The principal activities consist of the provision of airline and airline-related services, including aircraft engineering services, air catering services and airport ground handling services, mainly in Mainland China, Hong Kong and Macau.
The Group's profit attributable to shareholders for the 6 months ended 30-06-2019 amounted to RMB 3.14 billion, a decrease of 9.5% compared with previous corresponding period. Basic earnings per share was RMB 0.2289. No dividend declared. Turnover amounted to RMB 67.24 billion, an increase of 1.6% over the same period last year, gross profit margin down 0.8% to 88.0%. (Announcement Date: 28 Aug 2019)
Business Review - For the six months ended June 30, 2019
Development of Fleet
During the Reporting Period, the Group introduced 19 aircraft including four A350-900, one A330- 300, two B737-8MAX, ten A320NEO and two A321NEO, and phased out 12 aircraft including eight B737-800, one A319 and three A320. As at the end of the Reporting Period, the Group operated a fleet of 676 aircraft with an average age of 6.81 years, of which the Company operated a fleet of 415 aircraft with an average age of 7.02 years. The Company introduced 14 aircraft and phased out 8 aircraft, among which two were sold to Air Macau, one was sold to Dalian Airlines and one was sold to Air China Inner Mongolia.
The Company continued to follow the strategy of developing our diamond-shaped hub network and devoted balanced efforts to the development of both international and domestic route networks. The Company’s principal base is located at Beijing Capital International Airport, also known as “the first gateway to China”, which has unique location advantages and has one of the best local government and corporate customer bases. During the Reporting Period, the Company actively promoted the renovation project of Terminal 3 of Beijing Capital International Airport, completed the planning of relevant route networks and the planning for the operation of “one airport and two terminals”, and formulated the plan for the overall renovation of premium lounges. The Company also facilitated the implementation of projects such as the construction of the fourth runway and the construction of landside integrated transportation hub. The Company will continue to concentrate our resources and advantages to develop its principal base in Beijing into a world-class aviation hub with global competitiveness.
In response to the “Belt and Road” Initiative, Beijing Hub launched domestic routes such as Beijing- Kashgar and Beijing-Changzhi and international routes such as Beijing-Phnom Penh and Beijing- Shenzhen-Johannesburg. The Company also optimised the flight schedule and aircraft models for international and domestic routes such as Beijing-London, Beijing-Manila and Beijing-Guangzhou, and optimised flights and interlining services via Beijing Hub. The Company newly opened all entrusted baggage through check services for routes from 24 cities in 11 countries to China via Beijing, covering 96% of total passengers who transit to China from the abroad via Beijing. The number of passengers who used interlining services in Beijing Hub recorded a year-on-year increase of 11%. The size of flights increased continually, and the commercial value of Beijing Hub improved steadily.
The Company continuously expanded route network and developed its hubs. The newly launched or resumed routes included domestic routes such as Shanghai-Hohhot-Xilinhot, Chengdu-Zhengzhou- Changchun and Chengdu-Bazhong-Shanghai and international routes such as Hangzhou-Rome, Hangzhou-Osaka and Tianjin-Osaka. We also increased flight frequencies to Chengdu-Harbin, Shanghai- Xi’an, Shanghai-Paris and other domestic and international routes. With the joint venture cooperation, Shanghai International Gateway has built up more domestic and international route network connection. Leveraging the upcoming completion of Chengdu Tianfu International Airport, Chengdu International Hub deployed more extensive route network. Shenzhen International Gateway launched the “Belt and Road” routes and supported the development of Guangdong-Hong Kong-Macau Greater Bay Area.
As at the end of the Reporting Period, the Company, Shenzhen Airlines (including Kunming Airlines), Air Macau, Beijing Airlines, Dalian Airlines and Air China Inner Mongolia newly launched or adjusted 28 domestic and international routes, and operated a total of 766 passenger routes, including 605 domestic routes, 132 international routes and 29 regional routes. The Company’s passenger routes reached 41 countries and regions and 190 cities, including 120 domestic cities, 67 international cities and three regions. The Company proactively carried out international cooperation and 36 global partners offered 15,436 code sharing flights per week. Through cooperation with members of Star Alliance, the Company has expanded our service coverage to 1,317 destinations in 193 countries.
