be materially and adversely affected. We also try to secure sufficient financing through financing arrangements with domestic and foreign banks in China as well as from debt and equity capital markets. In 2021, we actively expanded financing channels, and completed non-public issuance of A Shares of RMB10.8 billion and RMB9 billion of corporate bonds to ensure that the cash flow can meet our operation needs. In July 2021, we also issued credit enhanced bonds denominated in SGD with total principal of SGD0.5 billion due in 2026. Futhermore, in 2021, we issued a total of RMB39 billion of super short-term debentures, the outstanding amount of which amounted to nil as of December 31, 2021. However, our ability to obtain financing may be affected by our financial position and leverage, our credit rating and investor perception of the aviation industry, as well as prevailing economic conditions and the cost of financing in general. If we are unable to obtain adequate financing for our capital requirements, our liquidity and operations would be materially and adversely affected.

In addition, the airline industry overall is characterized by a high degree of operating leverage. Due to high fixed costs, including payments made in connection with aircraft leases, and landing and infrastructure fees which are set by government authorities and not within our control, the expenses relating to flight operations do not vary proportionately with the number of passengers carried, while revenues generated from a particular flight are directly related to the number of passengers carried and the fare structure of the flight. Accordingly, a decrease in revenues may result in a disproportionately higher decrease in profits.

We may not be able to secure future financing at terms acceptable to us or at all.

We require significant amounts of external financing to meet our capital commitments for acquiring and upgrading aircraft and flight equipment and for other general corporate needs. As of December 31, 2021, we had sufficient unutilized credit facilities billion from various banks. We expect to roll over these bank facilities in the near future. In addition, we generally acquire aircraft through either long-term capital leases or operating leases. In the past, we have obtained guarantees from Chinese banks in respect of payments under our foreign loan and capital lease obligations. However, we cannot assure you that we will be able to roll over our bank facilities or continue to obtain bank guarantees in the future. Unavailability of credit facilities or guarantees from Chinese banks or the increased cost of such guarantees may materially and adversely affect our ability to borrow additional funds or enter into international aircraft lease financing or other additional financing on acceptable terms. In addition, if we are not able to arrange financing for our aircraft on order, we may seek to defer aircraft deliveries or use cash from operations or other sources to acquire the aircraft

Our ability to obtain financing may also be impaired by our financial position, leverage and credit rating. In addition, factors beyond our control, such as recent global market and economic conditions, volatile oil prices, and the tightening of credit markets may result in limited availability of financing and increased volatility in credit and equity markets, which may materially and adversely affect our ability to secure financing at reasonable costs or at all. If we are unable to obtain financing for a significant portion of our capital requirements, our ability to expand our operations, purchase new aircraft, pursue business opportunities we believe to be desirable, withstand any future downturn in our business, or respond to increased competition or changing economic conditions may be impaired. We have and in the future will likely continue to have substantial debts. As a result, the interest costs associated with these debts might impair our future profitability.

We are subject to the risk of fuel price fluctuations.

Jet fuel is one of the major expenses of airlines. Significant fluctuations of international oil prices will significantly impact jet fuel prices and our revenue from fuel surcharge and accordingly our results of operations. In 2021, our total aircraft fuel cost was approximately RMB20,593 million, representing an increase of approximately 48.8% from approximately RMB13,840 million in 2020. The increase was due to an increase in our fuel consumption by 13.8% from 2020, as a result of the gradual recovery of the travel and transportation demand and the increase in passenger traffic and cargo and mail volume, and an increase in the average prices of fuel by 34.4% from 2020, which is in line with the fluctuation in price of crude oil and other commodities in the global market. In 2021, our total jet fuel cost accounted for approximately 23.7% of our total operating expenses, as compared to approximately 17.7% in 2020. As affected by the COVID-19 pandemic, the armed conflict in Ukraine involving Russian military and the global political and economic conditions, there remains great uncertainty on our fuel consumption in 2022, and hence, there also remains great uncertainty on the expected jet fuel costs.

The fluctuations of international crude oil prices and adjustments on domestic jet fuel prices by the National Development and Reform Commission (the “NDRC”) have a significant impact on our profitability. Aircraft fuel prices have been subject to high volatility, fluctuating substantially over the past several years. Our results of operation and financial condition are affected by any significant fluctuations that may occur, which are generally due to factors beyond our control. As such, we generally alleviate the pressure from the rise in operating costs arising from the increase in aviation fuel by imposing fuel surcharges, which, however, are subject to government regulations. In order to control fuel costs, we have also entered into fuel hedging transactions using financial derivative products linked to the price of underlying assets such as United States WTI crude oil and Singapore jet fuel during previous years. In 2021, we used jet fuel forward contracts to deal with the cash flow risks arising from fluctuation of jet fuel prices. The jet fuel forward contracts entered into by us are mainly based on the purchase of jet fuel at a fixed transaction price, and are cash flow hedges. In 2021, our aircraft fuel costs decreased by RMB580 million through aircraft fuel hedging transactions. As of December 31, 2021, we had no outstanding jet fuel forward contracts, while such jet fuel forward contracts amounted to approximately US$252 million as of December 31, 2020.

Since 2009, the PRC government required prior governmental approval for entering into fuel forward contracts. We may, from time to time, seek approval from the PRC government to enter into overseas fuel forward contracts. However, these hedging strategies may not always be effective and high fluctuations in aviation fuel prices exceeding the locked-in price ranges may result in losses. Significant decline in fuel prices may substantially increase the costs associated with such fuel hedging arrangements. In addition, where we may, from time to time, seek to manage the risk of fuel price increases by using derivative contracts, we cannot assure you that, at any given point in time, such fuel hedging transactions will provide any particular level of protection against increased fuel costs.

We are subject to the risk of exchange rate fluctuations.

We operate our business in many countries and territories. We generate revenue in different currencies, and our foreign currency liabilities are typically much higher than our foreign currency assets. Our purchases and leases of aircraft are mainly priced and settled in foreign currencies such as U.S. dollars. Fluctuations in exchange rates will affect our costs incurred from foreign purchases such as aircraft, flight equipment and aviation fuel, and take-off and landing charges in foreign airports. As of December 31, 2021, our total interest-bearing liabilities denominated in foreign currencies amounted to approximately RMB36,835 million, of which U.S. dollar interest-bearing liabilities accounted for approximately 83.0%. Therefore, a significant fluctuation in exchange rates will subject us to significant foreign exchange loss/gain arising from the exchange of foreign currency denominated liabilities, which would affect our profitability and business development. We typically use hedging contracts for foreign currencies to reduce the foreign exchange risks for foreign currency revenues generated from flight ticket sales and expenses required to be paid in foreign currencies. Our net foreign exchange gains decreased from approximately RMB2,494 million in 2020 to approximately RMB1,619 million in 2021. In 2021, we had no forward foreign currency contracts.

As a result of the large value of existing net foreign currency liabilities denominated in U.S. dollars, our results would be adversely affected if the Renminbi depreciates against the U.S. dollar or the rate of appreciation of the Renminbi against the U.S. dollar decreases in the future. In the past few years, we expanded our financing channels by issuing guaranteed bonds and credit enhanced bonds denominated in SGD and KRW, and proactively optimized the mix of currency denomination of our debts. Additionally, we expanded our financing channels by means of issuing bonds, super short-term debentures and medium-term notes, and acquiring RMB borrowings to bring in RMB financing, and continuing to optimize the mix of currency denomination of our debts. As of December 31, 2021, our proportion of U.S. dollar-denominated interest-bearing debts out of our total interest-bearing liabilities decreased to approximately 15.8% from 19.9% as of December 31, 2020. Our foreign exchange fluctuation risks are also subject to other factors beyond our control.

We are subject to the risk of interest rate fluctuations.

Our total interest-bearing liabilities (including long-term and short-term bank borrowings, lease liabilities, bonds payable and super short- term debentures) as of December 31, 2020 and 2021 were approximately RMB184,168 million and RMB193,765 million, respectively, of which short- term interest-bearing liabilities accounted for approximately 38.7% and 31.1%, respectively, and long-term interest-bearing liabilities accounted for approximately 61.3% and 68.9%, respectively. Both the short-term and long-term interest-bearing liabilities were affected by fluctuations in current market interest rates.

Our interest-bearing liabilities were primarily denominated in RMB and USD. As of December 31, 2020 and December 31, 2021, our interest-bearing liabilities denominated in RMB accounted for approximately 74.3% and 81.0 % of our total interest-bearing liabilities, respectively, and interest-bearing liabilities denominated in USD accounted for approximately 19.9% and 15.8% of our total interest-bearing liabilities, respectively. Fluctuations in interest rates of interest-bearing liabilities denominated in these two currencies have and will continue to have significant impact on our finance costs. As of December 31, 2021, the weighted average interest rates of our RMB-denominated interest-bearing liabilities, USD-denominated interest-bearing liabilities, EUR-denominated interest-bearing liabilities, SGD-denominated interest-bearing liabilities, KRW-denominated interest- bearing liabilities and JPY-denominated interest-bearing liabilities were approximately 3.57%, 3.47%, 0.10%, 2.00%, 2.40% and 0.58%, respectively. In the first quarter of 2018, we also issued credit enhanced bonds denominated in JPY with total principal of JPY50.0 billion due in 2021, bearing fixed interest at the rate of 0.33% per annum and 0.64% per annum for different tranches. In December 2019, we issued bonds denominated in KRW with total principal of KRW300.0 billion due in 2022, bearing fixed interest at the rate of 2.40% per annum. In July 2021, we issued credit enhanced bonds denominated in SGD with total principal of SGD0.5 billion due in 2026, bearing fixed interest at the rate of 2.00% per annum. To cope with the risk of interest rate fluctuation, we strategically changed our debt portfolio by replacing our USD-denominated liabilities with floating interest rates with USD-denominated liabilities with fixed interest rates. As of December 31, 2021, our USD-denominated interest-bearing liabilities with fixed interest rate was approximately US$3,252 million and accounted for approximately 10.6% of our total long-term interest-bearing USD-denominated liabilities, decreasing by approximately 12.1% from that as of December 31, 2020. As of December 31, 2021, our outstanding interest rate swap contracts amounted to a notional principal amount of US$495 million as compared to US$690 million as of December 31, 2020. These contracts will expire between the duration of 2022 to 2025. We will continue to optimize our liability structure to lower relevant risks by taking consideration of various factors including the market environment, interest rates and strategic plan. However, we cannot assure you that the relevant lending rates may not increase in the future for reasons beyond our control, which may adversely affect our business, prospects, cash flows, financial condition and results of operations. In addition, we expect to issue bonds and notes or enter into additional loan agreements and aircraft leases in the future to fund our operations and capital expenditures, and the cost of financing for these obligations will depend greatly on market interest rates.

Increases in insurance costs or reductions in insurance coverage may have adverse impact our results of operations and financial condition.

We could be exposed to significant liability or loss if our property or operations were to be affected by a natural catastrophe or other event, including aircraft accidents. We maintain insurance policies but we are not fully insured against all potential hazards and risks incident to our business. If we are unable to obtain sufficient insurance with acceptable terms or if the coverage obtained is insufficient relative to actual liability or losses that we experience, whether due to insurance market conditions, policy limitations and exclusions or otherwise, our results of operations and financial condition could be adversely affected. The Company and its subsidiaries have taken out insurance for all fleet assets and airline liability insurance, and the relevant insurance policies provide adequate protection for airframe loss, passenger compensation and third party liability compensation on the ground caused by aircraft accidents. After the accident of flight MU5735 on March 21, 2022, China Eastern Airlines Yunnan Co., Ltd. promptly reported the case to the insurance company and started the aftermath insurance claims. At present, the relevant claims work is proceeding in an orderly manner.

We may experience difficulty integrating our acquisitions, which could result in a material adverse effect on our operations and financial condition.

We may from time to time expand our business through acquisition of airlines or airline-related businesses. We may devote significant resources to the integration of our operations in order to achieve the anticipated synergies and benefits of the absorption and acquisitions mentioned above. See “Item 4. Information on the Company” for details. However, such acquisitions involve uncertainties and a number of risks, including:

•

difficulty with integrating the assets, operations and technologies of the acquired airlines or airline-related businesses, including their employees, corporate cultures, managerial systems, processes, procedures and management information systems and services;

•

complying with the laws, regulations and policies that are applicable to the acquired businesses;

•

failure to achieve the anticipated synergies, cost savings or revenue-enhancing opportunities resulting from the acquisition of such airlines or airline-related businesses;

•

managing relationships with employees, customers and business partners during the course of integration of new businesses;

•

attracting, training and motivating members of our management and workforce;

•

accessing our debt, equity or other capital resources to fund acquisitions, which may divert financial resources otherwise available for other purposes;

•

diverting significant management attention and resources from our other businesses;

•

strengthening our operational, financial and management controls, particularly those of our newly acquired assets and subsidiaries, to maintain the reliability of our reporting processes;

•

difficulty with exercising control and supervision over the newly acquired operations, including failure to implement and communicate our safety management procedures resulting in additional safety hazards and risks;

•

increased financial pressure resulting from the assumption of recorded and unrecorded liabilities of the acquired airlines or airline- related businesses; and

•

the risk that any such acquisitions may not close due to failure to obtain the required government approvals.

We cannot assure you that we will not have difficulties in assimilating the operations, technologies, services and products of newly acquired companies or businesses. Moreover, the continued integration of our acquired companies into our Company depends significantly on integrating the employees of our acquired companies with our employees and on maintaining productive employee relations. In the event that we are unable to efficiently and effectively integrate newly acquired companies or airline-related businesses into our Company, we may be unable to achieve the objectives or anticipated synergies of such acquisitions and such acquisitions may adversely impact the operations and financial results of our existing businesses.

We may be unable to retain key management personnel or pilots.

We are dependent on the experience and industry knowledge of our key management personnel and pilots, and there can be no assurance that we will be able to retain them. Any inability to retain our key management employees or pilots, or attract and retain additional qualified management employees or pilots, could have a negative impact on our operations and profitability.

Our controlling shareholder, CEA Holding, holds a majority interest in our Company, and its interests may not be aligned with other shareholders.

Most of the major airlines in China are currently majority-owned by either the central government or provincial or municipal governments in China. As of December 31, 2021, CEA Holding holds directly or indirectly 56.43% of our Company’s equity stake on behalf of the PRC government. As a result, CEA Holding could potentially elect the majority of the board of directors of the Company (“Board of Directors” or the “Board”) and otherwise be able to control us. CEA Holding also has sufficient voting control to effect transactions without the concurrence of our minority shareholders. The interests of the PRC government as the ultimate controlling shareholder of our Company and most of the other major PRC airlines could conflict with the interests of our minority shareholders. Although the CAAC currently has a policy of equal treatment of all PRC airlines, we cannot assure you that the CAAC will not favor other PRC airlines over us.

As our controlling shareholder, CEA Holding has the ability to exercise controlling influence over our business and affairs, including, but not limited to, decisions with respect to:

•

mergers or other business combinations;

•

acquisition or disposition of assets;

•

issuance of any additional shares or other equity securities;

•

the timing and amount of dividend payments; and

•

the management of our Company.

We engage in related party transactions, which may result in conflict of interests.

We have engaged in, from time to time, and may continue to engage in, in the future, a variety of transactions with CEA Holding and its various members, from whom we receive a number of important services, including support for in-flight catering and assistance with importation of aircraft, flight equipment and spare parts. Because we are controlled by CEA Holding and CEA Holding may have interests that conflict with our interests, we cannot assure you that CEA Holding will not take actions that will serve its interests over our interests.

We may not be able to accurately report our financial results or prevent fraud if we fail to maintain effective internal controls over financial reporting, resulting in adverse investor perception, which in turn could have a material adverse effect on our reputation and the performance of our shares and American Depositary Shares (the “ADSs”).

We are required under relevant United States securities laws and regulations to disclose in the reports that we file or submit under the Exchange Act to the SEC, including our annual report on Form 20-F, a management report assessing the effectiveness of our internal controls over financial reporting at the end of the fiscal year. Our registered public accounting firm is also required to provide an attestation report on the effectiveness of our internal controls over financial reporting. Our management concluded that our internal controls over financial reporting were effective as of December 31, 2021. However, we may discover other deficiencies or material weaknesses in the course of our future evaluation of our internal controls over financial reporting and we may be unable to address and rectify such deficiencies in a timely manner. Any failure to maintain effective internal controls over financial reporting could lead to diminished investor confidence in the reliability of our consolidated financial statements, thereby adversely affecting our business, operations, and reputation, including negatively affecting our performance in the securities markets and decreasing potential opportunities to obtain financing in the capital markets.

As part of our business strategy, we have adopted various measures to develop the international side of our business and to enhance our competitiveness in the international long-distance flight routes. Due to the differences in certain legal and market environments, we have encountered certain challenges during the course of developing our overseas business. We have already adopted and will continue to implement measures in order to enhance the internal controls of our overseas offices and to continue the development of our overseas business.

Any failure or disruption of our computer, communications, flight equipment or other technology systems could have an adverse impact on our business operations, profitability, reputation and customer services.

We rely heavily on computer, communications, flight equipment and other technology systems to operate our business and enhance customer service. Substantially all of our tickets are issued to passengers as electronic tickets, and we depend on our computerized reservation system to be able to issue, track and accept these electronic tickets. In addition, we rely on other automated systems for crew scheduling, flight dispatch and other operational needs. These systems could be disrupted due to various events, including natural disasters, power failures, terrorist attacks, equipment failures, software failures, computer viruses, cyber attacks and other events beyond our control. We cannot assure you that the measures we have taken to reduce the risk of some of these potential disruptions are adequate to prevent disruptions to or failures of these systems. Any substantial or repeated failure of or disruption to these systems could result in the loss of important data and/or flight delays, and could have an adverse impact on our business operations, profitability, reputation and customer services, including being liable for paying compensation to our customers.

We are subject to cyber security risks and may incur increasing costs in an effort to minimize those risks.

The nature of our business involves the receipt and storage of personal information about our customers. We have a program in place to detect and respond to data security incidents. To date, all incidents we have encountered have been insignificant. If we commit a significant data security breach or fail to detect and appropriately respond to a significant data security breach, we could be exposed to government enforcement actions and private litigation. In addition, our customers could lose confidence in our ability to protect their personal information, which could cause them to stop using our services. The loss of consumer confidence from a significant data security breach could hurt our reputation and adversely affect our business, result of operations and financial condition.

Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants, costs incurred in connection with the notifications to employees, suppliers or the general public as part of our notification obligations to the various government authorities that govern our business, or costs to dedicate significant resources to system repairs or other increase cyber security protection. We may also be required to pay fines in connection with stolen customer, employee or other confidential information, or incur significant litigation or other costs. In October 2020, the Standing Committee of the National People’s Congress officially released the draft of the Personal Information Protection Law, or the Draft Personal Information Protection Law. The Draft Personal Information Protection Law provides the basic regime for personal information protection, including without limitation, stipulating an expanded definition of personal information, providing a long-arm jurisdiction in cross-border scenarios, emphasizing individual rights, and prohibiting rampant infringement of personal information, such as stealing, selling, or secretly collecting personal information. If the Draft Personal Information Protection Law is promulgated as an effective regulation in the future, we cannot assure you that our business operations will comply with such regulation in all respects and we may be ordered to terminate certain of our business operations that are deemed illegal by the regulatory authorities and become subject to fines and/or other sanctions.

Interruptions or disruptions of service at one or more airports in our primary market could have an adverse impact on us.

Our business is heavily dependent on our operations at our core hub airports in Shanghai, namely, Hongqiao International Airport and Pudong International Airport and our core hub airport in Beijing, namely, Beijing Daxing International Airport as well as our regional hub airports in Xi’an and Kunming. Each of these operations includes flights that connect our primary market to other major cities. Any significant interruptions or disruptions of service at one or more of our primary market airports could adversely impact our operations.

Terrorist attacks or the fear of such attacks, even if not made directly on the airline industry, could negatively affect us and the airline industry as a whole. The travel industry continues to face on-going security concerns and cost burdens.

The aviation industry as a whole has been beset with high-profile terrorist attacks, most notably on September 11, 2001 in the United States. The CAAC has also implemented increased security measures in relation to the potential threat of terrorist attacks. Terrorist attacks, even if not made directly towards us or on the airline industry, or the fear of or the precautions taken in anticipation of such attacks (including elevated threat warnings or selective cancelation or redirection of flights) could materially and adversely affect us and the entire airline industry. In addition, potential or actual terrorist attacks may result in substantial flight disruption costs caused by grounding of fleet, significant increase of security costs and associated passenger inconvenience, increased insurance costs, substantially higher ticket refunds and significantly decreased traffic and RPK. International terrorist attacks targeting aircraft and airport not only directly threatens our flight safety, aviation security, operational safety and the safety of overseas institutions and employees, but also brings about on-going adverse impact on the outbound tourism demand for places where terrorist attacks have taken place.

We could be classified as a passive foreign investment company by the United States Internal Revenue Service and may therefore be subject to adverse tax impact.

Depending upon the relative values of our passive assets and income as compared to our total assets and income each taxable year, we could be classified as a passive foreign investment company, or PFIC, by the United States Internal Revenue Service, or IRS, for U.S. federal income tax purposes. We believe that we were not a PFIC for the taxable year 2021. However, there can be no assurance that we will not be a PFIC for the taxable year 2022 and/or later taxable years, as PFIC status is re-tested each year and depends on the facts in such year.

We will be classified as a PFIC in any taxable year if either: (1) the average value during the taxable year of our assets that produce passive income, or are held for the production of passive income, is at least 50% of the average value of our total assets for such taxable year (the “Asset Test”) or (2) 75% or more of our gross income for the taxable year is passive income (such as certain dividends, interest or royalties) (the “Income Test”). For purposes of the Asset Test: (1) any cash, cash equivalents, and cash invested in short-term, interest bearing, debt instruments, or bank deposits that is readily convertible into cash, will generally count as producing passive income or as being held for the production of passive income and (2) the average values of our passive and total assets is calculated based on our market capitalization.

If we were a PFIC, we would generally be subject to additional taxes and interest charges on certain “excess distributions” our Company makes regardless of whether we continue to be a PFIC in the year in which you receive an “excess distribution”. An “excess distribution” would be either (1) the excess amount of a distribution with respect to ADSs during a taxable year in which distributions to you exceed 125% of the average annual distributions to you over the preceding three taxable years or, if shorter, your holding period for the ADSs, or (2) 100% of the gain from the disposition of ADSs.

Risks Relating to the Aviation Industry

Our business is subject to extensive government regulation.

The Chinese civil aviation industry is subject to a high degree of regulation by the CAAC. Regulatory policies issued or implemented by the CAAC encompass virtually every aspect of airline operations, including, among other things:

(a)

route allocation;

(b)

pricing of domestic airfares;

(c)

administration of air traffic control systems and certain airports; (d) jet fuel pricing;

(e)

air carrier certifications and air operator certification;

(f)

aircraft registration and aircraft airworthiness certification; and

(g)

airport expense policy.

Our ability to provide services on international routes is subject to a variety of bilateral civil air transport agreements between China and other countries, international aviation conventions and local aviation laws. As a result of government regulations, we may face significant constraints on our flexibility and ability to expand our business operations or to maximize our profitability. In addition, as we operate internationally and corporate with various counterparties domestically and overseas, we may be exposed to the risks associated with foreign laws, regulations or other challenges arising from the regulatory aspect.

The downward trend in domestic and global economy could affect air travel.

The airline industry is highly cyclical, and the level of demand for air travel is correlated to the strength of domestic and global economies. Robust demand for our air transportation services depends largely on favorable general economic conditions, including the strength of global and local economies, low unemployment, strong consumer confidence and availability of consumer and business credit. The COVID-19 pandemic had a severe and negative impact on the Chinese and the global economy in 2021. Whether this will lead to a prolonged downturn in the economy is still unknown. Even before the outbreak of the COVID-19 pandemic, the global macroeconomic environment was facing numerous challenges. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies which had been adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China, even before 2021. In particular, there is significant uncertainty about the future relationship between the United States and China with respect to trade policies, treaties, government regulations, and tariffs. Any economic downturn or slowdown and/or negative business sentiment could potentially have an adverse indirect impact on almost all industries, and our business operations and financial condition may consequently be adversely affected. Moreover, there is currently an armed conflict in Ukraine involving Russian military. The current volatile situation may potentially deteriorate to an armed conflict of wider scale, which may have impact on the in international oil prices, cause other issues or even disruptions to our business in the region.

We operate in a highly competitive industry.

We face intense competition in each of the domestic, regional and international markets that we serve. In our domestic market, we compete against all airlines that have the same routes, including smaller domestic airlines that have lower operating costs. In the regional and international markets, we compete against international airlines that have significantly longer operating history, better brand recognition, or more resources, such as large sales networks or sophisticated reservation systems. See the section headed “Item 4. Information on the Company — Business Overview — Competition” for more details. The public’s perception of safety of Chinese airlines could also materially and adversely affect our ability to compete against our international competitors. To stay competitive, we have, from time to time in the past, lowered airfares for certain of our routes, and we may continue to do so in the future. Increased competition and pricing pressures may have a material adverse effect on our financial condition and results of operations.

We depend on a limited number of suppliers for aircraft, aircraft engines and parts.

The aviation transportation industry features advanced technology and high operation costs. As a result, the available suppliers for key operating resources including aircraft, engines, flight spare parts, jet fuel and information technology services are limited. We depend on a limited number of suppliers for aircraft, aircraft engines and related parts and components. Due to the limited number of these suppliers, we are vulnerable to any problems associated with the performance of their obligation to supply key aircraft, parts and engines, including design defects, mechanical problems, contractual performance by suppliers, adverse perception by the public that would result in customers’ avoidance of any of our aircraft or any action by the regulatory authorities.

We expect to face substantial competition from the rapid development of the Chinese rail network.

The PRC government is implementing the expansion of its high-speed rail network, which has provided train services at a speed of up to 350 kilometers per hour connecting major cities such as Beijing, Shanghai, Guangzhou and Hong Kong. The expansion of rail network, improvements in railway service quality, increased passenger capacity and urban center accessibility could enhance the competitiveness of the railway service and negatively affect our market share on some of our routes, in particular our short-haul routes. For example, Yinchuan-Xi’an and Yancheng- Nantong routes were largely affected by the opening of high-speed railway routes in 2020. The load factors of two routes demonstrated a trend to decrease significantly after the high-speed railway routes put into operation. Increased competition and pricing pressures from the railway service may have a material adverse effect on our business, financial condition and results of operations.

Limitations on foreign ownership of PRC airlines may affect our access to funding in the international equity capital markets or pursuing business opportunities.

The current CAAC policies limit foreign ownership of PRC airlines. Under these rules, non-PRC, Hong Kong, Macau or Taiwan residents cannot hold a majority equity interest in a PRC airline. As of December 31, 2021, approximately 27.4% of our total outstanding shares were held by non-PRC, Hong Kong, Macau or Taiwan residents or legal entities (excluding the qualified foreign institutional investors that are approved to invest in the A Share market of the PRC). As a result, our access to funding in the international equity capital markets may be limited. This restriction may also limit the opportunities available to us to obtain funding or other benefits through the creation of equity-based strategic alliances with foreign carriers. We cannot assure you that the CAAC will not increase these limits on foreign ownership of PRC airlines in the future.

Any jet fuel shortages or any increase in jet fuel prices may materially and adversely affect our financial condition and results of operations.

The availability and prices of jet fuel have a significant impact on our financial condition and results of operations. In the past, jet fuel shortages have occurred in China and, on limited occasions, required us to delay or cancel flights. Although jet fuel shortages have not occurred since the end of 1993, we cannot assure you that jet fuel shortages will not occur in the future. Fuel prices continue to be susceptible to, among other factors, political unrest in various parts of the world, OPEC policies, the rapid growth of the economies of certain countries, including China and India, the inventory levels carried by industries, the amount of reserves built by governments, disruptions to production and refining facilities and weather conditions. Fuel efficiency of our aircraft decreases as they advance in age which results in an overall increase in our aviation fuel costs. The foregoing and other factors that impact the global supply and demand for jet fuel may affect our financial performance due to its sensitivity to fuel prices.

Aircraft fuel prices have been subject to high volatility, fluctuating substantially over the past several years. Setting aside the adjustment in factors such as fuel surcharge, if the average price of jet fuel had increased or decreased by 5%, based on the actual fuel consumption of flights in 2021, our jet fuel costs would have increased or decreased by approximately RMB1,030 million. In addition, the NDRC adjusts gasoline and diesel prices in China from time to time, taking into account the changes in international oil prices, thereby affecting aviation fuel prices. As such, we cannot assure you that jet fuel prices will not fluctuate further in the future. Due to the highly competitive nature of the airline industry, we may be unable to fully or effectively pass on to our customers any future increase in jet fuel costs.

The airline industry is subject to increasing environmental regulations, which would increase costs and affect profitability.

In recent years, regulatory authorities in China and other countries have issued a number of directives and other regulations to address, among other things, aircraft noise and engine emissions, the use and handling of hazardous materials, aircraft age and environmental contamination remedial clean-up measures. These requirements impose high fees, taxes and substantial ongoing compliance costs on airlines, particularly as new aircraft brought into service will have to meet the environmental requirements during their entire service life.

We are committed to investing in environmental protection and greenhouse gas emission reduction measures. For example, we focused on pollution prevention and control by facilitating the application of new technologies for energy conservation and emission reduction, speeding up the “diesel-to-electric” (replacement of diesel vehicle by electric vehicle) project in airports, and promoting the replacement of Auxiliary Power Unit (APU) on aircraft. We also took measures to reduce the impact of our operations on the environment by optimizing our route network and flight schedules as well as installing energy-saving environmentally friendly engines. In addition, we continue to improve the energy efficiency of our fleet by introducing aircraft with energy-saving technologies, such as A350-900, A320-neo and ARJ21 and by retiring old aircraft. We are committed to investing in environmental protection and greenhouse gas emission reduction measures to comply with environmental regulations, which could restrict our ability to modify or expand facilities or continue operations. See also “- The aviation industry is subject to many forms of environmental regulation, including increased regulation to reduce emissions and other risks associated with climate change. Failure to comply with existing or future environmental regulations or to otherwise manage the risks of climate change effectively could have a material adverse effect on our business. “

Our results of operations tend to be volatile and fluctuate due to seasonality.

The aviation industry is characterized by annual high and low travel seasons. Our operating revenue is substantially dependent on the passenger and cargo traffic volume carried, which is subject to seasonal and other changes in traffic patterns, the availability of appropriate time slots for our flights and alternative routes, the degree of competition from other airlines and alternate means of transportation, as well as other factors that may influence passenger travel demand and cargo and mail volume. As a result, our results tend to be volatile and subject to rapid and unexpected change.

The aviation industry is subject to many forms of environmental regulation, including increased regulation to reduce emissions and other risks associated with climate change. Failure to comply with existing or future environmental regulations or to otherwise manage the risks of climate change effectively could have a material adverse effect on our business.

Many aspects of our operations are subject to evolving and increasingly stringent national, local and international laws governing the protection of the environment. Existing laws and future regulatory action concerning climate change and aircraft emissions could have a significant effect on the aviation industry. Given the scope of our business, we are required to comply with international and domestic regulatory requirements for carbon emission concerning our business activities and daily operations issued by relevant authorities. Compliance with existing and future environmental laws and regulations could require capital investment and increase operational costs, and violations can lead to significant fines and penalties and reputational harm. For more details, see “Item 4. Information on the Company—B. Business Overview—Climate Change and Related Matters”.

Additional regulation could result in taxation, regulatory or permitting requirements from multiple jurisdictions for the same operations and costs for the aviation industry, including us. In addition to direct costs, such regulation could result in increased fuel costs passed through from fuel suppliers affected by any such regulations. While the specific nature of future actions is hard to predict, new laws or regulations related to environmental matters adopted in the PRC or other countries could impose significant additional costs on our operations. Certain airports have also adopted, and others could in the future adopt, greenhouse gas emission or climate-related goals and requirements that could impact our operations or require us to make changes or investments in our infrastructure. Finally, there is uncertainty with respect to the future supply, demand and price of sustainable or lower carbon aircraft fuel, carbon offset credits and technologies that could allow us to reduce our emissions of carbon dioxide.

Risks Relating to the PRC

The Public Company Accounting Oversight Board (United States), or the PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor may affect our investors’ benefits of such inspections.

Our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Since our auditor is located in China, a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities, our auditor is not currently inspected by the PCAOB. As a result, the benefits of such PCAOB inspections on our ADS of our investors and us are affected. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause investors and potential investors in our ADSs to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.

Our ADSs will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, in 2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or 2023 if proposed changes to the law are enacted. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.

The HFCAA, was signed into law on December 18, 2020. The HFCAA states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection for the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares or ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 2, 2021, the SEC adopted final amendments implementing the disclosure and submission requirements of the HFCAA, pursuant to which the SEC will identify an issuer as a “Commission Identified Issuer” if the issuer has filed an annual report containing an audit report issued by a registered public accounting firm that the PCAOB has determined it is unable to inspect or investigate completely, and will then impose a trading prohibition on an issuer after it is identified as a Commission-Identified Issuer for three consecutive years. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. The PCAOB identified our auditor as one of the registered public accounting firms that the PCAOB is unable to inspect or investigate completely. Therefore, we expect to be identified as a “Commission Identified Issuer” after the filing of this Annual Report on Form 20-F.

Whether the PCAOB will be able to conduct inspections of our auditor before the issuance of our financial statements on Form 20-F for the year ending December 31, 2023 which is due by April 30, 2024, or at all, is subject to substantial uncertainty and depends on a number of factors out of our, and our auditor’s, control. Such a prohibition would substantially impair your ability to sell or purchase our ADSs when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our ADSs.

On June 22, 2021, the U.S. Senate passed a bill which would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two. On February 4, 2022, the U.S. House of Representatives passed a bill which contained, among other things, an identical provision. If this provision is enacted into law and the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA is reduced from three years to two, then our shares and ADSs could be prohibited from trading in the United States in 2023.

It may be difficult for overseas regulators to conduct investigation or collect evidence within China.

Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigations initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the PRC territory. While detailed interpretation or implementation of rules under this Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase the difficulties you face in protecting your interests.

Changes in the economic policies of the PRC government may materially affect our business, financial condition and results of operations.

Since the late 1970s, the PRC government has been reforming the Chinese economic system. These reforms have resulted in significant economic growth and social progress. These policies and measures may be modified or revised from time to time. Adverse changes in economic and social conditions in China, in the policies of the PRC government or in the laws and regulations of China, if any, may have a material adverse effect on the overall economic growth of China and investments in and profitability of the domestic airline industry. These developments, in turn, may have a material adverse effect on our business, financial condition and results of operations.

Changes in the foreign exchange regulations in the PRC may result in fluctuations of the Renminbi and adversely affect our ability to pay dividends or to satisfy our foreign currency liabilities.

A significant portion of our revenue and operating expenses are denominated in Renminbi, while a portion of our revenue, capital expenditures and debts are denominated in U.S. dollars and other foreign currencies. The Renminbi is currently freely convertible in the current account, which includes payment of dividends, trade and service-related foreign currency transactions, but not in the capital account, which includes foreign direct investment, unless approval from or registration or filing with the relevant authorities, is obtained. As a foreign invested enterprise approved by the PRC Ministry of Commerce (the “MOFCOM”), we can purchase foreign currencies without the approval of State Administration of Foreign Exchange (the “SAFE”) for settlement of current account transactions, including for the purpose of dividend payment, by providing commercial documents evidencing these transactions. We can also retain foreign currencies in our current accounts, subject to a maximum amount approved by SAFE, to satisfy foreign currency liabilities or pay dividends. The relevant PRC government authorities may limit or eliminate our ability to purchase and retain foreign currencies in the future. Foreign currency transactions in the capital account are still subject to limitations and require approvals from SAFE. This may affect our ability to raise foreign capital through debt or equity financing, including through loans or capital contributions. We cannot assure you that we will be able to obtain sufficient foreign currencies to pay dividends, if any, or satisfy our foreign currency liabilities.

Furthermore, the value of the Renminbi against the U.S. dollar and other currencies may fluctuate significantly and is affected by, among other things, the PRC government policies, domestic and international economic and political conditions and changes in the supply and demand of the currency. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. The Renminbi depreciated 2.0% against the U.S. dollar for the year ended December 31, 2018. The Renminbi depreciated 4.1% against the U.S. dollar for the year ended December 31, 2019. The Renminbi appreciated by approximately 6.5% against the U.S. dollar for the year ended December 31, 2020. However, it remains unclear what further fluctuations may occur or what impact this will have on the value of the Renminbi. It is possible that the PRC government could adopt a more flexible foreign exchange policy, which could result in further and more significant revaluations of the Renminbi against the U.S. dollar or any other foreign currency. Any resulting fluctuations in exchange rates as a result of such policy changes may have an adverse effect on our financial condition and results of operations.

Our operations may be adversely affected by rising inflation rates in the PRC.

Increase in inflation is due to many factors beyond our control, such as rising production and labor costs, high debts, changes in the PRC and foreign governmental policy and regulations, and movements in exchange rates and interest rates. The national consumer price index, which is an indicator of the inflation, was 2.9%, 2.5% and 0.9% in 2019, 2020 and 2021, respectively. We cannot assure you that inflation rates will not increase in the future. If inflation rates rise beyond our expectations, the costs of our business operations may become significantly higher than anticipated, and we may be unable to pass on such higher costs to consumers in amounts that are sufficient to cover those increasing operating costs. As a result, further inflationary pressures in the PRC may have a material adverse effect on our business, financial condition and results of operations, as well as our liquidity and profitability.

Any withdrawal of, or changes to, tax incentives in the PRC may adversely affect our results of operations and financial condition.

Prior to January 1, 2008, except for a number of preferential tax treatment schemes available to various enterprises, industries and locations, business enterprises in China were subject to an enterprise income tax rate of 33% under the relevant PRC Enterprise Income Tax Law. On March 16, 2007, China passed a new enterprise income tax law, or the EIT Law, which took effect on January 1, 2008 and amended on February 24, 2017 and December 29, 2018. The EIT Law imposes a uniform income tax rate of 25% for domestic enterprises and foreign invested enterprises. Business enterprises enjoying preferential tax treatment that was extended for a fixed term prior to January 1, 2008 will still be entitled to such treatment until such fixed term expires. Certain of our subsidiaries are entitled to preferential tax treatment, allowing us to enjoy a lower effective tax rate that would not otherwise be available to us. To the extent that there are any increases in the applicable effective tax rate, withdrawals of, or changes in, our preferential tax treatment or tax exemptions, our tax liability may increase correspondingly.

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to domestic public companies in the United States.

Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: (i) the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; (ii) the sections of the Exchange Act regulating the solicitation of proxies in respect of a security registered under the Exchange Act; (iii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and “short swing” liability for insiders who profit from certain trades; and (iv) the selective disclosure rules by issuers of material nonpublic information under Regulation FD.

We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we publish our results on a quarterly basis through press releases. Press releases relating to financial results and material events are furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and may be less timely compared with that required to be filed with the SEC by U.S. domestic issuers. As a result, holders of ADSs may not be afforded the same protections or information, which would be made available to them, were they investing in a U.S. domestic issuer.

We are subject to the corporate governance requirements of the NYSE. However, the NYSE rules permit a foreign private issuer like us to follow the corporate governance practices of our home country in lieu of certain NYSE rules. Certain corporate governance practices in the PRC, which is our home country, may differ significantly from the NYSE corporate governance requirements. To the extent we choose to follow home country practice, our shareholders may be afforded less protection than they would otherwise enjoy under the NYSE corporate governance listing standards applicable to U.S. domestic issuers.

Uncertainties embodied in the PRC legal system may limit certain legal protection available to investors.

The PRC legal system is a civil law system based on written statutes. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. Legislation over the past 20 years has significantly enhanced the protection afforded to foreign investors in China. However, the interpretation and enforcement of some of these laws and regulations involve uncertainties that may limit the legal protection available to investors. As a result, it may be difficult or impossible for our investors to bring an action against us or our directors and officers in the United States in the event that such investors believe that their rights have been infringed under the U.S. federal securities laws or otherwise. Even if such investors are successful in bringing an action of this kind, the PRC laws may render them unable to enforce a judgment against our assets or the assets of our directors and officers. Such uncertainties pervade as the legal system in the PRC continues to evolve. Even where adequate laws exist in the PRC, the enforcement of the existing laws or contracts may be uncertain and sporadic, and it may be difficult to obtain swift and equitable enforcement, including enforcing a foreign judgment. In addition, the PRC legal system is based on written statutes and their interpretation; prior court decisions may be cited as reference but have limited authority as precedents. As such, any litigation in the PRC may be protracted and result in substantial costs and diversion of our resources and management attention. We have full or majority board control over the management and operation of all of our subsidiaries established in the PRC. The control over these PRC entities and the exercise of shareholder rights are subject to their respective articles of association and PRC laws applicable to foreign-invested enterprises in the PRC, which may be different from the laws of other developed jurisdictions.

The enacted laws and regulations may not sufficiently cover all aspects of economic activities in the PRC and this may create additional uncertainties as to the outcome of any litigation. In addition, interpretation of statutes and regulations may be subject to government policies reflecting domestic political changes. Furthermore, in case of new laws and regulations, the interpretation, implementation and enforcement of these laws and regulations would involve uncertainties due to the lack of established practice or published court decisions available for reference. We cannot predict the future legal development in the PRC, including promulgation of new laws, changes to existing laws or interpretation or enforcement thereof, or inconsistencies between the local rules and regulations and the national law. As a result, we may not be aware of any violations until sometime after the violation has occurred. This may also limit the remedies available to investors and to us in the event of any claims or disputes with third parties.

Item 4. Information on the Company

A. History and Development of the Company

Our registered office is located at 66 Airport Street, Pudong International Airport, Shanghai, China, 201202. Our principal executive office and mailing address is 5/F, Block A2, Northern District, CEA Building, 36 Hongxiang 3rd Road, Minhang District, Shanghai, China. The telephone number of our principal executive office is (86-21) 6268-6268 and the fax number for the Board Secretariat’s office is (86-21) 6268-6116. We currently do not have an agent for service of process in the United States.

Our Company, China Eastern Airlines Corporation Limited was established on April 14, 1995 under the laws of China as a company limited by shares in connection with the restructuring of our predecessor and our initial public offering. We are commercially known in the industry as China Eastern Airlines. Our predecessor was one of the six original airlines established in 1988 as part of the decentralization of the airline industry in China undertaken in connection with China’s overall economic reform efforts. Prior to 1988, the CAAC was responsible for all aspects of civil aviation in China, including the regulation and operation of China’s airlines and airports. In connection with our initial public offering, our predecessor was restructured into two separate legal entities, our Company and EA Group. According to the restructuring arrangement, by operation of law, our Company succeeded to substantially all of the assets and liabilities relating to the airline business of our predecessor. EA Group succeeded to our predecessor’s assets and liabilities that do not directly relate to the airline operations and do not compete with our businesses. Assets transferred to EA Group included our predecessor’s equity interests in companies engaged in import and export, real estate, advertising, in-flight catering, tourism and certain other businesses. In connection with the restructuring, we entered into various agreements with EA Group and its subsidiaries for the provision of certain services to our Company. CEA Holding assumed the rights and liabilities of EA Group under these agreements after it was formed by merging EA Group, Yunnan Airlines Company and China Northwest Airlines Company in October 2002. See “Item 7. Major Shareholders and Related Party Transactions” for more details.

The following chart sets forth the organizational structure of our Company and our significant subsidiaries as of December 31, 2021:

In 2020, we took the initiative to confront the COVID-19 pandemic and made every effort to stabilize our operations, striving to reduce the adverse impact of the COVID-19 pandemic. We have closely followed the situation of the COVID-19 pandemic and market changes to dynamically adjust the deployment of transportation capacity, laid a solid foundation in servicing the coordinated development of Beijing-Tianjin-Hebei and the construction of Xiong’an New District and steadily promoted the construction of the core hub of Beijing, and moved our base to Beijing Daxing International Airport as the main base airline as planned. During the outbreak of the COVID-19 pandemic, we launched “Wild Your Dreams”, a series of innovative products, to stimulate passengers’ travel demand, restore market confidence, promote the recovery of the aviation market, effectively serve the internal circulation of China and achieve good economic, social and brand benefits. We also launched the new “Eastern Miles” membership system and introduced the “Eastern Airlines Wallet” enabling “points + cash” payment, so as to increase the ways of using member points. In 2020, we actively expanded financing channels and issued a total of RMB77.2 billion of super short-term debentures and RMB2 billion of corporate bonds to ensure that the cash flow can meet our operation needs.

In 2021, facing a complex external situation, we adhered to the general principle of seeking progress while maintaining stability. We overcame difficulties and actively improved quality and efficiency in terms of airline network layout, revenue management and control, and product marketing. We further built a high-quality flight network in Shanghai and Beijing, and continued to increase the capacity of Beijing Daxing International Airport. We built express lines such as Beijing-Shanghai, Shanghai-Guangzhou, Shanghai-Chengdu, etc., increased the proportion of wide-body aircraft and made full use of the our hub advantages in the Kunming and Xi’an markets, and increased the number of express lines in East China, Southwest China, Northwest China, etc. Meanwhile, we focused on the regional development strategy and has successfully completed the construction and transfer of Chengdu Tianfu Airport and Qingdao Jiaodong Airport bases. Improved services were introduced, tailoring to different customers’ demand on tickets to further stimulate market vitality. In 2021, we actively expanded financing channels, and completed non-public issuance of A Shares of RMB10.8 billion and RMB9 billion of corporate bonds to ensure that the cash flow can meet our operation needs. In July 2021, we also issued credit enhanced bonds denominated in SGD with total principal of SGD0.5 billion due in 2026. Futhermore, in 2021, we issued a total of RMB39 billion of super short-term debentures, the outstanding amount of which amounted to nil as of December 31, 2021.

The material development of our indebtedness is set out in Note 37 to the consolidated financial statements. The capital expenditure is set out in Item 5 in this Annual Report.

The SEC also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. We maintain our own website at http://www.ceair.com.

B. Business Overview

We were one of the three largest air carriers in China in terms of several indicators including number of passengers carried, ATK and ASK in 2021 and is an important domestic airline based in and serving Shanghai, which is considered to be the international financial and shipping center of China. The primary focus of our business is the operation of civil aviation, including the provision of passenger, cargo, mail delivery, tour operations and other extended transportation services.

We operate most of our flights through our three hubs located in eastern, northwestern and southwestern China, namely Shanghai, Xi’an and Kunming, respectively. With Shanghai as our core hub and Xi’an and Kunming as our regional hubs, we believe that we will benefit from the level of development and growth opportunities in eastern, northern and western China as a whole by providing direct services between various cities in those regions and between those regions and other major cities in China. We have steadily fostered the construction of a flight system for these core hubs by introducing new flight destinations and increasing the frequency of certain flights, thereby enhancing our transfer and connection capability in these hub markets. With the commencement of operation of Beijing Daxing International Airport in 2019, Beijing Daxing International Airport also becomes one of our core hubs. With dual core hubs in both Shanghai and Beijing, we believe that we are better positioned to further strengthen our hub network and accommodate market demands.

Our domestic routes contributed approximately 93.5% of our total passenger revenues in 2021. Our most heavily traveled domestic routes generally link Shanghai to the large commercial and business centers of China, such as Beijing, Guangzhou and Shenzhen. Our flight routes include all provincial capital cities in China and specifically designated cities. As of December 31, 2021, we served a route network that covers 1,036 destinations in 170 countries through SkyTeam, an international airlines alliance.

Our passenger traffic volume (as measured in revenue passenger-kilometers, or RPKs) increased by 1.4% from approximately 107,273 million in 2020 to approximately 108,804 million in 2021. Our cargo and mail traffic volume (as measured in revenue freight tonne-kilometers, or RFTKs) increased by 54.2% from approximately 2,200 million in 2020 to approximately 3,393 million in 2021. As a result, our traffic volume (as measured in RTKs) increased by 11.5% from approximately 11,700 million in 2020 to approximately 13,047 million in 2021.

Awards

We have received many awards, recognitions and accolades through the years.

In 2021, we were rated “A” on the ESG ratings assessment by MSCI, and were ranked 8

in Airline 50 2021 by Brand Finance, 20

in BrandZ™ Top 50 Chinese Global Brand Builders 2021 by Google, WPP and Kantar and 66

in BrandZ™ Top 100 Most Valuable Chinese Brands 2021 by WPP and Kantar.

Our Operations by Activity

The following table sets forth our traffic revenues by activity for each of the years ended December 31, 2019, 2020 and 2021:


	Year Ended December 31,
	2019		2020		2021
Traffic revenues	(in RMB million)
Passenger		110,416		49,215		54,105
Cargo and mail		3,826		4,895		8,309
Total traffic revenues		114,242		54,110		62,414

Passenger Operations

The following table sets forth our certain passenger operating statistics by route for each of the years ended December 31, 2019, 2020 and 2021:


	Year Ended December 31,
	2019		2020		2021
Passenger Traffic (in RPKs) (millions)		221,779		107,273		108,804
Domestic		142,921		96,206		106,605
Regional (Hong Kong, Macau and Taiwan)		5,046		458		410
International		73,812		10,609		1,789
Passenger Capacity (in ASKs) (millions)		270,254		152,066		160,690
Domestic		171,684		134,702		156,018
Regional (Hong Kong, Macau and Taiwan)		6,408		902		731
International		92,162		16,463		3,942
Passenger Yield (RMB)		0.52		0.49		0.53
Domestic		0.54		0.46		0.51
Regional (Hong Kong, Macau and Taiwan)		0.74		0.90		0.74
International		0.47		0.82		1.79
Passenger Load Factor (%)		82.06		70.54		67.71
Domestic		83.25		71.42		68.33
Regional (Hong Kong, Macau and Taiwan)		78.75		50.79		56.06
International		80.09		64.44		45.37

In 2019, we introduced a total of 44 aircraft of major models and one aircraft retired. With the introduction of new aircraft, such as A350-900, B787-9 and A320NEO, our fleet age structure has remained young. As of December 31, 2019, we operated a fleet of 734 aircraft, which included 723 passenger aircraft and 11 business aircraft held under trust. We have intensified our comprehensive cooperation with strategic partners and core partners to improve the capacity of international routes and enhance the quality of cooperation. For the core markets of Shanghai and Beijing, leveraging on the operation of the satellite terminal S1 of Shanghai Pudong International Airport (the “Satellite Terminal S1 of Pudong”) and Beijing Daxing International Airport, we worked with SkyTeam Airline Alliance members and other important partners to carry out the plan for route network optimization connection, as well as the development of ground service procedure and standards, explore ground operating cooperation opportunities, design passenger travel plan portfolio products and continue to expand the scope of code-sharing. As of the end of 2019, our code-sharing covered 347 flight route destinations, 1,007 routes and 4,617 flights. For the North American market, we and Delta Air Lines started to operate in the same terminal in Satellite Terminal S1 of Pudong and recorded increase in revenue from cooperation. For the European market, we have expanded joint operation routes with Air France-KLM by adding new routes from Kunming and Wuhan to Paris, and intensified the cooperation in the aspects such as transfer mode of connected flights, corporate clients and joint sales. For the Australian market, our in-depth cooperation with Qantas Airways Limited in the areas of code-sharing, allocation of flight capacity, joint marketing, resources sharing and personnel exchange has driven the growth in mutual sales revenue from cooperation. For the Asia Pacific market, we continued to facilitate the anti-monopoly approval procedures for the joint cooperation with Japan Airlines and deepened the cooperation in the areas of route network and flight capacity sharing with Japan Airlines to strengthen our market position in Japan routes.

In 2019, we have focused on the core hubs of Beijing and Shanghai, and the regional hubs such as Xi’an and Kunming to continuously optimize our route network layout and flight capacity allocation so as to strengthen the our market share and influence. In 2019, our market shares in hubs such as Shanghai, Beijing, Kunming and Xi’an were 40.6%, 18.3%, 37.2% and 29.4%, respectively. Through the scientific matching of routes and flight capacity and the optimization of transit connection procedures, the effect of hub network has gradually appeared. The number of transits connecting “origin to destination” of the three hubs, namely Shanghai Pudong, Xi’an and Kunming, significantly increased by 11.6%, 34.4% and 9.9%, respectively. The transit passengers of the three hubs, namely Shanghai Pudong, Kunming, and Xi’an amounted to 3,488,000 passengers, 1,658,000 passengers and 580,000 passengers, respectively, representing a year-on-year increase of 11.1%, 3.0% and 7.8%, respectively.

In 2019, we put in available seat – kilometers (ASK) of approximately 270,254 million passenger-kilometers, representing an increase of approximately 10.4% from 2018. Number of passengers carried in 2019 was approximately 130 million, representing an increase of approximately 7.5% from 2018. Passenger load factor in 2019 was approximately 82.06%, remaining relatively stable as compared to 2018. Passenger revenue in 2019 amounted to approximately RMB110,416 million, representing an increase of approximately 5.9% from 2018.

In 2020, we introduced a total of 13 aircraft of major models and a total of 11 aircraft retired. With the introduction of new aircraft, such as A350-900, B787-9 and A320NEO, our fleet age structure still continues to remain young. As of December 31, 2020, we operated a fleet of 734 aircraft, which included 725 passenger aircraft and nine business aircraft held under trust.

In 2020, we have closely followed the situation of the COVID-19 pandemic and market changes to dynamically adjust the deployment of transportation capacity. To improve our route network and the establishment of our core hubs, we paid special attention to adjusting our capacity; we paired core hubs and important business cities with more wide-body aircraft; we optimized our route network layout and focused on the construction of express and quasi express routes in key markets; we continued to facilitate the construction of the core hub of Beijing and moved our base to Beijing Daxing International Airport; we steadily promoted construction of hubs in important business markets such as Chengdu, Qingdao and Wuhan.

Due to the adverse impact of the COVID-19 pandemic, our production volume, revenue, profit and other indicators all dropped significantly. In 2020, our passenger revenue amounted to RMB49,215 million, representing a decrease of 55.4% from last year, and accounted for 91.0% of our traffic revenue. The passenger traffic volume was 107,273 million passenger-kilometres, representing a decrease of 51.6% from last year. Meanwhile, our cargo traffic revenues amounted to RMB4,895 million, representing an increase of 27.9% from last year, and accounted for 9.0% of our traffic revenue. The cargo and mail traffic volume was 2,200 million tonne-kilometres, representing a decrease of 26.0% from last year. Our other revenue amounted to RMB4,617 million, representing a decrease of 31.5% from last year.

In 2021, we introduced a total of 33 aircraft of major models and a total of six aircraft retired. With the introduction of new aircraft, such as A350-900, B787-9 and A320NEO, our fleet age structure continues to remain young. As of December 31, 2021, we operated a fleet of 758 aircraft, which included 752 passenger aircraft and six business aircraft.

Under the constant influence of the COVID-19 pandemic, in 2021, our passenger revenue amounted to RMB54,105 million, representing an increase of 9.9% from 2020, and accounted for 86.7% of our traffic revenue. The passenger traffic volume was 108,804 million passenger-kilometres in 2021, representing an increase of 1.4% from 2020. Meanwhile, our cargo traffic revenues amounted to RMB8,309 million in 2021, representing an increase of 69.7% from 2020, and accounted for 13.3% of our traffic revenue. The cargo and mail traffic volume was 3,393 million tonne-kilometres in 2021, representing an increase of 54.2% from 2020. Our other revenue amounted to RMB4,713 million, representing an increase of 2.1% from 2020.

Cargo and Mail Operations

We also provide air cargo and mail services. The following table sets forth certain of our cargo and mail operations statistics by route for each of the years ended December 31, 2019, 2020 and 2021:


	Year Ended December 31,
	2019		2020		2021
Cargo and Mail Traffic (in RFTKs) (millions)		2,971		2,200		3,393
Domestic		951		774		865
Regional (Hong Kong, Macau and Taiwan)		29		9		11
International		1,991		1,416		2,517
Cargo and Mail Capacity (in AFTKs) (millions)		9,133		6,946		9,077
Domestic		3,216		2,755		3,093
Regional (Hong Kong, Macau and Taiwan)		189		42		52
International		5,728		4,150		5,932
Cargo and Mail Yield (RMB)		1.29		2.23		2.45
Domestic		1.05		0.97		0.94
Regional (Hong Kong, Macau and Taiwan)		5.56		8.91		13.23
International		1.34		2.87		2.92
Cargo and Mail Load Factor (%)		32.54		31.67		37.38
Domestic		29.58		28.11		27.97
Regional (Hong Kong, Macau and Taiwan)		15.21		22.45		21.18
International		34.77		34.13		42.43

China Cargo Airlines has exclusive operation to independently operate and manage our passenger aircraft cargo business.

Our Operations by Geographical Area

Our revenues (net of business tax) by geographical area are analyzed based on the following criteria:

(1)

Traffic revenue from services within the PRC (excluding Hong Kong Special Administrative Region (“Hong Kong”), Macau Special Administrative Region (“Macau”) and Taiwan, (collectively known as “Regional”)) is classified as domestic operations. Traffic revenue from inbound and outbound services between overseas markets excluding Regional is classified as international operations.

(2)

Revenue from ticket handling services, ground services, cargo handling service and other miscellaneous services is classified based on where the services are performed.

The following table sets forth our revenues by geographical area for each of the three years ended December 31, 2021:


	2019		2020		2021
	(in RMB millions)
Domestic		80,058		45,479		56,133
Regional (Hong Kong, Macau and Taiwan)		3,846		489		441
International		37,082		12,759		10,553
Total		120,986		58,727		67,127

Regulation

The PRC Civil Aviation Law provides the framework for regulation of many important aspects of civil aviation activities in China, including:

(1)

the administration of airports and air traffic control systems;

(2)

aircraft registration and aircraft airworthiness certification;

(3)

operational safety standards; and

(4)

the liabilities of carriers.

The Chinese airline industry is also subject to a high degree of regulation by the CAAC. Regulations issued or implemented by the CAAC encompass virtually every aspect of airline operations, including route allocation, domestic airfare, licensing of pilots, operational safety standards, aircraft acquisition, aircraft airworthiness certification, fuel prices, standards for aircraft maintenance and air traffic control and standards for airport operations. Although the PRC airlines operate under the supervision and regulation of the CAAC, they are accorded a significant degree of operational autonomy. These areas of operational autonomy include:

•

whether to apply for any route;

•

the allocation of aircraft among routes;

•

the airfare pricing for the international and regional passenger routes;

•

the airfare pricing within the limit provided by the CAAC for the domestic passenger routes;

•

the acquisition of aircraft and spare parts;

•

the training and supervision of personnel; and

•

many other areas of day-to-day operations.

Although we have generally been allocated adequate routes in the past to accommodate our expansion plans and other changes in our operations, those routes are subject to allocation and re-allocation in response to changes in governmental policies or otherwise at the discretion of the CAAC. Consequently, we cannot assure you that our route structure will be adequate to satisfy our expansion plans.

The CAAC has established regulatory policies intended to promote controlled growth of the Chinese airline industry. We believe those policies will be beneficial to the development of and prospects for the Chinese airline industry as a whole. Nevertheless, those regulatory policies could limit our flexibility to respond to changes in market conditions, competition or our cost structure. Moreover, while we generally benefit from regulatory policies that are beneficial to the airline industry in China as a whole, the implementation of specific regulatory policies may from time to time materially and adversely affect our business operations.

Because we provide services on international routes, we are also subject to a variety of bilateral civil air transport agreements between China and other countries. In addition, China is a contracting state as well as a permanent member of the International Civil Aviation Organization, an agency of the United Nations established in 1947 to assist in the planning and development of the international air transportation. The International Civil Aviation Organization establishes technical standards for the international airline industry. China is also a party to a number of other international aviation conventions. Our business operations are also subject to these international aviation conventions, as well as certain foreign country aviation regulations and local aviation laws with respect to route allocation, landing rights and related flight operation regulation.

Domestic Route Rights

Chinese airlines must obtain from the CAAC the right to carry passengers or cargo on any domestic route. The CAAC’s policy on domestic route rights is to assign routes to the airline or airlines suitable for a particular route. The CAAC will take into account whether an applicant for a route is based at the point of origin or termination of a particular route. This policy benefits airlines, such as us, that have a hub located at each of the active air traffic centers in China. The CAAC also considers other factors that will make a particular airline suitable for an additional route, including the applicant’s safety record, previous on-time performance and level of service and availability of aircraft and pilots. The CAAC will consider the market conditions applicable to any given route before such route is allocated to one or more airlines. Generally, the CAAC will permit additional airlines to service a route that is already being serviced only when there is strong demand for a particular route relative to the available supply. The CAAC’s current general policy is to require the passenger load factor of one or two airlines on a particular route to reach a certain level before another carrier is permitted to commence operations on such route.

Regional Route Rights

Hong Kong routes and the corresponding landing rights were formerly derived from the Sino-British air services agreement. In February 2000, the PRC government, acting through the CAAC, and Hong Kong signed the Air Transportation Arrangement between mainland China and Hong Kong. The Air Transportation Arrangement provides equal opportunity for airlines based in Hong Kong and mainland China. Competition from airlines based in Hong Kong increased after the execution of the Air Transportation Arrangement. The CAAC normally will not allocate an international route or a Hong Kong route to more than one domestic airline unless certain criteria, including minimum load factors on existing flights, are met. There is more than one Chinese airline company on certain of our Hong Kong routes.

The CAAC and the Economic Development and Labor Bureau of Hong Kong entered into an agreement in 2007 to further expand the Air Transportation Arrangement. This agreement increases the routes between Hong Kong and mainland China to expand coverage to most major cities in mainland China. The capacity limits for passenger and/or cargo services on most routes will also be gradually lifted. Beginning in 2007, each side designated three airline companies to operate passenger and/or cargo flights and another airline company to operate all-cargo flights on the majority of the routes between Hong Kong and mainland China. Since then, the two sides signed memorandums to further expand the Air Transportation Arrangement several times.

On December 15, 2008, mainland China and Taiwan commenced direct air and sea transport and postal services, ending a nearly six-decade ban on regular links between the two sides since 1949. Under a historic agreement signed by the governments of mainland China and Taiwan in early November 2008, the new air links expanded from weekend charters to a daily service. According to the flight plan of 2019-2020 winter and spring season of CAAC, the total number of flights between mainland China and Taiwan reached 1,320 per week.

International Route Rights

International route rights, along with the corresponding landing rights, are derived from air services agreements negotiated between the PRC government, acting through the CAAC, and the government of the relevant foreign country. Each government grants to the other the right to designate one or more domestic airlines to operate scheduled services between certain points within each country. The CAAC awards the relevant route to an airline based on various criteria, including:

(1)

availability of appropriate aircraft and flight personnel;

(2)

safety record;

(3)

on-time performance; and

(4)

hub location.

Although hub location is an important criterion, an airline may be awarded a route that does not originate from an airport where it has a hub.

The route rights awarded do not have a fixed expiry date and can be terminated at the discretion of the CAAC.

Airfare Pricing Policy

The PRC Civil Aviation Law provides that airfares for domestic routes are determined jointly by the CAAC and the agency of the State Council responsible for price control, primarily based upon average airline operating costs and market conditions.

The CAAC and NDRC jointly issued a notice on April 13, 2010, effective on June 1, 2010, pursuant to which airlines may set first-class and business-class airfares in accordance with market prices, subject to relevant PRC laws. Such pricing must be filed 30 days before effectiveness with the CAAC and NDRC. Efforts by the Chinese regulators to promote a sale market with fair competition will also help provide a favorable environment for our business growth.

At the end of 2014, the CAAC and the NDRC jointly promulgated The Notice on Further Improving the Problems About Civil Aviation Domestic Air Transport Price Policy, which lifted the control over the civil domestic airlines cargo freight rate and changed the prices of specific airlines from government-oriented pricing to market-oriented pricing.

At the end of 2015, the CAAC announced the

Implementation Opinion on the Reform of Mechanism of Prices and Service Fee in Civil Aviation Transport

, which sets the goal to generally lift the control over the prices and service fee in competitive part of civil aviation transport by 2017, and to generally set up a basically optimized, scientific, standardized, transparent and market-oriented pricing regulatory system by 2020.

