20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION,

WASHINGTON, D.C. 20549

FORM 20-F

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

OR

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

For the fiscal year ended December 31, 2017

OR

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

For the transition period from                      to                     

OR

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

Date of event requiring this shell company report                     

Commission file number 1-14660

(Exact name of Registrant as specified in its charter)

CHINA SOUTHERN AIRLINES COMPANY LIMITED

(Translation of Registrant’s name into English)

THE PEOPLE’S REPUBLIC OF CHINA

(Jurisdiction of incorporation or organization)

278 JI CHANG ROAD

GUANGZHOU, 510405

PEOPLE’S REPUBLIC OF CHINA

(Address of principal executive offices)

Mr. Xie Bing

Telephone: +86 20 86124462

E-mail: ir@csair.com

Fax: +86 20 86659040

Address: 278 JI CHANG ROAD

GUANGZHOU, 510405

PEOPLE’S REPUBLIC OF CHINA

(Name, Telephone, E-mail 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	Name of each exchange on which registered
Ordinary H Shares of par value RMB1.00 per share represented by American Depositary Receipts	New York Stock Exchange

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

None

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

None

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: 7,022,650,000 A Shares of par value RMB1.00 per share and 3,065,523,272 H Shares of par value RMB1.00 per share.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ☐  Yes    ☒  No

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 the definitions 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 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

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS	1
INTRODUCTORY NOTE	2
GLOSSARY OF AIRLINE INDUSTRY TERMS	3
PART I	5
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	5
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE	5
ITEM 3. KEY INFORMATION	5
A.  Selected financial data.	5
B.  Capitalization and Indebtedness	7
C.  Reasons for the Offer and Use of Proceeds	7
D.  Risk Factors	7
ITEM 4. INFORMATION ON THE COMPANY	16
A.  History and Development of our Company	16
B.  Business Overview	20
C.  Organizational Structure	43
D.  Property, Plant and equipment	44
ITEM 4A. UNRESOLVED STAFF COMMENTS	45
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS	45
A.  Operating Results	49
B.  Liquidity and Capital Resources	55
C.  Research and Development, Patents and Licenses, etc.	56
D.  Trend information	57
E.   Off-Balance Sheet Arrangements	57
F.   Tabular Disclosure of Contractual Obligations	57
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	58
A.  Directors, Senior Management and Employees	58
B.  Compensation	65
C.  Board Practices	66
D.  Employees	67
E.   Share Ownership	68
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	68
A.  Major Shareholders	68
B.  Related Party Transactions	69
C.  Interests of Experts and Counsel	79
ITEM 8. FINANCIAL INFORMATION	80
A.  Consolidated Statements and Other Financial Information	80
B.  Significant Changes	80

i

ITEM 9. THE OFFER AND LISTING	81
A.  Offer and listing details	81
B.  Plan of Distibution	81
C   Markets	81
D.  Selling Shareholders	81
E.  Dilution	82
F.   Expenses of the Issue	82
ITEM 10. ADDITIONAL INFORMATION	82
A.  Share Capital	82
B.  Memorandum and Articles of Association	82
C    Material Contracts	86
D.  Exchange Controls	86
E.   Taxation	87
F.   Dividends and Paying Agents	91
G.  Statement By Experts	91
H.  Documents on Display	91
I.    Subsidiary Information	92
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	92
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	93
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	95
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	95
ITEM 15. CONTROLS AND PROCEDURES	95
ITEM 16A. AUDIT AND RISK MANAGEMENT COMMITTEE FINANCIAL EXPERT	98
ITEM 16B. CODE OF ETHICS	98
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES	98
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT AND RISK MANAGEMENT COMMITTEE	98
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	98
ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT	99
ITEM 16G. CORPORATE GOVERNANCE	100
ITEM 16. MINE SAFETY DISCLOSURE	102
ITEM 17. FINANCIAL STATEMENTS	103
ITEM 18. FINANCIAL STATEMENTS	103
ITEM 19. EXHIBITS	103

ii

FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements. These statements appear in a number of different places in this Annual Report. A forward-looking statement is usually identified by the use in this Annual Report of certain terminology such as “estimate”, “project”, “expect”, “intend”, “believe”, “plan”, “anticipate”, “may”, or their negatives or other comparable words. Also look for discussions of strategy that involve risks and uncertainties. Forward-looking statements include statements regarding the outlook for our future operations, forecasts of future costs and expenditures, evaluation of market conditions, the outcome of legal proceedings (if any), the adequacy of reserves, or other business plans. You are cautioned that such forward-looking statements are not guarantees and involve risks, assumptions and uncertainties. Our actual results may differ materially from those in the forward-looking statements due to risks facing our Company or due to actual facts differing from the assumptions underlying those forward-looking statements.

Some of these risks and assumptions, in addition to those identified under Item 3, “Key Information - Risk Factors,” include:

• general economic and business conditions in markets where our Company operates, including changes in interest rates;

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

• natural phenomena;

• the impact of unusual events on our business and operations;

• actions by government authorities, including changes in government regulations, and changes in CAAC’s regulatory policies;

• our relationship with China Southern Air Holding Limited Company (“CSAH”);

• uncertainties associated with legal proceedings;

• technological development;

• our ability to attract key personnel and attract new talent;

• future decisions by management in response to changing conditions;

• the Company’s ability to execute prospective business plans;

• the availability of qualified flight personnel and airport facilities; and

• misjudgments in the course of preparing forward-looking statements.

Our Company advises you that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to our Company, our Group and persons acting on their behalf.

1

INTRODUCTORY NOTE

In this Annual Report, unless the context indicates otherwise, the “Company”, “we”, “us” and “our” means China Southern Airlines Company Limited, a joint stock company incorporated in China on March 25, 1995, our “Group” means our Company and our consolidated subsidiaries, and “CSAH” means China Southern Air Holding Limited Company, our Company’s parent company which directly and indirectly holds a 50.65% interest in our Company as of April 26, 2018.

References to “China” or the “PRC” are to the People’s Republic of China, excluding Hong Kong, Macau and Taiwan. References to “Renminbi” or “RMB” are to the currency of China, references to “U.S. dollars”, “$” or “US$” are to the currency of the United States of America (the “U.S.” or “United States”), and reference to “HK$” is to the currency of Hong Kong. Reference to the “Chinese government” is to the national government of China. References to “Hong Kong” or “Hong Kong SAR” are to the Hong Kong Special Administrative Region of the PRC. References to “Macau” or “Macau SAR” are to the Macau Special Administrative Region of the PRC.

Our Company presents our consolidated financial statements in Renminbi. The consolidated financial statements of our Company have been prepared in accordance with all applicable International Financial Reporting Standards (“IFRSs”), which collective term includes all applicable individual IFRSs, International Accounting Standards (“IASs”) and Interpretations issued by the International Accounting Standards Board (the “IASB”).

Solely for the convenience of the readers, this Annual Report contains translations of certain Renminbi amounts into U.S. dollars at the rate of US$1.00 = RMB6.5342, which is the average of the buying and selling rates as quoted by the People’s Bank of China at the close of business on December 29, 2017. No representation is made that the Renminbi amounts or U.S. dollar amounts included in this Annual Report could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all. Any discrepancies in the tables included herein between the amounts listed and the totals are due to rounding.

2

GLOSSARY OF AIRLINE INDUSTRY TERMS

In this Annual Report, unless the context indicates otherwise, the following terms have the respective meanings set forth below.

Capacity
“available seat kilometers” or “ASK”	the number of seats made available for sale multiplied by the kilometers flown
“available ton kilometers” or “ATK”	the tons of capacity available for the transportation of revenue load (passengers and cargo) multiplied by the kilometers flown
Traffic
“revenue passenger kilometers” or “RPK”	i.e. passenger traffic volume, the number of passengers carried multiplied by the kilometers flown
“revenue ton kilometers” or “RTK”	i.e. total traffic volume, the load (passenger and cargo) in tons multiplied by the kilometers flown
“revenue ton kilometers-cargo” or “RFTK”	i.e. cargo and mail traffic volume or revenue ton kilometers for cargo, the load (cargo) in tons multiplied by the kilometers flown
“revenue ton kilometers-passenger”	the load (passenger) in tons multiplied by the kilometers flown
“ton”	a metric ton, equivalent to 2,204.6 pounds
Yield
“yield per RPK”	revenue from passenger operations divided by RPK
“yield per RFTK”	revenue from cargo operations divided by RFTK
“yield per RTK”	revenue from airline operations (passenger and cargo) divided by RTK
Cost
“operating cost per ATK”	operating expenses divided by ATK
Load Factors
“overall load factor”	RTK expressed as a percentage of ATK
“passenger load factor”	RPK expressed as a percentage of ASK
Utilization
“utilization rates”	flight hours that aircraft can service during specified time
Equipment
“expendables”	aircraft parts that are ordinarily used up and replaced with new parts
“rotables”	aircraft parts that are ordinarily repaired and reused
Others
“ADR”	American Depositary Receipt
“A Shares”	Shares issued by our Company to investors in the PRC for subscription in RMB, with par value of RMB1.00 each
“CSAH”	China Southern Air Holding Limited Company, formerly known as China Southern Air Holding Company
“CAAC”	Civil Aviation Administration of China
“CAOSC”	China Aviation Oil Supplies Company

3

“CSRC”	China Securities Regulatory Commission
“H Shares”	Shares issued by our Company, listed on The Stock Exchange of Hong Kong Limited and subscribed for and traded in Hong Kong dollars, with par value of RMB1.00 each
“Nan Lung”	Nan Lung Holding Limited (a wholly-owned subsidiary of CSAH)
“NDRC”	National Development and Reform Commission of China
“SA Finance”	Southern Airlines Group Finance Company Limited
“SAFE”	State Administration of Foreign Exchange of China
“SEC”	United States Securities and Exchange Commission
“SPVs”	China Southern Airlines No. 1 Lease (Tianjin); China Southern Airlines No. 2 Lease (Tianjin); China Southern Airlines No. 3 Lease (Tianjin); China Southern Airlines No. 4 Lease (Guangzhou); China Southern Airlines No. 5 Lease (Tianjin); China Southern Airlines No. 6 Lease (Tianjin); China Southern Airlines No. 7 Lease (Tianjin); China Southern Airlines No. 8 Lease (Tianjin); China Southern Airlines No. 9 Lease (Guangzhou); China Southern Airlines No. 12 Lease (Tianjin); China Southern Airlines No. 13 Lease (Tianjin); and China Southern Airlines No. 14 Lease (Tianjin)

4

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. SELECTED FINANCIAL DATA.

The following tables present selected financial data for the five-year period ended December 31, 2017. The selected consolidated income statement data (other than ADR data) for the three-year period ended December 31, 2015, 2016 and 2017 and selected consolidated statement of financial position data as of December 31, 2016 and 2017 are derived from the audited consolidated financial statements of our Company, included elsewhere in this Annual Report. The selected consolidated income statement data (other than ADR data) for the years ended December 31, 2013 and 2014 and selected consolidated statement of financial position data as of December 31, 2013, 2014 and 2015 are derived from our Company’s audited consolidated financial statements that are not included in this Annual Report.

Moreover, the selected financial data should be read in conjunction with our consolidated financial statements together with accompanying notes and “Item 5. Operating and Financial Review and Prospects” which are included elsewhere 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.

	Year ended 31,
	2017 US$			2017 RMB			2016 RMB			2015 RMB			2014 RMB			2013 RMB
	(in million, except per share and per ADR data)
Consolidated Income Statement Data
Operating revenue		19,560			127,806			114,981			111,652			108,584			98,547
Operating expenses		(18,839	)		(123,098	)		(106,204	)		(101,492	)		(106,026	)		(98,280	)
Operating profit		1,401			9,156			12,612			13,438			4,748			1,510
Profit before income tax		1,358			8,874			7,661			6,118			3,066			3,484
Profit for the year		1,056			6,898			5,898			4,818			2,398			2,750
Profit attributable to:
Equity shareholders of our Company		912			5,961			5,044			3,736			1,777			1,986
Non-controlling interests		143			937			854			1,082			621			764
Basic and diluted earnings per share		0.09			0.60			0.51			0.38			0.18			0.20
Basic and diluted earnings per ADR(1)		4.59			30.03			25.69			19.03			9.05			10.11
Other Financial Data
Cash dividends declared per share		0.02			0.10			0.10			0.08			0.04			0.04

(1) Basic and diluted earnings per share have been computed by dividing profit attributable to equity shareholders of our Company by the weighted average number of shares in issue. Basic and diluted earnings per ADR have been computed as if all of our issued or potential ordinary shares, including domestic shares and H shares, are represented by ADRs during each of the years presented. Each ADR represents 50 shares.

5

	Year ended 31,
	2017 US$		2017 RMB		2016 RMB		2015 RMB		2014 RMB		2013 RMB
	(in million, except per share and per ADR data)
Consolidated Statement of Financial Position Data:
Cash and cash equivalents		1,045		6,826		4,152		4,560		15,414		11,748
Total current assets, excluding cash and cash equivalents		1,692		11,058		9,612		9,553		12,127		8,825
Property, plant and equipment, net		24,322		158,926		146,746		142,870		134,453		119,777
Total assets		33,473		218,718		200,442		185,989		189,688		165,207
Current borrowings		4,219		27,568		26,746		30,002		20,979		20,242
Current portion of obligations under finance leases		1,277		8,341		8,695		6,416		5,992		3,636
Non-current borrowings		3,171		20,719		18,758		15,884		42,066		37,246
Obligations under finance leases, excluding current portion		9,119		59,583		53,527		49,408		43,919		31,373
Total equity		9,572		62,543		54,976		49,624		44,493		42,451
Number of shares (in million)		10,088		10,088		9,818		9,818		9,818		9,818

Selected Operating Data    

The operating data and the profit analysis and comparison below is calculated and disclosed in accordance with the statistical standards, which have been implemented by our Group since January 1, 2001. See “Glossary of Airline Industry Terms” at the front of this Annual Report for definitions of certain terms used herein.

	Year ended December 31,
	2017		2016		2015		2014		2013
Capacity
ASK (million)		280,646		255,992		235,616		209,807		186,800
ATK (million)		38,332		34,980		32,205		28,454		24,952
Kilometers flown (thousand)		1,623,014		1,504,310		1,408,500		1,275,570		1,147,070
Hours flown (thousand)		2,567		2,375		2,238		2,026		1,829
Number of landing and take-offs		1,010,460		959,110		936,750		884,070		809,870
Traffic
RPK (million)		230,697		206,106		189,588		166,629		148,417
RTK (million)		27,321		24,387		22,388		19,780		17,469
Passengers carried (thousand)		126,299		114,619		109,422		100,919		91,791
Cargo and mail carried (tons)		1,672,162		1,612,550		1,511,550		1,433,250		1,276,350
Load Factors
Passenger load factor (RPK/ASK) (%)		82.2		80.5		80.5		79.4		79.4
Overall load factor (RTK/ATK) (%)		71.3		69.7		69.5		69.5		70.0
Yield
Yield per RPK (RMB)		0.49		0.50		0.53		0.58		0.59
Yield per RFTK (RMB)		1.30		1.16		1.21		1.42		1.48
Yield per RTK (RMB)		4.46		4.50		4.78		5.27		5.42
Fleet
- Boeing		407		372		351		311		282
- Airbus		321		304		290		276		253
- Others		26		26		26		25		26
Total aircraft in service at period end		754		702		667		612		561
Average daily utilization rate (hours per day)		9.79		9.53		9.6		9.6		9.6

6

Exchange Rate Information

The following table sets forth certain information concerning exchange rates, based on the noon buying rates in New York City for cable transfers in foreign currencies, as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”), between Renminbi and U.S. dollars for the five most recent financial years.

	Renminbi per U.S. Exchange Rate (1)
Period	Average(2)		Low		High		Period—end
Exchange Rate
2013		6.1412		6.0537		6.2213		6.0537
2014		6.1704		6.0402		6.2591		6.2046
2015		6.2869		6.1870		6.4896		6.4778
2016		6.6400		6.4480		6.9580		6.9430
2017		6.7569		6.4773		6.9575		6.5063
October		6.6254		6.5712		6.6533		6.6328
November		6.6200		6.5967		6.6385		6.6090
December		6.5932		6.5063		6.6210		6.5063
2018
January		6.4233		6.8360		6.9575		6.2841
February		6.3183		6.2649		6.3471		6.3280
March		6.3174		6.2685		6.3565		6.2726
April (through April 25, 2018)		6.2912		6.2655		6.3229		6.3066

(1) Source: The source of the exchange rate is the H.10 statistical release of the Federal Reserve Board.

(2) The source of annual averages is the G.5A statistical release of the Federal Reserve Board. The source of monthly averages is the G.5 statistical release of the Federal Reserve Board.

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

We are indirectly majority owned by the Chinese government, which may exert influence in a manner that may conflict with the interests of holders of ADRs, H Shares and A Shares.

Major Chinese airlines are wholly- or majority-owned either by the Chinese government or by provincial or municipal governments in China. CSAH, an entity wholly-owned by the Chinese government, directly and indirectly holds and exercises the rights of ownership of 50.65% of the equity of our Company. The interests of the Chinese government in our Company and in other Chinese airlines may conflict with the interests of the holders of the ADRs, H Shares and A Shares. The public policy considerations of the Chinese government in regulating the Chinese commercial aviation industry may also conflict with its indirect ownership interest in our Company. In addition, our Company may accept further capital injection from CSAH through non-public subscriptions, which may have dilutive impact for other holders of ADRs, H Shares and A Shares.

7

Due to high degree of operating leverage and high fixed costs, a decrease in revenue of our Group could result in a disproportionately higher decrease in our profit for the year. The results of our operations are also significantly exposed to fluctuations in foreign exchange rates.

The airline industry is generally characterized by a high degree of operating leverage. In addition, due to high fixed costs, the expenses relating to the operation of any flight do not vary proportionately with the number of passengers carried, while revenues generated from a flight are directly related to the number of passengers carried and the fare structure of such flight. Accordingly, a decrease in revenues could result in a disproportionately higher decrease in our profit for the year. Moreover, as we have substantial obligations denominated in foreign currencies, our results of operations are significantly affected by fluctuations in foreign exchange rates, particularly by fluctuations in the Renminbi-U.S. dollar exchange rate. Our net exchange loss of RMB3,276 million and net exchange gain of RMB1,801 million was recorded in 2016 and 2017, respectively, primarily due to the translation of balances of borrowings and obligations under finance lease which are denominated in USD.

We have significant committed capital expenditures in the next three years, and may face challenges and difficulties as it seeks to maintain liquidity.

We have a substantial amount of debt, lease and other obligations, and will continue to have a substantial amount of debt, lease and other obligations in the future. As of December 31, 2017, our current liabilities exceeded our current assets by RMB 51,693 million. We generated net cash inflow from operating activities of RMB23,764 million and RMB17,732 million for the years ended December 31, 2016 and 2017, respectively. However, our substantial indebtedness and other obligations may in the future negatively impact our liquidity. In addition, we have significant committed capital expenditures in the next three years, due to aircraft acquisitions. In 2017 and thereafter, the liquidity of our Group is primarily dependent on our ability to maintain adequate cash inflow from operations to meet our debt obligations as they fall due, and our ability to obtain adequate external financing to meet our committed future capital expenditures. If our operating cash flow is materially and adversely affected by factors such as increased competition, a significant decrease in demand for our services, or a significant increase in jet fuel prices, our liquidity would be materially and adversely affected. Moreover, we may not be able to meet our debt obligations as they fall due and commit future capital expenditures if certain assumptions about the availability of external financing on acceptable terms are inaccurate. If we are unable to obtain adequate financing for our capital requirements, our liquidity and operations would be materially and adversely affected.

As of December 31, 2017, we had banking facilities with several PRC commercial banks for providing loan finance up to approximately RMB181,922 million, of which approximately RMB142,239 million was unutilized. Our directors believe that sufficient financing will be available to our Group in 2018. However there can be no assurance that such loan financing will be available on terms acceptable to our Group or at all.

CSAH will continue to be our controlling shareholder, and our interests may conflict with those of our Group. CSAH and certain of its affiliates will continue to provide certain important services to our Group. Any disruption of the provision of services by CSAH or its affiliates could affect our operations and financial conditions.

CSAH will continue to be the controlling shareholder of our Company. CSAH and certain of its affiliates will continue to provide certain important services to our Group, including advertising services, provision of air ticket selling services, property management services, leasing of properties and financial services, and repair, overhaul and maintenance services on jet engines. The interests of CSAH may conflict with those of our Group. In addition, any disruption of the provision of services by CSAH’s affiliates or a default by CSAH of its obligations owed to our Group could affect our operations and financial conditions. In particular, as part of our cash management system, our Group periodically places certain amount of demand deposits after independent shareholders’ approval with SA Finance, a PRC authorized financial institution controlled by CSAH and an associate of our Company. We have taken certain measures to monitor the fund flows between us and SA Finance and the placement of funds by SA Finance. Such monitoring measures may help to enhance the safety of our deposits with SA Finance. In addition, we have received a letter of undertakings from CSAH dated March 31, 2009, in which, among other things, CSAH warranted that our deposits and loans with SA Finance were secure and that SA Finance would continue to operate in strict compliance with the relevant rules and regulations. However, the deposits may be exposed to risks associated with the business of SA Finance over which our Group does not have control. As of December 31, 2016 and 2017, we had deposits of RMB3,759 million and RMB6,095 million, respectively, with SA Finance.

8

Both international and domestic economic conditions and Chinese government’s macroeconomic controls affect the demand for air travel, which will in turn cause volatility to our business and results of our operations.

As a result of the discretionary nature of air travel, the airline industry has been cyclical and particularly sensitive to changes in economic conditions. During periods of unfavorable or volatile economic conditions in the global economy or when global or regional economic conditions are affected by political events, such as the United Kingdom’s exit from the European Union (“EU”) and the trade policies between China and the U.S., demand for air travel can be impacted as business and leisure travelers choose not to travel, seek alternative forms of transportation for short trips or conduct business through videoconferencing. If unfavorable economic conditions occur, particularly for an extended period, our business, financial condition and results of operations may be adversely affected.

Following a referendum in June 2016 in which voters in the U.K. approved an exit from the EU, the U.K. government has initiated a process to leave the EU (often referred to as Brexit) and begun negotiating the terms of the U.K.’s future relationship with the EU. The airline industry faces substantial uncertainty regarding the impact of the exit of the U.K. from the EU. Adverse consequences such as deterioration in economic conditions, volatility in currency exchange rates or adverse changes in regulation of the airline industry or bilateral agreements governing air travel could have a negative impact on our operations, financial condition and results of operations.

On March 8, 2018, the U.S. President Donald Trump proposed a further 25% tariffs, the equivalent of $50 billion on Chinese goods. In response, on April 4, 2018, China released a tariff list of 25% on $50 billion’s US imports, including soybeans, automobiles and aeroplanes. On April 6, 2018, Trump reiterated that by considering adding a further $100 billion in tariffs on goods imported from China, and the Chinese Ministry of Commerce and the Foreign Affairs indicated that they would also adopt new measures. There is no guarantee that more measures will be introduced, and if these trade policies come into force and the scope of them is further expanded, the volume of China-U.S. import and export trade would drop significantly, which will lead to deterioration in economic conditions of both countries and decrease of business and official activities between both countries. Demand for air travel as well as cargo and mail volume can be impacted.

Chinese macroeconomic controls, such as financing adjustments, credit adjustments, taxation policies, price controls and exchange rate policies would also present unexpected changes to the aviation industry. As a result, the changing economic situation and Chinese macroeconomic controls may cause volatility to our business and results of our operations.

We could be adversely affected by an outbreak of a disease or large scale natural disasters that affect travel behavior.

The outbreak of the H1N1 swine flu in March 2009 has had an adverse impact on the aviation industry globally (including our Group). The spread of the swine flu adversely affected our international routes operations in 2009. A future outbreak of an infectious disease or any other serious public health concerns in Asia and elsewhere could have a material adverse effect on our business, financial condition and results of operations.

In 2011, a number of large-scale natural disasters occurred globally, such as the nuclear meltdown in Japan caused by earthquakes and subsequent tsunami, the hurricane on the East Coast of the United States, the flooding in Thailand and the typhoon in the Philippines. Disasters such as these can affect the aviation industry and our Group by reducing revenues and impacting travel behavior.

Lack of adequate documentation for land use rights and ownership of buildings subjects us to challenges and claims by third parties with respect to our Company’s use of such land and buildings.

Although systems for registration and transfer of land use rights and related real property interests in China have been implemented, such systems do not yet comprehensively account for all land and related property interests. We leased certain properties and buildings from CSAH which are located in Guangzhou, Haikou and other PRC cities. However, CSAH lacks adequate documentation evidencing CSAH’s rights to such land and buildings, and, as a result, the lease agreements between CSAH and our Company for such land has not been registered with the relevant authorities. As a result, such lease agreements may not be enforceable. Lack of adequate documentation for land use rights and ownership of buildings subjects our Company to challenges and claims by third parties with respect to our Company’s use of such land and buildings.

As of the date of this Annual Report, we had been occupying all of the land and buildings described above without challenge or claim by third parties. However, if any challenges to the property ownership or other claims are successful, our operation and business may be materially adversely affected. CSAH has agreed to indemnify us against any loss or damage caused by or arising from any challenge of, or interference with, our Company’s right to use certain land and buildings.

9

Any discontinuity or disruption in the direct flight arrangement between Taiwan and Mainland China may negatively affect our results.

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. As of April 26, 2018, there were 78 cross-Strait direct passenger flights per week. Our Company was the first Chinese carrier to operate non-stop flights from Mainland China to Taiwan and as a result has benefited from the operation of such flights. However, given the cross-Strait flight 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, and therefore may have a material adverse impact on our results.

Terrorist attacks or the fear of such attacks, even if not made directly on the airline industry, could adversely affect our Company 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 the attack on September 11, 2001 in the United States. Terrorist attacks could also affect the aviation industry in China. Airlines in China have experienced several incidents of terrorist attacks or threats recently. For example, on March 7, 2008, on a China Southern Airlines flight boarding in Urumqi, crew members discovered a terrorist suspect. On July 14, 2010, a passenger jet en route from Urumqi to Guangzhou was forced to make an emergency landing after receiving an anonymous call claiming there was a bomb on the aircraft. On June 29, 2012, there was an attempted hijacking on a passenger flight operated by Tianjin Airlines between Hotan and Urumqi in China’s Xinjiang region. CAAC has enhanced security measures, but the effectiveness of such measures cannot be ascertained. Additional terrorist attacks, even if not made directly on the airline industry, or the fear of or the precautions taken in anticipation of such attacks (including elevated threat warnings or selective cancellation or redirection of flights) could materially and adversely affect our Company and the aviation industry. Potential impacts that terrorist attacks could have on our Company include substantial flight disruption costs caused by grounding of fleet, significant increase in security costs and associated passenger inconvenience, increased insurance costs, substantially higher ticket refunds and significant decrease in traffic measured in revenue passenger kilometers. Additionally, increasingly strict security measures make air travel a hassle in the eyes of some consumers. These factors can have an uncertain impact on the development of the aviation industry.

We may suffer losses in the event of an accident involving our aircraft or the aircraft of any other airline.

An accident involving one of our aircraft could require repair or replacement of a damaged aircraft, and result in our consequential temporary or permanent loss from service and/or significant liability to injured passengers and others. Although we believe that we currently maintain liability insurance in amounts and of the types generally consistent with industry practice, the amounts of such coverage may not be adequate to fully cover the costs related to the accident or incident, which could result in harm to our results of operations and financial condition. In addition, any aircraft accident, even if fully insured, could cause a public perception that we are not as safe or reliable as other airlines, which would harm our competitive position and result in a decrease in our operating revenues. Moreover, a major accident involving the aircraft of any of our competitors may cause demand for air travel to decrease in general, which would adversely affect our results of operations and financial condition.

We could be adversely affected by a failure or disruption of our computer, communications or other technology systems.

We are increasingly dependent on technology to operate our business. In particular, to enhance our management of flight operations, our Group launched the computerized flight operations control system in May 1999. The system utilizes advanced computer and telecommunications technology to manage our flights on a centralized, real-time basis. We believe that the system will enhance the efficiency of flight schedule, increase the utilization of aircraft and improve the coordination of our aircraft maintenance and ground servicing functions. However, the computer and communications systems on which we rely could be disrupted due to various factors, some of which are beyond our control, including natural disasters, power failures, terrorist attacks, equipment failures, software failures and computer viruses and hackers. We have taken certain steps to reduce the risk of some of these potential disruptions. There can be no assurance, however, that the measures we have taken are adequate to prevent or remedy disruptions or failures of those systems. Any substantial or repeated failure of those systems could adversely affect our operations and customer services, result in the loss of important data, loss of revenues, and increased costs, and generally harm our business. Moreover, a failure of certain of our vital systems could limit our ability to operate our flights for an extended period of time, which would have a material adverse effect on our operations and our business.

10

We may lose investor confidence in the reliability of our financial statements if we fail to achieve and maintain effective internal control over financial reporting, which in turn could harm our business and negatively impact the trading prices of our ADRs, H Shares or A Shares.

The United States Securities and Exchange Commission, or the SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company in the United States to include a management report on such company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal control over financial reporting. In addition, our Company’s independent registered public accounting firm is required to report on the effectiveness of our Company’s internal control over financial reporting.

Since 2011, pursuant to the Basic Standard for Enterprise Internal Control jointly issued by the Ministry of Finance, China Securities Regulatory Commission (“CSRC”) and other three PRC authorities on May 22, 2008, and its application guidelines and other relevant regulations issued subsequently (collectively, “PRC internal control requirements”) , our Company has carried out a self-assessment of the effectiveness of its internal control and issue a self-assessment report annually in accordance with the PRC internal control requirements, and our Company’s auditor for our PRC GAAP financial statements (the “PRC Auditor”) is required to report on the effectiveness of our Company’s internal control over financial reporting.

However, our independent registered public accounting firm or PRC Auditor may not be satisfied with our internal controls, the level at which our controls are documented, designed, operated and reviewed. Our independent registered public accounting firm or PRC Auditor may also interpret the requirements, rules and regulations differently, and reach a different conclusion regarding the effectiveness of our internal control over financial reporting. Although our management have concluded that our internal control over financial reporting as of December 31, 2017 was effective, we may discover deficiencies in the course of our future evaluation of our internal control over financial reporting and may be unable to remediate such deficiencies in a timely manner. If we fail to maintain the adequacy of our internal control over financial reporting, we may not be able to conclude that we have effective internal control over financial reporting on an ongoing basis, as required under the above mentioned rules and regulations. Moreover, effective internal control is necessary for us to produce reliable financial reports and is important to prevent fraud. As a result, our failure to achieve and maintain effective internal control over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading prices of our ADRs, H Shares or A Shares.

Our Company 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. Our Company believes that we were not a PFIC for the taxable year 2017. However, there can be no assurance that we will not be a PFIC for the taxable year 2018 and/or later taxable years, as PFIC status is re-tested each year and depends on the facts in such year.

Our Company 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 Company’s 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 ADRs 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 ADRs, or (2) 100% of the gain from the disposition of ADRs. For more information on the United States federal income tax consequences to you that would result from our classification as a PFIC, please see Item 10, “Taxation - United States Federal Income Taxation - U.S. Holders - Passive Foreign Investment Company”.

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We may be unable to retain key management personnel.

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

Risks Relating to the Chinese Commercial Aviation Industry

Our business is subject to extensive government regulations, and there can be no assurance as to the equal treatment of all airlines under those regulations.

Our ability to implement our business strategy will continue to be affected by regulations and policies issued or implemented by relevant government agencies, particularly CAAC, which encompasses substantially all aspects of the Chinese commercial aviation industry, such as the approval of route allocation, the administration of certain airport operations and air traffic control. Such regulations and policies limit the flexibility of our Group to respond to market conditions, competition or changes in our cost structure. The implementation of specific government policies could from time to time adversely affect our operations.

Our results may be negatively impacted by the fluctuation in domestic prices for jet fuel, and we would be adversely affected by disruptions in the supply of fuel.

The availability and cost of jet fuel have a significant impact on our results of operations. Our jet fuel cost for 2017 accounted for 50.64% of our flight operations expenses. All of the domestic jet fuel requirements of Chinese airlines (other than at the Shenzhen, Sanya, Haikou, Shanghai Pudong) must be purchased from the exclusive providers, CAOSC and Bluesky Oil Supplies Company, which are supervised by the CAAC. Chinese airlines may also purchase jet fuel at the Shenzhen, Sanya, Haikou, Shanghai Pudong from Sino-foreign joint venture in which CAOSC is a joint venture partner. Jet fuel obtained from the CAOSC’s regional branches is purchased at uniform prices throughout China that are determined and adjusted by the CAOSC from time to time with the approval of the CAAC and the pricing department of the NDRC based on market conditions and other factors. As a result, the costs of transportation and storage of jet fuel in all regions of China are spread among all domestic airlines.

Domestic price for jet fuel has experienced fluctuations in the past few years. Our profit for the year may suffer from an unexpected change in the fuel surcharge collection policies and other factors beyond our control. For more information on the jet fuel prices, please see “Item 4, Information on our Company - Business Overview - Jet Fuel” section below for further discussion.

In summary, given the constant fluctuation of volatile fuel price, no assurance can be given that our operation and financial results will not be negatively impacted by the fluctuation in domestic prices for jet fuel.

In addition, China has experienced jet fuel shortages. On some rare occasions prior to 1993, our Group had to delay or even cancel flights. Although such shortages have not materially affected our operations since 1993, there can be no assurance that such a shortage will not occur in the future. If such a shortage occurs in the future to the extent that our Group has to delay or cancel flights due to fuel shortage, our operational reputation among passengers as well as our operations may suffer.

In 2017, a reasonable possible increase or decrease of 10% in average jet fuel price with volume of fuel consumed and all other variables held constant, would have increased or decreased our annual fuel costs by approximately RMB3,190 million. Accordingly, even if the jet fuel supply remains stable, increases in jet fuel prices will nevertheless adversely impact our financial results.

Our profit for the year may suffer from an unexpected volatility caused by any fluctuation in the level of fuel surcharges.

The level of fuel surcharges, which is regulated by Chinese government, affects domestic customers’ air travel demand as well as our ability to generate profits. On January 14, 2009, the NDRC and the CAAC jointly announced that the collection of passenger fuel surcharge for domestic routes should be suspended from January 15, 2009 onwards. Subsequently, in response to the increase in international fuel prices, the NDRC and CAAC issued a notice on November 11, 2009 to introduce a new pricing mechanism of fuel surcharge that links it with airlines’ jet fuel costs, which was further adjusted subsequently. On October 14, 2011, the NDRC and the CAAC issued a notice to adjust such pricing mechanism. As a result of this adjustment, the maximum rates for fuel surcharge can be adjusted according to the pricing mechanism of fuel surcharge, if the aggregated change in jet fuel costs exceeds RMB250 per ton. Due to the decrease in the jet fuel cost, the fuel surcharge has been suspended since February 5, 2015. On March 24, 2015, NDRC elected to revise the base price of jet fuel which is used to calculate the maximum rate for fuel surcharge. We cannot guarantee that fuel surcharges would not be adjusted further in the future or adjusted in our favour. If fuel surcharges are not adjusted in correspondence to the increase in jet fuel, our profit for the year may be materially adversely affected.

12

Our results of operations are subject to seasonality.

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. In particular, our airline revenue is generally higher in the second half of the year than in the first half of the year. As a result, our results may fluctuate from season to season.

Our operations may be adversely affected by insufficient aviation infrastructure in Chinese commercial aviation industry.

The rapid increase in air traffic volume in China in recent years has put pressure on many components of the Chinese commercial aviation industry, including China’s air traffic control system, the availability of qualified flight personnel and airport facilities. Airlines, such as our Group, which have route networks that emphasize short- to medium-haul routes, are generally more affected by insufficient aviation infrastructure in terms of on-time performance and high operating costs due to fuel inefficiencies resulting from the relatively short segments flown, as well as the relatively high proportion of time on the ground during turnaround. All of these factors may adversely affect the perception of the service provided by an airline and, consequently, the airline’s operating results. In recent years, the CAAC has placed increasing emphasis on the safety of Chinese airline operations and has implemented measures aimed at improving the safety record of the industry. The ability of our Group to increase utilization rates and to provide safe and efficient air transportation in the future will depend in part on factors such as the improvement of national air traffic control and navigation systems and ground control operations at Chinese airports, factors which are beyond the control of our Group.

We face increasingly intense competition both in domestic aviation industry and in the international market, as well as from alternative means of transportation.

The CAAC’s extensive regulation of the Chinese commercial aviation industry has had the effect of managing competition among Chinese airlines. Nevertheless, competition has become increasingly intense in recent years due to a number of factors, including relaxation of certain regulations by the CAAC and an increase in the capacity, routes and flights of Chinese airlines. Competition in the Chinese commercial aviation industry has led to widespread price-cutting practices that do not in all respects comply with applicable regulations. Until the interpretation of CAAC regulations limiting such price-cutting has been finalized and strictly enforced, discounted tickets from competitors will continue to have an adverse effect on our sales.

We face varying degrees of competition on our regional routes from certain Chinese airlines and Cathay Pacific, Cathay Dragon and Air Macau, and on our international routes, primarily from non-Chinese airlines, most of which have significantly longer operating histories, substantially greater financial and technological resources and greater name recognition than our Group. In addition, the public’s perception of the safety and service records of Chinese airlines could adversely affect our ability to compete against our regional and international competitors. Many of our international competitors have larger sales networks and participate in reservation systems that are more comprehensive and convenient than those of our Group, or engage in promotional activities, which may enhance their ability to attract international passengers.

Furthermore, for short-distance transportation, airplanes, trains and buses are alternatives to each other. Given the recent development of high-speed trains (as discussed below), the construction of nationwide high-speed railway network and the improvement of inter-city expressway network, the commercial aviation sector as a whole faces increasing competition from the alternative means of transportation such as railways and highways.

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

The PRC government is aggressively implementing the expansion of its high-speed rail network. The mileage of new railway lines put into operation in 2017 reached 3,038 kilometers. In 2017, the Baoji-Lanzhou, Wuhan-Jiujiang, Xi’an-Chengdu and Shijiazhuang-Jinan railways commenced operation. Operation of Shijiazhuang-Jinan railway indicates that the “four horizontal and four vertical” high speed railway corridors have been built ahead of schedule. As of December 31, 2017, China’s railway traffic mileage has reached 127,000 kilometers, among which 25,000 kilometers are covered by high-speed railway. China’s high-speed railway traffic mileage accounts for 66.3% of the world’s total high-speed railway traffic mileage. According to the latest development goal of the China Railway Corporation, China’s railway traffic mileage will reach 175,000 kilometers by 2025, among which 38,000 kilometers are covered by high-speed railway. The operating results of the Company’s air routes which overlap with the high-speed railway corridors (especially air routes with a distance of less than 800 kilometers) will be affected in the future.

13

Due to limitation on foreign ownership imposed by Chinese government policies, our Company may have limited access to the international equity capital markets.

Chinese government policies limit foreign ownership in Chinese airlines. Under these policies, the percentage ownership of our total outstanding ordinary shares held by investors in Hong Kong and any country outside China (“Foreign Investors”) may not in the aggregate exceed 49%. Currently, we estimate that 30.39% of the total outstanding ordinary shares of our Company are held by Foreign Investors. According to The Provisions on Domestic Investment in Civil Aviation Industry, effective on January 19, 2018, Chinese government has loosen up restrictions on state ownership of our total outstanding ordinary shares, which allows the percentage of state-owned shares to be under 50%. However, for so long as the limitation on foreign ownership is in force, we will have limited access to the international equity capital markets.

The European Emissions Trading Scheme may increase operational cost of our Group.

Starting on January 1, 2012, aviation sector has been included in the European Emissions Trading Scheme (ETS), EU’s mandatory cap-and-trade system for reduction of greenhouse gas emissions. Airline operators in the EU will receive tradable emission permits (aviation allowances) covering a certain level of their CO2 emissions per year for their flights operating to and from EU airports. If an airline fails to obtain free-of-charge emission permits from the EU, it will have to buy around EUR10 million (RMB100 million) worth of CO2 emissions allowances from other greener industries. Pursuant to this policy, the Chinese airlines having flight points in Europe undertake the same carbon emission reductions obligation as the European local airlines, which will result in a significant increase in the operating cost of Chinese airlines in Europe, including our Company, and further have an adverse impact on the results of operations and financial condition. In March 2011, a group representing China’s largest airlines sent a formal notice to the EU expressing strong opposition to non-member-state airlines’ inclusion in the EU’s Emissions Trading Scheme. Also, in early February 2012, CAAC issued instructions to various airlines announcing that without approval from the relevant government authorities, the major airlines are prohibited from joining the ETS and the transport airlines are also prohibited from raising the freight price or increasing fee items by adducing this reason. On November 12, 2012, EU announced to temporarily suspend the implementation of the ETS in the aviation sector in 2013 in order to forge a positive negotiation environment for all parties. In November 2014, CAAC issued a notification on the ETS. The notification provided that CAAC would not prohibit Chinese airlines to take part in the ETS if the relevant flights take off and land between the airports within the EU during 2012 and 2016. We operated few flights between airports within the EU since 2012. We expect we would operate few flights between airports within the EU in the future. Therefore, we submitted emissions report and pay the quota between 2012 and 2016 for our flights between airports within the EU. In April 2015, our Company had completed submission of emissions reports for the years 2012 to 2014 and fulfilled our obligations under the ETS. In 2016, our Company had finished year 2015 compliance cycle. On year 2017-2020 compliance cycle, our Company will be in compliance with the requirements of relevant PRC laws and the ETS. There can be no assurance that the new implementation proposal will not have negative impact on our financial condition and result of operation.

We may utilize fuel hedging arrangements which may result in losses.

While we have not entered into any fuel hedging transactions since the fourth quarter of 2008, we may in the future consider to hedge a portion of our future fuel requirements through various financial derivative instruments linked to certain fuel commodities to lock in fuel costs within a hedged price range. 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 declines in fuel prices may substantially increase the costs associated with our fuel hedging arrangements. In addition, where we seek to manage the risk of fuel price increases by using derivative contracts, we cannot assure you that, at any given point in time, our fuel hedging transactions will provide any particular level of protection against increased fuel costs.

Risks Relating to the PRC

We have significant exposure to foreign currency risk as part of our lease obligations and certain bank and other loans are denominated in foreign currencies. Due to rigid foreign exchange control by Chinese government, we may face difficulties in obtaining sufficient foreign exchange to pay dividends or satisfy our foreign exchange liabilities.

Under current Chinese foreign exchange regulations, the Renminbi is fully convertible for current account transactions, but is not freely convertible for capital account transactions. All foreign exchange transactions involving Renminbi must take place either through the People’s Bank of China or other institutions authorized to buy and sell foreign exchange or at a swap centre.

14

We have significant exposure to foreign currency risk as substantially all of our obligations under leases, certain bank and other loans and operating lease commitment are denominated in foreign currencies, principally U.S. dollars, Euros and Japanese Yen. Depreciation or appreciation of the Renminbi against foreign currencies affects our results significantly because our foreign currency liabilities generally exceed our foreign currency assets. We are not able to hedge our foreign currency exposure effectively other than by retaining our foreign currency denominated earnings and receipts to the extent permitted by SAFE, or subject to certain restrictive conditions, entering into foreign exchange forward option contracts with authorized banks. However, SAFE may limit or eliminate our ability to purchase and retain foreign currencies in the future. In addition, 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. No assurance can be given that our Group will be able to obtain sufficient foreign exchange to pay dividends or satisfy our foreign exchange liabilities.

Our operations are subject to immature development of legal system in China. Lack of uniform interpretation and effective enforcement of laws and regulations may cause significant uncertainties to our operations.

Our Company and the major subsidiaries of our Group are organized under the laws of China. The Chinese legal system is based on written statutes and is a system, unlike common law systems, in which decided legal cases have little precedential value. Since 1979, the Chinese government has been developing a comprehensive system of commercial laws and considerable progress has been made in the promulgation of laws and regulations dealing with economic matters, such as corporate organization and governance, foreign investments, commerce, taxation and trade. These laws, regulations and legal requirements are relatively recent, and, like other laws, regulations and legal requirements applicable in China (including with respect to the commercial aviation industry), their interpretation and enforcement involve significant uncertainties.

The PRC tax law may have negative tax impact on holders of H Shares or ADRs of our Company, by requiring the imposition of a withholding tax on dividends paid by a Chinese company to a non-resident enterprise.

The current tax law generally provides for a withholding tax on dividends paid by a Chinese company to a non-resident enterprise at a rate of 10%.

Caishui Notice [2014] No. 81 provides that, “for dividends derived by Mainland individual investors from investing in H Shares listed on the Hong Kong Stock Exchange through Shanghai Hong Kong Stock Connect, H-Share companies shall apply to the China Securities Depository and Clearing Corporation Limited (CSDC). CSDC shall provide the list of Mainland individual investors to H-Share companies who shall withhold individual income tax at a tax rate of 20%. For Mainland securities investment funds investing in shares listed on the Hong Kong Stock Exchange through Shanghai Hong Kong Stock Connect, the above rules shall also apply and individual income tax shall be levied on dividends derived therefrom.”

Caishui Notice [2014] No. 81 further provides that, “dividends derived by Mainland enterprise investors from investing in shares listed on the Hong Kong Stock Exchange through Shanghai Hong Kong Stock Connect shall be included in their gross income and subject to enterprise income tax. For dividends derived by Mainland enterprises where the relevant H Shares have been continuously held for no less than 12 months, enterprise income tax may be exempt according to the tax law. H-Share companies listed on the Hong Kong Stock Exchange shall apply to CSDC to obtain the list of Mainland enterprise investors from CSDC. H-Share companies are not required to withhold income tax on dividends to Mainland enterprise investors which shall report the income and make the tax payment by themselvers.”

In addition, to date, relevant tax authorities have not collected capital gains tax on the gains realized upon the sale or other disposition of overseas shares in Chinese enterprise held by foreign individuals. If relevant tax authorities promulgate implementation rules on the taxation of capital gains realized by individuals upon the sale or other disposition of the shares, individual holders of the shares may be required to pay capital gains tax.

Our investors in the U.S. who rely on our auditor’s audit reports currently do not have the benefit of PCAOB oversight.

As a company registered with the U.S. Securities and Exchange Commission, or the SEC, and traded publicly in the United States, our independent registered public accounting firm is required by the laws of the United States to be registered with the Public Company Accounting Oversight Board, or the PCAOB, and undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards. The PCAOB, however, is currently unable to inspect a registered public accounting firm’s audit work relating to a company’s operations in China where the documentation of such audit work is located in China. Accordingly, our independent registered public accounting firm’s audit of our operations in China is not subject to the PCAOB inspection.

15

The PCAOB has conducted inspections of independent registered public accounting firms outside of China and has at times identified deficiencies in the audit procedures and quality control procedures of those accounting firms. Such deficiencies may be addressed in those accounting firms’ future inspection process to improve their audit quality. Due to the lack of PCAOB inspections of audit work undertaken in China, our investors do not have the benefit of the regular evaluation by PCAOB of the audit works, audit procedures and quality control procedures of our independent registered public accounting firm.

If additional remedial measures are imposed against four PRC-based accounting firms, including our independent registered public accounting firm, in administrative proceedings brought by the SEC, it could result in our financial statements being determined to not be in compliance with the requirements of the Securities Exchange Act of 1934.

In December 2012, the SEC instituted administrative proceedings against four PRC-based accounting firms, including our independent registered public accounting firm, alleging that these firms had violated U.S. securities laws and the SEC’s rules and regulations thereunder by failing to provide to the SEC the firms’ work papers related to their audits of certain PRC-based companies that are publicly traded in the United States. On January 22, 2014, an initial administrative law decision was issued, which determined that the four PRC-based accounting firms should be censured and barred from practicing before the SEC for a period of six months. The four PRC-based accounting firms appealed the initial administrative law decision to the SEC. The initial law decision is neither final nor legally effective unless and until it is endorsed by the full SEC. In February 2015, each of the four PRC-based accounting firms agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC. The settlement requires the firms to follow detailed procedures to provide the SEC with access to PRC-based firms’ audit documents via the CSRC.

We were not and are not the subject of any SEC investigations nor are we involved in the proceedings brought by the SEC against the accounting firms. If the firms do not follow these procedures or if there is a failure in the process between the SEC and the CSRC, the SEC could impose penalties such as suspensions or it could restart the administrative proceedings. If the accounting firms including our independent registered public accounting firm were denied, temporarily or permanently, the ability to practice before the SEC, and we are unable to find timely another registered public accounting firm which can audit and issue a report on our financial statements, our financial statements could be determined to not be in compliance with the requirements for financial statements of public companies registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such a determination could ultimately lead to the delisting of our common stock from the NYSE for CSA’s case or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of our common stock in the United States.

ITEM 4. INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF OUR COMPANY

We were incorporated under PRC laws on March 25, 1995 as a joint stock company with limited liability under the name of China Southern Airlines Company Limited. The address of our principal place of business is 278 Ji Chang Road, Guangzhou, People’s Republic of China 510405. Our telephone number is +86 20 8612 4462 and our website is www.csair.com.

In July 1997, we issued 1,174,178,000 H Shares, par value RMB1.00 per share, and completed the listing of the H Shares on the Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) and the ADRs representing our H shares on the New York Stock Exchange.

On March 13, 2003, we obtained an approval certificate from the Ministry of Commerce to change to a permanent limited company with foreign investments and on October 17, 2003 obtained a business license for our new status, as a permanent limited company with foreign investments issued by the State Administration of Industry and Commerce of the People’s Republic of China.

In July 2003, we issued 1,000,000,000 A Shares, par value RMB1.00 per share, and completed the listing of the A shares on the Shanghai Stock Exchange.

Pursuant to a sale and purchase agreement dated November 12, 2004 between our Company, CSAH, China Northern Airlines (“CNA”) and Xinjiang Airlines (“XJA”), which was approved by our shareholders in an extraordinary general meeting held on December 31, 2004, we acquired the airline operations and certain related assets of CNA and XJA with effect from December 31, 2004 at a total consideration of RMB1,959 million.

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On May 30, 2007, we, together with an independent third party, established Chongqing Airlines Company Limited (“Chongqing Airlines”). As of December 31, 2012, our Company had transferred four aircraft to Chongqing Airlines as capital contribution. We own a total of 60% equity interest in Chongqing Airlines.

On August 14, 2007, we acquired a 51% equity interest in Nan Lung International Freight Limited beneficially owned by and registered in the name of Nan Lung Travel & Express (Hong Kong) Limited, and a 100% equity interest in China Southern Airlines Group Air Catering Company Limited, both a wholly owned subsidiary of CSAH, for a total consideration of RMB112 million.

In December 2008, we acquired a 26% equity interest in China Southern West Australian Flying College Pty Ltd. (“Flying College”) from CSAH, and Flying College became a 91% owned subsidiary of our Company.

In June 2009, we acquired a 50% equity interest in Beijing Southern Airlines Ground Services Company Limited (“Beijing Ground Service”) from the other shareholder, and Beijing Ground Service became a wholly-owned subsidiary of our Company.

On September 28, 2009, we entered into an agreement with CSAH to sell our 50% equity interest in MTU Maintenance Zhuhai Co., Ltd (“Zhuhai MTU”), a jointly controlled entity of our Company, to CSAH at a consideration of RMB 1,607,850,000. The transfer was completed in February 2010.

On June 2, 2010, a third party company injected capital to Flying College, which diluted our Company’s interest in Flying College from 91% to 48.12%. Flying College became a jointly controlled entity of our Company since then. The retained non-controlling equity interest in Flying College is re-measured to our fair value at the date when control was lost and a gain on deemed disposal of a subsidiary of RMB17 million was recorded in 2010.

In December 2010, we entered into an agreement with Xiamen Jianfa Group Co., Ltd. and Hebei Aviation Investment Group Corporation Limited (“Hebei Investment”), pursuant to which Hebei Investment agreed to inject a cash capital of RMB1,460 million into Xiamen Airlines Company Limited (“Xiamen Airlines”). In March 2011, the capital injection was received in full and our Company’s equity interest in Xiamen Airlines was diluted from 60% to 51%. Xiamen Airlines remains a subsidiary of our Company.

On June 29, 2012, Xiamen Airlines, a subsidiary of our Company and Southern Airlines Culture and Media Co., Ltd. (“SACM”) entered into an agreement, pursuant to which Xiamen Airlines agreed to sell and SACM agreed to purchase 51% equity interests in Xiamen Airlines Media Co., Ltd.(“XAMC”), at a consideration of approximately RMB43.12 million. Immediate prior to the transaction, XAMC was wholly owned by Xiamen Airlines and primarily engaged in providing advertising, corporate branding, publicity and exhibition services and was responsible for the overall brand building and publicity of Xiamen Airlines.

On September 24, 2012, we entered into a joint venture agreement with Henan Civil Aviation Development and Investment Co., Ltd. (“Henan Aviation Investment”) for the establishment of China Southern Airlines Henan Airlines Company Limited (“Henan Airlines”), a joint venture company with a total registered capital of RMB6 billion, which will be owned as 60% and 40% by our Company and Henan Aviation Investment, respectively. On September 28, 2013, Henan Airlines was established.

On October 13, 2014, Xiamen Airlines and Hebei Airlines Investment Group Company Limited (the “Hebei Airlines Investment”) entered into an agreement, pursuant to which Hebei Airlines Investment agreed to sell and Xiamen Airlines agreed to purchase 95.4% equity interests in Hebei Airlines at the consideration of RMB680 million. The acquisition was completed in December 2014.

On July 14, 2015, we and Xiamen Jianfa entered into an agreement, pursuant to which Xiamen Jianfa agreed to sell and we agreed to purchase 4% equity interests in Xiamen Airlines at the consideration of RMB586,666,670. The acquisition was completed in December 2015.

On February 2, 2016, we and CSAH entered into an agreement, pursuant to which CSAH agreed to sell and we agreed to purchase 100% equity interests in Southern Airlines (Group) Import And Export Trading Co. Ltd. at the consideration of RMB400,570,400. The acquisition was completed in August 2016.

On March 27, 2017, according to the authorisation under the general mandate approved by the 2015 annual general meeting and as approved by the Board, we entered into the Share Subscription Agreement with American Airlines, pursuant to which American Airlines has agreed to subscribe for 270,606,272 new H Shares of the Company (the “Subscription”), at the consideration of HK$1,553.28 million, representing a subscription price of HK$5.74 per share. The closing price of the H Shares as at the date of the Share Subscription Agreement is HK$5.49. The Subscription was completed on 10 August 2017.

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On May 18, 2017, we entered into the Joint Venture Agreement regarding Guangzhou Nanland Air Catering Company Limited with Hong Kong Sharpland Investments Ltd., Servair S.A and Hong Kong Ginkgo Group Company Limited, pursuant to which our Company made contribution into Guangzhou Nanland Air Catering Co., Ltd. in cash with an amount of RMB76,206,300 and by contributing the equity interests in a subsidiary with a valuation of RMB513,727,300. After the capital contribution, our Company held 70.5% equity interests in Guangzhou Nanland Air Catering Co., Ltd..

On July 10, 2017, we entered into the Share Transfer Agreement with CAE International Holdings Limited for the acquisition of 49% equity interests in Zhuhai Xiang Yi Aviation Technology Company Limited held by CAE with an amount of US$99.52 million (equivalent to approximately RMB678 million). Upon the completion of this acquisition, Zhuhai Xiang Yi Aviation Technology Company Limited become our wholly-owned subsidiary.

On October 13, 2017, Xiamen Airlines entered into the Share Transfer Agreement with SACM for the acquisition of 51% equity interests in Xiamen Airlines Media Co., Ltd. held by SACM with an amount of RMB47 million. Upon the completion of this acquisition, Xiamen Airlines Media Co., Ltd. become a wholly-owned subsidiary of Xiamen Airlines.

Aircraft Acquisitions

Pursuant to an A320 Series Aircraft Purchase Agreement dated January 20, 2010 between our Company and Airbus SNC, we will acquire 20 Airbus 320 series aircraft from Airbus SNC. According to the information provided by Airbus SNC, the catalogue price of an Airbus 320 aircraft, including airframe and engines, is around US$76.9 million. The aggregate consideration for the acquisition was partly paid in cash and partly through financing arrangements with banking institutions. The Airbus aircraft have been delivered in stages to our Company during the period commencing from 2011 to 2013.

On September 30, 2010, Xiamen Airlines entered into a supplemental agreement with Boeing to purchase additional 10 Boeing B737 series aircraft. The aggregate catalogue price for those aircraft, including airframe and engines, is around US$699 million. According to the information provided by Boeing, the aggregate consideration for the acquisition was partly paid in cash by Xiamen Airlines, and partly through financing arrangements with banking institutions. The Boeing aircraft were delivered in stages to Xiamen Airlines during the period commencing from 2015 to October 2016.

On November 4, 2010, we entered into an A320 series aircraft purchase agreement and an A330-300 aircraft purchase agreement with Airbus S.A.S. to purchase 30 Airbus A320 series aircraft and six Airbus A330 series aircraft. According to the information provided by Airbus S.A.S., the catalogue price of six Airbus A330 series aircraft and 30 Airbus A320 series aircraft, including airframe and engines, is US$1.205 billion and US$2.575 billion, respectively. The aggregate consideration for the acquisition was partly paid by cash and partly by financing arrangements with banking institutions. The six Airbus A330 aircraft were delivered in stages to our Company during the period commencing from 2013 to 2014 and the 30 Airbus A320 series aircraft were delivered in stages to our Company during the period commencing from 2012 to 2015.

On May 31, 2011, we entered into an aircraft acquisition agreement with Boeing to purchase six Boeing B777F freighters. According to the information provided by Boeing, the catalogue price of six Boeing B777F aircraft, including airframe and engines, is US$1,584 million. The aggregate consideration for the Acquisition was partly paid by cash and partly by financing arrangements with banking institutions. The six Boeing B777F freighters were delivered in stages to us during the period commencing from 2013 to 2015.

On May 9, 2011, Xiamen Airlines entered into an aircraft acquisition agreement to purchase six Boeing B787 series aircraft. According to the information provided by Boeing, the aggregate catalogue price, including airframe and engines, for the six Boeing B787 series aircraft is US$1,098 million. The aggregate consideration for the acquisition was partly paid in cash and partly through financing arrangements with banking institutions. The Boeing aircraft were delivered in stages to Xiamen Airlines during the period commencing from 2014 to 2015.

On February 28, 2012, we entered into an agreement with the Boeing Company to purchase 10 Boeing 777-300ER aircraft. According to the information provided by Boeing, the catalogue price of one Boeing B777-300ER aircraft, including airframe and engines, is around US$298 million. The aggregate consideration for the acquisition was partly paid in cash and partly through financing arrangements with banking institutions. The Boeing aircraft were delivered in stages to our Company during the period from 2014 to 2016.

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On August 3, 2012, Xiamen Airlines entered into an agreement with Boeing to purchase 40 Boeing B737 series aircraft from Boeing. The aggregate catalogue price of the 40 Boeing B737 series aircraft is US$3.36 billion. The aggregate consideration for the acquisition was partly paid by cash and partly by financing arrangements with banking institutions. The 27 Boeing737 series aircraft were delivered in stages to Xiamen Airlines during the period commencing from 2016 to 2017 and the 13 Boeing737 series aircraft will be delivered in stages to Xiamen Airlines during the period commencing from 2018 to 2019.

On December 5, 2012, we entered into the Airbus aircraft acquisition agreement with Airbus S.A.S. to purchase 10 Airbus A330-300 aircraft. The catalogue price of one Airbus A330-300 aircraft is US$188 million. The aggregate consideration for the acquisition was partly paid by cash and partly by financing arrangements with banking institutions. The Airbus aircraft were delivered in stages to our Company during the period commencing from 2014 to 2016.

On May 16, 2014, we entered into the aircraft acquisition agreement with Airbus S.A.S to purchase 30 Airbus A320 series aircraft and 50 A320 NEO series aircraft. The catalogue price of one Airbus A320 series aircraft is priced differently in the range of US$85.8 million and US$110.1 million and one A320 NEO series aircraft is priced differently in the range of US$94.4 million to US$120.5 million. The aggregate consideration for the acquisition will be funded partly by internal resources of our Company and partly through commercial loans by commercial banks. The 30Airbus320 aircraft were delivered in stages to our Company during the period commencing from 2016 to 2017 and the 50Airbus320 NEO aircraft will be delivered in stages to our Company during the period commencing from 2018 to 2020.

On December 17, 2015, we entered into the aircraft acquisition agreement with Boeing to purchase 30 B737NG series aircraft and 50 B737 MAX series aircraft. The catalogue price of each B737NG series aircraft and B737 MAX series aircraft is priced about US$81.2 million and US$96.1 million, respectively. The aggregate consideration for the acquisition will be funded partly payable by cash and partly by financing arrangements with banking institutions. The 30 Boeing737NG aircraft were delivered in stages to our Company in 2017 and the 50 Boeing737 MAX aircraft will be delivered in stages to our Company during the period commencing from 2018 to 2021.

On December 23, 2015, we entered into the aircraft acquisition agreement with Airbus S.A.S to purchase 10 Airbus A330-300 series aircraft. The catalogue price of one Airbus A330-300 series aircraft is priced about US$227.4 million. The aggregate consideration for the acquisition will be funded partly payable by cash and partly by financing arrangements with banking institutions. The Airbus aircraft will be delivered in stages to our Company during the period commencing from 2017 to 2019. The 3 Airbus A330-300 aircraft were delivered in stages to our Company in 2017 and the 7 Airbus A330-300 aircraft will be delivered in stages to our Company during the period commencing from 2018 to 2019.

On April 26, 2016, Xiamen Airlines entered into the aircraft acquisition agreement with Boeing to purchase 10 B737-800 series aircrafts. The catalogue price of one B737-800 series aircraft is priced about US$85.06 million. The aggregate consideration for the acquisition will be funded partly by internal sources of our Company and partly through commercial loans by commercial banks. The 4 Boeing787-800 series aircraft were delivered in stages to Xiamen Airlines during the period commencing in 2017 and the 6 Boeing787-800 series series aircraft will be delivered in stages to Xiamen Airlines in 2018.

On July 27, 2016, Xiamen Airlines entered into the aircraft acquisition agreement with Boeing to purchase 6 B787-9 series aircraft. The catalogue price of one is priced about US$230 million. The aggregate consideration for the acquisition will be funded partly by internal sources of our Company and partly through commercial loans by commercial banks. The Boeing 787-9 series aircraft were delivered in stages to Xiamen Airlines during the period commencing from 2016 to 2018.

On October 12, 2016, we entered into the aircraft acquisition agreement with Boeing to purchase 12 B787-9 series aircraft. The catalogue price of one is priced about US$271 million. The aggregate consideration for the acquisition will be funded partly by internal sources of our Company and partly through commercial loans by commercial banks. The Boeing aircraft will be delivered in stages to our Company during the period commencing from 2018 to 2020.

On April 26, 2017, we entered into the aircraft acquisition agreement with Airbus S.A.S to purchase 20 A350-900 series aircraft. The catalogue price of one A350 series aircraft is priced about US$299 million. The aggregate consideration for the acquisition will be funded partly by internal sources of our Company and partly through commercial loans by commercial banks. The Airbus aircraft will be delivered in stages to our Company during the period commencing from 2019 to 2022.

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On October 20, 2017, we entered into the aircraft acquisition agreement with Boeing to purchase 8 B777-300ER and 30 B737-8 series aircraft. The catalogue price of each B777-300ER series aircraft and B737-8 series aircraft is priced about US$318 million and US$104 million, respectively. The aggregate consideration for the acquisition will be funded partly by internal sources of our Company and partly through commercial loans by commercial banks. The Boeing aircraft will be delivered in stages to our Company during the period commencing from 2019 to 2020.

On March 21, 2018, Xiamen Airlines entered into the Boeing Aircraft Acquisition Agreement with Boeing to purchase the 20 B737-8 aircraft and 10 B737-10 aircraft. The catalogue price of each B737-8 series aircraft and B737-10 series aircraft is priced about US$104 million and US$116 million, respectively. The aggregate consideration for the acquisition will be funded partly by internal sources of our Company and partly through commercial loans by commercial banks. The Boeing aircraft will be delivered in stages to Xiamen Airlines during the period commencing from 2019 to 2022.

Capital Expenditure

We had RMB31,129 million, RMB29,454 million and RMB23,390 million capital expenditures in 2017, 2016 and 2015 respectively. Of such capital expenditures in 2017, RMB17,283 million was financed by capital leases, RMB12,208 million was financed by bank borrowings while the remaining RMB1,638 million was financed by internal resources. The capital expenditures were primarily incurred on the additional investments in aircraft and flight equipment under our fleet expansion plans and, to a small extent, additional investments in other facilities and buildings for operations. As of December 31, 2017, we had total capital commitments for aircraft, engines and related equipment of approximately RMB86,834 million.

B. BUSINESS OVERVIEW

General

We provide commercial airline services throughout Mainland China, Hong Kong, Macau and Taiwan regions, Southeast Asia and other parts of the world. Based on the statistics from the CAAC, we are one of the largest Chinese airlines and, as of the year end of 2017, ranked first in terms of number of passengers carried, number of scheduled flights per week, number of hours flown, number of routes and size of aircraft fleet. During the three years ended December 31, 2017, our RPKs increased at a compound annual growth rate of 10.3% from 189,588 million in 2015 to 206,106 million in 2016 and 230,697 million in 2017 while its capacity, measured in terms of ASKs, increased at a compound annual growth rate of 9.1%, from 235,616 million in 2015 to 255,992 million in 2016 and 280,646 million in 2017. In 2017, our Group carried 126 million passengers and had passenger revenue of RMB112,791 million (approximately US$17,262 million).

We conduct a portion of our airline operations through our airline subsidiaries namely Xiamen Airlines, Shantou Airlines Company Limited (“Shantou Airlines”), Zhuhai Airlines Company Limited (“Zhuhai Airlines”), Guizhou Airlines Company Limited (“Guizhou Airlines”), Chongqing Airlines Company Limited (“Chongqing Airlines”) and China Southern Airlines Henan Airlines Company Limited (“Henan Airlines”), (collectively, the “Airline Subsidiaries”). In 2017, the Airline Subsidiaries carried 48.49 million passengers and had passenger revenue of RMB36,477 million (approximately US$5,582 million) and accounted for 38.39% and 32.3% of our passengers carried and passenger revenue, respectively.

We also provide air cargo and mail services. Our cargo and mail revenue increased by 26.30% to RMB9,082 million (approximately US$1,390 million) in 2017 as compared with that of 2016. Our airline operations are fully integrated with our airline-related businesses, including aircraft maintenance, ground services and air catering operations.

As of December 31, 2017, we operated 1,169 routes, of which 905 were domestic, 226 were international and 38 were regional. We operate the most extensive domestic route network among all Chinese airlines. Our route network covers commercial centers and rapidly developing economic regions in Mainland China.

We focused on building the “Guangzhou-Beijing Dual Hub” strategic layout and acceleration of all the preparation work for stationing in Beijing’s new Airport. On October 10, 2017, we held the opening ceremony of the Beijing’s new airport’s base project. This new base will be completed simultaneously with the Beijing’s new airport. Through Beijing’s new airport base, we will spare no effort to make Beijing core hub. By 2025, it is estimated to station 250 aircraft to build the network covering international and domestic destinations.

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Our corporate headquarters and principal base of operations are located in Guangzhou, the capital of Guangdong Province and the largest city in southern China. Located in the rapidly developing Pearl River Delta region, Guangzhou is also the transportation hub of southern China and one of China’s major gateway cities. Guangzhou’s significance has increased as the transportation infrastructure of Guangdong Province has developed through the construction and development of expressways, an extensive rail network and the port cities of Guangzhou, Shenzhen, Zhanjiang, Zhuhai and Shantou.

In December 2005, we established a branch company in Beijing and have added wide-body airplanes to our operation base in Beijing, with the view to expanding our Beijing aviation business and building another main hub there in addition to our Guangzhou base. The establishment of Guangzhou and Beijing hubs will facilitate strategic refinement and enhancement of our route network operations, putting us in a better position to explore and seize the opportunities in the aviation market.

Our operations primarily focus on the domestic market. In addition, our Group also operates regional routes and international flights. As of December 31, 2017, we had 38 regional routes and 226 international routes. Our regional operations include flights between destinations in Mainland China, Hong Kong, Macau and Taiwan. Our international operations include scheduled services to cities in Australia, Azerbaijan, Bangladesh, Cambodia, Canada, Dutch, France, German, India, Indonesia, Iran, Italy, Japan, Kenya, Kazakhstan, Kyrgyzstan, Malaysia, Maldives, Nepal, New Zealand, Pakistan, Philippines, Russia, Singapore, South Korea, Tajikistan, Thailand, Turkmenistan, United Arab Emirates (UAE), United Kingdom, United States of American (USA), Uzbekistan and Vietnam, Mexico, Laos, Sri Lanka.

After joining Skyteam Alliance, we have established a network reaching over 1,062 destinations globally, connecting 177 countries and regions and covering major cities around the world.

As of December 31, 2017, we had a fleet of 754 aircraft, consisting primarily of Boeing737, 747, 777, 787 series, Airbus 320, 330, 380 series etc. The average age of our registered aircraft was 6.6 years as of December 31, 2017.

Restructuring and Initial Public Offering

As part of China’s economic reforms in the 1980’s, the PRC State Council directed the CAAC to separate its governmental, administrative and regulatory role from the commercial airline operations that were being conducted by the CAAC and its regional administrators. As a result, CSAH was established on January 26, 1991 for the purpose of assuming the airline and airline-related commercial operations of the Guangzhou Civil Aviation Administration, one of the then six regional bureaus of the CAAC. CSAH was one of the 55 large-scale enterprises designated by the Chinese government to play a leading role in their respective industries.

CSAH was restructured in 1994 and 1995 in anticipation of our initial public offering. The restructuring was effective through the establishment of our Company and the execution of the De-merger Agreement on March 25, 1995 by and between CSAH and our Company. Upon the restructuring, our Company assumed substantially the entire airline and airline-related businesses, assets and liabilities of CSAH, and CSAH retained its non-airline-related businesses, assets and liabilities. All interests, rights, duties and obligations of CSAH, whenever created or accrued, were divided between our Company and CSAH based on the businesses, assets and liabilities assumed by each of them under the De-merger Agreement. Under the De-merger Agreement, CSAH agreed not to conduct or participate or hold any interest in, either directly or indirectly, any business, activity or entity in or outside China that competes or is likely to compete with the commercial interests of our Group, although CSAH may continue to hold and control its affiliates existing on the date of the De-merger Agreement and may continue to operate the businesses of such associates. Under the De-merger Agreement, CSAH and our Company also agreed to indemnify each other against any losses, claims, damage, debts or expenses arising out of or in connection with the restructuring. As of the date of this Annual Report, no indemnity has been provided by either CSAH or us.

In July 1997, we completed a private placement of 32,200,000 H Shares to certain limited partnership investment funds affiliated with Goldman Sachs & Co. and an initial public offering of 1,141,978,000 H Shares, par value RMB1.00 per share, and the listing of the H Shares on the Hong Kong Stock Exchange and ADRs on the New York Stock Exchange. Prior to the private placement and the initial public offering, all of our issued and outstanding shares of capital stock, consisting of 2,200,000,000 non-tradable domestic shares (“Domestic Shares”), par value RMB1.00 per share, were owned by CSAH, which owned and exercised, on behalf of the Chinese government and under the supervision of the CAAC, the rights of ownership of such Domestic Shares. After giving effect to the private placement and the initial public offering, CSAH maintained its ownership of the 2,200,000,000 Domestic Shares (representing approximately 65.2% of the total share capital of our Company), and became entitled to elect all the directors of our Company and to control the management and policies of our Group. The Domestic Shares and H Shares are both ordinary shares of our Company.

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In July 2003, we issued 1,000,000,000 A Shares, par value of RMB1.00 per share, and listed these shares on the Shanghai Stock Exchange. Subsequent to the issuance of the A Shares, the shareholding of CSAH in our Company was reduced from 65.2% to 50.30%.

Share Reform Scheme

Pursuant to relevant PRC laws, we launched the share reform scheme in May 2007, whereby all the 2,200,000,000 non-tradable Domestic Shares held by CSAH would be converted into tradable A Shares. Upon the completion of such scheme on June 20, 2008, all the non-tradable Domestic Shares have been successfully converted into tradable A Shares, subject to the restriction that CSAH shall not transfer or trade these shares within 36 months after the commencement date of the share reform scheme (which is June 18, 2007).

Bonus Shares Issue by Conversion of Share Premium

On June 25, 2008, our shareholders approved issuance of bonus shares by way of conversion of share premium, and on August 14, 2008, the Ministry of Commerce approved the bonus share issue. The issue has been effected by conversion of share premium on the basis of five new shares, credited as fully paid, for every ten existing shares. Upon the completion of the bonus share issue, which is based on 4,374,178,000 shares in issue as of December 31, 2007, the number of paid up shares has increased by 2,187,089,000 shares to 6,561,267,000 shares.

Non-Public Subscriptions

On December 10, 2008, we entered into an A Shares subscription agreement with CSAH, pursuant to which CSAH conditionally agreed to subscribe and our Company conditionally agreed to allot and issue 721,150,000 new A Shares for a consideration of RMB2,278,834,000, equivalent to the subscription price of RMB3.16 per new A Share. Separately and on the same date, our Company and Nan Lung (a wholly-owned subsidiary of CSAH) entered into an H Shares subscription agreement, pursuant to which Nan Lung conditionally agreed to subscribe and our Company conditionally agreed to allot and issue 721,150,000 new H Shares for a consideration of RMB721,150,000, equivalent to the subscription price of RMB1.00 (equivalent to approximately HK$1.13) per new H Share. The subscription agreements were approved in the extraordinary general meeting and the respective class meetings of shareholders of A and H Shares on February 26, 2009. On June 3, 2009, we received the formal approval from CSRC for the proposed non-public issue of H Shares. On August 14, 2009, we received the formal approval from CSRC for the proposed non-public issue of A Shares. The issuance of 721,150,000 new A Shares to CSAH and 721,150,000 new H Shares to Nan Lung were completed on August 20, 2009 and August 21, 2009, respectively.

On March 8, 2010, our board approved the placement of up to 1,766,780,000 new A shares to not more than 10 specific investors including CSAH and the placement of not more than 312,500,000 new H shares to Nan Lung, a wholly-owned subsidiary of CSAH. On the same date, our Company entered into the A shares subscription agreement with CSAH, pursuant to which CSAH conditionally agreed to subscribe and our Company conditionally agreed to allot and issue new A shares of not more than 132,510,000 at the subscription price of not less than RMB5.66 per A share. In addition, our Company and Nan Lung entered into the H shares subscription agreement, pursuant to which Nan Lung conditionally agreed to subscribe and our Company conditionally agreed to allot and issue new H shares of not more than 312,500,000 at the subscription price of not less than HK$2.73 per H share. The above placement and subscription agreements were approved in the extraordinary general meeting and the respective class meetings of shareholders of A and H shares on April 30, 2010. On September 8, 2010, we received the formal approval from CSRC for the proposed non-public issuance of H Shares. On September 15, 2010, we received the formal approval from CSRC for the proposed non-public issue of A Shares. In November 2010, we completed the placements of 1,501,500,000 new A shares and 312,500,000 H shares, among which 123,900,000 new A shares were issued to CSAH at the subscription price of RMB6.66 per share, and 312,500,000 H shares were issued to Nan Lung at the subscription price of HK$2.73 per share.

On June 11, 2012, we entered into an A Shares subscription agreement with CSAH, pursuant to which CSAH conditionally agreed to subscribe and we conditionally agreed to allot and issue up to 487,804,878 A Shares for a consideration of not more than RMB2 billion, equivalent to the subscription price of approximately RMB4.1 per new A Share. The subscription agreement was approved in the extraordinary general meeting on August 10, 2012, which remained effective for a period of twelve months from the date of approval of the resolution at the general meeting. As of August 9, 2013, the relevant work regarding the 2012 Non-public A Share Issue of our Company had not been completed. The proposal for the 2012 Non-public A Share Issue of our Company and A Shares subscription agreement therefore were lapsed automatically due to the expiration of the resolution passed at the general meeting.

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On March 27, 2017, we entered into an H Shares subscription agreement as well as a framework agreement with American Airlines, Inc. (“American Airlines”), pursuant to which American Airlines conditionally agreed to subscribe and we conditionally agreed to issue 270,606,272 H Shares for a consideration of HK$1,553.28 million, equivalent to the subscription price of HK$5.74 per new H Share. In July 2017, we received the formal approval from CSRC for the proposed non-public issue of H Shares. The issuance of 270,606,272 new H Shares American Airlines was completed on August 10, 2017. Key principles of the above mentioned framework agreement include: (i) except for certain permitted transfers, American Airlines shall not dispose of any of the subscription shares for a period of three years (the “Lock-up Period”) following the purchase of the subscription shares unless any Lock-up termination event occurs; (ii) after the expiry of Lock-up Period, American Airlines shall have the right to dispose of the subscription shares, and we shall have a right of first refusal to purchase such subscription shares; after the Lock-Up Period, American Airlines shall notify us of its first disposal of subscription shares within three business days following the consummation of such sale, and shall announce any subsequent disposals as and if required by applicable law; (iii) whilst the Framework Agreement is in effect, in the event we or any of our subsidiaries intends to sell or issue, or enter into any agreement to sell or issue, equity or equity linked securities or any such subsidiary to any airline that is then a member of or is participating in an airline alliance as agreed by American Airlines and us (other than a PRC Mainland airline company), or any affiliate of any such airline, American Airlines shall have a right of first refusal to purchase such securities; and (iv) subject to applicable laws (including the Hong Kong Listing Rules), our Board will appoint one person to serve as an observer to our Board at the request of American Airlines (the “Board Observer”), and the Board Observer is allowed to attend all meetings of our Board whether in-person or by telephone or video-conference but will not be entitled to vote as a director; the Board Observer will be subject to the same non-disclosure, insider trading restrictions and conflicts of interest policies and procedures as and to the extent the same apply to the members of our Board from time to time, and the Board Observer will no longer serve as the observer to our Board if any Board Observer termination event occurs.

On June 26, 2017, our board proposed to put forward to the extraordinary general meeting and the class meetings to approve and authorise our board (i) to issue not more than 1,800,000,000 new A Shares to not more than 10 specific investors including CSAH, and as part of such A Share issuance, to enter into the A Share subscription agreement with CSAH, pursuant to which CSAH will subscribe for no less than 31% of such new A Shares, the consideration of which shall be satisfied by transfer 50% of the Zhuhai MTU shares to our Company and cash; and (ii) to issue no more than 590,000,000 new H Shares to Nan Lung at the subscription price of HK$6.27 per H Share (subject to adjustments) and to enter into the H Share subscription agreement with Nan Lung. The total funds to be raised from the aforesaid A Share issuance and the H Share issuance will be not more than RMB12,737.00 million, which will be utilised in the procurement of aircraft, the project for selection and installation of lightweight seats for A320 series aircraft and the supplemental to the general working capital. The aforesaid A Share issuance and the H Share issuance are inter-conditional upon each other. On September 19, 2017, our board considered and approved that (i) our Company to enter into the supplemental agreement I to the A Share subscription agreement with CSAH, pursuant to which 50% of the Zhuhai MTU shares as partial consideration payable by CSAH for its subscription of new A Shares under the A Share subscription agreement has been adjusted to RMB1,741.08 million according to the final assessment results as filed and approved by the State-owned Assets Supervision and Administration Commission of the State Council (“SASAC”); and (ii) the subscription price and the number of H Shares to be issued pursuant to the H Share subscription agreement shall be adjusted to HK$6.156 and not more than 600,925,925 new H Shares, respectively due to the implementation of the 2016 dividend distribution plan of our Company. On November 8, 2017, the aforesaid A Share issuance and the H Share issuance were approved in the extraordinary general meeting and the respective class meetings of shareholders of A and H shares on November 8, 2017. We have received the approval from CSRC for the aforesaid H Share issuance in March 2018, and the aforesaid A Share issuance is subject to the approval from CSRC.

Issuance of Ultra-short-term and Short-term Financing Bills and Medium-term Notes

On April 18, 2008, our board approved the proposed issuance of short-term financing bills in the principal amount of up to RMB4 billion in the PRC, and the submission of this proposal to the annual general meeting for the shareholders’ approval. On June 25, 2008, our shareholders approved such proposed bill issuance at the annual general meeting for the year 2007. We believed that the bill issuance would provide a further source of funding at an interest rate which was expected to be lower than that for loans from commercial banks, lower the financing cost of borrowings for us, and was in the interests of us and our shareholders as a whole. Our Company received the acceptance from National Association of Financial Market Institutional Investors to register our Company’s short-term financing bills in the amount of RMB3.5 billion for a period up to September 10, 2010. The bills were jointly underwritten by China CITIC Bank Cooperation Limited and Bank of China Limited. In October 2008, we issued short-term financing bills with total face value of RMB2 billion with a bearing coupon interest rate at 4.7% and a maturity period of one year for funding of the business activities of our Company.

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On May 28, 2008, our board approved the proposed issuance of medium term notes by our Company in the principal amount of up to RMB1.5 billion and the submission of such proposal to the shareholders for their consideration and approval. On June 25, 2008, shareholders of our Company approved such notes issuance at the annual general meeting for the year 2007. Our Company believed that the notes issue would provide a further source of medium to long term funding at an interest rate lower than the best lending rate for loans from commercial banks, lower the finance costs of borrowings for us and improve our debt structure. As of the date of this Annual Report, we have not issued any medium term notes, even though it has been approved by our board and shareholders.

In order to capitalize on opportunities in the market and improve the flexibility and efficiency of financing, on June 25, 2012, our Board resolved to obtain a general and unconditional mandate from shareholders to issue potential debt financing instruments, in one or multiple tranches, within the permissible size for debt issuance in accordance with the provisions of the applicable laws and regulations. On the extraordinary general meeting held on August 10, 2012, shareholders approved the authorization given to our Board, generally and unconditionally, to determine the specific debt financing instruments and issuance plan, and to issue, in one or multiple tranches, debt financing instruments within the permissible size for debt issuance in accordance with the provisions of the applicable laws and regulations. According to the resolution, on October 31, 2012, our Board approved to apply to National Association of Financial Market Institutional Investors for registration to issue, in one or multiple tranches, ultra-short-term financing bills with an aggregate principal amount of to RMB10 billion, according to our capital needs and the market conditions. Our Company has completed the issuance of the first tranche of ultra-short-term financing bills on February 8, 2013. The total issuance amount of the first tranche financing bills was RMB0.5 billion, with a maturity period of 180 days, a par value per unit of RMB100 and a nominal interest rate of 3.9%.

On March 21, 2014, our Company completed the issuance of the first tranche of ultra-short-term financing bills for the year 2014 of China Southern Airlines Company Limited (the “2014 First Tranche Financing Bills”). The total issuance amount of the 2014 First Tranche Financing Bills was RMB3 billion, with a maturity period of 180 days, a par value per unit of RMB100 and a nominal interest rate of 5.1%.

On April 17, 2014, our Company completed the issuance of the second tranche of ultra-short-term financing bills for the year 2014 of China Southern Airlines Company Limited (the “2014 Second Tranche Financing Bills”). The total issuance amount of the 2014 Second Tranche Financing Bills was RMB3 billion, with a maturity period of 270 days, a par value per unit of RMB100 and a nominal interest rate of 5.1%.

On August 14, 2014, our Board approved to make an application to National Association of Financial Market Institutional Investors for the registration and issuance of medium-term notes with an aggregate maximum principal amount of RMB10 billion for the purpose of replenishing the working capital and optimizing the debt structure of our Company. The annual general meeting for the year 2014 of our Company held on June 30, 2015 approved to make an application to the National Association of Financial Market Institutional Investors for the registration of ultra-short-term financing bills with the aggregate maximum principal amount of RMB14 billion (the “Ultra-short-term Financing Bills”), and the Ultra-short-term Financing Bills within the mentioned issuance size will be issued in one tranche or multiple tranches according to the funding needs and the market conditions. As of the date of this Annual Report, we have not issued any medium term notes.

On November 19, 2015, our Company completed the issuance of the first tranche of ultra-short-term financing bills for the year 2015 (the “2015 First Tranche Financing Bills”). The total issuance amount of the 2015 First Tranche Financing Bills was RMB3 billion, with a maturity period of 270 days, a par value per unit of RMB 100 and a nominal interest rate of 3.20%.

On November 24, 2015, our Company completed the issuance of the second tranche of ultra-short-term financing bills for the year 2015 (the “2015 Second Tranche Financing Bills”). The total issuance amount of the 2015 Second Tranche Financing Bills was RMB2 billion, with a maturity period of 180 days, a par value per unit of RMB 100 and a nominal interest rate of 3.04%.

On November 30, 2015, our Company completed the issuance of the third tranche of ultra-short-term financing bills for the year 2015 (the “2015 Third Tranche Financing Bills”). The total issuance amount of the 2015 Third Tranche Financing Bills was RMB3 billion, with a maturity period of 268 days, a par value per unit of RMB 100 and a nominal interest rate of 3.16%.

On March 8, 2016, our Board approved to make an application to National Association of Financial Market Institutional Investors for the registration and issuance of medium-term notes and ultra-short-term financing bills with an aggregate maximum principal amount of RMB5 billion and RMB10 billion respectively and the ultra-short-term financing bills within the mentioned issuance size will be issued in one tranche or multiple tranches according to the funding needs and the market conditions for the purpose of replenishing the working capital and optimizing the debt structure of our Company. The National Association of Financial Market Institutional Investors has approved the registration both the medium-term notes and ultra-short-term financing bills.

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On August 15, 2016 and August 16, 2016 Xiamen Airlines issued medium-term notes with aggregate nominal value of RMB1,300 million at an interest rate of 2.97%. The medium-term notes mature in three years.

On October 20, 2016, Xiamen Airlines issued medium-term notes with aggregate nominal value of RMB1,600 million at an interest rate of 3.11%. The medium-term notes mature in five years.

On November 21, 2016, Xiamen Airlines issued medium-term notes with aggregate nominal value of RMB1,800 million at an interest rate of 3.38%. The medium-term notes mature in three years.

On February 16, 2017, our Company completed the issuance of a round of ultra-short-term financing bills for the year 2017 (the “2017 Financing Bills”). The total issuance amount of the 2017 Financing Bills was RMB1 billion, with a interest rate of 3.70%. The end date of transcation is November 17, 2017.

Issuance of Corporate Bonds

On November 13, 2015, our Company was approved by the CSRC to publicly issue corporate bonds (the “Corporate Bonds”) in the amount of not more than RMB19 billion to qualified investors. The issuance of the Corporate Bonds shall be conducted in multiple tranches. The issuance of the first tranche must be completed within 12 months from the date of the approval and the issuance of the remaining tranches must be completed within 24 months from the date of the approval. On November 20, 2015, our Company issued the first tranche of 2015 corporate bonds of RMB3,000 million with an interest rate of 3.63% per annum due 2020. On March 3, 2016, our Company issued the first tranche of 2016 corporate bonds of RMB5,000 million with an interest rate of 2.97% per annum due 2019. On May 25, 2016, our Company issued the second tranche of 2016 corporate bonds of RMB5,000 million with an interest rate of 3.12% per annum due 2021.

Route Network

Overview

We operate the most extensive route network among all Chinese airlines. As of December 31, 2017, we operated 1,169 routes consisting of 905 domestic routes, 38 regional routes and 226 international routes.

We continually evaluate our network of domestic, regional and international routes in light of our operating profitability and efficiency. We seek to coordinate flight schedules with the Airline Subsidiaries on shared routes to maximize load factors and utilization rates. The acquisition of domestic, regional and international routes is subject to approval of the CAAC, and the acquisition of regional and international routes is also subject to the existence and the terms of agreements between the Chinese government and the government of the Hong Kong SAR, the government of the Macau SAR, the government of Taiwan province and the government of the proposed foreign destination.

In order to expand our international route network, we have entered into code-sharing agreements with several international airlines, including Aeroflot-Russian Airlines, Air France, Alitalia-Linee Aeree Italiane, American Airlines, INC., Asiana Airlines, China Airlines, China Eastern Airlines, CSA Czech Airlines, Chongqing Airlines Company Limited, Delta Air Lines, Etihad Airways PJSC, Japan Airlines International, Kenya Airways, KLM Royal Dutch Airline, Korean Air, Mandarin Airlines, Pakistan International Airlines, PT Garuda Indonesia (Persero) Tbk., Qantas Airways Limited, Saudi Arabian Airlines, Sichuan Airlines Co., Ltd., Vietnam Airlines, Virgin America, WestJet and Xiamen Airlines. Under the code-sharing agreements, the Participating Airlines are permitted to sell tickets on certain international routes operated by us to passengers using the Participating Airlines’ codes. Similarly, we are permitted to sell tickets for the other participating airlines using CZ code. The code-sharing agreements help increase the number of our international sales outlets. After joining Skyteam Alliance, we have further established a network reaching 1,062 destinations globally, connecting 177 countries and regions and covering major cities around the world.

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The following table sets forth certain statistical information with respect to our passenger, cargo and mail traffic for the years indicated.

	Passenger carried				Cargo and Mail arrived (tons)				Total traffic (tons kilometres)
Year	Total (in millions)		Increase (decrease) over previous year (%)		Total (in thousands		Increase (decrease) over previous year (%)		Total (in millions)		Increase (decrease) over previous year (%)
2015		109.42		8.4		1,511		5.4		22,388		13.2
2016		114.62		4.8		1,613		6.7		24,387		8.9
2017		126.30		10.2		1,672		3.7		27,321		12.03

Route Bases

In addition to our main route bases including Guangzhou as core hub, Beijing as major hub, Urumqi as regional hub and Chongqing as seasonal hub, we maintain regional route bases in Zhengzhou, Wuhan, Changsha, Shenzhen, Shenyang, Changchun, Dalian, Harbin, Haikou, Zhuhai, Xiamen, Shanghai, Xi’an, Fuzhou, Nanning, Guilin, Shantou, Guiyang and Sanya. Most of its regional route bases are located in provincial capitals or major commercial centers in the PRC.

We believe that our extensive network of route bases enables it to coordinate flights and deploy our aircraft more effectively and to provide more convenient connecting flight schedules and access service and maintenance facilities for our aircraft. We believe that the number and location of these route bases may enhance our ability to obtain the CAAC’s approval of requests by our Group to open new routes and provide additional flights between these bases and other destinations in China. Current regulations of the CAAC generally limit airlines to operations principally conducted from their respective route bases.

Domestic Routes

Our domestic routes network serves substantially all provinces and autonomous regions in China, including Guangdong, Fujian, Hubei, Hunan, Hainan, Guangxi, Guizhou, Henan, Heilongjiang, Jilin, Liaoning and Xinjiang, and serves all four centrally-administered municipalities in China, namely, Beijing, Shanghai, Tianjin, and Chongqing. In 2017, our most profitable domestic routes were between: Shenzhen-Beijing, Shengzhen-Shanghai, Guangzhou-Beijing, Beijing-Shenzhen; Shanghai-Shenzhen; Sanya-Beijing, Guangzhou-Shanghai; Shanghai-Guangzhou, Urumqi-Beijing, Beijing-Urumqi.

Regional Routes

We offer scheduled service between Hong Kong and Beijing, Shenyang, Meixian, Wuhan, Yiwu, Shantou, Xiamen, Wuyishan, Quanzhou; and between Taipei and Guangzhou, Shanghai, Fuzhou, Hangzhou, Xiamen, Shenyang, Changsha, Wuhan, Dalian, Guilin, Harbin, Guiyang, Zhengzhou, Changchun, Zhangjiajie, Nanning, Shantou, Yiwu, Quanzhou, Yanji and Shenzhen. In 2017, the most profitable scheduled regional routes were between: Taipei-Guangzhou; Shenzhen-Taipei; Taipei-Shenzhen; Guangzhou-Taipei; Shanghai-Taipei; Taipei-Shanghai; Taipei-Harbin; Taipei-Changchun; Hong Kong-Taipei.

In 2017, we conducted a total of 18,030 flights on our regional routes, accounting for approximately 22.7% of all passengers carried by Chinese airlines on routes between Hong Kong, Macau or Taiwan and destinations in Mainland China according to CAAC statistics briefing.

Previously, direct flights between Taiwan and Mainland China were only available during certain festivals. Other than that, travellers between Taiwan and Mainland China had to make use of intermediate stops in Hong Kong or elsewhere. Since July 2008, however, the ban on direct flights was further liberalized to allow direct charter flights on weekends. We were the first Chinese carrier to fly nonstop to Taiwan. On November 4, 2008, the Mainland China and Taiwan agreed to have regular direct passenger charter flights across the Taiwan Strait. On August 31, 2009, the Mainland China and Taiwan increased the number of regular cross-Strait direct passenger flights from 108 to 270 a week. Cross-Strait direct passenger flights were further increased in the following years. As of April 26, 2018, there were 78 cross-Strait direct passenger flights a week.

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International Routes

We are the principal Chinese airlines serving Southeast Asian destinations and Australasia, including Singapore and major cities in Australia, New Zealand, Bangladesh, Indonesia, Thailand, Malaysia, Philippines, Vietnam, Myanmar and Cambodia.

In addition, we also provide scheduled services to cities in Australia, Azerbaijan, Bangladesh, Cambodia, Canada, Dutch, France, German, India, Indonesia, Iran, Italy, Japan, Kenya, Kazakhstan, Kyrgyzstan, Malaysia, Maldives, Nepal, New Zealand, Pakistan, Philippines, Russia, Singapore, South Korea, Tajikistan, Thailand, Turkmenistan, United Arab Emirates (UAE), United Kingdom, United States of American (USA), Uzbekistan, and Vietnam. Since joining Skyteam Alliance, we have established a network reaching over 1,062 destinations globally, connecting 177 countries and regions and covering major cities around the world.

In 2017, our most profitable international routes were: Beijing-Amsterdam, Seoul-Yanji, Beijing-Guangzhou-Phnom Penh, Seoul-Shenyang, Osaka-Guangzhou, Yanji-Seoul, Guangzhou-Dhaka, Dhaka-Guangzhou, Phnom Penh-Guangzhou-Beijing, Guangzhou-Wuhan- San Francisco.

Aircraft Fleet

Our fleet plan in recent years has emphasized expansion and modernization through the acquisition of new aircraft and the retirement of less efficient and old aircraft. As of December 31, 2017, we operated a fleet of 754 aircraft with an average age of 6.6 years. Most aircraft of our Group are Boeing and Airbus aircraft. We have the largest fleet among Chinese airline companies. Among all the aircraft, 477 aircraft operated by our Group are leased pursuant to various types of leasing arrangements. Please see the table below for an analysis of our aircraft in terms of average age and respective passenger capacity.

Model	Number of Aircraft		Passenger Capacity
Boeing 787-8		16		228/237
Boeing 787-9		4		287
Boeing 777-300ER		10		309
Boeing 777-200		2		360
Boeing 757-200		6		174/180//197
Boeing 737-800		317		159/161/164/169/170/172/178/184
Boeing 737-700		38		128/134
Boeing 747-400F		2		N/A
Boeing 777-200F		12		N/A
Airbus 380-800		5		506
Airbus 330-300		29		259/275/284/286
Airbus 330-200		16		218/258/278
Airbus 321		98		179/189/195
Airbus 320		142		152/160/166/168
Airbus 319		31		122/130/138
EMB190		26		98
Total		754		N/A

In 2017, we continued to expand and modernize our aircraft fleet. During 2017, we (i) took scheduled delivery of 47 aircraft under purchase agreements, including 5 A320-200, 9 A321-200, 7 A330-300, 7 B737-8, 16 B737-800, 3 B787-9 (all 3 B787-9 aircraft belong to Xiamen Airlines); (ii) took scheduled delivery of 27 B737-800 (including 25 B737-800 aircraft belong to Xiamen Airlines) and 5 A320-200neo under operating leases; (iii) returned 6 A319-100, 3 A320-200, 2 B737-800 and 1 B737-700 (all 2 B737-800 and 1 B737-700 aircraft belong to Xiamen Airlines) under operating leases upon expiry; and (iv) disposed of 3 B737-300, 4 B757-200, 2 B777-200 and 6 B737-700 (all 6 B737-700 aircraft belong to Xiamen Airlines).

During 2017, Xiamen Airlines (i) took scheduled delivery of 25 B737-800 aircraft under operating leases; (ii) took scheduled delivery of 3 B787-9 under financing leases.

On April 26, 2017, we entered into the aircraft acquisition agreement with Airbus S.A.S for the acquisition of 20 A350-900 series aircraft to be delivered from 2019 to 2020. On October 20, 2017, we entered into the aircraft acquisition agreement with Boeing for the acquisition of 8 B777-300ER and 30 B737-8 series aircraft to be delivered from 2019 to 2020.

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Aircraft Financing Arrangements

Overview

A significant portion of our aircraft is acquired under long-term capital or operating leases or long-term mortgage loans with remaining terms to maturity mainly ranging from one to eleven years. As of December 31, 2017, of the Group’s 754 aircraft, 213 aircraft were operated under capital leases, 264 were operated under operating leases, 277 were either owned aircraft financed by long-term mortgage loans, or acquired either with cash proceeds or acquired by exercising the purchase options upon expiry of the respective capital leases. Our planned acquisition of aircraft in the foreseeable future will generally be made through acquisition by bank loans and our own funds, and pursuant to operating leases or capital leases. Our determination as to our acquisition strategy depends on our evaluation at the time of our capacity requirements, anticipated deliveries of aircraft, our capital structure and cash flow, prevailing interest rates and other general market conditions.

The following table sets forth, as of December 31, 2017, the number of aircraft operated by our Group pursuant to capital and operating leases and the average remaining terms, of such leases.

	Capital Lease		Operating Lease		Average Remaining Lease Term
Model	Number of Aircraft		Number of Aircraft		Year
Boeing 787-8		13		2		7.09
Boeing 787-9		4		0		9.24
Boeing 737-800		63		146		6.40
Boeing 737-700		0		3		0.27
Boeing 777-200F		5		0		8.78
Boeing 777-300ER		9		0		8.62
Airbus 380		2		0		5.66
Airbus 330-300		20		8		7.01
Airbus 330-200		7		2		4.54
Airbus 321-200		42		22		6.15
Airbus 320-200		41		37		6.60
Airbus 319-100		0		17		2.59
Airbus 320-220 NEO		0		7		10.58
Boeing 737-8 MAX		7		0		9.95
EMB190		0		20		2.30
Total		213		264		4.09

Capital leases

The majority of the capital leases in respect to aircraft and related equipment have terms of 10 to 15 years expiring during the years 2017 to 2030. As of December 31, 2017, our aggregate future minimum lease payments (including future finance charges) required under its capital leases were RMB78,899 million. Our capital leases typically cover a significant portion of the relevant aircraft’s useful life and transfer the benefits and risks of ownership to our Group. Under its capital leases, we generally have an option to purchase the aircraft at or near the end of the lease term. As is customary in the case of capital leases, our obligations are secured by the related aircraft, as well as other collateral.

Operating Leases

As of December 31, 2017, our aggregate future minimum lease payments required under its operating leases were RMB69,465 million. As of the year end of 2017, our operating leases had original terms generally ranging from five to fifthteen years from the date of delivery of the relevant aircraft, and the remaining terms of these leases ranged from one to twelve years. Pursuant to the terms of the operating leases, our Group is obligated to make rental payments based on the lease term, with no termination payment obligations or purchase option, and the lessor bears the economic benefits and risks of ownership. Under our operating leases, our Group has no option to purchase the aircraft and is required to return the aircraft in the agreed condition at the end of the lease term. Although title to the aircraft remains with the lessor, our Group is responsible during the lease term for the maintenance, servicing, insurance, repair and overhaul of the aircraft.

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For capital leases or operating leases, we are obligated to indemnify the lessors against any withholding or similar taxes that may be imposed on the lessors by taxing authorities in China with regard to payments made pursuant to such leases. In accordance with relevant PRC tax regulations, a PRC lessee is liable to withhold PRC withholding tax in respect of any lease payments regularly made to an overseas lessor. Depending on the circumstances, this tax is generally imposed at a fixed rate ranging from 6.0% to 10.0% of the lease payments, or in certain cases, the interest components of such payments for capital lease. The PRC withholding tax payable in respect of the lease arrangements amounting RMB234 million, RMB237 million and RMB291 million during 2017, 2016 and 2015, has been included as part of the lease charges.

Aircraft Flight Equipment

The jet engines used in our aircraft fleet are manufactured by General Electric Corporation, Rolls-Royce plc, United Technologies International, Inc., CFM International, Inc. and International Aviation Engines Corporation. We had 94 spare jet engines for our fleet as of the year end of 2017 and 2016, respectively. We determine our requirements for jet engines based on all relevant considerations, including manufacturers’ recommendations, the performance history of the jet engines and the planned utilization of its aircraft. Acquisition of rotables and certain of the expendables for our aircraft are generally handled by Southern Airlines (Group) Import and Export Trading Company Limited (“SAIETC”), a subsidiary we acquired from CSAH in August 2016, in consideration of an agency fee. We arrange the ordering of aircraft, jet engines and other flight equipment for the Airline Subsidiaries and keep an inventory of rotables and expendables for the Airline Subsidiaries.

Aircraft Maintenance

A major part of the maintenance for our fleet other than overhauls of jet engines is performed by Guangzhou Aircraft Maintenance Engineering Company Limited (“GAMECO”), an entity jointly controlled by our Company, Hutchison Whampoa (“Hutchison”) and South China International Aircraft Engineering Company Limited, consistent with our strategy to achieve fully integrated airline operations and to assure continued access to a stable source of high quality maintenance services. The remaining part of the maintenance for our fleet other than overhauls of jet engines is performed by service providers in China and overseas. GAMECO performs all types of maintenance services, ranging from maintenance inspections performed on aircraft (“line maintenance services”) to major overhaul performed at specified intervals. GAMECO was the first of three aircraft maintenance facilities in China having been certified as a repair station by both the CAAC and the Federal Aviation Administration. In March 1998, GAMECO received the Joint Civil Aviation Authorities certificate, which was transferred to European Aviation Safety Agency certification in November 2004, for the repair and maintenance of aircraft and aircraft engines.

We believe that GAMECO performs major maintenance checks on our aircraft within time periods generally consistent with those of large international airline maintenance centers. GAMECO’s repair and maintenance capacity include overhaul of more than 40% of our aircraft. Although rotables for our aircraft are generally imported through SAIETC, a portion of expendables and other maintenance materials are directly imported by GAMECO. Our agreement with GAMECO usually has a term of one year.

Overhauls of jet engines are performed by Zhuhai MTU, a former jointly controlled entity of CSAH and MTU Aero Engines GmbH, and also by domestic qualified service providers in Xiamen (TEXL), Hong Kong (RR) and Taiwan (EGAT), and by overseas qualified service providers in USA, Germany, Korea, Singapore, Nederland and Wales. On September 28, 2009, our Company entered into an agreement with CSAH to sell its 50% equity interest in Zhuhai MTU to CSAH at a consideration of RMB1,607,850,000. The transfer was completed in February 2010.

The amounts incurred by our Group for comprehensive maintenance services provided by GAMECO and Zhuhai MTU were RMB3,925 million, RMB3,897 million and RMB3,028 million for the years ended December 31, 2017, 2016 and 2015, respectively.

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Safety

We endeavour to maintain strict compliance with all laws and regulations applicable to flight safety. In addition, we have adopted measures to eliminate or minimize factors that may impair flight safety, including specialized training programs and safety manuals. The Air Safety Management Department of our Company implements safety-related training programs on an on-going basis in all of our operations to raise the safety awareness of all employees. As a result, overall flight safety has gradually improved. For “incidents” which include various events and conditions prescribed by the CAAC which do not involve serious personal injury or material damage to flight equipment, our Group has kept the number consistently below what is prescribed by the CAAC. For example, our Company’s “Air Transportation Incidents Per Ten Thousands Hours Ratio” was 0.01, 0.005 and 0.034 in 2017, 2016 and 2015, respectively. In comparison, CAAC’s published maximum acceptable Air Transportation Incidents Per Ten Thousands Hours Ratio was 0.5, 0.14 and 0.5 in 2017, 2016 and 2015, respectively. This ratio is defined as the number of occurrences of air transportation incident for every 10,000 hours of flight time. In 2013, we strengthened our flight safety management on the internal and external safety requirements. In 2008, we received the “Five-Star Flight Safety Award” from CAAC, being the first in domestic aviation industry to receive such a great honour. Subsequently in 2012, we were awarded the “Safe Flight Diamond Award” by CAAC for our 10,000,000 safety flight hours record, also being the first in domestic aviation industry to receive such a great honour. By December 31, 2017, our Company’s continuous safe flight span totalled to 2.567 million hours.

Jet Fuel

Jet fuel costs typically represent a major component of an airline’s operating expenses. Our jet fuel costs accounted for 25.9%, 22.4% and 25.9% of our operating expenses for the years ended December 31, 2017, 2016 and 2015, respectively. Like all Chinese airlines, we are generally required by the Chinese government to purchase our jet fuel requirements from regional branches of CAOSC and Bluesky Oil Supplies Company, except at the Shenzhen, Sanya, Haikou, Shanghai Pudong where jet fuel is supplied by Sino-foreign joint venture in which CAOSC is a joint venture partner. CAOSC is a State-owned organization controlled and supervised by the CAAC that controls the importation and distribution of jet fuel throughout China.

Jet fuel obtained from CAOSC’s regional branches is purchased at uniform prices throughout China that are determined and adjusted by CAOSC from time to time with the approval of the CAAC and the pricing department of the NDRC based on market conditions and other factors. As a result, the costs of transportation and storage of jet fuel in all regions of China are spread among all domestic airlines. Jet fuel costs in China are influenced by costs at state-owned oil refineries and limitations in the transportation infrastructure, as well as by insufficient storage facilities for jet fuel in certain regions of China.

Prior to 1994, domestic jet fuel prices were generally below international jet fuel prices. The Chinese government had gradually increased domestic jet fuel prices in order to reflect more accurately the costs of supplying jet fuel in China. As a result, domestic jet fuel prices have become higher than those in the international market since the beginning of 1994. In 2007 through the first half of 2008, the crude oil prices in the international market reached historic highs. In response to the pressure imposed by such soaring prices, on November 1, 2007 and June 20, 2008, respectively, NDRC increased the domestic price for jet fuel. Thereafter, in order to reduce fuel cost pressure faced by Chinese airlines, NDRC approved reductions in domestic prices for jet fuel in 2008 and 2009. However, during a period starting from February 2009 to 2013, the crude oil price in the international market continued to increase and maintained at a high level. However, influenced by excessive oil supply, global economic weakness and the strong US$, the international oil prices have been trending downward since 2014. Our jet fuel costs increased from RMB 23,799 million in 2016 to RMB 31,895 million in 2017 as a result of the increase in average jet fuel prices from 2016 to 2017.

In addition to purchases of jet fuel from CAOSC, we are also permitted by the Chinese government to purchase a portion of our jet fuel requirements for our international flights from foreign fuel suppliers located outside China at prevailing international market prices. Jet fuel purchased from such sources outside China accounted for approximately 17.31% and 15.96% of our total jet fuel consumption in 2017 and 2016, respectively.

Fuel Surcharge

Our profit for the year may suffer from an unexpected change in the fuel surcharge collection policies and other factors beyond our control. The level of fuel surcharges, which is regulated by Chinese government, affects domestic customers’ air travel demand as well as our ability to generate profits. On January 14, 2009, the NDRC and the CAAC jointly announced that the collection of passenger fuel surcharge for domestic routes should be suspended from January 15, 2009 onwards. Subsequently, in response to the increase in international fuel prices, the NDRC and CAAC issued a notice on November 11, 2009 to introduce a new pricing mechanism of fuel surcharge that links it with airlines’ jet fuel costs, which was further adjusted subsequently.

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From April 1, 2015, The NDRC has adjusted the benchmark oil price to RMB5,000 per ton, for every RMB100 by which the cost of jet fuel exceeds that price, the airlines are allowed to charge RMB0.00002566 per kilometre for the flight distance. Based on that rate, for every RMB100 by which the cost of jet fuel exceeds RMB5,000 per ton, the airlines are allowed to charge RMB 0.0002566 per kilometer for the flight distance. The NDRC has decreased the rate of fuel surcharge from RMB 0.00001614 per kilometer to RMB 0.00002566 per kilometer, starting from April 1, 2017 and ending on March 31, 2018.

Flight Operations

Flight operations for our flights originating in Guangzhou are managed by our flight operations and marketing divisions, which are responsible for formulating flight plans and schedules consistent with route and flight approvals received from the CAAC. Our Company’s flight operations center in Guangzhou is responsible for the on-site administration of flights, including the dispatch and coordination of flights, deployment of aircraft, ground services and crew staffing. In addition, each of the Airline Subsidiaries maintains flight operations centers at all servicing airports for on-site administration of their flights. Our general dispatch offices are responsible for monitoring conditions of our route network, administering our flight plans, collecting and monitoring navigation data and analyzing and monitoring airport conditions.

To enhance our management of flight operations, our computerized flight operations control system (SOC) began operation in May 1999. The system utilizes advanced computer and telecommunications technology to manage our flights on a centralized, real-time basis. We believe that the system will assist us to (i) compile flight schedules more efficiently; (ii) increase the utilization of aircraft; (iii) allow real-time tracking of all of our flights; and (iv) improve coordination of our aircraft maintenance and ground servicing functions.

Training of Pilots and Flight Attendants

We believe that our pilot training program, which was established in cooperation with the CAAC affiliated Beijing University of Aeronautics and Astronautics (the “BUAA”), has significantly improved the quality of the training received by our pilots and has helped maintain the quality of our staff of pilots at a level consistent with the expansion of operations called for by our business strategy.

As part of the pilot training program, trainee pilots receive their initial training in the operation of a specific aircraft with Zhuhai Xiang Yi Aviation Technology Company Limited (“Zhuhai Xiang Yi”), wholly owned subsidiary of the Company, which also provides training to pilots from other Chinese airlines. Zhuhai Xiang Yi is equipped with simulators for majority models of aircraft currently operated by our Group and provides flight simulation training services to our Group.

Our pilots are required to be licensed by the CAAC, which requires an annual proficiency check. Our pilots attend courses in simulator training twice annually and in emergency survival training once annually. We also conduct regular advanced training courses for captains and captain candidates. Pilots advance in rank based on number of hours flown, types of aircraft flown and their performance history.

We funded the training of our recruited pilots in previous years and, as a result, incurred significant costs over the years. Recently, there has been a trend in the financing of pilot training worldwide from employer-sponsored to self-sponsored scheme. Such a change will not only cut down our training expenses significantly, but also ensures the long-term dedicated service of the pilots. Starting from 2007, we began to recruit pilots under the self-sponsored training arrangement.

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Under the program, the self-sponsored pilots are bound to enter into service contracts with our Group when they finish their training courses. They have the choice to repay their loans in advance or in installments.

We conduct theoretical and practical training programs for our flight attendants at our Flight Attendants Training Center in Guangzhou (the “Guangzhou Training Center”). The Guangzhou Training Center is equipped with computerized training equipment, as well as simulator cabins for all models of aircraft currently operated by our Group. At the Guangzhou Training Center, flight attendants of our Group receive comprehensive training in areas such as in-flight service, emergency evacuation and water rescue.

Ground Services

We make arrangements with airport authorities, other airlines or ground services companies for substantially all ground facilities, including runway, ramp, terminal and support services buildings, at each airport that they serve. We pay landing, parking and other fees to such airports, including Guangzhou Baiyun International Airport (the “Guangzhou Baiyun Airport”). At domestic airports, such fees are generally determined by CAAC.

At Guangzhou Baiyun Airport, we operate our own passenger check-in, cargo, mail and baggage handling, aircraft maintenance and cleaning services. We also provide such services to our customer airlines that operate in Guangzhou Baiyun Airport.

Ground services at the airports, such as those in Shenzhen, Changsha, Wuhan, Zhengzhou, Haikou, Zhuhai, Guilin, Jieyang, Guiyang, Shenyang, Harbin, Dalian, Changchun, Sanya, Nanning, Chongqing, Shanghai Hongqiao, Shanghai Pudong and Urumqi, are operated directly by the Group. Ground services at the airport in Beijing have been primarily provided by Beijing China Southern Airlines Ground Services Co., Ltd, which became a wholly-own subsidiary of the Company in June 2009. Ground services at other airports in China are provided to the Group by local airport authorities or local airlines pursuant to various service agreements. Ground services and other services at airports outside China are provided to the Group by foreign services providers pursuant to various service agreements with such parties. All such agreements of the Group are short-term and otherwise on terms that are customary in the industry.

Air Catering

We own a 70.5% equity interest in Guangzhou Nanland Air Catering Company Limited (“Nanland”). Nanland provides in-flight meals, snacks, drinks and related services for all of our flights originating in Guangzhou and substantially all other flights departing from Guangzhou Baiyun Airport. We contract with various air catering suppliers with respect to in-flight catering services for flights originating from other airports, generally on an annual basis and otherwise on terms that are customary in the industry.

In order to optimize assets structure, tighten cost control, reduce the number of connected transactions and enhance the independence of operations in the long-run, our Company acquired a 100% equity interest in China Southern Airlines Group Air Catering Company Limited (“SAG Air Catering”) on August 31, 2007 from CSAH. SAG Air Catering provides in-flight meals for flights of our Group originating or stopping at domestic airports, mainly in northern China and Xinjiang regions.

Cargo and Mail

We also provide air cargo and mail services. A significant portion of these services are combined with passenger flights services. In 2017, we had 2 Boeing 747 freighters and 12 Boeing 777 freighters, mainly servicing 12 international cargo routes, including Guangzhou–Chongqing–Amsterdam–Guangzhou, Guangzhou–Amsterdam–Guangzhou, Guangzhou–London-Frankfurt-Guangzhou, Guangzhou-Frankfurt-Guangzhou, Guangzhou-Anchorage-Los Angeles-Guangzhou, Guangzhou-Hefei-Los Angeles-Hefei-Guangzhou, Guangzhou-Ho Chi Minh City-Hanoi-Guangzhou, Shanghai Pudong-Amsterdam-Chongqing-Shanghai Pudong, Shanghai Pudong-Amsterdam-Shanghai Pudong, Shanghai Pudong–Frankfurt–Shanghai Pudong, Shanghai Pudong–Anchorage–Chicago–Shanghai Pudong, Shanghai Pudong–Los Angeles–Shanghai Pudong. We conduct our cargo business primarily through our cargo hubs in Guangzhou and Shanghai.

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Sales, Reservations and Marketing

Passenger Ticket Sales and Reservations

Our ticket sales and reservations are conducted by or through independent sales agents and our own network of exclusive sales offices as well as the CAAC’s sales offices and CSAH’s affiliates. We have sales offices in Guangzhou and our other route bases. In addition, we maintain regional sales offices in other cities in China, including Beijing and Shanghai. We maintain international sales offices in Almaty, Amsterdam, Ashkhabad, Auckland, Baku, Bangkok, Bishkek, Brisbane, Busan, Chicago, Christchurch, Daegu, Daejeon, Delhi, Dhaka, Dubai (Sharjah), Dushanbe, Frankfurt, Fukuoka, Hanoi, Hiroshima, Ho Chi Minh City, Irkutsk, Islamabad, Istanbul, Jakarta, Kathmandu, Khabarovsk, Khudzhand, Kitakyushu, Kuala Lumpur, London, Los Angeles, Manila, Melbourne, Mexico City, Moscow, Nagoga, New York, Niigata, Novosibirsk, Nairobi, Oakland, Osaka, Osh, Paris, Penang, Perth, Phnom Penh, Phuket, Roma, San Francisco, Sapporo, Sendai, Seoul, Siem Reap, Singapore, Sydney, Tashkent, Tehran, Toronto, Tokyo, Toyama, Tbilisi, Vancouver, Vladivostok, Vientiane and Yangon.

We have agency agreements with airlines in the Asia-Pacific region, Europe, the United States and Africa for the processing of ticket sales and reservations on a reciprocal basis. In 2017, over 51.5% of all ticket sales for our scheduled flights were made by our network of sales offices and CSAH’s affiliates. We also sell tickets and accept reservations through an extensive network of non-exclusive independent sales agents. Under the agency agreements with these sales agents, we pay commissions based on the value of tickets sold. In 2017, sales by independent sales agents accounted for less than 48.2% of our ticket sales of our scheduled flights.

Substantially all of our sales offices and agents in China are linked electronically to the TravelSky Technology Limited’s computerized ticketing and reservations system, which is in turn linked to all domestic airlines for flights throughout China. We have also entered into membership agreements with several international reservation systems, including SABRE, AMADEUS, WORLDSPAN, GALILEO, INFINI and AXESS in the world. These systems facilitate reservations and sales of tickets for our international flights. In 2007, we further improved and optimized our online sales network, and launched Tencent sales counters in cooperation with Tencent Technology Limited, thus expanded the consumer sales network of our Group. Meanwhile, our Group upgraded and reconstructed the SMS platform, which provided SMS information services on mileage, flight schedule, flight status and air ticket price, and launched the “95539” services hotlines.

Cargo

Our cargo and mail services are promoted through our own cargo divisions and independent cargo agents both within and outside China that track available space among all airlines. In particular, our Group employs a number of cargo agents in the Pearl River Delta region. In 2017, we generally pay the cargo agents an average commission of 0.33% of the relevant cargo freight rate for domestic and international services, of which the commission of cargo agents in the Pearl River Delta region is 0.79%.

Promotional and Marketing Activities

We engage in regular promotional and marketing activities in an effort to increase our market share. Our promotional and marketing activities for domestic routes emphasize safety, passenger comfort and the frequency of our flights. Our promotional and marketing activities for international and regional passengers emphasize our quality of service, extensive route network in China and greater frequency of flights relative to other Chinese airlines. We were among the first to launch premium economy class of seating. In addition, we also promote and market our regional and international routes on the basis of price competitiveness.

We seek to increase our name recognition by offering new services to passengers. For example, our Group was the first Chinese airline to provide off-airport check-in services. We also offered transfer and baggage “through-handling” services to passengers connecting to other airlines, including passengers connecting in Hong Kong for flights to Taiwan. We widened our use of information technology and introduced new services such as cell phone check-in, SMS platforms and online meal booking. In 2017, our Company reached a strategic cooperation agreement with American Airlines. According to this agreement, American Airlines subscribed our Company’s shares in August 2017 by USD200 million. Our Company and American Airlines also established a code sharing partnership on 18 January 2018 to provide more convenient and diversified trip options for passengers. Our Company fully participate in the global network of SkyTeam and continuously strengthen the cooperation with SkyTeam’s members. Based on the “friend circle” in the existing international and domestic carriers, we expanded the circle according to the market demands. Therefore, we partnered with British Airways, Etihad Airways, South American Airlines and other airlines. At present, our Company has shared codes with 25 international and domestic airlines, such as, France Airlines, KLM Royal Dutch Airlines, Delta Airlines, American Airlines, Qantas Airways, in 585 routes (including trunk routes and beyond routes). This further enlarged our sales channels and flight route network.

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On the wake of permitted direct flights on weekends between Taiwan and Mainland China starting from July 4, 2008, our Company became the first Chinese carrier to fly nonstop to Taiwan. By taking advantage of such further liberalized air travel policy between Taiwan and Mainland China, our Company has taken measures to explore opportunities presented by and increase our name recognition in Taiwan market. On June 23, 2008, our Company entered into a memorandum of cooperation with China Airlines, which is the largest carrier in Taiwan by route network. Based on the memorandum, the scope of cooperation between the parties will cover passenger, cargo, maintenance and ground handling services. We believe that our strategic collaboration with China Airlines will be beneficial to both parties, expand their route network worldwide, increase their freight load factors, reduce labor and operating costs, and enhance the competitiveness of both airlines in the global air travel market.

To enhance relationships with our passengers, we have launched two major frequent flyer programs, namely the “China Southern Airlines Sky Pearl Club” and the “Xiamen Airlines’ Egret Card Frequent Flyer Program”. By the end of 2017, we had approximately 34.52 million members (including those of Xiamen Airlines) under these programs.

Regulation

The Chinese commercial aviation industry is subject to a high degree of regulation and oversight by the CAAC. Regulations and policies issued or implemented by the CAAC encompass substantially all aspects of airline operations, including route allocation, pricing of domestic airfare, the administration of air traffic control systems and certain airports, air carrier certifications and air operator certification and aircraft, registration and aircraft airworthiness certification. The Civil Aviation Law, which became effective in March 1996, provides a framework for regulation of many of these aspects of commercial aviation activities. Although China’s airlines operate under the supervision and regulation of the CAAC, they are accorded an increasingly significant degree of operational autonomy, including with respect to the application for domestic, regional and international routes, the allocation of aircraft among routes, the purchase of flight equipment, the pricing of air fares within a certain range, the training and supervision of personnel and their day-to-day operations.

As an airline providing services on international routes, we are also subject to a variety of bilateral civil air transport agreements that provide for the exchange of air traffic rights between China and various other countries. In addition, China is a contracting state, as well as a permanent member, of the International Civil Aviation Organization (the “ICAO”), an agency of the United Nations established in 1947 to assist in the planning and development of international air transport, and is a party to many other international aviation conventions. The ICAO establishes technical standards for the international aviation industry. We believe that we, in all material respects, comply with all such technical standards.

Route Rights

Domestic Routes. The right of any Chinese airline to carry passengers or cargo on any domestic route must be obtained from the CAAC. Non-Chinese airlines are not permitted to provide domestic air service between destinations in China. The CAAC’s policy is to assign a domestic route to the Chinese airline that is best suited to serve the route based, in part, on the location of the airline’s main or regional base at the point of origin. Under current regulations, airlines are generally expected to operate mainly from their route bases, and flights within a particular region are expected to be served by airlines based in that region. We believe that these regulatory parameters benefit airlines, such as our Group, that have a large number of regional route bases. The CAAC also considers other factors that may make a particular airline suitable to operate a domestic route, including the applicant’s general operating authority, compliance with pricing regulations and regulations applicable to safety and service quality, market demand, the ability of the applicant in terms of its existing routes, airport facilities and related support services.

The CAAC considers market conditions for a domestic route in determining whether the route should be allocated to one or more airlines. Generally, the CAAC requires the passenger load factor on certain route should be above the average rate of the whole market in the last flight season before additional flights and participants may be put on that route.

Regional Routes. Hong Kong and Macau routes and landing rights are derived from agreements between the Chinese government and the government of the Hong Kong SAR, and between the Chinese government and the government of Macau SAR. The rights to fly between Beijing and Hong Kong, Beijing and Macau, Shanghai and Hong Kong and Shanghai and Macau are allocated by the CAAC among the four Chinese airlines. We understand that the criteria for determining whether a Hong Kong and Macau route will be allocated to a particular airline include market demand, the ability of the airline to service the route and the appropriateness of the airline’s aircraft for such route.

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Previously, direct flights between Taiwan and Mainland China were only available during certain festivals. Since July 4, 2008, however, the ban on direct flights has been further liberalized to allow direct charter flights on weekends. On November 4, 2008, the Mainland China and Taiwan agreed to regular direct passenger charter flights across the Taiwan Strait. On August 31, 2009, the Mainland China and Taiwan extended the number of regular cross-Strait direct passenger flights from 108 to 270 a week. Cross-Strait direct passenger flights were further increased in the following years. As of April 26, 2018, there were 78 cross-Strait direct passenger flights a week.

International Routes. International route rights, as well as the corresponding landing rights, are derived from air services agreements negotiated between the Chinese government, 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 service between certain destinations within each of such countries. Upon entering into an air services agreement, the CAAC determines the airline to be awarded such routes based on various criteria, including the availability of appropriate aircraft, flight and management personnel, safety record, the overall size of the airline, financial condition and sufficiency of assets to bear civil liabilities in international air services. These route rights may be terminated by the CAAC under special circumstances.

Air Fare Pricing Policy

In recent years, there were a series of air fare reform to deregulate the control on the air fare pricing policy step by step. Pursuant to “Pricing Reform of Domestic Civil Aviation” as approved by the State Council of the PRC effective on April 20, 2004, prices on domestic routes now fluctuate freely within a predetermined range. Instead of direct supervision by setting prices of air tickets through a local price bureau, the government now provides guidance on domestic flights and domestic civil aviation is controlled by the government indirectly. Market-oriented pricing policy was introduced and pricing system has been adjusted as a result of the above pricing reform. The CAAC and NDRC issued a notice on April 13, 2010, pursuant to which, effective on June 1, 2010, airlines may set first-class and business-class airfares freely in accordance with market prices, subject to relevant PRC laws. The economy-class airfares remain to be subject to the predetermined range. The CAAC and NDRC further issued a notice, pursuant to which, effective on October 20, 2013, airlines are free to set domestic flights airfares not exceeding up to 25% above the bench mark prices where governmental pricing guidance is applicable; and to freely determine the airfares for domestic routes with the market-oriented pricing policy based on the market demand and supply situation. On September 29, 2016, the CAAC and NDRC further issued the Notice on Deepening the Pricing Reform of Demotic Civil Aviation to further expand the scope of the routes with the market-oriented pricing policy: airfares for the routes below 800 kilometers or the routes above 800 kilometers and in the competing relationship with the high-speed rail EMU trains can be freely determined by airlines. Airlines may raise the non-discounted announced airfares for a certain amount of routes with the market-oriented pricing policy. In principle, such amount shall be no more than 10 per flight season, and the accumulative increase rate of airfares shall be no more than 10 percent per route per flight season. On December 17, 2017, the CAAC further issued the Notice on Further Deepening the Pricing Reform of Demotic Civil Aviation, pursuant to which the airlines will be allowed to decide their own prices on domestic routes that have at least five carriers competing. Price increases of no more than 10 percent would be also allowed for each travel season.

On December 17, 2017, the CAAC further issued the Notice on Further Deepening the Pricing Reform of Demotic Civil Aviation, pursuant to which the airlines will be allowed to decide their own prices on domestic routes that have at least five carriers competing. For each airline, the total number of the routes which the airline can decide itself shall be no less than 10 but shall generally not exceed 15 percent of the total number of the market-oriented routes operated by such airline in one flight season. On April 13, 2018, CAAC issued the Notice on Distributing the Catalog of Domestic Routes adopting Market Regulation Price. The catalog of domestic routes is published together with such notice.

Published air fares of Chinese airlines for the Hong Kong and Taiwan routes are determined by the CAAC and the relevant civil aviation authorities in Hong Kong or Taiwan. Airlines may offer discounts on flights on their Hong Kong and Taiwan regional routes.

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Published air fares of Chinese airlines for international routes (except for Japan) are determined by Chinese airlines at their own discretion, taking into account the international air fare standards established through the International Air Transport Association. For Japan routes, air fares must be approved by the relevant civil aviation authorities in Japan, and discounting of published international air fares is permitted.

Acquisition of Aircraft and Flight Equipment

If a Chinese airline plans to acquire an aircraft, the airline must first seek approval from the CAAC and NDRC. The airline must, as a condition of approval, provide specific acquisition plans, which are subject to modification by the CAAC and NDRC. If the CAAC and NDRC approve an aircraft acquisition, the airline negotiates the terms of the acquisition with the manufacturer together with China Aviation Suppliers Holding Company (“CASC”), an entity controlled by CAAC, because CASC possesses the license required to import or export aircraft, and CASC receives a commission in respect thereof. Most Chinese airlines are also required to acquire their aircraft engines, spare parts and other flight equipment through CASC. Our Company and a few other Chinese airlines are permitted to import jet engines and other flight equipment for their own use without the participation of CASC. In the case of our Company, SAIETC acts as our import agent and receives an agency fee for our services.

Jet Fuel Supply and Pricing

CAOSC and Bluesky Oil Supplies Company, companies supervised by the CAAC, are the only jet fuel supply companies in China, with the exception of the joint venture jet fuel supply companies that supply Shenzhen, Zhuhai, Sanya, Haikou, Shanghai Pudong and other small airports. Airlines are generally not permitted to buy jet fuel from other suppliers in their domestic operations, since the direct import of jet fuel for domestic purposes is prohibited. As a result, all Chinese airlines purchase their domestic jet fuel supply requirements (other than the above mentioned exceptions) from the seven regional branches of CAOSC. Jet fuel obtained from such regional branches is purchased at uniform prices throughout China that are determined and adjusted by CAOSC from time to time with the approval of the CAAC and the pricing department of the NDRC based on market conditions and other factors.

Safety

The CAAC has made the improvement of air traffic safety in China a high priority and is responsible for the establishment of operational safety, maintenance and training standards for all Chinese airlines. The Chinese airlines are required to provide monthly flight safety reports to the CAAC, including reports of flight or other incidents or accidents and other safety related problems involving such airline’s aircraft occurring during the relevant reporting period. The CAAC periodically conducts safety inspections on individual airlines.

Every pilot is required to pass CAAC-administered examinations before obtaining a pilot license and is subject to an annual recertification examination.

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 aircraft operated by Chinese airlines must have a valid certificate of airworthiness, which is issued annually by the CAAC. In addition, maintenance permits are issued to a Chinese airline only after its maintenance capabilities have been examined and assessed by the CAAC. Such 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.

Security

The CAAC establishes and supervises the implementation of security standards and regulations for the Chinese commercial aviation industry. Such standards and regulations are based on Chinese laws, as well as standards developed by international commercial aviation organizations. Each airline and airport in China is required to submit to the CAAC an aviation security handbook describing specific security procedures established by such airline or airport for the day-to-day operations of commercial aviation and procedures for staff training on security. Such security procedures must be based on relevant CAAC regulations and international commercial aviation treaties. Chinese airports and airlines that operate international routes must also adopt security measures in accordance with the requirements of the relevant international agreements.

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Noise and Environmental Regulation

All airlines in China must comply with the noise and environmental regulations of the PRC State Environmental Protection Agency. Applicable regulations of the CAAC permit Chinese airports to refuse to grant take-off and landing rights to any aircraft that does not comply with noise regulations.

Chinese Airport Policy

The CAAC supervises and regulates all civilian airports in China. The local government of the PRC manages the administration of most civilian airports in China. Airports in China are also subject to regulation and ongoing review by the CAAC, which determines take-off and landing charges, as well as charges for the use of airports and airport services.

Competition

The CAAC’s extensive regulation of the Chinese commercial aviation industry has had the effect of managing competition among Chinese airlines. Nevertheless, competition has become increasingly intense in recent years due to a number of factors, including relaxation of certain regulations by the CAAC, an increase in the number of Chinese airlines and an increase in the capacity, routes and flights of Chinese airlines.

In the Chinese aviation industry, the three dominant airlines are our Group, Air China Limited (the “Air China”) and China Eastern Airlines Corporation Limited (the “China Eastern Airlines”). In 2017, these three airlines together controlled approximately 60.9% of the commercial aviation market in China as measured by passengers carried.

Most major Chinese airlines have in recent years significantly expanded their fleets, while at the same time passenger traffic may not increase proportionately. In some years, this has resulted in a reduction in our passenger load factors. As a result, we are required to be more competitive with respect to, for example, quality of service, including ticketing and reservations, in-flight services, flight scheduling and timeliness.

In the next few years, the target customers of high-speed railway and airline will gradually differenciate, so passengers of airline will not be massively redirected to high-speed railway. However, the positive changes in the high-speed railway will continue to erode the aviation market. First of all, the “eight horizontal and eight vertical” high-speed railway corridors are gradually being perfected. The advantages of scale are becoming obvious. Secondly, in the future, the railway system will gradually release its own pricing, adopt flexible pricing and market pricing. Passengers can get discount on more routes. Hence, the competition that aviation industry faces will become more intense. Thirdly, one-third of high-speed railway will speed-up which will have the following impacts: (i) the advantages of high-speed railway will increase. The competition on passengers whose trip distance are from 750 kilometers to 1000 kilometers was intense. Following the increase of speed, high-speed railway may attract passengers who travel longer than 1000 kilometers; (ii) the operational efficiency of high-speed railways and train capacity have increased.