Brand and Marketing
During the Reporting Period, the Company optimised the operation of the entire fleet and improved capacity allocation, and increased the daily utilisation of aircraft by 0.15 hour. The improvement of efficiency and capacity allocation contributed gains of about RMB400 million. We conducted accurate marketing to achieve better alignment between capacity and demand, matching of products and customers, and recorded a year-on-year growth of 0.51 ppt in average passenger load factor. We also refined the policies for premium services on different routes and saw a year-on-year growth of 4.3% in revenue from premium cabins. By introducing products such as the A350 Premium Economy Class, the accumulated sales revenue of our ancillary services and products has increased year-on-year by 73% to RMB160 million. We also stepped up the transformation of business model and further exploited innovative marketing. We improved the sales function and user experience of our mobile platform, and the number of registered users of our application has reached 9.37 million, contributing sales revenue of RMB3,590 million. We enriched ecosystem of our application by launching a payment method by which mileage credits can be used for payment with cash and be spent in various traveling-related scenarios, which has increased loyalty and stickiness of our customers. Our program “Phoenix Miles” has a total of 60.09 million members, and its contributed revenue has increased by 6.3% as compared with corresponding period of last year.
Our brand construction continued to proceed while our brand value steadily increased. We conducted comprehensive, systematic and multi-dimensional brand communication in major European markets, thereby significantly improving brand recognition. Furthermore, we endeavoured to maximise our brand value through the exhibition hall featuring “Wings of Dream (夢之翼)” of Beijing International Horticultural Exhibition, and the “Beijing Cross-Country Skiing Competition (北京越野滑雪大獎賽)” of Beijing 2022 Winter Olympic Games. Our brand communication has won numerous awards, such as the nomination of the “Best Enterprise Brand Communication on the Global Award List” by the PR Week (《公關週刊》全球榜單最佳企業品牌傳播獎), representing the first airline in the world to be nominated with such honor. We also won awards such as the “Best VR/AR” of 2019 Asia Pacific PR Award (亞太公關大獎「最佳VR/AR」獎項) and the “Excellent Chinese Global Brand Award ( 中國出海品牌卓越獎)”.
Products and Services
Upholding a philosophy of offering sincere service, we effectively enhanced passenger experience, implemented the “three-all” strategy of service, so as to promote the high-quality development of products and services. We kept abreast of global standards and strived to improve the competitiveness of services and products. We also continued to promote the benchmarking of service standard system with that of the Star Alliance and the implementation of digital system, “Move under One Roof” programme, Luggage Hub Center and other projects proposed by Star Alliance. Aircraft seats, entertainment systems, compartments on narrow-body aircraft, cabin lighting products and other products continued to be optimised and upgraded. We created innovative aircraft tableware, toiletries and other products, and launched new eco-friendly tableware of economy class, and created a catering brand for the Belt and Road routes. We implemented the whole process management to improve the design ability of service standards. We established the whole process product and service standard system. By the end of the Reporting Period, a total of 75 product and service standards were released. We opened the information flow for the whole process of service. In the first half of the year, 10 aircraft including A320 and B777 were revamped with in-flight WIFI. We made great efforts to improve the traveling experience of passengers in an all-round way. We fully promoted self-service check-in, self-service baggage check-in, face recognition + self-boarding and other convenient travel products. We enriched transit products, expanded transit guidance services and transit lounge booking channels. We created aircraft cultural entertainment scenarios, providing more than 1,031 hours of aircraft entertainment in 28 languages for passengers in the first half of the year.
The Company further promoted the implementation of 30 measures aimed at the sustainable and safe development of the Group by firmly establishing the concept of safe development, holding the bottom line of safety, strictly implementing safety responsibilities and strengthening the whole production process control. We enhanced our ability to handle emergency under irregular conditions such as the prompt launch of consultation mechanism and emergency security. We always maintained high sensitivity to safety and actively responded to situations such as the grounding of B737MAX and technical problems of the aircraft engine of B787, so as to ensure the safe operation of flights. We continued to reinforce the safety foundation by promoting the development of a three-level risk management system and developing a new risk source database. We applied a new flight quality monitoring system which improved the timeliness of data monitoring. We also fully utilised the flight training system and improved the utilization of training resources. Furthermore, we adopted the new Flight Standard Operating Procedure Manual (SOP) to unify flight procedures of our fleet. We promoted the integration of quality control system. AMECO was awarded the first maintenance license issued by the Civil Aviation Administration of China after the reform of “integrating certificates into one”. During the Reporting Period, the Company recorded 1.1292 million safe flight hours and conducted safe take-offs and landings for nearly 410 thousand times.
Business Outlook - For the six months ended June 30, 2019
In the second half of the year, the Group will continuously adhere to the important instructions of General Secretary Xi Jinping on civil aviation, stay committed to the underlying principle of pursuing progress while ensuring stability and adhere to the philosophy of high-quality development, so as to unswervingly develop Air China into a top-tier aviation group in the world. The Group will further enhance the management on civil safety, improve risk prevention and control capabilities, improve profitability, optimise the hub network and production organization, as well as improve service quality and passenger experience, so as to greet the 70th anniversary of the founding of the PRC with extraordinary achievements.
Source: Air China (00753) Interim Results Announcement