disclaimer · 1 disclaimer this presentation contains forward-looking forecast and statements that...
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1
Disclaimer
This presentation contains forward-looking forecast
and statements that reflect the presenting company’s
current opinions on future events and its future
financial performance. These opinions were based
on certain assumptions, which were determined by
various risk factors and subject to change. This
presentation does not give the assurance that the
events predicted will actually occur, the forecast will
materialize, or the assumptions made were correct.
The actual results may deviate materially from the
forecast.
2
Management
Director of Board
Secretariat
Mr. WANG Jian
Executive Director
Company Secretary
Mr. LUO ZhupingCFO
Mr. WU Yongliang
Director of Finance
& Accounting Dept.
Mr. WU Longxue
Vice GM of
Shanghai Airlines
Ms. SHAO Xiaoyun
2009 Results Summary
2009 Review
Outlook
2010Q1 Results Summary(Under PRC GAAP, unaudited)
4
12,506 7.4%
84,456 11.2%
4,904 2.1%
7,909 9.6%
60,942 13.3%
2,474 2.2%
9.4 0.3
Selected Operating Data
Change2009 2008
11,642
75,964
4,805
7,219
53,785
2,420
9.1
Capacity
Available tonne-kilometers (ATK) (million)
Available seat-kilometers (ASK) (million)
Available freight tonne-kilometers (AFTK) (million)
Traffic
Revenue tonne-kilometers (RTK) (million)
Revenue passenger-kilometers
(RPK) (million)
Revenue freight tonne-kilometers
(RFTK) (million)
Daily average utilization (hours)
5
Change2009
63.2% 1.2PPT
72.2% 1.4PPT
50.5% 0.1PPT
4.67 -13.2%
0.54 -12.9%
1.67 -24.4%
Selected Operating Data (Cont’d)
2008
62.0%
70.8%
50.4%
5.38
0.62
2.21
Yields
Revenue tonne-kilometers yield (RMB)
Passenger-kilometers yield (RMB)
Freight tonne-kilometers yield (RMB)
Load factors
Overall load factor (%)
Passenger load factor (%)
Freight load factor (%)
6
Selected Financials
Change2009 2008
38,990 41,073 -5.1%
38,456 56,828 -32.3%
1,821 (15,083) N.M.
0.026 (3.14) N.M.
9,949 (7,198) N.M.
169 (15,269) N.M.
Note: (1) Attributable to the equity holders of the Company
(2) Total shares in issue experienced a material change due to several capital operations completed in 2009
(3,775) 6,401 N.M.
(RMB million )
Revenues
Operating expenses
Operating profit/(loss)
Earnings/(loss) per share
(RMB)
EBITDAR
Profit/(loss) for the yearNote1
Of which, loss/(gain) on
financial derivatives
7
Social Responsibility and Brand Image
Expo Partner
We are the only partner in
passenger aviation to the 2010
Expo in Shanghai
Coordinate with the Expo organizer
to promote the Expo, serve the
Expo and advertise the Expo
Fully committed to the passenger
safety for the Expo
Map out an extensive service
standard based on the Service
Commitment for the Expo
Increasing Customer Satisfaction
Outstanding Service Quality
Honored with the Excellent
Award for Customers’
Satisfaction by CAAC
“Lin Yan” Team in the
Passenger Cabin Group was
honored with the Demonstrative
Window in Shanghai’s service
industry
Honored with the Most Popular
Domestic Airline Company in
China by Travel and Leisure
Magazine in 2009
Our on-time arrival rate was
83.45% in 2009, top 1 again
in the industry, 1.55% above
the industry average
In 2009, our complaint rate
was 0.6 per million,
significantly lower than 2008
Rating system based on the
whole process service
2009 Results Summary
2009 Review
Outlook
2010Q1 Results Summary(Under PRC GAAP, unaudited)
9
Overview
2009 review
Improved operating
environment
New management
initiatives
Successful capital operations
Global economic recovery
Strong rebounds of domestic
economy / consumption
Resumed market demand
Stable fuel price
Clear development strategies
Enhanced risk control
Adjusting the market structure
Cost slashing and efficiency
improvement
Proceeds from the two capital
injections
Successful merger with
Shanghai Airlines
Key Achievements
Key
Achievements
Detect and eliminate all potential threats
Enhance the predictability of safety work to ensure
quick responses
Revise the safety-related policies
Strengthen the accountability system
Strong safety track record Clear development strategies