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We believe that it possesses certain competitive advantages as compared to other Chinese airlines. We have the most extensive route network and the largest number of regional route bases among Chinese airlines, which our Group believes places it in a favorable position in the route allocation process. We also have the largest aircraft fleet among all Chinese airlines, which, together with our planned aircraft acquisitions, will permit our Group to expand our operations and to improve the deployment of the aircraft in our fleet. We also believe that our dominant presence in the populous and economically developed southern and central regions of China provides it with a competitive advantage in attracting new customers and that our fully integrated flight training, aircraft and engine maintenance and air catering operations enable it to achieve and maintain high quality service to our customers. In light of increasing competition from high-speed trains, we intend to place more flight fleet to the international routes, where we will make an effort for a stronger market position. We also believe that our optimized route network, increased operational efficiency and improved service quality will attract more customers. The proposed cooperation between our Company and the high speed trains operators will also enable us to render a seamless air-ground service to customers which will bring a win-win situation for both our Group and the high speed trains operators.

According to CAAC statistics briefing, the following table sets forth our market share of passengers carried, cargo and mail carried and total traffic of Chinese airlines for the years indicated.

	Passengar Carried				Cargo and Mail Carried (tons)				Total Traffic (tons kilometres)
Year	Industry Total (in millions)		Group’s Share (% of total)		Industry Total (in millions)		Group’s Share (% of total)		Industry Total (in millions)		Group’s Share (% of total)
2013		354.0		25.9		5,613		22.7		67.2		26.0
2014		391.7		25.8		5,933		24.2		74.9		26.4
2015		435.6		25.1		6,253		24.2		85.0		26.3
2016		487.8		23.5		6,669		22.7		96.1		25.4
2017		551.6		25.2		7,058		23.7		108.3		22.9

Domestic Routes

We compete against our domestic competitors primarily on the basis of flight schedule, route network, quality of service, safety, type and age of aircraft and, to a lesser extent, price. We compete against other major Chinese airlines in our various domestic route markets. Of these competitors, the largest are two airlines owned or controlled by the Chinese government, and the remaining airlines are operated by or under the control of various Chinese provincial or municipal governments.

The following table sets forth our market share in terms of passengers carried, cargo and mail carried on departing flights and total departing flights at the 10 busiest airports in China in 2017 according to passenger volume data from CAAC statistics briefing.

Airport	Passenger Carried (% of total)		Cargo and Mail Carried (% of total)		Departing Flight (% of total)
Beijing		16.4		9.4		16.7
Shanghai Pudong		9.3		6.8		10.0
Guangzhou		47.9		33.5		49.7
Chengdu		11.3		12.0		10.5
Shenzhen		27.5		15.3		25.7
Kunming		10.7		14.3		10.3
Shanghai Hongqiao		13.5		24.4		13.6
Xi’an		13.4		11.7		13.7
Chongqing		22.4		19.8		23.7
Hangzhou		24.9		13.5		25.2

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The following table sets forth our market share in terms of passengers carried, cargo and mail carried on departing flights and total departing flights at 8 busiest airports in southern and central China (excluding Guangzhou and Shenzhen, which are included in the table above) in 2017 according to passenger volume data from CAAC statistics briefing.

Airport	Passenger Carried (% of total)		Cargo and Mail Carried (% of total)		Departing Flight (% of total)
Changsha		30.2		36.4		31.2
Wuhan		35.0		32.4		35.6
Zhengzhou		28.4		9.8		29.2
Haikou		22.4		30.1		21.6
Sanya		24.1		35.6		25.0
Nanning		20.1		24.9		21.2
Guilin		19.0		23.5		20.7
Zhuhai		29.6		45.1		28.5

Regional Routes

In 2017, we conducted a total of 18,030 flights on our regional routes, accounting for approximately 22.7% of all passengers carried by Chinese airlines on routes between Hong Kong, Macau or Taiwan and destinations in China. We face less competition on regional routes than that on domestic and international, and earns higher operating margin. Air China, China Eastern Airlines, Air Macau, Cathay Dragon, Cathay Pacific, China Airlines and Eva Airways compete with our Group in the regional traffic markets.

International Routes

We compete with Air China, China Eastern Airlines and many well-established foreign airlines on our international routes. Most of these international competitors have significantly longer operating histories, substantially greater financial and technological resources and greater name recognition than our Group. In addition, the public’s perception of the safety and service records of Chinese airlines may adversely affect our ability to compete against our regional and international competitors. Many of our international competitors have larger sales networks and participate in reservation systems that are more comprehensive and convenient than those of our Group, or engage in promotional activities that may enhance their ability to attract international passengers.

In Southeast Asian routes, our competitors mainly include Thai Airways International, Singapore Airlines, Malaysian Airlines System, Vietnam Airlines, Garuda Indonesia, Philippine Airlines, Air China and China Eastern Airlines. In European routes, our competitors mainly include Air China, China Eastern Airlines, Cathay Pacific and Lufthansa German Airlines. In the United States routes, our competitors mainly include Air China, China Eastern Airlines, Cathay Pacific and United Airlines. In Australian routes, our competitors include Air China, China Eastern Airlines, Cathay Pacific and Qantas Airways. We compete in the international market primarily on the basis of safety, price, timeliness and convenience of scheduling.

39

Airline Subsidiaries

Our Airline Subsidiaries are joint ventures established by our Company and local companies in the provinces or special economic zones where our Airline Subsidiaries are based and are engaged in providing airline and related services. As of December 31, 2017, our Company owns a 55% or 60% equity interest in each of our Airline Subsidiaries.

As of December 31, 2017, Xiamen Airlines operated under the “MF” code with a fleet of 186 aircraft. In 2017, Xiamen Airlines carried a total of about 31.76 million passengers, or approximately 25.15% of the passengers carried by our Group in that year, and had RMB24,907 million in traffic revenue.

As of December 31, 2017, Shantou Airlines operated under “CZ” code with a fleet of 15 aircraft. In 2017, under the centralized allocation of flight routes of our Group, Shantou Airlines carried a total of about 3.14 million passengers, or 2.48% of the passengers carried by our Group in that year. Total traffic revenue of Shantou Airlines for the year ended December 31, 2017 was RMB2,194 million.

As of December 31, 2017, Chongqing Airlines operated under the “OQ” code with a fleet of 19 aircraft. In 2017, under the centralized allocation of flight routes of our Group, Chongqing Airlines carried a total of about 3.13 million passengers, or 2.48% of the total number of passengers carried by our Group in that year. Total traffic revenue of Chongqing Airlines for the year ended December 31, 2017 was RMB2,255 million.

As of December 31, 2017, Zhuhai Airlines operated under the “CZ” code with a fleet of 11 aircraft. In 2017, under the centralized allocation of flight routes of our Group, Zhuhai Airlines carried a total of about 1.93 million passengers, or approximately 1.53% of the total number of passengers carried by our Group in that year. Total traffic revenue of Zhuhai Airlines for the year ended December 31, 2017 was RMB1,506 million.

As of December 31, 2017, Guizhou Airlines operated under the “CZ” code with a fleet of 20 aircraft. In 2017, under the centralized allocation of flight routes of our Group, Guizhou Airlines carried a total of about 3.33 million passengers, or approximately 2.64% of the total number of passengers carried by our Group in that year. Total traffic revenue of Guizhou Airlines was approximately RMB2,697 million for the year ended December 31, 2017.

As of December 31, 2017, Henan Airlines operated under the “CZ” code with a fleet of 31 aircraft. In 2017, under the centralized allocation of flight routes of our Group, Henan Airlines carried a total of about 5.19 million passengers, or approximately 4.11% of the total number of passengers carried by our Group in that year. Total traffic revenue of Henan Airlines was approximately RMB3,851 million for the year ended December 31, 2017.

Insurance

The CAAC maintains fleet and legal liability insurance on behalf of our Group and all other Chinese airlines with PICC Property and Casualty Company Limited, or PICCP&C, and China Pacific Property Insurance Company Ltd., Ping An Property and Casualty Insurance Company of China, Ltd. under the PICCP&C master policy. We maintain aviation hull all risks, spares and airline liability insurance, aircraft hull all risks and spare engines deductible insurance, aviation hull war and allied perils policy of the type and in the amount customary in the Chinese aviation industry.

Under the relevant PRC laws, civil liability of Chinese airlines for death or injuries suffered by passengers on domestic flights is limited to RMB400,000 (approximately US$61,216) per passenger. 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 100,000 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 the damage arose solely from the negligence or other wrongful act of a third party. We believe that our Group maintains adequate insurance coverage for the civil liability that can be imposed in respect of death or injuries to passengers under Chinese law, the Montreal Convention and any agreement which our Group is subject to.

The CAAC allocates insurance premiums payable in respect of the PICCP&C master policy to each participating airline based on the value of the airline’s insured aircraft or, in the case of leased aircraft, based on the amount required by the terms of the lease. Insurance claims made by any participating airline may cause the premiums paid by our Group under the PICCP&C master policy to increase. PICCP&C’s practice has been to reinsure a substantial portion of its aircraft insurance business through reinsurance brokers on the London reinsurance market.

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Intellectual Property

Our businesses and operations, other than the businesses and operations of Xiamen Airlines and Chongqing Airlines, are conducted under the names “China Southern” and “China Southern Airlines” in both English and Chinese. We use as our logo a stylized rendition of a kapok plant. Xiamen Airlines conducts its businesses and operations under the name of “Xiamen Airlines” in English and Chinese and uses its own logo depicting a stylized rendition of an egret. Chongqing Airlines conducts its business and operations under the name of “Chongqing Airlines” in English and Chinese and uses its own logo depicting a cross of two rivers.

We own various trademarks and trade names related to our business. The names “China Southern” and “China Southern Airlines” contain Chinese words of common usage and are therefore not eligible for registration as trade names under current Chinese law. The kapok logo is a trademark registered in China and recorded with the International Air Transport Association (“IATA”), the rights to which are owned by CSAH. Our Company and CSAH have entered into a trademark license agreement (the “Trademark License Agreement”), pursuant to which CSAH has licensed to our Group the right to use the names “China Southern” and “China Southern Airlines” in both English and Chinese and granted our Company a ten-year renewable license from 1997 to use the kapok logo on a world-wide basis. CSAH has retained the right to use the kapok logo in connection with its non-airline related businesses conducted as of the date of the Trademark License Agreement and to permit its affiliates that do not compete, directly or indirectly, with our Group to use the kapok logo. Unless CSAH gives a written notice of termination three months before the expiration of the agreement, the agreement will be automatically renewed for another ten-year term. In May of 2017, the Trademark License Agreement has been automatically renewed by the two parties for another ten-year term ending 2027. Xiamen Airlines owns all rights to its egret logo, which is a trademark registered in China, and recorded with the IATA. Chongqing Airlines also owns all rights to its logo, which is a trademark registered in China, and recorded with the IATA.

41

Iran Sanctions Disclosure

Pursuant to Section 13(r) of the Securities Exchange Act of 1934, or the Exchange Act, if during 2017, our Company or any of our affiliates have engaged in certain transactions with Iran or with persons or entities designated under certain executive orders, our Company would be required to disclose information regarding such transactions in our Annual Report as required under Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, or ITRA. During 2017, our Company operated air services to and from Iran through the specifically designated route of “Beijing - Urumqi - Tehran - Urumqi - Beijing” (the “Iran Route”) and engages in international traffic in passengers, cargo and mail.

In order to provide our aviation service in Iran, our Company has entered into certain grounding service agreement with Iran Air whereby Iran Air provides our Company with grounding service, maintenance and other support services in return for certain service fees to be paid by our Company in accordance with the agreement. Our Company does not provide, nor has it ever provided any equipment, component, or technology to Iran. The service rendered by our Company to Iran is limited to the provision of international traffic in passengers, cargo and mail and those services provided by our local offices and agents to customers. Our Company does not operate flights within Iran.

Our Company’s international route rights, as well as the corresponding landing rights, are derived from air services agreements negotiated between the Chinese government, through the CAAC, and the governments of the relevant foreign countries. With respect to the Iran Route, our Company’s international route rights associated thereto are derived from and based on the bilateral air transport agreement (the “Bilateral Agreement”) entered into by and between the Chinese government and the Iranian government. Both parties are contracting parties to the Convention on International Civil Aviation, opened for signature at Chicago on December 7, 1944, and entered into the Bilateral Agreement with an aim to establish and operate scheduled air services between and beyond the two countries’ respective territories. The Bilateral Agreement, which has been registered with the International Civil Aviation Organization, sets forth general principles and specific rules governing our Company’s aviation services in Iran.

Our Company understands that Iran Air is Iran’s national airline carrier and is designated by the U.S. Department of the Treasury pursuant to Executive Order No. 13382. However, Executive Order No. 13382 only “prohibits all transactions between the designees and any U.S. person.” Our Company is incorporated in the People’s Republic of China and is a foreign issuer in the United States. As our Company is not a U.S. person, our transactions with Iran Air are not prohibited by Executive Order No. 13382. Our Company further understands that it has an obligation to disclose our transactions with Iran Air as described above under Exchange Act Section 13(r)(1)(D)(iii). Iran Air is Iran’s national airline carrier and is controlled or owned by the Government of Iran. Our Company believes that Iran Air can be identified as the Government of Iran under Section 560.304 of title 31, Code of Federal Registration (relating to the definition of the Government of Iran). Our Company has not obtained any specific authorization of a Federal department or agency of the United States concerning our transactions with Iran Air.

Our Company does not anticipate any significant change in our service to Iran, either by way of increasing significantly the size of or altering the nature of our operations in the territory. For the year ended December 31, 2017, the asset of Iran office and revenue generated from the air services to Iran amounted to US$7,948.48 and US$3.89 million, representing only 0.00002% and 0.0199% of the total asset and total revenue generated by our Group for the year ended December 31, 2017, respectively. Therefore, our Company believes that our operations in Iran for the year ended December 31, 2017 are inconsequential and quantitatively immaterial to our business, financial condition and results of operations.

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C. ORGANIZATIONAL STRUCTURE

The following chart illustrates the corporate structure of our Group as of December 31, 2017 and the aggregate effective equity interest of our Company in each of our principal subsidiaries, associates and jointly controlled entities.

The particulars of our principal subsidiaries as of December 31, 2017 are as follows:

Name of Company	Place and Date of Establishment/Operation	Proportion of Ownership Interest Held by our Company
Shantou Airlines Company Limited	PRC July 20, 1993		60	%
Zhuhai Airlines Company Limited	PRC May 8, 1995		60	%
Xiamen Airlines Company Limited	PRC August 11, 1984		55	%
Guizhou Airlines Company Limited	PRC June 17, 1998		60	%
Chongqing Airlines Company Limited	PRC May 30, 2007		60	%
Guangzhou Nanland Air Catering Company Limited	PRC November 21, 1989		70.5	%
Guangzhou Baiyun International Logistic Company Limited	PRC July 23, 2002		61	%
Zhuhai Xiang Yi Aviation Technology Company Limited	PRC July 10, 2002		100	%
Nan Lung International Freight Limited	Hong Kong October 1, 1996		51	%
Beijing Southern Airlines Ground Services Company Limited	PRC April 1, 2004		100	%
China Southern Airlines Henan Airlines Company Limited	PRC September 28, 2013		60	%
Southern Airlines Group Import and Export Trading Company	PRC June 8, 1993		100	%
Southern Airlines General Aviation Company Limited	PRC November 17, 2014		100	%

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The particulars of our principal associates and joint ventures as of December 31, 2017 are as follows:

			Proportion of Ownership Interest Held by
Name of Company	Place and Date of Establishment/Operation		Group Effective Interest			Our Company			Subsidiaries
Guangzhou Aircraft Maintenance Engineering Co., Ltd.		PRC October 28, 1989		50	%		50	%		—
Southern Airlines Group Finance Company Limited		PRC June 28, 1995		33.98	%		25.28	%		8.70	%
Sichuan Airlines Co., Ltd.		PRC August 28, 2002		39	%		39	%		—
Southern Airlines Culture and Media Co., Ltd.		PRC May 13, 2004		40	%		40	%		—
China Southern West Australian Flying College Pty Limited		Australia October 1,1993		48.12	%		48.12	%		—
Guangzhou China Southern Zhongmian Dutyfree Store Co., Limited		PRC March 1, 2001		50	%		50	%		—
Xinjiang Civil Aviation Property Management Limited		PRC December 12, 2002		42.80	%		42.80	%		—

D. PROPERTY, PLANT AND EQUIPMENT

For a discussion of our aircraft, see Item 4 “Information on our Company — History and development of our Company — Aircraft Acquisitions.”

Our headquarters in Guangzhou occupy an area of approximately 1,261,460 square meters of land and a total gross floor area of approximately 738,895 square meters. We lease from CSAH the land in Guangzhou on which our headquarters and other facilities are located. We also lease from CSAH certain buildings mainly at the Haikou, Wuhan, Nanyang, Shenyang, Dalian, Jilin, Harbin, Xinjiang and other PRC cities.

Our principal properties are located at our headquarters site and at our route bases. The following table sets forth certain information with respect to our properties at our headquarters in Guangzhou and certain route bases as of the date hereof.

	Land (in square meters)				Building (in square meters)
	Owned		Leased		Owned		Leased
Guangzhou		1,172,531		88,929		691,355		47,540
Shenzhen		256,280		—		101,502		5,730
Zhuhai		179,415		30,000		61,973		3,047
Changsha		255,422		45,568		86,092		12,836
Haikou		332,961		12,497		65,231		1,288
Wuhan		16,712		38,082		36,429		35,406
Nanyang		—		3,800,994		12,156		24,323
Sanya		106,680		—		38,513		5,421
Shenyang		142,199		70,808		29,078		62,330
Dalian		—		—		64,226		16,869
Jilin		134,488		65,076		78,536		7,767
Harbin		5,381		267,872		40,599		39,693
Xinjiang		2,143		540,493		137,932		2,758
Guangxi		112,246		—		61,093		2,892
Beijing		85,453		—		91,124		26,924
Shanghai		42,292		—		35,512		7,253
Chengdu		—		—		1,964		209
Sydney		—		—		1,151		2,449
Xi’an		—		—		4,367		1,707

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The following table sets forth certain information with respect to the properties of the Airline Subsidiaries as of the date hereof.

	Land (in square meters)				Building (in square meters)
	Owned		Leased		Owned		Leased
Xiamen Airlines		1,534,087		—		723,851		51,290
Shantou Airlines		260,639		1,605		73,499		3,544
Zhuhai Airlines		99,306		—		52,793		1,252
Guizhou Airlines		259,879		—		20,783		15,371
Chongqing Airlines		82,449		—		8,943		12,343
Henan Airlines		388,209		—		217,253		—

As systems for registration and transfer of land use rights and related real property interests in China have been implemented relatively recently, such systems do not yet comprehensively account for all land and related property interests. The land in Guangzhou on which our headquarters and other facilities are located and the buildings that our Company uses at our route bases in Wuhan and Haikou are leased by our Company from CSAH. However, CSAH lacks adequate documentation evidencing CSAH’s rights to such land and buildings, and, as a consequence, the lease agreements between CSAH and our Company for such land may not be registered with the relevant authorities. Lack of registration may affect the validity of such lease agreements. There are certain other parcels of land and buildings owned or used by us that lack adequate documentation. Lack of adequate documentation for land use rights and ownership of buildings may impair our ability to dispose of or mortgage such land use rights and buildings. As of February 2018, the Group was in the process of applying for the land use right certificates and property title certificates in respect of the properties located in Guangzhou (including Guangzhou Baiyun International Airport), Guangxi, Guizhou, Chengdu, Xiamen, Heilongjiang, Jilin, Dalian, Hunan, Beijing, Zhuhai, Shenyang, Shenzhen, Henan, Shantou, Xinjiang, Hainan, Shanghai, Hubei, Chongqing and Hangzhou, in which the Group has interests and for which such certificates have not been granted. Our directors are of the opinion that the use of and the conduct of operating activities at the properties referred to above are not affected by the fact that we have not yet obtained the relevant land use right certificates and property title certificates.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis should be read in conjunction with our consolidated financial statements, which have been prepared in accordance with IFRSs, included elsewhere in this Annual Report.

Critical Accounting Policies

The preparation of the consolidated financial statements requires our Group to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the end of each reporting period, and the reported revenues and expenses during each reporting period. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. Our principal accounting policies are set forth in Note 3 to the consolidated financial statements. We believe that the following critical accounting policies involve the key accounting judgments and estimates used in the preparation of our financial statements.

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Impairment of long-lived assets (other than goodwill)

If circumstances indicate that the carrying amount of a long-lived asset may not be recoverable, the asset may be considered “impaired”, and an impairment loss may be recognised in accordance with IAS 36, Impairment of Assets. The carrying amounts of long-lived assets are reviewed periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. These assets are tested for impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to the recoverable amount. The recoverable amount is the higher of the fair value less costs of disposal and value in use. In particular, in determining the value in use of the Group’s aircraft fleet, expected future cash flows to be generated by the asset are discounted to their present value, which requires significant judgement relating to forecast traffic revenue, forecast operating costs and discount rate applied. The Group uses all readily available information in determining an amount that is a reasonable approximation of recoverable amount, including estimates based on reasonable and supportable assumptions for projections of traffic revenue and operating costs and application of discount rate.

Provision for major overhauls

Provision for the cost of major overhauls to fulfil the lease return conditions for airframes and engines held under operating leases are accrued and charged to the income statement over the estimated overhaul period. This requires estimation of the expected overhaul cycles and overhaul costs, which are based on the historical experience of actual costs incurred for overhauls of airframes and engines of the same or similar types and current economic and airline-related developments. Different estimates could significantly affect the estimated provision and the results of operations.

Frequent flyer revenue

The amount of revenue attributable to the mileage earned by the members of the Group’s frequent flyer award programmes is estimated based on the fair value of the mileage awarded and the expected redemption rate. The fair value of mileage awarded is estimated by reference to external sales. The expected redemption rate is estimated based on historical experience, anticipated redemption patterns and the frequent flyer programmes’ design. Different estimates could significantly affect the estimated deferred revenue and the results of operations.

Depreciation

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 Group reviews the estimated useful lives of assets annually in order to determine the amount of depreciation expense to be recorded during any financial year. The useful lives are based on the Group’s historical experience with similar assets and take into account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates.

Provision for consumable spare parts and maintenance materials

Provision for consumable spare parts and maintenance materials is made based on the difference between the carrying amount and the net realisable value. The net realisable value is estimated based on current market condition, historical experience and the Group’s future operation plan for the consumable spare parts and maintenance materials. The net realisable value may be adjusted due to the change of market condition and the future plan for the consumable spare parts and maintenance materials.

Income tax

There are certain transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional tax will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the year in which such determination is made.

Impairment of trade receivables

When there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables, a provision for impairment of trade receivables is established based on the difference between the receivable’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

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Retirement benefits

According to IAS 19, Employee Benefits, an entity shall account not only for its legal obligation under the formal terms of a defined benefit plan, but also for any constructive obligation that arises from the entity’s informal practices where the entity has no realistic alternative but to pay the employee benefits. The Company believes the payments of welfare subsidy to those retirees who retired before the establishment of Pension Scheme (as defined in Note 51(a)) are discretionary and have not created a legal or constructive obligation. Such payments are made according to the Group’s business performance, and can be suspended at any time (note 14).

Recently Pronounced International Financial Reporting Standards

Information relating to the recently pronounced IFRSs is presented in Note 58 to the consolidated financial statements.

Business Overview

General

Because we finance our aircraft acquisitions mainly through capital leases or bank loans in U.S. dollars, and there are a substantial amount of transactions and obligations denominated in U.S. dollars in relation to our global purchases of jet fuel, lease and purchase of aviation equipment as well as major repairs, in addition to the landing fees of our international flights in the airports of other countries, our business was affected by the Renminbi depreciation. Renminbi depreciation has brought exchange loss to our Group and increased our operating costs which are denominated in foreign currencies.

A number of other external variables, including political and economic conditions in China, tend to have a major impact on our performance. Our financial performance is also significantly affected by factors arising from operating in a regulated industry. As substantially all aspects of our airline operations are regulated by the PRC government, our operating revenues and expenses are directly affected by the PRC government’s policies with respect to domestic air fares, jet fuel prices and landing and navigation fees, among others. The nature and extent of airline competition and the ability of Chinese airlines to expand are also affected by CAAC’s control over route allocations. Any changes in the PRC government’s regulatory policies or any implementation of such policies could have a significant impact on our future operations and our ability to implement our operating strategy.

In addition, 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. In particular, our airline revenue is generally higher in the second half of the year than in the first half of the year.

Like most airlines, we are subject to a high degree of financial and operating leverage. A significant percentage of our operating expenses are fixed costs that do not vary proportionally based on our yields or the load factors. These fixed costs include depreciation expense, jet fuel costs, landing and navigation fees, financing costs, operating lease payments, aircraft maintenance costs and labor for flight crew, cabin crew and ground personnel. Thus, a minor change in our yields or load factors would have a material effect on our results of operations. In addition, certain of these expenses, primarily financing costs and operating lease payments, labor costs and depreciation do not vary based on the number of flights flown. Thus, our operating results can also be substantially affected by minor changes in aircraft utilization rates. We are and will continue to be highly leveraged with substantial obligations denominated in foreign currencies and, accordingly, the results of our operations are significantly affected by fluctuations in foreign exchange rates, particularly for the U.S. dollar. Our net exchange gain of RMB1,801 million was recorded in 2017 mainly due to Renminbi appreciated significantly against U.S. dollar in 2017.

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Certain Financial Information and Operating Data by Geographic Region

The following table sets forth certain financial information and operating data by geographic region for the years ended December 31, 2017, 2016 and 2015.

	Year ended December 31,						2017 vs. 2016% increase			2016 vs. 2015% increase
Traffic	2017		2016		2015		(decrease)			(decrease)
RPK (million)
Domestic		160,427.72		144,979.57		138,769.05		10.66			4.48
Regional		2,934.65		3,083.71		3,526.99		(4.83	)		(12.57	)
International		67,334.50		58,042.36		47,291.67		16.01			22.73
Total		230,696.87		206,105.64		189,587.71		11.93			8.71
RTK (million)
Domestic		15,833.96		14,551.20		13,916.26		8.82			4.56
Regional		282.52		292.46		331.50		(3.40	)		(11.78	)
International		11,204.15		9,542.90		8,140.24		17.41			17.23
Total		27,320.63		24,386.56		22,388.00		12.03			8.93
Passengers carried (thousand)
Domestic		108,616.65		98,463.43		95,121.91		10.31			3.51
Regional		2,329.80		2,340.68		2,571.15		(0.46	)		(8.96	)
International		15,352.29		13,814.52		11,728.96		11.13			17.78
Total		126,298.75		114,618.63		109,422.02		10.19			4.75
Cargo and mail carried (thousand tons)
Domestic		1,048.18		1,083.68		1,030.10		(3.28	)		5.20
Regional		22.01		19.73		19.18		11.56			2.87
International		601.97		509.14		462.27		18.23			10.14
Total		1,672.16		1,612.55		1,511.55		3.70			6.68
Capacity
ASK (million)
Domestic		194,354.34		179,655.46		172,104.99		8.18			4.39
Regional		3,843.89		4,193.19		4,762.25		(8.33	)		(11.95	)
International		82,447.49		72,143.29		58,749.02		14.28			22.80
Total		280,645.72		255,991.94		235,616.26		9.63			8.65
ATK (million)
Domestic		22,168.17		20,740.93		20,055.09		6.88			3.42
Regional		446.80		491.23		562.65		(9.04	)		(12.69	)
International		15,717.21		13,748.02		11,586.92		14.32			18.65
Total		38,332.18		34,980.18		32,204.66		9.58			8.62
Load Factors
Passenger load factor (RPK/ASK) (%)
Domestic		82.5		80.7		80.6		1.84			0.12
Regional		76.4		73.5		74.1		2.81			(0.81	)
International		81.7		80.5		80.5		1.22			/
Overall		82.2		80.5		80.5		1.69			/
Overall load factor (RTK/ATK) (%)
Domestic		71.4		70.2		69.4		1.27			1.15
Regional		63.2		59.5		58.9		3.69			1.02
International		71.3		69.4		70.3		1.88			(1.28	)
Overall		71.3		69.7		69.5		1.55			0.29
Yield
Yield per RPK (RMB)
Domestic		0.53		0.53		0.55		/			(3.64	)
Regional		0.78		0.72		0.71		8.33			1.41
International		0.37		0.40		0.45		(7.50	)		(11.11	)
Overall		0.49		0.50		0.53		(2.00	)		(5.66	)
Yield per RTK (RMB)
Domestic		5.52		5.45		5.65		1.28			(3.54	)
Regional		8.45		7.92		7.89		6.69			0.38
International		2.87		2.94		3.18		(2.38	)		(7.55	)
Overall		4.46		4.50		4.78		(0.89	)		(5.86	)
Financial
Passenger revenue (RMB million)
Domestic		85,392		77,257		76,570		10.53			0.90
Regional		2,281		2,230		2,517		2.29			(11.40	)
International		25,118		23,015		21,151		9.14			8.81
Total		112,791		102,502		100,238		10.04			2.26
Cargo and mail revenue (RMB million)		9,082		7,191		6,861		26.30			4.81

48

A. OPERATING RESULTS

The historical results of operations discussed below may not be indicative of our future operating performance. In addition to the factors discussed under “Overview” above, our future operations will be affected by, among other things, changes in the aviation market, the cost of jet fuel, aircraft acquisition and leasing costs, aircraft maintenance expenses, take-off and landing charges, wages, salaries and benefits and other operating expenses, foreign exchange rates and the rates of income taxes paid.

2017 compared with 2016

The profit attributable to equity shareholders of our Company of RMB5,961 million was recorded in 2017 as compared to the profit attributable to equity shareholders of our Company of RMB5,044 million in 2016. Our operating revenue increased by RMB12,825 million or 11.15% from RMB114,981 million in 2016 to RMB127,806 million in 2017. Passenger load factor was 82.2% in 2017 and 80.51% in 2016. Passenger yield (in passenger revenue per RPK) decreased by 2.00% from RMB0.50 in 2016 to RMB0.49 in 2017. Average yield (in traffic revenue per RTK) decreased by 0.89% from RMB4.50 in 2016 to RMB4.46 in 2017. Operating expenses increased by RMB16,894 million or 15.91% from RMB106,204 million in 2016 to RMB123,098 million in 2017. Operating profit of RMB9,156 million was recorded in 2017 as compared to operating profit of RMB12,612 million in 2016, decreased by RMB3,456 million.

Operating Revenue

	2017					2016
	Operating revenue RMB million			Percentage %		Operating revenue RMB million			Percentage %		Change in revenue %
Traffic revenue		121,873			95.36		109,693			95.40		11.10
Including: Passenger revenue		112,791					102,502					10.04
– Domestic		85,392					77,257					10.53
– Hong Kong, Macau and Taiwan		2,281					2,230					2.29
– International		25,118					23,015					9.14
Cargo and mail revenue		9,082					7,191					26.30
Other operating revenue		5,933			4.64		5,288			4.60		12.20
Mainly including:
Commission income		2,781					2,518					10.44
Hotel and tour operation income		547					625					(12.48	)
General aviation income		467					461					1.30
Ground services income		429					384					11.72
Expired sales in advance of carriage		396					376					5.32
Total operating revenue		127,806			100.00		114,981			100.00		11.15
Less: fuel surcharges income		(5,355	)				(5,798	)				(7.64	)
Total operating revenue excluding fuel surcharges		122,451					109,183					12.15
	2017					2016
	Traffic revenu RMB million			Percentage %		Traffic revenu RMB million			Percentage %		Change in traffic revenue %
Passenger Revenue		112,791			92.55		102,502			93.44		10.04
Cargo and Mail Revenue		9,082			7.45		7,191			6.56		26.30
Traffic revenue		121,873			100.00		109,693			100.00		11.10
	2017					2016
	Passenger revenu RMB million			Percentage %		Passenger revenu RMB million			Percentage %		Change in passenger revenue %
Domestic		85,392			75.71		77,257			75.37		10.53
Hong Kong, Macau and Taiwan		2,281			2.02		2,230			2.18		2.29
International		25,118			22.27		23,015			22.45		9.14
Passenger revenue		112,791			100.00		102,502			100.00		10.04

49

Substantially all of our operating revenue is attributable to airlines transport operations. Traffic revenue accounted for 95.36% and 95.4% of total operating revenue in 2017 and 2016 respectively. Passenger revenue and cargo and mail revenue accounted for 92.55% and 7.45% respectively of the total traffic revenue in 2017. During the reporting period, our total traffic revenue was RMB121,873 million, representing an increase of RMB12,180 million or 11.10% from prior year, mainly due to the increase in traffic capacity and traffic volume. The other operating revenue is mainly derived from commission income, hotel and tour operation income, general aviation income, ground services income and expired sales in advance of carriage.

The increase in operating revenue was primarily due to a 10.04% increase in passenger revenue from RMB102,502 million in 2016 to RMB112,791 million in 2017. The total number of passengers carried increased by 10.19% to 126.3 million passengers in 2017. RPKs increased by 11.93% from 206,106 million in 2016 to 230,697 million in 2017, primarily as a result of the increase in number of passengers carried. Passenger yield per RPK decreased from RMB0.50 in 2016 to RMB0.49 in 2017, which is mainly due to the drop of average ticket price.

Domestic passenger revenue, which accounted for 75.71% of the total passenger revenue in 2017, increased by 10.53% from RMB77,257 million in 2016 to RMB85,392 million in 2017. Domestic capacity in ASKs increased by 8.18%, while passenger traffic in RPKs increased by 10.66%, resulting in an increase in passenger load factor by 1.84 percentage points from 80.70% in 2016 to 82.54% in 2017. Domestic passenger yield per RPK was RMB0.53 in 2017 which is consistent with the same in 2016.

Hong Kong, Macau and Taiwan passenger revenue, which accounted for 2.02% of total passenger revenue, increased by 2.29% from RMB2,230 million in 2016 to RMB2,281 million in 2017. For Hong Kong, Macau and Taiwan flights, passenger traffic in RPKs decreased by 4.83%, while passenger capacity in ASKs decreased by 8.33%, resulting in an increase in passenger load factor by 2.81 percentage points from 73.54% in 2016 to 76.35% in 2017. Passenger yield per RPK increased from RMB0.72 in 2016 to RMB0.78 in 2017.

International passenger revenue, which accounted for 22.27% of total passenger revenue, increased by 9.14% from RMB23,015 million in 2016 to RMB25,118 million in 2017. For international flights, passenger traffic in RPKs increased by 16.01%, while passenger capacity in ASKs increased by 14.28% resulting in 1.22 percentage points increase in passenger load factor from 80.45% in 2016 to 81.67% in 2017. Passenger yield per RPK decreased from RMB0.40 in 2016 to RMB0.37 in 2017.

Cargo and mail revenue, which accounted for 7.45% of the Group’s total traffic revenue and 7.11% of total operating revenue, increased by 26.30% from RMB7,191 million in 2016 to RMB9,082 million in 2017. The increase was attributable to the increase in cargo and mail carried.

Other operating revenue increased by 12.20% from RMB5,288 million in 2016 to RMB5,933 million in 2017. The increase was primarily due to the increase of commission income.

50

Operating Expenses

Total operating expenses in 2017 amounted to RMB123,098 million, representing an increase of RMB16,894 million or 15.91% over 2016, primarily due to the increase in staff cost, fuel cost and aircraft and transportation service expense. Total operating expenses as a percentage of total operating revenue was 96.32% in 2017 and 92.37% in 2016.

	2017				2016
	Operating expense RMB million		Percentage %		Operating expense RMB million		Percentage %		Change in Operating expenses %
Flight operation expenses		62,978		51.16		51,461		48.45		22.38
Mainly including:
Jet fuel costs		31,895				23,799				34.02
Aircraft operating lease charges		8,022				7,330				9.44
Flight personnel payroll and welfare		10,574				9,215				14.75
Maintenance expenses		11,877		9.65		11,318		10.66		4.94
Aircraft and transportation service expenses		22,935		18.63		20,215		19.03		13.46
Promotion and selling expenses		6,881		5.59		6,304		5.94		9.15
General and administrative expenses		3,391		2.75		2,815		2.65		20.46
Depreciation and amortization		13,162		10.69		12,619		11.88		4.30
Impairment on property, plant and equipment		324		0.26		71		0.07		356.34
Others		1,550		1.27		1,401		1.32		10.64
Total operating expenses		123,098		100.00		106,204		100.00		15.91

Flight operations expenses, which accounted for 51.16% of total operating expenses, increased by 22.38% from RMB51,461 million in 2016 to RMB62,978 million in 2017, primarily as a result of increase in RTK due to the increase of capacity and the increase in jet fuel costs because of increase in average fuel prices. Jet fuel costs, which accounted for 50.64% of flight operations expenses in 2017, increased by 34.02% from RMB23,799 million in 2016 to RMB31,895 million in 2017.

Maintenance expenses, which accounted for 9.65% of total operating expenses, increased by 4.94% from RMB11,318 million in 2016 to RMB11,877 million in 2017. The increase was mainly due to fleet expansion.

Aircraft and transportation service expenses, which accounted for 18.63% of total operating expenses, increase by 13.46% from RMB20,215 million in 2016 to RMB22,935 million in 2017. The increase was primarily due to a 13.74% rise in landing and navigation fees from RMB13,109 million in 2016 to RMB 14,910 million in 2017, resulted from the increase in the number of take-off and landings for international flights.

Promotion and selling expenses, which accounted for 5.59% of total operating expenses, increased by 9.15% from RMB6,304 million in 2016 to RMB6,881 million in 2017, mainly due to the decrease in ticket office expenses.

General and administrative expenses, which accounted for 2.75% of the total operating expenses, increased by 20.46% from RMB2,815 million in 2016 to RMB3,391 million in 2017, mainly due to the increase in general corporate expenses.

Depreciation and amortization, which accounted for 10.69% of total operating expenses, increased by 4.30% from RMB12,619 million in 2016 to RMB13,162 million in 2017, mainly due to fleet expansion.

Operating Profit

Operating profit of RMB9,156 million was recorded in 2017 (2016: RMB12,612 million). The decrease in operating profit was mainly due to the net effect of increase in operating revenue by RMB12,825 million or 11.15% and increase in operating expenses by RMB16,894 million or 15.91% compared with 2016.

51

Other Income or Expenses

Other net income increased by RMB613 million from RMB3,835 million in 2016 to RMB4,448 million in 2017, mainly due to the increase in gain on transfer of aircraft purchase quota.

Interest expense increased by RMB282 million from RMB2,465 million in 2016 to RMB2,747 million in 2017 was mainly due to the increase in the interest rate and the weighted average balance of obligations under finance leases during the year. Net exchange gain of RMB1,801 million was recorded in 2017, compared with net exchange loss of RMB3,276 million in 2016, mainly due to the translation of balances of borrowings and obligations under finance lease which are denominated in USD and the appreciation of RMB againt USD.

Income Tax

Income tax expense of RMB1,976 million was recorded in 2017, increased by RMB213 million from RMB1,763 million in 2016, mainly due to the increase of profit before income tax in the reporting period.

2016 compared with 2015

The profit attributable to equity shareholders of our Company of RMB5,044 million was recorded in 2016 as compared to the profit attributable to equity shareholders of our Company of RMB3,736 million in 2015. Our operating revenue increased by RMB3,329 million or 3.0% from RMB111,652 million in 2015 to RMB114,981 million in 2016. Passenger load factor was 80.5% in 2016 and 2015. Passenger yield (in passenger revenue per RPK) decreased by 5.66% from RMB0.53 in 2015 to RMB0.50 in 2016. Average yield (in traffic revenue per RTK) decreased by 5.86% from RMB4.78 in 2015 to RMB4.50 in 2016. Operating expenses increased by RMB4,712 million or 4.6% from RMB101,492 million in 2015 to RMB106,204 million in 2016. Operating profit of RMB12,612 million was recorded in 2016 as compared to operating profit of RMB13,438 million in 2015, decreased by RMB826 million.

Operating Revenue

	2016					2015
	Operating revenue RMB million			Percentage %		Operating revenue RMB million			Percentage %		Change in revenue %
Traffic revenue		109,693			95.4		107,099			95.9		2.4
Including: Passenger revenue		102,502					100,238					2.3
– Domestic		77,257					76,570					0.9
– Hong Kong, Macau and Taiwan		2,230					2,517					(11.4	)
– International		23,015					21,151					8.8
Cargo and mail revenue		7,191					6,861					4.8
Other operating revenue		5,288			4.6		4,553			4.1		16.1
Mainly including:
Commission income		2,518					1,545					63.0
Hotel and tour operation income		625					621					0.6
General aviation income		461					490					(5.9	)
Ground services income		384					345					11.3
Expired sales in advance of carriage		376					459					(18.1	)
Total operating revenue		114,981			100.0		111,652			100.0		3.0
Less: fuel surcharges income		(5,798	)				(6,300	)				(8.0	)
Total operating revenue excluding fuel surcharges		109,183					105,352					3.6

52

Traffic revenue composition

	2016						2015
	Traffic revenue RMB million		Percentage %		Traffic revenue RMB million		Percentage %		Change in traffic revenue %
Passenger Revenue		102,502		93.4		100,238		93.6		2.3
Cargo and Mail Revenue		7,191		6.6		6,861		6.4		4.8
Traffic revenue		109,693		100.0		107,099		100.0		2.4

Passenger revenue composition

	2016						2015
	Passenger revenue RMB million		Percentage %		Passenger revenue RMB million		Percentage %		Change in passenger revenue %
Domestic		77,257		75.4		76,570		76.4		0.9
Hong Kong, Macao and Taiwan		2,230		2.2		2,517		2.5		(11.4	)
International		23,015		22.4		21,151		21.1		8.8
Passenger revenue		102,502		100.0		100,238		100.0		2.3

Substantially all of our operating revenue is attributable to airline and airline-related operations. Traffic revenue accounted for 95.4% and 95.9% of total operating revenue in 2016 and 2015 respectively. Passenger revenue and cargo and mail revenue accounted for 93.4% and 6.6% respectively of the total traffic revenue in 2016. During the reporting period, our total traffic revenues was RM109,693 million, representing an increase of RMB2,594 million or 2.4% from prior year, mainly due to the increase in traffic capacity and traffic volume. The other operating revenue is mainly derived from commission income, expired sales in advance of carriage hotel and tour operation income, general aviation income, ground services income and expired sales in advanced carriage.

The increase in operating revenue was primarily due to a 2.3% increase in passenger revenue from RMB100,238 million in 2015 to RMB102,502 million in 2016. The total number of passengers carried increased by 4.75% to 114.62 million passengers in 2016. RPKs increased by 8.71% from 189,588 million in 2015 to 206,106 million in 2016, primarily as a result of the increase in number of passengers carried. Passenger yield per RPK decreased from RMB0.53 in 2015 to RMB0.50 in 2016, which is mainly due to the drop of average ticket price.

Domestic passenger revenue, which accounted for 75.4% of the total passenger revenue in 2016, increased by 0.9% from RMB76,570 million in 2015 to RMB77,257 million in 2016. Domestic capacity in ASKs increased by 4.39%, while passenger traffic in RPKs increased by 4.48%, resulting in an increase in passenger load factor by 0.1 percentage points from 80.6% in 2015 to 80.7% in 2016. Domestic passenger yield per RPK decreased from RMB0.55 in 2015 to RMB0.53 in 2016.

Hong Kong, Macau and Taiwan passenger revenue, which accounted for 2.2% of total passenger revenue, decreased by 11.4% from RMB2,517 million in 2015 to RMB2,230 million in 2016. For Hong Kong, Macau and Taiwan flights, passenger traffic in RPKs decreased by 12.57%, while passenger capacity in ASKs decreased by 11.95%, resulting in an decrease in passenger load factor by 0.6 percentage points from 74.1% in 2015 to 73.5% in 2016. Passenger yield per RPK increased from RMB0.71 in 2015 to RMB0.72 in 2016.

International passenger revenue, which accounted for 22.4% of total passenger revenue, increased by 8.8% from RMB21,151 million in 2015 to RMB23,015 million in 2016. For international flights, passenger traffic in RPKs increased by 22.73%, while passenger capacity in ASKs increased by 22.80%. Passenger load factor was 80.5% in 2015 and 2016. Passenger yield per RPK decreased from RMB0.45 in 2015 to RMB0.40 in 2016.

Cargo and mail revenue, which accounted for 6.6% of our total traffic revenue and 6.3% of total operating revenue, increased by 4.8% from RMB6,861 million in 2015 to RMB7,191 million in 2016. The increase was attributable to the increase in cargo and mail carried.

53

Other operating revenue increased by 16.1% from RMB4,553 million in 2015 to RMB5,288 million in 2016. The increase was primarily due to the increase of commission income.

Operating Expenses

Total operating expenses in 2016 amounted to RMB106,204 million, representing a increase of RMB4,712 million or 4.6% over 2015, primarily due to the increase in payroll, landing and navigation fees, depreciation and amortization and aircraft operating lease charges partially offset by the decrease in jet fuel costs. Total operating expenses as a percentage of total operating revenue was 92.4% in 2016 and 90.9% in 2015.

	2016				2015
	Operating expense RMB million		Percentage %		Operating expense RMB million		Percentage %		Change in Operating expenses %
Flight operation expenses		51,461		48.4		50,412		49.7		2.1
Mainly including:
Jet fuel costs		23,799				26,274				(9.4	)
Aircraft operating lease charges		7,330				6,153				19.1
Flight personnel payroll and welfare		9,215				8,070				14.2
Maintenance expenses		11,318		10.7		10,407		10.3		8.8
Aircraft and transportation service expenses		20,215		19.0		17,908		17.6		12.9
Promotion and selling expenses		6,304		5.9		6,976		6.9		(9.6	)
General and administrative expenses		2,815		2.7		2,464		2.4		14.2
Depreciation and amortization		12,619		11.9		11,845		11.7		6.5
Impairment on property, plant and equipment		71		0.1		90		0.1		(21.1	)
Others		1,401		1.3		1,390		1.4		0.8
Total operating expenses		106,204		100.0		101,492		100.0		4.6

Flight operations expenses, which accounted for 48.4% of total operating expenses, increased by 2.1% from RMB50,412 million in 2015 to RMB51,461 million in 2016, primarily as a result of increase in RTK due to the increase of capacity netted off by the decrease in jet fuel costs because of decrease in average fuel prices. Jet fuel costs, which accounted for 46.2% of flight operations expenses in 2016, decreased by 9.42% from RMB26,274 million in 2015 to RMB23,799 million in 2016.

Maintenance expenses, which accounted for 10.7% of total operating expenses, increased by 8.8% from RMB10,407 million in 2015 to RMB11,318 million in 2016. The increase was mainly due to fleet expansion.

Aircraft and transportation service expenses, which accounted for 19.0% of total operating expenses, increase by 12.9% from RMB17,908 million in 2015 to RMB20,215 million in 2016. The increase was primarily due to a 13.9% rise in landing and navigation fees from RMB11,510 million in 2015 to RMB13,109 million in 2016, resulted from the increase in the number of take-off and landings for international flights.

Promotion and selling expenses, which accounted for 5.9% of total operating expenses, decreased by 9.6% from RMB6,976 million in 2015 to RMB6,304 million in 2016, mainly due to the decrease in sales commissions expenses.

General and administrative expenses, which accounted for 2.7% of the total operating expenses, increased by 14.2% from RMB2,464 million in 2015 to RMB2,815 million in 2016, mainly due to the increase in general corporate expenses.

Depreciation and amortization, which accounted for 11.9% of total operating expenses, increased by 6.5% from RMB11,845 million in 2015 to RMB12,619 million in 2016, mainly due to fleet expansion.

54

Operating Profit

Operating profit of RMB12,612 million was recorded in 2016 (2015: RMB13,438 million). The decrease in operating profit was mainly due to the net effect of increase in operating revenue by RMB3,329 million or 3.0% and increase in operating expenses by RMB4,712 million or 4.6% compared with 2015.

Other Income or Expenses

Other net income increased by RMB557 million from RMB3,278 million in 2015 to RMB3,835 million in 2016, mainly due to the increase of government grants.

Interest expense increased by RMB277 million from RMB2,188 million in 2015 to RMB2,465 million in 2016 was mainly due to the increase in the interest rate and the weighted average balance of obligations under finance leases during the year.

Net exchange loss of RMB3,276 million was recorded in 2016, a decrease of RMB2,677 million from RMB5,953 million in 2015, mainly due to the decrease in USD dominated borrowings during the reporting period.

Income Tax

Income tax expense of RMB1,763 million was recorded in 2016, increased by RMB463 million from RMB1,300 million in 2015, mainly due to the increase of profit before income tax in the reporting period.

B. LIQUIDITY AND CAPITAL RESOURCES

Generally, we meet our working capital and capital expenditure requirements through cash from our operations, the proceeds of certain long-term and short-term bank loans, capital lease financing and rebates available under certain of our aircraft leases.

As of December 31, 2017, we had banking facilities with several PRC commercial banks for providing loan finance up to an approximate amount of RMB181,922 million to our Group. As of December 31, 2017, an approximate amount of RMB142,239 million was unutilized. As of December 31, 2017 and 2016, our cash and cash equivalents totaled RMB6,826 million and RMB4,152 million, respectively.

Net cash generated from operating activities in 2017, 2016 and 2015 were RMB17,732 million, RMB23,764 million and RMB23,734 million, respectively. Our operating cash inflows are primarily derived from the provision of air transportation and related service for customers. The decrease of operating cash inflows of our Group was mainly due to the increase of jet fuel cost. The vast majority of tickets are purchased prior to the day on which transportation is provided. Operating cash outflows primarily are related to the recurring operating expenses, including flight operation, maintenance, aircraft and transportation service, etc.

Net cash used in investing activities in 2017, 2016 and 2015 were RMB8,236 million, RMB15,750 million and RMB6,931 million, respectively. Cash capital expenditures in 2017, 2016 and 2015 were RMB13,846 million, RMB18,967 million and RMB12,139 million, respectively, reflecting predominantly additional investments in aircraft and flight equipment under our fleet expansion plans and additional investments in other facilities and buildings used in operations.

Net cash used in financing activities were RMB6,796 million, RMB8,459 million and RMB27,695 million in 2017, 2016 and 2015, respectively. Net cash inflow/(outflows) from borrowings and repayments of borrowings amounted to RMB2,557 million, RMB(481) million and RMB(20,042) million in 2017, 2016 and 2015, respectively. The borrowings were used for capital expenditures and general working capital. Repayment of capital leases in 2017, 2016 and 2015 were RMB9,835 million, RMB6,994 million, RMB8,209 million, respectively, resulting from the increase of aircraft acquisitions under capital leases.

55

As of December 31, 2017, our aggregate long-term borrowings and obligations under capital leases (including borrowings and capital leases obligations due within one year) totaled RMB95,585 million. In 2018, 2019, 2020, 2021 and thereafter, amounts payable under such loans and obligations will be RMB15,283 million, RMB14,174 million, RMB16,060 million, RMB13,862 million and RMB36,206 million respectively. Such borrowings and obligations were mainly denominated in U.S. dollars, Euro and Japanese Yen. In the normal course of business, we are exposed to fluctuations in foreign currencies. Our exposure to foreign currencies primarily results from our foreign currency liabilities. Depreciation or appreciation of the Renminbi against foreign currencies affects our results significantly because our foreign currency liabilities generally exceed our foreign currency assets. We are not able to hedge our foreign currency exposure effectively other than by retaining our foreign currency denominated earnings and receipts to the extent permitted by the SAFE, or subject to certain restrictive conditions, entering into forward foreign exchange contracts with authorized banks.

As of December 31, 2017, our short-term bank loans were RMB20,626 million. Our weighted average interest rate on short-term bank loans was 3.76% per annum as of December 31, 2017. As at December 31, 2017, our outstanding ultra-short-term financing bills was nil. The primary use of the proceeds of our short-term bank loans and ultra-short-term financing bills is to finance working capital and capital expenditure needs. We have generally been able to arrange short-term borrowings with domestic banks in China as necessary and believes it can continue to obtain them based on our well-established relationships with various lenders.

As of December 31, 2017, we had obligations under operating leases totaling RMB69,465 million, predominately for aircraft. Of such amount, RMB8,283 million, RMB8,776 million, RMB8,172 million, RMB7,256 million, RMB6,971 million and RMB30,007 million, respectively, is due in 2018, 2019, 2020, 2021 and 2022 and thereafter.

As of December 31, 2017, we had a working capital deficit of RMB51,693 million, as compared to a working capital deficit of RMB54,168 million as of December 31, 2016. Historically, we operated in a negative working capital position, relying on cash inflow from operating activities and renewal of short-term bank loans to meet our short-term liquidity and working capital needs. In 2018 and thereafter, our liquidity is primarily dependent on our ability to maintain adequate cash inflows from operations to meet our debt obligations as they fall due, and our ability to obtain adequate external financing to meet our committed future capital expenditure. As of December 31, 2017, we had banking facilities with several PRC commercial banks for providing loan finance up to approximately RMB181,922 million (2016: RMB139,274 million), of which approximately RMB142,239 million (2016: RMB110,199 million) was unutilized.

As we are subject to a high degree of operating leverage, a minor decrease in our yield and/or load factor could result in a significant decrease in our operating revenue and hence our operating cash flows. This could arise in such circumstances as where competition between Chinese airlines increases or where PRC aviation demand decreases. Similarly, a minor increase in the jet fuel prices, particularly in the domestic market, could result in a significant increase in our operating expenses and hence a significant decrease in our operating cash flows. This could be caused by fluctuations in supply and demand in international oil market. We currently complied with the financial covenants attached to certain of our borrowings. Nevertheless, as we are subject to a high degree of financial leverage, an adverse change in our operating cash flows could adversely affect our financial health and hence weaken our ability to obtain additional loans and lease facilities and to renew our short-term bank loans facilities as they fall due.

As of December 31, 2017, we had capital commitments as follows:

	2018		2019		2020		2021		2022 and afterwards		Total
	(RMB million)
Acquisition of aircraft and related equipment		28,125		28,370		22,686		4,808		2,845		86,834
Others		9,462		9,359		1,098		1,095		1,008		22,022
Total capital commitments		37,587		37,729		23,784		5,903		3,853		108,856

Others mainly represent airport and office facilities and equipment, overhaul and maintenance bases and training facilities.

As of December 31, 2017, our cash and cash equivalents totaled RMB6,826 million. Of such balance, 35.88% was denominated in U.S. Dollars, Hong Kong Dollars, Euro, Japanese Yen and other foreign currencies.

In view of the unutilized bank facilities of RMB142,239 million, we expect that we will have sufficient funding sources to meet our cash requirements in the foreseeable future.

C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

None.

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D. TREND INFORMATION

Other than as disclosed in the foregoing disclosures and elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2018 to December 31, 2018 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause our disclosed financial information to be not necessarily indicative of future operating results or financial conditions.

E. OFF-BALANCE SHEET ARRANGEMENTS

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition that is material to investors. In particular, we (i) have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any unconsolidated entity; (ii) have not entered into any derivative contracts that are both indexed to our own stock and classified in stockholders’ equity, or not reflected in our statement of financial position; and (iii) 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.

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

The following table sets forth our obligations and commitments to make future payments under contracts and under commitments (excluding share of commitments of a joint venture) as of December 31, 2017.

	As of December 31, 2017 Payment due by period										As of December 31, 2016
	Total		Less than 1 year		1 - 3 years		3 - 5 years		After 5 years		Total
Short-term bank loans and ultra-short-term bills (Note 1)		20,953		20,953		—		—		—		26,467
Long-term bank and other loans (Note 1)		29,502		7,823		14,808		6,843		28		21,411
Obligations under capital leases		78,899		10,764		20,194		19,690		28,251		71,388
Operating lease commitments		69,465		8,283		16,948		14,227		30,007		61,215
Aircraft purchase commitments (Note 2)		86,834		28,125		51,056		7,653		—		83,532
Other capital commitments		22,022		9,462		10,457		2,103		—		21,609
Investment commitments		—		—		—		—		—		170
Total		307,675		85,410		113,463		50,516		58,286		285,792

Note 1 Interest on variable rate loans was estimated based on the current rate in effect at December 31, 2017.

Note 2 Amounts shown are net of previously paid purchase deposits.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

The following table sets forth certain information concerning directors, senior management and supervisors of our Company. There were certain changes in our Company’s directors, senior management and supervisors as of April 26, 2018, details of which are set forth below.

Name	Position	Gender	Age
Wang Chang Shun	Executive Director, Chairman of our Board	Male	60
Tan Wan Geng	Executive Director, Vice Chairman of our Board and President	Male	53
Zhang Zi Fang	Executive Director and Executive Vice President	Male	59
Zheng Fan	Independent Non-executive Director	Male	62
Gu Hui Zhong	Independent Non-executive Director	Male	61
Tan Jin Song	Independent Non-executive Director	Male	53
Jiao Shu Ge	Independent Non-executive Director	Male	52
Pan Fu	Chairman of the Supervisory Committee	Male	55
Li Jia Shi	Supervisor	Male	56
Mao Juan	Supervisor	Female	44
Han Wen Sheng	Executive Vice President	Male	50
Xiao Li Xin	Executive Vice President, Chief Accountant and Chief Financial Officer	Male	51
Ren Ji Dong	Executive Vice President	Male	53
Wang Zhi Xue	Executive Vice President	Male	56
Li Tong Bin	Executive Vice President and Chief Engineer	Male	56
Zhang Zheng Rong	Chief Operation Officer	Male	55
Su Liang	Chief Economist	Male	55
Chen Wei Hua	Chief Legal Adviser	Male	51
Guo Zhi Qiang	Chief Marketing Officer	Male	54
Xie Bing	Company Secretary to our Board	Male	44
Feng Hua Nan	COO Flight Safety	Male	55
Luo Ming Hao	Chief Pilot	Male	55
Guo Jian Ye	Chief Customer Officer	Male	55

Directors

Wang Chang Shun, male, aged 60, Ph.D. degree, graduated from University of Science and Technology of China majoring in management science and engineering and is a member of Communist Party of China (“CPC”). He began his career in February 1976. He has acted as Vice Director and Director of aeronautical meteorology supervision department of CAAC Urumqi Administration, Vice President and a member of standing committee of Xinjiang Airlines (Vice Chairman of CAAC Urumqi Administration) and then as Party Secretary and Vice President of Xinjiang Airlines (Vice Chairman of CAAC Urumqi Administration). In November 2000, he acted as General Manager and Deputy Party Secretary of the Company. In April 2001, he also acted as the Vice Chairman of the Company; in September 2002, he acted as Vice President and Party member of CSAH and also as Vice Chairman, General Manager and Deputy Party Secretary of the Company. In August 2004, he served as Deputy Director and Party member of Civil Aviation Administration of China. In March 2008, he acted as Deputy Director and Party member of Civil Aviation Administration of China. In October 2011, he was appointed as General Manager and Deputy Party Secretary of CSAH and in January 2012, he also was appointed as the Chairman of Air China International Corporation. He was appointed as Vice Minister and Party Leadership Group Member of Ministry of Transport and Secretary of Communist Party Committee of the direct department in January 2014, General Manager and Deputy Party Secretary of CSAH from February 2016 to May 2016, General Manager and Deputy Party Secretary of CSAH and Chairman of the Company from May 2016 to December 2016. From December 2016 to November 2017, he has been Chairman, Party Secretary of CSAH and Chairman of the Company. Since November 2017, he has been Chairman, Party Secretary of CSAH and Chairman and Party Secretary of the Company. He is also a deputy to the 12th National People’s Congress. He is the representative of the 19th Communist Party of China National Congress, standing committee member of the 13th National Committee of the Chinese People’s Political Consultative Conference and a member of the 12th CPC Guangdong Provincial Committee.

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Tan Wan Geng, male, aged 53, graduated from Sun Yat-sen University, majoring in regional geography, with qualification of a Master’s degree. He is an economist and a member of CPC. Mr. Tan began his career in August 1990 and served as the head of the Infrastructure Department and Director of Human Resources and Administration Department of the Beijing Aircraft Maintenance and Engineering Corporation from 1992 to 1996. He served as the Deputy Director General of Human Resources Division of the CAAC from May 1996 to September 1998. Mr. Tan served as the Deputy Director General of Personnel and Education Division of the CAAC from September 1998 to December 2000. He had been the Director General and Party Secretary of the CAAC Northeast Regional Administration from December 2000 to January 2006, and became the Party Secretary and Executive Vice President of the Company from January 2006 to February 2007. He has been the Director of the Company since June 2006. He had been the Party Member of CSAH and the Party Secretary and Executive Vice President and Director of the Company from February 2007 to January 2009. He had been the Party Member of CSAH and the President, the Party Secretary and the Director of the Company from January 2009 to February 2009. He had been the Party Member of CSAH and the President, the Deputy Party Secretary and the Director of the Company from February 2009 to May 2011. He had been the Party Secretary of CSAH and General Manager, the Deputy Party Secretary and the Director of the Company from May 2011 to January 2013. He was the Party Secretary of CSAH and General Manager, the Deputy Party Secretary and the Vice Chairman of the Board from January 2013 to December 2016. Since December 2016 to date, Mr. Tan has been the President, Director and Deputy Party Secretary of CSAH and General Manager, the Deputy Party Secretary and the Vice Chairman of the Board. Mr. Tan has been a member of the 11th CPC Guangdong Provincial Committee.

Zhang Zi Fang, male, aged 59, graduated with a college degree from foundation science profession for Party administrative cadres of Liaoning University. While Mr. Zhang was at work, he obtained an Executive Master of Business Administration (EMBA) degree from Tsinghua University and is a senior expert of political science. Mr. Zhang is a CPC member and began his career in February 1976. He served as Deputy Commissioner of the China Northern Airlines Company as well as the Deputy Commissioner of the Office, Deputy Commissioner of Shenyang Flight Team from 1993 to 2000. He served as the Party Secretary of the Jilin Branch of China Northern Airlines Company and the General Manager of Dalian Branch from 2000 to 2003. He had been the Director of Political Works Department of CSAH from October 2003 to February 2005. Subsequently, Mr. Zhang was appointed as the Deputy Party Secretary and Secretary of the Commission for Discipline of the Company from February 2005 to December 2007. He had been Executive Vice President and the Deputy Party Secretary of the Company from December 2007 to February 2009. He was the Party Secretary and Executive Vice President of the Company from February 2009 to August 2011. Mr. Zhang has been the Director of the Company since June 2009. He had been the Party member of CSAH and the Party Secretary, Executive Vice President and the Director of the Company from August 2011 to April 2016. He had acted as the Party Member of the CSAH and the Director, Party Secretary, Executive Vice President of the Company as well as the Director and Chairman of China Southern Henan Airlines Company Limited from April 2016 to August 2016. Mr. Zhang has been Deputy Party Secretary, Executive Vice President of CSAH and Director, Party Secretary, Executive Vice President of the Company as well as the Director and Chairman of China Southern Henan Airlines Company Limited since August 2016. Since November 2017, he has been Deputy Party Secretary and Executive Vice President of CSAH, Director, Deputy Party Secretary and Executive Vice President of China Southern Airlines Company Limited, Chairman of China Southern Airlines Henan Airlines Company Limited. He has been a member of Standing Committee of 12th Guangdong Provincial Committee of the Chinese People’s Political Consultative Conference since January 2018 to date.

Zheng Fan, male, aged 62, graduated with a bachelor’s degree from Beijing Normal University majoring in School Education and is a senior expert of political science. Mr. Zheng is a CPC member and began his career in 1974. He served as a teacher of Faculty of Education at Beijing Normal University from February 1982. He worked as a cadre at public relationship department of the Chinese Communist Party Central Committee and was a deputy Director level investigator from January 1986, deputy Director-general (temporary post) of public relationship department of CBRC Shenzhen Municipality Luohu District Committee and deputy Director general (temporary post) of public relationship department of Shenzhen Committee of Communist Party of China from March 1988, deputy Director of public relationship department of CBRC Shenzhen Municipality Futian District Committee and office Director of working committee under the CBRC Shenzhen Municipality Committee from March 1991. Since August 1994, he has been appointed as general manager of general administration office of Overseas Chinese Town Economic Development Company, general manager’s assistant of OCT Group and managing Director of Overseas Chinese Town (HK) Company Limited since December 1997, deputy secretary of the Party Committee, secretary of Discipline Inspection Commission and Chief Cultural Officer of Overseas Chinese Group Company since August 2000, secretary of the Party Committee and vice-president of Overseas Chinese Group Company since March 2008, secretary of the Party Committee and vice-chairman of Overseas Chinese Town Company Limited since January 2010, chief supervisor since December 2014 and Professional External Director for Central State-owned Enterprises since February 2016. He acted as Council Member of China Overseas Exchange Association, Director of relation of the Two Shores Across the Strait Association, vice president of Guangdong’s Association For Promotion of Cooperation between Guangdong, Hong Kong and Macao and vice-chairman of Guangdong Province Association of Entrepreneurs. He was also a Congressman of the 4th term and 5th term of the People’s Congress for Shenzhen Municipality and a member of the 11th session of Guangdong Provincial Committee of Political Consultative Conference. Mr. Zheng has been independent non-executive Director of the company since 20 December 2017.

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Gu Hui Zhong, male, aged 61, graduated with a master degree from Beihang University majoring in International Finance and is a senior accountant with professor level. Mr. Gu is a CPC member and began his career in 1974. He served as deputy chief and chief of the General Office of Financial Division of Aviation Industry Department, Director of International Affairs Financial Division of Aviation Industry Corporation of China, general manager of Zhongzhen Accounting Consultative Corporation, vice Director general of Financial Department of Aviation Industry Corporation of China and deputy Directorgeneral of Financial Department of State Commission of Science, Technology and Industry for National Defence. From June 1999 to February 2005, he acted as a member of the Communist Party and vice president of Aviation Industry Corporation of China I. From February 2005 to August 2008, he acted as a member of Party Leadership Group, vice president and chief accountant of Aviation Industry Corporation of China I. From August 2008 to January 2017, he acted as a member of Party Leadership Group, vice president and chief accountant of Aviation Industry Corporation of China. He previously served as chairman of AVIC I International Leasing Co., Ltd., chairman of AVIC I Financial Co., Ltd., chairman of CATIC International Holdings Limited, chairman of AVIC Capital Co., Ltd and chairman of AVIC International Vanke Company Limited. He is currently served as supervisors of the Bank of Communications, is a chairman of the Expert Committee of government authorities in the PRC and vice chairman of the Accounting Society of China. Since 20 December 2017, Mr. Gu has been independent non-executive Director of the Company.

Tan Jin Song, male, aged 53, graduated from Renmin University of China with an on-job doctor degree in Accounting. Mr. Tan is a Chinese Certified Public Accountant and a CPC member. Mr. Tan began his career in 1985 and was a teacher in Shaoyang School of Finance and Accounting of Hunan Province and the Deputy Dean of the School of Management of Sun Yat-sen University. Mr. Tan is currently a professor and a doctorate-tutor of the School of Management of Sun Yat-sen University. He is also a member of the MPAcc Education Instruction Committee, a member of China Institute of Internal Audit, Vice President of Guangdong Institute of Certified Public Accountants and a member of China Audit Society. Currently, Mr. Tan also serves as the independent Director of Poly Real Estate Company Limited, Guangzhou Hengyun Enterprises Holdings Limited, Shanghai RAAS Blood Products Co., Ltd. and Zhuhai Huafa Industrial Company Limited. Mr. Tan has been the independent non-executive Director of the Company since 26 December 2013.

Jiao Shu Ge, male, aged 52, with a master degree, first graduated from the Control Theory Faculty of the Department of Mathematics of Shandong University with a bachelor degree, and then graduated from the Systems Engineering Faculty of No. 2 Research Institute of the Ministry of Aerospace Industry with a Master’s degree in Engineering. Mr. Jiao has extensive experience in funds management and equity management. Currently, Mr. Jiao is the Director and President of CDH China Management Company Limited (“CDH Investments”) and is the founder of CDH Investments. He was a computer researcher of 710 Research Institute of the former Ministry of Aerospace Industry of China, the Deputy General Manager of Direct Investment Department of China International Capital Corporation Ltd. (“CICC”). Mr. Jiao was the non-executive Director of China Yurun Food Group Limited and China Shanshui Cement Group Limited. Currently, he is also the Director of the associated companies of CDH Investments, the independent non-executive Director of China Mengniu Dairy Company Limited, the non-executive Director and Vice Chairman of WH Group Limited, the Director of Joyoung Co., Ltd., the Vice President of Henan Shuanghui Investment & Development Co.,Ltd. and the Director of a number of companies including Beijing Taiyang Pharmaceutical Industry Company Limited, Chery Automobile Co., Ltd., Inner Mongolia Hetao Spirit Group Co., Ltd., Fujian Nanping Nanfu Battery Co.,Ltd. and Shanghai Qingchen Real Estate Development Co., Ltd. Mr Jiao has been the independent non-executive Director of the Company since 30 June 2015.

Supervisors

Pan Fu, male, aged 55, graduated with a master degree from Chongqing University majoring in Power Systems and Automation, and is a senior engineer. Mr. Pan is a CPC member and began his career in July 1986, and served successively as the Deputy Head of the Planning Department of Electric Power Industry Bureau of Yunnan Province, the Deputy Director of the Planning & Development Department of Yunnan Electric Power Group Co., Ltd., the Deputy Director and Director of Kunming Power Plant, the Deputy Chief Engineer and chief engineer of Yunnan Electric Power Corporation from 1994 to 2003. He served as the deputy Director (work as chair) and Director of the Department of Security Supervision of China Southern Power Grid Company Ltd. from February 2003 to April 2004, he served as the Director of the China Southern Power Grid Technology and Research Center from April 2004 to January 2005, and served as the General Manager (legal representative) and Deputy Party Secretary of the Guizhou Power Grid Corporation from January 2005 to November 2007. Mr. Pan served as the Director of the Planning Development Department of China Southern Power Grid Company Ltd. from November 2007 to November 2010. Mr. Pan has been the party member and team leader of the Discipline Inspection Commission of CSAH since November 2010 and the supervisor and chairman of the Supervisory Committee of the Company since December 2010.

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Li Jia Shi, male, aged 56, graduated from Guangdong Polytechnic Normal University majoring in Economics and Mathematics, and obtained an Economic Administration bachelor degree from Correspondence School under the Party School of the CPC Central Committee and an Executive Master of Business Administration (EMBA) degree from Tsinghua University and is an expert of political science. Mr. Li is a CPC member and began his career in August 1976. He served as the Deputy Head of the Organization Division of the Party Committee of the China Southern Airlines (Group) Company, the party secretary of Guangzhou Nanland Air Catering Company Limited and the Deputy Head (work as chair) of the Organization Division of the Party Committee of the China Southern Airlines (Group) Company from 1994 to 1999. Mr. Li served as the head of the Organization Division of the Party Committee of CSAH from December 1999 to December 2003; and served as the Deputy Secretary of the Disciplinary Committee and the Director of the Disciplinary Committee Office of the Company from December 2003 to December 2007. Mr. Li served as a member of the Standing Committee of the CPC, the Secretary of the Disciplinary Committee and the Director of the Disciplinary Committee Office of the Company from December 2007 to February 2012. Mr. Li has been the supervisor of the Company since June 2009. He has been the team deputy leader of the Discipline Inspection Commission of CSAH, and member of the Standing Committee of the CPC, Secretary of the Disciplinary Committee of the Company from February 2012 to November 2017. He has acted as the Chairman of the Labour Union of CSAH and the Standing Member of Party Committee and Chairman of the Labour Union of China Southern Airlines Company Limited since November 2017.

Mao Juan, female, aged 44, with a bachelor’s degree, graduated from Operation and Management Department in Civil Aviation College of China majoring in civil aviation program and finance, and obtained an on-job bachelor degree in Auditing from the School of Adult Education, Harbin University of Science and Technology. Ms. Mao is a CPC member and began her career in July 1993. She served as Deputy General Manager of Hainan Branch Comprehensive Trading Company of the Company, Deputy Manager of Finance Department in Hainan Branch of the Company and Manager of Audit and System Office of Finance Department in the Company. From August 2011 to May 2016, she acted as Deputy General Manager of Audit Department in the Company. She has served various positions in the Company, such as general manager of Audit Department, from June 2016 to May 2017. She has been the deputy general manager of Audit Department in the Company from May 2017 to November 2017. She has served as the General Manager of the Company’s Audit Department since December 2017. She currently serve as the general manager of audit department of CSAH, the Chairman of the Supervisory Committee of Guangzhou Nanland Air Catering Company Limited and Nan Lung Freight Company Limited, as well as the supervisor of Southern Airlines Group Finance Company Limited, Xiamen Airlines Company Limited, Chongqing Airlines Company Limited, Guizhou Airlines Company Limited, Zhuhai Airlines Company Limited, China Southern Airlines Henan Airlines Company Limited, and Guangzhou Baiyun International Logistic Company Limited, etc.

Senior Management

Han Wen Sheng, male, aged 50, graduated from Management Department of Tianjin University, majoring in engineering management, with qualification of a Master’s degree. He is a member of CPC and began his career in August 1987.From September 1999 to June 2001, he acted as Deputy Director General of Cadre Training Center of the Company. He served as Director of The Research Bureau of the Company from June 2001 to January 2002. From January 2002 to November 2005, he acted as general manager of Labour Department and Secretary of CPC General Committee of the Company. From November 2005 to June 2007, he served as a member of Party Committee and the Deputy Director of the Commercial Steering Committee and general manager as well as Deputy Party Secretary of the sales and marketing department of the Company. From June 2007 to December 2009, he served as general manager of Shanghai base and Deputy Party Secretary of the Company. He acted as Deputy Party Secretary and Deputy Director of the Marketing Management Committee of the Company from December 2009 to October 2011. From October 2011 to October 2016, he was Party Secretary and Deputy Director of the Marketing Management Committee of the Company. From October 2016 to November 2017, he has been the Party member and Deputy General Manager of China Southern Air Holding Limited Company. He served as the Party member and Deputy General Manager of China Southern Air Holding Limited Company and Deputy General Manager of the Company since November 2017. For now, he also acts as Vice Chairman of Sichuan Airlines Corporation Limited and Vice Director General of China Air Transport Association.

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Xiao Li Xin, male, aged 51, graduated from Guangdong Academy of Social Sciences with a master degree in Economics and then obtained an on-job Executive Master of Business Administration (EMBA) degree from Tsinghua University. He is a qualified senior accountant and a certified public accountant. Mr. Xiao is a CPC member and began his career in July 1991. From June 1999 to March 2001, he acted as the General Manager Assistant of the Finance Department of the China Southern Airlines (Group) Company and served as the Deputy General Manager of the Finance Department of the Company from March 2001 to January 2002. He served as the General Manager and Deputy Secretary of the General Party Branch of the Finance Department of the Company from January 2002 to February 2007. Mr. Xiao served as the deputy chief accountant and general manager of the Finance Department of the Company from February 2007 to October 2007, and served as the General Manager and Secretary of the General Party Branch of Southern Airlines Group Finance Company Limited from October 2007 to February 2008. He served as the General Manager and Party Secretary of Southern Airlines Group Finance Company Limited from February 2008 to April 2015. Mr. Xiao has been the Chief Accountant and Chief Financial Officer of the Company since April 2015 to October 2016. From October 2016 to November 2017, he has served as Party member and Chief Accountant of CSAH and Chief Accountant and Chief Financial Officer of the Company. From December 2017 till now, he has served as Party member and Chief Accountant of CSAH and Executive Vice President, Chief Accountant and Chief Financial Officer of the Company. For now, he also serves as chairman of Guizhou Airlines Company Limited, Chairman of Shantou Airlines Company Limited, Chairman of Xiamen Airlines as well as Director of China Southern Airlines Overseas (Hong Kong) Co. Ltd.

Ren Ji Dong, male, aged 53, graduated from Nanjing University of Aeronautics and Astronautics, majoring in Aircraft Engine Design and obtained an Executive Master of Business Administration (EMBA) degree from Tsinghua University, and he is a senior engineer. Mr. Ren is a CPC member and began his career in August 1986. Mr. Ren served as the No. 2 Workshop Manager, Deputy Plant Manager and Deputy General Manager of Engineering Department of the aircraft maintenance factory of Urumqi Civil Aviation Administration (Xinjiang Airlines) from 1995 to 2000. He served as the Deputy Director (deputy general manager) and a member of the Standing Committee of the CPC of Urumqi Civil Aviation Administration (Xinjiang Airlines) from January 2000 to December 2001, and a member of the party committee and the Deputy General Manager of Xinjiang Airlines from December 2001 to June 2004, and the Party Secretary and Deputy General Manager of CSAH Xinjiang Company from June 2004 to December 2004, the Party Secretary and Deputy General Manager of Xinjiang Branch of the Company from January 2005 to February 2015, a member of the Standing Committee of the CPC and the Executive Vice President of the Company from March 2005 to February 2007; a member of the Standing Committee of the CPC of the Company and the General Manager and Deputy Party Secretary of Xinjiang Branch from January 2007 to April 2009.Mr. Ren has been a member of the Standing Committee of the CPC of the Company and the Executive Vice President of the Company since May 2009.

Wang Zhi Xue, male, aged 56, has a college degree from Civil Aviation Flight University of China majoring in Aircraft Piloting, and obtained an on-job university degree from Civil Aviation Flight University of China majoring in Wingmanship, and is a command pilot. Mr. Wang is a CPC member, and began his career in February 1981. Mr. Wang successively served as the Deputy General Manager and Manager of the Flight Safety Technology Division of Zhuhai Airlines Company Limited, the Senior Flight Instructor of Model B737, Deputy Chief Pilot and Director of the Flight Safety Technology Division as well as the Deputy Chief Pilot and Manager of the Flight Safety Technology Management Division from 1995 to 2002 of Shantou Airlines Company Limited of CSAH. He also acted as the Deputy General Manager of Shantou Airlines Company Limited from June 2002 to October 2004, and the General Manager of the Flight Management Division of the Company from October 2004 to February 2009, and the General Manager and Deputy Party Secretary of Guangzhou Flight Division of the Company from February 2009 to July 2012. Mr. Wang has been a member of the Standing Committee of the CPC, Executive Vice President and chief pilot of the Company from August 2012 to December 2016. He has been a member of the Standing Committee of the CPC and Executive Vice President of the Company from December 2016 until now. For now, he also serves as Chairman of Zhuhai Airlines Company Limited.

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Li Tong Bin, male, aged 56, has college qualification and graduated from Civil Aviation Institute of China majoring in Maintenance of Aircraft Electrical Equipment. He obtained on-job Master of Business Administration (MBA) from Hainan University and Executive Master of Business Administration (EMBA) form Tsinghua University, and is a senior engineer. Mr. Li is a CPC member and began his career in August 1983, and successively served as the Deputy Head of Technical Division of Aircraft Maintenance Plant, the head of Maintenance Plant and the deputy Director of Aircraft Engineering Department (aircraft maintenance base), the Director of Aircraft Engineering Department (aircraft maintenance base) of China Northern Airlines Company, the General Manager of Jilin branch of China Northern Airlines Company from 1994 to 2003. He also acted as the Deputy General Manager and Deputy Party Secretary of Zhuhai Airlines Company Limited from September 2004 to January 2005, the General Manager and Deputy Party Secretary of Zhuhai Airlines Company Limited from January 2005 to April 2012, and the party secretary and Deputy General Manager of Northern Branch of the Company from April 2012 to April 2014. Mr. Li was the Chief Engineer, General Manager and Deputy Party Secretary of Aircraft Engineering Department of the Company from April 2014 to August 2015. Mr. Li has been a member of the Standing Committee of the CPC, Executive Vice President and Chief Manager, as well as General Manager and Deputy Party Secretary of Aircraft Engineering Department of the Company since September 2015 to December 2016. From December 2016 till now, he has been a member of the Standing Committee of the CPC, Executive Vice President and Chief Manager. For now, Mr. Li also serves as Chairman of Shenyang Northern Aircraft Maintenance Co., Ltd., Southern Airlines Group Import and Export Trading Company and Guangzhou Aircraft Maintenance Engineering Co., Ltd.

Zhang Zheng Rong, male, aged 55, has a college degree from Civil Aviation Flight University of China majoring in Aircraft Piloting, and obtained an on-job Executive Master of Business Administration (EMBA) degree from Tsinghua University. He is a CPC member and began his career in February 1982. He served as Vice Captain of the Fifth Sub- Flight Corps under Sixth Flight Corps of Civil Aviation Administration, Sub-Captain, Vice Captain and Captain of China Southern Airlines Flight Corps, Vice President of Flight Corps of the Company, General Manager of Department of Security Supervision of the Company, as well as General Manager and Deputy Party Secretary of Guangzhou Flight Division of the Company. In August 2007, he was appointed as Chief Pilot of the Company and General Manager and Deputy Party Secretary of Guangzhou Flight Division of the Company. Since April 2012, he served as the Chief Pilot and Director of Aviation Security Department of CSAH and in July 2012, he served as the chief pilot and Aviation Security Minister of China Southern Airlines (Group) Company. Since April 2014, he has acted as Chief Pilot, Chief Safety Officer and Director of Aviation Security Department of CSAH. He has served as COO of the Company since January 2017. Since November 2017, he has been the General Manager Assistant of CSAH and COO of the Company.

Su Liang, male, aged 55, graduated from the University of Cranfield, United Kingdom with a master degree majoring in Air Transport Management, and is an engineer. Mr. Su is a CPC member and began his career in December 1981. From 1998 to 2000, he successively served as Deputy General Manager of the Flight Operations Division, Deputy General Manager and Manager of Planning and Management Division of CSAH Shenzhen Company. Mr. Su was the Secretary to the Board from July 2000 to December 2003, the Secretary to the Board and Director of Board Secretariat of the Company from December 2003 to November 2005, the Secretary to the Board and Vice Director of Commercial Steering Committee of the Company from November 2005 to February 2006, the Company Secretary and Director of Company Secretary Office and Vice Director of Commercial Steering Committee of the Company from February 2006 to January 2007, and the Secretary to the Board and Director of Company Secretary Office from January 2007 to November 2007. Mr. Su has been the Chief Economist of the Company since December 2007. For now, he also serves as Director of Sichuan Airlines Company Limited, chairman of Southern Airlines Culture and Media Co., Ltd. and chairman of China Southern West Australian Flying College Pty Ltd..

Chen Wei Hua, male, aged 51, graduated from the School of Law of Peking University with a bachelor degree, who is an economist, a qualified lawyer in the PRC and a qualified corporate legal counselor. Mr. Chen is a CPC member and joined the aviation industry in July 1988. He successively served as Deputy Director of China Southern Airlines (Group) Corporation, Deputy Director of the Office (Director of the Legal Department) of the Company and China Southern Airlines (Group) Corporation from 1997 to 2004. Mr. Chen was the Chief Legal Adviser of the Company and Director of the Legal Department of the Company from June 2004 to October 2008. Mr. Chen has been the General Counsel and General Manager of the Legal Department of the Company since October 2008. He has served as Chief Legal Adviser of the Company since April 2017. For now, he also acts as Director of Xiamen Airlines Company Limited.

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Guo Zhi Qiang, male, aged 54, is an economist who graduated with a master degree from Party School of Xinjiang Uyghur Autonomous Region majoring in Business Administration. Mr. Guo is a CPC member and began his career in January 1981. He successively served as the Xi’an Office manager, Beijing Office manager and General Manager of Transportation Department of Xinjiang Airlines; the Deputy General Manager of Xinjiang Airlines; the Beijing Office Director of CSAH, the General Manager and the Party Secretary of China Southern Airlines Beijing Office from 1995 to 2004. He served as a member of the Standing Committee of the CPC and the Deputy General Manager of CSAH Xinjiang Branch from June 2004 to December 2004, a member of the Standing Committee of the CPC and the Deputy General Manager of China Southern Airlines Xinjiang Branch from January 2005 to December 2005. Mr. Guo served as a member of Party Committee and the Deputy General Manager of the Shenzhen Branch of the Company from December 2005 to February 2008 and the President and Chief Executive Officer as well as Deputy Party Secretary of Chongqing Airlines Company Limited from February 2008 to May 2009. He served as a member of Party Committee and the Deputy Director of the Commercial Steering Committee of the Company from May 2009 to September 2009, the Director and Deputy Party Secretary of the Commercial Steering Committee of the Company from September 2009 to September 2012. Mr. Guo acted as the COO Marketing and Sales of the Company, the Director and the Deputy Party Secretary of the Commercial Steering Committee of the Company from September 2012 to July 2014. Mr. Guo has been the COO Marketing and Sales of the Company since July 2014. For now, he also serves as Chairman of China Southern Jia Yuan (Guangzhou) Air Products Co., Ltd., Guangzhou Nanland Air Catering Co., Ltd., Guangzhou China Southern PRC Zhongmian Dutyfree Store Co., Limited., China Southern Airlines General Aviation Limited and Shenzhen Air Catering Company Limited.

Xie Bing, male, aged 44, with a university degree, graduated from Nanjing University of Aeronautics and Astronautics, majoring in Civil Aviation Management. He subsequently received a master degree of business administration, a master degree of business administration (international banking and finance) and an Executive Master of Business Administration (EMBA) degree from Jinan University, the University of Birmingham, Britain and Tsinghua University, respectively. Mr. Xie is a Senior Economist, fellow member of The Hong Kong Institute of Chartered Secretaries, and has the qualification for Company Secretary of companies listed on Shanghai Stock Exchange and also has the qualification for Company Secretary of companies listed on Stock Exchange. Mr. Xie is a CPC member and began his career in July 1995. He successively served as the Assistant of Company Secretary of the Company, and the Executive Secretary of the General Office of CSAH from 2003 to 2007. Mr. Xie has been the Company Secretary and Deputy Director of the Company Secretary Office from November 2007 to December 2009. Mr. Xie has been the Company Secretary and Director of the Company Secretary Office from December 2009 to May 2017. Form May 2017 till now, he has been the Company Secretary and Director of the Company Secretary Bureau of the company. For now, he also acts as Chairman of China Southern Airlines Group Capital Holding Limited and CSA International Finance Leasing Co., Ltd..

Feng Hua Nan, male, aged 55, graduated with a college degree from China Civil Aviation Flying College, majoring in Aircraft Piloting, and obtained an on-job master degree in Aeronautical Engineering from Beijing University of Aeronautics and Astronautics and an Executive Master of Business Administration (EMBA) from the School of Economics and Management of Tsinghua University. He is a commanding pilot. Mr. Feng is a CPC member and began his career in January 1983. He successively served as the Director of Zhuhai Flight Training Centre of China Southern Airlines (Group) Company and the Deputy General Manager of Flight Operation Division of the Company from 1994 to 1999. He was the General Manager of Flight Safety Technology Department from December 1999 to October 2002, and the General Manager of Flight Technology Management Department of the Company from November 2002 to September 2004. Mr. Feng also served as the Party Secretary and Deputy General Manager of Guizhou Airlines Company Limited from September 2004 to February 2006, and then served as the General Manager and Deputy Party Secretary of Guizhou Airlines Company Limited from February 2006 to July 2014. He has been the COO Flight Safety of the Company since August 2014. For now, he also serves as President of Zhuhai Xiang Yi Aviation Technology Co., Ltd..

Luo Ming Hao, male, aged 55, Mr. Luo obtained a college diploma in aircraft aviation from the China Civil Aviation Flight College, a postgraduate degree in economics (in-service) from Hunan Provincial Party Committee College and an executive master degree in business administration (EMBA) from School of Economics and Management of Tsinghua University. Mr. Luo is a member of the Communist Party of China. Mr. Luo began his career in July 1982. From May 1996 to October 1997, he served as the deputy manager of Aviation Department of China Southern Airlines (Group) Hunan Company; from October 1997 to June 1998, he served as the deputy manager of Beihai Operation Branch of China Southern Airlines Hunan Company; from June 1998 to May 2002, he served as the manager of Beihai Operation Branch of China Southern Airlines Hunan Company; from May 2002 to December 2006, he served as the deputy general manager of Hunan Branch of China Southern Airlines Company Limited; from December 2006 to December 2010, he served as the general manager and the deputy secretary of the Party of Cabin Department of China Southern Airlines Company Limited; from December 2010 to July 2012, he served as the member of the Party Committee, the general manager and the deputy secretary of the Party of Dalian Branch of China Southern Airlines Company Limited; from July 2012 to March 2018, he served as the member of the Party Committee, the general manager and the deputy secretary of the Party of Guangzhou Flight Department of China Southern Airlines Company Limited.

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Guo Jian Ye, male, aged 55, graduated with a master degree from Party School of Civil Aviation Flight University of China majoring in Aircraft Piloting. He got the on-job university degree from South China Normal University majoring in Political Education in Education Management Department. He also obtained a master’s degree from the Party School of the Central Committee of CPC majoring in economics and management. He is a CPC member and began his career in May 1980. He was appointed as Committee Secretary, Director of Advertising and Promotion Department of CAAC Central and Southern Regional Administration, Director of Air Transportation Administration Political Office of CAAC Central and Southern Regional Administration, Vice Director of Air Transportation Administration under CAAC Central and Southern Regional Administration and General Manager, Vice Director of Guangdong CAAC Central and Southern Industrial Co., Ltd., Head of CAAC Henan Safety Supervision Office, Director of Safety Supervision Administration, Secretary of standing committee and the member of standing committee of CAAC Central and Southern Regional Administration, as well as the Vice Director. In July 2012, he served as a member of standing committee, General Manager and Deputy Party Secretary of Heilongjiang Branch of the Company. From July 2014 to January 2017, he acted as a Party member, Director and Deputy Party Secretary of marketing management committee of the Company. Since January 2017, he has been the Chief Customer Officer of the Company.

Save as disclosed above, none of the above Directors or Supervisors, senior management of our Company has any relationship with any Directors, Supervisors, senior management, substantial shareholders of our Company.

B. COMPENSATION

The aggregate compensation paid to all Directors, Supervisors and Senior Management for 2017 was RMB14.74 million. For the year ended December 31, 2017, we paid an aggregate of approximately RMB1.84 million on behalf of our executive Directors, Supervisors and Senior Management pursuant to the pension scheme and the retirement plans operated by various municipal and provincial governments in which we participate.

Details of the remuneration of Directors’ and Supervisors’ remuneration for the year ended December 31, 2017 are set out below:

	Directors’ fees RMB’000		Salaries, allowancs and benefits in kind RMB’000		Retirement scheme contributions RMB’000		Total RMB’000
Non-executive Directors
Yuan Xin An		—		—		—		—
Yang Li Hua		—		—		—		—
Executive Directors
Wang Chang Shun		—		—		—		—
Tan Wan Geng		—		—		—		—
Zhang Zi Fang		—		—		—		—
Li Shao Bin		—		812		123		935
Independent Non-executive Directors
Tan Jin Song		150		—		—		150
Zheng Fan		—		—		—		—
Jiao Shu Ge		150		—		—		150
Gu Hui Zhong		—		—		—		—
Ning Xiang Dong		150		—		—		150
Liu Chang Le		150		—		—		150
Guo Wei		150		—		—		150
Supervisors
Pan Fu		—		—		—		—
Li Jia Shi		—		901		126		1,027
Mao Juan		—		324		120		444
Zhang Wei		—		—		—		—
Yang Yi Hua		—		—		—		—
Wu De Ming		—		419		127		546
Total		750		2,456		496		3,702

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C. BOARD PRACTICES

Each director’s service contract with our Company or any of its subsidiaries provides prorated monthly salary upon termination of employment in accordance with his contract. The director is entitled to paid leave under his contract. The term of office of a director is three years. The terms of the eighth session of our board of directors will expire on December 20, 2020. A director may serve consecutive terms upon re-election.

Strategic and Investment Committee

The Strategic and Investment Committee comprises three members and is chaired by Mr. Wang Chang Shun. The other two members are Mr. Gu Hui Zhong as independent non-executive Director and Mr. Jiao Shu Ge as independent non-executive Director.

Audit and Risk Management Committee

The Audit and Risk Management Committee is appointed by our board of Directors and consists of three independent non-executive directors. The current members of the Audit and risk management committee are Tan Jin Song, Gu Hui Zhong and Jiao Shu Ge. Tan Jin Song is the Chairman of the Audit and Risk Management Committee. A member may serve consecutive terms upon re-election. At least once a year, the committee is required to meet with our Company’s external auditors without any executive members of our board in attendance. The quorum necessary for the transaction of any business is two committee members. The Audit and Risk Management Committee held 18 meetings in 2017, which were attended by all members.

The Audit and Risk Management Committee is required, amongst other things, to oversee the relationship with the external auditors, to review our interim results and annual financial statements, to monitor compliance with statutory and listing requirements, to review the scope, if necessary, to engage independent legal or other advisers as it determines is necessary and to perform investigations. In addition, the Audit and Risk Management Committee also examines the effectiveness of our Company’s internal controls, which involves regular reviews of the internal controls of various corporate structures and business processes on a continuous basis, and takes into account their respective potential risks and severity, in order to ensure the effectiveness of our Company’s business operations and the realization of our corporate objectives and strategies. The scope of such examinations and reviews includes finance, operations, regulatory compliance and risk management. The Audit and Risk Management Committee also reviews our Company’s internal audit plan, and submits relevant reports and concrete recommendations to our board on a regular basis.

Our Company has an internal audit department which reviews procedures in all major financial and operational activities. This department is led by the head of internal audit.

Remuneration and Evaluation Committees

The Remuneration and Evaluation Committees is comprised of three members. Currently, the Remuneration and Evaluation Committees is chaired by independent non-executive director Gu Hui Zhong with independent non-executive director Zhang Zi Fang and non-executive director Zheng Fan An as members. The term of office of each member is three years. A member may serve consecutive terms upon re-election. The Remuneration and Evaluation Committees held 3 meeting in 2017, which were attended by all members.

The responsibilities of the Remuneration and Evaluation Committees are to make recommendations on the remuneration policy and structure for directors and senior management of our Company, to establish regular and transparent procedures on remuneration policy development and improvement and submit our Company’s “Administrative Measures on Remuneration of Directors” and “Administrative Measures on Remuneration of Senior Management”. In particular, the Remuneration and Evaluation Committees has the duty to ensure that the directors or any of their associates shall not be involved in the determination of their own remuneration packages.

The Remuneration and Evaluation Committees consulted, when appropriate, the Chairman and/or the President about its proposals relating to the remuneration of other executive directors. The Remuneration and Evaluation Committees is provided with sufficient resources to discharge its duties and professional advice is available if necessary. The Remuneration and Evaluation Committees is also responsible for assessing performance of executive directors and approving the terms of executive directors’ service contracts. The Remuneration and Evaluation Committees has performed all its responsibilities under its terms of reference in 2017.

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Nomination Committee

The Nomination Committee was established on June 28, 2007. Before that, nomination of Directors and other senior management was mainly undertaken by our board. According to the Articles of Association, our board has the authority to appoint from time to time any person as director to fill a vacancy or as additional director. In selecting candidate directors, our board focuses on their qualifications, technical skills, experiences (in particular, the experience in the industry in which our Group operates in case of candidates of executive directors) and expected contributions to our Group.

As of December 31, 2017, the Nomination Committee consists of three members, including Zheng Fan as Chairman and Wang Chang Shun (independent non-executive director) and Jiao Shu Ge (independent non-executive director) as members. The responsibilities of the Nomination Committee are to make recommendations to our board in respect of the size and composition of our board based on the operational activities, assets and shareholding structure of our Company; study the selection criteria and procedures of directors and executives and give advice to our board; identify qualified candidates for Directors and executives; investigate and propose candidates for directors and managers and other senior management members to our board.

In accordance with relevant laws and regulations as well as the provisions of the Articles of Association of our Company, the Nomination Committee shall study and resolve on the selection criteria, procedures and terms of office for directors and managers with reference to our Company’s actual situation. Any resolution made in this regard shall be filed and proposed to our board for approval and shall be implemented accordingly. The Nomination Committee is provided with sufficient resources to discharge its duties and independently engages intermediate agencies to provide professional advice on its proposals if necessary.

The Nomination Committee held 3 meetings in 2017, which was attended by all members.

Aviation Safety Committee

The Aviation Safety Committee comprises three members and is chaired by Mr. Tan Wan Geng as non-executive Director. The other two members are Mr. Zheng Fan as independent non-executive Director and Mr. Tan Jin Song as independent non-executive Director.

D. EMPLOYEES

As of December 31, 2017, we had 96,234 employees, including 8,957 pilots, 19,632 flight attendants, 16,031 maintenance personnel, 9,409 passenger transportation personnel, 6,791 cargo transportation personnel, 10,340 ground service personnel, 2,519 flight operation officers, 2,301 flight security guards, 1,474 information system personnel, 2,485 financial personnel, and 16,295 other personnel. All of our pilots, flight attendants, maintenance personnel, administrative personnel and sales and marketing personnel are contract employees.

Our employees are members of a trade union organized under the auspices of the All-China Federation of Trade Unions, which is established in accordance with the Trade Union Law of China. One representative of our Company labor union currently serve on the Supervisory Committee of our Company. Each of our subsidiaries has its own trade union. We have not experienced any strikes, slowdowns or labor disputes that have interfered with our operations, and we believe that our relations with our employees are good.

All employees of our Group receive cash remuneration and certain non-cash benefits. Cash remuneration consists of salaries, bonuses and cash subsidies provided by our Group. Salaries are determined in accordance with the national basic wage standards. The total amount of wages payable by our Group to our employees is subject to a maximum limit based on the profitability of our Group and other factors. Bonuses are based on the profitability of our Group. Cash subsidies are intended as a form of cost-of-living adjustment. In addition to cash compensation, our contract employees receive certain non-cash benefits, including housing, education and health services, and our temporary employees also receive certain health services, housing fund and education.

Employee benefits

Employee benefits are all forms of considerations given and other related expenditures incurred in exchange for services rendered by employees. Except for termination benefits, employee benefits are recognized as a liability in the period in which the associated services are rendered by employees, with a corresponding increase in cost of relevant assets or expenses in the current period.

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Retirement benefits

Our employees participate in several defined contribution retirement schemes organized separately by the PRC municipal and provincial governments in regions where our major operations are located. We are required to contribute to these schemes at rates ranging from 13% to 20% (2016: 13% to 20%) of salary costs including certain allowances. A member of the retirement schemes is entitled to pension benefits from the Local Labour and Social Security Bureau upon his/her retirement. The retirement benefit obligations of all retired staff of our Group are assumed by these schemes. We, at our sole discretion, had made certain welfare subsidy payments to these retirees.

In 2014, our Company and our major subsidiaries joined a new defined contribution retirement scheme that was implemented by CSAH. The annual contribution to the Pension Scheme is based on a fixed specified percentage of prior year’s annual wage. There will be no further obligation beyond the annual contribution according to the Pension Scheme. The total contribution into the Pension Scheme in 2017 was approximately RMB546 million.

Housing fund and other social insurances

We contribute on a monthly basis to housing funds organized by municipal and provincial governments based on certain percentages of the salaries of employees. Our liability in respect of these funds is limited to the contributions payable in each year.

We also pay cash housing subsidies on a monthly basis to eligible employees. The monthly cash housing subsidies are reflected in the consolidated income statement.

Termination benefits

When we terminate the employment relationship with employees before the employment contracts expire, or provides compensation as an offer to encourage employees to accept voluntary redundancy, a provision for the termination benefits provided is recognized in the consolidated income statement when both of the following conditions are satisfied:

• We have a formal plan for the termination of employment or has made an offer to employees for voluntary redundancy, which will be implemented shortly; and

• We are not allowed to withdraw from termination plan or redundancy offer unilaterally.

Workers’ Compensation

There is no workers’ compensation or other similar compensation scheme under the Chinese labor and employment system. As required by Chinese law, however, we, subject to certain conditions and limitations, pay for the medical expenses of any contract employee who suffer a work-related illness, injury or disability, and continues to pay the full salary of, and provides all standard cash subsidies to, such employee during the term of such illness, injury or disability. We also pay for certain medical expenses of our temporary employees.

E. SHARE OWNERSHIP

None of our directors and senior management owns any shares or options in our Group as of April 26, 2018.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

The table below sets forth information regarding the ownership of our share capital as of April 26, 2018 by all persons who are known to us to be the beneficial owners of 5.0% or more of each class of our voting securities.

Title of Shares	Identity of Person or Group	Beneficially Owned(1)		Percentage of the Respective Class of Shares (2)			Percentage of Total Shares
A shares	CSAH		4,039,228,665		57.52	%		40.04	%
H shares	HKSCC Nominees Limited		1,749,711,988		57.08	%		17.34	%
H shares	CSAH(3)		1,070,362,000		34.92	%		10.61	%
H shares	Nan Lung Holding Limited		1,039,212,000		33.90	%		10.30	%

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(1) Beneficial ownership is determined in accordance with the rules of the SEC.

(2) Percentage of A Shares and percentage of H Shares is based on 7,022,650,000 A Shares and 3,065,523,272 H Shares, respectively, issued as of April 26, 2018. Percentage of total shares is based on 10,088,173,272 shares issued as of April 26, 2018.

(3) CSAH was deemed to be interested in an aggregate of 1,070,362,000 H Shares through its direct and indirect wholly-owned subsidiaries in Hong Kong, of which 31,150,000 H Shares were directly held by Yazhou Travel Investment Company Limited (representing approximately 1.02% of its then total issued H Shares) and 1,039,212,000 H Shares were directly held by Nan Lung (representing approximately 33.90% of its then total issued H Shares). As Yazhou Travel Investment Company Limited is also an indirect wholly-owned subsidiary of Nan Lung, Nan Lung was also deemed to be interested in the 31,150,000 H Shares held by Yazhou Travel Investment Company Limited.

Shareholders of H Shares and A Shares enjoy the same voting rights with respect to each share. None of our major shareholders has voting rights that differ from the voting rights 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, 2017, there were 46 registered holders of 1,760,568 American Depositary Shares in the U.S., consisting of 2.87% of our outstanding H shares. 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 majority-owned subsidiary of CSAH, which is an entity wholly-owned by the Chinese government.

B. RELATED PARTY TRANSACTIONS

For a detailed description of our related party transactions, please see Note 50 to the consolidated financial statements. In particular, the following arrangements, which our Company believes are material to our operations, have been made between our Company and CSAH and its affiliates during the year ended December 31, 2017 and up to the latest practicable date. Our Company believes that these arrangements have been entered into by our Company in the ordinary course of business and in accordance with the agreements governing such transactions.

Arrangements with CSAH

De-merger Agreement

The De-merger Agreement dated March 25, 1995 (such agreement was amended by the Amendment Agreement No.1 dated May 22, 1997) was entered into between CSAH and our Company for the purpose of defining and allocating the assets and liabilities between CSAH and our Company. Under the De-merger Agreement, CSAH and our Company have agreed to indemnify the other party against claims, liabilities and expenses incurred by such other party relating to the businesses, assets and liabilities held or assumed by CSAH or our Company pursuant to the De-merger Agreement.

Neither our Company nor CSAH has made any payments in respect of such indemnification obligations from the date of the De-merger Agreement up to the date of this Annual Report.

Trademark License Agreement

Our Company and CSAH entered into a ten-year trademark license agreement dated May 22, 1997. Pursuant to which CSAH acknowledges that our Company has the right to use the name “China Southern” and “China Southern Airlines” in both Chinese and English, and grants our Company a renewable and royalty free license to use the kapok logo on a worldwide basis in connection with our Company’s airline and airline-related businesses. Unless CSAH gives a written notice of termination three months before the expiration of the agreement, the agreement will be automatically renewed for another ten-year term. In May 2007, the trademark license agreement entered into by our Company and CSAH was automatically renewed for ten years.

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Leases

We (as lessee) and CSAH or its subsidiaries (as lessor) entered into lease agreements as follows:

(1) Our Company and CSAH entered into the Asset Lease Agreement (the “Asset Lease Agreement”) on September 25, 2012 to renew the leases transactions for a term of three years from January 1, 2012 to December 31, 2014. Pursuant to the Asset Lease Agreement, CSAH agrees to continue to lease to our Company certain parcels of land, properties, and civil aviation structures and facilities at existing locations in Guangzhou, Haikou, Wuhan, Hengyang, Jingzhou (previously known as “Shashi”), Zhanjiang and Changsha. The annual rents payable to CSAH under the Asset Lease Agreement is RMB36 million for the three years ending December 31, 2014.

Our Company further entered into the 2013 Nanyang Asset Lease Agreement (the “2013 Nanyang Asset Lease Agreement”) with CSAH on April 19, 2013, pursuant to which CSAH agreed to lease to our Company certain lands, properties, facilities and structures at Nanyang Jiangying Airport for a term of two years, commencing from January 1, 2013 to December 31, 2014. The rent payable under the Nanyang Asset Lease Agreement was RMB30 million for the year ended December 31, 2014.

For the year ended December 31, 2014, the rent incurred by our Group amounted to approximately RMB66 million pursuant to the Asset Lease Agreement and Nanyang Asset Lease Agreement.

As the lease transactions contemplated under the Asset Lease Agreement and the 2013 Nanyang Asset Lease Agreement would continue to be entered into on a recurring basis, our Company and CSAH entered into the new Asset Lease Agreement (the “New Asset Lease Agreement”) on December 29, 2014 for a term of three years from January 1, 2015 to December 31, 2017 to renew lease transactions originally covered under the Asset Lease Agreement and the 2013 Nanyang Asset Lease Agreement. The annual rents payable to CSAH under the New Asset Lease Agreement is RMB86,268,700 for the three years ending December 31, 2017.

For the years ended December 31, 2015, 2016 and 2017, the rent incurred by our Group amounted to RMB86 million pursuant to the New Asset Lease Agreement, respectively.

Our Company and CSAH entered into a new Asset Lease Agreement on January 26, 2018 for a term of three years from January 1, 2018 to December 31, 2020 to renew lease transactions originally covered under the Asset Lease Agreement and the 2013 Nanyang Asset Lease Agreement. The annual cap for rent payable to CSAH under such new New Asset Lease Agreement is RMB116,198,000 for the three years ending December 31, 2020.

(2) Our Company and CSAH entered into an indemnification agreement dated May 22, 1997 in which CSAH has agreed to indemnify our Company against any loss or damage caused by or arising from any challenge of, or interference with, our Company’s right to use certain lands and buildings.

(3) On January 9, 2014, our Company and CSAH have entered into two new lease agreements (the “Lease Agreements”), namely, the property lease agreement (the “Property Lease Agreement”) and the land lease agreement (the “Land Lease Agreement”) to renew the land and property leases transactions contemplated thereunder for the period from January 1, 2014 to December 31, 2016. Pursuant to the Property Lease Agreement, CSAH agreed to lease certain properties, facilities and other infrastructure located in various cities such as Guangzhou, Shenyang, Dalian, Harbin, Xinjiang, Changchun, Beijing and Shanghai held by CSAH or its subsidiaries to our Company for office use related to the civil aviation business development. Pursuant to the Land Lease Agreement, CSAH agreed to lease certain lands located in Xinjiang, Harbin, Changchun, Dalian and Shenyang by leasing the land use rights of such lands to our Company for the purposes of civil aviation and related businesses of our Company. The annual rental is determined after arm’s length negotiation between the parties and adjusted with reference to the rental assessment report prepared by Guangdong Yangcheng Land and Property Appraisal Co., Ltd. taking into account the prevailing market rental for properties located at similar locations and historical figures. The maximum annual aggregate amount of rent payable by our Company to CSAH under the Property Lease Agreement and the Land Lease Agreement for each of the three years ending December 31, 2016 shall not exceed RMB40,114,700 and RMB63,582,200, respectively, and such payment shall be made quarterly. On August 13, 2015, our Company and CSAH entered into a supplemental agreement to the Property Lease Agreement, pursuant to which our Company and CSAH agreed that the maximum annual aggregate amount of rent payable by our Company to CSAH under the Property Lease Agreement for the two years ending December 31, 2016 shall be slightly adjusted to not more than RMB40,270,700 (original cap of RMB 40,114,700) and RMB40,348,700 (original cap of RMB 40,114,700), respectively. Save as the said revision, all other terms of the Property Lease Agreement shall remain unchanged.

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On December16, 2016, our Company and CSAH have entered into the new Property Lease Agreement and Land Lease Agreement to renew the land and property leases transactions contemplated thereunder for the period from January 1, 2017 to December 31, 2019. Pursuant to this new Property Lease Agreement and Land Lease Agreement, CSAH further agreed to lease the property and land in Shenyang, Chaoyang, Dalian, Changchun, Harbin, Xinjiang, Beijing, Shanghai and foreign offices to our Company. The maximum annual aggregate amount of rent payable by our Company to CSAH under the Property Lease Agreement and the Land Lease Agreement for each of the three years ending December 31, 2019 shall not exceed RMB130 million. Pursuant to this new Property Lease Agreement and Land Lease Agreement, our Company and CSAH shall further discuss and agree on the scope and details of specific leasing and sign separate contracts.

For the year ended December 31, 2015, the rents for property lease and land lease incurred by our Group amounted to RMB40 million and RMB64 million, respectively pursuant to the Lease Agreements.

For the year ended December 31, 2016, the rents for property lease and land lease incurred by our Group amounted to RMB40 million and RMB64 million, respectively pursuant to the Lease Agreements.

For the year ended December 31, 2017, the rents for property lease and land lease incurred by our Group amounted to RMB32 million and RMB68 million, respectively pursuant to the Lease Agreements.

Share Issuance

On June 26, 2017, our Company and CSAH have entered into the A Share Subscription, pursuant to which, our Company will issue not more than 1,800,000,000 new A Shares (including 1,800,000,000 A Shares) and CSAH will subscribe for no less than 31% of new A Shares, the consideration of which shall be satisfied by transfer of 50% shares of Zhuhai MTU to our Company and cash. The subscription price for new A Shares under the A Shares Subscription Agreement shall not be lower than a price determined as the higher of (i) the 90% of the average trading price of the A Shares as quoted on the Shanghai Stock Exchange in the 20 trading days immediately prior to the Price Benchmark Date, and (ii) the most recent net assets value per share of the Company.

On 19 September 2017, the Company and CSAH entered into the A Share Subscription Supplemental Agreement, pursuant to which 50% shares of Zhuhai MTU as partial consideration payable by CSAH for its subscription of new A Shares under the A Share Subscription Agreement has been adjusted to RMB1,741.08 million, according to the final assessment results of RMB1,838.93 million as stated in the Zhuhai MTU Filed Valuation after the adjustment made due to the dividend distribution of MTU for 2016. Save as amended by the A Share Subscription Supplemental Agreement, all other terms and conditions of the A Share Subscription Agreement as described in the Announcement remain unchanged.

The completion of the A Shares Subscription Agreement will take place when the Shanghai Securities Depository and Clearing Corporation Limited confirms that the new A Shares to be subscribed by CSAH have been fully subscribed by CSAH.

SAIETC, a former wholly-owned subsidiary of CSAH

On January 9, 2014, our Company and SAIETC entered into a new import and export agency framework agreement (the “Import and Export Agency Framework Agreement”) to renew the continuing connected transactions contemplated therein for a fixed term of three years commencing from January 1, 2014 to December 31, 2016. Pursuant to the Import and Export Agency Framework Agreement, SAIETC agreed to provide import and export services and the relevant lease services, customs clearance services, customs declaration and inspection services, and the relevant storage, transportation and insurance agency services, and tendering and agency services to our Group. In relation to the service fee charged for import and export services, both parties agreed that such fee shall not be higher than the prevailing market rate charged by several trading companies of certain airlines companies in the PRC for similar services. In relation to the service fee charged for custom clearing, custom declaration and inspection, and the relevant storage, transportation and insurance services, both parties agreed that such fee charged shall not be higher than the prevailing market rate charged for similar services provided by independent third party service providers in the flight equipment logistics transportation market in the PRC. In relation to the service fee charged for the tendering and agency services, it is required to be determined in accordance with the fee standard prescribed by the State for this kind of tendering and agency services from time to time. During the period of the Import and Export Agency Framework Agreement, the annual cap are set at RMB160 million per annum.

For the year ended December 31, 2015, the agency fee incurred by our Group in respect of the above import and export services was RMB114 million.

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SAIETC was a former wholly-owned subsidiary of CSAH. In August 2016, since SAIETC has become a wholly-owned subsidiary of our Company, the transactions between our Company and SAIETC under Import and Export Agency Framework Agreement are not considered as the connected transactions of our Company. Prior to that, the agency fee incurred by our Group in respect of the above import and export services was RMB60 million in 2016.

Southern Airlines Culture and Media Co., Ltd. (“SACM”), which is 40% owned by our Company and 60% owned by CSAH

On April 19, 2013, our Company entered into a new Media Services Framework Agreement with SACM to renew the annual cap, expand the services scope and extend the term for an additional term of three years, commencing from January 1, 2013 to December 31, 2015. Pursuant to the agreement, our Company has appointed SACM to provide advertising agency services, plotting, purchase and production of in-flight TV and movie program agency services, channel publicity and production services, public relations services relating to recruitments of airhostess, and services relating to the distribution of newspapers and magazines. The service fees for the media services to be provided to members of our Group by SACM and its subsidiaries (the “SACM Group”) are determined, among others, the prevailing market price. Pricing are based on prevailing market price and agreed upon between the parties for each transaction on arm’s length negotiations in accordance with the following pricing mechanism: (a) if there are prevailing market prices for same or similar types of services in the same or similar locations of the services being provided, the pricing of the services shall follow such prevailing market price; or (b) if there are no such prevailing market price in the same or similar locations, the services to be provided by SACM Group shall be on terms which are no less favourable than the terms which can be obtained by our Group from independent third parties within the PRC market.The annual cap under the agreement for each year is RMB98 million, RMB105 million and RMB113 million for each of years ended December 31, 2013, 2014 and 2015, respectively.

Our Company and SACM entered into the Supplemental Agreement to the Media Services Framework Agreement on 29 December 2014 to revise the annual cap for services provided by the SACM Group for the period from January 1, 2015 to December 31, 2015 from RMB113 million to RMB118.5 million. In addition, the following revisions to the Media Services Framework Agreement were also made and set out in the Supplemental Agreement to the Media Services Framework Agreement as follows: (a) to clarify the parties referred in the Media Services Framework Agreement shall include itself and its wholly-owned or controlled subsidiaries; and (b) to clarify the rights and obligations of the SACM Group, i.e. clarifying the SACM Group will have full discretion for the whole process of the selection of media or media agent, negotiation, purchase, execution and supervision, and the SACM Group should take the responsibility to monitor the advertisement, submit the monitoring report and strengthen the supervision on the advertising effect. Save as the aforesaid revision, all other terms of the Media Services Framework Agreement remain unchanged.

On December 30, 2015, our Company entered into a new Media Services Framework Agreement with SACM to renew the media services transaction and extend for an additional term of three years, commencing from January 1, 2016 to December 31, 2018. The annual cap under the new agreement will remain unchanged at RMB118.5 million.

For the years ended December 31, 2015, 2016, 2017, the media fees incurred by our Group for the media services amounted to RMB67 million, RMB71 million and RMB74 million, respectively.

Southern Airlines Group Finance Company Limited (“SA Finance”), which is 66.02% owned by CSAH, 25.28% owned by our Company and 8.70% owned in aggregate by four subsidiaries of our Company

(1)    On November 8, 2013, our Company renewed the financial services framework agreement (the “Financial Services Framework Agreement”) with the SA Finance for a term of three years starting from January 1, 2014 to December 31, 2016. Under such agreement, the SA Finance agrees to provide to our Company deposit (the “Provision of Deposit Services”) and loan services (the “Provision of Loan Services”). The SA Finance shall pay interests to our Company regularly at a rate not lower than the current deposit rates set by the People’s Bank of China. The Group’s deposits placed with the SA Finance were re-deposited in a number of banks. The SA Finance has agreed that the loans it provided to CSAH and its subsidiaries other than our Group should not exceed the sum of the SA Finance’s shareholders’ equity, capital reserves and total deposits received from other companies (excluding our Group). The rates should be determined on an arm’s length basis and based on fair market rate, and should not be higher than those available from independent third parties. Each of the maximum daily balance of deposits (including the corresponding interests accrued thereon) placed by our Company as well as the maximum amount of the outstanding loan provided by the SA Finance to our Company (including the corresponding interests payable accrued thereon) at any time during the term of the Financial Services Framework Agreement shall not exceed the Cap which is set at RMB6 billion on any given day. The annual cap of fees payable to the SA Finance by our Group for the other financial services should not exceed RMB5 million. On 26 December 2013, the second extraordinary general meeting of 2013 considered and approved the Financial Services Framework Agreement.

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Our Company and the SA Finance entered into the Supplemental Agreement to the Financial Services Framework Agreement on May 4, 2015 to revise each of the annual cap in relation to the Provision of Deposit Services and the Provision of the Loan Services for the period from the effective date of Supplemental Agreement to December 31, 2016 from RMB6 billion to RMB8 billion. On June 30, 2015, 2014 annual general meeting of our Company considered and approved the Supplemental Agreement to the Financial Services Framework Agreement.

On August 29, 2016, our Company and SA Finance entered into the new Financial Services Framework Agreement for a term of three years starting from January 1, 2017 to December 31, 2019 to renew the provision of the financial services contemplated under the Financial Services Framework Agreement. The annual caps for the insurance business platform services arrangement under the new Financial Services Framework Agreement for any given day is RMB8 billion. On 16 December 2016, the first extraordinary general meeting of 2016 considered and approved the Financial Services Framework Agreement.

As of December 31, 2015, our deposits placed with SA Fiance amounted to RMB2,934 million.

As of December 31, 2016, our deposits placed with SA Fiance amounted to RMB3,759 million.

As of December 31, 2017, our deposits placed with SA Fiance amounted to RMB6,095 million.

(2)    On November 21, 2014, the Board approved Guangdong CSA E-commerce Co., Ltd. (the “E-commerce Company”, a wholly-owned subsidiary of our Company), to enter into the four electronic aviation passenger comprehensive insurance four parties cooperation agreements (the “Cooperation Agreements”) with the SA Finance, Insurance Brokers (Beijing) Co., Ltd. (the “Air Union”) and each of the four insurance companies, respectively, for a period of three years commencing from June 12, 2014 to May 31, 2017.

Pursuant to the Cooperation Agreements, the E-commerce Company agreed to authorize other parties to use the B2C website, the mobile terminal air tickets sale platform and VOS sale system of our Company for sales of online insurances in consideration for a fixed service fees for each policy sold through its electronic platform.

Our Group will charge a fixed service fee of RMB5 for each insurance policy sold through its electronic platforms. There has not been any comparative market prices due to the specific nature of such transaction and the above pricing model has been agreed on an arm’s length basis among the parties and has been adopted since the commencement of cooperation in 2008.

The annual caps in relation to the service fees to be charged by our Group are RMB14.24 million, RMB30.27 million, RMB42.38 million and RMB24.72 million for the seven months ended December 31, 2014, for the two years ended December 31, 2016 and the five months ending May 31, 2017.

As a result of the increase in aviation insurance purchase demand from travellers and the various cooperation between our Company and the SA Finance on the sale of aviation insurance, on November 19, 2015, our Company and the SA Finance entered into the cooperation framework agreement (the “Cooperation Framework Agreement”) for two years commencing from January 1, 2015 to December 31, 2016.

Pursuant to the insurance business platform cooperation arrangements under the Cooperation Framework Agreement, our Company as the platform service provider, agreed to cooperate with the SA Finance, and authorize SA Finance to use the various platforms of our Group including online channels and ground service counter channels as the sales platforms for sale of various insurances relating to aviation transportation including baggage insurance and aviation passenger accident insurance. The scope of the Cooperation Framework Agreement shall also cover the electronic platform as contemplated under the Cooperation Agreements. In addition, our Company agreed to further authorize the SA Finance to use our Group’s ground service counter channels as the sales platform for sale of baggage insurance and aviation passenger accident insurance.

For the sale of insurance policies through our Group’s ground service counter channels and its electronic platforms, our Group is currently charging a fixed ratio of the insurance premium of each of the different kinds of insurance policies. The pricing model has been agreed on an arm’s length basis by our Company and the SA Finance with reference to the determination basis as set out in a table disclosed in the announcement of our Company dated November 19, 2015.

The annual caps in relation to the service fees to be charged by our Group under the Cooperation Framework Agreement are RMB40 million and RMB60 million for the two years ended December 31, 2016, respectively.

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On August 29, 2016, our Company and SA Fiance entered into the new Insurance Business Platform Services Agreement under the new Financial Services Framework Agreement for a term of three years starting from January 1, 2017 to December 31, 2019 to renew the provision of the services contemplated under the Insurance Business Platform Services Agreement. The annual caps for the insurance business platform services arrangement under the new Financial Services Framework Agreement for each year are RMB68.60 million, RMB79.35 million and RMB91.67 million respectively. Pursuant to the new Financial Services Framework Agreement, our Company shall be only liable for providing insurance sales platforms and shall not be liable for any disputes arising among the insurers, insurance agents, policy holders, the insured and other parties. SA Fiance shall ensure that it has the agency authority to sell the insurance in the place where the insurance is sold while our Company shall not bear any obligations or liabilities arising therefrom.

For the year ended December 31, 2015 and 2016, the service fee charged by our Group were RMB16 million and RMB26 million, respectively.

For the year ended December 31, 2017, the service fee charged by our Group was RMB26 million.

China Southern Air Holding Ground Services Company Limited (“GSC”), a wholly-owned subsidiary of CSAH

On November 8, 2013, our Company and GSC renewed the Passenger and Cargo Sales Agency Services Framework Agreement (the “Passenger and Cargo Sales Agency Services Framework Agreement”) to renew the continuing connected transactions contemplated therein for a fixed term of three years commencing from January 1, 2014 to December 31, 2016. Pursuant to the New Passenger and Cargo Sales Agency Services Framework Agreement, GSC agrees to provide the following services to our Group: domestic and international air ticket sales agency services; domestic and international airfreight forwarding sales agency services; chartered flight and pallets sales agency services; internal operation services for the inside storage area (these services include the areas in Guangzhou, Beijing and Shanghai, etc); and delivery services for the outside storage area. The agency fee for sales agency services is determined by reference to the agency ratio paid to the agency companies by the airlines companies of the same types of the industry in the same regions; the service fee for internal operation services is determined by the fee standard prescribed by the local government. The annual cap shall maintain RMB250 million per annum for the entire term of the New Passenger and Cargo Sales Agency Services Framework Agreement.

In view of the sudden increase of the sales agency services as a result of the peak season market demand for our Group exceeds the original projection, the annual cap under the Passenger and Cargo Sales Agency Services Framework Agreement in respect of the year ended December 31, 2016 would become insufficient. Accordingly, on December 16, 2016, our Company and GSC entered into the Supplemental Agreement to revise the annual cap under Passenger and Cargo Sales Agency Services Framework Agreement from RMB250 million to RMB260 for the year ended December 31, 2016.

For the year ended December 31, 2015, the commission expense and goods handling fee paid to GSC were RMB98 million and RMB109 million, respectively, and the income relating to other services was RMB20million.

For the year ended December 31, 2016, the commission expense and goods handling fee paid to GSC were RMB99 million and RMB117 million, respectively, and the income relating to other services was RMB6 million.

For the year ended December 31, 2017, the commission expense and goods handling fee paid to GSC were RMB44 million and RMB112 million, respectively, and the income relating to other services was RMB3 million.

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On December 16, 2016, our Company entered into a new Passenger and Cargo Sales and Ground Services Framework Agreement (the “Passenger and Cargo Sales and Ground Services Framework Agreement”) for a term of three years starting from January 1, 2017 to December 31, 2019. Under Passenger and Cargo Sales and Ground Services Framework Agreement, GSC agreed to provide certain services and charge agent service fees while our Company agreed to lease certain assets including transportation tools and equipment and workplace and charge rental thereon. GSC agrees to provide the following services to our Group: (i) domestic and international air ticket sales agency services; (ii) domestic and international airfreight forwarding sales agency services; (iii) chartered flight and pallets sales agency services; (iv) Import and export port and transfer services related to cargo operations; (v) ground services, including aircraft maintenance, cabin cleaning, cleaning, collecting and issuing of towels, entertaining equipment maintenance within aircraft, surface cleaning of aircraft and comprehensive ground services; and (vi) support to sales and services oriented to major direct customers of our Company. In respect of the services provided by GSC to our Group, the agency fee for sales agency services is determined by reference to the agency ratio paid to the agency companies by the airlines companies of the same types of the industry in the same regions (including domestic and foreign market). The service fee for internal operation services is determined by the fee standard prescribed by the local government. The service fee for other maintenance and ground services is mainly determined based on related costs (mainly including labor costs, operation costs, management costs and taxes) in addition to 10% profit ratio. With respect to the rentals to be received by our Company, rentals are determined with reference to the valuation prepared by valuation agency (independent third party). Our Company expect the annual fees payable to our Company under Passenger and Cargo Sales and Ground Services Framework Agreement will not exceed RMB10 million. Under Passenger and Cargo Sales and Ground Services Framework Agreement, the annual caps for the services provided to our Group by GCS for each of the three years ending December 31, 2019 will be RMB270 million, RMB330 million and RMB400 million, respectively.

China Southern Airlines Group Property Management Company Limited (the “CSAGPMC”), a wholly-owned subsidiary of CSAH

Our Company has entered into a New Framework Agreement for Engagement of Property Management (the “New Property Management Framework Agreement”) on December 28, 2012 to renew the property management transactions for a term of three years from January 1, 2012 to December 31, 2014. Pursuant to the New Property Management Framework Agreement, our Company has renewed the appointment of CSAPMC for provision of property management and maintenance services for our Company’s leased properties in the airport terminal, the base and the 110KV transformer substation at the new Baiyun International Airport (other than certain properties in our Company’s headquarter located in the old Baiyun Airport which were covered in the existing Property Management Framework Agreement) to ensure the ideal working conditions of our Company’s production and office facilities and physical environment, and the normal operation of equipment.

Our Company has further entered into the airport property management framework agreement (the “Airport Property Management Framework Agreement”) on January 11, 2013 to renew the property management at the old Baiyun Airport for a term of three years from January 1, 2012 to December 31, 2014. Pursuant to the Airport Property Management Framework Agreement, our Company has renewed the appointment of CSAPMC for the provision of property management and maintenance services for our Company’s properties at the old Baiyun Airport and surrounding in Guangzhou.

The fee charging schedule (or charge standard) under the New Property Management Framework Agreement and the Airport Property Management Framework Agreement shall be determined on an arm’s length basis between both parties, and shall not be higher than the one charged by any independent third parties in the similar industry. The annual cap for the New Property Management Framework Agreement and the Airport Property Management Framework Agreement are set at RMB32,750,000 and RMB22,250,000, respectively.

On December 31, 2013, our Company further entered into an agreement supplemental to the New Property Management Framework Agreement (the “New Property Management Supplemental Agreement”) and an agreement supplemental to the Airport Property Management Framework Agreement (the “Airport Property Management Supplemental Agreement”). Pursuant to the New Property Management Supplemental Agreement, the parties have agreed to revise the services fee in relation to the provision of property management and maintenance services by CSAPMC for our Company’s leased properties at the airport terminal, the base and the 110KV transformer substation at the new Baiyun International Airport from RMB32,750,000 per annum to RMB42,700,000 per annum for the year ended December 31, 2014. Pursuant to the Airport Property Management Supplemental Agreement, the parties have agreed to revise the services fee in relation to provision of property management and maintenance services by CSAPMC for our Company’s several properties at the old Baiyun Airport and surrounding in Guangzhou from RMB22,250,000 per annum to RMB27,300,000 per annum for the year ended December 31, 2014.

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As the transactions contemplated under the New Property Management Framework Agreement and the Airport Property Management Framework Agreement will continue to be entered into on a recurring basis, our Company entered into the new Property Management Framework Agreement (the “Property Management Framework Agreement”) with the services fee in relation to the provision of property management and maintenance services by CSAPMC on December 29, 2014 to renew the property management transactions originally covered under the New Property Management Framework Agreement and the Airport Property Management Framework Agreement for a term of three years from January 1, 2015 to December 31, 2017. In addition, CSAGPMC has also been appointed for the provision of the property management and maintenance services for the power transformation and distribution equipment at Guangzhou cargo terminal, and the provision of the electricity charge agency services to our Group, which are newly added services to be provided by CSAGPMC to our Group. The annual cap for the Property Management Framework Agreement is set at RMB90 million, RMB92 million and RMB96 million for the three years ending December 31, 2015, 2016 and 2017, respectively.

For the years ended December 31, 2015, 2016 and 2017, the property management and maintenance fee incurred by our Group respectively amounted to RMB73 million, RMB70 million and RMB70 million pursuant to the New Property Management Framework Agreement, the Airport Property Management Framework Agreement and the Property Management Framework Agreement.

On December 19, 2017, our Company further entered into an Property management Framework Agreement to renew the property management transactions originally covered under the Property Management Framework Agreement for a term of three years from January 1, 2018 to December 31, 2020. The annual cap for the Property Management Framework Agreement is set at 155 million for the three years ending December 31, 2020, respectively.

Guangzhou Nansha CSA Tianru Leasing Co., Ltd. (the “CSA Leasing Company”), which is wholly owned by CSA International Finance Leasing Co., Ltd. (the “CSA International”), which is wholly owned by CSAH

Our Company entered into the A321 Finance Lease agreement and A330 Finance Lease Agreement with CSA Leasing Company on April 27, 2017, pursuant to which CSA Leasing Company agreed to provide finance leasing to our Company in relation to one Airbus A321 aircraft and one Airbus A330-300 aircraft.

CSA International, which is wholly owned by CSAH

Our Company entered into an Aircraft Finance Lease Framework Agreement with CSA International on May 26, 2017, pursuant to which CSA International agreed to provide finance leasing to our Company in relation to the Leased Aircraft.

Our Company entered into the 2018-2019 Finance and Lease Service Framework Agreement with CSA International on October 17, 2017, pursuant to which CSA International agreed to provide finance leasing service to the Company in relation to the Leased Aircraft, Leased Aircraft Related Assets and Leased Aviation Related Equipment, as well as the operating lease service to the Company in relation to certain aircraft and engines.

Shenzhen Air Catering Co., Ltd. (the “SACC”), which is 50.1% owned by CSAH

Our Company entered into a Catering Services Framework Agreement with SACC, a non-wholly-owned subsidiary of CSAH on April 19, 2013 for a term of three years, commencing from January 1, 2013 to December 31, 2015, pursuant to which SACC agrees to provide the in-flight lunch box, and order, supply, allot, recycle, store and install the in-flight supply with their respective services for the arrival and departure flights designated by our Group at the airport where SACC located at. The maximum annual aggregate amount of the services fee payable by our Company to SACC shall not exceed RMB100 million, RMB115 million and RMB132.5 million for each of the years ended December 31, 2013, 2014 and 2015, respectively.

Our Company entered into a new Catering Services Framework Agreement with SACC on December 30, 2015 for an additional term of three years, commencing from January 1, 2016 to December 31, 2018. The annual cap under the new agreement is set at RMB152 million, RMB175 million and RMB201 million for each of the years ending December 31, 2016, 2017 and 2018, respectively.

For the years ended December 31, 2015, 2016 and 2017 the services fee incurred by our Group for the catering services amounted to RMB100 million, RMB124 million and RMB125 million, respectively.

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Zhuhai MTU, which is 50% owned by CSAH

Our Company entered into an agreement relating to continuing connected transactions with CSAH, MTU Aero Engines GmbH (“MTU GmbH”) and Zhuhai MTU on September 28, 2009, by which Zhuhai MTU shall continue to provide our Company with engine repair and maintenance services subject to the international competitiveness and at the net most favorable terms, while our Company shall make relevant payment to Zhuhai MTU according to related charging standard. The agreement is effective from its date to April 5, 2031.

For the year ended December 31, 2015, 2016 and 2017, our engine repair and maintenance service fees incurred under the agreement amounted to RMB1,324 million, RMB1,877 million and RMB1,537 million, respectively.