In October 2016, the CAAC and the NDRC jointly promulgated the

Circular on the Further Reform of Passenger Transport Price Policy in Civil Aviation Domestic Air Transport

, which loosened the control over the civil domestic airlines passenger transportation and changed the prices from government-oriented pricing to market-oriented pricing. According to the circular, the price of routes under 800km or routes above 800km that are in competition with high-speed rails for passenger transportation can be determined independently.

At the end of 2017, the CAAC and the NDRC jointly promulgated the

Notice on Further Improving the Problems about Passenger

Transport Price Policy in Civil Aviation Domestic Air Transport

, given greater freedom to set fares on more domestic routes.

On April 13, 2018, the CAAC issued the

Notice on the Issuance of Domestic Route Directory with Market-adjusted Prices

showing a total of 1,030 domestic routes implementing market adjusted ticket prices.

On November 23, 2020, the Civil Aviation Authority and the National Development and Reform Commission, jointly issued a

Notice on Issues Related to Further Deepening the Reform of Transport Prices on Domestic Routes of Civil Aviation,

which may greatly increase the volume of market-adjusted domestic routes, and the market price-determining mechanism may be further strengthened.

Under the PRC Civil Aviation Law, maximum airfares on regional and international routes are set in accordance with the terms of the air services agreements pursuant to which these routes are operated. In the absence of an air services agreement, airfares are set by the airlines themselves or by the CAAC with reference to comparable market prices, taking into account the international airfare standards established through the coordination of the International Air Transport Association, which organizes periodic air traffic conferences for coordinating international airfares. Discounts are permitted on regional and international routes. For the airline industry in China as a whole, the airfare per kilometer is substantially higher for regional and international routes than that for domestic routes.

Acquisition of Aircraft and Spare Parts

We are permitted to import aircraft, aircraft spare parts and other equipment for our own use from manufacturers through Eastern Aviation Import and Export Co., Ltd., or EAIEC, which is 55% owned by CEA Holding and 45% owned by our Company. This gives us a sale market with fair competition flexibility with our inventory management by allowing us to maintain a relatively lower overall inventory level of aircraft parts and equipment than we otherwise would have to maintain. We are still required to obtain approval from the NDRC and may be subject to appraisal of the relevant competent authorities for any import of aircraft. We generally pay a commission to EAIEC in connection with these imports.

Domestic Fuel Supply and Pricing

The Civil Aviation Oil Supply Company, or the CAOSC, which is supervised by the State-owned Assets Supervision and Administration Commission of the State Council, or the SASAC, is currently the dominant civil aviation fuel supply company in China. We currently purchase a significant portion of our domestic fuel supply from CAOSC. The PRC government determines the fuel price at which the CAOSC acquires fuel from domestic suppliers and the CAAC issues a guidance price. The retail price at which the CAOSC resells fuel to airline customers is set within a specified range based on this guidance price.

In 2005, the NDRC, the CAAC and the China Air Transport Association jointly launched the linkage mechanism for aviation fuel prices and transportation prices by airline companies. The fuel surcharge standards for domestic passenger routes were adjusted according to a series of notices regarding the adjustments of passenger fuel surcharges on domestic routes issued by the NDRC and the CAAC from 2006 to 2008. A Notice Concerning the Relevant Issues on Establishment Linkage Mechanism for Passenger Fuel Surcharges on Domestic Routes and the Price of Domestic Aviation Coal Oil Fuel by NDRC and CAAC, with effect from November 14, 2009, provided that fuel surcharges shall be charged by the airlines, at the airline’s discretion, but within certain limits as set forth in the notice. On March 31, 2010, the NDRC and CAAC issued the Notice Regarding the Publication of Passenger Fuel Surcharges Rate on Domestic Routes, which reduced the standard fuel surcharge by 3.1% for domestic routes. In addition, on March 31, 2011, the NDRC and CAAC issued another similar notice, which further adjusted the standard fuel surcharge downwards. From August 1, 2011, according to the

Announcement on the Linking Mechanism for Fuel Surcharges and Aviation Coal Oil Fuel,

issued by the NDRC and CAAC, the rate of domestic route fuel surcharges will be adjusted each month if the difference in consolidated purchase costs for domestic aviation coal oil fuel exceeds RMB250 per ton.

On March 24, 2015, the CAAC and the NDRC jointly promulgated the

Notice on Adjustment of the Linking Mechanism for Fuel Surcharges and Aviation Coal Oil Fuel in Passenger Transport of Domestic Airlines

, in which they decided to increase the base price of aviation coal oil fuel from RMB4,140 per ton to RMB5,000 per ton.

Safety

The CAAC has made the continuance of improvement of air traffic safety in China a high priority. The CAAC is responsible for the establishment of operational safety, maintenance and training standards for all Chinese airlines, which have been formulated based on international standards. Each Chinese airline is required to provide flight safety reports to the CAAC, including reports of flight incidents or accidents involving its aircraft, which occurred during the relevant reporting period and other safety related problems. The CAAC conducts safety inspections on each airline periodically.

The CAAC oversees the training of most Chinese airline pilots through its operation of the pilot training college. The CAAC implements a unified pilot certification process applicable to all Chinese airline pilots and is responsible for the issuance, renewal, suspension and cancelation of pilot licenses. Each pilot is required to pass the CAAC-administered examinations before obtaining a pilot license and is subject to an annual examination in order to have such certification renewed.

All aircraft operated by Chinese airlines, other than a limited number of leased aircraft registered in foreign countries, are required to be registered with the CAAC. All of our aircraft are registered with the CAAC. All aircraft operated by Chinese airlines must have a valid certificate of airworthiness issued and annually renewed by the CAAC. In addition, maintenance permits are issued to a Chinese airline only after the maintenance capabilities of that Chinese airline have been examined and assessed by the CAAC. These maintenance permits are renewed annually. All aircraft operated by Chinese airlines may be maintained and repaired only by CAAC certified maintenance facilities, whether located within or outside China. Aircraft maintenance personnel must be certified by the CAAC before assuming aircraft maintenance posts.

In early 2013, the CAAC amended the original Civil Aviation Incidents Standards and published the new Civil Aviation Incidents Standards which became effective as of March 1, 2013. The CAAC amended the

Management Rules on Safety Information of Civil Aviation

which became effective on April 4, 2016 and required that related Chinese airlines should arrange a certain number of specialists that satisfied with special requirements to take charge of the management of safety information. The CAAC promulgated the new

Administrative Provisions on Emergencies of China’s Civil Aviation

which became effective from April 17, 2016 and formulated the duties and responsibilities of Chinese airlines on the prevention and emergency preparedness, prediction and early warning, emergency disposal, handling and other emergency work of civil aviation. We will ensure our relevant employees implement the new standards, which will enable us to enhance our daily operations. For more information on the safety standards and measures implemented by us, see “– Maintenance and Safety – Safety.” In 2016, the CAAC promulgated the new

Administrative Provisions on Civil Aviation Safety Information.

As a result, we formulated new internal regulations on aviation safety information to strengthen the safety of our information system.

Security

The CAAC establishes and oversees the implementation of security standards and regulations based on the PRC laws and standards established by international civil aviation organizations. Each airline is required to submit to the CAAC an aviation security handbook describing specific security procedures established by the airline for the day-to-day operations and security training for staff. Such security procedures must be formulated based on the relevant CAAC regulations. Chinese airlines that operate international routes must also adopt security measures in accordance with the requirements of the relevant international agreements and applicable local laws. We believe that we comply with all applicable security regulations.

Environmental Regulation

We are subject to a number of environmental laws and regulations issued by regulatory authorities in China including the Environment Protection Law of the PRC, the Prevention and Control of Noise Pollution Law of the PRC, the Environmental Protection Tax Law of the PRC, Implementing Regulations of Environmental Protection Tax Law of the PRC and Implementation Opinions on Further Promoting the Green Development of Civil Aviation. We believe that we comply with all applicable noise and environmental regulations in material aspects.

Chinese Airport Policy

Prior to September 2003, all civilian airports in China were operated directly by the CAAC or by provincial or municipal governments. In September 2003, as part of the restructuring of the aviation industry in China, the CAAC transferred 93 civilian airports to provincial or municipal governments. The CAAC retained the authority to determine the take-off and landing charges, as well as charges on airlines for the use of airports and airport services. Prior to 2004, Chinese airlines were generally required to collect from their passengers on behalf of the CAAC a levy for contribution to the civil aviation infrastructure fund, which was used for improving China’s civilian airport facilities. Our revenue for the previous years is shown net of this levy. In 2003, the levy was 5% of domestic airfares and 2% of international airfares. The levy was waived by the CAAC from May 1, 2003 to December 31, 2003. With effect from September 2004, the civil aviation infrastructure levies, now paid to the Ministry of Finance of the PRC (“MOF”), have been reflected in airfares of Chinese airlines rather than collected as a separate levy.

On December 28, 2007, the CAAC and the NDRC released the Implementing Scheme for the Civil Aviation Airport Charges Reform Implementation Plan, which was implemented on March 1, 2008. This new plan divides airport charges into three parts: charges related to airline businesses; charges related to important non-airline items; and other non-airline charges. The charges related to airline businesses and important non-airline items must follow the national guided prices, in which the standard prices are rarely increased, while reduced rates can be negotiated between the airport or the service provider and the users. The plan grants us the right to negotiate with airports on the airport charges. On January 23, 2017, CAAC promulgated the Notice of Distributing the Adjustment Plan for Charging Standards for Civil Airport, adjusting the general aviation fee policy and the preferential policy for passenger service fees, including but not limited to the categories, meanings, management methods, benchmark prices and floating ranges of several airport charges and take-off and landing fees. On May 28, 2019, the CAAC issued Notice on Issues Related to Civil Airport Charging, which lowered the charging standards for some airport charging items.

Limitation on Foreign Ownership

The CAAC’s present policies limit foreign ownership in Chinese airlines. Under these limits, non-Chinese residents and Hong Kong, Macau or Taiwan residents cannot hold a majority of our total outstanding shares individually or together. For PRC air transportation companies, pursuant to the Special Administrative Measures for Foreign Investment Access (Negative List) (2021 Edition), Chinese investors should be the controlling shareholders of a PRC public air transportation company and the total shares held by foreign investment enterprises and its associated enterprises are not permitted to exceed 25% of the total shares of a PRC public air transportation company.

Domestic Investment

According to the Regulations on Domestic Investment in Civil Aviation Industry issued by the Ministry of Transport of PRC and effected on January 19, 2018, public air transport companies that require special management for domestic investment can keep a relative state-owned holding in its equity structure. The state-owned shares ratio requirement of major civil transport airports is loosened. Moreover, investment restrictions among various entities in the civil aviation industry are further liberalized.

Competition

Domestic

We compete against our domestic competitors primarily based on safety, quality of service and frequency of scheduled flights. With the combination of our dominant position in Shanghai, our route network and our continued commitment to safety and service quality, we believe that we are well-positioned to compete against our domestic competitors in the growing airline industry in China. However, domestic competition from other Chinese airlines has been increasing recently as our competitors have increased capacity and expanded operations by adding new routes or additional flights to existing routes and acquiring other airlines. In addition, we have faced intense competition from entrants to our domestic markets as new investments into China’s civil aviation industry have been made following the CAAC’s relaxation of certain private-sector investment rules in July 2005. In December 2008, the CAAC announced ten measures to protect and encourage the domestic aviation industry, one of which provides that no new Chinese airlines will be licensed to incorporate and operate aviation businesses before 2010. In October 2010, the CAAC announced that the suspension of approvals for new Chinese airlines companies would continue for an indefinite period. However, if the restriction is lifted in the future, we expect that competition from other Chinese airlines on our routes will further intensify.

There are currently approximately 50 Chinese airlines in mainland China, and we compete with many of them on various domestic routes. All of these airlines operate under the regulatory supervision of the CAAC. Our Company, Air China Limited, or Air China, which is based in Beijing and listed on the Hong Kong Stock Exchange (“HKEX”) and the London Stock Exchange, and China Southern Airlines Company Limited, or China Southern, which is based in Guangzhou and listed on the HKEX and the NYSE, are the three leading air carriers in China.

Each of the domestic airlines competes against other airlines operating the same routes or flying indirect routes to the same destinations. Our principal competitors in the domestic market are China Southern and Air China, which also provide transportation services on some of our routes, principally routes originating from the major air transportation hubs in China, such as Shanghai, Guangzhou and Beijing. Some of these routes are among our most heavily traveled routes. Since most of the major domestic airlines operate routes from their respective hubs to Shanghai, we also compete against virtually all of the major domestic airlines on these routes. In addition, we are facing increasing competition from certain low-cost carriers, such as Spring Airlines, in the domestic market. Spring Airlines competes with us, as it operates daily domestic routes to certain destinations such as Harbin, Shenyang, Guangzhou, Xiamen, Sanya, Kunming and Chongqing, which are covered in our domestic routes. The “Twelfth Five-Year Plan” for civil aviation industry in China encourages low-cost airlines to enter into major logistics market gradually. In February 2014, CAAC issued Guidance on Facilitating Low-cost Aviation Development which aims at supporting the development of domestic low-cost airlines. This will further intensify the competition in domestic aviation market. However, we believe we are well-positioned to compete against domestic low-cost carriers due to our expansive route network, competitive pricing, greater availability of flight services to these destinations and strong brand name.

Domestic Rail

The PRC government is aggressively implementing the expansion of its domestic high-speed rail network, which has provided train services at speeds of up to 350 km per hour connecting major cities such as Beijing, Shanghai, Guangzhou and Hong Kong. The expansion of rail network, improvements in railway service quality, increased passenger capacity and urban center accessibility could enhance the competitiveness of the railway service and negatively affect our market share on some of our routes, in particular our short-haul routes. For example, in 2020, Yinchuan-Xi’an and Yancheng-Nantong routes were largely affected by the opening of high-speed railway routes. The load factors of two routes demonstrated a trend of significant decrease after the high-speed railway routes put into operation.

We have been taking active measures in decreasing the number of short-haul routes that overlap with high-speed train routes, as well as adjusting certain airfare prices on affected routes, facilitating “air-to-railway” transfers, adjusting the flight structure, and allocating flight resources to alternative routes or medium-to-long-haul routes that have higher profitability, higher demand and lessened competition. In addition, in 2013, we developed ground connection services such as Air-Rail Service and Air-Bus Service and cooperated with Disney, brand hotel groups, and renowned international travel enterprises to develop travel products. Our Air-Rail Service and Air-Bus Service have been developing steadily with increased routes in Yangtze River Delta, Xi’an, Lanzhou and other cities and regions. We expect to continue exploring cooperation opportunities with domestic railway authorities, while maintaining and strengthening our other competitive advantages, which include providing high quality services, increasing our pre-sale product promotions and developing our transfer services. In 2021, we upgraded “air-rail combined transportation” and expanded our coverage of combined transportation to 27 major cities and 471 railway stations.

Regional

Our Hong Kong routes were highly competitive before the outbreak of the COVID-19 pandemic. We operated approximately 20 flight routes between various cities in mainland China and Hong Kong in 2019. The primary competitors on our Hong Kong routes were Cathay Pacific Airways (“Cathay”) and HongKong Airlines. Cathay and HongKong Airlines compete with us on several of these routes, particularly the Shanghai- Hong Kong route. In addition, we continue to face competition from other low-cost airlines on overlapping routes connecting Hong Kong and mainland cities. The Air Transportation Arrangement signed between the PRC government and the administrative government of Hong Kong in February, 2000 provides for equal opportunity for airlines based in Hong Kong and mainland China. We currently operate one flight route between mainland China and Hong Kong.

The policy restraint on direct flights between Taiwan and mainland China has been further loosened in the past few years but there has been no further negotiation on the expansion of such arrangement between Taiwan and mainland China since mid-2016. However, given the arrangement is subject to the political relationship between Taiwan and mainland China, any deterioration in such political relationship may cause the discontinuity or disruption in the flight arrangement. As one of the several airlines offering Taiwan-mainland China direct flight services, we cannot assure you that we will maintain or will continue to be allocated sufficient Taiwan-mainland China routes, or our results will not be adversely impacted. We compete with China Airlines, China Southern and Eva Air on our route connecting mainland cities and Taiwan. We currently operate one flight route to Taipei from mainland China.

We compete with Air Macau on the Shanghai Pudong-Macau route. Air Macau’s routes also provide an alternative to our Hong Kong routes for passengers traveling between Taiwan and mainland China. We currently operate one flight route between mainland China and Macau.

International

We compete with Air China, China Southern and many other well-established foreign carriers on our international routes. Most of our international competitors are very well-known international carriers and are substantially larger than we are and have substantially greater financial resources than we do. Many of our international competitors also have significantly longer operating histories and greater name recognition than we do. Some international passengers, who may perceive these airlines to be safer and provide better service than Chinese airlines in general, may prefer to travel on these airlines. In addition, many of our international competitors have more extensive sales networks and utilize more developed reservation systems than ours, or engage in promotional activities, such as frequent flyer programs, that may be more popular than ours and effectively enhance their ability to attract international passengers.

To improve our competitive position in international markets, we have established additional dedicated overseas sales offices, launched our own frequent flyer program, participated in “Asia Miles”, a popular frequent flyer program in Asia, and entered into code-sharing arrangements with a number of foreign airlines. We have also improved our online reservation and payment system. In addition, in June 2011, we joined SkyTeam, an international airlines alliance and frequent flyer mileage program that includes, among others, international carriers such as Delta Air Lines, China Southern, Alitalia, Air France and KLM. As a member of SkyTeam alliance, our Elite members can enjoy approximately 790 VIP lounges worldwide. Since 2013, we have been implementing code-sharing programs to extend our international route and improve our competitiveness and reputation in the international market. In 2021, we have actively responded to industry competition, proactively strived for new air traffic rights and time slots in hub markets and core markets, continuously refined our route network, steadily improved and consolidated our market share in the hubs and core markets. Through improving service quality and enhancing flight punctuality rate, the passenger experience was enhanced, which further strengthened our competitiveness. In 2021, we actively expanded our cooperation with domestic and foreign airlines, added more than 1,100 code-sharing flights with Sichuan Airlines, Juneyao Airlines, Xiamen Airlines and other airlines, and strengthened cooperation and mutual sales with overseas airlines such as Air France-KLM and Delta Air Lines to promote revenue improvement. As of December 31, 2021, we cooperated with 11 airline companies outside the SkyTeam Airline Alliance on code-sharing.

Maintenance and Safety

The rapid increase in air traffic volume in China in recent years has put pressure on many components of China’s airline industry, including air traffic control systems, the availability of qualified flight personnel and airport facilities. In recent years, the CAAC has placed increasing emphasis on the safety of airline operations in China and has implemented a number of measures aimed at improving the safety record of the airlines. Our ability to provide safe air transportation in the future depends on the availability of qualified and experienced pilots in China and the improvement of maintenance services, national air traffic control and navigational systems and ground control operations at Chinese airports. We have a good safety record and regard the safety of our flights as the most important component of our operations.

Maintenance Capability

Through our cooperation with service providers and ventures with other companies, we currently perform regular repair and maintenance checks on all of our aircraft, which include D1 checks, C checks and other maintenance services for certain aircraft and other flight equipment. We also perform certain maintenance services for other Chinese and international airlines. We have four main maintenance bases in Shanghai, Kunming and Xi’an and several maintenance bases in our provincial hubs including Taiyuan, Qingdao, etc. We also constructed a new maintenance base in Beijing Daxing International Airport in 2019. Our primary aircraft maintenance base is at Pudong International Airport. We employed approximately 13,383 workers as maintenance personnel as of December 31, 2021. We prepared our own training plan for our employees to meet the requirements of certain regulations and the needs for future development. In order to enhance our maintenance capabilities and to reduce our maintenance costs, we have acquired additional maintenance equipment, tools and fixtures and other assets over the past few years, such as airborne testing and aircraft data recovery and analysis equipment. In 2019, we increased our capacities in our maintenance bases in Kunming and Xi’an by installing one additional production line for the maintenance of narrow-body aircraft in each of the two bases. Our avionics equipment is primarily maintained and repaired at our electronic maintenance equipment center located in Shanghai. In 2020, our maintenance bases continued to guarantee the maintenance and support work required for the daily operation of our large fleet. In 2021, we had no construction commencement at our maintenance bases.

We entered into a joint venture with Honeywell International Inc. (“Honeywell”), formerly Allied Signal Inc., in Shanghai for performing maintenance and repairs on aircraft wheel assemblies and brakes. Since October 1997, we have operated a maintenance hangar at Hongqiao International Airport, which has the capacity to house two wide-body aircraft. We and Rockwell Collins International Inc. of the United States have also co-established Collins Aviation Maintenance Service Shanghai Limited, which is primarily engaged in the provision of repair and maintenance services for avionics and aircraft in-flight entertainment facilities in China. We and Rockwell Collins International Inc. hold 35% and 65%, respectively, of the equity interests in the joint venture. Moreover, in November 2002, we, jointly with Aircraft Engineering Investment Limited, established Shanghai Eastern Aircraft Maintenance Limited, in which we hold 60% of the equity interests, to provide supplemental avionics and other maintenance services to us. STA, which was established in 2004 by us and Singapore Technologies Aerospace Ltd. under a joint venture agreement dated March 10, 2003, also provides us with aircraft maintenance, repair and overhaul services. In 2019, we entered into one agreement with Honeywell, pursuant to which we expected we will save certain repairing costs. In 2020, we did not enter into any maintenance agreement with Honeywell. In 2021, we entered into an APU selection agreement with Honeywell regarding 36 A320NEO aircraft.

In 2014, we established Eastern Airlines Technology Co. Ltd. (“Eastern Technology”), a wholly-owned subsidiary specializing in aircraft maintenance. Since 2016, our customer base continued to expand, other airlines such as Singapore Airlines, AirAsia, Royal Brunei Airlines, Macau Airlines, Delta Air Lines, Asiana Airlines, Hong Kong Airlines, Malaysia Airlines, Air Busan, British Airways and Egypt Air became customers of Eastern Technology.

Safety

The provision of safe and reliable air services for all of our customers is one of our primary operational objectives. We implement uniform safety standards and safety-related training programs in all operations. Our flight safety management division monitors and supervises our flight safety. We have had a flight safety committee since the commencement of our business, comprised of members of our senior management, to formulate policies and implement routine safety checks at our Shanghai headquarters and all provincial hubs. The flight safety committee meets monthly to review our overall operation safety record during the most recent quarter and to adopt measures to improve flight safety based upon these reviews. We have also implemented an employee incentive program, using a system of monetary rewards and discipline, to encourage compliance with the CAAC safety standards and our safety procedures. We periodically evaluate the skills, experience and safety records of our pilots in order to maintain strict control over the quality of our pilot crews. In 2011, we were awarded the “Flight Safety Five-star Award” by CAAC for our commitment to aviation and operations safety.

Since 2013, we have been strengthening our Safety Management System (“SMS”) and further enhanced our safety management system by strengthening the enforcement of safety responsibilities, our safety supervision and inspection, our risk control over special routes and international routes for long-haul flights, enhancing our operational risk alert abilities, boosting the quality of training for our pilots, improving our system for developing talents with core skills, enhancing our ability in handling security-related contingencies, and strictly implementing safety requirements for our flights. In 2019, we adhered to the civil aviation safety with zero tolerance for safety hazards, and has maintained safe operation throughout the year. In addition, we have studied the risks of new aircraft and new routes in advance to continuously strengthen the foundation for safe development. In terms of mechanism establishment, we have improved the relevant rules and regulations as well as implementation rules of our safe production responsibility system to further enhance safety requirements.

We have always been putting safety work in the first place. In 2021, we continued to place great emphasis on ensuring safe operation and further strengthen the implementation of safety responsibilities. We carried out in-depth safety rectification and special inspections of safety work, inspected and supervised key units and key tasks, carried out comprehensive investigation of hidden dangers, and improved safety management capabilities. We also continued to carry out safety education to our employees. In 2021, 1.755 million hours of safe flight and 756,000 take offs and landings have been carried out, representing a year-on-year increase of 13.2% and 12.4%, respectively. Despite that our number of flights was reduced during the pandemic, our maintenance expenses in 2021 increased by 12% compared with that of 2019.

Cyber-security

With respect to our internal policies on cyber-security and internet safety, we have established an information safety management system and issued internal regulations on cyber-security, internal hardware and data safety systems to prevent loss of information due to cyber-security incidents, network outages or hardware incidents. We also plan to implement measures relating to the office environment information safety management and information system emergency management, information system access control, protection from any malicious software, management of information exchange tools and internal review and audit of information safety risks. Furthermore, we have entered into a strategic cooperation plan with the China Information Technology Security Evaluation Center by which their trained engineers evaluate our internal data security policies and cyber-security measures. Since 2012, we established and announced four internal regulations relating to cyber-security, namely, China Eastern Airlines Information Security Management Regulation, China Eastern Airlines Information System Application and Development Safety Regulation, China Eastern Airlines Information Security Incident Management Regulation, China Eastern Airlines Information System Classification Measures, China Eastern Airlines Accounts Management Regulation and China Eastern Airlines Information System and Personal Data Protection Management Requirements, which we believe will strengthen our information safety management systems and overall cyber-security defenses. In addition, in strict compliance with the relevant provisions of the “General Data Protection Regulation” (“GDPR”) by the European Union, we have appointed a “data protection officer” to enhance the protection of customer information and prevent network security risks.

In 2020, we continuously promoted the construction of information security projects, and established a sound information security-related technical protection and security management platform. We strengthened information security management by deepening the strategic cooperation with external security agencies. In response to the implementation of the GDPR released by the European Union, we appointed a “data protection officer”. We strengthened customer privacy terms of online channels, assessed risks of third-party platforms and reinforced the passenger information protection firewall. In addition, we initiated a special task for network protection to improve its network security protection capabilities.

In 2021, we received ISO27001 Information Security Management System certification, implemented CEA Cyber Security Management Manual (“Manual”) and became the first company in the airline industry in China which passed the Commercial Cryptography Security Assessment. We implemented a monitoring platform for real time detection and analysis of cybersecurity risks. Additionally, we established a task force in risk management and promoting the Manual and relevant regulations.

Our Safety Operation Committee manages cybersecurity risks. The members of the Safety Operation Committee include our members of the Board of Directors and senior management of the Company. Once cybersecurity risk is identified, it will be reported to and discussed on a regular meeting of the Safety Operation Committee, which is scheduled every month. The Safety Operation Committee is responsible for making decisions and taking actions to handle the existing and potential cybersecurity risks. Safety Operation Committee is supervised by the Board of Directors and reports to the Board of Directors on its work every year.

As of December 31, 2021 and up to the date of this Annual Report, no significant cybersecurity incidents had ever occurred to us.

We did not purchase any cyber-security related insurance.

Fuel Supplies

Jet fuel is one of the major expenses of airlines. Fuel costs represented approximately 17.7% of our total operating expenses in 2020. We currently purchase a significant portion of the aviation fuel for our domestic routes from regional branches of the CAOSC

Fuel costs in China are affected by costs at domestic refineries and limitations in the transportation infrastructure, as well as by insufficient storage facilities for aviation fuel in certain regions of China. Fuel prices at six designated major airports in China, namely, the airports in Shanghai Pudong, Shanghai Hongqiao, Beijing, Guangzhou, Shenzhen and Tianjin, are set and adjusted once a month by the CAAC in accordance with prevailing fuel prices on the international market. For our international routes, we purchase a portion of our aviation fuel from foreign fuel suppliers located at the destinations of these routes, generally at international market prices. Significant fluctuations of international oil prices will significantly impact jet fuel prices and our revenue from fuel surcharge and accordingly our results of operations.

In 2021, our total aircraft fuel cost was approximately RMB20,593 million, representing an increase of 48.8% from RMB13,840 million in 2020. The increase was due to an increase in our fuel consumption by 13.8% from 2020, as a result of the gradual recovery of the travel and transportation demand and the increase in passenger traffic and cargo and mail volume, and an increase in the average prices of fuel by 34.4% from 2020, which is in line with the fluctuation in price of crude oil and other commodities in the global market. We cannot assure you that fuel prices will not fluctuate in the future. Further, due to the highly competitive nature of the airline industry and government regulation on airfare pricing, we may be unable to fully or effectively pass on to our customers any increased fuel costs we may encounter in the future. However, we reduced aircraft fuel costs by RMB 580 million through aircraft fuel hedging transactions and we intend to continue focusing on enhancing our jet fuel procurement policies and developing additional internal cost-control measures, which include streamlining the number of aircraft models in our fleet and optimizing route structures, which we believe will enable us to further control our fuel costs.

Ground Facilities and Services

The center of our operations is Shanghai, one of China’s principal air transportation hubs. Our Shanghai operations are based at Hongqiao International Airport and Pudong International Airport. In addition, we also started our operation in Beijing Daxing International Airport following its commencement of operation in September 2019. We currently also operate from various other domestic airports. We have hangars, aircraft parking and other airport service facilities at these airports, and provide ground services in these locations.

We have our own ground services and other operational services, such as aircraft cleaning and refueling and the handling of passengers and cargo for our operations at Hongqiao International Airport and Pudong International Airport. We also provide ground services for many other airlines that operate to and from Hongqiao International Airport and Pudong International Airport.

In-flight meals and other catering services for our Shanghai-originated flights are provided primarily by Shanghai Eastern Air Catering Limited Liability Company, a joint venture company affiliated with CEA Holding. We generally contract with local catering companies for flights originating from other airports.

In 2020, we strengthened our service management, further improved service efficiency and service experience in relation to check-in, baggage check-in, priority boarding and VIP lounge.

In 2021, we launched our ground facilities and services in Chengdu Tianfu International Airport and relocated our facilities and services from Shandong Liuting Airport to Shandong Jiaodong Airport. Additionally, we provided unaccompanied elderly passenger with guidance service and set up the caring service team in several airports in China in 2021.

Marketing and Sales

Passenger Operations

Our marketing strategy with respect to passenger operations is primarily aimed at increasing our market share for all categories of air travelers. With respect to our Hong Kong and international routes, we are permitted to market our services based on price. We have limited flexibility in setting our airfares for domestic routes and adjust our domestic airfares in response to market demand. As part of our overall marketing strategy, we emphasize our commitment to safety and service quality.

We have also adopted customized strategies to market our services to particular travelers. We seek to establish long-term customer relationships with business entities that have significant air travel requirements. In order to attract and retain business travelers, we focus on the frequency of flights between major business centers, convenient transit services and an extensive sales network. We launched our initial frequent flyer program in 1998 and joined the “Asia Miles” frequent flyer program in April 2001 to attract and retain travelers. In August 2003, we upgraded and rebranded our frequent flyer program to “Eastern Miles” and introduced a series of new services, including, among others, instant registration of membership and mileage, online registration of mileage, and accumulation of mileage on expenses at certain hotels, restaurants and other service providers that are our strategic partners. The special services hotline “95530” call center was established and came into operation in 2004. In light of the expansion of national high-speed railway network, we have cooperated with the Shanghai Railway Bureau to launch “Air-Rail Pass Transportation” products. Our domestic and international flights together with the high-speed railway products at Shanghai Hongqiao International Airport and Shanghai Pudong International Airport, have formed an air-rail two-way transportation product, which has helped us broaden our customer resources.

In terms of our customer resources, we have actively explored and expanded our customer base of high-end business travelers to accelerate the development of group clients. In addition, we have fully promoted the expansion of Eastern Miles membership. In order to attract more members and to provide members with better experience in terms of diversity, comprehensiveness and flexibility, we have strengthened our cooperation with retail stores by increasing the number of co-operative stores, covering various industries such as financial services, hotel, car rental and health services.

We also strengthened the operation of points mall, enriched point redemption products, and optimized the points payment function. During the outbreak of the COVID-19 pandemic, we first launched “Wild Your Dreams”, a series of innovative products, to stimulate passengers’ travel demand, restore market confidence, promote the recovery of the aviation market, effectively serve the internal circulation of China and achieve good economic, social and brand benefits. We actively expanded the sales channels of auxiliary products such as VIP lounges and realized the voucher sales of products such as class upgrades, so as to increase auxiliary revenue; and launched the new “Eastern Miles” membership system and introduced the “Eastern Airlines Wallet” enabling “points + cash” payment, so as to increase the ways of using member points. Our members can use CEA points for purchasing products from us and other suppliers. The consumption scenarios and value for CEA points were increased. We also strictly implemented on-board protection measures, optimized on-board service procedures and meal services, and improved passenger satisfaction. Taking into account the significant reduction in air travel of members during the outbreak of the COVID-19 pandemic, we proactively issued a protection policy for automatic extension of membership level to enhance member loyalty and satisfaction. As of the end of 2021, frequent passenger members of “Eastern Miles” reached 48.15 million, increased by 6.5% as compared to 2020.

Our advertising, marketing and other promotional activities include the use of social media, online platforms, radio, television and print advertisements. We continue to diversify our advertising and promotional channels. We plan to continue to use advertising and promotional campaigns to increase sales on new routes and competitive routes.

In 2016, China Eastern Airlines E-Commerce Co., Ltd. (“Eastern E-Commerce”) established an e-commerce platform by integrating our online and offline platforms. Ticket returns, rebooking and upgrades via multiple channels, such as our official website, mobile application and member website were launched with success. In 2020, we continued to optimize the e-commerce platform to ensure user experience. At the same time, we upgraded the CEA APP and official website, supporting new functions such as “Wild Your Dreams” ticket packages, seat selection, multiple login methods, unified display of orders, site-wide search and epidemic prevention functions. We made efforts to provide passengers with more product choices while ensuring the efficiency of the system.

In 2021, we continued to enhance the sales capability of our group customers, and the sales to our group customers representing an increase of more than 40% from 2020. We further optimised and promoted auxiliary products such as preferred seats, prepaid luggage, VIP room privileges, etc., and strived to increase auxiliary revenue. Improved services were introduced, tailoring to different customers’ demand on tickets to further stimulate market vitality.

Ticket Booking Systems

In 2002 and again in 2012, we upgraded our online ticket booking and payment system to facilitate customer purchases of tickets via the Internet. In 2012, we also expedited the construction of nine overseas websites in a variety of languages. We continue to encourage our customers to book and purchase tickets via the Internet by initiating various promotional campaigns, upgrading and expanding the services offered by our online sales system. In 2012, we introduced “China Eastern Mobile E”, a smartphone application that provides mobile flight booking, flight status and online checking services, which we believe will provide our customers with additional convenient, value-added services. We have been continuing to update our mobile phone application and our official website to enhance our direct sales efforts as well as vigorously promoting the establishment of overseas e-commerce platform.

Following up our establishment of a joint team for E-commerce operation in 2019 and application of global acceleration services on our global website in 2020, we continued to improve system stability and diversify our online services in 2021. In 2021, the number of tickets purchased from our direct sales channels reached approximately 9.2 million flight segments, generated revenue of RMB8.0 billion, and accounted for 12.3% of total ticket sales revenue and representing a decrease of approximately 14.0% as compared to 2020.

We also maintain an extensive domestic network of sales agents and representatives in order to promote in-person ticket sales and to assist customers. Direct sales are also promoted through the availability of our telephone reservation and confirmation services. In addition to our domestic sales agents located in various cities in mainland China, Hong Kong, Macau and Taiwan, we maintain overseas sales or representative offices worldwide, including: (i) North American locations such as Honolulu, Los Angeles, New York, San Francisco and Vancouver; (ii) European and Middle Eastern locations such as Frankfurt, Hamburg, London, Moscow, Paris, Rome, Madrid, Brussels and Munich; (iii) Asia-Pacific locations such as Seoul, Tokyo, Osaka, Nagoya, Fukuoka, Hiroshima, Sapporo, Niigata, Fukushima, Okinawa, Shizuoka, Kanazawa, Toyama, Nagasaki, Kagoshima, Okayama, Matsuyama, Singapore, Bangkok, Phuket, New Delhi, Kolkata, Kuala Lumpur, Ho Chi Minh, Bali, Dubai, Dhaka, Phnom Penh, Siem Reap, Vientiane, Yangon, Mandalay, Kathmandu and Maldives; and (iv) Australian locations such as Melbourne and Sydney.

As of June 1, 2008, we stopped issuing paper tickets for air travel in accordance with a mandate from the International Air Transport Association (“IATA”). The IATA currently represents approximately 290 airlines and comprises approximately 82% of the world’s air traffic. As a result of the mandate, we now issue electronic itineraries and receipts as well as electronic tickets to our passengers. We believe the transition to 100% electronic ticketing will decrease administrative costs, increase flexibility and travel options for passengers, in addition to benefiting the environment through the reduced need for paper. All of our direct passenger ticket sales are recorded on our computer systems. Most Chinese airlines, including us, are required to use the passenger reservation service system provided by the CAAC’s computer information management center, which is linked with the computer systems of major Chinese commercial airlines. In 2020, we continued to use the TravelSky Passenger Service System (PSS), cooperated with several international reservation systems with which we have carried out relevant business cooperation for many years, including Amadeus, Sabre, Travelport, Infini and Axess. Among them, Axess is scheduled to terminate its operations with us on June 30, 2021 due to its sole reason and our cooperation with other companies developed normally. In 2020, we cooperated with China National Railway Group Co., Ltd. to open a new era of “air-rail combined transportation” by linking the system of the CEA APP and Railway 12306 APP and providing one-stop joint booking of “aircraft + high-speed rail”, thereby offering passengers with more convenient one-stop services. In 2021, we further promoted new distribution capability (NDC) by expand the types of product provided by us and deepen the cooperation with online travel agencies and travel management companies.

SkyTeam Alliance

We officially joined SkyTeam, an international airlines alliance and frequent flyer mileage program that includes international carriers such as, among others, Delta Air Lines, Alitalia, Air France and KLM, on June 21, 2011 and have continued expand our code-sharing programs with SkyTeam members on more routes. In the past few years, we strengthened our strategic partnerships with Delta Air Lines and Air France-KLM through the SkyTeam Airlines Alliance to create an efficient and convenient flight network that covers all parts of China and connects the rest of the world.

By connecting to the route networks of other SkyTeam member airlines, we were able to offer our passengers seamless transit to 44 destinations in 15 countries under a single plane ticket with direct luggage services as of December 31, 2021. Passengers may also enjoy the comfort of more than 790 VIP airport lounges of SkyTeam around the world. 1,036 domestic and foreign destinations in 170 countries were covered through extensive global cooperation of 19 member airlines. We believe this will be another benefit for our passengers, as they will be afforded additional flight options and frequent flyer mileage benefits through our SkyTeam alliance partners. In addition, we will benefit from possible codeshare and cooperative flight options, reduced costs and increased alliance-related marketing and promotion overseas.

Patents and Trademarks

We own or have obtained licenses to use various domestic and foreign patents, patent applications and trademarks related to our business. While patents, patent applications and trademarks are important to our competitive position, no single one is material to us as a whole. In addition, we own various trademarks related to our business. The most important trademark is the service trademark of China Eastern Airlines Corporation Limited.

All of our trademarks are registered in China.

Insurance

The CAAC purchases fleet insurance from PICC Property and Casualty Company Limited (“PICC”), and China Pacific Property Insurance Company Ltd., on behalf of all Chinese airlines. PICC has reinsured a substantial portion of its aircraft insurance business through Lloyd’s of London. The fleet insurance is subject to certain deductibles. The premium payable in connection with the insurance is allocated among all Chinese airlines based on the aircraft owned or leased by these airlines. Under the relevant PRC laws, the maximum civil liability of Chinese airlines for injuries to passengers traveling on domestic flights has been increased to RMB400,000 per passenger in March 2006, for which we also purchase insurance. As of July 31, 2006, the Convention for the Unification of Certain Rules for International Carriage by Air of 1999, or Montreal Convention, became effective in China. Under the Montreal Convention, carriers of international flights are strictly liable for proven damages up to 128,821 Special Drawing Rights and beyond that, carriers are only able to exclude liability if they can prove that the damage was not due to negligence or other wrongful act of the carrier (and its agents) or if the damage solely arose from the negligence or other wrongful act of a third party. We believe that we maintain adequate insurance coverage for the civil liability that can be imposed due to injuries to passengers under Chinese law, the Montreal Convention and any other agreement we are subject to. We also maintain hull all risk, hull war risk and aircraft legal liability insurance, including third party liability insurance, of the types and in amounts customary for Chinese airlines.

The Company and its subsidiaries have taken out insurance for all fleet assets and airline liability insurance, and the relevant insurance policies provide adequate protection for airframe loss, passenger compensation and third party liability compensation on the ground caused by aircraft accidents. After the accident of flight MU5735 on March 21, 2022, China Eastern Airlines Yunnan Co., Ltd. promptly reported the case to the insurance company and started the aftermath insurance claims. At present, the relevant claims work is proceeding in an orderly manner.

Climate Change and Related Matters

Many aspects of our operations are subject to evolving and increasingly stringent national, local and international laws governing the protection of the environment. In recent years, regulatory authorities in China and other countries have issued a number of directives and other regulations to address, among other things, aircraft noise and emissions, the use and handling of hazardous materials, aircraft age and environmental contamination remedial clean-up measures. These requirements impose high fees, taxes and substantial ongoing compliance costs on airlines, particularly as new aircraft brought into service will have to meet the environmental requirements during their entire service life.

Existing laws and future regulatory action concerning climate change and aircraft emissions could have an effect on the aviation industry. For example, in order to address aircraft carbon dioxide emissions, the International Civil Aviation Organization (“ICAO”), a United Nations specialized agency, formally adopted, on the 39th Session of the ICAO Assembly, a global market-based management (“MBM”) scheme in the form of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) to address any annual increase in total CO2 emissions from international civil aviation (i.e. civil aviation flights that depart in one country and arrive in a different country) above the 2020 levels, taking into account special circumstances and capabilities of respective airlines. Certain CORSIA program details remain to be developed and thus the impact of CORSIA cannot be fully predicted at this time. However, CORSIA is expected to increase operating costs for airlines that operate internationally.

In 2008, the European Union (“EU”) issued the ETS2003/87/EC Directive, which implemented a greenhouse gas market-based reduction mechanism for the civil aviation industry from 2012 onwards, covering all flights arriving or departure at or from the EU airports. In 2013, 2014 and 2017, the European Commission amended the original directive several times, narrowing down the scope to cover only flights operating between two airports within the EU and allowing airlines with annual emissions of less than 3,000 tonnes of CO2 to use simplified methods for monitoring reporting and certification in accordance with the requirements of small emitters.

In accordance with the relevant EU resolutions and relevant documents of the Civil Aviation Administration of China (“CAAC”), we are qualified as a small emitter and have completed the carbon allowance compliance clearances for flights operating between two airports within the EU between 2012 and 2020.

On July 14, 2021, the European Commission put forward the proposal of “Fit for 55 Package”. The ultimate goal was to reduce emissions by 55% by 2030 as compared to that of 1990s, so as to achieve a completely climate-neutral EU by 2050. The European Union proposed to phase out the free ETS quotas allocated to airlines by 2026, which will further increase carbon emission management costs for airlines. According to the regulatory requirements on carbon emissions management issued by the relevant national and Shanghai regulatory authorities, we are required to timely submit the monitoring plans and carbon emission reports, accept inspection for carbon emission, fulfil the obligations of quota clearance as scheduled and improve the comprehensive capabilities of carbon emission management and trading. However, we may be subject to additional carbon trading compliance requirements in the future due to the general regulatory trend towards evolving and increasingly stringent protection against greenhouse gas emissions. For more information on the environmental regulation requirement, see “Item 3. Key Information—Risk Factors—Risks Relating to the Aviation Industry—The aviation industry is subject to many forms of environmental regulation, including increased regulation to reduce emissions and other risks associated with climate change. Failure to comply with existing or future environmental regulations or to otherwise manage the risks of climate change effectively could have a material adverse effect on our business.

In response to such general regulatory trend towards evolving and increasingly stringent protection against greenhouse gas emissions, the airline companies seek to adopt all kinds of approaches to address relevant issues, including improving the fuel efficiency of the existing aircraft fleet through the retirement of older aircraft and their replacement with newer, more fuel efficient aircraft; implementing fuel saving procedures in their flight, route and ground support operations that further reduce carbon emissions; and supporting efforts to develop sustainable alternative fuels and other innovative technologies to further reduce their emissions and minimize their impact on the environment. We believe such industry trend will lead to the accelerated fleet upgrading plan of airline companies, introduction of more low emission and fuel efficient aircraft, enhanced promotion in the application of energy-saving and environmentally friendly products, maintain compliance in the carbon trading in international and domestic markets, and careful management of reputational risk arising from non-compliant carbon emissions.

Being one of the largest players in international aviation industry, our commitment to reduce overall environmental impact of greenhouse gas emissions have been persistent. We have complied with international and domestic regulatory requirements for carbon emission and we are pushing further with reducing our carbon footprint. In particular, we participated in the EU ETS and the Shanghai Environment and Energy Exchange scheme and fulfilled our carbon emission obligation. We are also actively exploring voluntary emission reduction mechanisms by purchasing China Certified Emission Reductions (CCER) and introducing carbon neutrality flights. We are also committed to investing in greenhouse gas emission reduction measures. Our efforts include introducing new energy-efficient aircraft and retiring and replacing our older aircraft, and having wingtips and modified engines retrofitted on the aircraft, introducing electric-powered vehicles in the airport and implementing other refined fuel-saving measures to reduce greenhouse gas emissions.

In 2021, we introduced a total of 33 new aircraft and a total of six old aircraft were retired. Also, we continued to optimize the weight standard of the catering and on-board supplies and implement fleet weight reduction in 2021. In addition, we actively promoted new navigation technologies to effectively reduce flight time, fuel consumption, emission and noise. Moreover, we keep following the industry trend, promoting replacement for Auxiliary Power Unit (APU), and continuing to focus on the application of clean energy.

Transition risks

ervice Demand

It does not appear to us that climate change has an apparent effect on the demand for our air travel services for the time being, based on the following two factors:

(i) The change in demand for air travel services is not attributable to the climate change. Air travel remains one of the most efficient and main methods of travel domestically and globally. China’s aviation market has experienced a rapid growth for the past ten years, with the number of passengers in the civil aviation sector in China increased from 282.2 million in 2011 to 663.6 million in 2019, representing a CAGR of 11.3%, according to the data publicly available on the website of National Bureau of Statistics of China. However, the aviation industry has been going through a severe downturn after the breakout of COVID-19 in 2020. The rapid spread and the persistence of the pandemic, as well as the measures governments and private sectors have taken in order to stem the spread of this pandemic, have had, and are continuing to have a material adverse effect on the demand for worldwide air travel, and likewise, on the demand for our services. No apparent signs were found that change in demand for our services is attributable to climate change before or during the COVID-19 pandemic. With the introduction of vaccines and effective medications, we believe the pandemic will eventually be under control and in the long run, demand for air travel services will recover in line with the economic recovery.

(ii) Passenger behaviour does not change. When passengers choose to travel by air or other means of transport, the main factors taken into consideration by them are the length of the journey, the fare and the ease of transfer to the downtown area of the city. When choosing between different airlines, passengers generally consider factors such as fare, security, quality of service and departure and arrival time of the flight. It does not appear to us that passengers have been focused on climate change when making their travel plan or choosing between different means of transport or different airlines for the time being.

However, going forward, if the laws and regulations keep evolving and relevant regulators decide to mandate a high additional charge related to climate change for certain means of transport, passengers will most likely take into consideration the climate change when making travel plans. Also, with the increasing public awareness of climate change, passenger behaviors may start to change as well. If both regulatory trends and passenger behaviors were to change, it is expected that demand for air travel services will decrease for airlines which undervalued the importance of climate change and have not taken measures to save energy and reduce carbon emissions. In this regard, we have been constantly monitoring passenger behaviors, closely following regulatory and industry trends in energy conservation and carbon emission reduction, and have implemented a number of energy-saving and carbon emission reduction improvements, so as to minimize any possible decreases in demand for our services related to climate change.

Reputational Risk

Currently, we are not aware of any incidents which will expose us to apparent reputational risks related to greenhouse gas emissions from our business operations, and we have not encountered any incidents that expose us to reputational risks related to greenhouse gas emissions in our past operations. We are fully aware that climate change will be one of the major issues of increasing international concerns. Companies, which continue to emit high levels of greenhouse gases without dedication to reduce carbon emissions, will face mounting reputational risks. Therefore, we continue to monitor the progress of carbon emission reduction in aviation industry, and actively participate in the annual meetings and seminars of the IATA and the International Civil Aviation Organization (ICAO) to discuss and offer our views and advice on the sustainable development of the aviation industry. We attach great importance to global climate governance and follow industry trends to reduce greenhouse gas emissions with proactive attitude and best practices, including introducing the energy-efficient aircraft, applying refined and precise fuel-saving measures for aircrafts, and introducing electric-powered vehicles in the airport. In addition, we are constantly tracking feasible technology or market-oriented solutions, exploring market mechanisms of carbon emission reduction and seeking cooperation for carbon offset projects. Through our efforts, we hope to be recognized as one of the benchmark companies in reducing greenhouse gas emissions in the aviation industry. In the future, we will continue to follow and conduct research on evolving laws, regulations and policies related to climate change, as well as industry trends, to minimize any potential reputation risks arising from and associated with greenhouse gas emissions from our operations.

Technology Development

We do not believe we are facing any apparent transition risks related to technological advances, based on the following factors:

Major technological advances in aviation industry affecting climate change are expected to occur in two areas, namely, innovations in aircraft technology, especially engines, on the one hand, and fuel innovation on the other hand. According to the analysis of IATA, aircraft innovation, including hydrogen and electrical power drives, wing configuration/support wing configuration and other major breakthroughs, is expected to be commercialized after 2035. Fuel innovation mainly refers to the development and commercialized use of hydrogen energy, electrical energy and sustainable aviation fuel, among which, the development and commercialized use of sustainable aviation fuel is key to bringing aviation industry emissions to net-zero. However, the sustainable aviation fuel is featured with high cost, low production and standardization barriers. These two major technological advances, yet a long way to go before they can be fully developed and commercially available, may play a positive and important role in reducing carbon emissions for aviation industry if to be realized eventually in the future.

Currently, given the major technological advances are yet to be achieved, most airline companies are implementing a number of energy-saving and carbon emission reduction improvements, such as actively promoting the application of new aircraft technology, improving operational efficiency and making infrastructure improvements, including the improvement of air traffic management, flight operation management and ground operation management. In this regard, we keep following the industry trend, optimizing flight efficiency, reducing aircraft weight, promoting replacement for APU, and introducing electric-powered vehicles at the airport to strengthen ground operation management. Therefore, we do not believe we are facing any apparent transition risks related to technological advances for climate change.

In 2021, we continued to focus on the application of clean energy. By closely following up with the relevant policies and cutting-edge technologies of international SAF (Sustainable Aviation Fuel), we cooperated with the Civil Aviation Administration to conduct preliminary research on SAF application, and actively communicated with upstream and downstream enterprises in the supply chain to discuss the feasibility of promoting SAF application.

Market Trend

We do not believe we are facing any apparent transition risks associated with market trends in aviation industry.

In addition to the emission reduction measures mentioned above such as technological advances and operational efficiency improvement, the aviation industry sees a market trend of exploring market-oriented carbon offset projects. Currently, feasible carbon offset projects include industrial carbon reduction projects, renewable energy projects, forestry projects, industrial greenhouse gas compensation projects, natural carbon reduction solutions, methane capture and use projects, etc. In line with the market trend, we are exploring innovative mechanism in carbon emission reduction and carbon trading, exploring the feasibility of leveraging carbon capital markets and carbon financial instruments, as well as hedging carbon transaction costs, and seeking cooperation for carbon offset projects. From October 12 to December 31, 2021, the “Carbon Neutrality Flight” project was launched on 13 domestic boutique routes, a total of 516 flights carrying 57,118 passengers were deployed. Therefore, we do not believe we are facing any apparent transition risks associated with market trends in aviation industry.

Material Litigation Risk

We have not had any climate change-related litigation since the inception of our Company. Also, we are not aware of any risk of potential litigation related to climate change for the time being.

However, with evolving and increasingly stringent international, national or local laws and regulations against greenhouse gas emissions, and increasing attention drawn by the climate change issue from respective regulators, groups or individuals, we, as an airline company operating domestic and international routes, do not rule out the possibility that we may be involved in relevant administrative investigations or even lawsuits related to climate change domestically or in other jurisdictions, and be held liable, fined or subject to compensation, damages or other consequences in the future. We will continue to monitor if any of such proceedings are threatened or contemplated, and in the case of any litigation related to climate change, we will respond actively and try to minimize adverse consequences and reduce relevant losses. We endeavor to gain an in-depth understanding of the laws and regulations as well as the litigation patterns in the jurisdiction where the litigation takes place, conduct fact-finding, actively cooperate with local governmental and regulatory authorities, make necessary rectifications, and engage experienced local lawyers to defend the interests of the Company, or to resolve disputes through alternative dispute resolution such as settlement and mediation.

Compliance Cost

Our costs to comply with laws and regulations related to climate change overseas are the costs arising from the carbon allowance compliance clearances to the EU regulatory authorities, and we completed such clearances to the EU regulatory authorities on schedule, paying a total of approximately EUR74 thousand from 2012 to 2020. Our costs to comply with laws and regulations related to climate change in China are the costs arising from the carbon allowance compliance clearances to Shanghai Municipal Ecological Environment Bureau, and we purchased carbon allowances and carried out China Certified Emission Reductions (CCER) trading following the requirement of the local authority, paying a total of approximately RMB9.7 million from 2013 to 2020.

In 2021, we completed the clearances to the EU regulatory authorities on schedule, paying a total of approximately of EUR 2 thousand in 2021. We also completed our clearances to Shanghai Municipal Ecological Environment Bureau. Since we have residual quota for carbon allowance from 2020, there is no need for us to make any payment to the Shanghai Municipal Ecological Environment Bureau in 2021.

Other Environmental Protection Measures

We continue to follow up with the policies, regulations and standards related to plastic restriction at home and abroad. We have implemented new standard for plastic restriction on the on-board supplies for the EU and domestic (including regional) flights starting from July 2021 and January 2022, respectively. Subsequently, we will gradually promote the working mechanism of plastic restriction and plastic reduction in various sectors, ranging from aircraft cabins to terminal buildings, cargo packagings and ground offices.

C. Organizational Structure

See the section headed “Item 4. Information on the Company—History and Development of the Company”.

D. Property, Plant and Equipment

Fleet

As of December 31, 2021, we operated a fleet of 758 aircraft, including 752 passenger aircraft and 6 business aircraft. In 2021, we introduced 33 aircraft of major models. With the introduction of new aircraft, such as A350-900, B787-9 and A320NEO, our fleet age structure has remained young.

We plan to continue to expand our scale in the future and to adjust and optimize our route network, thereby increasing our competitiveness and ability to create more attractive products and services to meet the needs of the market.

Existing Fleet

The following table sets forth the details of our fleet as of December 31, 2021:


No.	Model	Self- owned		Under finance lease		Under operating lease		Sub- total		Units Average fleet age (Years)
1	B777-300ER		10		10		0		20		5.9
2	B787-9		3		7		0		10		2.9
3	A350-900		1		10		0		11		2.0
4	A330 series		30		21		5		56		8.1
Total number of wide-body aircraft			44		48		5		97		6.4
5	A320 series		113		148		97		358		8.2
6	B737 series		102		73		115		290		7.6
Total number of narrow-body aircraft			215		221		212		648		8.0
7	ARJ21		2		5		0		7		0.8
Total number of regional aircraft			2		5		0		7		0.8
Total number of passenger aircraft			261		274		217		752		7.7
Total number of business aircraft									6
Total number of aircraft									758

The table below sets forth the daily average utilization rates of our jet passenger aircraft for the year ended December 31, 2021:


	2021 (in hours)
B777-300ER		7.97
B787-9		7.05
A350-900		7.49
A330 Series		7.04
A320 Series		6.42
B737 Series		6.80
ARJ21		3.95

Most of our jet passenger aircraft were manufactured by either Airbus or Boeing Company. On July 9, 2015, we entered into a purchase agreement with Boeing Company to purchase fifty new Boeing B737 series aircraft which are expected to be delivered to us in stages from 2017 to 2019. On August 14, 2015, we also entered into a purchase agreement with Airbus SAS to purchase fifteen new Airbus A330 series aircraft, which are expected to be delivered to us in stages from 2017 to 2018. On April 28, 2016, we entered into a purchase agreement with Boeing Company to purchase 15 B787-9 aircraft, which are expected to be delivered to us in stages from 2018 to 2021. On the same day, we also entered into a purchase agreement with Airbus SAS to purchase 20 Airbus A350-900 series aircraft, which are expected to be delivered to us in stages from 2018 to 2022. On August 30, 2019, we entered into an aircraft purchase agreement with Commercial Aircraft Corporation of China Limited to purchase 35 ARJ21-700 aircraft, which are single-aisle regional aircraft with medium and short range and are expected to be delivered to us in stages from 2020 to 2024.

After the MU5735 accident on March 21, 2022, we temporarily grounded all Boeing 737-800 passenger aircraft to ensure safe operations, and carried out in-depth maintenance inspections. After a safety assessment, we have gradually resumed the relevant aircraft operation.

Future Fleet Development

Our aircraft acquisition program focuses on aircraft that will modernize and rationalize our fleet to better meet the anticipated requirements of our route structure, taking into account aircraft size and fuel efficiency. Our aircraft acquisition program, however, is subject to the approval of the CAAC and the NDRC. Older aircraft models of high energy-consumption will be surrendered as appropriate. Details of the expected fleet plan from 2022 to 2024 are as follows:


	2022E				2023E				2024E
	Introduction		Retirement		Introduction		Retirement		Introduction		Retirement
Model
B787 Series		5		—		4		—		—		—
A350 Series		6		—		3		—		—		—
A330 Series		—		—		—		—		—		—
A320 Series		22		7		13		4		—		14
B737 Series		—		5		—		12		—		9
ARJ Series		10		—		9		—		9		—
C919 Series		3		—		2		—		—		—
Total		46		12		31		16		9		23

Notes:

(1)

We and our suppliers have engaged in proactive negotiation and adjusted the progress for the introduction of aircraft under the influence of the COVID-19 pandemic. The planning for the introduction and retirement of aircraft will be subject to timely adjustment based on the changes in external environment, market conditions and our flight capacity allocation. As of the date of this Annual Report, B737 MAX 8 model aircraft is still grounded, and the delivery plan of this model of aircraft has not yet been included in future planning. In 2021, certain progress was reached in the follow-on negotiations with Boeing for the B737 MAX fleet.

As of December 31, 2021, according to confirmed orders, we planned to retire 37 aircraft in 2025, and for the time being, have no plans for further introduction of aircraft.

The actual quantity and time of the introduction and retirement of any of these aircraft or any additional aircraft may depend on such factors as general economic conditions, the levels of prevailing interest rates, foreign exchange rates, the level of inflation, credit conditions in the domestic and international markets, conditions in the global aviation industry, our financial condition and results of operations, our financing requirements, and the terms of any financing arrangements, such as leases, and other capital requirements. We believe that our aircraft acquisition plan will help us accomplish our expansion plans while maintaining an efficient fleet and ensuring alternative sources of supply.

Fleet Financing Arrangements

We generally acquire aircraft through internal funds, long-term capital leases or operating leases. Under the terms of most capital leases, we generally are obligated to make lease payments that finance most of the purchase price of the aircraft over the lease term. Upon the expiration of the lease term, we must either purchase the aircraft at a specified price or pay any amount by which such price exceeds the proceeds from the disposition of the aircraft to third parties. Alternatively, some capital leases provide for ownership of the aircraft to pass to us upon satisfaction of the final lease payment. Under capital leases, aircraft are generally leased for approximately the whole of their estimated working life, and the leases are either non-cancelable or cancelable only on a payment of a major penalty by the lessee. As a result, we bear substantially all of the economic risks and rewards of ownership of the aircraft held under capital leases. Operating leases, however, are customarily cancelable by the lessee on short notice and without major penalty. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Due to the adoption of IFRS 16

Leases

, long-term capital lease and operating leases are both classified as leases in our financial statements. For details of the impact of IFRS 16

Leases

on us, please refer to the section headed “Critical Accounting Policies” under Item 5.

Operating Facilities

As of December 31, 2021, we (including subsidiaries and branches) had operations on 656 parcels of land, occupying a total area of approximately 3.7 million square meters. In addition, as of December 31, 2021, we (including subsidiaries and branches) owned approximately 2,106 buildings. We and our major subsidiaries have obtained the land use rights certificates and building ownership certificates for most parcels of land and buildings, and are currently in the process of applying for the certificates with respect to the remaining 4 parcels of land and 133 buildings. We did not have any environmental issues that may have a material impact on our utilization of the assets in 2021.

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

You should read the following discussion in conjunction with our audited consolidated financial statements, together with the related notes, included elsewhere in this Annual Report. Our consolidated financial statements have been prepared in accordance with IFRSs. This discussion may include forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key information—D. Risk Factors” or in other parts of this Annual Report.

Overview

Our primary business is the provision of domestic, regional (which includes Hong Kong, Macau and Taiwan) and international passenger services.

Our overall capacity on an available tonne kilometer, or ATK, basis increased by approximately 14.1% from approximately 20,632 million in 2020 to approximately 23,539 million in 2021, and our passenger capacity on an available seat kilometer, or ASK, basis increased by 5.7% from approximately 152,066 million in 2020 to approximately 160,690 million in 2021. Total traffic on a revenue tonne kilometer, or RTK, basis increased by 11.5%, from approximately 11,700 million in 2020 to approximately 13,047 million in 2021.

The historical results of operations discussed in this Annual Report may not be indicative of our future operating performance. Like those of other airlines, our operations depend substantially on overall passenger and cargo traffic volumes and are subject to seasonal and other variations that may influence passenger travel demand and cargo volume and may not be under our control, including unusual political events, changes in the domestic and global economies and other unforeseen events. Our operations will be affected by, among other things, fluctuations in aviation fuel prices, aircraft acquisition and leasing costs, maintenance expenses, take-off and landing charges, wages, salaries and benefits, other operating expenses, the rates of income taxes paid and public health events such as the COVID-19 pandemic.

Our financial performance is also significantly affected by factors associated with operating in a highly regulated industry, as well as a number of other external variables, including political and economic conditions in China, competition, foreign exchange fluctuations and public perceptions of the safety of air travel with Chinese airlines. Because nearly every aspect of our airline operations is subject to the regulation of the CAAC, our operating revenues and expenses are directly affected by the CAAC regulations with respect to, among other things, domestic airfares, level of commissions paid to sales agents, the aviation fuel price, take-off and landing charges and route allocations. The nature and extent of airline competition and the ability of Chinese airlines to expand are also significantly affected by various CAAC regulations and policies. Changes in the CAAC’s regulatory policies, or in the implementation of such policies, are therefore likely to have a significant impact on our future operations.

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with IFRSs which requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the accounting policies. We have established procedures and processes to facilitate the making of such judgments in the preparation of our consolidated financial statements. Management has used the best information available but actual performance may differ from our management’s estimates and future changes in key variables could change future reported amounts in our consolidated financial statements.

Revenue recognition

Revenue from contracts with customers

Revenue from contracts with customers is recognized when control of goods or services is transferred to the customers at an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.

When the consideration in a contract includes a variable amount, the amount of consideration is estimated to which we will be entitled in exchange for transferring the goods or services to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with the variable consideration is subsequently resolved.

When the contract contains a financing component which provides the customer with a significant benefit of financing the transfer of goods or services to the customer for more than one year, revenue is measured at the present value of the amount receivable, discounted using the discount rate that would be reflected in a separate financing transaction between the customer and us at contract inception. When the contract contains a financing component which provides us with a significant financial benefit for more than one year, revenue recognized under the contract includes the interest expense accreted on the contract liability under the effective interest method. For a contract where the period between the payment by the customer and the transfer of the promised goods or services is one year or less, the transaction price is not adjusted for the effects of a significant financing component, using the practical expedient in IFRS 15.