Craft clear development strategies
Strengthen understanding of the strategies through
personnel training and communication
Effectively implement the strategies
Improved operating results Accelerated restructuring
Initial results from operating strategies adjustment
256 new initiatives to “stop bleeding”
Significantly increased profitability
Successful merger with Shanghai Airlines
Smooth and effecitve restructuring
Better social image Highly motivated personnels
Full-scope & multi-angle marketing / promotions
Set up a better social image via strengthened
branding and higher service quality
Strengthen personnel education to reinforce their
links with the Company
Expand communication channels to strengthen the
employees’ confidence in the Company
11263
71
2
6
3
333393
898417189
2008 2009
Domestic International
HongKong&Macau Taiwan
11
Routes Distribution and Fleet Structure
Routes distribution
(#) 504445
Improve routes network with particular focus on key markets and routes
Strengthen links between different routes to improve transit services
Successfully connect domestic routes with international routes
Make adjustments to the routes distribution to increase marginal
contributions
Make timely adjustments to routes distribution in responses to the
domestic and international market trends
Close out certain loss-making international routes, and open up new
domestic routes
Fleet structure
Passenger Cargo Optimize fleet structure to reduce operating costs
Ensure that newly introduced crafts fit well with the routes
network
Focus on A320, A330 and B737NG crafts
Replace old crafts
Developed a timetable for the retirement of MD90 and
A300 crafts in a planned manner
Continue to reduce the fleet models in the coming years
66
12
41,07338,990
2008 2009
Revenue and its Breakdown
2009 revenues
(RMB mn)
2009 revenues breakdown
Others, 5.4%
Cargo, 13.1%Passenger, 81.5%
2008 revenues breakdown
Others, 5.3%
Cargo, 10.6%Passenger, 84.1%
Note: Cargo revenue includes cargo revenue from
passenger flights
13
Passenger Businesses
Total % YoY
Passenger revenue (RMB mn) 32,800 33,486 -2.1%
Available seat-kilometers
(million)
84,456 75,964 11.2%
Revenue passenger-
kilometers (million)
60,942 53,785 13.3%
Passenger load factor (%) 72.16 70.80 1.36PPT
Yield
(RMB/passenger-kilometer)
0.54 0.62 -12.9%
Yield
(RMB/seat-kilometer)
0.39 0.44 -11.4%
2009 2008 Domestic routes % YoY
Passenger revenue (RMB mn) 24,038 21,389 12.4%
Available seat-kilometers
(million)
59,235 47,588 24.5%
Revenue passenger-
kilometers (million)
44,376 35,352 25.5%
Passenger load factor (%) 74.91 74.29 0.62PPT
Yield
(RMB/passenger-kilometer)
0.54 0.61 -11.5%
Yield
(RMB/seat-kilometer)
0.41 0.45 -8.9%
2009 2008
International routes % YoY
Passenger revenue (RMB mn) 7,133 10,134 -29.6%
Available seat-kilometers
(million)
21,386 23,814 -10.2%
Revenue passenger-kilometers
(million)
13,994 15,375 -9.0%
Passenger load factor (%) 65.43 64.56 0.87PPT
Yield
(RMB/passenger-kilometer)
0.51 0.66 -22.7%
Yield
(RMB/seat-kilometer)
0.33 0.43 -23.3%
2009 2008 Regional routes % YoY
Passenger revenue (RMB mn) 1,630 1,963 -17.0%
Available seat-kilometers
(million)
3,835 4,562 -15.9%
Revenue passenger-kilometers
(million)
2,573 3,058 -15.9%
Passenger load factor (%) 67.08 67.02 0.06PPT
Yield
(RMB/passenger-kilometer)
0.63 0.64 -1.6%
Yield
(RMB/seat-kilometer)
0.43 0.43 0.0%
2009 2008
Cargo Businesses
2009 2008
Cargo revenue (RMB mn) 4,124 5,358 -23.0%
AFTK (million) 4,904 4,805 2.1%
RFTK (million) 2,474 2,420 2.2%
Tonnage Carried (Thousands) 944 889 6.1%
Freight load factor (%) 50.45% 50.36% 0.2%
Yield (RMB/ tonne-kilometer) 1.67 2.21 -24.4%
Efficiency enhancement initiatives
Optimize capacity allocation with better market predictions
Control cargo costs through overall budgeting & planning
Focus on development of transit products, and enter into strategic
cooperation framework agreements with multiple corporations
Place bellyhold freight business under the centralized management of
China Cargo Airlines, and enhance marketing activities on cargo business
via various channels
% YoY
15
Operating Expense
Operating expense breakdown Available tonne-kilometers unit cost