Nan Lung, which is wholly owned by CSAH

Our Company entered into the H Share Subscription Agreement with Nan Lung on June 26, 2017, pursuant to which, Nan Lung will, at the subscription price of HK$6.27 per H Share, subscribe in cash for no more than 590,000,000 new H Shares (including 590,000,000 H Shares), raising gross proceeds of no more than HK$3,699.30 million (including HK$3,699.30 million). The subscription price and the number of the new H Shares will be adjusted in case of ex-right or ex-dividend events including distribution of dividend according to the H Share Subscription Agreement. On September 19, 2017, our board considered and approved that the subscription price and the number of H Shares to be issued pursuant to the H Share subscription agreement shall be adjusted to HK$6.156 and not more than 600,925,925 new H Shares, respectively due to the implementation of the 2016 dividend distribution plan of our Company.

Guangzhou Southern Airlines Construction Company Limited (the “GSAC”, which is wholly owned by CSAH)

Our Company entered into the CSA Building Asset Lease Agreement with GSAC on January 19, 2018, pursuant to which GSAC agreed to lease to (i) certain offices at floors 1-10, 12 and 17-36 in CSA Building located at West Side of Yuncheng East Road, Baiyun Xincheng, Baiyun District, Guangzhou with an aggregate gross floor area of not exceeding 88,396 square meters at an annual rental of not exceeding RMB159,112,800; and (ii) 550 parking lots in CSA Building at an annual rental of not exceeding RMB5,520,000 for a term of three years commencing from 19 January 2018 to 18 January 2021. CSA Building is developed by GSAC for office and business purpose. The annual rental will be payable on a quarterly basis and will be funded by the internal resources of our Company.

Guangzhou Nansha CSA Tianshui Leasing Co., Ltd(the Guangzhou “Tianshui”), which is indirect wholly-owned by CSAH

Our Company entered into the Aircraft Sale and Leaseback Agreement with Guangzhou Tianshui on March 16, 2018, pursuant to which our Company agreed to sell 14 A320 aircrafts to Guangzhou Tianshui. The consideration for such aircrafts of RMB371 million is determined after arm’s length negotiations between our Company and Guangzhou Tianshui with reference to the actual conditions of such aircrafts and the valuation of such aircrafts prepared by China United Assets Appraisal Group Co., Ltd..

Acquisition of 95.4% Equity Interests in Hebei Airlines by Xiamen Airlines

On October 13, 2014, Xiamen Airlines (a subsidiary of our Company) and Hebei Airlines Investment Group Company Limited (“Hebei Airlines Investment”) entered into the equity transfer agreement, pursuant to which Xiamen Airlines agreed to purchase and Hebei Airlines Investment agreed to sell the 95.40% equity interests in Hebei Airlines at the consideration of RMB680 million (the “Acquisition”). The consideration of RMB680 million is determined after an arm’s length negotiation between the parties in accordance with prevailing market conditions and after taking into account, inter alia, the net asset value of Hebei Airlines and the appraisal value of the 95.40% equity interests in Hebei Airlines as of April 30, 2014.

Our Company believes that the Acquisition can help our Group to further develop the aviation market in Hebei, facilitate the integration of the North China market by Xiamen Airlines and improve its domestic route network. The Acquisition will also achieve the synergies of Xiamen Airlines and Hebei Airlines to strengthen their market positions, so as to further enhance the competitiveness of the Company, Xiamen Airlines and Hebei Airlines as a whole.

The Acquisition was completed in December 2014.

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Acquisition of 4% Equity Interests in Xiamen Airlines from Xiamen Jianfa

On July 14, 2015, our board announced that our Company and Xiamen Jianfa entered into an agreement (the “Share Transfer Agreement”), pursuant to which Xiamen Jianfa agreed to sell and our Company agreed to purchase 4% equity interests (the “Targeted Equity Interests”) in Xiamen Airlines at the consideration of RMB586,666,670 (the “Acquisition”). Our Company believes that the increase of 4% equity interests in Xiamen Airlines held by our Company can help our Group to further enhance our control over the Xiamen Airlines, help the Xiamen Airlines to maintain a stable shareholding structure, further improve the strategic synergy effect of our Company and Xiamen Airlines and improve the overall operating results of our Company.

On December 8, 2015, our Company and Xiamen Jianfa entered into a supplemental agreement to the Share Transfer Agreement, pursuant to which the parties agreed to adjust the consideration from RMB586,666,667 to RMB626,666,667 so as to reflect the profit attribution arrangement. The acquisition was completed in December 2015.

Acquisition of 100% equity interests in SAIETC

On 2 February 2016, our Company and CSAH entered into the share transfer agreement (the “Share Transfer Agreement”), pursuant to which our Company agreed to purchase and CSAH agreed to sell 100% equity interests in SAIETC at the consideration of RMB400,570,400. The consideration of RMB400,570,400 is determined after an arm’s length negotiation between the parties in accordance with prevailing market conditions and after taking into account, inter alia, the net asset value of SAIETC and the appraisal value of 100% equity interests in SAIETC as of June 30, 2015, net of decrease of net asset resulting from events after balance sheet date (including profit distribution and long-term equity investment).

Our Company believes that the acquisition can assist our Group to strengthen procurement management of aircraft, flight equipment and other airlines-related facilities, lower management risk; assist our Company to streamline its relationship with trading companies so as to reduce connected transactions. With SAIETC’s experience in tendering and agency services, SAIETC will be developed into a centralised platform for procurement activities of our Group, that enhances concentration and efficiency of procurement activities.

Capital Increase Agreement

On December 23, 2016, our Company entered into the Capital Increase Agreement (the “Capital Increase Agreement”) with CSAH, Xiamen Airlines, Shantou Airlines, Zhuhai Airlines and Guangzhou Nanland Air Catering Company Limited (“Nanland Company”), under which each party agreed that each of our Company and CSAH can increase the capital of SA Finance, up to RMB500 million in total. RMB348,597,550 of such capital increase will be used to increase the registered capital from RMB724,329,500 to RMB1,072,927,050, while RMB151,402,450 will be used to increase the capital reserve of SA Finance. Xiamen Airlines, Shantou Airlines, Zhuhai Airlines and Nanland Company (non-wholly owned subsidiary of our Company) agreed to waive their rights to make capital contributions. The amounts of capital increase to the SA Finance were determined by each party through fair negotiation with reference to (among other things) the net assets of SA Finance on May 31, 2016 and current shareholding ratio of each party in SA Finance.

Upon the completion of capital increase, the equity interest held by CSAH in the SA Finance would remain at 66.022% while the equity interest held by our Company in the SA Finance would increase from 21.089% to 25.277%.

Our Company considers that the entering into the Capital Increase Agreement and the capital increase will enhance the finance conditions and therefore the development of the SA Finance and allow the SA Finance to further expand its business. Our Company would also be able to share the benefit from the SA Finance’s profits by holding 25.277% equity interest directly, and 8.701% equity interest indirectly through its four subsidiaries, in the SA Finance. All related party transactions have been approved by independent non-executive directors.

Acquisition of Property in the PRC

On December 15, 2016, Hainan Branch of our Company (as the purchaser) entered into the Sale and Purchase Agreement with China Southern Air Sanya Property Development Co., Ltd (the “Vendor”), under which our Company agreed to purchase a property at the total consideration of RMB56,089,800 (equivalent to HK$64,953,591). The property includes whole 4th floor of China Southern Air Sanya Headquarter Building located at No.360-2 Yingbin Road, Kedong District, Sanya, Hainan Province, the PRC with a gross floor area of approximately 2,123.5 square meters (the “Property”).

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The consideration for the Property acquisition was determined after arm’s length negotiations between our Company and the Vendor, with reference to (i) the prevailing selling prices of other presale units of the development in which the Property forms part of, in the open market of Sanya; (ii) the similar types (for office purpose) of properties located in the same areas in Sanya; and (iii) the agreed 15% discount provided by the Vendor to our Company. The consideration also included the taxes and renovation costs.

The Vendor is a wholly-owned subsidiary of CITIC China Southern Air Construction Development Co., Ltd. which is owned as to 49% by CSAH. CSAH is the controlling shareholder of our Company and therefore the Vendor is a connected person of our Company under the Listing Rules.

Since the Property is situated at the city centre of Sanya and a new commercial business district established by the Sanya municipal government, our Company believes that acquiring the Property with such geographical advantages as its office can not only meet the needs of future production development, but also realign its office premises with our Company’s brand and image. The Property Acquisition will also strengthen our Company’s strategic cooperation with the Sanya municipal government.

On 7 December 2017, Zhuhai Airlines, as purchaser (“Purchaser”), entered into the Sale and Purchase Agreements with Zhuhai China Southern Air Real Property Development Co., Ltd., as vendor (“Vendor”), pursuant to which the Purchaser agreed to acquire the whole 7th to 11th floor and one shop of China Southern Air Zhuhai Area Headquarter Building located at No. 52 Haibin South Road, Xiangzhou District, Zhuhai City, the PRC with a gross floor area of approximately 8,183.27 square meters (“Property”) at a total consideration of RMB159,990,100 for office and marketing purposes.

The consideration for the Property Acquisition was determined after arm’s length negotiations between our Company and the Vendor, with reference to (i) the price of similar types (for office purpose) of properties located in the same areas in Zhuhai, which ranges from RMB25,900 per square meter to RMB31,300 per square meter; (ii) the price of street shops in the open market of Zhuhai, which is approximately RMB80,000 per square meter; (iii) the prevailing selling prices of other shops of the development in which the Property forms part of, in the open market of Zhuhai; and (iv) the agreed discount of approximately 22.58% on the price offered to public which is RMB206,654,700, provided by the Vendor to the Company. The consideration also includes taxes and renovation costs. Our Company intends to satisfy the consideration by its internal resources.

The vendor is a wholly-owned subsidiary of Zhonghai China Southern Air Construction Development Co., Ltd., which is owned as to 49%, 30% and 21% equity interests by CSAH, CITIC Real Estate Group Co., Ltd. and Guangdong Zhonghai Real Estate Co., Ltd. respectively. As CSAH is a controlling shareholder of our Company, the vendor is a connected person of our Company under the Listing Rules.

The Property Acquisition will strengthen the Company’s cooperation with the Zhuhai municipal government as the development of the Property was approved by Zhuhai municipal government with a view to provide support to the business development of our Company. The Property Acquisition will also address Zhuhai Airline’s needs for improvement on infrastructure to support the growth of Zhuhai Airline in the civil aviation market. Since the Property is situated at the commercial business district in Zhuhai City, our Company believes that acquiring the Property with such geographical advantages as its office can not only meet the needs of future business development, but also realign its office premises with our Company’s brand and image.

All the above related party transactions have been approved by independent non-executive directors.

Provision of Guarantees to SPV established by our Company

In order to reduce aircraft leasing costs, the Board of the Company convened the extraordinary meeting on 29 December 2015, 7 April 2017, 25 April 2017, 21 August 2017, 29 November 2017, respectively, and considered the guarantees provided for SPVs established by the Company. By the end of the reporting period, the Company provided the SPV with total guarantee of US1.164 billion.

C. INTERESTS OF EXPERTS AND COUNSEL

Not applicable.

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ITEM 8. FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

Our audited consolidated financial statements are set forth beginning on page F-1, which can be found after Item 19.

Legal Proceedings

Not applicable.

Dividend Information

A dividend in respect of the year ended December 31, 2017 of RMB0.1 (inclusive of applicable tax) per share, amounting to a total dividend of RMB1,009 million was proposed by the directors on March 26, 2018. The final dividend proposed after the end of the financial year has not been recognized as a liability at the end of the financial year.

Our Board declares dividends, if any, in Renminbi with respect to H Shares on a per share basis and pays such dividends in Hong Kong dollars. Any final dividend for a fiscal year is subject to shareholders’ approval. Bank of New York Mellon, as depositary, converts the HK dollar dividend payments and distributes them to holders of ADSs in U.S. dollars, less expenses of conversion. Under the Company Law of the PRC 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, if any, based on the foreign exchange conversion rate published by the People’s Bank of China, or 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, 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 may deem relevant.

Pursuant to PRC laws and regulations and the Articles of Association of our Company, 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 GAAP. 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

No significant changes have occurred since the date of the consolidated financial statements.

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ITEM 9. THE OFFER AND LISTING

A. OFFER AND LISTING DETAILS

The principal trading market for our Company’s H Shares is the Hong Kong Stock Exchange, and our Company’s trading code is “1055”. Our Company completed our initial public offering of H Shares on July 30, 1997. The ADRs, each representing 50 H Shares, have been listed for trading on the New York Stock Exchange since July 31, 1997, under the symbol “ZNH”.

The principal trading market for our Company’s A Shares is the Shanghai Stock Exchange with trading code of “600029”. On July 25, 2003, our Company completed our initial public offering of A Shares.

Set forth below for the periods indicated are the high and low market prices of H Shares on the Hong Kong Stock Exchange, ADRs on the New York Stock Exchange and A Shares on the Shanghai Stock Exchange.

	The Hong Kong Stock Exchange Price Per H Share (HK$)				The New York Stock Exchange Price per ADR (US$)				The Shanghai Stock Exchange Price per A Share (RMB)
	High		Low		High		Low		High		Low
Annual Market Prices
Fiscal Year ended December 31, 2013		4.43		2.61		30.04		17.09		4.30		2.54
Fiscal Year ended December 31, 2014		3.90		2.23		25.17		14.53		5.93		2.26
Fiscal Year ended December 31, 2015		9.84		3.53		63.29		22.52		15.98		4.48
Fiscal Year ended December 31, 2016		5.50		4.00		36.29		25.44		8.62		5.86
Fiscal Year ended December 31, 2017		8.18		4.09		54.52		26.21		12.30		7.03
Quarterly Marker Prices
Fiscal Year ended December 31, 2016
First Quarter		5.48		4.13		35.23		25.44		8.04		5.86
Second Quarter		5.30		4.20		34.18		26.96		7.56		6.06
Third Quarter		5.50		4.35		36.29		28.13		8.62		6.97
Fourth Quarter		4.59		4.00		29.47		25.71		7.76		6.79
Fiscal Year ended December 31, 2017
First Quarter		5.49		4.09		35.68		26.21		8.20		7.03
Second Quarter		6.78		5.13		42.20		32.69		9.08		7.66
Third Quarter		6.52		5.38		41.81		34.37		9.06		7.90
Fourth Quarter		8.18		5.37		54.52		34.66		12.30		8.07
Monthly Marker Prices
October 2017		5.86		5.37		37.52		34.66		8.72		8.07
November 2017		7.42		5.79		48.00		37.05		11.14		8.91
December 2017		8.18		6.85		54.52		43.84		12.30		10.46
January 2018		10.20		7.90		64.70		50.54		11.94		10.44
February 2018		10.88		8.62		70.52		55.00		12.79		10.82
March 2018		10.42		7.86		66.29		50.29		11.83		9.71
April 2018 (up to April 20, 2018)		8.57		7.09		53.98		46.50		10.52		9.38

B. Plan of Distribution

Not applicable.

C Markets

See “Offer and Listing Details” above.

D. Selling Shareholders

Not applicable.

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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 summary of certain provisions of our Articles of Association. As this is a summary, it does not contain all the information that may be important to you. You and your advisors should read the text of our most updated Articles of Association for further information, which is filed as an exhibit to this Annual Report.

General

Our Company is registered with and has obtained a business license from the State Administration Bureau of Industry and Commerce of the People’s Republic of China on March 25, 1995. On March 13, 2003, our Company obtained an approval certificate from the Ministry of Commerce to change to a permanent limited company with foreign investments.

Other Senior Administrative Officers

Pursuant to the Article 17 of the Articles of Association, other senior administrative officers of our Company refer to the Executive Vice President, Chief Financial Officer, Chief Pilot, COO Flight Safety, Chief Information Officer, Chief Economist, Chief Legal Adviser, Chief Engineer, COO Flight Operations, Company Secretary and other senior management appointed by the Board of Directors.

Objects and Purposes

Pursuant to the Article 19 of the Articles of Association, the scope of business of our Company includes: (1) provision of scheduled and non-scheduled domestic, regional and international air transportation services for passengers, cargo, mail and luggage; (2) undertaking general aviation services; (3) provision of aircraft repair and maintenance services; (4) acting as agent for other domestic and international airlines; (5)provision of air catering services; (6) engaging in other airline or airlinerelated business, (limited to insurance agency business personal accident insurance); (7) provision of airline ground services; (8) aviation training; (9) asset leasing services; (10) project management and technical consultancy services; (11) sales of aviation equipment; (12) travel agency business; (13) merchandise retail and wholesale; all subject to approval by company registration authorities.

Directors

Pursuant to Article 175 of the Articles of Association, where a director is interested in any resolution proposed at a board meeting, such director shall abstain from voting and shall not have a right to vote. Such director shall not be counted in the quorum of the relevant meeting. Such directors also shall not vote on behalf of other directors. Board meetings may be convened by more than half of the directors who are not interested in the proposal. Resolutions of board meetings shall be passed by more than half of directors who are not interested in the proposal.

Pursuant to Article 245 of the Articles of Association, where a director of our Company is in any way, directly or indirectly, materially interested in a contract, transaction or arrangement or proposed contract, transaction or arrangement with the Company, (other than his contract of service with the Company), he 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 therefor is otherwise subject to the approval of the Board of Directors. For the purposes of this Article, a director is deemed to be interested in a contract, transaction or agreement in which an associate of him is interested.

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Pursuant to Article 253 of the Articles of Association, our Company shall, with the prior approval of shareholders in shareholders’ general meeting, enter into a contract in writing with a director wherein his emoluments are stipulated. The aforesaid emoluments include, emoluments in respect of his service as director, Supervisor or senior administrative officer of our Company or any subsidiary of our Company, emoluments in respect of the provision of other services in connection with the management of the affairs of our Company and any of its subsidiaries, and payment by way of compensation for loss of office, or as consideration for or in connection with his retirement from office. There is no specific provisions concerning a director’s power, in the absence of an independent quorum, to vote compensation to themselves or any members of their body, other than the above Article 175 with respect to a director’s voting power in matters he is materially interested.

Ordinary Shares

Pursuant to Article 27 of the Articles of Association, subject to the approval of the securities authority of the State Council, our Company may issue and offer shares to domestic investors or foreign investors for subscription. Foreign investors are those investors of foreign countries and regions of Hong Kong, Macau and Taiwan who subscribe for shares issued by our Company. Domestic investors are those investors within the territory of the PRC (excluding investors of the regions referred to in the preceding sentence) who subscribe for shares issued by our Company.

Pursuant to Article 28 of the Articles of Association, shares issued by our Company to domestic investors for subscription in RMB shall be referred to as “Domestic Shares”. Shares issued by our Company to foreign investors for subscription in foreign currencies shall be referred to as “Foreign Shares”. Foreign Shares which are listed overseas are called “Overseas Listed Foreign Shares”. The foreign currencies mean the legal currencies (apart from RMB) of other countries or regions which are recognised by the foreign exchange control authority of the state and can be used to pay our Company for the share price.

Pursuant to Article 29 of the Articles of Association, Domestic Shares issued by our Company shall be called “A Shares”. Overseas Listed Foreign Shares issued by our Company and listed in Hong Kong shall be called “H Shares”. H Shares are shares which have been admitted for listing on the Stock Exchange of Hong Kong Limited, the par value of which is denominated in RMB and which are subscribed for and traded in Hong Kong dollars. H Shares can also be listed on a stock exchange in the United States of America in the form of ADR. Shares issued by our Company, including Domestic Shares and Foreign Shares, are all ordinary shares.

Pursuant to Article 63 of the Articles of Association, the ordinary shareholders of our Company shall enjoy the following rights:

(1)    the right to attend or appoint a proxy to attend shareholders’ general meetings and to vote thereat;

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

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

(4)    the right to transfer, donate or pledge his shares in accordance with laws, administrative regulations and provisions of these Articles of Association;

(5)    the right of knowledge and decision making power with respect to important matters of the Company in accordance with laws, administrative regulations and these Articles of Association;

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

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

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

(iii)    all parts of the register of shareholders;

(a)    personal particulars of each of the Company’s directors, supervisors, president and other senior administrative officers, including:

(aa)    present name and alias and any former name or alias;

(bb)    principal address (residence);

(cc)    nationality;

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(dd)    primary and all other part-time occupations and duties;

(ee)    identification documents and their relevant numbers;

(b)state of the Company’s share capital;

(c)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 last accounting year and the aggregate amount paid by the Company for this purpose;

(d)minutes of shareholders’ general meetings and accountants’ report; and

(e)interim and annual reports of the Company.

(7)    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; and

(8)    the right to request the company to repurchase their shares as a result of disagreement on the resolutions passed by the shareholders’ general meeting on the merger or division of the Company; and

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

According to Article 270, dividends shall be distributed in accordance with the proportion of shares held by shareholders.

According to Article 38 of the Articles of Association, our Company may repurchase its issued shares under the following circumstances: (1) cancellation of shares for the reduction of its capital; (2) merging with another company that holds shares in our Company; (3) awarding its employees with shares; (4) at the request of the dissenting shareholders; and (5) other circumstances permitted by laws and administrative regulations.

According to Article 42 of the Articles of Association, unless our Company is in the course of liquidation, it must comply with thefollowing provisions in relation to repurchase of its issued shares: (1) where our Company repurchases shares of our Company at par value, payment shall be made out of book surplus distributable profits of our Company or out of proceeds of a fresh issue of shares made for that purpose; (2) where our Company repurchases shares of our Company at a premium to its par value, payment up to the par value may be made out of the book surplus distributable profits of our Company or out of the proceeds of a fresh issue of shares made for that purpose: (i) If the shares being repurchased were issued at par value, payment shall be made out of the book surplus distributable profits of the Company; (ii) If the shares being repurchased were issued at a premium to its par value, payment shall be made out of the book surplus distributable profits of the Company or out of the proceeds of a fresh issue of shares made for that purpose, provided that the amount paid out of the proceeds of the fresh issue shall not exceed the aggregate of premiums received by the Company on the issue of the shares repurchased or the current amount (including the premiums on the fresh issue) of the Company’s premium account (or capital common reserve fund account) at the time of the repurchase; (3) payment by our Company in consideration of the following shall be made out of our Company’s distributable profits: (i) acquisition of rights to repurchase shares of our Company; (ii) variation of any contract to repurchase shares of our Company; and (iii) release of any of our Company’s obligation under any contract to repurchase shares of our Company; and (4) After our Company’s registered capital has been reduced by the total par value of the cancelled shares in accordance with the relevant provisions, the amount deducted from the distributable profits of our Company for paying up the par-value portion of the shares repurchased shall be transferred to our Company’s premium account (or capital common reserve fund account).

According to Article 68 of the Articles of Association, shareholders of our company have the obligation not to withdraw their shares unless required by laws and regulations; shareholders are not liable to make any further contribution to the share capital other than as agreed by the subscriber of the relevant shares on subscription.

According to Article 267 of the Articles of Association, when distributing each year’s after-tax profits, our Company shall set aside 10% of such profits for our Company’s statutory common reserve fund, except where the accumulated balance of the said fund has reached 50% of our Company’s registered capital. After our Company has allocated its after-tax profits to the statutory common reserve fund, we may, with the approval of the shareholders by way of resolution in a shareholders’ general meeting, further allocate its after-tax profits to the discretionary common reserve fund.

The Articles of Association does not have specific provisions discriminating against any existing or prospective holder of such securities as a result of other shareholders owning a substantial number of shares.

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Action Necessary to Change Rights of Shareholders

Pursuant to Article 152 of the Articles of Association, shareholders who hold different classes of shares are shareholders of different classes. The holders of the Domestic Shares and holders of Overseas Listed Foreign Shares are deemed to be shareholders of different classes.

Pursuant to Article 153 of the Articles of Association, rights conferred on any class of shareholders in the capacity of shareholders (“class rights”) may not be varied or abrogated unless approved by a special resolution of shareholders in general meeting and by holders of shares of that class at a separate meeting.

Pursuant to Article 155 of the Articles of Association, 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 the following matters: (i) 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; (ii) to restrict the transfer or ownership of the shares of such class or add to such restriction; (iii) to restructure our Company where the proposed restructuring will result in different classes of shareholders bearing a disproportionate burden of such proposed restructuring; and (iv) to vary or abrogate the provisions of these Articles of Association. However, interested shareholder(s) shall not be entitled to vote at class meetings.

Pursuant to Article 156 of the Articles of Association, resolutions of a class of shareholders shall be passed by votes representing more than two-thirds of the voting rights of shareholders of that class represented at the relevant meeting who are entitled to vote at class meetings.

Pursuant to Article 157 of the Articles of Association, written notice of a class meeting shall be given forty-five days before the date of the class meeting to notify all of the shareholders in the share register of the class of the matters to be considered, the date and the place of the class meeting. A shareholder who intends to attend the class meeting shall deliver his written reply concerning attendance at the class meeting to our Company twenty days before the date of the class meeting. If the number of shares carrying voting rights at the meeting represented by the shareholders who intend to attend the class meeting reaches more than one half of the voting shares at the class meeting, our Company may hold the class meeting; if not, our Company shall within five (5) days notify the shareholders again by public notice of the matters to be considered, the date and the place for the class meeting. Our Company may then hold the class meeting after such publication of notice.

Pursuant to Article 158 of the Articles of Association, notice of class meetings need only be served on shareholders entitled to vote thereat. Meeting of any class of shareholders shall be conducted in a manner as similar as possible to that of general meetings of shareholders. The provisions of these Articles of Association relating to the manner to conduct any shareholders’ general meeting shall apply to any meeting of a class of shareholders.

Meetings of Shareholders

According to Article 79, shareholders’ general meetings are divided into annual general meetings and extraordinary general meetings. Shareholders’ general meetings shall be convened by our board of directors. Annual general meetings are held once every year and within six months from the end of the preceding financial year.

According to Article 80, under any of the following circumstances, our board of directors shall convene an extraordinary general meeting within two months: (1) the number of directors is less than that is required by the Company Law or two thirds of the number of directors specified in these Articles of Association; (2) the accrued losses of our Company amount to one third of the total amount of its share capital; (3) shareholder(s) individually or jointly holding 10% or more of our Company’s issued and outstanding shares carrying voting rights request(s) in writing the convening of an extraordinary general meeting; (4) it is deemed necessary by the board of directors or requested by the supervisory committee to convene an extraordinary general meeting; (5) more than one half of the independent directors propose to convene the meeting.

According to Article 92 of the Articles of Association, notice of a shareholders’ general meeting shall be given by way of announcement or by any other manner as provided in these Articles of Association (if necessary), not less than forty-five days (including forty-five days) before the date of the meeting to notify all of the shareholders in the share register of the matters to be considered, the date and the place of the meeting.

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According to Article 93 of the Articles of Association, our Company shall, based on the written replies received twenty days before the date of the shareholders’ general meeting from the shareholders, calculate the number of voting shares represented by the shareholders who intend to attend the meeting. If the number of voting shares represented by the shareholders who intend to attend the meeting reaches one half or more of our Company’s total voting shares, our Company may hold the meeting; if not, then our Company shall within five days notify the shareholders again by public notice of the matters to be considered, the place and date for, the meeting. Our Company may then hold the meeting after such publication of notice.

Limitation on Right to Own Securities

The Articles of Association does not specifically provide for the limitations on the rights to own securities by certain shareholders, however, the PRC Special Regulations on Overseas Offering and the Listing of Shares by Companies Limited by Share (the “Special Regulations”) and the Mandatory Provisions for Articles of Association of Companies to be Listed Overseas (the “Mandatory Provisions”) provide for different classes of shares to be subscribed for and traded by local and overseas investors respectively. Shares which can be traded by overseas investors must be in registered form and while denominated in Renminbi, they are traded in foreign currency with dividends payable in foreign currency. Local investors are prohibited from dealing in such shares.

Merger, Acquisition or Corporate Restructuring

Pursuant to Article 295 of the Articles of Association, in the event of the merger or division of our Company, a plan shall be presented by our Company’s board of directors and shall be approved in shareholders’ general meeting and 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 our Company or the shareholders who consent to the plan of merger or division to acquire that dissenting shareholder’s 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. Such special documents shall be sent by mail to holders of Overseas-Listed Foreign Shares.

Ownership to Be Disclosed

The Articles of Association do not contain any provisions governing the ownership threshold above which shareholder ownership must be disclosed.

C MATERIAL CONTRACTS

Other than such contracts as are described in our disclosure in Item 4 “Information on the Company” and Item 7 “Major Shareholders and Related Party Transactions”, we have not entered into any material contracts outside the ordinary course of our business within the two years preceding the date of this annual report.

D. EXCHANGE CONTROLS

Under current Chinese foreign exchange regulations, Renminbi is fully convertible for current account transactions, but is not freely convertible for capital account transactions. Current account foreign currency transactions can be undertaken without prior approval from the relevant Chinese government agencies by producing commercial documents evidencing such transactions, provided that they are processed through Chinese banks licensed to engage in foreign currency transactions. Conversion from Renminbi into a foreign currency or vice versa for purposes of capital account transactions requires prior approvals of relevant Chinese government agencies. This restriction on capital account transactions could affect the ability of our Company to acquire foreign currency for capital expenditures.

Our Company is generally required by law to sell all its foreign currency revenues to Chinese banks. Our Company may purchase foreign currency directly from Chinese banks for any current account transactions, such as trade transactions in our usual and normal course of business, including acquisition of aircraft, jet fuel and flight equipment (such acquisition requires approvals from the relevant Chinese government agencies). Payment of dividends by our Company to holders of our Company’s H Shares and ADRs is also considered a current account transaction under Chinese law. Therefore, there is no legal restriction on the conversion of Renminbi into foreign currency for the purpose of paying dividends to such holders of H Shares and ADRs. In addition, our Company’s Articles of Association require our Company to pay dividends to holders of our Company’s H Shares and ADRs in foreign currency.

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On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar so that the Renminbi is now permitted to fluctuate within a band against a basket of certain foreign currencies. On May 18, 2007, the People’s Bank of China announced that the floating band of Renminbi trading prices against U.S. dollar in the inter-bank spot foreign exchange market would be permitted to rise or fall by as much as 0.5%. The floating band was subsequently expanded to 1% by the People’s Bank of China, effective from April 16, 2012, and further expanded to 2% by the People’s Bank of China, effective from March 15, 2014.

The PRC government has stated publicly that it intends to further liberalize its currency policy, which could result in a further and more significant change in the value of the Renminbi against the U.S. dollar. Any significant revaluation of the Renminbi may have a material adverse effect on our Company’s financial performance, and the value of, and any dividends payable on, our Company’s H Shares and ADRs in foreign currency terms.

Other Limitations

There are no limitations on the right of non-resident or foreign owners to hold or vote H Shares or ADRs imposed by Chinese law or by the Articles of Association or other constituent documents of our Company. However, under current Chinese law, foreign ownership of our Company may not exceed 49%.

E. TAXATION

Chinese Taxation

The following is a general summary of certain Chinese tax consequences of the acquisition, ownership and disposition of A Shares, H Shares and ADRs. This summary is based upon tax laws of China as in effect on the date of this Annual Report, including the income tax treaty between the United States and China (the “U.S.-PRC Tax Treaty”), all of which are subject to change or different interpretation.

In general, for Chinese tax purposes, holders of ADRs will be treated as the owners of the H Shares represented by those ADRs, and exchanges of H Shares for ADRs, and ADRs for H Shares, will not be subject to taxation under the laws of China.

This summary does not purport to address all material tax consequences for holders or prospective purchasers of A Shares, H Shares or ADRs, and does not take into account the specific circumstances of such investors. Investors should consult their own tax advisors as to Chinese or other tax consequences of the acquisition, ownership and disposition of A shares, H Shares or ADRs.

As a result of the new corporate income tax law, the statutory corporate income tax rate adopted by our Company and our subsidiaries has been changed from 33% to 25% with effect from January 1, 2008. Pursuant to new corporate income tax law, the corporate income tax rates of entities that previously enjoyed preferential tax rates of 15% have been revised to 18%, 20%, 22%, 24% and 25% for 2008, 2009, 2010, 2011 and 2012 onwards, respectively.

Dividends

The new corporate income tax law and its relevant regulations generally provide for the imposition of a withholding tax on dividends paid by a Chinese company to a non-resident enterprise at a rate of 10%.

China currently has double-taxation treaties with a number of countries, such as Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands, Singapore, the United Kingdom and the United States. Under the U.S.-PRC Tax Treaty, China may tax a dividend paid by our Company to a U.S. holder up to a maximum of 10% of the gross amount of such dividend.

For individuals, Chinese tax law generally provides that an individual who receives dividends from Chinese companies is subject to a 20% individual income tax. A 50% reduction of taxable income is granted by Chinese tax law for an individual receiving dividends from a listed company on Shanghai Stock Exchange or Shenzhen Stock Exchange. As a result, the effective tax rate for dividends received by A share individual holder is 10% in 2018. Dividend income received by any foreign individual that holds overseas shares in Chinese enterprise is generally subject to individual income tax at a flat rate of 20%, subject to exemption or reduction by an applicable double-taxation treaty.

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Capital Gains from Transfer or Disposition of Shares

The new corporate income tax law and its relevant regulations generally provides that a non-resident enterprise is subject to a 10% capital gains tax for the transfer or disposition of shares of a Chinese company.

For individual shareholders, Chinese tax law generally provide that an individual who transfers or otherwise disposes of a company’s shares of capital stock is subject to a 20% individual income tax on the capital gain, if any. Currently, all individuals are temporarily exempt from individual income tax on transfers of shares of joint stock companies listed on Shanghai Stock Exchange or Shenzhen Stock Exchange, such as our Company. Should such temporary exemption be discontinued, such holders may be subject to a 20% individual income tax on the capital gain, if any, unless reduced by an applicable double-taxation treaty.

United States Federal Income Taxation

This discussion describes general U.S. federal income tax consequences of the purchase, ownership and disposition of our Company’s ADRs. This discussion does not address any aspect of U.S. federal gift or estate tax, or the state, local or foreign tax consequences of an investment in our Company’s ADRs. This discussion applies to you only if you hold and beneficially own our Company’s ADRs as capital assets for tax purposes. This discussion does not apply to you if you are a member of a class of holders subject to special rules, such as:

• dealers in securities or currencies;

• traders in securities that elect to use a mark-to-market method of accounting for securities holdings;

• banks or other financial institutions;

• insurance companies;

• tax-exempt organizations, retirement plans, individual retirement accounts or tax deferred accounts;

• partnerships or other pass-through entities (including entities treated as partnerships for U.S. federal income tax purposes) or persons holding ADRs through any such entities;

• persons that hold ADRs as part of a hedge, straddle, constructive sale, conversion transaction or other integrated investment;

• persons whose functional currency for tax purposes is not the U.S. dollar;

• persons who are U.S. expatriates;

• persons liable for alternative minimum tax; or

• persons who directly, indirectly or constructively own 10% or more of the total combined voting power of all classes of our Company’s shares (including ADRs) entitled to vote.

This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, which is referred to in this discussion as the Code, its legislative history, existing and proposed regulations promulgated thereunder, published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis. In addition, this discussion relies on the assumptions regarding the value of our Company’s shares and the nature of our business over time. Finally, this discussion is based in part upon the representations of the depositary and the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms. For U.S. federal income tax purposes, as a holder of ADRs, you are treated as the owner of the underlying ordinary shares represented by such ADRs.

The discussions and comments included herein are only a general description of the tax aspects and they do not constitute a tax advice or opinion. Therefore, you should consult your own tax advisor concerning the particular U.S. federal income tax consequences to you of the purchase, ownership and disposition of our Company’s ADRs, as well as the consequences to you arising under the laws of any other taxing jurisdiction.

For purposes of the U.S. federal income tax discussion below, you are a “U.S. Holder” if you beneficially own ADRs and are:

• a citizen or resident of the United States for U.S. federal income tax purposes;

• a corporation, or other entity taxable as a corporation, that was created or organized in or under the laws of the United States or any political subdivision thereof;

• an estate the income of which is subject to U.S. federal income tax regardless of its source; or

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• a trust if (a) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) the trust has a valid election in effect to be treated as a U.S. person.

If you are not a U.S. person, please refer to the discussion below under “Non-U.S. Holders.”

U.S. Holders

Dividends on ADRs

Subject to the Passive Foreign Investment Company (“PFIC”) discussion below, if our Company makes distributions and you are a U.S. Holder, the gross amount of any distributions you receive on your ADRs will generally be treated as dividend income if the distributions are made from our Company’s current or accumulated earnings and profits, calculated according to U.S. federal income tax principles. Dividends will generally be subject to U.S. federal income tax as ordinary income on the day you actually or constructively receive such income. However, if you are an individual and have held your ADRs for a sufficient period of time, dividend distributions on our Company’s ADRs will generally constitute qualified dividend income taxed at a preferential rate as long as our Company is not treated as a PFIC, our Company’s ADRs continue to be readily tradable on the New York Stock Exchange and certain other conditions apply. You should consult your own tax adviser as to the rate of tax that will apply to you with respect to dividend distributions, if any, you receive from us.

Distributions in excess of current and accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your adjusted tax basis in the ADRs and thereafter as capital gain. However, our Company does not intend to maintain calculations of our earnings and profits in accordance with U.S. federal income tax principles, so each U.S. Holder should therefore assume that any distribution by our Company with respect to the ADRs will constitute ordinary dividend income. Even if you are a corporation, you will not be entitled to claim a dividends-received deduction with respect to distributions you receive from our Company. Dividends generally will constitute foreign source passive income for U.S. foreign tax credit limitation purposes. You should consult your own tax advisor to determine the foreign tax credit implications of owning ADRs.

Sales and other dispositions of ADRs

Subject to the PFIC discussion below, when you sell or otherwise dispose of our Company’s ADRs, you will generally recognise capital gain or loss in an amount equal to the difference between the amount realized on the sale or other disposition and your adjusted tax basis in the ADRs, both as determined in U.S. dollars. Your adjusted tax basis will generally equal the amount you paid for the ADRs. Any gain or loss you recognise is long-term capital gain or loss if your holding period in our Company’s ADRs is more than one year at the time of disposition. If you are an individual, any such long-term capital gain is eligible for preferential rates. Your ability to deduct capital losses is subject to various limitations.

Passive Foreign Investment Company

If our Company is currently or were to become a PFIC, as a U.S. Holder, you would generally be subject to adverse U.S. tax consequences, in the form of increased tax liabilities and special U.S. tax reporting requirements.

Our Company 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 Company’s passive and total assets is calculated based on our market capitalization. In the case of publicly traded corporations, fair market value must be used for purposes of applying the Asset Test. In addition, regarding the above two tests, there are complex look-through rules to consider with respect to the assets and activities of related corporations from which our Company either receives income or in which it holds an interest. More specifically, certain adjustments are made to exclude certain income received from a related party or to include income earned and assets held by a 25% or more owned subsidiary in determining whether our Company qualifies as a PFIC under the two tests. In particular: 1) passive income received from a related party is excluded if it is properly allocable to the non-passive income of the related party, and 2) if our Company owns directly or indirectly 25% or more of the stock of another corporation, our Company is treated as if we owned directly a proportionate share of that corporation’s assets and income.

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Our Company believes that we were not a PFIC for the taxable year 2017. However, there can be no assurance that our Company will not be a PFIC for the taxable year 2017 and/or later taxable years, as PFIC status is re-tested each year and depends on the facts in such year. For example, our Company would be a PFIC for the taxable year 2017 if the sum of our average market capitalization, which is our share price multiplied by the total amount of our outstanding shares, and our liabilities over that taxable year is not more than twice the value of our cash, cash equivalents, and other assets that are readily converted into cash.

If our Company were a PFIC, you would generally be subject to additional taxes and interest charges on certain “excess distributions” our Company makes regardless of whether our Company continues 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 ADRs 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 ADRs, or (2) 100% of the gain from the disposition of ADRs.

To compute the tax on “excess” distributions or any gain, (1) the “excess distribution” would be allocated ratably to each day in your holding period, (2) the amounts allocated to the current year and to any tax year before the first day on which our Company became a PFIC would be taxed as ordinary income in the current year, (3) the amount allocated to other taxable years would be taxable at the highest applicable marginal rate in effect for that year, and (4) an interest charge at the rate for underpayment of U.S. federal income tax for any period described under (3) above would be imposed with respect to any portion of the “excess” distribution that is allocated to such period. In addition, if our Company were a PFIC, no distribution that you receive from our Company would qualify for taxation at the preferential rate discussed in the “Dividends on ADRs” section above.

If our Company were a PFIC in any year, as a U.S. Holder, you would be required to make an annual return on IRS Form 8621 “Information Return by a Shareholder of a Passive Foreign Investment Company or a Qualified Electing Fund.” However, our Company does not intend to generate, or share with you, information that you might need to properly complete IRS Form 8621. You should consult with your own tax adviser regarding reporting requirements with regard to your ADRs.

If our Company were a PFIC in any year, you would generally be able to avoid the “excess” distribution rules described above by making a timely so-called “mark-to-market” election with respect to your ADRs provided our Company’s ADRs are “marketable”. Our Company’s ADRs will be “marketable” as long as they remain regularly traded on a national securities exchange, such as the New York Stock Exchange. If you made this election in a timely fashion, you would generally recognise as ordinary income or ordinary loss the difference between the fair market value of your ADRs on the first day of any taxable year and their value on the last day of that taxable year. Any ordinary income resulting from this election would generally be taxed at ordinary income rates and would not be eligible for the reduced rate of tax applicable to qualified dividend income. Any ordinary losses would be limited to the extent of the net amount of previously included income as a result of the mark-to-market election, if any. Your basis in the ADRs would be adjusted to reflect any such income or loss. Any gains recognised on the sale or other disposition of the ADRs would be treated as ordinary income and any losses would be treated as ordinary losses (but only to the extent of the net amount of previously included income as a result of the mark-to-market election, if any). You should consult with your own tax adviser regarding potential advantages and disadvantages to you of making a “mark-to-market” election with respect to your ADRs.

Separately, if our Company were a PFIC in any year, you would be able to avoid the “excess” distribution rules by making a timely election to treat us as a so-called “Qualified Electing Fund” or “QEF”. You would then generally be required to include in gross income for any taxable year (1) as ordinary income, your pro rata share of our Company’s ordinary earnings for the taxable year, and (2) as long-term capital gain, your pro rata share of our Company’s net capital gain for the taxable year. However, our Company does not intend to provide you with the information you would need to make or maintain a “QEF” election and you will, therefore, not be able to make or maintain such an election with respect to your ADRs.

Medicare Tax

Recently enacted legislation requires certain U.S. Holders who are individuals, estates or trusts to pay up to an additional 3.8% tax on, among other things, dividends and capital gains for tax years beginning after December 12, 2012.

Non-U.S. Holders

If you beneficially own ADRs and are not a U.S. Holder for U.S. federal income tax purposes (a “Non-U.S. Holder”), you generally will not be subject to U.S. federal income tax or U.S. withholding tax on dividends received from our Company with respect to ADRs unless that income is considered effectively connected with your conduct of a U.S. trade or business and, if an applicable income tax treaty so requires as a condition for you to be subject to U.S. federal income tax with respect to income from your ADRs, such dividends are attributable to a permanent establishment that you maintain in the United States.

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You generally will not be subject to U.S. federal income tax, including withholding tax, on any gain realized upon the sale or exchange of ADRs, unless:

• that gain is effectively connected with the conduct of a U.S. trade or business and, if an applicable income tax treaty so requires as a condition for you to be subject to U.S. federal income tax with respect to income from your ADRs, such gain is attributable to a permanent establishment that you maintain in the United States; or

• you are a non-resident alien individual and are present in the United States for at least 183 days in the taxable year of the sale or other disposition and certain other conditions are met.

If you are engaged in a U.S. trade or business, unless an applicable tax treaty provides otherwise, the income from your ADRs, including dividends and the gain from the disposition of our Company’s ADRs, that is effectively connected with the conduct of that trade or business will generally be subject to the rules applicable to U.S. Holders discussed above. In addition, if you are a corporation, you may be subject to an additional branch profits tax at a rate of 30% or any lower rate under an applicable tax treaty.

U.S. information reporting and backup withholding rules

In general, dividend payments with respect to the ADRs and the proceeds received on the sale or other disposition of those ADRs may be subject to information reporting to the IRS and to backup withholding (currently imposed at a rate of 28%). Backup withholding will not apply, however, if you (1) are a corporation or come within certain other exempt categories and, when required, can demonstrate that fact or (2) provide a taxpayer identification number, certify as to no loss of exemption from backup withholding and otherwise comply with the applicable backup withholding rules. To establish your status as an exempt person, you will generally be required to provide certification on IRS Form W-9, W-8BEN or W-8ECI, or an appropriate substitute, as applicable. Any amounts withheld from payments to you under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability, provided that you furnish the required information to the IRS.

HOLDERS OF OUR COMPANY’S ADRS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES RESULTING FROM PURCHASING, HOLDING OR DISPOSING OF THE ADRS, INCLUDING THE APPLICABILITY AND EFFECT OF THE TAX LAWS OF ANY STATE, LOCAL OR FOREIGN JURISDICTION AND INCLUDING ESTATE, GIFT, AND INHERITANCE LAWS.

F. Dividends and Paying Agents

Not applicable.

G. Statement By Experts

Not applicable.

H. Documents on Display

Our Company has filed this Annual Report on Form 20-F with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Statements made in this Annual Report as to the contents of any document referred to are not necessarily complete. With respect to each such document filed as an exhibit to this Annual Report, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference.

Our Company is subject to the informational requirements of the Exchange Act and file reports and other information with the Securities and Exchange Commission. Reports and other information which our Company filed with the Securities and Exchange Commission, including this Annual Report on Form 20-F, may be inspected and copied at the public reference room of the Securities and Exchange Commission at 450 Fifth Street N.W. Washington D.C. 20549.

You can also obtain copies of this Annual Report on Form 20-F by mail from the Public Reference Section of the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. Additionally, copies of this material may be obtained from the Securities and Exchange Commission’s Internet site at http://www.sec.gov. The Commission’s telephone number is 1-800-SEC-0330. Copies of this material may also be obtained for our Company’s website at http:// www.csair.com.

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I. Subsidiary Information

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Fuel Price Fluctuation Risk

Our earnings are affected by changes in the price and availability of jet fuel. There are currently no effective means available to manage our exposure to the fluctuations in jet fuel prices. Our results of operations may be significantly affected by fluctuations in fuel prices which is a significant expense for our Group. A reasonable possible increase or decrease of 10% in jet fuel price, with volume of fuel consumed and all other variables held constant, would have increased or decreased the fuel costs by approximately RMB3,190 million. The sensitivity analysis of jet fuel price risk is disclosed in Note 4(e) to the consolidated financial statements.

Interest Rate Risk

We are subject to market risks due to fluctuations in interest rates. The majority of our borrowings and obligations under capital leases are in the form of long-term fixed-rate and variable-rate. Fluctuations in interest rates can lead to significant fluctuations in the fair value of such debt instruments.

Interest rate swaps, denominated in United States Dollars (“USD”), have been entered into to mitigate our cash flow interest rate risk. The interest rate swaps allow our Company to pay at fixed rate from 1.64% to 1.72% to receive LIBOR. The notional principal of the outstanding interest rate swap contracts as at December 31, 2017 amounted to USD460 million.

Cross currency swaps have been entered into mitigate interest rate risk and foreign currency risk. The cross currency swaps allow our Company to exchange the floating interest rate and principal payments in USD for fixed interest rate rate from 3.58% to 4.04% and principal payments in Renminbi. The notional principal of the outstanding cross currency swaps as at December 31, 2017 amounted to USD920 million.

The sensitivity analysis of interest rate risk is disclosed in Note 4(b) to the consolidated financial statements.

The following table provides information regarding our financial instruments that are sensitive to changes in interest rate as of December 31, 2017 and 2016:

	As of December 31, 2017 Expected Maturity Date																							As of December 31, 2016
	2018			2019			2020			2021			2022			Thereafter			Total recorded amount			Fair Vlaue(2)		Total Recorded amount			Fair Vlaue(2)
Variable rate bank and other loans in US$ Average interest rate		8,135			66			—			—			—			—			8,201			8,201		208			208
Average intereset rate		2.38	%		4.99	%		—			—			—			—			2.40	%				2.75	%
Variable rate bank and other loands in Euro		—			—			—			—			—			—			—			—		—			—
Average interest rate		—			—			—			—			—			—			—					—
Fixed rate bank and other loans in RMB		3,430			8,100			1			6,600			1			17			18,149			18,149		39,695			39,695
Average interest rate		3.67	%		3.06	%		1.20	%		3.12	%		1.20	%		1.20	%		3.20	%				2.97	%
Variable rate bank and other loans in RMB		16,003			963			4,833			69			63			10			21,941			21,941		5,601			5,601
Average interest rate		4.06	%		4.35	%		4.38	%		4.35	%		4.34	%		4.41	%		4.14	%				4.02	%

(1) These interest rates are calculated based on the year end indices.

(2) Fair value of debt instruments was estimated based on the interest rates applicable to similar debt instruments as of December 31, 2017 and 2016.

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Foreign Currency Exchange Risk

We are also exposed to foreign currency risk as a result of our aircraft and flight equipment being sourced from overseas suppliers. Specifically, our foreign currency exposure relates primarily to our foreign currency long-term bank and other loans used to finance such capital expenditures and our capital commitments. Subject to certain restrictive conditions imposed by the SAFE, we may, from time to time, enter into foreign exchange forward option contracts to mitigate our foreign currency exposures. The sensitivity analysis of foreign currency risk is disclosed in Note 4(c) to the consolidated Financial Statements.

As of December 31, 2017, we operated a total of 477 aircraft under operating leases and capital leases. Certain of the leases are at rates that are substantially fixed. Such leases expose us to market risks. However, in accordance with Item 305 of Regulation S-K, such leases have been excluded from the following market risk tables. Commitments under capital leases and operating leases are disclosed in Note 37 and Note 48(b) to the consolidated financial statements, respectively.

The following table provides information regarding our material foreign currency sensitive financial instruments and capital commitments as of December 31, 2017 and 2016:

	As of December 31, 2016 Expected Maturity Date																As of December 31, 2016
	2018		2019		2020		2021		2022		Thereafter		Total Recorded Amount		Fair Value (1)		Total Recorded Amount		Fair Value (1)
Variable rate bank and other loans in US$		8,135		66		—		—		—		—		8,201		8,201		208		208
Capital commitment in US$		28,125		28,370		22,686		4,808		2,845		—		86,834		86,834		83,532		83,532

(1) Fair value of debt instruments was estimated based on the floating interest rates applicable to similar debt instruments as of December 31, 2017 and 2016.

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.

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D. American Depositary Shares

The Bank of New York Mellon collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The Bank of New York Mellon 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 the fees. The Bank of New York Mellon may collect its annual fee for depositary services by deductions from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The Bank of New York Mellon may generally refuse to provide fee-attracting services until its fees for those services are paid.

Persons depositing or withdrawing shares must pay:	For:
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)	•  Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property •  Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
$.02 (or less) per ADS	•  Any cash distribution 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	•  Distribution of securities to holders of deposited securities which are distributed by the depositary to ADS registered holders
$.02 (or less) per ADSs per calendar year •	•  Depositary services
Registration or transfer fees	•  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
Expenses of the depositary	•  Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) •  Converting foreign currency to U.S. dollars
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	•  As necessary

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Fees and Payments from the Depositary to Us

In 2017, we received from the depositary a reimbursement of US$76,627.17, net of withholding tax, for continuing annual stock exchange listing fees and expenses incurred by our Company in connection with the administration and maintenance of the depositary receipt facility.

Indirect payments

As part of the service to our Company, the Bank of New York Mellon waived a total amount of US$131,269.98 for the standard costs associated with the administration of the ADS program in 2017.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

A. Material Modifications to the Instruments Defining the Rights of Security Holders

None.

B. Material Modifications to the Rights of Registered Securities by Issuing or Modifying any other Class of Securities

None.

C. Withdrawal or Substitution of a Material Amount of the Assets Securing any Registered Securities

Not applicable.

D. Change of Trustees or Paying Agents for any Registered Securities

Not applicable.

E. Use of Proceeds

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

Disclosure controls and procedures

Our President and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) or 15d-15(e)), and concluded that, based on their evaluation, our disclosure controls and procedures are effective as of the end of the period covered by this Annual Report to ensure that information required to be disclosed by our Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and were also effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our President and Chief Financial Officer, to allow timely decisions regarding required disclosure.

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Management’s annual report on internal control over financial reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. 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 and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of a company’s assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of a company’s management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of a company’s assets that could have a material effect on the consolidated financial statements. Our management has assessed the effectiveness of internal control over financial reporting based on the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our management has concluded that our internal control over financial reporting was effective as of December 31, 2017.

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 policies or procedures may deteriorate.

KPMG Huazhen LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this Annual Report, and, as part of the audit, has issued a report, included herein, on the effectiveness of our internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

China Southern Airlines Company Limited:

Opinion on Internal Control Over Financial Reporting

We have audited China Southern Airlines Company Limited and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Company as of December 31, 2017 and 2016, the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity, and consolidated cash flow statements for each of the years in the two-year period ended December 31, 2017, and the related notes (collectively, the consolidated financial statements), and our report dated April 26, 2018 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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.

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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 effective internal control over financial reporting was maintained in all material respects. 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 (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) 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 (3) 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.

/s/ KPMG Huazhen LLP

Beijing, China

April 26, 2018

Changes in internal control over financial reporting

During the year ended December 31, 2017, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 16A. AUDIT AND RISK MANAGEMENT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that Mr. Tan Jin Song qualifies as an audit and risk management committee financial expert in accordance with the terms of Item 16A of Form 20-F. Mr. Tan Jin Song satisfies as an “independent director” within the meaning of NYSE Manual Section 303A and meets the criteria for independence set forth in Section 10A(m)(3) of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, and Rule 10A-3 under the Exchange Act. See “Item 6 Directors, Senior Management and Employees — Directors and Senior Management”.

ITEM 16B. CODE OF ETHICS

We have adopted a code of ethics that applies to our principal executive officer, principal financial officer and principal accounting officer. Such code is included in the director service agreements, a form of which is incorporated by reference in this Annual Report in Exhibit 4.1. Each of the aforementioned senior corporate officers currently serves as a director and all of our directors are subject to the director service contracts with our Company. Pursuant to the director service agreements, among other things, directors (i) owe fiduciary duties to our Company and shall perform their duties in compliance with applicable governmental laws, rules and regulations; (ii) shall not engage in any activities in competition with our Company’s business or carry out any activities detrimental to the interests of our Company; and (iii) shall be held liable for any loss or injury incurred to our Company as a result of such director’s violation of applicable laws and regulations.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

KPMG Huazhen LLP, an independent registered public accounting firm, served as our principal accountant for the fiscal year ended December 31, 2016 and 2017. The following table sets forth the aggregate audit fees, audit-related fees, tax fees and other fees of our principal accountants for each of the fiscal years of 2016 and 2017:

	Audit Fees		Audit-Related Fees		Tax Fees		Other Fees
			RMB (in million)
2016		13.0		—		0.4		—
2017		13.8		—		0.1		—

Audit fees include the aggregate fees in each of the fiscal years listed for professional services rendered by our independent registered public accounting firm for the audit of our annual financial statements or services that are normally provided by the auditors in connection with and regulatory filing or engagements.

Tax fees consisted of fees for tax consultation and tax compliance services.

Our audit and risk management committee pre-approved all audit and non-audit services performed by our principal accountant for the fiscal years ended December 31, 2016 and 2017.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT AND RISK MANAGEMENT COMMITTEE

Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

None.

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ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

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ITEM 16G. CORPORATE GOVERNANCE

Set out below is a summary of any significant ways in which our corporate governance practices differ from those followed by domestic companies under the listing standards of the New York Stock Exchange (“NYSE”):

NYSE corporate governance rules	Our Company’s governance practices
Director Independence A listed company must have a majority of independent directors on its board of directors. No director qualifies as “independent” unless the board of directors affirmatively determines that the director has no material relationship with the listed company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). In addition, a director must meet certain standards to be deemed independent. For example, a director is not independent if the director is, or has been within the last three years, an employee of the listed company, or if the director has received, during any twelve-month period within the last three years, more than US$120,000 in direct compensation from the listed company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service).	Our Company has complied with the relevant Chinese corporate governance rules and has implemented internal rules governing the independence and responsibilities of independent directors. Our Company determines the independence of independent directors every year.
Executive Sessions The non-management directors of each listed company must meet at regularly scheduled executive sessions without management.	No similar requirements.
Nominating/Corporate Governance Committee Listed companies must have a nominating/corporate governance committee composed entirely of independent directors.	Our Company has established a nominating committee. As at 31 December 2017, the Nomination Committee consists of three members, including Mr. Zheng Fan (independent nonexecutive Director) as chairman and Mr. Wang Chang Shun (executive Director) and Mr. Jiao Shu Ge (independent non-executive Director) as members. The responsibilities of the Nomination Committee are to make recommendations to the Board in respect of the size and composition of the Board based on the operational activities, assets and shareholding structure of the Company; study the selection criteria and procedures of Directors and Management and give advice to the Board by consideration of the board diversity policy; identify qualified candidates for Directors and Management; investigate and propose candidates for Directors and Management and other senior management members to the Board.

100

NYSE corporate governance rules	Our Company’s governance practices
The nominating/corporate governance committee must have a written charter that addresses the committee’s purposes and responsibilities which, at minimum, must be to: identify individuals qualified to become board members, consistent with criteria approved by the board, and to select, or to recommend that the board select, the director nominees for the next annual meeting of shareholders; develop and recommend to the board a set of corporate governance guidelines applicable to the corporation; and oversee the evaluation of the board and management, and evaluate the performance of the committee every year.
Compensation Committee Listed companies must have a compensation committee composed entirely of independent directors.	Our Company has established a remuneration and assessment committee consisting of three members. As of December 31, 2017, the Remuneration and Assessment Committee comprises three members and chaired by Mr. Gu Hui Zhong (independent non-executive Director) together with Mr. Zhang Zi Fang (executive Director) and Mr. Zheng Fan (independent non-executive Director) as members.
The written charter of the compensation committee must state, at least, the following purposes and responsibilities: (1)   review and approve the corporate goals associated with CEO’s compensation, evaluate the performance of the CEO in fulfilling these goals, and based on such evaluation determine and approve the CEO’s compensation level; (2)   make recommendations to the board with respect to non-CEO executive officer compensation, and incentive-compensation and equity-based plans that are subject to board approval; (3)   produce a committee report on executive compensation as required by the SEC to be included in the annual proxy statement or annual report filed with the SEC. The charter must also include the requirement for an annual performance evaluation of the compensation committee.	The responsibilities are similar to those stipulated by the NYSE rules, but the committee is not required to produce a report on the executive compensation or make an annual performance evaluation of the committee. The responsibilities of the remuneration and assessment committee are to approve the remuneration packages of directors and senior management of our Group, and our Company’s “preliminary proposals on annual emoluments of the directors and senior management of our Group”. The remuneration and assessment committee is also responsible for assessing performance of executive director and approving the terms of executive directors’ service contracts.
Audit and risk management committee Listed companies must have an audit and risk management committee that satisfies the requirements of Rule 10A-3 of Exchange Act. It must have a minimum of three members, and all audit and risk management committee members must satisfy the requirements for independence set forth in Section 303A.02 of NYSE Corporate Governance Rules as well as the requirements of Rule 10A-3b (1) of the Exchange Act.	Our board of directors of our Company has established an audit and risk management committee that satisfies relevant domestic requirements and the audit and risk management committee has a written charter. As of December 31, 2017, the Audit and Risk Management Committee consists of three members, Mr. Gu Hui Zhong, Jiao Shu Ge and Tan Jin Song, with Tan Jin Song being the Chairman of the Audit and risk management committee.

101

NYSE corporate governance rules	Our Company’s governance practices
The written charter of the audit and risk management committee must specify that the purpose of the audit and risk management committee is to assist the board oversight of the integrity of financial statements, the company’s compliance with legal and regulatory requirements, qualifications and independence of independent auditors and the performance of the listed company’s internal audit function and independent auditors.	The responsibilities of the audit and risk management committee are similar to those stipulated by the NYSE rules, but according to the domestic practices, our Company is not required to make an annual performance evaluation of the audit and risk management committee and the audit and risk management committee is not required to prepare an audit report to be included in our Company’s annual proxy statement.
The written charter must also require the audit and risk management committee to prepare an audit and risk management committee report as required by the SEC to be included in the listed company’s annual proxy statement as well as an annual performance evaluation of the audit and risk management committee.
Shareholder Approval of Equity Compensation Plans Shareholders must be given the opportunity to vote on equity-compensation plans and material revisions thereto, except for employment incentive plans, certain awards and plans in the context of mergers and acquisitions.	The relevant regulations of China require our board of directors to propose plans and types of director compensation for the shareholders’ meeting to approve. The compensation plan of executive officers is subject to approval by our board and disclosed to the public upon the approval of our board of directors. The approval of director compensation and compensation plan of executive officers of our Company satisfies relevant domestic requirements.
Corporate Governance Guidelines Listed companies must adopt and disclose corporate governance guidelines, involving director qualification standards, director responsibilities, director access to management and , as necessary and appropriate, independent advisors, director compensation, director orientation continuing education, management succession and annual performance evaluation of the board of directors, etc.	CSRC has issued the Corporate Governance Rules, with which our Company has complied.
Certification Requirements Each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards and he or she must promptly notify the NYSE in writing of any material non-compliance with any applicable provisions of Section 303A.	There are no similar requirements under the domestic corporate governance rules in China.
Each listed company must submit an executed Written Affirmation annually to the NYSE. In addition, each listed company must submit an interim Written Affirmation as and when required by the interim Written Affirmation form specified by the NYSE.

ITEM 16. MINE SAFETY DISCLOSURE

Not applicable.

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ITEM 17. FINANCIAL STATEMENTS

We have elected to provide the financial statements and related information specified in Item 18 in lieu of Item 17.

ITEM 18. FINANCIAL STATEMENTS

See F-pages following Item 19.

ITEM 19. EXHIBITS

Index to Exhibits
Exhibit No.	Description of Exhibit
1.1	Restated and Amended Articles of Association of China Southern Airlines Company Limited (as amended) (English translation) (Filed as Exhibit 99.5 to our Form 6-K (File No. 001-14600) filed with the Securities and Exchange Commission on December 27, 2013).
2.1	Specimen Certificate for the H Shares (Filed as Exhibit 2.1 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2012 filed with the Securities and Exchange Commission on April 26, 2013).
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 Shares evidenced by American Depositary Receipt issued thereunder, including the form of American Depositary Receipt (Filed as Registration Statement on Form F-6 (File No. 333-07116), filed with the Securities and Exchange Commission on August 7, 2012).
4.1	Form of Director’s Service Agreement (Filed as Exhibit 4.1 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2005 filed with the Securities and Exchange Commission on June 30, 2006).
4.2	Form of Non-executive Director’s Service Agreement (Filed as Exhibit 4.2 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2005 filed with the Securities and Exchange Commission on June 30, 2006).
4.3	Aircraft Acquisition Agreement entered into by and between our Company and Boeing on February  28, 2012* (Filed as Exhibit 4.5 to our Form 20-F (File No. 001-14660) for the year ended December  31, 2011 filed with the Securities and Exchange Commission on April 27, 2012).
4.4	Aircraft Acquisition Agreement entered into by and between Xiamen Airlines and Boeing on August  8, 2012* (Filed as Exhibit 4.4 to our Form 20-F (File No. 001-14660) for the year ended December  31, 2012 filed with the Securities and Exchange Commission on April 26, 2013).
4.5	Aircraft Acquisition Agreement entered into by and between our Company and Airbus S.A.S. on December  5, 2012* (Filed as Exhibit 4.5 to our Form 20-F (File No. 001-14660) for the year ended December  31, 2012 filed with the Securities and Exchange Commission on April 26, 2013).
4.6	Aircraft Acquisition Agreement entered into by and between Xiamen Airlines and Boeing on December  17, 2015* (Filed as Exhibit 4.6 to our Form 20-F (File No. 001-14660) for the year ended December  31, 2015 filed with the Securities and Exchange Commission on April 28, 2016).
4.7	Aircraft Acquisition Agreement entered into by and between our Company and Boeing on December  17, 2015 * (Filed as Exhibit 4.7 to our Form 20-F (File No. 001-14660) for the year ended December  31, 2015 filed with the Securities and Exchange Commission on April 28, 2016).
4.8	Aircraft Acquisition Agreement entered into by and between our Company and Boeing on December  17, 2015 * (Filed as Exhibit 4.8 to our Form 20-F (File No. 001-14660) for the year ended December  31, 2015 filed with the Securities and Exchange Commission on April 28, 2016).
4.9	Aircraft Acquisition Agreement entered into by and between our Company and Airbus S.A.S. on December  23, 2015* (Filed as Exhibit 4.9 to our Form 20-F (File No. 001-14660) for the year ended December  31, 2015 filed with the Securities and Exchange Commission on April 28, 2016).

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4.10	Import and Export Agency Framework Agreement entered into by and between our Company and Southern Airlines (Group) Import and Export Trading Company Limited on January 9, 2014 (Filed as Exhibit 4.11 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2013 filed with the Securities and Exchange Commission on April 25, 2014).
4.11	Media Services Framework Agreement entered into by and between our Company and Southern Airlines Culture and Media Co., Ltd. on April 19, 2013 (Filed as Exhibit 4.12 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2013 filed with the Securities and Exchange Commission on April 25, 2014).
4.12	Financial Services Framework Agreement entered into by and between our Company and Southern Airlines Group Finance Company Limited on November 8, 2013 (Filed as Exhibit 4.13 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2013 filed with the Securities and Exchange Commission on April 25, 2014).
4.13	Passenger and Cargo Sales Agency Services Framework Agreement entered into by and between our Company and China Southern Airlines Group Passenger and Cargo Agent Company Limited on November 8, 2013 (Filed as Exhibit 4.14 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2013 filed with the Securities and Exchange Commission on April 25, 2014).
4.14	Catering Service Framework Agreement entered into by and between our Company and Shenzhen Air Catering Co., Ltd. on April  19, 2013 (Filed as Exhibit 4.17 to our Form 20-F (File No. 001-14660) for the year ended December  31, 2013 filed with the Securities and Exchange Commission on April 25, 2014).
4.15	Property Lease Agreement entered into by and between our Company and CSAH on January 9, 2014 (Filed as Exhibit 4.18 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2013 filed with the Securities and Exchange Commission on April 25, 2014).
4.16	Land Lease Agreement entered into by and between our Company and CSAH on January 9, 2014 (Filed as Exhibit 4.19 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2013 filed with the Securities and Exchange Commission on April 25, 2014).
4.17	Trademark License Agreement entered into by and between our Company and CSAH on May 22, 1997 (Filed as Exhibit 4.10 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2008 filed with the Securities and Exchange Commission on June 25, 2009).
4.18	A Share subscription agreement entered into by and between our Company and CSAH on June 11, 2012 (Filed as Exhibit 4.11 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2012 filed with the Securities and Exchange Commission on April 26, 2013).
4.19	Aircraft Acquisition Agreement entered into by and between our Company and Airbus S.A.S. on May  16, 2014* (Filed as Exhibit 4.23 to our Form 20-F (File No. 001-14660) for the year ended December  31, 2014 filed with the Securities and Exchange Commission on April 30, 2015).
4.20	English translation of Asset Lease Agreement entered into by and between our Company and CSAH on December  29, 2014 (Filed as Exhibit 4.24 to our Form 20-F (File No. 001-14660) for the year ended December  31, 2014 filed with the Securities and Exchange Commission on April 30, 2015).
4.21	English translation of Supplemental Agreement to the Media Services Framework Agreement entered into by and between our Company and Southern Airlines Culture and Media Co., Ltd. on December 29, 2014 (Filed as Exhibit 4.25 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2014 filed with the Securities and Exchange Commission on April 30, 2015).
4.22	English translation of Property Management Framework Agreement entered into by and between our Company and Guangzhou China Southern Airlines Property Management Company Limited on December 29, 2014 (Filed as Exhibit 4.26 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2014 filed with the Securities and Exchange Commission on April 30, 2015).
4.23	English translation of Electronic aviation passenger comprehensive insurance four-parties cooperation agreement entered into by and among Guangdong CSA E-commerce Co., Ltd. SA Finance, Air Union Insurance Brokers (Beijing) Co., Ltd. and Ping An Property & Casualty Insurance Company of China, Ltd. Guangdong Branch on November 21, 2014 (Filed as Exhibit 4.27 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2014 filed with the Securities and Exchange Commission on April 30, 2015).

104

4.24	English translation of Electronic aviation passenger comprehensive insurance four-parties cooperation agreement entered into by and among Guangdong CSA E-commerce Co., Ltd. SA Finance, Air Union Insurance Brokers (Beijing) Co., Ltd. and Sunshine Property and Casualty Insurance Company Limited on November 21, 2014 (Filed as Exhibit 4.28 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2014 filed with the Securities and Exchange Commission on April 30, 2015).
4.25	English translation of Electronic aviation passenger comprehensive insurance four-parties cooperation agreement entered into by and among Guangdong CSA E-commerce Co., Ltd. SA Finance, Air Union Insurance Brokers (Beijing) Co., Ltd. and PICC Property and Casualty Company Limited Guangzhou Branch on November 21, 2014 (Filed as Exhibit 4.29 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2014 filed with the Securities and Exchange Commission on April 30, 2015).
4.26	English translation of Electronic aviation passenger comprehensive insurance four-parties cooperation agreement entered into by and among Guangdong CSA E-commerce Co., Ltd. SA Finance, Air Union Insurance Brokers (Beijing) Co., Ltd. and Taiping Pension Co., Ltd. on November 21, 2014 (Filed as Exhibit 4.30 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2014 filed with the Securities and Exchange Commission on April 30, 2015).
4.27	English translation of Equity Transfer Agreement entered into by and between Xiamen Airlines Company Limited and Hebei Airlines Investment Group Company Limited on October 13, 2014 (Filed as Exhibit 4.31 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2014 filed with the Securities and Exchange Commission on April 30, 2015).
4.28	English translation of Supplemental Agreement to the financial service framework agreement entered into by and between our Company and Southern Airlines Group Finance Company Limited regarding revising each of the Cap in relation to the Provision of Deposit Services and the annual cap for the Provision of the Loan Services on May 4, 2015 (Filed as Exhibit 4.28 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2015 filed with the Securities and Exchange Commission on April 28, 2016).
4.29	English translation of Equity Transfer Agreement entered into by and between our Company and Xiamen Jiafa Group Co., Ltd. on July  14, 2015 (Filed as Exhibit 4.29 to our Form 20-F (File No. 001-14660) for the year ended December  31, 2015 filed with the Securities and Exchange Commission on April 28, 2016).
4.30	English translation of Insurance Business Platform Cooperation Framework Agreement entered into by and between our Company and Southern Airlines Group Finance Company Limited on November 19, 2015 (Filed as Exhibit 4.30 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2015 filed with the Securities and Exchange Commission on April 28, 2016).
4.31	English translation of Supplemental Agreement to Equity Transfer Agreement entered into by and between our Company and Xiamen Jiafa Group Co., Ltd. on December 8, 2015 (Filed as Exhibit 4.31 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2015 filed with the Securities and Exchange Commission on April 28, 2016).
4.32	English translation of Catering Service Framework Agreement entered into by and between our Company and Shenzhen Air Catering Co., Ltd. on December 30, 2015 (Filed as Exhibit 4.32 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2015 filed with the Securities and Exchange Commission on April 28, 2016).
4.33	English translation of Supplemental Agreement to the property lease agreement entered into by and between our Company and CSAH on August 13, 2015 (Filed as Exhibit 4.33 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2015 filed with the Securities and Exchange Commission on April 28, 2016).
4.34	English translation of Media Services Framework Agreement entered into by and between our Company and Southern Airlines Culture and Media Co., Ltd. on December 30, 2015 (Filed as Exhibit 4.34 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2015 filed with the Securities and Exchange Commission on April 28, 2016).
4.35	English translation of Financial Services Framework Agreement entered into by and between our Company and Southern Airlines Group Finance Company Limited on August 29, 2016 (Filed as Exhibit 4.35 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2016 filed with the Securities and Exchange Commission on April 27, 2017).
4.36	English translation of Insurance Business Platform Services Agreement entered into by and between our Company and Southern Airlines Group Finance Company Limited on August 29, 2016 (Filed as Exhibit 4.36 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2016 filed with the Securities and Exchange Commission on April 27, 2017).

105

4.37	English translation of Property Lease and Land Lease Agreement entered into by and between our Company and CSAH on December  16, 2016 (Filed as Exhibit 4.37 to our Form 20-F (File No. 001-14660) for the year ended December  31, 2016 filed with the Securities and Exchange Commission on April 27, 2017).
4.38	English translation of Passenger and Cargo Sales and Ground Services Framework Agreement entered into by and between our Company and China Southern Air Holding Ground Services Company Limited on December 16, 2016 (Filed as Exhibit 4.38 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2016 filed with the Securities and Exchange Commission on April 27, 2017).
4.39	Supplemental Agreement No. 3 to Purchase Agreement No.  03586 Relating to Boeing Model 787 Aircraft entered into by and between Xiamen Airlines and Boeing on July 27, 2016* (Filed as Exhibit 4.39 to our Form 20-F (File No.  001-14660) for the year ended December 31, 2016 filed with the Securities and Exchange Commission on April 27, 2017).
4.40	Supplemental Agreement No. 4 to Purchase Agreement No.  03586 Relating to Boeing Model 787 Aircraft entered into by and between Xiamen Airlines and Boeing on July 27, 2016* (Filed as Exhibit 4.40 to our Form 20-F (File No.  001-14660) for the year ended December 31, 2016 filed with the Securities and Exchange Commission on April 27, 2017).
4.41	Supplemental Agreement No. 3 to Purchase Agreement No.  03757 Relating to Boeing Model 737-800 Aircraft entered into by and between Xiamen Airlines and Boeing on April  26, 2016*(Filed as Exhibit 4.41 to our Form 20-F (File No. 001-14660) for the year ended December  31, 2016 filed with the Securities and Exchange Commission on April 27, 2017).
4.42	Purchase Agreement No. GUN-PA-04455 Relating to Boeing Model 787-9 Aircraft entered into by and between our Company and Boeing on October 12, 2016* (Filed as Exhibit 4.42 to our Form 20-F (File No. 001-14660) for the year ended December 31, 2016 filed with the Securities and Exchange Commission on April 27, 2017).
4.43	Airbus Aircraft Acquisition Agreement entered into by and between our Company and Airbus S.A.S on April 26, 2017*
4.44	English translation of Aircraft Finance Lease Framework Agreement entered into by and between our Company and CSA International on May 26, 2017
4.45	English translation of 2018-2019 Finance and Lease Service Framework Agreement entered into by and between our Company and CSA International on October 17, 2017
4.46	Acquisition Agreement entered into by and between our Company and Boeing on October 20, 2017*
4.47	Acquisition Agreement entered into by and between our Company and Boeing on October 20, 2017 *
4.48	English translation of Property Management Framework Agreement entered into by and between our Company and CSAPMC on December 19, 2017
4.49	Acquisition Agreement entered into by and between Xianmen Airlines and Boeing on March 21, 2018 *
8.1	Subsidiaries of China Southern Airlines Company Limited
11.1	Code of Ethics (included in Exhibit 4.1)
12.1	Section 302 Certification of President
12.2	Section 302 Certification of Chief Financial Officer
13.1	Section 906 Certification of President
13.2	Section 906 Certification of Chief Financial Officer
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

CHINA SOUTHERN AIRLINES COMPANY LIMITED

/s/ Wang Chang Shun
Name:	Wang Chang Shun
Title:	Chairman of our board of directors

Date: April 26, 2018

107

CHINA SOUTHERN AIRLINES COMPANY LIMITED

AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Reports of Independent Registered Public Accounting Firm		F-2
Consolidated Income Statements for the years ended December  31, 2017, 2016 and 2015		F-4
Consolidated Statements of Comprehensive Income for the years ended December 31, 2017, 2016 and 2015		F-5
Consolidated Statements of Financial Position at December  31, 2017 and 2016		F-6
Consolidated Statements of Changes in Equity for the years ended December 31, 2017, 2016 and 2015		F-8
Consolidated Cash Flow Statements for the years ended December  31, 2017, 2016 and 2015		F-9
Notes to the Consolidated Financial Statements		F-10

F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

China Southern Airlines Company Limited:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial position of China Southern Airlines Company Limited and subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity, and consolidated cash flow statements for the years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standard Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated April 26, 2018 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the 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 consolidated 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 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 audits 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. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG Huazhen LLP

We have served as the Company’s auditor since 2016.

Beijing, China

April 26, 2018

F-2

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of China Southern Airlines Company Limited:

In our opinion, the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended December 31, 2015 present fairly, in all material respects, the results of operations and cash flows of China Southern Airlines Company Limited and its subsidiaries (the “Company”) for the year ended December 31, 2015, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers Zhong Tian LLP

Shanghai, China

April 28, 2016

F-3

CONSOLIDATED INCOME STATEMENTS

For the years ended December 31, 2017, 2016 and 2015

	Note	2017 RMB million			2016 RMB million			2015 RMB million
Operating revenue
Traffic revenue	5		121,873			109,693			107,099
Other operating revenue	7		5,933			5,288			4,553
Total operating revenue			127,806			114,981			111,652
Operating expenses
Flight operation expenses	8		62,978			51,461			50,412
Maintenance expenses	9		11,877			11,318			10,407
Aircraft and transportation service expenses	10		22,935			20,215			17,908
Promotion and selling expenses	11		6,881			6,304			6,976
General and administrative expenses	12		3,391			2,815			2,464
Depreciation and amortization	13		13,162			12,619			11,845
Impairment on property, plant and equipment	20		324			71			90
Others			1,550			1,401			1,390
Total operating expenses			123,098			106,204			101,492
Other net income	15		4,448			3,835			3,278
Operating profit			9,156			12,612			13,438
Interest income			89			89			253
Interest expense	16		(2,747	)		(2,465	)		(2,188	)
Share of associates’ results	25		431			509			460
Share of joint ventures’ results	26		99			102			108
Exchange gain/(loss), net	37(d)		1,801			(3,276	)		(5,953	)
Fair value movement of derivative financial instruments	29		(64	)		—			—
Gain on deemed disposal of a subsidiary			—			90			—
Remeasurement of the originally held equity interests in a joint venture	24(iv)		109			—			—
Profit before income tax			8,874			7,661			6,118
Income tax	17		(1,976	)		(1,763	)		(1,300	)
Profit for the year			6,898			5,898			4,818
Profit attributable to:
Equity shareholders of the Company	19		5,961			5,044			3,736
Non-controlling interests			937			854			1,082
Profit for the year			6,898			5,898			4,818
Earnings per share
Basic and diluted	19		RMB0.60			RMB0.51			RMB0.38

The accompanying notes form part of these financial statements.

F-4

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, 2017, 2016 and 2015

	Note		2017 RMB million			2016 RMB million			2015 RMB million
Profit for the year				6,898			5,898			4,818
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
- Cash flow hedge: fair value movement of derivative financial instruments		18		25			8			13
- Fair value movement of available-for-sale financial assets		18		123			362			—
- Share of other comprehensive income (loss) of associates		25		2			(2	)		(7	)
- Deferred tax relating to above items		18		(37	)		(92	)		(3	)
Other comprehensive income for the year				113			276			3
Total comprehensive income for the year				7,011			6,174			4,821
Total comprehensive income attributable to:
Equity shareholders of the Company				6,028			5,196			3,742
Non-controlling interests				983			978			1,079
Total comprehensive income for the year				7,011			6,174			4,821

The accompanying notes form part of these financial statements.

F-5

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

At December 31, 2017 and 2016

	Note		2017 RMB million		2016 RMB million
Non-current assets
Property, plant and equipment, net		20		158,926		146,746
Construction in progress		21		30,233		28,910
Lease prepayments		22		2,923		2,687
Goodwill		23		237		182
Interest in associates		25		3,031		2,590
Interest in joint ventures		26		1,015		1,522
Other investments in equity securities		27		103		103
Aircraft lease deposits				642		725
Available-for-sale financial assets		28		622		499
Derivative financial instruments		29		46		21
Deferred tax assets		30		1,662		1,685
Other assets		31		1,394		1,008
				200,834		186,678
Current assets
Inventories		32		1,622		1,588
Trade receivables		33		2,675		2,989
Other receivables		34		5,232		3,387
Cash and cash equivalents		35		6,826		4,152
Assets held for sale		36		8		—
Restricted bank deposits				111		135
Prepaid expenses and other current assets				1,334		1,415
Amounts due from related companies		41		76		98
				17,884		13,764
Current liabilities
Derivative financial instruments		29		64		—
Borrowings		37		27,568		26,746
Current portion of obligations under finance leases		38		8,341		8,695
Trade payables		39		2,125		1,903
Sales in advance of carriage				7,853		8,420
Deferred revenue		40		1,502		1,299
Current income tax				919		647
Amounts due to related companies		41		101		103
Accrued expenses		42		15,370		15,147
Other liabilities		43		5,734		4,972
				69,577		67,932

The accompanying notes form part of these financial statements.

F-6

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (CONTINUED)

At December 31, 2017 and 2016

	Note		2017 RMB million		2016 RMB million
Non-current liabilities
Borrowings		37		20,719		18,758
Obligations under finance leases		38		59,583		53,527
Deferred revenue		40		1,849		1,622
Provision for major overhauls		44		2,808		2,089
Provision for early retirement benefits		45		3		6
Deferred benefits and gains		46		1,053		691
Deferred tax liabilities		30		583		841
				86,598		77,534
Net assets				62,543		54,976
Capital and reserves
Share capital		47		10,088		9,818
Reserves		48		39,848		33,638
Total equity attributable to equity shareholders of the Company				49,936		43,456
Non-controlling interests				12,607		11,520
Total equity				62,543		54,976

The accompanying notes form part of these financial statements.

F-7

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the years ended December 31, 2017, 2016 and 2015

	Attributable to equity shareholders of the Company
	Share		Share		Fair value		Other			Retained						Non- controlling			Total
	capital		premium		reserve		reserves			earnings			Total			interests			equity
	RMB		RMB		RMB		RMB			RMB			RMB			RMB			RMB
	million		million		million		million			million			million			million			million
Balance at January 1, 2015		9,818		14,131		44		1,486			10,269			35,748			8,745			44,493
Changes in equity for 2015:
Profit for the year		—		—		—		—			3,736			3,736			1,082			4,818
Other comprehensive income		—		—		11		(5	)		—			6			(3	)		3
Total comprehensive income		—		—		11		(5	)		3,736			3,742			1,079			4,821
Appropriations to reserves		—		—		—		246			(246	)		—			—			—
Dividends relating to 2014		—		—		—		—			(393	)		(393	)		—			(393	)
Capital injection of non-controlling interests in a subsidiary		—		—		—		—			—			—			1,360			1,360
Acquisition of non-controlling interests in a subsidiary		—		—		—		(52	)		—			(52	)		(574	)		(626	)
Distributions to non-controlling interests		—		—		—		—			—			—			(31	)		(31	)
Balance at December 31, 2015 and January 1, 2016		9,818		14,131		55		1,675			13,366			39,045			10,579			49,624
Changes in equity for 2016:
Profit for the year		—		—		—		—			5,044			5,044			854			5,898
Other comprehensive income		—		—		154		(2	)		—			152			124			276
Total comprehensive income		—		—		154		(2	)		5,044			5,196			978			6,174
Appropriations to reserves		—		—		—		405			(405	)		—			—			—
Dividends relating to 2015		—		—		—		—			(785	)		(785	)		—			(785	)
Capital injection of non-controlling interests in a subsidiary		—		—		—		—			—			—			260			260
Decrease in non-controlling interests as a result of loss of control of a subsidiary (Note 24(vii))		—		—		—		—			—			—			(83	)		(83	)
Distributions to non-controlling interests		—		—		—		—			—			—			(214	)		(214	)
Balance at December 31, 2016 and January 1, 2017		9,818		14,131		209		2,078			17,220			43,456			11,520			54,976
Changes in equity for 2017:
Profit for the year		—		—		—		—			5,961			5,961			937			6,898
Other comprehensive income		—		—		66		1			—			67			46			113
Total comprehensive income		—		—		66		1			5,961			6,028			983			7,011
Appropriations to reserves		—		—		—		492			(492	)		—			—			—
Dividends relating to 2016 (Note 48(b))		—		—		—		—			(982	)		(982	)		—			(982	)
Issuance of shares (Note 47(ii))		270		1,051		—		—			—			1,321			—			1,321
Capital injection of non-controlling interests in subsidiaries		—		—		—		—			—			—			404			404
Dilution and change in non-controlling interests and other reserves		—		—		—		113			—			113			(39	)		74
Distributions to non-controlling interests		—		—		—		—			—			—			(261	)		(261	)
Balance at December 31, 2017		10,088		15,182		275		2,684			21,707			49,936			12,607			62,543

The accompanying notes form part of these financial statements.

F-8

CONSOLIDATED CASH FLOW STATEMENTS

For the years ended December 31, 2017, 2016 and 2015

	Note	2017 RMB million			2016 RMB million			2015 RMB million
Operating activities
Cash generated from operating activities	35(b)		23,478			27,681			27,857
Interest received			119			118			313
Interest paid			(3,758	)		(2,629	)		(2,274	)
Income tax paid			(2,107	)		(1,406	)		(2,162	)
Net cash generated from operating activities			17,732			23,764			23,734
Investing activities
Acquisition of subsidiaries, net of cash acquired	24(iv)&(v)		(682	)		(189	)		(69	)
Deemed disposal of a subsidiary			—			(67	)		—
Proceeds from disposal of property, plant and equipment and lease prepayments			5,922			3,111			3,196
Proceeds from sale of a joint venture			7			2			—
Dividends received from associates			195			143			67
Dividends received from joint ventures			9			18			6
Dividends received from other investments in equity securities and available-for-sale financial assets			18			14			13
Acquisition of term deposits			(313	)		(263	)		(278	)
Proceeds from maturity of term deposits			568			456			1,971
Additions of property, plant and equipment, lease prepayments and other assets			(13,846	)		(18,967	)		(12,139	)
Capital injection into associates			(185	)		(34	)		(40	)
Payments for aircraft lease deposits			(40	)		(55	)		(123	)
Refund of aircraft lease deposits			111			81			141
Withdrawal of pledged bank deposits			—			—			324
Net cash used in investing activities			(8,236	)		(15,750	)		(6,931	)
Financing activities
Dividends paid to equity shareholders of the Company			(982	)		(785	)		(393	)
Proceeds from issuance of shares			1,321			—			—
Proceeds from bank borrowings			42,854			17,539			34,170
Proceeds from ultra-short-term financing bills			1,000			33,886			8,000
Proceeds from corporate bond			—			10,000			3,000
Proceeds from medium-term notes			—			4,689			—
Repayment of bank borrowings			(18,311	)		(46,695	)		(62,212	)
Repayment of principal under finance lease obligations			(9,835	)		(6,994	)		(8,209	)
Repayment of ultra-short-term financing bills			(22,986	)		(19,900	)		(3,000	)
Capital injection from the non-controlling interests of subsidiaries			404			260			1,360
Dividends paid to non-controlling interests			(261	)		(221	)		(23	)
Payment for purchase of non-controlling interests			—			(238	)		(388	)
Net cash used in financing activities			(6,796	)		(8,459	)		(27,695	)
Net increase/(decrease) in cash and cash equivalents			2,700			(445	)		(10,892	)
Cash and cash equivalents at January 1			4,152			4,560			15,414
Exchange (loss)/gain on cash and cash equivalents			(26	)		37			38
Cash and cash equivalents at December 31			6,826			4,152			4,560

The accompanying notes form part of these financial statements.

F-9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

1 Corporate information

China Southern Airlines Company Limited (the “Company”), a joint stock limited company, was incorporated in the People’s Republic of China (the “PRC”) on March 25, 1995. The address of the Company’s registered office is Unit 301, 3/F, Office Tower, Guanhao Science Park Phase I, 12 Yuyan Street, Huangpu District, Guangzhou, Guangdong Province, the PRC. The Company and its subsidiaries (the “Group”) are principally engaged in the operation of civil aviation, including the provision of passenger, cargo, mail delivery and other extended transportation services.

The Company’s majority interest is owned by China Southern Air Holding Limited Company (“CSAH”), formerly known as China Southern Air Holding Company, a state-owned enterprise incorporated in the PRC.

The Company’s shares are traded on the Shanghai Stock Exchange, The Stock Exchange of Hong Kong Limited and the New York Stock Exchange.

2 Significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

(a) Basis of preparation

The consolidated financial statements have been prepared in accordance with all applicable International Financial Reporting Standards (“IFRSs”), which collective term includes all applicable individual IFRSs, International Accounting Standards (“IASs”) and Interpretations issued by the International Accounting Standards Board (the “IASB”). The measurement basis used in the preparation of the financial statements is the historical cost basis, except that available-for-sale equity securities and derivative financial instruments are stated at their fair value as explained in the accounting policies set out in Note 2(f) and Note 2(g). Non-current assets and disposal groups held for sale are stated at the lower of carrying amount and fair value less costs to sell (Note 2(q)).

The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgments made by management in the application of IFRSs that have significant effect on the financial statements and major sources of estimation uncertainty are discussed in Note 3.

The consolidated financial statements comprise the Company and its subsidiaries and the Group’s interest in associates and joint ventures.

F-10

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(b) Changes in accounting policies

The IASB has issued several amendments to IFRSs that are first effective for the current accounting period of the Group. None of these developments have had a material effect on how the Group’s results and financial position for the current or prior periods have been prepared or presented. However, additional disclosure has been included in Note 35(c) to satisfy the new disclosure requirements introduced by the amendments to IAS 7, Statement of cash flows: Disclosure initiative, which require entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period. Note 58 provides information on the possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended December 31, 2017.

(c) Subsidiaries and non-controlling interests

Subsidiaries are all entities over which the Group has control. The Group controls an entity when 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 over the entity. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered.

An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group transactions, balances and cash flows and any unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies.

Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. With regards to each business combination, the Group recognized non-controlling interests based on the proportion of the net identifiable assets of the subsidiary owned by the non-controlling interests.

Non-controlling interests are presented in the consolidated statements of financial position within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented on the face of the consolidated income statements and the consolidated statements of comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests and the equity shareholders of the Company. Loans from holders of non-controlling interests and other contractual obligations towards these holders are presented as financial liabilities in the consolidated statements of financial position in accordance with Note 2(o) or Note 2(p) depending on the nature of the liability.

Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognized.

F-11

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(c) Subsidiaries and non-controlling interests (continued)

When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognized in consolidated income statements. Any interest retained in that former subsidiary at the date when control is lost is recognized at fair value and this amount is regarded as the fair value on initial recognition of a financial asset (Note 2(f)) or, when appropriate, the cost on initial recognition of an investment in an associate or joint venture (Note 2(d)).

The Group applies the acquisition method to account for business combinations. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Transaction costs are expensed as incurred.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognized in profit or loss.

(d) Associates and joint arrangements

An associate is an entity in which the Group has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions.

The Group has applied IFRS 11, Joint Arrangements (“IFRS 11”) to all joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures.

An investment in an associate or a joint venture is accounted for in the consolidated financial statements under the equity method and is initially recorded at cost, adjusted for any excess of the Group’s share of the acquisition-date fair values of the investee’s identifiable net assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the post acquisition change in the Group’s share of the investee’s net assets and any impairment loss relating to the investment (Notes 2(e) and 2(l)). The Group’s share of the post-acquisition, post-tax results of the investees, adjusted for any acquisition-date excess over cost and any impairment losses for the year are recognized in the consolidated income statements, whereas the Group’s share of the post-acquisition post-tax items of the investees’ other comprehensive income is recognized in the consolidated statements of comprehensive income.

When the Group’s share of losses exceeds its interest in the associate or the joint venture, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investee. For this purpose, the Group’s interest is the carrying amount of the investment under the equity method together with the Group’s long-term interests that in substance form part of the Group’s net investment in the associate or the joint venture.

Unrealized profits and losses resulting from transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in the investee, except where unrealized losses provide evidence of an impairment of the asset transferred, in which case they are recognized immediately in the consolidated income statements.

F-12

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(e) Goodwill

Goodwill represents the excess of

(i) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group’s previously held equity interest in the acquiree; over

(ii) the net fair value of the acquiree’s identifiable assets and liabilities measured as at the acquisition date.

When (ii) is greater than (i), then this excess is recognized immediately in the consolidated income statements as a gain on a bargain purchase.

Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating unit, or groups of cash generating units, that is expected to benefit from the synergies of the combination and is tested annually for impairment (Note 2(l)).

(f) Other investments in equity securities

The Group’s policies for investments in equity securities, other than investments in subsidiaries, associates and joint ventures, are as follows:

Investments in equity securities are initially stated at fair value, which is their transaction price unless fair value can be more reliably estimated using valuation techniques whose variables include only data from observable markets. Cost includes attributable transaction costs, except where indicated otherwise below. These investments are subsequently accounted for as follows, depending on their classification:

Available-for-sale equity securities are those non-derivative financial assets that are designated as available for sale or that are not classified as loans and receivables, held-to-maturity investments, or financial assets at fair value through profit or loss. At the end of each reporting period the fair value is remeasured, with any resultant gain or loss being recognized in other comprehensive income and accumulated separately in equity in the fair value reserve. Dividend income from these investments is recognized in the consolidated income statements in accordance with the policy set out in Note 2(x) (iv). When these investments are derecognized or impaired (Note 2(l)), the cumulative gain or loss is reclassified from equity to profit or loss.

The Group’s other investments in equity securities represent investments in equity securities that do not have a quoted price in an active market for an identical instrument and whose fair value cannot otherwise be reliably measured. Accordingly, they are recognized in the consolidated statements of financial position at cost less impairment losses (Note 2(l)). Dividend income from equity securities is recognized in profit or loss in accordance with the policy set out in Note 2(x) (iv).

Investments are recognized on the date the Group commits to purchase the investments, and are derecognized on the date the Group commits to sell investments or the Group’s rights to the cash flows from the investments expired.

F-13

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(g) Derivative financial instruments

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

Derivative financial instruments that do not qualify for hedge accounting are accounted for as trading instruments and any unrealized gains or losses, being changes in fair value of the derivatives, are recognized in the profit or loss immediately.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges and that are highly effective, are recorded in the profit or loss, along with any changes in the fair value of the hedged assets or liabilities that are attributable to the hedged risk.

Derivative financial instruments that qualify for hedge accounting and which are designated as a specific hedge of the variability in cash flows of a highly probable forecast transaction, are accounted for as follows:

(i) The effective portion of any gains or losses on remeasurement of the derivative financial instrument to fair value are recognized in other comprehensive income and accumulated separately in equity in the fair value reserve. The cumulative gain or loss on the derivative financial instrument recognized in other comprehensive income is reclassified from equity to profit or loss in the same period during which the hedged forecast cash flows affects profit or loss; and

(ii) The ineffective portion of any gains or losses on remeasurement of the derivative financial instrument to fair value is recognized in the profit or loss immediately.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gains or losses existing in equity at that time remains in equity and is recognized in the profit or loss when the committed or forecast transaction ultimately occurs. When a committed or forecast transaction is no longer expected to occur, the cumulative gains or losses that was recorded in equity is immediately transferred to the profit or loss.

(h) Investment properties

Investment properties are land and/or buildings which are owned to earn rental income and/or for capital appreciation.

Investment properties are stated at cost, less accumulated depreciation and impairment losses (Note 2(l)). Depreciation is calculated to write off the cost of items of investment properties, less their estimated residual value, if any, using the straight-line method over their estimated useful lives. Rental income from investment properties is accounted for as described in
Note 2(x) (iii).

F-14

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(i) Other property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (Note 2(l)).

The cost of self-constructed items of property, plant and equipment includes the cost of materials, direct labor, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads and borrowing costs (Note 2(aa)).

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the consolidated income statements during the financial period in which they are incurred.

When each major aircraft overhaul is performed, its cost is recognized in the carrying amount of the component of aircraft and is depreciated over the appropriate maintenance cycles. Components related to overhaul cost, are depreciated on a straight-line basis over 3 to 12 years. Upon completion of an overhaul, any remaining carrying amount of the cost of the previous overhaul is derecognized and charged to the consolidated income statements.

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognized in consolidated income statements on the date of retirement or disposal.

Except for components related to overhaul costs, the depreciation of other property, plant and equipment is calculated to write off the cost of items, less their estimated residual value, if any, using the straight line method over their estimated useful lives as follows:

Buildings	5 to 35 years
Owned and finance leased aircraft	15 to 20 years
Other flight equipment
– Jet engines	15 to 20 years
– Others, including rotables	3 to 15 years
Machinery and equipment	4 to 10 years
Vehicles	6 to 8 years

Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

(j) Construction in progress

Construction in progress represents advance payments for the acquisition of aircraft and flight equipment, office buildings, various infrastructure projects under construction and equipment pending for installation, and is stated at cost less impairment losses (Note 2(l)). Capitalization of these costs ceases and the construction in progress is transferred to property, plant and equipment when the asset is substantially ready for its intended use, notwithstanding any delay in the issue of the relevant commissioning certificates by the relevant PRC authorities.

No depreciation is provided in respect of construction in progress.

F-15

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(k) Leased assets

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

(i) Classification of assets leased to the Group

Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases, except for land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. For these purposes, the inception of the lease is the time that the lease was first entered into by the Group, or taken over from the previous lessee.

(ii) Assets acquired under finance leases

Where the Group acquires the use of assets under finance leases, the amounts representing the fair value of the leased asset, or, if lower, the present value of the minimum lease payments, of such assets are included in property, plant and equipment and the corresponding liabilities, net of finance charges, are recorded as obligations under finance leases. Depreciation is provided at rates which write off the cost or valuation of the assets over the term of the relevant lease or, where it is likely the Group will obtain ownership of the asset, the life of the asset, as set out in Note 2(i). Impairment losses are accounted for in accordance with the accounting policy as set out in Note 2(l). Finance charges implicit in the lease payments are charged to consolidated income statements over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period. Contingent rentals are charged to consolidated income statements in the accounting period in which they are incurred.

(iii) Operating lease charges

Where the Group has the use of assets held under operating leases, payments made under the leases are charged to consolidated income statements in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognized in consolidated income statements as an integral part of the aggregate net lease payments made. Contingent rentals are charged to consolidated income statements in the accounting period in which they are incurred.

The cost of acquiring land held under an operating lease is amortized on a straight-line basis over the respective periods of lease terms which range from 30 to 70 years.

(iv) Sale and leaseback transactions

Gains or losses on aircraft sale and leaseback transactions which result in finance leases are deferred and amortized over the terms of the related leases.

Gains or losses on aircraft sale and leaseback transactions which result in operating leases are recognized immediately if the transactions are established at fair value. If the sale price is below fair value then the gain or loss is recognized immediately. However, if a loss is compensated for by future rentals at a below-market price, then the loss is deferred and amortized over the period that the aircraft is expected to be used. If the sale price is above fair value, then any gain is deferred and amortized over the useful life of the assets.

F-16

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(l) Impairment of assets

(i) Impairment of investments in equity securities and receivables

Investments in equity securities and current and non-current receivables that are stated at cost or amortized cost or are classified as available-for-sale equity securities are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events:

• significant financial difficulty of the debtor;

• a breach of contract, such as a default or delinquency in interest or principal payments;

• it becoming probable that the debtor will enter bankruptcy or other financial reorganization;

• significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and

• a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

If any such evidence exists, any impairment loss is determined and recognized as follows:

• For investments in associates and joint ventures accounted for under the equity method in the consolidated financial statements (Note 2(d)), the impairment loss is measured by comparing the recoverable amount of the investment with its carrying amount in accordance with Note 2(l) (ii). The impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount in accordance with Note 2(l) (ii).

• For unquoted equity securities carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material. Impairment losses for equity securities carried at cost are not reversed.

• For trade and other current receivables and other financial assets carried at amortized cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where these financial assets share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognized, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognized in prior years.

F-17

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(l) Impairment of assets (continued)

(i) Impairment of investments in equity securities and receivables (continued)

• For available-for-sale equity securities, the cumulative loss that has been recognized in the fair value reserve is reclassified to profit or loss. The amount of the cumulative loss that is recognized in consolidated income statements is the difference between the acquisition cost and current fair value, less any impairment loss on that asset previously recognized in consolidated income statements.

Impairment losses recognized in consolidated income statements in respect of available-for-sale equity securities are not reversed through profit or loss. Any subsequent increase in the fair value of such assets is recognized directly in other comprehensive income.

Impairment losses are written off against the corresponding asset directly, except for impairment losses recognized in respect of trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade and other receivables directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognized in consolidated income statements.

(ii) Impairment of other assets

Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognized no longer exists or may have decreased:

• Investment properties;

• Other property, plant and equipment;

• Construction in progress;

• Lease prepayments;

• Goodwill;

• Investments in subsidiaries, associates and joint ventures in the company’s statement of financial position;

• Aircraft lease deposits; and

• Other assets

If any such indication exists, the asset’s recoverable amount is estimated. The recoverable amount of goodwill is estimated annually whether or not there is any indication of impairment.

• Calculation of recoverable amount

The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

F-18

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(l) Impairment of assets (continued)

(ii) Impairment of other assets (continued)

• Recognition of impairment losses

An impairment loss is recognized in consolidated income statements if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs of disposal, or value in use, if determinable.

• Reversals of impairment losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognized in prior years. Reversals of impairment losses are credited to consolidated income statements in the year in which the reversals are recognized.

(iii) Interim financial reporting and impairment

Under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the Group is required to prepare an interim financial report in compliance with IAS 34, Interim financial reporting, in respect of the first six months of the financial year. At the end of the interim period, the Group applies the same impairment testing, recognition, and reversal criteria as it would at the end of the financial year (Notes 2(l) (i) and (ii)).

Impairment losses recognized in an interim period in respect of goodwill, available-for-sale equity securities and unquoted equity securities carried at cost are not reversed in a subsequent period. This is the case even if no loss, or a smaller loss, would have been recognized had the impairment been assessed only at the end of the financial year to which the interim period relates. Consequently, if the fair value of an available-for-sale equity security increases in the remainder of the annual period, or in any other period subsequently, the increase is recognized in other comprehensive income and not profit or loss.

(m) Inventories

Inventories, which consist primarily of consumable spare parts and supplies, are stated at cost less any applicable provision for obsolescence, and are charged to consolidated income statements when used in operations. Cost represents the average unit cost.

Inventories held for sale or disposal are carried at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognized as an expense in the period in which the related revenue is recognized. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs.

F-19

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(n) Trade and other receivables

Trade and other receivables are initially recognized at fair value and thereafter stated at amortized cost using the effective interest method, less allowance for impairment of doubtful debts (Note 2(l)), except where the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of bad and doubtful debts.

(o) Interest-bearing borrowings

Interest-bearing borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost with any difference between the amount initially recognized and redemption value being recognized in consolidated income statements over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

(p) Trade and other payables

Trade and other payables are initially recognized at fair value. Except for financial guarantee liabilities measured in accordance with (Note 2(s) (i)), trade and other payables are subsequently stated at amortized cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(q) Non-current assets held for sale

A non-current asset (or disposal group) is classified as held for sale if it is highly probable that its carrying amount will be recovered through a sale transaction rather than through continuing use and the asset (or disposal group) is available for sale in its present condition. A disposal group is a group of assets to be disposed of together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction.

Immediately before classification as held for sale, the measurement of the non-current assets (and all individual assets and liabilities in a disposal group) is brought up-to-date in accordance with the accounting policies before the classification. Then, on initial classification as held for sale and until disposal, the non-current assets (except for certain assets as explained below), or disposal groups, are recognized at the lower of their carrying amount and fair value less costs to sell. The principal exceptions to this measurement policy so far as the consolidated financial statements of the Group are concerned are deferred tax assets, assets arising from employee benefits, financial assets (other than investments in associates and joint ventures) and investment properties. These assets, even if held for sale, would continue to be measured in accordance with the policies set out elsewhere in Note 2.

Impairment losses on initial classification as held for sale, and on subsequent remeasurement while held for sale, are recognized in profit or loss. As long as a non-current asset is classified as held for sale, or is included in a disposal group that is classified as held for sale, the noncurrent asset is not depreciated or amortized.

(r) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been generally within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated cash flow statements.

F-20

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(s) Financial guarantees issued, provisions and contingent liabilities

(i) Financial guarantees issued

Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the “holder”) for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

Where the Group issues a financial guarantee, the fair value of the guarantee (being the transaction price, unless the fair value can otherwise be reliably estimated) is initially recognized.

The amount of the guarantee initially recognized is amortized in consolidated income statements over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognized in accordance with Note 2(s) (ii) if and when (i) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognized, less accumulated amortization.

(ii) Provisions and contingent liabilities

Provisions are recognized for other liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

F-21

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(t) Dividend distribution

Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s consolidated financial statements in the period in which the dividends are approved by the Company’s shareholders.

(u) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

(v) Deferred benefits and gains

In connection with the acquisitions or leases of certain aircraft and engines, the Group receives various credits. Such credits are deferred until the aircraft and engines are delivered, at which time they are either applied as a reduction of the cost of acquiring the aircraft and engines, resulting in a reduction of future depreciation, or amortized as a reduction of rental expense for aircraft and engines under leases.

(w) Income tax

Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognized in the consolidated income statements except to the extent that they relate to items recognized in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognized in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting year, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

F-22

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(w) Income tax (continued)

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilized, are recognized. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilized.

The limited exception to the recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries, associates and joint ventures to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future and it is probable that future taxable profit will be available against which the temporary difference can be utilized.

The amount of deferred tax recognized is measured based on the expected manner of realization or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period and are expected to apply when related deferred tax asset is realized or the deferred tax liability is settled. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilized. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

• in the case of current tax assets and liabilities, the Group intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously; or

• in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:

• the same taxable entity; or

• different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realize the current tax assets and settle the current tax liabilities on a net basis or realize and settle simultaneously.

F-23

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(x) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognized in income statement as follows:

(i) Passenger, cargo and mail revenue

Passenger revenue is recognized at the fair value of the consideration received when the transportation service is provided. Unearned passenger revenue at the reporting date is included within sales in advance of carriage in the consolidated statements of financial position.

Cargo and mail revenue are recognized when the transportation is provided.

Revenue from airline-related business are recognized when services are rendered.

(ii) Frequent flyer revenue

The Group maintains two major frequent flyer award programs, namely, the China Southern Airlines Sky Pearl Club and the Xiamen Airlines’ Egret Card Frequent Flyer Program, which provide travel and other awards to members based on accumulated mileages.

The amount received in relation to mileage earning flights is allocated, based on fair value, between the flight and mileage earned by members of the Group’s frequent flyer award programs. The value attributed to the awarded mileage is deferred as a liability, within deferred revenue, until the mileage is redeemed and the related benefits are received or used or they expire.

The amount received from third parties for the issue of mileage under the Group’s frequent flyer award programs is also deferred as a liability, within deferred revenue.

As members of the frequent flyer award programs redeem mileages for an award, revenue in relation to flight awards is recognized when the transportation is provided; revenue in relation to non-flight rewards is recognized at the point of redemption where non-flight rewards are selected.

(iii) Operating rental income

Receivable under operating leases is recognized in income statement in equal instalments over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognized in income statement as an integral part of the aggregate net lease payments receivable. Contingent rentals are recognized as income in the accounting period in which they are earned.

(iv) Dividends

• Dividend income from unlisted investments is recognized when the shareholder’s right to receive payment is established.

• Dividend income from listed investments is recognized when the share price of the investment goes ex-dividend.

F-24

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(x) Revenue recognition (continued)

(v) Government grants

Government grants are recognized in consolidated statements of financial position initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognized as other net income in income statement on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted from the carrying amount of the asset and consequently are effectively recognized in income statement over the useful life of the asset by way of reduced depreciation expense.

(vi) Interest income

Interest income is recognized as it accrues using the effective interest method.

(y) Traffic commissions

Traffic commissions are expensed in income statement when the transportation is provided and the related revenue is recognized. Traffic commissions for transportation not yet provided are recorded on the consolidated statements of financial position as prepaid expense.

(z) Maintenance and overhaul costs

Routine maintenance, repairs and overhauls are charged to income statement as and when incurred.

In respect of owned and finance leased aircraft, components within the aircraft subject to replacement during major overhauls are depreciated over the average expected life between major overhauls. When each major overhaul is performed, its cost is recognized in the carrying amount of property, plant and equipment and is depreciated over the estimated period between major overhauls. Any remaining carrying amount of cost of previous major overhaul is derecognized and charged to income statement.

In respect of aircraft held under operating leases, the Group has responsibility to fulfil certain return conditions under relevant lease agreements. In order to fulfil these return conditions, major overhauls are required to be conducted. Accordingly, estimated costs of major overhauls are accrued and charged to the income statement over the estimated overhaul period. Differences between the estimated costs and the actual costs of overhauls are charged to income statement in the period when the overhaul is performed.

(aa) Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

Borrowing costs include interest expense, finance charges in respect of finance leases and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

F-25

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(ab) Employee benefits

(i) Short-term employee benefits and contributions to defined contribution retirement schemes

Salaries, annual bonuses and contributions to defined contribution retirement schemes are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

(ii) Termination benefits

Termination benefits are recognized when, and only when, the Group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.

(iii) Share-based payment

The fair value of the amount payable to employee in respect of share appreciation rights (“SARs”), which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the vesting period. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized as staff cost in the consolidated income statements.

(ac) Translation of foreign currencies

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 consolidated financial statements are presented in Renminbi, which is the Company’s functional and the Group’s presentation currency.

Foreign currencies transactions during the year are translated into Renminbi at the applicable rates of exchange quoted by the People’s Bank of China (“PBOC”) prevailing at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into Renminbi at the PBOC exchange rates prevailing at the end of the reporting period. Exchange gains and losses are recognized in income statement.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated into Renminbi at the PBOC exchange rates prevailing at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into Renminbi at the PBOC exchange rates prevailing at the dates the fair value was determined.

(ad) Related parties

(a) A person, or a close member of that person’s family, is related to the Group if that person:

(i) has control or joint control over the Group;

(ii) has significant influence over the Group; or

(iii) is a member of the key management personnel of the Group or the Group’s parent.

F-26

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

2 Significant accounting policies (continued)

(ad) Related parties (continued)

(b) An entity is related to the Group if any of the following conditions applies:

(i) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group.

(vi) The entity is controlled or jointly controlled by a person identified in (a).

(vii) A person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(viii) The entity, or any member of a Group of which it is a part, provides key management personnel services to the Group or to the Group’s parent.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

(ae) Segment reporting

Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial information provided regularly to the Group’s most senior executive management, who is the chief operating decision maker, for the purposes of allocating resources to, and assessing the performance of, the Group’s various lines of business and geographical locations.

Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

F-27

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

3 Accounting estimates and judgments

The Groups’ financial position and results of operations are sensitive to accounting methods, assumptions and estimates that underlie the preparation of the financial statements. The Group bases the assumptions and estimates on historical experience and on various other assumptions that the Group believes to be reasonable and which form the basis for making judgments about matters that are not readily apparent from other sources. On an ongoing basis, management evaluates its estimates. Actual results may differ from those estimates as facts, circumstances and conditions change.

The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in condition and assumptions are factors to be considered when reviewing the financial statements. In addition to the assumptions and estimates regarding fair value measurements of financial instruments disclosed in Note 4(g), the Group believes the following also involve key accounting estimates and judgments used in the preparation of the financial statements.

(a) Accounting estimates

(i) Impairment of long-lived assets (other than goodwill)

If circumstances indicate that the carrying amount of a long-lived asset may not be recoverable, the asset may be considered “impaired”, and an impairment loss may be recognized in accordance with IAS 36, Impairment of Assets. The carrying amounts of long-lived assets are reviewed periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. These assets are tested for impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to the recoverable amount. The recoverable amount is the higher of the fair value less costs of disposal and value in use. In particular, in determining the value in use of the Group’s aircraft fleet, expected future cash flows to be generated by the asset are discounted to their present value, which requires significant judgment relating to forecast traffic revenue, forecast operating costs and discount rate applied. The Group uses all readily available information in determining an amount that is a reasonable approximation of recoverable amount, including estimates based on reasonable and supportable assumptions for projections of traffic revenue and operating costs and application of discount rate.

(ii) Provision for major overhauls

Provision for the cost of major overhauls to fulfil the lease return conditions for airframes and engines held under operating leases are accrued and charged to the income statement over the estimated overhaul period. This requires estimation of the expected overhaul cycles and overhaul costs, which are based on the historical experience of actual costs incurred for overhauls of airframes and engines of the same or similar types and current economic and airline-related developments. Different estimates could significantly affect the estimated provision and the results of operations.

(iii) Frequent flyer revenue

The amount of revenue attributable to the mileage earned by the members of the Group’s frequent flyer award programs is estimated based on the fair value of the mileage awarded and the expected redemption rate. The fair value of mileage awarded is estimated by reference to external sales. The expected redemption rate is estimated based on historical experience, anticipated redemption patterns and the frequent flyer programs’ design. Different estimates could significantly affect the estimated deferred revenue and the results of operations.

F-28

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

3 Accounting estimates and judgments (continued)

(a) Accounting estimates (continued)

(iv) Depreciation

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 Group reviews the estimated useful lives of assets annually in order to determine the amount of depreciation expense to be recorded during any financial year. The useful lives are based on the Group’s historical experience with similar assets and take into account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates.

(v) Provision for consumable spare parts and maintenance materials

Provision for consumable spare parts and maintenance materials is made based on the difference between the carrying amount and the net realizable value. The net realizable value is estimated based on current market condition, historical experience and the Group’s future operation plan for the consumable spare parts and maintenance materials. The net realizable value may be adjusted due to the change of market condition and the future plan for the consumable spare parts and maintenance materials.

(vi) Income tax

There are certain transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional tax will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the year in which such determination is made.

(vii) Impairment of trade receivables

When there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables, a provision for impairment of trade receivables is established based on the difference between the receivable’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

F-29

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

3 Accounting estimates and judgments (continued)

(b) Accounting judgments

Retirement benefits

According to IAS 19, Employee Benefits, an entity shall account not only for its legal obligation under the formal terms of a defined benefit plan, but also for any constructive obligation that arises from the entity’s informal practices where the entity has no realistic alternative but to pay the employee benefits. The Group believes the payments of welfare subsidy to those retirees who retired before the establishment of Pension Scheme (as defined in Note 51(a)) are discretionary and have not created a legal or constructive obligation. Such payments are made according to the Group’s business performance, and can be suspended at any time (Note 14).

4 Financial risk management and fair values

The Group is exposed to liquidity, interest rate, currency, credit risks and commodity jet fuel price risk in the normal course of business. The Group’s overall risk management program focuses on the unpredictability of financial market and seeks to minimize the adverse effects on the Group’s financial performance. The Group’s exposure to these risks and the financial risk management policies and practices used by the Group to manage these risks are described below.

(a) Liquidity risk

As at December 31, 2017, the Group’s current liabilities exceeded its current assets by RMB51,693 million. For the year ended December 31, 2017, the Group recorded a net cash inflow from operating activities of RMB17,732 million, a net cash outflow from investing activities of RMB8,236 million and a net cash outflow from financing activities of RMB6,796 million, which in total resulted in a net increase in cash and cash equivalents of RMB2,700 million.

The Group is dependent on its ability to maintain adequate cash inflow from operations, its ability to maintain existing external financing, and its ability to obtain new external financing to meet its debt obligations as they fall due and to meet its committed future capital expenditures. The Group’s policy is to regularly monitor its liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term. As at December 31, 2017, the Group had banking facilities with several banks and financial institutions for providing bank financing up to approximately RMB181,922 million, of which approximately RMB142,239 million was unutilized. The Directors of the Company believe that sufficient financing will be available to the Group when and where needed.

F-30

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

4 Financial risk management and fair values (continued)

(a) Liquidity risk (continued)

The following tables show the remaining contractual maturities at the end of the reporting period of the Group’s non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the end of the reporting period) and the earliest date the Group can be required to pay:

	2017 Contractual undiscounted cash outflow
	Within 1 year or on demand RMB million		More than 1 year but less than 2 years RMB million		More than 2 years but less than 5 years RMB million		More than 5 years RMB million		Total RMB million		Carrying amount at December 31 RMB million
Borrowings		28,776		9,676		11,975		28		50,455		48,287
Obligations under finance leases		10,764		10,257		29,627		28,251		78,899		67,924
Trade and other payables and accrued charges		19,701		—		—		—		19,701		19,701
		59,241		19,933		41,602		28,279		149,055		135,912

	2016 Contractual undiscounted cash outflow
	Within 1 year or on demand RMB million		More than 1 year but less than 2 years RMB million		More than 2 years but less than 5 years RMB million		More than 5 years RMB million		Total RMB million		Carrying amount at December 31 RMB million
Borrowings		27,654		1,039		19,124		61		47,878		45,504
Obligations under finance leases		10,663		8,683		24,795		27,247		71,388		62,222
Trade and other payables and accrued charges		19,015		—		—		—		19,015		19,015
		57,332		9,722		43,919		27,308		138,281		126,741

F-31

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

4 Financial risk management and fair values (continued)

(b) Interest rate risk

The interest rates and maturity information of the Group’s borrowings and obligations under finance leases are disclosed in Note 37 and Note 38, respectively. The Group’s borrowings and obligations under finance leases issued at floating and fixed interest rates expose the Group to cash flow interest rate risk and fair value interest rate risk, respectively. The Group determines the ratio of fixed-rate and floating-rate instruments according to the market environment, and maintains an appropriate combination of fixed-rate and floating-rate instruments by reviewing and monitoring it on a regular basis.

Interest rate swaps, denominated in United States Dollars (“USD”), have been entered into to mitigate its cash flow interest rate risk. Under the interest rate swaps, the Group agrees with other third parties to exchange, at specified intervals (primarily quarterly), the difference between fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional amounts (Note 29).

Cross currency swaps have been entered into to mitigate its interest rate risk and foreign currency risk. Under the cross currency swaps, the Group agrees with other third parties to exchange the floating interest and principal payments in USD for fixed interest and principal payments in RMB for certain USD bank loans (Note 29).

As at December 31, 2017, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would have decreased/increased the Group’s profit after tax and retained profits by approximately RMB530 million (2016: RMB376 million; 2015: RMB416 million).

The sensitivity analysis above indicates the instantaneous change in the Group’s profit after tax and retained profits and other components of consolidated equity that would arise assuming that the change in interest rates had occurred at the end of the reporting period and had been applied to re-measure those financial instruments held by the Group which expose the Group to fair value interest rate risk at the end of the reporting period. In respect of the exposure to cash flow interest rate risk arising from floating rate non-derivative instruments held by the Group at the end of the reporting period, the impact on the Group’s profit after tax (and retained profits) and other components of consolidated equity is estimated as an annualized impact on interest expense or income of such a change in interest rates. This analysis is performed on the same basis as that for 2016 and 2015.

(c) Foreign currency risk

Renminbi is not freely convertible into foreign currencies. All foreign exchange transactions involving Renminbi must take place either through the PBOC or other institutions authorized to buy and sell foreign exchange or at a swap center.

The Group has significant exposure to foreign currency risk as majority of the Group’s obligations under finance leases (Note 38) and certain of the bank borrowings (Note 37) are denominated in foreign currencies, principally USD, Euro and Japanese Yen. Depreciation or appreciation of Renminbi against foreign currencies affects the Group’s results significantly because the Group’s foreign currency liabilities generally exceed its foreign currency assets.

F-32

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

4 Financial risk management and fair values (continued)

(c) Foreign currency risk (continued)

The following table indicates the instantaneous change in the Group’s profit after tax and retained profits that would arise if foreign exchange rates to which the Group has significant exposure at the end of the reporting period had changed at that date, assuming all other risk variables remained constant. The range of such sensitivity was considered to be reasonably possible at the end of the reporting date.

	2017
	Appreciation/(depreciation) of Renminbi against foreign currency			Increase/(decrease) on profit after tax and retained profits RMB million
USD		1	%		278
		(1	%)		(278	)
Euro		1	%		31
		(1	%)		(31	)
Japanese Yen		10	%		116
		(10	%)		(116	)

	2016
	Appreciation/(depreciation) of Renminbi against foreign currency			Increase/(decrease) on profit after tax and retained profits RMB million
USD		1	%		305
		(1	%)		(305	)
Euro		1	%		31
		(1	%)		(31	)
Japanese Yen		10	%		134
		(10	%)		(134	)

	2015
	Appreciation/(depreciation) of Renminbi against foreign currency			Increase/(decrease) on profit after tax and retained profits RMB million
USD		1	%		453
		(1	%)		(453	)
Euro		1	%		38
		(1	%)		(38	)
Japanese Yen		10	%		135
		(10	%)		(135	)

Results of the analysis as presented in the above table represent an aggregation of the instantaneous effects on each of the Group entities’ profit after tax and retained profits measured in the respective functional currencies, translated into Renminbi at the exchange rate ruling at the end of the reporting period for presentation purposes.

The sensitivity analysis assumes that the change in foreign exchange rates had been applied to re-measure those financial instruments, borrowings, and finance lease obligations held by the Group which expose the Group to foreign currency risk at the end of the reporting period, including inter-company payables and receivables within the Group which are denominated in a currency other than the functional currencies of the lender or the borrower. The analysis excludes differences that would result from the translation of the financial statements of foreign operations into the Group’s presentation currency. The analysis is performed on the same basis for 2016 and 2015.

F-33

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

4 Financial risk management and fair values (continued)

(d) Credit risk

The Group’s credit risk is primarily attributable to cash and cash equivalents, trade receivables and the guarantees on personal bank loans provided to the Group’s pilot trainees.

Substantially all of the Group’s cash and cash equivalents are deposited with major reputable PRC financial institutions, which management believes are of high credit quality.

A significant portion of the Group’s air tickets are sold by agents participating in the Billing and Settlement Plan (“BSP”), a clearing scheme between airlines and sales agents organized by International Air Transportation Association. The use of the BSP reduces credit risk to the Group. As at December 31, 2017, the balance due from BSP agents amounted to RMB1,015 million (December 31, 2016: RMB1,267 million). The credit risk exposure to BSP and the remaining trade receivables balance are monitored by the Group on an ongoing basis and the allowance for impairment of doubtful debts is within management’s expectations. Further quantitative disclosures in respect of the Group’s exposure to credit risk arising from trade receivables is set out in Note 33.

The Company and its subsidiary, Xiamen Airlines Company Limited (“Xiamen Airlines”), entered into agreements with their pilot trainees and certain banks to provide guarantees on personal bank loans amounting to RMB696 million (December 31, 2016: RMB696 million) that can be drawn by the pilot trainees to finance their respective flight training expenses. As at December 31, 2017, total personal bank loans of RMB361 million (December 31, 2016: RMB409 million), under these guarantees, were drawn down from the banks. During the year, the Group has paid RMB5 million (2016: RMB4 million) to the banks due to the default of payments of certain pilot trainees (Note 53(b)).

(e) Jet fuel price risk

The Group’s results of operations may be significantly affected by fluctuations in fuel prices since the jet fuel expenses are a significant cost for the Group. A reasonable possible increase/decrease of 10% (2016 and 2015:10%) in jet fuel price, with volume of fuel consumed and all other variables held constant, would have increased/decreased the fuel costs by approximately RMB3,190 million (2016: RMB2,380 million; 2015: RMB2,627 million). The sensitivity analysis indicates the instantaneous change in the Group’s jet fuel costs that would arise assuming that the change in fuel price had occurred at the beginning of the financial year.

(f) Capital management

The Group’s primary objectives in managing capital are to safeguard the Group’s ability to continue as a going concern, and to generate sufficient profit to maintain growth and provide returns to its shareholders, by securing access to finance at a reasonable cost.

The Group manages the amount of capital in proportion to risk and manages its debt portfolio in conjunction with projected financing requirements. The Group monitors capital on the basis of the debt ratio, which is calculated as total liabilities divided by total assets. During 2017, the Group’s strategy, which was unchanged from 2016 and 2015, was to maintain a debt ratio at a range of levels to support the operations and development of the Group’s business in the long run. In order to maintain or adjust the debt ratio, the Group may adjust the amount of dividends paid to shareholders, issue new shares, return capital to shareholders, raise new debt financing or sell assets to reduce debt.

The Group’s debt ratio was 71% as at December 31, 2017 (December 31, 2016: 73%).

Except for the compliance of certain financial covenants for maintaining the Group’s banking facilities and borrowings, the Group is not subject to any externally imposed capital requirements. The Group complied with the financial covenants attached to borrowings as at December 31, 2017.

F-34

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

4 Financial risk management and fair values (continued)

(g) Fair value

(i) Financial instruments carried at fair value

Fair value hierarchy

The following table presents the carrying value of financial instruments measured at the end of the reporting period on a recurring basis, categorized into the three-level fair value hierarchy as defined in IFRS 13, Fair value measurement. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as follows:

• Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date

• Level 2 valuations: Fair value measured using Level 2 inputs i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available

• Level 3 valuations: Fair value measured using significant unobservable inputs

						Fair value measurements as at December 31, 2017 categorized into
Recurring fair value measurement	Note		Fair value at December 31 2017 RMB million			Level 1 RMB million		Level 2 RMB million			Level 3 RMB million
Financial assets:
Available-for-sale equity securities:
-Listed shares		28		85			85		—			—
-Non-tradable shares		28		537			—		—			537
Derivative financial instruments:
-Interest rate swaps		29		46			—		46			—
Financial liabilities:
Derivative financial instruments:
-Cross currency swaps		29		(64	)		—		(64	)		—

					Fair value measurements as at December 31, 2016 categorized into
Recurring fair value measurement	Note		Fair value at December 31 2016 RMB million		Level 1 RMB million		Level 2 RMB million		Level 3 RMB million
Financial assets:
Available-for-sale equity securities:
-Listed shares		28		88		88		—		—
-Non-tradable shares		28		411		—		—		411
Derivative financial instruments:
-Interest rate swaps		29		21		—		21		—

During the years ended December 31, 2017 and 2016, there were no transfers among level 1, level 2 and level 3. The Group’s policy is to recognize transfers between levels of fair value hierarchy as at the end of the reporting period in which they occur.

F-35

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

4 Financial risk management and fair values (continued)

(g) Fair value (continued)

(i) Financial instruments carried at fair value (continued)

Valuation techniques and inputs used in Level 2 fair value measurements

Fair value of interest rate swaps in derivative financial instruments is measured by discounting the expected receivable or payable amounts under the assumption that these swaps had been terminated at the end of the reporting period. The discount rates used are the US Treasury bond yield curve as at the end of the reporting period.

The fair value of cross currency swaps is the estimated amount that the Group would receive or pay to terminate the swaps at the end of the reporting period, taking into account current exchange rates and interest rates and the current creditworthiness of the swap counterparties.

Information about Level 3 fair value measurements

	Valuation technique	Significant unobservable inputs	Range
Available-for-sale equity securities:
-Non-tradable shares	Discounted cash flow	Expected profit growth rate during the projection period		10% to 15%
		Terminal growth rate		9%
		Expected dividend payout rate		27%
		Discount rate		12.29%

The fair value of non-tradable available-for-sale equity securities is determined by discounting a projected cash flow series associated with the investment. The valuation takes into account the expected profit growth rates and expected dividend payout rate of the investee. The discount rate used have been adjusted to reflect specific risks relating to the investments. The fair value measurement is positively correlated to the expected profit growth rates and expected dividend rate of the investee, and negatively correlated to the discount rate.

For the year ended December 31, 2017, the net unrealized gains of RMB126 million (2016: RMB378 million) relating to the available-for sale equity securities – non-tradable shares are recognized in fair value reserve in other comprehensive income.

F-36

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

4 Financial risk management and fair values (continued)

(g) Fair value (continued)

(ii) Financial instruments not carried at fair value

(a) Other investments in equity securities represent investments in equity securities that do not have a quoted price in an active market for an identical instrument and whose fair value cannot otherwise be reliably measured. Accordingly, they are recognized in the consolidated statements of financial position at cost less impairment losses.

(b) All other financial instruments, including cash and cash equivalents, amounts due from/to related companies, trade and other receivables, trade and other payables, borrowings and obligations under finance leases are carried at amounts not materially different from their fair values as at December 31, 2017 and 2016.

5 Traffic revenue

	2017 RMB million		2016 RMB million		2015 RMB million
Passenger		107,947		97,135		94,677
Cargo and mail		8,571		6,760		6,122
Fuel surcharge income		5,355		5,798		6,300
		121,873		109,693		107,099

6 Segment reporting

(a) Business segments

The Group has two reportable operating segments “airline transportation operations” and “other segments”, according to internal organization structure, managerial needs and internal reporting system. “Airline transportation operations” comprises the Group’s passenger and cargo and mail operations. “Other segments” includes hotel and tour operation, air catering services, ground services, cargo handling and other miscellaneous services.

For the purposes of assessing segment performance and allocating resources between segments, the Group’s chief operating decision maker (“CODM”) monitors the results, assets and liabilities attributable to each reportable segment based on financial results prepared under the People’s Republic of China Accounting Standards for Business Enterprises (“PRC GAAP”). As such, the amount of each material reconciling item from the Group’s reportable segment revenue, profit before taxation, assets and liabilities arising from different accounting policies are set out in Note 6(c). The comparative figures in the Group’s financial statements prepared in accordance with PRC GAAP are restated as the Group acquired a subsidiary under common control in 2017 (Note 24(v)). Management considered the impact of the above restatement is not material. Therefore, the Group’s segment results for the year ended December 31, 2016 and 2015, and its segment assets and liabilities as at December 31, 2016 as disclosed in these financial statements have not been restated.

Inter-segment sales and transfers are transacted with reference to the selling prices used for sales made to third parties at the then prevailing market prices.

Information regarding the Group’s reportable segments as provided to the Group’s CODM for the purposes of resource allocation and assessment of segment performance is set out below.

F-37

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

6 Segment reporting (continued)

(a) Business segments (continued)

The segment results of the Group for the year ended December 31, 2017 are as follows:

	Airline transportation operations		Other segments		Elimination			Unallocated*			Total
	RMB million		RMB million		RMB million			RMB million			RMB million
Revenue from external customers		126,077		1,412		—			—			127,489
Inter-segment sales		159		2,823		(2,982	)		—			—
Reportable segment revenue		126,236		4,235		(2,982	)		—			127,489
Reportable segment profit before taxation		7,708		529		—			561			8,798
Reportable segment profit after taxation		5,875		381		—			577			6,833
Other segment information
Income tax		1,833		148		—			(16	)		1,965
Interest income		74		15		—			—			89
Interest expense		2,724		23		—			—			2,747
Depreciation and amortization		13,112		201		—			—			13,313
Impairment loss		440		2		—			—			442
Share of associates’ results		—		—		—			420			420
Share of joint ventures’ results		—		—		—			99			99
Remeasurement of the originally held equity interests in a joint venture		—		—		—			88			88
Fair value movement of derivative financial instruments		—		—		—			(64	)		(64	)
Non-current assets additions during the year#		30,776		1,828		—			—			32,604

F-38

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

6 Segment reporting (continued)

(a) Business segments (continued)

The segment results of the Group for the year ended December 31, 2016 are as follows:

	Airline transportation operations		Other segments		Elimination			Unallocated*		Total
	RMB million		RMB million		RMB million			RMB million		RMB million
Revenue from external customers		113,490		1,302		—			—		114,792
Inter-segment sales		101		2,231		(2,332	)		—		—
Reportable segment revenue		113,591		3,533		(2,332	)		—		114,792
Reportable segment profit before taxation		6,471		459		—			717		7,647
Reportable segment profit after taxation		4,834		337		—			717		5,888
Other segment information
Income tax		1,637		122		—			—		1,759
Interest income		79		10		—			—		89
Interest expense		2,458		7		—			—		2,465
Depreciation and amortization		12,693		96		—			—		12,789
Impairment loss		127		3		—			—		130
Share of associates’ results		—		—		—			511		511
Share of joint ventures’ results		—		—		—			102		102
Gain on deemed disposal of a subsidiary		—		—		—			90		90
Non-current assets additions during the year#		29,126		120		—			—		29,246

F-39

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

6 Segment reporting (continued)

(a) Business segments (continued)

The segment results of the Group for the year ended December 31, 2015 are as follows:

	Airline transportation operations		Other segments		Elimination			Unallocated*		Total
	RMB million		RMB million		RMB million			RMB million		RMB million
Revenue from external customers		110,067		1,400		—			—		111,467
Inter-segment sales		114		1,528		(1,642	)		—		—
Reportable segment revenue		110,181		2,928		(1,642	)		—		111,467
Reportable segment profit before taxation		5,480		279		—			582		6,341
Reportable segment profit after taxation		4,199		205		—			582		4,986
Other segment information
Income tax		1,281		74		—			—		1,355
Interest income		244		9		—			—		253
Interest expense		2,156		32		—			—		2,188
Depreciation and amortization		11,915		97		—			—		12,012
Impairment loss		105		3		—			—		108
Share of associates’ results		—		—		—			462		462
Share of joint ventures’ results		—		—		—			107		107
Non-current assets additions during the year#		24,242		98		—			—		24,340

The segment assets and liabilities of the Group as at December 31, 2017 and December 31, 2016 are as follows:

	Airline transportation operations		Other segments		Elimination			Unallocated*		Total
	RMB million		RMB million		RMB million			RMB million		RMB million
As at December 31, 2017
Reportable segment assets		208,116		5,799		(402	)		4,816		218,329
Reportable segment liabilities		154,391		2,111		(402	)		64		156,164
As at December 31, 2016
Reportable segment assets		192,881		3,201		(376	)		4,755		200,461
Reportable segment liabilities		144,768		1,355		(370	)		—		145,753

* Unallocated assets primarily include goodwill, interest in associates and joint ventures, available-for-sale financial assets, derivative financial instruments and other investments in equity securities. Unallocated results primarily include the share of results of associates and joint ventures, dividend income from available-for-sale financial assets and other investments in equity securities, remeasurement of the originally held equity interests in a joint venture, gain on deemed disposal of a subsidiary, and the fair value movement of derivative financial instruments recognized through profit or loss.