(a)

Provision of services

Traffic revenue

Passenger, cargo and mail revenues are recognized as traffic revenue when the transportation is provided or when ticket breakage occurs.The value of sold but unused tickets is included in contract liabilities as sales in advance of carriage (“SIAC”). We estimate the value of passenger ticket breakage based on historical trends and experience and recognizes revenue at the scheduled flight date.

Commission income

Commission income represents amounts earned from other carriers in respect of sales made by us on their behalf, and is recognized upon ticket sales.

Other operations incomes

Revenues from the provision of ground services, tour services, ticket cancelation services and other travel related services are recognized when the services are rendered.

(b)

Frequent flyer programme

We operate a frequent flyer program called “Eastern Miles” that issues mileage points to program members based on accumulated mileage. Mileage points can be used to redeem for free or discounted goods or tickets until expiration. The frequent flyer programme provides a significant right to the customers and we treats it as a separate performance obligation. We defer a portion of passenger revenue attributable to the mileage points issued based on the relative stand-alone selling price approach and recognizes revenue when the mileage points are redeemed and performance obligations are fulfilled or the mileage points expire unused. The stand-alone selling price of the mileage points was estimated based on the historical prices of equivalent flights and goods provided for mileage points redeemed and was adjusted for mileage points that are not expected to be redeemed (“Breakage”).

(c)

Sale of goods

Revenue from the sale of goods is recognized at the point in time when control of the asset is transferred to the customer.

(d)

Contract liabilities

A contract liability is recognized when a payment is received or a payment is due (whichever is earlier) from a customer before we transfer the related goods or services. Contract liabilities are recognized as revenue when we perform under the contract (i.e., transfers control of the related goods or services to the customer).

Revenue from other sources

Rental income is recognized on a time proportion basis over the lease terms. Variable lease payments that do not depend on an index or a rate are recognized as income in the accounting period in which they are incurred.

Interest income

Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit-impaired. For credit-impaired financial assets the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance).

Dividend income

Dividends are received from financial assets measured at fair value through profit or loss (FVPL) and at fair value through other comprehensive income (FVOCI). Dividends are recognised as other income in profit or loss when the right to receive payment is established. This applies even if they are paid out of pre-acquisition profits, unless the dividend clearly represents a recovery of part of the cost of an investment. In this case, the dividend is recognised in OCI if it relates to an investment measured at FVOCI. However, the investment may need to be tested for impairment as a consequence.

Maintenance and overhaul costs

Overhaul costs that meet specific recognition criteria are capitalized as a component of property, plant and equipment or right-of-use assets and are depreciated over the appropriate maintenance cycles.

Certain lease arrangements contain provisions that we are obligated to fulfill certain return conditions at the end of lease term. We estimate lease return costs for aircraft and engines and recognized such costs as part of the right-of-use asset and are depreciated during the lease term.

All other repairs and maintenance costs are charged to profit or loss as and when incurred.

Goodwill

The excess of the consideration transferred, amount of any non-controlling interest in the acquired entity, and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase.

Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised, but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes, being the operating segments

Property, plant and equipment

Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. When an item of property, plant and equipment is classified as held for sale or when it is part of a disposal group classified as held for sale, it is not depreciated and is accounted for in accordance with IFRS 5, as further explained in the accounting policy for “Non-current assets and disposal groups held for sale”. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

When each major aircraft overhaul is performed, its cost is recognized in the carrying amount of the item of property, plant and equipment and is depreciated over the appropriate maintenance cycles. Components related to airframe overhaul cost, are depreciated on a straight-line basis over 5 to 7.5 years. Components related to engine overhaul costs, are depreciated between each overhaul period using the ratio of actual flying hours and estimated flying hours between overhauls. Upon completion of an overhaul, any remaining carrying amount of the cost of the previous overhaul is derecognized and charged to profit or loss.

Except for components related to overhaul costs, the depreciation method of which has been described in the preceding paragraph, other depreciation of property, plant and equipment is calculated using the straight-line method to write off their costs to their residual values over their estimated useful lives, as follows:


Owned aircraft and engines			20 years
Other flight equipment, including rotables			10 years
Buildings			8 to 35 years
Other property, plant and equipment			3 to 20 years

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss. When revalued assets are sold, it is group policy to transfer any amounts included in other reserves in respect of those assets to retained earnings.

Construction in progress represents a building under construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction and capitalized borrowing costs on related borrowed funds during the period of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use.

Impairment of non-financial assets (other than goodwill)

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

Investments and other financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value through other comprehensive income, and fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and our business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which we have applied the practical expedient of not adjusting the effect of a significant financing component, initially we measure a financial asset at its fair value, plus in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which we have applied the practical expedient are measured at the transaction price determined under IFRS 15 in accordance with the policies set out for “Revenue recognition”.

In order for a financial asset to be classified and measured at amortized cost or fair value through other comprehensive income, it needs to give rise to cash flows that are solely payments of principal and interest (“SPPI”) on the principal amount outstanding. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.

Our business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at amortized cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows, while financial assets classified and measured at fair value through other comprehensive income are held within a business model with the objective of both holding to collect contractual cash flows and selling. Financial assets which are not held within the aforementioned business models are classified and measured at fair value through profit or loss.

All regular way purchases and sales of financial assets are recognized on the trade date, that is, the date that we commit to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at amortized cost (debt instruments)

Financial assets at amortized cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognized in the statement of profit or loss when the asset is derecognized, modified or impaired.

Financial assets at fair value through other comprehensive income (debt instruments)

For debt investments at fair value through other comprehensive income, interest income, foreign exchange revaluation and impairment losses or reversals are recognized in the statement of profit or loss and computed in the same manner as for financial assets measured at amortized cost. The remaining fair value changes are recognized in other comprehensive income. Upon derecognition, the cumulative fair value change recognized in other comprehensive income is recycled to the statement of profit or loss.

Financial assets designated at fair value through other comprehensive income (equity investments)

Upon initial recognition, we can elect to classify irrevocably its equity investments as equity investments designated at fair value through other comprehensive income when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis.

Gains and losses on these financial assets are never recycled to the statement of profit or loss. Dividends are recognized as other income in the statement of profit or loss when the right of payment has been established, it is probable that the economic benefits associated with the dividend will flow to us and the amount of the dividend can be measured reliably, except when we benefit from such proceeds as a recovery of part of the cost of the financial asset, in which case such gains are recorded in other comprehensive income. Equity investments designated at fair value through other comprehensive income are not subject to impairment assessment.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognized in the statement of profit or loss.

This category includes derivative instruments and equity investments which we had not irrevocably elected to classify at fair value through other comprehensive income. Dividends on equity investments classified as financial assets at fair value through profit or loss are also recognized as other income in the statement of profit or loss when the right of payment has been established, it is probable that the economic benefits associated with the dividend will flow to us and the amount of the dividend can be measured reliably.

A derivative embedded in a hybrid contract, with a financial liability or non-financial host, is separated from the host and accounted for as a separate derivative if the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognized in the statement of profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category.

A derivative embedded within a hybrid contract containing a financial asset host is not accounted for separately. The financial asset host together with the embedded derivative is required to be classified in its entirety as a financial asset at fair value through profit or loss.

Impairment of financial assets

We recognize an allowance for expected credit losses (“ECLs”) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that we expect to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

General approach

ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

At each reporting date, we assess whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, we compare the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information that is available without undue cost or effort, including historical and forward-looking information.

We consider a financial asset in default when contractual payments are past due. However, in certain cases, we may also consider a financial asset to be in default when internal or external information indicates that we are unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by us. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

Debt investments at fair value through other comprehensive income and financial assets at amortized cost are subject to impairment under the general approach and they are classified within the following stages for measurement of ECLs except for trade receivables and contract assets which apply the simplified approach as detailed below.

Stage 1 – Financial instruments for which credit risk has not increased significantly since initial recognition and for which the loss allowance is measured at an amount equal to 12-month ECLs

Stage 2 – Financial instruments for which credit risk has increased significantly since initial recognition but that are not credit-impaired financial assets and for which the loss allowance is measured at an amount equal to lifetime ECLs

Stage 3 – Financial assets that are credit-impaired at the reporting date (but that are not purchased or originated credit-impaired) and for which the loss allowance is measured at an amount equal to lifetime ECLs

Simplified approach

For trade receivables and contract assets that do not contain a significant financing component or when we apply the practical expedient of not adjusting the effect of a significant financing component, we apply the simplified approach in calculating ECLs. Under the simplified approach, we do not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. We have established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

Derivative financial instruments and hedge accounting

Initial recognition and subsequent measurement

We use derivative financial instruments, such as forward currency contracts, interest rate swaps and fuel forward contracts, to hedge its foreign currency risk, interest rate risk and fuel price risk, respectively. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

The fair value of commodity purchase contracts that meet the definition of a derivative as defined by IFRS 9 is recognized in the statement of profit or loss as cost of sales. Commodity contracts that are entered into and continue to be held for the purpose of the receipt or delivery of a non-financial item in accordance with our expected purchase, sale or usage requirements are held at cost.

Any gains or losses arising from changes in fair value of derivatives are taken directly to the statement of profit or loss, except for the effective portion of cash flow hedges, which is recognized in other comprehensive income and later reclassified to profit or loss when the hedged item affects profit or loss.

For the purpose of hedge accounting, hedges are classified as:

•

fair value hedges when hedging the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment; or

•

cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction, or a foreign currency risk in an unrecognized firm commitment; or

•

hedges of a net investment in a foreign operation.

At the inception of a hedge relationship, we formally designate and documents the hedge relationship to which we wish to apply hedge accounting, the risk management objective and its strategy for undertaking the hedge.

The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how we will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:

•

There is “an economic relationship” between the hedged item and the hedging instrument.

•

The effect of credit risk does not “dominate the value changes” that result from that economic relationship.

•

The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that we actually hedge and the quantity of the hedging instrument that we actually use to hedge that quantity of hedged item.

Hedges which meet all the qualifying criteria for hedge accounting are accounted for as follows:

Cash flow hedges

The effective portion of the gain or loss on the hedging instrument is recognized directly in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognized immediately in the statement of profit or loss. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item.

The amounts accumulated in other comprehensive income are accounted for, depending on the nature of the underlying hedged transaction. If the hedged transaction subsequently results in the recognition of a non-financial item, the amount accumulated in equity is removed from the separate component of equity and included in the initial cost or other carrying amount of the hedged asset or liability. This is not a reclassification adjustment and will not be recognized in other comprehensive income for the period. This also applies where the hedged forecast transaction of a non-financial asset or non-financial liability subsequently becomes a firm commitment to which fair value hedge accounting is applied.

For any other cash flow hedges, the amount accumulated in other comprehensive income is reclassified to the statement of profit or loss as a reclassification adjustment in the same period or periods during which the hedged cash flows affect the statement of profit or loss.

If cash flow hedge accounting is discontinued, the amount that has been accumulated in other comprehensive income must remain in accumulated other comprehensive income if the hedged future cash flows are still expected to occur. Otherwise, the amount will be immediately reclassified to the statement of profit or loss as a reclassification adjustment. After the discontinuation, once the hedged cash flow occurs, any amount remaining in accumulated other comprehensive income is accounted for depending on the nature of the underlying transaction as described above.

Fair value hedges

The change in the fair value of a hedging instrument is recognized in the statement of profit or loss as other expenses. The change in the fair value of the hedged item attributable to the risk hedged is recorded as a part of the carrying amount of the hedged item and is also recognized in the statement of profit or loss as other expenses.

For fair value hedges relating to items carried at amortized cost, the adjustment to carrying value is amortized through the statement of profit or loss over the remaining term of the hedge using the effective interest rate method. Effective interest rate amortization may begin as soon as an adjustment exists and shall begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. If the hedged item is derecognized, the unamortized fair value is recognized immediately in the statement of profit or loss.

When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in the statement of profit or loss. The changes in the fair value of the hedging instrument are also recognized in the statement of profit or loss.

Current versus non-current classification

Derivative instruments that are not designated as effective hedging instruments are classified as current or non-current or separated into current and non-current portions based on an assessment of the facts and circumstances (i.e., the underlying contracted cash flows).

•

Where we expect to hold a derivative as an economic hedge (and does not apply hedge accounting) for a period beyond 12 months after the end of the reporting period, the derivative is classified as non-current (or separated into current and non-current portions) consistently with the classification of the underlying item.

•

Embedded derivatives that are not closely related to the host contract are classified consistently with the cash flows of the host contract.

•

Derivative instruments that are designated as, and are effective hedging instruments, are classified consistently with the classification of the underlying hedged item. The derivative instruments are separated into current portions and non-current portions only if a reliable allocation can be made.

Leases

We assess at contract inception whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

(i)

As lessee

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.

Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group.

Contracts may contain both lease and non-lease components. We allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

•

fixed payments (including in-substance fixed payments), less any lease incentives receivable

•

variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date

•

amounts expected to be payable by the Group under residual value guarantees

•

the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and

•

payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

To determine the incremental borrowing rate, the Group:

•

where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received

•

uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which does not have recent third-party financing, and

•

makes adjustments specific to the lease, e.g., term, country, currency and security.

If a readily observable amortising loan rate is available to the individual lessee (through recent financing or market data) which has a similar payment profile to the lease, then the Group entities use that rate as a starting point to determine the incremental borrowing rate.

The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost, less any accumulated depreciation and any impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets comprising the following:

•

the amount of the initial measurement of lease liability

•

any lease payments made at or before the commencement date less any lease incentives received

•

any initial direct costs, and

•

restoration costs.

Except for engine overhaul costs are depreciated between each overhaul period using the ratio of actual flying hours and estimated flying hours between overhauls, right-of-use assets are depreciated on a straight-line basis over the shorter of the lease terms and the estimated useful lives of the assets as follows:


Aircraft and engines under leases			5 to 20 years
Buildings			2 to 10 years
Prepayments for land use rights			40 to 50 years
Other			2 to 5 years

If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.

The Group applies the short-term lease recognition exemption to its short-term leases (that is those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the recognition exemption for leases of low-value assets to leases of assets that are considered to be of low value. Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.

(ii)

As lessor

When we act as a lessor, it classifies at lease inception (or when there is a lease modification) each of its leases as either an operating lease or a finance lease.

Leases in which we do not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. When a contract contains lease and non-lease components, we allocate the consideration in the contract to each component on a relative stand-alone selling price basis. Rental income is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.

Leases that transfer substantially all the risks and rewards incidental to ownership of an underlying asset to the lessee are accounted for as finance leases.

(iii)

Sales and leaseback

The Group applies the requirements for determining when a performance obligation is satisfied in IFRS15 to determine whether the transfer of an asset is accounted for as a sale of that asset.

As seller-lessee

If the transfer of an asset by the seller-lessee satisfies the requirements of IFRS15 to be accounted for as a sale of the asset, the Group measures the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset that relates to the right of use retained by the seller-lessee. Accordingly, the Group recognises only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor. If the fair value of the consideration for the sale of an asset does not equal the fair value of the asset, or if the payments for the lease are not at market rates, the Group makes the following adjustments to measure the sale proceeds at fair value: a) any below-market terms shall be accounted for as a prepayment of lease payments; and b) any above-market terms shall be accounted for as additional financing provided by the buyer-lessor to the seller-lessee. The potential adjustment required is measured on the basis of the more readily determinable of: a) the difference between the fair value of the consideration for the sale and the fair value of the asset; and b) the difference between the present value of the contractual payments for the lease and the present value of payments for the lease at market rates.

If the transfer of an asset by the seller-lessee does not satisfy the requirements of IFRS15 to be accounted for as a sale of the asset, the Group continues to recognise the transferred asset and recognises a financial liability equal to the transfer proceeds. It shall account for the financial liability applying IFRS 9.

Retirement benefits

(i)

Defined contribution plans

We participate in schemes regarding pension and medical benefits for employees organized by the municipal governments of the relevant provinces. Contributions to these schemes are expensed as incurred.

We also implement an additional defined contribution pension benefit scheme (annuity) for voluntary eligible employees. Contributions are made based on a percentage of the employees’ total salaries and are charged to profit or loss as incurred.

(ii)

Defined benefit plan

We provide eligible retirees with certain post-retirement benefits including retirement subsidies, transportation allowance as well as other welfare. The defined post-retirement benefits are unfunded. The cost of providing benefits under the post-retirement benefit plan is determined using the projected unit credit actuarial valuation method.

Remeasurements arising from the post-retirement benefit plan, comprising actuarial gains and losses, the effect of the asset ceiling (excluding net interest) and the return on plan assets (excluding net interest), are recognized immediately in the consolidated statement of financial position with a corresponding debit or credit to equity through other comprehensive income in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.

Past service costs are recognized in profit or loss at the earlier of:

(i)

the date of the plan amendment or curtailment; and

(ii)

the date that we recognize restructuring-related costs

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. We recognize the following changes in the net defined benefit obligation under “Wages, salaries and benefits” and “Finance costs” in profit or loss:

(i)

service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and

(ii)

net interest expense

Income tax

Income tax comprises current and deferred tax. Income tax relating to items recognized outside profit or loss is recognized outside profit or loss, either in other comprehensive income or directly in equity.

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations and practices prevailing in the countries in which we operate.

Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

•

when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

•

in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, and the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilized, except:

•

when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

•

in respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are only recognized to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at the end of each reporting period and are recognized to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and deferred tax liabilities are offset if and only if we have a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

A. Operating Result

The following tables present selected financial data for the five-year period ended December 31, 2021. The selected consolidated income statement data (other than ADS data) for the three-year period ended December 31, 2019, 2020 and 2021 and selected consolidated statement of financial position data as of December 31, 2020 and 2021 are derived from the audited consolidated financial statements of us, included elsewhere in this Annual Report. The selected consolidated income statement data (other than ADS data) for the years ended December 31, 2017 and 2018 and selected consolidated statement of financial position data as of December 31, 2017, 2018 and 2019 are derived from our audited consolidated financial statements that are not included in this Annual Report.

Our consolidated financial statements are prepared and presented in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, or IFRSs. We have initially applied IFRS 16 on January 1, 2019 and IFRS 15 and IFRS 9 on January 1, 2018. According to the adopted transition plan, the comparative data has not been restated.


	Year Ended December 31,
	2017 RMB			2018 RMB			2019 RMB			2020 RMB			2021 RMB
	( in millions, except per share or per ADS data )
Consolidated Statements of Profit or Loss and Other Comprehensive Income Data:
Revenues		102,475			115,278			120,986			58,727			67,127
Other operating income and gains		7,481			6,592			7,202			5,698			6,079
Operating expenses (1)		(100,525	)		(112,561	)		(118,107	)		(78,265	)		(86,724	)
Operating profit /(loss)		9,431			9,309			10,081			(13,840	)		(13,518	)
Finance costs, net		(1,072	)		(5,657	)		(6,064	)		(2,553	)		(3,854	)
Profit /(loss) before income tax		8,610			3,856			4,299			(16,488	)		(17,513	)
Profit /(loss) for the year attributable to the equity holders of the Company		6,342			2,698			3,192			(11,836	)		(12,214	)
Basic and fully diluted earnings /(loss) per share (2)		0.44			0.19			0.21			(0.72	)		(0.73	)

	As of December 31,
	2017 RMB			2018 RMB			2019 RMB			2020 RMB			2021 RMB
	( in millions )
Consolidated Statements of Financial Position Data:
Cash and cash equivalents		4,605			646			1,350			7,651			12,950
Net current liabilities		(62,035	)		(57,132	)		(58,620	)		(77,310	)		(57,981	)
Non-current assets		211,434			223,085			265,442			262,152			260,880
Long term borrowings, including current portion		(28,842	)		(32,506	)		(31,137	)		(39,429	)		(58,177	)
Lease liabilities, including current portion		—			—			(110,275	)		(96,251	)		(98,476	)
Obligations under finance leases, including current portion		(66,868	)		(77,427	)		—			—			—
Total share capital and reserves attributable to the equity holders of the Company		55,360			58,008			69,008			56,249			53,615
Non-current liabilities		(90,621	)		(104,352	)		(134,176	)		(125,688	)		(145,747	)
Total assets less current liabilities		149,399			165,953			206,822			184,842			202,899

Notes:

(1)	Including gain on fair value changes of derivative financial instruments of RMB311 million for the years ended December 31, 2018 and loss on fair value changes of derivative financial instruments of RMB311 million for the year ended December 31, 2017.

(2)

The calculation of earnings per share for 2017 is based on the net profit attributable to the equity holders of the Company divided by the weighted average number of 14,467,585,682 ordinary shares in issue. The calculation of earnings per share for 2018 is based on the net profit attributable to the equity holders of the Company divided by the weighted average number of 14,467,585,682 ordinary shares in issue. The calculation of earnings per share for 2019 is based on the net profit attributable to the equity holders of the Company divided by the weighted average number of 15,104,893,522 ordinary shares in issue. The calculation of loss per share for 2020 is based on the net loss attributable to the equity holders of the Company divided by the weighted average number of 16,379,509,203 ordinary shares in issue. The calculation of basic loss per share for 2021 is based on the loss attributable to equity holders of the Company divided by the weighted average number of 16,795,331,016 ordinary shares in issue.

2021 Compared to 2020

Our revenues increased by approximately 14.3% from approximately RMB58,727 million in 2020 to approximately RMB67,127 million in 2021.

In 2021, we transported approximately 79 million passengers, representing an increase of approximately 6.0%, from approximately 75 million passengers in 2020. Our total passenger traffic (as measured in RPKs) increased by approximately 1.4%, from approximately 107,273 million in 2020 to approximately 108,804 million in 2021.

Our total cargo and mail traffic (as measured in RFTKs) increased by approximately 54.2% from approximately 2,200 million in 2020 to 3,393 million in 2021.

Our average yield for our passenger operations increased by approximately 7.7% from approximately RMB0.49 per passenger-kilometers in 2020 to approximately RMB0.53 per passenger-kilometers in 2021.

Our average yield for our cargo and mail operations increased by approximately 10.1% from approximately RMB2.23 per freight tonne- kilometers in 2020 to approximately RMB2.45 per freight tonne-kilometers in 2021.

The following chart sets forth our revenue breakdown for 2020 and 2021:


	Year Ended December 31,				2021 vs. 2020
	2020		2021		Increase (Decrease)		% Increase (Decrease)
	(in RMB million)
Traffic revenues		54,110		62,414		8,304		15.3
Passenger revenue		49,215		54,105		4,890		9.94
Cargo and mail revenue		4,895		8,309		3,414		69.7
Other (1)		4,617		4,713		96		2.08
Total revenues		58,727		67,127		8,400		14.3

Notes:

(1)	Including tour operations income, ground service income, commission income and others.

Passenger revenues

Our passenger traffic revenues increased by approximately RMB4,890 million, or approximately 9.94%, from approximately RMB49,215 million in 2020 to approximately RMB54,105 million in 2021. This increase was primarily due to the gradual recovery of the travel demand and the increase in passenger traffic volume.

Our domestic passenger traffic revenues (excluding Hong Kong, Macau and Taiwan passenger revenues) amounted to approximately RMB50,611 million in 2021, which accounted for approximately 93.5% of our total passenger traffic revenues in 2021, increased by approximately 25.5% from approximately RMB40,343 million in 2020, primarily because the domestic demand was gradually recovered from the COVID-19 pandemic in 2021. Our domestic passenger traffic (as measured in RPKs) increased by approximately 10.8% from approximately 96,206 million in 2020 to approximately 106,605 million in 2021. The number of passengers carried on domestic routes increased by approximately 9.1% from approximately 72 million in 2020 to approximately 79 million in 2021. Our passenger-kilometers yield for domestic routes increased from approximately RMB0.46 per passenger-kilometer in 2020 to approximately RMB0.51 per passenger-kilometer in 2021.

Our regional passenger traffic revenues (representing Hong Kong, Macau and Taiwan passenger revenues) amounted to approximately RMB296 million in 2021, which accounted for approximately 0.6% of our total passenger traffic revenues in 2021, decreased by approximately 26.9% from approximately RMB405 million in 2020, primarily due to the decrease of passenger volume resulting from the COVID-19 pandemic. Our regional passenger traffic (as measured in RPKs) decreased by approximately 10.6% from approximately 458 million in 2020 to approximately 410 million in 2021. The number of passengers carried on Hong Kong, Macau and Taiwan routes decreased by approximately 21.4% from approximately 0.35 million in 2020 to approximately 0.27 million in 2021. Our passenger-kilometers yield for regional routes decreased from approximately RMB0.90 per passenger-kilometer in 2020 to approximately RMB0.74 per passenger-kilometer in 2021.

Our international passenger traffic revenues amounted to approximately RMB3,198 million in 2021, which accounted for approximately 5.9% of our total passenger traffic revenues in 2021, decreased by approximately 62.2% from approximately RMB8,467 million in 2020, primarily due to decreased international passenger demand and decrease in our scheduled flights on international routes resulting from the COVID-19 pandemic. Our international passenger traffic (as measured in RPKs) decreased by approximately 83.1% from approximately 10,609 million in 2020 to approximately 1,789 million in 2021. The number of passengers carried on international routes decreased by approximately 88.1% from approximately 2.2 million in 2020 to approximately 0.27 million in 2021. Our passenger-kilometers yield for international routes increased from approximately RMB0.82 per passenger-kilometer in 2020 to approximately RMB1.79 per passenger-kilometer in 2021.

Cargo and mail revenues

Our cargo and mail traffic revenues accounted for approximately 13.3% of our total traffic revenues in 2021 and increased by approximately 69.7% from RMB4,895 million in 2020 to RMB8,309 million in 2021, primarily due to higher freight rate and increased transported cargo and mail volume in 2021 as a result of the increasing cargo service demand during the pandemic. To satisfy such demand, we also deployed a portion of our passenger flights to carry cargo and mail in 2021. Cargo and mail yield increased from approximately RMB2.23 per freight tonne-kilometers in 2020 to approximately RMB2.45 per freight tonne-kilometers in 2021.

Our domestic cargo and mail traffic revenues (excluding Hong Kong, Taiwan and Macau cargo and mail revenues) accounted for approximately 9.7% of our total cargo and mail traffic revenues in 2021 and increased by approximately 7.7% from RMB751 million in 2020 to RMB809 million in 2021, primarily due to the above-mentioned reason. Our freight tonne-kilometers yield for domestic routes was approximately RMB0.97 per freight tonne-kilometers in 2020 and approximately RMB0.94 per freight tonne-kilometers in 2021.

Our regional cargo and mail traffic revenues (representing Hong Kong, Macau and Taiwan cargo and mail traffic revenues) amounted to approximately RMB145 million in 2021, which accounted for approximately 1.8% of our total cargo and mail traffic revenues in 2021, increased by approximately 72.6% from approximately RMB84 million in 2020. Our freight tonne-kilometers yield for regional routes was approximately RMB8.91 per freight tonne-kilometers in 2020 and approximately RMB13.2 per freight tonne-kilometers in 2021.

International cargo and mail traffic revenues accounted for approximately 88.5% of our total cargo and mail traffic revenues in 2021 and increased by approximately 81.2% from approximately RMB4,060 million in 2020 to approximately RMB7,355 million in 2021, primarily due to the above-mentioned reason. Our freight tonne-kilometers yield for international routes was approximately RMB2.87 per freight tonne-kilometers in 2020 and approximately RMB2.92 per freight tonne-kilometers in 2021.

Other revenues

We also generated revenues from other services, including airport ground services and ticket handling services. These services include aircraft cleaning and ground transportation of cargo and passenger luggage for aircraft arriving at or departing from Hongqiao International Airport and Pudong International Airport of Shanghai. We are currently the principal provider of airport ground services at both Hongqiao International Airport and Pudong International Airport. Our total other revenues was approximately RMB4,713 million in 2021, remaining relatively stable as compared to 2020.

Operating Expenses

The following chart sets forth a breakdown of our operating expenses for the years ended December 31, 2020 and 2021:


	Year Ended December 31,						2021 vs. 2020
	2020			2021			Increase (Decrease)			% Increase (Decrease)
	(in RMB million)
Operating Expenses
Aircraft fuel		(13,840	)		(20,593	)		(6,753	)		48.8
Take-off and landing charges		(9,331	)		(10,251	)		(920	)		9.9
Depreciation and amortization		(22,255	)		(22,718	)		(463	)		2.1
Wages, salaries and benefits		(20,827	)		(21,061	)		(234	)		1.1
Aircraft maintenance		(3,451	)		(3,783	)		(332	)		9.6
Impairment charges		(184	)		(22	)		162			(88.0	)
Impairment losses on financial assets, net		(32	)		(28	)		4			(12.5	)
Food and beverages		(1,589	)		(1,655	)		(66	)		4.2
Low value and short-term lease rentals		(358	)		(383	)		(25	)		7.0
Selling and marketing expenses		(1,570	)		(1,128	)		442			(28.2	)
Civil aviation development fund		—			(852	)		(852	)		—
Ground services and other expenses		(872	)		(532	)		340			(39.0	)
Fair value changes of financial asset at fair value through profit or loss		(26	)		(11	)		15			(57.7	)
Indirect operating expenses		(3,930	)		(3,707	)		223			(5.7	)
Total Operating Expenses		(78,265	)		(86,724	)		(8,459	)		10.8

Our total operating expenses increased by approximately 10.8% from approximately RMB78,265 million in 2020 to approximately RMB86,724 million in 2021, mainly due to the gradual recovery of the travel and transportation demand and the increase in passenger traffic and cargo and mail volume , and the corresponding increase in relevant cost and expense.

Aircraft fuel costs increased by approximately 48.8% from approximately RMB13,840 million in 2020 to approximately RMB20,593 million in 2021. The increase was due to an increase in our fuel consumption by 13.8% from 2020, as a result of the gradual recovery of the travel demand and the increase in passenger traffic volume, and an increase in the average prices of fuel by 34.4% from 2020, which is in line with the fluctuation in price of crude oil and other commodities in the global market. Through aircraft fuel hedging transactions, we reduced aircraft fuel costs by RMB580 million.

Take-off and landing charges increased by 9.9% from approximately RMB9,331 million in 2020 to approximately RMB10,251 million in 2021, primarily due to the increase in the number of take-off and landing as a result of the increase in our flight capacity based on passenger travel needs.

Depreciation and amortization increase by 2.1% from approximately RMB22,255 million in 2020 and approximately RMB22,718 million in 2021, primarily due to the growth in the size of our assets.

Wages, salaries and benefits, which accounted for approximately 24.3% of our total operating expenses in 2021, increased by approximately 1.1% from approximately RMB20,827 million in 2020 to approximately RMB21,061 million in 2021, primarily due to the increase in our flight capacity, leading to the increase in remuneration of aircrew and ground crew.

Aircraft maintenance expenses, which accounted for approximately 4.4% of our total operating expenses in 2021, increased by approximately 9.6% from approximately RMB3,451 million in 2020 to approximately RMB3,783 million in 2021, primarily due to the increase in our flight capacity, leading to the increase in aircraft and engine daily maintenance expenses.

Food and beverages expenses increased by approximately 4.2% from approximately RMB1,589 million in 2020 to approximately RMB1,655 million in 2021, primarily due to the increase in the number of traffic volume of passengers.

Selling and marketing expenses decreased by approximately 28.2% from approximately RMB1,570 million in 2020 to approximately RMB1,128 million in 2021, primarily due to the decrease in online ticket preservation fee and the change in the structure of passengers.

Our civil aviation development fund to the CAAC was RMB852 million in 2021 while we recorded no civil aviation development fund to the CAAC in 2020, due to the cancellation of collection of such funds by the CAAC in 2020.

Ground services and other expenses decreased by approximately 39.0% from approximately RMB872 million in 2020 to approximately RMB532 million in 2021, primarily due to the decrease in our number of non-airline transportation operations.

Indirect operating expenses decreased by approximately 5.7% from approximately RMB3,930 million in 2020 to approximately RMB3,707 million in 2021, primarily due to our cost reduction and enhanced efficiency, which lowered related expenses

Other Operating Income and Gains

Our other operating income and gains mainly consist of co-operation routes income, income from disposal of property, plant and equipment and subsidy income. The total amount of our other operating income and gains increased by approximately 6.7% from approximately RMB5,698 million in 2020 to approximately RMB6,079 million in 2021, primarily due to the increase in the gains from disposal of land use rights.

Finance Income/Costs

In 2021, our finance income amounted to approximately RMB1,958 million, decreased from approximately RMB2,660 million in 2020, which were primarily due to our exchange gains of RMB1,619 million in 2021, as compared to the exchange gains of RMB2,494 million in 2020. In 2021, our finance costs amounted to RMB5,812 million, representing an increase of 11.5% from approximately RMB5,213 million in 2020, primarily due to the increase in our interest on bank borrowings.

Loss/Profit Attributable to the Equity Holders of the Company

As a result of the foregoing, we recorded a net loss attributable to the equity holders at approximately RMB12,214 million in 2021 while the net loss attributable to the equity holders amounted to approximately RMB11,836 million in 2020, primarily due to the increase in our revenue as a result of the gradual recover from the COVID-19 pandemic, which was largely offset by the increase of aircraft fuel costs due to a climb in the average price of fuel in 2021.

Property, Plant and Equipment

We had approximately RMB93,242 million of property, plant and equipment as of December 31, 2021, including, among other assets, aircraft, engines and flight equipment, representing a decrease of 7.7% from approximately RMB101,043 million as of December 31, 2020, primarily due to less fleets introduction during the pandemic while depreciation charges were normally provided accordingly the accounting policy and estimation.

2020 Compared to 2019

Our revenues decreased by approximately 51.5% from approximately RMB120,986 million in 2019 to approximately RMB58,727 million in 2020.

In 2020, we transported approximately 75 million passengers, representing a decrease of approximately 42.7%, from approximately 130 million passengers in 2019. Our total passenger traffic (as measured in RPKs) decreased by approximately 51.6%, from approximately 221,779 million in 2019 to approximately 107,273 million in 2020.

Our total cargo and mail traffic (as measured in RFTKs) decreased by approximately 26.0% from approximately 2,971 million in 2019 to 2,200 million in 2020.

Our average yield for our passenger operations decreased by approximately 5.6% from approximately RMB0.52 per passenger-kilometers in 2019 to approximately RMB0.49 per passenger-kilometers in 2020.

Our average yield for our cargo and mail operations increased by approximately 72.8% from approximately RMB1.29 per freight tonne- kilometers in 2019 to approximately RMB2.23 per freight tonne-kilometers in 2020.

The following chart sets forth our revenue breakdown for 2019 and 2020:


	Year Ended December 31,				2020 vs. 2019
	2019		2020		Increase (Decrease)			% Increase (Decrease)
	(in RMB million)
Traffic revenues		114,242		54,110		(60,132	)		(52.6	)
Passenger revenue		110,416		49,215		(61,201	)		(55.4	)
Cargo and mail revenue		3,826		4,895		1,069			27.9
Others (1)		6,744		4,617		(2,127	)		(31.5	)
Total revenue		120,986		58,727		(62,259	)		(51.5	)

Notes:

(1)	Including tour operations income, ground service income, commission income and others.

Passenger revenues

Our passenger traffic revenues decreased by approximately RMB61,201 million, or approximately 55.4%, from approximately RMB110,416 million in 2019 to approximately RMB49,215 million in 2020. This decrease was primarily due to decreased passenger demand and decrease in scheduled flights resulting from the COVID-19 pandemic.

Our domestic passenger traffic revenues (excluding Hong Kong, Macau and Taiwan passenger revenues) amounted to approximately RMB40,343 million in 2020, which accounted for approximately 82.0% of our total passenger traffic revenues in 2020, decreased by approximately 44.6% from approximately RMB72,764 million in 2019, primarily due to decreased passenger demand resulting from the COVID-19 pandemic. Our domestic passenger traffic (as measured in RPKs) decreased by approximately 32.7% from approximately 142,921 million in 2019 to approximately 96,206 million in 2020. The number of passengers carried on domestic routes decreased by approximately 33.9% from approximately 109 million in 2019 to approximately 72 million in 2020. Our passenger-kilometers yield for domestic routes decreased from approximately RMB0.54 per passenger- kilometer in 2019 to approximately RMB0.46 per passenger-kilometer in 2020.

Our regional passenger traffic revenues (representing Hong Kong, Macau and Taiwan passenger revenues) amounted to approximately RMB405 million in 2020, which accounted for approximately 0.8% of our total passenger traffic revenues in 2020, decreased by approximately 89.0% from approximately RMB3,686 million in 2019, primarily due to the decrease of passenger volume resulting from the COVID-19 pandemic. Our regional passenger traffic (as measured in RPKs) decreased by approximately 90.9% from approximately RMB5,046 million in 2019 to approximately RMB458 million in 2020. The number of passengers carried on Hong Kong, Macau and Taiwan routes decreased by approximately 90.6% from approximately 3.7 million in 2019 to approximately 0.3 million in 2020. Our passenger-kilometers yield for regional routes increased from approximately RMB0.74 per passenger-kilometer in 2019 to approximately RMB0.90 per passenger-kilometer in 2020.

Our international passenger traffic revenues amounted to approximately RMB8,467 million in 2020, which accounted for approximately 17.2% of our total passenger traffic revenues in 2020, decreased by approximately 75.1% from approximately RMB33,966 million in 2019, primarily due to decreased international passenger demand and decrease in our scheduled flights on international routes resulting from the COVID-19 pandemic. Our international passenger traffic (as measured in RPKs) decreased by approximately 85.6% from approximately RMB73,812 million in 2019 to approximately RMB10,609 million in 2020. The number of passengers carried on international routes decreased by approximately 87.3% from approximately 17.6 million in 2019 to approximately 2.2 million in 2020. Our passenger-kilometers yield for international routes increased from approximately RMB0.47 per passenger-kilometer in 2019 to approximately RMB0.82 per passenger-kilometer in 2020.

Cargo and mail revenues

Our cargo and mail traffic revenues accounted for approximately 9.0% of our total traffic revenues in 2020 and increased by approximately 27.9% from RMB3,826 million in 2019 to RMB4,895 million in 2020, primarily due to the passenger flights to transport pandemic prevention supplies. Cargo and mail yield increased from approximately RMB1.29 per freight tonne-kilometers in 2019 to approximately RMB2.23 per freight tonne-kilometers in 2020.

Our domestic cargo and mail traffic revenues (excluding Hong Kong, Taiwan and Macau cargo and mail revenues) accounted for approximately 15.4% of our total cargo and mail traffic revenues in 2020 and decreased by approximately 24.7% from RMB998 million in 2019 to RMB751 million in 2020, primarily due to the above-mentioned reason. Our freight tonne-kilometers yield for domestic routes was approximately RMB1.05 per freight tonne-kilometers in 2019 and approximately RMB0.97 per freight tonne-kilometers in 2020.

Our regional cargo and mail traffic revenues (representing Hong Kong, Macau and Taiwan cargo and mail traffic revenues) amounted to approximately RMB84 million in 2020, which accounted for approximately 1.7% of our total cargo and mail traffic revenues in 2020, decreased by approximately 47.2% from approximately RMB159 million in 2019. Our freight tonne-kilometers yield for regional routes was approximately RMB5.56 per freight tonne-kilometers in 2019 and approximately RMB8.91 per freight tonne-kilometers in 2020.

International cargo and mail traffic revenues accounted for approximately 82.9% of our total cargo and mail traffic revenues in 2020 and increased by approximately 52.1% from approximately RMB2,669 million in 2019 to approximately RMB4,060 million in 2020, primarily due to the above-mentioned reason. Our freight tonne-kilometers yield for international routes was approximately RMB1.34 per freight tonne-kilometers in 2019 and approximately RMB2.87 per freight tonne-kilometers in 2020.

Other revenues

We also generated revenues from other services, including tour operations, airport ground services and ticket handling services. These services include aircraft cleaning and ground transportation of cargo and passenger luggage for aircraft arriving at or departing from Hongqiao International Airport and Pudong International Airport of Shanghai. We are currently the principal provider of airport ground services at both Hongqiao International Airport and Pudong International Airport. Our total other revenues decreased by approximately 31.5% from approximately RMB6,744 million in 2019 to approximately RMB4,617 million in 2020, primarily due to the impact of the COVID-19 pandemic.

Operating Expenses

The following chart sets forth a breakdown of our operating expenses for the years ended December 31, 2019 and 2020:


	Year Ended December 31,						2019 vs. 2020
	2019			2020			(Increase) Decrease			% Increase (Decrease)
	(in RMB millions)
Operating Expenses:
Aircraft fuel		(34,191	)		(13,840	)		20,351			(59.5	)
Take-off and landing charges		(16,457	)		(9,331	)		7,126			(43.3	)
Depreciation and amortization		(22,080	)		(22,255	)		(175	)		0.8
Wages, salaries and benefits		(24,152	)		(20,827	)		3,325			(13.8	)
Aircraft maintenance		(3,380	)		(3,451	)		(71	)		2.1
Impairment charges		(4	)		(184	)		(180	)		4,500.0
Impairment losses on financial assets, net		(16	)		(32	)		(16	)		100.0
Food and beverages		(3,667	)		(1,589	)		2,078			(56.7	)
Low value and short-term lease rentals		(631	)		(358	)		273			(43.3	)
Selling and marketing expenses		(4,134	)		(1,570	)		2,564			(62.0	)
Civil aviation development fund		(1,831	)		—			1,831			(100.0	)
Ground services and other expenses		(2,476	)		(872	)		1,604			(64.8	)
Fair value changes of financial asset at fair value through profit or loss		25			(26	)		(51	)		(204.0	)
Indirect operating expenses		(5,113	)		(3,930	)		1,183			(23.1	)
Total Operating Expenses		(118,107	)		(78,265	)		39,842			(33.7	)

Our total operating expenses decreased by approximately 33.7% from approximately RMB118,107 million in 2019 to approximately RMB78,265 million in 2020. As affected by the COVID-19 pandemic, the passenger traffic volume and number of passengers carried significantly reduced, and our various costs such as aircraft fuel, aircraft take-off and landing costs and catering also decreased from last year.

Aircraft fuel costs decreased by approximately 59.5% from approximately RMB34,191 million in 2019 to approximately RMB13,840 million in 2020. The decrease was due to a decline in our fuel consumption by 38.5% and a drop in the average price of fuel by 34.2% from last year, both of which are attributable to the impact of the COVID-19 pandemic.

Take-off and landing charges decreased by 43.3% from approximately RMB16,457 million in 2019 to approximately RMB9,331 million in 2020, primarily due to the significant decrease in traffic volume as we significantly adjusted our flight capacity as a result of the significant decrease in passenger travel demand as affected by the COVID-19 pandemic.

Depreciation and amortization remaining relatively stable at approximately RMB22,080 million in 2019 and approximately RMB22,255 million in 2020.

Wages, salaries and benefits, which accounted for approximately 26.6% of our total operating expenses in 2020, decreased by approximately 13.8% from approximately RMB24,152 million in 2019 to approximately RMB20,827 million in 2020, primarily due to the decrease in number of flights, leading to the decrease in remuneration of aircrew and ground crew.

Aircraft maintenance expenses was approximately RMB3,451 million in 2020, which accounted for approximately 4.4% of our total operating expenses in 2020, remaining relatively stable as last year.

Food and beverages expenses decreased by approximately 56.7% from approximately RMB3,667 million in 2019 to approximately RMB1,589 million in 2020, primarily due to the significant decrease in traffic volume as we adjusted our flight capacity as a result of the significant decrease in passenger travel demand as affected by the COVID-19 pandemic.

Selling and marketing expenses decreased by approximately 62.0% from approximately RMB4,134 million in 2019 to approximately RMB1,570 million in 2020, primarily due to the significant decrease in a variety of our businesses in line with the decreased relevant operating cost as a result of the significant decrease in passenger travel demand as affected by the COVID-19 pandemic.

We recorded no civil aviation development fund to the CAAC in 2020 while our civil aviation development fund to the CAAC was RMB1,831 million in 2019, due to CAAC’s exemption of contribution to the civil aviation development fund as a result of the impact of the COVID-19 pandemic.

Ground services and other expenses decreased by approximately 64.8% from approximately RMB2,476 million in 2019 to approximately RMB872 million in 2020, primarily due to the significant decrease in a variety of our businesses in line with the decreased relevant operating cost as a result of the significant decrease in passenger travel demand as affected by the COVID-19 pandemic.

Indirect operating expenses decreased by approximately 23.1% from approximately RMB5,113 million in 2019 to approximately RMB3,930 million in 2020, primarily due to the significant decrease in a variety of our businesses in line with the decreased relevant operating cost as a result of the significant decrease in passenger travel demand as affected by the COVID-19 pandemic.

Other Operating Income and Gains

Our other operating income and gains mainly consist of co-operation routes income, income from disposal of property, plant and equipment and subsidy income. The total amount of our other operating income and gains decreased by approximately 20.9% from approximately RMB7,202 million in 2019 to approximately RMB5,698 million in 2020, primarily due to the significant reduction in our income from joint routes as a result of the impact of the COVID-19 pandemic.

Finance Income/Costs

In 2020, our finance income amounted to approximately RMB2,660 million, increased significantly from approximately RMB96 million in 2019; our finance costs amounted to RMB5,213 million, representing a decrease of 15.4% from approximately RMB6,160 million in 2019, which were primarily due to our exchange gains of RMB2,494 million in 2020, as compared to the exchange losses of RMB990 million in 2019.

Loss/Profit Attributable to the Equity Holders of the Company

As a result of the foregoing, we recorded a net loss attributable to the equity holders at approximately RMB11,836 million in 2020 while the net profit attributable to the equity holders amounted to approximately RMB3,192 million in 2019, primarily due to the significant reduction in our revenue as a result of the impact of the COVID-19 pandemic.

Property, Plant and Equipment

We had approximately RMB101,043 million of property, plant and equipment as of December 31, 2020, including, among other assets, aircraft, engines and flight equipment, remaining relatively stable as compared to approximately RMB99,437 million as of December 31, 2019.

Inflation

According to the National Bureau of Statistics of China, China’s overall national inflation rate, as represented by the general consumer price index, was approximately 1.6% in 2017, 2.1% in 2018, 2.9% in 2019, 2.5% in 2020 and 0.9% in 2021. Although neither inflation nor deflation in the past had any material adverse impact on our results of operations, we cannot assure you that the deflation or inflation of the Chinese economy in the future would not materially and adversely affect our financial condition and results of operations.

B. Liquidity and Capital Resources

We finance our working capital requirements through various financing channels, including a combination of funds generated from operations, bank loans, the issuance of corporate bonds and super short-term debentures. As a result, our liquidity could be materially and adversely affected if there is any deterioration in debt and equity capital markets, any delay in obtaining bank loans or a significant decrease in demand for our services.

As of December 31, 2019, 2020 and 2021, we had RMB1,350 million, RMB7,651 million and RMB12,950 million, respectively, in cash and cash equivalents; RMB51,872 million, RMB87,917 million and RMB95,089 million, respectively, in outstanding borrowings; and RMB6 million, RMB12 million and RMB12 million, respectively, in restricted bank deposits

Our cash and cash equivalents primarily consist of cash on hand and deposits that are placed with banks and other financial institutions. We plan to use the remaining available cash for other capital expenditures, including expenditures for aircraft, engines and related equipment, as well as for working capital and other day-to-day operating purposes.

In addition, our current liabilities exceeded our current assets by approximately RMB57,981 million as of December 31, 2021. Therefore, our directors have taken active steps to seek additional sources of financing to improve our liquidity position. As of December 31, 2021, we had sufficient unutilized credit facilities from various banks. See the discussion below under “– Working Capital and Liabilities”.

We believe that our current cash, cash equivalents, anticipated cash flow from operations, and the ability to obtain sufficient financing will enable us to operate, as well as to meet our anticipated cash needs for working capital and capital expenditure requirements for at least the next 12 months. However, additional cash may be required due to changing business conditions or other future developments, including any investments or acquisitions that we may decide to pursue.

Cash Flows from Operating Activities

In 2021, we generated a net cash inflow from operating activities of RMB5,692 million as a result of cash generated from operations of RMB5,828 million less income tax paid in 2021. Our cash generated from operations was mainly due to operating profit before working capital changes of RMB8,844 million and negative changes in working capital of RMB3,016 million. The operating profit before working capital changes of RMB8,844 million was a result of the loss before income tax of RMB17,513 million, mainly adjusted for: (i) depreciation of property, plant and equipment, depreciation of right-of-use assets and amortization of other non-current assets of RMB22,498 million, (ii) interest expenses of RMB5,812 million and (iii) net foreign exchange gains of RMB1,506 million. Negative changes in working capital mainly consisted of (i) other payables and accruals of RMB1,686 million, (ii) prepayments and other receivables of RMB916 million and (iii) contract liabilities of RMB805 million.

In 2020, we generated a net cash inflow from operating activities of RMB1,211 million as a result of cash generated from operations of RMB1,480 million less income tax paid in 2020. Our cash generated from operations was mainly due to operating profit before working capital changes of RMB8,534 million and negative changes in working capital of RMB7,054 million. The operating profit before working capital changes of RMB8,534 million was a result of the loss before income tax of RMB16,488 million, mainly adjusted for: (i) depreciation of property, plant and equipment, depreciation of right-of-use assets and amortization of other non-current assets of RMB22,004 million, (ii) interest expenses of RMB5,214 million and (iii) net foreign exchange gains of RMB2,746 million. Negative changes in working capital mainly consisted of (i) contract liabilities of RMB6,686 million, (ii) other long-term liabilities of RMB2,174 million and (iii) other payables and accruals of RMB983 million, partly offset by (i) prepayments and other receivables of RMB2,893 million and (ii) trade receivables of RMB593 million.

In 2019, we generated a net cash inflow from operating activities of RMB28,972 million as a result of cash generated from operations of RMB30,137 million less income tax paid in 2019. Our cash generated from operations was mainly due to operating profit before working capital changes of RMB32,043 million and negative changes in working capital of RMB1,906 million. The operating profit before working capital changes of RMB32,043 million was a result of the profit before income tax of RMB4,299 million, mainly adjusted for: (i) depreciation of property, plant and equipment, depreciation of right-of-use assets and amortization of other non-current assets of RMB21,912 million, (ii) interest expenses of RMB5,169 million and (iii) net foreign exchange losses of RMB890 million. Negative changes in working capital mainly consisted of (i) prepayments and other receivables of RMB2,336 million and (ii) other long-term liabilities of RMB1,916 million, partly offset by (i) other payables and accruals of RMB1,459 million and (ii) contract liabilities of RMB1,281 million.

Cash Flows from Investing Activities

In 2021, our net cash inflow from investing activities was RMB2,155 million. Our net cash inflow for investing activities mainly consisted of proceeds from novation of purchase rights and others of RMB8,793 million, proceeds from disposal of property, plant and equipment of RMB3,097 million and proceeds from disposal of intangible assets and land use rights of RMB752 million. These cash inflows were partly offset by additions to property, plant and equipment and other non-current assets of RMB10,807 million.

In 2020, our net cash outflow from investing activities was RMB6,283 million. Our net cash outflow for investing activities mainly consisted of additions to property, plant and equipment and other non-current assets of RMB7,247 million. These cash outflows were partly offset by proceeds from disposal of property, plant and equipment of RMB894 million.

In 2019, our net cash outflow from investing activities was RMB4,899 million. Our net cash outflow for investing activities mainly consisted of additions to property, plant and equipment and other non-current assets of RMB7,589 million. These cash outflows were partly offset by proceeds from novation of purchase rights of RMB2,366 million.

Cash Flows from Financing Activities

In 2021, our net cash outflow from financing activities was RMB2,526 million. Our net cash inflow for financing activities mainly consisted of (i) proceeds from draw-down of short-term bank loans of RMB55,954 million, (ii) proceeds from issuance of short-term debentures of RMB39,000 million, (iii) proceeds from draw-down of long-term bank loans of RMB20,279 million, (iv) proceeds from issuance of long-term debentures and bonds of RMB11,386 million and (v) proceeds from issue of shares of RMB10,820 million. These cash outflows were partly offset by (i) repayments of short-term debentures of RMB65,500 million, (ii) repayments of short-term bank loans of RMB40,329 million, (iii) repayments of principal of lease liabilities of RMB15,725 million, (iv) repayments of long-term debentures and bonds of RMB8,523 million and (v) repayments of long-term bank loans of RMB4,490 million

In 2020, our net cash inflow from financing activities was RMB11,426 million. Our net cash inflow for financing activities mainly consisted of (i) proceeds from issuance of short-term debentures of RMB77,200 million, (ii) proceeds from draw-down of short-term bank loans of RMB28,883 million, (iii) proceeds from draw-down of long-term bank loans of RMB10,823 million and (iv) proceeds from issuance of long-term debentures and bonds of RMB1,998 million. These cash outflows were partly offset by (i) repayments of short-term debentures of RMB69,200 million, (ii) repayments of principal of lease liabilities of RMB18,439 million, (iii) repayments of short-term bank loans of RMB9,130 million, (iv) repayments of long-term debentures and bonds of RMB2,453 million and (v) repayments of long-term bank loans of RMB1,948 million.

In 2019, our net cash outflow from financing activities was RMB23,375 million. Our net cash outflow for financing activities mainly consisted of (i) repayments of short-term debentures of RMB35,000 million, (ii) repayments of principal of lease liabilities of RMB23,895 million, (iii) repayments of short-term bank loans of RMB12,868 million, (iv) repayments of long-term debentures and bonds of RMB5,567 million and (v) repayments of long-term bank loans of RMB4,033 million. These cash outflows were partly offset by (i) proceeds from issuance of short-term debentures of RMB39,000 million, (ii) proceeds from issue of shares of RMB9,442 million, (iii) proceeds from issuance of long-term debentures and bonds of RMB7,755 million and (iv) proceeds from draw down of short-term bank loans of RMB6,986 million.

Working Capital and Liabilities

We have, and in the future may continue to have, substantial debts. In addition, we generally operate with a working capital deficit. As of December 31, 2021, our current liabilities exceeded our current assets by RMB57,981 million. In comparison, our current liabilities exceeded our current assets by RMB77,310 million as of December 31, 2020. Our current liabilities decreased by 13.9% from RMB99,808 million as of December 31, 2020 to RMB85,891 million as of December 31, 2021, primarily due to the decrease in the current portion of borrowings. Our current assets increased by 24.1% from RMB22,498 million as of December 31, 2020 to RMB27,910 million as of December 31, 2021, primarily due to the increase in cash and cash equivalents. Short-term loans outstanding totaled RMB57,150 million and RMB44,999 million as of December 31, 2020 and 2021, respectively. Long-term outstanding bank loans totaled RMB30,745 million and RMB50,792 million as of December 31, 2020 and 2021, respectively.

As of December 31, 2021, our debt ratio, representing total liabilities divided by total assets, was 80.21%. The interest expenses associated with these debts may impair our future profitability. We expect that cash from operations and bank borrowings will be sufficient to meet our operating cash flow requirements, although events that materially and adversely affect our operating results can also have a negative impact on liquidity.

Our consolidated interest-bearing borrowings as of December 31, 2020 and 2021 for the purpose of calculating the indebtedness were as follows:


	As of December 31,
	2020		2021
	(in RMB millions)
Secured		22,897		28,787
Unsecured		65,020		67,004
Total		87,917		95,791

Our maturity profile of interest-bearing borrowings as of December 31, 2020 and 2021 was as follows:


	As of December 31,
	2020		2021
	(in RMB millions)
Within one year		57,153		44,999
In the second year		5,948		14,080
In the third to fifth year inclusive		17,685		15,900
After the fifth year		7,131		20,812
Total		87,917		95,791

As of December 31, 2021, our interest rates relating to short-term borrowings ranged from 2.00% to 3.00%, while our fixed interest rates on our interest-bearing borrowings for long-term bank loans ranged from 2.40% to 3.92%. Our bank loans are denominated in Renminbi, U.S. dollars and Euros. As of December 31, 2021, our total bank loans denominated in Renminbi amounted to RMB65,916 million, our total bank loans denominated in U.S. dollars amounted to US$2 million and our total bank loans denominated in EUR amounted to EUR271 million.

As of December 31, 2020, our interest rates relating to short-term borrowings ranged from 1.21% to 3.30%, while our fixed interest rates on our interest-bearing borrowings for long-term bank loans ranged from 2.40% to 3.92%. Our bank loans are denominated in Renminbi, U.S. dollars, Singapore dollars and Euros. As of December 31, 2020, our total bank loans denominated in Renminbi amounted to RMB31,151 million, our total bank loans denominated in U.S. dollars amounted to US$57 million and our total bank loans denominated in EUR amounted to EUR332 million.

On March 5, 2019, we issued three-year medium-term bonds with a principal amount of RMB3 billion, at an issue price equal to the face value of the bonds. The bonds bear interest at the rate of 3.70% per annum, which is payable annually. The principal of the bonds will mature and become repayable on March 7, 2022.

On August 19, 2019, we issued five-year corporate bonds with a total principal amount of RMB3 billion. The bonds bear interest at the rate of 3.60% per annum, which is payable annually. The principal of the bonds will mature and become repayable on August 20, 2024.

On December 6, 2019, Eastern Air Overseas (Hong Kong) Co., Ltd. issued three-year corporate bonds with a principal amount of KRW300 billion, at an issue price equal to the face value of the bonds. The bonds bear interest at the rate of 2.40% per annum, which is payable annually. The principal of the bonds will mature and become repayable on December 6, 2022. We have unconditionally and irrevocably guaranteed the due payment and performance of the above bonds.

On April 24, 2020, we issued three-year corporate bonds with a total principal amount of RMB2 billion. The bonds bear interest at the rate of 2.39% per annum, which is payable annually. The principal of the bonds will mature and become repayable on April 28, 2023. See Note 37 to the consolidated financial statements for the issuance of bonds.

On March 11, 2021, the Company issued ten-year corporate bonds with a principal amount of RMB3 billion. The bonds bear interest at the rate of 3.95% per annum which is payable annually. The principle of the bonds will mature and become repayable on March 12, 2031.

On March 11, 2021, the Company issued six-year corporate bonds with a principal amount of RMB6 billion. The bonds bear interest at the rate of 3.68% per annum which is payable annually. The principle of the bonds will mature and become repayable on March 12, 2027.

On July 15, 2021, Eastern Air Overseas issued five-year credit enhanced bonds with a principal amount of SGD0.5 billion. The bonds bear interest at the rate of 2.00% per annum which is payable semi-annually. The principle of the bonds will mature and become repayable on July 15, 2026. The bonds are secured by a standby letter of credit issued by Industrial and Commercial Bank of China Limited Shanghai Municipal Branch.

We have entered into credit facility agreements to meet our future working capital needs. However, our ability to obtain financing may be affected by: (i) our results of operations, financial condition, cash flows and credit ratings; (ii) costs of financing in line with prevailing economic conditions and the status of the global financial markets; and (iii) our ability to obtain PRC government approvals required to access domestic or international financing or to undertake any project involving significant capital investment, which may include one or more approvals from the NDRC, SAFE, MOFCOM and/or the CSRC depending on the circumstances. If we are unable to obtain financing, for whatever reason, for a significant portion of our capital requirements, our ability to acquire new aircraft and to expand our operations may be materially and adversely affected.

Capital Expenditures

As of December 31, 2021, according to the relevant agreements, we expect our capital expenditures for aircraft, engines and related equipment to be in aggregate approximately RMB24,922 million, including the expected capital expenditure between 2022 and 2024 being approximately RMB9,530 million, RMB8,018 million and RMB7,374 million, respectively, in each case subject to contractually stipulated increases or any increase relating to inflation.

We plan to finance our other capital commitments through a combination of funds generated from operations, existing credit facilities, bank loans, leasing arrangements and other external financing arrangements.

Off-balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements other than our capital commitments:

(1)

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any unconsolidated entity;

(2)

We have not entered into any obligations under any derivative contracts that are indexed to our own shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements; and

(3)

We do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.

Tabular Disclosure of Contractual Obligations

Contractual Obligations and Commercial Commitments

The following tables set forth selected information regarding our outstanding contractual and commercial commitments as of December 31, 2021:


	Total		Less Than 1 Year		1-2 Year		2-4 Year		More Than 4 Years
Long-Term Debt (1)		58,177		7,385		14,080		10,292		26,420
Lease Liabilities (2)		98,476		16,350		14,659		27,727		39,740
Unconditional Purchase Obligations (3)		24,922		9,530		8,018		7,374		—
Other Long-term Obligations (4)(5)		2,248		—		—		—		—
Post-retirement Benefit Obligations (4)		2,527		—		—		—		—
Short-term Bank Loans (6)		37,614		37,614		—		—		—
Interest Obligations
Under Lease Liabilities		12,320		2,675		2,661		4,054		2,934
Under Borrowings		7,306		1,634		1,588		1,332		2,752
Fixed Rate		3,565		1,131		1,003		285		1,146
Variable Rate (7)		3,741		503		585		1,047		1,606

Notes:

(1)	Excludes interest.

(2)	Primarily comprise amounts to be paid under leases for the aircraft and engines.

(3)	Primarily comprise capital expenditures.

(4)	Figures of payments due by period are not available.

(5)	Other long-term obligations mainly include long-term duties and levies payable, and other long-term payables.

(6)	Short-term bank loans are generally repayable within one year. As of December 31, 2021, the weighted average interest rate of our short-term bank loans was 2.36% per annum (2020: 2.17%).

(7)

For our variable rate loans, interest rates range from three months Eurlibor + 0.50% to five years LPR – 0.75%. Interest obligations relating to variable rate loans are calculated based on the relevant variable rates as of December 31, 2021. A 25 basis points increase in the interest rate would increase interest expenses by RMB49 million.


	Total		Amount of Commitment Expiration Per Period
Other Commercial	Amounts		Less Than						After
Commitments/Credit Facilities	Committed		1 Year		1-3 Years		4-5 Years		5 Years
					(RMB in millions)
Lines of Credit		21,338		1,338		—		—		20,000
Standby Letters of Credit		—		—		—		—		—
Guarantees		—		—		—		—		—
Total		21,338		1,338		—		—		20,000

Taxation

We had carried forward tax losses of approximately RMB34,445 million as of December 31, 2021, which can be mainly used to set offagainst future taxable income between 2022 and 2028.

Pursuant to the “Notice on the continuation of the Income Tax Policies for Enhancing the Implementation of Western Region Development Strategy” (Ministry of Finance Announcement [2020] No.23), and other series of tax regulations, enterprises located in China western regions and engaged in the industrial activities as listed in the “Catalogue of Encouraged Industries in Western Regions”, will be entitled to a reduced corporate income tax rate of 15% from 2021 to 2030 upon approval from the tax authorities. CEA Yunnan, a subsidiary of the Company, obtained approval from the tax authorities and has been entitled to a reduced corporate income tax rate of 15% from January 1, 2011. The subsidiaries incorporated in Hong Kong are subject to Hong Kong profits tax rate of 16.5% (2020: 16.5%, 2019: 16.5%).

The Company and its subsidiaries, except for CEA Yunnan, and those incorporated in Hong Kong, are generally subject to the PRC standard corporate income tax rate of 25% (2020: 25%, 2019: 25%).

New Pronouncements

For a detailed discussion of new accounting pronouncements, please see Note 2 to the consolidated financial statements.

C. Research and Development, Patents and Licenses, etc.

None.

D. Trend Information

Other than as disclosed elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2021 to December 31, 2021 that are reasonably likely to have a material effect on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.

E. Critical Accounting Estimates and Judgments

See Note 3 to the consolidated financial statements for critical accounting estimates and judgments.

Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

The following table sets forth certain information concerning our current directors, supervisors and senior management members. Except as disclosed below, none of our directors, supervisors or members of our senior management was selected or chosen as a result of any arrangement or understanding with any major shareholders, customers, suppliers or others. There is no family relationship between any director, supervisor or senior management member and any other director, supervisor or senior management member of our Company.