4.88
3.08
2008 2009
(RMB)(RMB million) 2009 2008 %YtoY
Total 38,456 56,828 -32.3%
including:
Aircraft fuel 12,255 18,488 -33.7%
Loss/(gain) on financial derivatives
(3,775) 6,401
Depreciation & amortization
5,203 4,782 8.8%
Wages, salaries & benefits
5,149 4,545 13.3%
Aircraft maintenance 3,019 3,273 -7.8%
Impairment Loss 109 2,977 -96.3%
Selling & marketing 1,978 1,563 26.6%
Ground services & other charges
290 269 7.8%
Office, Administrative and other expenses
3,752 4,056 -7.5%
16
Key Cost Reduction Initiatives
Fuel consumption
Air catering Supplies
Capital cost
Cost
reduction
initiativesMaintenance & overhaul
Labor
Capex
A-share
–# of shares issued: 1,350,000,000
–Offering price: RMB4.75 / share
–Offering targets: 10 investors including
CEA Group
H-share
–# of shares issued: 490,000,000
–Offering price: HK$1.56 / share
–Target: CEA International, a 100%
subsidiary of CEA Group
Fully-subscribed, RMB7.085 billion
proceeds used for working capital
purpose
A-share / H-
share private
placements
Proposed merger via share swap
– Acquirer: CEA; target: Shanghai Airlines
– Transaction structure: 1 Shanghai Airlines A-share for 1.3 CEA A-shares
– Provide cash options to the dissenting shareholders of CEA / Shanghai Airlines
The transaction was successfully completed, with Shanghai Airlines delisted and
the stocks of post-merger CEA starting trading on February 2nd
Merger with
Shanghai
Airlines
CEA 2009 Capital Operations
June 2009 December 2009
A-share
–# of shares issued: 1,437,375,000
–Offering price: RMB3.87 / share
–Offering target: CEA Group
H-share
–# of shares issued: 1,437,375,000
–Offering price: RMB1 / share
–Target: CEA International, a 100%
subsidiary of CEA Group
Fully-subscribed, RMB7 billion
proceeds used for working capital
purpose
Post-merger Integration and
Potential Synergies
Marketing
Increased transit business
volume with a wider network
coverage
Strengthened market control
through combination of high-
rate and low-rate seats
Improved negotiating power
Expanded frequent traveler
base
Operations
Sharing of domestic /
international flight codes
Centralized allocation of
flight resources / schedules
Centralized control over the
sales network, sales
channels and sales force
team
Cost control
Uniform fleet purchase,
capacity and facilities
allocation; uniform purchase
of raw materials and fuel to
optimize inventory; uniform
purchase of food and
supplies
Integrate maintenance
functions and strengthen
negotiating power with
vendors
Reduce administrative costs
by integrating office
resources
Cargo businesses
Integration of traffic rights,
routes and flights resources
Sharing of truck resources,
customer bases and
warehousing facilities to
provide one-stop cargo /
logistics services
Redefine the strategic
cooperation directions with
existing foreign
shareholders
Back-office resources
Sharing of terminal buildings
Unified cabin cleaning
arrangements
Sharing of passenger ferry
services
Cooperation on loading /
unloading
Integration of ramp
resources
Unified branding / marketing
activities
IT system
Be selective as to existing
systems
Uniform development and
maintenance of new systems
completed underway underway
underway completed completed
Scale advantage of Post-Merger CEA
Fleet size Routes network
Scale
Advantage
Total Assets Market share
2009 Results Summary
2009 Review
Outlook
2010Q1 Results Summary (Under PRC GAAP, unaudited)
Opportunities
Air passenger
market continued
to pick up in China,
while gradually
recovered around
the world
Air cargo market is
expected to
experience an
overall recovery
Post-merger
synergy of CEA and
Shanghai Airlines
has started to
emerge
2010 Shanghai
World expo
created
tremendous
opportunities
World economic
recovery remained
stable, led by
economic rally in
China
Opportunities in 2010
“Open Sky Agreement ”
exerts great
impact on the operation
of international flights
Economy uncertainties exist,
international trade protectionism
Impacts growth of air
transport industry
Competitive landscape of the
domestic airlines has changed
Other uncertainties such as
oil price, interest,
exchange rate, etc.