# The additions of non-current assets do not include goodwill, interests in associates and joint ventures, other investments in equity securities, available-for-sale financial assets, derivative financial instruments and deferred tax assets.

(b) The Group’s business segments operate in three main geographical areas, even though they are managed on a worldwide basis.

The Group’s revenue by geographical segment are analyzed based on the following criteria:

(1) Traffic revenue from services of both origin and destination within the PRC (excluding Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan (“Hong Kong, Macau and Taiwan”)), is classified as domestic revenue. Traffic revenue with origin and destination among PRC, Hong Kong, Macau and Taiwan is classified as Hong Kong, Macau and Taiwan revenue; while that with origin and destination from/to other overseas markets is classified as international revenue.

F-40

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

6 Segment reporting (continued)

(b) The Group’s business segments operate in three main geographical areas, even though they are managed on a worldwide basis. (continued)

(2) Revenue from commission income, hotel and tour operation, ground services, cargo handling and other miscellaneous services are classified on the basis of where the services are performed.

	2017		2016		2015
	RMB million		RMB million		RMB million
Domestic		92,986		84,380		82,981
International		32,117		28,096		25,872
Hong Kong, Macau and Taiwan		2,386		2,316		2,614
		127,489		114,792		111,467

The major revenue earning asset of the Group is its aircraft fleet which is registered in the PRC and is deployed across its worldwide route network. Majority of the Group’s other assets are located in the PRC. CODM considers that there is no suitable basis for allocating such assets and related liabilities to geographical locations. Accordingly, geographical segment assets and liabilities are not disclosed.

(c) Reconciliation of reportable segment revenues, profit before income tax, assets and liabilities to the consolidated figures as reported in the consolidated financial statements.

		2017			2016			2015
	Note	RMB million			RMB million			RMB million
Revenue
Reportable segment revenue			127,489			114,792			111,467
Reclassification of expired sales in advance of carriage	(i)		396			376			459
Reclassification of sales tax	(ii)		(65	)		(161	)		(274	)
Adjustments arising from business combinations under common control	(v)		(14	)		(26	)		—
Consolidated revenue			127,806			114,981			111,652
		2017			2016			2015
	Note	RMB million			RMB million			RMB million
Profit before income tax
Reportable segment profit before taxation			8,798			7,647			6,341
Capitalization of exchange difference of specific loans	(iii)		47			48			(222	)
Government grants	(iv)		21			1			1
Adjustments arising from business combinations under common control	(v)		8			(35	)		(2	)
Consolidated profit before income tax			8,874			7,661			6,118

			2017			2016
	Note		RMB million			RMB million
Assets
Reportable segment assets				218,329			200,461
Capitalization of exchange difference of specific loans		(iii)		196			149
Government grants		(iv)		(8	)		(316	)
Adjustments arising from business combinations under common control		(v)		237			184
Others				(36	)		(36	)
Consolidated total assets				218,718			200,442

F-41

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

6 Segment reporting (continued)

(c) Reconciliation of reportable segment revenues, profit before income tax, assets and liabilities to the consolidated figures as reported in the consolidated financial statements. (continued)

			2017		2016
	Note		RMB million		RMB million
Liabilities
Reportable segment liabilities				156,164		145,753
Government grants		(iv)		—		(287	)
Others				11		—
Consolidated total liabilities				156,175		145,466

Notes:

(i) Expired sales in advance of carriage are recorded under non-operating income in the PRC GAAP financial statements. Such income is recognized as other operating revenue in the IFRS financial statements.

(ii) In accordance with the PRC GAAP, sales tax is separately disclosed rather than deducted from revenue under IFRSs.

(iii) In accordance with the PRC GAAP, exchange difference arising on translation of specific loans and related interest denominated in a foreign currency is capitalized as part of the cost of qualifying assets. Under IFRSs, such exchange difference is recognized in income statement unless the exchange difference represents an adjustment to interest.

(iv) Prior to the year 2017, under the PRC GAAP, special funds granted by the government are accounted for as increase in capital reserve if they are clearly defined on approval documents as part of “capital reserve”. Government grants that relate to the purchase of assets are recognized as deferred income and amortized to profit or loss on a straight line basis over the useful life of the related assets.

Pursuant to the accounting policy change under PRC GAAP which became effective in 2017, the Group deducted the government grants related to the purchase of assets (other than special funds) from the cost of the related assets. The accounting treatment is consistent with IFRSs.

(v) In accordance with the PRC GAAP, the Group accounts for the business combination under common control by applying the pooling-of-interest method. Under the pooling-of-interest method, the difference between the historical carrying amount of the acquiree and the consideration paid is accounted for as an equity transaction. Business combinations under common control are accounted for as if the acquisition had occurred at the beginning of the earliest comparative year presented or, if later, at the date that common control was established; for this purpose, comparative figures are restated under PRC GAAP. Under IFRSs, the Group adopts the purchase accounting method for acquisition of business under common control.

F-42

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

7 Other operating revenue

	2017		2016		2015
	RMB million		RMB million		RMB million
Commission income		2,781		2,518		1,545
Expired sales in advance of carriage		396		376		459
Hotel and tour operation income		547		625		621
General aviation income		467		461		490
Ground services income		429		384		345
Air catering income		335		253		239
Cargo handling income		241		201		230
Rental income		184		179		182
Others		553		291		442
		5,933		5,288		4,553

8 Flight operation expenses

	2017		2016		2015
	RMB million		RMB million		RMB million
Jet fuel costs		31,895		23,799		26,274
Flight personnel payroll and welfare		10,574		9,215		8,070
Aircraft operating lease charges		8,022		7,330		6,153
Air catering expenses		3,379		2,965		2,680
Civil Aviation Development Fund		2,720		2,565		2,482
Training expenses		1,184		1,120		1,003
Aircraft insurance		175		197		168
Others		5,029		4,270		3,582
		62,978		51,461		50,412

9 Maintenance expenses

	2017		2016		2015
	RMB million		RMB million		RMB million
Aviation repair and maintenance charges		7,930		7,952		7,396
Staff payroll and welfare		2,620		2,363		2,131
Maintenance materials		1,327		1,003		880
		11,877		11,318		10,407

10 Aircraft and transportation service expenses

	2017		2016		2015
	RMB million		RMB million		RMB million
Landing and navigation fees		14,910		13,109		11,510
Ground service and other charges		8,025		7,106		6,398
		22,935		20,215		17,908

F-43

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

11 Promotion and selling expenses

	2017		2016		2015
	RMB million		RMB million		RMB million
Sales commissions		1,935		1,926		3,150
Ticket office expenses		3,160		2,875		2,605
Computer reservation services		835		777		605
Advertising and promotion		196		173		122
Others		755		553		494
		6,881		6,304		6,976

12 General and administrative expenses

	2017		2016		2015
	RMB million		RMB million		RMB million
General corporate expenses		3,218		2,671		2,325
Auditors’ remuneration		14		13		15
- Audit services		14		13		15
- Non-audit services		—		—		—
Other taxes and levies		159		131		124
		3,391		2,815		2,464

13 Depreciation and amortization

	2017			2016			2015
	RMB million			RMB million			RMB million
Depreciation
– Owned assets		8,080			7,569			7,082
– Assets acquired under finance leases		4,883			4,849			4,684
Amortization of deferred benefits and gains		(161	)		(131	)		(148	)
Other amortization		360			332			227
		13,162			12,619			11,845

14 Staff costs

	2017		2016		2015
	RMB million		RMB million		RMB million
Salaries, wages and welfare		21,400		18,774		16,636
Defined contribution retirement scheme		2,114		1,886		1,726
Other retirement welfare subsidy		194		183		177
Early retirement benefits (Note 45)		1		3		3
		23,709		20,846		18,542

Staff costs relating to flight operation and maintenance are also included in the respective total amounts disclosed separately in Note 8 and Note 9 above.

Staff costs arising from the SARs, which have all been expired in 2015 (Note 51(c)), were included in “salaries, wages and welfare” above.

F-44

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

15 Other net income

	2017		2016		2015
	RMB million		RMB million		RMB million
Government grants (Note)		3,075		2,837		2,331
Gains/(losses) on disposal of property, plant and equipment and construction in progress
– Aircraft and spare engines and relating construction in progress		960		523		414
– Other property, plant and equipment		29		34		(102	)
Others		384		441		635
		4,448		3,835		3,278

Note:

Government grants mainly represent (i) subsidies based on certain amount of tax paid granted by governments to the Group; (ii) subsidies granted by various local governments to encourage the Group to operate certain routes to cities where these governments are located.

There are no unfulfilled conditions and other contingencies related to subsidies that have been recognized during the year ended December 31, 2017.

F-45

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

16 Interest expense

	2017			2016			2015
	RMB million			RMB million			RMB million
Interest on borrowings		1,628			1,444			1,320
Interest relating to obligations under finance leases		2,009			1,598			1,248
Interest relating to provision for early retirement benefits (Note 45)		1			1			2
Total interest expense on financial liabilities not at fair value through profit or loss		3,638			3,043			2,570
Less: interest expense capitalized (Note)		(908	)		(624	)		(382	)
		2,730			2,419			2,188
Interest rate swaps: cash flow hedge, reclassified from equity (Note 18)		17			46			—
		2,747			2,465			2,188

Note:

The weighted average interest rate used for interest capitalization was 3.32% per annum in 2017 (2016: 3.22%; 2015: 2.77%).

17 Income tax

(a) Income tax expense in the consolidated income statements

	2017			2016			2015
	RMB million			RMB million			RMB million
PRC income tax
– Provision for the year		2,280			2,203			1,700
– (Over) /under-provision in prior year		(2	)		47			(41	)
		2,278			2,250			1,659
Deferred tax (Note 30)
Origination and reversal of temporary differences		(302	)		(487	)		(359	)
Tax expense		1,976			1,763			1,300

In respect of majority of the Group’s airlines operation outside mainland China, the Group has either obtained exemptions from overseas taxation pursuant to the bilateral aviation agreements between the overseas governments and the PRC government, or has sustained tax losses in those overseas jurisdictions. Accordingly, no provision for overseas income tax has been made for overseas airlines operation in the current and prior years.

Under the Corporate Income Tax Law of the PRC, the Company and majority of its PRC subsidiaries are subject to PRC income tax at 25% (2016: 25%; 2015:25%). Certain PRC subsidiaries of the Company are subject to preferential income tax rate at 15% either because they are qualified as Advanced and New Technology Enterprises, or according to the preferential tax policy in locations, where those subsidiaries are located.

F-46

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

17 Income tax (continued)

(b) Reconciliation between actual tax expense and calculated tax based on accounting profit at applicable tax rates

	2017			2016			2015
	RMB million			RMB million			RMB million
Profit before income tax		8,874			7,661			6,118
Notional tax on profit before taxation, calculated at the rates applicable to profits in the tax jurisdictions concerned (Note 17(a))		2,179			1,857			1,482
Adjustments for tax effect of:
Non-deductible expenses		9			4			3
Share of results of associates and joint ventures and other non-taxable income		(137	)		(154	)		(144	)
Taxable temporary differences for which no deferred tax liabilities were recognized		(27	)		—			—
Unused tax losses and deductible temporary differences for which no deferred tax assets were recognized		26			48			23
Utilization of unused tax losses and deductible temporary differences for which no deferred tax assets were recognized in prior years		(72	)		(39	)		(18	)
(Over)/under-provision in prior year		(2	)		47			(41	)
Others		—			—			(5	)
Tax expense		1,976			1,763			1,300

F-47

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

18 Other comprehensive income

	2017			2016			2015
	RMB million			RMB million			RMB million
Cash flow hedges:
Effective portion of changes in fair value of hedging instruments recognized during the year		8			(38	)		13
Reclassification adjustments for amounts transferred to profit or loss:
- interest expense (Note 16)		17			46			—
Net deferred tax debited to other comprehensive income		(6	)		(2	)		(3	)
Net movement in the fair value reserve during the year recognized in other comprehensive income		19			6			10
Available-for-sale financial assets:
Changes in fair value recognized during the year		123			362			—
Net deferred tax debited to other comprehensive income		(31	)		(90	)		—
Net movement in the fair value reserve during the year recognized in other comprehensive income		92			272			—

19 Earnings per share

The calculation of basic earnings per share for the year ended December 31, 2017 is based on the profit attributable to equity shareholders of the Company of RMB5,961 million (2016: RMB5,044 million; 2015: RMB3,736 million) and the weighted average of 9,923,585,348 shares in issue during the year (2016 and 2015: 9,817,567,000 shares).

	2017		2016		2015
	million		million		million
Issued ordinary shares at January 1		9,818		9,818		9,818
Effect of issuance of H shares (Note 47)		106		—		—
Weighted average number of ordinary shares at December 31		9,924		9,818		9,818

The amounts of diluted earnings per share are the same as basic earnings per share as there were no dilutive potential ordinary shares in existence for the years ended December 31, 2017, 2016 and 2015.

F-48

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

20 Property, plant and equipment, net

							Aircraft
	Investment properties			Buildings			Owned			Acquired under finance leases			Other flight equipment including			Machinery, equipment and vehicles			Total
	RMB million			RMB million			RMB million			RMB million			rotables RMB million			RMB million			RMB million
Cost:
At January 1, 2016		730			10,074			93,708			86,832			18,970			6,109			216,423
Acquisitions through business combinations		—			5			—			—			—			2			7
Additions		—			39			1,675			5,112			1,148			453			8,427
Transfer from construction in progress (Note 21)		—			1,145			—			6,745			203			143			8,236
Transfer to lease prepayments		(21	)		—			—			—			—			—			(21	)
Transfer to buildings upon cease of lease intention		(64	)		64			—			—			—			—			—
Transfer to investment properties upon lease out		148			(148	)		—			—			—			—			—
Reclassification on exercise of purchase option		—			—			4,470			(4,470	)		—			—			—
Disposals		—			(32	)		(2,536	)		(347	)		(751	)		(466	)		(4,132	)
Deemed disposal of a subsidiary		(124	)		(79	)		—			—			—			(41	)		(244	)
At December 31, 2016		669			11,068			97,317			93,872			19,570			6,200			228,696
At January 1, 2017		669			11,068			97,317			93,872			19,570			6,200			228,696
Acquisitions through business combinations (Note 24(iv))		—			326			—			—			1,136			94			1,556
Additions		—			28			1,336			7,592			1,635			569			11,160
Transfer from construction in progress (Note 21)		—			1,506			1,098			10,684			317			77			13,682
Transfer to lease prepayments		(18	)		(143	)		—			—			—			—			(161	)
Transfer to buildings upon cease of lease intention		(75	)		75			—			—			—			—			—
Transfer to investment properties upon lease out		225			(225	)		—			—			—			—			—
Reclassification on exercise of purchase option		—			—			12,669			(12,669	)		—			—			—
Transfer to assets held for sale (Note 36)		—			(20	)		—			—			—			—			(20	)
Disposals		(7	)		(4	)		(6,446	)		(112	)		(752	)		(311	)		(7,632	)
At December 31, 2017		794			12,611			105,974			99,367			21,906			6,629			247,281

F-49

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

20 Property, plant and equipment, net (continued)

							Aircraft
	Investment properties			Buildings			Owned			Acquired under finance leases			Other flight equipment including			Machinery, equipment and vehicles			Total
	RMB million			RMB million			RMB million			RMB million			rotables RMB million			RMB million			RMB million
Accumulated depreciation and impairment losses:
At January 1, 2016		223			3,349			40,782			14,586			10,600			4,013			73,553
Depreciation charge for the year		20			358			5,476			4,849			1,159			556			12,418
Transfer to lease prepayments		(5	)		—			—			—			—			—			(5	)
Transfer to buildings upon cease of lease intention		(21	)		21			—			—			—			—			—
Transfer to investment properties upon lease out		39			(39	)		—			—			—			—			—
Reclassification on exercise of purchase options		—			—			2,141			(2,141	)		—			—			—
Disposals		—			(18	)		(2,468	)		(347	)		(736	)		(426	)		(3,995	)
Deemed disposal of a subsidiary		(27	)		(25	)		—			—			—			(39	)		(91	)
Provision for impairment losses		—			—			21			50			—			—			71
Impairment losses written off on disposal		—			—			—			—			(1	)		—			(1	)
At December 31, 2016		229			3,646			45,952			16,997			11,022			4,104			81,950
At January 1, 2017		229			3,646			45,952			16,997			11,022			4,104			81,950
Depreciation charge for the year		29			390			5,783			4,883			1,280			598			12,963
Transfer to lease prepayments		(5	)		(36	)		—			—			—			—			(41	)
Transfer to buildings upon cease of lease intention		(26	)		26			—			—			—			—			—
Transfer to investment properties upon lease out		48			(48	)		—			—			—			—			—
Reclassification on exercise of purchase options		—			—			4,757			(4,757	)		—			—			—
Transfer to assets held for sale (Note 36)		—			(12	)		—			—			—			—			(12	)
Disposals		(5	)		(1	)		(5,351	)		(112	)		(623	)		(266	)		(6,358	)
Provision for impairment losses (Note 20(e))		—			—			324			—			—			—			324
Impairment losses written off on disposal (Note 20(d))		—			—			(470	)		—			(1	)		—			(471	)
At December 31, 2017		270			3,965			50,995			17,011			11,678			4,436			88,355
Net book value:
At December 31, 2017		524			8,646			54,979			82,356			10,228			2,193			158,926
At December 31, 2016		440			7,422			51,365			76,875			8,548			2,096			146,746

F-50

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

20 Property, plant and equipment, net (continued)

(a) As at December 31, 2017, the accumulated impairment provision of aircraft and flight equipment of the Group is RMB1,495 million and RMB123 million respectively (December 31, 2016: RMB1,641 million and RMB124 million respectively).

(b) As at December 31, 2017, certain aircraft of the Group with an aggregate carrying value of approximately RMB83,687 million (December 31, 2016: RMB78,318 million) were mortgaged under certain loans or certain lease agreements (Note 37(a) (iii) and Note 38).

(c) As at December 31, 2017, other flight equipment of the Group with an aggregate carrying value of approximately RMB206 million (December 31, 2016: Nil) were mortgaged under certain loans (Note 37(a) (iii)).

(d) For the year ended December 31, 2017, 3 Boeing 737-300 aircraft and 2 Boeing 777-200 aircraft against which impairment provision had been provided in previous years were disposed of and the impairment provision of RMB470 million for these aircraft was written off on disposal.

(e) During the year, the Group estimated the recoverable amounts of certain aged fleet based on the disposal plans, and made an impairment provision of RMB314 million towards the fleet and related assets. The Group also made an additional impairment of RMB10 million for certain EMB 190 aircraft. The estimates of recoverable amounts were based on the greater of the assets’ fair value less cost to sell and the value in use. The fair value on which the recoverable amount is based on is categorized as a level 3 measurement and it was determined by reference to the recent observable market prices for the aircraft fleet and flight equipment. In cases when value in use are based, the pre-tax discount rate used in the estimate is 9.74% (2016: 8.87%).

(f) As at December 31, 2017 and up to the date of approval of these financial statements, the Group is in the process of applying for the property title certificates in respect of the properties located in Guangzhou (including Guangzhou Baiyun International Airport), Guangxi, Guizhou, Chengdu, Xiamen, Heilongjiang, Jilin, Dalian, Hunan, Beijing, Zhuhai, Shenyang, Shenzhen, Henan, Shantou, Xinjiang, Hainan, Shanghai, Hubei, Chongqing, and Hangzhou, in which the Group has interests and for which such certificates have not been granted. As at December 31, 2017, carrying value of such properties of the Group amounted to RMB5,196 million (December 31, 2016: RMB4,294 million). The Directors of the Company are of the opinion that the use of and the conduct of operating activities at the properties referred to above are not affected by the fact that the Group has not yet obtained the relevant property title certificates.

(g) The Group leased out investment properties under operating leases. The leases typically run for an initial period of one to fourteen years, with an option to renew the leases after that date at which time all terms are renegotiated. None of the leases includes contingent rentals. In this connection, rental income totaling RMB184 million (2016: RMB179 million; 2015: RMB 182 million) was received by the Group during the year in respect of the leases. Directors estimated the fair value of these investment properties approximate the carrying amount.

The properties are reclassified between investment properties and other property, plant and equipment, upon the intention of commencement or cease of lease.

The Group’s total future minimum lease income under non-cancellable operating leases are as follows:

	2017		2016
	RMB million		RMB million
Within 1 year		61		91
After 1 year but within 5 years		70		59
After 5 years		14		54
		145		204

F-51

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

20 Property, plant and equipment, net (continued)

(h) As at December 31, 2017, certain investment properties of the Group with an aggregate carrying value of approximately RMB20 million (December 31, 2016: RMB34 million) were mortgaged for certain bank borrowings (Note 37(a) (ii)).

21 Construction in progress

	Advance payment for aircraft and flight equipment			Others			Total
	RMB million			RMB million			RMB million
At January 1, 2016		17,700			1,733			19,433
Additions		18,930			1,362			20,292
Transferred to property, plant and equipment (Note 20)		(6,948	)		(1,288	)		(8,236	)
Transferred to other assets upon completion of development (Note 31)		—			(128	)		(128	)
Disposals		(2,415	)		(36	)		(2,451	)
At December 31, 2016		27,267			1,643			28,910
At January 1, 2017		27,267			1,643			28,910
Additions		16,319			2,920			19,239
Transferred to property, plant and equipment (Note 20)		(12,099	)		(1,583	)		(13,682	)
Transferred to other assets upon completion of development (Note 31)		—			(211	)		(211	)
Transferred to lease prepayments		—			(79	)		(79	)
Disposals		(3,944	)		—			(3,944	)
At December 31, 2017		27,543			2,690			30,233

22 Lease prepayments

Lease prepayments relate to the Group’s land use rights. In 2017, the amount of amortization charged to consolidated income statements was RMB78 million (2016: RMB75 million; 2015: RMB64 million).

A majority of the Group’s properties are located in the PRC. The Group was formally granted the rights to use certain parcels of land in Guangzhou, Shenzhen, Zhuhai, Beihai, Changsha, Shantou, Haikou, Zhengzhou, Jilin, Guiyang and other PRC cities by the relevant PRC authorities for periods of 30 to 70 years, which expire between 2020 and 2073.

As at December 31, 2017 and up to the date of approval of these financial statements, the Group is in the process of applying for land use right certificates in respect of certain land used by the Group. As at December 31, 2017, carrying value of such land use rights of the Group amounted to RMB827 million (December 31, 2016: RMB866 million). The Directors of the Company are of the opinion that the use of and the conduct of operating activities at the land referred to above are not affected by the fact that the Group has not yet obtained the relevant land use right certificates.

As at December 31, 2017, certain land use rights of the Group with an aggregate carrying value of approximately RMB90 million (December 31, 2016: RMB79 million) were mortgaged for certain bank borrowings (Note 37(a) (ii)).

F-52

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

23 Goodwill

	2017		2016
	RMB million		RMB million
Cost and carrying amount:
At January 1		182		—
Acquisitions through business combination (Note 24(v)&(vi))		55		182
At December 31		237		182

Impairment tests for cash-generating units containing goodwill

	2017		2016
	RMB million		RMB million
Southern Airlines Group Import and Export Trading Company (“SAIETC”)(Note 24(vi))		182		182
Xiamen Airlines Culture and Media Co., Ltd. (“XACM”) (Note 24(v))		55		—
Total		237		182

The recoverable amount of the CGU is determined based on value-in-use calculation. The calculation uses cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using an estimated weighted average growth rate which does not exceed the long-term average growth rates for the business in which the CGU operates.

The cash flows of SAIETC are discounted using a pre-tax discount rate of 13.40% (2016: 13.40%).

The cash flows of XACM are discounted using a pre-tax discount rate of 11.10%.

F-53

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

24 Subsidiaries

All the subsidiaries of the Company are unlisted. The following list contains only the particulars of subsidiaries which principally affect the results, assets or liabilities of the Group.

Name of company	Place of establishment/ operation	Registered capital		Proportion of ownership interest held by the Company			Principal activity
Henan Airlines Company Limited (i)	PRC		RMB6,000,000,000		60	%	Airline transportation
Xiamen Airlines (i)&(v)	PRC		RMB8,000,000,000		55	%	Airline transportation
Chongqing Airlines Company Limited (i)	PRC		RMB1,200,000,000		60	%	Airline transportation
Shantou Airlines Company Limited (i)	PRC		RMB280,000,000		60	%	Airline transportation
Zhuhai Airlines Company Limited (i)	PRC		RMB250,000,000		60	%	Airline transportation
Guizhou Airlines Company Limited (i)	PRC		RMB910,000,000		60	%	Airline transportation
Guangzhou Nanland Air Catering Company Limited (ii)	PRC		RMB240,000,000		70.5	%	Air catering
Guangzhou Baiyun International Logistic Company Limited (i)	PRC		RMB50,000,000		61	%	Logistics operations
Beijing Southern Airlines Ground Services Company Limited (i)	PRC		RMB18,000,000		100	%	Airport ground services
Nan Lung International Freight Limited	Hong Kong		HKD3,270,000		51	%	Freight services
Southern Airlines General Aviation Company Limited(i)	PRC		RMB1,000,000,000		100	%	General aviation
SAIETC (i)	PRC		RMB15,000,000		100	%	Import and export agent services
Zhuhai Xiang Yi Aviation Technology Company Limited (“Zhuhai Xiang Yi”)(i)&(iv)	PRC		RMB469,848,000		100	%	Flight simulation services

(i) These subsidiaries are PRC limited liability companies.

(ii) This subsidiary is a sino-foreign equity joint venture company established in the PRC.

(iii) Certain subsidiaries of the Group are PRC equity joint ventures which have limited terms pursuant to the PRC law.

F-54

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

24 Subsidiaries (continued)

(iv) Pursuant to the equity transfer agreement entered into between the Company and a third party, the Company acquired 49% equity interests in Zhuhai Xiang Yi, a former joint venture of the Company, at a cash consideration of USD99.52 million (equivalent to RMB678 million) on July 10, 2017. Zhuhai Xiang Yi became a wholly-owned subsidiary of the Company upon completion of the acquisition. The acquisition of Zhuhai Xiang Yi enables the Group to engage in flight simulation services.

In the period from the acquisition date to December 31, 2017, Zhuhai Xiang Yi contributed revenue of RMB196 million and profit of RMB15 million to the Group’s results. If the acquisition had occurred on January 1, 2017, management estimates that consolidated revenue would have been increased by RMB424 million, and consolidated profit for the year would have been increased by RMB53 million. In determining these amounts, management have assumed that the fair value adjustments that arose on the acquisition date would have been the same if the acquisition had occurred on January 1, 2017. The information above is the amount before inter-company eliminations.

The above acquisitions had the following effect on the Group’s assets and liabilities on acquisition date:

	Note		Recognized values on acquisition RMB million
Property, plant and equipment, net		20		1,556
Lease prepayments				115
Trade and other receivables				70
Cash and cash equivalents				41
Other assets				32
Trade and other payables				(34	)
Borrowings		35(c)		(342	)
Deferred tax liabilities				(30	)
Other liabilities				(24	)
Total net identifiable assets				1,384

Analysis of the net outflow of cash and cash equivalents in respect of the acquisitions:

Cash consideration paid	678
Cash and cash equivalents acquired	(41	)
Net cash outflow	637

Effect of the acquisition on the Group’s consolidated income statements

Fair value of the originally held 51% equity interests	706
Less: carrying value of the originally held 51% equity interests	(597	)
Remeasurement of the originally held 51% equity interests	109

Acquisition-related costs were minimal and included in “general and administrative expenses” in the consolidated income statements.

F-55

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

24 Subsidiaries (continued)

(v) Pursuant to the equity transfer agreement entered into between the Company’s subsidiary, Xiamen Airlines, and Southern Airlines Culture and Media Co., Ltd. (“SACM”, an associate of the Company) on October 13, 2017, Xiamen Airlines acquired 51% equity interests in XACM, at a consideration of RMB47 million. Xiamen Airlines held 49% equity interest in XACM before the acquisition. XACM became a wholly-owned subsidiary of the Xiamen Airlines upon completion of the acquisition. The acquisition of XACM enables the Group to engage in advertising agency business.

In the period from the acquisition date to December 31, 2017, XACM contributed revenue of RMB7 million and profit of RMB1 million to the Group’s results. If the acquisition had occurred on January 1, 2017, management estimates that consolidated revenue would have been increased by RMB44 million, and consolidated profit for the year would have been increased by RMB2 million. In determining these amounts, management have assumed that the fair value adjustments that arose on the acquisition date would have been the same if the acquisition had occurred on January 1, 2017. The information above is the amount before inter-company eliminations.

The above acquisitions had the following effect on the Group’s assets and liabilities on acquisition date:

	Recognized values on acquisition RMB million
Trade and other receivables		46
Cash and cash equivalents		2
Trade and other payables		(11	)
Total net identifiable assets		37

Analysis of the net outflow of cash and cash equivalents in respect of the acquisitions:

Cash consideration paid	47
Cash and cash equivalents acquired	(2	)
Net cash outflow	45

Goodwill

Goodwill was recognized as a result of the acquisitions as follows:

	Recognized values on acquisition RMB million
Total consideration transferred		47
The fair value of 49% equity of XACM on the acquisition date		45
Less: fair value of identifiable net assets		(37	)
Goodwill (Note 23)		55

The goodwill resulting from this acquisition represented the expected synergies from combining operations of XACM and the Group.

Acquisition-related costs were minimal and included in “general and administrative expenses” in the consolidated income statements.

F-56

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

24 Subsidiaries (continued)

(vi) Pursuant to the equity transfer agreement entered into between the Company and CSAH on February 2, 2016, the Company acquired 100% equity interests in SAIETC, a wholly owned subsidiary of CSAH, at a cash consideration of RMB400 million in August 2016. SAIETC became a wholly owned subsidiary of the Company upon completion of the acquisition. The acquisition of SAIETC enables the Group to engage in import and export trading transactions.

In the period from the acquisition date to December 31, 2016, SAIETC contributed revenue of RMB68 million and profit of RMB14 million to the Group’s results. If the acquisition had occurred on January 1, 2016, management estimate that consolidated revenue would have been increased by RMB154 million, and consolidated profit for the year would have been increased by RMB39 million. In determining these amounts, management have assumed that the fair value adjustments that arose on the acquisition date would have been the same if the acquisition had occurred on January 1, 2016. The information above is the amount before inter-company eliminations.

The above acquisitions had the following effect on the Group’s assets and liabilities on acquisition date:

	Note		Recognized values on acquisition RMB million
Property, plant and equipment		20		7
Trade and other receivables				124
Cash and cash equivalents				211
Trade and other payables				(124	)
Total net identifiable assets				218
Consideration, satisfied by cash				400

Analysis of the net outflow of cash and cash equivalents in respect of the acquisitions:

Cash consideration paid	400
Cash and cash equivalents acquired	(211	)
Net cash outflow	189

Goodwill

Goodwill was recognized as a result of the acquisitions as follows:

	Recognized values on acquisition RMB million
Total consideration transferred		400
Fair value of identifiable net assets		(218	)
Goodwill (Note 23)		182

F-57

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

24 Subsidiaries (continued)

(vii) The Company previously held 51.84% equity interests in Xinjiang Civil Aviation Property Management Limited (“XJCAPM”) and XJCAPM used to be the subsidiary of the Company. During the year of 2016, a third party non-controlling interests holder of XJCAPM injected capital amounting to RMB73 million to XJCAPM. This diluted the Company’s interest in XJCAPM from 51.84% to 42.80%. XJCAPM became an associate of the Company since December 2016. Details are as follows:

	Note		Net book value as of the deemed disposal date RMB million
Assets deemed disposed of:
Property, plant and equipment		20		153
Other non-current assets				15
Trade and other receivables				5
Cash and cash equivalents				67
Other current assets				15
Trade and other payables				(32	)
Other current liabilities				(48	)
Non-current liabilities				(2	)
Net identifiable assets				173
Non-controlling interests in the former subsidiary				(83	)
				90
Fair value of the remaining 42.80% equity interests				180
Net gain on deemed disposal and losing control				90
Net cash outflow from the deemed disposal				67

F-58

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

24 Subsidiaries (continued)

(viii) Material non-controlling interests:

As at December 31, 2017, the balance of total non-controlling interests is RMB12,607 million (December 31, 2016: RMB11,520 million), of which RMB8,547 million (December 31, 2016:RMB7,623 million) is for Xiamen Airlines. The rest of non-controlling interests are not individually material.

Set out below are the summarized financial information for Xiamen Airlines.

	2017 RMB million			2016 RMB million
Non-controlling interests percentage		45	%		45	%
Current assets		2,422			2,386
Non-current assets		39,689			41,689
Current liabilities		(9,963	)		(13,739	)
Non-current liabilities		(14,086	)		(13,997	)
Net assets		18,062			16,339
Carrying amount of non-controlling interests		8,547			7,623
Revenue		26,114			21,874
Profit for the year		1,477			1,223
Total comprehensive income		1,578			1,500
Profit allocated to non-controlling interests		651			532
Dividend paid to non-controlling interests		73			—
Net cash generated from operating activities		3,696			4,510
Net cash generated from/(used in) investing activities		3,671			(7,776	)
Net cash (used in) / generated from financing activities		(7,613	)		2,764

The information above is the amount before inter-company eliminations.

F-59

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

25 Interest in associates

	2017 RMB million		2016 RMB million
Share of net assets		3,031		2,590

All the Group’s associates are unlisted without quoted market price. The particulars of the Group’s principal associates as at December 31, 2017 are as follows:

						Proportion of ownership interest held by
	Place of establishment / operation		Group’s effective interest			The Company			Subsidiaries			Proportion of voting rights held by the Group			Principal activity
Southern Airlines Group Finance Co., Ltd. (“SA Finance”)		PRC		33.98	%		25.28	%		8.70	%		33.98	%	Provision of Airlines financial services
Sichuan Airlines Co., Ltd. (“Sichuan Airlines”)		PRC		39	%		39	%		—			39	%	Airline transportation
SACM		PRC		40	%		40	%		—			40	%	Advertising services
Xinjiang Civil Aviation Property Management Limited		PRC		42.80	%		42.80	%		—			42.80	%	Property management

There is no associate that is individually material to the Group.

The Group has interests in a number of individually immaterial associates that are accounted for using the equity method. The aggregate financial information of these associates is summarized as following:

	2017 RMB million		2016 RMB million			2015 RMB million
Aggregate carrying amount of individually immaterial associates		3,031		2,590			1,995
Aggregate amounts of the Group’s share of:
Profit from continuing operations		431		509			460
Other comprehensive income		2		(2	)		(7	)
Total comprehensive income		433		507			453

F-60

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

26 Interest in joint ventures

	2017 RMB million		2016 RMB million
Share of net assets		1,015		1,522

All the Group’s joint ventures are unlisted without quoted market price. The particulars of the Group’s principal joint ventures as at December 31, 2017 are as follows:

						Proportion of ownership interest held by
	Place of establishment/ operation		Group’s effective interest			The Company			Subsidiaries		Proportion of voting rights held by the Group			Principal activity
Guangzhou Aircraft Maintenance Engineering Co., Ltd. (”GAMECO”)		PRC		50	%		50	%		—		50	%	Aircraft repair and maintenance services
Guangzhou China Southern Zhongmian Dutyfree Store Co., Limited		PRC		50	%		50	%		—		50	%	Sales of duty free goods in flight
China Southern West Australian Flying College Pty Ltd. (“Flying College”)		Australia		48.12	%		48.12	%		—		50	%	Pilot training services

There is no joint venture that is individually material to the Group.

The Group has interest in a number of individually immaterial joint ventures that are accounted for using the equity method. The aggregate financial information of these joint ventures is summarized as following:

	2017 RMB million		2016 RMB million		2015 RMB million
Aggregate carrying amount of individually immaterial joint ventures		1,015		1,522		1,440
Aggregate amounts of the Group’s share of:
Profit from continuing operations and total comprehensive income		99		102		108

F-61

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

27 Other investments in equity securities

	2017 RMB million		2016 RMB million
Unlisted equity securities, at cost		103		103

Dividend income from unlisted equity securities of the Group amounted to RMB1 million during the year ended December 31, 2017 (2016: RMB1 million, 2015: RMB10 million).

28 Available-for-sale financial assets

	2017 RMB million		2016 RMB million
Available-for-sale financial assets
- Listed shares		85		88
- Non-tradable shares		537		411
		622		499

Dividend income from available-for-sale financial assets of the Group amounted to RMB17 million during the year ended December 31, 2017 (2016: RMB13 million, 2015: RMB3 million).

29 Derivative financial instruments

	2017 RMB million		2016 RMB million
Asset:
Interest rate swaps (a)		46		21
Liability
Cross currency swaps (b)		64		—

(a) In 2015, the Group entered into interest rate swaps to mitigate its cash flow interest rate risk. The interest rate swaps allow the Group to pay at fixed rate from 1.64% to 1.72% to receive LIBOR. The notional principal of the outstanding interest rate swap contracts as at December 31, 2017 amounted to USD460 million (December 31, 2016: USD527 million).

(b) In 2017, the Group entered into cross currency swaps to mitigate its interest rate risk and currency risk. Under the cross currency swaps, the Group agrees with other third parties to exchange the floating interest and principal payments in USD for fixed interest (ranging from 3.58% to 4.04%) and principal payments in RMB. At December 31, 2017, the fair value of the cross currency swaps amounted to RMB64 million (December 31, 2016: Nil). The notional principal of the outstanding cross currency swaps amounted to USD920 million (December 31, 2016: Nil).

F-62

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

30 Deferred tax assets/ (liabilities)

(a) Movements of net deferred tax assets are as follows:

	At the beginning of the year			Acquired in business combination			(Charged)/ credited to consolidated income statements			Charged to other comprehensive income			At the end of the year
	RMB million			RMB million			RMB million			RMB million			RMB million
For the year ended December 31, 2017
Deferred tax assets:
Accrued expenses		1,065			—			(45	)		—			1,020
Provision for major overhauls		505			—			186			—			691
Deferred revenue		87			—			1			—			88
Provision for impairment losses		174			—			74			—			248
Provision for tax losses		—			—			10			—			10
Change in fair value of derivative financial instruments		—			—			16			—			16
Others		86			—			(4	)		—			82
		1,917			—			238			—			2,155
Deferred tax liabilities:
Provision for major overhauls		(261	)		—			45			—			(216	)
Depreciation allowances under tax in excess of the related depreciation under accounting		(659	)		—			26			—			(633	)
Change in fair value of derivative financial instruments		(5	)		—			—			(6	)		(11	)
Change in fair value of available-for-sale equity securities		(110	)		—			—			(31	)		(141	)
Fair value remeasurement of identifiable assets in business combination		—			(30	)		4			—			(26	)
Others		(38	)		—			(11	)		—			(49	)
		(1,073	)		(30	)		64			(37	)		(1,076	)
Net deferred tax assets		844			(30	)		302			(37	)		1,079

F-63

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

30 Deferred tax assets/ (liabilities) (continued)

(a) Movements of net deferred tax assets are as follows (continued):

	At the beginning of the year			Credited/ (charged) to consolidated income statements			Charged to other comprehensive income			At the end of the year
	RMB million			RMB million			RMB million			RMB million
For the year ended December 31, 2016
Deferred tax assets:
Accrued expenses		751			314			—			1,065
Provision for major overhauls		472			33			—			505
Deferred revenue		82			5			—			87
Provision for impairment losses		201			(27	)		—			174
Others		62			24			—			86
		1,568			349			—			1,917
Deferred tax liabilities:
Provision for major overhauls		(384	)		123			—			(261	)
Depreciation allowances under tax in excess of the related depreciation under accounting		(687	)		28			—			(659	)
Change in fair value of derivative financial instruments		(3	)		—			(2	)		(5	)
Change in fair value of available-for-sale equity securities		(20	)		—			(90	)		(110	)
Others		(25	)		(13	)		—			(38	)
		(1,119	)		138			(92	)		(1,073	)
Net deferred tax assets		449			487			(92	)		844

(b) Deferred tax assets not recognized

Tax losses in the PRC are available for carrying forward to set off future assessable income for a maximum period of five years. As at December 31, 2017, the Group’s unused tax losses of RMB543 million (December 31, 2016: RMB704 million) have not been recognized as deferred tax assets, as it was determined by management that it is not probable that future taxable profits against which the losses can be utilized will be available before they expire. The expiry dates of unrecognized unused tax losses are analyzed as follows:

	2017		2016
	RMB million		RMB million
Expiring in:
2017		—		200
2018		171		214
2019		193		194
2020		—		—
2021		96		96
2022		83		—
		543		704

As at December 31, 2017, the Group’s other deductible temporary differences amounting to RMB653 million (December 31, 2016: RMB626 million) have not been recognized as deferred tax assets as it was determined by management that it is not probable that future taxable profits will be available for these deductible temporary differences to reverse in the foreseeable future.

F-64

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

31 Other assets

	Prepayment for exclusive use right of an airport terminal			Software			Leasehold improvement			Others			Total
	RMB million			RMB million			RMB million			RMB million			RMB million
At January 1, 2016		240			247			118			283			888
Additions		—			4			5			268			277
Transferred from construction in progress (Note 21)		—			91			36			1			128
Disposals		—			(2	)		—			(26	)		(28	)
Amortization for the year		(10	)		(85	)		(40	)		(122	)		(257	)
At December 31, 2016		230			255			119			404			1,008
At January 1, 2017		230			255			119			404			1,008
Additions		—			33			44			402			479
Acquisitions through business combinations		—			2			—			—			2
Transferred from construction in progress (Note 21)		—			142			56			13			211
Disposals		—			(4	)		—			(20	)		(24	)
Amortization for the year		(10	)		(112	)		(38	)		(122	)		(282	)
At December 31, 2017		220			316			181			677			1,394

Representing:

		2017		2016
	Note	RMB million		RMB million
Amount due from related parties	41(a) & 50(c)		160		—
Amount due from third parties and others			1,234		1,008
			1,394		1,008

F-65

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

32 Inventories

	2017			2016
	RMB million			RMB million
Consumable spare parts and maintenance materials		1,638			1,534
Other supplies		210			198
		1,848			1,732
Less: impairment		(226	)		(144	)
		1,622			1,588

Impairment of inventory is shown as below:

	2017			2016
	RMB million			RMB million
At January 1		144			110
Provision for impairment of inventories		110			44
Provision written off in relation to disposal of inventories		(28	)		(10	)
At December 31		226			144

33 Trade receivables

	2017			2016
	RMB million			RMB million
Trade receivables		2,712			3,026
Less: allowance for doubtful debts		(37	)		(37	)
		2,675			2,989

(a) Ageing analysis

Credit terms granted by the Group to sales agents and other customers generally range from one to three months. Ageing analysis of trade receivables based on transaction date is set out below:

	2017			2016
	RMB million			RMB million
Within 1 month		2,067			2,536
More than 1 month but less than 3 months		497			321
More than 3 months but less than 12 months		112			142
More than 1 year		36			27
		2,712			3,026
Less: allowance for doubtful debts		(37	)		(37	)
		2,675			2,989

All of the trade receivables are expected to be recovered within one year.

F-66

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

33 Trade receivables (continued)

(a) Ageing analysis (continued)

(i) Impairment loss in respect of trade receivables is recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade receivables directly (Note 2(l) (i)).

The movements in the allowance for doubtful debts during the year are as follows:

	2017			2016
	RMB million			RMB million
At January 1		37			33
Impairment loss recognized		8			14
Impairment loss written back		—			(1	)
Uncollectible amounts written off		(8	)		(9	)
At December 31		37			37

(ii) As at December 31, 2017, trade receivables of RMB36 million (December 31, 2016: RMB31 million) were past due but not impaired. These relate to a number of independent customers for whom there is no significant financial difficulty and based on experience, the overdue amounts can be recovered.

The ageing analysis of these trade receivables is as follows:

	2017		2016
	RMB million		RMB million
3 to 12 months		31		26
More than 1 year		5		5
		36		31

(iii) As at December 31, 2017, trade receivables of RMB40 million (December 31, 2016: RMB50 million) were impaired. The amount of the provision was RMB37 million as at December 31, 2017 (December 31, 2016: RMB37 million). The impaired receivables mainly relate to customers which are in unexpectedly difficult economic situations. It was assessed that a portion of the receivables is expected to be recovered. The ageing of these receivables is as follows:

	2017		2016
	RMB million		RMB million
3 to 12 months		9		28
More than 1 year		31		22
		40		50

F-67

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

33 Trade receivables (continued)

(b) Trade receivables that are not impaired

The ageing analysis of trade receivables that are neither individually nor collectively considered to be impaired is as follows:

	2017 RMB million		2016 RMB million
Neither past due nor impaired		2,636		2,945

Trade receivables that were neither past due nor impaired relate to customers for whom there was no recent history of default.

(c) Trade receivables by currencies

The carrying amounts of the Group’s trade receivables are denominated in the following currencies:

	2017		2016
	RMB million		RMB million
RMB		2,061		2,303
USD		179		268
EURO		171		129
AUD		52		53
TWD		33		40
GBP		36		23
Others		180		210
		2,712		3,026

As at December 31, 2017, the fair value of trade receivables approximates its carrying amount.

34 Other receivables

	2017			2016
	RMB million			RMB million
VAT recoverable		3,684			1,404
Rebate receivables on aircraft acquisitions		699			749
Term deposits		313			568
Deposits for aircraft purchase		—			13
Interest receivables		1			33
Others		538			623
		5,235			3,390
Less: allowance for doubtful debts		(3	)		(3	)
		5,232			3,387

Term deposits have a maturity over 3 months at acquisition. The weighted average annualized interest rate of term deposits as at December 31, 2017 is 2.01% (December 31, 2016: 3.22%).

As at December 31, 2017, the fair value of other receivables approximates its carrying amount.

F-68

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

35 Cash and cash equivalents

(a) Cash and cash equivalents comprise:

	2017 RMB million		2016 RMB million
Deposits in banks and other financial institutions		—		26
Cash at bank and other financial institutions and on hand		6,826		4,126
Cash and cash equivalents in the consolidated statements of financial position		6,826		4,152

As at December 31, 2017, the fair value of cash and cash equivalents approximates its carrying amount.

The carrying amounts of the Group’s cash and cash equivalents are denominated in the following currencies:

	2017 RMB million		2016 RMB million
RMB		4,377		3,494
USD		2,038		472
EURO		71		31
JPY		27		15
HKD		123		13
Others		190		127
		6,826		4,152

F-69

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

35 Cash and cash equivalents (continued)

(b) Reconciliation of profit before income tax to cash generated from operating activities:

	Note		2017 RMB million			2016 RMB million			2015 RMB million
Profit before income tax				8,874			7,661			6,118
Depreciation charges		13		12,963			12,418			11,766
Other amortisation		13		360			332			227
Amortisation of deferred benefits and gains		13		(161	)		(131	)		(148	)
Impairment losses on property, plant, equipment		20		324			71			90
Share of associates’ results		25		(431	)		(509	)		(460	)
Share of joint ventures’ results		26		(99	)		(102	)		(108	)
Gain on disposal of property, plant and equipment and construction in progress		15		(989	)		(557	)		(312	)
Gain on deemed disposal of equity interest in a subsidiary				—			(90	)		—
Fair value movement of derivative financial instruments		29		64			—			—
Remeasurement of the originally held equity interests in a joint venture		24(iv)		(109	)		—			—
Interest income				(89	)		(89	)		(253	)
Interest expense		16		2,747			2,465			2,188
Dividend income from other investments in equity securities and available-for-sale financial assets		27 & 28		(18	)		(14	)		(13	)
Exchange (gain)/losses, net				(642	)		3,368			5,516
(Increase)/decrease in inventories				(34	)		18			55
Decrease/(increase) in trade receivables				314			(409	)		103
(Increase)/decrease in other receivables				(1,840	)		637			418
Decrease/(increase) in prepaid expenses and other current assets				81			(224	)		(184	)
Increase/(decrease) in net amounts due to related companies				15			186			(153	)
Increase/(decrease) in trade payables				222			(597	)		843
(Decrease)/increase in sales in advance of carriage				(567	)		1,289			1,030
Increase in accrued expenses				223			2,066			695
Increase/(decrease) in other liabilities				762			(186	)		(277	)
Increase/(decrease) in deferred revenue				430			86			(75	)
Increase in provision for major overhauls				719			194			630
Decrease in provision for early retirement benefits				(3	)		(7	)		(20	)
Increase/(decrease) in deferred benefits and gains				362			(195	)		181
Cash generated from operating activities				23,478			27,681			27,857

F-70

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

35 Cash and cash equivalents (continued)

(c) Reconciliation of liabilities arising from financing activities

	Bank loans and other borrowings			Obligations under finance leases			Interest rate swaps held to hedge borrowings (assets)			Cross currency swaps		Total
	RMB million			RMB million			RMB million			RMB million		RMB million
	(Note 37)			(Note 38)			(Note 29)			(Note 29)
At January 1, 2017		45,504			62,222			(21	)		—		107,705
Changes from financing cash flows:
Proceeds from bank borrowings		42,854			—			—			—		42,854
Proceeds from ultra-short-term financing bills		1,000			—			—			—		1,000
Repayment of bank borrowings		(18,311	)		—			—			—		(18,311	)
Repayment of ultra-short-term financing bills		(22,986	)		—			—			—		(22,986	)
Repayment of principal under finance lease obligations		—			(9,835	)		—			—		(9,835	)
Total changes from financing cash flows		2,557			(9,835	)		—			—		(7,278	)
Exchange adjustments		(116	)		(1,746	)		—			—		(1,862	)
Changes in fair value		—			—			(25	)		64		39
Other changes:
Acquisitions through business combinations (Note 24(iv))		342			—			—			—		342
Additions of obligations under finance leases (Note 52)		—			17,283			—			—		17,283
Total other changes		342			17,283			—			—		17,625
At December 31, 2017		48,287			67,924			(46	)		64		116,229

F-71

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

36 Assets held for sale

Assets held for sale mainly represent buildings which are planned to be sold in the next 12 months and are measured at the lower of their carrying amounts and fair values less costs to sell.

	Note		Recognized values RMB million
Property, plant and equipment		20		8

As at December 31, 2017, the carrying amount of the assets held for sale is RMB8 million, while their fair value less cost to sell is RMB27 million. The fair value on which the recoverable amount is based on is categorized as a level 3 measurement.

37 Borrowings

(a) As at December 31, 2017 and 2016, borrowings are analyzed as follows:

	2017		2016
	RMB million		RMB million
Non-current
Long-term borrowings
– secured (Notes (i)&(ii)&(iii))		596		755
– unsecured		5,427		314
		6,023		1,069
Corporate bond
– unsecured (Note (iv))		10,000		13,000
Medium-term notes
– unsecured (Note (v))		4,696		4,689
		20,719		18,758
Current
Current portion of long-term borrowings
– secured (Notes (i)&(ii)&(iii))		208		220
– unsecured		3,734		345
Short-term borrowings
– unsecured		20,626		4,195
Ultra short-term financing bills
– unsecured		—		21,986
		24,568		26,746
Current portion of corporate bond
– unsecured (Note (iv))		3,000		—
		27,568		26,746
Total borrowings		48,287		45,504
The borrowings are repayable:
Within one year		27,568		26,746
In the second year		9,126		440
In the third to fifth year		11,566		18,260
After the fifth year		27		58
Total borrowings		48,287		45,504

F-72

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

37 Borrowings (continued)

(a) As at December 31, 2017, borrowings are analyzed as follows (continued):

Notes:

(i) As at December 31, 2017, bank borrowings of the Group totaling RMB440 million (December 31, 2016: RMB660 million) were secured by mortgages over certain of the Group’s aircraft with aggregate carrying amounts of RMB1,331 million (December 31, 2016: RMB1,443 million).

(ii) As at December 31, 2017, bank borrowings of the Group amounting to RMB265 million (December 31, 2016: RMB315 million) were secured by certain land use rights of RMB90 million (December 31, 2016: RMB79 million) and investment properties of RMB20 million (December 31, 2016: RMB34 million).

(iii) As at December 31, 2017, bank borrowings of the Group totaling RMB99 million (December 31, 2016: Nil) were secured by certain of the other flight equipment with aggregate carrying amounts of RMB206 million (December 31, 2016: Nil).

(iv) The Group issued corporate bonds with aggregate nominal value of RMB3,000 million on November 20, 2015 at a bond rate of 3.63%. The corporate bonds mature in five years. The Company will be entitled at its option to adjust its bond rate and the investors will be entitled to request the Company to redeem all or a portion of the bonds after three years of the issue date.

The Group issued corporate bonds with aggregate nominal value of RMB5,000 million on March 3, 2016 at a bond rate of 2.97%. The corporate bonds mature in three years.

The Group issued corporate bonds with aggregate nominal value of RMB5,000 million on May 25, 2016 at a bond rate of 3.12%. The corporate bonds mature in five years. The Company will be entitled at its option to adjust its bond rate and the investors will be entitled to request the Company to redeem all or a portion of the bonds after three years of the issue date.

(v) Xiamen Airlines issued medium-term notes with aggregate nominal value of RMB1,300 million on August 15, 2016 at an interest rate of 2.97%. The medium-term notes mature in three years.

Xiamen Airlines issued medium-term notes with aggregate nominal value of RMB1,600 million on October 20, 2016 at an interest rate of 3.11%. The medium-term notes mature in five years.

Xiamen Airlines issued medium-term notes with aggregate nominal value of RMB1,800 million on November 21, 2016 at an interest rate of 3.38%. The medium-term notes mature in three years.

(b) As at December 31, 2017, the Group’s weighted average interest rates on short-term borrowings were 3.76% per annum (December 31, 2016: 3.92% per annum).

F-73

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

37 Borrowings (continued)

(c) Details of borrowings with original maturity over one year are as follows:

	2017			2016
	RMB million			RMB million
Renminbi denominated loans
Fixed interest rate at 1.20% per annum as at December 31, 2017, with maturities through 2027		20			20
Corporate Bond - Fixed bond rate at 2.97%~3.63%		13,000			13,000
Medium-term notes- Fixed interest rate at 2.97%~3.38%		4,696			4,689
Floating interest rates 90%, 95%,100% of benchmark interest rate (stipulated by PBOC) as at December 31, 2017, with maturities through 2023		9,781			1,406
USD denominated loans
Floating interest rates at three-month LIBOR + 3.30% per annum as at December 31, 2017, with maturities through 2019		98			—
Floating interest rates at three-month LIBOR + 2.1% per annum as at December 31, 2017, with maturities through 2018		66			208
		27,661			19,323
Less: loans due within one year classified as current liabilities		(6,942	)		(565	)
		20,719			18,758

(d) The carrying amounts of the borrowings are denominated in the following currencies:

	2017		2016
	RMB million		RMB million
Renminbi		40,086		45,296
USD		8,201		208
		48,287		45,504

The Group has certain borrowings as well as significant obligations under finance leases (Note 37) which are denominated in USD as at December 31, 2017. The net exchange gain of RMB1,801 million for the year ended December 31, 2017 (2016: net exchange loss of RMB3,276 million; 2015: net exchange loss of RMB5,953 million) was mainly attributable to the translation of balances of borrowings and obligations under finance lease which are denominated in USD

(e) The balance of short-term borrowings as at December 31, 2017 included entrusted loans from CSAH via SA Finance to the Group amounted to RMB105 million (December 31, 2016: RMB105 million) (Note 50(d)(ii)).

(f) As at December 31, 2017, the fair value of borrowings approximate their carrying amount. The fair value is within level 2 of the fair value hierarchy.

(g) Certain of the Group’s banking facilities are subject to the fulfilment of covenants relating to certain of the Group’s balance sheet ratios, as are commonly found in lending arrangements with financial institutions. If the Group were to breach the covenants, the drawn down facilities would become payable on demand. The Group regularly monitors its compliance with these covenants. Further details of the Group’s management of liquidity risk are set out in Note 4(a). As at December 31, 2017 and 2016 none of the covenants relating to drawn down facilities had been breached.

F-74

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

38 Obligations under finance leases

The Group has commitments under finance lease agreements in respect of aircraft and related equipment. The majority of these leases have terms of 10 to 15 years expiring during the years 2018 to 2032. The Group has made careful assessment on the classification of leased aircraft pursuant to IAS 17 and believes all leased aircraft classified as finance lease meet one or more of the criteria as set out in IAS 17 that would lead to a lease being classified as a finance lease.

As at December 31, 2017 and 2016, future payments under these finance leases are as follows:

	2017							2016
	Present value of the minimum lease payments RMB million			Total minimum lease payments RMB million		Interest RMB million		Present value of the minimum lease payments RMB million			Total minimum lease payments RMB million		Interest RMB million
Within 1 year		8,341			10,764		2,423		8,695			10,663		1,968
After 1 year but within 2 years		8,145			10,257		2,112		6,973			8,683		1,710
After 2 years but within 5 years		25,376			29,627		4,251		21,583			24,795		3,212
After 5 years		26,062			28,251		2,189		24,971			27,247		2,276
		67,924			78,899		10,975		62,222			71,388		9,166
Less: balance due within one year classified as current liabilities		(8,341	)						(8,695	)
		59,583							53,527

F-75

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

38 Obligations under finance leases (continued)

Details of obligations under finance leases are as follows:

	2017		2016
	RMB million		RMB million
USD denominated obligations
Fixed interest rates ranging from 1.75% to 5.03% per annum as at December 31, 2017		7,803		9,761
Floating interest rates ranging from three-month LIBOR + 0.18% to three-month LIBOR + 2.95% per annum as at December 31, 2017		12,544		15,878
Floating interest rates ranging from six-month LIBOR + 0.03% to six-month LIBOR + 3.30% per annum as at December 31, 2017		11,327		15,720
Singapore Dollars denominated obligations
Floating interest rate at six-month SIBOR + 1.44% per annum as at December 31, 2017		292		341
Japanese Yen denominated obligations
Floating interest rate at three-month TIBOR + 0.75% to three-month TIBOR + 1.90% per annum as at December 31, 2017		1,279		1,502
Floating interest rate at six-month TIBOR + 3.00% per annum as at December 31, 2017		295		332
Renminbi denominated obligations
Fixed rate at 4.1% to 4.3% as at December 31, 2017		856		—
Floating interest rate ranging from 75.0% to 106.5% of five-year RMB loan benchmark interest rate announced by the PBOC per annum as at December 31, 2017		28,804		13,852
Floating interest rate at three-month CHN HIBOR + 0.38% as at December 31, 2017		455		503
Euro denominated obligations
Floating interest rate ranging from three-month EURIBOR + 0.32% to three-month EURIBOR + 2.20% per annum as at December 31, 2017		2,701		2,785
Floating interest rate ranging from six-month EURIBOR + 1.45% to six-month EURIBOR + 1.80% per annum as at December 31, 2017		1,568		1,548
		67,924		62,222

As at December 31, 2017, certain of the Group’s aircraft with carrying amounts of RMB82,356 million (December 31, 2016: RMB76,875 million) secured finance lease obligations totaling RMB67,924 million (December 31, 2016: RMB62,222 million).

As at December 31, 2017, the fair value of obligation under finance leases approximate their carrying amount. The fair value is within level 2 of the fair value hierarchy.

F-76

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

39 Trade payables

Ageing analysis of trade payables based on transaction date is set out below:

	2017		2016
	RMB million		RMB million
Within 1 month		465		612
More than 1 month but less than 3 months		533		529
More than 3 months but less than 6 months		497		484
More than 6 months but less than 1 year		443		173
More than 1 year		187		105
		2,125		1,903

As at December 31, 2017, the fair value of trade payables approximate their carrying amount.

The carrying amounts of the Group’s trade payables are denominated in the following currencies:

	2017		2016
	RMB million		RMB million
Renminbi		1,832		1,809
USD		209		85
Others		84		9
		2,125		1,903

40 Deferred revenue

Deferred revenue represents the unredeemed credits under the frequent flyer award program.

41 Amounts due from/to related companies

(a) Amounts due from related companies

	Note		2017 RMB million		2016 RMB million
Current
CSAH and its affiliates				9		7
Associates				18		15
Joint ventures				49		76
		50(c)		76		98
Non-current
CSAH and its affiliates		31 & 50(c)		160		—
				236		98

The amounts due from related companies are unsecured, interest free and have no fixed terms of repayment. They are expected to be recovered within one year.

F-77

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

41 Amounts due from/to related companies (continued)

(b) Amounts due to related companies

			2017		2016
	Note		RMB million		RMB million
CSAH and its affiliates				28		20
Joint ventures of CSAH				22		1
Associates				1		4
A joint venture				48		76
Other related companies				2		2
		50(c)		101		103

The amounts due to related companies are unsecured, interest free and have no fixed terms of repayment. They are expected to be settled within one year.

42 Accrued expenses

	2017		2016
	RMB million		RMB million
Repairs and maintenance		4,806		5,290
Jet fuel costs		1,345		1,530
Salaries and welfare		3,362		2,851
Landing and navigation fees		2,757		2,327
Computer reservation services		541		436
Provision for major overhauls (Note 44)		562		768
Interest expense		740		844
Air catering expenses		148		504
Provision for early retirement benefits (Note 45)		4		7
Others		1,105		590
		15,370		15,147

F-78

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

43 Other liabilities

	2017		2016
	RMB million		RMB million
Civil Aviation Development Fund and airport tax payable		1,788		1,559
Payable for purchase of property, plant and equipment		1,194		900
Sales agent deposits		507		430
Other taxes payable		569		508
Deposit received for chartered flights		191		216
Others		1,485		1,359
		5,734		4,972

As at December 31, 2017, the fair value of the balance approximate their carrying amount.

44 Provision for major overhauls

Details of provision for major overhauls in respect of aircraft held under operating leases are as follows:

	2017			2016
	RMB million			RMB million
At January 1		2,857			2,365
Additional provision		1,063			1,020
Utilization		(550	)		(528	)
At December 31		3,370			2,857
Less: current portion (Note 42)		(562	)		(768	)
		2,808			2,089

45 Provision for early retirement benefits

Details of provision for early retirement benefits in respect of obligations to early retired employees are as follows:

	2017			2016
	RMB million			RMB million
At January 1		13			25
Provision for the year (Note 14)		1			3
Financial cost (Note 16)		1			1
Payments made during the year		(8	)		(16	)
At December 31		7			13
Less: current portion (Note 42)		(4	)		(7	)
		3			6

F-79

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

45 Provision for early retirement benefits (continued)

The Group has implemented an early retirement plan for certain employees. The benefits of the early retirement plan 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 salary amount on the date of early retirement of the employees. The present value of the future cash flows expected to be required to settle the obligations is recognized as provision for early retirement benefits.

46 Deferred benefits and gains

	2017		2016
	RMB million		RMB million
Leases rebates (Note (i))		54		77
Maintenance rebates (Note (ii))		807		419
Gains relating to sale and leaseback (Note (iii))		28		51
Government grants		149		127
Others		15		17
		1,053		691

Notes:

(i) The Group was granted rebates by the lessors under certain lease arrangements when it fulfilled certain requirements. The rebates are deferred and amortized using the straight line method over the remaining lease terms.

(ii) The Group was granted rebates by the engine suppliers under certain arrangements when it fulfilled certain requirements. The rebates are deferred and amortized over the beneficial period.

(iii) The Group entered into sale and leaseback transactions with certain third parties under operating leases. The gains are deferred and amortized over the lease terms of the aircraft.

47 Share capital

	2017		2016
	RMB million		RMB million
Registered, issued and paid up capital:
4,039,228,665 domestic state-owned shares of RMB1.00 each (2016: 4,039,228,665 shares of RMB1.00 each)		4,039		4,039
2,983,421,335 A shares of RMB1.00 each (2016: 2,983,421,335 shares of RMB1.00 each)		2,984		2,984
3,065,523,272 H shares of RMB1.00 each (2016: 2,794,917,000 shares of RMB1.00 each)		3,065		2,795
		10,088		9,818

(i) All the domestic state-owned, H and A shares rank pari passu in all material respects.

(ii) On August 10, 2017, the Company issued 270,606,272 H shares to American Airlines, Inc. for a cash consideration equivalent to RMB1,321 million, of which RMB270 million was credited to share capital and RMB1,051 million was credited to share premium (Note 48 and Note 57). According to the Share Subscription Agreement signed by the Company and American Airlines, the H shares are subject to a lock-up period of three years.

F-80

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

48 Reserves

	2017			2016
	RMB million			RMB million
Share premium
At January 1		14,131			14,131
Addition (Note 47(ii))		1,051			—
At December 31		15,182			14,131
Fair value reserve
At January 1		209			55
Change in fair value of available-for-sale equity securities		47			148
Change in fair value of derivative financial instruments		19			6
At December 31		275			209
Statutory and discretionary surplus reserve
At January 1		1,957			1,552
Appropriations to reserves (Note (a))		492			405
At December 31		2,449			1,957
Other reserve
At January 1		121			123
Share of an associate’s reserves movement		1			(2	)
Dilution and change in non-controlling interests and other reserves		113			—
At December 31		235			121
Retained profits
At January 1		17,220			13,366
Profit for the year		5,961			5,044
Appropriations to reserves (Note (a))		(492	)		(405	)
Dividends approved in respect of the previous year		(982	)		(785	)
At December 31		21,707			17,220
Total		39,848			33,638

(a) Appropriations to reserves

According to the PRC Company Law and the Articles of Association of the Company and certain of its subsidiaries, the Company and the relevant subsidiaries are required to transfer 10% of their annual net profits after taxation, as determined under the PRC accounting rules and regulations, to a statutory surplus reserve until the reserve balance reaches 50% of the registered capital. The transfer to this reserve must be made before distribution of dividend to shareholders and when there are retained profits at the end of the financial year.

Statutory surplus reserve can be used to offset prior years’ losses, if any, and may be converted into share capital by the issue of new shares to shareholders in proportion to their existing shareholding or by increasing the par value of the shares currently held by them, provided that the balance after such issue is not less than 25% of the registered capital.

F-81

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

48 Reserves (continued)

(b) Dividends

Dividends payable to equity shareholders of the Company attributable to the year:

	2017		2016
	RMB million		RMB million
Final dividend proposed after the end of the reporting year of RMB0.10 per share (2016: RMB0.10 per share) (inclusive of applicable tax)		1,009		982

A dividend in respect of the year ended December 31, 2017 of RMB1.00 per 10 shares (inclusive of applicable tax) (2016: RMB1.00 per 10 shares (inclusive of applicable tax)), amounting to a total dividend of RMB1,009 million (2016: RMB982 million), was proposed by the directors on March 26, 2018. The dividend proposed after the end of the financial year has not been recognized as a liability at the end of the financial year.

49 Commitments

(a) Capital commitments

Capital commitments outstanding as at December 31, 2017 and 2016 not provided for in the financial statements were as follows:

	2017		2016
	RMB million		RMB million
Commitments in respect of aircraft and flight equipment
– authorized and contracted for		86,834		83,532
Investment commitments
– authorized and contracted for
– capital contributions for acquisition of interests in associates		—		170
– share of capital commitments of a joint venture		18		25
		18		195
– authorized but not contracted for
– share of capital commitments of a joint venture		22		19
		40		214
Commitments for other property, plant and equipment
– authorized and contracted for		6,386		2,297
– authorized but not contracted for		15,636		19,312
		22,022		21,609
		108,896		105,355

F-82

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

49 Commitments (continued)

(a) Capital commitments (continued)

As at December 31, 2017 and 2016, the approximate total future payments, including estimated amounts for price escalation through anticipated delivery dates for aircraft and flight equipment are as follows:

	2017		2016
	RMB million		RMB million
2017		—		25,971
2018		28,125		24,355
2019		28,370		17,878
2020		22,686		13,871
2021 and afterwards		7,653		1,457
		86,834		83,532

(b) Operating lease commitments

As at December 31, 2017 and 2016, the total future minimum lease payments under non-cancellable operating leases in respect of properties, aircraft and flight equipment are as follows:

	2017		2016
	RMB million		RMB million
Payments due:
Within 1 year		8,283		7,948
After 1 year but within 5 years		31,175		27,140
After 5 years		30,007		26,127
		69,465		61,215

50 Material related party transactions

(a) Key management personnel remuneration

Remuneration for key management personnel of the Group, including amounts paid to the Company’s directors (excluding independent non-executive directors) as disclosed in Note 57, is as follows:

	2017		2016		2015
	RMB ’000		RMB ’000		RMB ’000
Salaries, wages and welfare		12,151		8,219		8,907
Retirement scheme contributions		1,841		1,594		1,868
		13,992		9,813		10,775
	2017		2016		2015
	RMB ’000		RMB ’000		RMB ’000
Directors and supervisors (Note 57)		2,952		2,159		2,471
Senior management		11,040		7,654		8,304
		13,992		9,813		10,775

Total remuneration is included in “staff costs” (Note 14).

F-83

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

50 Material related party transactions (continued)

(b) Transactions with CSAH and its affiliates (the “CSAH Group”), associates, joint ventures and other related companies of the Group

The Group provided various operational services to the CSAH Group, associates, joint ventures and other related companies of the Group during the normal course of its business. The Group also received operational services provided by these entities.

Details of the significant transactions carried out by the Group are as follows:

	Note	2017 RMB million		2016 RMB million		2015 RMB million
Income received from the CSAH Group
Charter flight and pallet income	(i)		—		—		19
Cargo handling income and rental income	(i)		3		6		1
Aviation material sales income	(ii)		4		—		—
Rental income	(iii)		7		—		—
Others			1		1		2
Expenses paid to the CSAH Group
Cargo handling charges	(i)		112		117		109
Commission expenses	(i)		44		99		98
Maintenance material purchase expense and lease charges for aviation material	(ii)		43		—		—
Software service expenses	(ii)		4		—		—
Air catering supplies expenses	(iii)		125		124		100
Repairing charges	(iv)		1,537		1,877		1,324
Lease charges for land and buildings	(v)		189		193		193
Handling charges	(vi)		—		60		114
Property management fee	(vii)		72		70		73
Others			12		14		6
Expenses paid to joint ventures and associates
Repairing charges	(ix)		2,424		2,032		1,714
Maintenance material purchase expenses	(ix)		68		41		29
Flight simulation service charges	(x)		194		342		324
Training expenses	(xi)		36		110		112
Ground service expenses	(xii)		123		120		119
Air catering supplies	(xiii)		109		115		108
Advertising expenses	(xiv)		74		71		67
Property management fee	(xv)		26		—		—
Others			6		3		4
Income received from joint ventures and associates
Maintenance material sales and handling income	(xvi)		28		10		—
Disposal of equipment	(xvi)		—		39		—
Rental income	(x)		27		37		37
Entrustment income for advertising media business	(xiv)		20		22		21
Repairing income	(xvii)		1		12		12
Air catering supplies expenses	(xvii)		26		23		23
Commission income	(xviii)		26		26		17
Ground service income	(xix)		10		9		8
Labor service income	(xx)		15		—		—
Others			3		4		3
Income received from other related company
Air tickets income	(xxi)		6		9		10
Expenses paid to other related company
Advertising expenses	(xxi)		10		9		—
Computer reservation services	(xxii)		576		523		515
Aviation supplies expenses	(xxiii)		39		36		—
Canteen Service	(xxiii)		15		—		—
Others			4		—		—
Acquisition from CSAH Group
Acquisition of a subsidiary	(vi)&(xiv)		47		400		—
Acquisition of property, plant and equipment	(xxiv)		—		56		—
Leases from CSAH Group
Finance lease of aircraft	(viii)		6,831		—		—

F-84

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

50 Material related party transactions (continued)

(b) Transactions with CSAH and its affiliates (the “CSAH Group”), associates, joint ventures and other related companies of the Group (continued)

(i) China Southern Airlines Group Ground Services Co., Ltd. (“GSC”), is a wholly-owned subsidiary of CSAH. Cargo handling income/charges are earned/payable by the Group in respect of the cargo handling services with GSC.

Commission is earned by GSC in connection with the air tickets sold by them on behalf of the Group. Commission is calculated based on the rates stipulated by the Civil Aviation Administration of China and International Air Transportation Association.

In addition, the Group leased certain equipment to GSC under operating lease agreements.

(ii) China Aviation Supplies Holding Company (“CASC”), a joint venture of CSAH.

The Group purchases software service, as well as purchases and leases maintenance material and from CASC, and CASC also purchases maintenance material from the Group.

(iii) Shenzhen Air Catering Co., Ltd. (“SACC”), a joint venture of CSAH.

Air catering supplies income/expenses are earned/payable by the Group in respect of certain in-flight meals and related services with SACC.

In addition, the Group leased certain buildings to SACC under operating lease agreements.

(iv) MTU Maintenance Zhuhai Co., Ltd., a joint venture of CSAH, provides comprehensive maintenance services to the Group.

(v) The Group leases certain land and buildings in the PRC from CSAH Group. The amount represents rental payments for land and buildings paid or payable to CSAH Group.

(vi) The Group acquires aircraft, flight equipment and other airline-related facilities through SAIETC and pays handling charges to SAIETC, which used to be a wholly-owned subsidiary of CSAH. In August 2016, the Company acquired 100% equity interests in SAIETC from CSAH at a consideration of approximately RMB400 million. SAIETC became a wholly-owned subsidiary of the Company since then.

F-85

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

50 Material related party transactions (continued)

(b) Transactions with CSAH and its affiliates (the “CSAH Group”), associates, joint ventures and other related companies of the Group (continued)

(vii) China Southern Airlines Group Property Management Co., Ltd., a wholly-owned subsidiary of CSAH. Citic Southern Airlines Construction and Development Company Limited, an associate of CSAH. Both of them provide property management services to the Group.

(viii) China Southern Airlines International Finance Leasing Co., Ltd., a wholly-owned subsidiary of CSAH, provides financial lease of aircraft services to the Group.

(ix) GAMECO and Shenyang Northern Aircraft Maintenance Ltd., joint ventures of the Group, provide comprehensive maintenance services to the Group.

The Group also purchases maintenance material from GAMECO.

(x) Zhuhai Xiang Yi, a joint venture of the Group, provides flight simulation services to the Group. In addition, the Group leased certain flight training facilities and buildings to Zhuhai Xiang Yi under operating lease agreements.

In July 2017, the Company acquired 49% equity interests in Zhuhai Xiang Yi, which then became a wholly-owned subsidiary of the Company upon completion of the acquisition (Note 24(iv)). The amount represents the transactions in 2017 which incurred prior to the acquisition.

(xi) Flying College, a joint venture of the Group, provides training services to the Group.

(xii) Beijing Aviation Ground Services Co., Ltd., and Shenyang Konggang Logistic Co., Ltd., associates of the Group provides ground service to the Group.

(xiii) Beijing Airport Inflight Kitchen Co., Ltd., is an associate of the Group and provides air catering related services to the Group.

(xiv) SACM, an associate of the Group, provides advertising services to the Group.

XACM, originally an associate of Xiamen Airlines with 49% equity interests held, also a subsidiary of SACM, provided advertising service to Xiamen Airlines. In October 2017, Xiamen Airlines acquired the remaining 51% equity interests in XACM at a consideration of RMB47 million. XACM became a wholly-owned subsidiary of Xiamen Airlines upon completion of the acquisition since then (Note 24(v)). Xiamen Airlines provides certain media resources to Xiamen Airlines Media Co., Ltd., before the acquisition.

(xv) Xinjiang Civil Aviation Property Management Ltd., an associate of the Group, provides property management services to the Group.

(xvi) The Group imports and sales maintenance material to GAMECO and earns maintenance material sales and handling income. The Group disposed of equipment to GAMECO in 2016.

(xvii) The Group provides repairing service and Air catering supplies service to Sichuan Airlines.

(xviii) The Group provides certain website resources to SA Finance for the sales of air insurance.

(xix) The Group provides ground services to Shenyang Konggang Logistic Co., Ltd., and Sichuan Airlines, which are associates of the Group.

(xx) The Group provides labor service to Shenyang Northern Aircraft Maintenance Limited, and the charge rates are determined by reference to prevailing market price.

F-86

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

50 Material related party transactions (continued)

(b) Transactions with CSAH and its affiliates (the “CSAH Group”), associates, joint ventures and other related companies of the Group (continued)

(xxi) Phoenix Satellite Television Holdings Ltd., (“the Phoenix Group”) is a related party of the Group as the board chairman of the Phoenix Group was appointed as a non-executive director of the Group. It provides advertising services to the Group.

In addition, the Group sells tickets to the Phoenix Group on market price.

(xxii) China Travel Sky Holding Company is a related party of the Group as a director of the Group was appointed as the director of China Travel Sky Holding Company. It provides computer reservation services to the Group.

(xxiii) The Chairman of Guangdong Southern Airline Pearl Aviation Services Company Limited (“Pearl Aviation Services”) is the executive director of the Company. The Group purchases aviation supplies and canteen services from Pearl Aviation Services.

(xxiv) The Group acquires properties from Citic Southern Airlines Construction and Development Company Limited, which is an associate of CSAH.

(c) Balances with the CSAH Group, associates, joint ventures and other related companies of the Group

Details of amounts due from/to the CSAH Group, associates, joint ventures and other related company of the Group:

			2017		2016
	Note		RMB million		RMB million
Receivables:
The CSAH Group				9		7
Associates				18		15
Joint ventures				49		76
		41(a)		76		98
			2017		2016
	Note		RMB million		RMB million
Prepayments of acquisition of long-term assets:
The CSAH Group				160		—
		31 & 41(a)		160		—
			2017		2016
	Note		RMB million		RMB million
Payables:
The CSAH Group				50		21
Associates				1		4
A joint venture				48		76
Other related companies				2		2
		41(b)		101		103

F-87

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

50 Material related party transactions (continued)

(c) Balances with the CSAH Group, associates, joint ventures and other related companies of the Group (continued)

	2017		2016
	RMB million		RMB million
Accrued expenses:
The CSAH Group		1,023		1,117
Associates		95		121
Joint ventures		1,086		864
Other related companies		571		256
		2,775		2,358
	2017		2016
	RMB million		RMB million
Obligations under finance leases:
The CSAH Group		6,656		—
		6,656		—

Except the obligations under finance leases, the amounts due from/to the CSAH Group, associates, joint ventures and other related companies of the Group are unsecured, interest-free and have no fixed terms of repayment.

(d) Loans from and deposits placed with related parties

(i) Loans from related parties

At December 31, 2017, loans from SA Finance to the Group amounted to RMB431 million (December 31, 2016: Nil).

The unsecured loans are repayable as follows:

	2017		2016
	RMB million		RMB million
Within 1 year		273		—
After 1 year but within 2 years		58		—
After 2 years but within 5 years		100		—
		431		—

Interest expense paid on such loans amounted to RMB14 million (2016: RMB7 million) and the interest rates range from 3.92% to 4.51% per annum during the year ended December 31, 2017 (2016: 3.92%).

(ii) Entrusted loans from CSAH

In 2017, CSAH, SA Finance and the Group entered into an entrusted loan agreement, pursuant to which, CSAH, as the lender, entrusted SA Finance to lend RMB105 million to the Group from April 28, 2017 to April 28, 2018. The interest rate is 90% of benchmark interest rate stipulated by PBOC per annum.

F-88

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

50 Material related party transactions (continued)

(d) Loans from and deposits placed with related parties (continued)

(ii) Entrusted loans from CSAH (continued)

The unsecured entrusted loans are repayable as follows:

		2017		2016
	Note	RMB million		RMB million
Within 1 year	37(e)		105		105

Interest expense paid on such loans amounted to RMB4 million (2016: RMB4 million) at interest rate 3.92% per annum during the year ended December 31, 2017 (2016: 3.92% per annum).

(iii) Deposits placed with SA Finance

As at December 31, 2017, the Group’s deposits with SA Finance are presented in the table below. The applicable interest rates are determined in accordance with the rates published by the PBOC.

	2017		2016
	RMB million		RMB million
Deposits placed with SA Finance		6,095		3,759

Interest income received on such deposits amounted to RMB72 million during the year ended December 31, 2017 (2016: RMB37 million).

(e) Commitments to CSAH

As at December 31, 2017, the Group had operating lease commitments to CSAH in respect of lease payments for land and buildings of RMB334 million (December 31, 2016: RMB476 million).

51 Employee benefits plan

(a) Retirement benefits

Employees of the Group participate in several defined contribution retirement schemes organized separately by the PRC municipal and provincial governments in regions where the major operations of the Group are located. The Group is required to contribute to these schemes at rates ranging from 13% to 20% (2016: 13% to 20%; 2015: 13% to 21%) of salary costs including certain allowances. A member of the retirement schemes is entitled to pension benefits from the Local Labor and Social Security Bureau upon his/her retirement. The retirement benefit obligations of all retired staff of the Group are assumed by these schemes. The Group, at its sole discretion, had made certain welfare subsidy payments to these retirees.

In 2014, the Company and its major subsidiaries joined a new defined contribution retirement scheme (“Pension Scheme”) that was implemented by CSAH. The annual contribution to the Pension Scheme is based on a fixed specified percentage of prior year’s annual wage. There will be no further obligation beyond the annual contribution according to the Pension Scheme. The total contribution into the Pension Scheme in 2017 was approximately RMB546 million (2016: RMB486 million ; 2015: RMB438 million).

F-89

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

51 Employee benefits plan (continued)

(b) Housing benefits

The Group contributes on a monthly basis to housing funds organized by municipal and provincial governments based on certain percentages of the salaries of employees. The Group’s liability in respect of these funds is limited to the contributions payable in each year.

The Group also pays cash housing subsidies on a monthly basis to eligible employees. The monthly cash housing subsidies are charged to income statement.

(c) Share Appreciation Rights Scheme

On November 30, 2011, the Company’s General Meeting approved the “H Share Appreciation Rights Scheme of China Southern Airlines Company Limited” and “Initial Grant under the H Share Appreciation Rights Scheme of China Southern Airlines Company Limited” (“the Scheme”).

Under the Scheme, 24,660,000 units of SARs were granted to 118 employees of the Group. No shares will be issued under the Scheme and each SAR is notionally linked to one existing H share of the Company. Upon exercise of the SARs, a recipient will receive an amount of cash equal to the difference between the market share price of the relevant H share and the exercise price.

The SARs will have an exercise period of six years from the date of grant. Upon the satisfaction of certain performance conditions after the second, third and fourth anniversary of the date of grant, each one third of the SARs will become exercisable.

All of the 24,660,000 units of SARs granted by the Company have been expired by the end of 2015.

52 Supplementary information to the consolidated cash flow statements

Non-cash transactions-acquisition of aircraft

During the year ended December 31, 2017, aircraft acquired under finance leases amounted to RMB17,283 million (2016: RMB10,487 million; 2015: RMB11,251 million).

53 Contingent liabilities

(a) The Group leased certain properties and buildings from CSAH which located in Guangzhou, Wuhan and Haikou, etc. However, to the knowledge of the Group, such properties and buildings lack adequate documentation evidencing CSAH’s rights thereto.

Pursuant to the indemnification agreement dated May 22, 1997 between the Group and CSAH, CSAH has agreed to indemnify the Group against any loss or damage arising from any challenge of the Group’s right to use such properties and buildings.

In addition, as disclosed in Note 20 and Note 22, the Group is applying title certificates for certain of the Group’s properties and land use rights certificates for certain properties and parcels of land. The Company is of the opinion that the use of and the conduct of operating activities at these properties and these parcels of land are not affected by the fact that the Group has not yet obtained the relevant certificates.

(b) The Company and its subsidiary, Xiamen Airlines, entered into agreements with certain pilot trainees and certain banks to provide guarantees on personal bank loans amounting to RMB696 million (December 31, 2016: RMB696 million) that can be drawn by the pilot trainees to finance their respective flight training expenses. As at December 31, 2017, total personal bank loans of RMB361million (December 31, 2016: RMB409 million), under these guarantees, were drawn down from the banks. During the year, the Group paid RMB5 million (2016: RMB4 million) to the banks due to the default of payments of certain pilot trainees.

F-90

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

54 Immediate and ultimate controlling party

As at December 31, 2017, the Directors of the Company consider the immediate parent and ultimate controlling party of the Group to be CSAH, a state-owned enterprise established in the PRC. CSAH does not produce financial statements available for public use.

55 Approval of financial statements

The financial statements were approved by the Board of Directors on April 26, 2018.

56 Non-adjusting events after the financial year end

(a) On March 26, 2018, the Directors of the Company proposed a final dividend in respect of the year ended December 31, 2017. Further details are disclosed in Note 48(b).

(b) On June 26, 2017, the Company entered into the A Share Subscription Agreement with CSAH, pursuant to which the Company is to issue not more than 1,800,000,000 (inclusive) new A Shares to not more than 10 specific investors (including CSAH) (“the A Share Issuance”). The total funds to be raised from the A Share Issuance will be not more than RMB9,500 million (inclusive). CSAH will subscribe for no less than 31% of the new A Shares, the consideration of which shall be satisfied by transfer of assets and cash. In the meantime, the Company entered into the H Share Subscription Agreement with Nan Lung (a wholly-owned subsidiary of CSAH), pursuant to which the Company is to issue not more than 600,925,925 (inclusive and adjusted) new H shares at the subscription price of HK$6.156 per H Share (“the H Share Issuance”). The total funds to be raised from the H Share Issuance will be not more than HKD3,699 million (inclusive). The consideration will be satisfied by cash. Both of the A Share Issuance and the H Share Issuance were approved by the Extraordinary General Meeting and the respective Class Meetings on November 8, 2017. On March 12, 2018, the H Share Issuance was approved by China Securities Regulatory Commission. The A Share Issuance and the H Share Issuance are inter-conditional upon each other, and the Company shall obtain all of the approvals required under the applicable laws and regulations before issuance.

(c) On March 21, 2018, Xiamen Airlines, a subsidiary of the Company, entered into an agreement with Boeing Company to purchase 20 Boeing B373-8 aircraft and 10 Boeing B737-10 aircraft, which are scheduled for delivery from 2019 to 2022. According the information provided in the market, the total catalogue price for the aircraft is around USD$3.24 billion.

F-91

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

57 Directors’ and supervisors’ emoluments

The remuneration of every director and supervisor for the year ended December 31, 2017 is set out below:

Emoluments paid or receivable in respect of a person’s services as a director or supervisor, whether of the Company or its subsidiary undertaking:

	Directors’ fees		Salaries, wages and welfare		Housing allowance		Employer’s contribution to a retirement benefit scheme		Remunerations paid or receivable in respect of accepting office as director or supervisor		Emoluments paid or receivable in respect of director’s or supervisor’s other services in connection with the management of the affairs of the Company or its subsidiary undertaking		Total
Name	RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000
Non-executive directors
Yuan Xin An (Note (i) & (ii))		—		—		—		—		—		—		—
Yang Li Hua (Note (i) & (ii))		—		—		—		—		—		—		—
Executive directors
Wang Chang Shun (Note (i) & (v))		—		—		—		—		—		—		—
Tan Wan Geng (Note (i))		—		—		—		—		—		—		—
Zhang Zi Fang (Note (i))		—		—		—		—		—		—		—
Li Shao Bin (Note (ii))		—		812		—		123		—		—		935
Supervisors
Pan Fu (Note (i))		—		—		—		—		—		—		—
Li Jia Shi		—		901		—		126		—		—		1,027
Zhang Wei (Note (i) & (ii))		—		—		—		—		—		—		—
Yang Yi Hua (Note (ii) & (iv))		—		—		—		—		—		—		—
Wu De Ming (Note (ii))		—		419		—		127		—		—		546
Mao Juan (Note (iii))		—		324		—		120		—		—		444

F-92

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

57 Directors’ and supervisors’ emoluments (continued)

The remuneration of every director and supervisor for the year ended December 31, 2017 is set out below (continued):

Emoluments paid or receivable in respect of a person’s services as a director or supervisor, whether of the Company or its subsidiary undertaking (continued):

	Directors’ fees		Salaries, wages and welfare		Housing allowance		Employer’s contribution to a retirement benefit scheme		Remunerations paid or receivable in respect of accepting office as director or supervisor		Emoluments paid or receivable in respect of director’s or supervisor’s other services in connection with the management of the affairs of the Company or its subsidiary undertaking		Total
Name	RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000
Independent non-executive directors
Ning Xiang Dong (Note (ii))		150		—		—		—		—		—		150
Liu Chang Le (Note (ii))		150		—		—		—		—		—		150
Tan Jin Song		150		—		—		—		—		—		150
Guo Wei (Note (ii))		150		—		—		—		—		—		150
Jiao Shu Ge		150		—		—		—		—		—		150
Zheng Fan (Note (iii))		—		—		—		—		—		—		—
Gu Hui Zhong (Note (iii))		—		—		—		—		—		—		—

F-93

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

57 Directors’ and supervisors’ emoluments (continued)

For the year ended December 31, 2016:

Emoluments paid or receivable in respect of a person’s services as a director or supervisor, whether of the Company or its subsidiary undertaking:

	Directors’ fees		Salaries, wages and welfare		Housing allowance		Employer’s contribution to a retirement benefit scheme		Remunerations paid or receivable in respect of accepting office as director or supervisor		Emoluments paid or receivable in respect of director’s or supervisor’s other services in connection with the management of the affairs of the Company or its subsidiary undertaking		Total
Name	RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000
Non-executive directors
Wang Chang Shun (Note (i) & (v))		—		—		—		—		—		—		—
Yuan Xin An (Note (i) & (ii))		—		—		—		—		—		—		—
Yang Li Hua (Note (i) & (ii))		—		—		—		—		—		—		—
Executive directors
Tan Wan Geng (Note (i))		—		—		—		—		—		—		—
Zhang Zi Fang (Note (i))		—		—		—		—		—		—		—
Li Shao Bin (Note (ii))		—		639		—		130		—		—		769
Supervisors
Pan Fu (Note (i))		—		—		—		—		—		—		—
Li Jia Shi		—		711		—		133		—		—		844
Zhang Wei (Note (i) & (ii))		—		—		—		—		—		—		—
Yang Yi Hua (Note (ii) & (iv))		—		—		—		—		—		—		—
Wu De Ming (Note (ii))		—		413		—		133		—		—		546
Independent non-executive directors
Ning Xiang Dong (Note (ii))		150		—		—		—		—		—		150
Liu Chang Le (Note (ii))		150		—		—		—		—		—		150
Tan Jin Song		150		—		—		—		—		—		150
Guo Wei (Note (ii))		150		—		—		—		—		—		150
Jiao Shu Ge		150		—		—		—		—		—		150

F-94

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

57 Directors’ and supervisors’ emoluments (continued)

For the year ended December 31, 2015:

Emoluments paid or receivable in respect of a person’s services as a director or supervisor, whether of the Company or its subsidiary undertaking:

	Directors’ fees		Salaries, wages and welfare		Housing allowance		Employer’s contribution to a retirement benefit scheme		Remunerations paid or receivable in respect of accepting office as director or supervisor		Emoluments paid or receivable in respect of director’s or supervisor’s other services in connection with the management of the affairs of the Company or its subsidiary undertaking		Total
Name	RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000
Non-executive directors
Wang Quan Hua (Note (i) & (ii))		—		—		—		—		—		—		—
Yuan Xin An (Note (i))		—		—		—		—		—		—		—
Yang Li Hua (Note (i))		—		—		—		—		—		—		—
Executive directors
Tan Wan Geng (Note (i))		—		—		—		—		—		—		—
Zhang Zi Fang (Note (i))		—		—		—		—		—		—		—
Li Shao Bin		—		636		—		137		—		—		773
Supervisors
Pan Fu (Note (i))		—		—		—		—		—		—		—
Li Jia Shi		—		636		—		139		—		—		775
Zhang Wei (Note (i))		—		—		—		—		—		—		—
Yang Yi Hua (Note (iv))		—		240		—		92		—		—		332
Wu De Ming		—		451		—		140		—		—		591
Independent non-executive directors
Ning Xiang Dong		150		—		—		—		—		—		150
Liu Chang Le		150		—		—		—		—		—		150
Tan Jin Song		150		—		—		—		—		—		150
Wei Jin Cai (Note (iii))		75		—		—		—		—		—		75
Guo Wei (Note (iv))		75		—		—		—		—		—		75
Jiao Shu Ge (Note (iv))		75		—		—		—		—		—		75

F-95

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

57 Directors’ and supervisors’ emoluments (continued)

Note:

(i) These directors or supervisors did not receive any remuneration for their services in the capacity of the directors or supervisors of the Company. They also held management positions in CSAH and their salaries were borne by CSAH.

(ii) Resigned on December 20, 2017.

(iii) Appointed on December 20, 2017.

(iv) Ms. Yang Yi Hua retired in September 2015, while still served as supervisor before December 20, 2017. Ms. Yang Yi Hua did not receive any remuneration for her service in the capacity of the supervisor of the Company since September 2015.

(v) Mr. Wang Chang Shun was a non-executive director of the Company before December 20, 2017 and was appointed to be the executive director since December 20, 2017.

F-96

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

58 Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended December 31, 2017

Up to the date of issue of these financial statements, the IASB has issued a number of amendments and new standards which are not yet effective for the year ended December 31, 2017 and which have not been adopted in these financial statements. These include the following which may be relevant to the Group.

	Effective for accounting periods beginning on or after
IFRS 9, Financial instruments		January 1, 2018
IFRS 15, Revenue from contracts with customers		January 1, 2018
Amendments to IFRS 2, Share-based payment: Classification and measurement of share-based payment transactions		January 1, 2018
Amendments to IAS 40, Transfers of investment property		January 1, 2018
IFRIC 22, Foreign currency transactions and advance consideration		January 1, 2018
IFRS 16, Leases		January 1, 2019

The Group has made an assessment of IFRS 9 and IFRS 15, and is in the process of making an assessment of IFRS 16, for the impact of these new standards in the period of initial application. So far the Group has identified some aspects of the new standards which may have a significant impact on the consolidated financial statements. Further details of the expected impacts are discussed below. As the Group has not completed its assessment of IFRS 16, further impacts may be identified in due course and will be taken into consideration when determining the adoption of these new requirements and which transitional approach to take, where there are alternative approaches allowed under the new standards.

IFRS 9, Financial instruments

IFRS 9 “Financial Instruments” is relevant to the Group and becomes effective for accounting periods beginning on or after 1 January 2018. IFRS 9 contains three principal classification categories for financial assets: measured at (a) amortized cost, (b) fair value through profit or loss and (c) fair value through other comprehensive income. If an equity security is designated as fair value through other comprehensive income, then only dividend income on that security will be recognized in profit or loss. Gains, losses and impairments on that security will be recognized in other comprehensive income without recycling. With respect to the Group’s financial assets currently classified as “available-for-sale financial assets” and “other investments in equity securities”, these are investments in equity securities which now default to fair value through profit or loss unless there is an irrevocable election to designate as fair value through other comprehensive income (without recycling) on transition to IFRS 9. The Group has decided to irrevocably designate those investments it considers to be long term strategic investments as fair value through other comprehensive income. This standard, and the irrevocable election, gives rise to a change in accounting policy as: 1) for available-for-sale equity investments, the current accounting policy is to recognize fair value changes in other comprehensive income until disposal or impairment, when gains or losses are recycled to profit or loss; and 2) for other investments in equity securities, the current accounting policy is to recognize such investments in the consolidated statements of financial position at cost less impairment losses, and dividend income from such equity securities is recognized in profit or loss. This change in policy will have no impact on the Group’s net assets and total comprehensive income but the Group expects there to be a credit adjustment to opening reserves on adoption of IFRS 9.

F-97

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Renminbi unless otherwise indicated)

58 Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended 31 December 2017 (continued)

IFRS 15, Revenue from contracts with customers

IFRS 15 “Revenue from Contracts with Customers” is relevant to the Group and became effective for accounting periods beginning from the 1 January 2018. The standard establishes a framework for reporting to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The Group has assessed the impact of the new standard, and expects there to be a credit adjustment to opening reserves on adoption of IFRS 15 in respect to the timing of recognition of unflown ticket breakage income and the transaction price allocated to mileage awarded. For the unflown ticket breakage income, the Group currently adopts a more prudent policy than that required under IFRS 15 where breakage is to be recognized on each flight based on an assessment that it is highly probable that the income will not result in a significant reversal of the cumulative revenue recognized in the future. This assessment will be based on the historic patterns of breakage. For the transaction price allocated to mileage awarded, the Group currently allocates the amount received in relation to mileage earning flights based on fair value, between the flight and mileage earned by members of the Group’s frequent flyer award programs. Under IFRS 15, the Group shall estimate the stand-alone selling price of mileage awarded by the members of the Group’s frequent flyer award programs and allocates the transaction price to performance obligation for flight and mileage awarded. IFRS 15 is also expected to impact the classification, presentation and disclosure of ancillary income, change fees and interline cargo transactions, albeit the impact is not expected to be material. The Group will adopt the cumulative effect approach when applying the new standard at the date of initial application.

IFRS 16, Leases

IFRS 16 “Leases” is relevant to the Group and becomes effective for accounting periods beginning on or after 1st January 2019. The standard eliminates the lessee’s classification of leases as either operating leases or finance leases and, instead, introduces a single lease accounting model. Applying that model, a lessee is required to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value, and depreciation of lease assets separately from interest on lease liabilities in the statement of profit or loss. IFRS 16 will primarily affect the Group’s accounting as a lessee of leases for aircraft and related equipment, and buildings and other equipment which are currently classified as operating leases. The application of the new accounting model is expected to lead to a material increase in both assets and liabilities and to impact on the timing of the expense recognition in the statement of profit or loss over the period of the lease. The Group is in the process of making an assessment of IFRS 16 to determine the amounts of new assets and liabilities arising from operating lease commitments on adoption of IFRS 16.

F-98

EX-4.43

Exhibit 4.43

A350

PURCHASE AGREEMENT

BETWEEN

AIRBUS S.A.S

as Seller

AND

CHINA SOUTHERN AIRLINES COMPANY LIMITED

as Buyer

AND

CHINA SOUTHERN AIRLINES GROUP

IMPORT AND EXPORT TRADING CORP., LTD.

as Consenting Party

Buyer’s reference: 17SIES2003FR

Seller’s reference: CT1600622

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Clause 00A		Privileged and Confidential
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CONTENTS

CLAUSES	TITLES
0	DEFINITIONS AND INTERPRETATION
1	SALE AND PURCHASE
2	SPECIFICATION
3	PRICES
4	PRICE REVISION
5	PAYMENTS
6	MANUFACTURE PROCEDURE—INSPECTION
7	CERTIFICATION
8	TECHNICAL ACCEPTANCE
9	DELIVERY
10	EXCUSABLE DELAY
11	NON-EXCUSABLE DELAY
12	WARRANTIES AND SERVICE LIFE POLICY
13	PATENT AND COPYRIGHT INDEMNITY
14	TECHNICAL DATA AND SOFTWARE SERVICES
15	SELLER REPRESENTATIVES SERVICES
16	TRAINING SUPPORT AND SERVICES
17	SUPPLIER AND ACS SUPPLIER PRODUCT SUPPORT
18	BUYER FURNISHED EQUIPMENT AND AIRBUS CONTRACTED SUPPLIER EQUIPMENT
19	INDEMNIFICATION AND INSURANCE
20	TERMINATION
21	ASSIGNMENTS AND TRANSFERS
22	MISCELLANEOUS PROVISIONS

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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CONTENTS

EXHIBITS	TITLES
Exhibit A	SPECIFICATION
Exhibit B	B-1: FORM OF A SPECIFICATION CHANGE NOTICE
	B-2: FORM OF A MANUFACTURER’S SPECIFICATION CHANGE NOTICE
Exhibit C	AIRCRAFT PRICE REVISION FORMULA
Exhibit D	FORM OF CERTIFICATE OF ACCEPTANCE
Exhibit E	FORM OF BILL OF SALE
Exhibit F	SERVICE LIFE POLICY – LIST OF ITEMS
Exhibit G	TECHNICAL DATA INDEX
Exhibit H	MATERIAL SUPPLY AND SERVICES
Exhibit I	LICENSES AND ON LINE SERVICES

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Clause 00A		Privileged and Confidential
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A350 PURCHASE AGREEMENT

This A350 Purchase Agreement (the “Agreement”) is made                    2017

BETWEEN:

AIRBUS S.A.S., a société par actions simplifiée, created and existing under French law having its registered office at 1 Rond-Point Maurice Bellonte, 31707 Blagnac-Cedex, France and registered with the Toulouse Registre du Commerce under number RCS Toulouse 383 474 814 (the “Seller”),

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED, a company organised under the laws of the People’s Republic of China having its principal place of business at Nº278, Airport Road Baiyun District, Guangzhou 510405, People’s Republic of China, (the “Buyer”),

and

CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD., having its principal office at Nº 272, Airport Road Baiyun District, Guangzhou 510405, People’s Republic of China (the “Consenting Party”).

WHEREAS subject to the terms and conditions of this Agreement, the Seller desires to sell the Aircraft to the Buyer and the Buyer desires to purchase the Aircraft from the Seller.

NOW THEREFORE IT IS AGREED AS FOLLOWS:

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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0 DEFINITIONS AND INTERPRETATION

0.1 In addition to words and terms elsewhere defined in this Agreement, the initially capitalised words and terms used in this Agreement shall have the meaning set out below.

Affiliate means with respect to any person or entity, any other person or entity directly or indirectly controlling, controlled by or under common control with such person or entity.

Airbus Contracted Suppliers (ACS) Equipment has the meaning set out in Clause 12.3.2.1.2.

Airbus Contracted Suppliers Support Agreements has the meaning set out in Clause 12.3.2.1.3.

ACS Suppliers has the meaning set out in Clause 12.3.2.1.1.

ACS Supplier Base Price has the meaning set forth in Clause 2.1.4.1

AirbusWorld corresponds to the Seller’s customer portal as further defined in Part 2 of Exhibit I.

Aircraft means [***].

[***].

[***] means, as the context requires, [***] or any subsequent issue thereof applicable at the time of equipment selection.

[***] means the [***], a copy of which has been annexed hereto as Exhibit A.

Aircraft Training Services means any flight support services including but not limited to any and all training courses, flight training, flight assistance, line training, line assistance and more generally all flights of any kind performed by the Seller, its agents, employees or subcontractors, and maintenance support, maintenance training (including Practical Training), training support of any kind performed on aircraft and provided to the Buyer pursuant to this Agreement.

Airframe means the Aircraft excluding the Propulsion Systems.

[***] has the meaning set out in Clause 3.1.

[***] is set out in Exhibit C.

Aviation Authority means when used in respect of any jurisdiction the government entity, which under the laws of such jurisdiction has control over civil aviation or the registration, airworthiness or operation of aircraft in such jurisdiction.

Balance of Final Price has the meaning set out in Clause 5.4.1.

BFE Engineering Definition has the meaning set out in Clause 18.1.2.1.

BFE Seats has the meaning set out in Clause 2.1.4.2.

BFE Supplier means a supplier of Buyer Furnished Equipment.

Bill of Sale has the meaning set out in Clause 9.2.2.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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Business Day means a day, other than a Saturday or a Sunday (or a bank holiday where the obligation takes place), on which business of the kind contemplated by this Agreement is carried on in France, in Germany, and in the People’s Republic of China or, where used in relation to a payment, which is a day on which banks are open for business in France, in Germany, in the People’s Republic of China, and in New York, USA as appropriate.

Buyer Furnished Equipment or BFE has the meaning set out in Clause 18.1.1.1.

Cabin Definition Closure Meeting or CDCM means the final cabin definition meeting relative to SFE and ACS Equipment that takes place at the A350XWB Customer Definition Centre in Hamburg, Germany.

Certificate of Acceptance has the meaning set out in Clause 8.3.

Contractual Definition Freeze or CDF has the meaning set out in Clause 2.4.1.

Customer Specific Price has the meaning set out in Clause 2.1.4.1.

Customisation Milestone Chart has the meaning set out in Clause 2.4.2.

Declaration of Design and Performance or DDP means the documentation provided by an equipment manufacturer guaranteeing that the corresponding equipment meets the requirements of the Specification, the interface documentation as well as all the relevant certification requirements.

Delivery means the transfer of title to the Aircraft from the Seller to the Buyer in accordance with Clause 9.

Delivery Date means the date on which Delivery shall occur.

Delivery Location means the facilities of the Seller at the location of final assembly of the Aircraft currently in Toulouse, France.

Excusable Delay has the meaning set out in Clause 10.1.

Export Airworthiness Certificate and Statement of Conformity means an export certificate of airworthiness and a statement of conformity issued by the Aviation Authority of the Delivery Location.

Final Price has the meaning set out in Clause 3.3.

General Terms and Conditions or GTC means the General Terms and Conditions of Access to and Use of AirbusWorld set forth in Part 2 to Exhibit I.

Goods and Services means any goods and services that may be purchased by the Buyer from the Seller, or, if applicable, its subsidiaries, as listed in the Seller’s relevant customer services catalogue, excluding Aircraft.

Gross Negligence means any act or omission done with intent to cause damage or recklessly and with knowledge that damage would probably result.

Ground Training Services means all training courses performed in classrooms, full flight simulator sessions, fixed base simulator sessions, field trips and any other services provided to the Buyer on the ground pursuant to this Agreement and which are not Aircraft Training Services.

[***]

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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Initial Technical Coordination Meeting or ITCM means the initial meeting relative to BFE Seats and associated IFE, during which the Buyer’s requirements and the technical constraints are captured, in order to launch the development of the corresponding BFE.

Manufacture Facilities means the various manufacture facilities of the Seller, its Affiliates or any sub-contractor, where the Airframe or its parts are manufactured or assembled.

Manufacturer Specification Change Notice or MSCN has the meaning set out in Clause 2.2.2.1.

Material has the meaning set out in Clause 1.2 of Exhibit H.

Non-Excusable Delay has the meaning set out in Clause 11.1.

Other Agreement means any agreement relating to the sale, purchase, financing, leasing, of any aircraft, of any such aircraft entered into between (a) the Seller or any of its Affiliates and (b) the Buyer.

Predelivery Payment means the payment(s) determined in accordance with Clause 5.3.

Propulsion Systems has the meaning set out in Clause 2.3.

Propulsion Systems Manufacturer means the manufacturer of the Propulsion Systems as set out in Clause 2.3.

Ready for Delivery means the time when the Technical Acceptance Process has been completed in accordance with Clause 8 and all technical conditions required for the issuance of the Export Airworthiness Certificate and the Statement of Conformity have been satisfied.

Scheduled Delivery Month has the meaning set out in Clause 9.1.

Scheduled Delivery Period has the meaning set out in Clause 9.1.

Scheduled Delivery Quarter has the meaning set out in Clause 9.1.

Seller Furnished Equipment or SFE corresponds to items of equipment that are identified in the Specification as being furnished by the Seller.

Seller Representatives means the representatives of the Seller referred to in Clause 15.

Seller Representatives Services means the services provided by the Seller to the Buyer and from the Buyer to the Seller pursuant to Clause 15.

Seller Service Life Policy has the meaning set out in Clause 12.2.

Spare Parts means the items of equipment and material that may be provided pursuant to Exhibit H.

Specification Change Notice or SCN means an agreement in writing between the parties to amend the Specification pursuant to Clause 2.

Specification means either (a) the Standard Specification if no SCNs are applicable or (b) if SCNs are issued, the Standard Specification as amended by all applicable SCNs.

Standard Specification means the [***].

Subsidiary means [***].

Supplier has the meaning set out in Clause 12.3.1.1.1.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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Supplier Part has the meaning set out in Clause 12.3.1.1.2.

Supplier Product Support Agreement has the meaning set out in Clause 12.3.1.1.3.

SPSA Application means the application on AirbusWorld, which provides the Buyer with access to the Supplier Product Support Agreements and the Airbus Contracted Suppliers Support Agreements.

Technical Data has the meaning set out in Clause 14.1.

Total Loss has the meaning set out in Clause 10.4.

Type Certificate has the meaning set out in Clause 7.1.

Warranted Part has the meaning set out in Clause 12.1.1.

0.2 Clause headings and the Index are inserted for convenience of reference only and shall be ignored in the interpretation of this Agreement.

0.3 In this Agreement unless the context otherwise requires:

(a) references to Clauses, Appendices and Exhibits are to be construed as references to the Clauses of, and Appendices, and Exhibits to this Agreement and references to this Agreement include its Schedules, Exhibits and Appendices;

(b) words importing the plural shall include the singular and vice versa; and

(c) references to a person shall be construed as including, without limitation, references to an individual, firm, company, corporation, unincorporated body of persons and any state or agency of a state.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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1 SALE AND PURCHASE

The Seller shall sell and deliver and the Buyer shall buy and take delivery of twenty (20) [***] Aircraft on the Delivery Date at the Delivery Location upon the terms and conditions contained in this Agreement.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Clause 01		Privileged and Confidential
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2 SPECIFICATION

2.1 Aircraft Specification

2.1.1 The Aircraft shall be manufactured in accordance with the corresponding Standard Specification, as may already have been modified or varied at the date of this Agreement by the Specification Change Notices listed in Appendix 1 to Exhibit A.

2.1.2 [***]

2.1.3 Comprehensive Offer

In addition to the [***] , for the purpose of offering a comprehensive view of the available standard and optional features for both models, the Seller has also issued an [***]

This document encompasses the basic aircraft features and functionalities set forth in the respective Standard Specifications, as well as—under sections marked “Customisation”—the options available at the date hereof and constituting the Seller’s customisation offer.

2.1.4 A350XWB Cabin Customisation

Subject to Clause 2.4, the Buyer is offered the option to define the Aircraft through the selection of:

• SFE or ACS catalogue cabin solutions and options developed by the Seller (“Catalogue Items”) out of the A350XWB Family ADD applicable at the time of customisation, and

• as an alternative, solely for seats and associated integrated in-flight entertainment equipment, Buyer Furnished Equipment.

It is a prerequisite to the selection of ACS or BFE equipment, that:

• any in-flight entertainment (IFE) equipment to be incorporated into the BFE Seats be exclusively BFE items, and

• any in-flight entertainment (IFE) equipment to be incorporated into ACS seats selected from the Catalogue Items be exclusively ACS items.

2.1.4.1 ACS Equipment

The A350XWB Family ADD lists the pre-developed catalogue ACS Equipment available for selection by the Buyer. It is agreed and understood that such ACS Equipment shall be supplied exclusively by manufacturers qualified by the Seller as ACS Suppliers.

The Buyer shall choose the ACS Equipment and its features from the A350XWB Family ADD applicable at the time of the corresponding customisation and shall formally notify the Seller thereof in writing, by the date set in the Customisation Milestone Chart. Such selection shall be formally notified in writing at the date set forth to this effect in the Customisation Milestone Chart and shall subsequently be formalised through the SCN process described in Clause 2.2.1.

The Seller shall purchase and take title to the ACS Equipment. The Seller shall place the purchase order for the ACS Equipment either:

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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a) at the price and associated price revision conditions jointly notified to the Seller by the Buyer and the ACS Supplier (the “Customer Specific Price”), or

b) at the corresponding ACS Supplier’s base price applicable to such equipment at the time of the order (the “ACS Supplier Base Price”).

Should the Buyer and the corresponding ACS Supplier fail to jointly notify the Seller as per a) above at the latest ten (10) calendar days prior to the CDF date of the corresponding Aircraft, the Seller shall order the ACS Equipment at the then applicable ACS Supplier Base Price.

The format and recipient of the above notification shall be indicated to the Buyer during the customisation process.

2.1.4.2 Alternative BFE Equipment

In addition to the Catalogue Items chosen in the A350XWB Family ADD as set forth above, the Buyer may submit to the Seller for consideration specific alternative BFE seats (the “BFE Seats”) and associated in-flight entertainment (IFE) equipment to be incorporated into such BFE Seats, subject to the provisions of Clause 18.

2.2 Specification Amendment

The parties understand and agree that the Specification may be further amended following signature of this Agreement in accordance with the terms of this Clause 2.

2.2.1 Specification Change Notice

The Specification may be amended by written agreement between the parties in a Specification Change Notice (SCN). Each SCN shall be substantially in the form set out in Exhibit B1 and shall set out the SCN’s Aircraft embodiment rank and shall also set forth, in detail, the particular change to be made to the Specification and the effect, if any, of such change on design, performance, weight, Delivery Date of the Aircraft affected thereby and on the text of the Specification. An SCN may result in an adjustment of the Aircraft Base Price, which adjustment, if any, shall be specified in the SCN.

2.2.2 Development Changes

The Specification may also be amended to incorporate changes deemed necessary by the Seller to improve the Aircraft, prevent delay or ensure compliance with this Agreement (“Development Changes”), as set forth in this Clause 2.

2.2.2.1 Manufacturer Specification Changes Notices

The Specification may be amended by the Seller through a Manufacturer Specification Change Notice (“MSCN”), which shall be substantially in the form set out in Exhibit B2 hereto and shall set out the MSCN’s Aircraft embodiment rank as well as, in detail, the particular change to be made to the Specification and the effect, if any, of such change on performance, weight, Aircraft Base Price, Delivery Date of the Aircraft affected thereby and interchangeability or replaceability requirements under the Specification.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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Except when the MSCN is necessitated by an Aviation Authority directive or by equipment obsolescence, in which case the MSCN shall be accomplished without requiring the Buyer’s consent, if the MSCN adversely affects the performance, weight, Base Price, Delivery Date of the Aircraft affected thereby or the interchangeability or replaceability requirements under the Specification, the Seller shall notify the Buyer of a reasonable period of time during which the Buyer must accept or reject such MSCN. If the Buyer does not notify the Seller of the rejection of the MSCN within such period, the MSCN shall be deemed accepted by the Buyer and the corresponding modification shall be accomplished.

2.2.2.2 In the event of the Seller revising the Specification to incorporate Development Changes, which have no adverse effect on any of the elements as set forth in 2.2.2.1 above, such revision shall be performed by the Seller without the Buyer’s consent and the Seller shall as soon as practicable notify the Buyer in writing of any such change.

In such cases, the Buyer shall have access to the details of such changes through the relevant application in AirbusWorld.

2.2.3 [***]

[***]

2.3 Propulsion Systems

2.3.1 The Airframe shall be equipped with a set of [***] engines (the “Propulsion Systems”).

2.3.2 The above Propulsion Systems designation is received from the Propulsions Systems Manufacturer and is subject to amendment by the Propulsion Systems Manufacturer at any time prior to the Delivery Date. If the Propulsion Systems Manufacturer makes any such amendment, the amendment shall be automatically incorporated into this Agreement and the Propulsion Systems designation shall be adjusted accordingly. The Seller agrees to notify the Buyer as soon as it receives notice of any such amendment from the Propulsion Systems Manufacturer. It is understood by the parties that warranties for the Propulsion Systems will be provided directly to the Buyer by the Propulsion Systems Manufacturer.

2.4 Milestones

2.4.1 Contractual Definition Freeze

The Customisation Milestone Chart defined in Clause 2.4.2 hereunder shall define the date(s) by which the contractual definition of the Aircraft must be finalised and all SCNs need to have been executed by the Buyer (the “Contractual Definition Freeze” or “CDF”) in order to enable their incorporation into the manufacturing of the Aircraft and Delivery of the Aircraft in the Scheduled Delivery Month.

2.4.2 Customisation Milestone Chart

Within a reasonable period following signature of the Agreement, the Seller shall provide the Buyer with a customisation milestones chart (the “Customisation Milestone Chart”), setting out how far in advance of the Scheduled Delivery Month of the Aircraft:

• the Buyer needs to take certain decisions and actions; and

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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• the Buyer needs to provide certain information and documentation; and

• the Buyer needs to notify the selection of BFE Seats, together with the selected BFE in-flight-entertainment (IFE) equipment, and associated BFE Suppliers to the Seller; such notification shall be made in advance of the ITCM; and

• the Buyer needs to notify the selection of ACS seats, together with the selected ACS in-flight-entertainment (IFE) equipment, and associated ACS Suppliers to the Seller; such notification shall be made in advance of the CDCM; and

• the CDCM for ACS Equipment and the ITCM for BFE Seats, as applicable, shall be held; and

• SCNs must be executed in order to integrate into the Specification any items requested by the Buyer from the options set forth in the Seller’s A350XWB Family ADD applicable at the time of customisation or any other items that the Buyer wishes to have installed in the Aircraft as per Clauses 2.1.4 and 18.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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3 PRICES

3.1 [***] Base Price

3.1.1 The Aircraft Base Price is the sum of:

[***]

3.1.2 The [***] Base Price has been established in accordance with the average economic conditions prevailing in [***] and corresponding to a theoretical delivery in [***] - (the “Base Period”).

3.2 Airbus Contracted Supplier (ACS) Equipment Price

The conditions of purchasing of ACS Equipment for the Aircraft shall be the subject of a separate agreement between the Buyer and the respective ACS Suppliers. The Buyer and each ACS Supplier shall jointly communicate to the Seller the Customer Specific Price as per Clause 2.1.4.1, at which the Seller is to place the purchase order for each ACS Equipment selected by the Buyer.

Notwithstanding the foregoing, it is understood that ACS Equipment for the Aircraft shall be purchased by the Seller, in accordance with the agreed terms as set forth in Clause 2.1.4.1, and invoiced to the Buyer in accordance with Clause 3.3.

The following reference amounts (the “ACS Reference Price”) may be used as a budgetary guide for the ACS Equipment for the Buyer’s Aircraft:

[***]

at economic conditions prevailing for a theoretical delivery in [***]

3.3 Final Price

The Final Price of each Aircraft shall be the sum of:

(i) the Aircraft Base Price as revised as of the Delivery Date in accordance with Clause 4; plus

(ii) the aggregate of all increases or decreases to the Aircraft Base Price as agreed in any Specification Change Notice or part thereof applicable to the Aircraft subsequent to the date of this Agreement as revised as of the Delivery Date in accordance with Clause 4; plus

(iii) the price of any and all ACS Equipment selected by the Buyer in the applicable Seller’s A350XWB Family Aircraft Description Document and purchased by the Seller, either at the corresponding ACS Supplier Base Price applicable at the time of the order (including any catalogue price revision applicable at the time of the purchase order), or at the Customer Specific Price(s) (including the associated price revision conditions) jointly communicated to the Seller by the Buyer and the respective ACS Suppliers as per Clause 2.1.4.1; plus

(iv) any other amount due by the Buyer to the Seller pursuant to this Agreement and/or any other written agreement between the Buyer and the Seller with respect to the Aircraft.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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4 PRICE REVISION

The [***] Base Price is subject to revision in accordance with the [***] Price Revision Formula up to and including the Delivery Date as set forth in Exhibit C.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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5 PAYMENTS

5.1 Seller’s Account

The Buyer shall pay the Predelivery Payments, the Balance of Final Price and/or any other amount due by the Buyer to the Seller, to the Seller’s account:

[***]

5.2 [***]

[***]

5.3 Predelivery Payments

[***].

5.3.3 Any Predelivery Payment received by the Seller shall constitute an instalment in respect of the Final Price of the Aircraft. The Seller shall be entitled to hold and use any Predelivery Payment as absolute owner thereof, subject only to (i) the obligation to deduct any such Predelivery Payment from the Final Price when calculating the Balance of Final Price or (ii) the obligation to pay to the Buyer an amount equal to the Predelivery Payments pursuant to any other provision of this Agreement.

5.3.4 If any Predelivery Payment is not received [***]

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5.3.5 [***]

5.4 Balance of Final Price

5.4.1 The Balance of Final Price payable by the Buyer to the Seller on the Delivery Date shall be the Final Price less the amount of Predelivery Payments received by the Seller on or before the Delivery Date.

5.4.2 Upon receipt of the Seller’s invoice, and immediately prior to Delivery, the Buyer shall pay to the Seller the Balance of Final Price.

5.5 [***]

5.6 Method of Payment

5.6.1 All payments provided for in this Agreement shall be made in United States Dollars (USD) in immediately available funds.

5.6.2 [***]

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5.7 [***]

5.8 Taxes

5.8.1 The amounts stated in this Agreement to be payable by the Buyer are exclusive of value added tax (“VAT”) chargeable under the laws of the Delivery Location and accordingly the Buyer shall pay any VAT chargeable in respect of supplies to the Buyer as contemplated by this Agreement.

5.8.2 The Seller shall pay all other taxes, duties or similar charges of any nature whatsoever levied, assessed, charged or collected for or in connection with the manufacture, assembly, sale and delivery under this Agreement of any of the Aircraft, services, instructions and data delivered or furnished hereunder provided such charges have been promulgated and are enforceable under the laws of the Delivery Location.

5.8.3 The Buyer shall bear the costs of and pay any and all taxes, duties or similar charges of any nature whatsoever not assumed by the Seller under Clause 5.8.2 including but not limited to any duties or taxes due upon or in relation to the importation or registration of the Aircraft in the Buyer’s country and/or any withholdings or deductions levied or required in the Buyer’s country in respect of the payment to the Seller of any amount due by the Buyer hereunder.

5.9 Proprietary Interest

The Buyer shall not, by virtue of anything contained in this Agreement (including, without limitation, any Predelivery Payments hereunder, or any designation or identification by the Seller of a particular aircraft as an Aircraft to which any of the provisions of this Agreement refers) acquire any proprietary, insurable or other interest whatsoever in any Aircraft before Delivery of and payment for such Aircraft, as provided in this Agreement.

5.10 Set-Off

The Seller may set-off any matured obligation owed by the Buyer to the Seller and/or its Affiliates against any obligation (whether or not matured) owed by the Seller to the Buyer, regardless of the place of payment or currency (it being understood that if this obligation is unascertainable it may be estimated and the set-off made in respect of such estimate).

5.11 Cross-Collateralisation

5.11.1 The Buyer hereby agrees that, notwithstanding any provision to the contrary in this Agreement, in the event that the Buyer should fail to make any material payment owing under this Agreement or under any other agreement between the Buyer and the Seller and/or any of their respective Affiliates (the “Other Agreement”), the Seller may:

(i) withhold payment to the Buyer or its Affiliates of any sums that may be due to or claimed by the Buyer or its Affiliates from the Seller or its Affiliates pursuant to this Agreement or any Other Agreement, including Predelivery Payments, unless or until the default under this Agreement or the Other Agreement is cured or remedied; and

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(ii) apply any amount of any Predelivery Payment it then holds under this Agreement in respect of any of the Aircraft as well as any other monies held pursuant to any Other Agreement (collectively the “Relevant Amounts”) in such order as the Seller deems appropriate in satisfaction of any amounts due and unpaid by the Buyer or its Affiliates and to compensate for any losses and/or damages the Seller or its Affiliates may suffer as a result of the Buyer’s or its Affiliates’ failure to make payments in a timely manner under this Agreement or any Other Agreement. The Buyer acknowledges that the application of any of the Relevant Amounts as aforesaid may result in the Buyer or its Affiliates being in default (unless such default is otherwise cured or remedied) in relation to the agreement in respect of which such Relevant Amounts were originally granted or required to be paid, as the case may be.

The rights granted to the Seller in the preceding paragraphs (i) and (ii) are without prejudice and are in addition to and shall not be deemed a waiver of any other rights and remedies the Seller or its Affiliates may have at law or under this Agreement or any Other Agreement, including the right of set-off.

5.11.2 [***]

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6 MANUFACTURE PROCEDURE – INSPECTION

6.1 Manufacture Procedure

The Airframe shall be manufactured in accordance with the relevant requirements of the laws of the jurisdiction of incorporation of the Seller or of its relevant Affiliate as enforced by the Aviation Authority of such jurisdiction.

6.2 Inspection

6.2.1 Subject to providing the Seller with certificates evidencing compliance with the insurance requirements set forth in Clause 19, the Buyer or its duly authorised representatives (the “Buyer’s Inspector(s)”) shall be entitled to inspect the manufacture of the Airframe and all materials and parts obtained by the Seller for the manufacture of the Airframe on the following terms and conditions;

(i) any inspection shall be made according to a procedure to be agreed upon with the Buyer but shall be conducted pursuant to the Seller’s own system of inspection as developed under the supervision of the relevant Aviation Authority;

(ii) the Buyer’s Inspector(s) shall have access to such relevant technical data as is reasonably necessary for the purpose of the inspection;

(iii) any inspection and any related discussions with the Seller and other relevant personnel by the Buyer’s Inspector(s) shall be at reasonable times during business hours and shall take place in the presence of relevant inspection department personnel of the Seller;

(iv) the inspections shall be performed in a manner not to unduly delay or hinder the manufacture or assembly of the Aircraft or the performance of this Agreement by the Seller or any other work in progress at the Manufacture Facilities.

6.2.2 Location of Inspections

The Buyer’s Inspector(s) shall be entitled to conduct any such inspection at the relevant Manufacture Facility of the Seller or the Affiliates and where possible at the Manufacture Facilities of the sub-contractors provided that if access to any part of the Manufacture Facilities where the Airframe manufacture is in progress or materials or parts are stored are restricted for security or confidentiality reasons, the Seller shall be allowed reasonable time to make the relevant items available elsewhere.

6.3 Seller’s Service for Buyer’s Inspector(s)

For the purpose of the inspections, and commencing with the date of this Agreement until the Delivery Date, the Seller shall furnish without additional charge suitable space and office equipment in or conveniently located with respect to the Delivery Location for the use of a reasonable number of Buyer’s Inspector(s).

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7 CERTIFICATION

7.1 Type Certification

The Aircraft has been type certificated under European Aviation Safety Agency (EASA) procedures for certification in the transport category. The Seller has obtained the relevant type certificate (the “Type Certificate”) to allow the issuance of the Export Airworthiness Certificate and/or the Statement of Conformity, as applicable.

7.2 Export Airworthiness Certificate and/or Statement of Conformity

7.2.1 The Aircraft shall be delivered to the Buyer with an Export Airworthiness Certificate and/or with a Statement of Conformity, as applicable.

7.2.2 If, any time before the date on which the Aircraft is Ready for Delivery, any law or regulation is enacted, promulgated, becomes effective and/or an interpretation of any law or regulation is issued which requires any change to the Specification for the purposes of obtaining the Export Airworthiness Certificate or issuing the Statement of Conformity, as applicable, (a “Change in Law”), the Seller shall make the required variation or modification and the parties hereto shall sign a Specification Change Notice which specifies the effects, if any, upon the guaranteed performances, weights, interchangeability, time of Delivery, price of the Aircraft and text of the Specification.

7.2.3 The Seller shall as far as practicable (but at its sole discretion and without prejudice to Clause 7.3.1 (ii) take into account the information available to it concerning any proposed law, regulation or interpretation which could become a Change in Law in order to minimise the costs of changes to the Specification as a result of such proposed law, regulation or interpretation becoming effective prior to the Aircraft being Ready for Delivery.

7.3 Costs of SCNs for Certification

7.3.1 The costs of implementing the variation or modification referred to in Clause 7.2.2 above shall be

(i) for the account of the Seller if the Change in Law became effective prior to the date of this Agreement;

(ii) shared equally between the Seller and the Buyer if the Change in Law became effective after the date of this Agreement.

7.3.2 Notwithstanding the provisions of sub-Clauses 7.3.1 (i) and (ii), if the Change in Law relates to the Propulsion Systems, the costs shall be borne in accordance with such arrangements as may be made separately between the Buyer and the Propulsion Systems Manufacturer.

7.4 Validation of Export Airworthiness Certificate or Statement of Conformity

7.4.1 The Seller shall endeavour to obtain the validation of the Export Airworthiness Certificate or the Statement of Conformity, as applicable, by the Buyer’s Aviation Authority.

7.4.2 Where the Buyer’s Aviation Authority requires a modification to comply with additional import aviation requirements and/or supply of additional data prior to the issuance of the Export Airworthiness Certificate or the Statement of Conformity, as applicable, the Seller shall incorporate such modification and/or provide such data at costs to be borne by the Buyer. The parties shall sign a Specification Change Notice which specifies the effects, if any, upon the guaranteed performances, weights, interchangeability, time of Delivery and price of the Aircraft.

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8 TECHNICAL ACCEPTANCE

8.1 Technical Acceptance Process

8.1.1 Prior to Delivery the Aircraft shall undergo a technical acceptance process, proposed by the Seller (the “Technical Acceptance Process”). Completion of the Technical Acceptance Process shall demonstrate the satisfactory functioning of the Aircraft and shall be deemed to demonstrate compliance with the Specification. Should it be established that the Aircraft does not comply with the Technical Acceptance Process requirements, the Seller shall without hindrance from the Buyer be entitled to carry out any necessary changes and, as soon as practicable thereafter, resubmit the Aircraft to such further Technical Acceptance Process as is necessary to demonstrate the elimination of the non-compliance.

8.1.2 The Technical Acceptance Process shall:

(i) commence on a date notified by the Seller to the Buyer by no less than [***] days notice;

(ii) take place at the Delivery Location;

(iii) be carried out by the personnel of the Seller;

(iv) include a technical acceptance flight which shall not exceed a period of three (3) hours.

8.2 Buyer’s Attendance

8.2.1 The Buyer shall be entitled to attend the Technical Acceptance Process and notification of the start of such Technical Acceptance Process shall be done in accordance with Clause 9.1.2.

8.2.2 If the Buyer elects to attend the Technical Acceptance Process, the Buyer:

(i) shall co-operate in complying with the reasonable requirements of the Seller with the intention of completing the Technical Acceptance Process within [***] after its commencement;

(ii) may have a maximum of [***] of the Buyer’s representatives (with no more than [***] such representatives having access to the cockpit at any one time) accompany the Seller’s representatives on a technical acceptance flight and during such flight the Buyer’s representatives shall comply with the instructions of the Seller’s representatives.

8.2.3 If the Buyer does not attend or fails to co-operate in the Technical Acceptance Process, the Seller shall be entitled to complete the Technical Acceptance Process and the Buyer shall be deemed to have accepted the Technical Acceptance Process as satisfactory in all respects.

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8.3 Certificate of Acceptance

Following completion of the Technical Acceptance Process, the Buyer shall sign and deliver to the Seller, in accordance with Clause 9.2.1, a certificate of acceptance in respect of the Aircraft in the form of Exhibit D (the “Certificate of Acceptance”).

8.4 Aircraft Utilisation

The Seller shall, without payment or other liability, be entitled to use the Aircraft prior to Delivery as may be necessary to obtain the certificates required under Clause 7, and such use shall not prejudice the Buyer’s obligation to accept Delivery of the Aircraft hereunder.

However the Seller shall not be authorised to use the Aircraft during more than [***] for any other purpose without the specific agreement of the Buyer.