Name	Age	Shares Owned	Position
Liu Shaoyong	63	—	Chairman of the Board of Directors
Li Yangmin	58	3,960 A Shares (1)	Vice Chairman of the Board of Directors and President
Tang Bing	55	—	Director
Lin Wanli	60	—	Director
Sun Zheng	65	—	Independent Non-executive Director
Lu Xiongwen	55	—	Independent Non-executive Director
Cai Hongping	67	—	Independent Non-executive Director
Dong Xuebo	68	—	Independent Non-executive Director
Jiang Jiang	57	—	Employee Representative Director
Guo Lijun	50	—	Chairman of the Supervisory Committee
Fang Zhaoya	53	—	Supervisor
Zhou Huaxin	51	—	Employee Representative Supervisor
Xi Sheng	59	—	Vice President
Zhou Qimin	54	—	Vice President and Chief Financial Officer
Feng Dehua	56	—	Vice President
Cheng Guowei	52	—	Vice President
Liu Tiexiang	56	—	Vice President
Wang Jian	48	—	Board Secretary and Company Secretary

Notes:

(1)	Mr. Li Yangmin directly held 3,960 A Shares in the capacity of beneficial owner.

Directors

Mr. Liu Shaoyong

is currently the Chairman and party secretary of the Company and Chairman and party secretary of CEA Holding. Mr. Liu joined the civil aviation industry in 1978 and was appointed as vice president of China General Aviation Corporation, deputy director of Shanxi Provincial Civil Aviation Administration of the PRC, general manager of the Shanxi Branch of the Company, and director general of Flight Standard Department of the CAAC. Mr. Liu served as President of the Company from December 2000 to October 2002, vice minister of the CAAC from October 2002 to August 2004, president of China Southern Air Holding Company from August 2004 to December 2008, and chairman of China Southern Airlines Co., Limited from November 2004 to December 2008. Mr. Liu served as president and vice party secretary of CEA Holding from December 2008 to December 2016, and has become the Chairman of the Company since February 2009. He has served as the Chairman and party secretary of CEA Holding since December 2016 and the party secretary of the Company since December 2017. Mr. Liu is also currently a member of the 13th National Committee of the Chinese People’s Political Consultative Conference, and a council member of International Air Transport Association. Mr. Liu graduated from the Civil Aviation Flight College of China and obtained a Master of Business Administration degree from Tsinghua University. He holds the title of professorate senior pilot.

Mr. Li Yangmin

is currently the Vice Chairman, President and vice party secretary of the Company, and a director, the president and vice party secretary of CEA Holding. Mr. Li joined the civil aviation industry in 1985. He was previously deputy general manager of the aircraft maintenance base and the manager of air route department of Northwest Company, general manager of the aircraft maintenance base of China Eastern Air Northwest Branch Company and vice president of China Eastern Air Northwest Branch Company. From October 2005 to March 2019, he was also a vice president of the Company. He served as the Safety Director of the Company from July 2010 to November 2012. He has become a party member of CEA Holding since May 2011. He was a Director of the Company from June 2011 to August 2018 and served as the party secretary of the Company from June 2011 to December 2017. He has served as a vice party secretary of CEA Holding since August 2016 and was a vice president of CEA Holding from August 2016 to February 2019. Since December 2017, he has served as a vice party secretary of the Company. He has served as a director and the president of CEA Holding since February 2019 and the President of the Company since March 2019. He has served as the Vice Chairman of the Company since May 2019 and vice president of China Association for Public Companies since August 2019. Since November 2019, he has served as a director of Juneyao Airlines Co., Ltd. Mr. Li graduated from the Civil Aviation University of China and Northwestern Polytechnical University and obtained an Executive Master of Business Administration degree from Fudan University. He is also a qualified professorate senior engineer.

Mr. Tang Bing

is currently a Director and vice party secretary of the Company and a director and vice party secretary of CEA Holding. Mr. Tang joined the civil aviation industry in 1993. He served as vice executive president (general manager representing Chinese shareholder) of MTU Maintenance Zhuhai Co., Limited, office director of China Southern Airlines Holding Company and president of Chongqing Airlines Company Limited. From December 2007 to May 2009, he served as chief engineer and general manager of the Aircraft Engineering Department of China Southern Airlines Company Limited. From May 2009 to February 2010, he was appointed as president of the Beijing Branch of the Company and was the president of Shanghai Airlines Co., Limited from February 2010 to December 2011. He served as the chairman and executive director of Shanghai Airlines Co., Limited from January 2012 to January 2018 and a vice president of the Company from February 2010 to March 2019. He was appointed a party member of CEA Holding in May 2011. He served as a Director of the Company from June 2012 to August 2018 and a vice president of CEA Holding from December 2016 to February 2019. He has served as a director and vice party secretary of CEA Holding since February 2019, a vice party secretary of the Company since March 2019 and a Director of the Company since May 2019. Mr. Tang graduated from Nanjing University of Aeronautics and Astronautics majoring in electrical technology. He obtained a Master of Business Administration degree from the Administration Institute of Sun Yatsen University, an Executive Master of Business Administration degree from the School of Economics and Management of Tsinghua University and a doctoral degree in national economics from the Graduate School of Chinese Academy of Social Sciences. He is also a qualified senior engineer.

Mr. Lin Wanli

is currently a Director of the Company, an external director of China Eastern Airlines and an external director of central state-owned enterprise. Mr Lin served as a vice party secretary and secretary of the disciplinary committee of the Tunnel Bureau of the Ministry of Railways, vice chairman and party secretary of China Railway Tunnel Group, and vice party secretary, secretary of the disciplinary committee and chairman of the labour union of China Northern Locomotive and Rolling Stock Industry (Group) Corporation. He served as the president and party secretary of China Railway Materials Commercial Corporation and chairman and party secretary of China Railway Materials Company Limited, director and party secretary of China National Aviation Fuel Group Corporation, and chairman of China Aviation Oil (Singapore) Corporation Ltd and an Independent non-executive Director of the Company. Since June 2021, Mr Lin has been a director of the Company. Mr. Lin currently served as the external director of China National Agricultural Development Group Co., Ltd. and non-executive director of China Construction Technology Co., Ltd. Mr. Lin graduated from the Economics Faculty of Shandong University and obtained an Executive Master’s Degree in Business Administration from Tsinghua University. He is a researcher-level senior political work specialist and senior economist.

Mr. Cai Hongping

is currently an Independent non-executive Director of the Company. Mr. Cai currently serves as the chairman of AGIC Capital. He is a resident of Hong Kong, special administrative region of China. He worked for Sinopec Shanghai Petrochemical Company Limited (“Sinopec Shanghai”) from 1987 to 1993. He participated in the listing of Sinopec Shanghai in Hong Kong and the United States (the first company of the PRC to be listed in the stock exchanges of Hong Kong and the United States) and is one of the founders of H shares in the PRC. From 1992 to 1996, he acted as a member of the Overseas Listing Team for Chinese Enterprises under the Restructuring Committee of the State Council and the chairman of the Joint Committee of Board Secretaries for H Share Companies in the PRC. He served as a joint director of the investment banking division of Peregrine Investments Holdings Limited in Asia from 1996 to 2006, chairman of the investment banking division of UBS AG in Asia from 2006 to 2010 and chairman of Deutsche Bank in the Asia Pacific region from 2010 to 2015, and has served as the chairman of AGIC Capital since February 2015. Since June 2016, Mr. Cai has served as an Independent non-executive Director of the Company. Mr. Cai is also an independent director of COSCO SHIPPING Development Co., Ltd., Shanghai Pudong Development Bank Co., Ltd and BYD Company Limited. Mr. Cai graduated from Fudan University, majoring in mass communications.

Mr. Dong Xuebo

is currently an Independent non-executive Director of the Company. Mr. Dong served as the deputy mayor of Luoyang City, Henan Province, deputy director of the comprehensive planning department and director of the comprehensive programming department of the Ministry of Transport, assistant to the president of China Merchants Group, general manager of Huajian Transportation Economic Development Center, assistant to the president of China Merchants Group, executive vice chairman, director, CEO and party secretary of China Merchants Highway, general counsel of China Merchants Group and the external director of China Shipbuilding Industry Group Co., Ltd. Since December 2019, Mr. Dong has served as an Independent non-executive Director of the Company. Currently, Mr. Dong is also an external director of China National Machinery Industry Corporation. Mr. Dong obtained a postgraduate degree.

Mr. Sun Zheng

is currently an Independent non-executive Director of the Company, a senior professor at Shanghai University of Finance and Economics, the vice president of the Accounting Society of China, the vice president of the Accounting Society of Shanghai. Mr. Sun has served as an Independent non-executive Director of the Company since June 2021. Mr. Sun has currently served as an independent director of Bank of Shanghai Co., Ltd., Shanghai Rural Commercial Bank Co., Ltd., Industrial Securities Co., Ltd. and COFCO Capital Holdings Co., Ltd. Mr. Sun graduated from Shanghai University of Finance and Economics with a doctoral degree in economics, and is a Chinese Certified Public Accountant.

Mr. Lu Xiongwen

is currently an Independent non-executive Director of the Company, the dean, a professor and doctoral supervisor of the School of Management of Fudan University and the vice chairman of the sixth session of the China National MBA Postgraduate Education Supervisory Committee. Mr. Lu served as a supervisor of SPD Silicon Valley Bank. Mr. Lu has been the Independent non-executive Director of the Company since June 2021. Currently, Mr. Lu also serves as an independent director of Shanghai Jinqiao Export Processing Zone Development Co., Ltd., Baoshan Iron & Steel Co., Ltd., SPD Silicon Valley Bank and Morgan Stanley Huaxin Securities Co., Ltd. Mr. Lu graduated from Fudan University with a doctoral degree in economics

Mr. Jiang Jiang

is currently the employee representative Director, chairman of the labour union of the Company and the employee representative director and chairman of the labour union of CEA Holding. Mr. Jiang joined the civil aviation industry in 1986, and successively worked in the Civil Aviation Industry Airline Corporation and China General Aviation Corporation. From June 1999 to April 2005, he served as the deputy manager and manager of the flight division of the Shanxi Branch of the Company. From April 2005 to July 2010, he served as the deputy general manager of the Shanxi Branch. From July 2010 to June 2014, he served as the general manager and vice party secretary of the Shanxi Branch. From June 2014 to December 2016, he served as the general manager and vice party secretary of China Eastern Airlines Wuhan Limited. From December 2016 to February 2017, he served as the person-incharge of the safety operation management of the Company. From February 2017 to January 2021, he served as a vice president and party member of the Company. From July 2020 to August 2021, he served as the Safety Director of the Company. Since November 2020, he has served as the chairman of the labour union of the Company and CEA Holding. Since December 2020, he has served as the employee representative director of the Company and CEA Holding. Mr. Jiang graduated from the Civil Aviation Flight College of China majoring in air traffic control and aviation of aviation transportation, and obtained an Executive Master of Business Administration degree from Fudan University. He has the title of professorate senior pilot.

Supervisory Committee

As required by the PRC Company Law and our Articles of Association, our Company has a supervisory committee (the “Supervisory Committee”), whose primary duty is the supervision of our senior management, including our Board of Directors, managers and senior officers. Supervisory Committee consists of three supervisors.

Mr. Guo Lijun

is currently the chairman of the Supervisory Committee and Chief Economist of the Company. Mr. Guo joined the civil aviation industry in 1994. Mr. Guo had taken up the position as the Officer of the Secretariat of the Board of the Company. He served as the General Manager of the Legal Department of the Company and the Deputy Director of the Legal Department of CEA Holding from April 2009 to August 2014; served as the General Counsel Legal Adviser of the Company from December 2011 to December 2017; served as the Service Director of the Company from July 2013 to June 2014; served as the General Manager of the Planning and Development Department of the Company from June 2014 to September 2016; and served as the General Manager of the Company’s Beijing branch from September 2016 to April 2018. Mr. Guo has served as the Chief Economist of the Company since December 2017. From April 2018 to April 2020, he temporarily served as a member of the Standing Committee of the Wuhu Municipal Committee and Deputy Mayor of Wuhu Municipal Government, Anhui Province. He has served as the chairman of the Supervisory Committee of the Company since March 2021. Mr. Guo graduated from the Zhongnan University of Economics and Law, majoring in law. He obtained a master’s degree in law from the University of Washington in the United States, a master’s degree in law from Fudan University and an Executive Master of Business Administration degree from Fudan University. Mr. Guo has the title of corporate legal adviser.

Mr. Fang Zhaoya

is currently a Supervisor of the Company and the head of the strategic development department of CEA Holding. Mr. Fang joined the civil aviation industry in 1989. He served as the director of the time control office of the production planning department and the director of the A310/300 workshop of the route department of the maintenance base of China Northwest Airlines Co., Ltd., and the deputy director of the technical maintenance control centre (TMCC) for production of the route department and the deputy head of the quality control department of the maintenance base of the Northwest Branch of the Company, and the manager of the production planning centre of the maintenance management department and the manager of the business development department and the manager of the aircraft selection and lease and sales management department and the acting responsible person as claims manager of the aircraft selection and lease of China Eastern Air Engineering & Technique Co., Ltd., the deputy general manager of China Eastern Air Engineering & Technique Co., Ltd. from May 2015 to June 2017, and the general manager of the planning department of the Company from June 2017 to April 2019. He has been the head of the strategic development department of CEA Holding since April 2019 and a Supervisor of the Company since December 2019. Mr. Fang graduated from the Department of Aviation Machinery of China Civil Aviation Institute majored in thermal power machinery and equipment. He obtained a master’s degree from the Northwestern Polytechnical University majored in aviation engineering, and holds the title of senior engineer.

Mr. Zhou Huaxin

is currently the employee representative Supervisor of the Company and the head of Mass Organization department of the Company and CEA Holding. Mr. Zhou joined the civil aviation industry in 1993 and served as the deputy director of general office and director of research office of CEA Holding and office director of the Company. He served as the director of general office and director of foreign affairs office (Hong Kong, Macao and Taiwan affairs office) of CEA Holding from June 2014 to August 2017; the party secretary and vice president of the Anhui branch of the Company from August 2017 to April 2018; and the executive vice president and party member of the Beijing branch of the Company from April 2018 to September 2020. He has served as the head of Mass Organization department of the Company and CEA Holding since September 2020, and the employee representative Supervisor of the Company since December 2020. Mr. Zhou graduated from Lanzhou University majoring in Marxism, and obtained a master’s degree in economics from the Renmin University of China majoring in national economic planning and management and an Executive Master of Business Administration degree from the School of Management of Fudan University. He holds a senior political worker title.

Senior Management

Mr. Xi Sheng

is currently a vice president and party member of the Company and a vice president, party member and the chief auditor of CEA Holding. Mr. Xi served as the deputy head of the foreign affairs department II of the foreign funds utilisation and application audit department and the head of the liaison and reception office of the foreign affairs department of the National Audit Office of the PRC and the deputy head of the PRC Audit Institute. He was also the deputy head and head of the fixed assets investment audit department of the National Audit Office of the PRC, and the party secretary and a special commissioner of the Harbin office of the National Audit Office of the PRC. He served as the head of the personnel and education department of the National Audit Office of the PRC. He was the head of the audit department of CEA Holding from September 2009 to November 2012. Mr. Xi has served as the chief auditor of CEA Holding since September 2009. From June 2012 to January 2021, he was a Supervisor of the Company. From June 2016 to January 2021, he was the chairman of the Supervisory Committee of the Company. He served as the head of the audit department of CEA Holding from December 2017 to November 2018, and has served as a vice president and party member of CEA Holding since January 2018. From November 2018 to May 2020, he served as the general manager of audit department of the Company and CEA Holding. Since January 2021, he has served as a vice president and party member of the Company. Mr. Xi is also the vice chairman of China Institute of Internal Audit. Mr. Xi graduated from Jiangxi University of Finance and Economics with undergraduate education background. He is a senior auditor, a Chinese Certified Public Accountant (CPA) and an International Certified Internal Auditor (CIA).

Mr. Zhou Qimin

is currently a vice president, the Chief Financial Officer and a party member of the Company and the chief accountant and a party member of CEA Holding. Mr. Zhou served as deputy head of the Finance Department of the eighth research institute of Shanghai Aerospace Bureau of China Aerospace Corporation, and head of the Finance Department, chief accountant and a member of party committee of the eighth research institute of China Aerospace Science and Technology Corporation. He served as the head of financial department of Commercial Aircraft Corporation of China, Ltd. from April 2008 to October 2016, the deputy chief accountant of Commercial Aircraft Corporation of China, Ltd. from August 2014 to January 2018, the chief accountant of Commercial Aircraft Corporation of China, Ltd. from January 2018 to July 2020, a member of party committee of Commercial Aircraft Corporation of China, Ltd. from January 2018 to July 2018 and standing member of party committee of Commercial Aircraft Corporation of China, Ltd. from July 2018 to July 2020. He has served as the chief accountant and a party member of CEA Holding since July 2020, the Chief Financial Officer of the Company since August 2020, and a vice president and party member of the Company since January 2021. Mr. Zhou graduated from the Faculty of Mathematics of Gannan Normal University, majoring in mathematics. He also graduated from the Faculty of Management Engineering of University of Electronic Science and Technology of China, majoring in industrial management engineering, holds an undergraduate degree and is a researcher-level senior accountant.

Mr. Feng Dehua

is currently a vice president and party member of the Company and a vice president and party member of CEA Holding. Mr. Feng joined the civil aviation industry in 1989 and successively worked in China General Aviation Corporation, the Shanxi Branch of the Company and the sales and marketing system of the Company. From May 2009 to August 2009, Mr. Feng was the executive vice president for sales and marketing of passenger transportation department of the Company. From August 2009 to November 2011, he was the party secretary and vice president for sales and marketing of passenger transportation department of the Company. From November 2011 to August 2014, he was the president and vice party secretary of the Beijing Branch of the Company. From August 2014 to December 2017, he was the secretary of the disciplinary committee of the Company. He has served as a party member of the Company since August 2014. From September 2014 to February 2019, he has been the deputy head of party disciplinary inspection group of CEA Holding. Since December 2017, he has been a vice president of the Company. Since December 2019, he has been a party member and vice president of CEA Holding; Mr. Feng has also been the deputy director of China Air Transport Association. Mr. Feng graduated from Shanxi Finance and Economics Institute majoring in commercial business management, and obtained an Executive Master of Business Administration degree from Fudan University. He is qualified as a professorate senior economist.

Mr. Cheng Guowei

is currently a vice president and party member of the Company and a vice president, party member and the safety director of CEA Holding. Mr. Cheng joined the civil aviation industry in 1994 and served as the deputy chief engineer, chief engineer, director of flight maintenance and general manager of the flight maintenance engineering department of Shanghai Airlines Co., Limited from April 2005 to March 2010, the vice president of Shanghai Airlines Co., Limited from March 2010 to November 2010, the vice president and safety director of Shanghai Airlines Co., Limited from November 2010 to August 2011, the vice president, safety director and secretary of the disciplinary committee of Shanghai Airlines Co., Limited from August 2011 to July 2013, and the party secretary and vice president of Shanghai Airlines Co., Limited from July 2013 to September 2016. He served as the party secretary and vice president of the Northwest Branch of the Company from September 2016 to August 2017, and the president and vice party secretary of the Northwest Branch of the Company from August 2017 to November 2018. He served as the general manager and vice party secretary of China Eastern Airlines Technology Co., Ltd. from November 2018 to December 2019. He has served as a vice president and party member of CEA Holding since December 2019. He has served as a vice president and party member of the Company since January 2020. He served as the Safety Director of the Company from February 2020 to July 2020, and has served as the safety director of CEA Holding since February 2020. Mr. Cheng graduated from Nanjing University of Aeronautics and Astronautics majoring in aerodynamics and obtained a Master of Business Administration degree jointly offered by Beijing University of Technology and American City University. He holds the title of senior engineer.

Mr. Liu Tiexiang

is currently a vice president and party member of the Company and a vice president and party member of CEA Holding. Mr. Liu joined the civil aviation industry in 1983, and served as the manager of the flight training center of training department, the deputy general manager of the aviation safety technology department and the deputy general manager of the flight technology management department of Air China Company, and the general manager of the flight technology management department, deputy chief and party member of the general fleet and chief and vice party secretary of the general fleet of Air China Limited (“Air China”). From April 2011 to August 2014, he served as the chief pilot of Air China. From March 2012 to January 2013, he also served as the general manager, party member and deputy secretary of the operation control center of Air China, and the deputy chief operating officer of Air China. From January 2013 to August 2014, he also served as the general manager and vice party secretary of the Southwest Branch of Air China. From August 2014 to March 2020, he served as the vice president and party member of Air China. From April 2015 to March 2020, he also served as the chief operating officer of Air China. From May 2016 to March 2020, he also served as the chairman of Beijing Airlines Co., Ltd. Since March 2020, he has served as a vice president and party member of CEA Holding. Since April 2020, he has served as a vice president and party member of the Company. Mr. Liu graduated from the Central Party School majoring in economics and management, and holds the title of professorate senior pilot.

Mr. Wang Jian

is currently the Board secretary of the Company. Mr. Wang joined the civil aviation industry in 1995 and served as deputy head of the Company’s office, the deputy general manager of the Shanghai Business Office of the Company, and the deputy general manager of the Shanghai Business Office of China Southern Airlines Company Limited. He served as the head of the Board office of the Company and a representative of the Company’s securities affairs. He has served as the Board secretary of the Company since April 2012. He also served as a general manager and chairman Eastern Airlines Industry Investment from November 2016. He served as a director of Eastern Air Logistics from June 2017, and also served as a director of AFK since July 2019. During his term as secretary to the Board and his relevant work, he designed and promoted the implementation of several capital and strategic projects of CEA. Mr. Wang graduated from Shanghai Jiao Tong University and has a Master of Business Administration postgraduate degree from East China University of Science and Technology and an Executive Master of Business Administration degree from Tsinghua University.

Retired Director, Supervisor and Senior Management during the Reporting Period

Mr. Shao Ruiqing

was an Independent non-executive Director of the Company during the reporting period. Mr. Shao currently serves as a professor in accounting and a PhD supervisor at the Shanghai Lixin University of Commerce, the professional consultant of the Committee for Accounting Standards of the Ministry of Finance, the standing director of Accounting Society of China, a consultative committee member of the Ministry of Transport, as an expert in finance and accounting, and the deputy head of China Transportation Accounting Society. Mr. Shao served as the deputy dean and dean of the School of Economics and Management of Shanghai Maritime University and the deputy dean of Shanghai Lixin University of Commerce. Mr. Shao served as an Independent non-executive Director of the Company from June 2015 to June 2021. Mr. Shao is currently an independent director of China Everbright Bank Co., Ltd, Shanghai International Port (Group) Co., Ltd, China Enterprise Company Limited and COSCO Shipping Development Co.,Ltd. Mr. Shao successively graduated from Shanghai Maritime University, Shanghai University of Finance and Economics and Tongji University with a bachelor’s degree in economics, and master’s and doctoral degrees in management. Mr. Shao spent two and a half years studying and being a senior visiting scholar in the U.K. and Australia. Mr. Shao was awarded the special allowance by the State Council of the PRC in 1995.

B. Compensation

The aggregate amount of cash compensation paid by us to our directors, supervisors and the senior management during 2021 for services performed as directors, supervisors and officers or employees of our Company was approximately RMB3.5 million. In addition, directors and supervisors who are also officers or employees of our Company receive certain other in-kind benefits which are provided to all of our employees.

Details of the emoluments paid to our directors, supervisors and senior management for the year 2021 are as follows:


	Total
Name and Principal Position	RMB’000
Directors
Liu Shaoyong*		—
Li Yangmin*		—
Tang Bing*		—
Lin Wanli		—
Independent Non-executive Directors
Cai Hongping		200
Dong Xuebo		80
Sun Zheng		120
Lu Xiongwen		120
Employee Representative Director
Jiang Jiang*		—
Supervisors
Guo Lijun		1,112.8
Fang Zhaoya*		—
Zhou Huaxin		555.1
Senior Management
Xi Sheng*		—
Zhou Qimin*		—
Feng Dehua*		—
Cheng Guowei*		—
Liu Tiexiang*		—
Wang Jian		1,177.4
Retired Director, Supervisor and Senior Management
Shao Ruiqing		100
Total		3,465.3

These directors and supervisors of our Company received emoluments from CEA Holding, our parent company, part of which were in respect of their services to our Company and our subsidiaries. No apportionment has been made, as it is impracticable to apportion this amount between their services to us and their services to CEA Holding.

During the year ended December 31, 2021, no directors or supervisors of the Company waived their compensation.

C. Board Practices

All of our directors and supervisors serve a term of three years or until such later date as their successors are elected or appointed. Directors and supervisors may serve consecutive terms. One of the supervisors is employee representative supervisor appointed by our employees, and the rest are appointed by the shareholders. The following table sets forth the terms and the expiration of the terms of the directors, executive officers and supervisors of the Company who have held their positions during the period from January 1, 2021 to April 28, 2022.


Name	Position	Held Position Since	Expiration of Term
Liu Shaoyong	Chairman of the Board of Directors	December 31, 2019	December 31, 2022
Li Yangmin	Vice Chairman	December 31, 2019	December 31, 2022
	President	December 31, 2019	December 31, 2022
Tang Bing	Director	December 31, 2019	December 31, 2022
Lin Wanli	Director	June 23, 2021	December 31, 2022
Shao Ruiqing	Independent Non-executive Director	December 31, 2019	June 23, 2021
Cai Hongping	Independent Non-executive Director	December 31, 2019	December 31, 2022
Dong Xuebo	Independent Non-executive Director	December 31, 2019	December 31, 2022
Sun Zheng	Independent Non-executive Director	June 23, 2021	December 31, 2022
Lu Xiongwen	Independent Non-executive Director	June 23, 2021	December 31, 2022
Jiang Jiang	Employee Representative Director	December 28, 2020	December 31, 2022
	Vice President	December 31, 2019	January 18, 2021
Guo Lijun	Chairman of the Supervisory Committee	March 29, 2021	December 31, 2022
Fang Zhaoya	Supervisor	December 31, 2019	December 31, 2022
Zhou Huaxin	Employee Representative Supervisor	December 10, 2020	December 31, 2022
Xi Sheng	Chairman of the Supervisory Committee	December 31, 2019	January 18, 2021
	Vice President	January 18, 2021	December 31, 2022
Zhou Qimin	Chief Financial Officer	August 28, 2020	December 31, 2022
	Vice President	January 18, 2021	December 31, 2022
Feng Dehua	Vice President	December 31, 2019	December 31, 2022
Cheng Guowei	Vice President	January 15, 2020	December 31, 2022
Liu Tiexiang	Vice President	April 29, 2020	December 31, 2022
Wang Jian	Board Secretary	December 31, 2019	December 31, 2022

None of our directors, supervisors or members of our senior management has entered into any agreement or reached any understanding with us requiring our Company to pay any benefits as a result of termination of their services.

Audit and Risk Management Committee

Our Board of Directors established the audit committee in August 2000 in accordance with the listing rules of the HKEX. Currently, the Audit and Risk Management Committee comprised three members, namely Mr. Sun Zheng, as chairman of the committee, Mr. Cai Hongping and Mr. Dong Xuebo, all of which are independent non-executive directors, and satisfy the requirements of Rule 10A-3 of the Exchange Act and NYSE Rule 303A.06 relating to audit committees, including the requirements relating to independence of the audit committee members. On June 23, 2021, the term of Mr. Shao Ruiqing has expired and he was no longer the member of the Audit and Risk Management Committee.

The Audit and Risk Management Committee is authorized to, among other things, examine our internal control, internal audit and risk management systems, review auditing procedures and financial reports with our auditors, evaluate the overall risk management and corporate governance of our Company and prepare relevant recommendations to our Board of Directors. Subject to the approval of the shareholders’ meeting, the Audit and Risk Management Committee of our Company is also directly responsible for the appointment, compensation, retention and oversight of our external auditors, including resolving disagreements between management and the auditor regarding financial reporting. The external auditors report directly to the Audit and Risk Management Committee. The Audit and Risk Management Committee holds at least three meetings each year. The Audit and Risk Management Committee has established procedures for the receipt, retention and treatment of complaints received by our Company regarding accounting, internal controls or auditing matters, and procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. The Audit and Risk Management Committee has the authority to engage independent counsel and other advisors, as it determines necessary, to carry out its duties. Our Company provides appropriate funding, as determined by the Audit and Risk Management Committee, for payment of compensation to the external auditors, advisors employed by the audit committee, if any, and ordinary administrative expenses of the audit committee that are necessary or appropriate in carrying out its duties. The Audit and Risk Management Committee held 11 meetings in 2021.

Nominations and Remuneration Committee

Currently, the Nominations and Remuneration Committee comprised three members, namely Mr. Liu Shaoyong, the Chairman, Mr. Cai Hongping and Mr. Lu Xiongwen. Mr. Cai Hongping and Mr. Lu Xiongwen are independent non-executive directors. Mr. Dong Xuebo no longer served as a member of the Nomination and Remuneration Committee of the Board on June 23, 2021, and the Board appointed Mr. Lu Xiongwen as a member of the Nomination and Remuneration Committee on the same day. When considering and approving nomination related matters, the Nomination and Remuneration Committee shall be chaired by Mr. Liu Shaoyong; and when considering and approving remuneration related matters, it shall be chaired by Mr. Cai Hongping.

The Nominations and Remuneration Committee is authorized to make recommendations to our Board of Directors regarding its size and composition based on the relevant provisions of the PRC Company Law and in the light of specific circumstances such as the characteristics of the Company’s equity structure, determine standards and procedures for the nomination of directors and senior management of the Company, examine the remuneration policies of directors and senior management of the Company, review the performance of our directors and senior management as well as determine their annual compensation level. The Nominations and Remuneration Committee submits to our Board of Directors or shareholders’ meeting for approval compensation plans and oversee the implementation of approved compensation plans. The Nominations and Remuneration Committee may consult financial, legal or other outside professional firms in carrying out its duties. The Nominations and Remuneration Committee held 4 meetings in 2021.

We follow our home country practice in relation to the composition of our Nominations and Remuneration Committee in reliance on the exemption provided under NYSE Corporate Governance Rule 303A.00 available to foreign private issuers. Our home country practice does not require us to establish a remuneration committee composed entirely of independent directors.

Planning and Development Committee

Currently, the Planning and Development Committee comprised three members, namely Mr. Tang Bing, a director, Mr. Dong Xuebo and Mr. Lu Xiongwen, both of which are independent non-executive directors. Mr. Tang Bing is appointed as the chairman of the Planning and Development Committee. Mr. Cai Hongping no long served as a member of the Planning and Development Committee on June 23, 2021, and the Board appointed Mr. Lu Xiongwen as a member of the Planning and Development Committee on the same day.

The Planning and Development Committee, a specialized committee under our Board of Directors, is responsible for studying, considering, and developing plans and making recommendations with regard to the long-term development plans and material investment decisions of the Company. The members of the committee also oversee the implementation of such plans. The Planning and Development Committee held 7 meetings in 2021.

Aviation Safety and Environment Committee

Currently, the Aviation Safety and Environment Committee comprised three members, namely Mr. Li Yangmin, a director, Mr.Sun Zheng, an independent non-executive director and Mr. Jiang Jiang, an employee representative director. Mr. Li Yangmin is appointed as the chairman of the committee. Mr. Shao Ruiqing resigned as a member of the Aviation Safety and Environment Committee of the Company on June 23, 2021, and on the same day, the Board appointed Mr. Sun Zheng as a member of the Aviation Safety and Environment Committee.

The Aviation Safety and Environment Committee, a specialized committee under the Board of Directors, is responsible for consistent implementation of relevant laws or regulations regarding national aviation safety and environmental protection, examining and overseeing the aviation safety management of the Company, studying, considering and making recommendations with regard to aviation safety duty plans and significant issues resulting from related safety duties as well as implementing such safety duty plans. In addition, the Aviation Safety and Environment Committee performs studies, and makes recommendations on significant environmental protection issues, including carbon emissions on our domestic and international aviation routes and carbon emission programs, and overseeing their implementation. The Aviation Safety and Environment Committee held 2 meetings in 2021.

D. Employees

Our employees are members of a labor association, which represents employees with respect to labor disputes and certain other employee matters. We believe that we maintain good relations with our employees and with their labor association.

The table below sets forth the number of our employees as of December 31, 2019, 2020 and 2021, respectively:


			As of December 31,
	2019		2020	2021
Pilots		8,284	8,837	9,506
Flight attendants and other aircrew staff		21,673	21,149	20,518
Maintenance personnel		12,960	13,258	13,383
Sales and marketing		4,009	4,040	3,716
Operation control		1,877	1,893	1,961
Information technology		1,116	1,168	1,183
Management		3,650	3,677	3,792
Ground Services and others		27,567	27,135	26,262
Total		81,136	81,157	80,321

In 2021, we formulated talent training plans based on the modern development needs of our governance system and governance capabilities, improved the multi-tier and multi-form talent training mechanism, and strived to build various platforms for the growth of employees and advocate and encourage employees to grow on their work position to realise the improvement of work ability and self-worth. For example, since 2020, we launched training programs for cabin crew, ground services personnel and maintenance personnel in relation to the new model of aircraft we introduced. We also prepared specific training plan for backup talents to enhance our talent reserve. Due to the impact of the COVID-19 pandemic, we adjusted our training program in a timely manner, added online training methods, and provided various types of training for the middle and high level management personnel.

See Note 8 to the consolidated financial statements for changes in our retirement benefits.

E. Share Ownership

See Item 6.A and Item 6.B above.

In 2012, we implemented an H shares appreciation rights scheme, under which H shares appreciation rights were granted to the directors and senior management on November 30, 2012 at an exercise price of HK$2.67. The H share appreciation rights granted under this scheme are valid for a period of five years from the date of grant. The lock-up period of the share appreciation rights shall be the 24 months from the date of grant, during which no share appreciation right shall be exercised. Subject to the satisfaction of performance appraisal indicators, incentive recipients may exercise their share appreciation rights in equal installments within three years after the expiration of the lock-up period.

There was no granting or exercise of rights under the H shares appreciation rights of our Company during 2013. The first tranche of H shares appreciation rights, amounting to one third of the total H shares appreciation rights of our Company, was originally planned to be exercised on December 1, 2014. However, as our Company did not satisfy the exercising conditions in 2013, such tranche expired automatically.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

The following table sets forth certain information regarding ownership of our capital stock as of December 31, 2021 by all persons who were known to us to be the beneficial owners of 5% or more of any class of our issued share capital:


Name of shareholder	Class of shares		Number of shares held			Percentage in the relevant class of Shares (%)		Percentage in total issued shares (%)
CEA Holding		A Shares		7,567,853,802	(2)		55.25		40.10
				457,317,073	(2)		3.34		2.42
		H Shares		2,626,240,000	(3)		50.73		13.91
CES Global		H Shares		2,626,240,000	(3)		50.73		13.91
HKSCC Nominees Limited		H Shares		4,701,279,905			90.81		24.91
Juneyao Group		A Shares		311,831,909	(4)		2.28		1.65
				808,441,233	(4)		5.90		4.28
		H Shares		558,769,777	(5)		10.79		2.96
Juneyao Airlines		A Shares		219,400,137	(4)		1.60		1.16
				589,041,096	(4)		4.30		3.12
				311,831,909	(4)		2.28		1.65
		H Shares		12,000,000	(5)		0.23		0.06
				546,769,777	(5)		10.56		2.90
Juneyao Hong Kong		H Shares		546,769,777	(5)		10.56		2.90
Shanghai Jidaohang		A Shares		589,041,096	(4)		4.30		3.12
Wang Junjin		A Shares		1,120,273,142	(4)		8.18		5.94
		H Shares		558,769,777	(5)		10.79		2.96
Wang Han		A Shares		1,120,273,142	(4)		8.18		5.94
		H Shares		558,769,777	(5)		10.79		2.96
Ye Jinqi		A Shares		1,120,273,142	(4)		8.18		5.94
		H Shares		558,769,777	(5)		10.79		2.96

Notes:

(1)	Based on the information available to the directors (including such information as was available on the website of the HKEX) and so far as they are aware, as of December 31, 2021.

(2)	7,567,853,802 A Shares were held directly by CEA Holding; and 457,317,073 A Shares were held directly by CES Finance, which in turn was entirely held by CEA Holding. Therefore, CEA Holding is deemed to be interested in the 457,317,073 A Shares held directly by CES Finance.

(3)

CES Global directly held 2,626,240,000 H Shares through HKSCC Nominees Limited, and CEA Holding indirectly owned the entire interests of CES Global through CES Finance. Therefore, CEA Holding is deemed to be interested in the 2,626,240,000 H Shares held directly by CES Global. As of December 31, 2021, CES Global had pledged 1,670,000,000 H shares. For details, please refer to the announcement of the Company published on the website of the Hong Kong Stock Exchange on October 15, 2021.

(4)

311,831,909 A Shares were held directly by Juneyao Group. 219,400,137 A Shares were held directly by Juneyao Airlines. 589,041,096 A Shares were held directly by Shanghai Jidaohang. Mr. Wang Han and Mr. Wang Junjin were interested in 35.63% and 71.77% of shares of Juneyao Group, respectively. Juneyao Group is the controlling shareholder of Juneyao Airlines. Juneyao Airlines owned the entire equity interests of Shanghai Jidaohang. Ms. Ye Jinqi is the spouse of Mr. Wang Junjin. Therefore, Juneyao Group is deemed to be interested in 219,400,137 A Shares and 589,041,096 A Shares held by Juneyao Airlines and Shanghai Jidaohang, respectively. Juneyao Airlines is deemed to be interested in 589,041,096 A Shares held directly by Shanghai Jidaohang. Mr. Wang Han and Mr. Wang Junjin are deemed to be interested in 311,831,909 A Shares, 219,400,137 A Shares and 589,041,096 A Shares held directly by Juneyao Group, Juneyao Airlines and Shanghai Jidaohang, respectively. Ms. Ye Jinqi is deemed to be interested in 1,120,273,142 A Shares held indirectly by Mr. Wang Junjin.

On October 29, 2019, Juneyao Group and Juneyao Airlines signed a voting rights proxy agreement to delegate the voting rights of 311,831,909 A Shares held directly by Juneyao Group to Juneyao Airlines. Therefore, Juneyao Airlines is also deemed to be interested in the 311,831,909 A Shares held directly by Juneyao Group.

As of December 31, 2021, Juneyao Group had pledged 311,831,909 A shares. For details, please refer to the announcement of the Company published on the website of the Hong Kong Stock Exchange on October 22, 2021.

(5)

Juneyao Airlines directly held 12,000,000 H Shares and Juneyao Hong Kong directly held 546,769,777 H Shares through HKSCC Nominees Limited. Mr. Wang Han and Mr. Wang Junjin were interested in 35.63% and 71.77% of shares of Juneyao Group. Juneyao Group is the controlling shareholder of Juneyao Airlines. Juneyao Airlines owned the entire equity interests of Juneyao Hong Kong. Ms. Ye Jinqi is the spouse of Mr. Wang Junjin. Therefore, Juneyao Group, Mr. Wang Han and Mr. Wang Junjin are deemed to be interested in 12,000,000 H Shares and 546,769,777 H Shares held directly by Juneyao Airlines and Juneyao Hong Kong. Juneyao Airlines is deemed to be interested in 546,769,777 H Shares held directly by Juneyao Hong Kong. Ms. Ye Jinqi is deemed to be interested in 558,769,777 H Shares held indirectly by Mr. Wang Junjin.

As of December 31, 2021, Juneyao Hong Kong had pledged 232,000,000 H shares. For details, please refer to the announcement of us published on the website of the Hong Kong Stock Exchange on October 22, 2021.

As of December 31, 2021, CEA Holding directly or indirectly held 56.43% of our issued and outstanding capital stock. Due to the completion of non-public issuance of H Shares and A Shares by us to Juneyao Airlines and Juneyao Group in 2019, the shareholding of Juneyao Airlines, Juneyao Group, Mr. Wang Junjin, Mr. Wang Han and Ms. Ye Jinqi in us increased in 2019, resulting in the dilution of the shareholding of CEA Holding in us. See “Item 4. Information on the Company – History and Development of the Company” for details of the non-public issuance of H Shares and A Shares. Neither CEA Holding nor HKSCC Nominees Limited has any voting rights different from those of other shareholders. We are not aware of any arrangement which may at a subsequent date result in a change of control of our Company.

As of December 31, 2021, there were 5,176,777,777 H Shares issued and outstanding. As of December 31, 2021 and April 15, 2022, there were 57 and 57 registered holders, respectively, of American Depositary Receipts evidencing 1,223,463 and 1,223,463 ADSs, respectively. Since certain of the ADSs are held by nominees, the above number may not be representative of the actual number of U.S. beneficial holders of ADSs or the number of ADSs beneficially held by U.S. persons.

Our Company is currently a subsidiary of CEA Holding who holds 56.43% of our issued and outstanding capital stock. CEA Holding itself is a wholly state-owned enterprise under the administrative control of the SASAC. CEA Holding’s shareholding in our Company is in the form of ordinary domestic shares, through which it, under the supervision of the SASAC, enjoys shareholders’ rights and benefits on behalf of the PRC government.

B. Related Party Transactions

Relationship with CEA Holding and Associated Companies

We enter into transactions from time to time with CEA Holding and its subsidiaries. For a description of such transactions, see Note 45 to the consolidated financial statements.

Related Business Transactions

As our Company and EA Group and its subsidiaries were a single group prior to the restructuring in 2002, certain arrangements among us have continued after the restructuring and the establishment of CEA Holding. Although we do not currently intend to enter into any equivalent contracts with third parties, each of these arrangements is non-exclusive.

Eastern Aviation Import and Export Co., Ltd. (“EAIEC”), a 55% owned subsidiary of CEA Holding

Import and Export Services (previously known as Import and Export Agency Services)

On August 30, 2016, we entered into an agreement relating to the renewal of the existing import and export agency agreement with EAIEC, pursuant to which EAIEC and its subsidiaries will from time to time provide us with a range of import and export services including: (i) agency services for the import and export of goods, including aircraft and related raw materials, accessories, machinery and equipment, together with related insurance and financial services, required in the daily airlines operations and civil aviation business of us; (ii) the provision of transportation services as required by us in the conduct of foreign trade; and (iii) provision of aircraft on-board supplies. The import and export services renewal agreement (previously known as import and export agency renewal agreement) is effective for a term of three years, from January 1, 2017 to December 31, 2019.

On August 30, 2019, we entered into an agreement relating to the renewal of the existing import and export services renewal agreement with EAIEC (the “Import and Export Services Agreement”), pursuant to which EAIEC and its subsidiaries will from time to time provide us with a range of import and export services in the conduct of foreign trade including: (i) provision of agency services for the import and export of goods in the conduct of foreign trade; (ii) provision of transportation management services in the conduct of foreign trade; and (iii) provision of aircraft on-board supplies procurement and other services. The Import and Export Services Agreement is effective for a term of three years, from January 1, 2020 and December 31, 2022.

For the year ended December 31, 2021, we paid handling charges of approximately RMB135 million to EAIEC. We currently have certain balances with EAIEC, which are trade in nature, interest-free and payable within normal credit terms. See Note 45(c) to the consolidated financial statements for more details.

China Eastern Airlines Media Co. Ltd. (“CEA Media”), a 55% owned subsidiary of CEA Holding

Advertising Service Agreement

On August 30, 2016, we entered into an agreement relating to the renewal of the existing advertising services agreement with CEA Media on substantially the same terms, pursuant to which CEA Media and its subsidiaries will from time to time provide us with multi-media advertising services to promote our business and to organize promotional functions and campaigns to enhance our reputation in the civil aviation industry. The advertising services renewal agreement is effective for a term of three years, from January 1, 2017 to December 31, 2019.

On August 30, 2019, we entered into an agreement relating to the renewal of the existing advertising services agreement with CEA Media (the “Advertising Services Renewal Agreement”), pursuant to which CEA Media and its subsidiaries will from time to time provide us with multi-media advertising services to promote our business and to organize promotional functions and campaigns to enhance our reputation in the civil aviation industry. The Advertising Services Renewal Agreement is effective for a term of three years, from January 1, 2020 and December 31, 2022.

For the year ended December 31, 2021, we paid to Eastern Aviation Advertising approximately RMB25 million for advertising services.

Media Resources Agreement

On September 27, 2013, we entered into an agreement with CEA Media, pursuant to which we and certain of our subsidiaries agreed to transfer the exclusive rights to use certain media and advertising resources to CEA Media and certain of its subsidiaries for a period of 15 years (from January 1, 2014 to December 31, 2028). CEA Media is a subsidiary of and thus an associate of CEA Holding, which in turn is a controlling shareholder of the Company.

For the year ended December 31, 2021, Eastern Aviation Advertising paid approximately RMB14 million in media royalty fees.

China Eastern Air Catering Investment Co., Ltd. (“CEA Catering”), a 55% owned subsidiary of CEA Holding with the remaining by our Company

Catering Service Agreements

On August 30, 2016, we entered into an agreement relating to the renewal of the existing catering services agreement with CEA Catering, pursuant to which CEA Catering and its subsidiaries (each an “Eastern Air Catering Entity” and collectively the “Eastern Air Catering Entities”) will from time to time provide us with catering services (including the supply of meals and beverages, cutlery and tableware) and related storage and complementary services required in the day-to-day airline and ground operation of us. The Eastern Air Catering Entities provide their services in accordance with the specifications and schedules as from time to time specified by the relevant member(s) of us to accommodate the operational needs of us.

On August 30, 2019, we entered into an agreement relating to the renewal of the existing catering services agreement with CEA Catering (the “Catering Services and Related Services Agreement”), pursuant to which CEA Catering and its subsidiaries (each an “Eastern Air Catering Entity” and collectively the “Eastern Air Catering Entities”) will from time to time provide us with food, beverages, related tableware and the storage, recycling and other related services for food and beverages required for air transport and ground services. In addition, the Eastern Air Catering Entities (as the lessee) will lease lands and buildings owned by us (as the lessor) and will construct buildings and structures on lands leased from us, offsetting rent with construction costs. The Catering Services and Related Services Agreement is effective for a term of three years, from January 1, 2020 and December 31, 2022.

On August 28, 2020, we entered into an agreement relating to the daily connected transaction with CEA Catering (the “the Catering and Aircraft On-board Supplies Support Agreement”), pursuant to which we shall engage Eastern Air Catering Entities for the centralized procurement and the support and maintenance of operation of all of the catering, aircraft on-board supplies support and related services. In addition, Eastern Air Catering Entities shall provide property leasing services in the mode of “offsetting rent with construction costs” to us. The Catering and Aircraft On-board Supplies Support Agreement (the renewed catering service and related services agreement) is effective for a term of three years, from January 1, 2021 and December 31, 2023.

In 2021, we paid RMB1,636 million to CEA Catering for its provision of food, beverages, related tableware and the storage, recycling and other related services, and received RMB48 million from CEA Catering for our provison of property leasing services to CEA Catering.

Eastern Air Group Finance Co., Ltd., (“Eastern Finance”), a 53.75% owned subsidiary of CEA Holding

On August 30, 2016, we entered into an agreement relating to the renewal of the existing financial services agreement with Eastern Finance and CES Finance, on substantially the same terms, pursuant to which Eastern Finance and its subsidiaries (each an “Eastern Air Finance Entity” and collectively the “Eastern Air Finance Entities”) and CES Finance and its subsidiaries (each a “CES Finance Entity” and collectively the “CES Finance Entities”) agreed from time to time provide us with a range of financial services including: (i) deposit services by the Eastern Air Finance Entities; (ii) loan and financing services by the Eastern Air Finance Entities; and (iii) other financial services, such as: (a) the provision of services such as trust loans, financial guarantees and credit references by the Eastern Air Finance Entities; and (b) the provision of services such as broker services for future products (e.g. crude oil, foreign exchange and national debt) by the CES Finance Entities (the scope of “other financial services” is not limited and different services may be provided to us as and when they are needed). The financial services renewal agreement is effective for a term of three years, from January 1, 2017 to December 31, 2019.

On August 30, 2019, we entered into an agreement relating to the renewal of the existing financial services agreement with Eastern Finance (the “Financial Services Agreement”), pursuant to which Eastern Finance and its subsidiaries agreed from time to time provide us with a range of financial services including: with a range of financial services including: (i) deposit services; (ii) loan services; and (iii) other financial services. The Financial Services Agreement is effective for a term of three years, from January 1, 2020 to December 31, 2022.

As of December 31, 2021, we had deposits amounting to RMB12,269 million placed with Eastern Finance, which paid interest to us at 0.20% to 1.38% per annum.

CEA Development Co. (“CEA Development”), a wholly-owned subsidiary of CEA Holding

On August 30, 2016, we entered into the complementary services renewal agreement (previously known as the existing maintenance and repair services agreement) with CEA Development, pursuant to which CEA Development and its subsidiaries (each a “CEA Development Entity” and collectively the “CEA Development Entities”) will from time to time provide us with a range of services including: (i) supply of equipment and materials and provision of maintenance and repair services to our automobiles and equipment; (ii) provision of property management services; (iii) provision of hotel accommodation services; and (iv) other complementary aviation services. The complementary services renewal agreement is effective for a term of three years, from January 1, 2017 to December 31, 2019.

On August 30, 2019, the Company entered into an agreement relating to the renewal of the existing complementary services agreement with CEA Development (the “Complementary Services Agreement”), pursuant to which CEA Development Entities will from time to time provide us with a range of services. According to the Complementary Services Agreement, CEA Development Entities will provide us with special vehicles and equipment leasing, supply and maintenance services, property management services, hotel services, ground transportation services and other aviation supporting services.

For the year ended December 31, 2021, production and maintenance services fees paid to CEA Development Entity amounted to approximately RMB438 million.

Eastern Logistics, an indirectly owned subsidiary of CEA Holding

Disposal of the entire equity interest in Eastern Air Logistics

On November 29, 2016, we entered into a disposal agreement with Eastern Airlines Industry Investment, pursuant to which, we have conditionally agreed to sell, and Eastern Airlines Industry Investment has conditionally agreed to purchase, our entire equity interest in Eastern Logistics at a consideration of RMB2,432,544,211.50, determined with reference to the relevant valuation report. Upon completion of the disposal on February 8, 2017, Eastern Logistics ceased to be our subsidiary.

Freight Logistics Daily Connected Transactions Framework Agreement with Eastern Logistics

As Eastern Logistics ceased to be our subsidiary, each member of the Eastern Logistics Group became a connected person of us. On November 29, 2016, we entered into the Freight Logistics Daily Connected Transactions Framework Agreement with Eastern Logistics. We will provide the following services to the Eastern Logistics Group, required for the daily operation of its freight logistics business: (i) aircraft maintenance and its ancillary support services; (ii) information technology support services; (iii) cleaning services; (iv) training services; and (v) other daily support services. The Eastern Logistics Group will provide us the following services required for our daily business operation: (i) apron transfer services, cargo terminal operation services and security inspection services; and (ii) other daily support services. The Freight Logistics Daily Connected Transactions Framework Agreement will be effective for a term of three years, commencing from the date on which the entire equity interest in Eastern Logistics was transferred from us to Eastern Airlines Industry Investment pursuant to the disposal agreement, and ending on December 31, 2019.

On August 30, 2019, we entered into an agreement relating to the renewal of the existing freight logistics daily connected transactions framework agreement with Eastern Logistics on substantially the same terms (the “Freight Logistics Daily Connected Transactions Framework Agreement”), pursuant to which we will provide the freight logistics business support services, including (i) aircraft maintenance and its ancillary support services; (ii) cargo transport maintenance and its ancillary support services; (iii) information technology support services; (iv) cleaning services; (v) training services; and (vi) other daily support services, to Eastern Logistics required for the daily operation of its freight logistics business, and the Eastern Logistics will provide the cargo terminal business support services (as defined below), including (i) apron transfer services, cargo terminal operation services and security inspection services; and (ii) other daily support services, to us required for our daily business operation. The Freight Logistics Daily Connected Transactions Framework Agreement is effective for a term of three years, from January 1, 2020 to December 31, 2022.

For the year ended December 31, 2021, the amount payable by Eastern Logistics to us for the freight logistics support services amounted to approximately RMB273 million and the amount payable by us to Eastern Logistics for the cargo terminal business support services amounted to approximately RMB369 million.

Exclusive Operation Agreement for Passenger Aircraft Cargo Business

On January 1, 2017, to avoid the competition between the bellyhold space business operated by us and the all-cargo aircraft freight business operated by China Cargo Airlines, the subsidiary of Eastern Logistics, after the completion of equity transfer in Eastern Logistics, we entered into the Bellyhold Space Management Agreement with China Cargo Airlines to entrust China Cargo Airlines for the operation of the bellyhold space business for a term of three years, which commenced on January 1, 2017. Pursuant to the Bellyhold Space Management Agreement, in respect of the entrusted management of bellyhold space business, we will pay management fee to China Cargo Airlines according to industry practice, including handling charges for the entrusted management and incentives for achieving specified sales targets. The Bellyhold Space Management Agreement is effective for a term of three years commencing January 1, 2017 until December 31, 2019.

The Bellyhold Space Management Agreement has been superseded by the contractual operation agreement dated March 1, 2018 entered into between the Company and China Cargo Airlines from March 31, 2018.

On September 29, 2020, we entered into the adjusted “passenger aircraft bellyhold space contractual operation proposal” with China Cargo Airlines, pursuant to which we clarified the coverage of the transaction, and the pricing method. In addition, the adjustment provided the cap amount of the Exclusive Operation Agreement (the adjusted “passenger aircraft bellyhold space contractual operation proposal”) for each of the three years ending December 31, 2020, 2021 and 2022. The Exclusive Operation Agreement is effective from January 1, 2020 to December 31, 2032.

For the year ended December 31, 2021, the actual amount paid by the China Cargo Airlines amounted to RMB8,309 million under the Exclusive Operation Agreement.

Shanghai Eastern Airlines Investment Co., Limited (“Eastern Investment”), a wholly-owned subsidiary of CEA Holding

Land Use Rights Transfer Agreement and the Buildings Compensation Agreement

On September 29, 2017, we entered into the land use rights transfer agreement and the buildings compensation agreement with Eastern Investment in Shanghai. Pursuant to the land use rights transfer agreement and the buildings compensation agreement, (i) we agreed to transfer to Eastern Investment the land use rights in respect of the target land together with the buildings thereon at the eastern district of Terminal One of the Shanghai Hongqiao International Airport; and (ii) Eastern Investment agreed to compensate us for the transfer of the buildings, at total consideration of approximately RMB808 million.

Property Leases

On August 30, 2016, we entered into an agreement relating to the renewal of the existing property leasing agreement with CEA Holding. Pursuant to the property leasing renewal agreement, we will lease from CEA Holding and its subsidiaries the following properties, for use in our daily airlines and other business operations:

(a)

altogether 17 land properties owned by CEA Holding in Lanzhou, Gansu, covering an aggregate site area of approximately 234,989 square meters together with a total of 81 building properties, construction, structures and other ancillary facilities occupying an aggregate floor area of approximately 54,290 square meters;

(b)

altogether three land properties owned by CEA Holding in Kunming, Yunnan, covering an aggregate site area of 44,835 square meters together with a total of 24 building properties, construction, structures and other ancillary facilities occupying an aggregate floor area of approximately 67,992 square meters;

(c)

one building property, construction, structures and other ancillary facilities owned by CEA Holding in Shijiazhuang, occupying an aggregate floor area of approximately 8,853 square meters;

(d)

a total of 67 building properties, construction, structures and other ancillary facilities owned by CEA Holding in Taiyuan, occupying an aggregate floor area of approximately 45,068 square meters;

(e)

a total of 7 building properties, construction, structures and other ancillary facilities owned by CEA Holding in Shanghai, occupying an aggregate floor area of approximately 13,195 square meters;

(f)

altogether 16 land properties owned by China Eastern Air Northwest Company (“CEA Northwest”), covering an aggregate site area of approximately 393,929 square meters together with a total of 115 building properties, construction, structures and other ancillary facilities occupying an aggregate floor area of approximately 88,440 square meters;

(g)

a total of altogether 33 guest rooms in Eastern Hotel owned by CEA Holding, occupying an aggregate floor area of approximately 1,500 square meters located in Shanghai; and

(h)

other land and property facilities owned by CEA Holding may be leased to us from time to time due to our business and operational needs.

In addition to the above and on terms and conditions to be further agreed, we leased some of the properties legally owned or leased by us to subsidiaries of CEA Holding as needed by the subsidiaries of CEA Holding. The property leasing renewal agreement was effective for a term of three years from January 1, 2017 to December 31, 2019.

On August 30, 2019, we entered into an agreement relating to the renewal of the existing property leasing agreement with CEA Holding and Eastern Investment (the “Property Leasing and Construction and Management Agency Agreement”). Pursuant to the Property Leasing and Construction and Management Agency Agreement, CEA Holding and its subsidiaries (including Eastern Investment) will lease to us relevant properties. In the meantime, Eastern Investment will also provide the construction and management agency services to us in relation to the basic construction projects, organize the implementation of the construction management work and provide the projects that meet various standards to us pursuant to the agreement. The scope of specific construction and management agency services is determined according to the agreement of the specific agreement signed by both parties.

Pursuant to the Property Leasing and Construction and Management Agency Agreement, we will lease from CEA Holding and its subsidiaries (excluding Eastern Investment) the following properties, for use by us in our daily airlines and other business operations:

(a)

altogether 20 land properties owned by CEA Holding in Lanzhou, Gansu, covering an aggregate site area of approximately 234,989 square meters together with a total of 77 building properties, construction, structures and other ancillary facilities occupying an aggregate floor area of approximately 54,290 square meters;

(b)

(c)

one building property, construction, structures and other ancillary facilities owned by CEA Holding in Shijiazhuang, occupying an aggregate floor area of approximately 8,853 square meters;

(d)

a total of 77 building properties, construction, structures and other ancillary facilities owned by CEA Holding in Taiyuan, occupying an aggregate floor area of approximately 45,068 square meters;

(e)

a total of seven building properties, construction, structures and other ancillary facilities owned by CEA Holding in Shanghai, occupying an aggregate floor area of approximately 13,195 square meters;

(f)

altogether 15 land properties owned by CEA Northwest, covering an aggregate site area of approximately 335,741 square meters together with a total of 106 building properties, construction, structures and other ancillary facilities occupying an aggregate floor area of approximately 92,935 square meters; and

(g)

other land and property facilities owned by CEA Holding may be leased to us from time to time due to our business and operational needs.

Pursuant to the Property Leasing and Construction and Management Agency Agreement, we will lease from Eastern Investment the following properties, for use by us in its daily airlines and other business operations:

(a)

a total of 78 building properties, construction, structures and other ancillary facilities owned by Eastern Investment in Chengdu, occupying an aggregate floor area of approximately 25,992 square meters;

(b)

a total of 17 building properties, construction, structures and other ancillary facilities owned by Eastern Investment in Beijing, occupying an aggregate floor area of approximately 35,730 square meters;

(c)

a total of 26 building properties, construction, structures and other ancillary facilities owned by Eastern Investment in Lanzhou, occupying an aggregate floor area of approximately 29,274 square meters;

(d)

altogether five land properties owned by Eastern Investment in Shanghai Hongqiao East District, covering an aggregate site area of approximately 333,369 square meters together with a total of 60 building properties, construction, structures and other ancillary facilities occupying an aggregate floor area of approximately 120,053 square meters;

(e)

one building property, construction, structures and other ancillary facilities owned by Eastern Investment in Hangzhou, occupying an aggregate floor area of approximately 486 square meters; and

(f)

other land and property facilities owned by Eastern Investment may be leased to us from time to time due to our business and operational needs.

The Property Leasing and Construction and Management Agency Agreement is effective for a term of three years commencing from January 1, 2020 to December 31, 2022.

For the year ended December 31, 2021, we paid a rental fee of RMB212 million under the property leasing renewal agreement.

Amendments to the Non-Competition Undertaking with CEA Holding

On December 22, 2017, we and CEA Holding entered into the supplemental agreement II to the reorganization and division agreement to amend the non-competition undertaking of CEA Holding as set out in article 3 of the supplemental agreement I to the reorganization and division agreement entered into by both parties in 1996.

Pursuant to article 3 of the supplemental agreement I, CEA Holding has undertaken to us that, so long as we are listed in the PRC, Hong Kong or New York, if CEA Holding holds more than 35% of the issued shares of us or is deemed to be our controlling shareholder pursuant to the listing rules of relevant stock exchange(s) or relevant laws and regulations, CEA Holding shall not, in any place within or outside the PRC or in any way (including but not limited to carrying on through sole proprietorship, forming partnerships or joint ventures with others and holding shares or interests in other companies or enterprises, except that the shares held by CEA Holdings do not exceed 10% of our shares or enterprise as listed on a stock exchange) conduct any business or activities that is or may be in direct or indirect competition with our business.

Pursuant to the amendments, CEA Holding undertakes to us that so long as we are listed in the PRC, Hong Kong or New York, if CEA Holding holds more than 35% of the issued shares of us or is deemed to be our controlling shareholder pursuant to the listing rules of relevant stock exchange(s) or relevant laws and regulations, CEA Holding shall not, in any place within or outside the PRC or in any way, conduct any business or activities that is or may be in direct or indirect competition with our business, with an exception that CEA Holding will be allowed to conduct equity investment in any companies or enterprises that is or may be in direct or indirect competition with the principal business of the Company (the “Competing Enterprise(s)”), provided that CEA Holding and its controlled subsidiary(ies) (other than us) will not contravene any applicable laws and regulations as well as regulatory rules, control or be deemed to control such Competing Enterprises by the listing rules of relevant stock exchange(s) or relevant laws and regulations after the investment, and subject to certain conditions.

Guarantee by CEA Holding

As of December 31, 2019, 2020 and 2021, bonds issued by us in an aggregate amount of RMB7.8billion were guaranteed by CEA Holding.

See Note 45(d) to the consolidated financial statements.

Guarantee by the Company

To Certain Subsidiaries

On January 17, 2017, the Board of Directors considered and approved that we shall provide, within the period from the effective date of the Board resolution to December 31, 2017, guarantee in the total amount of up to RMB1,000 million to China United Airlines, Shanghai Eastern Flight Training Co., Limited, Eastern Business Airlines Service Co., Limited, Eastern Technology, and their respective wholly-owned subsidiaries. The period of guarantee shall be the same as the period of subject obligations of the respective guaranteed parties and shall not exceed 10 years.

On December 22, 2017, the Board of Directors considered and approved that we shall provide, within the period from the effective date of the Board resolution to December 31, 2018, guarantee in the total amount of up to RMB1,000 million to China United Airlines, Shanghai Eastern Flight Training Co., Limited, Eastern Business Airlines Service Co., Limited, Eastern Technology, and their respective wholly-owned subsidiaries, and that Shanghai Airlines Tours International (Group) Co., Limited, a wholly-owned subsidiary of us, shall provide guarantee in the total amount of up to RMB10 million to Shanghai Dongmei Air Travel Co., Ltd. The period of guarantee shall be the same as the period of subject obligations of the respective guaranteed parties and shall not exceed 10 years.

On January 19, 2018, with an aim to carry out the work of changing aircraft leasing from overseas operating lease to domestic operating lease for not more than 67 aircraft, the Board of Directors agreed us to invest and establish not more than 67 subsidiaries in Dongjiang Free Trade Port Zone of Tianjin with the aggregate guarantee amount not exceeding RMB9.8 billion. The term of each guarantee will not exceed 15 years commencing from the actual date when we provide guarantee to each subsidiary. The guarantee was considered and approved at the general meeting of the Company held on February 8, 2018.

On January 18, 2019, the Board of Directors considered and approved that we shall provide, within the period from the effective date of the resolution to December 31, 2019, guarantee in the total amount of up to RMB1 billion to China United Airlines, Shanghai Eastern Flight Training Co., Ltd., Eastern Business Airlines Service Co., Ltd., Eastern Technology, and their respective wholly-owned subsidiaries. Shanghai Airlines Tours

(our then wholly-owned subsidiary) shall provide guarantee in the total amount of RMB10 million to Shanghai Dongmei Air Travel Co., Ltd., the period of which shall be the same as the period of the subject obligations of the respective guaranteed parties and shall not exceed 10 years.

