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Public company info - China Southern Airlines Co. Ltd. - H Shares , 01055.HK

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China Southern Airlines Co. Ltd. - H Shares, 01055.HK - Company Profile
Chairman Wang Chang Shun
Share Issued (share) 3,066,000,000
Par Currency Renminbi
Par Value 1.0
Industry Airline Services
Corporate Profile Business Summary: The Group is principally engaged in the operation of civil aviation, including the provision of passenger, cargo, mail delivery and other extended transportation services. Performance for the year: During the reporting period, the Group recorded total operating revenue of RMB114,981 million,representing an increase of 2.98% as compared with the same period of the previous year. Operating profit of RMB12,612 million was recorded in 2016 (2015: RMB13,438 million). Business Review: In 2016, as the global economy struggled to recover, the economic growth of China slowed down, but had showed a trend of “moderate but stable and sound momentum of development”. The global civil aviation industry was in strong demand, and continued to benefit from the positive effects brought about by the global low oil prices, but was also faced with various challenges, including the slow recovery in oil prices and the escalation of geopolitical risks. The civil aviation industry in China maintained a double-digit fast growth but was also faced with the challenges, such as increased market competition, impact brought by the operations of high-speed railways on the civil aviation industry in China, exchange losses and etc. Adhering to the strategy of steady development, the Group proactively establishes a “Sunshine China Southern Airlines” and conducts every work with a criteria featured with “strict, practice, prudent, accurate, incorrupt”, such that the “cohesiveness, combat power, executive power, creativity and immunity” of staff of the Group strengthened to a further extend.The Group reinforced deeply the construction of safety management system, made more clear the strategy and direction of the development of the Company, initiatively propelled the integration of resources and coordination of strategies and spared no efforts on enhancing its brand influence and, as a result of which, its comprehensive competitive strength increased significantly. Safety Operation The Group have firmly established the concept of sustainable safety and constantly strengthened the development of safety responsibility system to further refine the preventive and controlling measures for safety incidents so that the risk management has become more effective. During the reporting period, the Group realized 2,375,000 safe flight hours, accumulated 18,095,000 safe flight hours and 12,312 hours of general aviation service, and maintained over 17 years of aviation safety and 22 years of aviation security. The Group continued to keep the best safety records among Chinese airlines. The Group seized the incremental resources of time slots in the key domestic market and fully mobilized the transport capacity, to effectively improve the utilization rate of flight crew; strengthened the internal and external cooperation for more efficient allocation of resources and enhanced operational efficiency.The operating data of the Company has been at the best level in the recent five years. In addition, the Group had launched a total of 156 flight delay warnings during the year, and successfully managed the extensive delays resulting from severe weather, including thunderstorms and typhoons, achieving an industry-leading flight on-time rate. Fleet Development The Group conducted an in-depth research on market demands and integrated with the Company’s strategies to optimize the fleet structure. During the reporting period, the Group introduced 53 aircraft and retired 18 aircraft. The Company entered into an agreement with Boeing Company to purchase 12 787-9 aircraft from Boeing Company. Moreover, Xiamen Airlines entered into an agreement with Boeing Company to purchase 6 787-9 aircraft and 10 737-800 aircraft from Boeing Company. As at the end of the reporting period, the Group became the first domestic airline which owned over 700 aircraft,and continued to rank first in Asia. Fully integrating the fleet development plan, the Group actively expanded its flight team. During the year, the Group recruited 661 pilots (including 88 foreign pilots), 1,672 cabin attendants. Network Hub The Group continued to optimize the route network and reinforce the construction of the hub, so as to propel the strategic transformation. In the domestic market, the Group focused on increasing the number of main flight routes, and both the number of core flight routes and capacity concentration kept a steady upward trend in the international market, the Group fully grasped the growth opportunities and further improved the international route network. During the reporting period, the Company launched new flight routes of Guangzhou – Toronto, Guangzhou – Adelaide, Shenzhen – Sydney, Shenzhen – Wuhan – Dubai and etc.,consolidating its position as the largest air carrier of Chinese Mainland to Australia and New Zealand,Southeast Asia and Central Asia regions. As Xiamen Airlines launched new flight routes of Xiamen– Melbourne, Xiamen – Vancouver, Xiamen – Shenzhen – Seattle and etc., the internationalization process accelerated at the same time. The Group grasped the opportunities arising from the release of time slots in Guangzhou hub to improve the layout of key routes network and focused on increasing the number of main lines in Beijing hub and the investment into highly profitable routes; and launched Urumchi hub by leveraging the “One Belt One Road” strategy to increase investments into domestic base market, with a view to consolidating the Group's position in the domestic main lines. During the reporting period, the Company’s construction of hubs had achieved remarkable results. During the year, the number of transit passengers in hubs reached 4,650,000, representing an increase of 11% as compared with the same period of the previous year; of which, the number of international transit passengers was 3,450,000, representing an increase of 19% as compared with the same period of the previous year, and the number of transit passengers through the traffic under the Sixth Freedom Traffic Right reached 782,000, representing an increase of 50% as compared with the same period of the previous year. During the reporting period, the international(including Hong Kong, Macau and Taiwan) revenue passenger kilometers percentage of the Company reached 32.4%, representing an increase of 2.8 percentage points as compared with the same period of the previous year. Marketing The Group continued to optimize and adjust the flight schedules and gave priority to those routes with economy effectiveness when allocating transportation capacity and hot time slots resources, in an effort to match capacity with market, continue to improve passenger load factor and record consecutive profits for the international routes. The Group utilized the advantage of scale and grasped the peak demand, thus the revenue of the peak seasons, including the Spring Festival and summer holidays, recorded an increase of 3.45% as compared with the same period of the previous year. Furthermore, the Group participated in important domestic and overseas exhibitions to enhance cooperation with governments and organizations in overseas key markets and continuously expanded the high-end channels, and the international brand awareness of the Company had been further enhanced. At last, the Group optimized freighter operation and network layout, and the freighter operation had recorded profits for three consecutive years. The Group vigorously promoted the value-added products, such as onboard upgrade in the flight and prepayment for seat selection, as a result of which, the auxiliary revenue of the Company amounted to RMB550 million, representing an increase of 179.1% as compared with the same period of the previous year. The number of members maintained rapid growth and the total number of Sky Pearl Club membership amounted to 30.10 million, growing by 19.9% as compared with the same period of the previous year; of which, the frequent flyers contributed nearly 40% of the Group's total revenue, and the “Member’s Day” theme activities had attracted over 2.12 million new members. The Group expanded the key client accounts business in a steady manner and had 355 designated client accounts and 45 global client accounts. The Group had established the concept of “Excellent Service is the Best Marketing Strategy (優質服務是最好的營銷)” in the Group's Customer Service Center of “95539”, and the sales through it exceeded RMB3 billion and the customer satisfaction rate reached 97.47%. E-commerce During the reporting period, the Company actively promoted the “Internet Plus” strategy and spared no effort to build the “China Southern e-Travel”, so as to facilitate extensive integration between the Internet and 306 passenger service contact points and increase the passengers’ loyalties through improving service convenience, and thus accelerating the intelligent strategy of the Company. At present, there are 71 functions in the China Southern Airlines App, including class upgrade at the gate,airport navigation and refund insurance and etc.; and such App has been downloaded and activated for 13.78 million times and has over 13.35 million followers in social media, ranking first in the civil aviation industry in China. Meanwhile, the Company was among the first to take part in “the Open Cloud Platform for Big Data of Integrated Transport Travel (綜合交通運輸出行大數據開放雲平台)” organized by the Ministry of Transport and also entered into a strategic cooperation agreement with Baidu Company to facilitate the construction of the “China Southern e-Travel”. The Group innovated the Group's marketing activities and put much effort into social media marketing, and the Group's e-commerce marketing capability had been enhanced significantly. During the reporting period,the Company recorded an electronic direct sales of RMB28.84 billion, representing an increase of 57.6% as compared with the same period of the previous year. In addition, the sales generated from mobile application and social media amounted to RMB4.86 billion and RMB0.55 billion, respectively,representing an increase of 142.3% and 262.3%, respectively, as compared with the same period of the previous year. The “Official Account” in WeChat (微信公眾號) of the Company has been awarded“the Most Influential New Media Account for Central Enterprise in 2016 (2016年中央企業最具影響力新媒體賬號)”, leading the industry in terms of traffic volume, number of users and user engagement. Product Service During the reporting period, the Group continued to increase efforts input into the research and development of product and service control, and its overall service level was elevated in a steady way. The Company was ranked 13th in the Most Loved Airlines on SKYTRAX website, which was the highest ranking among the Chinese airlines. Moreover, Xiamen Airlines won the “China Quality Award (中國質量獎)”, the highest recognition of quality conferred by the government, becoming the first service enterprise to win such award, as well as the only Chinese airline to do so. Adhering to the concept of “people-oriented, life above all (以人為本、生命高於一切)”, the Company took the lead in opening a green passage for transportation of human donated organs in the civil aviation industry.During the year, it successfully transported living donor organs for 248 times with a success rate of 100%, and launched a flight medical volunteer project with the number of medical volunteers reaching 2,419, providing medical assistance to 3,027 flights. With the goal of providing intelligent and convenient services, the Company introduced in-flight WIFI service in some flights and some value-added products, such as self-service return and re-scheduling,pre-order excess baggage fees and payment for seat selection and etc., and continued to promote online ordering products for the first- and business-class. The Company has been able to deliver online booking of transit hotels, and has completed nearly 15,000 bookings during the year. In addition, it designed and developed 45 new meals with local flavors and increased significantly the number of Hollywood movies to more than 130 movies in total per month. Xiamen Airlines completed a full-scale upgrade of its intercontinental routes service and carefully tailored its special service products, such as providing special Chinese white tableware for the first- and business-class under the theme activity of “Up in the Air with Egret, Chinese White (鷺翔雲端‧中國白)”, creating “six exquisite meals (六精六美餐食)” together with international brands and creating themed flights, including the “Girl’s Heart, Princess’s Dream (少女心‧公主夢)”-themed flights for the International Women’s Day and “Magical Kingdom(魔幻王國)”-themed flights for the International Children’s Day. Cost Control During the reporting period, the Group took the initiative to manage the risk of fluctuations in oil price and exchange rate. As such, its overall budget management system is becoming more mature and its risk control ability has been improved constantly. The Company strictly implemented the “Income Less, Cost Less (收入減,成本減)” linkage adjustment mechanism to effectively mitigate the impact of the rising trend of the oil prices, hence its costs and expenses had been limited within the annual targets. It actively adjusted the debt structure to mitigate the challenge of RMB depreciation, repaid a debt of 1.837 billion US dollars ahead of schedule and its RMB financing ratio had increased from 30.69% to 51.16%. Additionally, the Company continued to increase direct sales while cutting agency activities, and its direct sales percentage increased to over 40% with a decrease of RMB1.224 billion in agency fees as compared with the same period of the previous year. The Company carried out various forms of low interest rates financing, such as issuing corporate bonds and ultra-short-term financing bills and etc., and the direct financing (excluding obligations under finance leases) ratio increased from 29.5% to 88.9%. Xiamen Airlines adopted cost control in all aspects during the whole process and among all crews,lowering strategic cost of aircraft fleet, management cost, finance cost and flight operating cost through the streamlining of fleet, comprehensive management of budget, refined financial management and precise operation, respectively. Such long-term fine cost mechanism has further reinforced its low cost advantage. Prospects: Looking forward to 2017, although the global economy growth is expected to be slightly higher as compared with the previous year, the pace of trade liberalization will slow down due to the rising protectionism and the increasing geopolitical risks. Although faced with great downward pressure,China will continue to rank the forefront of the world’s major economies in terms of economic growth,as its reform deepens. Civil aviation industry in China is still in the important period of opportunities with huge market potentials. Meanwhile, the Group are facing a number of challenges, such as rebound of international crude oil prices, fluctuations of RMB exchange rate, aggravation of international market competition and gradual improvement of the “Eight Vertical and Eight Horizontal (八縱八橫)” network for high-speed railways and etc. Under the general principle of “Steady Progress”, the strategic concept of “Safety First” and the strategic guideline of “Market Orientation”, the Group will endeavor to create a strategic layout of “Dual Hubs” of Guangzhou-Beijing. Adhering firmly to the strategic orientation of standardization, integration, intellectualization and internationalization, the Group will deepen the reform and keep on implementing its strategies to ensure aviation safety and