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9 DELIVERY

9.1 Delivery Schedule

9.1.1 Subject to Clauses 2, 7, 8, 10 and 18, the Seller shall have the Aircraft Ready for Delivery at the Delivery Location within the following months or quarters:

Aircraft Type	Rank			Scheduled Delivery Month or Quarter
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]
[***]		[	***]		[	***]

Each such month being, with respect to each Aircraft, the “Scheduled Delivery Month”.

Each such quarter being, with respect to each Aircraft, the “Scheduled Delivery Quarter”.

(Scheduled Delivery Month and Scheduled Delivery Quarter are collectively defined as “Scheduled Delivery Period”).

The Scheduled Delivery Month that have not been indicated at the time of signature of the Agreement of each Aircraft shall be notified in writing to the Buyer by the Seller no later than [***] prior to the first day of the Scheduled Delivery Quarter of such Aircraft.

9.1.2 The Seller shall give the Buyer at least [***] prior written notice of the anticipated date on which the Aircraft shall be Ready for Delivery. [***].

9.1.3 Until the Scheduled Delivery Month has been notified to the Buyer in accordance with Clause 9.1.1 above, the Scheduled Delivery Month of a certain Aircraft shall be deemed the [***] of the Scheduled Delivery Quarter for the purposes of Predelivery Payments.

9.2 Delivery

9.2.1 The Buyer shall, [***] after the date on which the Aircraft is Ready for Delivery, sign the Certificate of Acceptance, pay the Balance of the Final Price and send its representatives to the Delivery Location to take Delivery of, and collect, the Aircraft.

9.2.2 The Seller shall deliver and transfer title to the Aircraft free and clear of all encumbrances to the Buyer provided that the Balance of the Final Price has been paid by the Buyer pursuant to Clause 5.4 and that the Certificate of Acceptance has been signed and delivered to the Seller pursuant to Clause 8.3. The Seller shall provide the Buyer with a bill of sale in the form of Exhibit E (the “Bill of Sale”) and/or such other documentation confirming transfer of title and receipt of the Final Price as may reasonably be requested by the Buyer. Title to, property in and risk of loss of or damage to the Aircraft shall be transferred to the Buyer on Delivery.

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9.2.3.1 Should the Buyer fail, within the period specified in Clause 9.2.1, to:

(i) deliver the signed Certificate of Acceptance to the Seller ; or

(ii) pay the Balance of the Final Price for the Aircraft to the Seller and take Delivery of the Aircraft;

then the Buyer shall be deemed to have rejected delivery of the Aircraft without warrant when duly tendered to it hereunder. Without prejudice to Clause 5.7 and the Seller’s other rights under this Agreement or at law (a) the Seller shall retain title to the Aircraft and (b) the Buyer shall bear all risk of loss of or damage to the Aircraft and shall indemnify and hold the Seller harmless against any and all costs (including but not limited to any parking, storage, and insurance costs) and consequences resulting from such failure, it being understood that the Seller shall be under no duty towards the Buyer to store, park, insure, or otherwise protect the Aircraft.

9.2.3.2 Should the Buyer fail to collect the Aircraft as mentioned in Clause 9.2.1 above and without prejudice to the Seller’s other rights under this Agreement or at law, the provisions of Clause 9.2.3.1 (b) shall apply.

9.3 Fly Away

9.3.1 The Buyer and the Seller shall co-operate to obtain any licenses, which may be required by the Aviation Authority of the Delivery Location for the purpose of exporting the Aircraft.

9.3.2 All expenses of, or connected with, flying the Aircraft from the Delivery Location after Delivery shall be borne by the Buyer. The Buyer shall make direct arrangements with the supplying companies for the fuel and oil required for all post-Delivery flights.

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10 EXCUSABLE DELAY

10.1 The Buyer acknowledges that the Aircraft are to be manufactured by Seller in performance of this Agreement and that the Scheduled Delivery Months are based on the assumption that there shall be no delay due to causes beyond the control of the Seller. Accordingly, Seller shall not be responsible for any delay in the Delivery of the Aircraft or delay or interruption in the performance of the other obligations of the Seller hereunder due to causes beyond its control, and not occasioned by its fault or negligence including (but without limitation) acts of God or the public enemy, war, civil war, warlike operations, terrorism, insurrections or riots, fires, explosions, natural disasters, compliance with any applicable foreign or domestic governmental regulation or order, labour disputes causing cessation, slowdown or interruption of work, inability after due and timely diligence to procure materials, equipment or parts, general hindrance in transportation or failure of a sub-contractor or supplier to furnish materials, equipment or parts. Any delay or interruption resulting from any of the foregoing causes is referred to as an “Excusable Delay”.

10.2 If an Excusable Delay occurs:

(i) the Seller shall notify the Buyer of such Excusable Delay as soon as practicable after becoming aware of the same;

(ii) the Seller shall not be responsible for any damages arising from or in connection with such Excusable Delay suffered or incurred by the Buyer;

(iii) the Seller shall not be deemed to be in default in the performance of its obligations hereunder as a result of such Excusable Delay; and

(iv) the Seller shall as soon as practicable after the removal of the cause of the delay resume performance of its obligations under this Agreement and in particular shall notify to the Buyer the revised Scheduled Delivery Month.

10.3 Termination on Excusable Delay

10.3.1 If the Delivery of any Aircraft is delayed as a result of an Excusable Delay for a period of more than [***] after the last day of the Scheduled Delivery Month then either party may terminate this Agreement with respect to the Aircraft so affected by giving written notice to the other party within [***] after the expiry of such [***] period provided that the Buyer shall not be entitled to terminate this Agreement pursuant to this Clause if the Excusable Delay results from a cause within its control.

10.3.2 If the Seller concludes that the Delivery of any Aircraft shall be delayed for more than [***] after the last day of the Scheduled Delivery Month due to an Excusable Delay and as a result thereof reschedules Delivery of such Aircraft to a date or month reflecting such delay then the Seller shall promptly notify the Buyer in writing to this effect and shall include in such notification the new Scheduled Delivery Month. Either party may thereupon terminate this Agreement with respect to such Aircraft by giving written notice to the other party [***] after receipt by the Buyer of the notice of anticipated delay.

10.3.3 If this Agreement shall not have been terminated with respect to the delayed Aircraft during the [***] referred to in either Clause 10.3.1 or 10.3.2 above, then the Seller shall be entitled to reschedule Delivery and the new Scheduled Delivery Month shall be notified to the Buyer and shall be binding on the parties.

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10.4 Total Loss, Destruction or Damage

If prior to Delivery, any Aircraft is lost, destroyed or in the reasonable opinion of the Seller is damaged beyond repair (“Total Loss”), the Seller shall notify the Buyer to this effect within [***] of such occurrence. The Seller shall include in said notification (or as soon after the issue of the notice as such information becomes available to the Seller) the earliest date consistent with the Seller’s other commitments and production capabilities that an aircraft to replace the Aircraft may be delivered to the Buyer and the Scheduled Delivery Month shall be extended as specified in the Seller’s notice to accommodate the delivery of the replacement aircraft; provided, however, that in the event the specified extension of the Scheduled Delivery Month to a month is exceeding [***] after the last day of the original Scheduled Delivery Month then this Agreement shall terminate with respect to said Aircraft unless:

(i) the Buyer notifies the Seller [***] of the date of receipt of the Seller’s notice that it desires the Seller to provide a replacement aircraft during the month quoted in the Seller’s notice; and

(ii) the parties execute an amendment to this Agreement recording the variation in the Scheduled Delivery Month;

provided, however, that nothing herein shall require the Seller to manufacture and deliver a replacement aircraft if such manufacture would require the reactivation of its production line for the model or series of aircraft which includes the Aircraft purchased hereunder.

10.5 Termination Rights Exclusive

In the event that this Agreement shall be terminated as provided for under the terms of Clauses 10.3 or 10.4, such termination shall discharge all obligations and liabilities of the parties hereunder with respect to such affected Aircraft and undelivered material, services, data or other items applicable thereto and to be furnished hereunder and neither party shall have any claim against the other for any loss resulting from such non-delivery. The Seller shall in no circumstances have any liability whatsoever for Excusable Delay other than as set forth in this Clause 10.

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11 NON-EXCUSABLE DELAY

11.1 Liquidated Damages

Should any of the Aircraft not be Ready for Delivery to the Buyer [***] after the last day of the Scheduled Delivery Month (as varied by virtue of Clauses 2, 7 and 10) (the “Delivery Period”) and such delay is not as a result of an Excusable Delay or Total Loss (a “Non-Excusable Delay”), then the Buyer shall have the right to claim, and the Seller shall pay by way of liquidated damages to the Buyer [***].

The amount of such liquidated damages shall in no event [***] in respect of any one Aircraft.

The Buyer’s right to be paid damages in respect of the Aircraft is conditional upon the Buyer submitting a claim in respect of such liquidated damages in writing to the Seller [***]

11.2 Re-negotiation

If, as a result of Non-Excusable Delay, Delivery does not occur in the period falling [***]after the Delivery Period, the Buyer shall have the right exercisable by written notice to the Seller given [***] to require from the Seller a re-negotiation of the Scheduled Delivery Month for the affected Aircraft. Unless otherwise agreed between the Seller and the Buyer during such re-negotiation, the said re-negotiation shall not prejudice the Buyer’s right to receive liquidated damages in accordance with Clause 11.1 during the period of Non-Excusable Delay.

11.3 Termination

If, as a result of Non-Excusable Delay, Delivery does not occur in the period falling [***] after the Delivery Period and the parties have not renegotiated the Scheduled Delivery Month pursuant to Clause 11.2, either party shall have the right exercisable by written notice to the other party, given not [***] to terminate this Agreement in respect of the affected Aircraft and neither party shall have any claim against the other in respect of such non-delivery except that the Seller shall pay to the Buyer an amount equal to the Predelivery Payments received from the Buyer hereunder in respect of such affected Aircraft and shall pay to the Buyer any amounts due pursuant to Clause 11.1.

11.4 Limitation of Damages

The Buyer and the Seller agree that payment by the Seller of the amounts due pursuant to Clause 11.1 shall be considered to be liquidated damages and have been calculated to compensate the Buyer for its entire damages for all losses of any kind due to Non-Excusable Delay. The Seller shall not in any circumstances have any liability whatsoever for Non-Excusable Delay other than as set forth in this Clause 11.

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12 WARRANTIES AND SERVICE LIFE POLICY

This Clause covers the terms and conditions of the warranty and service life policy.

12.1 Standard Warranty

12.1.1 Nature of Warranty

For the purpose of this Agreement the term “Warranted Part” shall mean any Seller proprietary component, equipment, accessory or part, which is installed on an Aircraft at Delivery thereof and

(a) which is manufactured to the detailed design of the Seller or a subcontractor of the Seller and

(b) which bears a part number of the Seller at the time of such Delivery.

Subject to the conditions and limitations as hereinafter provided for and except as provided for in Clause 12.1.2, the Seller warrants to the Buyer that each Aircraft and each Warranted Part shall at Delivery to the Buyer be free from defects:

(i) in material;

(ii) in workmanship, including without limitation processes of manufacture;

(iii) in design (including without limitation the selection of materials) having regard to the state of the art at the date of such design; and

(iv) arising from failure to conform to the Specification, except to those portions of the Specification relating to performance or where it is expressly stated that they are estimates, approximations or design aims.

12.1.2 Exclusions

The warranties set forth in Clause 12.1.1 shall not apply to Buyer Furnished Equipment, nor to the Propulsion Systems, nor to any component, equipment, accessory or part installed on the Aircraft at Delivery that is not a Warranted Part except that:

(i) any defect in the Seller’s workmanship in respect of the installation of such items in the Aircraft, including any failure by the Seller to conform to the installation instructions of the manufacturers of such items, that invalidates any applicable warranty from such manufacturers, shall constitute a defect in workmanship for the purpose of this Clause 12.1 and be covered by the warranty set forth in Clause 12.1.1 (ii); and

(ii) any defect inherent in the Seller’s design of the installation, in consideration of the state of the art at the date of such design, which impairs the use of such items, shall constitute a defect in design for the purpose of this Clause 12.1 and be covered by the warranty set forth in Clause 12.1.1 (iii).

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12.1.3 Warranty Period

The warranties set forth in Clauses 12.1.1 and 12.1.2 shall be limited to those defects that [***] after Delivery of the affected Aircraft (the “Warranty Period”).

12.1.4 Buyer’s Remedy and Seller’s Obligation

12.1.4.1 The Buyer’s remedy and the Seller’s obligation and liability under Clauses 12.1.1 and 12.1.2 are limited to, at the Seller’s expense and option, the repair, replacement or correction of any Warranted Part which is defective (or to the supply of modification kits rectifying the defect), together with a credit to the Buyer’s account with the Seller of an amount equal to the mutually agreed direct labor costs expended in performing the removal and the reinstallation thereof on the Aircraft at the labor rate defined in Clause 12.1.7.5.

The Seller may alternatively furnish to the Buyer’s account with the Seller a credit equal to the price at which the Buyer is entitled to purchase a replacement for the defective Warranted Part.

12.1.4.2 In the event of a defect covered by Clauses 12.1.1 (iii), 12.1.1 (iv) and 12.1.2 (ii) becoming apparent within the Warranty Period, the Seller shall also, if so requested by the Buyer in writing, correct such defect in any Aircraft which has not yet been delivered to the Buyer, provided, however,

(i) that the Seller shall not be responsible, nor deemed to be in default on account of any delay in Delivery of any Aircraft or otherwise in respect of the performance of this Agreement, due to the Seller’s undertaking to make such correction and provided further

(ii) that, rather than accept a delay in the Delivery of any such Aircraft, the Buyer and the Seller may agree to deliver such Aircraft with subsequent correction of the defect by the Buyer at the Seller’s expense, or the Buyer may elect to accept Delivery and thereafter file a Warranty Claim as though the defect had become apparent immediately after Delivery of such Aircraft.

12.1.4.3 Cost of inspection

In addition to the remedies set forth in Clauses 12.1.4.1 and 12.1.4.2, the Seller shall reimburse the direct labor costs incurred by the Buyer in performing inspections of the Aircraft to determine whether or not a defect exists in any Warranted Part within the Warranty Period subject to the following conditions:

(i) such inspections are recommended by a Seller Service Bulletin to be performed within the Warranty Period;

(ii) the reimbursement shall not apply for any inspections performed as an alternative to accomplishing corrective action as recommended by the Seller when such corrective action has been made available to the Buyer and such corrective action could have reasonably been accomplished by the Buyer at the time such inspections are performed or earlier,

(iii) the labor rate for the reimbursement shall be the labor rate defined in Clause 12.1.7.5, and

(iv) the manhours used to determine such reimbursement shall not exceed the Seller’s estimate of the manhours required for such inspections.

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12.1.5 Warranty Claim Requirements

The Buyer’s remedy and the Seller’s obligation and liability under this Clause 12.1, with respect to any warranty claim submitted by the Buyer (each a “Warranty Claim”) are subject to the following conditions:

(i) the defect having become apparent within the Warranty Period;

(ii) the Buyer having filed a warranty claim [***] of discovering the defect;

(iii) the Buyer having submitted to the Seller evidence reasonably satisfactory to the Seller that the claimed defect is due to a matter embraced within this Clause 12.1 and that such defect has not resulted from any act or omission of the Buyer, including but not limited to, any failure to operate and maintain the affected Aircraft or part thereof in accordance with the standards set forth in Clause 12.1.10 or from any act or omission of any third party;

(iv) the Seller having received a Warranty Claim complying with the provisions of Clause 12.1.6 below.

12.1.6 Warranty Administration

The warranties set forth in Clause 12.1 shall be administered as hereinafter provided for:

12.1.6.1 Claim Determination

Determination as to whether any claimed defect in any Warranted Part is a valid Warranty Claim shall be made by the Seller and shall be based upon the claim details, reports from the Seller’s Representatives, historical data logs, inspections, tests, findings during repair, defect analysis and other relevant documents.

12.1.6.2 Transportation Costs

The cost of transporting a Warranted Part claimed to be defective to the facilities designated by the Seller and for the return therefrom of a repaired or replaced Warranted Part shall be borne by the Buyer.

12.1.6.3 Return of an Aircraft

If the Buyer and the Seller mutually agree, prior to such return, that it is necessary to return an Aircraft to the Seller for consideration of a Warranty Claim, the Seller shall bear the direct costs of fuel and landing fees to and from the Seller’s facilities for such return of the Aircraft. The Buyer shall make its reasonable efforts to minimize the duration of the corresponding flights.

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12.1.6.4 On Aircraft Work by the Seller

If the Seller determines that a defect subject to this Clause 12.1 justifies the dispatch by the Seller of a working team to repair or correct such defect through the embodiment of one or several Seller’s Service Bulletins at the Buyer’s facilities, or if the Seller accepts the return of an Aircraft to perform or have performed such repair or correction, then the labor costs for such on-Aircraft work shall be borne by the Seller.

The condition which has to be fulfilled for on-Aircraft work by the Seller is that, in the opinion of the Seller, the work necessitates the technical expertise of the Seller as manufacturer of the Aircraft.

If said condition is fulfilled and if the Seller is requested to perform the work, the Seller and the Buyer shall agree on a schedule and place for the work to be performed.

12.1.6.5 Warranty Claim Substantiation

Each Warranty Claim filed by the Buyer under this Clause 12.1 shall contain at least the following data:

(a) description of defect and action taken, if any,

(b) date of incident and/or removal date,

(c) description of Warranted Part claimed to be defective,

(d) part number,

(e) serial number (if applicable),

(f) position on Aircraft,

(g) total flying hours or calendar time, as applicable, at the date of defect appearance,

(h) time since last shop visit at the date of defect appearance,

(i) Manufacturer Serial Number of the Aircraft and/or its registration,

(j) Aircraft total flying hours and/or number of landings at the date of defect appearance,

(k) Warranty Claim number,

(l) date of Warranty Claim,

(m) Delivery Date of Aircraft or Warranted Part to the Buyer,

Warranty Claims are to be addressed as follows:

AIRBUS

CUSTOMER SERVICES DIRECTORATE

WARRANTY ADMINISTRATION

ROND POINT MAURICE BELLONTE

B.P. 33

F 31707 BLAGNAC CEDEX

FRANCE

12.1.6.6 Replacements

Title to and risk of loss of any Aircraft, component, accessory, equipment or part returned by the Buyer to the Seller shall at all times remain with the Buyer, except that:

(i) risk of loss (limited to cost of replacement and excluding in particular loss of use) shall be with the Seller for as long as such Aircraft, component, accessory, equipment or part shall be under the care, custody and control of the Seller and;

(ii) title to and risk of loss of a returned component, accessory, equipment or part shall pass to the Seller upon shipment by the Seller to the Buyer of any item furnished by the Seller to the Buyer as a replacement therefor.

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Upon the Seller’s shipment to the Buyer of any replacement component, accessory, equipment or part provided by the Seller pursuant to this Clause 12.1, title to and risk of loss of such replacement component, accessory, equipment or part shall pass to the Buyer.

12.1.6.7 Rejection

The Seller shall provide reasonable written substantiation in case of rejection of a Warranty Claim. In such event the Buyer shall refund to the Seller reasonable inspection and test charges incurred in connection therewith.

12.1.6.8 Inspection

The Seller shall have the right to inspect the affected Aircraft, documents and other records relating thereto in the event of any Warranty Claim under this Clause 12.1.

12.1.7 Inhouse Warranty

12.1.7.1 Seller’s Authorization

The Seller hereby authorizes the Buyer to repair Warranted Parts (“Inhouse Warranty”) subject to the terms of this Clause 12.1.7.

12.1.7.2 Conditions for Seller’s Authorization

The Buyer shall be entitled to repair such Warranted Parts:

• provided the Buyer notifies the Seller Representative of its intention to perform Inhouse Warranty repairs before any such repairs are started where the estimated cost of such repair is [***]. The Buyer’s notification shall include sufficient detail regarding the defect, estimated labor hours and material to allow the Seller to ascertain the reasonableness of the estimate. The Seller agrees to use all reasonable efforts to ensure a prompt response and shall not unreasonably withhold authorization;

• provided adequate facilities and qualified personnel are available to the Buyer;

• provided repairs are performed in accordance with the Seller’s Technical Data or written instructions; and

• only to the extent specified by the Seller, or, in the absence of such specification, to the extent reasonably necessary to correct the defect, in accordance with the standards set forth in Clause 12.1.10.

12.1.7.3 Seller’s Rights

The Seller shall have the right to require the return of any Warranted Part, or any part removed therefrom, which is claimed to be defective if, in the judgment of the Seller, the nature of the claimed defect requires technical investigation. Such return shall be subject to the provisions of Clause 12.1.6.2. Furthermore, the Seller shall have the right to have a Seller Representative present during the disassembly, inspection and testing of any Warranted Part claimed to be defective, subject to such presence being practical and not unduly delaying the repair.

12.1.7.4 Inhouse Warranty Claim Substantiation

Claims for Inhouse Warranty credit shall be filed within the time period set forth in 12.1.5 (ii) and shall contain the same information as that required for Warranty Claims under Clause 12.1.6.5 and in addition shall include:

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(a) a report of technical findings with respect to the defect,

(b) for parts required to remedy the defect:

• part numbers,

• serial numbers (if applicable),

• parts description,

• quantity of parts,

• unit price of parts,

• related Seller’s or third party’s invoices (if applicable),

• total price of parts,

(c) detailed number of labor hours,

(d) Inhouse Warranty Labor Rate,

(e) total claim value.

12.1.7.5 Credit

The Buyer’s sole remedy and the Seller’s sole obligation and liability with respect to Inhouse Warranty Claims shall be the credit to the Buyer’s account of an amount equal to the mutually agreed direct labor costs expended in performing the repair of a Warranted Part and to the direct costs of materials incorporated in said repair, determined as set forth below:

(a) to determine direct labor costs, only manhours spent on removal from the Aircraft, disassembly, inspection, repair, reassembly, final inspection and test of the Warranted Part and reinstallation thereof on the Aircraft shall be counted. Any manhours required for maintenance work concurrently being carried out on the Aircraft or the Warranted Part shall not be included.

(b) The manhours counted as set forth above shall be multiplied by an agreed labor rate of [***] (“Inhouse Warranty Labour Rate”), which is deemed to represent the Buyer’s composite labor rate meaning the average hourly rate (excluding all fringe benefits, premium time allowances, social security charges, business taxes and the like) paid to the Buyer’s employees whose jobs are directly related to the performance of the repair.

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(c) Direct material costs are determined by the prices at which the Buyer acquired such material, excluding any parts and materials used for overhaul and as may be furnished by the Seller at no charge.

12.1.7.6 Limitation

The Buyer shall in no event be credited for repair costs (including labor and material) for any Warranted Part in excess [***] of the Seller’s current catalogue price for a replacement of such defective Warranted Part.

12.1.7.7 Scrapped Material

The Buyer shall retain any defective Warranted Part beyond economic repair and any defective part removed from a Warranted Part during repair for a period of [***] after submission of a claim for Inhouse Warranty credit relating thereto, whichever is longer. Such parts shall be returned to the Seller [***] of the Seller’s request to that effect.

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Notwithstanding the foregoing, the Buyer may scrap any such defective parts, which are beyond economic repair and not required for technical evaluation locally, with the agreement of the Seller Representative(s).

Scrapped Warranted Parts shall be evidenced by a record of scrapped material certified by an authorized representative of the Buyer and shall be kept in the Buyer’s file for a least the duration of the applicable Warranty Period.

12.1.8 Standard Warranty in case of Pooling or Leasing Arrangements

Without prejudice to Clause 21.1, the warranties provided for in this Clause 12.1 for any Warranted Part shall accrue to the benefit of any airline in revenue service, other than the Buyer, if the Warranted Part enters into the possession of any such airline as a result of a pooling or leasing agreement between such airline and the Buyer, in accordance with the terms and subject to the limitations and exclusions of the foregoing warranties and to the extent permitted by any applicable law or regulations.

12.1.9 Warranty for Corrected, Replaced or Repaired Warranted Parts

Whenever any Warranted Part, which contains a defect for which the Seller is liable under Clause 12.1, has been corrected, replaced or repaired pursuant to the terms of this Clause 12.1, the period of the Seller’s warranty with respect to such corrected, repaired or replacement Warranted Part, whichever the case may be, shall be the remaining portion of the original warranty or twelve (12) months, whichever is longer.

If a defect is attributable to a defective repair or replacement by the Buyer, a Warranty Claim with respect to such defect shall be rejected, notwithstanding any subsequent correction or repair, and shall immediately terminate the remaining warranties under this Clause 12.1 in respect of the affected Warranted Part.

12.1.10 Accepted Industry Standard Practices Normal Wear and Tear

The Buyer’s rights under this Clause 12.1 are subject to the Aircraft and each component, equipment, accessory and part thereof being maintained, overhauled, repaired and operated in accordance with accepted industry standard practices, all Technical Data and any other instructions issued by the Seller, the Suppliers and the Propulsion Systems Manufacturer and all applicable rules, regulations and directives of the relevant Aviation Authorities.

The Seller’s liability under this Clause 12.1 shall not extend to normal wear and tear nor to:

(i) any Aircraft or component, equipment, accessory or part thereof, which has been repaired, altered or modified after Delivery, except by the Seller or in a manner approved by the Seller;

(ii) any Aircraft or component, equipment, accessory or part thereof, which has been operated in a damaged state;

(iii) any component, equipment, accessory and part from which the trademark, name, part or serial number or other identification marks have been removed.

12.1.11 Limitation of liability

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12.2 Seller Service Life Policy

12.2.1 In addition to the warranties set forth in Clause 12.1, the Seller further agrees that should a Failure occur in any Item (as these terms are defined herebelow) that has not suffered from an extrinsic force, then, subject to the general conditions and limitations set forth in Clause 12.2.4, the provisions of this Clause 12.2 shall apply.

For the purposes of this Clause 12.2:

(i) “Item” means any item listed in Exhibit “F”;

(ii) “Failure” means a breakage or defect that can reasonably be expected to occur on a fleetwide basis and which materially impairs the utility of the Item.

12.2.2 Periods and Seller’s Undertakings

The Seller agrees that if a Failure occurs in an Item [***] after the Delivery of the Aircraft in which such Item was originally installed, the Seller shall, at its discretion and as promptly as practicable and with the Seller’s financial participation as hereinafter provided, either:

• design and furnish to the Buyer a correction for such Item with a Failure and provide any parts required for such correction (including Seller designed standard parts but excluding industry standard parts), or

• replace such Item.

12.2.3 Seller’s Participation in the Costs

Subject to the general conditions and limitations set forth in Clause 12.2.4, any part or Item that the Seller is required to furnish to the Buyer under this Service Life Policy in connection with the correction or replacement of an Item shall be furnished to the Buyer at the Seller’s then current sales price therefore, less the Seller’s financial participation determined in accordance with the following formula:

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12.2.4 General Conditions and Limitations

12.2.4.1 The undertakings set forth in this Clause 12.2 shall be valid after the period of the Seller’s warranty applicable to an Item under Clause 12.1.

12.2.4.2 The Buyer’s remedies and the Seller’s obligations and liabilities under this Service Life Policy are subject to the prior compliance by the Buyer with the following conditions:

(i) the Buyer shall maintain log books and other historical records with respect to each Item, adequate to enable the Seller to determine whether the alleged Failure is covered by this Service Life Policy and, if so, to define the portion of the costs to be borne by the Seller in accordance with Clause 12.2.3;

(ii) the Buyer shall keep the Seller informed of any significant incidents relating to an Aircraft, howsoever occurring or recorded;

(iii) the Buyer shall comply with the conditions of Clause 12.1.10;

(iv) the Buyer shall implement specific structural inspection programs for monitoring purposes as may be established from time to time by the Seller. Such programs shall be as compatible as possible with the Buyer’s operational requirements and shall be carried out at the Buyer’s expense. Reports relating thereto shall be regularly furnished to the Seller;

(v) the Buyer shall report any breakage or defect in a Item in writing to the Seller within [***] whether or not said breakage or defect can reasonably be expected to occur in any other aircraft, and the Buyer shall have provided to the Seller sufficient detail on the breakage or defect to enable the Seller to determine whether said breakage or defect is subject to this Service Life Policy.

12.2.4.3 Except as otherwise provided for in this Clause 12.2, any claim under this Service Life Policy shall be administered as provided for in, and shall be subject to the terms and conditions of, Clause 12.1.6.

12.2.4.4 In the event of the Seller having issued a modification applicable to an Aircraft, the purpose of which is to avoid a Failure, the Seller may elect to supply the necessary modification kit free of charge or under a pro rata formula. If such a kit is so offered to the Buyer, then, to the extent of such Failure and any Failures that could ensue therefrom, the validity of the Seller’s commitment under this Clause 12.2 shall be subject to the Buyer incorporating such modification in the relevant Aircraft, as promulgated by the Seller and in accordance with the Seller’s instructions, within a reasonable time.

12.2.4.5 This Service Life Policy is neither a warranty, performance guarantee, nor an agreement to modify any Aircraft or Airframe components to conform to new developments occurring in the state of airframe design and manufacturing art.

The Seller’s obligation hereunder is to furnish only those corrections to the Items or provide replacements therefor as provided for in this Clause 12.2.

The Buyer’s sole remedy and relief for the non-performance of any obligation or liability of the Seller arising under or by virtue of this Service Life Policy shall be in the form of a credit, limited to the amount the Buyer reasonably expends in procuring a correction or replacement for any Item that is the subject of a Failure covered by this Service Life Policy and to which such non-performance is related.

The Buyer hereby waives, releases and renounces all claims to any further damages, direct, incidental or consequential, including loss of profits and all other rights, claims and remedies, arising under or by virtue of this Service Life Policy.

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12.3 Supplier and ACS Supplier Warranties and Service Life Policies

Prior to/at Delivery of the first Aircraft, the Seller shall provide the Buyer, in accordance with the provisions of Clause 17, with:

a) the warranties and, where applicable, service life policies that the Seller has obtained for Supplier Parts pursuant to the Supplier Product Support Agreements, and

b) the warranties that the Seller has obtained for ACS Equipment pursuant to the Airbus Contracted Suppliers Support Agreements.

12.3.1 Supplier Warranties and Service Life Policies

12.3.1.1 Definitions

12.3.1.1.1 “Supplier” means any supplier of Supplier Parts.

12.3.1.1.2 “Supplier Part” means any component, equipment, accessory or part installed in an Aircraft at the time of Delivery thereof and for which there exists a Supplier Product Support Agreement. For the sake of clarity, Propulsion Systems, ACS Equipment, Buyer Furnished Equipment and other equipment selected by the Buyer to be supplied by suppliers with whom the Seller has no existing enforceable warranty agreements are not Supplier Parts.

12.3.1.1.3 “Supplier Product Support Agreements” means agreements between the Seller and Suppliers, as described in Clause 17.1.2, containing enforceable and transferable warranties and, in the case of landing gear suppliers, service life policies for selected structural landing gear elements.

12.3.1.2 Supplier’s Default

12.3.1.2.1 In the event of any Supplier, under any standard warranty obtained by the Seller pursuant to Clause 12.3.1, defaulting in the performance of any material obligation with respect thereto and the Buyer submitting in reasonable time to the Seller reasonable proof that such default has occurred, then Clause 12.1 shall apply to the extent the same would have been applicable had such Supplier Part been a Warranted Part, except that the Supplier’s warranty period as indicated in the Supplier Product Support Agreement shall apply.

12.3.1.2.2 In the event of any Supplier, under any Supplier Service Life Policy obtained by the Seller pursuant to Clause 12.3.1, defaulting in the performance of any material obligation with respect thereto and the Buyer submitting in reasonable time to the Seller reasonable proof that such default has occurred, then Clause 12.2 shall apply to the extent the same would have been applicable had such Supplier Item been listed in Exhibit F, Seller Service Life Policy, except that the Supplier’s Service Life Policy period as indicated in the Supplier Product Support Agreement shall apply.

12.3.1.2.3 At the Seller’s request, the Buyer shall assign to the Seller, and the Seller shall be subrogated to, all of the Buyer’s rights against the relevant Supplier with respect to and arising by reason of such default and shall provide reasonable assistance to enable the Seller to enforce the rights so assigned.

12.3.2 ACS Supplier Warranties

12.3.2.1 Definitions

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12.3.2.1.1 “ACS Supplier” means any supplier of ACS Equipment.

12.3.2.1.2 “ACS Equipment” means any component, equipment, accessory or part installed in an Aircraft at the time of Delivery thereof and for which there exists an Airbus Contracted Suppliers Support Agreement. For the sake of clarity, Propulsion Systems, Supplier Parts, Buyer Furnished Equipment and other equipment selected by the Buyer to be supplied by suppliers with whom the Seller has no existing enforceable warranty agreements are not ACS Equipment.

12.3.2.1.3 “Airbus Contracted Suppliers Support Agreements” means agreements between the Seller and ACS Suppliers, as described in Clause 17.2.2, containing enforceable and transferable warranties.

12.3.2.2 ACS Supplier’s Default

The Buyer hereby:

a) agrees and acknowledges that it shall have no right of recourse against the Seller with respect to any default by an ACS Supplier; and

b) waives to the fullest extent permitted by applicable law any right of recourse against the Seller (in contract and/or at law) with respect to any default by an ACS Supplier,

in each case, following transfer by the Seller to the Buyer of warranties that the Seller has obtained for ACS Equipment pursuant to Airbus Contracted Suppliers Support Agreements.

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12.4 Interface Commitment

12.4.1 Interface Problem

If the Buyer experiences any technical problem in the operation of an Aircraft or its systems due to a malfunction, the cause of which, after due and reasonable investigation, is not readily identifiable by the Buyer but which the Buyer reasonably believes to be attributable to the design characteristics of one or more components of the Aircraft (“Interface Problem”), the Seller shall, if so requested by the Buyer, and without additional charge to the Buyer except for transportation of the Seller’s personnel to the Buyer’s facilities, promptly conduct or have conducted an investigation and analysis of such problem to determine, if possible, the cause or causes of the problem and to recommend such corrective action as may be feasible. The Buyer shall furnish to the Seller all data and information in the Buyer’s possession relevant to the Interface Problem and shall cooperate with the Seller in the conduct of the Seller’s investigations and such tests as may be required.

At the conclusion of such investigation, the Seller shall promptly advise the Buyer in writing of the Seller’s opinion as to the cause or causes of the Interface Problem and the Seller’s recommendations as to corrective action.

12.4.2 Seller’s Responsibility

If the Seller determines that the Interface Problem is primarily attributable to the design of a Warranted Part, the Seller shall, if so requested by the Buyer and pursuant to the terms and conditions of Clause 12.1, correct the design of such Warranted Part to the extent of the Seller’s obligation as defined in Clause 12.1.

12.4.3 Supplier’s Responsibility

If the Seller determines that the Interface Problem is primarily attributable to the design of any Supplier Part, the Seller shall, if so requested by the Buyer, reasonably assist the Buyer in processing any warranty claim the Buyer may have against the Supplier.

12.4.4 Joint Responsibility

If the Seller determines that the Interface Problem is attributable partially to the design of a Warranted Part and partially to the design of any Supplier Part, the Seller shall, if so requested by the Buyer, seek a solution to the Interface Problem through cooperative efforts of the Seller and any Supplier involved.

The Seller shall promptly advise the Buyer of such corrective action as may be proposed by the Seller and any such Supplier. Such proposal shall be consistent with any then existing obligations of the Seller hereunder and of any such Supplier towards the Buyer. Such corrective action, when accepted by the Buyer, shall constitute full satisfaction of any claim the Buyer may have against either the Seller or any such Supplier with respect to such Interface Problem.

12.4.5 General

12.4.5.1 All requests under this Clause 12.4 shall be directed to both the Seller and the Supplier.

12.4.5.2 Except as specifically set forth in this Clause 12.4, this Clause shall not be deemed to impose on the Seller any obligations not expressly set forth elsewhere in this Clause 12.

12.4.5.3 All reports, recommendations, data and other documents furnished by the Seller to the Buyer pursuant to this Clause 12.4 shall be deemed to be delivered under this Agreement and shall be subject to the terms, covenants and conditions set forth in this Clause 12.

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12.5 Waiver, Release and Renunciation

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12.6 Duplicate Remedies

The Seller shall not be obliged to provide any remedy that duplicates any other remedy available to the Buyer in respect of the same defect under Clauses 12.1 and 12.2 as such Clauses may be amended, complemented or supplemented by other contractual agreements or by other Clauses of this Agreement.

12.7 Negotiated Agreement

The Buyer specifically recognizes that:

(i) the Specification has been agreed upon after careful consideration by the Buyer using its judgment as a professional operator of aircraft;

(ii) this Agreement, and in particular this Clause 12, has been the subject of discussion and negotiation and is fully understood by the Buyer; and

(iii) the price of the Aircraft and the other mutual agreements of the Buyer set forth in this Agreement were arrived at in consideration of, inter alia, the provisions of this Clause 12, specifically including the waiver, release and renunciation by the Buyer set forth in Clause 12.5.

12.8 Disclosure to Third party Entity

In the event of the Buyer intending to designate a third party entity (a “Third party Entity”) to administrate this Clause 12, the Buyer shall notify the Seller of such intention prior to any disclosure of this Clause to the selected Third party Entity and shall cause such Third party Entity to enter into a confidentiality agreement and or any other relevant documentation with the Seller solely for the purpose of administrating this Clause 12.

12.9 Transferability

Without prejudice to Clause 21.1, the Buyer’s rights under this Clause 12 may not be assigned, sold, transferred, novated or otherwise alienated by operation of law or otherwise, without the Seller’s prior written consent, which shall not be unreasonably withheld.

Any transfer in violation of this Clause 12.9 shall, as to the particular Aircraft involved, void the rights and warranties of the Buyer under this Clause 12 and any and all other warranties that might arise under or be implied in law.

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13 PATENT AND COPYRIGHT INDEMNITY

13.1 Indemnity

13.1.1 Subject to the provisions of Clause 13.2.3, the Seller shall indemnify the Buyer from and against any damages, costs or expenses including legal costs (excluding damages, costs, expenses, loss of profits and other liabilities in respect of or resulting from loss of use of the Aircraft) resulting from any infringement or claim of infringement by the Airframe (or any part or software installed therein at Delivery) of:

(i) any British, French, German, Spanish or U.S. patent;

and

(ii) any patent issued under the laws of any other country in which the Buyer may lawfully operate the Aircraft, provided that :

(1) from the time of design of such Airframe, accessory, equipment or part and until infringement claims are resolved, such country and the flag country of the Aircraft are each a party to the Chicago Convention on International Civil Aviation of December 7, 1944, and are each fully entitled to all benefits of Article 27 thereof,

or in the alternative,

(2) from such time of design and until infringement claims are resolved, such country and the flag country of the Aircraft are each a party to the International Convention for the Protection of Industrial Property of March 20, 1883 (“Paris Convention”);

and

(iii) in respect of computer software installed on the Aircraft, any copyright, provided that the Seller’s obligation to indemnify shall be limited to infringements in countries which, at the time of infringement, are members of The Berne Union and recognise computer software as a “work” under the Berne Convention.

13.1.2 Clause 13.1.1 shall not apply to:

(i) Buyer Furnished Equipment, nor

(ii) Propulsion Systems, nor

(iii) software not created by the Seller.

13.1.3 In the event that the Buyer is prevented from using the Aircraft (whether by a valid judgement of a court of competent jurisdiction or by a settlement arrived at between claimant, Seller and Buyer), the Seller shall at its expense either:

(i) procure for the Buyer the right to use the same free of charge to the Buyer; or

(ii) replace the infringing part of the Aircraft as soon as possible with a non-infringing substitute complying in all other respects with the requirements of this Agreement.

13.2 Administration of Patent and Copyright Indemnity Claims

13.2.1 If the Buyer receives a written claim or a suit is threatened or commenced against the Buyer for infringement of a patent or copyright referred to in Clause 13.1, the Buyer shall:

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(i) forthwith notify the Seller giving particulars thereof;

(ii) furnish to the Seller all data, papers and records within the Buyer’s control or possession relating to such patent or claim;

(iii) refrain from admitting any liability or making any payment or assuming any expenses, damages, costs or royalties or otherwise acting in a manner prejudicial to the defense or denial of such suit or claim provided always that nothing in this sub-Clause (iii) shall prevent the Buyer from paying such sums as may be required in order to obtain the release of the Aircraft, provided such payment is accompanied by a denial of liability and is made without prejudice;

(iv) fully co-operate with, and render all such assistance to, the Seller as may be pertinent to the defense or denial of the suit or claim;

(v) act in such a way as to mitigate damages and / or to reduce the amount of royalties which may be payable as well as to minimise costs and expenses.

13.2.2 The Seller shall be entitled either in its own name or on behalf of the Buyer to conduct negotiations with the party or parties alleging infringement and may assume and conduct the defense or settlement of any suit or claim in the manner which, in the Seller’s opinion, it deems proper.

13.2.3 The Seller’s liability hereunder shall be conditional upon the strict and timely compliance by the Buyer with the terms of this Clause and is in lieu of any other liability to the Buyer express or implied which the Seller might incur at law as a result of any infringement or claim of infringement of any patent or copyright.

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14 TECHNICAL DATA AND SOFTWARE SERVICES

14.1 Scope

This Clause 14 covers the terms and conditions for the supply of technical data (hereinafter “Technical Data”) and software services described hereunder (hereinafter “Software Services”) to support the Aircraft operation.

14.1.1 The Technical Data shall be supplied in the English language using the aeronautical terminology in common use.

14.1.2 All Technical Data shall be available on-line as set forth in Clause 14.4. Range, type, format and delivery schedule of the on-line Technical Data to be provided under this Agreement are outlined in Exhibit G hereto.

14.2 Aircraft Identification for Technical Data

14.2.1 [***]

14.2.2 The sequence shall not be interrupted unless two (2) different Propulsion Systems or two (2) different Aircraft models are selected.

14.2.3 The Buyer shall indicate to the Seller the Fleet Serial Number allocated to each Aircraft corresponding to the delivery schedule set forth in Clause 9.1.1 no later than twelve (12) months before the Scheduled Delivery Month of the first Aircraft. Neither the designation of such Fleet Serial Numbers nor the subsequent allocation of the Fleet Serial Numbers to Manufacturer Serial Numbers for the purpose of producing certain customized Technical Data shall constitute any property, insurable or other interest of the Buyer in any Aircraft prior to the Delivery of such Aircraft as provided for in this Agreement.

The customized Technical Data that are affected thereby are the following:

[***]

14.3 Integration of Equipment Data

14.3.1 Supplier Equipment

Information, including revisions, relating to Supplier equipment that is installed on the Aircraft at Delivery or through Airbus Service Bulletins thereafter shall be introduced into the customized Technical Data to the extent necessary for the comprehension of the affected systems, at no additional charge to the Buyer.

14.3.2 Airbus Contracted Supplier Equipment

The Seller shall introduce Airbus Contracted Supplier Equipment data, for ACS Equipment that is installed on the Aircraft by the Seller, into the customized Technical Data, at no additional charge to the Buyer for the initial issue of the Technical Data provided at or before Delivery of the first Aircraft.

14.3.3 Buyer Furnished Equipment

14.3.3.1 The Seller shall introduce Buyer Furnished Equipment data for Buyer Furnished Equipment that is installed on the Aircraft by the Seller (hereinafter “BFE Data”) into the customized Technical Data, at no additional charge to the Buyer solely for the initial issue of the Technical Data provided at or before Delivery of the first Aircraft, provided such BFE Data is provided in accordance with the conditions set forth in Clauses 14.3.3.2 through 14.3.3.5.

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14.3.3.2 The Buyer shall supply, or shall cause the BFE Supplier(s) to supply on its behalf, BFE Data to the Seller [***] to the Scheduled Delivery Month of the first Aircraft.

14.3.3.3 The BFE Data shall be supplied in English and shall be established in compliance with the then applicable revision of ATA iSpecification 2200 and/or S1000D Specification jointly defined by the ASD (Aerospace and Defense Industries Association of Europe), AIA (Aerospace Industries Association) and ATA (Air Transport Association of America), as applicable.

14.3.3.4 The BFE Data shall be delivered in digital format and/or in Portable Document Format (PDF), as agreed between the Buyer and the Seller.

14.3.3.5 All costs related to the delivery to the Seller of the applicable BFE Data shall be borne by the Buyer.

14.4 Supply

14.4.1 Except as specifically otherwise set forth in Exhibit G, all Technical Data shall be made available on-line through the relevant services on the Seller’s customer portal AirbusWorld (“AirbusWorld”), as further described in Part 2 of Exhibit I to the Agreement.

14.4.2 The Technical Data shall be delivered according to a mutually agreed schedule to correspond with the Deliveries of Aircraft. The Buyer shall provide [***] when requesting a change to such delivery schedule.

14.4.3 It shall be the responsibility of the Buyer to coordinate and satisfy local Aviation Authorities’ requirements with respect to Technical Data. Upon request from the Buyer’s Aviation Authorities, such Aviation Authorities shall be given on-line access to the Buyer’s Technical Data.

14.5 Revision Service

For each firmly ordered Aircraft covered under this Agreement, revision service for the Technical Data shall be provided on a free of charge basis for a period [***].

Thereafter revision service shall be provided in accordance with the terms and conditions set forth in the Seller’s then current Customer Services Catalog.

14.6 Service Bulletins (SB) Incorporation

During any Revision Service Period and upon the Buyer’s request, Seller Service Bulletin information shall be incorporated into the Technical Data, provided that the Buyer notifies the Seller through the AirbusWorld “Service Bulletin Reporting” service that it intends to accomplish such Service Bulletin, after which post Service Bulletin status shall be shown.

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14.7 Technical Data Familiarization

Upon request by the Buyer, the Seller shall provide [***] of Technical Data familiarization training at the Seller’s or the Buyer’s facilities. The basic familiarization course is tailored for maintenance and engineering personnel.

14.8 Customer Originated Changes (COC)

In the event of the Buyer wishing to introduce Buyer originated data, including BFE Data after the initial issue of the Technical Data, (hereinafter “COC Data”) into any of the customized Technical Data that are identified as eligible for such incorporation in the Seller’s then current Customer Services Catalog, the Buyer shall notify the Seller of such intention.

The incorporation of any COC Data shall be performed under the methods and tools for achieving such introduction and the conditions specified in the Seller’s then current Customer Services Catalog.

14.9 Advanced Consultation Tool

14.9.1 Some Technical Data shall be made available through several domains listed herebelow and shall be provided on-line through an Advanced Consultation Tool, which shall include the necessary navigation software and viewer to browse the Technical Data (hereinafter together referred to as “Advanced Consultation Tool”).

14.9.2 The Advanced Consultation Tool encompasses the following domains:

[***]

14.9.3 Further details on the Technical Data included in such Advanced Consultation Tool are set forth in Exhibit “G”.

14.9.4 The licensing conditions for the use of the Advanced Consultation Tool software shall be as set forth in Part 1 of Exhibit I to the Agreement, “End-User License Agreement for Airbus Software”.

14.9.5 The revision service and the license to use Advanced Consultation Tool shall be granted free of charge for the duration of the corresponding Revision Service Period. At the end of such Revision Service Period, the yearly revision service for the Advanced Consultation Tool and the associated license fee shall be provided to the Buyer under the commercial conditions set forth in the Seller’s then current Customer Services Catalog.

14.10 On-Line Access to Technical Data

14.10.1 Access to AirbusWorld shall be subject to the “General Terms and Conditions of Access to and Use of AirbusWorld” (hereinafter the “GTC”), as set forth in Part 2 of Exhibit I to this Agreement.

14.10.2 Access to AirbusWorld shall be granted free of charge for an unlimited number of the Buyer’s users (including two (2) Buyer’s Administrators) for the Technical Data related to the Aircraft which shall be operated by the Buyer.

14.10.3 Should AirbusWorld provide access to Technical Data in software format, the use of such software shall be further subject to the conditions of Part 1 of Exhibit I to the Agreement.

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14.11 Waiver, Release and Renunciation

The Seller warrants that the Technical Data are prepared in accordance with the state of art at the date of their conception. Should any Technical Data prepared by the Seller contain non-conformity or defect, the sole and exclusive liability of the Seller shall be to take all reasonable and proper steps to correct such Technical Data. Notwithstanding the above, no warranties of any kind shall be given for the Customer Originated Changes, as set forth in Clause 14.8.

[***]

14.12 Proprietary Rights

14.12.1 All proprietary rights, including but not limited to patent, design and copyrights, relating to Technical Data shall remain with the Seller and/or its Affiliates as the case may be.

These proprietary rights shall also apply to any translation into a language or languages or media that may have been performed or caused to be performed by the Buyer.

14.12.2 Whenever this Agreement and/or any Technical Data provides for manufacturing by the Buyer, the consent given by the Seller shall not be construed as express or implicit approval howsoever neither of the Buyer nor of the manufactured products. The supply of the Technical Data shall not be construed as any further right for the Buyer to design or manufacture any aircraft or part thereof or spare part.

14.13 Performance Engineer’s Program

14.13.1 In addition to the Technical Data provided under Clause 14, the Seller shall provide to the Buyer Software Services, which shall consist of the Performance Engineer’s Programs (“PEP”) for the Aircraft type covered under this Agreement. Such PEP is composed of software components and databases and its use is subject to the license conditions set forth in Part 1 of Exhibit I to the Agreement “End-User License Agreement for Airbus Software”.

14.13.2 Use of the PEP shall be limited to [***] to be used on the Buyer’s computers for the purpose of computing performance engineering data. The PEP is intended for use on ground only and shall not be embarked on board the Aircraft.

14.13.3 The license to use the PEP and the revision service shall be provided [***].

14.13.4 At the end of such PEP Revision Service Period, the PEP shall be provided to the Buyer at the standard commercial conditions set forth in the Seller’s then current Customer Services Catalog.

14.14 Future Developments

The Seller continuously monitors technological developments and applies them to Technical Data, document and information systems’ functionalities, production and methods of transmission.

The Seller shall implement and the Buyer shall accept such new developments, it being understood that the Buyer shall be informed in due time by the Seller of such new developments and their application and of the date by which the same shall be implemented by the Seller.

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14.15 Confidentiality

14.15.1 This Clause, the Technical Data, the Software Services and their content are designated as confidential. All such Technical Data and Software Services are provided to the Buyer for the sole use of the Buyer who undertakes not to disclose the contents thereof to any third party without the prior written consent of the Seller save as permitted therein or pursuant to any government or legal requirement imposed upon the Buyer.

14.15.2 In the event of the Seller authorizing the disclosure of this Clause or any Technical Data or Software Services to third parties either under this Agreement or by an express prior written authorization and specifically, in the event of the Buyer intending to designate a maintenance and repair organization or a third party to perform the maintenance of the Aircraft or to perform data processing on its behalf (each a “Third party”), the Buyer shall notify the Seller of such intention prior to any disclosure of this Clause and/or the Technical Data and/or the Software Services to such Third party.

The Buyer hereby undertakes to cause such Third party to agree to be bound by the conditions and restrictions set forth in this Clause 14 with respect to the disclosed Clause, Technical Data or Software Services and shall in particular cause such Third party to enter into a confidentiality agreement with the Seller and appropriate licensing conditions, and to commit to use the Technical Data solely for the purpose of maintaining the Buyer’s Aircraft and the Software Services exclusively for processing the Buyer’s data.

14.16 Transferability

Without prejudice to Clause 21.1, the Buyer’s rights under this Clause 14 may not be assigned, sold, transferred, novated or otherwise alienated by operation of law or otherwise, without the Seller’s prior written consent.

Any transfer in violation of this Clause 14.16 shall, as to the particular Aircraft involved, void the rights and warranties of the Buyer under this Clause 14 and any and all other warranties that might arise under or be implied in law.

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15 SELLER REPRESENTATIVE SERVICES

The Seller shall provide at no charge to the Buyer the services described in this Clause 15, at the Buyer’s main base or at other locations to be mutually agreed.

15.1 Customer Support Representative(s)

15.1.1 The Seller shall provide free of charge to the Buyer the services of Seller customer support representative(s), as defined in Appendix A to this Clause 15 (each a “Seller Representative”), at the Buyer’s main base or such other locations as the parties may agree.

15.1.2 In providing the services as described hereabove, any Seller Representatives, or any Seller employee(s) providing services to the Buyer hereunder, are deemed to be acting in an advisory capacity only and at no time shall they be deemed to be acting as Buyer’s employees or agents, either directly or indirectly.

15.1.3 The Seller shall provide to the Buyer an annual written accounting of the consumed man-months and any remaining man-month balance from the allowance defined in Appendix A. Such accounting shall be deemed final and accepted by the Buyer unless the Seller receives written objection from the Buyer within thirty (30) calendar days of receipt of such accounting.

15.1.4 In the event of a need for Aircraft On Ground (“AOG”) technical assistance after the end of the assignment referred to in Appendix A to this Clause 15, the Buyer shall have non-exclusive access to:

(a) AIRTAC (Airbus Technical AOG Center);

(b) The Seller Representative network closest to the Buyer’s main base. A list of contacts of the Seller Representatives closest to the Buyer’s main base shall be provided to the Buyer.

As a matter of reciprocity, the Buyer shall authorize the Seller Representative(s), during his/their assignment at the Buyer’s, to provide similar assistance to another airline.

15.1.5 Should the Buyer request Seller Representative services exceeding the allocation specified in Appendix A to this Clause 15, the Seller may provide such additional services subject to terms and conditions to be mutually agreed.

15.1.6 The Seller shall cause similar services to be provided by representatives of the Propulsion Systems Manufacturer and Suppliers, when necessary and applicable.

15.2 Buyer’s Support

15.2.1 From the date of arrival of the first Seller Representative and for the duration of the assignment, the Buyer shall provide free of charge a suitable lockable office, conveniently located with respect to the Buyer’s maintenance facilities, with complete office furniture and equipment including telephone, internet, email and facsimile connections for the sole use of the Seller Representative(s). All related communication costs shall be borne by the Seller upon receipt by the Seller of all relevant justifications, however the Buyer shall not impose on the Seller any charges other than the direct cost of such communications.

15.2.2 The Buyer shall reimburse the Seller the costs for the initial and termination assignment travel of the Seller Representatives of [***].

15.2.3 [***].

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15.2.4 Should the Buyer request any Seller Representative referred to in Clause 15.1 above to travel on business to a city other than his usual place of assignment, the Buyer shall be responsible for all related transportation costs and expenses.

15.2.5 Absence of an assigned Seller Representative during normal statutory vacation periods are covered by the Seller Representatives as defined in Clause 15.1.4 and as such are accounted against the total allocation provided in Appendix A hereto.

15.2.6 The Buyer shall assist the Seller in obtaining from the civil authorities of the Buyer’s country those documents that are necessary to permit the Seller Representative to live and work in the Buyer’s country. Failure of the Seller to obtain the necessary documents shall relieve the Seller of any obligation to the Buyer under the provisions of Clause 15.1.

15.2.7 The Buyer shall reimburse to the Seller charges, taxes, duties, imposts or levies of any kind whatsoever, imposed by the authorities of the Buyer’s country upon:

• the entry into or exit from the Buyer’s country of the Seller Representatives and their families,

• the entry into or the exit from the Buyer’s country of the Seller Representatives and their families’ personal property,

• the entry into or the exit from the Buyer’s country of the Seller’s property, for the purpose of providing the Seller Representatives services.

15.3 Withdrawal of the Seller Representative

The Seller shall have the right to withdraw its assigned Seller Representatives as it sees fit if conditions arise, which are in the Seller’s opinion dangerous to their safety or health or prevent them from fulfilling their contractual tasks.

15.4 Indemnities

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            APPENDIX A TO CLAUSE 15

SELLER REPRESENTATIVE ALLOCATION

The Seller Representative allocation provided to the Buyer pursuant to Clause 15.1 is defined hereunder.

1 The Seller shall provide to the Buyer Seller Representative services at the Buyer’s main base or at other locations to be mutually agreed for a total [***].

2 For the sake of clarification, such Seller Representatives’ services shall include initial Aircraft Entry Into Service (EIS) assistance and sustaining support services.

3 The number of the Seller Representatives assigned to the Buyer at any one time shall be mutually agreed, [***].

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16 TRAINING SUPPORT AND SERVICES

16.1 General

16.1.1 This Clause 16 sets forth the terms and conditions for the supply of training support and services for the Buyer’s personnel to support the Aircraft operation.

16.1.2 The range, quantity and validity of training to be provided free of charge under this Agreement are covered in Appendix A to this Clause 16.

16.1.3 Scheduling of training courses covered in Appendix A shall be mutually agreed during a training conference (the “Training Conference”) that shall be held no later [***].

16.2 Training Location

16.2.1 The Seller shall provide training at its training center in Blagnac, France, and/or in Hamburg, Germany, or shall designate an affiliated training center in Miami, U.S.A., or Beijing, China (individually a “Seller’s Training Center” and collectively the “Seller’s Training Centers”).

16.2.2 If the unavailability of facilities or scheduling difficulties make training by the Seller at any Seller’s Training Center impractical, the Seller shall ensure that the Buyer is provided with such training at another location designated by the Seller.

16.2.3.1 Upon the Buyer’s request, the Seller may also provide certain training at a location other than the Seller’s Training Centers, including one of the Buyer’s bases, if and when practicable for the Seller, under terms and conditions to be mutually agreed upon. In such event, all additional charges listed in Clauses 16.5.2 and 16.5.3 shall be borne by the Buyer.

16.2.3.2 If the Buyer requests training at a location as indicated in Clause 16.2.3.1 and requires such training to be an Airbus approved course, the Buyer undertakes that the training facilities shall be approved prior to the performance of such training. The Buyer shall, as necessary and in due time prior to the performance of such training, provide access to the training facilities set forth in Clause 16.2.3.1 to the Seller’s and the competent Aviation Authority’s representatives for approval of such facilities.

16.3 Training Courses

16.3.1 Training courses shall be as described in the Seller’s customer services catalog (the “Seller’s Customer Services Catalog”). The Seller’s Customer Services Catalog also sets forth the minimum and maximum number of trainees per course.

All training requests or training course changes made outside of the frame of the Training Conference shall be submitted by the Buyer with a minimum of three (3) months prior notice.

16.3.2 The following terms and conditions shall apply to training performed by the Seller:

(i) Training courses shall be the Seller’s standard courses as described in the Seller’s Customer Services Catalog valid at the time of execution of the course. The Seller shall be responsible for all training course syllabi, training aids and training equipment necessary for the organization of the training courses; for the avoidance of doubt, for the purpose of performing training, such training equipment does not include aircraft.

(ii) The training equipment and the training curricula used for the training of flight, cabin and maintenance personnel shall not be fully customized but shall be configured in order to obtain the relevant Aviation Authority’s approval and to support the Seller’s training programs.

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(iii) Training data and documentation for trainees receiving the training at the Seller’s Training Centers shall be provided free of charge. Training data and documentation shall be marked “FOR TRAINING ONLY” and as such are supplied for the sole and express purpose of training; training data and documentation shall not be revised.

16.3.3 When the Seller’s training courses are provided by the Seller’s instructors (individually an “Instructor” and collectively “Instructors”) the Seller shall deliver a Certificate of Recognition or a Certificate of Course Completion (each a “Certificate”) or an attestation (an “Attestation”), as applicable, at the end of any such training course. Any such Certificate or Attestation shall not represent authority or qualification by any Aviation Authority but may be presented to such Aviation Authority in order to obtain relevant formal qualification.

In the event of training courses being provided by a training provider selected by the Seller as set forth in Clause 16.2.2, the Seller shall cause such training provider to deliver a Certificate or Attestation, which shall not represent authority or qualification by any Aviation Authority, but may be presented to such Aviation Authority in order to obtain relevant formal qualification.

16.3.4.1 Should the Buyer wish to exchange any of the training courses provided under Appendix A hereto, the Buyer shall place a request for exchange to this effect with the Seller. The Buyer may exchange, subject to the Seller’s confirmation, the training allowances granted under Appendix A of the present Agreement as follows:

(i) flight operations training courses as listed under Article 1 of Appendix A against any flight operations training courses described in the Seller’s Customer Services Catalog current at the time of the Buyer’s request;

(ii) maintenance training courses as listed under Article 3 of Appendix A against any maintenance training courses described in the Seller’s Customer Services Catalog current at the time of the Buyer’s request;

(iii) should any one of the allowances granted thereunder (flight operations or maintenance) have been fully drawn upon, the Buyer shall be entitled to exchange flight operations or maintenance training courses as needed against the remaining allowances.

The exchange value shall be based on the Seller’s ”Training Course Exchange Matrix” applicable at the time of the request for exchange and which shall be provided to the Buyer at such time.

It is understood that the above shall apply to the extent that training allowances granted under Appendix A remain in credit to the full extent necessary to perform the exchange.

All requests to exchange training courses shall be submitted by the Buyer with a minimum [***] prior notice. The requested training shall be subject to the Seller’s then existing planning constraints.

16.3.4.2 Should the Buyer use none or only part of the training to be provided pursuant to this Clause 16, no compensation or credit of any nature shall be provided.

16.3.5.1 Should the Buyer decide to cancel or reschedule, fully or partially, and irrespective of the location of the training, a training course, a minimum advance notification of at least [***] prior to the relevant training course start date is required.

16.3.5.2 If the notification occurs less [***] prior to such training, a cancellation fee corresponding to [***] of such training shall be, as applicable, either deducted from the training allowance defined in Appendix A or invoiced at the Seller’s then applicable price.

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16.3.5.3 If the notification occurs less [***] prior to such training, a cancellation fee [***] of such training shall be, as applicable, either deducted from the training allowance defined in Appendix A or invoiced at the Seller’s then applicable price.

16.3.5.4 All courses exchanged under Clause 16.3.4.1 shall remain subject to the provisions of this Clause 16.3.5.

16.4 Prerequisites and Conditions

16.4.1 Training shall be conducted in English and all training aids used during such training shall be written in English using common aeronautical terminology.

16.4.2 The Buyer hereby acknowledges that all training courses conducted pursuant to this Clause 16 are “Standard Transition Training Courses” and not “Ab Initio Training Courses”.

16.4.3 Trainees shall have the prerequisite knowledge and experience specified for each course in the Seller’s Customer Services Catalog.

16.4.4.1 The Buyer shall be responsible for the selection of the trainees and for any liability with respect to the entry knowledge level of the trainees.

16.4.4.2 The Seller reserves the right to verify the trainees’ proficiency and previous professional experience.

16.4.4.3 The Seller shall provide to the Buyer during the Training Conference an “Airbus Pre-Training Survey” for completion by the Buyer for each trainee.

The Buyer shall provide the Seller with an attendance list of the trainees for each course, with the validated qualification of each trainee, at the time of reservation of the training course [***] calendar days before the start of the training course. The Buyer shall return concurrently thereto the completed Airbus Pre-Training Survey, detailing the trainees’ associated background. If the Seller determines through the Airbus Pre-Training Survey that a trainee does not match the prerequisites set forth in the Seller’s Customer Services Catalog, following consultation with the Buyer, such trainee shall be withdrawn from the program or directed through a relevant entry level training (ELT) program, which shall be at the Buyer’s expense.

16.4.4.4 If the Seller determines at any time during the training that a trainee lacks the required level, following consultation with the Buyer, such trainee shall be withdrawn from the program or, upon the Buyer’s request, the Seller may be consulted to direct the above mentioned trainee(s), if possible, through any other required additional training, which shall be at the Buyer’s expense.

16.4.5 The Seller shall in no case warrant or otherwise be held liable for any trainee’s performance as a result of any training provided.

16.5 Logistics

16.5.1 Trainees

16.5.1.1 Living and travel expenses for the Buyer’s trainees shall be borne by the Buyer.

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16.5.1.2 It shall be the responsibility of the Buyer to make all necessary arrangements relative to authorizations, permits and/or visas necessary for the Buyer’s trainees to attend the training courses to be provided hereunder. Rescheduling or cancellation of courses due to the Buyer’s failure to obtain any such authorizations, permits and/or visas shall be subject to the provisions of Clauses 16.3.5.1 thru 16.3.5.3.

16.5.2 Training at External Location—Seller’s Instructors

16.5.2.1.1 In the event of training being provided at the Seller’s request at any location other than the Seller’s Training Centers, as provided for in Clause 16.2.2, the expenses of the Seller’s Instructors shall be borne directly by the Seller.

16.5.2.1.2 In the event of training being provided by the Seller’s Instructor(s) at any location other than the Seller’s Training Centers at the Buyer’s request, the Buyer shall reimburse the Seller for all the expenses related to the assignment of such Seller Instructors and the performance of their duties as aforesaid.

16.5.2.2 Living Expenses

Except as provided for in Clause 16.5.2.1.1 above, the Buyer shall reimburse the Seller the living expenses for each Seller Instructor and/or other Seller’s personnel providing support under this Clause 16, covering the entire period from his day of departure from his main base to day of return to such base at the perdiem rate set forth in the Seller’s Customer Services Catalog current at the time of the corresponding training or support.

Such perdiem shall include, but shall not be limited to, lodging, food and local transportation to and from the place of lodging and the training course location.

16.5.2.3 Air Travel

Except as provided for in Clause 16.5.2.1.1 above, the Buyer shall reimburse the Seller the airfares for each Seller Instructor and/or other Seller’s personnel providing support under this Clause 16, in confirmed business class to and from the Buyer’s designated training site and the Seller’s Training Centers, as such airfares are set forth in the Seller’s Customer Services Catalog current at the time of the corresponding training or support.

16.5.2.4 Buyer’s Indemnity

Except in case of Gross Negligence of the Seller, the Seller shall not be held liable to the Buyer for any delay or cancellation in the performance of any training outside of the Seller’s Training Centers associated with any transportation described in this Clause 16.5.2 and the Buyer shall indemnify and hold harmless the Seller from any such delay and/or cancellation and any consequences arising therefrom.

16.5.3 Training Material and Equipment Availability—Training at External Location

Training material and equipment necessary for course performance at any location other than the Seller’s Training Centers or the facilities of a training provider selected by the Seller shall be provided by the Buyer at its own cost in accordance with the Seller’s specifications.

Notwithstanding the foregoing, should the Buyer request the performance of a course at another location as per Clause 16.2.3.1, the Seller may, upon the Buyer’s request, provide the training material and equipment necessary for such course’s performance. Such provision shall be at the Buyer’s expense.

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16.6 Flight Operations Training

The Seller shall provide training for the Buyer’s flight operations personnel as further detailed in Appendix A to this Clause 16, including the courses described in this Clause 16.6.

16.6.1 Flight Crew Training Course

The Seller shall perform a flight crew training course program for the Buyer’s flight crews, each of which shall consist of [***] who shall be either captain(s) or first officer(s).

16.6.2 Base Flight Training

16.6.2.1 The Buyer shall provide at its own cost its delivered Aircraft, or any other aircraft it operates, for any base flight training, which shall consist of [***], performed in accordance with the related Airbus training course definition (the “Base Flight Training”).

16.6.2.2 Should it be necessary to ferry the Buyer’s delivered Aircraft to the location where the Base Flight Training shall take place, the additional flight time required for the ferry flight to and/or from the Base Flight Training field shall not be deducted from the Base Flight Training time.

16.6.2.3 If the Base Flight Training is performed outside of the zone where the Seller usually performs such training, the ferry flight to the location where the Base Flight Training shall take place shall be performed by a crew composed of the Seller’s and/or the Buyer’s qualified pilots, in accordance with the relevant Aviation Authority’s regulations related to the place of performance of the Base Flight Training.

16.6.3 Flight Crew Line Initial Operating Experience

In order to assist the Buyer with initial operating experience after Delivery of the first Aircraft, the Seller shall provide to the Buyer pilot Instructor(s) as set forth in Appendix A to this Clause 16.

Should the Buyer request, subject to the Seller’s consent, such Seller pilot Instructors to perform any other flight support during the flight crew line initial operating period, such as but not limited to line assistance, demonstration flight(s), ferry flight(s) or any flight(s) required by the Buyer during the period of entry into service of the Aircraft, it is understood that such flight(s) shall be deducted from the flight crew line initial operating experience allowance set forth in Appendix A hereto.

It is hereby understood by the parties that the Seller’s pilot Instructors shall only perform the above flight support services to the extent they bear the relevant qualifications to do so.

16.6.4 Type Specific Cabin Crew Training Course

The Seller shall provide type specific training for cabin crews, at one of the locations defined in Clause 16.2.1.

If the Buyer’s Aircraft is to incorporate special features, the type specific cabin crew training course shall be performed [***] the scheduled Delivery Date of the Buyer’s first Aircraft.

16.6.5 Training on Aircraft

During any and all flights performed in accordance with this Clause 16.6, the Buyer shall bear full responsibility for the aircraft upon which the flight is performed, including but not limited to any required maintenance, all expenses such as fuel, oil or landing fees and the provision of insurance in line with Clause 16.13.

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The Buyer shall assist the Seller, if necessary, in obtaining the validation of the licenses of the Seller’s pilots performing Base Flight Training or initial operating experience by the Aviation Authority of the place of registration of the Aircraft.

16.7 Performance / Operations Courses

The Seller shall provide performance/operations training for the Buyer’s personnel as defined in Appendix A to this Clause 16.

The available courses shall be listed in the Seller’s Customer Services Catalog current at the time of the course.

16.8 Maintenance Training

16.8.1 The Seller shall provide maintenance training for the Buyer’s ground personnel as further set forth in Appendix A to this Clause 16.

The available courses shall be as listed in the Seller’s Customer Services Catalog current at the time of the course.

The practical training provided in the frame of maintenance training shall be performed on the training devices in use in the Seller’s Training Centers.

16.8.2 Practical Training on Aircraft

Notwithstanding Clause 16.8.1 above, upon the Buyer’s request, the Seller may provide Instructors for the performance of practical training on aircraft (“Practical Training”).

Irrespective of the location at which the training takes place, the Buyer shall provide at its own cost an aircraft for the performance of the Practical Training.

Should the Buyer require the Seller’s Instructors to provide Practical Training at facilities selected by the Buyer, such training shall be subject to prior approval of the facilities by the Seller. All costs related to such Practical Training, including but not limited to the Seller’s approval of the facilities, shall be borne by the Buyer.

The provision of a Seller Instructor for the Practical Training shall be deducted from the trainee days allowance defined in Appendix A to this Clause 16, subject to the conditions detailed in Paragraph 4.4 thereof.

16.9 Supplier and Propulsion Systems Manufacturer Training

Upon the Buyer’s request, the Seller shall provide to the Buyer the list of the maintenance and overhaul training courses provided by major Suppliers and ACS Suppliers and the applicable Propulsion Systems Manufacturer on their respective products.

16.10 Proprietary Rights

All proprietary rights, including but not limited to patent, design and copyrights, relating to the Seller’s training data and documentation shall remain with the Seller and/or its Affiliates and/or its Suppliers and/or ACS Suppliers, as the case may be.

These proprietary rights shall also apply to any translation into a language or languages or media that may have been performed or caused to be performed by the Buyer.

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16.11 Confidentiality

The Seller’s training data and documentation are designated as confidential and as such are provided to the Buyer for the sole use of the Buyer, for training of its own personnel, who undertakes not to disclose the content thereof in whole or in part, to any third party without the prior written consent of the Seller, save as permitted herein or otherwise pursuant to any government or legal requirement imposed upon the Buyer.

In the event of the Seller having authorized the disclosure of any training data and documentation to third parties either under this Agreement or by an express prior written authorization, the Buyer shall cause such third party to agree to be bound by the same conditions and restrictions as the Buyer with respect to the disclosed training data and documentation and to use such training data and documentation solely for the purpose for which they are provided.

16.12 Transferability

Without prejudice to Clause 21.1, the Buyer’s rights under this Clause 16 may not be assigned, sold, transferred, novated or otherwise alienated by operation of law or otherwise, without the Seller’s prior written consent.

16.13 Indemnities and Insurance

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APPENDIX “A” TO CLAUSE 16

TRAINING ALLOWANCE

[***]

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17 SUPPLIER AND ACS SUPPLIER PRODUCT SUPPORT

17.1 Supplier Product Support Agreements

17.1.1 The Seller has obtained enforceable and transferable product support agreements from Suppliers of Supplier Parts, the benefit of which is hereby accepted by the Buyer. Said agreements become enforceable as soon as and for as long as an operator is identified as an Airbus aircraft operator.

17.1.2 These agreements are based on the “World Airlines Suppliers Guide”, are made available to the Buyer through the SPSA Application, and include Supplier commitments contained in the “Supplier Product Support Agreements”, as defined in Clause 12.3.1.1.3, which include the following provisions:

17.1.2.1 Technical data and manuals required to operate, maintain, service and overhaul the Supplier Parts. Such technical data and manuals shall be prepared in accordance with the applicable provisions of ATA Specification including revision service and be published in the English language. The Seller shall recommend that a software user guide, where applicable, be supplied in the form of an appendix to the Component Maintenance Manual, such data shall be provided in compliance with the applicable ATA Specification;

17.1.2.2 Warranties and guarantees, including standard warranties. In addition, landing gear Suppliers shall provide service life policies for selected structural landing gear elements;

17.1.2.3 Training to ensure efficient operation, maintenance and overhaul of the Supplier Parts for the Buyer’s instructors, shop and line service personnel;

17.1.2.4 Spares data in compliance with ATA iSpecification 2200, initial provisioning recommendations, spare parts and logistics service including routine and expedite deliveries;

17.1.2.5 Technical service to assist the Buyer with maintenance, overhaul, repair, operation and inspection of Supplier Parts as well as required tooling and spares provisioning.

17.1.3 Supplier Compliance

The Seller shall monitor Suppliers’ compliance with the support commitments defined in the Supplier Product Support Agreements and shall, if necessary, jointly take remedial action with the Buyer.

17.2 ACS Suppliers Support Agreements

17.2.1 The Seller has obtained enforceable and transferable product support agreements from ACS Suppliers of ACS Equipment, the benefit of which is hereby accepted by the Buyer. Said agreements become enforceable as soon as and for as long as an operator is identified as an Airbus aircraft operator.

17.2.2 These agreements are based on the “World Airlines Suppliers Guide”, are made available to the Buyer through the SPSA Application, and include ACS Supplier commitments contained in the “Airbus Contracted Suppliers Support Agreements”, as defined in Clause 12.3.2.1.3. Such commitments shall be substantially the same as those included in the Supplier Product Support Agreements, and detailed in Clause 17.1.2, except that guarantees, if any, shall be negotiated and agreed directly between the Buyer and the corresponding ACS Supplier.

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17.2.3 ACS Supplier Compliance

The Seller shall monitor ACS Suppliers’ compliance with support commitments defined in the Airbus Contracted Suppliers Support Agreements and shall provide assistance to the Buyer as may reasonably be required.

17.3 Nothing in this Clause 17 shall be construed to prevent or limit the Buyer from entering into direct negotiations with a Supplier or an ACS Supplier with respect to different or additional terms and conditions applicable to Suppliers Parts or ACS Equipment selected by the Buyer to be installed on the Aircraft.

17.4 Familiarization Training

Upon the Buyer’s request, the Seller shall provide the Buyer with Supplier Product Support Agreements and Airbus Contracted Suppliers Support Agreements familiarization training at the Seller’s facilities in Blagnac, France.

An on-line training module shall be further available through AirbusWorld, access to which shall be subject to the “General Terms and Conditions of Access to and Use of AirbusWorld” (hereinafter the “GTC”), as set forth in Part 2 of Exhibit I to this Agreement.

Both the Supplier Product Support Agreements and the Airbus Contracted Suppliers Support Agreements may be accessed through the SPSA Application.

For the avoidance of doubt, the use of the term “SPSA” with respect to ACS Suppliers or ACS Equipment shall solely be a reference to such SPSA Application and shall not be construed to imply that such ACS Suppliers or ACS Equipment are the subject of the Supplier Product Support Agreements for the purposes of Clause 17.1 above.

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18 BUYER FURNISHED EQUIPMENT AND AIRBUS CONTRACTED SUPPLIER EQUIPMENT

18.1 Buyer Furnished Equipment

18.1.1 In accordance with the Specification, the Seller shall install those items of equipment that are identified in the Specification as being furnished by the Buyer (“Buyer Furnished Equipment” or “BFE”), provided that the BFE and the supplier of such BFE (the “BFE Supplier”) [***].

Without prejudice to the foregoing, it is hereby expressly agreed between the parties that, in the exceptional case of the Buyer wishing to select and install a BFE item that is still under the approval process of the Seller, such selection shall be subject to an executed SCN between the parties, its installation shall be subject to the approval being obtained, and the conditions of this Clause 18, including specifically Clauses 18.1.6 and 18.1.7, shall apply to such BFE.     

18.1.2.1 The Seller shall advise the Buyer, when relevant, of the dates by which, in the planned release of engineering for the Aircraft, the Seller requires the written detailed engineering definition, encompassing a Declaration of Design and Performance (the “BFE Engineering Definition”). The BFE Engineering Definition shall include the description of the dimensions and weight of BFE, the information related to its certification and the information necessary for the installation and operation thereof, including 3D models compatible with the Seller’s systems.

The Buyer shall furnish, or cause the BFE Suppliers to furnish the BFE Engineering Definition by the dates specified through the Customisation Milestone Chart as set forth in Clause 2.4.2.

The BFE Engineering Definition shall not be revised, except through an SCN executed in accordance with Clause 2.

18.1.2.2 The Seller shall provide in due time to the Buyer a schedule of dates and the shipping addresses for delivery of the BFE and, where requested by the Seller, additional spare BFE to permit installation in the Aircraft and Delivery of the Aircraft in accordance with the Aircraft delivery schedule. The Buyer shall provide, or cause the BFE Suppliers to provide, the BFE by such dates in a serviceable condition, in order to allow performance of any assembly, installation, test, or acceptance process in accordance with the Seller’s industrial schedule.

[***].

The Buyer shall also provide, when requested by the Seller, at Airbus Operations S.A.S. works in Toulouse (France) and/or at Airbus Operations GmbH works in Hamburg (Germany) adequate field service including support from BFE Suppliers to act in a technical advisory capacity to the Seller in the installation, calibration and possible repair of any BFE.

18.1.3 At a suitable time prior to CDF, and without prejudice to the Buyer’s obligations hereabove, the Seller shall organise, when relevant, an Initial Technical Coordination Meeting (ITCM) between the Seller, the Buyer and BFE Suppliers. During such ITCM, the Seller’s employees shall be acting in an advisory capacity only and at no time shall they be deemed to be acting as Buyer’s employees or agents, either directly or indirectly

18.1.3.1 Thereafter, the Buyer shall ensure that the necessary development review meetings are organised between the Buyer and the BFE Suppliers and shall provide adequate technical and engineering expertise to reach decisions within the defined timeframe.

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In addition to the foregoing meetings, throughout the development phase and up to Delivery of the Aircraft to the Buyer, the Buyer agrees:

• to monitor the BFE Suppliers and ensure that they shall enable the Buyer to fulfil its obligations, including but not limited to those set forth in the Customisation Milestone Chart;

• to place BFE purchase orders in a timely manner in order to ensure delivery of the corresponding BFE in accordance with the dates provided as per Clause 18.1.2.2.

• that, should a timeframe, quality or other type of risk be identified at a given BFE Supplier, the Buyer shall allocate resources to such BFE Supplier so as not to jeopardise the industrial schedule of the Aircraft.

18.1.3.2 Without prejudice to the Buyer’s obligations hereunder, in order to facilitate the follow-up of the timely receipt of BFE, the Seller reserves the right to request from the Buyer the dates and references of any relevant BFE purchase order placed by the Buyer and/or a copy of such purchase orders (excluding any commercial or confidential data).

18.1.4 The Buyer hereby agrees:

• to attend the First Article Inspection (“FAI”) for the first shipset of all BFE Seats and BFE IFE. Should the Buyer not attend such FAI, the Buyer shall delegate the FAI to the BFE Supplier and confirmation thereof shall be supplied to the Seller in writing. Should the Buyer not attend the FAI, the Buyer shall be deemed to have accepted the conclusions of the BFE Supplier with respect to such FAI.

• to attend the Source Inspection (“SI”) that takes place at the BFE Supplier’s premises prior to shipping, for each shipset of all BFE Seats and, when applicable, BFE IFE. Should the Buyer not attend such SI, the Buyer shall delegate the SI to the BFE Supplier and confirmation thereof shall be brought to the Seller in writing. Should the Buyer not attend the SI, the Buyer shall be deemed to have accepted the conclusions of the BFE Supplier with respect to such SI.

18.1.5 The BFE shall be imported into France or into Germany by the Buyer under a suspensive customs system (“Régime de l’entrepôt douanier ou régime de perfectionnement actif “ or “Zollverschluss”) without application of any French or German tax or customs duty, and shall be Delivered At Place (DAP)) according to the Incoterms, to the following shipping addresses:

AIRBUS OPERATIONS S.A.S.

316 Route de Bayonne

31300 TOULOUSE

FRANCE

or

AIRBUS OPERATIONS GmbH

Kreetslag 10

21129 HAMBURG

GERMANY

or such other location as may be specified by the Seller.

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18.1.6 Applicable Requirements

The Buyer is responsible for ensuring, at its expense, and warrants that the BFE shall:

• be supplied by a Seller approved BFE Supplier, as per Clause 18.1.1, and

• meet the requirements of the applicable Specification of the Aircraft, and

• be delivered with the relevant certification documentation, including but not limited to the DDP, and

• comply with the BFE Engineering Definition, and

• comply with applicable requirements incorporated by reference to the Type Certificate and listed in the Type Certificate Data Sheet, and

• be approved by the Aviation Authority issuing the Export Airworthiness Certificate and by the Buyer’s Aviation Authority for installation and use on the Aircraft at the time of Delivery of the Aircraft, and

• not infringe any patent, copyright or other intellectual property right of the Seller or any third party, and

• not be subject to any legal obligation or other encumbrance that may prevent, hinder or delay the installation of the BFE in the Aircraft and/or the Delivery of the Aircraft.

The Seller shall be entitled to refuse any item of BFE that it considers incompatible with the Specification, the BFE Engineering Definition or the certification requirements.

18.1.7 Buyer’s Obligation and Seller’s Remedies

18.1.7.1 Any delay or failure by the Buyer or the BFE Suppliers in:

• complying with the foregoing warranty or in providing the BFE Engineering Definition or field service mentioned in Clause 18.1.2.2, or

• furnishing the BFE in a serviceable condition at the requested delivery date, or

• obtaining any required approval for such BFE equipment under the above mentioned Aviation Authorities’ regulations,

may delay the performance of any act to be performed by the Seller, including Delivery of the Aircraft. The Seller shall not be responsible for such delay which shall cause the Final Price of the Aircraft to be adjusted in accordance with the updated delivery schedule and to include in particular the amount of the Seller’s additional costs attributable to such delay or failure by the Buyer or the BFE Suppliers, such as storage, taxes, insurance and costs of out-of-sequence installation.

18.1.7.2 In addition, in the event of any delay or failure mentioned in 18.1.7.1 above, the Seller may:

(i) select, purchase and install equipment similar to the BFE at issue, in which event the Final Price of the affected Aircraft shall also be increased by the purchase price of such equipment plus reasonable costs and expenses incurred by the Seller for handling charges, transportation, insurance, packaging and, if so required and not already provided for in the Final Price of the Aircraft, for adjustment and calibration; or

(ii) [***].

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18.1.8 Title and Risk of Loss

Title to and risk of loss of any BFE shall at all times remain with the Buyer except that risk of loss (limited to cost of replacement of said BFE) shall be with the Seller for as long as such BFE is under the care, custody and control of the Seller.

18.1.9 Disposition of BFE Following Termination

18.1.9.1 If a termination of this Agreement pursuant to the provisions of Clause 20 occurs with respect to an Aircraft in which all or any part of the BFE has been installed prior to the date of such termination, the Seller shall be entitled, but not required, to remove all items of BFE that can be removed without damage to the Aircraft and to undertake commercially reasonable efforts to facilitate the sale of such items of BFE to other customers, retaining and applying the proceeds of such sales to reduce the Seller’s damages resulting from the termination.

18.1.9.2 The Buyer shall cooperate with the Seller in facilitating the sale of BFE pursuant to Clause 18.1.9.1 and shall be responsible for all costs incurred by the Seller in removing and facilitating the sale of such BFE. [***].

18.1.9.3 The Seller shall notify the Buyer as to those items of BFE not sold by the Seller pursuant to Clause 18.1.9.1 above and, at the Seller’s request, the Buyer shall undertake to remove such items from the Seller’s facility within thirty (30) days of the date of such notice. The Buyer shall have no claim against the Seller for damage, loss or destruction of any item of BFE removed from the Aircraft and not removed from Seller’s facility within such period.

18.1.9.4 The Buyer shall have no claim against the Seller for damage to or destruction of any item of BFE damaged or destroyed in the process of being removed from the Aircraft, provided that the Seller shall use reasonable care in such removal.

18.1.9.5 The Buyer shall grant the Seller title to any BFE items that cannot be removed from the Aircraft without causing damage to the Aircraft or rendering any system in the Aircraft unusable.

18.2 Airbus Contracted Supplier Equipment

18.2.1 Administration

In accordance with the Specification, the Seller shall install those items of equipment that are identified in the Specification as being ACS Equipment, provided that the ACS Equipment and the corresponding ACS Supplier of such ACS are referred to in the then applicable A350XWB Family Aircraft Description Document.

18.2.2 ACS Selection

18.2.2.1 The Buyer shall select ACS Equipment and all associated features out of the options proposed by the Seller [***].

18.2.2.2 [***]

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18.2.3 Meetings with ACS Suppliers

The Seller shall be entitled to request the participation of the Buyer in meetings with ACS Suppliers, subject to reasonable prior notice.

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19 INDEMNIFICATION AND INSURANCE

19.1 Indemnities Relating to Inspection, Technical Acceptance Process and Ground Training

19.1.1 The Seller shall, except in case of Gross Negligence of the Buyer, its directors, officers, agents or employees, be solely liable for and shall indemnify and hold harmless the Buyer, its Affiliates and each of their respective directors, officers, agents, employees and insurers from and against all liabilities, claims, damages, costs and expenses (including legal expenses and attorney fees) in respect of:

(i) loss of, or damage to, the Seller’s property;

(ii) injury to, or death of, the directors, officers, agents or employees of the Seller;

(iii) any damage caused by the Seller to third parties arising out of, or in any way connected with, any ground check, check or controls under Clause 6 or Clause 8 of this Agreement and/or Ground Training Services ; and

(iv) any damage caused by the Buyer and/or the Seller to third parties arising out of, or in any way connected with, technical acceptance flights under Clause 8 of this Agreement.

19.1.2 The Buyer shall, except in case of Gross Negligence of the Seller, its directors, officers, agents or employees, be solely liable for and shall indemnify and hold harmless the Seller, its Affiliates and each of their respective directors, officers, agents, employees, sub-contractors and insurers from and against all liabilities, claims, damages, costs and expenses (including legal expenses and attorney fees) in respect of:

(i) loss of, or damage to, the Buyer’s property;

(ii) injury to, or death of, the directors, officers, agents or employees of the Buyer; and

(iii) any damage caused by the Buyer to third parties arising out of, or in any way connected with, any ground check, check or controls under Clause 6 or Clause 8 of this Agreement and/or Ground Training Services.

19.2 Indemnities Relating to Training on Aircraft after Delivery

19.2.1 The Buyer shall, except in the case of Gross Negligence of the Seller, its directors, officers, agents and employees, be solely liable for and shall indemnify and hold harmless the Seller, its Affiliates and each of their respective directors, officers, agents, employees, sub-contractors and insurers from and against all liabilities, claims, damages, costs and expenses (including legal expenses and attorney fees) incident thereto or incident to successfully establishing the right to indemnification in respect of:

(i) injury to, or death of, any person (including any of the Buyer’s directors, officers, agents and employees, but not directors, officers, agents and employees of the Seller); and

(ii) loss of, or damage to, any property and for loss of use thereof (including the aircraft on which the Aircraft Training Services are performed),

arising out of, or in any way connected with, the performance of any Aircraft Training Services.

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19.2.2 The foregoing indemnity shall not apply with respect to the Seller’s legal liability towards any person other than the Buyer, its directors, officers, agents or employees arising out of an accident caused solely by a product defect in the Aircraft delivered to and accepted by the Buyer hereunder.

19.3 Indemnities relating to Seller Representatives Services

19.3.1 The Buyer shall, except in case of Gross Negligence of the Seller, its directors, officers, agents or employees, be solely liable for and shall indemnify and hold harmless the Seller, its Affiliates and each of their respective directors, officers, agents, employees, sub-contractors and insurers from and against all liabilities, claims, damages, costs and expenses (including legal expenses and attorney fees) in respect of:

(i) injury to, or death of, any person (except Seller’s Representatives); and

(ii) loss of, or damage to, any property and for loss of use thereof; arising out of, or in any way connected with the Seller’s Representatives Services.

19.3.2 The Seller shall, except in case of Gross Negligence of the Buyer, its directors, officers, agents or employees, be solely liable for and shall indemnify and hold harmless the Buyer, its Affiliates and each of their respective directors, officers, agents, employees and insurers from and against all liabilities, claims, damages, costs and expenses (including legal expenses and attorney fees) in respect of all injuries to, or death of, the Seller’s Representatives arising out of, or in any way connected with the Seller’s Representatives Services.

19.4 Insurances

To the extent of the Buyer’s undertaking set forth in Clause 19.2.1, for all training periods on aircraft, the Buyer shall:

(i) cause the Seller, its directors, officers, agents, employees, Affiliates and sub-contractors, and their respective insurers, to be named as additional insureds under the Buyer’s Comprehensive Aviation Legal Liability insurance policies, including War Risks and Allied Perils such insurance shall include the AVN 52E Extended Coverage Endorsement Aviation Liabilities as well as additional coverage in respect of War and Allied Perils Third parties Legal Liabilities Insurance; and

(ii) with respect to the Buyer’s Hull All Risks and Hull War Risks insurances and Allied Perils, cause the insurers of the Buyer’s hull insurance policies to waive all rights of subrogation against the Seller, its directors, officers, agents, employees, Affiliates and sub-contractors, and their respective insurers.

Any applicable deductible shall be borne by the Buyer.

With respect to the above policies, the Buyer shall furnish to the Seller, [***] to the start of any such training period, certificates of insurance from the Buyer’s insurance broker(s), in English, evidencing the limit of liability cover and period of insurance in a form acceptable to the Seller certifying that such policies have been endorsed as follows:

(i) under the Comprehensive Aviation Legal Liability Insurances, the Buyer’s policies are primary and non-contributory to any insurance maintained by the Seller;

(ii) such insurance can only be cancelled or materially altered by the giving of [***] prior written notice thereof to the Seller; and

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(iii) under any such cover, all rights of subrogation against the Seller, its directors, officers, agents, employees, Affiliates and sub-contractors, and their respective insurers, have been waived to the extent of the Buyer’s undertaking and specifically referring to Clause 19.2.1 and to this Clause 19.4.

19.5 Notice of Claims

If any claim is made or suit is brought against either party (or its respective directors, officers, agents, employees, Affiliates and sub-contractors) for damages for which liability has been assumed by the other party in accordance with the provisions of this Agreement, the party against which a claim is so made or suit is so brought shall promptly give notice to the other party, and the latter shall (unless otherwise requested by the party against which a claim is so made or suit is so brought, in which case the other party nevertheless shall have the right to) assume and conduct the defence thereof, or effect any settlement which it, in its opinion, deems proper.

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20 TERMINATION

20.1 Termination for Insolvency

In the event that either the Seller or the Buyer:

(a) makes a general assignment for the benefit of creditors or becomes insolvent;

(b) files a voluntary petition in bankruptcy;

(c) petitions for or acquiesces in the appointment of any receiver, trustee or similar officer to liquidate or conserve its business or any substantial part of its assets;

(d) commences under the laws of any competent jurisdiction any proceeding involving its insolvency, bankruptcy, readjustment of debt, liquidation or any other similar proceeding for the relief of financially distressed debtors;

(e) becomes the object of any proceeding or action of the type described in (c) or (d) above and such proceeding or action remains undismissed or unstayed for a period of [***]; or

(f) [***],

then the other party may, to the full extent permitted by law, by written notice, terminate all or part of this Agreement.

20.2 Termination for Non-Payment of Predelivery Payments

[***]

20.3 Termination for Failure to Take Delivery

If the Buyer fails to comply with its obligations as set forth under Clause 8 and/or Clause 9, or fails to pay the Final Price of the Aircraft, the Seller shall have the right to put the Buyer on notice to do so within a period of [***] after the date of such notification.

If the Buyer has not cured such default within such period, the Seller may, by written notice, terminate all or part of this Agreement with respect to undelivered Aircraft.

[***]

20.4 Termination for Default under other Agreements

If the Buyer or any of its Affiliates fails to perform or comply with any material obligation expressed to be assumed by it in any other agreement between the Buyer or any of its Affiliates and the Seller or any of its Affiliates and such failure is not remedied [***] after the Seller has given notice thereof to the Buyer, then the Seller may, by written notice, terminate all or part of this Agreement.

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20.5 General

20.5.1 To the full extent permitted by law, the termination of all or part of this Agreement pursuant to Clauses 20.1, 20.2, 20.3 and 20.4 shall become effective immediately upon receipt by the relevant party of the notice of termination sent by the other party without it being necessary for either party to take any further action or to seek any consent from the other party or any court or arbitral panel having jurisdiction.

20.5.2 The right for either party under Clause 20.1 and for the Seller under Clauses 20.2, 20.3, and 20.4 to terminate all or part of this Agreement shall be without prejudice to any other rights and remedies available to such party to seek termination of all or part of this Agreement before any court or arbitral panel having jurisdiction pursuant to any failure by the other party to perform its obligations under this Agreement.

20.5.3 If the party taking the initiative of terminating this Agreement decides to terminate part of it only, the notice sent to the other party shall specify those provisions of this Agreement which shall be terminated.

20.5.4 [***]

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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21 ASSIGNMENTS AND TRANSFERS

21.1 Assignments by Buyer

Except as hereinafter provided, the Buyer may not sell, assign, novate or transfer its rights and obligations under this Agreement to any person without the prior written consent of the Seller.

21.1.1 Assignments for Predelivery Financing

The Buyer shall be entitled to assign its rights under this Agreement at any time in order to provide security for the financing of any Predelivery Payments subject to such assignment being in form and substance acceptable to the Seller.

21.1.2 Assignments for Delivery Financing

The Buyer shall be entitled to assign its rights under this Agreement at any time in connection with the financing of its obligation to pay the Final Price subject to such assignment being in form and substance acceptable to the Seller.

21.2 Assignments by Seller

The Seller may at any time sell, assign, novate or transfer its rights and obligations under this Agreement to any person, provided such sale, assignment or transfer be notified to Buyer and shall not have a material adverse effect on any of Buyer’s rights and obligations under this Agreement.

21.2.1 Transfer of Rights and Obligations upon Restructuring

In the event that the Seller is subject to a corporate restructuring having as its object the transfer of, or succession by operation of law in, all or a substantial part of its assets and liabilities, rights and obligations, including those existing under this Agreement, to a person (“the Successor”) under the control of the ultimate controlling shareholders of the Seller at the time of that restructuring, for the purpose of the Successor carrying on the business carried on by the Seller at the time of the restructuring, such restructuring shall be completed without consent of the Buyer following notification by the Seller to the Buyer in writing. The Buyer recognises that succession of the Successor to the Agreement by operation of law, which is valid under the law pursuant to which that succession occurs, shall be binding upon the Buyer.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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22 MISCELLANEOUS PROVISIONS

22.1 Data Retrieval

On the Seller’s reasonable request, the Buyer shall provide the Seller with all the necessary data, as customarily compiled by the Buyer and pertaining to the operation of the Aircraft, to assist the Seller in making an efficient and coordinated survey of all reliability, maintenance, operational and cost data with a view to monitoring the efficient and cost effective operations of the Airbus fleet worldwide.

22.2 Notices

All notices and requests required or authorized hereunder shall be given in writing either by personal delivery to an authorized representative of the party to whom the same is given or by registered mail (return receipt requested), express mail (tracking receipt requested) or by facsimile, to be confirmed by subsequent registered mail, and the date upon which any such notice or request is so personally delivered or if such notice or request is given by registered mail, the date upon which it is received by the addressee or, if given by facsimile, the date upon which it is sent with a correct confirmation printout, provided that if such date of receipt is not a Business Day notice shall be deemed to have been received on the first following Business Day, shall be deemed to be the effective date of such notice or request.

Seller’s address for notices is:

[***]

Buyer’s address for notices is:

[***]

or such other address or such other person as the party receiving the notice or request may reasonably designate from time to time.

22.3 Waiver

The failure of either party to enforce at any time any of the provisions of this Agreement, or to exercise any right herein provided, or to require at any time performance by the other party of any of the provisions hereof, shall in no way be construed to be a present or future waiver of such provisions nor in any way to affect the validity of this Agreement or any part thereof or the right of the other party thereafter to enforce each and every such provision. The express waiver (whether made one (1) or several times) by either party of any provision, condition or requirement of this Agreement shall not constitute a waiver of any future obligation to comply with such provision, condition or requirement.

22.4 Law and Jurisdiction

22.4.1 This Agreement shall be governed by and construed in accordance with the laws of England.

22.4.2 Any dispute arising out of or in connection with this Agreement shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by three (3) arbitrators appointed in accordance with such rules.

[***].

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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22.5 Contracts (Rights of Third Parties) Act 1999

The parties do not intend that any term of this Agreement shall be enforceable solely by virtue of the Contracts (Rights of Third Parties) Act 1999 by any person who is not a party to this Agreement.

22.6 International Supply Contract

The Buyer and the Seller recognise that this Agreement is an international supply contract which has been the subject of discussion and negotiation, that all its terms and conditions are fully understood by the parties, and that the Specification and price of the Aircraft and the other mutual agreements of the parties set forth herein were arrived at in consideration of, inter alia, all the provisions hereof specifically including all waivers, releases and renunciations by the Buyer set out herein.

The Buyer and the Seller hereby also agree that the United Nations Convention on Contracts for the International Sale of Goods shall not apply to this transaction.

22.7 Severability

In the event that any provision of this Agreement should for any reason be held ineffective, the remainder of this Agreement shall remain in full force and effect. To the extent permitted by applicable law, each party hereto hereby waives any provision of law, which renders any provision of this Agreement prohibited or unenforceable in any respect.

22.8 Alterations to Contract

This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes any previous understandings, commitments or representations whatsoever oral or written in respect thereto. This Agreement shall not be varied except by an instrument in writing of date even herewith or subsequent hereto executed by the parties or by their duly authorised representatives.

22.9 Language

All correspondence, documents and any other written matters in connection with this Agreement shall be in English.

22.10 Counterparts

This Agreement has been executed in three (3) original copies.

Notwithstanding the above, this Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same Agreement.

22.11 Inconsistencies

In the event of any inconsistency between the terms of this Agreement and the terms contained in either (i) the Specification, or (ii) any other Exhibit, in each such case the terms of this Agreement shall prevail over the terms of the Specification or any other Exhibit. For the purpose of this Clause 22.11, the term Agreement shall not include the Specification or any other Exhibit hereto.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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22.12 Confidentiality

For the purpose of this Clause 22.12, the term “Buyer” shall, throughout this clause 22.12, be deemed to include the Consenting Party.

This Agreement including any Exhibits, other documents or data exchanged between the Seller and the Buyer for the fulfilment of their respective obligations under the Agreement shall be treated by both parties as confidential and shall not be released in whole or in part to any third party except as may be required by law, or to professional advisors for the purpose of implementation hereof or, in the case of the Seller, to the Propulsion Systems Manufacturer.

In particular, both parties agree:

• not to make any press release concerning the whole or any part of the contents and/or subject matter hereof or of any future addendum hereto without the prior written consent of the other party hereto.

• that any and all terms and conditions of the transaction contemplated in this Agreement are strictly personal and exclusive to the Buyer, including in particular, but not limited to, the Aircraft pricing (the “Personal Information”). The Buyer therefore agrees to enter into consultations with the Seller reasonably in advance of any required disclosure of Personal Information to financial institutions, including operating lessors, investment banks and their agents or other relevant institutions for aircraft sale and leaseback or any other Aircraft or Predelivery Payment financing purposes (the “Receiving party”).

Without limiting the generality of the foregoing, the Buyer will use its best efforts to limit the disclosure of the contents of this Agreement to the extent legally permissible in (i) any filing required to be made by the Buyer with any governmental agency and will make such applications as will be necessary to implement the foregoing, and (ii) any press release concerning the whole or any part of the contents and/or subject matter hereof or of any future addendum hereto. With respect to any public disclosure or filing (notably to the New York, Shanghai and Hong-Kong Stock Exchange), the Buyer agrees to request the Seller to provide a redacted version of this Agreement to be filed or disclosed and give the Seller a period of not less than 30 days to prepare such document. The Buyer and the Seller will consult with each other prior to the making of any public disclosure or filing, permitted hereunder, of this Agreement or the terms and conditions thereof.

The provisions of this Clause 22.12 shall survive any termination of this Agreement for a period of five (5) years.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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IN WITNESS WHEREOF this Agreement was entered into the day and year first above written.

For and on behalf of	For and on behalf of
CHINA SOUTHERN AIRLINES	AIRBUS S.A.S.
COMPANY LIMITED
Name:	Name:
Title:	Title:
Witnessed and acknowledged by:
CHINA SOUTHERN AIRLINES GROUP
IMPORT AND EXPORT TRADING CORP., LTD.
Name:
Title:

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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EXHIBIT A

E X H I B I T    A

S P E C I F I C A T I O N

[***].

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Exhibit A		Privileged and Confidential
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EXHIBIT A

Appendix 1

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Exhibit A		Privileged and Confidential
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EXHIBIT B

E X H I B I T    B

Exhibit B-1: Form of a Specification Change Notice

Exhibit B-2: Form of a Manufacturer’s Specification Change Notice

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Exhibit B		Privileged and Confidential
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DRAFT WITHOUT PREJUDICE EXHIBIT B-1

  SPECIFICATION CHANGE NOTICE   (SCN) For   SCN Number Issue Dated Page

Title :

Description :

Effect on weight :

• Manufacturer’s Weight Empty change :

• Operational Weight Empty change :

• Allowable Payload change :

Remarks / References

Specification changed by this SCN

This SCN requires prior or concurrent acceptance of the following SCN (s):

Price per aircraft

US DOLLARS:

AT DELIVERY CONDITIONS:

This change will be effective on                                     AIRCRAFT N°                                 and subsequent.

Provided approval is received by

Buyer approval	Seller approval
By :	By :
Date :	Date :

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Exhibit B		Privileged and Confidential
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DRAFT WITHOUT PREJUDICE EXHIBIT B-1

  SPECIFICATION CHANGE NOTICE   (SCN) For
  SCN Number Issue Dated Page

Specification repercussion:

After contractual agreement with respect to weight, performance, delivery, etc, the indicated part of the specification wording will read as follows:

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Exhibit B		Privileged and Confidential
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DRAFT WITHOUT PREJUDICE EXHIBIT B-1

  SPECIFICATION CHANGE NOTICE   (SCN) For
  SCN Number Issue Dated Page

Scope of change (FOR INFORMATION ONLY)

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Exhibit B		Privileged and Confidential
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DRAFT WITHOUT PREJUDICE EXHIBIT B-2

  MANUFACTURER’S SPECIFICATION CHANGE NOTICE   (MSCN) For
  MSCN Number Issue Dated Page

Title :

Description :

Effect on weight :

• Manufacturer’s Weight Empty change :

• Operational Weight Empty change :

• Allowable Payload change :

Remarks / References

Specification changed by this MSCN

Price per aircraft

US DOLLARS:

AT DELIVERY CONDITIONS:

This change will be effective on             AIRCRAFT N°             and subsequent.

Provided MSCN is not rejected by

Buyer approval	Seller approval
By :	By :
Date :	Date :

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Exhibit B		Privileged and Confidential
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DRAFT WITHOUT PREJUDICE EXHIBIT B-2

  MANUFACTURER’S SPECIFICATION CHANGE NOTICE   (MSCN) For   MSCN Number Issue Dated Page

Specification repercussion:

After contractual agreement with respect to weight, performance, delivery, etc, the indicated part of the specification wording will read as follows:

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - EXHIBIT B		Privileged and Confidential
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DRAFT WITHOUT PREJUDICE EXHIBIT B-2

MANUFACTURER’S SPECIFICATION CHANGE NOTICE   (MSCN) For   MSCN Number Issue Dated Page

Scope of change (FOR INFORMATION ONLY)

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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EXHIBIT C

[***] PRICE REVISION FORMULA

[***]

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Exhibit C		Privileged and Confidential
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EXHIBIT D

CERTIFICATE OF ACCEPTANCE

In accordance with the terms of clause          of the          purchase agreement dated                          and made between [name of the party to the Purchase Agreement] (the “Customer”) and Airbus S.A.S., as amended and supplemented from time to time (the “Purchase Agreement”), the technical acceptance tests relating to one Airbus [***] bearing manufacturer’s serial number              and registration mark          (the “Aircraft”) have taken place in Blagnac, France.

In view of said tests having been carried out with satisfactory results, the Customer, [as agent of [Name of party purchasing the Aircraft] (the “Owner”) pursuant to the purchase agreement assignment dated                          and made between the Customer and the Owner]¹, hereby approves the Aircraft as being in conformity with the provisions of the Purchase Agreement and accepts the Aircraft for delivery in accordance with the provisions of the Purchase Agreement.

Such acceptance shall not impair the rights that may be derived from the warranties relating to the Aircraft set forth in the Purchase Agreement.

Any right at law or otherwise to revoke this acceptance of the Aircraft is hereby irrevocably waived.

IN WITNESS WHEREOF, the Customer, [as agent of the Owner], has caused this instrument to be executed by its duly authorised representative this         day of                          in Blagnac, France.

[CUSTOMER] [as agent of the OWNER]

Name:

Title:

Signature:

¹  The wording underlined in yellow shall be added in case of assignment of the PA (e.g. Lessors, SPC)

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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EXHIBIT E

AIRCRAFT BILL OF SALE

(the “Bill of Sale”)

Know all men by these presents that Airbus S.A.S., a Société par Actions Simplifiée existing under French law and having its principal office at 1, rond-point Maurice Bellonte, 31707 Blagnac Cedex, FRANCE (the “Seller”), was, this          day of                     , the owner of the title to the following airframe (the “Airframe”), the [engines/propulsion systems] as specified (the “[Engines/Propulsion Systems]”) and all appliances, components, parts, instruments, accessories, furnishings, modules and other equipment of any nature, excluding buyer furnished equipment (“BFE”), incorporated therein, installed thereon or attached thereto on the date hereof (the “Parts”):

AIRFRAME:	[ENGINES/PROPULSION SYSTEMS]:
AIRBUS Model A3    -	[engine or p/s manufacturer] Model
MANUFACTURER’S SERIAL NUMBER:	ENGINE SERIAL NUMBERS:
	LH:
	RH:

REGISTRATION MARK:            

and had such title to the BFE as was acquired by it from [insert name of vendor of the BFE] pursuant to a bill of sale dated                             (the “BFE Bill of Sale”).

The Airframe, [Engines/Propulsion Systems] and Parts are hereafter together referred to as the “Aircraft”.

The Seller did, this          day of                         , sell, transfer and deliver all of its above described rights, title and interest in and to the Aircraft and the BFE to the following entity and to its successors and assigns forever, said Aircraft and the BFE to be the property thereof:

[Insert Name and Address of Buyer]

(the “Buyer”)

The Seller hereby warrants to the Buyer, its successors and assigns that it had (i) good and lawful right to sell, deliver and transfer title to the Aircraft to the Buyer and that there was conveyed to the Buyer good, legal and valid title to the Aircraft, free and clear of all liens, claims, charges, encumbrances and rights of others and that the Seller will warrant and defend such title forever against all claims and demands whatsoever and (ii) such title to the BFE as Seller has acquired from [insert name of vendor of the BFE] pursuant to the BFE Bill of Sale.

This Bill of Sale is governed by and shall be construed in accordance with the laws of [same governing law as in the Purchase Agreement].

IN WITNESS WHEREOF, the Seller has caused this instrument to be executed by its duly authorised representative this          day of                          in Blagnac, France.

AIRBUS S.A.S.

Name:

Title:

Signature:

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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EXHIBIT F

EXHIBIT F

S E R V I C E    L I F E    P O L I C Y

L I S T    O F    I T E M S    

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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EXHIBIT F

SELLER SERVICE LIFE POLICY

[***]

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Exhibit F		Privileged and Confidential
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EXHIBIT G

TECHNICAL DATA & SOFTWARE

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Exhibit G		Privileged and Confidential
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EXHIBIT G

TECHNICAL DATA & SOFTWARE

Where applicable, data shall be established in general compliance with the S1000D Specification jointly defined by the ASD (Aerospace and Defense Industries Association of Europe), AIA (Aerospace Industries Association) and ATA (Air Transport Association of America).

The Seller shall provide the Buyer with the following Technical Data (or such other equivalent Technical Data as may be applicable at the time of their provision to the Buyer).

1- [***]

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Exhibit G		Privileged and Confidential
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EXHIBIT H

E X H I B I T   H

M A T E R I A L

S U P P L Y    AND    S E R V I C E S

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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EXHIBIT H

[***]

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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EXHIBIT I

EXHIBIT I

LICENSES AND ON LINE SERVICES

[***]

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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EXHIBIT I

[***]

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Exhibit I		Privileged and Confidential
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CONTENTS

LETTER AGREEMENT	TITLES
Letter Agreement N°1	[***]
Letter Agreement N°2	[***]
Letter Agreement N°3	[***]
Letter Agreement N°4A	[***]
Letter Agreement N°4B	[***]
Letter Agreement N°5	[***]
Letter Agreement N°6	[***]
Letter Agreement N°7	[***]
Letter Agreement N°8	[***]
Letter Agreement N°9	[***]

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - INDEX	Privileged and Confidential
CT 1600622

LETTER AGREEMENT N°1

CHINA SOUTHERN AIRLINES

COMPANY LIMITED

Bai Yun Airport,

Guangzhou 510405,

People’s Republic of China

Subject : [***]

CHINA SOUTHERN AIRLINES COMPANY LIMITED (the “Buyer”) and AIRBUS S.A.S. (the “Seller”) have entered into a purchase agreement (the “Agreement”) dated as of even date herewith, as witnessed by CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD. (the “Consenting Party”) which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the [***] Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

The parties agree that this Letter Agreement, upon execution thereof, shall constitute an integral, non-severable part of said Agreement and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement.

If there is any inconsistency between the Agreement and this Letter Agreement, the latter shall prevail to the extent of such inconsistency.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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LETTER AGREEMENT N°1

[***]

[***] Assignment

Notwithstanding any other provision of this Letter Agreement or of the Agreement, this Letter Agreement and the rights and obligations of the Buyer herein shall not be assigned or transferred in any manner, and any attempted assignment or transfer in contravention of the provisions of this Clause shall be void and of no force or effect.

[***] Confidentiality

For the purpose of this Clause 9, the term “Buyer” shall be deemed to include a reference to the Consenting Party.

This Letter Agreement (and its existence) shall be treated by the Seller and the Buyer as confidential and shall not be released (or revealed) in whole or in part to any third party without the prior consent of the other party. In particular, each party agrees not to make any press release concerning the whole or any part of the contents and/or subject matter hereof or of any future addendum hereto without the prior consent of the other party.

[***] Law and Jurisdiction

This Letter Agreement shall be governed by, and construed in accordance with the laws of England and the provisions of Clause 22.4 of the Agreement shall apply to this Letter Agreement.    

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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LETTER AGREEMENT N°1

If the foregoing correctly sets forth our understanding, please execute three (3) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted	Agreed and Accepted
For and on behalf of	For and on behalf of
CHINA SOUTHERN AIRLINES	AIRBUS S.A.S.
COMPANY LIMITED

Signature:	Signature:
Name:	Name:
Title:	Title:

Witnessed and acknowledged by:

CHINA SOUTHERN AIRLINES GROUP

IMPORT AND EXPORT TRADING CORP., LTD.

Signature:

Name:

Title:

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°1		Privileged and Confidential
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LETTER AGREEMENT N°2

CHINA SOUTHERN AIRLINES

COMPANY LIMITED

Bai Yun Airport,

Guangzhou 510405,

People’s Republic of China

Subject : [***]

CHINA SOUTHERN AIRLINES COMPANY LIMITED (the “Buyer”) and AIRBUS S.A.S. (the “Seller”) have entered into a purchase agreement (the “Agreement”) dated as of even date herewith, as witnessed by CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD. (the “Consenting Party”) which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the [***] Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

The parties agree that this Letter Agreement, upon execution thereof, shall constitute an integral, non-severable part of said Agreement and shall be governed by all its provisions; as such provisions have been specifically amended pursuant to this Letter Agreement.

If there is any inconsistency between the Agreement and this Letter Agreement, the latter shall prevail to the extent of such inconsistency.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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LETTER AGREEMENT N°2

1 [***]

[***] Assignment

Notwithstanding any other provision of this Letter Agreement or of the Agreement, this Letter Agreement and the rights and obligations of the Buyer herein shall not be assigned or transferred in any manner, and any attempted assignment or transfer in contravention of the provisions of this Clause shall be void and of no force or effect.

[***] Confidentiality

For the purpose of this Clause 13 the term “Buyer” shall be deemed to include a reference to the Consenting Party.

This Letter Agreement (and its existence) shall be treated by the Seller and the Buyer as confidential and shall not be released (or revealed) in whole or in part to any third party without the prior consent of the other party. In particular, each party agrees not to make any press release concerning the whole or any part of the contents and/or subject matter hereof or of any future addendum hereto without the prior consent of the other party.

[***] Law and Jurisdiction

This Letter Agreement shall be governed by, and construed in accordance with, the laws of England and the provisions of Clause 22.4 of the Agreement shall apply to this Letter Agreement.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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LETTER AGREEMENT N°2

If the foregoing correctly sets forth our understanding, please execute three (3) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted	Agreed and Accepted
For and on behalf of	For and on behalf of
CHINA SOUTHERN AIRLINES	AIRBUS S.A.S.
COMPANY LIMITED
Signature:	Signature:
Name:	Name:
Title:	Title:
Witnessed and acknowledged by:
CHINA SOUTHERN AIRLINES GROUP
IMPORT AND EXPORT TRADING CORP., LTD.
Signature:
Name:
Title:

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

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LETTER AGREEMENT N°3

CHINA SOUTHERN AIRLINES

COMPANY LIMITED

Bai Yun Airport,

Guangzhou 510405,

People’s Republic of China

Subject : [***]

CHINA SOUTHERN AIRLINES COMPANY LIMITED (the “Buyer”) and AIRBUS S.A.S. (the “Seller”) have entered into a purchase agreement (the “Agreement”) dated as of even date herewith, as witnessed by CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD. (the “Consenting Party”) which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the [***] Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

The parties agree that this Letter Agreement, upon execution thereof, shall constitute an integral, non-severable part of said Agreement and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement.

If there is any inconsistency between the Agreement and this Letter Agreement, the latter shall prevail to the extent of such inconsistency.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°3		Privileged and Confidential
CT 1600622	Page 1/3

LETTER AGREEMENT N°3

1 [***]

[***] Assignment

Notwithstanding any other provision of this Letter Agreement or of the Agreement, this Letter Agreement and the rights and obligations of the Buyer herein shall not be assigned or transferred in any manner, and any attempted assignment or transfer in contravention of the provisions of this Clause shall be void and of no force or effect.

[***] Confidentiality

For the purpose of this Clause 3, the term “Buyer” shall be deemed to include a reference to the Consenting Party.

This Letter Agreement (and its existence) shall be treated by the Seller and the Buyer as confidential and shall not be released (or revealed) in whole or in part to any third party without the prior consent of the other party. In particular, each party agrees not to make any press release concerning the whole or any part of the contents and/or subject matter hereof or of any future addendum hereto without the prior consent of the other party.

[***] Law and Jurisdiction

This Letter Agreement shall be governed by, and construed in accordance with, the laws of England and the provisions of Clause 22.4 of the Agreement shall apply to this Letter Agreement.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°3		Privileged and Confidential
CT 1600622	Page 2/3

LETTER AGREEMENT N°3

If the foregoing correctly sets forth our understanding, please execute three (3) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted	Agreed and Accepted
For and on behalf of	For and on behalf of
CHINA SOUTHERN AIRLINES	AIRBUS S.A.S.
COMPANY LIMITED
Signature:	Signature:
Name:	Name:
Title:	Title:
Witnessed and acknowledged by:
CHINA SOUTHERN AIRLINES GROUP
IMPORT AND EXPORT TRADING CORP., LTD.
Signature:
Name:
Title:

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°3		Privileged and Confidential
CT 1600622	Page 3/3

LETTER AGREEMENT N°4A

CHINA SOUTHERN AIRLINES

COMPANY LIMITED

Bai Yun Airport,

Guangzhou 510405,

People’s Republic of China

Subject : [***]

CHINA SOUTHERN AIRLINES COMPANY LIMITED (the “Buyer”) and AIRBUS S.A.S. (the “Seller”) have entered into a purchase agreement (the “Agreement”) dated as of even date herewith, as witnessed by CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD. (the “Consenting party”) which covers the manufacture and the sale by the Seller and the purchase by the Buyer of [***] Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

The parties agree that this Letter Agreement, upon execution thereof, shall constitute an integral, non-severable part of said Agreement and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement.

If there is any inconsistency between the Agreement and this Letter Agreement, the latter shall prevail to the extent of such inconsistency.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°4A		Privileged and Confidential
CT 1600622	Page 1/4

LETTER AGREEMENT N°4A

1 [***]

[***] ASSIGNMENT

Notwithstanding any other provision of this Letter Agreement or of the Agreement, this Letter Agreement and the rights and obligations of the Buyer herein shall not be assigned or transferred in any manner, and any attempted assignment or transfer in contravention of the provisions of this Clause shall be void and of no force or effect.

[***] CONFIDENTIALITY

For the purpose of this Clause 13, the term “Buyer” shall be deemed to include a reference to the Consenting party.

This Letter Agreement (and its existence) shall be treated by the Seller and the Buyer as confidential and shall not be released (or revealed) in whole or in part to any third party without the prior consent of the other party. In particular, each party agrees not to make any press release concerning the whole or any part of the contents and/or subject matter hereof or of any future addendum hereto without the prior consent of the other party.

[***] LAW AND JURISDICTION

This Letter Agreement shall be governed by, and construed in accordance with, the laws of England and the provisions of Clause 22.4 of the Agreement shall apply to this Letter Agreement.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°4A		Privileged and Confidential
CT 1600622	Page 2/4

LETTER AGREEMENT N°4A

If the foregoing correctly sets forth our understanding, please execute three (3) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted	Agreed and Accepted
For and on behalf of	For and on behalf of
CHINA SOUTHERN AIRLINES	AIRBUS S.A.S.
COMPANY LIMITED
Signature:	Signature:
Name:	Name:
Title:	Title:
Witnessed and acknowledged by:
CHINA SOUTHERN AIRLINES GROUP
IMPORT AND EXPORT TRADING CORP., LTD.
Signature:
Name:
Title:

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°4A		Privileged and Confidential
CT 1600622	Page 3/4

LETTER AGREEMENT N°4A

[***]

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°4A		Privileged and Confidential
CT 1600622	Page 4/4

LETTER AGREEMENT N°4B

CHINA SOUTHERN AIRLINES

COMPANY LIMITED

Bai Yun Airport,

Guangzhou 510405,

People’s Republic of China

Subject : [***]

CHINA SOUTHERN AIRLINES COMPANY LIMITED (the “Buyer”) and AIRBUS S.A.S. (the “Seller”) have entered into a purchase agreement (the “Agreement”) dated as of even date herewith, as witnessed by CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD. (the “Consenting party”) which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the [***] Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

The parties agree that this Letter Agreement, upon execution thereof, shall constitute an integral, non-severable part of said Agreement and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement.

If there is any inconsistency between the Agreement and this Letter Agreement, the latter shall prevail to the extent of such inconsistency.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°4B		Privileged and Confidential
CT 1600622	Page 1/4

LETTER AGREEMENT N°4B

1 [***]

[***] ASSIGNMENT

Notwithstanding any other provision of this Letter Agreement or of the Agreement, this Letter Agreement and the rights and obligations of the Buyer herein shall not be assigned or transferred in any manner, and any attempted assignment or transfer in contravention of the provisions of this Clause shall be void and of no force or effect.

[***] CONFIDENTIALITY

For the purpose of this Clause 13, the term “Buyer” shall be deemed to include a reference to the Consenting party.

This Letter Agreement (and its existence) shall be treated by the Seller and the Buyer as confidential and shall not be released (or revealed) in whole or in part to any third party without the prior consent of the other party. In particular, each party agrees not to make any press release concerning the whole or any part of the contents and/or subject matter hereof or of any future addendum hereto without the prior consent of the other party.

[***] LAW AND JURISDICTION

This Letter Agreement shall be governed by, and construed in accordance with, the laws of England and the provisions of Clause 22.4 of the Agreement shall apply to this Letter Agreement.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°4B		Privileged and Confidential
CT 1600622	Page 2/4

LETTER AGREEMENT N°4B

If the foregoing correctly sets forth our understanding, please execute three (3) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted	Agreed and Accepted
For and on behalf of	For and on behalf of
CHINA SOUTHERN AIRLINES	AIRBUS S.A.S.
COMPANY LIMITED
Signature:	Signature:
Name:	Name:
Title:	Title:
Witnessed and acknowledged by:
CHINA SOUTHERN AIRLINES GROUP
IMPORT AND EXPORT TRADING CORP., LTD.
Signature:
Name:
Title:

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°4B		Privileged and Confidential
CT 1600622	Page 3/4

LETTER AGREEMENT N°4B

[***]

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°4B		Privileged and Confidential
CT 1600622	Page 4/4

LETTER AGREEMENT N°5

CHINA SOUTHERN AIRLINES

COMPANY LIMITED

Bai Yun Airport,

Guangzhou 510405,

People’s Republic of China

Subject : [***]

CHINA SOUTHERN AIRLINES COMPANY LIMITED (the “Buyer”) and AIRBUS S.A.S. (the “Seller”) have entered into a purchase agreement (the “Agreement”) dated as of even date herewith, as witnessed by CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD. (the “Consenting Party”) which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the [***] Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

The parties agree that this Letter Agreement, upon execution thereof, shall constitute an integral, non-severable part of said Agreement and shall be governed by all its provisions; as such provisions have been specifically amended pursuant to this Letter Agreement.

If there is any inconsistency between the Agreement and this Letter Agreement, the latter shall prevail to the extent of such inconsistency.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°5		Privileged and Confidential
CT 1600622	Page 1/3

LETTER AGREEMENT N°5

1 [***]

[***] Assignment

Notwithstanding any other provision of this Letter Agreement or of the Agreement, this Letter Agreement and the rights and obligations of the Buyer herein shall not be assigned or transferred in any manner, and any attempted assignment or transfer in contravention of the provisions of this Clause shall be void and of no force or effect.

[***] Confidentiality

For the purpose of this Clause 11, the term “Buyer” shall be deemed to include a reference to the Consenting Party.

This Letter Agreement (and its existence) shall be treated by the Seller and the Buyer as confidential and shall not be released (or revealed) in whole or in part to any third party without the prior consent of the other party. In particular, each party agrees not to make any press release concerning the whole or any part of the contents and/or subject matter hereof or of any future addendum hereto without the prior consent of the other party.

[***] Law and Jurisdiction

This Letter Agreement shall be governed by, and construed in accordance with, the laws of England and the provisions of Clause 22.4 of the Agreement shall apply to this Letter Agreement.    

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°5		Privileged and Confidential
CT 1600622	Page 2/3

LETTER AGREEMENT N°5

If the foregoing correctly sets forth our understanding, please execute three (3) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted	Agreed and Accepted
For and on behalf of	For and on behalf of
CHINA SOUTHERN AIRLINES	AIRBUS S.A.S.
COMPANY LIMITED
Signature:	Signature:
Name:	Name:
Title:	Title:
Witnessed and acknowledged by:
CHINA SOUTHERN AIRLINES GROUP
IMPORT AND EXPORT TRADING CORP., LTD.
Signature:
Name:
Title:

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°5		Privileged and Confidential
CT 1600622	Page 3/3

LETTER AGREEMENT N°6

CHINA SOUTHERN AIRLINES

COMPANY LIMITED

Bai Yun Airport,

Guangzhou 510405,

People’s Republic of China

Subject : [***]

CHINA SOUTHERN AIRLINES COMPANY LIMITED (the “Buyer”) and AIRBUS S.A.S. (the “Seller”) have entered into a purchase agreement (the “Agreement”) dated as of even date herewith, as witnessed by CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD. (the “Consenting Party”) which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the [***] Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

Both parties agree that this Letter Agreement, upon execution thereof, shall constitute an integral, non-severable part of said Agreement and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement.

If there is any inconsistency between the Agreement and this Letter Agreement, the latter shall prevail to the extent of such inconsistency.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°6		Privileged and Confidential
CT 1600622	Page 1/3

LETTER AGREEMENT N°6

1 [***]

[***] Assignment

Notwithstanding any other provision of this Letter Agreement or of the Agreement, this Letter Agreement and the rights and obligations of the Buyer herein shall not be assigned or transferred in any manner, and any attempted assignment or transfer in contravention of the provisions of this Clause shall be void and of no force or effect.

[***] Confidentiality

For the purpose of this Clause 10, the term “Buyer” shall be deemed to include a reference to the Consenting Party.

This Letter Agreement (and its existence) shall be treated by the Seller and the Buyer as confidential and shall not be released (or revealed) in whole or in part to any third party without the prior consent of the other party. In particular, each party agrees not to make any press release concerning the whole or any part of the contents and/or subject matter hereof or of any future addendum hereto without the prior consent of the other party.

[***] Law and Jurisdiction

This Letter Agreement shall be governed by, and construed in accordance with, the laws of England and the provisions of Clause 22.4 of the Agreement shall apply to this Letter Agreement.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°6		Privileged and Confidential
CT 1600622	Page 2/3

LETTER AGREEMENT N°6

If the foregoing correctly sets forth our understanding, please execute three (3) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted	Agreed and Accepted
For and on behalf of	For and on behalf of
CHINA SOUTHERN AIRLINES	AIRBUS S.A.S.
COMPANY LIMITED
Signature:	Signature:
Name:	Name:
Title:	Title:
Witnessed and acknowledged by:
CHINA SOUTHERN AIRLINES GROUP
IMPORT AND EXPORT TRADING CORP., LTD.
Signature:
Name:
Title:

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°6		Privileged and Confidential
CT 1600622	Page 3/3

LETTER AGREEMENT N°7

CHINA SOUTHERN AIRLINES

COMPANY LIMITED

Bai Yun Airport,

Guangzhou 510405,

People’s Republic of China

Subject : [***]

CHINA SOUTHERN AIRLINES COMPANY LIMITED (the “Buyer”) and AIRBUS S.A.S. (the “Seller”) have entered into a purchase agreement (the “Agreement”) dated as of even date herewith, as witnessed by CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD. (the “Consenting Party”) which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the [***] Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

The parties agree that this Letter Agreement, upon execution thereof, shall constitute an integral, non-severable part of said Agreement and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement.

If there is any inconsistency between the Agreement and this Letter Agreement, the latter shall prevail to the extent of such inconsistency.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°7		Privileged and Confidential
CT 1600622	Page 1/3

LETTER AGREEMENT N°7

1 [***]

[***] Assignment

Notwithstanding any other provision of this Letter Agreement or of the Agreement, this Letter Agreement and the rights and obligations of the Buyer herein shall not be assigned or transferred in any manner, and any attempted assignment or transfer in contravention of the provisions of this Clause shall be void and of no force or effect.

[***] Confidentiality

For the purpose of this Clause 3, the term “Buyer” shall be deemed to include a reference to the Consenting Party.

This Letter Agreement (and its existence) shall be treated by the Seller and the Buyer as confidential and shall not be released (or revealed) in whole or in part to any third party without the prior consent of the other party. In particular, each party agrees not to make any press release concerning the whole or any part of the contents and/or subject matter hereof or of any future addendum hereto without the prior consent of the other party.

[***] Law and Jurisdiction

This Letter Agreement shall be governed by, and construed in accordance with, the laws of England and the provisions of Clause 22.4 of the Agreement shall apply to this Letter Agreement.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°7		Privileged and Confidential
CT 1600622	Page 2/3

LETTER AGREEMENT N°7

If the foregoing correctly sets forth our understanding, please execute three (3) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted	Agreed and Accepted
For and on behalf of	For and on behalf of
CHINA SOUTHERN AIRLINES	AIRBUS S.A.S.
COMPANY LIMITED
Signature:	Signature:
Name:	Name:
Title:	Title:
Witnessed and acknowledged by:
CHINA SOUTHERN AIRLINES GROUP
IMPORT AND EXPORT TRADING CORP., LTD.
Signature:
Name:
Title:

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°7		Privileged and Confidential
CT 1600622	Page 3/3

LETTER AGREEMENT N°8

CHINA SOUTHERN AIRLINES

COMPANY LIMITED

Bai Yun Airport,

Guangzhou 510405,

People’s Republic of China

Subject : [***]

CHINA SOUTHERN AIRLINES COMPANY LIMITED (the “Buyer”) and AIRBUS S.A.S. (the “Seller”) have entered into a purchase agreement (the “Agreement”) dated as of even date herewith, as witnessed by CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD. (the “Consenting Party”) which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the [***] Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

The parties agree that this Letter Agreement, upon execution thereof, shall constitute an integral, non-severable part of said Agreement and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement.

If there is any inconsistency between the Agreement and this Letter Agreement, the latter shall prevail to the extent of such inconsistency.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°8		Privileged and Confidential
CT 1600622	Page 1/3

LETTER AGREEMENT N°8

1 [***].

[***] Assignment

Notwithstanding any other provision of this Letter Agreement or of the Agreement, this Letter Agreement and the rights and obligations of the Buyer herein shall not be assigned or transferred in any manner, and any attempted assignment or transfer in contravention of the provisions of this Clause shall be void and of no force or effect.

[***] Confidentiality

For the purpose of this Clause 4, the term “Buyer” shall be deemed to include a reference to the Consenting Party.

This Letter Agreement (and its existence) shall be treated by the Seller and the Buyer as confidential and shall not be released (or revealed) in whole or in part to any third party without the prior consent of the other party. In particular, each party agrees not to make any press release concerning the whole or any part of the contents and/or subject matter hereof or of any future addendum hereto without the prior consent of the other party.

[***] Law and Jurisdiction

This Letter Agreement shall be governed by, and construed in accordance with, the laws of England and the provisions of Clause 22.4 of the Agreement shall apply to this Letter Agreement.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°8		Privileged and Confidential
CT 1600622	Page 2/3

LETTER AGREEMENT N°8

If the foregoing correctly sets forth our understanding, please execute three (3) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted	Agreed and Accepted
For and on behalf of	For and on behalf of
CHINA SOUTHERN AIRLINES	AIRBUS S.A.S.
COMPANY LIMITED
Signature:	Signature:
Name:	Name:
Title:	Title:
Witnessed and acknowledged by:
CHINA SOUTHERN AIRLINES GROUP
IMPORT AND EXPORT TRADING CORP., LTD.
Signature:
Name:
Title:

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°8		Privileged and Confidential
CT 1600622	Page 3/3

LETTER AGREEMENT N°9

CHINA SOUTHERN AIRLINES

COMPANY LIMITED

Bai Yun Airport,

Guangzhou 510405,

People’s Republic of China

Subject : [***]

CHINA SOUTHERN AIRLINES COMPANY LIMITED (the “Buyer”) and AIRBUS S.A.S. (the “Seller”) have entered into a purchase agreement (the “Agreement”) dated as of even date herewith, as witnessed by CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD. (the “Consenting Party”) which covers the manufacture and the sale by the Seller and the purchase by the Buyer of the [***] Aircraft as described in the Agreement.

Capitalized terms used herein and not otherwise defined in this Letter Agreement shall have the meanings assigned thereto in the Agreement.

The parties agree that this Letter Agreement, upon execution thereof, shall constitute an integral, non-severable part of said Agreement and shall be governed by all its provisions, as such provisions have been specifically amended pursuant to this Letter Agreement.