On December 31, 2019, the Board of Directors considered and approved that we shall provide, within the period from the effective date of the resolution to December 31, 2020, guarantee in the total amount of up to RMB1 billion to our three wholly-owned subsidiaries, namely China United Airlines, Shanghai Eastern Flight Training Co., Ltd., and Eastern Technology, or their respective wholly-owned subsidiaries. The period of guarantee shall be the same as the period of the subject obligations of the respective guaranteed parties and shall not exceed 10 years.

A further guarantee was considered and approved at the 2021 first regular meeting of the Board of Directors held on January 26, 2021, which passed the resolution to provide guarantees to certain wholly-owned subsidiaries and agreed us to offer three wholly owned subsidiaries, namely, Shanghai Eastern Flight Training Co., Ltd., China Eastern Aviation Technology Co., Ltd. and One Two Three Airlines Co., Ltd. or their wholly-owned subsidiaries with the aggregate guarantee amount not exceeding RMB1 billion. The term of the guarantee will not exceed 10 years and shall be consistent with the term of the principal debt of the guarantee.

Agreements in relation to Aircraft Finance Lease and Aircraft Operating Lease with CES Leasing

Master Lease Agreement

On May 5, 2015, we entered into a master lease agreement with CES Leasing, pursuant to which CES Leasing agreed to provide finance leasing to us in relation to 23 aircraft in accordance with the terms and conditions of the master lease agreement and the relevant implementation agreements. CES Leasing is a non-wholly owned subsidiary of CEA Holding, which in turn is the controlling shareholder of the Company.

2016 Aircraft Finance Lease Framework Agreement

On April 28, 2016, we entered into the 2016 Aircraft Finance Lease Framework Agreement with CES Leasing, pursuant to which CES Leasing agreed to provide finance leasing to us in relation to the leased aircraft, as and when we consider desirable, in our interests and the interests of the shareholders as a whole in accordance with the terms and conditions of the 2016 Aircraft Finance Lease Framework Agreement and the relevant implementation agreements contemplated thereunder. The 2016 Aircraft Finance Lease Framework Agreement was effective for a term of one year commencing January 1, 2016.

2017–2019 Aircraft Finance Lease Framework Agreement

On April 28, 2016, we entered into the 2017–2019 Aircraft Finance Lease Framework Agreement with CES Leasing, pursuant to which CES Leasing agreed to provide finance leasing to us in relation to the Leased Aircraft, as and when we consider desirable, in our interests and the interests of the shareholders as a whole in accordance with the terms and conditions of the 2017–2019 Aircraft Finance Lease Framework Agreement and the relevant implementation agreements contemplated thereunder. The 2017–2019 Aircraft Finance Lease Framework Agreement is effective for a term of three years, from January 1, 2017 to December 31, 2019.

Novation Agreement and Aircraft Operating Lease Agreement

On July 9, 2015, we (as the purchaser) entered into the purchase agreement with Boeing Company (as the seller) regarding the acquisition of fifty brand new Boeing B737 series aircraft (the “Purchase Agreement”).

On August 10, 2017, we entered into a novation agreement with CES Leasing, pursuant to which, (i) we agreed to novate, from the date of the novation agreement, our rights (including the purchase right) and obligations in and under the Purchase Agreement in respect of the five Boeing Aircraft, which are expected to be delivered by the Boeing Company to us in 2017 pursuant to the Purchase Agreement (the “Five Boeing Aircraft”) at nil consideration; and (ii) CES Leasing agreed to, from the date of the novation agreement, assume all of the rights (including the purchaser right) and obligations in and under the Purchase Agreement in respect of the Five Boeing Aircraft at nil consideration. The parties entered into the novation agreement at nil consideration.

On August 10, 2017, we entered into the aircraft operating lease agreement with CES Leasing, pursuant to which, CES Leasing agreed to provide operating leasing to us in relation to the Five Boeing Aircraft. The aircraft operating lease agreement is effective for a term of 144 months for each aircraft from the date on which each of the Five Boeing Aircraft is delivered. Delivery date would fall on the period between August 2017 and December 2017.

2018-2019 Aircraft and Engines Operating Lease Framework Agreement

On December 22, 2017, we entered into the 2018-2019 aircraft and engines operating lease framework agreement with CES Leasing, pursuant to which CES Leasing agreed to provide operating leasing to us in relation to the aircraft and aircraft engines. Upon successful bidding of the tender of the aircraft and/or aircraft engines during the period between January 1, 2018 and December 31, 2019 by CES Leasing, the term of each of the lease agreement under the 2018-2019 aircraft and engines operating lease framework agreement shall be not more than 144 months for each leasing of the aircraft and aircraft engines by CES Leasing to us.

2020–2022 Aircraft Finance Lease Framework Agreement

On August 30, 2019, we entered into an agreement relating to the renewal of the 2017–2019 Aircraft Finance Lease Framework

Agreement with CES Leasing on substantially the same terms, pursuant to which CES Leasing Group (as lessor(s)) agreed to provide finance lease to us (as lessee(s)) in respect of the aircraft (the “2020–2022 Aircraft Finance Lease Framework Agreement”) with reference to the transaction practices for years between the parties for aircraft finance lease. Pursuant to the 2020–2022 Aircraft Finance Lease Framework Agreement, for certain aircraft which we intend to purchase during the years from 2020 to 2022, if, as evaluated on requests for proposals, the finance plans proposed by CES Leasing are better than the plans proposed by other parties (including, but not limited to the overall financial cost quoted in the finance plans proposed by CES Leasing being more competitive than those under other plans), we agreed to select CES Leasing for relevant transactions.

2020–2022 Aircraft and Aircraft Engines Operating Lease Framework Agreement

On August 30, 2019, we entered into an agreement relating to the renewal of the 2018-2019 Aircraft and Aircraft Engines Operating Lease Framework Agreement with CES Leasing on substantially the same terms, pursuant to which CES Leasing Group (as lessor(s)) agreed to provide operating leasing to us (as lessee(s)) in respect of the aircraft and aircraft engines (the “2020–2022 Aircraft and Aircraft Engines Operating Lease Framework Agreement”) with reference to the transaction practices for years between parties for aircraft and engine operating leasing agreements. According to such agreement, if, as evaluated on requests for proposals, the operating lease plans proposed by CES Leasing are better than other plans, we agreed to select CES Leasing for relevant transactions.

For the year ended December 31, 2021, the actual amount paid by us for aircraft lease services (including aircraft finance lease and aircraft operating lease services) was approximately RMB6,103 million.

Transactions with Air France-KLM

On July 27, 2017, a wholly-owned subsidiary of CEA Holding and Delta Air Lines entered into a conditional subscription agreement with Air France-KLM, respectively, to acquire 10% newly issued shares in the share capital of Air France-KLM after the completion of issuance of additional shares. We entered into a marketing agreement with Air France-KLM to further strengthen the business partnership on the basis of good business relationship between the two parties.

On October 3, 2017, the trading of the fixed issuance of additional 10% shares to CEA Holding by Air France-KLM was completed in the Euronext. CEA Holding appointed Tang Bing, our director and then vice president as the director of Air France-KLM. According to the relevant requirements of the Shanghai Stock Exchange, the daily businesses such as joint operation and service security between us and Air France-KLM and its controlled subsidiaries constituted a related party transaction of the Company under the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange.

On December 22, 2017, the Board of Directors considered and approved the relevant resolution regarding the 2017-2019 daily related party transactions between Air France-KLM and us, pursuant to which, we will provide aircraft aviation transportation cooperation and support services to Air France-KLM and Air France-KLM will provide aircraft aviation transportation cooperation and support services to us. The Board of Directors also approved the 2017-2019 annual caps for the Air France-KLM aircraft aviation transportation cooperation and support services.

On August 10, 2018, a wholly-owned subsidiary of us entered into the aeronautical materials and components maintenance and spare parts supply service agreement and components lease service agreement with the wholly-owned subsidiary of Air France-KLM, KLM Royal Dutch Airlines, pursuant to which, KLM Royal Dutch Airlines will lease and maintain aeronautical material and spare parts for our 15 B787 airplanes to us for 15 years. The Board of Directors considered and approved the relevant transactions.

On October 30, 2018, a wholly-owned subsidiary of us entered into the aeronautical materials and components maintenance and spare parts supply service agreement and components lease service agreement with the wholly-owned subsidiary of Air France-KLM, Societe Air France, pursuant to which, Societe Air France will lease and maintain aeronautical material and spare parts for our 20 A350 airplanes to us for 15 years. The Board of Directors considered and approved the relevant transactions.

On August 30, 2019, the Board of Directors considered and approved the relevant resolution regarding the 2020-2022 daily related party transactions between Air France-KLM and us. The Board of Directors also approved the 2020-2022 annual caps for the Air France-KLM aircraft aviation transportation cooperation and support services.

For the year ended December 31, 2021, the actual amount of the Air France-KLM aircraft aviation transportation cooperation and support services received by us was approximately RMB14 million and the actual amount of the Air France-KLM aircraft aviation transportation cooperation and support services paid by us was approximately RMB65 million. The actual amount for the aeronautical materials, components and spare parts supply, leasing and maintenance services paid by us to Air France-KLM was approximately RMB22 million.

C. Interests of Experts and Counsel

Not applicable.

Item 8. Financial Information

A. Consolidated Statements and Other Financial Information

Financial Statements

Please read “Item 18. Financial Statements” for information regarding our audited consolidated financial statements.

Legal Proceedings

We are involved in routine litigation and other proceedings in the ordinary course of our business. We do not believe that any of these proceedings are likely to be material to our business operations, financial condition or results of operations.

Dividends and Dividend Policy

On March 29, 2018, the Board of Directors considered and approved the 2017 annual profit distribution proposal. It was recommended by the Board of Directors that the 2017 annual distribution be approximately RMB740.3 million in cash. Based on the total share capital of 14,467,585,682 shares of the Company, the cash distribution per share would be RMB0.051 (before tax) in cash which will be distributed to holders of A shares of the Company in RMB and to holders of H shares of the Company in HKD.

On March 29, 2019, the Board of Directors considered and approved the 2018 annual profit distribution proposal. According to the relevant requirements of the “Measures for the Administration of Securities Issuance and Underwriting” of the CSRC, “for issue securities by a listed company, in the event that any profit distribution proposal or proposal of conversion of the reserve into the share capital has not been submitted to its general meeting for voting or has been approved by the general meeting but has not yet been implemented, the issuance of securities shall proceed after such proposal has been implemented.” As the proposed non-public issuance of our A shares was under review by the CSRC and the project was strategically important to us, in order to guarantee the smooth progress of the proposed nonpublic issuance project, we intended not to proceed with cash dividend distribution or conversion of capital reserve into share capital for the year 2018, after comprehensively taking into account of our long-term development and the interests of all of our shareholders. The retained profits would be used to supplement our daily working capital, to fulfill our main business development needs.

We have, for the years ended December 31, 2016 and 2017, consecutively implemented profit distribution proposals to return to our investors. The accumulated profit distribution for the years ended December 31, 2016, 2017 and 2018 amounted to RMB1,446.8 million, which has exceeded the requirement provided in our Articles of Association that “the accumulated profit distribution made in cash by the Company in the latest three years shall not be less than 30% of the average annual distributable profit attributable to the owners of the parent company in the consolidated statements in the latest three years”.

The independent non-executive directors were of the view that the aforesaid 2018 annual profit distribution proposal of the Board of Directors had comprehensively considered the significance of our proposed non-public offering of shares, taking into account of our long-term development and the interests of all of our shareholders. The Board of Directors had performed the voting procedures for the matter in accordance with the requirements of relevant laws and regulations and considered that there is no circumstance detrimental to the interests of our shareholders, especially to our minority shareholders. Meanwhile, it would help us to ensure smooth implementation of our major capital projects, facilitate our healthy and sustainable development.

On March 31, 2020, the Board of Directors considered and approved the 2019 annual profit distribution proposal. It was recommended by the Board of Directors that the 2019 annual distribution be approximately RMB819 million in cash. Based on the total share capital of 16,379,509,203 shares of the Company, the cash distribution per share would be RMB0.050 (before tax) in cash which will be distributed to holders of A shares of the Company in RMB and to holders of H shares of the Company in HKD.

On March 30, 2021, the Board of Directors considered and approved the 2020 profit distribution proposal in the second regular meeting in 2021, and recommended the Company not to distribute profit for 2020.

On March 30, 2022, the Board of Directors considered and approved the 2021 profit distribution proposal in the second regular meeting in 2022, and recommended the Company not to distribute profit for 2021.

The independent non-executive directors of the Company consider that the Company’s 2021 profit distribution proposal is in line with the objective situation of the Company, that the consideration procedures are legal and valid, and that the proposal is in line with the PRC Company Law, the PRC Securities Law, relevant laws and regulations of the CSRC and the Shanghai Stock Exchange and the relevant provisions of the articles of association of the Company. The proposal does not damage the interests of investors, especially the interests of small and medium shareholders. The independent non-executive directors of the Company agreed to submit the 2021 profit distribution proposal to the 2021 annual general meeting of the Company for consideration.

The aforesaid profit distribution proposal is subject to consideration and approval by the shareholders at the 2021 general meeting of our Company.

Our Board of Directors declares dividends, if any, in Renminbi, with respect to H Shares on a per share basis and pays such dividends in HK dollars. Any final dividend for a fiscal year is subject to shareholders’ approval. The Bank of New York Mellon (the “BNYM”), as depositary, converts the HK dollar dividend payments and distributes them to holders of ADSs in U.S. dollars, less conversion expenses. Under PRC Company Law and our Articles of Association, all of our shareholders have equal rights to dividends and distributions. The holders of the H Shares share proportionately on a per share basis in all dividends and other distributions declared by our Board of Directors, if any, based on the foreign exchange conversion rate published by PBOC, on the date of the distribution of the cash dividend.

We believe that our dividend policy strikes a balance between two important goals providing our shareholders with a competitive return on investment and assuring sufficient reinvestment of profits to enable us to achieve our strategic objectives. The declaration of dividends is subject to the discretion of our Board of Directors, which takes into account the following factors:

•

our financial results;

•

capital requirements;

•

contractual restrictions on the payment of dividends by us to our shareholders or by our subsidiaries to us;

•

our shareholders interests;

•

the effect on our creditworthiness;

•

general business and economic conditions; and

•

other factors our Board of Directors may deem relevant.

Pursuant to PRC laws and regulations, dividends may only be distributed after allowance has been made for: (i) recovery of losses, if any and (ii) allocations to the statutory surplus reserve. The allocation to the statutory surplus reserve is 10% of our net profit determined in accordance with PRC Generally Accepted Accounting Principles. Our distributable profits for the current fiscal year will be equal to our net profits determined in accordance with IFRSs, less allocations to the statutory surplus reserve.

B. Significant Changes

Significant Post Financial Statements Events

On March 21, 2022, a Boeing 737-800 passenger plane with flight number MU5735 of China Eastern Airlines Yunnan Co., Ltd. crashed in Wuzhou, Guangxi, China. Authorities subsequently confirmed fatalities of the 132 passengers and crew members on board. The investigation of the cause of the accident is still in progress. Eastern Airlines Yunnan Co., Ltd. is cooperating with the relevant investigations and will continue to comfort the bereaved family and to properly handle the work at the aftermath.

Item 9. The Offer and Listing

A. Offer and Listing Details

The principal trading market for our H Shares is the HKEX (Code: 00670). The ADSs, each representing 50 H Shares, have been issued by BNYM as Depositary and are listed for trading on the NYSE under the symbol “CEA”. Prior to our initial public offering and subsequent listings on the NYSE and the HKEX on February 4 and 5, 1997, respectively, there was no market for our H Shares or ADSs. Our publicly traded domestic shares, or A shares, have been listed on the Shanghai Stock Exchange (Code: 600115) since November 5, 1997.

As of December 31, 2021, there were 5,176,777,777 H Shares issued and outstanding. As of December 31, 2021 and April 15, 2022, there were 57 and 57 registered holders, respectively, of American Depositary Receipts evidencing 1,223,463 and 1,223,463 ADSs, respectively. Since nominees hold certain of the ADSs, the above number may not be representative of the actual number of U.S. beneficial holders of ADSs or the number of ADSs beneficially held by U.S. persons. A total of 13,697,662,301 domestic ordinary shares were also outstanding as of December 31, 2021.

B. Plan of Distribution

Not applicable.

C. Markets

Our H Shares are listed for trading on the HKEX (Code: 00670), our ADSs are listed for trading on the NYSE under the symbol “CEA” and our A Shares are listed for trading on the Shanghai Stock Exchange (Code: 600115).

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

Item 10. Additional Information

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

The following is a brief summary of certain provisions of our Articles of Association, as amended. Such summary does not purport to be complete. For further information, you and your advisors should refer to the text of our Articles of Association, as amended, and to the texts of applicable laws and regulations. A copy of the English translation of our Articles of Association, as amended on November 10, 2021, is attached as an exhibit to this Annual Report on Form 20-F (which is incorporated by reference).

Selected Summary of the Articles of Association

We are a joint stock limited company established in accordance with the

Company Law of the People’s Republic of China

(the “Company Law”), the “State Council’s Special Regulations Regarding the Issue of Shares Overseas and the Listing of Shares Overseas by Companies Limited by Share” (the “Special Regulations”) and other relevant laws and regulations of the State. We are established by way of promotion with the approval under the document “Ti Gai Sheng” 1994 No. 140 of the PRC State Commission for Restructuring the Economic System. We are registered with and obtained a business license from China’s State Administration Bureau of Industry and Commerce on April 14, 1995. On February 8, 2017, we completed the “Combination of Three Licenses into One” procedures for our business license, organization code certificate and tax registration certificate. The unified social credit code of our business license after the integration is 913100007416029816.

We were incorporated in the PRC for the purpose of providing the public with safe, punctual, comfortable, fast and convenient air transport services and other ancillary services, to enhance the cost-effectiveness of these services and to protect the lawful rights and interests of shareholders.

Board of Directors

The Board of Directors shall consist of seven (7) to thirteen (13) directors, who are to be elected at the shareholders’ general meeting (excluding employee representative directors, who shall be elected or removed by employee representative assembly) and will hold a term of office for three (3) years. At least one-third of the members of the Board of Directors shall be independent directors. The directors are not required to hold shares of our Company.

Directors who are either directly or indirectly materially interested in a contract, transaction or arrangement or proposed contract, transaction or arrangement with our Company (other than his contract of service with our Company) shall declare the nature and extent of his interests to the Board of Directors at the earliest opportunity, whether or not the contract, transaction or arrangement or proposal is otherwise subject to the approval of the Board of Directors.

In accordance with our Articles, a director shall abstain from voting at a board meeting, the purpose of which is to approve contracts, transactions or arrangements that such director or any of his or her associates (as defined in the relevant rules governing the listing of securities) has a material interest in. Such director shall not be counted in the quorum for the relevant board meeting.

Unless the interested director discloses his interests in accordance with our Articles of Association and the contract, transaction or arrangement is approved by the Board of Directors at a meeting in which the interested director is not counted in the quorum and refrains from voting, a contract, transaction or arrangement in which that director is materially interested is voidable at the instance of our Company except as against a bona fide party thereto acting without notice of the breach of duty by the interested director. A director is also deemed to be interested in a contract, transaction or arrangement in which an associate of the director is interested.

Our Articles provide that our Company shall not in any manner pay taxes for or on behalf of a director or make directly or indirectly a loan to or provide any guarantee in connection with the making of a loan to a director of our Company or of our Company’s holding company or any of their respective associates. However, the following transactions are not subject to such prohibition: (i) the provision by our Company of a loan or a guarantee of a loan to a company which is a subsidiary of our Company; (ii) the provision by our Company of a loan or a guarantee in connection with the making of a loan or any other funds to any of its directors, administrative officers to meet expenditure incurred or to be incurred by him for the purposes of our Company or for the purpose of enabling him to perform his duties properly, in accordance with the terms of a service contract approved by the shareholders in general meeting; (iii) our Company may make a loan to or provide a guarantee in connection with the making of a loan to any of the relevant directors or their respective associates in the ordinary course of its business on normal commercial terms, provided that the ordinary course of business of our Company includes the lending of money or the giving of guarantees.

Our Articles do not contain any requirements for (i) the directors’ power to vote compensation to themselves or any members of their body, in the absence of an independent quorum or (ii) the directors to retire by a specified age.

Description of the Shares

As of December 31, 2021, our share capital structure was as follows: 18,874,440,078 ordinary shares, comprising a total of

13,697,662,301 A Shares, representing 72.57% of our total share capital, a total of 5,176,777,777 H Shares, representing 27.43% of our total share capital.

Our ordinary shareholders shall enjoy the following rights:

(i)

the right to dividends and other distributions in proportion to the number of shares held;

(ii)

the right to attend or appoint a proxy to attend Shareholders’ general meetings and to vote thereat;

(iii)

the right of supervisory management over the Company’s business operations, and the right to present proposals or enquiries;

(iv)

the right to transfer shares in accordance with laws, administrative regulations and provisions of these Articles of Association;

(v)

the right to obtain relevant information in accordance with the provisions of these Articles of Association, including:

(1)

the right to obtain a copy of these Articles of Association, subject to payment of the cost of such copy;

(2)

the right to inspect and copy, subject to payment of a reasonable charge;

(a)

all parts of the register of shareholders;

(b)

personal particulars of each of the Company’s directors, supervisors, general manager, deputy general managers and other senior administrative officers, including:

(aa)

present name and alias and any former name or alias;

(bb)

principal address (residence);

(cc)

nationality;

(dd)

primary and all other part-time occupations and duties;

(ee)

identification documents and their relevant numbers;

(c)

state of the Company’s share capital;

(d)

reports showing the aggregate par value, quantity, highest and lowest price paid in respect of each class of shares repurchased by the Company since the end of the last accounting year and the aggregate amount paid by the Company for this purpose;

(e)

minutes of Shareholders’ general meetings and the accountant’s report;

(vi)

in the event of the termination or liquidation of the Company, to participate in the distribution of surplus assets of the Company in accordance with the number of shares held; or

(vii)

other rights conferred by laws, administrative regulations and these Articles of Association.

A shareholder (including a proxy), when voting at a Shareholders’ general meeting, may exercise such voting rights in accordance with the number of shares carrying the right to vote and each share shall have one vote. Resolutions of shareholders’ general meetings shall be divided into ordinary resolutions and special resolutions. To adopt an ordinary resolution, votes representing more than one half of the voting rights represented by the shareholders (including proxies) present at the meeting must be exercised in favor of the resolution in order for it to be passed. To adopt a special resolution, votes representing more than two-thirds of the voting rights represented by the shareholders (including proxies) present at the meeting must be exercised in favor of the resolution in order for it to be passed. Our ordinary shareholders are entitled to the right to dividends and other distributions in proportion to the number of shares held, and they are not liable for making any further contribution to the share capital other than as agreed by the subscriber of the relevant shares on subscription. Our Articles of Association provide that a controlling shareholder (as defined in the Articles of Association) shall not approve certain matters which will be prejudicial to the interests of all or some of other shareholders by exercising his/her voting rights.

The Listing Agreement between us and the HKEX further provides that we may not permit amendments to certain sections of the Articles of Association subject to the Mandatory Provisions for the Articles of Association of Companies Listed Overseas promulgated by the State Council Securities Commission and the State Restructuring Commission on August 27, 1994 (the “Mandatory Provisions”). These sections include provisions relating to (i) varying the rights of existing classes of shares; (ii) voting rights; (iii) our power to purchase our own shares; (iv) rights of minority shareholders; and (v) procedures upon liquidation. In addition, certain amendments to the Articles of Association require the approval and assent of relevant PRC authorities.

Shareholders’ Meetings

Shareholders’ general meetings are divided into annual general meetings and extraordinary general meetings. Shareholders’ general meetings shall be convened by the Board of Directors. Annual general meetings are held once every year and within six (6) months from the end of the preceding financial year. The Board of Directors shall convene an extraordinary general meeting within two (2) months of the occurrence of any one of the following events:

(i)

where the number of directors is less than the number of directors required by Company Law or two-thirds of the number of directors specified in these Articles of Association;

(ii)

where the unrecovered losses of the Company amount to one-third of the total amount of its share capital;

(iii)

where shareholder(s) holding 10 per cent or more of the Company’s issued and outstanding shares carrying voting rights request(s) in writing the convening of an extraordinary general meeting; or

(iv)

when deemed necessary by the Board of Directors or as requested by the supervisory committee.

When we convene a shareholders’ general meeting, written notice of the meeting shall be given forty five (45) days before the date of the meeting to notify all of the shareholders in the share register of the matters to be considered and the date and place of the meeting. A shareholder who intends to attend the meeting shall deliver his written reply concerning the attendance of the meeting to us twenty (20) days before the date of the meeting. When we convene a shareholders’ annual general meeting, shareholders holding three per cent or more of the total voting shares of the Company shall have the right to propose new motions in writing, and we shall place those matters in the proposed motions within the scope of functions and powers of the Shareholders’ general meeting on the agenda.

Shareholders’ Rights

Set forth below is certain information relating to the H Shares, including a brief summary of certain provisions of the Articles, and selected laws and regulations applicable to us.

Sources of Shareholders’ Rights

The rights and obligations of holders of H Shares and other provisions relating to shareholder protection are principally provided in the Articles of Association and Company Law. The Articles of Association incorporate mandatory provisions in accordance with Mandatory Provisions. We are further subject to management ordinances applicable to the listed companies in Hong Kong SAR and the United States, as our H Shares are listed on the HKEX and the NYSE (in the form of ADSs).

In addition, for so long as the H Shares are listed on the HKEX, we are subject to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “HKSE Rules”), the

Securities and Futures Ordinance of Hong Kong

(the “SFO”) and the Hong Kong Code on Takeovers and Mergers and Share Repurchases.

Unless otherwise specified, all rights, obligations and protections discussed below are derived from the Articles of Association, Company Law and abovementioned laws and regulations.

Significant Differences in the H Shares and A Shares

Holders of H Shares and A Shares, with minor exceptions, are entitled to the same economic and voting rights. The Articles of Association provide that dividends or other payments payable to A shareholders shall be declared and calculated in Renminbi and paid in Renminbi, while those to H shareholders shall be declared and calculated in Renminbi and paid in the local currency at the place where such H Shares are listed (if there is more than one place of listing, then the principal place of listing as determined by the Board of Directors).

Restrictions on Transferability and the Share Register

All fully paid up H Shares will be freely transferable in accordance with the Articles of Association unless otherwise prescribed by laws and/or administrative regulations. There are no restrictions on the ability of investors who are not PRC residents to hold H Shares.

Pursuant to the Articles of Association, we may refuse to register a transfer of H Shares unless:

(1)

a fee (for each instrument of transfer) of HK$2.50 or any higher fee as agreed by the Stock Exchange has been paid to us for registration of any transfer or any other document which is related to or will affect ownership of or change of ownership of the shares;

(2)

the instrument of transfer only involves H Shares;

(3)

the stamp duty chargeable on the instrument of transfer has been paid;

(4)

the relevant share certificate and upon the reasonable request of the Board of Directors any evidence in relation to the right of the transferor to transfer the shares have been submitted;

(5)

if it is intended to transfer the shares to joint owners, then the maximum number of joint owners shall not exceed four (4); or

(6)

we do not have any lien on the relevant shares.

If we refuse to register any transfer of shares, we shall within two months of the formal application for the transfer provide the transferor and the transferee with a notice of refusal to register such transfer. No changes in the shareholders’ register due to the transfer of shares may be made within thirty (30) days before the date of a Shareholders’ general meeting or within five (5) days before the record date established for the purpose of distributing a dividend.

Merger and Acquisitions

In the event of the merger or division of our Company, a plan shall be presented by our Board of Directors and shall be approved in accordance with the procedures stipulated in our Articles of Association and then the relevant examining and approving formalities shall be processed as required by law. A shareholder who objects to the plan of merger or division shall have the right to demand that we or the shareholders who consent to the plan of merger or division acquire such dissenting shareholders’ shareholding at a fair price. The contents of the resolution of merger or division of our Company shall be made into special documents for shareholders’ inspection.

Repurchase of Shares

We may, with approval according to the procedures provided in these Articles of Association and subject to the approval of the relevant governing authority of the State, repurchase our issued shares under the following circumstances:

(i)

cancelation of shares for the reduction of capital;

(ii)

merging with another company that holds shares in our Company;

(iii)

issue of shares in connection with staff shareholding plans or share incentives;

(iv)

requesting our Company to purchase its own shares where shareholders object to the merger or demerger resolution of a general meeting;

(v)

issue of shares in connection with convertible bonds issued by the Company;

(vi)

deemed necessary by the Company for protecting the Company’s value and shareholders’ interests; or

(vii)

other circumstances permitted by relevant laws and administrative regulations.

We shall not repurchase our issued shares except under the circumstances stated above.

We may, with the approval of the relevant State governing authority for repurchasing shares, conduct the repurchase in one of the following ways:

(i)

making a pro rata general offer of repurchase to all our shareholders;

(ii)

repurchasing shares through public dealing on a stock exchange;

(iii)

repurchasing shares by an off-market agreement outside a stock exchange; or

(iv)

by any other mean which is permitted by law and administrative regulations and by the authorities in charge of the securities and stock exchanges in the place where our Company is listed.

Interested Shareholders

Articles 89 and 90 of our Articles of Association provide the following:

Article 89: the following circumstances shall be deemed to be a variation or abrogation of the class rights of a class:

(i)

to increase or decrease the number of shares of such class, or increase or decrease the number of shares of a class having voting or equity rights or privileges equal or superior to those of the shares of that class;

(ii)

to effect an exchange of all or part of the shares of such class into shares of another class or to effect an exchange or create a right of exchange of all or part of the shares of another class into the shares of such class;

(iii)

to remove or reduce rights to accrued dividends or rights to cumulative dividends attached to shares of such class; (iv) to reduce or remove a dividend preference or a liquidation preference attached to shares of such class;

(v)

to add, remove or reduce conversion privileges, options, voting rights, transfer or pre-emptive rights, or rights to acquire securities of the Company attached to shares of such class;

(vi)

to remove or reduce rights to receive payment payable by the Company in particular currencies attached to shares of such class;

(vii)

to create a new class of shares having voting or equity rights or privileges equal or superior to those of the shares of such class;

(viii)

to restrict the transfer or ownership of the shares of such class or add to such restrictions;

(ix)

to allot and issue rights to subscribe for, or convert into, shares in the Company of such class or another class; (x) to increase the rights or privileges of shares of another class;

(xi)

to restructure the Company where the proposed restructuring will result in different classes of shareholders bearing a disproportionate burden of such proposed restructuring; or

(xii)

to vary or abrogate the provisions of this Chapter.

Article 90. Shareholders of the affected class, whether or not otherwise having the right to vote at Shareholders’ general meetings, shall nevertheless have the right to vote at class meetings in respect of matters concerning sub-paragraphs (2) to (8), (11) and (12) of Article 89, but interested shareholder(s) shall not be entitled to vote at class meetings.

The meaning of “interested shareholder(s)” as mentioned in the preceding paragraph is:

in the case of a repurchase of shares by offers to all shareholders or public dealing on a stock exchange under Article 31, a “controlling shareholder” within the meaning of Article 54;

in the case of a repurchase of shares by an off-market contract under Article 31, a holder of the shares to which the proposed contract relates; and

in the case of a restructuring of the Company, a shareholder within a class who bears less than a proportionate obligation imposed on that class under the proposed restructuring or who has an interest in the proposed restructuring different from the interest of shareholders of that class.

Ownership Threshold

There are no ownership thresholds above which shareholder ownership is required to be disclosed.

Changes in Capital

Article 79(1) provides that any increase or reduction in share capital shall be resolved by a special resolution at a shareholders’ general meeting.

Changes in Registered Capital

The Company may reduce its registered share capital. It shall do so in accordance with Company Law, any other relevant regulatory provisions and the Articles of Association.

C. Material Contracts

For a summary of any material contracts entered into by our Company or any of our consolidated subsidiaries outside of the ordinary course of business during the last two years, see “Item 4. Information on the Company”, “Item 5. Operating and Financial Review and Prospects” and “Item 7. Major Shareholders and Related Party Transactions”.

D. Exchange Controls

The Renminbi is not currently a freely convertible currency. SAFE, under the authority of PBOC, controls the conversion of Renminbi into foreign currency. Prior to January 1, 1994, Renminbi could be converted to foreign currency through the Bank of China or other authorized institutions at official rates fixed daily by SAFE. Renminbi could also be converted at swap centers open to Chinese enterprises and foreign invested enterprises subject to SAFE approval of each foreign currency trade, at exchange rates negotiated by the parties for each transaction. Effective January 1, 1994, a unitary exchange rate system was introduced in China, replacing the dual-rate system previously in effect. In connection with the creation of a unitary exchange rate, the PRC government announced the establishment of an inter-bank foreign exchange market, the China Foreign Exchange Trading System, or CFETS, and the phasing out of the swap centers. Effective December 1, 1998, the swap centers were abolished by the PRC government.

On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. The PRC government further reformed the Renminbi exchange rate regime in 2012 and 2014. On August 11, 2015, the PBOC announced an adjustment to the mechanism of determining the midpoint price of Renminbi to the U.S. dollar to make the exchange rate of Renminbi more market-based. The modified mechanism allows traders to consider the closing exchange rate in the previous trading day when they quote the mid-point price for Renminbi against the U.S. dollar. The PRC government may make further adjustments to the exchange rate system in the future.

In general, under existing foreign exchange regulations, domestic enterprises operating in China must price and sell their goods and services in China in Renminbi. Any foreign exchange received by such enterprises must be sold to authorized foreign exchange banks in China. A significant portion of our revenue and operating expenses are denominated in Renminbi, while a portion of our revenue, capital expenditures and debts are denominated in U.S. dollars and other foreign currencies. Renminbi is currently freely convertible under the current account, which includes dividends, trade and service-related foreign currency transactions, but not under the capital account, which includes foreign direct investment, unless the prior approval of the SAFE, is obtained. As a foreign investment enterprise approved by the MOC, we can purchase foreign currency without the approval of SAFE for settlement of current account transactions, including payment of dividends, by providing commercial documents evidencing these transactions. We can also retain foreign exchange in our current accounts, subject to a maximum amount approved by SAFE, to satisfy foreign currency liabilities or to pay dividends. However, the relevant PRC government authorities may limit or eliminate our ability to purchase and retain foreign currencies in the future. Foreign currency transactions under the capital account are still subject to limitations and require approvals from SAFE. This may affect our ability to obtain foreign exchange through debt or equity financing, including by means of loans or capital contributions. We cannot assure you that we will be able to obtain sufficient foreign exchange to pay dividends or satisfy our foreign exchange liabilities.

E. Taxation

The taxation of income and capital gains of holders of H Shares or ADSs is subject to the laws and practices of China and of jurisdictions in which holders of H Shares or ADSs are resident or otherwise subject to tax. The following summary of certain relevant taxation provisions is based on current law and practice, is subject to change and does not constitute legal or tax advice. The discussion does not deal with all possible tax consequences relating to an investment in the H Shares or ADSs. In particular, the discussion does not address the tax consequences under state, local and other laws, such as non-U.S. federal laws. Accordingly, you should consult your own tax adviser regarding the tax consequences of an investment in the H Shares and ADSs. The discussion is based upon laws and relevant interpretations in effect as of the date of this Annual Report, all of which are subject to change

Hong Kong Taxation

The following discussion summarizes the relevant Hong Kong tax rules relating to the ownership of H shares or ADSs purchased in connection with the global offering and held by you.

Dividends

Under current Hong Kong Inland Revenue Department practice, no profits tax is payable by the recipient in respect of dividends we paid.

Taxation of Capital Gains

Gains derived from the sale of capital assets are specifically exempt from profits tax. Thus, no profits tax is imposed on capital gains arising from the sale of property (such as H shares) acquired and held as a capital asset. However, whether or not there has been a sale of a capital asset depends upon the particular circumstances of a case. If a person carries on a business in Hong Kong of trading and dealing in securities and derives trading gains from that business in Hong Kong, that person could be subject to profits tax on any assessable gains. Assessable gains include gains derived from the sales of H shares effected on the HKEX as these gains are considered to be trading gains derived from Hong Kong. Profits tax is currently charged at the rate of 16.5% for corporations and at the rate of 15% for unincorporated businesses (i.e. individuals). A concessionary tax rate (i.e. half of the current tax rate) can apply to corporations or unincorporated businesses for the first HK$2 million of assessable profits subject to applicable conditions.

No profits tax liability will arise on trading gains arising from the sale of ADSs where the purchase and sale is effected outside Hong Kong (e.g. on the NYSE).

Hong Kong Stamp Duty

Stamp duty is payable by each of the seller and the purchaser for every sold note and every bought note created for every sale and purchase of the H shares. Stamp duty is levied at the total rate of 0.26% (0.13% for each of sold note and bought note) of the value of the H shares transferred (the buyer and seller each paying half of such stamp duty). In addition, a fixed duty of HK$5 is currently payable on an instrument of transfer of H shares. If one of the parties to a sale is a non-resident of Hong Kong and does not pay the required stamp duty, the amount of unpaid stamp duty will be assessed on the instrument of transfer (if any), and the transferee will be liable for payment of such unpaid amount.

If the withdrawal of H shares when ADSs are surrendered or the issuance of ADSs when H shares are deposited results in a change of beneficial ownership in the H shares under Hong Kong law, stamp duty at the rate cited above for a sale and purchase transaction will apply. The issuance of ADSs for deposited H shares issued directly to the depositary, or for the account of the depositary, should not result in any stamp duty liability. Holders of the ADSs are not liable for the stamp duty on transfers of ADSs outside of Hong Kong so long as the transfers do not result in a change of beneficial interest in the H shares under Hong Kong law.

Hong Kong Estate Duty

Hong Kong estate duty was abolished with respect to persons passing away on or after February 11, 2006.

China Taxation

The following is a general summary of certain Chinese tax consequences of the acquisition, ownership and disposition of the H Shares and ADSs. This summary does not purport to address all material tax consequences of the ownership of Shares or ADSs, and does not take into account the specific circumstances of any particular investors. This summary is based on the tax laws of China as in effect on the date of this Annual Report, as well as on the U.S.- China Treaty, all of which are subject to change (or changes in interpretation), possibly with retroactive effect.

In general, and taking into account the earlier assumptions, for Chinese tax purposes, holders of ADRs evidencing ADSs will be treated as the owners of the H Shares represented by those ADSs, and exchanges of H Shares for ADSs, and ADSs for H Shares, will not be subject to Chinese tax.

Taxation of Dividends by China

Individual investors

The Provisional Regulations of China Concerning Questions of Taxation on Enterprises Experimenting with the Share System,

or the Provisional Regulations, provide that dividends from Chinese companies are ordinarily subject to a Chinese withholding tax levied at a flat rate of 20%. However, on July 21, 1993, the Chinese State Tax Bureau issued a Notice Concerning the Taxation of Gains on Transfer and Dividends from Shares (Equities) Received by Foreign Investment Enterprises, Foreign Enterprises and Foreign Individuals Numbered Guo Shui Fa [1993] No. 045, or No. 45 Document which provides that dividends from a Chinese company on shares listed on an overseas stock exchange, or Overseas Shares, such as H Shares (including H Shares represented by ADSs), would not be subject to Chinese withholding tax. The relevant tax authority has not collected withholding tax on dividend payments on Overseas Shares.

Nevertheless, No.45 Document was abolished on January 4, 2011 and the Chinese State Tax Bureau issued, on June 28, 2011, a Notice on Issues Concerning the Levy of Individual Income Tax following the Abolishment of the Document Numbered Guo Shui Fa [1993] No. 045, according to which dividends from a Chinese company are ordinarily subject to a Chinese withholding tax levied at a flat rate of 20% unless otherwise provided in applicable tax treaties between the PRC and the jurisdiction in which the relevant non-resident shareholder resides. The tax rate of dividends income tax applicable to Hong Kong residents and U.S. residents is 10% of the gross amount of interest.

On October 31, 2014, CSRC, MOF and STA together promulgated

The Notice of the Relevant Tax Policy of the Pilot Program for the Shanghai-Hong Kong Stock Connect

(Hereinafter refer to as Notice 81) which has been effective from November 17, 2014. Pursuant to Notice 81, for dividends acquired by mainland individual investors through investment in H-shares listed on the HKEX via Hong Kong-Shanghai Stock Connect, the H-share company shall apply to China Securities Depository and Clearing Corporation Limited (Hereinafter refer to as Chinese Clearing). Chinese Clearing shall provide the H-share company with the mainland individual’s investor rosters. The H-share company withholds the individual income tax at the tax rate of 20%. For dividends acquired by mainland securities investment funds through investment in shares listed on the HKEX via Hong Kong- Shanghai Stock Connect, the individual income tax shall be collected according to the regulations hereinbefore.

For dividends acquired by Hong Kong investors’ (including enterprises and individuals) through investment in A-shares listed on the Shanghai Stock Exchange, before Hong Kong Securities Clearing Limited (Hereinafter refer to as Hong Kong Clearing) meet the conditions to provide Chinese Clearing with detailed data of investors’ identity certification and time of shareholding, the different tax policy according to time of shareholding will temporarily not to be implemented. The listed company shall withhold the income tax at the tax rate of 10%, declare, and pay to the tax authorities.

Enterprises

Under the EIT Law amended in 2018 and the implementation regulations to the EIT Law amended on April 23, 2019, PRC income tax at the rate of 10% is applicable to dividends payable to investors that are “non-resident enterprises”, which do not have an establishment or place of business in the PRC, or which have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business. The rate could be reduced or eliminated pursuant to an applicable double taxation treaty.

In accordance with the Notice 81, (a) dividends acquired by mainland enterprise investors through investment in shares listed on the HKEX via Hong Kong-Shanghai Stock Connect will be accounted into their total income and subject to enterprise income tax according to the laws. Among those, for the dividends acquired by mainland enterprise investors through continuing holding H shares for 12 months, the enterprise income tax shall be exempted according to the laws; (b) the H-share company listed on the HKEX shall apply to the Chinese Clearing to offer them the mainland enterprise investor rosters. The H-share company does not withhold income tax from dividends for mainland enterprise investors. The enterprises shall declare and pay by themselves; and (c) the mainland enterprise investors may apply for tax credits for dividends already withheld by non-H-share listed companies on the HKEX when declaring and paying the enterprise tax income.

Tax Treaties

Non-Chinese investors resident in countries, which have entered into double-taxation treaties with China, may be entitled to a reduction of the withholding tax imposed on the payment of dividends to non-Chinese investors of our Company. China currently has double-taxation treaties with a number of other countries, including Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands, Singapore, the United Kingdom and the United States.

Notice 81 explicitly stipulated that for Hong Kong investors who are tax residents of other countries that have signed the tax agreement with China to regulate the tax rate for dividends, that income tax to be less than 10%, the enterprise or individual may, by themselves or withholding agents, apply for the treatment of the tax agreement to the tax authorities of listed companies. After examination and verification, the tax authorities shall reimburse the difference between the levied tax and the payable tax according to the tax agreement.

Under the U.S.-China Treaty, China may tax a dividend paid by our Company to a U.S. holder of H Shares or ADSs only up to a maximum of 10% of the gross amount of such dividend.

Taxation of Capital Gains by China

Individual Investors

According to the Law of Individual Income Tax and its implementation regulations, holders of H Shares or ADSs who have no domiciles and do not reside in China or who have no domiciles but have resided in China for less than one year shall be subject to individual income tax on their income gained within China, unless otherwise reduced or eliminated pursuant to an applicable double taxation treaty.

Notice 81 requires, (a) from November 17, 2014 to November 16, 2017, the income tax from transfer price difference will be temporarily exempted for mainland individual investors’ investment in shares listed on the HKEX through Hong Kong-Shanghai Stock Connect; (b) for mainland individual investors, the business tax from transfer price difference in the trading of shares listed on the HKEX through Hong Kong- Shanghai Stock Connect will be temporarily exempted according to current policy; and (c) the income tax and the business tax from transfer price difference will be temporarily exempted for Hong Kong individual investors’ investment in A-shares listed on the Shanghai Stock Exchange.

Under the U.S.-China Treaty, China may only tax gains from the sale or disposition by a U.S. holder of H Shares or ADSs representing an interest in the company of 25% or more.

Enterprises

Under the EIT Law and the implementation regulations to the EIT Law, gains realized upon the sale of Overseas Shares by “non-resident enterprises” may be subject to PRC taxation at the rate of 10% (or lower treaty rate).

Pursuant to Notice 81, the income tax from transfer price difference will be accounted into the total income and subject to enterprise income tax according to the laws for mainland enterprise investors’ investment in shares listed on the HKEX through Hong Kong-Shanghai Stock Connect. For mainland enterprise investors, the business tax from transfer price difference in the trading of shares listed on the HKEX through Hong Kong-Shanghai Stock Connect shall be levied and exempted according to current policy. Income tax and the business tax from transfer price difference will be temporarily exempted for Hong Kong enterprise investors’ investment in A-shares listed on the Shanghai Stock Exchange.

PRC Stamp Tax

Chinese stamp tax imposed on the transfer of shares of Chinese publicly traded companies under the Share System Tax Regulations should not apply to the acquisition or disposition by non-Chinese investors of H Shares or ADSs outside of China by virtue of the Provisional Regulations of the People’s Republic of China Concerning Stamp Tax, which provides that Chinese stamp tax is imposed only on documents executed or received within China or that should be considered as having been executed or received within China.

According to Notice 81, Hong Kong investors shall pay stamp duty according to mainland current tax policy when trading, inheriting, gifting the A- shares listed on the Shanghai Stock Exchange through Hong Kong-Shanghai Stock Connect.

United States Federal Income Taxation

Each potential investor is strongly urged to consult his, her or its own tax adviser to determine the particular U.S. federal, state, local, treaty and foreign tax consequences and U.S. reporting and compliance requirement of acquiring, owning or disposing of the H Shares or ADSs.

The following is a general discussion of material U.S. federal income tax consequences of purchasing, owning and disposing of the H Shares or ADSs if you are a U.S. Holder, as defined below, use the U.S. Dollar as your functional currency, and hold the H Shares or ADSs as capital assets within the meaning of Section 1221 of the

U.S. Internal Revenue Code of 1986

as amended (the “Code”). This discussion does not address all of the tax consequences relating to the purchase, ownership and disposition of the H Shares or ADSs, and does not take into account U.S. Holders (defined below) who may be subject to special rules including:

•

tax-exempt entities;

•

banks, financial institutions, and insurance companies;

•

real estate investment trusts, regulated investment companies and grantor trusts;

•

dealers or traders in securities, commodities or currencies;

•

U.S. Holders that own, actually or constructively, 10% or more of our voting stock;

•

persons who receive the H Shares or ADSs as compensation for services;

•

U.S. Holders that hold the H Shares or ADSs as part of a straddle or a hedging or conversion transaction;

•

persons that generally mark their securities to market for U.S. federal income tax purposes;

•

U.S. citizens or tax residents who are residents of the PRC;

•

U.S. citizens or tax residents who are subject to Hong Kong profits tax;

•

certain U.S. expatriates;

•

certain accrual method taxpayers subject to special tax accounting rules as a result of their use of financial statements;

•

a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) or pass-through entity (or a partner, member, or owner thereof);

•

persons who are resident or have a permanent establishment outside of the United States;

•

dual resident corporations; or

•

U.S. Holders whose functional currency is not the U.S. dollar.

Moreover, this description does not address U.S. federal estate, gift or alternative minimum taxes, the U.S. federal unearned Medicare contribution tax, or any state or local tax consequences of the acquisition, ownership and disposition of the H Shares or ADSs.

This discussion is based on the Code, its legislative history, final, temporary and proposed U.S. Treasury regulations promulgated thereunder, published rulings and court decisions as in effect on the date hereof, all of which are subject to change, or changes in interpretation, possibly with retroactive effect. In addition, this discussion is based in part upon representations of the depositary and the assumption that each obligation in the deposit agreement and any related agreements will be performed according to its terms.

You are a “U.S. Holder” if you are a beneficial owner of H Shares or ADSs and are:

•

an individual citizen or resident of the United States for U.S. federal income tax purposes;

•

a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States or any political subdivision or engaged in a US trade or business thereof;

•

an estate the income of which is subject to U.S. federal income tax without regard to its source; or

•

a trust if (i) a court within the United States is able to exercise primary supervision over it’s administration, and one or more U.S. persons have the authority to control all of the substantial decisions of such trust, or (ii) such trust has a valid election in effect to be treated as a U.S. person for U.S. federal income tax purposes.

If a partnership (including any entity treated as a partnership for U.S. federal tax purposes) is a beneficial owner of the H Shares or ADSs, the treatment of the partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. If an investor is a partner in a partnership that holds H Shares or ADSs, such investor should consult its tax advisor.

In general, if you hold ADRs evidencing ADSs, you will be treated as the owner of the H Shares represented by the ADSs. Exchanges of H shares for ADRs, and ADRs for H shares, generally will not be subject to U.S. federal income tax.

INVESTORS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSIDERATIONS APPLICABLE TO THEM RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE H SHARES OR ADSs, INCLUDING THE APPLICABILITY OF U.S. FEDERAL, STATE AND LOCAL TAX LAWS OR NON-U.S. TAX LAWS, ANY CHANGES IN APPLICABLE TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION OR REGULATIONS.

Distributions on the H Shares or ADSs

Subject to the discussion below under “— Passive Foreign Investment Company”, the gross amount of any distribution (without reduction for any withheld PRC tax) we make on the H Shares or ADSs out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) will be includible in your gross income as ordinary dividend income when the distribution is actually or constructively received by you, or by the depositary in the case of ADSs. Distributions that exceed our current and accumulated earnings and profits will be treated as a return of capital to you to the extent of your basis in the H Shares or ADSs and thereafter as capital gain. We, however, may not calculate earnings and profits in accordance with U.S. tax principles. Accordingly, it is expected that distributions by us to U.S. Holders, if any, will generally be treated as dividends. Any dividend will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of dividends received from U.S. corporations or foreign corporations. The amount of any distribution of property other than cash will be the fair market value of such property on the date of such distribution.

Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by certain non-corporate U.S. Holders will be subject to taxation at a maximum rate of 20% if the dividends are “qualified dividends.” Dividends paid on H Shares or ADSs will be treated as qualified dividends if either (i) we are eligible for the benefits of a comprehensive income tax treaty with the United States that the Internal Revenue Service, or IRS, has approved for the purposes of the qualified dividend rules, or (ii) the dividends are, with respect to ADSs, readily tradable on a U.S. securities market, provided that we were not, in each case, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign investment company, or PFIC. The Agreement Between the Government of the United States of America and the Government of the People’s Republic of China for the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income (the “Treaty”) has been approved for the purposes of the qualified dividend rules, and we expect to qualify for benefits under the Treaty. We are considered a qualified foreign corporation with respect to the ADSs because our ADSs are listed on the NYSE. There can be no assurance that our shares will be considered readily tradable on an established securities market in later years. Finally, based on our audited consolidated financial statements and relevant market data, we believe that we did not satisfy the definition for PFIC status for U.S. federal income tax purposes with respect to our 2021 taxable year. In addition, based on our audited consolidated financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market data, we do not anticipate becoming a PFIC for our 2022 taxable year or any future year. However, our status in the current year and future years will depend on our income and assets (which for this purpose depends in part on the market value of the H Shares or ADSs) in those years. See the discussion below under “— Passive Foreign Investment Company”. Our U.S. counsel expresses no opinion with respect to our expectations contained in this paragraph.

Holders of H Shares or ADSs should consult their own tax advisors regarding the availability of the reduced dividend tax rate in light of their own particular circumstances.

If we make a distribution paid in Hong Kong dollars, you may be treated as recognizing currency gain or loss to the extent the distributions on the H Shares or ADSs are affected by currency gains or losses. U.S. Holders should consult their own tax advisors regarding the calculation of non-U.S. currency gain or loss.

Subject to various limitations, any PRC tax withheld from distributions in accordance with the Treaty may be deductible or creditable against your U.S. federal income tax liability depending on the application of the section 904 foreign tax credit limitation provisions. Dividends paid by us generally will constitute income from sources outside the United States, however, there can be no assurance that you will be eligible to benefit from a foreign tax credit. The foreign tax credit rules are complex and U.S. Holders should consult their own tax advisors regarding the effect of these rules in their particular circumstance.

In the event we are required to withhold PRC income tax on dividends paid to U.S. Holders on the H Shares or ADSs (see discussion under “— China Taxation”), you may be able to claim a reduced 10% rate of PRC withholding tax if you are eligible for benefits under the Treaty. You should consult your own tax adviser about the eligibility for reduction of PRC withholding tax.

Sale, Exchange or Other Disposition

Subject to the discussion below under “— Passive Foreign Investment Company”, upon a sale, exchange or other disposition of the H Shares or ADSs, you will generally recognize capital gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the U.S. dollar value of the amount realized and your tax basis, determined in U.S. dollars, in such H Shares or ADSs. Generally, gain or loss recognized upon the sale or other disposition of H Shares or ADSs, will be long-term capital gain or loss if the U.S. Holder’s holding period for such H Shares or ADSs exceeds one year, and generally will be income or loss from sources within the United States. For non-corporate U.S. Holders, the U.S. income tax rate applicable to net long-term capital gain currently will not exceed 20%. The deductibility of capital losses is subject to significant limitations.

A U.S. Holder that receives foreign currency from a sale or disposition of H Shares or ADSs may be treated as recognizing currency gain or loss. U.S. Holders should consult their own tax advisors regarding the calculation of non-U.S. currency gain or loss.

Any gain or loss will generally be U.S. source gain or loss for foreign tax credit limitation purposes and as a result of the U.S. foreign tax credit limitation, foreign taxes, if any, imposed upon capital gains in respect of H Shares or ADSs may not be currently creditable. Under the Treaty, however, if any PRC tax were to be imposed on any gain from the disposition of H Shares or ADSs, the gain could be treated as PRC-source income. U.S. Holders are urged to consult their tax advisors regarding the interaction of the foreign tax credit and the Treaty “resourcing” rule.

Passive Foreign Investment Company

In general, a foreign corporation is a PFIC for any taxable year in which, after applying relevant look-through rules with respect to the income and assets of subsidiaries:

•

75% or more of its gross income consists of passive income, such as dividends, interest, rents, royalties, and gains from the sale of assets that give rise to such income; or

•

50% or more of the average quarterly value of its gross assets consists of assets that produce, or are held for the production of, passive income.

“Passive income” for this purpose includes, for example, dividends, interest, royalties, rents and gains from commodities and securities transactions. Passive income does not include rents and royalties derived from the active conduct of a trade or business. If the stock of a non-U.S. corporation is publicly traded for the taxable year, the asset test is applied using the fair market value of the assets for purposes of measuring such corporation’s assets. If we own, directly or indirectly, at least 25% (by value) of the stock of another corporation, we will be treated, for purposes of the PFIC tests, as owning our proportionate share of the other corporation’s assets and receiving our proportionate share of the other corporation’s income for purposes of the PFIC income and asset tests.

Based on the current and anticipated composition of our assets and income and the current expectations regarding the price of the H Shares and ADSs, we believe that we were not a PFIC for U.S. federal income tax purposes with respect to our 2021 taxable year and we do not intend to become or anticipate becoming a PFIC for the current or any future taxable year. However, the determination of PFIC status is a factual determination that must be made annually at the close of each taxable year and therefore, there can be no certainty as to our status in this regard until the close of the 2022 taxable year. Changes in the nature of our income or assets or a decrease in the trading price of the H Shares or ADSs may cause us to be considered a PFIC in the current or any subsequent year. Our U.S. counsel expresses no opinion with respect to our expectations contained in this paragraph.

If we were a PFIC in any taxable year that you held the H Shares or ADSs, certain adverse U.S. federal income tax rules would apply. You generally would be subject to special rules with respect to “excess distributions” made by us on the H Shares or ADSs and with respect to gain from your disposition of the H Shares or ADSs. An “excess distribution” generally is defined as the excess of the distributions you receive with respect to the H Shares or ADSs in any taxable year over 125% of the average annual distributions you have received from us during the shorter of the three preceding years, or your holding period for the H Shares or ADSs. Generally, you would be required to allocate any excess distribution or gain from the disposition of the H Shares or ADSs ratably over your holding period for the H Shares or ADSs. The portion of the excess distribution or gain allocated to a prior taxable year, other than a year prior to the first year in which we became a PFIC, would be taxed at the highest U.S. federal income tax rate on ordinary income in effect for such taxable year, and you would be subject to an interest charge on the resulting tax liability, determined as if the tax liability had been due with respect to such particular taxable years. The portion of the excess distribution or gain that is not allocated to prior taxable years, together with the portion allocated to the years prior to the first year in which we became a PFIC, would be included in your gross income for the taxable year of the excess distribution or disposition and taxed as ordinary income. If we were a PFIC in any year during a U.S. Holder’s holding period, we would generally be treated as a PFIC for each subsequent year absent a “purging” election by the U.S. Holder.

Under certain attribution rules, if we are a PFIC, you will be deemed to own your proportionate share (by value) of lower-tier PFICs, and will be subject to U.S. federal income tax on (i) a distribution on the shares of a lower-tier PFIC and (ii) a disposition of shares of a lower-tier PFIC, both as if you directly held the shares of such lower-tier PFIC.

These adverse tax consequences may be avoided if the U.S. Holder is eligible to and does elect to annually mark-to-market the H Shares or ADSs. If a U.S. Holder makes a mark-to-market election, such holder will generally include as ordinary income the excess, if any, of the fair market value of the H Shares or ADSs at the end of each taxable year over their adjusted basis, and will be permitted an ordinary loss in respect of the excess, if any, of the adjusted basis of the H Shares or ADSs over their fair market value at the end of the taxable year (but only to the extent of the net amount of income previously included as a result of the mark-to-market election). Any gain recognized on the sale or other disposition of the H Shares or ADSs will be treated as ordinary income. The mark-to-market election is available only for “marketable stock,” which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter on a qualified exchange or other market, as defined in the applicable Treasury regulations. The ADSs should qualify as “marketable stock” because the ADSs are listed on the NYSE. There can be no assurance that our shares will be considered readily tradable on an established securities market in later years. Further, the stock of any of our subsidiaries that were PFICs that is deemed owned pursuant to the attribution rules discussed above would not be eligible for the mark-to-market election.

A U.S. Holder’s adjusted tax basis in the H Shares or ADSs will be increased by the amount of any income inclusion and decreased by the amount of any deductions under the mark-to-market rules. If a U.S. Holder makes a mark-to-market election it will be effective for the taxable year for which the election is made and all subsequent taxable years, unless the H Shares or ADSs are no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election. U.S. Holders are urged to consult their tax advisors about the availability of the mark-to-market election, and whether making the election would be advisable in their particular circumstances.

Alternatively, a timely election to treat us as a qualified electing fund could be made to avoid the foregoing rules with respect to excess distributions and dispositions. You should be aware, however, that if we become a PFIC, we do not intend to satisfy record keeping requirements that would permit you to make a qualified electing fund election; you will, therefore, not be able to make or maintain such an election with respect to your H Shares or ADSs.

If we were regarded as a PFIC, a U.S. Holder of H Shares or ADSs generally would be required to file an information return on IRS Form 8621 for any year in which the holder received a direct or indirect distribution with respect to the H Shares or ADSs, recognized gain on a direct or indirect disposition of the H Shares or ADSs, or made an election with respect to the H Shares or ADSs, reporting distributions received and gains realized with respect to the H Shares or ADSs. In addition, if we were regarded as a PFIC, a U.S. Holder would be required to file an annual information return (also on IRS Form 8621) relating to the holder’s ownership of the shares or ADSs. This requirement would be in addition to other reporting requirements applicable to ownership in a PFIC. Once we are considered a PFIC, we will always be treated as a PFIC for all succeeding years.

We encourage you to consult your own tax adviser concerning the U.S. federal income tax consequences of holding the H Shares or ADSs that would arise if we were considered a PFIC.

Backup Withholding and Information Reporting

In general, information reporting requirements will apply to dividends in respect of the H Shares or ADSs or the proceeds of the sale, exchange, or redemption of the H Shares or ADSs paid within the United States, and in some cases, outside of the United States, other than to various exempt recipients, including corporations. In addition, you may, under some circumstances, be subject to “backup withholding” with respect to dividends paid on the H Shares or ADSs or the proceeds of any sale, exchange or transfer of the H Shares or ADSs, unless you:

are a corporation or fall within various other exempt categories, and, when required, demonstrate this fact; or

provide a correct taxpayer identification number on a properly completed IRS Form W-9 or a substitute form, certifying that you are exempt from backup withholding and otherwise comply with applicable requirements of the backup withholding rules.

Any amount withheld under the backup withholding rules generally will be creditable against your U.S. federal income tax liability or may be refunded to the extent they exceed such liability provided that you furnish the required information to the IRS in a timely manner. If you do not provide a correct taxpayer identification number you may be subject to penalties imposed by the IRS.

Certain U.S. Holders may be required to report information with respect to such holder’s interest in “specified foreign financial assets” (as defined in Section 6038D of the Code), including stock of a non-U.S. corporation that is not held in an account maintained by certain financial institutions, if the aggregate value of all such assets exceeds certain dollar thresholds. Persons who are required to report specified foreign financial assets and fail to do so may be subject to substantial penalties. U.S. Holders are urged to consult their own tax advisors regarding the foreign financial asset reporting obligations and their possible application to the holding of H Shares or ADSs.

Potential FATCA Consequences relating to the H Shares and ADSs

Under sections 1471-1474 of the Code and applicable U.S. Treasury regulations promulgated thereunder (commonly referred to as the Foreign Account Tax Compliance Act (“FATCA”)) as well as certain intergovernmental agreements between the United States and certain other countries together with implementing legislation and regulations, certain holders of the H Shares and ADSs may be required to provide information and tax documentation regarding their identities as well as that of their direct and indirect owners. It is also possible that payments in respect of the H Shares and ADSs may be subject to withholding tax of 30% (“FATCA withholding”) to the extent that such payments are considered to be “foreign passthru payments” to non-U.S. financial institutions (including intermediaries) that have not entered into agreements with the U.S. Treasury pursuant to FATCA or otherwise established an exemption from FATCA, or to other holders that fail to provide sufficient identifying information. Regulations defining “foreign passthru payments” have not yet been adopted or proposed, and the IRS has indicated in proposed Treasury regulations (the preamble to which specifies that taxpayers can rely on them prior to their finalization) that no withholding on foreign passthru payments will be required before the date that is two years after the date of publication of final Treasury regulations defining the term “foreign passthru payments”. Under current guidance it is not clear whether and to what extent payments on the H Shares and ADSs will be considered foreign passthru payments subject to FATCA withholding or the extent to which foreign passthru payment withholding will be required under intergovernmental agreements or implementing legislation or regulations. Holders of H Shares and ADSs should consult their tax advisers as to the potential implications of FATCA on their investment in the H Shares and ADSs.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

H. Documents on Display

You may read and copy documents referred to in this Annual Report on Form 20-F that have been filed with the Securities and Exchange Commission at its public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the SEC.

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.

The SEC allows us to “incorporate by reference” the information we file with the SEC. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this Annual Report on Form 20-F.

l. Subsidiary Information

For a listing of our significant subsidiaries, see “Item 4. Information on the Company — History and Development of the Company”.

Item 11. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

Our interest rate risk primarily arises from borrowings and lease liabilities. Borrowings issued at variable rates expose us to cash flow interest rate risk. Borrowings and finance leases issued at fixed rates expose us to fair value interest rate risk. We determine the proportion of borrowings and finance leases issued at variable rates and fixed rates based on the market environment.

Our finance department has been monitoring the level of interest rates. The increase in the interest rates will increase the interest costs of borrowings and finance leases issued at variable rates, which will further impact our performance. To hedge against the variability in the cash flows arising from a change in market interest rates, we have entered into certain interest rate swaps to swap variable rates into fixed rates. The interest rates and terms of repayment of borrowings made to us and interest rate swaps are disclosed in Notes 37 and 25 to the consolidated financial statements.