Challenge
s
Challenges in 2010
On the premise of ensuring safety,
actively and cautiously promote the
consolidation of both parties’ segment,
business and staff; the segments
include marketing, logistics, ground
services, aircraft maintenance,
procurement, IT, etc.
Complete the post-merger
Integration
Major Focuses in
2010
Make remarkable progress in
hub construction
Make every effort to serve World
Expo and enhance our brand
image
Offer the finest and customized
service and build up strong brand
image by fully utilizing the Expo
platform
Build up optimized airline route
network
Ensure the hub operation
Strengthen OD marketing and
increase the proportion of transit
passenger
Strengthen the yield management to
meet the advanced industrial standard
Adjust the costs structure, focus on
the potential to reduce the cost of the
major items, and optimize cost
management system
Increase the profitability of our
core business
Major Focuses in 2010
Enhance the IT capacitySteadily promote the reform on
system
Establish the 4 information centers:
development, operation, project
management and telecommunication
Establish business information
management system
Build up information infrastructure
platform to promote the Top Ten
Business Systems Project
Start the process of reengineering and
smoothen the whole-process of the
production and operation
Accelerate the application of
professional-technology- two-track
system
Improve the performance
management system
Propel the SMS construction
and enhance level of safety
Carry out safety management through
systems, emphasize on safe operation
to achieve closed-loop control and risk
management to achieve the
sustainable safety
New CEA Strategies
To be a leading airline
company in Asia with
strong global
competitiveness
Staff Loyalty, Customer Preference
Investor Satisfaction, Strong Social Reputation
Build up
strong hub
network
Provide the best
service with the
finest
management
Be well-established in
core market to
achieve growth
efficiency
Acquire strong
global
competitiveness
Vision
Mission
Strategic Goals
Hub-spoke
networking
strategy
Cost
control
strategy
Brand
management
strategy
Sophisticated
management
strategy
Informatization
strategy
2009 Results Summary
2009 Review
Outlook
2010Q1 Results Summary(Under PRC GAAP, unaudited)
2010Q1 Operating Data
Passenger Businesses
Million 1Q2010 Yoy growth
ASK 27,688 37.5%
-Domestic 19,728 44.0%
-International 6,678 22.9%
-Regional 1,283 29.5%
RPK 20,705 45.2%
-Domestic 15,000 46.1%
-International 4,802 44.5%
-Regional 903 35.0%
Passenger Load Factor 74.8% 3.9PPT
-Domestic 76.0% 1.1PPT
-International 71.9% 10.8PPT
-Regional 70.4% 2.9PPT
Cargo Businesses
Million 1Q2010 Yoy growth
AFTK 1,674 47.0%
-Domestic 517 22.7%
-International 1,083 62.0%
-Regional 74 50.5%
RFTK 982 108.5%
-Domestic 246 60.8%
-International 700 131.9%
-Regional 36 125.2%
Freight Load Factor 58.6% 17.3PPT
-Domestic 47.7% 11.3PPT
-International 64.6% 19.5PPT
-Regional 48.2% 16.0PPT
Note: 2009 Q1 operating data excluded the operating results of Shanghai Airlines
27
2010Q1 Financial Data
(RMB Million)
2010Q1
New CEA
2009Q1
CEA
Operating Income
Operating Cost
Operating Profit
EPS (RMB)
— Net profit attributable to
shareholders of the parent
Net Profit
Note: 2009 Q1 financial data excluded the operating results of Shanghai Airlines
(Under PRC GAAP)
Income From Changes In Fair Value
15,569 8,946
12,962 8,423
753 (850)
0.0716 0.008
770 40
787 11
463 422
74.0%
53.9%
N.M.
795.0%
1825.0%
6806.1%
9.8%
YoY Growth
28
Q&A