If there is any inconsistency between the Agreement and this Letter Agreement, the latter shall prevail to the extent of such inconsistency.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°9		Privileged and Confidential
CT 1600622	Page 1/3

LETTER AGREEMENT N°9

1 [***]

[***] Assignment

Notwithstanding any other provision of this Letter Agreement or of the Agreement, this Letter Agreement and the rights and obligations of the Buyer herein shall not be assigned or transferred in any manner, and any attempted assignment or transfer in contravention of the provisions of this Clause shall be void and of no force or effect.

[***] Confidentiality

For the purpose of this Clause 28, the term “Buyer” shall be deemed to include a reference to the Consenting Party.

This Letter Agreement (and its existence) shall be treated by the Seller and the Buyer as confidential and shall not be released (or revealed) in whole or in part to any third party without the prior consent of the other party. In particular, each party agrees not to make any press release concerning the whole or any part of the contents and/or subject matter hereof or of any future addendum hereto without the prior consent of the other party.

[***] Law and Jurisdiction

This Letter Agreement shall be governed by, and construed in accordance with the laws of England and the provisions of Clause 22.4 of the Agreement shall apply to this Letter Agreement.

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°9		Privileged and Confidential
CT 1600622	Page 2/3

LETTER AGREEMENT N°9

If the foregoing correctly sets forth our understanding, please execute three (3) originals in the space provided below and return one (1) original of this Letter Agreement to the Seller.

Agreed and Accepted	Agreed and Accepted
For and on behalf of	For and on behalf of
CHINA SOUTHERN AIRLINES	AIRBUS S.A.S.
COMPANY LIMITED
Signature:	Signature:
Name:	Name:
Title:	Title:
Witnessed and acknowledged by:
CHINA SOUTHERN AIRLINES GROUP
IMPORT AND EXPORT TRADING CORP., LTD.
Signature:
Name:
Title:

[***] This information is subject to confidential treatment and has been omitted and filled separately with the commission.

CSN - A350XWB - Letter Agreement N°9		Privileged and Confidential
CT 1600622	Page 3/3

EX-4.44

Exhibit 4.44

AIRCRAFT FINANCE LEASE FRAMEWORK AGREEMENT

DURING THE SECOND HALF OF 2017

This Agreement is made on 26 May 2017 in Guangzhou by and between:

Party A: China Southern Airlines Company Limited

Address: Unit 301, 3/F, Office Tower, Guanhao Science Park Phase I, 12 Yuyan Street, Huangpu

District, Guangzhou, Guangdong Province

Legal Representative: Wang Chang Shun (王昌顺)

Party B: CSA International Finance Leasing Co., Ltd.* (南航国际融资租赁有限公司)

Address: X1301-I1254 (Own building No. 1), 106 Fengze Road East, Nansha District, Guangzhou

Legal Representative: Wang Jianjun (王建军)

As to Party B’s provision of aircraft related financing services to Party A, Party A and Party B, in the principle of equality and mutual benefit, and through friendly consultations, have reached a framework agreement as follows:

Chapter 1 General Provisions

1    As to that in the second half of 2017, Party A is proposed to introduce finance leasing business with regard to aircraft, Party A has agreed Party B to provide it each year with finance leasing service, the amount of which shall not be more than a half of the total amount for introducing the aircraft.

2    The integrated cost of Party B’s aircraft financing program provided to Party A and the fee quote of finance leasing service charge shall not be higher than that of the shortlisted financing program and the fee quote of finance leasing service charge from independent third parties invited by Party A for bids or inquiries.

Chapter 2 Specific Agreements

3    According to this Framework Agreement, Party A will enter into separate financing agreements with Party B with regard to the aircraft. The main content of such agreements will be as follows:

Lessor(s): Southern Airlines Lease or its wholly-owned subsidiaries set up in Guangzhou Nansha Bonded Port Area, China (Shanghai) Pilot Free Trade Zone, Tianjin Dongjiang Bonded Port Area or other areas.

Lessee(s): China Southern Airlines Company Limited or its wholly-owned / holding subsidiaries.

Subject matter: some aircrafts Party A plans to introduce in the second half of 2017.

Lease method: finance leasing

Financing amount: not more than 100% of the total purchase price of the subject matter.

Interest rate for lease: as agreed by Lessor and Lessee.

Total rental amount: including the principal and the interest.

Payment method: following the delivery date of the subject matter the rental shall be paid monthly, quarterly or semi-annually and on the basis of equal principal or equal principal of principal and interest. The Lessor shall issue to the Lessee special VAT invoice against the full amount of principal and interest of the finance leasing for the Lessee to use for deduction of VAT.

Lease service charge: For each aircraft, the Lessee shall pay finance leasing service charge to Party B or the Lessor prior to the delivery date of the aircraft. The finance leasing service charge for each aircraft shall not exceed 1% of the financing amount.

The ownership of the equipment to be leased: During the lease period, the Lessor shall have the ownership of the aircraft. Upon the payment of the final installment of rental and the final nominal repurchase price made by the Lessee to the Lessor, the Lessor shall transfer the ownership of the aircraft to the Lessee.

Chapter 3 Special Agreements

4    Both parties shall follow a fair and reasonable pricing principle based on market price. The preconditions for Party A’s selection of Party B to arrange finance leasing for it to introduce aircraft shall include:

(1) Party B shall operate stably and have the qualifications and abilities to be engaged in large-scale finance leasing transactions with regard to aircraft.

(2) Party B shall refer to results of bids or inquiries invited by Party A to provide financing program to Party A and the integrated cost of such program and the quoted finance leasing service charge shall not be higher than that of the shortlisted financing program and the quoted finance leasing service charge from independent third parties invited by Party A for bids or inquiries.

(3) The Lessor shall be able to issue to the Lessee special VAT invoice against the full amount of principal and interest of the finance leasing for the Lessee to use for deduction of VAT. Meanwhile, the finance leasing service charge shall be lower than the deductible VAT on interest, which will help lower the financing cost of the Lessee.

5    The total rental Party A shall pay in the lease period to Party B or the Lessor for the aircraft which will be introduced in the second half of 2017 and which have been introduced in the first half of 2017 shall not exceed the ceiling limit of US$1.3 billion or equivalent RMB.

6    The total finance leasing service charge Party A shall pay in the lease period to Party B or the Lessor for the aircraft which will be introduced in the second half of 2017 and which have been introduced in the first half of 2017 shall not exceed the ceiling limit of US$9.10 million or equivalent RMB.

Chapter 4 Liability for Breach of Contract

7    Party A and Party B shall perform their respective obligation under this Agreement strictly. Any party’s violation of this Agreement shall constitute a breach of this Agreement, and shall bear the liability for breach of contract under the relevant provisions of the Contract Law of the People ‘s Republic of China and the other party shall have the right to terminate this Agreement.

8    If one party only violates a specific agreement signed in accordance with this Framework Agreement, its liability shall be determined in accordance with the specific agreement and shall not affect the continuing performance of this Framework Agreement and other Special Agreements.

Chapter 5 Effective Date and Term of Validity of this Agreement

9    This Agreement shall be effective during the period commencing from 1 July 2017 to 31 December 2017. This Agreement shall be subject to the approval of the Board of Directors of Party A and its General Meeting. As of the Effective Date of this Agreement, this Agreement shall have legal binding effect on both parties.

10    In thirty (30) days prior to the expiration date of this Agreement, Party A and Party B may elect to extend this Agreement in written and through friendly consultations upon approval by the Board of Directors of Party A and its General Meeting, unless otherwise specified or required by the listing rules applicable to Party A.

Chapter 6 Supplementary Provisions

11    Without prior written consents of both parties hereto, any party shall not alter or modify any terms or contents of this Agreement. To have legal binding effect on both parties, any supplements or modifications shall be agreed by both parties and formed a written supplementary agreement.

12    Both parties shall further negotiate to sign any written supplementary agreement for any matters not covered under this Agreement. Such written supplementary agreement shall have same legal effect as this Agreement.

13    Both parties shall settle, through friendly negotiation, any dispute arising from or in connection with the interpretation, effect and performance of this Agreement. If such dispute cannot be settled through negotiation, either party shall have the right to submit such dispute to a competent People’s Court in Guangzhou City.

14    This Agreement is made in six copies, with each party holding three copies. Each copy shall have equal legal effect.

Party A: China Southern Airlines Company Limited

Authorized Representative:

Party B: CSA International Finance Leasing Co., Ltd.* (南航国际融资租赁有限公司)

Authorized Representative:

EX-4.45

Exhibit 4.45

2018 - 2019 FINANCE AND LEASE SERVICE FRAMEWORK AGREEMENT

This Agreement is made on 17 October 2017 in Guangzhou by and between:

“Party A” in this Agreement shall include China Southern Airlines Company Limited (the “Company”) and its wholly-owned and controlled subsidiaries. “Party B” in this Agreement shall include CSA International Finance Leasing Co., Ltd.* (南航国际融资租赁有限公司) (“CSA Leasing”) and its wholly-owned subsidiaries set up in Guangzhou Nansha Bonded Port Area, China (Shanghai) Pilot Free Trade Zone, Tianjin Dongjiang Bonded Port Area or other areas.

As to Party B’s provision of financing and lease services to Party A, Party A and Party B, in the principle of equality and mutual benefit, and through friendly consultations, have reached a framework agreement as follows:

Chapter 1 General Provisions

1    In 2018-2019, Party A intends to carry out finance leasing or operating lease business with regard to aircraft (including helicopter, collectively called “aircraft”), flight simulator, engine, air-material and special equipment (including special vehicle, transport, loading and unloading, security check, communication and navigation, flight training, maintenance and testing equipment, process equipment and etc., collectively called “special equipment”). Party A has agreed Party B to provide it with some of the foregoing finance leasing service or operating lease service each year.

Chapter 2 Specific Agreements

2    According to this Framework Agreement, Party A will enter into separate financing agreements with Party B with regard to the aircraft, simulator, engine, air-material and special equipment mentioned above. The main content of such agreements will be as follows:

Lessor: CSA Leasing or its wholly-owned subsidiaries set up in Guangzhou Nansha Bonded Port Area, China (Shanghai) Pilot Free Trade Zone, Tianjin Dongjiang Bonded Port Area or other areas.

Lessee(s): the Company or its wholly-owned / controlled subsidiaries.

Subject matter: some aircraft, simulator, engine, air-material and special equipment the Lessee plans to introduce in 2018-2019.

Lease method: finance leasing.

Financing amount: not more than 100% of the total purchase price of the subject matter.

Interest rate for lease: as agreed by Lessor and Lessee.

Total rental amount: including the principal and the interest.

Payment method: following the delivery date of the subject matter, the rental shall be paid in arrears monthly, quarterly or semi-annually. The principal is calculated on the principal of equal principal or equal principal and interest. The Lessor shall issue to the Lessee special VAT invoice against the full amount of principal and interest of the finance leasing service for the Lessee to use for deduction of VAT.

Lease service charge: As to the aircraft, simulator or engine, the finance leasing service charge Lessee needs to pay to Lessor prior to the delivery date shall not exceed 1% of the finance leasing amount. As to the air-material and special equipment, the finance leasing service charge Lessee needs to pay to Lessor prior to the delivery date shall not exceed 1.5% of the finance leasing amount.

The ownership of the equipment to be leased: During the lease period, the Lessor shall have the ownership of the subject matter. Upon the payment of the final installment of rental and the final nominal repurchase price made by the Lessee to the Lessor, the Lessor shall transfer the ownership of the subject matter to the Lessee.

3    According to this Framework Agreement, Party A will enter into separate operating lease agreements with regard to the aircraft and engine with Party B as per specific transactions. The main content of such agreements will be as follows:

Lessor(s): CSA Leasing or its wholly-owned subsidiaries set up in Guangzhou Nansha Bonded Port Area, China (Shanghai) Pilot Free Trade Zone, Tianjin Dongjiang Bonded Port Area or other areas.

Lessee(s): the Company or its wholly-owned/ holding subsidiaries.

Subject matter: aircraft and engine the Lessee plans to lease by means of operating lease during 1 January 2018 to 31 December 2019.

Lease method: Operating lease.

Rental: as agreed by Lessor and Lessee

Payment method: Following the delivery date or the subrogation date of the aircraft and/or the engine, the rental shall be paid in advance monthly, or quarterly .

The ownership of the equipment to be leased: During the lease period, the Lessor shall own the ownership of the aircraft and the engine while the Lessee shall enjoy the right to use the aircraft and the engine. Upon the end of the lease period, the Lessee shall return the aircraft and engine to the Lessor.

Chapter 3 Special Agreements

4    Both parties shall follow a fair and reasonable pricing principle based on market price.

5    The preconditions for Party A’s selection of Party B to arrange finance leasing service for it to introduce aircraft, simulator, engine, air-material and special equipment shall include:

(1) Party B shall operate stably and have the qualifications and abilities to be engaged in large-scale finance leasing service transactions with regard to aircraft, simulator, engine, air-material and special equipment.

(2) Party B shall refer to results of bids or inquiries invited by Party A to provide financing program to Party A and the integrated cost of such program and the quoted finance leasing service charge shall not be higher than that of the shortlisted financing program and the quoted finance leasing service charge from not less than 3 independent third parties invited by Party A for bids or inquiries.

(3) Party B shall be able to issue to the Lessee special VAT invoice against the full amount of principal and interest of the finance leasing service for the Lessee to use for deduction of VAT. Meanwhile, the finance leasing service charge shall be lower than the deductible VAT on interest, which will help lower the financing cost of Party A.

6    The preconditions for Party A’s selection of Party B’s aircraft or engine for use for operating lease shall include:

(1) Party B shall have the ownership of such aircraft or engine.

(2) The rental level of the aircraft or engine Party A will lease by means of operating lease from Party B shall be based on the rental of the aircraft or engine of the same type and age in China’s market in the same period and shall not be higher than the shortlisted operating lease rental quoted by not less than 3 independent third parties Party A will invite for bidding or inquiries.

7    The total rental Party A shall pay in the lease period to Party B for the aircraft, simulator, engine, air-material and special equipment introduced by finance leasing service shall not exceed the ceiling of US$2.6 billion or equivalent RMB in 2018 and the ceiling of US$3.1 billion or equivalent RMB in 2019. The total finance leasing service charge Party A shall pay in the lease period to Party B for the aircraft, simulator, engine, air-material and special equipment introduced by finance leasing service shall not exceed the ceiling of US$21 million or equivalent RMB in 2018 and shall not exceed the ceiling of US$26 million or equivalent RMB in 2019.

The total rental Party A shall pay in the lease period to Party B for the aircraft and engine introduced by operating lease shall not exceed the ceiling of US$150 million or equivalent RMB in 2018 and shall not exceed the ceiling of US$240 million or equivalent RMB in 2019.

Chapter 4 Liability for Breach of Contract

8    Party A and Party B shall perform their respective obligation under this Agreement strictly. Any party’s violation of this Agreement shall constitute a breach of this Agreement, and shall bear the liability for breach of contract under the relevant provisions of the Contract Law of the People ‘s Republic of China and the other party shall have the right to terminate this Agreement.

9    If one party only violates a specific agreement signed in accordance with this Framework Agreement, its liability shall be determined in accordance with the specific agreement and shall not affect the continuing performance of this Framework Agreement and other Special Agreements.

Chapter 5 Effective Date and Term of Validity of this Agreement

10    This Agreement shall be effective during the period commencing from 1 January 2018 to 31 December 2019. This Agreement shall be subject to the approval of Party A’s Board of Directors and its General Meeting. As of the Effective Date of this Agreement, this Agreement shall have legal binding effect on both parties.

11    During the period of thirty (30) days prior to the expiration date of this Agreement Party A and Party B may elect to extend this Agreement in written and through friendly consultations upon approval of Party A’s Board of Directors and its General Meeting, unless otherwise specified or required by the listing rules applicable to Party A.

Chapter 6 Supplementary Provisions

12    Without prior written consents of both parties hereto, any party shall not alter or modify any terms or contents of this Agreement. To have legal binding effect on both parties, any supplements or modifications shall be agreed by both parties and formed a written supplementary agreement.

13    Both parties shall further negotiate to sign any written supplementary agreement for any matters not covered under this Agreement. Such written supplementary agreement shall have same legal effect as this Agreement.

14    Both parties shall settle, through friendly negotiation, any dispute arising from or in connection with the interpretation, effect and performance of this Agreement. If such dispute cannot be settled through negotiation, either party shall have the right to submit such dispute to a competent People’s Court in Guangzhou City.

14    This Agreement is made in six copies, with each party holding three copies. Each copy shall have equal legal effect.

Party A:

Authorized Representative:

Party B:

Authorized Representative:

EX-4.46

Exhibit 4.46

PURCHASE AGREEMENT NUMBER GUN-PA-04666

between

THE BOEING COMPANY

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

as Consenting Party

Relating to Boeing Model 777-300ER Aircraft

(Contract Reference No.                                 )

This document has been redacted. The redacted information is subject to confidential treatment and has been omitted and filed separately with the commission.

	Page 1
BOEING PROPRIETARY

TABLE OF CONTENTS

ARTICLES
Article 1.	Quantity, Model and Description	5
Article 2.	Delivery Schedule	5
Article 3.	Price	6
Article 4.	Payment	6
Article 5.	Additional Terms	6
TABLE
1.	Aircraft Information Table
EXHIBIT
A.	Aircraft Configuration
B.	Aircraft Delivery Requirements and Responsibilities
SUPPLEMENTAL EXHIBITS
AE1.	[*CTR]
BFE1.	BFE Variables
CS1.	Customer Support Variables
EE1.	Engine Escalation Adjustment, Engine Warranty and Patent Indemnity
SLP1.	Service Life Policy Components

GUN-PA-04666		Page 3
	BOEING PROPRIETARY

LETTER AGREEMENTS

LA-1703143	LA-AGTA Terms Updates
LA-1703144	LA-Payment Matters
LA-1703145	LA-Clarifications and Understandings
LA-1703146	LA-Boeing BFE Purchase
LA-1703147	LA-Cabin Systems Equipment
LA-1703148	LA-Special Escalation Program
LA-1703149	LA-EULA Special Matters
LA-1703150	LA-Government Approval
LA-1703151	LA-Liquidated Damages Non-Excusable Delay
LA-1703152	LA-Loading of Customer Software
LA-1703153	LA-Performance Guarantees
LA-1703154	LA-Special Matters
LA-1703155	LA-Open Configuration Matters
LA-1705807	LA-Integrated Performance Remedy
LA-1706283	LA-Working Together

GUN-PA-04666		Page 4
	BOEING PROPRIETARY

PURCHASE AGREEMENT NO. PA-04666

between

THE BOEING COMPANY

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.

as Consenting Party

This Purchase Agreement No. PA-04666 between The Boeing Company, a Delaware corporation, (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Importand Export Trading Corp., Ltd. as consenting party (Consenting Party), binding and in full force and effect on the date executed below (Effective Date), relating to the purchase and sale of Model 777- 300ER aircraft together with all tables, exhibits, supplemental exhibits, letter agreements and other attachments thereto, if any, (Purchase Agreement) incorporates and amends the terms and conditions (except as specifically set forth below) of the Aircraft General Terms Agreement dated as of September 19, 2000, between Boeing and Consenting Party (formerly known as China Southern Airlines Group Import and Export Trading Corp., Ltd.), identified as AGTA-GUN (AGTA). All capitalized terms used but not defined in this Purchase Agreement have the same meaning as in the AGTA, except that the term “Buyer’ in the AGTA shall mean “Customer” in this Purchase Agreement.

1. Quantity. Model and Description.

The aircraft to be delivered to Customer will be designated as Model 777-300ER aircraft (Aircraft). Boeing will manufacture and sell to Customer Aircraft conforming to the configuration described in Exhibit A in the quantities listed in Table 1 to the Purchase Agreement.

2. Delivery Schedule.

The scheduled months of delivery of the Aircraft are listed in the attached Table 1. [*CTR], then only those obligations to be performed under the Purchase Agreement after the [*CTR] will be performed to the newly established scheduled delivery month. Exhibit B describes certain responsibilities for both Customer and Boeing in order to accomplish the delivery of the Aircraft.

GUN-PA-04666		Page 5
	BOEING PROPRIETARY

3. Price.

3.1 Aircraft Basic Price. The Aircraft Basic Price is listed in Table 1 and is subject to escalation in accordance with the terms of this Purchase Agreement.

3.2 Airframe Price. The Airframe Price reflected in Table 1 includes the engine price at its basic thrust level.

3.3 Advance Payment Base Prices. The Advance Payment Base Prices listed in Table 1 were calculated utilizing the latest escalation factors available to Boeing on the date of this Purchase Agreement projected to the month of scheduled delivery.

4. Payment.

4.1 Boeing acknowledges receipt of a deposit in the amount shown in Table 1 for each Aircraft (Deposit).

4.2 The standard advance payment schedule for the Model 777-300ER aircraft requires Customer to make certain advance payments, expressed in a percentage of the Advance Payment Base Price of each Aircraft beginning with a payment of [*CTR] due within [*CTR] of the Effective Date. Additional advance payments for each Aircraft are due as specified in and on the first business day of the months listed in the attached Table 1.

4.3 For any Aircraft whose scheduled month of delivery is less than twenty-four (24) months from the Effective Date, the total amount of advance payments due within [*CTR] Date will include all advance payments which are past due in accordance with the standard advance payment schedule set forth in paragraph 4.2 above.

4.4 Customer will pay the balance of the Aircraft Price of each Aircraft at delivery.

5. Additional Terms.

5.1 Aircraft Information Table. Table 1 consolidates information contained in Articles 1, 2, 3 and 4 with respect to (i) quantity of Aircraft, (ii) applicable Detail Specification, (iii) month and year of scheduled deliveries, (iv) Aircraft Basic Price,

(v) applicable escalation factors and (vi) Advance Payment Base Prices and advance payments and their schedules.

5.2 Airframe and Optional Features Escalation Adjustment. Supplemental Exhibit AE1 contains the applicable airframe and optional features escalation formula.

5.3 Buyer Furnished Equipment Variables. Supplemental Exhibit BFE1 contains supplier selection dates, on-dock dates and other variables applicable to the Aircraft.

GUN-PA-04666		Page 6
	BOEING PROPRIETARY

5.4 Customer Support Variables. Information, training, services and other things furnished by Boeing in support of introduction of the Aircraft into Customer’s fleet are described in Supplemental Exhibit CS1. If Customer obtains, or is set to obtain, duplicative training and planning assistance from that set out in Supplemental Exhibit CS1, then Boeing may adjust Supplemental Exhibit CS1 accordingly.

5.5 Engine Escalation Adjustment. Supplemental Exhibit EE1 contains: a) the engine escalation formula applicable to the Engine Price when such Engine Price is separately specified in Table 1, and b) the engine warranty and the engine patent indemnity for the Aircraft.

5.6 Service Life Policy Component Variables. Supplemental Exhibit SLP1 lists the SLP Components covered by the Service Life Policy for the Aircraft.

5.7 Public Announcement. Boeing reserves the right to make a public announcement regarding Customer’s purchase of the Aircraft upon approval of Boeing’s press release by Customer’s public relations department or other authorized representative.

5.8 Negotiated Agreement; Entire Agreement. This Purchase Agreement, including the provisions of Article 8.2 of the AGTA relating to insurance, and Article 11 of Part 2 of Exhibit C of the AGTA relating to DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES, has been the subject of discussion and negotiation and is understood by the parties, and the Aircraft Price and other agreements of the parties stated in this Purchase Agreement were arrived at in consideration of such provisions. This Purchase Agreement, including the AGTA, contains the entire agreement between the parties and supersedes all previous proposals, understandings, commitments or representations whatsoever, oral or written, and may be changed only in writing signed by authorized representatives of the parties.

AGREED AND ACCEPTED this
Date
THE BOEING COMPANY	CHINA SOUTHERN AIRLINES COMPANY LIMITED
Signature	Signature
M. Shelley
Printed name	Printed name
Attorney-in-Fact
Title	Title

GUN-PA-04666		Page 7
	BOEING PROPRIETARY

CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.

Signature

Printed name

Attorney-in-Fact

Title

GUN-PA-04666		Page 8
	BOEING PROPRIETARY

Table 1 To

Purchase Agreement No. PA-04666

Aircraft Delivery, Description, Price and Advance Payments

del/MTOW:	777-300ER	77[*CTR] pounds	Detail Specification:	D019W00 5-L (8/7/2015)
Engine Model/Thrust:	GE90-115BL	115,300 pounds	[*CTR] Formula:	1111 [*CTR]
Airframe Price:			Airframe Price Base Year/Escalation Formula: Engine Price Base Year/Escalation Formula:
Optional Features:	[*CTR]
Sub-Total of Airframe and Features:	[*CTR]		Airframe Escalation Data:
Enging Price (per Air craft):	$0		Base Yeal Index IIII	[*CTR]
Aircraft Basic Price (Excluding BFE /SPE):	-		BEK	-
Buye 1 Furnished Equipment (BFE) Estimate:	-
Seller Purchased Equipment (SPE)/1 n-Flight Entel	-
	[*CTR]

[*CTR]	Number of [*CTR]	Escalation Factor [*CTR]	Escalation Estimate Adv Payment Base [*CTR]	Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
				[*CTR]	[*CTR]	[*CTR]	[*CTR]
Ar-2019	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Ma-2019	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jul-2019	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Au-2019	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Oct-2019	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jan-2020	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Mar-2020	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
May-2020	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Total:	8

GUN-PA-04666		Page 1
	Boeing Proprietary

AIRCRAFT CONFIGURATION

between

THE BOEING COMPANY

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

as Consenting Party

EXHIBIT A to PURCHASE AGREEMENT NUMBER PA-

04666

	Page 1
BOEING PROPRIETARY

EXHIBIT A

AIRCRAFT CONFIGURATION

DATED <EXECUTIONDATE>

relating to

BOEING MODEL 777-300ER AIRCRAFT

The content of this Exhibit A will be defined pursuant to the provisions of Letter Agreement LA-1703155 to the Purchase Agreement, entitled “Open Configuration Matters”.

GUN-PA-04666-EXA		Page 2
	BOEING PROPRIETARY

AIRCRAFT DELIVERY REQUIREMENTS AND

RESPONSIBILITIES

between

THE BOEING COMPANY

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

as Consenting Party

EXHIBIT B to PURCHASE AGREEMENT NUMBER PA-

04666

	Page 1
BOEING PROPRIETARY

EXHIBIT B

AIRCRAFT DELIVERY REQUIREMENTS AND RESPONSIBILITIES

relating to

BOEING MODEL 777-300ER AIRCRAFT

Both Boeing and Customer have certain documentation and approval responsibilities at various times during the construction cycle of the Aircraft that are critical to making the delivery of each Aircraft a positive experience for both parties. This Exhibit B documents those responsibilities and indicates recommended completion deadlines for the actions to be accomplished.

1. GOVERNMENT DOCUMENTATION REQUIREMENTS.

Certain actions are required to be taken by Customer in advance of the scheduled delivery month of each Aircraft with respect to obtaining certain government issued documentation.

1.1 Airworthiness and Registration Documents. Not later than [*CTR] Customer will notify Boeing of the registration number to be painted on the side of the Aircraft. If required by the regulatory authority, Customer will authorize, by letter to the regulatory authority having jurisdiction, the display of such registration numbers by Boeing during the pre-delivery testing of the Aircraft, no later than [*CTR] of each Aircraft.

Customer is responsible for furnishing any temporary or permanent registration certificates required by any governmental authority having jurisdiction to be displayed aboard the Aircraft after delivery.

1.2 Certificate of Sanitary Construction.

1.2.1 U.S. Registered Aircraft. Boeing will obtain from the United States Public Health Service, a United States Certificate of Sanitary Construction to be displayed aboard each Aircraft after delivery to Customer. The above Boeing obligation only applies to commercial passenger aircraft.

1.2.2 Non-U.S. Registered Aircraft. If Customer requires a United States Certificate of Sanitary Construction at the time of delivery of the Aircraft, Customer will give written notice thereof to Boeing at least [*CTR]. Boeing will then use commercially reasonable efforts to obtain the certificate from the United States Public Health Service and present it to Customer at the time of Aircraft delivery. The above Boeing obligation only applies to commercial passenger aircraft.

1.3 Customs Documentation.

1.3.1 Import Documentation. If the Aircraft is intended to be exported from the United States, Customer must notify Boeing not later than [*CTR] of any documentation required by the customs authorities or by any other agency of the country of import.

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	BOEING PROPRIETARY

1.3.2 General Declaration - U.S. If the Aircraft is intended to be exported from the United States, Boeing will prepare Customs Form 7507, General Declaration, for execution by U.S. Customs immediately prior to the ferry flight of the Aircraft. For this purpose, Customer will furnish to Boeing not later than [*CTR] all information required by U.S. Customs and Border Protection, including without limitation (i) a complete crew and passenger list identifying the names, birth dates, passport numbers and passport expiration dates of all crew and passengers and (ii) a complete ferry flight itinerary, including point of exit from the United States for the Aircraft.

If Customer intends, during the ferry flight of an Aircraft, to land at a U.S. airport after clearing Customs at delivery, Customer must notify Boeing not later than [*CTR] of such intention. If Boeing receives such notification, Boeing will provide to Customer the documents constituting a customs permit to proceed, allowing such Aircraft to depart after any such landing. Sufficient copies of completed Form 7507, along with passenger manifest, will be furnished to Customer to cover U.S. stops scheduled for the ferry flight.

1.3.3 Export Declaration - U.S. If the Aircraft is intended to be exported from the United States following delivery, and (i) Customer is a non-U.S. customer, Boeing will file an export declaration electronically with U.S. Customs and Border Protection (CBP), or (ii) Customer is a U.S. customer, it is the responsibility of the U.S. customer, as the exporter of record, to file the export declaration with CBP.

2. INSURANCE CERTIFICATES.

Unless provided earlier, Customer will provide to Boeing not later than [*CTR] a copy of the requisite annual insurance certificate in accordance with the requirements of Article 8 of the AGTA.

3. NOTICE OF FLYAWAY CONFIGURATION.

Not later than [*CTR] of the Aircraft, Customer will provide to Boeing a configuration letter stating the requested “flyaway configuration” of the Aircraft for its ferry flight. This configuration letter should include:

(i) the name of the company which is to furnish fuel for the ferry flight and any scheduled post-delivery flight training, the method of payment for such fuel, and fuel load for the ferry flight;

(ii) the cargo to be loaded and where it is to be stowed on board the Aircraft, the address where cargo is to be shipped after flyaway and notification of any hazardous materials requiring special handling;

(iii) any BFE equipment to be removed prior to flyaway and returned to Boeing BFE stores for installation on Customer’s subsequent Aircraft;

GUN-PA-04666-EXB		Page 3
	BOEING PROPRIETARY

(iv) a complete list of names and citizenship of each crew member and non-revenue passenger who will be aboard the ferry flight; and

(v) a complete ferry flight itinerary.

4. DELIVERY ACTIONS BY BOEING.

4.1 Schedule of Inspections. All FAA, Boeing, Customer and, if required, U.S. Customs Bureau inspections will be scheduled by Boeing for completion prior to delivery or departure of the Aircraft. Customer will be informed of such schedules.

4.2 Schedule of Demonstration Flights. All FAA and Customer demonstration flights will be scheduled by Boeing for completion prior to delivery of the Aircraft.

4.3 Schedule for Customer’s Flight Crew. Boeing will inform Customer of the date that a flight crew is required for acceptance routines associated with delivery of the Aircraft.

4.4 Fuel Provided by Boeing. Boeing will provide to Customer, without charge, the amount of fuel shown in U.S. gallons in the table below for the model of Aircraft being delivered and full capacity of engine oil at the time of delivery or prior to the ferry flight of the Aircraft.

Aircraft Model	Fuel Provided
777		[*CTR]

4.5 Flight Crew and Passenger Consumables. Boeing will provide reasonable quantities of food, coat hangers, towels, toilet tissue, drinking cups and soap for the first segment of the ferry flight for the Aircraft.

4.6 Delivery Papers, Documents and Data. Boeing will have available at the time of delivery of the Aircraft certain delivery papers, documents and data for execution and delivery. If the Aircraft will be registered with the FAA, Boeing will pre-position in Oklahoma City, Oklahoma, for filing with the FAA at the time of delivery of the Aircraft an executed original Form 8050-2, Aircraft Bill of Sale, indicating transfer of title to the Aircraft from Boeing to Customer.

4.7 Delegation of Authority. If specifically requested in advance by Customer, Boeing will present a certified copy of a delegation of authority, designating and authorizing certain persons to act on its behalf in connection with delivery of the Aircraft.

5. DELIVERY ACTIONS BY CUSTOMER.

5.1 Aircraft Radio Station License. At delivery Customer will provide its aircraft radio station license to be placed on board the Aircraft following delivery.

5.2 Aircraft Flight Log. At delivery Customer will provide the aircraft flight log for the Aircraft.

5.3 Delegation of Authority. Customer will present to Boeing at delivery of the Aircraft an original or certified copy of Customer’s delegation of authority designating and authorizing certain persons to act on its behalf in connection with delivery of the specified Aircraft.

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	BOEING PROPRIETARY

5.4 TSA Waiver Approval. Customer may be required to have an approved Transportation Security Administration (TSA) waiver for the ferry flight depending upon the Customer’s en-route stop(s) and destination unless the Customer already has a TSA approved security program in place. Customer is responsible for application of the TSA waiver and obtaining TSA approval. Customer will provide a copy of the approved TSA waiver to Boeing upon arrival at the Boeing delivery center.

5.5 Electronic Advance Passenger Information System. Should the ferry flight of an Aircraft leave the United States, the Department of Homeland Security office requires Customer to comply with the Electronic Advance Passenger Information System (eAPIS). Customer needs to establish their own account with US Customs and Border Protection in order to file for departure. A copy of the eAPIS forms is to be provided by Customer to Boeing upon arrival of Customer’s acceptance team at the Boeing delivery center.

GUN-PA-04666-EXB		Page 5
	BOEING PROPRIETARY

AIRFRAME AND OPTIONAL FEATURES

ESCALATION ADJUSTMENT

between

THE BOEING COMPANY

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

as Consenting Party

Supplemental Exhibit AE1

to Purchase Agreement Number PA-04666

	Page 1
BOEING PROPRIETARY

AIRFRAME AND OPTIONAL FEATURES

ESCALATION ADJUSTMENT

relating to

BOEING MODEL 777-300ER AIRCRAFT

1. Formula.

Airframe and Optional Featuresprice adjustments (Airframe Price Adjustment) are used to allow prices to be stated in current year dollars at the signing of this Purchase Agreement and to adjust the amount to be paid by Customer at delivery for the effects of economic fluctuation. The Airframe Price Adjustment will be determined at the time of Aircraft delivery in accordance with the following formula:

[*CTR]

Where:

[*CTR]

[*CTR]

[*CTR]

Where:

1111 is the base year airframe escalation index (as set forth in Table 1 of this Purchase Agreement);

[*CTR]

- is a value determined using the U.S. Department of Labor, Bureau of Labor Statistics, [*CTR] ca cu a e y es a 1s 1ng a [*CTR] arithmetic average value (expressed as a decimal and rounded to the nearesenth) using the values for [*CTR] months prior to the month of scheduled delivery of the applica e ircra. s employment Cost Index values are only released on a quarterly basis, the value released for the first quarter will be used for the months of January, February, and March; the value released for the second quarter will be used for the months of April, May, and June; the value released for the third quarter will be used for the months of July, August, and September; the value released for the fourth quarter will be used for the months of October, November and December.

GUN-PA-04666-AE1		Page 2
	BOEING PROPRIETARY

[*CTR]

Where:

is the base year index (as set forth in Table 1 of this Purchase Agreement); and

is a value determined using the U.S. Department of Labor, Bureau of Labor [*CTR], calculated as a [*CTR] month arithmetic average of the released monthly values (expressed ressed as a dec1ma and rounded to the nearest tenth) using the values for the [*CTR] months prior to the month of scheduled delivery of the applicable Aircraft.

II [*CTR]

Where:

I is the number of calendar months which have elapsed from the Airframe Price base year and month up to and including the month of                     shown in Table 1 of the Purchase Agreement. The entire calculationo-                     will be rounded to 4 places, and the final value of B will be rounded to the nearest dollar.

As an example, for an Aircraft scheduled to be delivered in the month of July, the months of J nd August of the preceding year will be utilized in determni ing the value of _                     _

Note:

(i) In determni ing the values of L and M, all calculations and resulting values will be expressed as a decimal rounded to the nearestten-thousandth.

(ii) • is the numeric ratio attributed to labor in the Airframe Price Adjustment formula.

(iii) • is the numeric ratio attributed to materials in the Airframe Price Adjustment formula.

(iv) The denominators (base year indices) are the actual average values reported by the U.S. Department of Labor, Bureau of Labor Statistics. The actual average values are calculated as a -                     month arithmetic average of the released moiiT!iiyvaTu’ es (expressed as a decimal and rounded to the nearest tenth) using the values for the -                     months prior to the airframe base             able base year and corresponding denominator is provided by Boeing in Table 1 of this Purchase Agreement.

GUN-PA-04666-AE1		Page 3
	BOEING PROPRIETARY

(v) The final value of [*CTR] will be rounded to the nearest dollar.

(vi) The Airframe Price Adjustment will not be made if it will result in a decrease in the Aircraft Basic Price.

2. Values to be Utilized in the Event of Unavailability.

2.1 If the Bureau of Labor Statistics substantially revises the methodology used for the determination of the values to be used to determine the [*CTR] values (in contrast to benchmark adjustments or other corrections of previously released values), or for any reason has not released values needed to determine the applicable Airframe Price Adjustment, the parties will, prior to the delivery of any such Aircraft, select a substitute from other Bureau of Labor Statistics data or similar data reported by non-governmental organizations. Such substitute will result in the same adjustment, insofar as possible, as would have been calculated utilizing the original values adjusted for fluctuation during the applicable time period. However, if [*CTR] months after delivery of the Aircraft, the Bureau of Labor Statistics should resume releasing values for the months needed to determine the Airframe Price Adjustment; such values will be used to determine any increase or decrease in the Airframe Price Adjustment for the Aircraft from that determined at the time of delivery of the Aircraft.

2.2 Notwithstanding Article 2.1 above, if prior to the scheduled delivery month of an Aircraft the Bureau of Labor Statistics changes the base year for determination of the [*CTR] values as defined above, such re-based values will be incorporated in the Airframe Price Adjustment calculation.

2.3 In the event escalation provisions are made non-enforceable or otherwise rendered void by any agency of the United States Government, the parties agree, to the extent they may lawfully do so, to equitably adjust the Aircraft Price of any affected Aircraft to reflect an allowance for increases or decreases consistent with the applicable provisions of paragraph 1 of this Supplemental Exhibit AE1 in labor compensation and material costs occurring since [*CTR] months prior to the price base year shown in the Purchase Agreement.

2.4 If within [*CTR] months of Aircraft delivery, the published index values are revised due to an acknowledged error by the Bureau of Labor Statistics, the Airframe Price Adjustment will be re-calculated using the revised index values (this does not include those values noted as preliminary by the Bureau of Labor Statistics). A credit memorandum or supplemental invoice will be issued for the Airframe Price Adjustment difference. Interest charges will not apply for the period of original invoice to issuance of credit memorandum or supplemental invoice.

GUN-PA-04666-AE1		Page 4
	BOEING PROPRIETARY

Note:

(i) The values released by the Bureau of Labor Statistics and available to Boeing [*CTR] prior to the first day of the scheduled delivery month of an Aircraft will be used to determine the [*CTR] values for the applicable months (including those noted as preliminary by the Bureau of Labor Statistics) to calculate the

Airframe Price Adjustment for the Aircraft invoice at the time of delivery. The values will be considered final and no Airframe Price Adjustments will be made after Aircraft delivery for any subsequent changes in published index values, subject always to paragraph 2.4 above.

(ii) The maximum number of digits to the right of the decimal after rounding utilized in any part of the Airframe Price Adjustment equation will be 4, where rounding of the fourth digit will be increased to the next highest digit when the 5th digit is equal to five (5) or greater.

GUN-PA-04666-AE1		Page 5
	BOEING PROPRIETARY

BUYER FURNISHED EQUIPMENT VARIABLES

between

THE BOEING COMPANY

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

as Consenting Party

Supplemental Exhibit BFE1

to Purchase Agreement Number PA-04666

	Page 1
BOEING PROPRIETARY

BUYER FURNISHED EQUIPMENT VARIABLES

relating to

BOEING MODEL 777-300ER AIRCRAFT

This Supplemental Exhibit BFE1 contains supplier selection dates, on-dock dates and other requirements applicable to the Aircraft.

1. Supplier Selection.

Customer will:

Select and notify Boeing of the suppliers, model and part numbers of the following BFE items by the following dates:

Galley System	[*CTR]
Galley Inserts	[*CTR]
Seats (Suites)	[*CTR]
Seats (F/C, B/C, Premium E/C)	[*CTR]
Seats (Economyclass)	[*CTR]
Overhead & Audio System	[*CTR]
In-Seat Video System	[*CTR]
Miscellaneous Emergency Equipment	[*CTR]

2. . On-dock Dates and Other Information.

On or before- months prior to each aircraft delivery, Boeing will provide to Customer the BFE Requirements. These requirements may be periodically revised, setting forth the items, quantities, on-dock dates and shipping instructions and other requirements relating to the in-sequence installation of BFE. For planning purposes, preliminaryBFE on-dock dates are set forth below:

GUN-PA-04666-BFE1		Page 2
	BOEING PROPRIETARY

Nominal Del Date	Aircraft Qty	Seats	Galley / Furnishings	Antennas & Mounting Equipment	Avionics	Cabin Systems Equipment	Misc. Emergency Equipment	Textiles / Raw Materials
Apr 2019	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
May 2019	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jul 2019	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Au 2019	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Oct 2019	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jan 2020	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Mar 2020	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Ma 2020	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Total	8	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]

3. Additional Delivery Requirements - Import.

Customer will be the importer of record (as defined by the U.S. Customs and Border Protection) for all BFE imported into the United States, and as such, it has the responsibility to ensure all of Customer’s BFE shipments comply with U.S. Customs Service regulations. In the event Customer requests Boeing, in writing, to act as importer of record for Customer’s BFE, and Boeing agrees to such request, Customeris responsible for ensuring Boeing can comply with all U.S. Customs Import Regulations by making certain that, at the time of shipment, all BFE shipments comply with the requirements in the “International Shipment Routing Instructions”, including the Customs Trade Partnership Against Terrorism (C-TPAT), as set out on the Boeing website referenced below. Customer agrees to include the International Shipment Routing Instructions, including C-TPAT requirements, in each contract between Customer and BFE supplier.

http://www.boeing.com/companyoffice/sdoingbiz/supplier portal/index general.html

GUN-PA-04666-BFE1		Page 3
	BOEING PROPRIETARY

CUSTOMER SUPPORT VARIABLES

BETWEEN

THE BOEING COMPANY

AND

China Southern Airlines Company Limited

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

as Consenting Party

Supplemental Exhibit CS1

to Purchase Agreement Number PA-04666

	Page 1
BOEING PROPRIETARY

CUSTOMER SUPPORT VARIABLES

relating to

Boeing Model 777-300ER Aircraft

Customer currently operates an aircraft of the same model as the Aircraft. Upon Customer’s request, Boeing will develop and schedule a customized support program (Customer Support Program) to be furnished in support of the Aircraft. The Customer Support Program will be based upon and equivalent to the entitlements summarized below.

1. Maintenance Training.

1.1 Maintenance Training Minor Model Differences Course, if required, covering operational, structural or systems differences between Customer’s newly-purchased Aircraft and an aircraft of the same model currently operated by Customer; [*CTR]

1.2 Training materials, if applicable, will be provided to each student. In addition, [*CTR].

2. Flight Training.

Boeing will provide, if required, [*CTR]

3. Planning Assistance.

3.1 Maintenance Engineering. Notwithstanding anything in Exhibit B to the AGTA to the contrary, Boeing will provide the following maintenance engineering support:

3.1.1 Maintenance Planning Assistance. [*CTR]

3.1.2 ETOPS Maintenance Planning Assistance. [*CTR]

3.1.3 GSE/Shops/Tooling Consulting. [*CTR]

GUN-PA-04666-CS1		Page 2
	BOEING PROPRIETARY

3.2 Spares. [*CTR]

4. Technical Data and Documents.

[*CTR]

4.1 Fleet Statistical Data and Report.

[*CTR]

5.1 Aircraft Information.

5.1 Aircraft Information. [*CTR]

5.2 [*CTR]

For purposes of this article, Boeing is defined as The Boeing Company and its wholly owned subsidiaries.

Customer will provide [*CTR]

GUN-PA-04666-CS1		Page 3
	BOEING PROPRIETARY

ENGINE ESCALATION ADJUSTMENT,

ENGINE WARRANTY AND PATENT INDEMNITY

between

THE BOEING COMPANY

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

as Consenting Party

Supplemental Exhibit EE1

to Purchase Agreement Number PA-04666

	Page 1
BOEING PROPRIETARY

ENGINE ESCALATION ADJUSTMENT,

ENGINE WARRANTY AND PATENT INDEMNITY

relating to

BOEING MODEL 777-300ER AIRCRAFT

1. ENGINE ESCALATION.

[*CTR]

2. ENGINE WARRANTY AND PRODUCT SUPPORT PLAN.

[*CTR]

[*CTR].

GUN-PA-04666-EE1		Page 2
	BOEING PROPRIETARY

SERVICE LIFE POLICY COMPONENTS

between

THE BOEING COMPANY

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

as Consenting Party

SUPPLEMENTAL EXHIBIT SLP1

to PURCHASE AGREEMENT NUMBER PA-04666

	Page 1
BOEING PROPRIETARY

SERVICE LIFE POLICY COMPONENTS

relating to

BOEING MODEL 777-300ER AIRCRAFT

This is the listing of SLP Components for the Aircraft which relate to Part 3, Boeing Service Life Policy of Exhibit C, Product Assurance Document to the AGTA and is a part of Purchase Agreement No. PA-04666.

1. Wing.

(i) Upper and lower wing skins and stiffeners between the forward and rear wing spars.

(ii) Wing spar webs, chords and stiffeners.

(iii) Inspar wing ribs.

(iv) Inspar splice plates and fittings.

(v) Main landing gear support structure.

(vi) Wing center section lower beams, spanwise beams and floor beams, but not the seat tracks attached to floor beams.

(vii) Wing-to-body structural attachments.

(viii) Engine strut support fittings attached directly to wing primary structure.

(ix) Support structure in the wing for spoilers and spoiler actuators; for aileron hinges and reaction links; and for leading edge devices and trailing edge flaps.

(x) Leading edge device and trailing edge flap support system.

(xi) Aileron leading edge device and trailing edge flap internal, fixed attachment and actuator support structure.

2. Body.

(i) External surface skins and doublers, longitudinal stiffeners, longerons and circumferential rings and frames between the forward pressure bulkhead and the vertical stabilizer rear spar bulkhead and structural support and enclosure for the APU but excluding all system components and related installation and connecting devices, insulation, lining, and decorative panels and related installation and connecting devices.

GUN-PA-04666-SLP1		Page 2
	BOEING PROPRIETARY

(ii) Window and windshield structure but excluding the windows and windshields.

(iii) Fixed attachment structure of the passenger doors, cargo doors and emergency exits, excluding door mechanisms and movable hinge components. Sills and frames around the body openings for the passenger doors, cargo doors and emergency exits, excluding scuff plates and pressure seals.

(iv) Nose wheel well structure, including the wheel well walls, pressure deck, forward and aft bulkheads, and the gear support structure.

(v) Main gear wheel well structure including pressure deck, bulkheads and landing gear beam support structure.

(vi) Floor beams and support posts in the control cab and passenger cabin area, but excluding seat tracks.

(vii) Forward and aft pressure bulkheads.

(viii) Keel structure between the wing front spar bulkhead and the main gear wheel well aft bulkhead, including splices.

(ix) Wing front and rear spar support bulkheads, and vertical and horizontal stabilizer front and rear spar support bulkheads including terminal fittings but excluding all system components and related installation and connecting devices, insulation, lining, and decorative panels and related installation and connecting devices.

(x) Support structure in the body for the stabilizer pivot and stabilizer screw.

3. Vertical Stabilizer.

(i) External skins between front and rear spars.

(ii) Front and rear spars including stiffeners.

(iii) Attachment fittings between vertical stabilizer and body.

(iv) Inspar ribs.

(v) Rudder hinges and supporting ribs, excluding bearings.

GUN-PA-04666-SLP1		Page 3
	BOEING PROPRIETARY

(vi) Support structure in the vertical stabilizer for rudder hinges, reaction links and actuators.

(vii) Rudder internal, fixed attachment and actuator support structure.

4. Horizontal Stabilizer.

(i) External skins between front and rear spars.

(ii) Front and rear spars including splices and stiffeners.

(iii) Inspar ribs.

(iv) Stabilizer splice fittings and pivot and screw support structure.

(v) Support structure in the horizontal stabilizer for the elevator hinges, reaction links and actuators.

(vi) Elevator internal, fixed attachment and actuator support structure.

(vii) Elevator hinges and supporting ribs, excluding bearings.

5. Engine Strut.

(i) Strut external surface skin and doublers and stiffeners.

(ii) Internal strut chords, frames and bulkheads.

(iii) Strut to wing fittings and diagonal brace.

(iv) Engine mount support fittings attached directly to strut structure.

(v) For Aircraft equipped with General Electric or Pratt & Whitney engines only, the engine-mounted support fittings.

6. Main Landing Gear.

(i) Outer cylinder.

(ii) Inner cylinder.

(iii) Upper and lower side strut, including spindles and universals.

(iv) Upper and lower drag strut, including spindles and universals.

(v) Orifice support tube.

(vi) Downlock links including spindles and universals.

(vii) Torsion links.

GUN-PA-04666-SLP1		Page 4
	BOEING PROPRIETARY

(viii) Bogie beam.

(ix) Axles.

(x) Steering crank arm.

(xi) Steering rod.

7. Nose Landing Gear.

(i) Outer cylinder.

(ii) Inner cylinder, including axles.

(iii) Orifice support tube.

(iv) Upper and lower drag strut, including lock links.

(v) Steering plates and steering collar.

(vi) Torsion links.

(vii) Actuator support beam and hanger.

NOTE: The Service Life Policy does not cover any bearings, bolts, bushings, clamps, brackets, actuating mechanisms or latching mechanisms used in or on the SLP Components.

GUN-PA-04666-SLP1		Page 5
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

GUN-PA-04666-LA-1703143

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject: AGTA Terms Updates

Reference:  Purchase Agreement No. PA-04666 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 777-300ER aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. AGTA Basic Articles.

Article 2.1.1, “Airframe Price”, of the basic articles of the AGTA is revised to read as follows:

2.1.1 Airframe Price is defined as the price of the airframe for a specific model of aircraft described in a purchase agreement. (For certain model aircraft, as reflected in the purchase agreement, the Airframe Price includes the engine price at its basic thrust level).

Article 2.1.3, “Engine Price”, of the basic articles of the AGTA is revised to read as follows:

2.1.3 Engine Price is defined as the price set by the engine manufacturer for a specific engine to be installed on the model of aircraft described in a purchase agreement (not applicable to certain models of aircraft as reflected in the purchase agreement).

Article 2.1.5, “Escalation Adjustment”, of the basic articles of the AGTA is revised to read as follows:

2.1.5 Escalation Adjustment is defined as the price adjustment to the Airframe Price (which includes the basic engine price for certain models of aircraft as reflected in the purchase agreement) and the Optional Features Prices resulting from the calculation using the economic price formula contained in the Airframe and Optional Features Escalation Adjustment supplemental exhibit to the applicable purchase agreement. The price adjustment to the Engine Price will be calculated using the economic price formula in the Engine Escalation Adjustment supplemental exhibit to the applicable purchase agreement when the Airframe Price does not include the engine price at its basic thrust level as reflected in the purchase agreement.

GUN-PA-04666-LA-1703143		Page 1
AGTA Terms Updates	BOEING PROPRIETARY

2. AGTA - Appendix I “Sample InsuranceCertificate”.

Appendix I, entitled “SAMPLE Insurance Certificate”, under the LIMITS OF LIABILITY section, the aircraft models and corresponding insurance amounts are hereby revised as follows:

737 [*CTR]

747, 767, 777, & 787 [*CTR]

3. AGTA - Exhibit C “Product AssuranceDocumen”t.

Part 2, Article 3.1, subsection (i), of Exhibit C of the AGTA is revised to read as follows:

(i) for all Boeing aircraft models except 767, the warrantyperiod ends forty-eight (48) months after Delivery.

Part 2, Article 3.1, subsection (iii) of Exhibit C of the AGTA is revised to read as follows:

(iii) for Boeing aircraft model 767, the warranty period ends thirty-six (36) months after Delivery.

GUN-PA-04666-LA-1703143		Page 2
AGTA Terms Updates	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY

By
Its	Attorney-In-Fact

CHINA SOUTHERN AIRLINES COMPANY LIMITED

By

Its

CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.

By

Its

GUN-PA-04666-LA-1703143		Page 3
AGTA Terms Updates	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN- PA-04666-LA-1703144

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject: Payment Matters

Reference:  Purchase Agreement No. PA-04666 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 777-300ER aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

1. Advance Payments for the Aircraft – Due on the Effective Date of the Purchase Agreement.

It is understood that Customer’s ability to make advance payments described in Articles 4.2 and 4.3 of the Purchase Agreement may be impacted due to monetary issues. Therefore Boeing agrees all advance payments due on or before the effective date of the signing of the Purchase Agreement, as specified in Articles 4.2 and 4.3, may be deferred without interest until [*CTR], by which time Customer will pay all advance payments specified in the Purchase Agreement as being due on or before that date.

2. Other Scheduled Advance Payments.

As defined in Article 4.2 of the Purchase Agreement, advance payments are required for each Aircraft in the percentages and at the times shown in Table 1 of the Purchase Agreement. For all advance payments due to Boeing, Boeing will provide Customer with an invoice [*CTR] prior to the date the advance payment is due. This is done as an accommodation for Customer and does not relieve Customer from providing advance payments to Boeing at the times shown in Table 1 of the Purchase Agreement.

3. Payment at Aircraft Delivery.

GUN- PA-04666-LA-1703144		Page 1
Payment Matters	BOEING PROPRIETARY

Pursuant to Article 4.4 of the Purchase Agreement, Customer will pay, or cause to be paid, the balance of the Aircraft Price of each Aircraft at delivery. Boeing will provide the invoice for such payment about [*CTR] days prior to Aircraft delivery.

4. Rescheduling of Aircraft.

Concerning Letter Agreement [*CTR] [*CTR], if Customer does not make all advance payments as specified in the Purchase Agreement, Boeing may reschedule any or all of the Aircraft at any time thereafter as it deems necessary based on Boeing’s production considerations and constraints. Boeing will give Customer [*CTR] advance notice of any such Aircraft rescheduling, and will not reschedule such Aircraft if advance payments on all Aircraft are current prior to the expiration of such [*CTR] day notification period. Boeing will work with Customer in good faith to explore alternatives to such Aircraft rescheduling as may be available.

5. Effect of Aircraft Rescheduling.

If Boeing reschedules any or all of the Aircraft pursuant to the provisions of Paragraph 4 above, then Customer and Boeing will complete a Supplemental Agreement to document the revised Aircraft delivery schedules within [*CTR] advance notice is given.

6. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

7. Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents, except for as required by applicable laws or regulations, to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

GUN- PA-04666-LA-1703144		Page 2
Payment Matters	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY

By
Its	Attorney-In-Fact

CHINA SOUTHERN AIRLINES COMPANY LIMITED

By

Its

CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.

By

Its

GUN-PA-04666-LA-1703144		Page 3
Payment Matters	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-04666-LA-1703145

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject: Clarifications and Understandings

Reference:  Purchase Agreement No. PA-04666 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 777-300ER aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

1. Clarifications and Understandings. The following clarifications and understandings pertain to the indicated provisions of the Purchase Agreement:

1.1 Purchase Agreement, Article 1. Quantity, Model and Description. As set forth in the AGTA, Boeing will manufacture each Aircraft to conform to the appropriate Type Certificate issued by the United States Federal Aviation Administration (FAA) for the specific model of Aircraft and will obtain from the FAA and furnish to Customer at delivery of each Aircraft either a Standard Airworthiness Certificate or an Export Certificate of Airworthiness issued pursuant to Part 21 of the Federal Aviation Regulations.

The Civil Aviation Authority of China (CAAC) has indicated to the FAA that Boeing’s manufacturing procedures meet the bi-lateral agreements between the responsible parties. The FAA uses FAR Part 25 to establish the Type Certificate. Similarly, the CAAC uses its CCAR 25 for its Type Certificate. CCAR 25 is not identical to the FAA, but the CAAC considers both to be sufficiently equivalent to recognize the FAA Type Certificate to be valid.

In the issuance of an Export Certificate of Airworthiness, the FAA complies with any additional CAAC requirements through the use of Advisory Circular 21-2 (AC 21-2). Such additional requirements are documented by the FAA in AC 21-2.

1.2 Purchase Agreement, Article 4. Payment.

GUN-PA-04666-LA-1703145		Page 1
Clarifications and Understandings	BOEING PROPRIETARY

Article 4.2 refers to payments due on the “effective date” of the Purchase Agreement. Article 4.3 refers to payments due “upon signing” of the Purchase Agreement. The effective date of the Purchase Agreement is the day it is signed by Boeing, Customer and the Consenting Party. Such date appears in the first sentence of the Purchase Agreement and again just above the signature blocks of the parties to the Purchase Agreement. For clarification purposes, Boeing will provide invoices in advance for all payments due under the Purchase Agreement to facilitate payment by Customer.

1.3 Purchase Agreement, Article 5.6. Public Disclosure.

For clarity, Customer may make a public announcement regarding Customer’s purchase of the Aircraft upon approval of Customer’s press release by Boeing’s public relations department or other authorized representative.

1.4 Purchase Agreement, Article 5.7. Negotiated Agreement; Entire Agreement.

For clarity, to the extent there is any inconsistency between the terms of the AGTA and the Purchase Agreement, in each case, relating to the Aircraft, the terms of this Purchase Agreement shall prevail.

2. AGTA Article 5.3 Demonstration Flights.

For clarity, demonstration flights are to demonstrate the function of the Aircraft only to Customer and not for marketing or commercial activities with Boeing’s other customers.

3. AGTA Article 5.5 Special Aircraft Test Requirements.

Customer is concerned for the potential that flight and ground test hours on any Aircraft could [*CTR]. As an accommodation for Customer’s concern, Boeing will notify Customer for any flight and ground testing that would [*CTR] on an Aircraft. Customer and Boeing agree to discuss the matter if tests are for purposes other than the flight and ground tests described in Article 5.5 (i) and (ii) of the AGTA. For the avoidance of doubt, Boeing flight and ground tests will not unfairly select Customer’s Aircraft when other aircraft are equally available and suitable for such tests.

4. AGTA Article 8.2 Insurance.

Customer is concerned about aircraft insurance requirements under Article 8.2 of AGTA after Customer has sold an Aircraft to a new owner. For clarity, after Customer has transferred the title of an Aircraft to the new owner, Customer will be released from [*CTR] for that specific Aircraft after Customer has provided Boeing the notification of such post-delivery sale (AGTA Appendix III provides such a reference notice). Notwithstanding the foregoing, Customer is not released from its obligation under Article 8.2 of AGTA during any period which Customer has control or possession of an Aircraft.

GUN-PA-04666-LA-1703145		Page 2
Clarifications and Understandings	BOEING PROPRIETARY

5. AGTA Exhibit A, Buyer Furnished Equipment,

5.1 Article 7. Title and Risk of Loss. For clarification purposes, the last sentence of Article 7.1 of Exhibit A of the AGTA will rovide Customer [*CTR] In either case, Boeing will not be liable for loss of use.

5.2 Article 9 Indemnification of Boeing. This last sentence of Article 9 shall be modified to read: “This indemnity will not apply with respect to any nonconformance or defect caused solely by Boeing’s storage, handling, and installation of the BFE.”

6. Purchase Agreement Exhibit B. Aircraft Delivery Requirements and Responsibilities.

6.1 Article 1.1, Airworthiness and Registration Documents. The first sentence of Article 1.1 shall be modified to read: “Airworthiness and Registration Documents. Not later than prior to delivery of each Aircraft, Customer will notify Boeing of the registration number to be painted on the side of the Aircraft.” Customer and Boeing also agree to work together to minimize the impact related to Customer’s notification to Boeing of the aircraft SELCAL and Mode-S information.

6.2 Article 1.2. Certificate of Sanitary Construction. For clarification purposes and pursuant to Article 1.2.2, Customer has elected to receive the Certificate of Sanitary Construction at the time of Aircraft delivery.

6.3 Article 1.3.1, Import Documentation. At the end of article 1.3.1 the following shall be inserted, Boeing will provide reasonable assistance if requested by Customer in connection with the import of the Aircraft into the country of import.

6.4 Article 4.1, Schedule of Inspections, Article 4.2, Schedule for Demonstration Flights. and Article 4.3 Schedule for Customer’s Flight Crew. Articles identify parties that participate in such actions, and the Civil Aviation Authority of China (CAAC) may also participate in these actions. It’s noted that Boeing will provide advance notice of such actions.

6.5 Article 4.4, Fuel Provided by Boeing. In addition to the fuel provided by Boeing pursuant to Article 4.4, Boein=             ers with certain unique services or accommodation items at - If requested, Boeing provides oil and hydraulic fluid for the ferry flight. Also, if Customer does not load its own navigationdatabase for ferry flight, Boeing will provide a limited-time use database for the ferry flight.

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Clarifications and Understandings	BOEING PROPRIETARY

6.6 Article 4.6 Delivery Papers, Documents and Data. Replace the first sentence with the following:

“Boeing will have available at the time of delivery of the necessary Aircraft delivery papers, delivery agenda, documents and data for execution and delivery. Such documents may include, but are not limited to the following:

1. Aircraft Bill of Sale

2. FAA Export Certificate of Airworthiness

3. Weight and Balance Supplement

4. Engine Brochure

5. Miscellaneous Delivery Record Brochure

6. Aircraft Readiness Log

7. Rigging Record Brochure

8. Auxiliary Power Unit Log

9. FAA Airworthiness Directive Compliance Record Status”

6.7 Article 4.7, Delegation of Authority. Boeing will present a delegation of authority, designating and authorizing certain persons to act on its behalf in connection with delivery of the Aircraft. For clarity, if required to complete the delivery of Aircraft, Boeing will provide a legal opinion in form and substance satisfactory to the Customer in connection with delivery of the Aircraft.

7. Purchase Agreement Supplemental Exhibit BFE1, Aircraft Delivery Requirements and Responsibilities.

Customer and Boeing agree to work together to help Customer fulfill the requirements under Supplemental Exhibit BFE1.

8. Purchase Agreement – Redacted Versions.

Customer has concerns regarding the confidential treatment of the Purchase Agreement when the relevant stock exchanges require certain disclosure from Customer. To accommodate Customer, Boeing will provide redacted version of the Purchase Agreement if requested by Customer for the purpose of providing disclosure of the Purchase Agreement to relevant stock exchanges.

9. AGTA Terms Revisions.

AGTA terms revisions in L [*CTR] will apply to Purchase Agreement No. 04666 where applicable.

10. Purchase Agreement Letter Agreement LA-1703147 Cabin Systems Equipment (CSE).

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Clarifications and Understandings	BOEING PROPRIETARY

10.1 For clarification purposes concerning CSE changes, Customer may provide written request to Boeing for review and approval subject to price and offer ability through Boeing’s master change or other process for amendment of the Purchase Agreement. In addition, Boeing agrees to work with Customer and suppliers in the event Boeing determines CSE changes are necessary to fulfill the Boeing’s obligations under the Purchase Agreement.

10.2 [*CTR].

10.3 Article 8. Customer’s Indemnification of Boeing. This last sentence of CSE Letter Areement LA-1703147 Article 8 shall be modified to read: [*CTR]

11. Purchase Agreement Letter Agreement LA-1703148 Special Escalation Program.

11.1 Customer has concerns regarding the length of time period Boeing - the Escalation Adjustment for the Airframe, Price and Optional Features of each Aircraft in Table 1 of the Purchase Agreement. For the avoidance of doubt, - [*CTR] mutual agreement between Customer and Boeing in the event of [*CTR]

11.2 In the event the Aircraft is [*CTR].

12. CAAC regulatory information

It is recognized that the Civil Aviation Authority of China (CAAC) works with certain aircraft-related information, including Type Certificate Data Sheets (TCDS), Validation of Type Certificate Data Sheets (VTCDS), Aircraft Letter of Definition (ALOD) in order to issue to Customer the necessary aircraft certificates for operating the Aircraft in China. Boeing agrees to work with the relevant regulatory entities on a timely basis to support the process providing such information to the CAAC.

13. Borescope Inspection.

At the time of delivery, if Boeing and Customer mutually agree that the condition of an Aircraft requires borescope inspections, such inspection will be conducted in accordance with the relevant aircraft engine maintenance procedures.

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Clarifications and Understandings	BOEING PROPRIETARY

14. Assignment

14.1 Notwithstanding any other provisions of the Purchase Agreement, whereby this clause takes precedence, if Customer requests to assign an Aircraft under the Purchase Agreement to an assignee which Customer or China Southern Airlines Holding Company directly controls or holds [*CTR], Customer will work with Boeing in accordance with the lead-time and charges required for configuration changes and Boeing will not unreasonably withhold its consent to the assignment of Customer’s rights and obligations under the Purchase Agreement as relates to the specific Aircraft or post-delivery entitlements (collectively “Assigned Rights”), including but not limited to all rights and obligations with respect to advance payments already paid to Boeing under the Purchase Agreement.

14.2 Any such assignment will be in the form acceptable to Boeing (AGTA Appendix II provides such a reference form), including the undertaking by Customer to be bound by the DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES provisions set forth in Article 11 of Part 2 of Exhibit C to the AGTA.

15. Confidential Treatment.

Customer and Boeing understand and agree that the information contained in the Purchase Agreement represents confidential business information and has value precisely because it is not available generally or to other parties. The parties agree that they will to limit the disclosure of its contents except as required by applicable laws, regulations, to its employees and its professional advisers with a need to know the contents for purposes of helping perform its respective obligations under the Purchase Agreement and who are under an obligation not to disclose its contents to any other person or entity without the prior written consent of the parties hereto.

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Clarifications and Understandings	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY

By
Its	Attorney-In-Fact

CHINA SOUTHERN AIRLINES COMPANY LIMITED

By

Its

CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.

By

Its

GUN-PA-04666-LA-1703145		Page 7
Clarifications and Understandings	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

GUN-PA-04666-LA-1703146

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Boeing Purchase of Buyer Furnished Equipment
Reference:	Purchase Agreement No. PA-04666 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 777-300ER aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. BFE Bill of Sale to Boeing. Customer will deliver to Boeing a bill of sale, in the form of Exhibit A to this Letter Agreement (BFE FULL WARRANTY BILL OF SALE), for all the Buyer Furnished Equipment (BFE) applicable to a specific Aircraft no less than four weeksprior to delivery of the specific Aircraft.

2. BFE Purchase Price and BFE Bill of Sale to Customer. The BFE purchase price will be the amount stated on the BFE FULL WARRANTY BILL OF SALE applicable to the specific Aircraft and will be reimbursed to Customer in the form of a miscellaneous credit memorandum on the specific Aircraft’s final delivery invoice. Upon Customers payment of the specific Aircraft’s final delivery invoice Boeing will deliver a bill of sale for the BFE to Customer either (i) in the form of Exhibit B to this Letter Agreement, or (ii) included in the specific Aircraft’s bill of sale, at the election of Customer.

3. Fee and Payment.

3.1 Customer will pay to Boeing [*CTR] of the BFE purchase price (Fee) which will [*CTR] or other activity associated with any of the BFE purchased as part of this letter Agreement.

3.2 The purchase price of the specific Aircraft will be increased by the amount paid by Boeing for the BFE as shown on the applicable BFE FULL WARRANTY BILL OF SALE plus any amounts which are identified at the time of the specific Aircraft’s delivery to be due to Boeing from Customer pursuant to the provisions of paragraph 3.1, above. The remainder of any charges due Boeing from Customer pursuant to paragraph 3.1 will be payable to Boeing upon written demand and substantiated with supporting information.

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Boeing Purchase of Buyer Furnished Equipment	BOEING PROPRIETARY

4. Indemnities and Warranty.

4.1 Customer will indemnify and hold harmless Boeing from and against all claims, suits, actions, liabilities, damages, costs and expenses for any actual or alleged infringement of any patent issued or equivalent right under the laws of any country arising out of or in any way connected with any sale, purchase, use, ownership, delivery, transfer, storage or other activity associated with any of the BFE purchased as part of this Letter Agreement.

4.2 Customer will indemnify and hold harmless Boeing from and against all claims and liabilities, including costs and expenses (including attorneys’ fees) incident thereto or incident to successfully establishing the right to indemnification, for injury to or death of any person or persons, including employees of Customer but not employees of Boeing, or for loss of or damage to any property, including any aircraft, arising out of or in any way connected with the performance by Boeing of services or other obligations under this Letter Agreement and whether or not arising in tort or occasioned in whole or in part by the negligence of Boeing.

4.3 Boeing makes no warranty other than warranty of such title to the BFE as has been transferred by Customer to Boeing pursuant to this Letter Agreement. The exclusion of liabilities and other provisions of the AGTA are applicable to this Letter Agreement.

4.4 For the purposes of the Indemnities and Warranty contained in this section 4 of this Letter Agreement, the term “Boeing” includes The Boeing Company, its divisions, subsidiaries, affiliates, the assignees of each, and their directors, officers, employees and agents.

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Boeing Purchase of Buyer Furnished Equipment	BOEING PROPRIETARY

Very truly yours,
	AGREED AND ACCEPTED this
	Date
THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04666-LA-1703146		Page 3
Boeing Purchase of Buyer Furnished Equipment	BOEING PROPRIETARY

EXHIBIT A

BFE FULL WARRANTY BILL OF SALE

China Southern Airlines Company Limited (SELLER) in consideration of the promise of THE BOEING COMPANY (BUYER) to pay to SELLER                     U.S. Dollars ($                 ) hereby sells to BUYER the goods described in the “Schedule of Buyer Furnished Equipment” attached hereto (BFE). Such payment by BUYER will be made concurrently with delivery to                 of and payment for the aircraft bearing Manufacturer’s Serial No.                 on which the BFE is installed.

SELLER warrants to BUYER that it has good title to the BFE free and clear of all liens, encumbrances and rights of others; and that it will warrant and defend such title against all claims and demands whatsoever.

THIS BFE Full Warranty Bill of Sale is delivered by SELLER to BUYER in the State of                     and will be interpreted under and governed by the laws of the State of Washington, U.S.A., except that Washington’s choice of law rules will not be invoked for the purpose of applying the law of another jurisdiction.

AGREED AND ACCEPTED this

Date

CHINA SOUTHERN AIRLINES COMPANY LIMITED

Signature

Printed name

Title

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Boeing Purchase of Buyer Furnished Equipment	BOEING PROPRIETARY

Boeing Acknowledgment

Receipt of this BFE Full Warranty Bill of Sale is hereby acknowledged by BUYER by its duly authorized representative.

THE BOEING COMPANY

Signature

Printed Name

Attorney-In-Fact

Title

GUN-PA-04666-LA-1703146		Page 5
Boeing Purchase of Buyer Furnished Equipment	BOEING PROPRIETARY

SCHEDULE OF BUYER FURNISHED EQUIPMENT

APPLICABLE to

BOEING MODEL <MODEL> AIRCRAFT

MANUFACTURER’S SERIAL NO. <MSN>

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Boeing Purchase of Buyer Furnished Equipment	BOEING PROPRIETARY

EXHIBIT B

BOEING BFE BILL OF SALE

THE BOEING COMPANY (SELLER) in consideration of the sum of One U.S. Dollar ($1.00) and other valuable consideration hereby sells to                     (BUYER) the goods described in the “Schedule of Buyer Furnished Equipment” attached hereto (BFE). Such payment by BUYER will be made concurrently with delivery to BUYER of and payment for the aircraft bearing Manufacturer’s Serial No.                     on which the BFE is installed.

SELLER represents and warrants that it has such title to the BFE as was previously transferred to SELLER by China Southern Airlines Company Limited and that it hereby conveys such BFE and such title thereto to BUYER.

THIS Boeing BFE Bill of Sale is delivered by SELLER to BUYER in the State of                     and will be interpreted under and governed by the laws of the State of Washington, U.S.A., except that Washington’s choice of law rules will not be invoked for the purpose of applying the law of another jurisdiction.

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY

Signature

Printed name

Title

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Boeing Purchase of Buyer Furnished Equipment	BOEING PROPRIETARY

Boeing Acknowledgment

Receipt of this BFE Bill of Sale is hereby acknowledged by BUYER by its duly authorized representative.

CHINA SOUTHERN AIRLINES COMPANY LIMITED

Signature

Printed Name

Attorney-In-Fact

Title

GUN-PA-04666-LA-1703146		Page 8
Boeing Purchase of Buyer Furnished Equipment	BOEING PROPRIETARY

SCHEDULE OF BUYER FURNISHED EQUIPMENT

APPLICABLE to

BOEING MODEL <MODEL> AIRCRAFT

MANUFACTURER’S SERIAL NO. <MSN>

GUN-PA-04666-LA-1703146		Page 9
Boeing Purchase of Buyer Furnished Equipment	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

GUN-PA-04666-LA-1703147

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Installation of Cabin Systems Equipment
Reference:	Purchase Agreement No. PA-04666 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 777-300ER aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

Customer has requested that Boeing install in the Aircraft the In-Flight Entertainment and communications systems described in Attachment A to this Letter Agreement (collectively referred to as Cabin Systems Equipment or CSE). CSE is BFE that Boeing purchases for Customer and that is identified in the Detail Specification for the Aircraft.

The complexity of the CSE requires special attention and additional resources during the development, integration, and certification of the CSE and manufacture of the Aircraft to achieve proper operation of the CSE at the time of delivery of the Aircraft. To assist Customer, Boeing will perform the functions of [*CTR] as set forth in Attachment B.

1. Responsibilities.

1.1 Customer will:

1.1.1 provide Customer’s CSE system requirements to Boeing;

1.1.2 select the CSE suppliers (Supplier(s)) and system configuration) from among those identified in the Option(s) listed in Attachment A to this Letter Agreement, on or before [*CTR]; or as otherwise available in the then current Standard Selections Catalog and formally offered by Boeing;

1.1.3 promptly after selecting the Options, participate with Boeing in meetings with Suppliers to ensure that Supplier’s functional system specifications meet Customer’s and Boeing’s respective requirements. Such functional system specifications define functionality to which Boeing will test prior to delivery but are not a guarantee of functionality at delivery;

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Installation of Cabin Systems Equipment	BOEING PROPRIETARY

1.1.4 select Supplier part numbers;

1.1.5 negotiate and obtain agreements on product assurance, product support following Aircraft delivery (including spares support), and any other special business arrangements directly with Suppliers;

1.1.6 provide pricing information for CSE part numbers selected to Boeing by a mutually selected date;

1.1.7 negotiate and obtain agreements with any required service providers;

1.1.8 include in Customer’s contract with any seat supplier a condition causing such seat supplier to enter a bonded stores agreement with Boeing. This bonded stores agreement will set forth the terms concerning the use, handling. storage, and risk of loss of CSE during the time such equipment is under the seat supplier’s control;

1.1.9 cause Suppliers to:

1.1.9.1 assist the seat suppliers in the preparation of seat assembly functional test plans;

1.1.9.2 coordinate integration testing, and provide seat assembly functional test procedures for seat electronic parts to seat suppliers and Boeing, as determined by Boeing; and

1.1.9.3 comply with Boeing’s type design and type certification data development and protection requirements where the Supplier has type design/certification responsibility. The requirements will require Suppliers to (i) maintain type design/certificatedata for the life of such type certificate for all type design and (ii) entitle Boeing to access, review, and receive such type design/certification data. These requirements will be provided to Customer and included in any applicable contracts between Customer and Supplier.

1.2 Boeing will:

1.2.1 [*CTR]

1.2.2 [*CTR]

1.2.3 [*CTR]

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Installation of Cabin Systems Equipment	BOEING PROPRIETARY

1.2.4 [*CTR];

1.2.5 [*CTR]

1.2.6 [*CTR]

1.2.7 [*CTR]

2. Software.

CSE systems may contain software of the following two types:

2.1 Certification Software. The software required to functionally test, operate and certify the CSE systems on the Aircraft is the Certification Software and is part of the CSE.

2.2 Customer’s Software. The software which is defined by the Customer to support specified features and appearance is Customer’s Software and is not part of the CSE.

2.2.1 Customer is solely responsible for specifying Customer’s Software functional and performance requirements and ensuring that Customer’s Software meets such requirements. Customer and Customer’s Software supplier will have total responsibility for the writing, certification, modification, revision, or correction of any of Customer’s Software. Boeing will not perform the functions and obligations described in paragraph 1.2 above, or the Project Manager’s functions described in Attachment B, for Customer’s Software.

2.2.2 The omission of any Customer’s Software or the lack of any functionailty of Customers Software will not be a valid condition for Customers rejection of the Aircraft at the time of Aircraft delivery.

2.2.3 Boeing has no obligation to approve any documentation to support Customer’s Software certification. Boeing will only review and operate Customer’s Software if in Boeing’s reasonable opinion such review and operation is necessary to certify the CSE on the Aircraft.

2.2.4 Boeing will not be responsible for obtaining FAA certification for Customer’s Software.

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	BOEING PROPRIETARY

3. Changes.

3.1 After Customer’s selection of CSE, in accordance with the terms of this letter agreement, any changes to CSE may only be made by and between Boeing and the Supplier. Any Customer request for changes to the CSE specification after selection by Customer will be made in writing directly to Boeing for approval and for coordination by Boeing with the Supplier. Any such change to the configuration of the Aircraft will be subject to price and offerability through Boeing’s master change or other process for amendment of the Purchase Agreement and if such changes are acceptable, shall be confirmed in writing between Boeing and Customer. Any Supplier price increase or decrease resulting from such change will be negotiated and agreed between Customer and Supplier.

3.2 Boeing and Customer recognize that the developmental nature of the CSE may require changes to the CSE or the Aircraft in order to ensure (i) compatibility of the CSE with the Aircraft and all other Aircraft systems, and (ii) FAA certification of the Aircraft with the CSE installed therein. In such event Boeing will notify Customer and recommend to Customer the most practical means for incorporating any such change. If within [*CTR] notification Customer and Boeing cannot mutually agree on the incorporation of any such change or alternate course of action, the remedies available to Boeing in Paragraph 6 will apply.

4. Supplier Defaults.

Boeing will notify Customer in a timely manner in the event of a default by a Supplier under the Supplier’s purchase order with Boeing. Within [*CTR] of Customer’s receipt of such notification, Boeing and Customer will agree on an alternate Supplier or other course of action. If Boeing and Customer are unable to agree on an alternate Supplier or course of action within such time, the remedies available to Boeing in Paragraph 6 will apply.

5. Exhibits B and C to the AGTA.

CSE is deemed to be BFE for the purposes of Exhibit B, Customer Support Document, and Exhibit C, the Product Assurance Document, of the AGTA.

6. Boeing’s Remedies.

If Customer does not perform its obligations as provided in this Letter Agreement or if supplier fails (for any reason other than a default by Boeing under the purchase order terms) to deliver conforming CSE per the schedule set forth in the purchase order, then, in addition to any other remedies which Boeing may have by contract or under law, Boeing may:

6.1 revise the [*CTR] of the Aircraft to accommodate the delay in delivery of the conforming CSE and base the calculation of the[*CTR];

6.2 [*CTR]

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	BOEING PROPRIETARY

6.3 increase the [*CTR], including but not limited to, [*CTR] by Boeing [*CTR].

7. Advance Payments.

7.1 Estimated Price for the CSE. An estimated rice for the CSE purchased by Boeing will be included in the            to establish the advance payments for each Aircraft. The estimated price for the Boeing purchased CSE installed on each Aircraft is identified in Table 1 of the Purchase Agreement.

7.2 Aircraft Price. The Aircraft Price will include the [*CTR] charged Boeing by Suppliers or otherwise incurred by Boeing.

8. Customer’s Indemnification of Boeing.

Customer will indemnify and hold harmless Boeing from and against all claims and liabilities, including costs and expenses (including attorneys’ fees) incident thereto or incident to successfully establishing the right to indemnification, for injury to or death of any person or persons, including employees of Customer but not employees of Boeing, or for loss of or damage to any property, including Aircraft, arising out of or in any way connected with any nonconformance or defect in any CSE, or in the installation thereof or in the provision of services hereunder, and whether or not arising in tort or occasioned in whole or in part by the negligence of Boeing. This indemnity will not apply with respect to any nonconformance or defect caused solely by Boeing’s installation of the CSE.

9. Title and Risk of Loss.

Title of CSE will remain with Boeing until the Aircraft title is transferred to Customer. Risk of loss will remain with the entity that is in possession of the CSE prior to Aircraft delivery

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated above, please indicate your acceptance and approval below.

GUN-PA-04666-LA-1703147 Installation of Cabin Systems Equipment		Page 5
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04666-LA-1703147 Installation of Cabin Systems Equipment		Page 6
	BOEING PROPRIETARY

ATTACHMENT A

CABIN SYSTEMS EQUIPMENT

The following optional features (Option(s)) describe(s) the items of equipment that under the terms and conditions of this Letter A reement are considered to be CSE. Each such Option is fully described in the / [*CTR] // as described in Exhibit A to the Purchase Agreemen . ma [*CTR] configuration will be based on Customer acceptance of any or all Options listed below.

Option Request Number and Title

/ [*CTR].../

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	BOEING PROPRIETARY

ATTACHMENT B

[*CTR]

1. [*CTR]

Boeing will perform the following functions for the CSE. [*CTR]:

(i) [*CTR]

(ii) [*CTR]

(iii) [*CTR]

(iv) [*CTR]

(v) [*CTR]

(vi) [*CTR];

(vii) [*CTR] and

(viii) [*CTR]

2. System Integration.

[*CTR]

(i) [*CTR]

GUN-PA-04666-LA-1703147 Installation of Cabin Systems Equipment		Page 8
	BOEING PROPRIETARY

(ii) [*CTR]

(iii) [*CTR]

3. Seat Integration.

(i) [*CTR]

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	BOEING PROPRIETARY

                                                     The Boeing Company                                                      P.O. Box 3707                                                      Seattle, WA 98124-2207

GUN-PA-04666-LA-1703148

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject: Special Escalation Program

Reference: Purchase Agreement No. PA-04666 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 777-300ER aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. Definitions.

Escalation Notice means the written communication provided by Boeing to Customer in accordance with the requirements of Article 8.1, below.

Program Aircraft means each Aircraft specified in Table 1 of the Purchase Agreement as of the date of this Letter Agreement.

2. Applicability.

Notwithstanding any other provision of the Purchase Agreement to the contrary, the parties agree that the Escalation Adjustment for the Airframe Price and Optional Features Prices for each Program Aircraft will be determined in accordance with this Letter Agreement.

3. Escalation Forecast.

Boeing will release an escalation forecast in February and August of each year based on Boeing’s then current standard [*CTR] escalation formula. Only one escalation forecast will be used to conduct the escalation analysis performed in accordance with Article 8.1, below, for a given Program Aircraft. The escalation forecast applicable to a given Program Aircraft is set forth in Attachment A of this Letter Agreement.

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Special Escalation Program	BOEING PROPRIETARY

4. [*CTR]

4.1 [*CTR] in accordance with the term of this Letter Agreement.

4.2 The Escalation Adjustment for the Airframe Price and Optional Features Prices of each Program Aircraft will be [*CTR] unless the escalation forecast, as set forth in Article 3, project a [*CTR] factor for the scheduled delivery month of any Program Aircraft that is deliver within the time period applicable to such escalation forecast. See attachment B (Capped Factor).

5. [*CTR] Cumulative Annual Escalation during the [*CTR].

If the cumulative annual escalation factor as determined in accordance with Supplemental Exhibit AE1 at time of delivery of Program Aircraft, produces an escalation rate of equal to or less than two point seven five percent (2.75%) cumulative annual escalation for such Program Aircraft, then the escalation rate so produced shall apply to the Airframe Price and the Optional Features Prices for such Program Aircraft.

6. [*CTR]

If the cumulative annual escalation factor, as determined in accordance with Supplemental Exhibit AE1 at time of delive of Aircraft, reduces an [*CTR]

7. [*CTR]

If the cumulative annual escalation factor, as determined in accordance with Supplemental Exhibit AE1 at time of delive of Aircraft, [*CTR]

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Special Escalation Program	BOEING PROPRIETARY

8. [*CTR]

8.1 If the escalation forecast, as set forth in Article 3, above, projects a [*CTR]

8.1.1 [*CTR] or

8.1.2 [*CTR]

8.1.3 [*CTR]

8.2 If Boeing or Customer exercise the option described in Article 8.1.3 above, [*CTR]

8.2.1 [*CTR].

8.2.2 Should Customer, and neither Articles 8.1.1 nor 8.1.2 apply, fail to issue any notice to Boeing in accordance with Article 8.2 above, then the Escalation Adjustment for the Airframe Price and Optional Features Prices for such Program Aircraft shall be [*CTR]

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	BOEING PROPRIETARY

8.3 Should Boeing fail to issue an Escalation Notice to Customer in accordance with Article 8.1, then the escalation adjustment for the Airframe Price and Optional Features Prices for such Program Aircraft shall be calculated in accordance [*CTR].

9. Applicability to Other Financial Consideration.

The escalation adjustment for any other sum, identified in the Purchase Agreement as subject to escalation pursuant to Supplemental Exhibit AE1, and which pertains to the Program Aircraft will be calculated using the escalation methodology established in this Letter Agreement for such Program Aircraft notwithstanding any other provisions of the Purchase Agreement to the contrary.

10. Assignment.

Except for an assignment by Customer to a wholly-owned subsidiary as permitted under Article 9, entitled “Assignment, Resale, or Lease” of the AGTA, this Letter Agreement is provided as an accommodation to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned in whole or in part.

11. Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents, except for as required by applicable laws or regulations, to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

GUN-PA-04666-LA-1703148 Special Escalation Program		LA Page 4
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY

By

Its Attorney-In-Fact

CHINA SOUTHERN AIRLINES COMPANY LIMITED

By

Its

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

By

Its

GUN-PA-04666-LA-1703148 Special Escalation Program		LA Page 5
	BOEING PROPRIETARY

ATTACHMENT A

Escalation Forecast & Escalation Notice Date

Escalation Forecast	Applicable to Program Aircraft Delivering in Time Period	Escalation Notice Date
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

GUN-PA-04666-LA-1703148 Special Escalation Program		LA Page 6
	BOEING PROPRIETARY

ATTACHMENT B

Escalation Factors

Airframe Price Base Year: -

Beginning of [*CTR]: [*CTR]

End of [*CTR]: [*CTR]

Delivery Date	[*CTR] Escalation Factors	[*CTR] Escalation Factors
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

GUN-PA-04666-LA-1703148 Special Escalation Program		LA Page 7
	BOEING PROPRIETARY

[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

GUN-PA-04666-LA-1703148 Special Escalation Program		LA Page 8
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

GUN-PA-04666-LA-1703149

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject: Special Matters relating to COTS Software and End User License Agreements

Reference:  Purchase Agreement No. PA-04666 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 777-300ER aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

Recitals

1. Certain third party, commercial off-the-shelf software products are available to perform various functions required in the Aircraft (COTS Software).

2. The industry practice with respect to COTS Software is to permit manufacturers to install the software in products for sale to customers. The manufacturer is required to pass to the customer an End User License Agreement (EULA), which covers the right to use the COTS Software. The EULA’s also require each user of the product to further license the software and pass the EULA to any user to whom he transfers the product.

3. Because of the described industry practice with respect to COTS Software, Boeing does not acquire title to COTS Software and cannot pass title to COTS Software at the time of delivery of the Aircraft.

4. Therefore, the parties desire to amend certain provisions of the Purchase Agreement to properly reflect the respective rights and obligations of the parties with respect to the COTS Software included in the Aircraft.

Agreement

1. Prior to delivery of the Aircraft, Boeing will make available to Customer copies of all EULA’s applicable to the Aircraft, and Customer agrees to comply with all provisions of the applicable EULA’s.

GUN-PA-04666-LA-1703149 EULA		Page 1
	BOEING PROPRIETARY

2. Notwithstanding the provisions of Article 6.3 of the AGTA, at delivery of each Aircraft, Boeing will provide Customer a [*CTR]

3. In connection with any sale or other transfer of the Aircraft, Customer agrees to comply with all provisions of the applicable EULA’s, including without limitation the re-licensing of the software to Customer’s transferee and the flow down within such license of the further requirement that Customer’s transferee comply with and flow to other transferees the obligations of the EULA.

Very truly yours,
AGREED AND ACCEPTED this
Date
THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERNAIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERNAIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04666-LA-1703149 EULA		Page 2
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207  

GUN-PA-04666-LA-1703150

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject: Government Approval Matters

Reference:  Purchase Agreement No. PA-04666 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 777-300ER aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

1. Government Approval.

Boeing and Customer both acknowledge that it is necessary for Customer to obtain government approval to import the Aircraft into the [*CTR]. Customer agrees to use best efforts to obtain Government Approval and notify Boeing promptly in writing as soon as approval has been obtained. In cooperation with Customer, Boeing shall provide reasonable assistance to Customer in preparing informational materials relating to the Purchase Agreement and the Aircraft which Customer advises are reasonably required for the Government Approval process. Customer shall advise Boeing as soon as practical of the specific assistance which Customer plans to request from Boeing.

2. Flexibility.

Boeing and Customer will work together, to help Customer [*CTR], and to ensure the delivery schedule and advance payments as specified in Table 1 of the Purchase Agreement are met. If Customer is not current with advance payments for all Aircraft per the Purchase Agreement, then Boeing may, after consultation with Customer for [*CTR], take one or more of the actions set forth below for the Aircraft as it deems appropriate based on Boeing’s production considerations and requirements, while expressly reserving all of Boeing’s rights and remedies under law.

GUN-PA-04666-LA-1703150 Government Approval Matters		Page 1
	BOEING PROPRIETARY

2.1. Reschedule Aircraft. Boeing may reschedule an or all of the Aircraft. Boeing, after consultation with Customer, will give [*CTR] notice of any such Aircraft rescheduling, an wI no resc e u e ircra or which Customer becomes current with advance payments prior to the expiration of such [*CTR] notification period.

The following terms shall apply to the rescheduled Delivery Period Aircraft.

2.1.1 The [*CTR] for each such rescheduled Aircraft will be in accordance with the provisions of will be [*CTR] in accordance with the provision of the Purchase Agreement.

2.1.2. Advance a ments for each such rescheduled Aircraft will be calculated to the [*CTR] in accordance with the provisions of the Purchase Agreement.

2.1.3. The Advance Payment Base Price will be calculated to the - [*CTR] in accordance with the provisions of the Purchase Agreement. The credit memoranda Boeing provides to the Customer which are noted as “subject to escalation” will be calculated to the [*CTR] in              accordance with the provisions of the Purchase Agreement.

2.1.4. In the event of any delivery reschedule performed under this Letter Agreement, Boeing will              for a particular Aircraft prior to the reschedule of that Aircraft and apply those payments towards the future advance payments for that same rescheduled Aircraft. In no case will Boeing pay interest on any advance payment amounts or early payment resulting from the reschedule of the relevant Aircraft.

2.2. Terminate Aircraft. Boeing, after consultation with Customer, may terminate the Aircraft by providing Customer with written notice of such termination and shall o Customer, [*CTR] - Customer for the terminate Aircraft.

3. Confidential Treatment.

Boeing and Customer understand that certain information contained in this Letter Agreement is considered to be confidential. The parties agree that they will treat this Letter Agreement and the information contained herein as confidential and will not, without the prior written consent of the other party, disclose this Letter Agreement or any information contained herein to any other person or entity.

GUN-PA-04455-LA-1703150 Government Approval Matters		Page 2
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this
Date
THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04455-LA-1703150 Government Approval Matters		Page 3
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

GUN-PA-04666-LA-1703151

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject: Liquidated Damages - Non-Excusable Delay

Reference:  Purchase Agreement No. PA-04666 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 777-300ER aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

Definition of Terms:

Non-Excusable Delay: Delay in delivery of any Aircraft beyond the last day of the delivery month (Scheduled Delivery Month) established in the Purchase Agreement by any cause that is not an Excusable Delay pursuant to Article 7 of the AGTA and for which Customer is otherwise entitled to a remedy from Boeing pursuant to applicable law.

1. Liquidated Damages.

Boeing agrees to pay Customer liquidated damages for each day of Non-Excusable Delay [*CTR] after the Scheduled Delivery Month (collectively Non-excusable Delay Payment Period) at a rate [*CTR] per Aircraft (Liquidated Damages). Liquidated Damages will be payable at actual delivery of the Aircraft or as per Article 5.

2. Interest.

In addition to the Liquidated Damages in section 1, for each day of Non-Excusable Delay in days after the Scheduled Delivery Month, Boeing will pay Customer interest calculated as follows (Interest):

The product of the dail interest rate, computed by dividing the interest rate in effect for each day by             , times the entire amount of advance payments receive [ILLEGIBLE]. The interest rate in effect for each day will be computed the [*CTR], effective the first business day of the calendar month and reset each calendar month.

GUN-PA-04666-LA-1703151 Liquidated Damages - Non-Excusable Delay		Page 1
	BOEING PROPRIETARY

Such interest will be calculated on a simple interest basis and paid in full at actual delivery of the Aircraft.

3. [*CTR]

In the event any Aircraft has been delayed beyond the Scheduled Delivery Month due to a Non-Excusable Delay, for the Non-Excusable Delay P calculation of the Escalation Adjustment will be based on the - [*CTR]

4. [*CTR]

Customer will not have the right to refuse to accept delivery of any Aircraft because of a Non-Excusable Delay unless and until the are ate duration of the Non-Excusable Dela for such Aircraft [*CTR]. Within [*CTR] of receipt of written notice from Boeing that delivery of an aircraft will be delayed beyond the Non-Excusable Delay Period, [*CTR] the Purchase Agreement to such Aircraft by written or telegraphic notice given to the other. [*CTR] period, then the Purchase Agreement will remain in effect for the Aircraft.

5. [*CTR]

If the Purchase Agreement is - with respect to any Aircraft for a Non-Excusable Delay, Boeing will pay Cus

i) Liquidated Damages at the later to occur of: [*CTR]

[*CTR] Promptly for Interest calculated and paid in full as described above, except the period of interest calculation will end on the date Boeing returns such ments, [*CTR] - after the effective date of the termination.

(iii) Promptly for the entire principal amount of the advance payments received by Boeing for such Aircraft, [*CTR]

6. Exclusive Remedies.

GUN-PA-04666-LA-1703151 Liquidated Damages - Non-Excusable Delay		Page 2
	BOEING PROPRIETARY

The remedies set forth in this Letter Agreement are Customer’s exclusive remedies for a Non-Excusable Delay and are in lieu of all other damages, claims, and remedies of Customer arising at law or otherwise for any Non-Excusable Delay in the Aircraft delivery. Customer hereby waives and renounces all other claims and remedies arising at law or otherwise for any such Non-Excusable Delay.

7. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned, in whole or in part, without the prior written consent of Boeing.

8. Confidentiality.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

GUN-PA-04666-LA-1703151 Liquidated Damages - Non-Excusable Delay		Page 3
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this
Date
THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04666-LA-1703151 Liquidated Damages - Non-Excusable Delay		Page 4
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

GUN-PA-04666-LA-1703152

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject: Loading of Customer Software

Reference:  Purchase Agreement No. PA-04666 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 777-300ER aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. Introduction.

1.1 At Customer’s request, Boeing may offer to perform a courtesy load of Customer-unique aircraft operational software and associated data owned by or licensed to Customer (Customer Software) on the Aircraft. The terms and conditions of this Letter Agreement will apply if Customer has accepted Boeing’s offer to perform a courtesy load of Customer Software on the Aircraft.

1.2 Customer Software is not part of the Aircraft type design therefore the Aircraft cannot be certified for delivery with such Customer Software installed on the Aircraft. For the Aircraft systems included in the Aircraft type design, Boeing will install its baseline production software to certify the Aircraft for delivery to Customer.

2. Customer Software Loading.

2.1 Boeing may temporarily load Customer Software on the Aircraft prior to Aircraft certification to support standard Customer inspection activities for the Aircraft. Following the Customer inspection activities, Boeing will remove the Customer Software.

2.2 Boeing may load [*CTR].

3. Additional Terms and Conditions.

GUN-PA-04666-LA-1703152 Loading of Customer Software		Page 1
	BOEING PROPRIETARY

3.1 Customer must provide the Customer Software to Boeing in support of Boeing’s schedule requirements. If any Customer Software load is not successful, Boeing will not be required to further attempt to load such Customer Software and Boeing will load Boeing baseline production software, if applicable, on the Aircraft.

3.2 Customer is responsible for all testing, verification, quality assurance, and operational approval of Customer Software.

3.3 Customer Software is BFE for the purposes of Articles 3.1.3, 3.2, 3.4, 3.5, 9, 10, and 11 of Exhibit A “Buyer Furnished Equipment Provisions Document” of the AGTA and such Articles apply to the loading of Customer Software.

3.4 The loading of Customer Software is a service under Exhibit B “Customer Support Document” of the AGTA.

3.5 Boeing makes no warranty for the Customer Software loading services and Article 11 of Part 2 of Exhibit C “Disclaimer and Release; Exclusion of Liabilities” of the AGTA and Article 8.2 “Insurance” of the AGTA apply to the loading of Customer Software.

GUN-PA-04666-LA-1703152 Loading of Customer Software		Page 2
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this
Date
THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04666-LA-1703152 Loading of Customer Software		Page 3
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

GUN-PA-04666-LA-1703153

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject: Aircraft Performance Guarantees

Reference:  Purchase Agreement No. PA-04666 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 777-300ER aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

Boeing agrees to provide Customer with the performance guarantees in the Attachment. These guarantees are exclusive and expire upon delivery of the Aircraft to Customer.

1. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned, in whole or in part, without the prior written consent of Boeing.

2. Confidentiality.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

GUN-PA-04666-LA-1703153 Performance Guarantees		Page 1
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this
Date
THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04666-LA-1703153 Performance Guarantees		Page 2
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1703153

GE90-115BL Engines

Page 1

MODEL 777-300ER PERFORMANCE GUARANTEES

FOR CHINA SOUTHERN AIRLINES COMPANY LIMITED

SECTION             CONTENTS

1 AIRCRAFT MODEL APPLICABILITY

2 FLIGHT PERFORMANCE

3 AIRCRAFT CONFIGURATION

4 GUARANTEE CONDITIONS

5 GUARANTEE COMPLIANCE

6 EXCLUSIVE GUARANTEES

P.A. No. 4666
AERO-B-BBA4-M17-0752B		SS17-0542
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1703153

GE90-115BL Engines

Page 2

1 AIRCRAFT MODEL APPLICABILITY

The guarantees contained in this Attachment (the “Performance Guarantees”) are applicable to the 777-300ER Aircraft with a maximum takeoff wei ht of                    , a maximum landing wei ht of                 , and a maximum zero fuel weight of                 equipped with Boeing furnished GE90-115BL engines.

2 FLIGHT PERFORMANCE

2.1 Takeoff

2.1.1 The FAA-approved takeoff gross weight at the start of groundroll, at a temperature of.             , at an altitude of             , with an alternate forward center of ravit limit of [*CTR] takeoff thrust, and using the conditions defined below, will not be less than the following guarantee value:

GUARANTEE: [*CTR]

Condtiions:

The takeoff runway available (TORA) is [*CTR]

The takeoff distance available (TODA) is [*CTR]

The accelerate-stop distance available (ASDA) is - [*CTR]

The lineup allowance adjustment to TORA and TODA is II [*CTR]

The lineup allowance adjustment to ASDA is -                     .

The runway slope [*CTR]

The minimum level off height is -                     .

P.A. No. 4666
AERO-B-BBA4-M17-07528		SS17-0542
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1703153

GE90-115BL Engines

Page 3

The following obstacle definition is based on a straight-out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Height	Distance
1.	[*CTR]	[*CTR]
2.	[*CTR]	[*CTR]
3.	[*CTR]	[*CTR]
4.	[*CTR]	[*CTR]
5.	[*CTR]	[*CTR]
6.	[*CTR]	[*CTR]
7.	[*CTR]	[*CTR]
8.	[*CTR]	[*CTR]
9.	[*CTR]	[*CTR]
10.	[*CTR]	[*CTR]

2.1.2 The FAA-approved takeoff gross weight at the start of ground roll, at a temperature of-             at an altitude o             , with an alternate forward center of gravity limit of             of the mean aerodynamic chord, using maximum ta eo rust, and using the conditions defined below, will not be less than the following guarantee value:

GUARANTEE: [*CTR]

Conditions :

The takeoff runway available (TORA) is [*CTR]

The takeoff distance available (TODA) is [*CTR]

The accelerate-stop distance available (ASDA) is - [*CTR]

The lineup allowance adjustment to TORA and TODA is II [*CTR]

The lineup allowance adjustment to ASDA is -             .

The runway slope is [*CTR]

The minimum level off height is -             .

P.A. No. 4666
AERO-B-BBA4-M17-07528		SS17-0542
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1703153

GE90-115BL Engines

Page 4

The following obstacle definition is based on a straight-out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Height	Distance
1.	[*CTR]	[*CTR]
2.	[*CTR]	[*CTR]
3.	[*CTR]	[*CTR]
4.	[*CTR]	[*CTR]
5.	[*CTR]	[*CTR]
6.	[*CTR]	[*CTR]
7.	[*CTR]	[*CTR]

2.2 Landing

The FAA-approved landing field length at a gross weight of [*CTR] and at a sea level altitude, will not be more than the following guarantee value:

GUARANTEE: [*CTR]

2.3 Mission

2.3.1 Mission Payload

The payload for a stage length of [*CTR] in still air [*CTR] te) using the conditions and operating rules defined below, will not be less than the following guarantee value:

NOMINAL:                 [*CTR]

TOLERANCE:            [*CTR]

GUARANTEE:            [*CTR]

The above payload may require special attention to payload distribution.

Conditions and operating rules:

Stage Length:	The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.
Takeoff:	The airport altitude is -             .

P.A. No. 4666
AERO-B-BBA4-M17-07528		SS17-0542
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1703153

GE90-115BL Engines

Page 5

The airport temperature is -

The takeoff runway available(TORA) is - [*CTR]

The takeoff distance available (TODA) is [*CTR]

The accelerate-stop distance available (ASDA) is [*CTR]

The lineup allowance adjustment for TORA and TODA is -             .

The lineup allowance adjustment for ASDA is [*CTR]

The runway slope is [*CTR]

The minimum level off height is -     

The following obstacle definition is based on a straight out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Height	Distance
1.	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
6.	[*CTR]	[*CTR]
7.	[*CTR]	[*CTR]
8.	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

Takeoff performance is based on an alternate forward center of gravity limit of [*CTR] the mean aerodynamic chord.

Maximum takeoff thrust is used for the takeoff.

P.A. No. 4666
AERO-B-BBA4-M17-07528		SS17-0542
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1703153

GE90-115BL Engines

Page 6

	The takeoff gross weight will conform to FAA Regulations.
Climbout Maneuver:	Following the takeoff to [*CTR], the Aircraft retracts landing gear, climbs to [*CTR] above the departure airport altitude and accelerates to the recommended speed while retracting flaps.
Climb:	The Aircraft climbs from the initial climb altitude to [*CTR] altitude at the recommended speed.
	The Aircraft then accelerates at a rate of climb of [*CTR] to the recommended climb speed for minimum block fuel.
	The climb continues at the recommended climb speed for minimum block fuel to the final climb altitude.
	The temperature is [*CTR] during climb.
	Maximum climb thrust is used during climb.
Cruise:	The Aircraft cruises at [*CTR] number.
	The Aircraft cruises at westbound ICAO RVSM cruise altitudes.
	The temperature is ISA [*CTR] during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at [*CTR] above the destination airport altitude.
	Throughout the descent, the cabin pressure is controlled to a maximum rate of descent equivalent to [*CTR] at sea level.
	The temperature is ISA [*CTR] during descent.

P.A. No. 4666
AERO-B-BBA4-M17-0752B		SS17-0542
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Attachment to Letter Agreement

No. LA-1703153

GE90-115BL Engines

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	Minimum flight idle thrust is used except as required at the top of descent to satisfy the above - per minute criteria.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending flaps and landing gear, then descends and lands.
	The destination airport altitude_is _
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following will be used as fixed quantities and allowances:
	Apu:
	Fuel	[*CTR]
	Taxi-Out:
	Fuel	[*CTR]
	Takeoff and Climbout Maneuver:
	Fuel	[*CTR]
	Distance	[*CTR]
	Approach and Landin
	Fue l	.
	Taxi-In (will be consumedfrom the reserve fuel):
	Fuel	[*CTR]
	Usable reserve fuel remaining upon
	completion and dingn maneuver: -

P.A. No. 4666
AERO-B-BBA4-M17-07528		SS17-0542
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1703153

GE90-115BL Engines

Page 8

For information purposes, the reserve fuel is based on a standard day temerature and a) a contingency fuel allowance equivalent to [*CTR] point through the completion of the approach and landing maneuver at the destination airport, starting at the end of the mission cruise at an [*CTR], b) [*CTR] a [*CTR] alternate with a cruising altitude of [*CTR], c) an approach and landing maneuver at the alternate airport, and d) a [*CTR] hold at [*CTR]. Reserve fuel will not be less than [*CTR].

2.3.2 Mission Block Fuel

The block fuel for a stage length of            in still air [*CTR] ) with a - [*CTR] payload using the conditions and operating rules defined below, will not be more than the following guarantee value:

NOMINAL:	[*CTR]
TOLERANCE:	[*CTR]
[*CTR]	[*CTR]

Conditions and operating rules:

Stage Length:	The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.
Block Fuel:	The block fuel is defined as the sum of the fuel used for taxi-out, takeoff and climbout maneuver, climb, cruise, descent, approach and landing maneuver, and taxi-in.
Takeoff:	The airport altitude is -             .
	The airport temperature is •             .

P.A. No. 4666
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No. LA-1703153

GE90-115BL Engines

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The takeoff runway available (TORA) is - [*CTR]

The takeoff distance available (TODA) is [*CTR]

The accelerate-stop distance available (ASDA) is [*CTR]

The lineup allowance adjustment for TORA and TODA is -             .

The lineup allowance adjustment for ASDA is [*CTR]

The runway slope is [*CTR]

The minimum level off height is -             .

The following obstacle definition is based on a straight out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Height	Distance
1.	[*CTR]	[*CTR]
2.	[*CTR]	[*CTR]
3.	[*CTR]	[*CTR]
4.	[*CTR]	[*CTR]
5.	[*CTR]	[*CTR]
6.	[*CTR]	[*CTR]
7.	[*CTR]	[*CTR]

Takeoff performance is based on an alternate forward center of gravity limit of- of the mean aerodynamic chord.

Maximum takeoff thrust is used for the takeoff.

The takeoff gross weight will conform to FAA Regulations.

P.A. No. 4666
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GE90-115BL Engines

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Climbout Maneuver:	Following the takeoff to [*CTR], the Aircraft retracts landing gear, climbs to [*CTR] above the departure airport altitude and accelerates to the recommended speed while retracting flaps.
Climb:	The Aircraft climbs from the initial climb altitude to [*CTR] altitude at the recommended speed.
	The Aircraft then accelerates at a rate of climb of [*CTR] to the recommended climb speed for minimum block fuel.
	The climb continues at the recommended climb speed for minimum block fuel to the final climb altitude.
	The temperature is ISA [*CTR] during climb.
	Maximum climb thrust is used during climb.
Cruise:	The Aircraft cruises at [*CTR] number.
	The Aircraft cruises at westbound ICAO RVSM cruise altitudes.
	The temperature is ISA [*CTR] during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at [*CTR] feet above the destination airport altitude.
	Throughout the descent, the cabin pressure is controlled to a maximum rate of descent equivalent to [*CTR] at sea level.
	The temperature is [*CTR] during descent.

P.A. No. 4666
AERO-B-BBA4-M17-0752B		SS17-0542
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1703153

GE90-115BL Engines

Page 11

	Minimum flight idle thrust is used except as required at the top of descent to satisfy the above - per minute criteria.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending flaps and landing gear, then descends and lands.
	The destination airport [*CTR]
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following will be used as fixed quantities and allowances:
	Apu:
	Fuel	[*CTR]
	Taxi-Out:
	Fuel	[*CTR]
	Takeoff and Climbout Maneuver:
	Fuel	[*CTR]
	Distance	[*CTR]
	Approach and Landin
	Fuel	.
	Taxi-In (will be consumed from the reserve fuel):
	Fuel	[*CTR]
	Usable reserve fuel remainnig upon completion and dingn maneuver: -

P.A. No. 4666
AERO-B-BBA4-M17-07528		SS17-0542
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1703153

GE90-115BL Engines

Page 12

For information purposes, the reserve fuel is based on a standard day temperature and acontingency fuel allowance equivalent to. - of the trip time from the redispatch point through the completion of the approach and landing maneuver at the final destination airport, starting at the end of the cruise at an [*CTR], b) a [*CTR] to a [*CTR] a [*CTR] c) an approach and landi the alternate airport, and d) a -- at [*CTR]. Reserve fuel will not be less than [*CTR].

2.3.3 Operational Empty Weight Basis

The Operational Empty Weight (OEW) derived in paragraph 2.3.4 is the basis for the mission guarantees of paragraphs 2.3.1 through 2.3.2.

P.A. No. 4666
AERO-B-BBA4-M17-07528		SS17-0542
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Attachment to Letter Agreement

No. LA-1703153

GE90-115BL Engines

Page 13

2.3.4 777-300ER Weight Summary – China Southern Airlines (GUN)

	Kilograms
Standard Model Specification (MEW)	[*CTR]
Configuration Specification [*CTR]
365 (22 FC / 70 BC / 273 TC) Interior
GE90-115B Engines
Maximum Taxi Weight
Liters Fuel Capacity
Changes for China Southern Airlines:
Interior Change to 361 Passengers (28 CC / 28 PYC / 305 YC) *	[*CTR]
Ref: LOPA-B7720491A
Selected MTW: [*CTR]	[*CTR]
Engine Thrust Rating: GE90-[*CTR]	[*CTR]
IFE - In Flight Entertainment [*CTR]	[*CTR]
In-Flight Overhead Flight Crew Rest (2 Berths and 2 Seats)	[*CTR]
In-Flight Overhead Attendant Crew Rest (8 Berths) 22 Minute Additional Chemical Oxygen	[*CTR] [*CTR]
Additional Customer Options Allowance	[*CTR]
China Southern Airlines Manufacturer’s Empty Weight (MEW)
Standard and Operational Items Allowance
(Paragraph 2.3.5)
China Southern Airlines Operational Empty Weight (OEW)	[*CTR]

	Quantity		Kilograms		Kilograms
* Seat Weight Included:						[*CTR]
Business Class     Singles		[*CTR]
Business Class     Furniture		[*CTR]
Premium Economy Class Doubles		[*CTR]		[*CTR]
Economy Class     Doubles		[*CTR]
Economy Class     Triples		[*CTR]

P.A. No. 4666
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Attachment to Letter Agreement

No. LA-1703153

GE90-115BL Engines

Page 14

2.3.5 Standard and Operational Items Allowance Standard Items Allowance

	Qty	Kilograms	Kilograms	Kilograms
Standard Items Allowance				[*CTR]
Unusable Fuel			[*CTR]
Oil			II
Oxygen Equipment			II
Miscellaneous Equipment			II
Galley Structure & Fixed Inserts			[*CTR]
Operational Items Allowance
Crew and Crew Baggage			[*CTR]	[*CTR]
Flight Crew (Inc. Pilot Flight Bag)	I	[*CTR]
Cabin Crew (Inc. Flight Att. Kit)	II	[*CTR]
Baggage	II	[*CTR]
Catering Allowance			[*CTR]
Business Class	II	[*CTR]
Premium Economy Class	II	[*CTR]
Economy Class	[*CTR]	[*CTR]
Passenger Service Equipment ( 361			[*CTR]
Potable Water - ) 361 Passengers			[*CTR]
Waste Tank Disinfectant			I
Emergency Equipment (Incl. Overwater Equip.)
Cargo System			[*CTR]
Pallets	I
Containers	II	[*CTR]
Total Standard and Operational Items Allowance				[*CTR]

P.A. No. 4666
AERO-B-BBA4-M17-07528		SS17-0542
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Attachment to Letter Agreement

No. LA-1703153

GE90-115BL Engines

Page 15

3 AIRCRAFT CONFIGURATION

3.1 The guarantees contained in this Attachment are based on the Aircraft configuration as defined in D019W005, Revision M, “Configuration Specification, Model 777-200, -200ER, -200LR, - 300, -300ER”, dated April 28, 2017, plus any changes mutually agreed upon or otherwise allowed by the Purchase Agreement to be incorporated into the Customer’s Detail Specification (herein referred to as the Detail Specification). Appropriate adjustment will be made for changes in such Detail Specification approved by the Customer and Boeing or otherwise allowed by the Purchase Agreement which cause changes to the flight performance and/or weight and balance of the Aircraft. Such adjustment will be accounted for by Boeing in its evidence of compliance with the guarantees.

3.2 The guarantee payload of paragraph 2.3.1, and the specified payload of the paragraph 2.3.2 block fuel guarantee will be adjusted by Boeing for the effect of the following on OEW in its evidence of compliance with the guarantees:

(1) Changes to the Detail Specification or any other changes mutually agreed upon between the Customer and Boeing or otherwise allowed by the Purchase Agreement.

(2) The difference between the component weight allowances given in Appendix E of the Detail Specification and the actual weights.

4 GUARANTEE CONDITIONS

4.1 All guaranteed performance data are based on the International Standard Atmosphere (ISA) and specified variations therefrom; altitudes are pressure altitudes.

4.2 The Federal Aviation Administration (FAA) regulations referred to in this Attachment are, unless otherwise specified, the 777-300ER Certification Basis regulations specified in the Type Certificate Data Sheet T00001SE, dated March 16, 2004.

P.A. No. 4666
AERO-B-BBA4-M17-0752B		SS17-0542
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Attachment to Letter Agreement

No. LA-1703153

GE90-115BL Engines

Page 16

4.3 In the event a change is made to any law, governmental regulation or requirement, or in the interpretation of any such law, governmental regulation or requirement that affects the certification basis for the Aircraft as described in Paragraph 4.2, and as a result thereof, a change is made to the configuration and/or the performance of the Aircraft in order to obtain certification, the guarantees set forth in this Attachment will be appropriately modified to reflect any such change.

4.4 The takeoff and landing guarantees, and the takeoff mission guarantees are based on [*CTR]

4.5 The climb, cruise and descentportions of the mission of the mission guarantees include [*CTR].

4.6 Long Range Cruise (LRC) [*CTR]

4.7 The climb, cruise and descent portions of the missio es are based on an Aircraft center of gravity location of- of the mean aerodynamic chord.

P.A. No. 4666
AERO-B-BBA4-M17-07528		SS17-0542
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GE90-115BL Engines

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4.8 Performance, where applicable, is based on a fuel Lower Heating Value (LHV) of [*CRT] unless otherwise specified.

5 GUARANTEE COMPLIANCE

5.1 Compliance with the guarantees of Section 2 will be based on the conditions specified in those sections, the Aircraft configuration of Section 3 and the guarantee conditions of Section 4.

5.2 Compliance with the takeoff and landing guarantees and the takeoff portion of the mission guarantee will be based on the FAA - approved Airplane Flight Manual for the Model 777-300ER.

5.3 Compliance with the climb, cruise and descent portions of the mission guarantees will be established by calculations based on flight test data obtained from an aircraft in a configuration similar to that defined by the Detail Specification.

5.4 Compliance with the mission block fuel guarantees may exceed the design weights in the FAA-approved Airplane Flight Manual for convenience of calculating block fuel for the specified payload. Such exceedance is not to be construed as authorization to operate the aircraft above the weights in the FAA-approved Airplane Flight Manual.

5.5 The OEW used for compliance with the mission guarantees will be the actual MEW plus the Standard and Operational Items Allowance in Appendix E of the Detail Specification.

5.6 The data derived from tests will be adjusted as required by conventional methods of correction, interpolation or extrapolation in accordance with established engineering practices to show compliance with these guarantees.

5.7 Compliance will be based on the performance of the airframe and engines in combination, and will not be contingent on the engine meeting its manufacturer’s performance specification.

6 EXCLUSIVE GUARANTEES

The only performance guarantees applicable to the Aircraft are those set forth in this Attachment.

P.A. No. 4666
AERO-B-BBA4-M17-07528		SS17-0542
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

GUN-PA-04666-LA-1703154

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Special Matters
Reference:	Purchase Agreement No. PA-04666 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 777-300ER aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meanni g as in the PurchaseAgreement.

1. Credit Memoranda. In consideration of Custome’rs purchase of eight (8) Aircraft, at the time of delivery of each such Aircraft, unless otherwise noted, Boeing will provide to Customerthe following credit memoranda:

1.1 Basic Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer a basic credit memorandum Basic Credit Memorandum in an amount of [*CTR]

1.2 Customer Support Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer a customer sup art credit memorandum CustomerSu ort Credit Memorandum in an amount of [*CTR]

1.3 777 Loyal Customer Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer a 777 loyal customer credit memorandum 777 Lo al Customer Credit Memorandum in an amount of [*CTR]

1.4 777-300ER Incremental Purchase Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer a 777-300ER incremental purchase credit memorandum 777-300ER Incremental Purchase Credit Memorandum in an amount of [*CTR]

1.5 Wide-body Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer a Wide-body credit memorandum (Wide-body Credit Memorandum ) in an amount of [*CTR]

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1.6 Operations Support Credit Memorandum. As a consideration to Customer to address Customer concerns on operational support, at the time of delivery of each Aircraft, Boeing will issue to Customer an operations sup ort credit memorandum 0 erations Su ort Credit Memorandum in an amount of [*CTR]

1.7 Signing Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer credit memorandum Si nin Credit Memorandum in an amount of [*CTR]

1.8 Partnership Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer a partnership credit memorandum (Partnership Credit Memorandum in an amount of [*CTR]

1.9 Executive Closing Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer an executive closin credit memorandum (Executive Closing Memorandum) in an amount of [*CTR]

1.10 Promotional Support Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer a promotional support credit memorandum [ILLEGIBLE] Credit Memorandum) in the fixed amount of [*CTR]

1.11 Unless otherwise noted, the amounts of the credit memoranda set forth in paragraphs 1.1 to 1.9 above are stated in the - base year dollars, as defined in Table 1 to the Purchase Agreement, and will be escalated to the scheduled delivery month of the respective Aircraft pursuant to the airframe escalation formula set forth in the Purchase Agreement applicable to such Aircraft. In addition, unless otherwise noted, the credit memoranda set forth in paragraphs 1.1 to 1.10 above, may, at the election of Customer,be (i) applied against the Aircraft Price of the respective Aircraft at the time of delivery or (ii) used for the purchase of other Boeing goods and services (but will not be applied to advance payments).

2. Additional Business Considerations.

In further consideration of Customers purchase of the eight (8) Aircraft in the proposal, Boeing will provide to Customer the following.

2.1 Introduction Support Credit Memoranda. Boeing will issue to Customer introduction support credit memoranda as follows: i) Boeing will issue to Customer an introduction support credit memorandum (Introduction Support Credit Memorandum 1) in the fixed amount of              payable to Customer on [*CTR] and ii) Boeing will issue to Customer an introduction su ntroduction Su ort Credit Memorandum 2) in the [*CTR] payable to Customer [*CTR].

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	BOEING PROPRIETARY

2.2 777-300ER Fleet Growth Support Credit Memorandum. Boeing will issue to Customer a 777-300ER Fleet Growth support credit memorandum 777-300ER Fleet Growth Su ort Credit Memorandum, in the [*CTR] payable to Customer on [*CTR].

2.3 Special Support Credit Memorandum. Boeing will issue to Customer a special support credit memorandum (Special Support Credit Memorandum) in the [*CTR] payable to Customer on - [*CTR]

2.4 Configuration Support Creadit Memorandum. Should Customer purchase the [*CTR], Boeing will issue to Customer a configuration support credit memorandum (Configuration Support Credit Memorandum) in the [*CTR] payable to Customer [*CTR] e Configuration Supp [ILLEGIBLE] [*CTR] purchases the retrofit service package from Boeing.

2.5 Engineering Technical Goods and Services Credit Memorandum. Boeing will issue to Customer an engineering technical goods and services credit memorandum [ILLEGIBLE], Technical Goods and Services Credit Memorandum in the [*CTR].

2.6 Wide-body Development Goods and Services Credit Memorandum. Boeing will issue to Customer an wide-body development goods and services credit memorandum Wide-bod Development Goods and Services Credit Memorandum in the [*CTR].

2.7 Unless otherwise noted, the amounts of the credit memoranda set forth in paragraphs2.1 through 2.6 above are              In addition, unless otherwise noted, the credit memoran a may, a e e ec I0n o ustomer, be (i) applied against the Aircraft Price at the time of delivery or (ii) used for the purchase of other Boeing goods and services (but may not be applied to advance payments) or (iii) Issued by wire transfer to the account provided by the Customer. For the avoidance of doubt, goods and services credit memoranda many only be used for Boeing goods and services.

3. Assignment.

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	BOEING PROPRIETARY

Unless otherwise noted herein, the Credit Memoranda described in this Letter Agreement are provided as a financial accommodation to Customer and in consideration of Customer taking title to the Aircraft at time of delivery and becoming the operator of the Aircraft. This Letter Agreement cannot be assigned, in whole or in part, without the prior written consent of Boeing.

4. Confidentiality.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing. In addition to any equitable relief that may be available to Boeing in the event of a breach of this clause, Boeing may rescind the 777 Loyal Customer Credit Memoranda contained in paragraph 1.3 above, in the event of any unauthorized disclosure by Customer.

GUN-PA-04666-LA-1703154 Special Matters		Page 4
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04666-LA-1703154 Special Matters		Page 5
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

GUN-PA-04666-LA-1703155

China Southern Airlines Company Limited No.

278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Open Configuration Matters
Reference:	Purchase Agreement No. PA-04666 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 777-300ER aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. Aircraft Configuration.

1.1 Initial Configuration. The initial configuration of the Aircraft is defined by Boeing Model 777 Detail Specification D019W005-L dated August 7, 2015. Due to the long period of time between Purchase Agreement signing and delivery of the first Aircraft, the final configuration of the Aircraft will be completed as described below.

1.2 Final Configuration. The Aircraft configuration will be completed using the Boeing then-current basic model aircraft configuration documentation applicable to the Aircraft. Boeing and Customer will incorporate certain other configuration changes into the Aircraft as such changes are offered by Boeing and accepted by Customer (Final Configuration) in accordance with the following schedule:

1.2.1 [*CTR].

1.2.2 As soon as practical after that meeting, Boeing will provide Customer with a proposal for those optional features that can be incorporated into the Aircraft during production.

1.2.3 Customer will then have to accept or reject the optional features or as otherwise agreed. Boeing acknowledges that some items may have a longer internal approval process and will work with Customer on those items.

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2. Effect on Purchase Agreement.

2.1 Within [*CTR] following Final Configuration, Boeing and Customer execute a written amendment to the Purchase Agreement (Amendment) addressing the items below:

2.1.1 Changes to the basic model aircraft which are applicable to the Aircraft and have been developed by Boeing between the date of signing of the Purchase Agreement and date of Final Configuration;

2.1.2 Optional features accepted by Customer pursuant to Article 1.2 above (Customer Configuration Changes);

2.1.3 Update the Aircraft configuration definition contained in Exhibit A of the Purchase Agreement and referenced in Table 1 of the Purchase Agreement; and

2.1.4 Update the prices contained in Table 1 of the Purchase Agreement to adjust for the difference, if any, between the prices estimated for the optional features and the actual prices of the optional features reflected in the Customer Configuration Changes.

2.2 Revisions to the Performance Guarantees may be included in the Amendment when such Customer Configuration Changes have a significant effect on Aircraft performance, otherwise such performance impact will be addressed at the time Boeing demonstrates compliance to the Performance Guarantees.

2.3 If the Amendment to the Purchase Agreement does not occur as set out in Article 2.1 above, then Boeing may rely on Customer’s acceptance of the optional features, as set out in Article 1.2 above, as Customer acceptance of the Amendment and direction to incorporate the Customer Configuration Changes in the Aircraft.

3. Other Letter Agreements.

As the definition of the Aircraft progresses, there may be a need to execute additional letter agreements addressing one or more of the following subjects:

3.1 Software. Additional provisions relating to software.

3.2 Installation of Cabin Systems Equipment. Additional provisions relating to the terms under which Boeing will offer and install in-flight entertainment systems in the Aircraft.

3.3 Seller Purchased Equipment (SPE) and/or Buyer Furnished Equipment (BFE). Provisions relating to the terms under which Boeing may offer or install SPE and/or BFE in the Aircraft.

GUN-PA-04666-LA-1703155 Open Configuration Matters		Page 2
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04666-LA-1703155 Open Configuration Matters		Page 3
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

GUN-PA-04666-LA-1705807

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Integrated Performance Remedy
Reference:	Purchase Agreement No. PA-04666 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) relating to Model 777-300ER aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. Applicable Guarantees.

The Attachment to contains [*CTR] performance guarantees which apply to the Aircraft (Performance Guarantees). The Performance Guarantees include a mission payload guarantee in paragraph 2.3.1 (Mission Payload Guarantee) and a mission block fuel guarantee in paragraph 2.3.2 (Block Fuel Guarantee) applicable to the Aircraft. The remedies contained in this Letter Agreement apply if the guarantee compliance report furnished to Customer for any Aircraft pursuant to Article 5.4 of the AGTA shows a demonstrated value [*CTR] Block Fuel Guarantee or Mission Payload Guarantee value (each a Compliance Deviation).

2. Demonstration of Compliance.

Article 5.4 of the AGTA and the Performance Guarantees provide a procedure for demonstration of compliance with the Performance Guarantees prior to Aircraft delivery. That method will be used to demonstrate compliance with the Mission Payload Guarantee and Block Fuel Guarantee.

3. Rights and Obligations in the Event of a Compliance Deviation.

In the event of a Compliance Deviation for any Aircraft, at the time Boeing tenders that Aircraft for delivery, Boeing will provide the applicable remedies set forth in sections 4 and 5. Customer cannot refuse to accept delivery of such Aircraft because of such Compliance Deviation.

	Page 1
BOEING PROPRIETARY

4. Post Delivery Improvement to Reduce or Eliminate the Compliance Deviation.

In the event of a Compliance Deviation for any Aircraft, the following terms and conditions will apply:

4.1 Boeing may design, or may cause to be designed by the engine manufacturer, airframe improvement parts and/or engine improvement parts (Improvement Parts) which, when installed on such Aircraft, would reduce or eliminate the Compliance Deviation.

4.2 If Boeing elects to provide, or causes to be provided, Improvement Parts for such Aircraft, then Customer and Boeing will mutually agree upon the details of an Improvement Parts program. Im rovement Parts will be rovided, except those provided by the engine manufacturer,              Unless agreed to otherwise, Im rovement Parts rovided er will be at [*CTR] Boeing and/or engine manufacturer, as applicable, will provide reasonable support for such a program at - to Customer.

4.3 If Customer elects to install Improvement Parts on such Aircraft, they will be installed within - after the delivery of such Improvement Parts to Customer if such i e accomplished during Aircraft line maintenance. Improvement Parts which cannot be installed during Aircraft line maintenance will be installed within a mutually agreed period of time. All Improvement Parts will be installed in accordance with Boeing and engine manufacturer instructions.

4.4 Boeing will provide and/or will cause en ine manufacturer to reimbursement of Customer’s reasonable [*CTR] to install Improvement Parts at the warranty labor rate in effect, at the time of installation, between Boeing and Customer or engine manufacturer and Customer, as applicable. Improvement Parts related to engines will apply also to spare engines on terms not less favorable to Customer. Boeing and/or the engine manufacturer, as applicable, will give Customer reasonab le advance written notice of the estimated on-dock date at Customer’s maintenance base for any such Improvement Parts. Customer’s claim for reimbursement must reference this Letter Agreement and be submitted to Boeing Warranty and Product Assurance Contracts using established warranty procedures and other terms identified in the Improvement Parts program contemplated in paragraph 4.2.

5. Payments.

If Boeing has not provided, or caused to be provided by the engine manufacturer, Improvement Parts which eliminate the Compliance Deviation, then Boeing will provide only the remedies described in this section 5.

5.1 [ILLEGIBLE] will pay to Customer, for a period not exceeding of each Aircraft, an amount equal to the Annual Payload Compensation Amount (as defined below) for the immediately precedni g calendar year (Annual Period), as adjusted, if at all, pursuant to paragraph5.4 below.

GUN-PA-04666-LA-1705807 Integrated Performance Remedy		Page 2
	BOEING PROPRIETARY

5.1.1 The Annual Payload Compensation Amount is a U.S. Dollar amount equal to the sum of each Monthly Payload Compensaiton Amount (as defined below) for all months in such Annual Period. The Monthly Payload Compensation Amount a is defined as, and will be calculatedin accordance with the following formula:

[*CTR]

The following definitions will apply:

• = A specific month in an Annual Period.

• = [*CTR]

11= [*CTR]

[*CTR]

[*CTR].

• = [*CTR]

5.1.1 Customer will provide to Boeing, within - days following the end of each Annual Period, the - for each monthiiiiFieAnnual Period in a single summarized submittalfor all applicable Aircraft.

5.1.2 Boeing will review the NF data. Boeing may request additional informaiton from Customer to further substantiate the NF data. Such additional information will not be unreasonably requested by Boeing, nor unreasonably withheldby Customer.

5.1.3 If Customer does not provide the NF data within the - day requirement, pursuant to paragraph 5.1.2 for any Annual Period, theneustomei- will forfeit any and all rights to payment from Boeing for any such Annual Period and Boeing will have no further obligation to pay Customer any Annual Payload Compensation Amount for such Annual Period.

GUN-PA-04666- LA-1705807 Integrated Performance Remedy		Page 3
	BOEING PROPRIETARY

5.2 Annual Excess Fuel Burn Amount. Boeing will pay to Customer, for a period after the delivery of each Aircraft, an amount equal to the Annual Excess Fuel Burn Amount for the immediately preceding calendar year (Annual Period), as adjusted, if at all, pursuant to paragraph 5.4.

5.2.1 The Annual Excess Fuel Burn Amount is a U.S. Dollar amount [*CTR]. The Monthly Excess Fuel Burn Amount is a [*CTR] defined as, and will be calculated in accordance with, the following formula

[*CTR]

The following definitions will apply:

11 [*CTR]

[*CTR]

[*CTR].

[*CTR]

[*CTR]

[*CTR]

5.2.2 Customer will rovide to Boein , within [*CTR] following the end of each Annual Period, the [*CTR] for each month in the Annual Period (Fuel Data ) in a singe summarize submittal for all applicable Aircraft.

5.2.3 Boeing will review the Fuel Data. Boeing may request additional informaiton from Customer to further substantiate the Fuel Data. Such additional informaiton will not be unreasonably requested by Boeing, nor unreasonably withheld by Customer.

GUN-PA-04666-LA-1705807 Integrated Performance Remedy		Page 4
	BOEING PROPRIETARY

5.2.4 If Customer does not provide the Fuel Data within the - - requirement, pursuant to paragraph 5.2.2, for any Annual Period, then Customer will forfeit any and all rights to payment from Boeing for any such Annual Period and Boeing will have no further obligation to pay Customer any Annual Excess Fuel Burn Amount for such Annual Period.