Foreign Currency Exchange Rate Risk

We operate our business in many countries and territories. We generate our revenue in different currencies, and the amount of our foreign currency liabilities at the end of the period is much higher than that of our foreign currency assets. Our major liability items (mainly resulting from purchases of aircraft) are mainly priced and settled in foreign currencies, primarily USD. We are exposed to currency risks from fluctuations in various foreign currency exchange rates against RMB.

The RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, we are permitted to exchange RMB for other currencies through banks authorized to conduct foreign exchange business.

In addition, fluctuations in foreign currency exchange rates will affect our future costs for purchases of aircraft, flight equipment and aviation fuel, and take-off and landing charges in foreign airports.

The following tables detail our exposure to major currency risk at the reporting date:


	2021
	USD RMB million			EUR RMB million			SGD RMB million			JPY RMB million
Trade receivables		11			5			—			3
Cash and cash equivalents		96			7			28			5
Other receivables		32			—			1			11
Other non-current assets		1,428			—			—			—
Trade and other payables		(118	)		(12	)		—			—
Lease liabilities		(30,710	)		(10	)		(6	)		(67	)
Borrowings		(13	)		(1,957	)		(2,371	)		—


	2020
	USD RMB million			EUR RMB million			SGD RMB million			JPY RMB million
Trade receivables		10			2			—			2
Cash and cash equivalents		968			4			3			3
Other receivables		115			3			1			12
Other non-current assets		150			—			—			—
Trade and other payables		(108	)		(1	)		—			—
Lease liabilities		(36,267	)		(8	)		(85	)		(142	)
Borrowings		(375	)		(2,664	)		(2,466	)		(3,162	)

The following tables indicate the approximate change in our consolidated statement of profit or loss and other comprehensive income in response to a 1% appreciation or depreciation of the RMB against the following major currencies at the reporting date:

2021

2020

Effect on
profit or loss

Effect on other
comprehensive
income

Effect on
profit or loss

Effect on other
comprehensive
income

RMB million

If RMB (weakens)/strengthens against USD

(222)/222

—

(266)/266

—

If RMB (weakens)/strengthens against JPY

0.36/(0.36

—

(25)/25

—

If RMB (weakens)/strengthens against EUR

(15)/15

—

(20)/20

—

If RMB (weakens)/strengthens against SGD

(18)/18

—

(19)/19

—

Fuel Price Fluctuation Risk

Jet fuel is a major component of our operating expenses and our results are significantly affected by the volatility in the price of jet fuel. For the year ended December 31, 2021, if fuel price had been 5% lower/higher with all other variables held constant, our fuel cost would have been RMB1,030 million lower/higher (2020: RMB692 million lower/higher).

Our policy is to reduce fuel price risk by hedging a percentage of its expected fuel consumption. Fuel forward contracts are used to achieve our desired hedging position. An increase of 5 percent in the jet fuel price at the reporting date would have resulted in a change in other comprehensive income by the amounts shown below. It represents the change in fair value of fuel forward contracts at the reporting date. The analysis assumes that all other variables remain constant.


	2021		2020
	Effect on other		Effect on other
	comprehensive		comprehensive
	income		income
	RMB million		RMB million
Fuel forward contracts		0		62

Equity Price Risk

We are exposed to equity price risk arising from individual equity investments included in financial asset at fair value through profit or loss (Note 30) and equity investments designated at fair value through other comprehensive income (Note 24) as of December 31, 2021. Our listed investments are listed on the Hong Kong and Shanghai stock exchanges and are valued at quoted market prices at the end of the reporting period.

The market equity indices for the following stock exchanges, at the close of business of the nearest trading day in the year to the end of the reporting period, and their respective highest and lowest points during the year were as follows:


	December 31,		High/Low		December 31,		High/Low
	2021		2021		2020		2020
Hong Kong – Hang Seng Index		23,398		31,183/22,665		27,231		29,056/21,696
Shanghai – A Share Index		3,640		3,732/3,313		3,640		3,640/2,788

The following table demonstrates the sensitivity to every 10% change in the fair values of the equity investments, with all other variables held constant, based on their carrying amounts at the end of the reporting period. For the purpose of this analysis, for the equity investments at fair value through other comprehensive income, the impact is deemed to be on the fair value reserve as of December 31, 2021.


	Carrying amount of equity investment RMB million		Increase/(decrease) in profit or loss RMB million			Increase/(decrease) in comprehensive income RMB million
2021 Investments listed in:
Hong Kong – Equity investment designated at fair value through other comprehensive income		237		—			18/	(18)
Shanghai – Financial asset at fair value through profit or loss		84		6/	(6)		—
Unlisted investments at fair value:
– Equity investment designated at fair value through other comprehensive income		220		—
2020
Investments listed in:
Hong Kong – Equity investment designated at fair value through other comprehensive income		457		—			34/	(34)
Shanghai – Financial asset at fair value through profit or loss		95		7/	(7)		—
Unlisted investments at fair value:
– Equity investment designated at fair value through other comprehensive income		538		—			40/	(40)

Item 12. Description of Securities Other than Equity Securities

A. Debt Securities

Not applicable.

B. Warrants and Rights

Not applicable.

C. Other Securities

Not applicable.

D. American Depositary Shares

Our ADSs, each representing 50 H shares, are traded on the NYSE under the symbol “CEA”. The ADSs are evidenced by American Depositary Receipts, or ADRs, issued by BNYM, as depositary under the Deposit Agreement, dated as of February 5, 1997, among the Company, BNYM and holders and beneficial owners of ADSs. BNYM’s principle executive office is at 240 Greenwich Street, New York City, New York, U.S. ADS holders are required to pay the following service fees to BNYM:


Service		Fees (in U.S. dollars)

Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property		US$5.00 (or less) per 100 ADSs (or portion thereof )
Cancelation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates		US$5.00 (or less) per 100 ADSs (or portion thereof )

Any cash distribution to ADS registered holders		US$0.05 (or less) per ADS (or portion thereof)
Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS registered holders		A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs
Depositary services		US$0.05 (or less) per ADS (or portion thereof)

Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares		Registration or transfer fees

Cable (including SWIFT) and facsimile transmissions (when expressly provided in the deposit agreement)		Expenses of the depositary

Converting foreign currency to U.S. dollars		Foreign exchange fees
As necessary		Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes

As necessary		Any charges incurred by the depositary or its agents for servicing the deposited securities

For the past annual period, from January 1, 2021 to December 31, 2021, the Company received continuing stock exchange annual listing fees and reimbursement fees from the depositary an aggregate of US$66,608.30 , and the depositary waived standard out-of-pocket maintenance costs for the ADRs (consisting of administrative expenses) of US$99,859.60.

BNYM, as depositary, has agreed to reimburse the Company for expenses incurred in the future in relation to the establishment and maintenance of the ADS program, which include standard out-of-pocket expenses such as postage and envelopes for mailing annual and interim financial reports and all related administrative and documentary expenses. BNYM has agreed to reimburse the Company annually for certain investor relationship programs and promotional activities. There are limits as to the amount of reimbursable expenses and this amount is not necessarily commensurate with the amount of fees BNYM collects from ADS investors. BNYM collects fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal. BNYM collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay fees. BNYM may also collect its annual fee by deducting cash distributions or by directly billing investors, or by charging the book-entry system accounts of participants acting for investors.

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

On August 10, 2010, we effected an ADS split whereby each ADS now represents 50 H shares. There was no change to the rights and preferences of the underlying H shares.

Item 15. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our President and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of the end of the period covered by this Annual Report. Our management, with the participation of President and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures, have concluded that as of the end of the period covered by this Form 20-F, our disclosure controls and procedures were effective to ensure that material information required to be disclosed in the reports that we file and furnish under Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and regulations.

Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information required to be disclosed by us in the reports that we file or submit under Exchange Act is accumulated and communicated to our management, including our President and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) and has designed internal control procedures over financial reporting or caused internal control procedures over financial reporting to be designed under our supervision in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles, as applicable. Under the supervision and with the participation of our President and our Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021 based upon the criteria in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)(the COSO criteria). Based on that evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2021.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness of our internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Attestation Report of the Registered Public Accounting Firm

The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers Zhong Tian LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Control over Financial Reporting

During 2021, there have been no changes in our internal control over financial reporting that occurred during the fiscal year covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 16A. Audit Committee Financial Expert

Our Board of Directors has determined that Mr. Sun Zheng, the chairman of our audit committee, is an independent financial expert serving on our audit committee, given his experience in the academic aspects of accounting and notable achievements in accounting education and academic research. Mr. Sun Zheng is independent of the Board of Directors, senior management, supervisors or substantial shareholders of our Company.

Item 16B. Code of Ethics

We have adopted a code of ethics that applies to our directors, supervisors, President, Chief Financial Officer and other senior managers of our Company. We have filed this code of ethics as Exhibit 11.1 to this annual report (which is incorporated by reference). A copy of our code of ethics will be provided to any person free of charge upon written request to Wang Jian, Secretary Office of the Board of Directors, China Eastern Airlines Corporation Limited at 5/F, Block A2, Northern District, CEA Building, 36 Hongxiang 3rd Road, Minhang District, Shanghai, China.

Item 16C. Principal Accountant Fees and Services

Ernst & Young Hua Ming LLP (“Ernst & Young”) served as our independent auditor for the fiscal year ended December 31, 2020. On June 23, 2021, we engaged PricewaterhouseCoopers Zhong Tian LLP served as our independent auditor for the fiscal year ended December 31, 2021. The following table sets forth the aggregate audit fees, audit-related fees and tax fees of our principal accountants for the years ended December 31, 2020 and 2021:


	Audit Fees		Audit-Related Fees		Tax Fees		All Other Fees
	(RMB)		(RMB)		(RMB)		(RMB)
2020 (1 )		15,900,000		430,000		484,374		—
2021 (2 )		12,000,000		—		—		—

Note :

(1). 2020 represents the fee obtained from audit work charged by Ernst & Young.

(2). 2021 represents the fee obtained from audit work charged by PricewaterhouseCoopers and PricewaterhouseCoopers Zhong Tian LLP.

Before our principal accountants were engaged by our Company or our subsidiaries to render audit or non-audit services, our audit committee approved the engagements.

Audit Fees

Audit fees primarily consist of fees for the audits of the Company’s financial statements prepared under both of IFRSs and

PRC Accounting Standards for Business Enterprises

as of and for the years ended December 31, 2020 and 2021.

Audit-Related Fees

Audit-Related fees for the year ended December 31, 2020 primarily consist of fees for the capital verification services, issuing comfort letters in respect of the statement relating to the sufficiency of working capital and the statement of indebtedness, and the verification services of revenue regarding the bellyhold space.

All Other Fees

All other fees for the year ended December 31, 2020 primarily consist of fees for the GDPR assessment service.

Audit Committee Pre-approval Policies and Procedures

Our audit committee has adopted procedures which set forth the manner in which the committee will review and approve all audit and non-audit services to be provided by our independent registered public accounting firm. The pre-approval procedures are as follows:

Any audit or non-audit service to be provided to us by the independent accountant must be submitted to the audit committee for review and approval, with a description of the services to be performed and the fees to be charged.

The audit committee in its sole discretion then approves or disapproves the proposed services and documents such approval, if given, through written resolutions or in the minutes of meetings, as the case may be.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers

On November 9, 2012, we held an extraordinary general meeting to approve, among other things, the proposals for the non-public issuance of A Shares and H Shares to specific placees.

On April 9, 2013, the Company obtained an approval from the CSRC, pursuant to which the CSRC approved the non-public issue by the Company to CEA Holding and CES Finance of no more than 698,865,000 new A Shares. On April 16, 2013, the procedure for registration of the new A Shares with the Shanghai Branch of China Securities Depository & Clearing Co. Ltd. was completed. The 698,865,000 new A Shares under this issue, at an issue price of RMB3.28 per share, are subject to a lock-up period of 36 months from the completion date of the issue and are expected to be listed on April 17, 2016.

The issuance of new H Shares was completed on June 21, 2013. A total of 698,865,000 new H Shares were issued to CES Global at the price of HK$2.32 per share.

Item 16F. Changes in Registrant’s Certifying Accountant

(a) Change of Principal Accountant

On March 30, 2021, the Board approved not to re-appoint our independent registered public accounting firm, which was approved by our shareholders at the annual general meeting held on June 23, 2021, Ernst & Young Hua Ming LLP (“Ernst & Young”) due to the relevant regulations issued by the MOF and the SASAC in December 2011. The relevant regulations restrict and limit the number of years that audit services can be continuously provided by an accounting firm to a PRC state-owned enterprise and its subsidiaries.

The audit reports of Ernst & Young on our consolidated financial statements for the two fiscal years ended December 31, 2019 and 2020 did not contain any adverse opinion or a disclaimer of opinion, nor were such reports qualified or modified in any way as to any uncertainty, audit scope, or accounting principles.

During the two fiscal years ended December 31, 2019 and 2020 and up to the subsequent interim period through June 23, 2021, when the shareholders approved not to re-appoint Ernst & Young , there were no disagreements (as that term is used in Item 16F (a)(1)(iv) of Form 20-F and the related instructions to Item 16F) with Ernst & Young on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Ernst & Young, would have caused Ernst & Young to make reference to the subject matter of the disagreements in its reports on the consolidated financial statements during the end of such fiscal years.

During the two fiscal years ended December 31, 2019 and 2020 and up to the subsequent interim period through June 23, 2021, there were no “reportable events” as that term described in paragraphs (a)(1)(v)(A)-(D) of Item 16F of Form 20-F.

We have provided Ernst & Young with a copy of the disclosures under Item 16F(a) as included herein and have requested that Ernst & Young furnish us with a letter addressed to the SEC stating whether Ernst & Young agrees with the foregoing statements. A copy of the letter dated April 28, 2022, furnished by Ernst & Young in response to that request was filed as Exhibit 15.1 to this Form 20-F.

(b) Engagement of New Principal Accountant

On March 30, 2021, the Board resolved to propose to appoint PricewaterhouseCoopers Zhong Tian LLP as the Company’s independent registered public accounting firm, which was approved by our shareholders at the annual general meeting held on June 23, 2021.

During the fiscal years ended December 31, 2020 and 2019 and the subsequent interim period through June 23, 2021, we has not consulted with PricewaterhouseCoopers Zhong Tian LLP. regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on our financial statements, and neither a written report was provided to us or oral advice was provided that PricewaterhouseCoopers Zhong Tian LLP concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as that term is defined in 16F (a)(1)(iv) of Form 20-F and the related instructions to Item 16F, or a reportable event, as that term is defined in 16F (a)(1)(v) of Form 20-F.

Item 16G. Corporate Governance

The NYSE has imposed a series of corporate governance listing standards for companies listed on the NYSE in Section 303A of its listing rules. However, the NYSE provides that listed companies that are foreign private issuers, subject to certain limitations and conditions, are permitted to follow “home country” practice in lieu of the provisions of Section 303A of the NYSE Listed Company Manual. To qualify for this exemption, a listed foreign private issuer must disclose any significant differences between their corporate governance practices and the requirements of the NYSE corporate governance standards.

As a foreign private issuer, we are subject to more than one set of corporate governance requirements. In the table below, we set out material differences between our corporate governance practices and the NYSE’s corporate governance requirements as set out in Section 303A of the Listed Company Manual:


	NYSE Listed Company Manual Requirements on Corporate Governance	Company’s Practices
Majority independent requirement of the Board of Directors	Section 303A.01 of the Listed Company Manual requires that listed companies must have a majority of independent directors.	There is no identical corporate governance requirement in the PRC. As a company listed in the PRC, the Company is subject to the requirement under the Independent Director Guidance that at least one-third of the Board of Directors be independent as determined thereunder. The standards for establishing independence set forth under the Independent Director Guidance of the PRC differ, to some extent, from those set forth in the NYSE Listed Company Manual. We currently have four independent directors out of a total of nine directors.

Non-management directors must meet at regularly scheduled executive sessions without management participation	Section 303A.03 of the Listed Company Manual requires non- management directors of each listed company to meet at regularly scheduled executive sessions without management participation.	There is no identical corporate governance requirement in the PRC.

Audit and Risk Management Committee	Sections 303A.06 and 303A.07 of the NYSE Listed Company Manual provides that listed companies must have an audit committee composed entirely of independent directors. In addition, audit committee members must satisfy the independence requirements set forth in Section 303A.02(a)(ii). The factors to be considered for independence include whether the committee member receives any consulting, advisory or other compensatory fees from the company and whether such director is affiliated with the listed company or its subsidiary.	There is no identical corporate governance requirement in the PRC. Under the PRC laws and the applicable listing rules in the PRC, a majority of the members of the audit committee must be independent directors. The Audit and Risk Management Committee of the Company is composed of three members, all of which are independent non-executive directors.

100


	NYSE Listed Company Manual Requirements on Corporate Governance	Company’s Practices

Nominating/Corporate Governance Committee	Section 303A.04 of the Listed Company Manual requires that (i) listed companies must have a nominating/corporate governance committee composed entirely of independent directors and (ii) the nominating/corporate governance committee must have a written charter that addresses the committee’s purposes and responsibilities and an annual performance evaluation of the committee.	The merger of the Nomination Committee and Remuneration and Appraisal Committee into the Nominations and Remuneration Committee was agreed at the ordinary meeting of the Board of Directors held on March 19, 2010. The Nominations and Remuneration Committee currently consists of three members, two of which are independent non-executive directors. The Nominations and Remuneration Committee is a specialized committee under the Board of Directors. It is responsible for the discussion in regard to nominees, standards and procedures for selecting directors and senior management of the Company and making recommendations; responsible for studying and examining the remuneration policy and solutions of directors and senior management of the Company; responsible for studying the performance appraisal standards for directors and senior management of the Company, conducting appraisals and making recommendation.

Compensation Committee	Section 303A.05 of the Listed Company Manual requires that listed companies must (i) have a compensation committee composed entirely of independent directors and (ii) the compensation committee must have a written charter that addresses the committee’s purposes and responsibilities and an annual performance evaluation of the committee.	We have established a Nominations and Remuneration Committee. The merger of the Nomination Committee and Remuneration and Appraisal Committee into the Nominations and Remuneration Committee was agreed at the ordinary meeting of the Board of Directors held on March 19, 2010. The Nominations and Remuneration Committee currently consists of three members, two of which are independent non-executive directors.

Code of Business Conduct and Ethics	Section 303A.10 requires a listed company to adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers from the code for directors or executive officers.	As required under the Sarbanes-Oxley Act of 2002 , the Company has adopted a code of ethics that is applicable to the Company’s directors, Supervisors, President, Chief Financial Officer and other senior managers.

In addition, we have posted a description of such differences under the section entitled “Corporate Governance” of our 2021 Hong Kong

Annual Report, which can be accessed through the following link:

https://www1.hkexnews.hk/listedco/listconews/sehk/2022/0427/2022042702334.pdf

Item 16H. Mine Safety Disclosures

Not applicable.

Item 16I. Disclosure Regarding Foreign Jurisdictions That Prevent Inspection

Not applicable.

101

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of China Eastern Airlines Corporation Limited

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of financial position of China Eastern Airlines Corporation Limited and its subsidiaries (the “Company”) as of December 31, 2021, and the related consolidated statements of profit or loss and other comprehensive income, of changes in equity and of cash flows for the year then ended, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in

Internal Control - Integrated Framework

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in

Internal Control - Integrated Framework

(2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 15. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

F-2

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Impairment tests of goodwill, aircraft and engines

As described in Note 19, Note 16 and Note 18 to the consolidated financial statements, as of December 31, 2021, the balance of the Group’s goodwill was RMB11,270 million and the balances of the Group’s owned and leased aircraft and engines were RMB70,916 million and RMB122,811 million, respectively. The goodwill, aircraft and engines were all allocated to the cash-generating unit of airline transportation operations. Management performs impairment test of goodwill annually and performs impairment test of aircraft and engines when indication of impairment exists. Based on impairment tests performed, the Group concluded that no impairment provision for goodwill, aircraft and engines was made as at December 31, 2021. The impairment tests involved management’s significant estimates and judgements, including revenue growth rates, long term growth rate, gross margin rates and discount rate.

The principal considerations for our determination that performing procedures relating to the impairment tests of goodwill, aircraft and engines is a critical audit matter are (i) the significant estimates, judgments and assumptions made by management; (ii) a high degree of auditor judgment and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, long term growth rate, gross margin rates, and discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of internal controls relating to management’s goodwill, aircraft and engines impairment tests. These procedures also included, among others (i) testing management’s process for the impairment tests; (ii) evaluating the appropriateness of the discounted cash flow model; (iii) testing the completeness and accuracy of underlying data used in the model; and (iv) evaluating the reasonableness of the significant assumptions used by management relating to the revenue growth rates, long term growth rate, gross margin rates, and discount rate. Evaluating management’s assumptions relating to the revenue growth rates, long term growth rate and gross margin rates involved assessing their reasonableness by considering (i) the current and past performance of the reporting unit; (ii) the consistency with external market and industry data. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Group’s discounted cash flow model, and the discount rate assumption.

Recognition of deferred tax assets

As described in Note 27 to the consolidated financial statements, as of December 31, 2021, the balance of the Group’s deferred tax assets was RMB 9,580 million. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilized. The significant assumptions used in future taxable profit forecast include annual revenue growth rates and gross margin rates.

The principal consideration for our determination that performing procedures relating to the recognition of deferred tax assets is a critical audit matter are (i) the significant judgment by management when determining whether deferred tax assets should be recognized, including a high degree of estimation uncertainty relative to the future taxable profit forecast; (ii) a high degree of auditor judgment and effort.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of internal controls relating to deferred tax assets recognition process, including internal controls over the development of future taxable profit forecast. These procedures also included, among others (i) testing management’s process for developing future taxable profit forecast; (ii) evaluating the appropriateness of future taxable profit forecast model; (iii) testing the completeness and accuracy of underlying data used in the model; and (iv) evaluating the reasonableness of the significant assumptions used by management relating to revenue growth rates and gross margin rates by considering (i) the current and past performance of the relevant entities; (ii) the consistency with external market and industry data.

F-3

Provision for lease return costs for aircraft and engines

As described in Note 38 to the consolidated financial statements, the balance of the Group’s provision for lease return costs for aircraft and engines under lease arrangements was RMB 7,270 million as of December 31, 2021. According to the terms in certain lease contracts, the Group has the obligation to fulfill the return conditions of aircraft and engines at the end of the lease terms. Management estimates the provision for lease return costs for aircraft and engines by taking into account the aircraft and engines utilization patterns and the estimated return costs.

The principal considerations for our determination that performing procedures relating to provision for lease return costs for aircraft and engines is a critical audit matter are the significant estimate and judgment by management in developing the estimated return costs, which in turn led to a high degree of auditor judgment and effort in evaluating management’s estimate and judgement.

Recognition of contract liabilities for frequent flyer programme

As discussed in Note 35 to the consolidated financial statements, the balance of the Group’s contract liabilities for frequent flyer programme was RMB 1,492 million as of December 31, 2021. The Group operates a frequent flyer programme that issues mileage points to program members. Mileage points can be used to redeem for free or discounted goods or tickets until expiration. The frequent flyer programme provides a significant right to the customers and the Group treats it as a single performance obligation. The Group allocates part of the transaction price to the mileage points which is deferred and recognized as contract liabilities for frequent flyer programme. The transaction price allocated to mileage points is estimated based on the historical prices of equivalent flights and goods which the mileage points can redeem for, adjusted for mileage points that are not expected to be redeemed (“the estimated Breakage”).

The principal considerations for our determination that performing procedures relating to recognition of contract liabilities for frequent flyer programme is a critical audit matter are the significant judgment by management when determining the estimated transaction price of mileage points and the estimated Breakage, which in turn led to a high degree of auditor judgment and effort in evaluating management’s estimate of transaction price allocated to mileage points, including the estimated Breakage.

/s/ PricewaterhouseCoopers Zhong Tian LLP

Shanghai, the People’s Republic of China

April 28, 2022

We have served as the Company’s auditor since 2021.

F-4

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of China Eastern Airlines Corporation Limited

Opinion on the Financial Statements

We have audited the accompanying consolidated statement of financial position of China Eastern Airlines Corporation Limited (the “Company”) as of December 31, 2020, the related consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

China Eastern Airlines Corporation Limited

Consolidated Statements of Profit or Loss and Other Comprehensive Income

For the years ended December 31, 2021, 2020 and 2019


	Notes		2021			2020			2019
	Notes		RMB million			RMB million			RMB million
Revenue		5		67,127			58,727			120,986
Other operating income and gains		6		6,079			5,698			7,202

Operating expenses
Aircraft fuel				(20,593	)		(13,840	)		(34,191	)
Take-off and landing charges				(10,251	)		(9,331	)		(16,457	)
Depreciation and amortisation				(22,718	)		(22,255	)		(22,080	)
Wages, salaries and benefits		8		(21,061	)		(20,827	)		(24,152	)
Aircraft maintenance				(3,783	)		(3,451	)		(3,380	)
Food and beverages				(1,655	)		(1,589	)		(3,667	)
Low value and short-term lease rentals				(383	)		(358	)		(631	)
Selling and marketing expenses				(1,128	)		(1,570	)		(4,134	)
Civil aviation development fund				(852	)		—			(1,831	)
Ground services and other expenses				(532	)		(872	)		(2,476	)
Impairment charges		9		(22	)		(184	)		(4	)
Impairment losses on financial assets, net		10		(28	)		(32	)		(16	)
Fair value changes of financial asset at fair value through profit or loss				(11	)		(26	)		25
Indirect operating expenses				(3,707	)		(3,930	)		(5,113	)

Total operating expenses				(86,724	)		(78,265	)		(118,107	)

Operating (loss)/profit		7		(13,518	)		(13,840	)		10,081
Share of result of associates		22		(97	)		(82	)		265
Share of result of joint ventures		23		(44	)		(13	)		17
Finance income		11		1,958			2,660			96
Finance costs		12		(5,812	)		(5,213	)		(6,160	)

(Loss)/profit before income tax				(17,513	)		(16,488	)		4,299
Income tax credit /(expense)		13		4,229			3,927			(819	)

(Loss)/profit for the year				(13,284	)		(12,561	)		3,480

(Loss)/profit is attributable to:
Equity holders of the Company				(12,214	)		(11,836	)		3,192
Non-controlling interests				(1,070	)		(725	)		288

				(13,284	)		(12,561	)		3,480

(Loss)/earnings per share attributable to the equity holders of the Company:
- Basic and diluted (expressed in RMB per share)		15		(0.73	)		(0.72	)		0.21

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Table of Contents

China Eastern Airlines Corporation Limited

Consolidated Statements of Financial Position

As at December 31, 2021 and 2020


	Note			December 31, 2021			December 31, 2020
	Note			RMB million			RMB million
Non-current assets
Property, plant and equipment		16			93,242			101,043
Investment properties		17			118			166
Right-of-use assets		18	(a)		126,875			118,210
Intangible assets		19			11,713			11,718
Advanced payments on acquisition of aircraft		20			12,165			17,240
Investments in associates		22			1,777			1,793
Investments in joint ventures		23			484			594
Equity investments designed at fair value through other comprehensive income		24			457			995
Derivative financial instruments		25			—			37
Deferred tax assets		27			9,580			5,011
Other non-current assets		26			4,469			5,345

					260,880			262,152

Current assets
Flight equipment spare parts		28			1,799			2,054
Trade receivables		29			974			1,124
Prepayments and other receivables		31			12,089			11,198
Financial assets at fair value through profit or loss		30			84			95
Derivative financial instruments		25			—			362
Restricted bank deposits		32			12			12
Cash and cash equivalents		32			12,950			7,651
Assets classified as held for sale		33			2			2

					27,910			22,498

Current liabilities
Trade and bills payables		34			2,454			3,220
Other payables and accruals		36			18,745			21,619
Contract liabilities		35			3,287			3,671
Current portion of borrowings		37			44,999			57,150
Current portion of lease liabilities		18	(b)		16,350			14,073
Income tax payable					55			48
Current portion of provision for lease return costs for aircraft and engines		38			—			24
Derivative financial instruments		25			1			3

					85,891			99,808

Net current liabilities					(57,981	)		(77,310	)

Total assets less current liabilities					202,899			184,842

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Table of Contents

China Eastern Airlines Corporation Limited

Consolidated Statements of Changes in Equity

For the year

ended December 31, 2021, 2020 and 2019


			Attributable to equity holders of the Company
	Note		Share capital		Other reserves			Retained earnings/ (accumulated losses)			Total			Non-controlling interests			Total equity
			RMB million		RMB million			RMB million			RMB million			RMB million			RMB million
At January 1, 2019				14,467		27,045			14,901			56,413			3,430			59,843

Comprehensive income:
Profit for the year				—		—			3,192			3,192			288			3,480
Other comprehensive income				—		(51	)		—			(51	)		4			(47	)

Total comprehensive income				—		(51	)		3,192			3,141			292			3,433

Total transaction with equity holders:
Issue of shares				1,912		7,530			—			9,442			—			9,442
Dividend paid to non-controlling interests				—		—			—			—			(84	)		(84	)
Transfer from retained profits				—		212			(212	)		—			—			—
Others				—		11			1			12			—			12

Balance at December 31, 2019				16,379		34,747	*		17,882	*		69,008			3,638			72,646

At January 1, 2020				16,379		34,747			17,882			69,008			3,638			72,646
Comprehensive income:
Loss for the year				—		—			(11,836	)		(11,836	)		(725	)		(12,561	)
Other comprehensive income				—		(104	)		—			(104	)		(6	)		(110	)

Total comprehensive income				—		(104	)		(11,836	)		(11,940	)		(731	)		(12,671	)

Total transaction with equity holders:
Dividends relating to 2019				—		—			(819	)		(819	)		—			(819	)
Dividend paid to non-controlling interests				—		—			—			—			(2	)		(2	)

Balance at December 31, 2020				16,379		34,643	*		5,227	*		56,249			2,905			59,154

At January 1, 2021				16,379		34,643			5,227			56,249			2,905			59,154

Comprehensive income:
Loss for the year				—		—			(12,214	)		(12,214	)		(1,070	)		(13,284	)
Other comprehensive income				—		(551	)		—			(551	)		(15	)		(566	)

Total comprehensive income				—		(551	)		(12,214	)		(12,765	)		(1,085	)		(13,850	)

Total transaction with equity holders:
Issue of ordinary shares, net of transaction costs and tax		41		2,495		8,325			—			10,820			—			10,820
Capital injection by non-controlling interests in subsidiaries		21		—		(689	)		—			(689	)		1,717			1,028
Transfer of gain on disposal of equity investments at fair value through other comprehensive income to retained earnings				—		(157	)		157			—			—			—

Balance at December 31, 2021				18,874		41,571	*		(6,830	)*		53,615			3,537			57,152

*	As at December 31, 2021, these reserve accounts comprise the consolidated reserves of RMB34,741 million (2020: RMB39,870 million, 2019: RMB52,629 million) in the consolidated statements of financial position.

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Table of Contents

China Eastern Airlines Corporation Limited

Consolidated Statements of Cash Flows

For the years ended December 31, 2021, 2020 and 2019


	Note			2021			2020			2019
	Note			RMB million			RMB million			RMB million
Cash flow from operating activities
Cash generated from operations		43	(a)		5,828			1,480			30,137
Income tax paid					(136	)		(269	)		(1,165	)

Net cash generated from operating activities					5,692			1,211			28,972

Cash flow from investing activities
Additions to property, plant and equipment and other non-current assets					(10,807	)		(7,247	)		(7,589	)
Investments in associates and joint ventures					(140	)		—			(110	)
Net proceeds/(payments) from disposal of a subsidiary					117			—			(90	)
Proceeds from disposal of property, plant and equipment					3,097			894			157
Proceeds from novation of purchase rights and others					8,793			—			2,366
Proceeds from disposal of intangible assets and land use rights					752			5			2
Proceeds from disposal of an equity investment					288			—			5
Dividends received					105			100			241
Settlement relating to derivative financial instruments					—			(28	)		104
Loan to a joint venture					—			(7	)		—
Proceeds from repayment of loans to a joint venture					4			—			15

Net cash generated from/(used in) investing activities					2,155			(6,283	)		(4,899	)

Cash flows from financing activities
Proceeds from issue of shares					10,820			—			9,442
Capital injection by non-controlling interests in a subsidiary					283			—			—
Proceeds from drarw-down of short-term bank loans					55,954			28,883			6,986
Proceeds from drarw-down of long-term bank loans					20,279			10,823			300
Proceeds from issuance of short-term debentures					39,000			77,200			39,000
Proceeds from issuance of long-term debentures and bonds					11,386			1,998			7,755
Proceeds from sales-leaseback of aircraft					686			—			—
Repayments of short-term bank loans					(40,329	)		(9,130	)		(12,868	)
Repayments of long-term bank loans					(4,490	)		(1,948	)		(4,033	)
Repayments of short-term debentures					(65,500	)		(69,200	)		(35,000	)
Repayments of long-term debentures and bonds					(8,523	)		(2,453	)		(5,567	)
Repayments of principal of lease liabilities					(15,725	)		(18,439	)		(23,895	)
Interest paid					(6,307	)		(5,482	)		(5,494	)
Settlement relating to derivative financial instruments					(60	)		(4	)		82
Dividends paid to Company’s shareholders					—			(819	)		—
Dividends paid to non-controlling interests of subsidiaries					—			(3	)		(83	)

Net cash (used in)/generated from financing activities					(2,526	)		11,426			(23,375	)

Net increase in cash and cash equivalents					5,321			6,354			698
Cash and cash equivalents at beginning of the year					7,651			1,350			646
Effects of exchange rate changes on cash and cash equivalents					(22	)		(53	)		6

Cash and cash equivalents at end of the year					12,950			7,651			1,350

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

1.	Corporate information

China Eastern Airlines Corporation Limited (the “Company”), a joint stock company limited by shares was established in the People’s Republic of China (the “PRC”) on April 14, 1995. The address of the Company’s registered office is 66 Airport Street, Pudong International Airport, Shanghai, the PRC. The Company and its subsidiaries (together, the “Group”) are principally engaged in the operation of civil aviation, including the provision of passenger, cargo, mail delivery and other extended transportation services.

In the opinion of the directors of the Company, the holding company and ultimate holding company of the Company is China Eastern Air Holding Company Limited (“CEA Holding”), a state-owned enterprise established in the PRC.

The A shares, H shares and American Depositary Shares of the Company are listed on the Shanghai Stock Exchange, the Stock Exchange of Hong Kong Limited and the New York Stock Exchange, respectively.

These financial statements were approved and authorised for issue by the Company’s Board of Directors (the “Board”) on April 28, 2022.

2	Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1	Basis of preparation

The accompanying consolidated financial statements have been prepared in accordance with all applicable International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) .

They have been prepared under the historical cost convention, except for equity investments designated at fair value through other comprehensive income, financial assets at fair value through profit or loss and derivative financial instruments which have been measured at fair value.

These financial statements are presented in Renminbi (“RMB”) and all values are rounded to the nearest million except when otherwise indicated.

(i)	Going concern

In 2021, the Group incurred net loss of RMB13.28 billion. As at December 31, 2021, the Group’s current liabilities exceeded its current assets by approximately RMB 57.98 billion. In preparing the financial statements, the Board has conducted a detailed review over the Group’s going concern ability based on its financial condition and operating results. The Board has also considered the following factors:

•

Sufficient unutilized banking facilities as at December 31, 2021;

•

The Group’s sound credit standing and history of cooperation with banks and other financial institutions; and

•

The Group’s expected net cash inflows from operating activities for not less than 12 months starting from the period end of the financial statements, considering the recovery of flights and the Group’s major operating costs including fuel prices during such period.

The Board believes that the Group has sufficient source of financing to enable it to operate, as well as to meet its liabilities as and when they become due, and to support its the capital expenditures in the forseeable future of not less than twelve months starting from the period end of the financial statements. Accordingly, the Board continued to prepare the Group’s financial statements as of and for the year ended December 31, 2021 on a going concern basis.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.1	Basis of preparation (continued)

(ii)	New and amended standards adopted by the Group

The Group has applied the following amendments for the first time for their annual reporting period commencing January 1, 2021:

Amendment to IFRS 16 -

COVID-19-related

rent concessions beyond June 30, 2021.

The Group has early adopted the amendment to IFRS 16. The Group previously applied the practical expedient in IFRS 16 such that as lessee it was not required to assess whether rent concessions occurring as a direct consequence of the

COVID-19

pandemic were lease modifications, if the eligibility conditions are met. One of these conditions requires that the reduction in lease payments affect only payments originally due on or before a specified time limit. The 2021 amendment extends this time limit from June 30, 2021 to June 30, 2022.

The eligible rent concessions are accounted for as negative variable lease payments, and are recognised in profit or loss in the period in which the event or condition that triggers those payments occurred.

There is no impact on the opening balance of equity at January 1

, 2021. The adoption of this new amendment did not give rise to significant impact on the Group’s result of operations and financial position for the year ended December 31, 2021.

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 - Interest Rate Benchmark Reform - Phase 2

The amendments focus on accounting reliefs once a new benchmark interest rate is in place. The reliefs have the effect that changing the basis for determining contractual cash flows for financial assets, financial liabilities and lease liabilities, that are as a direct consequence of the Inter-Bank Offered Rate (“IBOR”) reform and are economically equivalent, will not result in an immediate gain or loss in the profit or loss. The amendments also provide reliefs to allow hedge accounting to continue when the hedging relationships are directly affected by IBOR reform.

The amendments do not have an impact on the current reporting period as the Group has not moved any existing contracts to new benchmark interest rates. In addition, the Group considers that uncertainty remains over the timing and/or amounts of future cash flows indexed to benchmark interest rates and thus the Group continues to apply the existing accounting policies.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.1	Basis of preparation (continued)

(iii)

New standards and interpretations not yet adopted

Certain new accounting standards, amendments to accounting standards and interpretations have been published that are not mandatory for December 31, 2021 reporting periods and have not been early adopted by the Group. These standards, amendments or interpretations are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.


		Effective for accounting year beginning on or after
Amendments to IAS 16 - Property, Plant and Equipment: Proceeds before Intended Use		January 1, 2022
Amendments to IFRS 3 - Reference to the Conceptual Framework		January 1, 2022
Amendments to IAS 37 - Onerous Contracts — Cost of Fulfilling a Contract		January 1, 2022
Annual Improvements to IFRS Standards 2018–2020		January 1, 2022
IFRS 17 - Insurance Contracts		January 1, 2023 (deferred from January 1, 2021)
Amendments to IAS 1 - Classification of Liabilities as Current or Non-current		January 1, 2023 (deferred from January 1, 2022)
Amendments to IAS 1 and IFRS Practice Statement 2- Disclosure of Accounting Policies		January 1, 2023
Amendments to IAS 8 - Definitions of Accounting Estimates		January 1, 2023
Amendments to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a Single Transaction		January 1, 2023
Amendments to IFRS 10 and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture		To be determined

2.2	Principles of consolidation

(i)	Subsidiaries

Subsidiaries are all entities (including structured entities) over which the

roup has control. The Group controls an entity where the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the Group (refer to note 2.3).

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling

interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss, statement of comprehensive income, statement of changes in equity and balance sheet respectively.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.2	Principles of consolidation (continued)

(ii)	Associates

Associates are all entities over which the Group has significant influence but not control or joint control. This is generally the case where the Group holds between 20% and 50% of the voting rights.

Investments in associates are accounted for using the equity method of accounting (see (iv) below), after initially being recognised at cost.

(iii)

Joint ventures

Interests in joint ventures are accounted for using the equity method (see (iv) below), after initially being recognised at cost in the consolidated balance sheet.

(iv)	Equity method

Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment.

Where the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity.

Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity-accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Group.

The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in note 2.18.

(v)	Changes in ownership interests

The Group treats transactions with

non-controlling

interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and

non-controlling

interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to

non-controlling

interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of the Company.

When the Group ceases to consolidate or equity account for an investment because of a loss of control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

If the ownership interest in a joint venture or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.

F-1

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.3	Business combinations

The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:

•

fair values of the assets transferred

•

liabilities incurred to the former owners of the acquired business

•

equity interests issued by the Group

•

fair value of any asset or liability resulting from a contingent consideration arrangement, and

•

fair value of any

pre-existing

equity interest in the subsidiary.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any

non-controlling

interest in the acquired entity on an

acquisition-by-acquisition

basis either at fair value or at the

non-controlling

interest’s proportionate share of the acquired entity’s net identifiable assets.

Acquisition-related costs are expensed as incurred.

The excess of the consideration transferred, amount of any

non-controlling

interest in the acquired entity, and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognised in profit or loss.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss.

2.4	Separate financial statements

Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct attributable costs of investment. The results of subsidiaries are accounted for by the company on the basis of dividend received and receivable.

Impairment testing of the investments in subsidiaries is required upon receiving a dividend from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.

F-1

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.5	Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker(“CODM”). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the office of the General Manager that makes strategic decisions.

2.6	Foreign currency translation

(i)	Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The financial statements are presented in“RMB”, which is the functional and presentation currency of the Company and the Group’s entities.

(ii)	Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates, are generally recognised in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in profit or loss within “finance income” or “finance costs”.

2.7	Revenue recognition

(i)	Revenue from contracts with customers

Revenue from contracts with customers is recognised when control of goods or services is transferred to the customers at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.

When the consideration in a contract includes a variable amount, the amount of consideration is estimated to which the Group will be entitled in exchange for transferring the goods or services to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved.

When the contract contains a financing component which provides the customer with a significant benefit of financing the transfer of goods or services to the customer for more than one year, revenue is measured at the present value of the amount receivable, discounted using the discount rate that would be reflected in a separate financing transaction between the Group and the customer at contract inception. When the contract contains a financing component which provides the Group with a significant financial benefit for more than one year, revenue recognised under the contract includes the interest expense accreted on the contract liability under the effective interest method. For a contract where the period between the payment by the customer and the transfer of the promised goods or services is one year or less, the transaction price is not adjusted for the effects of a significant financing component, using the practical expedient in IFRS 15.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.7	Revenue recognition

(i)	Revenue from contracts with customers

(a)	Provision of services

Traffic revenue

Passenger, cargo and mail revenues are recognised as traffic revenue when the transportation is provided or when ticket breakage occurs. The value of sold but unused tickets is included in contract liabilities as sales in advance of carriage (“SIAC”). The Group estimates the value of passenger ticket breakage based on historical trends and experience and recognises revenue at the scheduled flight date.

Commission income

Commission income represents amounts earned from other carriers in respect of sales made by the Group on their behalf, and is recognised upon ticket sales.

Other operations incomes

Revenues from the provision of ground services, ticket cancellation services and other travel related services are recognised when the services are rendered.

(b)	Frequent flyer programme

The Group operates a frequent flyer programme called “Eastern Miles” that issues mileage points to program members based on accumulated mileage. Mileage points can be used to redeem for free or discounted goods or tickets until expiration. The frequent flyer programme provides a significant right to the customers and the Group treats it as a separate performance obligation. The Group defers a portion of passenger revenue attributable to the mileage points issued based on the relative stand-alone selling price approach and recognises revenue when the mileage points are redeemed and performance obligations are fulfilled or the mileage points expire unused. The stand-alone selling price of the mileage points was estimated based on the historical prices of equivalent flights and goods provided for mileage points redeemed and was adjusted for mileage points that are not expected to be redeemed (“Breakage”).

(c)	Sale of goods

Revenue from the sale of goods is recognised at the point in time when control of the asset is transferred to the customer.

(d)	Contract liabilities

A contract liability is recognised when a payment is received or a payment is due (whichever is earlier) from a customer before the Group transfers the related goods or services. Contract liabilities are recognised as revenue when the Group performs under the contract (i.e., transfers control of the related goods or services to the customer).

(ii)	Revenue from other sources

Rental income is recognised on a time proportion basis over the lease terms. Variable lease payments that do not depend on an index or a rate are recognised as income in the accounting period in which they are incurred.

F-1

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.8	Government grants

Government grants are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.

When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the costs, for which it is intended to compensate are expensed.

Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to profit or loss over the expected useful life of the relevant asset by equal annual instalments.

2.9	Maintenance and overhaul costs

Overhaul costs that meet specific recognition criteria are capitalised as a component of property, plant and equipment or

right-of-use

assets and are depreciated over the appropriate maintenance cycles.

Certain lease arrangements contain provisions for the Group‘s obligations to fulfil certain return conditions at the end of lease term. The Group estimated lease return costs for aircraft and engines and recognised such costs as part of the

right-of-use

asset and are depreciated over their respective lease term.

All other repairs and maintenance costs are charged to profit or loss as and when incurred.

2.10	Interest income

2.11	Dividend income

pre-acquisition

profits, unless the dividend clearly represents a recovery of part of the cost of an investment. In this case, the dividend is recognised in OCI if it relates to an investment measured at FVOCI. However, the investment may need to be tested for impairment as a consequence.

2.12	Borrowing costs

General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

Other borrowing costs are expensed in the period in which they are incurred.

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.13	Income tax

Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss is recognised outside profit or loss, either in other comprehensive income or directly in equity.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

(i)

(ii)

Deferred tax assets are recognised for all deductible temporary differences, and the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilised, except:

(i)

(ii)

in respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and deferred tax liabilities are offset if and only if the Group has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.15	Deferred pilot recruitment costs

Deferred pilot recruitment costs represent the costs borne by the Group in connection with securing a certain minimum period of employment of pilots and are amortised on a straight-line basis over the anticipated beneficial period of 5 years, starting from the date the pilot joins the Group.

2.16	Property, plant and equipment

Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses.

When an item of property, plant and equipment is classified as held for sale or when it is part of a disposal group classified as held for sale, it is not depreciated and is accounted for in accordance with IFRS 5, as further explained in the accounting policy for

“Non-current

assets and disposal groups held for sale”.

The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

When each major aircraft overhaul is performed, its cost is recognised in the carrying amount of the item of property, plant and equipment and is depreciated over the appropriate maintenance cycles. Components related to airframe overhaul cost, are depreciated on a straight-line basis over 5 to 7.5 years. Components related to engine overhaul costs, are depreciated between each overhaul period using the ratio of actual flying hours and estimated flying hours between overhauls. Upon completion of an overhaul, any remaining carrying amount of the cost of the previous overhaul is derecognised and charged to profit or loss.


Owned aircraft and engines		20 years
Other flight equipment, including rotables		10 years
Buildings		8 to 35 years
Other property, plant and equipment		3 to 20 years

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss. When revalued assets are sold, it is group policy to transfer any amounts included in other reserves in respect of those assets to retained earnings.

Construction in progress represents a building under construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowed funds during the period of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use.

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.17	Investment properties

Investment properties are interests in land and buildings held to earn rental income and/or for capital appreciation, rather than for use in the production or supply of goods or services or for administrative purposes, or for sale in the ordinary course of business. Such properties are measured initially at cost, including related transaction costs. After initial recognition, the Group chooses the cost model to measure all of its investment properties.

Depreciation is calculated on the straight-line basis to write off the cost to its residual value over its estimated useful life. The estimated useful lives are as follows:


Buildings		20 to 35 years

The carrying amounts of investment properties measured using the cost method are reviewed for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable.

Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year of the retirement or disposal.

2.18	Impairment of non-financial assets

Non-financial

assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

2.19	Non-current assets and disposal groups held for sale

Non-current

assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sales transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets that are carried at fair value, which are specifically exempt from this requirement.

Non-current

assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale.

2.20	Advanced payments on acquisition of aircraft

Advanced payments on acquisition of aircraft represent payments to aircraft manufacturers to secure deliveries of aircraft in future years, including attributable borrowing costs, and are included in

non-current

assets. The balance is transferred to property, plant and equipment upon delivery of the aircraft.

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.21	Flight equipment spare parts

Flight equipment spare parts are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method. The cost of flight equipment spare parts comprises the purchase price (net of discounts), freight charges, duty and other miscellaneous charges. Net realisable value is the estimated selling price of the flight equipment spare parts in the ordinary course of business, less applicable selling expenses.

2.22	Investments and other financial assets

(i)	Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income, and fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient of not adjusting the effect of a significant financing component, the Group initially measures a financial asset at its fair value, plus in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15 in accordance with the policies set out for “Revenue recognition”.

In order for a financial asset to be classified and measured at amortised cost or fair value through other comprehensive income, it needs to give rise to cash flows that are solely payments of principal and interest (“SPPI”) on the principal amount outstanding. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.

The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows, while financial assets classified and measured at fair value through other comprehensive income are held within a business model with the objective of both holding to collect contractual cash flows and selling. Financial assets which are not held within the aforementioned business models are classified and measured at fair value through profit or loss.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.22	Investments and other financial assets (continued)

(ii)	Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at amortised cost (debt instruments)

Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognised in the statement of profit or loss when the asset is derecognised, modified or impaired.

Financial assets at fair value through other comprehensive income (debt instruments)

For debt investments at fair value through other comprehensive income, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the statement of profit or loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in other comprehensive income. Upon derecognition, the cumulative fair value change recognised in other comprehensive income is recycled to the statement of profit or loss.

Financial assets designated at fair value through other comprehensive income (equity investments)

Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity investments designated at fair value through other comprehensive income when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an

instrument-by-instrument

basis.

Gains and losses on these financial assets are never recycled to the statement of profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established, it is probable that the economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case such gains are recorded in other comprehensive income. Equity investments designated at fair value through other comprehensive income are not subject to impairment assessment.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss.

This category includes derivative instruments and equity investments which the Group had not irrevocably elected to classify at fair value through other comprehensive income. Dividends on equity investments classified as financial assets at fair value through profit or loss are also recognised as other income in the statement of profit or loss when the right of payment has been established, it is probable that the economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

A derivative embedded in a hybrid contract, with a financial liability or

non-financial

host, is separated from the host and accounted for as a separate derivative if the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognised in the statement of profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category.

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.22	Investments and other financial assets (continued)

(iii)

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when:

(i)

the rights to receive cash flows from the asset have expired; or

(ii)

the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group’s continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.22	Investments and other financial assets (continued)

(iv)	Impairment

The Group recognises an allowance for expected credit losses (“ECLs”) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

General approach

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a

12-month

ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

At each reporting date, the Group assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information that is available without undue cost or effort, including historical and forwardlooking information.

The Group considers a financial asset in default when contractual payments are past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

Debt investments at fair value through other comprehensive income and financial assets at amortised cost are subject to impairment under the general approach and they are classified within the following stages for measurement of ECLs except for trade receivables and contract assets which apply the simplified approach as detailed below.

Stage 1 — Financial instruments for which credit risk has not increased significantly since initial recognition and for which the loss allowance is measured at an amount equal to

12-month

ECLs

Stage 2 — Financial instruments for which credit risk has increased significantly since initial recognition but that are not credit-impaired financial assets and for which the loss allowance is measured at an amount equal to lifetime ECLs

Stage 3 — Financial assets that are credit-impaired at the reporting date (but that are not purchased or originated credit impaired) and for which the loss allowance is measured at an amount equal to lifetime ECLs

Simplified approach

For trade receivables and contract assets that do not contain a significant financing component or when the Group applies the practical expedient of not adjusting the effect of a significant financing component, the Group applies the simplified approach in calculating ECLs. Under the simplified approach, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.23	Financial liabilities

(i)	Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, derivative financial instruments, lease liabilities, interest-bearing bank and other borrowings.

(ii)	Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

Financial liabilities at amortised cost

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in the statement of profit or loss when the liabilities are derecognised as well as through the effective interest rate amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance costs in the statement of profit or loss.

(iii)

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the statement of profit or loss.

2.24	Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

F-2

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.25	Derivatives and hedging activities

Initial recognition and subsequent measurement

The Group uses derivative financial instruments, such as forward currency contracts, interest rate swaps and fuel forward contracts, to hedge its foreign currency risk, interest rate risk and fuel price risk, respectively. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

The fair value of commodity purchase contracts that meet the definition of a derivative as defined by IFRS 9 is recognised in the statement of profit or loss as cost of sales. Commodity contracts that are entered into and continue to be held for the purpose of the receipt or delivery of a

non-financial

item in accordance with the Group’s expected purchase, sale or usage requirements are held at cost.

Any gains or losses arising from changes in fair value of derivatives are taken directly to the statement of profit or loss, except for the effective portion of cash flow hedges, which is recognised in other comprehensive income and later reclassified to profit or loss when the hedged item affects profit or loss.

For the purpose of hedge accounting, hedges are classified as:

•

fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment; or

•

cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction, or a foreign currency risk in an unrecognised firm commitment; or

•

hedges of a net investment in a foreign operation.

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting, the risk management objective and its strategy for undertaking the hedge.

The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:

•

There is “an economic relationship” between the hedged item and the hedging instrument.

•

The effect of credit risk does not “dominate the value changes” that result from that economic relationship.

•

The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.25	Derivatives and hedging activities (continued)

Hedges which meet all the qualifying criteria for hedge accounting are accounted for as follows:

(i)	Cash flow hedges

The effective portion of the gain or loss on the hedging instrument is recognised directly in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit or loss. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item.

non-financial

item, the amount accumulated in equity is removed from the separate component of equity and included in the initial cost or other carrying amount of the hedged asset or liability. This is not a reclassification adjustment and will not be recognised in other comprehensive income for the period. This also applies where the hedged forecast transaction of a

non-financial

asset or

non-financial

liability subsequently becomes a firm commitment to which fair value hedge accounting is applied.

(ii)	Fair value hedges

The change in the fair value of a hedging instrument is recognised in the statement of profit or loss as other expenses. The change in the fair value of the hedged item attributable to the risk hedged is recorded as a part of the carrying amount of the hedged item and is also recognised in the statement of profit or loss as other expenses.

For fair value hedges relating to items carried at amortised cost, the adjustment to carrying value is amortised through the statement of profit or loss over the remaining term of the hedge using the effective interest rate method. Effective interest rate amortisation may begin as soon as an adjustment exists and shall begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. If the hedged item is derecognised, the unamortised fair value is recognised immediately in the statement of profit or loss.

When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in the statement of profit or loss. The changes in the fair value of the hedging instrument are also recognised in the statement of profit or loss.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.25	Derivatives and hedging activities (continued)

Current versus

non-current

classification

Derivative instruments that are not designated as effective hedging instruments are classified as current or

non-current

or separated into current and

non-current

portions based on an assessment of the facts and circumstances (i.e., the underlying contracted cash flows).

•

Where the Group expects to hold a derivative as an economic hedge (and does not apply hedge accounting) for a period beyond 12 months after the end of the reporting period, the derivative is classified as

non-current

(or separated into current and

non-current

portions) consistently with the classification of the underlying item.

•

Embedded derivatives that are not closely related to the host contract are classified consistently with the cash flows of the host contract.

•

non-current

portions only if a reliable allocation can be made.

2.26	Trade receivables

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30 days and therefore all classified as current.

Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Group holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. See note 29 for further information about the Group’s accounting for trade receivables and note 48.1 for a description of the Group’s impairment policies.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.27	Cash and cash equivalents

For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

For the purpose of the consolidated statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including assets similar in nature to cash, which are not restricted as to use.

2.28	Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as finance costs.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

2.29	Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a

pre-tax

rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

For the contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it, the present obligation under the contract is recognised and measured as a provision.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.30

Leases

The Group assesses at contract inception whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

(i)

As lessee

Leases are recognised as a

right-of-use

asset and a corresponding liability at the date at which the leased asset is available for use by the Group.

Contracts may contain both lease and

non-lease

components. The Group allocates the consideration in the contract to the lease and

non-lease

components based on their relative stand-alone prices.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

•

fixed payments (including

in-substance

fixed payments), less any lease incentives receivable

•

variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date

•

amounts expected to be payable by the Group under residual value guarantees

•

the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and

•

payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

right-of-use

asset in a similar economic environment with similar terms, security and conditions.

To determine the incremental borrowing rate, the Group:

•

where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received

•

uses a

build-up

approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which does not have recent third-party financing, and

•

makes adjustments specific to the lease, e.g., term, country, currency and security.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.30	Leases (continued)

(i)	As lessee (continued)

right-of-use

asset.

Right-of-use

assets are measured at cost, less any accumulated depreciation and any impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of

right-of-use

assets comprising the following:

•

the amount of the initial measurement of lease liability

•

any lease payments made at or before the commencement date less any lease incentives received

•

any initial direct costs, and

•

restoration costs.

Except for engine overhaul costs are depreciated between each overhaul period using the ratio of actual flying hours and estimated flying hours between overhauls,

right-of-use

assets are depreciated on a straight-line basis over the shorter of the lease terms and the estimated useful lives of the assets as follows:


Aircraft and engines under leases			5 to 20 years
Buildings			2 to 10 years
Prepayments for land use rights			40 to 50 years
Others			2 to 5 years

If the Group is reasonably certain to exercise a purchase option, the

right-of-use

asset is depreciated over the underlying asset’s useful life.

low-value

assets to leases of assets that are considered to be of low value. Lease payments on short-term leases and leases of

low-value

assets are recognised as an expense on a straight-line basis over the lease term.

(ii)

As lessor

When the Group acts as a lessor, it classifies at lease inception (or when there is a lease modification) each of its leases as either an operating lease or a finance lease.

Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. When a contract contains lease and

non-lease

components, the Group allocates the consideration in the contract to each component on a relative stand-alone selling price basis. Rental income is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.

Leases that transfer substantially all the risks and rewards incidental to ownership of an underlying asset to the lessee are accounted for as finance leases.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.30	Leases (continued)

(iii)

Sales and leaseback

The Group applies the requirements for determining when a performance obligation is satisfied in IFRS15 to determine whether the transfer of an asset is accounted for as a sale of that asset.

As seller-lessee

If the transfer of an asset by the seller-lessee satisfies the requirements of IFRS15 to be accounted for as a sale of the asset, the Group measures the

right-of-use

asset arising from the leaseback at the proportion of the previous carrying amount of the asset that relates to the right of use retained by the seller-lessee. Accordingly, the Group recognises only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor. If the fair value of the consideration for the sale of an asset does not equal the fair value of the asset, or if the payments for the lease are not at market rates, the Group makes the following adjustments to measure the sale proceeds at fair value: a) any below-market terms shall be accounted for as a prepayment of lease payments; and b) any above-market terms shall be accounted for as additional financing provided by the buyer-lessor to the seller-lessee. The potential adjustment required is measured on the basis of the more readily determinable of: a) the difference between the fair value of the consideration for the sale and the fair value of the asset; and b) the difference between the present value of the contractual payments for the lease and the present value of payments for the lease at market rates.

applying IFRS 9.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.31	Retirement benefits

(i)	Defined contribution plans

The Group participates in schemes regarding pension and medical benefits for employees organised by the municipal governments of the relevant provinces. Contributions to these schemes are expensed as incurred.

The Group also implements an additional defined contribution pension benefit scheme (annuity) for voluntary eligible employees. Contributions are made based on a percentage of the employees’ total salaries and are charged to profit or loss as incurred.

(ii)	Defined benefit plan

The Group provides eligible retirees with certain post-retirement benefits including retirement subsidies, transportation allowance as well as other welfare. The defined post-retirement benefits are unfunded. The cost of providing benefits under the post-retirement benefit plan is determined using the projected unit credit actuarial valuation method.

Remeasurements arising from the post-retirement benefit plan, comprising actuarial gains and losses, the effect of the asset ceiling (excluding net interest) and the return on plan assets (excluding net interest), are recognised immediately in the consolidated statement of financial position with a corresponding debit or credit to equity through other comprehensive income in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.

Past service costs are recognised in profit or loss at the earlier of:

•

the date of the plan amendment or curtailment; and

•

the date that the Group recognises restructuring-related costs

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group recognises the following changes in the net defined benefit obligation under “Wages, salaries and benefits” and “Finance costs” in profit or loss:

•

service costs comprising current service costs, past-service costs, gains and losses on curtailments and

non-routine

settlements

•

net interest expense

2.32	Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the consolidated financial statements in the period in which the dividends are approved by the Company’s shareholders. Proposed final dividends are disclosed in the notes to the consolidated financial statements.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

2	Summary of significant accounting policies (continued)

2.33	Fair value measurement

The Group measures its derivative financial instruments and equity investments at fair value at the end of each reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a

non-financial

asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 – based on quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 – based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly

Level 3 – based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

2.34	Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

2.35	Research and development

Research expenditures are recognised as expenses as incurred. Costs incurred on development projects are capitalised as intangible assets when recognition criteria are met, including:

•

it is technically feasible to complete the software so that it will be available for use

•

management intends to complete the software and use or sell it

•

there is an ability to use or sell the software

•

it can be demonstrated how the software will generate probable future economic benefits

•

adequate technical, financial and other resources to complete the development and to use or sell the software are available, and

•

the expenditure attributable to the software during its development can be reliably measured.

Other development costs that do not meet those criteria are expensed as incurred.

Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

3	Critical accounting estimates and judgements

Estimates and judgements used in preparing the financial statements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a)	Passenger ticket breakage

The Group recognises traffic revenues in accordance with the accounting policy stated in Note 2.7 to the consolidated financial statements. Passenger ticket breakage is recognised as revenue based on estimates. The Group estimates the value of passenger ticket breakage, reduces contract liabilities and recognises revenue at the scheduled flight date using a portfolio-based approach. The breakage rate is estimated and constrained by reference to the historical trend of passenger ticket breakage.

(b)	Recognition of contract liabilities for frequent flyer programme

Passenger ticket sales earning mileage points under the Company’s frequent flyer programme provide customers with mileage points earned and air transportation. A portion of passenger revenue attributable to the mileage points issued is deferred based on the relative stand-alone selling price approach. Significant assumptions are used in determining the estimated stand-alone selling price of mileage points, including the historical prices of equivalent flights and goods provided, which is estimated by reference to the quantitative value a program member receives by redeeming mileage points for flights and goods, and the estimated Breakage. The Breakage is estimated considering historical redemption pattern, current industry and economic trends and other relevant factors. Changes in the significant assumptions could have a significant effect on the balance of contract liabilities for frequent flyer programme and the results of operations.

(c)	Provision for lease return costs for aircraft and engines

Provision for lease return costs for aircraft and engines is recognised as part of the

right-of-use

assets and are depreciated during the lease term. The estimation of the provision is made taking into account anticipated aircraft and engines’ utilisation patterns and the anticipated return costs derived from historical experience of actual return costs incurred. Different estimates could significantly affect the estimated provision for lease return costs for aircraft and engines.

(d)	Retirement benefits

The Group operates and maintains a defined retirement benefit plan which provides eligible retirees with benefits including retirement subsidies, transportation allowance as well as other welfare. The cost of providing the aforementioned benefits in the defined retirement benefit plan is actuarially determined and recognised over the employee’s service period by utilising various actuarial assumptions and using the projected unit credit method in accordance with the accounting policy stated in Note 2.31 to the consolidated financial statements. These assumptions include, without limitation, the selection of discount rate and annual rate of increase of per capita benefit payment. The discount rate is based on management’s review of government bonds. The annual rate of increase of benefit payments is based on the general local economic conditions.

Additional information regarding the retirement benefit plan is disclosed in Note 39 to the consolidated financial statements.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

3	Critical accounting estimates and judgements (continued)

(e)	Deferred income tax

Deferred tax assets are recognised for unused tax losses and deductible temporary difference to the extent that it is

probable that taxable profit will be available against which the losses and deductible temporary difference, and the carry forward of unused tax credits and unused tax losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. To determine the future taxable profits, reference was made to the latest available profit forecast. The key assumptions adopted in the future taxable profit forecast include revenue growth rates and gross margin rates.

(f)	Estimated impairment of long-term assets (other than goodwill)

The Group tests whether property, plant and equipment,

right-of-use

assets, intangible assets (other than goodwill),

advanced payments on acquisition of aircraft and other

non-current

assets have been impaired in accordance with the accounting policy stated in Note 2.18 to the consolidated financial statements. The recoverable amount of the cashgenerating unit has been determined based on the higher of its value in use and its fair value less costs of disposal. The cash flow projections used to determine the value in use of a cash-generating unit, including the airline transportation operations cash-generating unit, is based on significant assumptions, such as revenue growth rates, long term growth rate, gross margin rates, and discount rate applied to the projected cash flows. These assumptions may be affected by unexpected changes in future market or economic conditions.