excellent performance.The Group is marching forward to the goal of becoming a world first-class aviation industry group with international competitiveness, striving to offer returns to its shareholders and the society with better performance. In 2017, the Group will focus on the following matters: 1. Continuously improve the level of safety management. The Group will implement the accountability system for safety in all aspects, all level and the whole chain under the concept of “Safety First”;improve the manual systems to be of complete quantity and perfect quality and build the authority of the rules by using various methods; carry on the safety training and in-depth technical research and discussions to accelerate the promotion and application of new technology and promote the use of safe big data; and perfect the contingency plans and the internal rapid emergency response mechanism, increase actual maneuvers and establish an external emergency linkage mechanism.In 2017, the Group will continue to ensure another year of aviation safety. 2. Continuously optimize the fleet structure based on the market environment. The Group will strengthen medium- and long-term planning for transport capacity, and make rolling planning and dynamic adjustment based on market changes; accelerate the upgrading of cabins in order to be in line with new trends in cabin layout; and increase the compatibility of wide-body aircraft to flights taking into account the international route structure. In 2017, the Group plans to introduce 86 aircrafts and retire 30 aircrafts. 3. Create a first-class international service brand with sincere service. The Group will increase hardware and software investments to accelerate the interconnection between the air and the ground and in-flight WIFI service, continuously improve hub transit service, optimize the transit process and enhance the transit efficiency and the electronic service level of ticket purchases, seat selection,check-in, luggage and security check. Moreover, the Group will continue to strengthen the promotion of the “China Southern Airlines” brand, increase international marketing efforts and increase the influence on the mainstream markets. 4. Accelerate adaptation to new changes and further raise the capability in operation assurance. The Group will adapt to the Company’s rapid development and accelerate the construction of the “centralized control, unified command” mega operating system, adjust and optimize the organization and operation process and set up an operation and management mode which matches with specific features of a large fleet. In addition, the Group will continue to perfect the contingency plans for extensive flight delays, enhance services for delayed flights and effectively safeguard the interest of the passengers, in order to maintain the Group's industry-leading on-time arrival rate. 5. Vigorously strengthen the hub construction and continuously expand the effectiveness of transition.The Group will put forward the construction of Beijing new airport, and plan and consider the integrated function of the hub to ensure that the operational process meets the hub requirements; further deepen the construction of Guangzhou hub, continue to consolidate the advantages and perfect the international network, with a view to enlarging the effect of “Canton Route”; and continue to intensify the hub coordination, study and promote the integration strategy for Guangzhou and Shenzhen, so as to consolidate the Pearl River Delta market and create two mutually-supporting collaborative hubs with their respective focuses. 6. Expedite the construction of the “China Southern e-Travel” and consolidate the competitive advantages. The Group will launch all the core functions of the “China Southern Airlines Mobile” during the year as soon as possible, so as to enhance its convenience; improve the evaluation feedback mechanism by consolidating various indicators, such as passenger activity, sales volume and etc.;strengthen the integration of IT resources of the Company, break isolation of information and promote the integration of data from marketing, operation, service and management systems, so as to establish a China Southern Airlines database for information sharing, and thus elevating the intelligent level; and continue to vigorously develop the follower base, striving to get over 20 million followers in the social media by the end of the year and 9 million new downloads of the App. 7. Fully utilize the important functions of financial management, and focus on cost control. The Group will keep on paying attention to exchange rate fluctuations and make timely and decisive responses,so as to dynamically optimize the debt currency structure; match the capital duration of the investment projects in a scientific way, adjust and optimize the ratios of short- and long-term financings and reduce financing costs by using a combination of various methods; make full use of various fiscal and taxation preferential policies, and actively explore other lease models and businesses including setting up special purpose vehicles, so as to reduce leasing costs; and consolidate and deepen the overall budget management, increase efforts to fine management of costs and further tap the potentials of cost control.

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