5.3 [*CTR]Credit Memorandum. Amounts payable to section 5 will be paid by credit memorandum issued b manufacturer, which may be used solely for [*CTR] applicable. The total amount o sue ere ₁ the following:

[*CTR](i)

[*CTR](ii)

No payments will be made pursuant to this section 5 for any Aircraft not operated by Customer or Customers initiallessee.

5.4 Credit Adjustments. The amount of performance improvement attributable to any Improvement Parts will be determined by Boeing analysis based on data verified to be correct by Boeing. The amount of such improvement will be deemed to be the amount of improvement as calculated using reasonable engineering interpretations based on the data furnished pursuant to Article 5.4 of the AGTA and the data furnished pursuant to this paragraph 5.4. If Improvement Parts are installed on an Aircraft pursuant to paragraph 4.3, subsequent payments of the Annual Excess Fuel Burn Amount will be reduced by an amount consistent with the reduction in the Compilance Deviation after such ImprovementParts are installed. If Customer elects not to install Improvement Parts on any applicable Aircraft pursuant to paragraph 4.3, subsequent payments of the Annual Excess Fuel Burn Amount will be reduced by an amount consistent with the reduction in the Compliance Deviation which would have been realized had such Improvement Parts been installed pursuant to paragraph 4.3.

6. Duplication of Benefits.

Boeing and Customer agree it is not the intent of the parties to provide benefits hereunder that duplicate benefits to be provided (a) by Boeing under the Purchase Agreement, or any other agreement between Boeing and Customer, or (b) by engine [*CTR]manufacturer under any agreement between engine manufacturer and Customer, due to the Aircraft not satisfying any performance metric similar to the Block Fuel Guarantee or any performance metric that otherwise impacts fuel burn. Boeing may offset its obligation to provide benefits hereunder against the benefits provided or to be provided to Customer by engine manufacturer or Boeing pursuant to such other guarantee.

GUN-PA-04666-LA1-705807 Integrated Performance Remedy		Page 5
	BOEING PROPRIETARY

7. Exclusive Remedy.

Customer agrees that the remedies contained in sections 4 and 5 are Customer’s exclusive remedies for purposes of resolving all issues with respect to the Performance Guarantees of Customer’s Aircraft described herein and are in lieu of all other rights, [*CTR]remedies, claims and causes of action Customer may have, arising at law or otherwise, in connection therewith and will constitute complete, full and final settlement and satisfaction of any and all of Boeing’s obligations and liabilities to Customer in connection therewith. Customer releases Boeing and its successors, affiliates and subsidiaries from all present, past and future rights, remedies, claims and causes of action, whether arising at law or otherwise, known or unknown, relating to or arising from such Performance Guarantees.

8. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned, in whole or in part, without the prior written consent of Boeing.

9. Confidentiality.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any [*CTR]other person or entity without the prior written consent of Boeing.

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters contained herein, please indicate your acceptance and approval below.

GUN-PA-04666-LA-1705807 Integrated Performance Remedy		Page 6
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date:
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its

CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.

By

Its

GUN-PA-04666-LA-1705807 Integrated Performance Remedy		Page 7
	BOEING PROPRIETARY

EX-4.47

Exhibit 4.47

PURCHASE AGREEMENT NUMBER GUN-PA-04676

between

THE BOEING COMPANY

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

as Consenting Party

Relating to Boeing Model 737-8 Aircraft

(Contract Reference No.             )

This document has been redacted. The redacted information is subject to confidential treatment and has been omitted and filed separately with the commission.

	Page 1
BOEING PROPRIETARY

TABLE OF CONTENTS

ARTICLES
Article 1.	Quantity, Model and Description	Page 4
Article 2.	Delivery Schedule	Page 4
Article 3.	Price	Page 5
Article 4.	Payment	Page 5
Article 5.	Additional Terms	Page 5
TABLE
1.	Aircraft Information Table
EXHIBIT
A.	Aircraft Configuration
B.	Aircraft Delivery Requirements and Responsibilities
SUPPLEMENTAL EXHIBITS
AE1.	[*CTR]
BFE1.	BFE Variables
CS1.	Customer Support Variables
EE1.	Engine Escalation Adjustment, Engine Warranty and Patent Indemnity
SLP1.	Service Life Policy Components

GUN-PA-04676		Page 2
	BOEING PROPRIETARY

LETTER AGREEMENTS

LA-1704312	Performance Guarantees
LA-1704313	Integrated Performance Remedy – PG Attachment A
LA-1704314	Integrated Performance Remedy – PG Attachment B
LA-1704315	Liquidated Damages—Non-Excusable Delay
LA-1704316	Special Escalation Program
LA-1704317	Boeing BFE Purchase
LA-1704318	Government Approval
LA-1704319	Loading of Customer Software
LA-1704320	Aircraft Model Substitution
LA-1704321	Seller Purchased Equipment
LA-1704322	Installation of Cabin Systems Equipment
LA-1704323	Clarifications and Understandings
LA-1704324	Airworthiness Directive Cost Participation Agreement
LA-1704325	Payment Matters
LA-1704326	AGTA Matters
LA-1704327	Special Matters
LA-1704328	Customer Support Matters
LA-1706289	Miscellaneous Matters
LA-1706290	Working Together

GUN-PA-04676		Page 3
	BOEING PROPRIETARY

PURCHASE AGREEMENT NO. PA-04676

between

THE BOEING COMPANY

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.

as Consenting Party

This Purchase Agreement No. PA-04676 between The Boeing Company, a Delaware corporation, (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. as consenting party (Consenting Party), binding and in full force and effect on the date executed below (Effective Date), relating to the purchase and sale of Model 737-8 aircraft together with all tables, exhibits, supplemental exhibits, letter agreements and other attachments thereto, if any, (Purchase Agreement) incorporates and amends the terms and conditions (except as specifically set forth below) of the Aircraft General Terms Agreement dated as of September 19, 2000, between Boeing and Consenting Party (formerly known as China Southern Airlines Group Import and Export Trading Corp., Ltd.), identified as AGTA-GUN (AGTA). All capitalized terms used but not defined in this Purchase Agreement have the same meaning as in the AGTA, except that the term “Buyer” in the AGTA shall mean “Customer” in this Purchase Agreement.

1. Quantity, Model and Description.

The aircraft to be delivered to Customer will be designated as Model 737-8 aircraft (Aircraft). Boeing will manufacture and sell to Customer Aircraft conforming to the configuration described in Exhibit A in the quantities listed in Table 1 to the Purchase Agreement.

2. Delivery Schedule.

The scheduled months of delivery of the Aircraft are listed in the attached Table 1. [*CTR], then only those obligations to be performed under the Purchase Agreement after the [*CTR] will be performed [*CTR]. Exhibit B describes certain responsibilities for both Customer and Boeing in order to accomplish the delivery of the Aircraft.

GUN-PA-04676		Page 4
	BOEING PROPRIETARY

3. Price.

3.1 Aircraft Basic Price. The Aircraft Basic Price is listed in Table 1 and is subject to escalation in accordance with the terms of this Purchase Agreement.

3.2 Airframe Price. The Airframe Price reflected in Table 1 included the engine price at its basic thrust level.

3.3 Advance Payment Base Prices. The Advance Payment Base Prices listed in Table 1 were calculated using the latest escalation factors available to Boeing on the date of this Purchase Agreement projected to the month of scheduled delivery.

4. Payment.

4.1 Boeing acknowledges receipt of a deposit in the amount shown in Table 1 for each Aircraft (Deposit).

4.2 The standard advance payment schedule for the Model 737-8 aircraft requires Customer to make certain advance payments, expressed in a percentage of the Advance Payment Base Price of each Aircraft beginning with a payment of [*CTR], less the Deposit, due within [*CTR] of the Effective Date. Additional advance payments for each Aircraft are due as specified in and on the first business day of the months listed in the attached Table 1.

4.3 For any Aircraft whose scheduled month of delivery is less than twenty-four (24)months from the Effective Date, the total amount of advance payments due within [*CTR] of the Effective Date will include all advance payments which are past due in accordance with the standard advance payment schedule set forth in paragraph 4.2 above.

4.4 Customer will pay the balance of the Aircraft Price of each Aircraft at delivery.

5. Additional Terms.

5.1 Aircraft Information Table. Table 1 consolidates information contained in Articles 1, 2, 3 and 4 with respect to (i) quantity of Aircraft, (ii) applicable Detail Specification, (iii) month and year of scheduled deliveries, (iv) Aircraft Basic Price,

(v) applicable escalation factors and (vi) Advance Payment Base Prices and advance payments and their schedules.

5.2 Airframe and Optional Features Escalation Adjustment. Supplemental Exhibit AE1 contains the applicable airframe and optional features escalation formula.

5.3 Buyer Furnished Equipment Variables. Supplemental Exhibit BFE1 contains supplier selection dates, on-dock dates and other variables applicable to the Aircraft.

5.4 Customer Support Variables. Information, training, services and other things furnished by Boeing in support of introduction of the Aircraft into Customer’s fleet are described in Supplemental Exhibit CS1. If Customer obtains, or is set to obtain, duplicative training and planning assistance from that set out in Supplemental Exhibit CS1, then Boeing may adjust Supplemental Exhibit CS1 accordingly.

GUN-PA-04676		Page 5
	BOEING PROPRIETARY

5.5 Engine Escalation Adjustment. Supplemental Exhibit EE1 contains: a) the engine escalation formula applicable to the Engine Price when such Engine Price is separately specified in Table 1, and b) the engine warranty and the engine patent indemnity for the Aircraft.

5.6 Service Life Policy Component Variables. Supplemental Exhibit SLP1 lists the SLP Components covered by the Service Life Policy for the Aircraft.

5.7 Public Announcement. Boeing reserves the right to make a public announcement regarding Customer’s purchase of the Aircraft upon approval of Boeing’s press release by Customer’s public relations department or other authorized representative.

5.8 Negotiated Agreement; Entire Agreement. This Purchase Agreement, including the provisions of Article 8.2 of the AGTA relating to insurance, and Article 11 of Part 2 of Exhibit C of the AGTA relating to DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES, has been the subject of discussion and negotiation and is understood by the parties, and the Aircraft Price and other agreements of the parties stated in this Purchase Agreement were arrived at in consideration of such provisions. This Purchase Agreement, including the AGTA, contains the entire agreement between the parties and supersedes all previous proposals, understandings, commitments or representations whatsoever, oral or written, and may be changed only in writing signed by authorized representatives of the parties.

AGREED AND ACCEPTED this
Date
THE BOEING COMPANY	CHINA SOUTHERN AIRLINES COMPANY LIMITED
Signature	Signature
M. Shelley
Printed name	Printed name
Attorney-in-Fact
Title	Title

GUN-PA-04676		Page 6
	BOEING PROPRIETARY

CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.

Signature

Printed name

Title

GUN-PA-04676		Page 7
	BOEING PROPRIETARY

Table 1 To

Purchase Agreement No. PA-04676

Aircraft Delivery, Description, Price and Advance Payments

Airframe Model/MTOW:	737-8	167,600 pounds	Detail Specification:	D019A008-K (5/29/2015)
Engine Model/Thrust:	CFMLEAP-1B27	26,400 pounds	Airframe Price Base Year/Escalation Formula:	[*CTR]	[*CTR]
Airframe Price:		[*CTR]	Engine Price Base Year/Escalation Formula:	[*CTR]
Optional Features:		[*CTR]
Sub-Total of Airframe and Features:		[*CTR]	Airframe Escalation Data:
Engine Price (Per Aircraft):		$0
Aircraft Basic Price (Excluding BFE/SPE):		[*CTR]
Buyer Furnished Equipment (BFE) Estimate:		[*CTR]
Seller Purchased Equipment (SPE)/In-Flight Ent		[*CTR]
Deposit per Aircraft:		[*CTR]

			Escalation Factor	Escalation Estimate Adv Payment Base	Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
Delivery	Number of				[*CTR]	[*CTR]	[*CTR]	Total
Date	Aircraft		(Airframe)	Price Per A/P	[*CTR]	[*CTR]	[*CTR]	[*CTR]
[*CTR]			[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Feb-2019		1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Apr-2019		1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jun-2019		1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jul-2019		1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Aug-2019		2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Sep-2019		2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Oct-2019		1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Nov-2019		1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Dec-2019		1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jan-2020		1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Feb-2020		1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Mar-2020		1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]

Table 1 To

Purchase Agreement No. PA-04676

Aircraft Delivery, Description, Price and Advance Payments

			Escalation Factor	Escalation Estimate Adv Payment Base	Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
Delivery	Number of				[*CTR]	[*CTR]	[*CTR]	[*CTR]
Date	Aircraft		(Airframe)	Price Per A/P	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Apr-2020		1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
May-2020		1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jun-2020		1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jul-2020		2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Aug-2020		2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Sep-2020		2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Oct-2020		2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Nov-2020		2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Dec-2020		2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Total:		30

AIRCRAFT CONFIGURATION

between

THE BOEING COMPANY

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

as Consenting Party

Exhibit A to Purchase Agreement Number PA-04676

GUN-PA-04676-EXA		Page 1
	BOEING PROPRIETARY

Exhibit A

AIRCRAFT CONFIGURATION

Dated <ExecutionDate>

relating to

Boeing Model 737-8 Aircraft

The Detail Specification is Boeing document number D019A008-K (5/29/2015). The Detail Specification provides further description of Customer’s configuration set forth in this Exhibit A. Such Detail Specification will be comprised of Customer’s existing Boeing detail specification as amended to incorporate the optional features (Options) listed below, including the effects on Manufacturer’s Empty Weight (MEW) and Operating Empty Weight (OEW). As soon as practicable, Boeing will furnish to Customer copies of the Detail Specification, which copies will reflect such Options. The Aircraft Basic Price reflects and includes all effects of such Options, except such Aircraft Basic Price does not include the price effects of any Buyer Furnished Equipment or Seller Purchased Equipment.

GUN-PA-04676-EXA		Page 2
	BOEING PROPRIETARY

Exhibit A To

Boeing Purchase Agreement 4676

Customer Log:	GUN18WEXHA-115
Customer:	GUN-China Southern Airlines
Model:	737-8
Base Date:	[*CTR]
Qty of A/C:	30

CR	Title	FOLLOW ON Price Per A/C $
0110-000030	MAJOR MODEL 737 AIRPLANE
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

PA No. 04676 Boeing Proprietary Page: 1 of 10

Exhibit A Boeing Proprietary

[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

PA No. 04676 Boeing Proprietary Page: 2 of 10

Exhibit A Boeing Proprietary

[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

PA No. 04676 Boeing Proprietary Page: 3 of 10

Exhibit A Boeing Proprietary

[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

PA No. 04676 Boeing Proprietary Page: 4 of 10

Exhibit A Boeing Proprietary

[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

PA No. 04676 Boeing Proprietary Page: 5 of 10

Exhibit A Boeing Proprietary

[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

PA No. 04676 Boeing Proprietary Page: 6 of 10

Exhibit A Boeing Proprietary

[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

PA No. 04676 Boeing Proprietary Page: 7 of 10

Exhibit A Boeing Proprietary

[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

PA No. 04676 Boeing Proprietary Page: 8 of 10

Exhibit A Boeing Proprietary

[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

PA No. 04676 Boeing Proprietary Page: 9 of 10

Exhibit A Boeing Proprietary

[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

PA No. 04676 Boeing Proprietary Page: 10 of 10

AIRCRAFT DELIVERY REQUIREMENTS AND

RESPONSIBILITIES

between

THE BOEING COMPANY

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

as Consenting Party

EXHIBIT B to PURCHASE AGREEMENT NUMBER PA-04676

	Page 1
BOEING PROPRIETARY

EXHIBIT B

AIRCRAFT DELIVERY REQUIREMENTS AND RESPONSIBILITIES

relating to

BOEING MODEL 737-8 AIRCRAFT

Both Boeing and Customer have certain documentation and approval responsibilities at various times during the construction cycle of the Aircraft that are critical to making the delivery of each Aircraft a positive experience for both parties. This Exhibit B documents those responsibilities and indicates recommended completion deadlines for the actions to be accomplished.

1. GOVERNMENT DOCUMENTATION REQUIREMENTS.

Certain actions are required to be taken by Customer in advance of the scheduled delivery month of each Aircraft with respect to obtaining certain government issued documentation.

1.1 Airworthiness and Registration Documents. Not later than [*CTR], Customer will notify Boeing of the registration number to be painted on the side of the Aircraft. If required by the regulatory authority, Customer will authorize, by letter to the regulatory authority having jurisdiction, the display of such registration numbers by Boeing during the pre-delivery testing of the Aircraft, no later than [*CTR] of each Aircraft.

Customer is responsible for furnishing any temporary or permanent registration certificates required by any governmental authority having jurisdiction to be displayed aboard the Aircraft after delivery.

1.2 Certificate of Sanitary Construction.

1.2.1 U.S. Registered Aircraft. Boeing will obtain from the United States Public Health Service, a United States Certificate of Sanitary Construction to be displayed aboard each Aircraft after delivery to Customer. The above Boeing obligation only applies to commercial passenger aircraft.

1.2.2 Non-U.S. Registered Aircraft. If Customer requires a United States Certificate of Sanitary Construction at the time of delivery of the Aircraft, Customer will give written notice thereof to Boeing at least [*CTR]. Boeing will then use commercially reasonable efforts to obtain the certificate from the United States Public Health Service and present it to Customer at the time of Aircraft delivery. The above Boeing obligation only applies to commercial passenger aircraft.

1.3 Customs Documentation.

1.3.1 Import Documentation. If the Aircraft is intended to be exported from the United States, Customer must notify Boeing not later than [*CTR] each Aircraft of any documentation required by the customs authorities or by any other agency of the country of import.

GUN-PA-04676-EXB		Page 2
	BOEING PROPRIETARY

1.3.2 General Declaration—U.S. If the Aircraft is intended to be exported from the United States, Boeing will prepare Customs Form 7507, General Declaration, for execution by U.S. Customs immediately prior to the ferry flight of the Aircraft. For this purpose, Customer will furnish to Boeing not later than [*CTR] all [*CTR] required by U.S. Customs and Border Protection, including without limitation (i) a complete crew and passenger list identifying the names, birth dates, passport numbers and passport expiration dates of all crew and passengers and (ii) a complete ferry flight itinerary, including point of exit from the United States for the Aircraft.

If Customer intends, during the ferry flight of an Aircraft, to land at a U.S. airport after clearing Customs at delivery, Customer must notify Boeing not later than [*CTR]. If Boeing receives such notification, Boeing will provide to Customer the documents constituting a customs permit to proceed, allowing such Aircraft to depart after any such landing. Sufficient copies of completed Form 7507, along with passenger manifest, will be furnished to Customer to cover U.S. stops scheduled for the ferry flight.

1.3.3 Export Declaration—U.S. If the Aircraft is intended to be exported from the United States following delivery, and (i) Customer is a non-U.S. customer, Boeing will file an export declaration electronically with U.S. Customs and Border Protection (CBP), or (ii) Customer is a U.S. customer, it is the responsibility of the U.S. customer, as the exporter of record, to file the export declaration with CBP.

2. INSURANCE CERTIFICATES.

Unless provided earlier, Customer will provide to Boeing not later than [*CTR] of the first Aircraft, a copy of the requisite annual insurance certificate in accordance with the requirements of Article 8 of the AGTA.

3. NOTICE OF FLYAWAY CONFIGURATION.

Not later than [*CTR] of the Aircraft, Customer will provide to Boeing a configuration letter stating the requested “flyaway configuration” of the Aircraft for its ferry flight. This configuration letter should include:

(i) the name of the company which is to furnish fuel for the ferry flight and any scheduled post-delivery flight training, the method of payment for such fuel, and fuel load for the ferry flight;

(ii) the cargo to be loaded and where it is to be stowed on board the Aircraft, the address where cargo is to be shipped after flyaway and notification of any hazardous materials requiring special handling;

(iii) any BFE equipment to be removed prior to flyaway and returned to Boeing BFE stores for installation on Customer’s subsequent Aircraft;

GUN-PA-04676-EXB		Page 3
	BOEING PROPRIETARY

(iv) a complete list of names and citizenship of each crew member and non-revenue passenger who will be aboard the ferry flight; and

(v) a complete ferry flight itinerary.

4. DELIVERY ACTIONS BY BOEING.

4.1 Schedule of Inspections. All FAA, Boeing, Customer and, if required, U.S. Customs Bureau inspections will be scheduled by Boeing for completion prior to delivery or departure of the Aircraft. Customer will be informed of such schedules.

4.2 Schedule of Demonstration Flights. All FAA and Customer demonstration flights will be scheduled by Boeing for completion prior to delivery of the Aircraft.

4.3 Schedule for Customer’s Flight Crew. Boeing will inform Customer of the date that a flight crew is required for acceptance routines associated with delivery of the Aircraft.

4.4 Fuel Provided by Boeing. Boeing will provide to Customer, without charge, the amount of fuel shown in U.S. gallons in the table below for the model of Aircraft being delivered and full capacity of engine oil at the time of delivery or prior to the ferry flight of the Aircraft.

Aircraft Model	Fuel Provided
737	[*CTR]

4.5 Flight Crew and Passenger Consumables. Boeing will provide reasonable quantities of food, coat hangers, towels, toilet tissue, drinking cups and soap for the first segment of the ferry flight for the Aircraft.

4.6 Delivery Papers, Documents and Data. Boeing will have available at the time of delivery of the Aircraft certain delivery papers, documents and data for execution and delivery. If the Aircraft will be registered with the FAA, Boeing will pre-position in Oklahoma City, Oklahoma, for filing with the FAA at the time of delivery of the Aircraft an executed original Form 8050-2, Aircraft Bill of Sale, indicating transfer of title to the Aircraft from Boeing to Customer.

4.7 Delegation of Authority. If specifically requested in advance by Customer, Boeing will present a certified copy of a delegation of authority, designating and authorizing certain persons to act on its behalf in connection with delivery of the Aircraft.

5. DELIVERY ACTIONS BY CUSTOMER.

5.1 Aircraft Radio Station License. At delivery Customer will provide its aircraft radio station license to be placed on board the Aircraft following delivery.

5.2 Aircraft Flight Log. At delivery Customer will provide the aircraft flight log for the Aircraft.

5.3 Delegation of Authority. Customer will present to Boeing at delivery of the Aircraft an original or certified copy of Customer’s delegation of authority designating and authorizing certain persons to act on its behalf in connection with delivery of the specified Aircraft.

GUN-PA-04676-EXB		Page 4
	BOEING PROPRIETARY

5.4 TSA Waiver Approval. Customer may be required to have an approved Transportation Security Administration (TSA) waiver for the ferry flight depending upon the Customer’s en-route stop(s) and destination unless the Customer already has a TSA approved security program in place. Customer is responsible for application of the TSA waiver and obtaining TSA approval. Customer will provide a copy of the approved TSA waiver to Boeing upon arrival at the Boeing delivery center.

5.5 Electronic Advance Passenger Information System. Should the ferry flight of an Aircraft leave the United States, the Department of Homeland Security office requires Customer to comply with the Electronic Advance Passenger Information System (eAPIS). Customer needs to establish their own account with US Customs and Border Protection in order to file for departure. A copy of the eAPIS forms is to be provided by Customer to Boeing upon arrival of Customer’s acceptance team at the Boeing delivery center.

GUN-PA-04676-EXB		Page 5
	BOEING PROPRIETARY

AIRFRAME AND OPTIONAL FEATURES

ESCALATION ADJUSTMENT

between

THE BOEING COMPANY

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

as Consenting Party

Supplemental Exhibit AE1

to Purchase Agreement Number PA-04676

	Page 1
BOEING PROPRIETARY

AIRFRAME AND OPTIONAL FEATURES

ESCALATION ADJUSTMENT

relating to

BOEING MODEL 737-8 AIRCRAFT

1. Formula.

Airframe and Optional Features price adjustments (Airframe Price Adjustment) are used to allow prices to be stated in current year dollars at the signing of this Purchase Agreement and to adjust the amount to be paid by Customer at delivery for the effects of economic fluctuation. The Airframe Price Adjustment will be determined at the time of Aircraft delivery in accordance with the following formula:

[*CTR]

Where:

[*CTR]

[*CTR]

[*CTR]

Where:

[*CTR] is the base year airframe escalation index (as set forth in Table 1 of this Purchase Agreement);

ECI is a value determined using the U.S. Department of Labor, Bureau of Labor Statistics, [*CTR] calculated by establishing a [*CTR] value (expressed as a decimal and rounded to the nearest tenth) using the values for the [*CTR] months prior to the month of scheduled delivery of the applicable Aircraft. As the Employment Cost Index values are only released on a quarterly basis, the value released for the first quarter will be used for the months of January, February, and March; the value released for the second quarter will be used for the months of April, May, and June; the value released for the third quarter will be used for the months of July, August, and September; the value released for the fourth quarter will be used for the months of October, November, and December.

GUN-PA-04676-AE1		Page 2
	BOEING PROPRIETARY

[*CTR]

Where:

[*CTR] is the base year index (as set forth in Table 1 of this Purchase Agreement); and

[*CTR] is a value determined using the U.S. Department of Labor, Bureau of Labor Statistics, [*CTR] monthly [*CTR] tenth) using the values for the prior to the month of scheduled delivery of the applicable Aircraft.

[*CTR]

[*CTR]        [*CTR]

Where:

[*CTR] is the number of calendar months which have elapsed from the Airframe Price base year and month up to and including the month of delivery, both as shown in Table 1 of the Purchase Agreement. The entire calculation of [*CTR] will be rounded to 4 places, and the final value of [*CTR] will be rounded to the nearest dollar.

As an example, for an Aircraft scheduled to be delivered in the month of July, the months of June, July, and August of the preceding year will be utilized in determining the value of [*CTR]

Note:

(i) In determining the values of [*CTR], all calculations and resulting values will be expressed as a decimal rounded to the nearest ten-thousandth.

(ii) [*CTR] numeric ratio attributed to labor in the Airframe Price Adjustment formula.

(iii) [*CTR] numeric ratio attributed to materials in the Airframe Price Adjustment formula.

(iv) The denominators (base year indices) are the actual average values reported by the U.S. Department of Labor, Bureau of Labor Statistics. The actual average values are calculated as a [*CTR] arithmetic average of the released monthly values (expressed as a decimal and rounded to the nearest tenth) using the values for the [*CTR] months prior to the airframe base year. The applicable base year and corresponding denominator is provided by Boeing in Table 1 of this Purchase Agreement.

GUN-PA-04676-AE1		Page 3
	BOEING PROPRIETARY

(v) The final value of [*CTR] will be rounded to the nearest dollar.

(vi) The Airframe Price Adjustment will not be made if it will result in a decrease in the Aircraft Basic Price.

2. Values to be Utilized in the Event of Unavailability.

2.1 If the Bureau of Labor Statistics substantially revises the methodology used for the determination of the values to be used to determine the [*CTR] values (in contrast to benchmark adjustments or other corrections of previously released values), or for any reason has not released values needed to determine the applicable Airframe Price Adjustment, the parties will, prior to the delivery of any such Aircraft, select a substitute from other Bureau of Labor Statistics data or similar data reported by non-governmental organizations. Such substitute will result in the same adjustment, insofar as possible, as would have been calculated utilizing the original values adjusted for fluctuation during the applicable time period. However, if within [*CTR] after delivery of the Aircraft, the Bureau of Labor Statistics should resume releasing values for the months needed to determine the Airframe Price Adjustment; such values will be used to determine any increase or decrease in the Airframe Price Adjustment for the Aircraft from that determined at the time of delivery of the Aircraft.

2.2 Notwithstanding Article 2.1 above, if prior to the scheduled delivery month of an Aircraft the Bureau of Labor Statistics changes the base year for determination of the [*CTR] values as defined above, such re-based values will be incorporated in the Airframe Price Adjustment calculation.

2.3 In the event escalation provisions are made non-enforceable or otherwise rendered void by any agency of the United States Government, the parties agree, to the extent they may lawfully do so, to equitably adjust the Aircraft Price of any affected Aircraft to reflect an allowance for increases or decreases consistent with the applicable provisions of paragraph 1 of this Supplemental Exhibit AE1 in labor compensation and material costs occurring since [*CTR] prior to the price base year shown in the Purchase Agreement.

2.4 If within [*CTR] of Aircraft delivery, the published index values are revised due to an acknowledged error by the Bureau of Labor Statistics, the Airframe Price Adjustment will be re-calculated using the revised index values (this does not include those values noted as preliminary by the Bureau of Labor Statistics). A credit memorandum or supplemental invoice will be issued for the Airframe Price Adjustment difference. Interest charges will not apply for the period of original invoice to issuance of credit memorandum or supplemental invoice.

GUN-PA-04676-AE1		Page 4
	BOEING PROPRIETARY

Note:

(i) The values released by the Bureau of Labor Statistics and available to Boeing [*CTR] prior to the first day of the scheduled delivery month of an Aircraft will be used to determine the [*CTR] for the applicable months (including those noted as preliminary by the Bureau of Labor Statistics) to calculate the Airframe Price Adjustment for the Aircraft invoice at the time of delivery. The values will be considered final and no Airframe Price Adjustments will be made after Aircraft delivery for any subsequent changes in published index values, subject always to paragraph 2.4 above.

(ii) The maximum number of digits to the right of the decimal after rounding utilized in any part of the Airframe Price Adjustment equation will be 4, where rounding of the fourth digit will be increased to the next highest digit when the 5th digit is equal to five (5) or greater.

GUN-PA-04676-AE1		Page 5
	BOEING PROPRIETARY

BUYER FURNISHED EQUIPMENT VARIABLES

between

THE BOEING COMPANY

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

as Consenting Party

Supplemental Exhibit BFE1

to Purchase Agreement Number PA-04676

	Page 1
BOEING PROPRIETARY

BUYER FURNISHED EQUIPMENT VARIABLES

relating to

BOEING MODEL 737 AIRCRAFT

This Supplemental Exhibit BFE1 contains supplier selection dates, on-dock dates and other requirements applicable to the Aircraft.

1. Supplier Selection. Customer will:

Select and notify Boeing of the suppliers, model and part numbers of the following BFE items by the following dates:

Galley System	[*CTR]
Galley Inserts	[*CTR]
Seats (passenger)	[*CTR]
Overhead & Audio System	[*CTR]
In-Seat Video System	[*CTR]
Miscellaneous Emergency Equipment	[*CTR]
Cargo Handling Systems*	[*CTR]
(Single Aisle Programs only)	[*CTR]

* For a new certification, supplier requires notification [*CTR] months prior to Cargo Handling System on-dock date.

Customer will enter into initial agreements with the selected Galley System, Galley Inserts, Seats, and In-Seat Video System suppliers on or before [*CTR] after the above supplier selection dates to actively participate with Customer and Boeing in coordination actions including the Initial Technical Coordination Meeting (ITCM).

2. On-dock Dates and Other Information.

On or before [*CTR] prior to each airplane delivery, Boeing will provide to Customer the BFE Requirements. These requirements may be periodically revised, setting forth the items, quantities, on-dock dates and shipping instructions and other requirements relating to the in-sequence installation of BFE. For planning purposes, preliminary BFE on-dock dates are set forth below:

GUN-PA-04676-BFE1		Page 2
	BOEING PROPRIETARY

Nominal Del Date

Aircraft Qty

Seats

Galley / Furnishings

Antennas & Mounting quipment

Avionics

Cabin Systems quipment

Misc. mergency quipment

Textiles / Raw Materials

Cargo Systems

Provision Kits

Radomes

Jan 2019

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Feb 2019

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Mar 2019

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Apr 2019

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Jun 2019

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Jul 2019

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Aug 2019

2

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Sep 2019

2

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Oct 2019

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Nov 2019

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Dec 2019

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Jan 2020

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Feb 2020

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Mar 2020

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Apr 2020

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

May 2020

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Jun 2020

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Jul 2020

2

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Aug 2020

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Sep 2020

2

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Oct 2020

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Nov 2020

2

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Dec 2020

2

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Total

30

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

3. Additional Delivery Requirements - Import.

Customer will be the importer of record (as defined by the U.S. Customs and Border Protection) for all BFE imported into the United States, and as such, it has the responsibility to ensure all of Customer’s BFE shipments comply with U.S. Customs Service regulations. In the event Customer requests Boeing, in writing, to act as importer of record for Customer’s BFE, and Boeing agrees to such request, Customer is responsible for ensuring Boeing can comply with all U.S. Customs Import Regulations by making certain that, at the time of shipment, all BFE shipments comply with the requirements in the “International Shipment Routing Instructions”, including the Customs Trade Partnership Against Terrorism (C-TPAT), as set out on the Boeing website referenced below. Customer agrees to include the International Shipment Routing Instructions, including C-TPAT requirements, in each contract between Customer and BFE supplier.

GUN-PA-04676-BFE1		Page 3
	BOEING PROPRIETARY

http://www.boeing.com/companyoffices/doingbiz/supplier_portal/index_general.html

GUN-PA-04676-BFE1		Page 4
	BOEING PROPRIETARY

CUSTOMER SUPPORT VARIABLES

BETWEEN

THE BOEING COMPANY

AND

China Southern Airlines Company Limited

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

as Consenting Party

Supplemental Exhibit CS1

to Purchase Agreement Number PA-04676

	Page 1
BOEING PROPRIETARY

CUSTOMER SUPPORT VARIABLES

relating to

Boeing Model 737-8 Aircraft

Customer currently operates an aircraft of the same model as the Aircraft. Upon Customer’s request, Boeing will develop and schedule a customized support program (Customer Support Program) to be furnished in support of the Aircraft. The Customer Support Program will be based upon and equivalent to the entitlements summarized below.

1. Maintenance Training.

1.1 Maintenance Training Minor Model Differences Course, if required, covering operational, structural or systems differences between Customer’s newly-purchased Aircraft and an aircraft of the same model currently operated by Customer;

1.2 [*CTR] will be provided to each student. In addition,

2. Flight [*CTR]

Boeing will provide, if required, [*CTR]

3. Planning Assistance.

3.1 Maintenance Engineering. Notwithstanding anything in Exhibit B to the AGTA to the contrary, Boeing will provide the following maintenance engineering support:

3.1.1 Maintenance Planning Assistance. [*CTR]

3.1.2 ETOPS Maintenance Planning Assistance. [*CTR].

3.1.3 GSE/Shops/Tooling Consulting. [*CTR]

GUN-PA-04676-CS1		Page 2
	BOEING PROPRIETARY

3.2 Spares. [*CTR]

4. Technical Data and Documents.

[*CTR]

4.1 Fleet Statistical Data and Report.

[*CTR]

5. Aircraft Information.

5.1 Aircraft Information. [*CTR]

5.2 License Grant. [*CTR]

For purposes of this article, Boeing is defined as The Boeing Company and its wholly owned subsidiaries.

Customer will provide [*CTR]

GUN-PA-04676-CS1		Page 3
	BOEING PROPRIETARY

ENGINE ESCALATION ADJUSTMENT,

ENGINE WARRANTY AND PATENT INDEMNITY

between

THE BOEING COMPANY

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

as Consenting Party

Supplemental Exhibit EE1

to Purchase Agreement Number PA-04676

	Page 1
BOEING PROPRIETARY

ENGINE ESCALATION ADJUSTMENT,

ENGINE WARRANTY AND PATENT INDEMNITY

relating to

BOEING MODEL 737-8 AIRCRAFT

1. ENGINE ESCALATION.

[*CTR]

2. ENGINE WARRANTY AND PRODUCT SUPPORT PLAN.

Boeing has obtained from CFM International, Inc. (or CFM International, S.A., as the case may be) (CFM) the right to extend to Customer the provisions of CFM’s warranty as set forth below (herein referred to as Warranty); subject, however, to Customer’s acceptance of the conditions set forth herein. Accordingly,

2.1 [*CTR] Title. CFM warrants that at the date of delivery, CFM has legal title to and good and lawful [*CTR] right to sell its CFM56-7 and CFM LEAP-1B type Engine and Products and furthermore [*CTR] warrants that such title is free and clear of all claims, liens and encumbrances of any nature whatsoever.

2.2 Patents.

GUN-PA-04676-EE1		Page 2
	BOEING PROPRIETARY

2.2.1 CFM will handle all claims and defend any suit or proceeding brought against Customer insofar as based on a claim that any product or part furnished under this Agreement constitutes an infringement of any patent of the United States, and will pay all damages and costs awarded therein against Customer. This paragraph will not apply to any product or any part manufactured to Customer’s design or to the aircraft manufacturer’s design. As to such product or part, CFM assumes no liability for patent infringement.

2.2.2 CFM’s liability hereunder is conditioned upon Customer promptly notifying CFM in writing and giving CFM authority, information and assistance (at CFM’s expense) for the defense of any suit. In case said equipment or part is held in such suit to constitute infringement and the use of said equipment or part is enjoined, CFM will expeditiously, at its own expense and at its option, either (i) procure for Customer the rights to continue using said product or part; (ii) replace the same with a satisfactory and non-infringing product or part; or (iii) modify the same so it becomes satisfactory and non-infringing. The foregoing will constitute the sole remedy of Customer and the sole liability of CFM for patent infringement.

2.2.3 The above provisions also apply to products which are the same as those covered by this Agreement and are delivered to Customer as part of the installed equipment on CFM56-7 and CFM LEAP-1B powered Aircraft.

2.3 Initial Warranty. CFM warrants that CFM56-7 and CFM LEAP-1B Engine products will conform to CFM’s applicable specifications and will be free from defects in material and workmanship prior to Customer’s initial use of such products.

2.4 Warranty Pass-On.

2.4.1 If requested by Customer and agreed to by CFM in writing, CFM will extend warranty support for Engines sold by Customer to commercial airline operators, or to other aircraft operators. Such warranty support will be limited to the New Engine Warranty, New Parts Warranty, Ultimate Life Warranty and Campaign Change Warranty and will require such operator(s) to agree in writing to be bound by and comply with all the terms and conditions, including the limitations, applicable to such warranties.

2.4.2 Any warranties set forth herein will not be transferable to a third party, merging company or an acquiring entity of Customer.

2.4.3 In the event Customer is merged with, or acquired by, another aircraft operator which has a general terms agreement with CFM, the Warranties as set forth herein will apply to the Engines, Modules, and Parts.

2.5 New Engine Warranty.

2.5.1 CFM warrants each new Engine and Module against Failure for the initial [*CTR] follows:

(i) Parts Credit Allowance will be granted for any Failed Parts.

(ii) Labor Allowance for disassembly, reassembly, test and Parts repair of any new Engine Part will be granted for replacement of Failed Parts.

GUN-PA-04676-EE1		Page 3
	BOEING PROPRIETARY

(iii) Such Parts Credit Allowance and Labor Allowance will be:

[*CTR]

2.5.2 As an alternative to the above [*CTR] CFM will, upon request of Customer:

(i) Arrange to have the failed Engines and Modules repaired, as appropriate, at a facility designated by CFM at no charge to Customer for the [*CTR] and at a charge to Customer increasing pro rata from [*CTR].

(ii) Transportation to and from the designated facility will be at Customer’s expense.

2.6 New Parts Warranty. In addition to the warranty granted for new Engines and new Modules, CFM warrants Engine and Module Parts as follows:

2.6.1 During the first for such Parts and Expendable Parts, CFM will grant Parts Credit [*CTR] Allowance or Labor Allowance for repair labor for failed Parts.

2.6.2 CFM will grant a pro rata Parts Credit Allowance for Scrapped Parts decreasing from t [*CTR].

2.7 [*CTR]

2.7.1 CFM warrants Ultimate Life limits on the following Parts:

(i) Fan and Compressor Disks/Drums

(ii) Fan and Compressor Shafts

(iii) Compressor Discharge Pressure Seal (CDP)

(iv) Turbine Disks

(v) HPT Forward and Stub Shaft

(vi) LPT Driving Cone

(vii) LPT Shaft and Stub Shaft

GUN-PA-04676-EE1		Page 4
	BOEING PROPRIETARY

2.7.2 CFM will grant a pro rata Parts Credit Allowance [*CTR] whichever comes earlier. Credit will be granted only when such Parts are permanently removed from service by a CFM or a U.S. and/or French Government imposed Ultimate Life limitation of less than

2.8 Campaign Change Warranty [*CTR]

[*CTR] be declared by CFM when a new Part design introduction, Part modification, Part Inspection, or premature replacement of an Engine or Module is required by a mandatory time compliance CFM Service Bulletin or FAA Airworthiness Directive. Campaign change may also be declared for CFM Service Bulletins requesting new Part introduction no later than the next Engine or Module shop visit. CFM will grant following Parts Credit Allowances:

Engines and Modules

(i) [*CTR]

(ii) [*CTR]

2.8.2 Labor Allowance—CFM will grant [*CTR] for disassembly, reassembly, modification, testing, or Inspection of CFM supplied Engines, Modules, or Parts therefore when such action is required to comply with a mandatory time compliance CFM Service Bulletin or FAA Airworthiness Directive. A [*CTR] will be granted by CFM for other CFM issued Service Bulletins if so specified in such Service Bulletins.

2.8.3 Life Controlled Rotating Parts retired by Ultimate Life limits including FAA and/or EASA Airworthiness Directive, are excluded from Campaign Change Warranty.

2.9 LIMITATIONS. THE PROVISIONS SET FORTH HEREIN ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER WARRANTIES WHETHER WRITTEN, ORAL OR IMPLIED. THERE ARE NO IMPLIED WARRANTIES OF FITNESS OR MERCHANTABILITY. SAID PROVISIONS SET FORTH THE MAXIMUM LIABILITY OF CFM WITH RESPECT TO CLAIMS OF ANY KIND, INCLUDING NEGLIGENCE, ARISING OUT OF MANUFACTURE, SALE, POSSESSION, USE OR HANDLING OF THE PRODUCTS OR PARTS THEREOF OR THEREFORE, AND IN NO EVENT WILL CFM’S LIABILITY TO CUSTOMER EXCEED THE PURCHASE PRICE OF THE PRODUCT GIVING RISE TO CUSTOMER’S CLAIM OR INCLUDE INCIDENTAL OR CONSEQUENTIAL DAMAGES.

2.10 INDEMNITY AND CONTRIBUTION.

GUN-PA-04676-EE1		Page 5
	BOEING PROPRIETARY

2.10.1 IN THE EVENT CUSTOMER ASSERTS A CLAIM AGAINST A THIRD PARTY FOR DAMAGES OF THE TYPE LIMITED OR EXCLUDED IN LIMITATIONS, PARAGRAPH 2.9. ABOVE, CUSTOMER WILL INDEMNIFY AND HOLD CFM HARMLESS FROM AND AGAINST ANY CLAIM BY OR LIABILITY TO SUCH THIRD PARTY FOR CONTRIBUTION OR INDEMNITY, INCLUDING COSTS AND EXPENSES (INCLUDING ATTORNEYS’ FEES) INCIDENT THERETO OR INCIDENT TO ESTABLISHING SUCCESSFULLY THE RIGHT TO INDEMNIFICATION UNDER THIS PROVISION. THIS INDEMNITY WILL APPLY WHETHER OR NOT SUCH DAMAGES WERE OCCASIONED IN WHOLE OR IN PART BY THE FAULT OR NEGLIGENCE OF CFM, WHETHER ACTIVE, PASSIVE OR IMPUTED.

2.10.2 CUSTOMER WILL INDEMNIFY AND HOLD CFM HARMLESS FROM ANY DAMAGE, LOSS, CLAIM, AND LIABILITY OF ANY KIND (INCLUDING EXPENSES OF LITIGATION AND ATTORNEYS’ FEES) FOR PHYSICAL INJURY TO OR DEATH OF ANY PERSON, OR FOR PROPERTY DAMAGE OF ANY TYPE, ARISING OUT OF THE ALLEGED DEFECTIVE NATURE OF ANY PRODUCT OR SERVICE FURNISHED UNDER THIS AGREEMENT, TO THE EXTENT THAT THE PAYMENTS MADE OR REQUIRED TO BE MADE BY CFM EXCEED ITS ALLOCATED SHARE OF THE TOTAL FAULT OR LEGAL RESPONSIBILITY OF ALL PERSONS ALLEGED TO HAVE CAUSED SUCH DAMAGE, LOSS, CLAIM, OR LIABILITY BECAUSE OF A LIMITATION OF LIABILITY ASSERTED BY CUSTOMER OR BECAUSE CUSTOMER DID NOT APPEAR IN AN ACTION BROUGHT AGAINST CFM. CUSTOMER’S OBLIGATION TO INDEMNIFY CFM HEREUNDER WILL BE APPLICABLE AT SUCH TIME AS CFM IS REQUIRED TO MAKE PAYMENT PURSUANT TO A FINAL JUDGEMENT IN AN ACTION OR PROCEEDING IN WHICH CFM WAS A PARTY, PERSONALLY APPEARED, AND HAD THE OPPORTUNITY TO DEFEND ITSELF. THIS INDEMNITY WILL APPLY WHETHER OR NOT CUSTOMER’S LIABILITY IS OTHERWISE LIMITED.

GUN-PA-04676-EE1		Page 6
	BOEING PROPRIETARY

TABLE 1—LEAP-1B WARRANTY PARTS LIST*

	ENGINE FLIGHT HOURS
	[*CTR]		[*CTR]		[*CTR]
Fan Rotor
Blade, 1st Stage		X
Blade, Platforms		X
Blade, Booster Stages 2-4		X
Disk, 1st Stage						X
Spool, Booster						X
Forward Fan Shaft						X
Spinner		X
Fan Stator
Forward Case				X
Booster Vanes		X
Booster Case rings		X
Outlet Guide Vane (OGV)		X
Aft Acoustic Panels		X
Bleed Valve System		X
Aft Case				X
Compressor Rotor
Blades		X
Blisks, Spools, and Shafts						X
Compressor Stator
Cases				X
Vane Shrouds		X
Vanes		X
Variable Stator Actuating Rings		X
Combustor
Inner/Outer Liners & Dome		X
Case				X
HPT Rotor
Blades		X
Retaining Rings		X
Stg 1&2 Disks						X
Midseal						X
Forward Outer Seal						X
Aft seal						X
HPT Stator
Case				X
Vane Assemblies		X
Vane Support		X
Shrouds		X
Shroud Support		X

GUN-PA-04676-EE1		Page 7
	BOEING PROPRIETARY

Turbine Center Frame
Case		X
LPT Rotor
Blades	X
Interstage Seals			X
Disks			X
LP Cone Shaft			X
LP Shaft			X
LPT Stator
Case		X
Vane Assemblies	X
Shrouds	X
Fan Frame
Fan Hub Frame		X
All Supports	X
“A” Sump	X
Turbine Center Frame
Frame		X
“B” Sump	X
Turbine Rear Frame
Frame		X
#5 Bearing Support	X
“C” Sump	X
Main Engine Bearings	X
Gearboxes
Cases		X
Shafts, Drive	X
Gears	X
Bearings	X
Air Duct	X
Sump Air and Oil Seals	X

* Warranty Parts List may change as Engine program evolves

GUN-PA-04676-EE1		Page 8
	BOEING PROPRIETARY

SERVICE LIFE POLICY COMPONENTS

between

THE BOEING COMPANY

and

CHINA SOUTHERN AIRLINES COMPANY LIMITED

with

CHINA SOUTHERN AIRLINES GROUP IMPORT AND

EXPORT TRADING CORP., LTD.

as Consenting Party

SUPPLEMENTAL EXHIBIT SLP1

to PURCHASE AGREEMENT NUMBER PA-04676

	Page 1
BOEING PROPRIETARY

SERVICE LIFE POLICY COMPONENTS

relating to

BOEING MODEL 737-8 AIRCRAFT

This is the listing of SLP Components for the Aircraft which relate to Part 3, Boeing Service Life Policy of Exhibit C, Product Assurance Document to the AGTA and is a part of Purchase Agreement No. PA-04676.

1. Wing.

(i) Upper and lower wing skins and stiffeners between the forward and rear wing spars.

(ii) Wing spar webs, chords and stiffeners.

(iii) Inspar wing ribs.

(iv) Inspar splice plates and fittings.

(v) Main landing gear support structure.

(vi) Wing center section lower beams, spanwise beams and floor beams, but not the seat tracks attached to floor beams.

(vii) Wing-to-body structural attachments.

(viii) Engine strut support fittings attached directly to wing primary structure.

(ix) Support structure in the wing for spoilers and spoiler actuators; for aileron hinges and reaction links; and for leading edge devices and trailing edge flaps.

(x) Trailing edge flap tracks and carriages.

(xi) Aileron leading edge device and trailing edge flap internal, fixed attachment and actuator support structure.

2. Body.

(i) External surface skins and doublers, longitudinal stiffeners, longerons and circumferential rings and frames between the forward pressure bulkhead and the vertical stabilizer rear spar bulkhead and structural support and enclosure for the APU but excluding all system components and related installation and connecting devices, insulation, lining, and decorative panels and related installation and connecting devices.

GUN-PA-04676-SLP1		Page 2
	BOEING PROPRIETARY

(ii) Window and windshield structure but excluding the windows and windshields.

(iii) Fixed attachment structure of the passenger doors, cargo doors and emergency exits, excluding door mechanisms and movable hinge components. Sills and frames around the body openings for the passenger doors, cargo doors and emergency exits, excluding scuff plates and pressure seals.

(iv) Nose wheel well structure, including the wheel well walls, pressure deck, bulkheads, and gear support structure.

(v) Main gear wheel well structure including pressure deck and landing gear beam support structure.

(vi) Floor beams and support posts in the control cab and passenger cabin area, but excluding seat tracks.

(vii) Forward and aft pressure bulkheads.

(viii) Keel structure between the wing front spar bulkhead and the main gear wheel well aft bulkhead including splices.

(ix) Wing front and rear spar support bulkheads, and vertical and horizontal stabilizer front and rear spar support bulkheads including terminal fittings but excluding all system components and related installation and connecting devices, insulation, lining, and decorative panels and related installation and connecting devices.

(x) Support structure in the body for the stabilizer pivot and stabilizer screw.

3. Vertical Stabilizer.

(i) External skins between front and rear spars.

(ii) Front, rear and auxiliary spar chords, webs and stiffeners and attachment fittings.

(iii) Inspar ribs.

(iv) Rudder hinges and supporting ribs, excluding bearings.

(v) Support structure in the vertical stabilizer for rudder hinges, reaction links and actuators.

(vi) Rudder internal, fixed attachment and actuator support structure.

4. Horizontal Stabilizer.

GUN-PA-04676-SLP1		Page 3
	BOEING PROPRIETARY

(i) External skins between front and rear spars.

(ii) Front and rear spar chords, webs and stiffeners.

(iii) Inspar ribs.

(iv) Stabilizer center section including hinge and screw support structure.

(v) Support structure in the horizontal stabilizer for the elevator hinges, reaction links and actuators.

(vi) Elevator internal, fixed attachment and actuator support structure.

5. Engine Strut.

(i) Strut external surface skin and doublers and stiffeners.

(ii) Internal strut chords, frames and bulkheads.

(iii) Strut to wing fittings and diagonal brace.

(iv) Engine mount support fittings attached directly to strut structure and including the engine-mounted support fittings.

6. Main Landing Gear.

(i) Outer cylinder.

(ii) Inner cylinder, including axles.

(iii) Upper and lower side struts, including spindles, universals and reaction links.

(iv) Drag strut.

(v) Orifice support tube.

(vi) Downlock links including spindles and universals.

(vii) Torsion links.

(viii) Bell crank.

(ix) Trunnion link.

(x) Actuator beam, support link and beam arm.

7. Nose Landing Gear.

(i) Outer cylinder.

(ii) Inner cylinder, including axles.

(iii) Orifice support tube.

(iv) Upper and lower drag strut, including lock links.

(v) Steering plates and steering collars.

GUN-PA-04676-SLP1		Page 4
	BOEING PROPRIETARY

(vi) Torsion links.

NOTE: The Service Life Policy does not cover any bearings, bolts, bushings, clamps, brackets, actuating mechanisms or latching mechanisms used in or on the SLP Components.

GUN-PA-04676-SLP1		Page 5
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-04676-LA-1704312

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject: Aircraft Performance Guarantees

Reference: Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

Boeing agrees to provide Customer with the performance guarantees in the Attachments A and B. The performance guarantees in Attachment A to this Letter Agreement are applicable to the Aircraft set forth in Table 1 of the Purchase Agreement with configuration of [*CTR] ) maximum takeoff weight and CFM LEAP- 1B27 engines. If Customer modifies the Aircraft configuration to [*CTR] maximum takeoff weight and CFM LEAP-1B28 engines, in accordance with Boeing’s standard price and offerability process, then the performance guarantees in Attachment B to this Letter Agreement will be applicable to the relevant Aircraft. These guarantees are exclusive and expire upon delivery of the Aircraft to Customer.

1. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

2. Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents, except for as required by applicable laws or regulations, to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

GUN-PA-04676-LA-1704312 Performance Guarantees		Page 1
	BOEING PROPRIETARY

Very truly yours,
AGREED AND ACCEPTED this
Date
THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04676-LA-1704312		Page 2
Performance Guarantees	BOEING PROPRIETARY

Attachment A to Letter Agreement

No. LA-1704312

LEAP-1B27 Engines

Page 1

MODEL 737-8 PERFORMANCE GUARANTEES

FOR CHINA SOUTHERN AIRLINES COMPANY LIMITED

SECTION	CONTENTS
1	AIRCRAFT MODEL APPLICABILITY
2	FLIGHT PERFORMANCE
3	AIRCRAFT CONFIGURATION
4	GUARANTEE CONDITIONS
5	GUARANTEE COMPLIANCE
6	EXCLUSIVE GUARANTEES

P.A. No. 04676
AERO-B-BBA4-M13-1056A		SS13-0357
	BOEING PROPRIETARY

Attachment A to Letter Agreement

No. LA-1704312

LEAP-1B27 Engines

Page 2

1 AIRCRAFT MODEL APPLICABILITY

The guarantees contained in this Attachment (the “Performance Guarantees”) are applicable to the 737-8 Aircraft with a maximum takeoff weight of [*CTR], a maximum landing weight of [*CTR], and a maximum zero fuel weight of [*CTR] and equipped with Boeing furnished LEAP-1B27 engines.

2 FLIGHT PERFORMANCE

2.1 Takeoff

2.1.1 The FAA approved takeoff gross weight at the start of ground roll, at a temperature of [*CTR], at an altitude of [*CTR], from a [*CTR] and using maximum takeoff thrust, shall not be less than the following guarantee value:

NOMINAL: [*CTR]

TOLERANCE: [*CTR]

GUARANTEE: [*CTR]

Conditions:

The stopway is [*CTR].

The runway slope is [*CTR].

The following obstacle definition is based on a straight-out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Distance	Height
1.
2.
3.
4.
5.
6.

2.1.2 The FAA approved takeoff gross weight at the start of ground roll, at a temperature of [*CTR] at an altitude of [*CTR], from a [*CTR] and satisfying the conditions defined below, and using maximum takeoff thrust, shall not be less than the following guarantee value:

P.A. No. 04676
AERO-B-BBA4-M13-1056A		SS13-0357
	BOEING PROPRIETARY

Attachment A to Letter Agreement

No. LA-1704312

LEAP-1B27 Engines

Page 3

NOMINAL:

TOLERANCE:

GUARANTEE:

Conditions:

The runway slope is [*CTR].

The following obstacle definition is based on a straight-out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Distance	Height
1.
2.
3.
4.

2.1.3 The FAA approved takeoff gross weight at the start of ground roll, at a temperature of [*CTR], at an altitude of [*CTR], from a [*CTR], and satisfying the conditions defined below, and using maximum takeoff thrust, shall not be less than the following guarantee value:

NOMINAL:

TOLERANCE:

GUARANTEE:

Conditions:

The clearway is [*CTR].

The stopway is [*CTR].

The runway slope is [*CTR].

The following obstacle definition is based on a straight-out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

P.A. No. 04676
AERO-B-BBA4-M13-1056A		SS13-0357
	BOEING PROPRIETARY

Attachment A to Letter Agreement

No. LA-1704312

LEAP-1B27 Engines

Page 4

	Distance	Height
1.		[*CTR]
2.		[*CTR]
3.		[*CTR]
4.		[*CTR]
5.		[*CTR]

2.1.4 The FAA approved takeoff field length at a gross weight at the start of the ground roll of                    , at a temperature of [*CTR], at a [*CTR], and using             takeoff thrust, shall not be [*CTR] more than the following guarantee value:

NOMINAL:

TOLERANCE:

GUARANTEE:

2.2 Landing

The FAA approved landing field length at a gross weight of [*CTR] and at a [*CTR] altitude, shall not be more than the following guarantee value:

NOMINAL:

TOLERANCE:

GUARANTEE:

2.3 Mission

2.3.1 Mission Payload

The payload for a stage length of [*CTR] the conditions and operating rules defined below, shall not be less than the following guarantee value:

NOMINAL:

TOLERANCE:

GUARANTEE:

P.A. No. 04676
AERO-B-BBA4-M13-1056A		SS13-0357
	BOEING PROPRIETARY

Attachment A to Letter Agreement

No. LA-1704312

LEAP-1B27 Engines

Page 5

Conditions and operating rules:
Stage Length:	The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.
Takeoff:	The airport altitude is [*CTR].
	The takeoff gross weight is not limited by the airport conditions.
	For information purposes, the takeoff conditions are defined as follows:
	The airport temperature is [*CTR].
	The runway length is [*CTR].
	The runway slope is [*CTR].
	[*CTR] thrust is used for the takeoff.
	The takeoff gross weight shall conform to FAA Regulations.
Climbout Maneuver:	Following the takeoff to, the Aircraft accelerates to [*CTR] the departure airport altitude and retracting flaps and landing gear.
Climb:	The Aircraft climbs from [*CTR].
	The Aircraft then accelerates at a rate of climb of [*CTR] per minute to the recommended climb speed for minimum block fuel.
	The climb continues at the recommended climb speed for minimum block fuel until [*CTR].
	The climb continues [*CTR] to the initial cruise altitude.

P.A. No. 04676
AERO-B-BBA4-M13-1056A		SS13-0357
	BOEING PROPRIETARY

Attachment A to Letter Agreement

No. LA-1704312

LEAP-1B27 Engines

Page 6

	The temperature is standard day during climb.
	Maximum climb thrust is used during climb.
Cruise:	The Aircraft cruises at the Long Range Cruise (LRC) speed.
	The initial cruise altitude is [*CTR].
	A step climb of [*CTR] may be used when beneficial to minimize fuel burn.
	The temperature is standard day during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at [*CTR] above the destination airport altitude.
	Throughout the descent, the cabin pressure will be controlled to a maximum rate of descent equivalent to [*CTR] minute at sea level.
	The temperature is standard day during descent.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands.
	The destination airport altitude is [*CTR].
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances:
	Taxi-Out:
	Fuel [*CTR]
	Takeoff and Climbout Maneuver:
	Fuel
	Distance

P.A. No. 04676
AERO-B-BBA4-M13-1056A		SS13-0357
	BOEING PROPRIETARY

Attachment A to Letter Agreement

No. LA-1704312

LEAP-1B27 Engines

Page 7

Approach and Landing Maneuver:

        Fuel [*CTR]

Taxi-In (shall be consumed from the reserve fuel):

        Fuel [*CTR]

APU (shall be consumed from the reserve fuel):

        Fuel [*CTR]

Usable reserve fuel remaining upon completion of the approach and landing maneuver: [*CTR]

For information purposes, the reserve fuel is based on a standard day temperature and a) a contingency fuel allowance equivalent to [*CTR] of the trip time from takeoff through the completion of the approach and landing maneuver at the destination airport, starting at the end of the mission cruise at an [*CTR], b) a [*CTR] c) an approach and landing maneuver at the alternate airport, and d) a [*CTR] above the alternate airport altitude of [*CTR] The minimum reserve fuel is [*CTR].

2.3.2 Mission Block Fuel

The block fuel for a stage length of [*CTR] in still air with a [*CTR] payload using the conditions and operating rules defined below, shall not be more than the following guarantee value:

NOMINAL:

TOLERANCE:

GUARANTEE:

P.A. No. 04676
AERO-B-BBA4-M13-1056A		SS13-0357
	BOEING PROPRIETARY

Attachment A to Letter Agreement

No. LA-1704312

LEAP-1B27 Engines

Page 8

Conditions and operating rules:
Stage Length:	The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.
Block Fuel:	The block fuel is defined as the sum of the fuel used for taxi-out, takeoff and climbout maneuver, climb, cruise, descent, approach and landing maneuver, taxi-in, and APU.
Takeoff:	The airport altitude is [*CTR].
	The takeoff gross weight is not limited by the airport conditions.
	Maximum takeoff thrust is used for the takeoff.
	The takeoff gross weight shall conform to FAA Regulations.
Climbout Maneuver:	Following the takeoff to, the Aircraft accelerates to [*CTR] above the departure airport altitude and retracting flaps and landing gear.
Climb:	The Aircraft climbs from [*CTR]
	The Aircraft then accelerates at a rate of climb of [*CTR] [*CTR] to the recommended climb speed for minimum block fuel.
	The climb continues at the recommended climb speed for minimum block fuel to the cruise altitude.
	The temperature is standard day during climb.
	Maximum climb thrust is used during climb.
Cruise:	The Aircraft cruises at the Long Range Cruise (LRC) speed.

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	The cruise altitude is [*CTR].
	The temperature is standard day during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at [*CTR] above the destination airport altitude.
	Throughout the descent, the cabin pressure is controlled to a maximum rate of descent equivalent to [*CTR] [*CTR] at sea level.
	The temperature is standard day during descent.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands.
	The destination is a [*CTR] airport.
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances:
	Taxi-Out:
	Fuel [*CTR]
	Takeoff and Climbout Maneuver:
	Fuel
	Distance
	Approach and Landing Maneuver:
	Fuel [*CTR]
	Taxi-In (shall be consumed from the reserve fuel):
	Fuel [*CTR]
	APU (shall be consumed from the reserve fuel):
	Fuel [*CTR]

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Usable reserve fuel remaining upon completion of the approach and landing maneuver: [*CTR]

For information purposes, the reserve fuel is based on a standard day temperature and a) a contingency fuel allowance equivalent to [*CTR] of the trip time from takeoff through the completion of the approach and landing maneuver at the destination airport, starting at the end of the mission cruise at an [*CTR] and [*CTR] to a [*CTR], c) an approach and landing maneuver at the alternate airport, and d) a [*CTR] above the alternate airport altitude of sea level. The minimum reserve fuel is [*CTR].

2.3.3 Mission Block Fuel

The block fuel for a stage length of [*CTR] payload using the conditions and operating rules defined below, shall not be more than the following guarantee value:

NOMINAL:

TOLERANCE:

GUARANTEE:

Conditions and operating rules:

Stage Length: The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.

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Block Fuel:	The block fuel is defined as the sum of the fuel used for taxi-out, takeoff and climbout maneuver, climb, cruise, descent, approach and landing maneuver, taxi-in, and APU.
Takeoff:	The airport altitude is sea level.
	The takeoff gross weight is not limited by the airport conditions.
	Maximum takeoff thrust is used for the takeoff.
	The takeoff gross weight shall conform to FAA Regulations.
Climbout Maneuver:	Following the takeoff to [*CTR] above the departure airport altitude and retracting flaps and landing gear.
Climb:	The Aircraft climbs from [*CTR]
	The Aircraft then accelerates at a rate of climb of [*CTR] to the recommended climb speed for minimum block fuel.
	The climb continues at the recommended climb speed for minimum block fuel [*CTR].
	The climb continues at [*CTR] to the cruise altitude.
	The temperature is standard day during climb.
	Maximum climb thrust is used during climb.

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Cruise:	The Aircraft cruises at the Long Range Cruise (LRC) speed.
	The cruise altitude is [*CTR].
	The temperature is standard day during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at [*CTR] above the destination airport altitude.
	Throughout the descent, the cabin pressure is controlled to a maximum rate of descent equivalent to [*CTR].
	The temperature is standard day during descent.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands.
	The destination is a sea level airport.
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances:
	Taxi-Out:
	Fuel [*CTR]
	Takeoff and Climbout Maneuver:
	Fuel
	Distance

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Approach and Landing Maneuver:

        Fuel [*CTR]

Taxi-In (shall be consumed from the reserve fuel):

        Fuel [*CTR]

APU (shall be consumed from the reserve fuel):

        Fuel [*CTR]

Usable reserve fuel remaining upon completion of the approach and landing maneuver:

        [*CTR]

For information purposes, the reserve fuel is based on a standard day temperature and a) a contingency fuel allowance equivalent to [*CTR] of the trip time from takeoff through the completion of the approach and landing maneuver at the destination airport, starting at the end of the mission cruise at an [*CTR], b) a [*CTR] to a [*CTR] c) an approach and landing maneuver at the alternate airport, and d) a [*CTR] above the [*CTR]. The minimum reserve fuel is [*CTR].

2.3.4 Operational Empty Weight Basis

The Operational Empty Weight (OEW) derived in Paragraph 2.3.5 is the basis for the mission guarantees of Paragraphs 2.3.1, 2.3.2, and 2.3.3.

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2.3.5 737-8 Weight Summary – China Southern Airlines

	Kilograms
Standard Model Specification MEW	[*CTR]
Configuration Specification D019A008, Rev. E, Dated September 10, 2013
[*CTR] Tourist Class Passengers
CFM LEAP-1B Engines
[*CTR] Maximum Taxi Weight
Changes for China Southern Airlines
Interior Change to 164 Passengers (8 BC / 156 EC) *	[*CTR]
(Ref: LOPA—B379327) Boeing Sky Interior
[*CTR] Maximum Taxi Weight	[*CTR]
In-Flight Entertainment System	[*CTR]
Dual HF / Triple VHF Communications	[*CTR]
Flight Deck Entry Video Surveillance	[*CTR]
Extended Operations (ETOPS)	[*CTR]
Supplemental Oxygen—22-Minute Chemical Oxygen Generators	[*CTR]
Heavy Duty Cargo Compartment Linings/Panels	[*CTR]
Centerline Overhead Stowage Compartments (3)	[*CTR]
Customer Options Allowance	[*CTR]
China Southern Airlines Manufacturer’s Empty Weight (MEW)	[*CTR]
Standard and Operational Items Allowance	[*CTR]
(Paragraph 2.3.6)
China Southern Airlines Operational Empty Weight (OEW)	[*CTR]

	Quantity	Kilograms	Kilograms
* Seat Weight Included:			[*CTR]
Business Class Double	[*CTR]	[*CTR]
Economy Class Triple	[*CTR]	[*CTR]
Economy Class Triple w/3 In-Arm Food Trays	[*CTR]	[*CTR]

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2.3.6 Standard and Operational Items Allowance

	Qty		Kilograms		Kilograms		Kilograms
Standard Items Allowance								[*CTR]
Unusable Fuel						[*CTR]
Oil						[*CTR]
Oxygen Equipment						[*CTR]
Passenger Portable / Disposable Mask		[*CTR]		[*CTR]
Crew Masks / Goggles		[*CTR]		[*CTR]
Miscellaneous Equipment						[*CTR]
Crash Axe		[*CTR]		[*CTR]
Megaphones		[*CTR]		[*CTR]
Flashlights		[*CTR]		[*CTR]
Demo Kits		[*CTR]		[*CTR]
Smoke Hoods		[*CTR]		[*CTR]
[*CTR]		[*CTR]		[*CTR]
Galley Structure & Fixed Inserts						[*CTR]
Operational Items Allowance								[*CTR]
Crew and Crew Baggage						[*CTR]
Flight Crew & Flight Bag		[*CTR]
Flight Attendant and Kit		[*CTR]
[*CTR]		[*CTR]
Catering Allowance & Removable Inserts						[*CTR]
Business Class		[*CTR]
Economy Class		[*CTR]
Service Cart Weights (8 Full / 2 Half Carts)
Passenger Service Equipment		[*CTR]				[*CTR]
Potable Water - 60 USG						[*CTR]
Waste Tank Disinfectant						[*CTR]
Emergency Equipment						[*CTR]
Escape Slides - Forward		[*CTR]		[*CTR]
[*CTR]		[*CTR]		43
Life Vests - Crew and Passengers		[*CTR]		[*CTR]
Life Rafts		[*CTR]		[*CTR]
Auto Radio Beacon (ELT)		[*CTR]		[*CTR]
Total Standard and Operational Items Allowance								[*CTR]

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3 AIRCRAFT CONFIGURATION

3.1 The guarantees contained in this Attachment are based on the Aircraft configuration as defined in the original release of Detail Specification TBD (hereinafter referred to as the Detail Specification). Appropriate adjustment shall be made for changes in such Detail Specification approved by the Customer and Boeing or otherwise allowed by the Purchase Agreement which cause changes to the flight performance and/or weight and balance of the Aircraft. Such adjustment shall be accounted for by Boeing in its evidence of compliance with the guarantees.

3.2 The guarantee payload of Paragraph 2.3.1 and the specified payloads of Paragraph 2.3.2 and 2.3.3 block fuel guarantees will be adjusted by Boeing for the effect of the following on OEW in its evidence of compliance with the guarantees:

(1) Changes to the Detail Specification or any other changes mutually agreed upon between the Customer and Boeing or otherwise allowed by the Purchase Agreement.

(2) The difference between the component weight allowances given in Appendix IV of the Detail Specification and the actual weights.

4 GUARANTEE CONDITIONS

4.1 All guaranteed performance data are based on the International Standard Atmosphere (ISA) and specified variations therefrom; altitudes are pressure altitudes.

4.2 For the purposes of these 737-8 guarantees the Federal Aviation Administration (FAA) regulations referred to in this Attachment are, unless otherwise specified, the 737-900ER Certification Basis regulations specified in the Type Certificate Data Sheet A16WE, Revision 41, dated July 31, 2007.

4.3 In the event a change is made to any law, governmental regulation or requirement, or in the interpretation of any such law, governmental regulation or requirement that affects the certification basis for the Aircraft as described in Paragraph 4.2, and as a result thereof, a change is made to the configuration and/or the performance of the Aircraft in order to obtain certification, the guarantees set forth in this Attachment shall be appropriately modified to reflect any such change.

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4.4 The takeoff and landing guarantees and the takeoff portion of the mission guarantees are based on [*CTR]

4.5 The climb, cruise and descent portions of the mission guarantees include [*CTR]

4.6 Long Range Cruise (LRC) [*CTR].

4.7 The climb, cruise and descent portions of the mission guarantees are based on an Aircraft center of gravity location, as determined by Boeing, not to be aft of [*CTR] of the mean aerodynamic chord.

4.8 Performance, where applicable, is based on a fuel Lower Heating Value (LHV) of [*CTR]

5 GUARANTEE COMPLIANCE [*CTR]

5.1 Compliance with the guarantees of Section 2 shall be based on the conditions specified in that section, the Aircraft configuration of Section 3 and the guarantee conditions of Section 4.

5.2 Compliance with the takeoff and landing guarantees and the takeoff portion of the mission guarantee shall be based on the FAA approved Airplane Flight Manual for the Model 737-8.

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5.3 Compliance with the climb, cruise and descent portions of the mission guarantees shall be established by calculations based on flight test data obtained from an aircraft in a configuration similar to that defined by the Detail Specification.

5.4 The OEW used for compliance with the mission guarantees shall be the actual MEW plus the Standard and Operational Items Allowance in Paragraph 03-60-00 of the Detail Specification.

5.5 The data derived from tests shall be adjusted as required by conventional methods of correction, interpolation or extrapolation in accordance with established engineering practices to show compliance with these guarantees.

5.6 Compliance shall be based on the performance of the airframe and engines in combination, and shall not be contingent on the engine meeting its manufacturer’s performance specification.

6 EXCLUSIVE GUARANTEES

The only performance guarantees applicable to the Aircraft are those set forth in this Attachment.

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MODEL 737-8 PERFORMANCE GUARANTEES

FOR CHINA SOUTHERN AIRLINES COMPANY LIMITED

SECTION	CONTENTS
1	AIRCRAFT MODEL APPLICABILITY
2	FLIGHT PERFORMANCE
3	AIRCRAFT CONFIGURATION
4	GUARANTEE CONDITIONS
5	GUARANTEE COMPLIANCE
6	EXCLUSIVE GUARANTEES

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1 AIRCRAFT MODEL APPLICABILITY

The guarantees contained in this Attachment (the “Performance Guarantees”) are applicable to the 737-8 Aircraft with a maximum takeoff weight of [*CTR], a maximum landing weight of [*CTR], and a maximum zero fuel weight of [*CTR] kilograms, and equipped with Boeing furnished LEAP-1B28 engines.

2 FLIGHT PERFORMANCE

2.1 Takeoff

2.1.1 The FAA approved takeoff gross weight at the start of ground roll, at a temperature of [*CTR] at an [*CTR], from a [*CTR] runway, and satisfying the conditions defined below, and using maximum takeoff thrust, shall not be less than the following guarantee value:

GUARANTEE: [*CTR]

Conditions:

The runway slope is [*CTR].

The following obstacle definition is based on a straight-out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Distance	Height
1.	[*CTR]	[*CTR]
2.	[*CTR]	[*CTR]
3.	[*CTR]	[*CTR]
4.	[*CTR]	[*CTR]
5.	[*CTR]	[*CTR]
6.	[*CTR]	[*CTR]
7.	[*CTR]	[*CTR]

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2.1.2 The FAA approved takeoff gross weight at the start of ground roll, at a temperature of [*CTR] at an altitude of [*CTR], from a [*CTR], and satisfying the conditions defined below, and using maximum takeoff thrust, shall not be less than the following guarantee value:

NOMINAL:

TOLERANCE:

GUARANTEE:

Conditions:

The clearway is [*CTR].

The stopway is [*CTR].

The runway slope is [*CTR].

The following obstacle definition is based on a straight-out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Distance	Height
1.		[*CTR]
2.		[*CTR]
3.		[*CTR]
4.		[*CTR]
5.		[*CTR]

2.1.3 The FAA approved takeoff gross weight at the start of ground roll, at a temperature of [*CTR] at an altitude of [*CTR], from a [*CTR] and satisfying the conditions defined below, and using maximum takeoff thrust, shall not be less than the following guarantee value:

GUARANTEE: [*CTR]

Conditions:

The clearway is [*CTR].

The stopway is [*CTR]

The runway slope is [*CTR].

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The following obstacle definition is based on a straight-out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Distance	Height
1.		[*CTR]
2.		[*CTR]
3.		[*CTR]

2.1.4 The FAA approved takeoff field length at a gross weight at the start of the ground roll of, at a temperature of [*CTR], at a [*CTR], and using                    , shall not be more than the following guarantee value: [*CTR]

NOMINAL:

TOLERANCE:

GUARANTEE:

2.2 Landing

The FAA approved landing field length at a gross weight of [*CTR] and at a [*CTR], shall not be more than the following guarantee value:

NOMINAL:

TOLERANCE:

GUARANTEE:

2.3 Mission

2.3.1 Mission Payload

The payload for a stage length of [*CTR] and operating rules defined below, shall not be less than the following guarantee value:

NOMINAL:

TOLERANCE:

[*CTR]

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Conditions and operating rules:
Stage Length:	The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.
Takeoff:	The airport altitude is [*CTR].
	The takeoff gross weight is not limited by the airport conditions.
	For information purposes, the takeoff conditions are defined as follows:
	The airport temperature is            .
	The runway length is [*CTR].
	The runway slope is [*CTR].
	[*CTR] thrust is used for the takeoff.
	The takeoff gross weight shall conform to FAA Regulations.
Climbout Maneuver:	Following the takeoff to [*CTR], the Aircraft accelerates to [*CTR] above the departure airport altitude and retracting flaps and landing gear.
Climb:	The Aircraft climbs from [*CTR]
	The Aircraft then accelerates at a rate of climb of [*CTR] to the recommended climb speed for minimum block fuel.
	The climb continues at the recommended climb speed for minimum block fuel until [*CTR].
	The climb continues at [*CTR] to the initial cruise altitude.

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	The temperature is standard day during climb.
	Maximum climb thrust is used during climb.
Cruise:	The Aircraft cruises at the Long Range Cruise (LRC) speed.
	The initial cruise altitude is [*CTR].
	A step climb of [*CTR] may be used when beneficial to minimize fuel burn.
	The temperature is standard day during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at [*CTR] above the destination airport altitude.
	Throughout the descent, the cabin pressure will be controlled to a maximum rate of descent equivalent to [*CTR] per minute at sea level.
	The temperature is standard day during descent.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands.
	The destination airport altitude is [*CTR].
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances:
	Taxi-Out:
	Fuel [*CTR]

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Takeoff and Climbout Maneuver:

        Fuel

        Distance

Approach and Landing Maneuver:

        Fuel [*CTR]

Taxi-In (shall be consumed from the reserve fuel):

        Fuel [*CTR]

APU (shall be consumed from the reserve fuel):

        Fuel [*CTR]

Usable reserve fuel remaining upon completion of the approach and landing maneuver: [*CTR]

For information purposes, the reserve fuel is based on a standard day temperature and a) a contingency fuel allowance equivalent to [*CTR] of the trip time from takeoff through the completion of the approach and landing maneuver at the destination airport, starting at the end of the mission cruise at an [*CTR] b) a [*CTR] t to a [*CTR], c) an approach and landing maneuver at the alternate airport, and d) a [*CTR] above the alternate airport altitude [*CTR]. The minimum reserve fuel is [*CTR].

2.3.2 Mission Block Fuel

The block fuel for a stage length of [*CTR] in still air with a [*CTR] payload using the conditions and operating rules defined below, shall not be more than the following guarantee value:

NOMINAL:

TOLERANCE:

GUARANTEE:

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Conditions and operating rules:
Stage Length:	The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.
BlockFuel:	The block fuel is defined as the sum of the fuel used for taxi-out, takeoff and climbout maneuver, climb, cruise, descent, approach and landing maneuver, taxi-in, and APU.
Takeoff:	The airport altitude is sea level.
	The takeoff gross weight is not limited by the airport conditions.
	Maximum takeoff thrust is used for the takeoff.
	The takeoff gross weight shall conform to FAA Regulations.
Climbout Maneuver:	Following the takeoff to [*CTR], the Aircraft accelerates to [*CTR] above the departure airport altitude and retracting flaps and landing gear.
Climb:	The Aircraft climbs from [*CTR]
	The Aircraft then accelerates at a rate of climb of [*CTR] to the recommended climb speed for minimum block fuel.
	The climb continues at the recommended climb speed for minimum block fuel to the cruise altitude.
	The temperature is standard day during climb.
	Maximum climb thrust is used during climb.
Cruise:	The Aircraft cruises at the Long Range Cruise (LRC) speed.

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	The cruise altitude is [*CTR].
	The temperature is standard day during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at [*CTR] above the destination airport altitude.
	Throughout the descent, the cabin pressure is controlled to a maximum rate of descent equivalent to [*CTR] at sea level.
	The temperature is standard day during descent.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands.
	The destination airport altitude is a [*CTR] airport.
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances:
	Taxi-Out:
	Fuel [*CTR]
	Takeoff and Climbout Maneuver:
	Fuel
	Distance
	Approach and Landing Maneuver:
	Fuel [*CTR] [*CTR]
	Taxi-In (shall be consumed from the reserve fuel):
	Fuel [*CTR]

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APU (shall be consumed from the reserve fuel):

        Fuel [*CTR]

Usable reserve fuel remaining upon completion of the approach and landing maneuver: [*CTR]

For information purposes, the reserve fuel is based on a standard day temperature and a) a contingency fuel allowance equivalent to [*CTR] of the trip time from takeoff through the completion of the approach and landing maneuver at the destination airport, [*CTR] b) a [*CTR] to a [*CTR], c) an approach and landing maneuver at the alternate airport, and d) a [*CTR] above the alternate airport [*CTR]. The minimum reserve fuel is [*CTR].

2.3.3 Mission BlockFuel

The block fuel for a stage length of [*CTR] payload using the conditions and operating rules defined below, shall not be more than the following guarantee value:

NOMINAL:

TOLERANCE:

GUARANTEE:

Conditions and operating rules:

Stage Length: The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.

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Block Fuel:	The block fuel is defined as the sum of the fuel used for taxi-out, takeoff and climbout maneuver, climb, cruise, descent, approach and landing maneuver, taxi-in, and APU.
Takeoff:	The airport altitude is sea level.
	The takeoff gross weight is not limited by the airport conditions.
	Maximum takeoff thrust is used for the takeoff.
	The takeoff gross weight shall conform to FAA Regulations.
Climbout Maneuver:	Following the takeoff to [*CTR], the Aircraft [*CTR] above the departure airport altitude and retracting flaps and landing gear.
Climb:	The Aircraft climbs from [*CTR]
	The Aircraft then accelerates at a rate of climb of [*CTR] to the recommended climb speed for minimum block fuel.
	The climb continues at the recommended climb speed for minimum block fuel until [*CTR] is reached.
	The climb continues at [*CTR] to the initial cruise altitude.
	The temperature is standard day during climb.
	Maximum climb thrust is used during climb.
Cruise:	The Aircraft cruises at the Long Range Cruise (LRC) speed.
	The initial cruise altitude is [*CTR].

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	A step climb of [*CTR] altitude may be used when beneficial to minimize fuel burn.
	The temperature is standard day during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at [*CTR] above the destination airport altitude.
	Throughout the descent, the cabin pressure is controlled to a maximum rate of descent equivalent to [*CTR] [*CTR].
	The temperature is standard day during descent.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending landing gear and flaps, then descends and lands.
	The destination airport altitude is a sea level airport.
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following shall be used as fixed quantities and allowances:
	Taxi-Out:
	Fuel [*CTR]
	Takeoff and Climbout Maneuver:
	Fuel
	Distance
	Approach and Landing Maneuver:
	Fuel [*CTR]
	Taxi-In (shall be consumed from the reserve fuel):
	Fuel [*CTR]

P.A. No. 04676
AERO-B-BBA4-M13-0917B		SS13-0357
	BOEING PROPRIETARY

Attachment B to Letter Agreement

No. LA-1704312

LEAP-1B28 Engines

Page 13

APU (shall be consumed from the reserve fuel):

        Fuel [*CTR]

Usable reserve fuel remaining upon completion of the approach and landing maneuver: [*CTR]

For information purposes, the reserve fuel is based on a standard day temperature and a) a contingency fuel allowance equivalent to [*CTR] of the trip time from takeoff through the completion of the approach and landing maneuver at the destination airport, starting at the end of the mission cruise at an [*CTR] b) a [*CTR] to a [*CTR] c) an approach and landing maneuver at the alternate airport, and d) a [*CTR] above the alternate airport [*CTR]. The minimum reserve fuel is [*CTR].

2.3.4 Operational Empty Weight Basis

The Operational Empty Weight (OEW) derived in Paragraph 2.3.5 is the basis for the mission guarantees of Paragraphs 2.3.1, 2.3.2, and 2.3.3.

P.A. No. 04676
AERO-B-BBA4-M13-0917B		SS13-0357
	BOEING PROPRIETARY

Attachment B to Letter Agreement

No. LA-1704312

LEAP-1B28 Engines

Page 14

2.3.5 737-8 Weight Summary – China Southern Airlines

	Kilograms
Standard Model Specification MEW		[*CTR]
Configuration Specification D019A008, Rev. E, Dated September 10, 2013
[*CTR] Tourist Class Passengers
CFM LEAP-1B Engines
[*CTR] Maximum Taxi Weight
Changes for China Southern Airlines
Interior Change to 164 Passengers (8 BC / 156 EC) *		[*CTR]
(Ref: LOPA - B379327) Boeing Sky Interior
[*CTR] Maximum Taxi Weight		[*CTR]
In-Flight Entertainment System		[*CTR]
Dual HF / Triple VHF Communications		[*CTR]
Flight Deck Entry Video Surveillance		[*CTR]
Extended Operations (ETOPS)		[*CTR]
[*CTR]		[*CTR]
Heavy Duty Cargo Compartment Linings/Panels		[*CTR]
Centerline Overhead Stowage Compartments (3)		[*CTR]
Customer Options Allowance		[*CTR]
China Southern Airlines Manufacturer’s Empty Weight (MEW)		[*CTR]
Standard and Operational Items Allowance		[*CTR]
(Paragraph 2.3.6)
China Southern Airlines Operational Empty Weight (OEW)		[*CTR]

	Quantity	Kilograms	Kilograms
*  Seat Weight Included:				[*CTR]
Business Class Double	[*CTR]	[*CTR]
Economy Class Triple	[*CTR]	[*CTR]
Economy Class Triple w/3 In-Arm Food Trays	[*CTR]	[*CTR]

P.A. No. 04676
AERO-B-BBA4-M13-0917B		SS13-0357
	BOEING PROPRIETARY

Attachment B to Letter Agreement

No. LA-1704312

LEAP-1B28 Engines

Page 15

2.3.6 Standard and Operational Items Allowance

	Qty		Kilograms		Kilograms		Kilograms
Standard Items Allowance								[*CTR]
Unusable Fuel
Oil
Oxygen Equipment
Passenger Portable / Disposable Mask		[*CTR]		[*CTR]
Crew Masks / Goggles		[*CTR]		[*CTR]
Miscellaneous Equipment						[*CTR]
Crash Axe		[*CTR]		[*CTR]
Megaphones		[*CTR]		[*CTR]
Flashlights		[*CTR]		[*CTR]
Demo Kits		[*CTR]		[*CTR]
Smoke Hoods		[*CTR]		[*CTR]
Seat Belt Extension		[*CTR]		[*CTR]
Galley Structure & Fixed Inserts						[*CTR]
Operational Items Allowance								[*CTR]
Crew and Crew Baggage						[*CTR]
Flight Crew & Flight Bag		[*CTR]		[*CTR]
Flight Attendant and Kit		[*CTR]		[*CTR]
Navigation Bags & Manuals		[*CTR]		[*CTR]
Catering Allowance & Removable Inserts						[*CTR]
Business Class		[*CTR]		[*CTR]
Economy Class		[*CTR]		[*CTR]
Service Cart Weights (8 Full / 2 Half Carts)				[*CTR]
Passenger Service Equipment		[*CTR]
Potable Water - 60 USG
Waste Tank Disinfectant
Emergency Equipment
Escape Slides - Forward		[*CTR]		[*CTR]
Escape Slides - Aft		[*CTR]		[*CTR]
Life Vests - Crew and Passengers		[*CTR]		[*CTR]
[*CTR]		[*CTR]		[*CTR]
Auto Radio Beacon (ELT)		[*CTR]		[*CTR]
Total Standard and Operational Items Allowance								[*CTR]

P.A. No. 04676
AERO-B-BBA4-M13-0917B		SS13-0357
	BOEING PROPRIETARY

Attachment B to Letter Agreement

No. LA-1704312

LEAP-1B28 Engines

Page 16

3 AIRCRAFT CONFIGURATION

3.1 The guarantees contained in this Attachment are based on the Aircraft configuration as defined in the original release of Detail Specification TBD (hereinafter referred to as the Detail Specification). Appropriate adjustment shall be made for changes in such Detail Specification approved by the Customer and Boeing or otherwise allowed by the Purchase Agreement which cause changes to the flight performance and/or weight and balance of the Aircraft. Such adjustment shall be accounted for by Boeing in its evidence of compliance with the guarantees.

3.2 The guarantee payload of Paragraph 2.3.1 and the specified payloads of Paragraph 2.3.2 and 2.3.3 block fuel guarantees will be adjusted by Boeing for the effect of the following on OEW in its evidence of compliance with the guarantees:

(1)    Changes to the Detail Specification or any other changes mutually agreed upon between the Customer and Boeing or otherwise allowed by the Purchase Agreement.

(2)    The difference between the component weight allowances given in Appendix IV of the Detail Specification and the actual weights.

4 GUARANTEE CONDITIONS

4.1 All guaranteed performance data are based on the International Standard Atmosphere (ISA) and specified variations therefrom; altitudes are pressure altitudes.

4.2 For the purposes of these 737-8 guarantees the Federal Aviation Administration (FAA) regulations referred to in this Attachment are, unless otherwise specified, the 737-900ER Certification Basis regulations specified in the Type Certificate Data Sheet A16WE, Revision 41, dated July 31, 2007.

4.3 In the event a change is made to any law, governmental regulation or requirement, or in the interpretation of any such law, governmental regulation or requirement that affects the certification basis for the Aircraft as described in Paragraph 4.2, and as a result thereof, a change is made to the configuration and/or the performance of the Aircraft in order to obtain certification, the guarantees set forth in this Attachment shall be appropriately modified to reflect any such change.

P.A. No. 04676
AERO-B-BBA4-M13-0917B		SS13-0357
	BOEING PROPRIETARY

Attachment B to Letter Agreement

No. LA-1704312

LEAP-1B28 Engines

Page 17

4.4 The takeoff and landing guarantees and the takeoff portion of the mission guarantees are based on [*CTR]

4.5 The climb, cruise and descent portions of the mission guarantees include [*CTR]

4.6 Long Range Cruise (LRC) [*CTR]

4.7 The climb, cruise and descent portions of the mission guarantees are based on an Aircraft center of gravity location, as determined by Boeing, not to be aft of [*CTR] of the mean aerodynamic chord.

4.8 Performance, where applicable, is based on a fuel Lower Heating Value (LHV) of [*CTR]

5 GUARANTEE COMPLIANCE

5.1 Compliance with the guarantees of Section 2 shall be based on the conditions specified in that section, the Aircraft configuration of Section 3 and the guarantee conditions of Section 4.

5.2 Compliance with the takeoff and landing guarantees and the takeoff portion of the mission guarantee shall be based on the FAA approved Airplane Flight Manual for the Model 737-8.

P.A. No. 04676
AERO-B-BBA4-M13-0917B		SS13-0357
	BOEING PROPRIETARY

Attachment B to Letter Agreement

No. LA-1704312

LEAP-1B28 Engines

Page 18

5.3 Compliance with the climb, cruise and descent portions of the mission guarantees shall be established by calculations based on flight test data obtained from an aircraft in a configuration similar to that defined by the Detail Specification.

5.4 The OEW used for compliance with the mission guarantees shall be the actual MEW plus the Standard and Operational Items Allowance in Paragraph 03-60-00 of the Detail Specification.

5.5 The data derived from tests shall be adjusted as required by conventional methods of correction, interpolation or extrapolation in accordance with established engineering practices to show compliance with these guarantees.

5.6 Compliance shall be based on the performance of the airframe and engines in combination, and shall not be contingent on the engine meeting its manufacturer’s performance specification.

6 EXCLUSIVE GUARANTEES

The only performance guarantees applicable to the Aircraft are those set forth in this Attachment.

P.A. No. 04676
AERO-B-BBA4-M13-0917B		SS13-0357
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-04676-LA-1704313

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject: Integrated Performance Remedy – Performance Guarantee Attachment A

Reference: Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement. For the avoidance of doubt, this Letter Agreement survives delivery of the Aircraft as set forth herein.

1. Compliance Deviation.

The Attachment A to [*CTR] contains performance guarantees (Performance Guarantees) for Aircraft with configuration of [*CTR] maximum takeoff weight and CFM [*CTR] engines (Attachment A Aircraft). The Performance Guarantees include mission payload guarantees (Payload Guarantee) and block fuel guarantees (Block Fuel Guarantee) applicable to the Attachment A Aircraft in accordance with such Performance Guarantees. Boeing offers the following remedies in the event that the guarantee compliance report furnished to Customer for the Attachment A Aircraft pursuant to Article 5.4 of the AGTA shows a demonstrated value worse than the Block Fuel Guarantee or Payload Guarantee (each a Compliance Deviation). Customer cannot refuse to accept delivery of such Attachment A Aircraft because of such Compliance Deviation.

2. Cure Period.

2.1. Within [*CTR] from the delivery of an Attachment A Aircraft with a Compliance Deviation (Cure Period), Boeing or the engine manufacturer may design airframe improvement parts or engine improvement parts (Improvement Parts) which, when installed on such Attachment A Aircraft, would reduce or eliminate the Compliance Deviation. Such Improvement Parts may include, but is not limited to, increased maximum take-off weight (MTOW).

GUN-PA-04676-LA-1704313
Integrated Performance Remedy – PG Attachment A		Page 1
	BOEING PROPRIETARY

2.2. If Boeing elects to provide, or to cause to be provided, Improvement Parts for such Attachment A Aircraft, then Customer and Boeing will mutually agree upon the details of an Improvement Parts program. Improvement Parts will be provided to Customer at [*CTR] to be mutually agreed. Boeing will, or cause the engine manufacturer, as applicable, to provide reasonable support for an Improvement Parts program at to [*CTR]

2.3. If Customer elects to install Improvement Parts in such Attachment A Aircraft, then they will be installed within [*CTR] after the delivery of such Improvement Parts to Customer if such installation can be accomplished during aircraft line maintenance (ALM). Improvement Parts which cannot be installed during ALM will be installed within a mutually agreed period of time. All Improvement Parts will be installed in accordance with Boeing and the engine manufacturer instructions.

2.4. Boeing will provide or will cause the engine manufacturer to provide reimbursement of Customer’s reasonable [*CTR] to install Improvement Parts at the warranty labor rate in effect at the time of installation between Boeing and Customer or the engine manufacturer and Customer, as applicable. Improvement Parts related to engines will apply also to spare engines on terms not less favorable to Customer. Boeing will, or cause the engine manufacturer, as applicable, to l give Customer reasonable advance written notice of the estimated on-dock date at Customer’s maintenance base for any such Improvement Parts.

3. Performance Remedy Credit Memorandum.

For a Compliance Deviation which has not been remedied during the Cure Period, Boeing shall provide Customer with a credit memorandum in the amounts determined in 3.1 and 3.2, below (Performance Remedy Credit Memorandum). The Performance Remedy Credit Memorandum may be used for the purchase of Boeing goods and services or engine manufacturer goods and services, as applicable.

3.1. Block Fuel Adjustment

In the event of a Compliance Deviation from the Block Fuel Guarantee for an Attachment A Aircraft, Boeing will credit to the Performance Remedy Credit Memorandum

3.2. [*CTR]

In the event of a Compliance Deviation from the Mission Payload Guarantee for an Attachment A Aircraft, Boeing will credit to the Performance Remedy Credit Memorandum [*CTR]

GUN-PA-04676-LA-1704313
Integrated Performance Remedy – PG Attachment A		Page 2
	BOEING PROPRIETARY

4. Duplication of Benefits.

Boeing and Customer agree it is not the intent of the parties to provide benefits hereunder that duplicate the benefits to be provided (a) by Boeing under the Purchase Agreement, or any other agreement between Boeing and Customer, or (b) by the engine manufacturer under any agreement between engine manufacturer and Customer, due to the Attachment A Aircraft not satisfying any performance metric similar to the Payload Guarantee, Block Fuel Guarantee or any performance metric that otherwise impacts payload. Boeing may offset its obligation to provide benefits hereunder against the benefits provided or to be provided to Customer by the engine manufacturer or Boeing pursuant to such other guarantee.

5. Exclusive Remedy.

Customer agrees that the remedies contained in this Letter Agreement herein are Customer’s exclusive remedies for purposes of resolving all issues with respect to the Performance Guarantees and are in lieu of all other rights, remedies, claims and causes of action Customer may have, arising at law or otherwise, in connection therewith and shall constitute complete, full and final settlement and satisfaction of any and all of Boeing’s obligations and liabilities to Customer in connection therewith. Customer releases Boeing and its successors, affiliates and subsidiaries from all present, past and future rights, remedies, claims and causes of action, whether arising at law or otherwise, known or unknown, relating to or arising from such Performance Guarantees.

6. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer’s becoming the operator of the Attachment A Aircraft and cannot be assigned in whole or, in part.

7. Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents, except for as required by applicable laws or regulations, to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

GUN-PA-04676-LA-1704313
Integrated Performance Remedy – PG Attachment A		Page 3
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04676-LA-1704313
Integrated Performance Remedy – PG Attachment A		Page 4
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-03981-LA-1704314

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject: Integrated Performance Remedy – Performance Guarantee Attachment B

Reference: Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement. For the avoidance of doubt, this Letter Agreement survives delivery of the Aircraft as set forth herein.

1. Compliance Deviation.

The Attachment B to Letter Agreement No. LA-1704312 contains performance guarantees (Performance Guarantees) for Aircraft with configuration of [*CTR] maximum takeoff weight and CFM LEAP-1B28 engines (Attachment B Aircraft). The Performance Guarantees include mission payload guarantees (Payload Guarantee) and block fuel guarantees (Block Fuel Guarantee) applicable to the Attachment B Aircraft in accordance with such Performance Guarantees. Boeing offers the following remedies in the event that the guarantee compliance report furnished to Customer for the Attachment B Aircraft pursuant to Article 5.4 of the AGTA shows a demonstrated value worse than the Block Fuel Guarantee or Payload Guarantee (each a Compliance Deviation). Customer cannot refuse to accept delivery of such Attachment B Aircraft because of such Compliance Deviation.

2. Cure Period.

2.1. Within [*CTR] from the delivery of an Attachment B Aircraft with a Compliance Deviation (Cure Period), Boeing or the engine manufacturer may design airframe improvement parts or engine improvement parts (Improvement Parts) which, when installed on such Attachment B Aircraft, would reduce or eliminate the Compliance Deviation. Such Improvement Parts may include, but is not limited to, increased maximum take-off weight (MTOW).

GUN-PA-04676-LA-1704314
Integrated Performance Remedy – PG Attachment B		Page 1
	BOEING PROPRIETARY

2.2. If Boeing elects to provide, or to cause to be provided, Improvement Parts for such Attachment B Aircraft, then Customer and Boeing will mutually agree upon the details of an Improvement Parts program. Improvement Parts will be provided to Customer at no charge at a location to be mutually agreed. Boeing will, or cause the engine manufacturer, as applicable, to provide reasonable support for an Improvement Parts program at no charge to Customer.

2.3. If Customer elects to install Improvement Parts in such Attachment B Aircraft, then they will be installed within [*CTR] after the delivery of such Improvement Parts to Customer if such installation can be accomplished during aircraft line maintenance (ALM). Improvement Parts which cannot be installed during ALM will be installed within a mutually agreed period of time. All Improvement Parts will be installed in accordance with Boeing and the engine manufacturer instructions.

2.4. Boeing will provide or will cause the engine manufacturer to provide reimbursement of Customer’s [*CTR] to install Improvement Parts at the warranty labor rate in effect at the time of installation between Boeing and Customer or the engine manufacturer and Customer, as applicable. Improvement Parts related to engines will apply also to spare engines on terms not less favorable to Customer. Boeing will, or cause the engine manufacturer, as applicable, to give Customer reasonable advance written notice of the estimated on-dock date at Customer’s maintenance base for any such Improvement Parts.

3. Performance Remedy Credit Memorandum.

For a Compliance Deviation which has not been remedied during the Cure Period, Boeing shall provide Customer with a credit memorandum in the amounts determined in 3.1 and 3.2, below (Performance Remedy Credit Memorandum). The Performance Remedy Credit Memorandum may be used for the purchase of Boeing goods and services or engine manufacturer goods and services, as applicable.

3.1. Block Fuel Adjustment

In the event of a Compliance Deviation from the Block Fuel Guarantee for an Attachment B Aircraft, Boeing will credit to the Performance Remedy Credit Memorandum

3.2. [*CTR]

In the event of a Compliance Deviation from the Mission Payload Guarantee for an Attachment B Aircraft, Boeing will credit to the Performance Remedy Credit Memorandum [*CTR]

GUN-PA-04676-LA-1704314
Integrated Performance Remedy – PG Attachment B		Page 2
	BOEING PROPRIETARY

4. Duplication of Benefits.

Boeing and Customer agree it is not the intent of the parties to provide benefits hereunder that duplicate the benefits to be provided (a) by Boeing under the Purchase Agreement, or any other agreement between Boeing and Customer, or (b) by the engine manufacturer under any agreement between engine manufacturer and Customer, due to the Attachment B Aircraft not satisfying any performance metric similar to the Payload Guarantee, Block Fuel Guarantee or any performance metric that otherwise impacts payload. Boeing may offset its obligation to provide benefits hereunder against the benefits provided or to be provided to Customer by the engine manufacturer or Boeing pursuant to such other guarantee.

5. Exclusive Remedy.

Customer agrees that the remedies contained in this Letter Agreement herein are Customer’s exclusive remedies for purposes of resolving all issues with respect to the Performance Guarantees and are in lieu of all other rights, remedies, claims and causes of action Customer may have, arising at law or otherwise, in connection therewith and shall constitute complete, full and final settlement and satisfaction of any and all of Boeing’s obligations and liabilities to Customer in connection therewith. Customer releases Boeing and its successors, affiliates and subsidiaries from all present, past and future rights, remedies, claims and causes of action, whether arising at law or otherwise, known or unknown, relating to or arising from such Performance Guarantees.

6. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer’s becoming the operator of the Attachment B Aircraft and cannot be assigned in whole or, in part.

7. Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents, except for as required by applicable laws or regulations, to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

GUN-PA-04676-LA-1704314
Integrated Performance Remedy – PG Attachment B		Page 3
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04676-LA-1704314
Integrated Performance Remedy – PG Attachment B		Page 4
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-04676-LA-1704315

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject: Liquidated Damages – Non-Excusable Delay

Reference: Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

Definition of Terms:

Non-Excusable Delay: Delay in delivery of any Aircraft beyond the last day of the delivery month (Scheduled Delivery Month) established in the Purchase Agreement by any cause that is not an Excusable Delay pursuant to Article 7 of the AGTA and for which Customer is otherwise entitled to a remedy from Boeing pursuant to applicable law.

1. Liquidated Damages.

Boeing agrees to pay Customer liquidated damages for each day of Non- Excusable Delay [*CTR] after the Scheduled Delivery Month (collectively the Non-Excusable Delay Payment Period) at a rate [*CTR] Aircraft (Liquidated Damages). Liquidated Damages will be payable at actual delivery of the Aircraft or as provided for in Article 5.

2. Interest.

In addition to the Liquidated Damages in section 1, for each day of Non-Excusable Delay in [*CTR] after the Scheduled Delivery Month, Boeing will pay Customer interest calculated as follows (Interest):

GUN-PA-04676-LA-1704315
Liquidated Damages Non-Excusable Delay		Page 1
	BOEING PROPRIETARY

The product of the daily interest rate (computed by dividing the interest rate in effect for each day by [*CTR] as the case may be) times the entire amount of advance payments received by Boeing for such Aircraft. The interest rate in effect for each day shall be computed using the ffective the first business day of the calendar quarter and reset each calendar quarter. [*CTR]

Such interest will be calculated on a simple interest basis and paid in full at actual delivery of the Aircraft.

3. [*CTR]

In the event any Aircraft has been delayed beyond the Scheduled Delivery Month due to a Non-Excusable Delay, for the Non-Excusable Delay Payment Period the calculation of the Escalation Adjustment will be based on the [*CTR]

4. [*CTR].

Customer will not have the right to refuse to accept delivery of any Aircraft because of a Non-Excusable Delay unless and until the aggregate duration of the Non- Excusable Delay for such Aircraft [*CTR] Within of receipt of written notice from Boeing that delivery of an Aircraft will be delayed beyond the Non-Excusable Delay Period, [*CTR] the Purchase Agreement as to such Aircraft by written or telegraphic notice given to the other. [*CTR], then the Purchase Agreement will remain in effect for that Aircraft.

5. [*CTR].

If the Purchase Agreement is [*CTR] with respect to any Aircraft for a Non- Excusable Delay, Boeing will pay Customer:

(i) Liquidated Damages at the later to occur of: [*CTR]

(ii) for Interest calculated and paid in full as described above, except the period of interest calculation will end on the date Boeing returns such advance payments, [*CTR] after the effective date of the termination.

GUN-PA-04676-LA-1704315
Liquidated Damages Non-Excusable Delay		Page 2
	BOEING PROPRIETARY

(iii) for the entire principal amount of the advance payments received by Boeing for such Aircraft, [*CTR].

6. Exclusive Remedies.

The remedies set forth in this Letter Agreement are Customer’s exclusive remedies for a Non-Excusable Delay and are in lieu of all other damages, claims, and remedies of Customer arising at law or otherwise for any Non-Excusable Delay in the Aircraft delivery. Customer hereby waives and renounces all other claims and remedies arising at law or otherwise for any such Non-Excusable Delay.

7. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

8. Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents, except for as required by applicable laws or regulations, to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

GUN-PA-04676-LA-1704315
Liquidated Damages Non-Excusable Delay		Page 3
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04676-LA-1704315
Liquidated Damages Non-Excusable Delay		Page 4
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-04676-LA-1704316

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject: Special Escalation Program

Reference: Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. Definitions.

Escalation Notice means the written communication provided by Boeing to Customer in accordance with the requirements of Article 8.1, below.

Program Aircraft means each Aircraft specified in Table 1 of the Purchase Agreement as of the date of this Letter Agreement.

2. Applicability.

Notwithstanding any other provision of the Purchase Agreement to the contrary, the parties agree that the Escalation Adjustment for the Airframe Price and Optional Features Prices for each Program Aircraft will be determined in accordance with this Letter Agreement.

3. Escalation Forecast.

Boeing will release an escalation forecast in February and August of each year based on Boeing’s then current standard [*CTR] escalation formula. Only one escalation forecast will be used to conduct the escalation analysis performed in accordance with Article 8.1, below, for a given Program Aircraft. The escalation forecast applicable to a given Program Aircraft is set forth in Attachment A of this Letter Agreement.

GUN-PA-04676-LA-1704316
Special Escalation Program		Page 1
	BOEING PROPRIETARY

4. [*CTR]

4.1 [*CTR]

4.2 The Escalation Adjustment for the Airframe Price and Optional Features Prices of each Program Aircraft will be [*CTR]

5. [*CTR] Cumulative Annual Escalation during the [*CTR]

6. [*CTR]

If the cumulative annual escalation factor, as determined in accordance with Supplemental Exhibit AE1 at time of delivery of Program Aircraft, produces an [*CTR]

7. [*CTR]

If the cumulative annual escalation factor, as determined in accordance with Supplemental Exhibit AE1 at time of delivery of Aircraft, [*CTR]

GUN-PA-04676-LA-1704316
Special Escalation Program		Page 2
	BOEING PROPRIETARY

8. [*CTR]

8.1 If the escalation forecast, as set forth in Article 3, above, projects a [*CTR]:

8.1.1 [*CTR]; or

8.1.2 [*CTR]

8.1.2 [*CTR]

8.1.3 [*CTR]

8.2 If Boeing or Customer exercise the option described in Article 8.1.3 above, [*CTR]

8.2.1 [*CTR]

8.2.2 Should Customer, and neither Articles 8.1.1 nor 8.1.2 apply, fail to issue any notice to Boeing in accordance with Article 8.2 above, then the Escalation Adjustment for the Airframe Price and Optional Features Prices for such Program Aircraft shall be calculated [*CTR].

8.3 Should Boeing fail to issue an Escalation Notice to Customer in accordance with Article 8.1, then the escalation adjustment for the Airframe Price and Optional Features Prices for such Program Aircraft shall be calculated in accordance [*CTR].

GUN-PA-04676-LA-1704316
Special Escalation Program		Page 3
	BOEING PROPRIETARY

9. Applicability to Other Financial Consideration.

The escalation adjustment for any other sum, identified in the Purchase Agreement as subject to escalation pursuant to Supplemental Exhibit AE1, and which pertains to the Program Aircraft will be calculated using the escalation methodology established in this Letter Agreement for such Program Aircraft notwithstanding any other provisions of the Purchase Agreement to the contrary.

10. Assignment.

Except for an assignment by Customer to a wholly-owned subsidiary as permitted under Article 9, entitled “Assignment, Resale, or Lease” of the AGTA, this Letter Agreement is provided as an accommodation to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned in whole or in part.

11. Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents, except for as required by applicable laws or regulations, to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

GUN-PA-04676-LA-1704316
Special Escalation Program		Page 4
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04676-LA-1704316
Special Escalation Program		Page 5
	BOEING PROPRIETARY

ATTACHMENT A

Escalation Forecast & Escalation Notice Date

Escalation Forecast	Applicable to Program Aircraft Delivering in Time Period	Escalation Notice Date
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

GUN-PA-04676-LA-1704316
Special Escalation Program		Page 6
	BOEING PROPRIETARY

ATTACHMENT B

Escalation Factors

Airframe Price Base Year: [*CTR]

Beginning of Capped Period: [*CTR]

End of Capped Period: [*CTR]

Delivery Date	Escalation Factors	Escalation Factors
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

GUN-PA-04676-LA-1704316
Special Escalation Program		Page 7
	BOEING PROPRIETARY

[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

GUN-PA-04676-LA-1704316
Special Escalation Program		Page 8
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-04676-LA-1704317

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Boeing Purchase of Buyer Furnished Equipment
Reference:	Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

Customer will sell to Boeing the Buyer Furnished Equipment (BFE) listed in the Annex to Exhibit A to this Letter Agreement under the terms and conditions set forth below.

1. Customer will deliver to Boeing a bill of sale for the BFE conveying good title, free of any encumbrances, in the form of Exhibit A to this Letter Agreement (BFE Bill of Sale) with sufficient lead time to complete Boeing’s BFE purchase by the time of Aircraft delivery, and will provide a list of BFE no less than four weeks prior to delivery of the Aircraft.

2. The BFE purchase price will be the amount stated on the BFE Bill of Sale applicable to the Aircraft and will be reimbursed to Customer in the form of a miscellaneous credit memorandum on the Aircraft’s final delivery invoice. Upon Customer’s payment of the Aircraft’s final delivery invoice Boeing will deliver a bill of sale for the BFE to Customer either (i) in the form of Exhibit B to this Letter Agreement, or (ii) included in the Aircraft bill of sale, at the election of Customer.

3. Customer will pay to Boeing a fee equal to [*CTR] of the BFE Purchase Price (Fee) which will cover [*CTR], result of any sale, purchase , use, ownership, delivery, transfer, storage or other activity associated with any of the BFE purchased as part of this Letter Agreement.

GUN-PA-04676-LA-1704317
Boeing Purchase of Buyer Furnished Equipment		Page 1
	BOEING PROPRIETARY

4. The purchase price of the Aircraft will be increased by the amount paid by Boeing for the BFE as shown on the applicable BFE Bill of Sale plus any amounts which are identified at the time of Aircraft delivery to be due to Boeing from Customer pursuant to the provisions of paragraph 3, above. The remainder of any charges due Boeing from Customer pursuant to paragraph 3 will be payable to Boeing upon written demand and substantiated with supporting information.

5. Customer will indemnify and hold harmless Boeing from and against all claims, suits, actions, liabilities, damages, costs and expenses for any actual or alleged infringement of any patent issued or equivalent right under the laws of any country arising out of or in any way connected with any sale, purchase, use, ownership, delivery, transfer, storage or other activity associated with any of the BFE purchased as part of this Letter Agreement.

6. Customer will indemnify and hold harmless Boeing from and against all claims and liabilities, including costs and expenses (including attorneys’ fees) incident thereto or incident to successfully establishing the right to indemnification, for injury to or death of any person or persons, including employees of Customer but not employees of Boeing, or for loss of or damage to any property, including any aircraft, arising out of or in any way connected with the performance by Boeing of services or other obligations under this Letter Agreement and whether or not arising in tort or occasioned in whole or in part by the negligence of Boeing.

7. Boeing makes no warranty other than warranty of such title to the BFE as has been transferred by Customer to Boeing pursuant to this Letter Agreement. The exclusion of liabilities and other provisions of the AGTA are applicable to this Letter Agreement.

8. For the purposes of this Letter Agreement, the term “Boeing” includes The Boeing Company, its divisions, subsidiaries, affiliates, the assignees of each, and their directors, officers, employees and agents.

GUN-PA-04676-LA-1704317
Boeing Purchase of Buyer Furnished Equipment		Page 2
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04676-LA-1704317
Boeing Purchase of Buyer Furnished Equipment		Page 3
	BOEING PROPRIETARY

Exhibit A

FULL WARRANTY BILL OF SALE

China Southern Airlines Company Limited (Seller) in consideration of the promise of The Boeing Company (Buyer) to pay to Seller                  U.S. Dollars ($        ) hereby sells to Buyer the goods described in the “Schedule of Buyer Furnished Equipment (BFE)” attached hereto. Such payment by Buyer will be made immediately after delivery to Seller of and payment for the Aircraft bearing Manufacturer’s Serial No. on which the BFE is installed.

Seller warrants to Buyer that it has good title to the BFE free and clear of all liens, encumbrances and rights of others; and that it will warrant and defend such title against all claims and demands whatsoever.

This Full Warranty Bill of Sale is delivered by Seller to Buyer in the State of Washington, and will be governed by the law of the State of Washington, exclusive of Washington’s conflicts of laws principles.

CHINA SOUTHERN AIRLINES COMPANY LIMITED

Signature

Printed Name

Title

Dated:                                                  

GUN-PA-04676-LA-1704317
Boeing Purchase of Buyer Furnished Equipment		Page 4
	BOEING PROPRIETARY

Receipt of this Full Warranty Bill of Sale is hereby acknowledged by Buyer by its duly authorized representative.

THE BOEING COMPANY

Signature

Printed Name

Attorney-in-Fact

GUN-PA-04676-LA-1704317
Boeing Purchase of Buyer Furnished Equipment		Page 5
	BOEING PROPRIETARY

SCHEDULE OF BUYER FURNISHED EQUIPMENT (BFE)

Applicable to: +

Aircraft Model: <Model>

Manufacturer’s Serial No.: <MSN>

GUN-PA-04676-LA-1704317
Boeing Purchase of Buyer Furnished Equipment		Page 6
	BOEING PROPRIETARY

Exhibit B

BOEING BILL OF SALE

The Boeing Company (Seller) in consideration of the sum of $1.00 and other valuable consideration hereby sells to China Southern Airlines Company Limited (Buyer) the goods described in the “Schedule of Buyer Furnished Equipment (BFE)” attached hereto. Such payment by Buyer will be made concurrently with delivery to Buyer of and payment for the aircraft bearing Manufacturer’s Serial No.         on which the BFE is installed.

Seller represents and warrants that it has such title to the BFE as was previously transferred to Seller by Buyer and that it hereby conveys such BFE and such title thereto to Buyer.

This Boeing Bill of Sale is delivered by Seller to Buyer in the State of Washington, and will be governed by the law of the State of Washington, exclusive of Washington’s conflicts of laws principles.

THE BOEING COMPANY

Signature

Printed Name

Attorney-in-Fact

Title

Dated:                                              

GUN-PA-04676-LA-1704317
Boeing Purchase of Buyer Furnished Equipment		Page 7
	BOEING PROPRIETARY

Receipt of this Bill of Sale is hereby acknowledged by Buyer by its duly authorized representative.

CHINA SOUTHERN AIRLINES COMPANY LIMITED

Signature

Printed Name

GUN-PA-04676-LA-1704317
Boeing Purchase of Buyer Furnished Equipment		Page 8
	BOEING PROPRIETARY

SCHEDULE OF BUYER FURNISHED EQUIPMENT (BFE)

Applicable to: +

Aircraft Model: <Model>

Manufacturer’s Serial No.: <MSN>

GUN-PA-04676-LA-1704317
Boeing Purchase of Buyer Furnished Equipment		Page 9
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-04676-LA-1704318

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Government Approval
Reference:	Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. Government Approval.

Boeing and Customer both acknowledge that it is necessary for Customer to obtain government approval to import the Aircraft into the People’s Republic of China (Government Approval). Customer agrees to use best efforts to obtain Government Approval and notify Boeing promptly in writing as soon as approval has been obtained. In cooperation with Customer, Boeing shall provide reasonable assistance to Customer in preparing informational materials relating to the Purchase Agreement and the Aircraft which Customer advises are reasonably required for the Government Approval process. Customer shall advise Boeing as soon as practical of the specific assistance which Customer plans to request from Boeing.

2. Flexibility.

Boeing and Customer will work together, to help Customer obtain the Government Approval, and to ensure the delivery schedule and advance payments as specified in Table 1 of the Purchase Agreement are met. If Customer is not current with advance payments for all Aircraft per the Purchase Agreement, then Boeing may, after consultation with Customer for no less than [*CTR], take one or more of the actions set forth below for the Aircraft as it deems appropriate based on Boeing’s production considerations and requirements, while expressly reserving all of Boeing’s rights and remedies under law.

GUN-PA-04676-LA-1704318
Government Approval		Page 1
	BOEING PROPRIETARY

2.1 Reschedule Aircraft. Boeing may reschedule any or all of the Aircraft. Boeing, after consultation with Customer, will give Customer [*CTR] advance notice of any such Aircraft rescheduling, and will not reschedule Aircraft for which Customer is successful in obtaining Government Approval prior to the expiration of such notification period.

The following terms [*CTR] Delivery Period Aircraft.

2.1.1 The Escalation Adjustment for each such rescheduled Aircraft will be calculated to the revised delivery month in accordance with the provisions of the Purchase Agreement.

2.1.2 Advance payments for each such rescheduled Aircraft will be calculated to the revised delivery month in accordance with the provisions of the Purchase Agreement.

2.1.3 The Advance Payment Base Price will be calculated to the revised delivery month in accordance with the provisions of the Purchase Agreement. The credit memoranda Boeing provides to the Customer which are noted as “subject to escalation” will be calculated to the revised delivery month in accordance with the provisions of the Purchase Agreement.

2.1.4 In the event of any delivery reschedule performed under this Letter Agreement, Boeing will retain all advance payments received for a particular Aircraft prior to the reschedule of that Aircraft and apply those payments towards the future advance payments for that same rescheduled Aircraft. In no case will Boeing pay interest on any advance payment amounts or early payment resulting from the reschedule of the relevant Aircraft.

2.2 Terminate Aircraft. Boeing, after consultation with Customer, may terminate the Aircraft by providing Customer with written notice of such termination and shall promptly return to Customer, without interest, an amount equal to all advance payments paid by Customer for the terminated Aircraft.

3. Confidential Treatment.

Boeing and Customer understand that certain information contained in this Letter Agreement is considered to be confidential. The parties agree that they will treat this Letter Agreement and the information contained herein as confidential and will not, without the prior written consent of the other party, disclose this Letter Agreement or any information contained herein to any other person or entity.

GUN-PA-04676-LA-1704318
Government Approval		Page 2
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04676-LA-1704318
Government Approval		Page 3
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-04676-LA-1704319

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Loading of Customer Software
Reference:	Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. Customer may request Boeing to install software owned by or licensed to Customer (Software) in the following systems in the Aircraft: (i) aircraft communications addressing and reporting system (ACARS), (ii) digital flight data acquisition unit (DFDAU), (iii) flight management system (FMS), (iv) cabin management system (CMS), (v) engine indication and crew alerting system (EICAS), (vi) airplane information management system (AIMS), (vii) satellite communications system (SATCOM), and (viii) In-Flight Entertainment (IFE).

2. For all Software described in paragraph 1, above, other than Software to be installed in SATCOM and IFE, the Software is not part of the configuration of the Aircraft certified by the FAA and therefore cannot be installed prior to delivery. If requested by Customer, Boeing will install such Software after the transfer to Customer of title to the Aircraft, but before fly away.

3. The SATCOM Software is part of the configuration of the Aircraft and included in the type design. If requested by Customer, Boeing will install the SATCOM Software prior to transfer to Customer of title to the Aircraft.

4. For IFE Software, if requested by Customer, Boeing will make the Aircraft accessible to Customer and Customer’s IFE Software supplier so that the supplier can install the Software after delivery of the Aircraft, but before fly away.

GUN-PA-04676-LA-1704319
Loading of Customer Software		Page 1
	BOEING PROPRIETARY

5. All Software which is installed by Boeing other than the SATCOM Software will be subject to the following conditions:

(i) Customer and Boeing agree that the Software is BFE for the purposes of Articles 3.1.3, 3.2, 3.4, 3.5, 3.10, 10 and 11 of Exhibit A, Buyer Furnished Equipment Provisions Document, to the AGTA and such articles apply to the installation of the Software.

(ii) Customer and Boeing further agree that the installation of the Software is a service under Exhibit B, Customer Support Document, to the AGTA.

(iii) Boeing makes no warranty as to the performance of such installation and Article 11 of Part 2 of Exhibit C of the AGTA, Disclaimer and Release; Exclusion of Liabilities and Article 8.2, Insurance, of the AGTA apply to the installation of the Software.

GUN-PA-04676-LA-1704319
Loading of Customer Software		Page 2
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04676-LA-1704319
Loading of Customer Software		Page 3
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-04676-LA-17043120

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Aircraft Model Substitution
Reference:	Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

Customer may substitute the purchase of Boeing Model 737-7 aircraft, Model 737-9 aircraft or Model 737-10 aircraft (Substitute Aircraft) in place of any Aircraft, subject to the following terms and conditions:

1. Customer’s Written Notice.

Customer shall provide written notice of its intention to substitute the purchase of an Aircraft with the purchase of a Substitute Aircraft,

(i) for 737-8 to 737-7 substitutions no later than the first day of the month that is [*CTR]

(ii) for 737-8 to 737-7 substitutions no later than the first day of the month that is [*CTR]

(iii) for 737-8 to 737-9 substitutions no later than the first day of the month that is [*CTR];

GUN-PA-04676-LA-1704320
Aircraft Model Substitution		Page 1
	BOEING PROPRIETARY

(iv) for 737-8 to 737-9 substitutions no later than the first day of the month that is [*CTR]

(v) for 737-8 to 737-10 substitutions no later than the first day of the month that is [*CTR]

(vi) for 737-8 to 737-10 substitutions no later than the first day of the month that is [*CTR]

2. Boeing’s Production Capability.

2.1 Customer’s substitution right is conditioned upon Boeing having production capability for the Substitute Aircraft in the same scheduled delivery month as the Aircraft for which it will be substituted. Boeing will provide a written response to Customer’s notice of intent indicating whether or not Boeing’s production capability will support the scheduled delivery month.

2.2 If Boeing is unable to manufacture the Substitute Aircraft in the same scheduled delivery month as the Aircraft for which it will be substituted, then Boeing shall promptly make a written offer of an alternate delivery month for Customer’s consideration and written acceptance within [*CTR] of such offer.

2.3 All of Boeing’s quoted delivery positions for Substitute Aircraft shall be considered preliminary until such time as the parties enter into a definitive agreement in accordance with paragraph 4 below.

GUN-PA-04676-LA-1704320
Aircraft Model Substitution		Page 2
	BOEING PROPRIETARY

2.4 In each case, as set out in Article 1, items (i) through to (vi) above, a shorter notice period may be acceptable subject to the agreement by Boeing.

3. [*CTR].

[*CTR].

4. Definitive Agreement.

Customer’s substitution right and Boeing obligation in this Letter Agreement are further conditioned upon Customer and Boeing’s executing a definitive agreement for the purchase of the Substitute Aircraft within [*CTR] days of Customer’s substitution notice to Boeing or of Customer’s acceptance of an alternate delivery month in accordance with paragraph 2 above.

5. Price and Advance Payments.

The Airframe Price, Optional Features Price and, if applicable, Engine Price will be adjusted to Boeing’s and the engine manufacturer’s then-current prices for such elements as of the date of execution of the definitive purchase agreement for the Substitute Aircraft.

6. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

7. Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents, except for as required by applicable laws or regulations, to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

GUN-PA-04676-LA-1704320
Aircraft Model Substitution		Page 3
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04676-LA-1704320
Aircraft Model Substitution		Page 4
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-04676-LA-1704321

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Seller Purchased Equipment
Reference:	Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

Definition of Terms:

Seller Purchased Equipment (SPE) is BFE that Boeing purchases for Customer and that is identified as SPE in the Detail Specification for the Aircraft.

1. Price.

1.1 Advance Payments. An estimated SPE price is included in the Advance Payment Base Prices shown in Table 1 for the purpose of establishing the advance payments for the Aircraft.

1.2 Aircraft Price. The Aircraft Price will be adjusted to reflect the actual costs charged to Boeing by the SPE suppliers and transportation charges.

2. Customer Responsibilities.

Customer is responsible for:

(i) selecting the SPE suppliers from a list provided by Boeing for the commodities identified on such list and notifying Boeing of the SPE suppliers in accordance with the supplier selection date(s) as set forth in Attachment A of this Letter Agreement;

GUN-PA-04676-LA-1704321
Seller Purchased Equipment		Page 1
	BOEING PROPRIETARY

(ii) to Customer at the time and [*CTR]

(iii) [*CTR]

3. Boeing Responsibilities.

Boeing is responsible for:

(i) [*CTR]

(ii) [*CTR];

(iii) [*CTR];

(iv) [*CTR];

(v) [*CTR];

(vi) [*CTR].

4. Supplier Selection For SPE Galleys and Seats.

GUN-PA-04676-LA-1704321
Seller Purchased Equipment		Page 2
	BOEING PROPRIETARY

4.1 In addition to those responsibilities described above, for SPE galleys and seats the following provisions apply with respect to Customer’s selection of suppliers:

4.1.1 Galley Requirements. Customer will provide Boeing the definitive galley configuration requirements, including identification of refrigeration requirements and fixed and removable insert equipment by quantity, manufacturer and part number not later than [*CTR] supplier selection dates in Attachment A.

4.1.2 Seat Requirements. Customer will provide to Boeing the definitive seat configuration requirements not later than [*CTR] prior to seat supplier selection dates in Attachment A.

4.1.3 Bidder’s List. For information purposes, Boeing will submit to Customer a bidder’s list of existing suppliers of seats and galleys [*CTR] prior to the supplier selection date(s) referred to in paragraph 2 (i) above.

4.1.4 Request for Quotation (RFQ). Approximately [*CTR] prior to the supplier selection date(s), Boeing will issue its RFQ inviting potential bidders to submit bids for the galleys and seats within [*CTR] of the selection date.

4.1.5 Recommended Bidders. Not later than [*CTR] prior to the supplier selection date(s), Boeing will submit to Customer a list of recommended bidders from which to choose a supplier for the galleys and seats. The recommendation is based on an evaluation of the bids submitted using price, weight, warranty and schedule as the criteria.

4.1.6 Supplier Selection. If Customer selects a seat or galley supplier that is not on the Boeing recommended list, such seat or galley will become BFE and the provisions of Exhibit A, Buyer Furnished Equipment Provisions Document, of the AGTA will apply.

5. IFE/CCS Software.

IFE/CCS may contain software of the following two types:

5.1 Systems Software. The software required to operate and certify the IFE/CCS systems on the Aircraft is the Systems Software and is part of the IFE/CCS.

5.2 Customer’s Software. The software accessible to the Aircraft passengers which controls Customer’s specified optional features is Customer’s Software and is not part of the IFE/CCS.

5.2.1 Customer is solely responsible for specifying Customer’s Software functional and performance requirements and ensuring that Customer’s Software meets such requirements. Customer and Customer’s Software supplier will have total responsibility for the writing, certification, modification, revision, or correction of any of Customer’s Software. Customer shall be responsible for and assumes all liability with respect to Customer’s Software.

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5.2.2 The omission of any Customer’s Software or the lack of any functionality of Customer’s Software will not be a valid condition for Customer’s rejection of the Aircraft at the time of Aircraft delivery.

5.2.3 Boeing has no obligation to approve any documentation to support Customer’s Software certification. Boeing will only review and operate Customer’s Software if in Boeing’s reasonable opinion such review and operation is necessary to certify the IFE/CCS system on the Aircraft.

5.2.4 Boeing shall not be responsible for obtaining FAA certification for Customer’s Software.

6. Changes.

If the Customer has selected SPE, any changes to SPE may only be made by and between Boeing and the SPE suppliers. Customer requested changes to the SPE will be made by Customer in writing directly to Boeing for confirmation and for coordination by Boeing with the SPE supplier. Any such change to the configuration of the Aircraft will be subject to price and offerability through Boeing’s master change or other process for amendment of the Purchase Agreement.

7. Proprietary Rights.

Boeing’s obligation to purchase SPE will not impose upon Boeing any obligation to compensate Customer or any supplier for any proprietary rights Customer may have in the design of the SPE.

8. Remedies.

If Customer’s nonperformance of its obligations in this Letter Agreement causes a delay in the delivery of the Aircraft or causes Boeing to perform out-of-sequence or additional work, Customer will reimburse Boeing for all resulting expenses and be deemed to have agreed to any such delay in Aircraft delivery. In addition, Boeing will have the right to:

8.1 [*CTR];

8.2 [*CTR];

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8.3 [*CTR]

8.4 [*CTR]

9. Title and Risk of Loss.

Title and risk of loss of the SPE will remain with Boeing until the Aircraft is delivered to Customer.

10. Customer’s Indemnification of Boeing.

Customer will indemnify and hold harmless Boeing from and against all claims and liabilities, including costs and expenses (including attorneys’ fees) incident thereto or incident to successfully establishing the right to indemnification, for injury to or death of any person or persons, including employees of Customer but not employees of Boeing, or for loss of or damage to any property, including Aircraft, arising out of or in any way connected with any nonconformance or defect in any SPE and whether or not arising in tort or occasioned in whole or in part by the negligence of Boeing. This indemnity will not apply with respect to any nonconformance or defect caused solely by Boeing’s installation of the SPE.

11. Definition.

For purposes of the above indemnity, the term Boeing includes The Boeing Company, its divisions, subsidiaries and affiliates, the assignees of each, and their directors, officers, employees and agents.

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Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

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	BOEING PROPRIETARY

Attachment A

1. Supplier Selection.

Customer will:

1.1 Select and notify Boeing of the suppliers and part numbers of the following SPE items by the following dates:

Galley System	[*CTR]
Galley Inserts	[*CTR]
Seats (passenger)	[*CTR]
Overhead & Audio System	[*CTR]
In-Seat Video System	[*CTR]
Miscellaneous Emergency Equipment	[*CTR]
Cargo Handling Systems* (Single Aisle Programs only)	[*CTR]

* For a new certification, Customer will need to provide Supplier Selections [*CTR] earlier than stated above.

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The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-04676-LA-1704322

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Installation of Cabin Systems Equipment
Reference:	Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

Customer has requested that Boeing install in the Aircraft In-Flight Entertainment and communications systems described in Attachment A to this Letter Agreement (collectively referred to as Cabin Systems Equipment or CSE). CSE is BFE that Boeing purchases for Customer and that is identified in the Detail Specification for the Aircraft.

Because of the complexity of the CSE, special attention and additional resources will be required during the development, integration, and certification of the CSE and manufacture of the Aircraft to achieve proper operation of the CSE at the time of delivery of the Aircraft. [*CTR]

1. Responsibilities.

1.1 Customer will:

1.1.1 provide [*CTR]

1.1.2 Customer has selected the CSE suppliers (Supplier(s)) and system configuration) from among those identified in the Option(s) listed in Attachment A to this Letter Agreement, as available in the current 737 Standard Selections Catalog and formally offered by Boeing;

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1.1.3 promptly after selecting the Options, participate with Boeing in meetings with Suppliers to ensure that Supplier’s functional system specifications meet Customer’s and Boeing’s respective requirements. Such functional system specifications define functionality to which Boeing will test prior to delivery but are not a guarantee of functionality at delivery;

1.1.4 select Supplier part numbers;

1.1.5 negotiate and obtain agreements on product assurance, product support following Aircraft delivery (including spares support), and any other special business arrangements directly with Suppliers;

1.1.6 provide pricing information for CSE part numbers selected to Boeing by a mutually selected date;

1.1.7 negotiate and obtain agreements with any required service providers;

1.1.8 include in Customer’s contract with any seat supplier a condition obligating such seat supplier to enter a bonded stores agreement with Boeing. This bonded stores agreement will set forth the terms concerning the use, handling. storage, and risk of loss of CSE during the time such equipment is under the seat supplier’s control;

1.1.9 obligate Suppliers to:

1.1.9.1 assist the seat suppliers in the preparation of seat assembly functional test plans;

1.1.9.2 coordinate integration testing, and provide seat assembly functional test procedures for seat electronic parts to seat suppliers and Boeing, as determined by Boeing; and.

1.1.9.3 comply with Boeing’s type design and type certification data development and protection requirements where the Supplier has type design/certification responsibility. The requirements will require Suppliers to (i) maintain type design/certificate data for the life of such type certificate for all type design and (ii) entitle Boeing to access, review, and receive such type design/certification data. These requirements will be provided to Customer and included in any applicable contracts between Customer and Supplier.