(g)	Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the

recoverable amount which is the higher of its value in use and its fair value less costs of disposal. The Group uses the value in use of the cash-generating unit to which the goodwill is allocated to determine the recoverable amount. The cash flow projections used to determine the value in use of a cash-generating unit, including the airline transportation operations cash-generating unit, is based on significant assumptions, such as revenue growth rates, long term growth rate, gross margin rates, and discount rate applied to the projected cash flows. These assumptions may be affected by unexpected changes in future market or economic conditions.

(h)	Leases — estimating the incremental borrowing rate

The Group cannot readily determine the interest rate implicit in a lease, and therefore, it uses an incremental borrowing rate (“IBR”) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the

right-of-use

asset in a similar economic environment. The IBR therefore reflects what the Group “would have to pay”, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when it needs to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency). The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating) when necessary.

(i)	Depreciation of property, plant and equipment and right-of-use assets

Depreciation of components related to the owned and leased airframe and engine overhaul costs are based on the Group’s historical experience with similar airframe and engine models and taking into account anticipated overhauls costs, timeframe between each overhaul, ratio of actual flying hours and estimated flying hours between overhauls. Different judgments or estimates could significantly affect the estimated depreciation charge and the results of operations.

Except for components related to the owned and leased airframe and engine overhaul costs, other property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives, after taking into account the estimated residual value. The useful lives are based on the Group’s historical experience with similar assets and taking into account anticipated technological changes. The Group reviews the estimated useful lives of assets regularly in order to determine the amount of depreciation expense to be recorded during any reporting period. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

4	Operating segment information

(a)	CODM, office of the General Manager, reviews the Group’s internal reporting in order to assess performance and allocate resources.

The Group has one reportable operating segment, reported as “airline transportation operations”, which comprises the provision of passenger, cargo, mail delivery and ground service.

Other services including primarily tour operations, air catering and other miscellaneous services are not included within the airline transportation operations segment, as their internal reports are separately provided to the CODM. The results of these operations are included in the “other segments” column.

Inter-segment transactions are entered into under normal commercial terms and conditions that would be available to unrelated third parties.

In accordance with IFRS 8, segment disclosure has been presented in a manner that is consistent with the information used by the Group’s CODM. The Group’s CODM monitors the results, assets and liabilities attributable to each reportable segment based on financial results prepared under the PRC Accounting Standards for Business Enterprises (the “PRC Accounting Standards”), which differ from IFRSs in certain aspects. The amount of each material reconciling item from the Group’s reportable segment revenues and profit/(loss) before income tax, arising from different accounting policies is set out in Note 4(c) below.

The segment results for the year ended December 31, 2021 were as follows:


	Airline transportation operations			Other segments		Eliminations			Unallocated*		Total
	RMB million			RMB million		RMB million			RMB million		RMB million
Segment revenue
Reportable segment revenue from external customers		66,812			315		—			—		67,127
Inter-segment sales		—			1,006		(1,006	)		—		—

Reportable segment revenue		66,812			1,321		(1,006	)		—		67,127

Reportable segment loss before income tax		(17,889	)		374		—			2		(17,513	)

Other segment information
Depreciation and amortisation		22,441			277		—			—		22,718
Impairment charges/impairment losses on financial assets, net		48			2		—			—		50
Interest income		354			—		(15	)		—		339
Interest expenses		5,811			16		(15	)		—		5,812
Capital expenditure		30,846			169		—			—		31,015

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

4	Operating segment information (continued)

(a)	CODM, office of the General Manager, reviews the Group’s internal reporting in order to assess performance and allocate resources. (Continued)

The segment results for year ended December 31, 2020 were as follows:


	Airline transportation operations			Other segments		Eliminations			Unallocated*			Total
	RMB million			RMB million		RMB million			RMB million			RMB million
Segment revenue
Reportable segment revenue from external customers		58,337			302		—			—			58,639
Inter-segment sales		—			1,499		(1,499	)		—			—

Reportable segment revenue		58,337			1,801		(1,499	)		—			58,639

Reportable segment loss before income tax		(17,062	)		684		—			(103	)		(16,481	)

Other segment information
Depreciation and amortisation		21,965			283		—			—			22,248
Impairment charges/impairment losses on financial assets, net		215			1		—			—			216
Interest income		178			1		(13	)		—			166
Interest expenses		5,212			15		(13	)		—			5,214
Capital expenditure		17,778			639		—			—			18,417

The segment results for year ended December 31, 2019 were as follows:
	Airline transportation operations			Other segments		Eliminations			Unallocated*			Total
	RMB million			RMB million		RMB million			RMB million			RMB million
Segment revenue
Reportable segment revenue from external customers		119,240			1,620		—			—			120,860
Inter-segment sales		—			2,052		(2,052	)		—			—

Reportable segment revenue		119,240			3,672		(2,052	)		—			120,860

Reportable segment profit before income tax		2,745			1,164		—			393			4,302

Other segment information
Depreciation and amortisation		21,816			261		—			—			22,077
Impairment charges/impairment losses on financial assets, net		20			—		—			—			20
Interest income		108			1		(13	)		—			96
Interest expenses		5,152			30		(13	)		—			5,169
Capital expenditure		42,853			303		—			—			43,156

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

4	Operating segment information (continued)

(a)	CODM, office of the General Manager, reviews the Group’s internal reporting in order to assess performance and allocate resources. (Continued)

The segment assets and liabilities as at December 31, 2021 and December 31, 2020 were as follows:


	Airline transportation operations		Other segments		Eliminations			Unallocated*		Total
	RMB million		RMB million		RMB million			RMB million		RMB million
At December 31, 2021
Reportable segment assets		280,976		4,376		(1,606	)		2,802		286,548
Reportable segment liabilities		230,799		2,398		(1,606	)		47		231,638
At December 31, 2020
Reportable segment assets		275,028		5,510		(1,736	)		3,606		282,408
Reportable segment liabilities		224,862		2,228		(1,736	)		142		225,496

Unallocated assets primarily represent investments in associates and joint ventures, derivative financial instruments, financial asset at fair value through profit or loss and equity instruments designated at fair value through other comprehensive income. Unallocated results primarily represent the share of results of associates and joint ventures, fair value changes of financial asset at fair value through profit or loss and dividend income relating to equity investments at fair value through profit or loss.

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

4	Operating segment information (continued)

(b)	The Group’s business operates in three main geographical areas, even though they are managed on a worldwide basis.

The Group’s revenues by geographical area are analysed based on the following criteria:

(1)

Traffic revenue from services within Mainland China (the PRC excluding the Hong Kong Special Administrative Region (“Hong Kong”), Macau Special Administrative Region (“Macau”) and Taiwan, collectively known as “Regional”) is classified as domestic operations. Traffic revenue from inbound and outbound services between overseas markets excluding Regional is classified as international operations

(2)	Revenue from ticket handling services, ground services and other miscellaneous services are classified on the basis of where the services are performed


	2021		2020		2019
	RMB million		RMB million		RMB million
Domestic (the PRC, excluding Hong Kong, Macau and Taiwan)		56,133		45,479		80,058
International		10,553		12,759		37,082
Regional (Hong Kong, Macau and Taiwan)		441		489		3,846

		67,127		58,727		120,986

(3)

The major revenue-earning assets of the Group are its aircraft, all of which are registered in the PRC. Since the Group’s aircraft are deployed flexibly across its route network, there is no suitable basis of allocating such assets and the related liabilities by geographic area and hence segment

non-current

assets and capital expenditure by geographic area are not presented. Except the aircraft, most

non-current

assets (except financial instruments) are registered and located in the PRC.

F-4

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

4	Operating segment information (continued)

(c)	Reconciliation of reportable segment revenues, (loss)/profit and assets to the consolidated figures as reported in the consolidated financial statements:


				Year ended December 31,
				2021			2020			2019
	Note			RMB million			RMB million			RMB million
Revenue
Reportable segment revenue					67,127			58,639			120,860
— Reclassification of taxes relating to the expired tickets		(i	)		—			88			126

Consolidated revenue					67,127			58,727			120,986

				Year ended December 31,
				2021			2020			2019
	Note			RMB million			RMB million			RMB million
(Loss)/profit before income tax
Reportable segment (loss)/profit					(17,513	)		(16,481	)		4,302
— Differences in depreciation charges for aircraft and engines due to different depreciation lives		(ii	)		—			(7	)		(3	)

Consolidated (loss)/profit before income tax					(17,513	)		(16,488	)		4,299


				As at December 31,
				2021		2020
	Note			RMB million		RMB million
Assets
Reportable segment assets					286,548		282,408
— Differences in depreciation charges for aircraft and engines due to different depreciation lives		(ii	)		—		—
— Difference in intangible asset arising from the acquisition of Shanghai Airlines		(iii	)		2,242		2,242

Consolidated assets					288,790		284,650

F-4

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

4	Operating segment information (continued)

(c)	Reconciliation of reportable segment revenues, profit, assets and liabilities to the consolidated figures as reported in the consolidated financial statements: (Continued)

Notes:

(i) The difference represents the different classification of sales related taxes under the PRC Accounting Standards and IFRSs.

(ii) The difference is attributable to the differences in the useful lives and residual values of aircraft and engines adopted for depreciation purposes in prior years under the PRC Accounting Standards and IFRSs. Despite the depreciation policies of these assets which have been unified under IFRSs and the PRC Accounting Standards in recent years, the changes were applied prospectively as changes in accounting estimates which result in the differences in the carrying amounts and related depreciation charges under IFRSs and the PRC Accounting Standards.

(iii) The difference represents the different measurement of the fair value of acquisition cost of the shares from Shanghai Airlines between the PRC Accounting standards and IFRSs, which results in the different measurement of goodwill.

F-4

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

Revenue


An analysis of revenue is as follows:
	Year ended December 31,
	2021		2020		2019
	RMB million		RMB million		RMB million
Revenue from contracts with customers		66,887		58,470		120,796
Revenue from other sources
— Rental income		240		257		190

		67,127		58,727		120,986

(a)	Disaggregated revenue information for revenue from contracts with customers:


For the year ended December 31, 2021
	Airline
	transportation		Others
Segments	operations		operations		Total
	RMB million		RMB million		RMB million
Types of goods or services
Traffic revenues
— Passenger		54,105		—		54,105
— Cargo and mail		8,309		—		8,309
Ticket cancellation and commission service		2,115		—		2,115
Ground service income		756		—		756
Others		1,287		315		1,602

Total revenue from contracts with customers		66,572		315		66,887

Geographical markets
Domestic (the PRC, excluding Hong Kong, Macau and Taiwan)		55,578		315		55,893
International		10,553		—		10,553
Regional (Hong Kong, Macau and Taiwan)		441		—		441

Total revenue from contracts with customers		66,572		315		66,887

F-4

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

5	Revenue (continued)

(a)	Disaggregated revenue information for revenue from contracts with customers: (continued)

For the year ended December 31, 2020


	Airline
	transportation		Others
Segments	operations		operations		Total
	RMB million		RMB million		RMB million
Types of goods or services
Traffic revenues
— Passenger		49,215		—		49,215
— Cargo and mail		4,895		—		4,895
Ticket cancellation and commission service		2,206		—		2,206
Ground service income		818		—		818
Others		1,034		302		1,336

Total revenue from contracts with customers		58,168		302		58,470

Geographical markets
Domestic (the PRC, excluding Hong Kong, Macau and Taiwan)		44,920		302		45,222
International		12,759		—		12,759
Regional (Hong Kong, Macau and Taiwan)		489		—		489

Total revenue from contracts with customers		58,168		302		58,470


For the year ended December 31, 2019
	Airline
	transportation		Others
Segments	operations		operations		Total
	RMB million		RMB million		RMB million
Types of goods or services
Traffic revenues
— Passenger		110,416		—		110,416
— Cargo and mail		3,826		—		3,826
Ticket cancellation and commission service		2,485		—		2,485
Ground service income		1,180		—		1,180
Others		1,269		1,620		2,889

Total revenue from contracts with customers		119,176		1,620		120,796

Geographical markets
Domestic (the PRC, excluding Hong Kong, Macau and Taiwan)		78,248		1,620		79,868
International		37,082		—		37,082
Regional (Hong Kong, Macau and Taiwan)		3,846		—		3,846

Total revenue from contracts with customers		119,176		1,620		120,796

F-4

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

5	Revenue (continued)

(a)	Disaggregated revenue information for revenue from contracts with customers: (continued)

Set out below is the reconciliation of the revenue from contracts with customers to the amounts disclosed in the segment information:

For the year ended December 31, 2021


	Airline
	transportation		Others
Segments	operations		operations			Total
	RMB million		RMB million			RMB million
Revenue from contracts with customers
External customers		66,572		315			66,887
Intersegment sales		—		1,006			1,006

Intersegment adjustment and eliminations		—		(1,006	)		(1,006	)

Total revenue from contracts with customers		66,572		315			66,887


For the year ended December 31, 2020
	Airline
	transportation		Others
Segments	operations		operations			Total
	RMB million		RMB million			RMB million
Revenue from contracts with customers
External customers		58,168		302			58,470
Intersegment sales		—		1,499			1,499

Intersegment adjustment and eliminations		—		(1,499	)		(1,499	)

Total revenue from contracts with customers		58,168		302			58,470


For the year ended December 31, 2019
	Airline
	transportation		Others
Segments	operations		operations			Total
	RMB million		RMB million			RMB million
Revenue from contracts with customers
External customers		119,176		1,620			120,796
Intersegment sales		—		2,052			2,052

Intersegment adjustment and eliminations		—		(2,052	)		(2,052	)

Total revenue from contracts with customers		119,176		1,620			120,796

F-4

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

5	Revenue (continued)

(a)	Disaggregated revenue information for revenue from contracts with customers: (continued)

The following table shows the amount of revenue recognised in the current reporting period that was included in the contract liabilities at the beginning of the reporting period:


	2021		2020
	RMB million		RMB million
Revenue recognised that was included in contract liabilities at the beginning of the year:
Passenger transportation services		2,979		6,699

As at December 31, 2021, the contract liabilities for frequent flyer programme amounted to RMB1,492 million. The table below presents the activity of the contract liabilities for frequent flyer programme.


	2021			2020
	RMB million			RMB million
At January 1,		1,966			2,245
Deferred during the year		945			843
Recognised as revenue during the year		(1,250	)		(1,122	)

At December 31,		1,661			1,966
Less: the related pending output value added tax therein		(169	)		(185	)

		1,492			1,781

(b)	Performance obligations

Information about the Group’s performance obligations is summarised below:

Passenger transportation services

The performance obligation is satisfied upon transportation service provided. Payment in advance is required and reflected in sales in advance of carriage or frequent flyer programme, both of which are included in contract liabilities.

Cargo and mail transportation services

The performance obligation is satisfied as services are rendered and payment is generally due within 30 days after the end of each month.

Ground services

The performance obligation is satisfied as services are rendered and payment is generally due within 45 days from the date of billing.

Ticket cancellation and commission services

The performance obligation is satisfied as the process of ticket cancellation or sales is completed and consideration normally has been received before the services are rendered.

F-

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

6	Other operating income and gains


	2021		2020		2019
	RMB million		RMB million		RMB million
Co-operation routes income (note (a))		3,696		3,650		5,436
Routes subsidy income (note (b))		383		372		353
Other subsidy income (note (c))		803		1,326		535
Gain on disposal of items of property, plant and equipment and right-of-use assets		742		55		40
Gain on disposal of subsidiaries, associates and joint ventures		142		—		64
Compensation from ticket sales agents		63		53		331
Others		250		242		443

		6,079		5,698		7,202

(a)	Co-operation routes income represents subsidies granted by various local authorities and other parties, with which the Group developed certain routes to support the development of local economy. The amounts granted are calculated based on the agreements entered into by all parties.

(b)	Routes subsidy income represents subsidies granted by various authorities to support certain international and domestic routes operated by the Group.

(c)	Other subsidy income represents subsidies granted by various local authorities based on certain amounts of tax paid and other government grants.

(d)	There are no unfulfilled conditions or other contingencies related to subsidies that were recognised for the year ended December 31, 2021, 2020 and 2019.

7	Operating (loss)/ profit

Operating (loss)/ profit is stated after charging/(crediting) the following items:


	2021		2020		2019
	RMB million		RMB million		RMB million
Amortisation of intangible assets (Note 19)		210		239		143
Depreciation of property, plant and equipment (Note 16)		9,490		9,067		9,078
Depreciation of right-of-use assets (Note 18(a))		12,389		12,367		12,298
Depreciation of investment properties (Note 17)		10		12		25
Amortisation of long-term deferred assets included in other non-current assets		619		570		536
Impairment charge on property, plant and equipment (Note 9)		1		31		4
Write-down of flight equipment spare parts to net realisable value (Note 9)		21		153		—
Consumption of flight equipment spare parts		1,218		1,135		1,013
Auditors’ remuneration		12		17		18

F-5

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

8	Wages, salaries and benefits


	2021		2020		2019
	RMB million		RMB million		RMB million
Wages, salaries, bonuses and allowances		15,776		16,412		19,385
Employee welfare and benefits		435		128		143
Pension (Note 39(a))		2,412		2,149		2,571
Medical insurance (note (i))		982		725		789
Staff housing fund (note (ii))		1,265		1,195		1,056
Staff housing allowances (note (iii))		186		214		186
Early retirement benefits (note (iv))		5		4		22

		21,061		20,827		24,152

Notes:

(i)	Medical insurance

Majority of the Group’s PRC employees participate in the medical insurance schemes organised by municipal governments.

(ii)	Staff housing fund

In accordance with the relevant PRC housing regulations, the Group is required to contribute to the state-sponsored housing fund for its employees. At the same time, the employees are required to contribute an amount equal to the Group’s contribution. The employees are entitled to claim the entire sum of the fund contributed under certain specified withdrawal circumstances. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits.

(iii)

Staff housing allowances

The Group also provides staff housing allowances in cash to eligible employees. The total entitlement of an eligible employee is principally provided over a period of 20 years. Upon an eligible employee’s resignation or retirement, his or her entitlement would cease and any unpaid entitlement related to past service up to the date of resignation or retirement would be paid.

(iv)	Early retirement benefits

The Group implements an early retirement scheme which allows eligible employees to early retire on a voluntary basis. The Group undertakes the obligations to pay the early retirement employees’ basic salaries and certain welfare in the future on a monthly basis according to the early retirement scheme, together with social insurance and housing fund pursuant to the regulation of the local government. The benefits of the early retirement scheme are calculated based on factors including the remaining number of years of service from the date of early retirement to the normal retirement date and the benefits the early retirement employees enjoyed. The present value of the future cash flows expected to be required to settle the obligations is recognised as a provision in “other long-term liabilities”.

F-5

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

8	Wages, salaries and benefits (continued)

(v)	Directors’ and executive’s remuneration

Directors’ and executive’s remuneration for the year, disclosed pursuant to the Listing Rules, section 383(1)(a), (b), (c) and (f) of the Hong Kong Companies Ordinance and Part 2 of the Companies (Disclosure of Information about Benefits of Directors) Regulation, is as follows:


	2021		2020		2019
	RMB million		RMB million		RMB million
Fees		620		460		805
Other emoluments:
Salaries, allowances and benefits in kind		1,616		2,906		665
Performance related bonuses*		—		—		—
Pension scheme contributions		52		61		21

		2,288		3,427		1,491

*	No executive directors of the Company are entitled to bonus payments which are determined as percentage of the profit after tax of the Group.

2021


	Fees		Salaries, allowances and benefits in kind		Performance related bonuses		Pension scheme contributions		Total
	RMB’000		RMB’000		RMB’000		RMB’000		RMB’000
Executive Directors
Liu Shaoyong*		—		—		—		—		—
Li Yangmin*		—		—		—		—		—
Tang Bing*		—		—		—		—		—
Lin Wanli**		—		—		—		—		—
Jiang Jiang*****		—		—		—		—		—
Independent non-executive Directors
Cai Hongping		200		—		—		—		200
Dong Xuebo		80		—		—		—		80
Sun Zheng**		120		—		—		—		120
Lu Xiongwen**		120		—		—		—		120
Shao Ruiqing***		100		—		—		—		100
Supervisors
Guo Lijun**		—		1,082		—		31		1,113
Fang Zhaoya*		—		—		—		—		—
Zhou Huaxin*****		—		534		—		21		555

Total		620		1,616		—		52		2,288

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

8	Wages, salaries and benefits (continued)

(v)	Directors’ and executive’s remuneration

2019


	Fees		Salaries, allowances and benefits in kind		Performance related bonuses		Pension scheme contributions		Total
	RMB’000		RMB’000		RMB’000		RMB’000		RMB’000
Executive Directors
Liu Shaoyong*		—		—		—		—		—
Ma Xulun* & ****		—		—		—		—		—
Wang Junjin**		—		—		—		—		—
Li Yangmin* & **		—		—		—		—		—
Tang Bing* & **		—		—		—		—		—
Yuan Jun*		—		—		—		—		—
Independent non-executive Directors
Lin Wanli		—		—		—		—		—
Li Ruoshan***		200		—		—		—		200
Ma Weihua***		200		—		—		—		200
Shao Ruiqing		200		—		—		—		200
Cai Hongping		200		—		—		—		200
Dong Xuebo**		5		—		—		—		5
Supervisors
Xi Sheng*		—		—		—		—		—
Gao Feng		—		665		—		21		686
Li Jinde&**		—		—		—		—		—
Fang Zhaoya* & **		—		—		—		—		—

Total		805		665		—		21		1,491

These directors and supervisors of the Company received emoluments from CEA Holding, the parent company, part of which were in respect of their services to the Company and its subsidiaries. No apportionment has been made as it is impracticable to apportion those amounts between their services to the Group and their services to CEA Holding.

**	These directors and supervisors of the Company were newly appointed or elected during the years ended December 31, 2021,2020 and 2019, respectively.

***	These directors and supervisors of the Company resigned during the years ended December 31, 2021, 2020 and 2019, respectively.

****	Mr. Ma Xulun resigned on February 1, 2019.

*****

Mr. Jiang Jiang was newly appointed as Employee Representative Director on December 28, 2020 and Mr. Zhou Huaxin was newly appointed as Supervisor on December 10, 2020. Their salaries, allowances and benefits in kind were listed as being Managers.

During the years ended December 31, 2021, 2020 and 2019, no directors and supervisors waived their emoluments.

F-5

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

8	Wages, salaries and benefits (continued)

(f)	Five highest paid individuals

Nil of the Company’s directors and supervisors was among the five highest paid individuals in the Group for the year ended December 31, 2021 (2020: One, 2019: Nil). The emoluments payable to the five highest paid individuals were as follows:


	2021		2020		2019
	RMB’000		RMB’000		RMB’000
Wages, salaries and allowances		8,537		10,495		11,413
Performance related bonuses*		—		—		—
Pension scheme contributions		185		172		185

	8,722		10,667		11,598

*	None of the above highest paid individuals are entitled to bonus payments which are determined as a percentage of the profit after tax of the Group.

The number of five highest paid individuals whose emoluments fell within the following bands is as follows:


	2021		2020		2019
HK$2,000,001 to HK$2,500,000		5		2		2
HK$2,500,001 to HK$3,000,000		—		3		2
HK$3,000,001 to HK$3,500,000		—		—		1

During the year ended December 31, 2021, no emoluments were paid by the Group to the directors, supervisors and the five highest paid individuals as an inducement to join or upon joining the Group, or as a compensation for loss of office (2020: Nil, 2019: Nil).

9	Impairment charges


	2021		2020		2019
	RMB million		RMB million		RMB million
Impairment charge on property, plant and equipment (Note 16)		1		31		4
Write-down of flight equipment spare parts to net realisable value (Note 28)		21		153		—

	22		184		4

10	Impairment losses on financial assets, net



	2021		2020		2019
	RMB million		RMB million		RMB million
Impairment losses on trade receivable, net (Note 29)		3		15		(6	)
Impairment losses on other receivables (Note 31)		25		17		22

	28		32		16

F-5

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

13	Income tax

The amounts of income tax (credit)/expense charged to the consolidated income statements represent:


	2021			2020			2019
	RMB million			RMB million			RMB million
Current income tax		143			222			942
Deferred income tax		(4,372	)		(4,149	)		(123	)

	(4,229)			(3,927)			819

The Company and its subsidiaries, except for CEA Yunnan and those incorporated in Hong Kong, are generally subject to the PRC standard corporate income tax rate of 25% (2020: 25%, 2019: 25%).

A reconciliation of the tax (credit)/charge applicable to (loss)/profit before tax at the statutory rate for the country in which the Company and the majority of its subsidiaries are domiciled to the tax expense at the effective tax rate is as follows:


	2021			2020			2019
	RMB million			RMB million			RMB million
(Loss)/profit before income tax		(17,513	)		(16,488	)		4,299
Tax calculated at the tax rate of 25% (2020: 25%, 2019: 25%)		(4,378	)		(4,122	)		1,075
Lower tax rates enacted by local authority		60			56			(139	)
Share of results of associates and joint ventures		35			24			(71	)
Income not subject to tax		(84	)		(12	)		(36	)
Expenses not deductible for tax		159			169			128
Utilisation of previously unrecognised tax losses		—			(16	)		(11	)
Unrecognised tax losses for the year		69			21			17
Utilisation of previously unrecognised deductible temporary differences		—			(10	)		(8	)
Unrecognised deductible temporary differences		—			3			3
Adjustments in respect of current tax of previous periods		(1	)		(4	)		(34	)
Additional deduction of research and development costs		(58	)		(31	)		(27	)
Income tax deduction of purchase of special equipment for production safety		(31	)		(5	)		(78	)

Tax (credit)/charge		(4,229	)		(3,927	)		819

Effective tax rate		24.15	%		23.82	%		19.05	%

The Group operates international flights to overseas destinations. There was no material overseas taxation for the years ended December 31, 2021, 2020 and 2019, as there are tax treaties between the PRC and the corresponding jurisdictions relating to the aviation business.

F-5

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

Dividend


	2021		2020		2019
	RMB million		RMB million		RMB million
Proposed final – Nil (2020: Nil, 2019: 0.050) per ordinary share		—		—		819

On March 30, 2022, the Group has no profit distribution plan to propose cash dividend for 2021 (2020: Nil, 2019: RMB0.050 per share before tax).

15	(Loss)/earnings per share

The calculation of basic loss per share for the year ended December 31, 2021 was based on the loss attributable to equity holders of the Company of RMB12,214 million and the weighted average number of shares of 16,795,331,016 in issue during the year.

The calculation of basic loss per share for the year ended December 31, 2020 was based on the loss attributable to equity holders of the Company of RMB11,836 million and the weighted average number of shares of 16,379,509,203 in issue during the year.

The calculation of basic earnings per share for the year ended December 31, 2019 was based on the profit attributable to equity holders of the Company of RMB3,192 million and the weighted average number of shares of 15,104,893,522 in issue during the year.

The Company had no potentially dilutive options or other financial instruments relating to the ordinary shares in issue during the years ended December 31, 2021, 2020 and 2019.

F-5

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

16	Property, plant and equipment


	Aircraft, engines and flight equipment			Buildings			Other property, plant and equipment			Construction in progress			Total
	RMB million			RMB million			RMB million			RMB million			RMB million
December 31, 2021
At January 1, 2021
Cost		144,827			15,816			10,337			3,362			174,342
Accumulated depreciation and impairment		(63,868	)		(3,102	)		(6,329	)		—			(73,299	)

Net carrying amount		80,959			12,714			4,008			3,362			101,043

At January 1, 2021, net of accumulated depreciation and impairment		80,959			12,714			4,008			3,362			101,043
Additions		2,343			170			626			1,467			4,606
Disposals		(3,094	)		(85	)		(63	)		—			(3,242	)
Transfer from construction in progress		—			745			279			(1,024	)		—
Transfer from investment properties (Note 17)		—			34			—			—			34
Transfer from right-of-use assets (Note 18(a))		809			—			—			—			809
Transfer to other non-current assets		—			—			—			(517	)		(517	)
Impairment		(1	)		—			—			—			(1	)
Depreciation provided during the year		(7,958	)		(536	)		(996	)		—			(9,490	)

At December 31, 2021, net of accumulated depreciation and impairment		73,058			13,042			3,854			3,288			93,242

At December 31, 2021:
Cost		136,247			16,562			10,986			3,288			167,083
Accumulated depreciation and impairment		(63,189	)		(3,520	)		(7,132	)		—			(73,841	)

Net carrying amount		73,058			13,042			3,854			3,288			93,242

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

16	Property, plant and equipment (continued)

As at December 31, 2021, the ownership certificates of buildings with a net carrying amount of RMB1,897 million (2020: RMB8,453 million) have not been obtained. The directors of the Company are of the opinion that the Group legally owns and has the rights to use the aforesaid buildings, and that there is no material adverse impact on the overall financial position of the Group.

The Group’s parcels of land in Mainland China where the buildings are situated are held under medium-term leases.

The following table indicates the cost and net carrying amount of the Group’s aircraft pledged as collateral under certain borrowing arrangements (Note 37):


	2021				2020
	Cost RMB million		Net carrying Amount RMB million		Cost RMB million		Net carrying Amount RMB million
Aircraft

— pledged as collateral		31,958		23,129		26,149		17,515

F-6

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

16	Property, plant and equipment (continued)


	Aircraft, engines and flight equipment RMB million			Buildings RMB million			Other property, plant and equipment RMB million			Construction in progress RMB million			Total RMB million
December 31, 2020
At January 1, 2020
Cost		133,845			14,153			10,217			3,857			162,072
Accumulated depreciation and impairment		(54,366	)		(2,499	)		(5,770	)		—			(62,635	)

Net carrying amount		79,479			11,654			4,447			3,857			99,437

At January 1, 2020, net of accumulated depreciation and impairment		79,479			11,654			4,447			3,857			99,437
Additions		3,517			69			528			1,055			5,169
Disposals		(781	)		(22	)		(102	)		(425	)		(1,330	)
Transfer from construction in progress		—			1,102			21			(1,123	)		—
Transfer from advanced payments on acquisition of aircraft		53			—			—			—			53
Transfer from investment properties (Note 17)		—			425			—			—			425
Transfer from right-of-use assets (Note 18(a))		6,402			—			—			—			6,402
Transfer to investment properties (Note 17)		—			(13	)		—			—			(13	)
Transfer to other non-current assets		—			—			—			(2	)		(2	)
Depreciation provided during the year		(7,680	)		(501	)		(886	)		—			(9,067	)
Impairment (note)		(31	)		—			—			—			(31	)

At December 31, 2020, net of accumulated depreciation and impairment		80,959			12,714			4,008			3,362			101,043

At December 31, 2020:
Cost		144,827			15,816			10,337			3,362			174,342
Accumulated depreciation and impairment		(63,868	)		(3,102	)		(6,329	)		—			(73,299	)

Net carrying amount		80,959			12,714			4,008			3,362			101,043

Note: During the year ended December 31, 2020, the Group made an impairment provision of

RMB31 million for certain retired engines, the recoverable amount is determined based on the estimated market prices.

F-

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

17	Investment properties


	2021			2020
	RMB million			RMB million
Cost
At January 1		263			883
Transfer from property, plant and equipment (Note 16)		—			25
Transfer from right-of-use assets (Note 18(a))		—			11
Transfer to property, plant and equipment (Note 16)		(62	)		(565	)
Transfer to right-of-use assets (Note 18(a))		(9	)		(91	)

At December 31,		192			263

Accumulated depreciation
At January 1		97			230
Transfer from property, plant and equipment (Note 16)		—			12
Transfer from right-of-use assets (Note 18(a))		—			3
Transfer to property, plant and equipment (Note 16)		(28	)		(140	)
Transfer to right-of-use assets (Note 18(a))		(5	)		(20	)
Charge for the year (Note 7)		10			12

At December 31,		74			97

Net book amount
At December 31,		118			166

As at December 31, 2021, the fair value of the investment properties was approximately RMB324 million (2020: RMB445 million) according to a valuation performed by an independent professionally qualified valuer.

The investment properties are leased to third parties and related parties under operating leases. Rental income of RMB178 million (2020: RMB139 million, 2019: RMB100 million) was received by the Group during the year in respect of the leases.

As at December 31, 2021, the Group had no pledged investment properties (2020: Nil).

F-6

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

17	Investment properties (continued)

Fair value hierarchy

The following table illustrates the fair value measurement hierarchy of the Group’s investment properties:


	Fair value measurement using
Buildings	Quoted prices in active markets (Level 1) RMB million		Significant observable inputs (Level 2) RMB million		Significant unobservable inputs (Level 3) RMB million		Total RMB million
Not measured at fair value but fair value is disclosed:
As at December 31, 2021		—		80		244		324

As at December 31, 2020		—		119		326		445

During the year, there were no transfers of fair value measurements between Level 1 and Level 2 and no transfers into or out of Level 3 (2020: Nil).

The fair values of the buildings with comparable market prices have been estimated using significant observable inputs and calculated by adjusted market prices considering the condition and location of the buildings.

The fair values of the buildings without comparable market prices have been estimated by a discounted cash flow valuation model using significant unobservable inputs such as the estimated rental value, rent growth, long term vacancy rate and discount rate.

Leases

The Group as a lessee

The Group has lease contracts for various items of aircraft, engines, buildings and others used in its operations. Lump sum payments were made upfront to acquire the leased land with lease periods of 40 to 50 years, and no ongoing payments will be made under the terms of these land leases. As at December 31, 2021, the Group had 491 aircraft (2020: 440 aircraft) under leases, which generally have lease terms between 5 and 20 years. Leases of engines generally have lease terms between 5 and 10 years, while buildings generally have lease terms between 2 and 10 years. Others, including motor vehicles, generally have lease term between 2 to 5 years. The Group also has lease contracts for buildings and equipment with lease terms of 12 months or less or is individually of low value. Generally, the Group is restricted from assigning and subleasing the leased assets outside the Group.

F-6

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

18	Leases (continued)

The Group as a lessee (continued)

(a)	Right-of-use assets

The carrying amounts of the Group’s

right-of-use

assets and the movements during the year are as follows:


	Aircraft, and engines RMB million			Prepayments for land use rights RMB million			Buildings RMB million			Others RMB million			Total RMB million
At January 1, 2020, net of accumulated depreciation		126,464			1,343			824			73			128,704

Additions		7,109			—			1,145			135			8,389
Transfer from investment properties (Note 17)		—			71			—			—			71
Transfer to property, plant and equipment (Note 16)		(6,402	)		—			—			—			(6,402	)
Transfer to investment properties (Note 17)		—			(8	)		—			—			(8	)
Disposals		(171	)		—			(6	)		—			(177	)
Depreciation provided during the year		(11,322	)		(38	)		(948	)		(59	)		(12,367	)

At December 31, 2020 and January 1, 2021,net of accumulated depreciation		115,678			1,368			1,015			149			118,210

Additions		19,206			1,112			1,350			295			21,963
Transfer from investment properties (Note 17)		—			4			—			—			4
Transfer to property, plant and equipment (Note 16)		(809	)		—			—			—			(809	)
Disposals		(58	)		(13	)		(24	)		(9	)		(104	)
Depreciation provided during the year		(11,206	)		(259	)		(834	)		(90	)		(12,389	)

At December 31, 2021		122,811			2,212			1,507			345			126,875

F-6

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

18	Leases (continued)

The Group as a lessee (continued)

(b)	Lease liabilities

The carrying amount of lease liabilities and the movements during the year are as follows:


	2021			2020
	RMB million			RMB million
Carrying amount at January 1		96,251			110,275
New leases		18,202			7,191
Other addition		486			—
Effect of foreign exchange		(738	)		(2,768	)
COVID-19-related rent concessions from lessors		—			(3	)
Accretion of interest recognised during the year		3,113			3,655
Payments		(18,838	)		(22,099	)

Carrying amount at December 31,		98,476			96,251

Analysed into:
Current portion		16,350			14,073
Non-current portion		82,126			82,178

The maturity analysis of lease liabilities is disclosed in Note 48 to the consolidated financial statements.

(c)	The amounts recognised in profit or loss in relation to leases are as follows:


	2021		2020
	RMB million		RMB million
Interest on lease liabilities (Note 12)		3,113		3,655
Depreciation charge of right-of-use assets (Note 7)		12,389		12,367
COVID-19-related rent concessions from lessors		—		(3	)
Low value and short-term lease rental		383		358

Total amount recognised in profit or loss		15,885		16,377

(d)	The Group has no significant lease contracts that include extension and termination options or contain variable payments.

(e)	The total cash outflow for leases and future cash outflows relating to leases that have not yet commenced are disclosed in Notes 43(d) and 44, respectively, to the consolidated financial statements.

F-6

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

18	Leases (continued)

The Group as a lessor

The Group leases its certain investment properties and buildings in the PRC under operating lease arrangements, with leases negotiated for terms ranging from one to thirteen years. The terms of the leases generally require the tenants to pay security deposits and provide for periodic rent adjustments according to the then prevailing market conditions. Rental income recognised by the Group during the year was RMB240 million (2020: RMB257 million; 2019: RMB190 million), details of which are included in Note 5 to the consolidated financial statements.

At December 31, 2021, the undiscounted lease payments receivable by the Group in future periods under

non-cancellable

operating leases with its tenants are as follows:


	2021		2020
	RMB million		RMB million
Within one year		135		150
After one year but within two years		74		141
After two years but within three years		69		135
After three years but within four years		57		134
After four years but within five years		53		114
After five years		254		197

		642		871

F-6

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

19	Intangible assets


	Goodwill (Note (a))		Others			Total
	RMB million		RMB million			RMB million
Cost at January 1, 2021, net of accumulated amortization		11,270		448			11,718
Additions		—		191			191
Transfer from construction in process		—		14			14
Amortization provided during the year		—		(210	)		(210	)

At December 31, 2021		11,270		443			11,713

At December 31, 2021:
Cost		11,270		1,765			12,937
Accumulated amortisation		—		(1,322	)		(1,224	)
Net carrying amount		11,270		443			11,713


	Goodwill		Others			Total
	RMB million		RMB million			RMB million
Cost at January 1, 2020, net of accumulated amortization		11,270		428			11,698
Additions		—		263			263
Transfer from construction in process		—		1			1
Disposal		—		(5	)		(5	)
Amortization provided during the year		—		(239	)		(239	)

At December 31, 2020		11,270		448			11,718

At December 31, 2020:
Cost		11,270		1,462			12,732
Accumulated amortisation		—		(1,014	)		(1,014	)

Net carrying amount		11,270		448			11,718

Note:

(a)

The balance represents goodwill arising from the acquisition of Shanghai Airlines. The value of the goodwill is attributable to strengthening the competitiveness of the Group’s airline transportation operations, attaining synergy through integration of the resources and accelerating the development of international air transportation in Shanghai. For the purpose of impairment assessment, goodwill was allocated to the cash-generating unit (“CGU”) of airline transportation operations that the Group operates and benefits from the acquisition.

The recoverable amount of the CGU has been determined based on a

value-in-use

calculation using cash flow projections based on a financial budget approved by senior management covering a five-year period. The revenue growth rates of the five-year period are ranging from 10%~47%. The long-term growth rate used to extrapolate the cash flows of the above cash-generating unit beyond the five-year period is 2.5%, which does not exceed the long-term average growth rate for the business in which the CGU operates. The gross margin rates are ranging from 3%~16%. The

pre-tax

discount rate applied to the

pre-tax

cash flow projections is 10.6%. No impairment for the goodwill was required based on the

value-in-use

calculation as at the reporting date.

In 2020, the discount rate after tax applied to the post-tax cash flow projections is 9.5%. The growth rate used to extrapolate the cash flows of the above cash-generating unit beyond the fiveyear period is 2.60%, which does not exceed the long-term average growth rate for the business in which the CGU operates. No impairment for the goodwill was required based on the value-in-use calculation as at the reporting date in 2020.

F-6

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

20	Advanced payments on acquisition of aircraft


		December 31, 2021		December 31, 2020
	RMB million		RMB million
Advanced payments on acquisition of aircraft		12,165		17,240

Included in the Group’s balance as at December 31, 2021, the amounts of accumulated interest capitalised are approximately RMB1,213 million

During the year, the Group changed the introduction pattern of some aircraft and received RMB8,092 million from novation of purchase rights.

F-6

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

21	Subsidiaries

The Group’s principal subsidiaries at December 31, 2021 and 2020 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The place of incorporation or registration is also their principal place of business.


Company name	Place and date of incorporation/ registration and kind of legal entity		Principle activities		Issued ordinary/ registered share capital		Ownership interest held by the group						Ownership interest held by non-controlling interests
					million		2021			2020			2021			2020

China Eastern Airlines Jiangsu Co., Ltd. (“CEA Jiangsu”)		PRC/Mainland China, April 7, 1993, limited liability company		Provision of airline services		RMB2,000		62.56	%		62.56	%		37.44	%		37.44	%
China Eastern Airlines Wuhan Co., Ltd. (“CEA Wuhan”)		PRC/Mainland China, August 16, 2002, limited liability company		Provision of airline services		RMB1,750		60	%		60	%		40	%		40	%
Shanghai Eastern Flight Training Co., Ltd. (“Shanghai Flight Training”)		PRC/Mainland China, December 18, 1995, limited liability company		Provision of flight training services		RMB694		100	%		100	%		—			—
Shanghai Airlines Co., Ltd. (“Shanghai Airlines”)		PRC/Mainland China, March 16, 2010, limited liability company		Provision of airline services		RMB500		100	%		100	%		—			—
China Eastern Airlines Technology Co., Ltd. (“Eastern Technology”)		PRC/Mainland China, November 19, 2014, limited liability company		Provision of airline maintenance services		RMB4,300		100	%		100	%		—			—
One two three Airlines Co., Ltd. (“OTT Airlines”) (Originally named Eastern Business Airlines Co., Ltd.)		PRC /Mainland China, September 27, 2008, limited liability company		Provision of business aviation services		RMB1,500		100	%		100	%		—			—
China Eastern Airlines Yunnan Co., Ltd. (“CEA Yunnan”) (Note(b))		PRC /Mainland China, July 27, 2010, limited liability company		Provision of airline services		RMB3,662		65	%		90.36	%		35	%		9.64	%
Eastern Air Overseas (Hong Kong) Co., Ltd. (“Eastern Air Overseas”)		Hong Kong , June 10, 2011, limited liability company		Provision of import and export, investment, leasing and consultation services		HKD280		100	%		100	%		—			—
China United Airlines Co., Ltd. (“China United Airlines”)		PRC /Mainland China, September 21, 1984, limited liability company		Provision of airline services		RMB1,320		100	%		100	%		—			—
China Eastern Airlines Application Development Center Co., Ltd. (“Application Development Center”)		PRC /Mainland China, November 21, 2011 , limited liability company		Provision of research and development of technology and products in the field of aviation		RMB498		100	%		100	%		—			—
China Eastern Airlines E-Commerce Co., Ltd. (“Eastern E-Commerce”)		PRC /Mainland China, December 1, 2014, limited liability company		E-commerce platform and ticket agent		RMB100		100	%		100	%		—			—

F-

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

21	Subsidiaries (continued)

(a)	Non-controlling interests

Details of the Group’s subsidiaries that have material

non-controlling

interests are set out below:


	December 31, 2021			December 31,2020
Percentage of equity interest held by non-controlling interests:
CEA Jiangsu		37.44	%		37.44	%
CEA Yunnan (Note (b))		35.00	%		9.64	%
CEA Wuhan		40.00	%		40.00	%


	December 31, 2021			December 31,2020
	RMB million			RMB million
Loss for the year allocated to non-controlling interests:
CEA Jiangsu		(612	)		(435	)
CEA Yunnan		(348	)		(73	)
CEA Wuhan		(127	)		(207	)

Accumulated balances of non-controlling interests at the reporting date:
CEA Jiangsu		395			1,010
CEA Yunnan		2,000			631
CEA Wuhan		1,160			1,299

The following tables illustrate the summarised financial information of the above subsidiaries. The amounts disclosed are before any inter-company eliminations:


December 31, 2021	CEA Jiangsu			CEA Yunnan			CEA Wuhan
	RMB million			RMB million			RMB million
Revenue		5,157			6,595			2,813
Total expenses		(6,792	)		(7,616	)		(3,131	)
Loss for the year		(1,635	)		(1,021	)		(318	)
Total comprehensive income for the year		(1,642	)		(1,021	)		(341	)

Current assets		384			467			158
Non-current assets		14,006			17,164			6,938
Current liabilities		6,146			5,622			2,091
Non-current liabilities		7,189			5,461			2,098

Net cash flows from operating activities		1,155			1,585			637
Net cash flows generated from /(used in) investing activities		591			(309	)		(156	)
Net cash flows used in financing activities		(1,754	)		(1,275	)		(481	)
Effect of foreign exchange rate changes, net		—			—			—

Net decrease in cash and cash equivalents		(8	)		1			—

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Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

21	Subsidiaries (continued)

(a)	Non-controlling interests (continued)

The following tables illustrate the summarised financial information of the above subsidiaries. The amounts disclosed are before any inter-company eliminations: (continued)


December 31, 2020	CEA Jiangsu			CEA Yunnan			CEA Wuhan
	RMB million			RMB million			RMB million
Revenue		4,550			6,048			1,650
Total expenses		(5,713	)		(6,809	)		(2,167	)
Loss for the year		(1,163	)		(761	)		(517	)
Total comprehensive loss for the year		(1,164	)		(761	)		(532	)

Current assets		477			290			97
Non-current assets		12,724			17,999			7,590
Current liabilities		(4,109	)		(5,219	)		(1,998	)
Non-current liabilities		(6,395	)		(6,528	)		(2,441	)

Net cash flows from operating activities		1,833			3,232			642
Net cash flows used in investing activities		(331	)		(534	)		(99	)
Net cash flows used in financing activities		(1,556	)		(2,698	)		(543	)
Effect of foreign exchange rate changes, net		—			—			—

Net decrease in cash and cash equivalents		(55	)		—			—

(b)	Transaction with non-controlling interests


	2021
	RMB million
Carrying amount of non-controlling interests disposed		1,717
Consideration paid by non-controlling interests		1,028

Deficit of consideration received recognised in the transactions with non-controlling interests reserve within equity		689

There were no transactions with

non-controlling

interests in 2020 and 2019.

CEA Yunnan was jointly invested by the Company and Yunnan Provincial People’s Government (“SASAC”) in 2010. According to the joint venture agreement and the articles of association, SASAC shall contribute 35% of the registered capital in cash and land use right of Kunming Airport. Before 2021, although SASAC was not able to transfer the land use right to CEA Yunnan for lacking administration approval, CEA Yunnan has operated on the land since 2010.

From January to February 2021, SASAC settled capital contributions to the subsidiary of the Company CEA Yunnan of which 283 million in cash and 744 million in the fair value of the land use right based on valuation results. Upon completion of the capital contributions, the Company and SASAC owns 65% and 35% respectively for profit/loss sharing and shareholders voting rights of CEA Yunnan. According to the supplementary shareholder agreement between the Company and SASAC signed on January 2021, from the incorporation date of CEA Yunan to the completion of capital contribution by SASAC on January 31, 2021, the undistributed profit of CEA Yunnan shall be allocated based on the proportion of 72.74% to the Company and 27.26% to SASAC. This is treated as the transaction with

non-controlling

shareholder of the subsidiary and RMB689 million was recorded in reserve (Note 42).

F-7

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

22	Investment in associate


	2021			2020
	RMB million			RMB million
Share of net assets		1,777			1,793

The movements in investments in associates were as follows:

	2021			2020
	RMB million			RMB million
At January 1		1,793			1,977
Additions		140			—
Share of results of associates		(97	)		(82	)
Share of revaluation on equity investments designated at fair value through other comprehensive income held by an associate		(7	)		2
Dividend declared during the year		(21	)		(104	)
Disposal of associates		(31	)		—

At December 31		1,777			1,793

F-7

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

22	Investment in associate (continued)

Particulars of the principal associates, which are limited liability companies, are as follows:

Place of
establishment and
operation and date of
establishment

Registered capital

Attributable

equity
interest

Principal activities

Company name

2021

Million

2020

Million

2021

2020

Eastern Air Group Finance Co., Ltd. (“Eastern Air Finance Company”)

PRC/Mainland China

December 6, 1995

RMB2,000

25%

Provision of financial

services to group

companies of

CEA Holding

China Eastern Air Catering Investment Co., Ltd.

PRC/Mainland China

November 17, 2003

RMB350

45%

Provision of air catering services

Shanghai Pratt & Whitney Aircraft Engine Maintenance Co., Ltd. (“Shanghai P&W”) (note)

PRC/Mainland China

March 28, 2008

USD40

51%

Provision of aircraft,
engine and other
related component
maintenance services

New Shanghai International Tower Co., Ltd.

PRC/Mainland China

November 17, 1992

RMB167

20%

Property development provision and management services

Eastern Aviation Import & Export Co., Ltd. (“Eastern Import & Export”)

PRC/Mainland China

June 9, 1993

RMB80

45%

Provision of aviation
equipment and
purchase of spare
parts

Eastern Aviation Advertising Service Co., Ltd. (“Eastern Advertising”

PRC/Mainland China

March 4, 1986

RMB200

45%

Provision of aviation
advertising agency
services

Shanghai Collins Aviation Maintenance Service Co., Ltd. (“Collins Aviation”)

PRC/Mainland China

September 27, 2002

USD7

35%

Provision of airline
electronic product
maintenance services

Shanghai Airlines Tours International (Group) Co., Ltd. (“Shanghai Airlines Tours”)

PRC/Mainland China

August 29, 1992

RMB143

35%

Tour operations, travel
and air ticketing
agency and
transportation

Note:

In 2008, the Company entered into an agreement with United Technologies International Corporation (“Technologies International”) to establish Shanghai P&W, in which the Company holds a 51% interest. According to the shareholder’s agreement, Technologies International has the power to govern the financial and operating policies and in this respect the Company accounts for Shanghai P&W as an associate.

F-7

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

22	Investment in associate (continued)

The following table illustrates the aggregate financial information of the Group’s associates that were not individually material:


	2021			2020
	RMB million			RMB million
Share of the associates’ loss for the year		(97	)		(82	)
Share of the associates’ other comprehensive income		(7	)		2

Share of the associates’ total comprehensive income		(104	)		(80	)
Aggregate carrying amount of the Group’s interests in the associates		1,777			1,793

23	Investments in joint ventures


	2021		2020
	RMB million		RMB million
Share of net assets		484		594

The movements in investments in joint ventures were as follows:


	2021			2020
	RMB million			RMB million
At January 1		594			627
Share of results		(44	)		(13	)
Dividend declared during the year		(12	)		(20	)
Disposal of joint ventures		(54	)		—

At December 31		484			594

F-7

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

23	Investments in joint ventures (continued)

Particulars of the principal joint ventures, which are limited liability companies, are as follows:

Company name

Place of establishment
and operation and date
of establishment

Registered capital

Attributable

equity
interest

Principal activities

2021

Million

2020

Million

2021

2020

Shanghai Technologies Aerospace Co., Ltd. (“Technologies Aerospace”) (note)

PRC/Mainland China

September 28, 2004

USD73

51%

Provision of repair and maintenance services

Shanghai Eastern Union Aviation Wheels & Brakes Maintenance Services Overhaul Engineering Co., Ltd. (“Wheels & Brakes”)

PRC/Mainland China

December 28, 1995

USD2

—

40%

Provision of spare parts
repair and maintenance
services

Eastern China Kaiya System Integration Co., Ltd. (“China Kaiya”)

PRC/Mainland China

May 21, 1999

RMB10

41%

Provision of computer
system development and
maintenance services

CAE Melbourne Flight Training Pty Ltd. (“CAE Melbourne”)

Australia
March 9, 2007

AUD11

50%

Provision of flight training services

Shanghai Hute Aviation Technology Co., Ltd. (“Shanghai Hute”)

PRC/Mainland China

April 9, 2003

RMB30

—

50%

Provision of equipment Maintenance services

Xi’an CEA SAFRAN Landing Systems Services Co., Ltd. (“XIESA”)

PRC/Mainland China

July 12, 2017

USD40

50%

Provision of aircraft, engine
and other related
component maintenance
services

Note:

Under a joint venture agreement with a joint venture partner of Technologies Aerospace dated March

10,

2003, the Group and the joint venture partner have agreed to share the control over the economic activities of Technologies Aerospace. Any strategic financial and operating decisions relating to the activities of Technologies Aerospace require the unanimous consent of the Company and the joint venture partner.

The following table illustrates the aggregate financial information of the Group’s joint ventures that were not individually material:


	2021			2020
	RMB million			RMB million
Share of the joint ventures’ (loss)/profit and total comprehensive income for the year		(44	)		(13	)

Aggregate carrying amount of the Group’s interests in the joint ventures		484			594

F-7

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

26	Other non-current assets


	December 31, 2021		December 31, 2020
	RMB million		RMB million
Deposits relating to aircraft held under leases		140		143
Deferred pilot recruitment costs		2,088		2,100
Rebate receivables on aircraft acquisitions		1,134		1,264
Prepayment for acquisition of property, plant and equipment		286		1,055
Others		821		783

		4,469		5,345

27	Deferred tax assets and liabilities

Deferred tax assets and liabilities are offset when there is a legally enforceable right of offsetting and when the deferred income taxes relate to the same authority. The following amounts, determined after appropriate offsetting, are shown in the consolidated statement of financial position:


	December 31, 2021		December 31, 2020
	RMB million		RMB million
Deferred tax assets:		9,580		5,011
Deferred tax liabilities		—		(13	)

Net deferred income tax assets		9,580		4,998

Movements in the net deferred tax assets were as follows:


	December 31, 2021		December 31, 2020
	RMB million		RMB million
At January 1		4,998		831
Credited to profit or loss (Note 13)		4,372		4,149
Charged to other comprehensive income		210		18

At December 31		9,580		4,998

F-7

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

27	Deferred tax assets and liabilities (continued)

The deferred tax assets and liabilities (prior to the offsetting of balances within the same tax jurisdiction) were made up of the taxation effects of the following:


	December 31, 2021		December 31, 2020
	RMB million		RMB million
Deferred tax assets:
Provision for lease return costs for aircraft and engines		1,190		1,109
Lease liabilities/right-of-use assets		—		94
Impairment provision for flight equipment spare parts		65		61
Impairment provision for receivables		84		80
Impairment provision for property, plant and equipment		61		115
Derivative financial instruments		12		36
Financial asset at fair value through profit or loss		10		7
Other payables and accruals		65		70
Government grants related to assets		22		29
Loss available for offsetting against future taxable profits		8,323		3,699
Safety equipment tax credit		41		10
Aged payables		—		1

	9,873		5,311

Deferred tax liabilities:
Lease liabilities/right-of-use assets		(214)		—
Equity investments designated at fair value through other comprehensive income		(79)		(213)
Derivative financial instruments		—		(100)

	(293)		(313)

	9,580		4,998

F-

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

27	Deferred tax assets and liabilities (continued)

Movements in the net deferred tax assets/(liabilities) of the Group for the year were as follows:


	At January 1, 2021			(Charged) / credited to profit or loss			(Charged) / credited to other comprehensive income			At December 31, 2021
	RMB million			RMB million			RMB million			RMB million
For the year ended December 31, 2021
Provision for lease return costs for aircraft and engines		1,109			81			—			1,190
Lease liabilities/right-of-use assets		94			(94	)		—			—
Impairment provision for flight equipment spare parts		61			4			—			65
Impairment provision for receivables		80			4			—			84
Impairment provision for property, plant and equipment		115			(54	)		—			61
Derivative financial instruments		36			—			(24	)		12
Financial asset at fair value through profit or loss		7			3			—			10
Other payables and accruals		70			(5	)		—			65
Government grants related to assets		29			(7	)		—			22
Loss available for offsetting against future taxable profits		3,699			4,624			—			8,323
Safety equipment tax credit		10			31			—			41
Aged payables		1			(1	)		—			—

	5,311			4,586			(24)			9,873

Lease liabilities/right-of-use assets		—			(214	)		—			(214	)
Equity investments designated at fair value through other comprehensive income		(213	)		—			134			(79	)
Derivative financial instruments		(100	)		—			100			—

	(313)			(214)			234			(293)

Net deferred tax assets		4,998			4,372			210			9,580

F-8

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

27	Deferred tax assets and liabilities (continued)

Movements in the net deferred tax assets/(liabilities) of the Group for the year were as follows:


	At January 1, 202 0			(Charged) / credited to profit or loss			(Charged) / credited to other comprehensive income			At December 31, 2020
	RMB million			RMB million			RMB million			RMB million
For the year ended December 31, 2020
Provision for lease return costs for aircraft and engines		1,075			34			—			1,109
Lease liabilities/Right-of-use assets		—			94			—			94
Impairment provision for flight equipment spare parts		53			8			—			61
Impairment provision for receivables		76			4			—			80
Impairment provision for property, plant and equipment		101			14			—			115
Derivative financial instruments		6			—			30			36
Financial asset at fair value through profit or loss		—			7			—			7
Other payables and accruals		71			(1	)		—			70
Government grants related to assets		35			(6	)		—			29
Loss available for offsetting against future taxable profits		66			3,633			—			3,699
Safety equipment tax credit		—			10			—			10
Aged payables		1			—			—			1
	1,484			3,797			30			5,311

Lease liabilities/Right-of-use assets		(352	)		352			—			—
Equity investments designated at fair value through other comprehensive income		(283	)		—			70			(213	)
Derivative financial instruments		(18	)		—			(82	)		(100	)

	(653)			352			(12)			(313)

Net deferred tax assets		831			4,149			18			4,998

(a)	The temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, for which deferred tax has not been recognised in the periods presented, totalled RMB3,042 million (2020: RMB7,087 million).

F-8

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

27	Deferred tax assets and liabilities (continued)

As at the reporting date, the Group had the following balances in respect of which deferred tax assets have not been recognised:


	2021				2020
	Deferred taxation		Temporary differences		Deferred taxation		Temporary differences
	RMB million		RMB million		RMB million		RMB million
Tax losses carried forward		95		380		34		135
Other deductible temporary differences		8		33		8		35

Total unrecognised deferred tax assets		103		413		42		170

In accordance with the PRC tax law and relevant regulations, tax losses for the year 2020 can be carried forward for a period of eight years and other years’ tax losses can be carried forward for a period of five years to offset against future taxable income. The Group’s tax losses carried forward will expire between 2022 and 2028

As at December 31, 2021, management carried out an assessment to determine whether future taxable profits will be available to utilise the tax losses and deductible temporary differences. The Group has recognised deferred tax assets of RMB8,323 million (2020: RMB3,699 million) for tax losses of RMB34,065 million (2020: RMB15,175 million) and RMB1,550 million (2020: RMB1,612 million) for deductible temporary differences. For certain subsidiaries, as there are still uncertainties around the future operating results, such as market competition, management assessed that there are significant uncertainties that future taxable profits will be available for these subsidiaries and accordingly no deferred tax assets were recognised.

28	Flight equipment spare parts


	December 31, 2021			December 31, 2020
	RMB million			RMB million
Flight equipment spare parts		2,059			2,299
Less: provision for spare parts		(260	)		(245	)

	1,799			2,054

Movements in the Group’s provision for impairment of flight equipment spare parts were as follows:


	December 31, 2021			December 31, 2020
	RMB million			RMB million
At January 1		245			325
Accrual		21			153
Amount written off in relation to disposal of spare parts		(6	)		(233	)

At December 31		260			245

F-8

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

29	Trade receivables

The credit terms given to trade customers are determined on an individual basis.


	December 31, 2021			December 31, 2020
	RMB million			RMB million
Trade receivables		1,051			1,210
Less: impairment		(77	)		(86	)

	974			1,124

An ageing analysis of the trade receivables as at the end of the reporting period, based on the invoice/billing date and net of loss allowance, is as follows:


	December 31, 2021		December 31, 2020
	RMB million		RMB million
Within 90 days		919		1,054
91 to 180 days		39		46
181 to 365 days		9		8
Over 365 days		7		16

	974		1,124

Balances with related parties included in trade receivables are summarised in Note 45(c)(i).

The movements in the loss allowance for impairment of trade receivables are as follows:


	December 31, 2021			December 31, 2020
	RMB million			RMB million
At January 1		86			76
Impairment losses, net (Note 10)		3			15
Amount written off as uncollectible		(12	)		(5	)
At December 31		77			86

F-8

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

29	Trade receivables (continued)

The Group applies IFRS 9 simplified approach to measuring the expected credit losses which uses a lifetime expected loss allowance for all trade receivables. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions.

Set out below is the information about the credit risk exposure on the Group’s trade receivables using a provision matrix:

As at December 31, 2021


			Past due
			Less than		90 to 365		Over
	Current		90 days		days		365 days		Total
Expected credit loss rate (%)		0.70		3.67		5.36		90.79		7.37
Gross carrying amount (RMB million)		925		40		10		76		1,051
Expected credit losses (RMB million)		6		1		1		69		77

As at December 31, 2020


			Past due
			Less than		90 to 365		Over
	Current		90 days		days		365 days		Total
Expected credit loss rate (%)		0.85		4.79		6.87		76.93		7.08
Gross carrying amount (RMB million)		1,063		42		9		96		1,210
Expected credit losses (RMB million)		9		1		1		75		86

Trade receivables that were neither past due nor impaired relate to a large number of independent sales agents for whom there was no recent history of default.

The net impacts of recognition and reversal of provisions for impaired receivables have been included in “Impairment losses on financial assets, net” in profit or loss (Note 10). Amounts charged to the allowance account are generally written off when there is no expectation of recovering.

30	Financial asset at fair value through profit or loss


	2021		2020
	RMB million		RMB million
Listed equity investment, at fair value:
Shanghai Pudong Development Bank Co., Ltd.		84		95

The above equity investment was classified as a financial asset at fair value through profit or loss as it was held for trading.


	2021			2020
	RMB million			RMB million
Fair value losses on equity investments at FVPL recognised in other losses		(11	)		(26	)

F-8

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

32	Cash and cash equivalents and restricted cash


	December 31, 2021			December 31, 2020
	RMB million			RMB million
Cash at bank and on hand		12,962			7,663
Less: restricted cash (a)		(12	)		(12	)

Cash and cash equivalents(b)		12,950			7,651

(a)	Details of restricted cash are as follows:


	December 31, 2021		December 31, 2020
	RMB million		RMB million
Restricted bank deposits		12		12

(b)

At the end of the reporting period, the cash and bank balances of the Group denominated in RMB amounted to RMB12,788 million (2020: RMB6,658 million). The RMB is not freely convertible into other currencies. However, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.

Cash at banks earns interest at floating rates based on daily bank deposit rates. The bank balances are deposited with creditworthy banks and financial institutions with no recent history of default.

33	Assets classified as held for sale

The Group entered into agreements with China Aviation Supplies Co., Ltd. to dispose of certain flight equipment. The flight equipment with an aggregate carrying amount of RMB2 million (2020: RMB2 million) was recognised as assets classified as held for sale by the Group as at December 31, 2021, which are stated at the lower of their carrying amounts and their fair value less cost to sell.

34	Trade payables and bills payable

An ageing analysis of the trade and bills payables as at the end of the reporting period was as follows:



	December 31, 2021		December 31, 2020
	RMB million		RMB million
Within 90 days		2,338		2,868
91 to 180 days		6		35
181 to 365 days		16		109
1-2 years		15		111
Over 2 years		79		97

		2,454		3,220


Balances with related parties included in trade and bills payables are summarised in Note 45(c)(ii).

As at December 31, 2021, bills payable of the Group accounted to RMB748 million (2020: RMB610 million ).

F-8

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

37	Borrowings


	December 31, 2021		December 31, 2020
	RMB million		RMB million
Non-current:
Long-term bank borrowings
- secured (note (a))		16,401		8,638
- unsecured		11,750		4,526
Guaranteed bonds (note (b))		8,648		9,585
Unsecured bonds (note (b))		13,993		7,996

		50,792		30,745

Current :
Current portion of non-current borrowings
- secured (note (a))		1,910		1,498
- unsecured		211		28
Current portion of guaranteed bonds (note (b))		1,828		3,158
Current portion of unsecured bonds (note (b))		3,436		4,000
Short-term bank borrowings
- unsecured		37,614		21,966
Short-term debentures		—		26,500

		44,999		57,150

		95,791		87,895

The borrowings are repayable as follows:


	December 31, 2021		December 31, 2020
	RMB million		RMB million
Within one year		44,999		57,149
In the second year		14,080		5,936
Between third and fifth years, inclusive		15,900		17,680
After the fifth year		20,812		7,130

		95,791		87,895

Notes:

(a) As at December 31, 2021, the secured bank borrowings of the Group were secured by the related aircraft with a net carrying amount of RMB23,129 million (2020: RMB17,515 million) (Note 16).

(b) Detailed borrowings from banks are listed below:


	Issue date		Principal	Notes			Interest rate
Ten-year guaranteed bonds		2013/03/18	RMB4.8 billion		(i	)		5.05	%
Ten-year corporate bonds		2016/10/24	RMB1.5 billion		(ii	)		3.03	%
Ten-year corporate bonds		2016/10/24	RMB1.5 billion		(ii	)		3.30	%
Three-year medium-term bonds		2019/03/05	RMB3 billion		(iii	)		3.70	%
Five-year corporate bonds		2019/08/19	RMB3 billion		(iv	)		3.60	%
Three-year corporate bonds		2019/12/06	KRW300 billion		(v	)		2.40	%
Three-year corporate bonds		2020/04/24	RMB2 billion		(vi	)		2.39	%
Ten-year corporate bonds		2021/03/11	RMB3 billion		(vii	)		3.95	%
Six-year corporate bonds		2021/03/11	RMB6 billion		(viii	)		3.68	%
Five-year credit enhanced bonds		2021/07/15	SGD0.5 billion		(ix	)		2.00	%

F-8

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

37	Borrowings (continued)

(b) Detailed borrowings from banks are listed below: (continued)

(i)

On March 18, 2013

, the Company

issued

ten-year

guaranteed

bonds with a principal amount of RMB4.8 billion at an issue price equal to the face value of the bonds. The bonds bear interest at the rate

of 5.05% per

annum, which is payable annually. The principal of the bonds will mature and become repayable on March 18, 2023

. CEA Holding has unconditionally and irrevocably guaranteed the due payment and performance of the above bonds (Note 45

(d)).

(ii)

On October 24, 2016

, the Company

issued

ten-year

corporate

bonds with a total principal amount of RMB3 billion, of which bonds of R

MB1.5 billion

bear interest at the rate of 3.03% per annum and the remaining bonds of R

MB1.5 billion bear interest at the rate

of 3.30%

per annum. The bonds interest is payable annually. The principal of the bonds will mature and become repayable on October 24, 2026

. CEA Holding has unconditionally and irrevocably guaranteed the due payment and performance of the above bonds (Note 45

(d)).

(iii)

On March 5, 2019

, the Company

issued three-year medium-term

bonds with a principal amount of

RMB3 billion

, at an issue price equal to the face value of the bonds. The bonds bear interest at the

rate of 3.70% per annum

, which is payable annually. The principal of the bonds will mature and become repayable on March 7, 2022

(iv)

On August 19, 2019

, the Company

issued five-year corporate

bonds with a total principal amount of

RMB3 billion

. The bonds bear interest at the rate

of 3.60% per

annum, which is payable annually. The principal of the bonds will mature and become repayable on August 20, 2024

(v)

On December 6, 2019

, Eastern Air Overseas

issued three-year corporate

bonds with a principal amount

of KRW300 billion

, at an issue price equal to the face value of the bonds. The bonds bear interest at the

rate of 2.40% per annum

, which is payable annually. The principal of the bonds will mature and become repayable on December 6, 2022

. The Company has unconditionally and irrevocably guaranteed the due payment and performance of the above bonds.

(vi)

On April 24, 2020

, the Company

issued three-year corporate

bonds with a total principal amount of

RMB2 billion

. The bonds bear interest at the rate

of 2.39% per annum

, which is payable annually. The principal of the bonds will mature and become repayable on April 28, 2023

(vii)

On March 11, 2021

, the Company

issued

ten-year

corporate

bonds with a principal amount of RMB3 billion. The bonds bear interest at the rate

of 3.95% pe

r annum which is payable annually. The principle of the bonds will mature and become repayable on March 12, 2031

(viii)

On March 11, 2021

, the Company

issued

six-year

corporate

bonds with a principal amount of RMB6 billion. The bonds bear interest at the rate

of 3.68% per

annum which is payable annually. The principle of the bonds will mature and become repayable on March 12, 2027

(ix)

On July 15, 2021

, Eastern Air Overseas issued five-year credit enhanced bonds with a principal amount of SGD0.5 billion. The bonds bear interest at the rate of 2.00% per annum which is payable semi-annually. The principle of the bonds will mature and become repayable on July 15, 2026

. The bonds are secured by a standby letter of credit issued by Industrial and Commercial Bank of China Limited Shanghai Municipal Branch.

F-

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

37	Borrowings (continued)

The terms of the long-term borrowings and bonds were summarised as follows:


	Interest rate and final maturities	December 31, 2021 RMB million		December 31, 2020 RMB million
Long-term bank borrowings
RMB denominated	Interest rates ranging from 2.40% to 4.15% with final maturities through 2045 (2020: 2.40% to 4.21%)		28,302		11,651
USD denominated	Interest rates ranging from 6-month LIBOR +0.70% to 6-month LIBOR +0.85% with final maturities through 2022 (2020: 6-month LIBOR +0.70% to 6-month LIBOR +0.85%)		13		375
EUR denominated	Interest rates at 3-month EURLIBOR +0.5% with final maturities through 2026 (2020: 3 months EURLIBOR +0.5%)		1,957		2,664

Guaranteed bonds
RMB denominated	Interest rates ranging from 3.03% to 5.05% with final maturities through 2026 (2020: 3.03% to 5.05%)		6,499		7,798
JPY denominated	Interest rates ranging from 0.33% to 0.64% with final maturities through 2021 (2020: 0.33% to 0.64%)		—		3,158
KRW denominated	Interest rate at 2.40% with final maturities through 2022 (2020: 2.40%)		1,606		1,787
SGD denominated	Interest rate at 2.00% with final maturities through 2026		2,371		—

Unsecured bonds
RMB denominated	Interest rates ranging from 2.39 % to 3.95% with final maturities through 2031 (2020: from 2.39% to 3.70%)		17,429		11,996

			58,177		39,429

Short-term borrowings of the Group are repayable within one year. As at December 31, 2021, the interest rates relating to such borrowings were 2.00% to 3.00% (2020: 1.21% to 3.30%) per annum.

F-9

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

38	Provision for lease return costs for aircraft and engines


	2021 RMB million			2020 RMB million
At January 1		6,990			7,178
Accrual		373			283
Utilisation		(93	)		(471	)

At December 31		7,270			6,990
Less: current portion		—			(24	)

Non-current portion		7,270			6,966

39	Post-retirement benefit obligations

(a)	Pension — defined contribution

The group companies participate in defined contribution retirement schemes organised by municipal governments of various provinces in which the group companies operate. Substantially all of the Group’s PRC employees are eligible to participate in these defined contribution retirement schemes. Therefore, the employees are entitled to a monthly pension based on certain formulas. The relevant government agencies are responsible for the pension liability to these retired employees. In addition, the group companies have implemented an additional defined contribution retirement pension scheme for eligible employees since 2014.

As at December 31, 2021 and December 31, 2020, the Group cannot use forfeited contributions to reduce its contributions to the pension schemes.

(b)	Post-retirement benefits

In addition to the above schemes, the Group provides eligible retirees with other post-retirement benefits, including retirement subsidies, transportation allowance as well as other welfare. The expected cost of providing these post-retirement benefits is actuarially determined and recognised by using the projected unit credit method, which involves a number of assumptions and estimates, including inflation rate, discount rate, annual increase rate of post-retirement medical expenses and mortality rate.

The plan is exposed to interest rate risk and the risk of changes in the life expectancy for pensioners

The most recent actuarial valuation of the post-retirement benefit obligations was carried out at December 31, 2021 with assistance from a third-party consultant using the projected unit credit actuarial valuation method.

The post-retirement benefit obligations recognised in the consolidated statement of financial position are as follows:


	2021 RMB million			2020 RMB million
Post-retirement benefit obligations		2,527			2,538
Less: current portion		(160	)		(165	)

Non-current portion		2,367			2,373

F-9

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

39	Post-retirement benefit obligations (continued)

(b)	Post-retirement benefits (continued)

The principal actuarial assumptions utilised as at the end of the reporting period are as follows:


	2021			2020
Discount rates for post-retirement benefits		2.85	%		3.40	%
Mortality rate		China Insurance Life Mortality Table (2010-2013). CL5 for Male and CL6 for Female			China Insurance Life Mortality Table (2010-2013). CL5 for Male and CL6 for Female
Annual increase rate of post-retirement medical expenses		6.50	%		6.50	%
Inflation rate of pension benefits		2.50	%		2.50	%

A quantitative sensitivity analysis for significant assumptions at the end of the reporting period is shown below:


	Increase in rate %		Increase/ (decrease) in post-retirement benefit obligations RMB million			Decrease in rate %		Increase/ (decrease) in post-retirement benefit obligations RMB million
2021
Discount rate for post-retirement benefits		0.25		(66	)		0.25		69
Annual increase rate of pension benefits		1.00		246			1.00		(211	)
Annual increase rate of medical expenses		1.00		37			1.00		(31	)

2020
Discount rate for post-retirement benefits		0.25		(78	)		0.25		81
Annual increase rate of pension benefits		1.00		244			1.00		(208	)
Annual increase rate of medical expenses		1.00		43			1.00		(36	)

The sensitivity analyses above have been determined based on a method that extrapolates the impact on net post-retirement benefit obligations as a result of reasonable changes in key assumptions occurring at the end of the reporting period.

Expected contributions to be made in the future years out of the post-retirement benefit obligations were as follows:


	2021 RMB million		2020 RMB million
Within the next 12 months		161		165
Between 2 and 5 years		635		660
Between 6 and 10 years		757		805
Over 10 years		1,998		2,449

Total expected payments		3,551		4,079

The average duration of the post-retirement benefit obligations at the end of 2021 was 11 years (2020: 13 years).

F-9

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

39	Post-retirement benefit obligations (continued)

(b)	Post-retirement benefits (continued)

The movements in the post-retirement benefit obligations were as

follows:

2021

Pension cost charged to

profit or loss

Remeasurement losses

in other comprehensive income

January

2021

Service

cost

Net

interest

Sub-

total

included

in profit

or loss

Actuarial

changes

arising from

changes in

financial

assumptions

Actuarial

changes

arising from

changes in

demographic

assumptions

Experience

adjustments

Sub-total

included

in other

compreh-
ensive

income

Benefit

settled

December

31,

2021

RMB
million

RMB

million

RMB

million

RMB

million

RMB
million

Defined benefit obligations/ benefit liability

2,538

—

140

—

(56

)

(178

)

2,527

2020

Pension cost charged to

profit or loss

Remeasurement losses

in other comprehensive income

January

2020

Service

cost

Net

interest

Sub-

total

included

in profit

or loss

Actuarial

changes

arising from

changes in

financial

assumptions

Actuarial

changes

arising from

changes in

demographic

assumptions

Experience

adjustments

Sub-total

included

in other

compreh-
ensive

income

Benefit

settled

December

31,

2020

RMB
million

RMB

million

RMB

million

RMB

million

RMB
million

Defined benefit obligations/ benefit liability

2,584

—

(192

)

2,538

F-9

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

40	Other long-term liabilities


	December 31, 2021			December 31, 2020
	RMB million			RMB million
Long-term duties and levies payable relating to finance leases		908			1,159
Deferred gains relating to government grants		91			121
Provision for early retirement benefit obligations and other benefit obligations		315			251
Other long-term payables		1,227			659

		2,541			2,190

Less: current portion included in other payables and accruals (Note 36)		(293	)		(235	)
Non-current portion		2,248			1,955

41	Share capital


	December 31, 2021		December 31, 2020
	RMB million		RMB million
Registered, issued and fully paid of RMB1.00 each
A shares listed on the Shanghai Stock Exchange (“A Shares”)		13,697		11,202
— Tradable shares with trading moratorium		3,889		1,394
— Tradable shares without trading moratorium		9,808		9,808
H shares listed on the Stock Exchange of Hong Kong Limited (“H Shares”)		5,177		5,177
— Tradable shares with trading moratorium		518		518
— Tradable shares without trading moratorium		4,659		4,659

Total		18,874		16,379

Pursuant to articles 50 and 51 of the Company’s articles of association, both the listed A shares and listed H shares are registered ordinary shares and carry equal rights.

According to the approval of the China Securities Regulatory Commission, the Company completed the

non-public

issuance of 2,495

million A shares to

CEA Holding on October 27, 2021

raising a total of RMB

10,820

million in net funds.

F-9

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

Reserves


	Share premium			Capital reserve (note (a))			Hedging reserve			Statutory reserve (note (b))		Other reserves			Retained earnings/ (accumulated losses)			Total
	RMB million			RMB million			RMB million			RMB million		RMB million			RMB million			RMB million
Balance at January 1, 2020		37,070			(767	)		24			782		(2,362	)		17,882			52,629

Unrealised gains on cash flow hedges		—			—			158			—		—			—			158
Fair value movements in equity investments designated at fair value through other comprehensive income		—			—			—			—		(203	)		—			(203	)
Fair value changes of equity investments designated at fair value through other comprehensive income held by an associate		—			—			—			—		2			—			2
Actuarial gains on post-retirement benefit obligations		—			—			—			—		(61	)		—			(61	)
Loss for the year		—			—			—			—		—			(11,836	)		(11,836	)
Final 2019 dividend		—			—			—			—		—			(819	)		(819	)

At December 31, 2020		37,070			(767	)		182			782		(2,624	)		5,227			39,870

Balance at January 1, 2021		37,070			(767	)		182			782		(2,624	)		5,227			39,870

Unrealised gains on cash flow hedges		—			—			(228	)		—		—			—			(228	)
Fair value movements in equity investments designated at fair value through other comprehensive income		—			—			—			—		(237	)		—			(237	)
Fair value changes of equity investments designated at fair value through other comprehensive income held by an associate		—			—			—			—		(7	)		—			(7	)
Actuarial gains on post-retirement benefit obligations		—			—			—			—		(79	)		—			(79	)
Loss for the year		—			—			—			—		—			(12,214	)		(12,214	)
Issue of ordinary shares, net of transaction costs and tax		8,325			—			—			—		—			—			8,325
Transfer of gain on disposal of equity investments at fair value through other comprehensive income to retained earnings		—			—			—			—		(157	)		157			—
Transactions with non-controlling interests (Note 21(b))		(689	)		—			—			—		—			—			(689	)

At December 31, 2021		44,706			(767	)		(46	)		782		(3,104	)		(6,830	)		34,741

Notes:

(a)	Capital reserve

Capital reserve mainly represents the difference between the fair value of the net assets injected and the nominal amount of the Company’s share capital issued in respect of the Group restructuring carried out in June 1996 for the purpose of the Company’s listing.

(b)	Statutory reserve

According to the PRC Company Law, the Company is required to transfer a portion of the profits to the statutory reserve. The transfer to this reserve must be made before distribution of dividends to shareholders and when there are retained profits at the end of the financial year.

F-9

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

43	Notes to the consolidated statement of cash flows

(a)	Cash generated from operations


	2021			2020			2019
	RMB million			RMB million			RMB million
(Loss)/profit before income tax		(17,513	)		(16,488	)		4,299
Adjustments for:
Depreciation of property, plant and equipment		9,490			9,067			9,078
Depreciation of right-of-use assets		12,389			12,367			12,298
Depreciation of investment properties		10			12			25
Amortisation of intangible assets		210			239			143
Amortisation of other non-current assets		619			570			536
Gain on disposal of property, plant and equipment and right-of-use assets		(719	)		(17	)		(22	)
Gain on disposal of an investment in subsidiaries, associates and joint ventures		(142	)		—			(64	)
Dividend income from equity investments at fair value through other comprehensive income		(3	)		(12	)		(19	)
Dividend income from a financial asset at fair value through profit or loss		(5	)		(6	)		(3	)
Share of results of associates		97			82			(265	)
Share of results of joint ventures		44			13			(17	)
Net foreign exchange (gains)/loss		(1,506	)		(2,746	)		890
Fair value losses/(gains), net:
Financial asset at fair value through profit or loss		11			26			(25	)
COVID-19-related rent concessions from lessors		—			(3	)		—
Impairment charges		22			184			4
Impairment losses on financial assets, net		28			32			16
Interest expense		5,812			5,214			5,169

Operating profit before working capital changes		8,844			8,534			32,043

Changes in working capital
Flight equipment spare parts		240			200			(457	)
Trade receivables		159			593			(275	)
Prepayments and other receivables		(916	)		2,893			(2,336	)
Contract liabilities		(805	)		(6,686	)		1,281
Restricted bank deposits		—			(6	)		9
Trade and bills payables		(766	)		(657	)		(163	)
Other payables and accruals		(1,686	)		(983	)		1,459
Other long-term liabilities		489			(2,174	)		(1,916	)
Post-retirement benefit obligations		(11	)		(46	)		(125	)
Provision for lease return costs for aircraft and engines		280			(188	)		617

Cash generated from operations		5,828			1,480			30,137

F-9

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

43	Notes to the consolidated statement of cash flows (continued)

(b)	Major non-cash transactions


	2021		2020
	RMB million		RMB million
Additions to right-of-use assets and reserve (Note 21(b))		744		—
Additions to right-of-use assets and lease liabilities		18,202		7,191

(c)	Changes in liabilities arising from financing activities


	Bank and other loans			Lease liabilities
	RMB million			RMB million
At January 1, 2019		55,126			109,306
Changes from financing cash flows		(3,427	)		(23,895	)
Foreign exchange movement		138			851
Disposal of a subsidiary		—			(10	)
New leases		—			24,023

At December 31, 2019		51,837			110,275

At January 1, 2020		51,837			110,275
Changes from financing cash flows		36,173			(18,444	)
COVID-19-related rent concessions from lessors		—			(3	)
Foreign exchange movement		(115	)		(2,768	)
New leases		—			7,191

At December 31, 2020		87,895			96,251

At January 1, 2021		87,895			96,251
Changes from financing cash flows		7,778			(15,725	)
COVID-19-related rent concessions from lessors		—			—
Other addition		702			486
Foreign exchange movement		(584	)		(738	)
New leases		—			18,202

At December 31, 2021		95,791			98,476

(d)	Total cash outflow for leases

The total cash outflow for leases included in the statement of cash flows is as follows:


	2021			2020			2019
	RMB million			RMB million			RMB million

Within operating activities		(383	)		(358	)		(631	)
Within investing activities		(1,516	)		(1,183	)		(1,449	)
Within financing activities		(18,838	)		(22,099	)		(27,789	)

F-9

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

44	Commitments

(a)	The Group had the following capital commitments at the end of the reporting period:


	December 31, 2021		December 31, 2020
	RMB million		RMB million
Contracted for:
— Aircraft, engines and flight equipment (note i)		24,922		37,277
— Other property, plant and equipment		2,980		3,646
— Investments		2,163		1,335

		30,065		42,258

Note:

(i)	Contracted expenditures for the above aircraft, engines and flight equipment, including deposits prior to delivery, subject to future inflation increase built into the contracts were expected to be paid as follows:


	December 31, 2021		December 31, 2020
	RMB million		RMB million
Within one year		9,530		13,542
In the second year		8,018		13,692
In the third year		7,374		7,109
Over three years		—		2,934

		24,922		37,277

The above capital commitments represent the future outflows of cash or other resources.

(ii)	On March 11, 2019, the Civil Aviation Administration of China ordered all domestic airlines to ground all 737MAX-8 aircraft. The Group has certain 737MAX-8 aircraft on order as at December 31, 2021 and has not taken delivery of any 737MAX-8 aircraft since the grounding.

In 2021, certain progress was reached in our follow-on negotiations with Boeing for the B737 MAX fleet. Any cash received will be accounted for as an adjustment to the purchase price of current and future deliveries and will flow through consolidated statement of operations as reduced depreciation expense over the life of the aircraft, and as cash proceeds from investing activities on the consolidated statement of cash flow.

(b)

The Group has various lease contracts that have not yet commenced as at December 31, 2021. The future lease payments for these

non-cancellable

lease contracts are RMB283 million (2020: RMB62 million) due within one year, RMB2,006 million (2020: RMB123million) due in the second to

fifth years and RMB3,730 million due over five years (2020: nil)

(c)	As at December 31, 2021, lease commitments for short-term leases amounted to RMB59 million (2020: RMB130 million).

F-9

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

45	Related party transactions

The Group is controlled by CEA Holding, which directly owns 40.10% of the Company’s shares as at December 31, 2021 (December 31, 2020: 30.97%). In addition, through CES Global Holdings (Hong Kong) Limited and CES Finance Holding Co., Limited, two wholly owned subsidiaries of CEA Holding, CEA Holding indirectly owns additional shares of the Company of approximately 13.91% and 2.42% respectively as at December 31, 2021 (December 31, 2020: 16.03% and 2.79%).

The Company is a state-owned enterprise established in the PRC and is controlled by the PRC government, which also owns a significant portion of the productive assets in the PRC. In accordance with IAS 24 “Related Party Disclosures”, government-related entities and their subsidiaries, directly or indirectly controlled, jointly controlled or significantly influenced by the PRC government are defined as related parties of the Group. On that basis, related parties include CEA Holding and its subsidiaries (other than the Group), other government-related entities and their subsidiaries (“Other State-owned Enterprises”), other entities and corporations over which the Company is able to control or exercise significant influence and key management personnel of the Company as well as their close family members.

For the purpose of the related party transaction disclosures, the directors of the Company believe that meaningful information in respect of related party transactions has been adequately disclosed.

(a)	Nature of related parties that do not control or controlled by the Group:


		Name of related party		Relationship with the Group
		Eastern Air Group Finance Co., Ltd. (“Eastern Air Finance Company”)		Associate of the Company
		Eastern Aviation Import & Export Co., Ltd. and its subsidiaries (“Eastern Import & Export”)		Associate of the Company
		Shanghai Pratt & Whitney Aircraft Engine Maintenance Co., Ltd. (“Shanghai P&W”)		Associate of the Company
		Eastern Aviation Advertising Service Co., Ltd. and its subsidiaries (“Eastern Advertising”)		Associate of the Company
		Shanghai Collins Aviation Maintenance Service Co., Ltd. (“Collins Aviation”)		Associate of the Company
		Shanghai Airlines Tours International (Group) Co., Ltd. and its subsidiaries (“Shanghai Airlines Tours”)		Associate of the Company
		China Eastern Air Catering Investment Co., Limited and its subsidiaries		Associate of the Company
		(“Eastern Air Catering”)
		CAE Melbourne Flight Training Pty Limited (“CAE Melbourne”)		Joint venture of the Company
		Shanghai Technologies Aerospace Co., Ltd. (“Technologies Aerospace”)		Joint venture of the Company
		Eastern China Kaiya System Integration Co., Ltd. (“China Kaiya”)		Joint venture of the Company
		Xi An Cea Safran Landing Systems Services Co., Ltd. (“XIESA”)		Joint venture of the Company
		CEA Development Co., Limited and its subsidiaries (“CEA Development”)		Controlled by the same parent company
		Eastern Air Logistics Co., Ltd. and its subsidiaries (“Eastern Logistics”)		Controlled by the same parent company
		Shanghai Eastern Airlines Investment Co., Ltd. and its subsidiaries (“Eastern Investment”)		Controlled by the same parent company
		CES International Financial Leasing Corporation Limited and its subsidiaries (“CES Lease Company”)		Controlled by the same parent company
		TravelSky Technology Limited (“TravelSky”)		A key management personnel of the Company is a director of Travelsky
		Sichuan Airlines Co.,Ltd. (“Sichuan Air”)		A key management personnel of the Company is a director of Sichuan Air
		Air France-KLM Group (“AFK”)		A key management personnel of the Company is a director of AFK
		Juneyao Airlines Co., Ltd and its subsidiaries (“Juneyao Air”)		Shareholder who hold more than 5% of the company’s voting shares

F-

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

45	Related party transactions (continued)

(b)	Related party transactions


			Pricing policy
			and decision			2021		2020		2019
Nature of transaction	Related party		process			RMB million		RMB million		RMB million
Purchase of goods and services
Payments on food and beverages*		Eastern Air Catering		(i	)		1,636		812		1,471
		Eastern Import & Export		(i	)		62		50		56
Handling charges for purchase of aircraft, flight equipment, flight equipment spare parts, other property, plant and flight equipment and repairs for aircraft and engines*		Eastern Import & Export		(i	)		135		132		142
Repairs and maintenance expense for aircraft and engines		Shanghai P&W		(i	)		973		1,180		1,762
		Technologies Aerospace		(i	)		179		184		221
		Wheels & Brakes		(i	)		—		45		144
		Shanghai Hute		(i	)		—		116		88
		XIESA		(i	)		—		67		2
Payments on cabin cleaning services		Eastern Advertising		(i	)		3		9		22
Advertising expense*		Eastern Advertising		(i	)		25		26		29
Payments on system services		China Kaiya		(i	)		16		18		16
Equipment maintenance fee*		Collins Aviation		(i	)		36		33		45
		CEA Development		(i	)		48		81		98
Automobile maintenance service, aircraft maintenance, providing transportation automobile and other products*		CEA Development		(i	)		2		4		13
Property management and green maintenance expenses*		CEA Development		(i	)		185		195		205
Payments on hotel accommodation service*		CEA Development		(i	)		120		122		134
		Shanghai Airlines Tours		(i	)		40		10		23
Payments on construction and management agent*		Eastern Investment		(i	)		14		13		14
Payments on logistics services		Eastern Import & Export		(i	)		—		—		49
		Eastern Logistics		(i	)		103		115		53
Civil aviation information network services**		TravelSky		(i	)		230		552		753

F-10

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

45	Related party transactions (continued)

(b)	Related party transactions (continued)


			Pricing policy
			and decision			2021		2020		2019
Nature of transaction	Related party		process			RMB million		RMB million		RMB million
Purchase of goods and services (continued)
Flight equipment spare parts maintenance**		CASC		(i	)		—		107		143
Flight training fee		CAE Melbourne		(i	)		—		41		70
Payments on aviation transportation cooperation and support services**		AFK		(i	)		65		221		537
Payments on aviation transportation cooperation services		Juneyao Air		(i	)		4		2		2
Flight equipment spare parts maintenance and support services		AFK		(i	)		22		10		19
Bellyhold space operation cost*		Eastern Logistics		(i	)		—		—		310
Transfer of pilots		Eastern Logistics		(i	)		—		—		11
Cargo terminal business support services*		Eastern Logistics		(i	)		369		286		481
Bellyhold container management		Eastern Logistics		(i	)		13		13		13
Provision of services
Contractual revenue from bellyhold space* (note)		Eastern Logistics		(i	)		—		—		3,826
Exclusive operation transportation in relation to the passenger aircraft cargo business* (note)		Eastern Logistics		(i	)		8,309		4,895		—
Freight logistics support services*		Eastern Logistics		(i	)		192		185		135
Software system and support services		Eastern Logistics		(i	)		14		5		4
Transfer of pilots		Eastern Logistics		(i	)		29		—		—
Media royalty fee		Eastern Advertising		(i	)		14		14		15
Aviation transportation cooperation and support services**		AFK		(i	)		14		105		593
Aviation transportation cooperation services		Juneyao Air		(i	)		16		14		11
Transfer of pilots		Juneyao Air		(i	)		4		22		—

F-10

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

45	Related party transactions (continued)

(b)	Related party transactions (continued)


		Pricing policy
		and decision	2021		2020		2019
Nature of transaction	Related party	process	RMB million		RMB million		RMB million
Provision of services (continued)
Flight equipment spare parts maintenance and support services	Juneyao Air	(i)		24		35		41
Aviation transportation cooperation services	Sichuan Air	(i)		10		—		—
	Eastern Investment	(i)		3		—		—
Sale of Goods	Eastern Air Catering	(ii)		48		—		—
Rental income
Rental income for land and buildings under short-term leases*	Eastern Air Catering	(ii)		48		15		—
	Sichuan Air	(ii)		9		—		—
	CEA Development	(ii)		5		—		—
	Juneyao Air	(ii)		4		—		—
	Eastern Import & Export	(ii)		3		—		—
Rental income for Intangible assets	Eastern Logistics	(ii)		5		—		—
Rental income for cargo terminal*	Eastern Logistics	(ii)		81		—		—
Lease Payments
Lease payments for land and buildings*	CEA Holding	(ii)		7		36		40
	Eastern Investment	(ii)		210		98		83
	Eastern Air Catering	(ii)		2		—		—
Settlements of lease liabilities on aircraft and engines	CES Lease Company	(ii)		7,245		6,667		5,779
Lease payments for special vehicle and equipment*	CEA Development	(ii)		83		37		21


In 2021, the additional amount of right-of-use assets for the newly-introduced aircraft and engines from CES Lease Company was RMB11,061 million; the additional amount of right-of-use assets for the newly-leased land and buildings from Eastern Investment was RMB302 million; the additional amount of right-of-use assets for the newly-leased special vehicle and equipment from CEA Development was RMB195 million.

In 2021, the interest amounts on lease liabilities due to CES Lease Company was RMB1,311 million; the interest amounts on lease liabilities due to Eastern Investment was RMB31 million; the interest amounts on lease liabilities due to CEA Development was RMB9 million. As at December 31, 2021, the lease liability due to CEA Development, Eastern Investment and Eastern Air Catering were RMB323 mi l lion, RMB255 million and RMB2 million, respectively.

Interest expense
Interest expense on loans	CEA Holding	(iii)		41		32		27
	Eastern Air Finance Company	(iii)		21		5		5
Interest income
Interest income on loans	CAE Melbourne	(iii)		—		1		—
Interest income on deposits	Eastern Air Finance Company	(iii)		20		24		15

F-10

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

45	Related party transactions (continued)

(b)	Related party transactions (continued)


			Pricing policy
			and decision			2021		2020		2019
Nature of transaction	Related party		process			RMB million		RMB million		RMB million
Gains on disposal of equity
Dispose 100% equity of China Eastern Airlines Grand Hotel Co., Ltd.		Sichuan Air		(i	)		97		—		—
Dispose 49% equity of Yunnan Civil Aviation Kaiya Information Co., Ltd.		TravelSky		(i	)		8		—		—
Dispose 27.5% equity of Beijing Xinghang Aviation Property Co., Ltd.		Eastern Investment		(i	)		29		—		—
Catering trolleys and aircraft on-board supplies		Eastern Air Catering		(i	)		123		—		—

Note:

To address the business competition between the passenger aircraft cargo business of the Company and the

all-cargo

aircraft business of China Cargo Airlines Co., Limited (“China Cargo Airlines”), a subsidiary of Eastern Logistics, the Company gave China Cargo Airlines a long term contractual operation to operate and manage the passenger aircraft bellyhold space cargo business with independence and autonomy from April 2018. Against the backdrop of

COVID-19’s

immense impact on the aviation industry, in order to further clarify the passenger aircraft cargo business’s related business scope and pricing methods under unconventional circumstances such as

“passenger-to-cargo

conversion”, and taking into account certain limitations of adopting an evaluation-based pricing mechanism in the original passenger aircraft bellyhold space contractual operation transactions, the Company and China Cargo Airlines have negotiated and agreed to adjust and optimise the passenger aircraft cargo business’s scope, pricing methods and settlement methods without altering, amongst others, the business entities, rights and obligations, and business procedures of both parties, and adjust the original passenger aircraft bellyhold space contractual operation proposal to an exclusive operation proposal for passenger aircraft cargo business, pursuant to which China Cargo Airlines will have exclusive operation to independently operate and manage the Group’s passenger aircraft cargo business. The exclusive operation agreement was entered into by both parties on September 29, 2020 which was deemed to have become effective on January 1, 2020.

(i)	The Group’s pricing policies on goods and services purchased from and provided to related parties are mutually agreed between contract parties

(ii)	The Group’s pricing policies on related party lease payments are mutually agreed between contract parties.

(iii)

The Group’s pricing policies on related party interest rates are mutually agreed based on benchmark interest rates.

*	These related party transactions also constitute connected transactions or continuing connected transactions as defined in Chapter 14A of the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”).

**	This related party transaction constitutes a continuing connected transaction pursuant to the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange.

During the year ended December 31, 2021,2020 and 2019, the Group’s significant transactions with entities that are controlled, jointly controlled or significantly influenced by the PRC government mainly include most of its bank deposits/borrowings and the corresponding interest income/expense and part of sales and purchases of goods and services. The price and other terms of such transactions are set out in the agreements governing these transactions or as mutually agreed.

F-10

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

45	Related party transactions (continued)

(c)	Balances with related parties

(i)	Amounts due from related parties


	December 31, 2021		December 31, 2020
	RMB million		RMB million
Trade receivables
Eastern Logistics		497		630
Juneyao Air		5		8
Eastern Air Catering		17		—
Others		2		4

		521		642


	December 31, 2021		December 31, 2020
	RMB million		RMB million
Prepayments and other receivables
Eastern Import & Export		134		158
Technologies Aerospace		6		6
Eastern Air Catering		55		36
Eastern Advertising		—		1
CEA Development		1		11
CEA Holding		10		228
CASC		—		13
TravelSky		42		49
Juneyao Air		5		4
Eastern Air Finance Company		120		240
Others		9		22

		382		768


(ii) Amounts due to related parties
	December 31, 2021		December 31, 2020
	RMB million		RMB million
Trade and bills payables
Eastern Import & Export		472		363
Eastern Air Catering		583		266
Technologies Aerospace		59		95
CEA Development		81		96
Shanghai P&W		280		213
Collins Aviation		8		9
CEA Holding		23		28
CASC		—		27
Shanghai Hute		—		32
TravelSky		7		7
Wheels & Brakes		—		14
Shanghai Airlines Tours		—		1
Eastern Advertising		6		—
Eastern Investment		1		74
XIESA		—		32
Others		6		13

		1,526		1,270

F-10

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

45	Related party transactions (continued)

(c)	Balances with related parties (continued)

(ii)	Amounts due to related parties (continued)


	December 31, 2021		December 31, 2020
	RMB million		RMB million
Other payables and accruals
Eastern Import & Export		—		37
Eastern Air Catering		1		2
CEA Holding		68		99
CEA Development		15		1
Eastern Investment		61		61
CES Lease Company		63		189
CASC		—		2
Others		5		7

		213		398

	December 31, 2021		December 31, 2020
	RMB million		RMB million
Lease liabilities
CES Lease Company		46,251		42,168

	December 31, 2021		December 31, 2020
	RMB million		RMB million
Other long-term liabilities
Eastern Air Catering		64		—

		64		—

Except for the amounts due to CES Lease Company, which are related to the aircraft under leases, all other amounts due to related parties are interest-free and payable within normal credit terms given by trade creditors.

F-10

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

45	Related party transactions (continued)

(c)	Balances with related parties (continued)

(iii)

Short-term deposits, loan and borrowings with related parties


	Average interest rate for the year ended December 31,						December 31,		December 31,
	2021			2020			2021		2020
							RMB million		RMB million
Short-term deposits (included in cash and cash equivalents)
Eastern Air Finance Company		0.23	%		0.35	%		12,269		5,474
Short-term borrowings (included in borrowings)
Eastern Air Finance Company		2.80	%		2.80	%		6,000		4,000
CEA Holding		2.80	%		—			11,000		—
Eastern Investment		2.80	%		—			7,700		—
Long-term borrowings (included in borrowings)
CEA Holding		—			3.86	%		—		828
Loan to a joint venture
CAE Melbourne		8.00	%		3.74	%		6		11

(d)	Guarantees by the holding company

As at December 31, 2021, bonds of the Group guaranteed by CEA Holding amounted to RMB7.8 billion (December 31, 2020: RMB7.8 billion).

(e)	Key management compensation

The compensation paid or payable to key management for employee services mainly comprising salaries and other short-term employee benefits were analysed as follows:


	2021		2020		2019
	RMB million		RMB million		RMB million
Other payables and accruals
Directors and supervisors		2		4		1
Senior management		1		1		8

		3		5		9

F-10

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

46	Financial instruments by category

The group holds the following financial instruments:


	Note		December 31, 2021		December 31, 2020
Financial assets			RMB million		RMB million
Financial assets at amortised cost
Trade receivables		29		974		1,124
Prepayments and other receivables		31		2,397		2,452
Cash and cash equivalents		32		12,950		7,651
Restricted bank deposits		32		12		12
Financial assets included in other non-current assets				142		150
Financial assets at fair value through other comprehensive income
Equity investments designed at fair value through other comprehensive income		24		457		995
Financial assets at fair value through profit or loss		30		84		95
Derivative financial instruments		25		—		399

				17,016		12,878


	Note		December 31, 2021		December 31, 2020
Financial liabilities			RMB million		RMB million
Liabilities at amortised cost
Trade and bills payables				2,454		3,220
Financial liabilities included in other payables and accruals				13,484		15,790
Borrowings		37		95,791		87,895
Lease liabilities		18(b)		98,476		96,251
Derivative financial instruments		25		46		141

				210,251		203,297

F-10

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

47	Fair value and fair value hierarchy of financial instruments

The carrying amounts and fair values of the Group’s financial instruments, other than those with carrying amounts that reasonably approximate to fair values, were as follows:


	December 31, 2021				December 31, 2020
	Carrying amount		Fair value amount		Carrying amount		Fair value amount
	RMB million		RMB million		RMB million		RMB million
Financial assets
Equity investments designated at fair value through other comprehensive income		457		457		995		995
Financial asset at fair value through profit or loss		84		84		95		95
Derivative financial assets		—		—		399		399
Deposits relating to aircraft held under leases included in other non-current assets		140		139		143		142

Total		681		680		1,632		1,631

Financial liabilities
Derivative financial liabilities		46		46		141		141
Long-term borrowings		50,792		49,971		30,745		32,355
Lease liabilities		82,126		81,232		82,178		82,653

Total		132,964		131,249		113,064		115,149

The Group has assessed that the fair values of cash and cash equivalents, restricted bank deposits, trade receivables, trade and bills payables, financial assets included in prepayments and other receivables, financial liabilities included in other payables and accruals, short-term bank borrowings and short-term debentures approximate to their carrying amounts largely due to the short-term maturities of these instruments.

The fair values of the deposits relating to aircraft held under leases included in other

non-current

assets, long-term borrowings and lease liabilities have been measured using significant observable inputs and calculated by discounting the expected future cash flows using rates currently available for instruments with similar terms, credit risk and remaining maturities.

The Group enters into derivative financial instruments, including forward currency contracts, fuel hedging contracts and interest rate swaps with various counterparties, principally financial institutions with high credit ratings

Derivative financial instruments are measured using valuation techniques similar to forward pricing and swap models, using present value calculations. The models incorporate various market observable inputs including the foreign exchange spot and forward rates, interest rate curves and fuel hedging price. The carrying amounts of forward currency contracts, fuel hedging contracts and interest rate swaps are the same as their fair values.

As at December 31, 2021, the marked to market value of the derivative asset position is net of a credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationship and other financial instruments recognised at fair value.

F-10

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

47	Fair value and fair value hierarchy of financial instruments (continued)

The fair values of listed equity investments are based on quoted market prices. The fair values of unlisted equity investments designated at fair value through other comprehensive income have been estimated using a market-based valuation technique based on assumptions that are not supported by observable market prices or rates. The valuation requires the directors to determine comparable public companies (peers) based on industry, size, leverage and strategy, and calculates an appropriate price multiple, such as enterprise value to earnings before interest, taxes, depreciation and amortisation (“EV/EBITDA”) multiple and price to earnings (“P/E”) multiple, for each comparable company identified. The multiple is calculated by dividing the enterprise value of the comparable company by an earnings measure. The trading multiple is then discounted for considerations such as illiquidity and size differences between the comparable companies based on company-specific facts and circumstances. The discounted multiple is applied to the corresponding earnings measure of the unlisted equity investments to measure the fair value. The directors believe that the estimated fair values resulting from the valuation technique, which are recorded in the consolidated statement of financial position, and the related changes in fair values, which are recorded in other comprehensive income, are reasonable, and that they were the most appropriate values at the end of the reporting period.

Set out below is a summary of significant unobservable inputs to the valuation of financial instruments together with a quantitative sensitivity analysis as at December 31, 2021 and 2020:


	Valuation technique	Significant unobservable input	Range	Sensitivity of fair value to the input
Unlisted equity investments	Valuation multiples	Discount for lack of marketability	20%(December 31, 2020: 20% to 35%)	1% (December 31, 2020: 1%) increase/decrease in multiple would result in increase/ decrease in fair value by RMB 3 million (December 31, 2020: RMB 5 million)

The discount for lack of marketability represents the amounts of premiums and discounts determined by the Group that market participants would take into account when pricing the investments.

F-10

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

47	Fair value and fair value hierarchy of financial instruments (continued)

Fair value hierarchy

The following tables illustrate the fair value measurement hierarchy of the Group’s financial instruments:

Assets and liabilities measured at fair value:

As at December 31, 2021


	Fair value measurement using
	Quoted prices in active markets (Level 1) RMB million		Significant observable inputs (Level 2) RMB million		Significant unobservable inputs (Level 3) RMB million		Total RMB million
Assets
Equity investments designated at fair value through other comprehensive income		237		—		220		457
Financial asset at fair value through profit or loss		84		—		—		84

Total		321		—		220		541

Liabilities
Derivative financial liabilities
— Interest rate swaps		—		46		—		46

Total		—		46		—		46

As at December 31, 2020


	Fair value measurement using
	Quoted prices in active markets (Level 1) RMB million		Significant observable inputs (Level 2) RMB million		Significant unobservable inputs (Level 3) RMB million		Total RMB million
Assets
Equity investments designated at fair value through other comprehensive income		457		—		538		995
Derivative financial assets
— Forward fuel contracts		—		399		—		399
Financial asset at fair value through profit or loss		95		—		—		95

Total		552		399		538		1,489

Liabilities
Derivative financial liabilities
— Interest rate swaps		—		140		—		140
— Forward fuel contracts		—		1		—		1

Total		—		141		—		141

During the year, there were no transfers of fair value measurements between Level 1 and Level 2 (2020: Nil; 2019: Nil) and no transfers into or out of Level 3 for both financial assets and financial liabilities during the year of 2020 (2019: Nil).

F-11

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

47	Assets and liabilities for which fair values are disclosed:


As at December 31, 2021


	Fair value measurement using
	Quoted prices in active markets (Level 1) RMB million		Significant observable inputs (Level 2) RMB million		Significant unobservable inputs (Level 3) RMB million		Total RMB million
Assets
Deposits relating to aircraft held under leases included in other non-current assets		—		139		—		139

Liabilities
Long-term borrowings		—		49,971		—		49,971
Lease liabilities		—		81,232		—		81,232

		—		131,203		—		131,203


As at December 31, 2020


	Fair value measurement using
	Quoted prices in active markets (Level 1) RMB million		Significant observable inputs (Level 2) RMB million		Significant unobservable inputs (Level 3) RMB million		Total RMB million
Assets
Deposits relating to aircraft held under leases included in other non-current assets		—		142		—		142

Liabilities
Long-term borrowings		4,936		27,419		—		32,355
Lease liabilities		—		82,653		—		82,653

		4,936		110,072				115,008

F-11

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

48	Financial risk management

The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, interest rate risk, fuel price risk and equity price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to manage risk exposures whenever management considers necessary.

Risk management is carried out by a central treasury department (the “Group Treasury”) under policies approved by the Board. The Group Treasury identifies, evaluates and hedges financial risks in close cooperation with the Group’s operating units. The overall risk management strategies, as well as written policies covering specific areas such as foreign currency risk, interest rate risk, credit risk, use of derivative financial instruments and

non-derivative

financial instruments, were approved by the Board.

48.1	Financial risk factors

(a)	Market risk

(i)	Foreign exchange risk

The Group operates its business in many countries and territories. The Group generates its revenue in different currencies, and the amount of its foreign currency liabilities at the end of the period is much higher than that of its foreign currency assets. The Group’s major liability items (mainly resulting from purchases of aircraft) are mainly priced and settled in foreign currencies, primarily USD. The Group is exposed to currency risks from fluctuations in various foreign currency exchange rates against RMB.

The RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.

In addition, fluctuations in foreign currency exchange rates will affect the Group’s future costs for purchases of aircraft, flight equipment and aviation fuel, and

take-off

and landing charges in foreign airports.

The following tables detail the Group’s exposure to major currency risk at the reporting date:


	2021
	USD			EUR			SGD			JPY
	RMB million			RMB million			RMB million			RMB million
Trade receivables		11			5			—			3
Cash and cash equivalents		96			7			28			5
Other receivables		32			—			1			11
Other non-current assets		1,428			—			—			—
Trade and other payables		(118	)		(12	)		—			—
Lease liabilities		(30,710	)		(10	)		(6	)		(67	)
Borrowings		(13	)		(1,957	)		(2,371	)		—


	2020
	USD			EUR			SGD			JPY
	RMB million			RMB million			RMB million			RMB million
Trade receivables		10			2			—			2
Cash and cash equivalents		968			4			3			3
Other receivables		115			3			1			12
Other non-current assets		150			—			—			—
Trade and other payables		(108	)		(1	)		—			—
Lease liabilities		(36,267	)		(8	)		(85	)		(142	)
Borrowings		(375	)		(2,664	)		(2,466	)		(3,162	)

F-11

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

48	Financial risk management (continued)

(a)	Market risk (continued)

(i)	Foreign exchange risk (continued)

48.1	Financial risk factors (continued)

The following tables indicate the approximate change in the Group’s consolidated statement of profit or loss and other comprehensive income in response to a 1% appreciation or depreciation of the RMB against the following major currencies at the reporting date:


	2021					2020
	Effect on profit or loss			Effect on other comprehensive income		Effect on profit or loss			Effect on other comprehensive income
	RMB million			RMB million		RMB million			RMB million
If RMB (weakens)/strengthens against USD		(222	)/ 222		—		(266	)/266		—
If RMB (weakens)/strengthens Against JPY		(0.36	)/0.36		—		(25	)/25		—
If RMB (weakens)/strengthens Against EUR		(15	)/15		—		(20	)/20		—
If RMB (weakens)/strengthens against SGD		(18	)/18		—		(19	)/19		—

F-11

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

48	Financial risk management (continued)

48.1	Financial risk factors (continued)

(a)	Market risk (continued)

(ii)	Interest rate risk

The Group’s interest rate risk primarily arises from borrowings and lease liabilities. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings and finance leases issued at fixed rates expose the Group to fair value interest rate risk. The Group determines the proportion of borrowings and finance leases issued at variable rates and fixed rates based on the market environment.

The Group’s finance department has been monitoring the level of interest rates. The increase in the interest rates will increase the interest costs of borrowings and finance leases issued at variable rates, which will further impact the performance of the Group. To hedge against the variability in the cash flows arising from a change in market interest rates, the Group has entered into certain interest rate swaps to swap variable rates into fixed rates. The interest rates and terms of repayment of borrowings made to the Group and interest rate swaps are disclosed in Notes 37 and 25 to the consolidated financial statements.

The following tables detail the interest rate profiles of the Group’s interest-bearing financial instruments at the reporting date:


	December 31, 2021			December 31, 2020
	RMB million			RMB million
Floating rate instruments
Cash and cash equivalents		12,950			7,651
Restricted bank deposits		12			12
Borrowings		(26,146	)		(13,328	)
Lease liabilities		(62,406	)		(44,541	)
Interest rate swaps at notional amount		3,154			4,504


	December 31, 2021			December 31, 2020
	RMB million			RMB million
Fixed rate instruments
Borrowings		(68,943	)		(74,567	)
Lease liabilities		(35,584	)		(51,710	)

The following table indicates the approximate change in the Group’s profit or loss and other comprehensive income, taking the interest rate swap into consideration, if interest rate had been 25 basis points higher with all other variables held constant:


	2021					2020
	Effect on profit or loss			Effect on other comprehensive income		Effect on profit or loss			Effect on other comprehensive income
	RMB million			RMB million		RMB million			RMB million
Floating rate instruments		(142	)		6		(94	)		8

F-11

Table of Contents

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

48	Financial risk management (continued)

48.1	Financial risk factors (continued)

(a)	Market risk (continued)

(iii)

Fuel price risk

Jet fuel is a major component of the Group’s operating expenses and the Group’s results are significantly affected by the volatility in the price of jet fuel. For the year ended December 31, 2021, if fuel price had been 5% lower/higher with all other variables held constant, the Group’s fuel cost would have been RMB1,030 million lower/higher (2020: RMB692 million lower/higher).

The Group’s policy is to reduce fuel price risk by hedging a percentage of its expected fuel consumption. Fuel forward contracts are used to achieve the Group’s desired hedging position. An increase of 5 percent in the jet fuel price at the reporting date would have resulted in a change in other comprehensive income by the amounts shown below. It represents the change in fair value of fuel forward contracts at the reporting date. The analysis assumes that all other variables remain constant.


	2021		2020
	Effect on other comprehensive income		Effect on other comprehensive income
	RMB million		RMB million
Fuel forward contracts		—		62

(b)	Credit risk

The Group’s credit risk is primarily attributable to cash and cash equivalents, deposits and derivative financial instruments with banks and financial institutions, as well as credit exposures to sales agents.

A significant portion of the Group’s air tickets is sold by sales agents participating in the Billing and Settlements Plan (“BSP”), a clearing system between airlines and sales agents organised by the International Air Transportation Association. The balance due from BSP agents amounted to approximately RMB185 million as at December 31, 2021 (2020: approximately RMB165 million). The credit risk exposure to BSP agents and the remaining trade receivables are maintained by the Group on an

on-going

basis and the allowance for impairment of doubtful debts is within management’s expectations.

The Group’s cash management policy is to deposit cash and cash equivalents mainly in state-owned banks and other reputable banks and financial institutions. The Group also deposits cash and cash equivalents in an associate financial institution owned by its holding company (Note 45(c)(iii)). Management does not expect any loss to arise from

non-performance

by these banks and the financial institution.

Transactions in relation to derivative financial instruments are only carried out with reputable banks and financial institutions. The Group has policies that limit the amount of credit exposure to any bank and financial institution. Management does not expect any losses from

non-performance

by these banks and financial institutions.

F-11

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

48	Financial risk management (continued)

48.1	Financial risk factors (continued)

(b)	Credit risk (continued)

Maximum exposure and

year-end

staging

The tables below show the credit quality and the maximum exposure to credit risk based on the Group’s credit policy, which is mainly based on past due information unless other information is available without undue cost or effort, and

year-end

staging classification as at December 31,

The amounts presented are gross carrying amounts for financial assets and the exposure to credit risk.


As at December 31, 2021	12-month ECLs		Lifetime ECLs
	Stage 1		Stage 2		Stage 3		Simplified approach		Total
	RMB million		RMB million		RMB million		RMB million		RMB million
Trade receivable*		—		—		40		934		974
Financial assets included in prepayments and other receivables
- Normal **		2,202		271		232		—		2,705
Restricted bank deposits
- Not yet past due		12		—		—		—		12
Cash and cash equivalents
- Not yet past due		12,950		—		—		—		12,950


As at December 31, 2020	12-month ECLs		Lifetime ECLs
	Stage 1		Stage 2		Stage 3		Simplified approach		Total
	RMB million		RMB million		RMB million		RMB million		RMB million
Trade receivable*		—		—		47		1,077		1,124
Financial assets included in prepayments and other receivables
- Normal **		2,067		274		111		—		2,452
Restricted bank deposits
- Not yet past due		12		—		—		—		12
Cash and cash equivalents
- Not yet past due		7,651		—		—		—		7,651

*	For trade receivables to which the Group applies the simplified approach for impairment, information based on the provision matrix is disclosed in notes 29 to the financial statements, respectively.

The credit quality of the financial assets included in prepayments and other receivables is considered to be “normal” when they are not past due and there is no information indicating that the financial assets had a significant increase in credit risk since initial recognition. Otherwise, the credit quality of the financial assets is considered to be “doubtful”.

Further quantitative data in respect of the Group’s exposure to credit risk arising from trade receivables are disclosed in note 29 to the financial statements.

Since the Group trades only with recognised and creditworthy third parties, there is no requirement for collateral. Concentrations of credit risk are managed by customer/counterparty, by geographical region and by industry sector. There are no significant concentrations of credit risk within the Group as the customer bases of the Group’s trade receivables are widely dispersed in different sectors and industries.

F-11

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

48	Financial risk management (continued)

48.1	Financial risk factors (continued)

(c)	Liquidity risk

The Group’s primary cash requirements are for

day-to-day

operations, additions of and upgrades to aircraft, engines and flight equipment and repayments of related borrowings. The Group finances its working capital requirements through a combination of funds generated from operations and borrowings including bank loans, debentures and bonds (both short-term and long-term). The Group generally finances the acquisition of aircraft through leases or bank loans.

The table below analyses the Group’s financial liabilities that will be settled into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.


	Less than 1 year		1 to 2 years		2 to 5 years		Over 5 years		Total
At December 31, 2021	RMB million		RMB million		RMB million		RMB million		RMB million

Borrowings		46,633		15,668		18,490		22,306		103,097
Derivative financial instruments		1		—		45		—		46
Lease liabilities		19,025		17,320		43,259		31,192		110,796
Trade, bills and other payables		15,939		—		—		—		15,939

Total		81,598		32,988		61,794		53,498		229,878


	Less than 1 year		1 to 2 years		2 to 5 years		Over 5 years		Total
At December 31, 2020	RMB million		RMB million		RMB million		RMB million		RMB million

Borrowings		58,989		6,946		19,126		7,779		92,840
Derivative financial instruments		3		7		132		—		142
Lease liabilities		17,443		16,009		40,241		37,319		111,012
Trade, bills and other payables		19,010		—		—		—		19,010

Total		95,445		22,962		59,499		45,098		223,004

F-11

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

48	Financial risk management (continued)

48.1	Financial risk factors (continued)

(d)	Equity price risk

The Group is exposed to equity price risk arising from individual equity investments included in financial asset at fair value through profit or loss (Note 30) and equity investments designated at fair value through other comprehensive income (Note 24) as at December 31, 2021. The Group’s listed investments are listed on the Hong Kong and Shanghai stock exchanges and are valued at quoted market prices at the end of the reporting period.

December 31,

2021

High/Low

2021

December 31,

2020

High/Low

2020

Hong Kong - Hang Seng Index

23,398

31,183/22,665

27,231

29,056/21,696

Shanghai - A Share Index

3,640

3,732/3,313

3,640

3,640/2,788


2021	Carrying amount of equity investment		Increase/ (decrease) in profit or loss			Increase/(decrease) in comprehensive income
	RMB million		RMB million			RMB million
Investments listed in:
Hong Kong — Equity investment designated at fair value through other comprehensive income		237		—			18/	(18)
Shanghai — Financial asset at fair value through profit or loss		84		6/	(6)		—
Unlisted investments at fair value:
— Equity investment designated at fair value through other comprehensive income		220		—			17/	(17)


2020	Carrying amount of equity investment		Increase/ (decrease) in profit or loss			Increase/(decrease) in comprehensive income
	RMB million		RMB million			RMB million
Investments listed in:
Hong Kong — Equity investment designated at fair value through other comprehensive income		457		—			34/	(34)
Shanghai — Financial asset at fair value through profit or loss		95		7/	(7)		—
Unlisted investments at fair value:
— Equity investment designated at fair value through other comprehensive income		538		—			40/	(40)

F-1

China Eastern Airlines Corporation Limited

Notes to the Consolidated Financial Statements

For the year

ended December 31, 2021, 2020 and 2019

48	Financial risk management (continued)

48.2	Capital management

The primary objectives of the Group’s capital management are to safeguard the Group’s ability to continue as a going concern and to maintain healthy capital ratios in order to support its business and maximise shareholders’ value.

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group is not subject to any externally imposed capital requirements. No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2021 and December 31, 2020.

The Group monitors capital on the basis of the debt ratio, which is calculated as total liabilities divided by total assets. The debt ratios as at the end of the reporting periods were as follows:


	December 31, 2021			December 31, 2020
	RMB million			RMB million
Total liabilities		231,638			225,496
Total assets		288,790			284,650

Debt ratio		80	%		79	%

49	Events occurred after the reporting period

On March 21, 2022, a Boeing 737 passenger aircraft of CEA Yunnan, a subsidiary of the Company, lost contact over Wuzhou, Guangxi while performing a flight from Kunming to Guangzhou. Since the plane crashed, the Company has attached great importance to the incident and immediately activated the emergency response plan. The cause of the plane crash is under investigation. The Company will cooperate with the relevant investigations and continue to evaluate its impact on the financial position and operating results of the Group.

F-12



Capacity measurements

ATK (available tonne-kilometers)		the number of tonnes of capacity available for the carriage of revenue load (passengers and cargo) multiplied by the distance flown

ASK (available seat kilometers)		the number of seats made available for sale multiplied by the distance flown

AFTK (available freight tonne-kilometers)		the number of tonnes of capacity available for the carriage of cargo and mail multiplied by the distance flown

Traffic measurements

revenue passenger-kilometers or RPK		the number of passengers carried multiplied by the distance flown

revenue freight tonne-kilometers or RFTK		cargo and mail load in tonnes multiplied by the distance flown

revenue tonne-kilometers or RTK		load (passenger and cargo) in tonnes multiplied by the distance flown

Load factors

o v erall load factor		tonne-kilometers expressed as a percentage of ATK

passenger load factor		passenger-kilometers expressed as a percentage of ASK

Yield and cost measurements

passenger yield (revenue per passenger-kilometer)		revenue from passenger operations divided by passenger-kilometers

cargo and mail yield (revenue per cargo and mail tonne-kilometer)		revenue from cargo and mail operations divided by cargo and mail tonne-kilometers

average yield (revenue per total tonne-kilometer)		revenue from airline operations divided by tonne-kilometers

unit cost		operating expenses divided by ATK

Tonne		a metric ton, equivalent to 2,204.6 lbs


Exhibits		Description

1.1		Articles of Association as amended on November 11, 2021 (English translation) (Furnished to the Securities and Exchange Commission on our Form 6-K as filed on November 12, 2021).**

2.1		Specimen Certificate for the H Shares.**

2.2		Form of Deposit Agreement among the Registrant, The Bank of New York, as depositary, and Owners and Beneficial Owners from time to time of American Depositary Receipts (Filed as FORM OF DEPOSIT AGREEMENT on our Form F-6 as filed on May 7, 2021).**

4.1		Aircraft Sale and Purchase Agreement relating to the disposal of eight Bombardier CRJ-200 Aircraft and ten Embraer ERJ-145 Aircraft, dated November 23, 2012, among our Company, Airbus SAS and other parties (Filed as Exhibit 4.27 to our Form 20-F as filed on April 24, 2013)./*

4.2		Amendment No. 2 to the A 320 Family Purchase Agreement dated December 30, 2010, dated November 23, 2012, between our Company and Airbus SAS (Filed as Exhibit 4.28 to our Form 20-F as filed on April 24, 2013)./*

4.3		Acquisition Agreement for Used Aircraft relating to five Airbus Model A340-642 Aircraft, dated April 27, 2012, between our Company and Boeing Aircraft Holding Company (Filed as Exhibit 4.29 to our Form 20-F as filed on April 24, 2013)./*

4.4		Purchase Agreement Number PA-03746 relating to Boeing Model 777-300ER Aircraft, dated April 27, 2012, between our Company and the Boeing Company (Filed as Exhibit 4.30 to our Form 20-F as filed on April 24, 2013)./*

4.5		Purchase Agreement Number PA-4076 relating to Boeing Model 737-8 Aircraft, dated June 13, 2014, between our Company and the Boeing Company (Filed as Exhibit 4.5 to our Form 20-F as filed on April 25, 2015)./*

4.6		Purchase Agreement Number PA-4077 relating to Boeing Model 737-800 Aircraft, dated June 13, 2014, between our Company and the Boeing Company (Filed as Exhibit 4.6 to our Form 20-F as filed on April 25, 2015)./*

4.7		Purchase Agreement relating to Airbus A320NEO Aircraft, dated February 28, 2014, between our Company and Airbus SAS (Filed as Exhibit 4.7 to our Form 20-F as filed on April 25, 2015)./*

4.8		Supplemental Agreement No.1 to Purchase Agreement Number PA-4077 relating to Boeing Model 737-800 Aircraft, dated July 9, 2015, between our Company and the Boeing Company (Filed as Exhibit 4.8 to our Form 20-F as filed on April 25, 2016). /*

8.1		List of Subsidiaries (as of December 31, 2021).

11.1		Code of Ethics (English translation) (Filed as Exhibit 11.1 to our Form 20-F as filed on June 24, 2008).**

12.1		Certification of the President pursuant to Rule 13a-14(a).

12.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).

13.1		Certification of the President pursuant to Rule 13a-14(b).

13.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14(b).

15.1		Letter from Ernst & Young Hua Ming LLP regarding Item 16F of this annual report.

101.INS		Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


By:		/s/ Liu Shaoyong
		Name: Liu Shaoyong
		Title: Chairman of the Board of Directors


	Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 1424)		F-2
Report of Independent Registered Public Accounting Firm (PCAOB ID: 1408)		F-5
Consolidated statements of profit or loss and other comprehensive income		F- 6
Consolidated Statements of Financial Position		F- 8
Consolidated Statements of Changes in Equity		F-1 0
Consolidated Statements of Cash Flows		F-1 1
Notes to the Consolidated Financial Statements		F-1 2


	Page No.
PART I		3
Item 1. Identity of Directors, Senior Management and Advisers		3
Item 2. Offer Statistics and Expected Timetable		3
Item 3. Key Information		3
Item 4. Information on the Company		15
Item 4A. Unresolved Staff Comments		35
Item 5. Operating and Financial Review and Prospects		35
Item 6. Directors, Senior Management and Employees		58
Item 7. Major Shareholders and Related Party Transactions		66
Item 8. Financial Information		75
Item 9. The Offer and Listing		77
Item 10. Additional Information		77
Item 11. Quantitative and Qualitative Disclosures about Market Risk		90
Item 12. Description of Securities Other than Equity Securities		94
Item 13. Defaults, Dividend Arrearages and Delinquencies		96
PART II		96
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds		96
Item 15. Controls and Procedures		96
Item 16A. Audit Committee Financial Expert		97
Item 16B. Code of Ethics		97
Item 16C. Principal Accountant Fees and Services		97
Item 16D. Exemptions from the Listing Standards for Audit Committees		98
Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers		98
Item 16F. Changes in Registrant’s Certifying Accountant		98
Item 16G. Corporate Governance		99
Item 16H. Mine Safety Disclosures		101
Item 16I. Disclosure Regarding Foreign Jurisdictions That Prevent Inspection		101
PART III		102
Item 17. Financial Statements		102
Item 18. Financial Statements		102
Item 19. Exhibits		102


	Assets				Liability
	2021 RMB million		2020 RMB million		2021 RMB million		2020 RMB million
Fuel forward contracts		—		399		—		1
Interest rate swaps		—		—		46		140

Total		—		399		46		141

Less: current portion
— Fuel forward contracts		—		362		—		1
— Interest rate swaps		—		—		1		2

Current portion		—		362		1		3

Non-current portion		—		37		45		138


	12-month ECLs			Lifetime ECLs
	Stage 1			Stage 2			Stage 3		Total
As at January 1, 2021		36			122			111		269
Transferred — to stage 3		—			(71	)		71		—
Transferred — to stage 2		(8	)		8			—		—
Accrual		1			9			15		25

As at December 31, 2021		29			68			197		294


	Equity investments designated at fair value through other comprehensive income RMB million
Opening balance as at January 1, 20 21		538

Disposals		(75	)
Recognised in other comprehensive income – net		(243	)

Closing balance as at December 31, 2021		220