1.2 Boeing will:

1.2.1 [*CTR]

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1.2.2 [*CTR]

1.2.3 [*CTR];

1.2.4 [*CTR];

1.2.5 [*CTR];

1.2.6 [*CTR]

1.2.7 [*CTR]

2. Software.

CSE systems may contain software of the following two types:

2.1 Certification Software. The software required to functionally test, operate and certify the CSE systems on the Aircraft is the Certification Software and is part of the CSE.

2.2 Customer’s Software. The software which is defined by the Customer to support specified features and appearance is Customer’s Software and is not part of the CSE.

2.2.1 Customer is solely responsible for specifying Customer’s Software functional and performance requirements and ensuring that Customer’s Software meets such requirements. Customer and Customer’s Software supplier will have total responsibility for the writing, certification, modification, revision, or correction of any of Customer’s Software. Boeing will not perform the functions and obligations described in paragraph 1.2 above, or the [*CTR] described in Attachment B, for Customer’s Software.

2.2.2 The omission of any Customer’s Software or the lack of any functionality of Customer’s Software will not be a valid condition for Customer’s rejection of the Aircraft at the time of Aircraft delivery.

2.2.3 Boeing has no obligation to approve any documentation to support Customer’s Software certification. Boeing will only review and operate Customer’s Software if in Boeing’s reasonable opinion such review and operation is necessary to certify the CSE on the Aircraft.

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2.2.4 Boeing will not be responsible for obtaining FAA certification for Customer’s Software.

3. Changes.

3.1 After Customer’s selection of the CSE, in accordance with the terms of this Letter Agreement, any changes to CSE may only be made by and between Boeing and the Supplier. Any Customer request for changes to the CSE specification after selection by Customer will be made in writing directly to Boeing for approval and for coordination by Boeing with the Supplier. Any such change to the configuration of the Aircraft will be subject to price and offerability through Boeing’s master change or other process for amendment of the Purchase Agreement and if such changes are acceptable, shall be confirmed in writing between Boeing and Customer. Any Supplier price increase or decrease resulting from such change will be negotiated and agreed between Customer and Supplier.

3.2 Boeing and Customer recognize that the developmental nature of the CSE may require changes to the CSE or the Aircraft in order to ensure (i) compatibility of the CSE with the Aircraft and all other Aircraft systems, and (ii) FAA certification of the Aircraft with the CSE installed therein. In such event Boeing will notify Customer and recommend to Customer the most practical means for incorporating any such change. If within [*CTR] notification Customer and Boeing cannot mutually agree on the incorporation of any such change or alternate course of action, the remedies available to Boeing in Paragraph 6 will apply.

3.3 The incorporation into the Aircraft of any mutually agreed change to the CSE may result in Boeing adjusting the price of the Option(s) contained in Attachment A to this Letter Agreement.

3.4 Boeing’s obligation to obtain FAA certification of the Aircraft as it relates to CSE is limited to the CSE as described in Attachment A, as Attachment A may be amended from time to time.

4. Supplier Defaults.

Boeing will notify Customer in a timely manner in the event of a default by a Supplier under the Supplier’s purchase order with Boeing. Within fifteen (15) days of Customer’s receipt of such notification, Boeing and Customer will agree on an alternate Supplier or other course of action. If Boeing and Customer are unable to agree on an alternate Supplier or course of action within such time, the remedies available to Boeing in Paragraph 6 will apply.

5. Exhibits B and C to the AGTA.

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CSE is deemed to be BFE for the purposes of Exhibit B, Customer Support Document, and Exhibit C, the Product Assurance Document, of the AGTA.

6. Boeing’s Remedies.

If Customer does not perform its obligations as provided in this Letter Agreement or if supplier fails (for any reason other than a default by Boeing under the purchase order terms) to deliver conforming CSE per the schedule set forth in the purchase order, then, in addition to any other remedies which Boeing may have by contract or under law, Boeing may:

6.1 [*CTR];

6.2 [*CTR]

6.3 [*CTR]

7. Advance Payments.

7.1 Estimated Price for the CSE. An estimated price for the CSE purchased by Boeing will be included in the Aircraft Advance Payment Base Price to establish the advance payments for each Aircraft.

7.2 Aircraft Price. [*CTR]

8. Customer’s Indemnification of Boeing.

Customer will indemnify and hold harmless Boeing from and against all claims and liabilities, including costs and expenses (including attorneys’ fees) incident thereto or incident to successfully establishing the right to indemnification, for injury to or death of any person or persons, including employees of Customer but not employees of Boeing, or for loss of or damage to any property, including Aircraft, arising out of or in any way connected with any nonconformance or defect in any CSE, or in the installation thereof or in the provision of services hereunder, and whether or not arising in tort or occasioned in whole or in part by the negligence of Boeing. This indemnity will not apply with respect to any nonconformance or defect caused solely by Boeing’s installation of the CSE.

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9. Title and Risk of Loss.

Title of CSE will remain with Boeing until the Aircraft title is transferred to Customer. Risk of loss will remain with the entity that is in possession of the CSE prior to Aircraft delivery

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters treated above, please indicate your acceptance and approval below.

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact

CHINA SOUTHERN AIRLINES COMPANY LIMITED

By

Its

CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.

By

Its

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Attachment A

Cabin Systems Equipment

The following optional features (Option(s)) describe(s) the items of equipment that under the terms and conditions of this Letter Agreement are considered to be CSE. Each such Option is fully described in Option Document as described in Exhibit A to the Purchase Agreement. Final configuration will be based on Customer acceptance of any or all Options listed below.

Option Request Number and Title

[*CTR]

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Attachment B

[*CTR]

1. [*CTR].

[*CTR]

(i) [*CTR];

(ii) [*CTR]

(iii) [*CTR]

(iv) [*CTR]

(v) [*CTR];

(vi) [*CTR];

(vii) [*CTR]

(viii) [*CTR]

2. [*CTR]

[*CTR] :

(i) [*CTR]

[*CTR]

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(ii) [*CTR] and

(iii) [*CTR].

3. [*CTR].

(i) [*CTR]

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	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-04676-LA-1704322

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Clarifications and Understandings
Reference:	Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

1. Clarifications and Understandings. The following clarifications and understandings pertain to the indicated provisions of the Purchase Agreement:

1.1 Purchase Agreement, Article 1. Quantity, Model and Description. As set forth in the AGTA, Boeing will manufacture each Aircraft to conform to the appropriate Type Certificate issued by the United States Federal Aviation Administration (FAA) for the specific model of Aircraft and will obtain from the FAA and furnish to Buyer at delivery of each aircraft either a Standard Airworthiness Certificate or an Export Certificate of Airworthiness issued pursuant to Part 21 of the Federal Aviation Regulations.

The Civil Aviation Authority of China (CAAC) has indicated to the FAA that Boeing’s manufacturing procedures meet the bi-lateral agreements between the responsible parties. The FAA uses FAR Part 25 to establish the Type Certificate. Similarly, the CAAC uses its CCAR 25 for its Type Certificate. CCAR 25 is not identical to the FAA, but the CAAC considers both to be sufficiently equivalent to recognize the FAA Type Certificate to be valid.

In the issuance of an Export Certificate of Airworthiness, the FAA complies with any additional CAAC requirements through the use of Advisory Circular 21-2 (AC 21-2). Such additional requirements are documented by the FAA in AC 21-2.

1.2 Purchase Agreement, Article 4. Payment.

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Article 4.2 refers to payments due on the “effective date” of the Purchase Agreement. Article 4.3 refers to payments due “upon signing” of the Purchase Agreement. The effective date of the Purchase Agreement is the day it is signed by Boeing, Customer and the Consenting Party. Such date appears in the first sentence of the Purchase Agreement and again just above the signature blocks of the parties to the Purchase Agreement. For clarification purposes, Boeing will provide invoices in advance for all payments due under the Purchase Agreement to facilitate payment by Customer.

1.3 Purchase Agreement, Article 5.7. Public Disclosure.

For clarity, Customer may make a public announcement regarding Customer’s purchase of the Aircraft upon approval of Customer’s press release by Boeing’s public relations department or other authorized representative.

1.4 Purchase Agreement, Article 5.7. Negotiated Agreement; Entire Agreement.

For clarity, to the extent there is any inconsistency between the terms of the AGTA and the Purchase Agreement, in each case, relating to the Aircraft, the terms of this Purchase Agreement shall prevail.

2. AGTA Article 5.3 Demonstration Flights.

For clarity, demonstration flights are to demonstrate the function of the Aircraft only to Customer and not for marketing or commercial activities with Boeing’s other customers.

3. AGTA Article 5.5 Special Aircraft Test Requirements.

Customer is concerned for the potential that flight and ground test hours on any Aircraft could [*CTR]. As an accommodation for Customer’s concern, Boeing will notify Customer for any flight and ground testing that would [*CTR] hours on an Aircraft. Customer and Boeing agree to discuss the matter if tests are for purposes other than the flight and ground tests described in Article 5.5 (i) and (ii) of the AGTA. For the avoidance of doubt, Boeing flight and ground tests will not unfairly select Customer’s Aircraft when other aircraft are equally available and suitable for such tests.

4. AGTA Article 6, Delivery.

Customer is concerned events may occur affecting Customer’s ability to take delivery of an Aircraft on the scheduled delivery date. As an accommodation for Customer’s concern, Boeing will work with the Customer to adjust the delivery date for up to [*CTR] Aircraft in the Purchase Agreement within the scheduled delivery month as long as Customer provides a notice to Boeing within              after receiving Boeing’s delivery notice on that Aircraft, and, notwithstanding ) of the AGTA, Delay, Customer will [*CTR] for any of Boeing’s costs as a result of such adjustment.

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5. AGTA Article 8.2 Insurance.

Customer is concerned about aircraft insurance requirements under Article 8.2 of the AGTA after Customer has sold an aircraft to a new owner. For clarity, after Customer has transferred the title of an aircraft to the new owner, Customer will be released from [*CTR] for that specific aircraft after Customer has provided Boeing the notification of such post-delivery sale (AGTA Appendix III provides such a reference notice). Notwithstanding the foregoing, Customer is not released from its obligation under Article 8.2 of the AGTA during any period which Customer has control or possession of an aircraft.

6. AGTA Exhibit A, Buyer Furnished Equipment,

6.1 Article 7. Title and Risk of Loss. For clarification purposes, the last sentence of Article 7.1 of Exhibit A of the AGTA will provide Customer [*CTR] liable for loss [*CTR]

6.2 Article 9 Indemnification of Boeing. This last sentence of Article 9 shall be modified to read: “This indemnity will not apply with respect to any nonconformance or defect caused solely by Boeing’s storage, handling, and installation of the BFE.”

7. Purchase Agreement Exhibit B, Aircraft Delivery Requirements and Responsibilities.

7.1 Article 1.1, Airworthiness and Registration Documents. The first sentence of Article 1.1 shall be modified to read: “Airworthiness and Registration Documents. Not later than [*CTR] prior to delivery of each Aircraft, Customer will notify Boeing of the registration number to be painted on the side of the Aircraft.” Customer and Boeing also agree to work together to minimize the impact related to Customer’s notification to Boeing of the aircraft SELCAL and Mode-S information.

7.2 Article 1.2, Certificate of Sanitary Construction. For clarification purposes and pursuant to Article 1.2.2, Customer has elected to receive the Certificate of Sanitary Construction at the time of Aircraft delivery.

7.3 Article 1.3.1, Import Documentation. At the end of Article 1.3.1 the following shall be inserted: Boeing will provide reasonable assistance if requested by Customer in connection with the import of the Aircraft into the country of import.

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7.4 Article 4.1, Schedule of Inspections, Article 4.2, Schedule for Demonstration Flights and Article 4.3 Schedule for Customer’s Flight Crew. Articles identify parties that participate in such actions and the Civil Aviation Authority of China (CAAC) may also participate in these actions. It’s noted that Boeing will provide advance notice of such actions.

7.5 Article 4.4, Fuel Provided by Boeing. In addition to the fuel provided by Boeing pursuant to Article 4.4, Boeing assists its customers with certain unique services or accommodation items at [*CTR]. If requested, Boeing provides oil and hydraulic fluid for the ferry flight. Also, if Customer does not load its own navigation database for ferry flight, Boeing will provide a limited-time use database for the ferry flight.

7.6 Article 4.6 Delivery Papers, Documents and Data. Replace the first sentence with the following:

“Boeing will have available at the time of delivery of the Aircraft necessary delivery papers, documents and data for execution and delivery. Such documents may include, but are not limited to the following:

1. Aircraft Bill of Sale

2. FAA Export Certificate of Airworthiness

3. Weight and Balance Supplement

4. Engine Brochure

5. Miscellaneous Delivery Record Brochure

6. Aircraft Readiness Log

7. Rigging Record Brochure

8. Auxiliary Power Unit Log

9. FAA Airworthiness Directive Compliance Record Status”

7.7 Article 4.7, Delegation of Authority. Boeing will present a delegation of authority, designating and authorizing certain persons to act on its behalf in connection with delivery of the Aircraft. For clarity, if required to complete the delivery of Aircraft, Boeing will provide a legal opinion in form and substance satisfactory to the Customer in connection with delivery of the Aircraft.

8. Purchase Agreement Supplemental Exhibit BFE1, Aircraft Delivery Requirements and Responsibilities.

Customer and Boeing agree to work together to help Customer fulfill the requirements under Supplemental Exhibit BFE1.

9. Redacted version of Purchase Agreement.

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Customer has concerns regarding the confidential treatment of the Purchase Agreement when the relevant stock exchanges require certain disclosure from Customer. To accommodate Customer, Boeing will provide redacted version of the Purchase Agreement if requested by Customer for the purpose of providing disclosure to relevant stock exchanges.

10. AGTA Terms Revisions.

AGTA terms revisions in [*CTR] will apply to Purchase Agreement No. 04676 where applicable.

11. Purchase Agreement Letter Agreement LA-1704321 Seller Purchased Equipment.

11.1 For clarification purposes concerning SPE changes, Customer may provide written request to Boeing for review and approval subject to price and offerability through Boeing’s master change or other process for amendment of the Purchase Agreement. In addition, Boeing agrees to work with Customer and suppliers in the event Boeing determines SPE changes are necessary to fulfill the Boeing’s obligations under the Purchase Agreement.

11.2 [*CTR]

11.3 Article 10. Customer’s Indemnification of Boeing. This last sentence of SPE Letter Agreement LA-1704321 Article 10 shall be modified to read:

12. Purchase [*CTR] Systems Equipment (CSE).

12.1 For clarification purposes concerning CSE changes, Customer may provide written request to Boeing for review and approval subject to price and offerability through Boeing’s master change or other process for amendment of the Purchase Agreement. In addition, Boeing agrees to work with Customer and suppliers in the event Boeing determines CSE changes are necessary to fulfill the Boeing’s obligations under the Purchase Agreement.

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12.2 [*CTR]

12.3 Article 8. Customer’s Indemnification of Boeing. This last sentence of CSE Letter Agreement LA-1704322 Article 8 shall be modified to read: “

13. Purchase [*CTR] Special Escalation Program. Customer has concerns regarding the length of time period [*CTR] the Escalation Adjustment for the Airframe, Price and Optional Features of each Aircraft in Table 1 of the Purchase Agreement. For the avoidance of doubt, t between Customer and Boeing in the event of In the event Boeing

14. CAAC [*CTR]

It is [*CTR] certain aircraft [*CTR] (TCDS), Validation of Type Certificate Data Sheets (VTCDS), Aircraft Letter of Definition (ALOD) in order to issue to Customer the necessary aircraft certificates for operating the Aircraft in China. Boeing agrees to work with the relevant regulatory entities on a timely basis to support the process providing such information to the CAAC.

15. Assignment

15.1 Notwithstanding any other provisions of the Purchase Agreement, if Customer requests to assign an Aircraft under the Purchase Agreement to an assignee which Customer or China Southern Airlines Holding Company directly controls or holds [*CTR], Customer will work with Boeing in accordance with the lead-time and charges required for configuration changes and Boeing will not unreasonably withhold its consent to the assignment of Customer’s rights and obligations under the Purchase Agreement as relates to the specific Aircraft or post- delivery entitlements (collectively “Assigned Rights”), including but not limited to all rights and obligations with respect to advance payments already paid to Boeing under the Purchase Agreement.

15.2 Any such assignment will be in the form acceptable to Boeing (AGTA Appendix II provides such a reference form), including the undertaking by Customer to be bound by the DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES provisions set forth in Article 11 of Part 2 of Exhibit C to the AGTA.

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16. Regulatory Approval, Validated Type Certificate (VTC).

It is recognized that obtaining the 737-8 Validated Type Certificate (VTC) is necessary for Customer to import and use the Aircraft in China. Customer has requested that Boeing take responsibility for obtaining the VTC for the 737-8. While Boeing recognizes Customer’s concern regarding VTC for the 737-8, Boeing is not able to accept responsibility for obtaining the VTC from the CAAC. If the lack of VTC approval results in the delay of an Aircraft delivery, such a delay [*CTR]. However, Boeing commits to support the process of obtaining the VTC and Customer’s efforts (as applicable) towards the same as described herein. In support of obtaining VTC approval, Boeing will be responsible for: (1) assessing the applicable regulatory requirements, (2) generating data and analysis to reasonably support the approval requirements, (3) submitting such information to the applicable regulatory agency, and (4) supporting discussions with regulators to assist in the evaluation of the Boeing submittal.

[*CTR].

17. Aircraft and Engines.

17.1 Customer has concerns regarding the CFM LEAP-1B type engines installed in the Aircraft at the time of delivery. For clarity, Boeing will manufacture each Aircraft and install the appropriate CFM LEAP-1B engines to conform to the appropriate Type Certificate issued by the FAA and in accordance with Boeing’s production process and requirement.

17.2 At the time of delivery, if Boeing and Customer mutually agree that the condition of an Aircraft requires borescope inspections, such inspection will be conducted in accordance with the relevant aircraft engine maintenance procedures.

18. Confidential Treatment.

Customer and Boeing understand and agree that the information contained in the Purchase Agreement represents confidential business information and has value precisely because it is not available generally or to other parties. The parties agree that they will to limit the disclosure of its contents except as required by applicable laws, regulations, to its employees and its professional advisers with a need to know the contents for purposes of helping perform its respective obligations under the Purchase Agreement and who are under an obligation not to disclose its contents to any other person or entity without the prior written consent of the parties hereto.

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Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

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	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-04676-LA-1704324

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Airworthiness Directive Cost Participation Program
Reference:	Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. It grants to Customer the Airworthiness Directive Cost Participation Program described herein (Program). All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

1. Scope.

This Program applies to any Boeing Product installed in the Aircraft at the time of delivery that is modified or replaced with Boeing-designed corrective materials to comply with terminating actions specified in FAA Airworthiness Directives when the defects are of the type covered by the material and workmanship or design warranties set forth in Part 2 of Exhibit C, Product Assurance Document, of the AGTA.

2. Term.

The term of the Program is [*CTR] after delivery of each Aircraft.

3. Boeing Participation.

3.1 Materials. If any corrective materials are required as described under paragraph 1 above during the term of this Program, Boeing will promptly furnish such materials to Customer (including Boeing-designed standard parts but excluding industry standard parts such as MS and NAS standards) at a price determined in accordance with the following formula:

[*CTR]

[*CTR]

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[*CTR] [*CTR]

[*CTR] [*CTR]

[*CTR] [*CTR]

3.2 Labor. Any labor reimbursement for [*CTR] of materials in the Aircraft that Boeing is required to provide to Customer pursuant to the provisions of paragraph 1 above, will be provided to Customer in an amount as determined by the following formula:

[*CTR] [*CTR]

[*CTR] [*CTR]

[*CTR] [*CTR]

[*CTR] [*CTR]

4. General Conditions and Limitations.

4.1 Customer’s written notice of claim under this Program must be received by Boeing’s Warranties Regional Manager within [*CTR] from the date of issuance of any applicable Airworthiness Directive.

4.2 THE DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES provisions stated in Article 11 of Part 2 of Exhibit C of the AGTA apply to this Program.

5. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

GUN-PA-04676-LA-1704324
Airworthiness Directive Cost Participation Program		Page 2
	BOEING PROPRIETARY

6. Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents, except for as required by applicable laws or regulations, to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

GUN-PA-04676-LA-1704324
Airworthiness Directive Cost Participation Program		Page 3
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04676-LA-1704324
Airworthiness Directive Cost Participation Program		Page 4
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-04676-LA-1704325

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Payment Matters
Reference:	Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

1. Advance Payments for the Aircraft – Due on the Effective Date of the Purchase Agreement.

It is understood that Customer’s ability to make advance payments described in Articles 4.2 and 4.3 of the Purchase Agreement may be impacted due to monetary issues. Therefore Boeing agrees all advance payments due on or before the effective date of the signing of the Purchase Agreement, as specified in Articles 4.2 and 4.3, may be deferred without interest until [*CTR] by which time Customer will pay all advance payments specified in the Purchase Agreement as being due on or before that date.

2. Other Scheduled Advance Payments.

As defined in Article 4.2 of the Purchase Agreement, advance payments are required for each Aircraft in the percentages and at the times shown in Table 1 of the Purchase Agreement. For all advance payments due to Boeing, Boeing will provide Customer with an invoice [*CTR] prior to the date the advance payment is due. This is done as an accommodation for Customer and does not relieve Customer from providing advance payments to Boeing at the times shown in Table 1 of the Purchase Agreement.

GUN-PA-04676-LA-1704325
Payment Matters		Page 1
	BOEING PROPRIETARY

3. Payment at Aircraft Delivery.

Pursuant to Article 4.4 of the Purchase Agreement, Customer will pay, or cause to be paid, the balance of the Aircraft Price of each Aircraft at delivery. Boeing will provide the invoice for such payment about [*CTR] days prior to Aircraft delivery.

4. Rescheduling of Aircraft.

Letter Agreement [*CTR] specifies the date by which government approval is to be obtained. After Customer obtains government approval and if Customer does not make all advance payments as specified in the Purchase Agreement, Boeing may reschedule any or all of the Aircraft at any time thereafter as it deems necessary based on Boeing’s production considerations and constraints. Boeing will give Customer [*CTR] advance notice of any such Aircraft rescheduling, and will not reschedule such Aircraft if advance payments on all Aircraft are current prior to the expiration of such [*CTR] notification period. Boeing will work with Customer in good faith to explore alternatives to such Aircraft rescheduling as may be available.

5. Effect of Aircraft Rescheduling.

If Boeing reschedules any or all of the Aircraft pursuant to the provisions of Paragraph 4 above, then Customer and Boeing will complete a Supplemental Agreement to document the revised Aircraft delivery schedules within [*CTR] advance notice is given.

6. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

7. Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents, except for as required by applicable laws or regulations, to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

GUN-PA-04676-LA-1704325
Payment Matters		Page 2
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04676-LA-1704325
Payment Matters		Page 3
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-04676-LA-1704326

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	AGTA Matters
Reference:	Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. AGTA Basic Articles.

1.1 Article 2.1.1, “Airframe Price,” of the basic articles of the AGTA is revised to read as follows: Airframe Price is defined as the price of the airframe for a specific model of aircraft described in a purchase agreement. (For Models 737-600, 737-700, 737-800, 737-900, 737-7, 737-8, 737-9, 737-10, 747-8, 777-200LR, and 777-300ER the Airframe Price includes the engine price at its basic thrust level.)

1.2 Article 2.1.3, “Engine Price” of the basic articles of the AGTA is revised to read as follows: Engine Price is defined as the price set by the engine manufacturer for a specific engine to be installed on the model of aircraft described in a purchase agreement (not applicable to Models 737-600, 737-700, 737-800, 737-900, 737-7, 737- 8, 737-9, 737-10, 747-8, 777-200LR and 777-300ER).

1.3 Article 2.1.5, “Escalation Adjustment” of the basic articles of the AGTA is revised to read as follows: Escalation Adjustment is defined as the price adjustment to the Airframe Price (which includes the basic engine price for Models 737-600, 737- 700 737-800, 737-900, 737-7, 737-8, 737-9, 737-10, 747-8, 777-200LR and 777- 300ER) and the Optional Features Prices resulting from the calculation using the economic price formula contained in the Airframe and Optional Features Escalation Adjustment supplemental exhibit to the applicable purchase agreement. The price adjustment to the Engine Price for all other models of aircraft will be calculated using the economic price formula in the Engine Escalation Adjustment supplemental exhibit to the applicable purchase agreement.

GUN-PA-04676-LA-1704326
AGTA Matters		Page 1
	BOEING PROPRIETARY

2. Appendices to the AGTA.

2.1 Appendix I, entitled “SAMPLE Insurance Certificate” the Combined Single Limit Bodily Injury and Property Damage: U.S. Dollars ($) any one occurrence each Aircraft (with aggregates as applicable) is added for the 737-7, 737-8, 737-9, 737-10, in the amount of [*CTR].

3. Exhibit C to the AGTA, “Product Assurance Document”.

3.1 Part 2, Article 3.1, subsection (i), of Exhibit C of the AGTA is revised to read as follows: for Boeing aircraft models 777F, 777-200, 777-300, 737-600, 737- 700, 737-800, 737-900, 737-7, 737-8, 737-9, 737-10, 787 or new aircraft models designed and manufactured with similar, new technology and for the model 747-8, the warranty period ends forty-eight (48) months after Delivery.

GUN-PA-04676-LA-1704326
AGTA Matters		Page 2
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04676-LA-1704326
AGTA Matters		Page 3
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

GUN-PA-04676-1704327

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Special Matters
Reference:	Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. Credit Memoranda. In consideration of Customer’s purchase of thirty (30) Aircraft, at the time of delivery of each such Aircraft, unless otherwise noted, Boeing will provide to Customer the following credit memoranda:

1.1 Basic Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer a basic credit memorandum (Basic Credit Memorandum) in an amount of [*CTR]

1.2 Customer Support Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer a customer support credit memorandum (Customer Support Credit Memorandum) in an amount of [*CTR].

1.3 Customer Loyalty Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer a customer loyalty credit memorandum (Customer Loyalty Credit Memorandum) in an amount of [*CTR]

1.4 737 MAX Incremental Purchase Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer a 737 MAX incremental purchase credit memorandum (737 MAX Incremental Purchase Credit Memorandum) in an amount of [*CTR]

GUN-PA-04676-LA-1704327
Special Matters		Page 1
	BOEING PROPRIETARY

1.5 Quantity Bonus Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer a quantity bonus credit memorandum (Quantity Bonus Credit Memorandum) in an amount of [*CTR]

1.6 MAX Support Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer a MAX support credit memorandum (MAX Support Credit Memorandum) in an amount of [*CTR]

1.7 Fleet Support Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer a fleet support credit memorandum (Fleet Support Credit Memorandum) in an amount of [*CTR]

1.8 Signing Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer a signing credit memorandum (Signing Credit Memorandum) in an amount of [*CTR]

1.9 Executive Closing Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer an Executive closing credit memorandum (Executive Closing Credit Memorandum) in an amount of [*CTR].

1.10 Promotional Support Credit Memorandum. At the time of delivery of each Aircraft, Boeing will issue to Customer a promotional support credit memorandum (Promotional Support Credit Memorandum) in the [*CTR]

1.11 Unless otherwise noted, the amounts of the credit memoranda set forth in paragraphs 1.1 to 1.9 above are stated in the [*CTR] base year dollars, as defined in Table 1, and will be escalated to the scheduled delivery month of the respective Aircraft pursuant to the airframe escalation formula set forth in the Purchase Agreement applicable to such Aircraft. In addition, unless otherwise noted, the credit memoranda set forth in paragraphs 1.1 to 1.10 above, may, at the election of Customer, be (i) applied against the Aircraft Price of the respective Aircraft at the time of delivery or (ii) used for the purchase of other Boeing goods and services (but will not be applied to advance payments).

2. Additional Business Considerations.

In further consideration of Customer’s purchase of the thirty (30) Aircraft in the proposal, Boeing will provide to Customer the following,

2.1 Boeing Fleet Growth Support Credit Memorandum. Boeing will issue to Customer a Boeing Fleet Growth support credit memorandum (Boeing Fleet Growth Support Credit Memorandum) in the [*CTR].

GUN-PA-04676-LA-1704327
Special Matters		Page 2
	BOEING PROPRIETARY

2.2 Program Support Credit Memorandum. Boeing will issue to Customer a Program Support credit memorandum (Program Support Credit Memorandum) in the [*CTR].

2.3 Configuration Support Credit Memorandum. Should Customer purchase the retrofit packages for 777-300ER and 787 aircraft as offered by Boeing, Boeing will issue to Customer a configuration support credit memorandum (Configuration Support Credit Memorandum) in the [*CTR] Customer [*CTR] Support Credit Memorandum is only available if Customer purchases the retrofit service package from Boeing.

2.4 Engineering Technical Goods and Services Credit Memorandum. Boeing will issue to Customer an engineering technical goods and services credit memorandum [*CTR]

2.5 Flight Training Support Goods and Services Credit Memorandum. Should Customer purchase a 737-MAX simulator date package from Boeing, Boeing will issue to Customer a flight training support goods and services credit memorandum (Flight Training Support Goods and Services Credit Memorandum) in the [*CTR].

2.6 Training Center Development Credit Memorandum. Boeing will issue to Customer a training center development credit memorandum (Training Center Development Credit Memorandum) in the [*CTR]

2.7 Unless otherwise noted, the amount of the credit memoranda set forth in paragraph 2.1 and 2.6 above [*CTR]. In addition, unless otherwise noted, the credit memoranda may, at the election of Customer, be (i) applied against the Aircraft Price at the time of delivery or (ii) used for the purchase of other Boeing goods and services (but may not be applied to advance payments) or (iii) be issued by wired transfer to the account provided by Customer. For the avoidance of doubt, goods and services credit memoranda many only be used for Boeing goods and services.

GUN-PA-04676-LA-1704327
Special Matters		Page 3
	BOEING PROPRIETARY

3. Assignment.

Unless otherwise noted herein, the Credit Memoranda described in this Letter Agreement are provided as a financial accommodation to Customer and in consideration of Customer taking title to the Aircraft at time of delivery and becoming the operator of the Aircraft. This Letter Agreement cannot be assigned, in whole or in part, without the prior written consent of Boeing.

4. Confidentiality.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing. In addition to any equitable relief that may be available to Boeing in the event of a breach of this clause, Boeing may rescind the Additional Business Considerations contained in paragraph 2 above, in the event of any unauthorized disclosure by Customer.

GUN-PA-04676-LA-1704327
Special Matters		Page 4
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By
Its
CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.
By
Its

GUN-PA-04676-LA-1704327
Special Matters		Page 5
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

GUN-PA-04676-LA-1704328

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Customer Support Matters
Reference:	Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) with China Southern Airlines Group Import and Export Trading Corp., Ltd. (Consenting Party) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. Customer Support Document.

AGTA Exhibit B, Part 1, Article 5.3 is modified to the following:

If the training is based at Boeing’s facility and the aircraft is damaged during such training, Boeing will make all necessary repairs to the aircraft as promptly as possible. Customer will pay Boeing’s reasonable charge, including the price of parts and materials, for making the repairs. If Boeing’s estimated labor charge for the repair exceeds [*CTR]. Boeing and Customer will enter into an agreement for additional services before beginning the repair work. For the avoidance of doubt, any training using an aircraft will occur only after delivery and will be at the request of Customer.

2. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

3. Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents, except for as required by applicable laws or regulations, to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

GUN-PA-04676-LA-1704328
Customer Support Matters		Page 1
	BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact

CHINA SOUTHERN AIRLINES COMPANY LIMITED

By

Its

CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.

By

Its

GUN-PA-04676-LA-1704328
Customer Support Matters		Page 2
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

GUN-PA-04676-LA-1706289

China Southern Airlines Company Limited

No. 278, Jichang Road,

Baiyun District, Guangzhou,

People’s Republic of China, 510406

Subject:	Miscellaneous Matters
Reference:	Purchase Agreement No. PA-04676 (Purchase Agreement) between The Boeing Company (Boeing) and China Southern Airlines Company Limited (Customer) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. Supplier Selection and Features.

Notwithstanding that the supplier selection dates as shown in the BFE1 Exhibit are complete, Boeing and Customer acknowledge that Customer is entitled to changes with regards to supplier, configuration and/or features. Such changes are subsequently subject to price and offerability by the 737 Program.

2. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned, in whole or in part, without the prior written consent of Boeing.

3. Confidentiality.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

If the foregoing correctly sets forth your understanding of our agreement with respect to the matters contained herein, please indicate your acceptance and approval below.

	Page 1
BOEING PROPRIETARY

Very truly yours,

AGREED AND ACCEPTED this

Date

THE BOEING COMPANY
By
Its	Attorney-In-Fact

ACCEPTED AND AGREED TO this

Date:

CHINA SOUTHERN AIRLINES COMPANY LIMITED

By

Its

CHINA SOUTHERN AIRLINES GROUP IMPORT AND EXPORT TRADING CORP., LTD.

By

Its

GUN-PA-04676-LA-1706289
Miscellaneous Matters		Page 2
	BOEING PROPRIETARY

EX-4.48

Exhibit 4.48

PROPERTY MANAGEMENT FRAMEWORK AGREEMENT

This Agreement is made on 19 December 2017 in Guangzhou by and between:

Party A: China Southern Airlines Company Limited

Address: No. 278, Ji Chang Road, Guangzhou

Legal Representative: Wang Chang Shun (王昌顺)

Party B: China Southern Airlines Group Property Management Company Limited

Address: 2/F, Building 4, Guangzhou Baiyun International Airport, Baiyun District, Guangzhou

Legal Representative: Guo Bing Hua (郭炳华)

In order to achieve optimal allocation of resources, fully use the management advantages of Party B and improve the economic benefits, Party A entrusts Party B to conduct property management and take charge of related repair matters. Both parties have reached a framework agreement as follows through friendly consultations in this regard:

1 Representations and Warranties

1. Party A, an enterprise incorporated in China, is validly existing and in good standing. It has obtained its business licenses with the industry and commerce administration department according to relevant laws and regulations of China. Meanwhile, it fulfills its annual inspection obligations as required.

2. Party B, an enterprise incorporated in China, is validly existing and in good standing. It has obtained its business licenses with the industry and commerce administration department and administrative department according to relevant laws and regulations of China. Meanwhile, it fulfills its annual inspection obligations as required. It has management abilities, and management and service personnel required by the industry.

2 Property Management

In order to ensure the facilities and properties of Party A located in the production, office and living areas in and near Guangzhou Old Baiyun Airport or New Baiyun Airport are in good condition, Party A entrusts Party B to manage and repair such facilities and properties leased by Party A located in the Southern Airlines bases and the terminals of Guangzhou New Baiyun Airport, to effectively monitor and manage the operation and maintenance of 110kV Southern Airlines substation in theNew Baiyun Airport, to manage and maintain the operation of high and low voltage substation and distribution equipment of Guangzhou Cargo Station, and to collect electricity fees on Party A’s behalf. In these regards, both parties will enter into specific entrustment management agreements upon mutual agreements. Party B undertakes to Party A that its price (or charge standards) will not higher than the price (or charge standards) of any independent third parties in the industry.

3 Rights and Obligations of Both Parties

(1) Rights and Obligations of Party A

1. Party A shall pay management fees in accordance with the property management agreements.

2. Party A shall be entitled to monitor, assess and give guidance or opinions with regard to Party B’s management and repair service.

(2) Rights and Obligations of Party B

1. Party B shall collect management fees in accordance with the property management agreements.

2. Party B shall accept the supervision and assessment by Party A.

3. Party B shall manage Party A’s properties with all its heart, staff qualified property management personnel and ensure to complete all work as scheduled with high quality.

4 Annual Cap of Transaction

Both parties of this Agreement have agreed mutually that the annual cap of this Agreement shall be RMB155 million.

5 Force Majeure

1. In the case of failure to perform this Agreement due to any force majeure, neither party shall be liable for such failure, and this Agreement shall be terminated automatically. In the case of failure to perform any part of this Agreement due to any force majeure, the party suffering from such force majeure may be exempted from corresponding liability to the extent of the impact of such force majeure. However, such party shall continue to perform other obligations under this Agreement which have not been affected by such force majeure. If such force majeure occurs after such party delays to perform this Agreement, it shall not be exempted from its corresponding liabilities.

Force Majeure may refer to an unforeseeable, unavoidable and unconquered objective situation, including but not limited to war, plague, strike, earthquake, flood, etc.

2. Any party failing to perform this Agreement due to any force majeure shall notice the other party within forty eight (48) hours so as to reduce the possible loss caused to the other party and provide the proof of such force majeure within fifteen (15) working days. If it fails to perform its such obligations within the required time for rational reasons, such required time may be extended according to the actual conditions.

6 Resolution of Disputes

Any dispute arising from or in connection with the signing or performance of this Agreement, both parties shall first make efforts to solve it through friendly consultations. If no agreements have reached, any party may bring a suit before a competent people’s court.

7 Other Matters

(1) This Agreement shall be effective for three years from 1 January 2018 to 31 December 2020.

(2) Both parties may enter into any separate supplementary agreement as to any matter not covered in this Agreement. Such supplementary agreement shall have the equal legal effect as this Agreement. The performance of this Agreement shall be strictly in line with the relevant laws and regulations of the People’s Republic of China and meet the requirements of the related laws and regulations of the listing place of Party A and the listing rules thereof.

(3) This Agreement was made in two copies, with each party holding one copy. Each copy shall have the equal legal binding effect.

Party A:	Party B:
Authorized representative:	Authorized representative:

EX-4.49

Exhibit 4.49

PURCHASE AGREEMENT NUMBER PA-03807

between

THE BOEING COMPANY

and

XIAMEN AIRLINES

Relating to Boeing Model 737 MAX Aircraft

SA-3

BOEING PROPRIETARY

Supplemental Agreement No. 3

to

Purchase Agreement No. PA-03807

between

The Boeing Company

and

Xiamen Airlines

Relating to Boeing Model 737 MAX Aircraft

THIS SUPPLEMENTAL AGREEMENT (Supplemental Agreement) is entered into by and between The Boeing Company (Boeing) and Xiamen Airlines (Customer);

Customer and Boeing entered into Purchase Agreement No. PA-03807 dated December 17, 2015, as amended, and supplemented, (Purchase Agreement) relating to the purchase and sale of Boeing Model 737 MAX aircraft (the Aircraft); and this Supplemental Agreement is an amendment to and is incorporated into the Purchase Agreement:

WHEREAS, Boeing and Customer have agreed to add twenty (20) Model 737-8 and ten (10) 737-10 aircraft to the Purchase Agreement.

NOW, THEREFORE, the parties agree that the Purchase Agreement is amended as set forth below and otherwise agree as follows:

1. The Table of Contents of the Purchase Agreement is hereby deleted in its entirety and is replaced by the new Table of Contents attached as Exhibit 1 to this Supplemental Agreement;

2. The Articles are deleted and new Articles are provided to reflect the addition of Model 737-10 aircraft and are attached as Exhibit 2 to this Supplemental Agreement;

3. Table 1B entitled “Aircraft Information Table – 2015$” and Table 1C entitled “Aircraft Information Table – 737-10” are hereby added and attached as Exhibits 3 and 4 to this Supplemental Agreement;

4. Exhibit A2, entitled “Aircraft Configuration – 737-8 2015$,” is hereby added attached as Exhibit 5 to this Supplemental Agreement;

5. Exhibit A3, entitled “Aircraft Configuration – 737-10 Aircraft,” is hereby added, attached as Exhibit 6 to this Supplemental Agreement;

6. Exhibit B, entitled “Aircraft Delivery Requirements and Responsibilities,” is hereby revised to change 737-8 to 737-MAX and is attached as Exhibit 7 to this Supplemental Agreement;

P.A. No. PA-03807		SA-3
		Page 1
	BOEING PROPRIETARY

7. Exhibits AE1, EE1 and SLP1 are hereby revised to incorporate the new model aircraft being added by this Supplemental Agreement and are attached as Exhibits 8, 9 and 10 to this Supplemental Agreement;

8. Exhibits BFE2 and BFE3 are hereby added to reflect the BFE dates for Table 1B 737-8 and 1C 737-10 Aircraft respectively. Exhibits BFE2 and BFE3 are attached as Exhibits 11 and 12 to this Supplemental Agreement;

9. Exhibit CS2 is hereby added for the Table 1C 737-10 model Aircraft and is attached as Exhibit 13 to this Supplemental Agreement;

10. Letter Agreement LA-1301950, entitled “AGTA Matters for 737-7, 737-8, 737-9 and 737-10 Aircraft” is deleted and replaced by Letter Agreement LA-1301950R1 attached as Exhibit 14 to this Supplemental Agreement.

11. Letter Agreement LA-1704707, entitled “Performance Guarantees – Table 1B 737-8 Aircraft” is hereby added and attached as Exhibit 15 to this Supplemental Agreement;

12. Letter Agreement LA-1704708, entitled “Performance Guarantee Remedies Table 1B 737-8 Aircraft” is hereby added and attached as Exhibit 16 to this Supplemental Agreement;

13. Letter Agreement LA-1704709, entitled “Performance Guarantees – Table 1C 737-10 Aircraft” is hereby added and attached as Exhibit 17 to this Supplemental Agreement;

14. Letter Agreement LA-1704710, entitled “Performance Guarantee Remedies – Table 1C 737-10 Aircraft” is hereby added and attached as Exhibit 18 to this Supplemental Agreement

15. Letter Agreement LA-1704711, entitled “Special Escalation Program – Table 1B 737-8 and 1C 737-10 Aircraft” is hereby added and attached as Exhibit 19 to this Supplemental Agreement;

16. Letter Agreement LA-1704712, entitled “Special Matters – Table 1B 737-8 and 1C 737-10 Aircraft” is hereby added and attached as Exhibit 20 to this Supplemental Agreement;

17. Letter Agreement LA-1704713, entitled “Open Configuration Matters—Table 1C 737-10 Model Aircraft” is hereby added and attached as Exhibit 21 to this Supplemental Agreement;

18. Letter Agreement LA-1705506, entitled “Aircraft Model Substitution – Table 1B 737-8 Aircraft” is hereby added and attached as Exhibit 22 to this Supplemental Agreement;

P.A. No. PA-03807		SA-3
		Page 2
	BOEING PROPRIETARY

19. Letter Agreement LA-1705511, entitled “Liquidated Damages Non-Excusable Delay – Table 1B 737-8 and Table 1C 737-10 Aircraft” is hereby added and attached as Exhibit 23 to this Supplemental Agreement;

20. Letter Agreement LA-1705512, entitled “Promotional Support – Table 1C 737-

10 Aircraft” is hereby added and attached as Exhibit 24 to this Supplemental Agreement;

21. Letter Agreement LA-1705513, entitled “Aircraft Model Substitution – Table 1C Model 737-10 Aircraft” is hereby added and attached as Exhibit 25 to this Supplemental Agreement;

22. Letter Agreement LA-1705514, entitled “Delivery Fuel Mileage Verification—Table 1C 737-10 Aircraft” is hereby added and attached as Exhibit 26 to this Supplemental Agreement;

23. Letter Agreement LA-1705515, entitled “Government Approval Matters – Table 1B and 1C Aircraft” is hereby added and attached as Exhibit 27 to this Supplemental Agreement;

24. Letter Agreement LA-1705516, entitled “Payment Matters – Table 1B 737-8 and 1C 737-10 Aircraft” is hereby added and attached as Exhibit 28 to this Supplemental Agreement;

25. Letter Agreement LA-1705517, entitled “Purchase Right Aircraft” is hereby added and attached as Exhibit 29 to this Supplemental Agreement;

27. Letter Agreement LA-1705518, entitled “Miscellaneous Matters – Table 1B and 1C Aircraft” is hereby added and attached as Exhibit 30 to this Supplemental Agreement;

28. Letter Agreement LA-1707602, entitled “Promotional Support – Table 1B Aircraft” is hereby added and attached as Exhibit 31 to this Supplemental Agreement

29. Miscellaneous.

29.1 The Purchase Agreement is amended as set forth above, and all other terms and conditions of the Purchase Agreement remain unchanged and are in full force and effect. Any Tables of Contents, Tables, Supplemental Exhibits, Letter Agreements or other documents that are listed in the Sections above are incorporated into this Supplemental Agreement by this reference.

29.2 This Supplemental Agreement will become effective upon execution and receipt by both Parties.

P.A. No. PA-03807		SA-3
		Page 3
	BOEING PROPRIETARY

EXECUTED as of                                                                                                                           , 20 .
XIAMEN AIRLINES	THE BOEING COMPANY
By:	By:
Name:	Name:
Title:	Title:	Attorney-in-fact

P.A. No. PA-03807		SA-3
		Page 4
	BOEING PROPRIETARY

TABLE OF CONTENTS
ARTICLES
Article 1.	Quantity, Model and Description	SA-3
Article 2.	Delivery Schedule	SA-3
Article 3.	Price	SA-3
Article 4.	Payment	SA-3
Article 5.	Additional Terms	SA-3
TABLE
1A.	Aircraft Information Table – 2012$	SA-2
1B.	Aircraft Information Table – 2015$	SA-3
1C	Aircraft Information Table – 737-10	SA-3
EXHIBIT
A-1.	Aircraft Configuration—737-8 2012$	SA-2
A-2	Aircraft Configuration – 737-8 2015$	SA-3
A-3	Aircraft Configuration – 737-10	SA-3
B.	Aircraft Delivery Requirements and Responsibilities	SA-3
SUPPLEMENTAL EXHIBITS
AE1.	Escalation Adjustment/Airframe and Optional Features	SA-3
BFE1.	BFE Variables Table 1A Aircraft
BFE2.	BFE Variables Table 1B Aircraft	SA-3
BFE3.	BFE Variables Table 1C Aircraft	SA-3
CS1.	Customer Support Variables
CS2	Customer Support Variables – Table 1C 737-10	SA-3
EE1.	Engine Escalation, Engine Warranty and Patent Indemnity	SA-3
SLP1.	Service Life Policy Components	SA-3

XIA-PA-03807		SA-3
		Page 2
	BOEING PROPRIETARY

LETTER AGREEMENTS
XIA-PA-03807-LA-1301950R1	AGTA Matters for 737-7, 737-8, 737-9 and 737-10 Aircraft	SA-3
XIA-PA-03807-LA-1301951R1	Open Matters	SA-2
XIA-PA-03807-LA-1301952	Boeing BFE Purchase
XIA-PA-03807-LA-1301953	Government Approval Matters
XIA-PA-03807-LA-1301954	Liquidated Damages Non-Excusable Delay
XIA-PA-03807-LA-1301955	Loading of Customer Software
XIA-PA-03807-LA-1301956	Volume Agreement	SA-1
XIA-PA-03807-LA-1301957	Promotional Support
XIA-PA-03807-LA-1301958	Seller Purchased Equipment
XIA-PA-03807-LA-1301959	Spare Parts Initial Provisioning
XIA-PA-03807-LA-1301960R1	Special Matters	SA-1
XIA-PA-03807-LA-1301961	Payment Matters
XIA-PA-03807-LA-1301962	Performance Guarantees
XIA-PA-03807-LA-1301963	Performance Guarantee Remedies
XIA-PA-03807-LA-1301964	Delivery Flight Fuel Mileage Verification
XIA-PA-03807-LA-1301965	Aircraft Model Substitution
XIA-PA-03807-LA-1301966	Clarifications and Understandings
XIA-PA-03807-LA-1301967	Purchase Rights
XIA-PA-03807-LA-1301968R1	Special Escalation Program	SA-1
XIA-PA-03807-LA-1301969	Training and Services Matters
XIA-PA-03807-LA-1704707	Performance Guarantees – Table 1B 737-8 Aircraft	SA-3
XIA-PA-03807-LA-1704708	Performance Guarantee Remedies—Table 1B 737-8 Aircraft	SA-3
XIA-PA-03807-LA-1704709	Performance Guarantees – Table 1C 737- 10 Aircraft	SA-3
XIA-PA-03807-LA-1704710	Performance Guarantee Remedies – Table 1C 737-10 Aircraft	SA-3
XIA-PA-03807-LA-1704711	Special Escalation Program – Table 1B 737-8 and 1C 737-10 Aircraft	SA-3
XIA-PA-03807-LA-1704712	Special Matters – Table 1B 737-8 and 1C 737-10 Aircraft	SA-3
XIA-PA-03807-LA-1704713	Open Configuration Matters – Table 1C 737-10 Model Aircraft	SA-3

XIA-PA-03807		SA-3
		Page 3
	BOEING PROPRIETARY

XIA-PA-03807-LA-1705506	Aircraft Model Substitution—Table 1B 737- 8 Aircraft	SA-3
XIA-PA-03807-LA-1705511	Liquidated Damages Non-Excusable Delay – Table 1B 737-8 and Table 1C 737-10 Aircraft	SA-3
XIA-PA-03807-LA-1705512	Promotional Support – Table 1C 737-10 Aircraft	SA-3
XIA-PA-03807-LA-1705513	Aircraft Model Substitution – Table 1C 737- 10 Aircraft	SA-3
XIA-PA-03807-LA-1705514	Delivery Fuel Mileage Verification – Table 1C 737-10 Aircraft	SA-3
XIA-PA-03807-LA-1705515	Government Approval Matters – Table 1B and 1C Aircraft	SA-3
XIA-PA-03807-LA-1705516	Payment Matters – Table 1B 737-8 and 1C 737-10 Aircraft	SA-3
XIA-PA-03807-LA-1705517	Purchase Right Aircraft	SA-3
XIA-PA-03807-LA-1705518	Miscellaneous Matters – Table 1B and 1C Aircraft	SA-3
XIA-PA-03807-LA-1707602	Promotional Support – Table 1B Aircraft	SA-3

XIA-PA-03807		SA-3
		Page 4
	BOEING PROPRIETARY

Purchase Agreement No. PA-03807

between

THE BOEING COMPANY

and

XIAMEN AIRLINES

This Purchase Agreement No. PA-03807 between The Boeing Company, a Delaware corporation, (Boeing) and Xiamen Airlines, a Chinese corporation, (Customer) relating to the purchase and sale of Model 737 MAX aircraft together with all tables, exhibits, supplemental exhibits, letter agreements and other attachments thereto, if any, (Purchase Agreement) incorporates the terms and conditions (except as specifically set forth below) of the Aircraft General Terms Agreement dated as of November 10, 2003 between the parties, identified as AGTA-XIA (AGTA).

1. Quantity, Model and Description.

The aircraft to be delivered to Customer will be designated as Model 737 MAX aircraft (Aircraft). Boeing will manufacture and sell to Customer Aircraft conforming to the configuration described in the relevant Exhibit A in the quantities listed in the corresponding Table 1 to the Purchase Agreement.

2. Delivery Schedule.

2.1 The scheduled months of delivery of the Aircraft are listed in the attached Table 1. Exhibit B describes certain responsibilities for both Customer and Boeing in order to accomplish the delivery of the Aircraft.

2.2 The scheduled months of delivery of the Aircraft incorporated in to the Purchase Agreement by Supplemental Agreement No. 3 are listed in the attached Tables 1B and 1C. The scheduled delivery month for any Supplemental Agreement No. 3 Aircraft may be [*CTR] then only those obligations to be performed under the Purchase Agreement after the [*CTR]. Exhibit B describes certain responsibilities for both Customer and Boeing in order to accomplish the delivery of the Aircraft.

3. Price.

3.1 Aircraft Basic Price. The Aircraft Basic Price is listed in Table 1 and is subject to escalation in accordance with the terms of this Purchase Agreement.

3.2 Advance Payment Base Prices. The Advance Payment Base Prices listed in Table 1 were calculated using the 737-8 [*CTR]

XIA-PA-03807		SA-3
		Page 1
	BOEING PROPRIETARY

[*CTR]

4. Payment.

4.1 Boeing acknowledges receipt of a deposit in the amount shown in Table 1 for each Aircraft (Deposit).

4.2 The standard advance payment schedule for the Model 737-7/-8/-9/-10 aircraft requires Customer to make certain advance payments, expressed in a percentage of the Advance Payment Base Price of each Aircraft beginning with a [*CTR], on the effective date of the Purchase Agreement for the Aircraft. Additional advance payments for each Aircraft are due as specified in and on the first (1^st) business day of the months listed in the attached Table 1.

4.3 For any Aircraft whose scheduled month of delivery is less [*CTR] after the date of this Purchase Agreement, the total amount of advance payments due for payment upon signing of this Purchase Agreement will include all advance payments which are past due in accordance with the standard advance payment schedule set forth in paragraph 4.2 above.

4.4 Customer will pay the balance of the Aircraft Price of each Aircraft at delivery.

5. Additional Terms.

5.1 Aircraft Information Table. Table 1 consolidates information contained in Articles 1, 2, 3 and 4 with respect to (i) quantity of Aircraft, (ii) applicable Detail or Configuration Specification, (iii) month and year of scheduled deliveries, (iv) Aircraft Basic Price, (v) applicable escalation factors and (vi) Advance Payment Base Prices and advance payments and their schedules.

5.2 Escalation Adjustment/Airframe and Optional Features. Supplemental Exhibit AE1 contains the applicable airframe and optional features escalation formula.

5.3 Buyer Furnished Equipment Variables. Supplemental Exhibit BFE1 contains supplier selection dates, on dock dates and other variables applicable to the Aircraft.

5.4 Customer Support Variables. Information, training, services and other things furnished by Boeing in support of introduction of the Aircraft into Customer’s fleet are described in Supplemental Exhibit CS1. The level of support to be provided under Supplemental Exhibit CS1 ( Entitlements) assumes that at the time of delivery of Customer’s first (1^st) Aircraft under the Purchase Agreement, Customer has not taken possession of a 737-7, 737-8, 737-9 or 737-10 aircraft whether such 737-7, 737-8, 737-9 or 737-10 aircraft was purchased, leased or otherwise obtained by Customer from Boeing or another party. If prior to the delivery of Customer’s first (1^st) Aircraft, Customer has taken possession of a 737-7, 737-8, 737-9 or 737-10 aircraft, Boeing will revise the Entitlements to reflect the level of support normally provided by Boeing to operators already operating such aircraft. Under no circumstances under the Purchase Agreement or any other agreement will Boeing provide the Entitlements more than once to support Customer’s operation of 737-7, 737-8, 737-9 or 737-10 aircraft.

XIA-PA-03807		SA-3
		Page 2
	BOEING PROPRIETARY

5.5 Engine Escalation Variables. Supplemental Exhibit EE1 describes the applicable engine escalation formula and contains the engine warranty and the engine patent indemnity for the Aircraft.

5.6 Service Life Policy Component Variables. Supplemental Exhibit SLP1 lists the SLP Components covered by the Service Life Policy for the Aircraft.

5.7 Public Announcement. Boeing reserves the right to make a public announcement regarding Customer’s purchase of the Aircraft upon approval of Boeing’s press release by Customer’s public relations department or other authorized representative.

5.8 Negotiated Agreement; Entire Agreement. This Purchase Agreement, including the provisions of Article 8.2 of the AGTA relating to insurance, and Article 11 of Part 2 of Exhibit C of the AGTA relating to DISCLAIMER AND RELEASE and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES, has been the subject of discussion and negotiation and is understood by the parties; the Aircraft Price and other agreements of the parties stated in this Purchase Agreement were arrived at in consideration of such provisions. This Purchase Agreement, including the AGTA, contains the entire agreement between the parties and supersedes all previous proposals, understandings, commitments or representations whatsoever, oral or written, and may be changed only in writing signed by authorized representatives of the parties.

XIA-PA-03807		SA-3
		Page 3
	BOEING PROPRIETARY

AGREED AND ACCEPTED this
Date
THE BOEING COMPANY	XIAMEN AIRLINES
Signature	Signature
Printed name	Printed name
Attorney-in-Fact
Title	Title

XIA-PA-03807		SA-3
		Page 4
	BOEING PROPRIETARY

Table 1B To

Purchase Agreement No. PA-03807

Aircraft Delivery, Description, Price and Advance Payments

Airframe Model/MTOW:	737-8	[*CTR]	Detail Specification:	D019A008-N (6/10/2016)
Engine Model/Thrust:	CFMLEAP-1B27	[*CTR]	Airframe Price Base Year/Escalation Formula:	[*CTR]		[*CTR]
Airframe Price:		[*CTR]	Engine Price Base Year/Escalation Formula:
Optional Features:		[*CTR]
Sub-Total of Airframe and Features:		[*CTR]	Airframe Escalation Data:
Engine Price (Per Aircraft):		[*CTR]	Base Year Index (ECI):		[*CTR]
Aircraft Basic Price (Excluding BFE/SPE):		[*CTR]	Base Year Index (ICI):		[*CTR]
Buyer Furnished Equipment (BFE) Estimate:		$0
Seller Purchased Equipment (SPE)/In-Flight En		[*CTR]
Deposit per Aircraft:		$0

		Escalation Estimate	Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
Delivery	Number of	Adv Payment Base	At Signing	24 Mos.	21/18/15/12 Mos.	Total
Date	Aircraft	Price Per A/P	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jul-2019	2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Oct-2019	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Dec-2019	2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jan-2020	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jun-2020	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jul-2020	3	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Sep-2020	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Oct-2020	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jul-2021	2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Aug-2021	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Oct-2021	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Nov-2021	2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Dec-2021	2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Total:	20	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]

XIA-PA-03807 107411-1F.txt		SA-3
		Page 1
	Boeing Proprietary

Table 1C To

Purchase Agreement No. PA-03807

Aircraft Delivery, Description, Price and Advance Payments

Airframe Model/MTOW:	737-10	[*CTR]	Detail Specification:	D019A008-O (9/30/2016)
Engine Model/Thrust:	CFMLEAP-1B27	[*CTR]	Airframe Price Base Year/Escalation Formula:	[*CTR]		[*CTR]
Airframe Price:		[*CTR]	Engine Price Base Year/Escalation Formula:
Optional Features:		[*CTR]
Sub-Total of Airframe and Features:		[*CTR]	Airframe Escalation Data:
Engine Price (Per Aircraft):		[*CTR]	Base Year Index (ECI):		[*CTR]
Aircraft Basic Price (Excluding BFE/SPE):		[*CTR]	Base Year Index (ICI):		[*CTR]
Buyer Furnished Equipment (BFE) Estimate:		[*CTR]
//Seller Purchased Equipment (SPE)/In-Flight E		[*CTR]
Deposit per Aircraft:		[*CTR]

		Escalation Estimate	Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
Delivery	Number of	Adv Payment Base	At Signing	24 Mos.	21/18/15/12 Mos.	Total
Date	Aircraft	Price Per A/P	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jun-2021	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jul-2021	2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Sep-2021	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Oct-2021	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Nov-2021	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Dec-2021	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jan-2022	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Feb-2022	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Mar-2022	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Total:	10	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]

XIA-PA-03807 105224-1F.txt		SA-3
		Page 1
	Boeing Proprietary

AIRCRAFT CONFIGURATION

between

THE BOEING COMPANY

and

XIAMEN AIRLINES

Exhibit A-2 to Purchase Agreement Number PA-03807

XIA-PA-03807		SA-3
Exhibit A-2		Page 1
	BOEING PROPRIETARY

Exhibit A-2

AIRCRAFT CONFIGURATION

relating to

BOEING MODEL 737-8 Table 1B AIRCRAFT

The Detail Specification is Boeing document number D019A008-n (6/10/2016). The Detail Specification provides further description of Customer’s configuration set forth in this Exhibit A-2. Such Detail Specification will be comprised of Customer’s existing Boeing detail specification as amended to incorporate the optional features (Options) listed below, including the effects on Manufacturer’s Empty Weight (MEW) and Operating Empty Weight (OEW). As soon as practicable, Boeing will furnish to Customer copies of the Detail Specification, which copies will reflect such Options. The Aircraft Basic Price reflects and includes all effects of such Options, except such Aircraft Basic Price does not include the price effects of any Buyer Furnished Equipment or Seller Purchased Equipment.

XIA-PA-03807		SA-3
Exhibit A-2		Page 2
	BOEING PROPRIETARY

Exhbit A2 737-8 [*CTR]                                    Boeing Proprietary

Exhibit A2 To

Boeing Purchase Agreement

Customer Log:	XIA18WEXHA-15FO
Customer:	XIA-Xiamen Airlines
Model:	737-8
Base Date:	[*CTR]
Qty of A/C:	20

CR	Title	Price
0110-000030	MAJOR MODEL 737 AIRPLANE	[*CTR]
0110E131A08	MINOR MODEL 737-8 AIRPLANE	[*CTR]
0170B401A73	CLIMATE - NORMAL WEATHER OPERATIONS	[*CTR]
0170B871A31	GALLEY AFT COMPLEX - G4B GALLEY - DOMED AFT BULKHEAD (BASELINE)	[*CTR]
0170D387A08	AVIONICS - DUAL FMC WITH MULTI-CONTROL DISPLAY UNIT	[*CTR]
0170D837A13	FLEXIBLE CERTIFICATION	[*CTR]
0170E173B00	FLIGHT DECK - TWO OBSERVERS	[*CTR]
0170E516A14	COMMUNICATIONS - BASIC COMMUNICATIONS CONFIGURATION WITH HF	[*CTR]
0170E526A94	LAVATORY AFT COMPLEX - TWO ADVANCED LAVATORIES WITH TWO DOUBLE ATTENDANT SEATS	[*CTR]
0170E656A04	AIRFRAME - 737-8	[*CTR]
0170E716B30	FORWARD COMPLEX - ADVANCED LAVATORY WITH MAXIMUM GALLEY CAPACITY - BOEING SKY INTERIOR	[*CTR]
0170E806A23	CARGO LINERS- HEAVY DUTY - FORWARD	[*CTR]
0170E806A26	CARGO LINERS- HEAVY DUTY- AFT	[*CTR]
0220E461K41	TYPE CERTIFICATE & CERTIFICATE OF AIRWORTHINESS	[*CTR]
0221A609B52	DISPATCH WITH GEAR EXTENDED FOR REVENUE FLIGHT	[*CTR]
0221E173A41	LANDING PERFORMANCE IMPROVEMENT- SKID RESISTANT RUNWAYS	[*CTR]
0224E173A42	EXTENDED OPERATIONS (ETOPS)	[*CTR]
0226C594A32	GNSS LANDING SYSTEM (GLS) - CATEGORY I APPROACH CAPABILITY - ACTIVATION	[*CTR]
0228E437F53	AIRPLANE FLIGHT MANUAL	[*CTR]
0252B299A36	INSTRUMENTATION, AIRPLANE MANUALS AND FUEL MEASURING STICKS IN METRIC UNITS - TEMPERATURE IN DEGREES CELSIUS	[*CTR]
0254-000003	USPHS CERTIFICATE OF SANITARY CONSTRUCTION	[*CTR]
0315E461K42	CERTIFIED OPERATIONAL WEIGHTS AND STRUCTURAL DESIGN WEIGHTS	[*CTR]
0352-000002	CUSTOMIZED LOADING SCHEDULE FOR WEIGHT & BALANCE CONTROL - ALIGNMENT CHART LOADING	[*CTR]
1110F001A30	EXTERIOR NON-REGULATORY MARKINGS	[*CTR]
1110F001A31	EXTERIOR REGULATORY MARKINGS AND COLOR SCHEME	[*CT9R]

PA No. 3807		SA-3
	Boeing Proprietary	Page: 1 of 9

Exhbit A2 737-8 [*CTR]                                    Boeing Proprietary

1130A397A08	CAAC BILINGUAL PLACARD INSTALLATION - CARGO COMPARTMENT	[*CTR]
1130E364N95	CARGO COMPARTMENT PLACARDS	[*CTR]
1130E364N96	LIGHTED SIGNS	[*CTR]
1130E388079	INTERIOR PLACARDS AND MARKERS	[*CTR]
1130F001A32	REGISTRY PLACARD	[*CTR]
2103D839A04	AC HEAT EXCHANGER OUTLET TEMPERATURE MONITORING SENSOR - INSTALLATION	[*CTR]
2130-000010	600 FPM CABIN PRESSURE ASCENT RATE	[*CTR]
2130-000012	350 FPM CABIN PRESSURE DESCENT RATE	[*CTR]
2158D839A20	ELECTRONIC RACK COOLING SYSTEM - ENHANCED E6 RACK	[*CTR]
2160C703A76	CABIN TEMPERATURE CONTROL SYSTEM WITH ATTENDANT PANEL ADJUSTMENT CAPABILITY - 737 BOEING SKY INTERIOR	[*CTR]
2170-000021	OZONE CONTROL - SPACE PROVISIONS FOR CATALYTIC CONVERTERS	[*CTR]
2210-000003	AUTOFLIGHT - INHIBIT GLIDE SLOPE CAPTURE PRIOR TO LOCALIZER CAPTURE	[*CTR]
2210-000123	AUTOFLIGHT - FLIGHT DIRECTOR TAKEOFF MODE WINGS LEVEL	[*CTR]
2210-000128	AUTOFLIGHT - CONTROL WHEEL STEERING WARNING	[*CTR]
2210-000130	AUTOFLIGHT - AIRSPEED DEVIATION WARNING	[*CTR]
2210-000142	AUTOFLIGHT - ALTITUDE ALERT - 300/900 FEET	[*CTR]
2210C175A38	AUTOFLIGHT - GO-AROUND ROLL MODE - LNAV	[*CTR]
2230-000137	AUTOTHROTTLE - FMCS - TAKEOFF PROFILE THRUST REDUCTION ALTITUDE	[*CTR]
2310B401A33	COMMUNICATIONS CONTROL PANELS - TRIPLE GABLES RADIO TUNING PANELS CAPABLE OF TWO HF SYSTEMS AND THREE VHF SYSTEMS (8.33 KHZ CAPABLE) - P/N G7404-124 - BFE/SPE	[*CTR]
2311B401A39	HF COMMUNICATIONS - EQUIPMENT INSTALLATION OF DUAL ROCKWELL HF VOICE/DATA TRANSCEIVERS - P/N 822-0990-004 AND DIGITAL HF COUPLERS - P/N 822-0987- 004 BFE/SPE	[*CTR]
2312-000703	VHF COMMUNICATIONS - ACTIVATION OF 8.33 KHZ CHANNEL SPACING	[*CTR]
2312A639A46	VHF COMMUNICATIONS - ACTIVATION OF KEYLINE TIMER	[*CTR]
2312B401A87	VHF COMMUNICATIONS - EQUIPMENT INSTALLATION OF TRIPLE ROCKWELL COLLINS ARINC 750 VHF-2100 TRANSCEIVERS WITH 8.33 KHZ CHANNEL SPACING, VDL MODE 2, AND CMC INTERFACE CAPABILITY - P/N 822-1287- 101 - BFE/SPE	[*CTR]
2315D486A17	SATCOM - SYSTEM INSTALLATION - IRIDIUM SATCOM AVIONICS EQUIPMENT ICS-300 - ROCKWELL COLLINS - BFE/SPE	[*CTR]
2321-000050	SELCAL - AVTECH FIVE CHANNEL DECODER - P/N 1200008- 000 - BFE/SPE	[*CTR]
2321-000063	SELCAL - ANNUNCIATION ON AUDIO SELECTOR PANELS	[*CTR]
2322C939A06	COMMUNICATIONS MANAGEMENT UNIT (CMU) - DATA LINK RECORDING ACTIVATION	[*CTR]

PA No. 3807		SA-3
	Boeing Proprietary	Page: 2 of 9

Exhbit A2 737-8 [*CTR]                                    Boeing Proprietary

2322E516A03	CMU - INSTALLATION OF HONEYWELL MARK II ARINC 758 LEVEL AOA CMU W/ARINC SERVICE PROVIDER - DATA LINK RECORDING CAPABLE - P/N 965-0758-006 - BFE / SPE	[*CTR]
2322E516A28	CMU - INSTALLATION OF PARTIAL PROVISIONS FOR A SINGLE CMU IN ACCORDANCE WITH ARINC 758	[*CTR]
2324D197A17	EMERGENCY LOCATOR TRANSMITTER (ELT) - ACR ELECTRONICS 3-FREQUENCY AUTOMATIC - FIXED - WITH ANTENNA P/N 110-337 - BFE/SPE	[*CTR]
2331B754B15	PASSENGER ADDRESS (PA) SYSTEM - ARINC 715 - ROCKWELL COLLINS AMPLIFIER - BFE/SPE	[*CTR]
2331B754B17	PASSENGER ADDRESS (PA) SYSTEM - PA-IN-USE INDICATOR IN THE FLIGHT DECK	[*CTR]
2342C998B43	CABIN READY SYSTEM - 737 BOEING SKY INTERIOR	[*CTR]
2350B872A08	AUDIO CONTROL PANEL - INTEGRATED SELCAL, CREW CALL, AND SATCOM FUNCTIONS - INSTALLATION - 3 VHF/2 HF	[*CTR]
2351-000034	HAND HELD MICROPHONE - CAPTAIN AND FIRST OFFICER - ELECTROVOICE - P/N 903-1341 - BFE/SPE	[*CTR]
2351-000036	HAND HELD MICROPHONE - FIRST OBSERVER - ELECTROVOICE - P/N 903-1341 - BFE/SPE	[*CTR]
2351-000042	CONTROL WHEEL PUSH TO TALK (PTT) SWITCH - STANDARD THREE POSITION	[*CTR]
2351A213A33	AUDIO INTEGRATION - INSTALLATION - TWO-PLUG AUDIO JACKS IN THE FLIGHT DECK	[*CTR]
2351A213B78	BOOM MICROPHONE HEADSETS - CAPTAIN, FIRST OFFICER AND FIRST OBSERVER - TELEX AIRMAN 750 - P/N 64300-200 - BFE/SPE	[*CTR]
2371B628B41	VOICE RECORDER - RECORDER INDEPENDENT POWER SUPPLY (RIPS) - AFT LOWERED CEILING	[*CTR]
2371E568A71	VOICE RECORDER AND MICROPHONE/MONITOR - HONEYWELL - 2 HOUR RECORDING TIME - WITH DATALINK RECORDING CAPABILITY - P/N 980-6032-003 AND P/N 980- 6116-001 - BFE/SPE	[*CTR]
2375E526A61	FLIGHT DECK ENTRY VIDEO SURVEILLANCE SYSTEM - COMMON PARTIAL PROVISIONS - MAX DISPLAY SYSTEM (MDS) INTERFACE	[*CTR]
2375E526A62	FLIGHT DECK ENTRY VIDEO SURVEILLANCE SYSTEM - INSTALLATION INTO PARTIAL PROVISIONS - MDS INTERFACE - AD AEROSPACE - BFE/SPE	[*CTR]
2375E861K81	MP - VIDEO SURVEILLANCE SYSTEM - REVISION - GOODRICH IN LIEU OF AD AEROSPACE SYSTEM - GOODRICH - SPE	[*CTR]
2451B815K32	POWER DISTRIBUTION - WIRING INSTALLATION FOR ADDITIONAL CAPACITY	[*CTR]
2451E825A01	AUXILIARY ELECTRICAL OUTLETS - 110VAC, 60HZ / 5VDC, 2.1A USB COMBINATION - FLIGHT DECK - ASTRONICS AES - BFE/SPE	[*CTR]
2454E861J43	PED POWER OUTLETS - INSTALLATION - ULTRALITE WITH DUAL HIGH POWER USB PORTS - FULL CABIN - ASTRONICS AES - CSE/SPE	[*CTR]

PA No. 3807		SA-3
	Boeing Proprietary	Page: 3 of 9

Exhbit A2 737-8 [*CTR]                                    Boeing Proprietary

2520E432W29	INTERIOR COLOR AND MATERIAL - STANDARD OFFERING	[*CTR]
2523F001A35	PASSENGER SERVICE UNITS - 737 BOEING SKY INTERIOR	[*CTR]
2524C204J14	CURTAIN AND TRACK, FORWARD - CROSS AISLE, STA 363.5 - CEILING MOUNTED - 737 BOEING SKY INTERIOR	[*CTR]
2524E432Y71	FORWARD LEFT HAND FULL HEIGHT CLOSET/STOWAGE UNIT - BOEING SKY INTERIOR	[*CTR]
2525C204F40	LARGE LOWER STOWAGE BOX FOR DOUBLE ATTENDANT SEAT - STA 949 LH	[*CTR]
2525C204F41	LARGE LOWER STOWAGE BOX FOR DOUBLE ATTENDANT SEAT - STA 949 RH	[*CTR]
2525C204K04	HIC AND FEMUR LOAD COMPLIANCE - ECONOMY CLASS SEATS	[*CTR]
2525C204K05	HIC AND FEMUR LOAD COMPLIANCE - ATTENDANT SEATS	[*CTR]
2525F001D98	ECONOMY CLASS SEATS - BFE/SPE	[*CTR]
2528B508D79	STOWAGE BOX, WALL MOUNTED WITH WINDOWS - AFT FACE OF LAV LE	[*CTR]
2528C204J16	FIRST FORWARD CENTER OVERHEAD STOWAGE COMPARTMENT - PROVISIONED FOR PALLETIZED EQUIPMENT OR LIFE RAFT - 737 BOEING SKY INTERIOR	[*CTR]
2528C204J18	SECOND FORWARD CENTER OVERHEAD STOWAGE COMPARTMENT - PROVISIONED FOR PALLETIZED EQUIPMENT OR LIFE RAFT - 737 BOEING SKY INTERIOR	[*CTR]
2528C204J20	FIRST MID CABIN CENTER OVERHEAD STOWAGE COMPARTMENT - PROVISIONED FOR PALLETIZED EQUIPMENT OR LIFE RAFT - 737 BOEING SKY INTERIOR	[*CTR]
2528C204J22	SECOND MID-CABIN CENTER OVERHEAD STOWAGE COMPARTMENT - PROVISIONED FOR PALLETIZED EQUIPMENT OR LIFE RAFT - 737 BOEING SKY INTERIOR	[*CTR]
2528F001A40	OVERHEAD STOWAGE BINS - SPACE BINS - 737 BOEING SKY INTERIOR	[*CTR]
2528F001A63	LITERATURE POCKETS	[*CTR]
2528F001A65	MAGAZINE STOWAGE - MONUMENT MOUNTED	[*CTR]
2530F001A42	G2 GALLEY SELECTABLES	[*CTR]
2530F001A44	GALLEY PART NUMBERS - STANDARD EFFORT - BFE/SPE	[*CTR]
2530F001A45	GALLEY INSERT PART NUMBERS - BFE/SPE	[*CTR]
2540F001A46	LA ADVANCED LAVATORY 2.0 SELECTABLES	[*CTR]
2540F001A47	LD ADVANCED LAVATORY 2.0 SELECTABLES	[*CTR]
2540F001A48	LE ADVANCED LAVATORY 2.0 SELECTABLES	[*CTR]
2560-000269	CREW LIFE VEST STOWAGE - FLIGHT DECK, SECOND OBSERVER - CAPTAIN’S SEAT BACK	[*CTR]
2560B694K12	FLASHLIGHTS, TWO - FLIGHT DECK - DME - LED - P/N P2-07- 0015-003 - BFE/SPE	[*CTR]
2560C171C13	PROTECTIVE BREATHING EQUIPMENT - FLIGHT DECK - ESSEX PB&R - P/N MR-10034N - BFE/SPE	[*CTR]
2560E437E10	CREW LIFE VESTS - FLIGHT DECK, WITH SECOND OBSERVER - XIAMEN FEIPENG IND. - P/N XMF0100/1WCP - BFE/SPE	[*CTR]
2562E432Y05	OVERWATER EMERGENCY EQUIPMENT - BFE/SPE - 737 BOEING SKY INTERIOR	[*CTR]

PA No. 3807		SA-3
		Page: 4 of 9
	Boeing Proprietary

Exhbit A2 737-8 [*CTR]                                    Boeing Proprietary

2564F001A54	DETACHABLE EMERGENCY EQUIPMENT - PASSENGER COMPARTMENT - BFE/SPE - 737 BOEING SKY INTERIOR	[*CTR]
2622E088A14	APU FIRE EXTINGUISHER BOTTLE - COMMON WITH ENGINE BOTTLES	[*CTR]
2841-000004	STANDARD FUEL SYSTEM ACCURACY - NO FUEL DENSITOMETERS	[*CTR]
2841-000012	FUEL QUANTITY INDICATORS ON RIGHT WING FUELING PANEL	[*CTR]
2911-000041	ENGINE-DRIVEN HYDRAULIC PUMPS WITH VESPEL SPLINE - PARKER (ABEX) - 10-62167	[*CTR]
2911-000043	AC MOTOR-DRIVEN HYDRAULIC PUMPS - PARKER (ABEX) 10-60556	[*CTR]
3041-000003	NO HEATED FLIGHT COMPARTMENT NUMBER 3 WINDOW	[*CTR]
3131-000143	ACCELEROMETER - HONEYWELL P/N 971-4193-001 - BFE/SPE
3131E568A70	DIGITAL FLIGHT DATA RECORDER (DFDR) - HONEYWELL - 1024 WORDS PER SECOND MAXIMUM DATA RATE - P/N 980- 4750-003 - BFE/SPE	[*CTR]
3132E437D33	ARINC 615 PORTABLE DATA LOADER CONNECTOR - INSTALLATION - FLIGHT DECK - P61-4 MAINTENANCE BITE PANEL	[*CTR]
3133-000045	MULTI-INPUT PRINTER - HONEYWELL INC - ARINC 740 P/N 8055515-4507 - BFE/SPE	[*CTR]
3133-000123	ARINC 740 PRINTER PROVISIONS IN THE FLIGHT DECK AISLESTAND	[*CTR]
3135E526B33	ONBOARD NETWORK SYSTEM - QUICK ACCESS RECORDER - DAR OUTPUT	[*CTR]
3161-000070	ENGINE OIL QUANTITY DISPLAY - QUARTS - ENGINE DISPLAY	[*CTR]
3161-000133	ENGINE FUEL FLOW - FULL TIME DISPLAY - PRIMARY ENGINE DISPLAY UNIT	[*CTR]
3162-000018	ATTITUDE COMPARATOR - FLASHING - ADI	[*CTR]
3162-000023	FLIGHT DIRECTOR COMMAND DISPLAY - FILLED INTEGRATED CUE - ADI	[*CTR]
3162-000028	RADIO ALTITUDE - BELOW ADI	[*CTR]
3162-000030	RISING RUNWAY - DISPLAYED ON THE ADI	[*CTR]
3162-000036	LANDING ALTITUDE REFERENCE BAR - PRIMARY FLIGHT DISPLAY	[*CTR]
3162-000040	BARO MINIMUMS POINTER - DISPLAYED ON SELECTION OF RADIO ALTITUDE MINIMUMS - PRIMARY FLIGHT DISPLAY	[*CTR]
3162-000044	TCAS RESOLUTION ADVISORY - VSI	[*CTR]
3162-000046	SINGLE CHANNEL AUTOPILOT ANNUNCIATION - ABOVE ADI	[*CTR]
3162-000051	ILS LOCALIZER DEVIATION EXPANDED SCALE - AUTOPILOT OR FLIGHT DIRECTOR MODE	[*CTR]
3162-000059	MAP MODE ORIENTATION - TRACK UP - NAVIGATION DISPLAY	[*CTR]
3162-000064	RANGE ARCS - NAVIGATION DISPLAY	[*CTR]
3162-000079	MANUALLY TUNED VOR SELECTED COURSE LINES DISPLAYED - NAVIGATION DISPLAY	[*CTR]
3162-000084	TCAS 3 NM RANGE RING - NAVIGATION DISPLAY	[*CTR]

PA No. 3807		SA-3
	Boeing Proprietary	Page: 5 of 9

Exhbit A2 737-8 [*CTR]                                    Boeing Proprietary

3162-000088	AIRSPEED BUG - ENABLED - 80 KNOT SETTING - MACH AIRSPEED INDICATOR	[*CTR]
3162-000355	V1 AURAL CALLOUT - FLIGHT DECK	[*CTR]
3162A627A32	SOFTWARE ACTIVATION - DOUBLE DERATE INDICATION - ENABLE	[*CTR]
3162A627A36	CDS - SOFTWARE ACTIVATION - VNAV SPEED BANDS - ENABLE	[*CTR]
3162A627A38	CDS - SOFTWARE ACTIVATION - HORIZON LINE HEADING SCALE - ENABLE	[*CTR]
3162A627A42	CDS - SOFTWARE ACTIVATION - REF FLAP/SPEED ANNUNCIATION - ENABLE	[*CTR]
3162C594A29	CDS - SOFTWARE ACTIVATION - NAVIGATION PERFORMANCE SCALES - ENABLE	[*CTR]
3242E837D36	AUTO BRAKE SYSTEM - REVISE SETTING FOR DECELERATION RATE	[*CTR]
3244-000008	SERVICE INTERPHONE CONNECTOR - EXTERNAL POWER PANEL	[*CTR]
3245B290A77	WHEELS AND TIRES - NOSE LANDING GEAR - WHEELS - GOODRICH - INSTALLATION WITH SFE 12 PR, 235 MPH RATED RADIAL TIRES	[*CTR]
3245B290A92	BRAKES - CARBON - GOODRICH	[*CTR]
3245C927A08	WHEELS AND TIRES - MAIN LANDING GEAR - WHEELS FOR CARBON BRAKES - GOODRICH - INSTALLATION WITH 30- PR, 235 MPH RADIAL TIRES	[*CTR]
3249E173A73	TIRE PRESSURE INDICATION SYSTEM - INSTALLATION	[*CTR]
3321C869A65	PASSENGER CABIN LIGHTING - SINGLE-ZONE CONTROL - 737 BOEING SKY INTERIOR	[*CTR]
3324C195A05	NO SMOKING SIGN - SILK SCREENED SYMBOL	[*CTR]
3342E568A55	LED LANDING LIGHTS - ALTERNATE FLASH FUNCTIONALITY	[*CTR]
3350E097A38	EMERGENCY ESCAPE PATH LIGHTING - FLOOR MOUNTED - NARROW COLOR PHOTOLUMINESCENT	[*CTR]
3412-000022	DUAL ELEMENT NON-ASPIRATED TAT PROBE ILS/GNSS/GLS MULTI-MODE RECEIVER - GNSS LANDING	[*CTR]
3430E032A04	SYSTEM (GLS) CAPABLE - ROCKWELL COLLINS - 822-1821- 332 - BFE/SPE
3431C175A06	NAVIGATION CONTROL PANEL (NCP) - GNSS LANDING SYSTEM (GLS) CAPABLE - GABLES - P/N G7501-01- BFE/SPE	[*CTR]
3433C594A24	RADIO ALTIMETER (RA) - CAT IIIB CAPABLE - ROCKWELL/COLLINS - P/N 822-0334-003 - BFE/SPE	[*CTR]
3436D972A01	HEAD-UP DISPLAY (HUD) - PARTIAL PROVISIONS FOR SINGLE ROCKWELL COLLINS HEAD-UP GUIDANCE SYSTEM (HGS) MODEL 6000 WITH MCDU INTERFACE	[*CTR]
3436D972A02	HEAD-UP DISPLAY (HUD) - INSTALLATION OF SINGLE ROCKWELL COLLINS HEAD-UP GUIDANCE SYSTEM (HGS) MODEL 6000 WITH MCDU INTERFACE - STC CERTIFIED - BFE/SPE	[*CTR]
3443A065B18	SINGLE WEATHER RADAR CONTROL PANEL - WITH MULTISCAN FUNCTIONALITY - ROCKWELL COLLINS P/N 622-5129-802 - BFE/SPE	[*CTR]

PA No. 3807		SA-3
	Boeing Proprietary	Page: 6 of 9

Exhbit A2 737-8 [*CTR]                                    Boeing Proprietary

3443E568A02	SINGLE WEATHER RADAR SYSTEM - WITH PREDICTIVE WINDSHEAR AND MULTISCAN CAPABILITY WITH V2.0	[*CTR]
	HAZARD DISPLAY FEATURES - ROCKWELL COLLINS WRP- 2100A PROCESSOR P/N 822-3150-101 - BFE/SPE	[*CTR]
3445E724A21	TCAS SYSTEM - ROCKWELL COLLINS TCAS COMPUTER P/N 822-2911-002 - TCAS CHANGE 7.1 COMPLIANT - BFE/SPE	[*CTR]
3446-000045	STANDARD VOLUME FOR ALTITUDE CALLOUTS	[*CTR]
3446-000049	500 SMART CALLOUT INHIBITED	[*CTR]
3446-000074	GROUND PROXIMITY WARNING SYSTEM ALTITUDE CALLOUTS - 500, 400, 300, 200, 100, 50, 40, 30, 20, 10, MINIMUMS	[*CTR]
3446C174A14	ENHANCED GROUND PROXIMITY WARNING SYSTEM (EGPWS) - BANK ANGLE CALLOUT (VARIABLE CALLOUT BELOW 130 FT) - ENABLE	[*CTR]
3446E437F57	ENHANCED GROUND PROXIMITY WARNING SYSTEM - RUNWAY AWARENESS AND ADVISORY SYSTEM (RAAS) CONFIGURATION DATABASE WORKSHEET	[*CTR]
3446E760A03	RSAT - RUNWAY AWARENESS AND ADVISORY SYSTEM, OVERRUN WARNING, SPEEDBRAKE WARNING, AND HUD PERSPECTIVE RUNWAY	[*CTR]
3451-000022	VOR/MARKER BEACON - ROCKWELL RECEIVER P/N 822- 0297-001 - BFE/SPE	[*CTR]
3453E640A14	ATC SYSTEM - ROCKWELL COLLINS ATC TRANSPONDER P/N 822-1338-205 - ADS-B OUT DO-260B COMPLIANT - GABLES CONTROL PANEL P/N G6990-51 - BFE/SPE	[*CTR]
3455E717A12	DISTANCE MEASURING EQUIPMENT (DME) - ROCKWELL COLLINS INTERROGATOR P/N 822-2325-001 - BFE/SPE	[*CTR]
3457A065A53	AUTOMATIC DIRECTION FINDER - DUAL SYSTEM WITH DUAL FUNCTION GABLES CONTROL PANEL - G7403-03 - BFE/SPE
3457A065A59	AUTOMATIC DIRECTION FINDER (ADF) - DUAL SYSTEM INTO EXISTING PROVISIONS - ROCKWELL ADF-900 SERIES - ADF RECEIVER P/N 822-0299-001; ADF ANTENNA P/N 822-5404-001 - BFE/SPE	[*CTR]
3461A150B73	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - ENGINE-OUT STANDARD INSTRUMENT DEPARTURES (SID’S) - ENABLE	[*CTR]
3461A425A09	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - NAVIGATION DATABASE - BOEING SUPPLIED	[*CTR]
3461A425A17	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - AIRLINE OPERATIONAL COMMUNICATION DATA LINK (AOC DL) - FEATURE ACTIVATION	[*CTR]
3461A425A28	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS)- ALTERNATE DESTINATIONS - ENABLE	[*CTR]
3461A425A34	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS)- RUNWAY DISTANCE REMAINING- METERS	[*CTR]
3461A425A40	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS)- VERTICAL NAVIGATION PROFILE- “VNAV ALT”- ENABLE	[*CTR]
3461A425A48	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - ACTIVATE COLOR OPERATION	[*CTR]

PA No. 3807		SA-3
		Page: 7 of 9
	Boeing Proprietary

Exhbit A2 737-8 [*CTR]                                    Boeing Proprietary

3461A425A55	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - DISABLE ENTRY OF GROSS WEIGHT ON “PERF INIT” PAGE	[*CTR]
3461A890A76	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - NAVIGATION DISPLAY - MISSED APPROACH IN CYAN UNTIL ACTIVE - ENABLE	[*CTR]
3461B403A13	FLIGHT MANAGEMENT COMPUTING SYSTEM (FMCS) - INTEGRATED APPROACH NAVIGATION (IAN)	[*CTR]
3461C175A11	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - AIR TRAFFIC SERVICES DATA LINK (ATS DL) - FANS FEATURE ACTIVATION	[*CTR]
3461C175A14	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - FANS CAPABLE MCDU WITH ATC KEYBOARD - INSTALLATION- SFE	[*CTR]
3461C175A32	FLIGHT MANAGEMENT COMPUTER SYSTEM (FMCS) - COMMON VNAV - ENABLE	[*CTR]
3511E837B11	CREW OXYGEN MASK - FULL FACE MASK WITH BUILT-IN SMOKE GOGGLES - FIRST OBSERVER - AVOX - BFE/SPE	[*CTR]
3511E837B16	CREW OXYGEN MASKS - FULL FACE MASK WITH BUILT-IN SMOKE GOGGLES - CAPTAIN AND FIRST OFFICER - AV-OX INC - BFE/SPE	[*CTR]
3511E837B22	CREW OXYGEN MASK - FULL FACE MASK WITH BUILT-IN SMOKE GOGGLES - SECOND OBSERVER - AVOX - BFE/SPE	[*CTR]
3811-000019	POTABLE WATER - SERVICEABLE TO 60 GALLONS	[*CTR]
3812-000001	WATER QUANTITY GAUGE - WATER SERVICE PANEL	[*CTR]
3832-000077	SENSOR FOULED LIGHT - VACUUM WASTE SYSTEM SERVICE PANEL	[*CTR]
3832A244C26	WASTE QUANTITY GAUGE - VACUUM WASTE SYSTEM SERVICE PANEL	[*CTR]
3910D322A19	AFT ELECTRONICS PANEL ARRANGEMENT	[*CTR]
4420E173A52	IFE SYSTEM - INTEGRATED PASSENGER FLIGHT INFORMATION SYSTEM - ACTIVATION	[*CTR]
4420E526B61	IFE SYSTEM - PARTIAL PROVISIONS FOR OVERHEAD VIDEO SYSTEM - 737 MAX	[*CTR]
4420E861D13	IFE SYSTEM - OVERHEAD VIDEO INSTALLATION - FULL CABIN WITH 16 PSU MOUNTED MONITORS - ROCKWELL - CSE/SPE	[*CTR]
4420E861J42	IFE SYSTEM - INSTALLATION INTO PROVISIONS - PAVES 2 HD MAIN EQUIPMENT - ROCKWELL COLLINS - 737 MAX - CSE/SPE	[*CTR]
4420E895E05	IFE SYSTEM - PARTIAL PROVISIONS FOR IN-FLIGHT ENTERTAINMENT AND CONNECTIVITY SYSTEM MAIN EQUIPMENT - 737 MAX	[*CTR]
4610E526A80	ONBOARD NETWORK SYSTEM - CELLULAR GROUND BASED CONNECTIVITY - WIRELESS WIDE AREA NETWORK UNIT (WWU) - BFE/SPE	[*CTR]
4610E526A81	ONBOARD NETWORK SYSTEM - PARTIAL PROVISIONS - GROUND BASED CONNECTIVITY	[*CTR]
4610E526E60	ONBOARD NETWORK SYSTEM - ACTIVATION OF ONS-ACARS CMU INTERFACE	[*CTR]

PA No. 3807		SA-3
	Boeing Proprietary	Page: 8 of 9

Exhbit A2 737-8 [*CTR]                                    Boeing Proprietary

5231A561C54	CARGO DOOR - SOLID SKIN	[*CTR]
5300-000027	UNDERSEAT FLOOR PANELS, LOW TRAFFIC CAPABILITY	[*CTR]
5352A298A27	RADOME- HONEYCOMB CORE - SFE	[*CTR]
7200D422A05	CFM LEAP-1B ENGINES - 1B27 RATING	[*CTR]
7900-000116	LUBRICATING OIL - MOBIL JET II	[*CTR]
MISC	INTERIOR ALLOWANCE	[*CTR]
OPTIONS: 200	TOTALS:	[*CTR]

PA No. 3807		SA-3
	Boeing Proprietary	Page: 9 of 9

AIRCRAFT CONFIGURATION

between

THE BOEING COMPANY

and

XIAMEN AIRLINES

Exhibit A-3 to Purchase Agreement Number PA-03807

	Page 1
BOEING PROPRIETARY

EXHIBIT A-3

AIRCRAFT CONFIGURATION

relating to

BOEING MODEL 737-10 TABLE 1C AIRCRAFT

The content of this Exhibit A-3 will be defined pursuant to the provisions of Letter Agreement LA- 1704713 to the Purchase Agreement, entitled “Open Configuration Matters – Table 1C 737-10 Model Aircraft”.

XIA-PA-03807		SA-3
Exhibit A-3		Page 2
	BOEING PROPRIETARY

AIRCRAFT DELIVERY REQUIREMENTS AND RESPONSIBILITIES

between

THE BOEING COMPANY

and

XIAMEN AIRLINES

Exhibit B to Purchase Agreement Number PA-03807

XIA-PA-03807		SA-3
Exhibit B		Page 1
	BOEING PROPRIETARY

Exhibit B

AIRCRAFT DELIVERY REQUIREMENTS AND RESPONSIBILITIES

relating to

BOEING MODEL 737-MAX AIRCRAFT

Both Boeing and Customer have certain documentation and approval responsibilities at various times during the construction cycle of Customer’s Aircraft that are critical to making the delivery of each Aircraft a positive experience for both parties. This Exhibit B documents those responsibilities and indicates recommended completion deadlines for the actions to be accomplished.

1. Government Documentation Requirements.

Certain actions are required to be taken by Customer in advance of the scheduled delivery month of each Aircraft with respect to obtaining certain government issued documentation.

1.1 Airworthiness and Registration Documents. Not later than six (6) months prior to delivery of each Aircraft, Customer will notify Boeing of the registration number to be painted on the side of the Aircraft. In addition, and not later than three (3) months prior to delivery of each Aircraft, Customer will, by letter to the regulatory authority having jurisdiction, authorize the temporary use of such registration numbers by Boeing during the pre-delivery testing of the Aircraft.

Customer is responsible for furnishing any Temporary or Permanent Registration Certificates required by any governmental authority having jurisdiction to be displayed aboard the Aircraft after delivery.

1.2 Certificate of Sanitary Construction.

1.2.1 U.S. Registered Aircraft. Boeing will obtain from the United States Public Health Service, a United States Certificate of Sanitary Construction to be displayed aboard each Aircraft after delivery to Customer. The above Boeing obligation only applies to commercial passenger-configured aircraft.

1.2.2 Non-U.S. Registered Aircraft. If Customer requires a United States Certificate of Sanitary Construction at the time of delivery of the Aircraft, Customer will give written notice thereof to Boeing at least [*CTR]. Boeing will then use commercially reasonable efforts to obtain the Certificate from the United States Public Health Service and present it to Customer at the time of Aircraft delivery. The above Boeing obligation only applies to commercial passenger-configured aircraft.

XIA-PA-03807		SA-3
Exhibit B		Page 2
	BOEING PROPRIETARY

1.3 Customs Documentation.

1.3.1 Import Documentation. If the Aircraft is intended to be exported from the United States, Customer must notify Boeing not later than [*CTR] to delivery of each Aircraft of any documentation required by the customs authorities or by any other agency of the country of import.

1.3.2 General Declaration—U.S. If the Aircraft is intended to be exported from the United States, Boeing will prepare Customs Form 7507, General Declaration, for execution by U.S. Customs immediately prior to the ferry flight of the Aircraft. For this purpose, Customer will furnish to Boeing not later than [*CTR] prior to delivery all information required by U.S. Customs and Border Protection, including without limitation (i) a complete crew and passenger list identifying the names, birth dates, passport numbers and passport expiration dates of all crew and passengers and (ii) a complete ferry flight itinerary, including point of exit from the United States for the Aircraft.

If Customer intends, during the ferry flight of an Aircraft, to land at a U.S. airport after clearing Customs at delivery, Customer must notify Boeing not later than [*CTR] days prior to delivery of such intention. If Boeing receives such notification, Boeing will provide to Customer the documents constituting a Customs permit to proceed, allowing such Aircraft to depart after any such landing. Sufficient copies of completed Form 7507, along with passenger manifest, will be furnished to Customer to cover U.S. stops scheduled for the ferry flight.

1.3.3 Export Declaration—U.S. If the Aircraft is intended to be exported from the United States following delivery, and (i) Customer is a non-U.S. customer, Boeing will file an export declaration electronically with U.S. Customs and Border Protection (CBP), or (ii) Customer is a U.S. customer, it is the responsibility of the U.S. customer, as the exporter of record, to file the export declaration with CBP.

2. Insurance Certificates.

Unless provided earlier, Customer will provide to Boeing not later than [*CTR] prior to delivery of the first Aircraft, a copy of the requisite annual insurance certificate in accordance with the requirements of Article 8 of the AGTA.

3. Notice of Flyaway Configuration.

Not later than [*CTR] prior to delivery of the Aircraft, Customer will provide to Boeing a configuration letter stating the requested “flyaway configuration” of the Aircraft for its ferry flight. This configuration letter should include:

(i) the name of the company which is to furnish fuel for the ferry flight and any scheduled post-delivery flight training, the method of payment for such fuel, and fuel load for the ferry flight;

(ii) the cargo to be loaded and where it is to be stowed on board the Aircraft, the address where cargo is to be shipped after flyaway and notification of any hazardous materials requiring special handling;

(iii) any BFE equipment to be removed prior to flyaway and returned to Boeing BFE stores for installation on Customer’s subsequent Aircraft;

XIA-PA-03807		SA-3
Exhibit B		Page 3
	BOEING PROPRIETARY

(iv) a complete list of names and citizenship of each crew member and non-revenue passenger who will be aboard the ferry flight; and

(v) a complete ferry flight itinerary.

4. Delivery Actions By Boeing.

4.1 Schedule of Inspections. All FAA, Boeing, Customer and, if required, U.S. Customs Bureau inspections will be scheduled by Boeing for completion prior to delivery or departure of the Aircraft. Customer will be informed of such schedules.

4.2 Schedule of Demonstration Flights. All FAA and Customer demonstration flights will be scheduled by Boeing for completion prior to delivery of the Aircraft.

4.3 Schedule for Customer’s Flight Crew. Boeing will inform Customer of the date that a flight crew is required for acceptance routines associated with delivery of the Aircraft.

4.4 Fuel Provided by Boeing. Boeing will provide to Customer, without charge, the amount of fuel shown in U.S. gallons in the table below for the model of Aircraft being delivered and full capacity of engine oil at the time of delivery or prior to the ferry flight of the Aircraft.

Aircraft Model	Fuel Provided
737	[*CTR]

4.5 Flight Crew and Passenger Consumables. Boeing will provide reasonable quantities of food, coat hangers, towels, toilet tissue, drinking cups and soap for the first segment of the ferry flight for the Aircraft.

4.6 Delivery Papers, Documents and Data. Boeing will have available at the time of delivery of the Aircraft certain delivery papers, documents and data for execution and delivery. If title for the Aircraft will be transferred to Customer through a Boeing subsidiary and if the Aircraft will be registered with the FAA, Boeing will pre- position in Oklahoma City, Oklahoma, for filing with the FAA at the time of delivery of the Aircraft an executed original Form 8050-2, Aircraft Bill of Sale, indicating transfer of title to the Aircraft from Boeing’s subsidiary to Customer.

4.7 Delegation of Authority. If specifically requested in advance by Customer, Boeing will present a certified copy of a Resolution of Boeing’s Board of Directors, designating and authorizing certain persons to act on its behalf in connection with delivery of the Aircraft.

5. Delivery Actions By Customer.

5.1 Aircraft Radio Station License. At delivery Customer will provide its Aircraft Radio Station License to be placed on board the Aircraft following delivery.

5.2 Aircraft Flight Log. At delivery Customer will provide the Aircraft Flight Log for the Aircraft.

XIA-PA-03807		SA-3
Exhibit B		Page 4
	BOEING PROPRIETARY

5.3 Delegation of Authority. Customer will present to Boeing at delivery of the Aircraft an original or certified copy of Customer’s Delegation of Authority designating and authorizing certain persons to act on its behalf in connection with delivery of the specified Aircraft.

5.4 TSA Waiver Approval. Customer may be required to have an approved Transportation Security Administration (TSA) waiver for the ferry flight depending upon the Customer’s en-route stop(s) and destination unless the Customer already has a TSA approved security program in place. Customer is responsible for application for the TSA waiver and obtaining TSA approval. Customer will provide a copy of the approved TSA waiver to Boeing upon arrival at the Boeing delivery center.

5.5 Electronic Advance Passenger Information System. Should the ferry flight of an Aircraft leave the United States, the Department of Homeland Security office requires Customer to comply with the Electronic Advance Passenger Information System (eAPIS). Customer needs to establish their own account with US Customs and Border Protection in order to file for departure. A copy of the eAPIS forms is to be provided by Customer to Boeing upon arrival of Customer’s acceptance team at the Boeing delivery center.

XIA-PA-03807		SA-3
Exhibit B		Page 5
	BOEING PROPRIETARY

ESCALATION ADJUSTMENT

AIRFRAME AND OPTIONAL FEATURES

between

THE BOEING COMPANY

and

XIAMEN AIRLINES

Supplemental Exhibit AE1

to Purchase Agreement Number PA-03807

XIA-PA-03807 AE1		SA-3
		Page 1
	BOEING PROPRIETARY

ESCALATION ADJUSTMENT

AIRFRAME AND OPTIONAL FEATURES

relating to

BOEING Model 737-7, 737-8, 737-9 and 737-10 AIRCRAFT

1. Formula.

Airframe and Optional Features price adjustments (Airframe Price Adjustment) are used to allow prices to be stated in current year dollars at the signing of this Purchase Agreement and to adjust the amount to be paid by Customer at delivery for the effects of economic fluctuation. The Airframe Price Adjustment will be determined at the time of Aircraft delivery in accordance with the following formula:

[*CTR]

Where:

[*CTR]

Where:

[*CTR] is the base year airframe escalation index (as set forth in Table 1 of this Purchase Agreement);

[*CTR] is a value determined using the U.S. Department of Labor, Bureau of Labor Statistics, [*CTR] calculated by establishing a three-month arithmetic average value (expressed as a decimal and rounded to the nearest tenth) using the values for the 11^th, 12^th and 13^th months prior to the month of scheduled delivery of the applicable Aircraft. As the [*CTR] values are only released on a quarterly basis, the value released for the first quarter will be used for the months of January, February, and March; the value released for the second quarter will be used for the months of April, May, and June; the value released for the third quarter will be used for the months of July, August, and September; the value released for the fourth quarter will be used for the months of October, November, and December.

XIA-PA-03807 AE1		SA-3
		Page 2
	BOEING PROPRIETARY

[*CTR]

Where:

[*CTR] is the base year index (as set forth in Table 1 of this Purchase Agreement); and

[*CTR] is a value determined using the U.S. Department of Labor, Bureau of Labor Statistics, [*CTR] calculated as a three (3) month arithmetic average of the released monthly values (expressed as a decimal and rounded to the nearest tenth) using the values for the 11^th, 12^th, and 13^th months prior to the month of scheduled delivery of the applicable Aircraft.

[*CTR]

Where:

[*CTR] is the number of calendar months which have elapsed from the Airframe Price base year and month up to and including the month of delivery, both as shown in Table 1 of the Purchase Agreement. The entire calculation of 0.005 X (N/12) will be rounded to 4 places, and the final value of [*CTR] will be rounded to the nearest dollar.

As an example, for an Aircraft scheduled to be delivered in the month of July, the months of June, July, and August of the preceding year will be utilized in determining the value of [*CTR].

Note:

(i)	In determining the values of [*CTR], all calculations and resulting values will be expressed as a decimal rounded to the nearest ten-thousandth.
(ii)	[*CTR] the numeric ratio attributed [*CTR] in the Airframe Price Adjustment formula.
(iii)	[*CTR] is the numeric ratio attributed [*CTR] in the Airframe Price Adjustment formula.
(iv)	The [*CTR] are the actual average values reported by the U.S. Department of Labor, Bureau of Labor Statistics. The actual average values are calculated as a three (3) month arithmetic average of the released monthly values (expressed as a decimal and rounded to the nearest tenth) using the values for the 11th, 12th and 13th months prior to the airframe base year. The applicable base year and corresponding denominator is provided by Boeing in Table 1 of this Purchase Agreement.
(v)	The final value of [*CTR] will be rounded to the nearest dollar.
(vi)	The [*CTR]

XIA-PA-03807 AE1		SA-3
		Page 3
	BOEING PROPRIETARY

2. Values to be Utilized in the Event of Unavailability.

2.1 If the Bureau of Labor Statistics substantially revises the methodology used for the determination of the values to be used to determine the [*CTR] values (in contrast to benchmark adjustments or other corrections of previously released values), or for any reason has not released values needed to determine the applicable Airframe Price Adjustment, the parties will, prior to the delivery of any such Aircraft, select a substitute from other Bureau of Labor Statistics data or similar data reported by non-governmental organizations. Such substitute will result in the same adjustment, insofar as possible, as would have been calculated utilizing the original values adjusted for fluctuation during the applicable time period. However, if within [*CTR] after delivery of the Aircraft, the Bureau of Labor Statistics should resume releasing values for the months needed to determine the Airframe Price Adjustment; such values will be used to determine any increase or decrease in the Airframe Price Adjustment for the Aircraft from that determined at the time of delivery of the Aircraft.

2.2 Notwithstanding Article 2.1 above, if prior to the scheduled delivery month of an Aircraft the Bureau of Labor Statistics changes the base year for determination of the [*CTR] values as defined above, such re-based values will be incorporated in the Airframe Price Adjustment calculation.

2.3 In the event escalation provisions are made non-enforceable or otherwise rendered void by any agency of the United States Government, the parties agree, to the extent they may lawfully do so, to equitably adjust the Aircraft Price of any affected Aircraft to reflect an allowance for increases or decreases consistent with the applicable provisions of paragraph 1 of this Supplemental Exhibit AE1 in labor compensation and material costs occurring since August of the year prior to the price base year shown in the Purchase Agreement.

2.4 If within [*CTR] months of Aircraft delivery, the published index values are revised due to an acknowledged error by the Bureau of Labor Statistics, the Airframe Price Adjustment will be re-calculated using the revised index values (this does not include those values noted as preliminary by the Bureau of Labor Statistics). A credit memorandum or supplemental invoice will be issued for the Airframe Price Adjustment difference. Interest charges will not apply for the period of original invoice to issuance of credit memorandum or supplemental invoice.

Note:

(i) The values released by the Bureau of Labor Statistics and available to Boeing [*CTR] prior to the first day of the scheduled delivery month of an Aircraft will be used to determine the [*CTR] values for the applicable months (including those noted as preliminary by the Bureau of Labor Statistics) to calculate the Airframe Price Adjustment for the Aircraft invoice at the time of delivery. The values will be considered final and no Airframe Price Adjustments will be made after Aircraft delivery for any subsequent changes in published index values, subject always to paragraph 2.4 above.

(ii) The maximum number of digits to the right of the decimal after rounding utilized in any part of the Airframe Price Adjustment equation will be 4, where rounding of the fourth digit will be increased to the next highest digit when the 5th digit is equal to five (5) or greater.

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		Page 4
	BOEING PROPRIETARY

BUYER FURNISHED EQUIPMENT VARIABLES

between

THE BOEING COMPANY

and

XIAMEN AIRLINES

Supplemental Exhibit BFE2

to Purchase Agreement Number PA-03807

PA 3807		SA-3
Exhibit BFE2		Page 1
	BOEING PROPRIETARY

BUYER FURNISHED EQUIPMENT VARIABLES

relating to

BOEING MODEL 737-8 TABLE 1B AIRCRAFT

This Supplemental Exhibit BFE2 contains supplier selection dates, on-dock dates and other requirements applicable to the Aircraft.

1. Supplier Selection.

Customer will:

Select and notify Boeing of the suppliers and part numbers of the following BFE items by the following dates:

Galley System	[	*CTR]
Galley Inserts	[	*CTR]
Seats (passenger)	[	*CTR]
Overhead & Audio System	[	*CTR]
In-Seat Video System	[	*CTR]
Miscellaneous Emergency Equipment	[	*CTR]
Cargo Handling Systems* (Single Aisle Programs only)	[	*CTR]

* For a new certification, supplier requires notification [*CTR] months prior to Cargo Handling System on-dock date.

Customer will enter into initial agreements with the selected Galley System, Galley Inserts, Seats, and In-Seat Video System suppliers [*CTR] or before the above supplier selection dates to actively participate with Customer and Boeing in coordination actions including the Initial Technical Coordination Meeting (ITCM).

2. On-dock Dates and Other Information.

On or before [*CTR] prior to aircraft delivery, Boeing will provide to Customer the BFE Requirements. These requirements may be periodically revised, setting forth the items, quantities, on-dock dates and shipping instructions and other requirements relating to the in-sequence installation of BFE. For planning purposes, preliminary BFE on-dock dates are set forth below:

PA 3807		SA-3
Exhibit BFE2		Page 2
	BOEING PROPRIETARY

737-8

Nominal Del Date

Aircraft Qty

Seats

Galley / Furnishings

Antennas & Mounting Equipment

Avionics

Cabin Systems Equipment

Misc. Emergency Equipment

Textiles / Raw Materials

Cargo Systems

Provision Kits

Radomes

Jul 2019

2

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Oct 2019

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Dec 2019

2

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Jan 2020

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Jun 2020

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Jul 2020

3

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Sep 2020

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Oct 2020

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Jul 2021

2

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Aug 2021

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Oct 2021

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Nov 2021

2

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Dec 2021

2

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

3. Additional Delivery Requirements—Import.

Customer will be the importer of record (as defined by the U.S. Customs and Border Protection) for all BFE imported into the United States, and as such, it has the responsibility to ensure all of Customer’s BFE shipments comply with U.S. Customs Service regulations. In the event Customer requests Boeing, in writing, to act as importer of record for Customer’s BFE, and Boeing agrees to such request, Customer is responsible for ensuring Boeing can comply with all U.S. Customs Import Regulations by making certain that, at the time of shipment, all BFE shipments comply with the requirements in the “International Shipment Routing Instructions”, including the Customs Trade Partnership Against Terrorism (C-TPAT), as set out on the Boeing website referenced below. Customer agrees to include the International Shipment Routing Instructions, including C-TPAT requirements, in each contract between Customer and BFE supplier.

http://www.boeing.com/companyoffices/doingbiz/supplier_portal/index_general.html

PA 3807		SA-3
Exhibit BFE2		Page 3
	BOEING PROPRIETARY

BUYER FURNISHED EQUIPMENT VARIABLES

between

THE BOEING COMPANY

and

XIAMEN AIRLINES

Supplemental Exhibit BFE3

to Purchase Agreement Number PA-03807

PA-03807		SA-3
BFE3		Page 1
	BOEING PROPRIETARY

BUYER FURNISHED EQUIPMENT VARIABLES

relating to

BOEING MODEL 737-10 TABLE 1C AIRCRAFT

This Supplemental Exhibit BFE3 contains supplier selection dates, on-dock dates and other requirements applicable to the 737-10 Model Aircraft.

1. Supplier Selection.

Customer will:

Select and notify Boeing of the suppliers and part numbers of the following BFE items by the following dates:

Galley System	[	*CTR]
Galley Inserts	[	*CTR]
Seats (passenger)	[	*CTR]
Overhead & Audio System	[	*CTR]
In-Seat Video System	[	*CTR]
Miscellaneous Emergency Equipment	[	*CTR]
Cargo Handling Systems* (Single Aisle Programs only)	[	*CTR]

* For a new certification, supplier requires notification [*CTR] prior to Cargo Handling System on-dock date.

Customer will enter into initial agreements with the selected Galley System, Galley Inserts, Seats, and In-Seat Video System suppliers [*CTR] or before the above supplier selection dates to actively participate with Customer and Boeing in coordination actions including the Initial Technical Coordination Meeting (ITCM).

2. On-dock Dates and Other Information.

On or before [*CTR] prior to aircraft delivery, Boeing will provide to Customer the BFE Requirements. These requirements may be periodically revised, setting forth the items, quantities, on-dock dates and shipping instructions and other requirements relating to the in-sequence installation of BFE. For planning purposes, preliminary BFE on-dock dates are set forth below:

PA-03807		SA-3
BFE3		Page 2
	BOEING PROPRIETARY

Nominal Del Date

Aircraft Qty

Seats

Galley / Furnishings

Antennas & Mounting Equipment

Avionics

Cabin Systems Equipment

Misc. Emergency Equipment

Textiles / Raw Materials

Cargo Systems

Provision Kits

Radomes

Jun 2021

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Jul 2021

2

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Sep 2021

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Oct 2021

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Nov 2021

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Dec 2021

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Jan 2022

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Feb 2022

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Mar 2022

1

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

Total

10

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

[*CTR]

3. Additional Delivery Requirements—Import.

Customer will be the importer of record (as defined by the U.S. Customs and Border Protection) for all BFE imported into the United States, and as such, it has the responsibility to ensure all of Customer’s BFE shipments comply with U.S. Customs Service regulations. In the event Customer requests Boeing, in writing, to act as importer of record for Customer’s BFE, and Boeing agrees to such request, Customer is responsible for ensuring Boeing can comply with all U.S. Customs Import Regulations by making certain that, at the time of shipment, all BFE shipments comply with the requirements in the “International Shipment Routing Instructions”, including the Customs Trade Partnership Against Terrorism (C-TPAT), as set out on the Boeing website referenced below. Customer agrees to include the International Shipment Routing Instructions, including C-TPAT requirements, in each contract between Customer and BFE supplier.

http://www.boeing.com/companyoffices/doingbiz/supplier_portal/index_general.html

PA-03807		SA-3
BFE3		Page 3
	BOEING PROPRIETARY

CUSTOMER SUPPORT VARIABLES

BETWEEN

THE BOEING COMPANY

AND

XIAMEN AIRLINES

Supplemental Exhibit CS2

TO Purchase Agreement Number PA-03807

XIA-PA-03807 CS2		SA-3
		Page 1
	BOEING PROPRIETARY

CUSTOMER SUPPORT VARIABLES

relating to

Boeing Model Table 1C 737-10 Aircraft

Customer currently operates an aircraft of the same model as the Aircraft. Upon Customer’s request, Boeing will develop and schedule a customized support program (Customer Support Program) to be furnished in support of the Aircraft. The Customer Support Program will be based upon and equivalent to the entitlements summarized below.

1. Maintenance Training.

1. 1 Maintenance Training Minor Model Differences Course, if required, covering operational, structural or systems differences between Customer’s newly-purchased Aircraft and an aircraft of the same model currently operated by Customer; [*CTR];

1.2 Training materials, if applicable, will be provided to each student. In addition, [*CTR] of training materials as used in Boeing’s training program, including visual aids, text and graphics will be provided for use in Customer’s own training program.

2. Flight Training.

Boeing will provide, if required, [*CTR]

3. Planning Assistance.

3.1 Maintenance Engineering. Notwithstanding anything in Exhibit B to the AGTA to the contrary, Boeing will provide the following maintenance engineering support:

3.1.1 Maintenance Planning Assistance[*CTR]

3.1.2 ETOPS Maintenance Planning Assistance [*CTR]

3.1.3 GSE/Shops/Tooling Consulting. [*CTR]

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		Page 2
	BOEING PROPRIETARY

[*CTR]

3.2 Spares. Boeing will revise, as applicable, the customized Recommended Spares Parts List (RSPL).

4. Technical Data and Documents.

Boeing will revise, as applicable, technical data and documents provided with previously delivered aircraft.

4.1 Fleet Statistical Data and Report.

Fleet reliability views, charts, and reports

5. Aircraft Information.

5.1 Aircraft Information. is defined as that data provided by Customer to Boeing which falls into one of the following categories: (i) aircraft operational information (including, but not limited to, flight hours, departures, schedule reliability, engine hours, number of aircraft, aircraft registries, landings, and daily utilization and schedule interruptions for Boeing model aircraft); (ii) summary and detailed shop findings data; (iii) line maintenance data; (iv) airplane message data, (v) scheduled maintenance data; (vi) service bulletin incorporation; and (vii) aircraft data generated or received by equipment installed on Customer’s aircraft in analog or digital form including but not limited to information regarding the state, condition, performance, location, setting, or path of the aircraft and associated systems, sub-systems and components.

5.2 License Grant. To the extent Customer has or obtains rights to Aircraft Information, Customer grants to Boeing a perpetual, world-wide, non-exclusive license to use and disclose Aircraft Information and create derivatives thereof in Boeing data and information and products and services provided Customer identification information as originating from Customer is removed. Customer identification information may be retained as necessary for Boeing to provide products and services Customer has requested from Boeing or for Boeing to inform Customer of additional Boeing products and services. This grant is in addition to any other grants of rights in the agreements governing provision of such information to Boeing regardless of whether that information is identified as Aircraft Information in such agreement including any information submitted under the In Service Data Program (ISDP).

For purposes of this article, Boeing is defined as The Boeing Company and its wholly owned subsidiaries.

Customer will provide Aircraft Information to Boeing through an automated software feed necessary to support Fleet Statistical Analysis. Boeing will provide assistance to Customer under a separate agreement for mapping services to enable the automated software feed.

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		Page 3
	BOEING PROPRIETARY

ENGINE ESCALATION,

ENGINE WARRANTY AND PATENT INDEMNITY

between

THE BOEING COMPANY

and

XIAMEN AIRLINES

Supplemental Exhibit EE1

to Purchase Agreement Number PA-03807

XIA-PA-03807		SA-3
EE1		Page 1
	BOEING PROPRIETARY

ENGINE ESCALATION

ENGINE WARRANTY AND PATENT INDEMNITY

relating to

BOEING MODEL 737-7, 737-8, 737-9 and 737-10 AIRCRAFT

1. ENGINE ESCALATION.

[*CTR]

2. ENGINE WARRANTY AND PRODUCT SUPPORT PLAN.

Boeing has obtained from CFM International, Inc. (or CFM International, S.A., as the case may be) (CFM) the right to extend to Customer the provisions of CFM’s warranty as set forth below (herein referred to as Warranty); subject, however, to Customer’s acceptance of the conditions set forth herein. Accordingly, [*CTR]

2.1 Title. CFM warrants that at the date of delivery, CFM has legal title to and good and lawful right to sell its CFM56- 7 and CFM-LEAP type Engine and Products and furthermore warrants that such title is free and clear of all claims, liens and encumbrances of any nature whatsoever.

2.2 Patents.

2.2.1 CFM shall handle all claims and defend any suit or proceeding brought against Customer insofar as based on a claim that any product or part furnished under this Agreement constitutes an infringement of any patent of the United States, and shall pay all damages and costs awarded therein against Customer. This paragraph shall not apply to any product or any part manufactured to Customer’s design or to the aircraft manufacturer’s design. As to such product or part, CFM assumes no liability for patent infringement.

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EE1		Page 2
	BOEING PROPRIETARY

2.2.2 CFM’s liability hereunder is conditioned upon Customer promptly notifying CFM in writing and giving CFM authority, information and assistance (at CFM’s expense) for the defense of any suit. In case said equipment or part is held in such suit to constitute infringement and the use of said equipment or part is enjoined, CFM shall expeditiously, at its own expense and at its option, either (i) procure for Customer the rights to continue using said product or part; (ii) replace the same with a satisfactory and non-infringing product or part; or (iii) modify the same so it becomes satisfactory and non-infringing. The foregoing shall constitute the sole remedy of Customer and the sole liability of CFM for patent infringement.

2.2.3 The above provisions also apply to products which are the same as those covered by this Agreement and are delivered to Customer as part of the installed equipment on CFM56-7 and CFM-LEAP-1B powered Aircraft.

2.3 Initial Warranty. CFM warrants that CFM56-7 and CFM-LEAP-1B Engine products will conform to CFM’s applicable specifications and will be free from defects in material and workmanship prior to Customer’s initial use of such products.

2.4 Warranty Pass-On.

2.4.1 If requested by Customer and agreed to by CFM in writing, CFM will extend warranty support for Engines sold by Customer to commercial airline operators, or to other aircraft operators. Such warranty support will be limited to the New Engine Warranty, New Parts Warranty, Ultimate Life Warranty and Campaign Change Warranty and will require such operator(s) to agree in writing to be bound by and comply with all the terms and conditions, including the limitations, applicable to such warranties.

2.4.2 Any warranties set forth herein shall not be transferable to a third party, merging company or an acquiring entity of Customer.

2.4.3 In the event Customer is merged with, or acquired by, another aircraft operator which has a general terms agreement with CFM, the Warranties as set forth herein shall apply to the Engines, Modules, and Parts.

2.5 New Engine Warranty.

2.5.1 CFM warrants each new Engine and Module against Failure for the initial [*CTR] as follows:

(i) Parts Credit Allowance will be granted for any Failed Parts.

(ii) Labor Allowance for disassembly, reassembly, test and Parts repair of any new Engine Part will be granted for replacement of Failed Parts.

(iii) Such Parts Credit Allowance and Labor Allowance will be[*CTR]

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EE1		Page 3
	BOEING PROPRIETARY

2.5.2 As an alternative to the above allowances, CFM shall, upon request of Customer:

(i) Arrange to have the failed Engines and Modules repaired, as appropriate, at a facility designated by CFM at no charge to Customer for the [*CTR] and at a charge to Customer increasing pro rata fro [*CTR]

(ii) Transportation to and from the designated facility shall be at Customer’s expense.

2. 6 New Parts Warranty. In addition to the warranty granted for new Engines and new Modules, CFM warrants Engine and Module Parts as follows:

2.6.1 During the first [*CTR] for such Parts and Expendable Parts, CFM will grant [*CTR] Parts Credit Allowance or Labor Allowance for repair labor for failed Parts.

2.6.2 CFM will grant a pro rata Parts Credit Allowance for Scrapped Parts decreasing from [*CTR] the applicable hours designated in Table 1.

2.7 Ultimate Life Warranty.

2.7.1 CFM warrants Ultimate Life limits on the following Parts:

(i) Fan and Compressor Disks/Drums

(ii) Fan and Compressor Shafts

(iii) Compressor Discharge Pressure Seal (CDP)

(iv) Turbine Disks

(v) HPT Forward and Stub Shaft

(vi) LPT Driving Cone

(vii) LPT Shaft and Stub Shaft

2.7.2 CFM will grant a pro rata Parts Credit Allowanc [*CTR] whichever comes earlier. Credit will be granted only when such Parts are permanently removed from service by a CFM or a U.S. and/or French Government imposed Ultimate Life limitation of less than [*CTR]

2.8 Campaign Change Warranty.

2.8.1 A campaign change will be declared by CFM when a new Part design introduction, Part modification, Part Inspection, or premature replacement of an Engine or Module is required by a mandatory time compliance CFM Service Bulletin or FAA Airworthiness Directive. Campaign change may also be declared for CFM Service Bulletins requesting new Part introduction no later than the next Engine or Module shop visit. CFM will grant following Parts Credit Allowances:

XIA-PA-03807		SA-3
EE1		Page 4
	BOEING PROPRIETARY

Engines and Modules

(i) [*CTR]

(ii) [*CTR]

2.8.2 Labor Allowance—CFM will grant [*CTR] for disassembly, reassembly, modification, testing, or Inspection of CFM supplied Engines, Modules, or Parts therefore when such action is required to comply with a mandatory time compliance CFM Service Bulletin or FAA Airworthiness Directive. A [*CTR] will be granted by CFM for other CFM issued Service Bulletins if so specified in such Service Bulletins.

2.8.3 Life Controlled Rotating Parts retired by Ultimate Life limits including FAA and/or EASA Airworthiness Directive, are excluded from Campaign Change Warranty.

2.9 Limitations. THE PROVISIONS SET FORTH HEREIN ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER WARRANTIES WHETHER WRITTEN, ORAL OR IMPLIED. THERE ARE NO IMPLIED WARRANTIES OF FITNESS OR MERCHANTABILITY. SAID PROVISIONS SET FORTH THE MAXIMUM LIABILITY OF CFM WITH RESPECT TO CLAIMS OF ANY KIND, INCLUDING NEGLIGENCE, ARISING OUT OF MANUFACTURE, SALE, POSSESSION, USE OR HANDLING OF THE PRODUCTS OR PARTS THEREOF OR THEREFORE, AND IN NO EVENT SHALL CFM’S LIABILITY TO CUSTOMER EXCEED THE PURCHASE PRICE OF THE PRODUCT GIVING RISE TO CUSTOMER’S CLAIM OR INCLUDE INCIDENTAL OR CONSEQUENTIAL DAMAGES.

2.10 Indemnity and Contribution.

2.10.1 IN THE EVENT CUSTOMER ASSERTS A CLAIM AGAINST A THIRD PARTY FOR DAMAGES OF THE TYPE LIMITED OR EXCLUDED IN LIMITATIONS, PARAGRAPH 2.9. ABOVE, CUSTOMER SHALL INDEMNIFY AND HOLD CFM HARMLESS FROM AND AGAINST ANY CLAIM BY OR LIABILITY TO SUCH THIRD PARTY FOR CONTRIBUTION OR INDEMNITY, INCLUDING COSTS AND EXPENSES (INCLUDING ATTORNEYS’ FEES) INCIDENT THERETO OR INCIDENT TO ESTABLISHING SUCCESSFULLY THE RIGHT TO INDEMNIFICATION UNDER THIS PROVISION. THIS INDEMNITY SHALL APPLY WHETHER OR NOT SUCH DAMAGES WERE OCCASIONED IN WHOLE OR IN PART BY THE FAULT OR NEGLIGENCE OF CFM, WHETHER ACTIVE, PASSIVE OR IMPUTED.

XIA-PA-03807		SA-3
EE1		Page 5
	BOEING PROPRIETARY

2.10.2 CUSTOMER SHALL INDEMNIFY AND HOLD CFM HARMLESS FROM ANY DAMAGE, LOSS, CLAIM, AND LIABILITY OF ANY KIND (INCLUDING EXPENSES OF LITIGATION AND ATTORNEYS’ FEES) FOR PHYSICAL INJURY TO OR DEATH OF ANY PERSON, OR FOR PROPERTY DAMAGE OF ANY TYPE, ARISING OUT OF THE ALLEGED DEFECTIVE NATURE OF ANY PRODUCT OR SERVICE FURNISHED UNDER THIS AGREEMENT, TO THE EXTENT THAT THE PAYMENTS MADE OR REQUIRED TO BE MADE BY CFM EXCEED ITS ALLOCATED SHARE OF THE TOTAL FAULT OR LEGAL RESPONSIBILITY OF ALL PERSONS ALLEGED TO HAVE CAUSED SUCH DAMAGE, LOSS, CLAIM, OR LIABILITY BECAUSE OF A LIMITATION OF LIABILITY ASSERTED BY CUSTOMER OR BECAUSE CUSTOMER DID NOT APPEAR IN AN ACTION BROUGHT AGAINST CFM. CUSTOMER’S OBLIGATION TO INDEMNIFY CFM HEREUNDER SHALL BE APPLICABLE AT SUCH TIME AS CFM IS REQUIRED TO MAKE PAYMENT PURSUANT TO A FINAL JUDGEMENT IN AN ACTION OR PROCEEDING IN WHICH CFM WAS A PARTY, PERSONALLY APPEARED, AND HAD THE OPPORTUNITY TO DEFEND ITSELF. THIS INDEMNITY SHALL APPLY WHETHER OR NOT CUSTOMER’S LIABILITY IS OTHERWISE LIMITED.

XIA-PA-03807		SA-3
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	BOEING PROPRIETARY

SERVICE LIFE POLICY COMPONENTS

between

THE BOEING COMPANY

and

XIAMEN AIRLINES

Supplemental Exhibit SLP1

to Purchase Agreement Number PA-03807

XIA-PA-03807		SA-3
SLP1		Page 1
	BOEING PROPRIETARY

SERVICE LIFE POLICY COMPONENTS

relating to

BOEING MODEL 737-7, 737-8, 737-9 and 737-10 AIRCRAFT

This is the listing of SLP Components for the Aircraft which relate to Part 3, Boeing Service Life Policy of Exhibit C, Product Assurance Document to the AGTA and is included in the Purchase Agreement.

1. Wing.

(i) Upper and lower wing skins and stiffeners between the forward and rear wing spars.

(ii) Wing spar webs, chords and stiffeners.

(iii) Inspar wing ribs.

(iv) Inspar splice plates and fittings.

(v) Main landing gear support structure.

(vi) Wing center section lower beams, spanwise beams and floor beams, but not the seat tracks attached to floor beams.

(vii) Wing-to-body structural attachments.

(viii) Engine strut support fittings attached directly to wing primary structure.

(ix) Support structure in the wing for spoilers and spoiler actuators; for aileron hinges and reaction links; and for leading edge devices and trailing edge flaps.

(x) Trailing edge flap tracks and carriages.

(xi) Aileron leading edge device and trailing edge flap internal, fixed attachment and actuator support structure.

2. Body.

(i) External surface skins and doublers, longitudinal stiffeners, longerons and circumferential rings and frames between the forward pressure bulkhead and the vertical stabilizer rear spar bulkhead and structural support and enclosure for the APU but excluding all system components and related installation and connecting devices, insulation, lining, and decorative panels and related installation and connecting devices.

(ii) Window and windshield structure but excluding the windows and windshields.

(iii) Fixed attachment structure of the passenger doors, cargo doors and emergency exits, excluding door mechanisms and movable hinge components. Sills and frames around the body openings for the passenger doors, cargo doors and emergency exits, excluding scuff plates and pressure seals.

XIA-PA-03807		SA-3
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	BOEING PROPRIETARY

(iv) Nose wheel well structure, including the wheel well walls, pressure deck, bulkheads, and gear support structure.

(v) Main gear wheel well structure including pressure deck and landing gear beam support structure.

(vi) Floor beams and support posts in the control cab and passenger cabin area, but excluding seat tracks.

(vii) Forward and aft pressure bulkheads.

(viii) Keel structure between the wing front spar bulkhead and the main gear wheel well aft bulkhead including splices.

(ix) Wing front and rear spar support bulkheads, and vertical and horizontal stabilizer front and rear spar support bulkheads including terminal fittings but excluding all system components and related installation and connecting devices, insulation, lining, and decorative panels and related installation and connecting devices.

(x) Support structure in the body for the stabilizer pivot and stabilizer screw.

3. Vertical Stabilizer.

(i) External skins between front and rear spars.

(ii) Front, rear and auxiliary spar chords, webs and stiffeners and attachment fittings.

(iii) Inspar ribs.

(iv) Rudder hinges and supporting ribs, excluding bearings.

(v) Support structure in the vertical stabilizer for rudder hinges, reaction links and actuators.

(vi) Rudder internal, fixed attachment and actuator support structure.

4. Horizontal Stabilizer.

(i) External skins between front and rear spars.

(ii) Front and rear spar chords, webs and stiffeners.

(iii) Inspar ribs.

(iv) Stabilizer center section including hinge and screw support structure.

(v) Support structure in the horizontal stabilizer for the elevator hinges, reaction links and actuators.

(vi) Elevator internal, fixed attachment and actuator support structure.

5. Engine Strut.

(i) Strut external surface skin and doublers and stiffeners.

(ii) Internal strut chords, frames and bulkheads.

(iii) Strut to wing fittings and diagonal brace.

(iv) Engine mount support fittings attached directly to strut structure and including the engine-mounted support fittings.

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	BOEING PROPRIETARY

6. Main Landing Gear.

(i) Outer cylinder.

(ii) Inner cylinder, including axles.

(iii) Upper and lower side struts, including spindles, universals and reaction links.

(iv) Drag strut.

(v) Orifice support tube.

(vi) Downlock links including spindles and universals.

(vii) Torsion links.

(viii) Bell crank.

(ix) Trunnion link.

(x) Actuator beam, support link and beam arm.

7. Nose Landing Gear.

(i) Outer cylinder.

(ii) Inner cylinder, including axles.

(iii) Orifice support tube.

(iv) Upper and lower drag strut, including lock links.

(v) Steering plates and steering collars.

(vi) Torsion links.

NOTE: The Service Life Policy does not cover any bearings, bolts, bushings, clamps, brackets, actuating mechanisms or latching mechanisms used in or on the SLP Components.

XIA-PA-03807		SA-3
SLP1		Page 4
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

XIA-PA-03807-LA-1301950R1

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject:	AGTA Matters for 737-7, 737-8, 737-9, and 737-10 Aircraft
Reference:	Purchase Agreement No. PA-03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen Airlines (Customer) relating to Model 737 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

1. AGTA Basic Articles.

1.1 Article 2.1.1, “Airframe Price,” of the basic articles of the AGTA is revised to read as follows:

Airframe Price is defined as the price of the airframe for a specific model of aircraft described in a purchase agreement (for Models 737-600, 737-700, 737-800, 737-900, 737-7, 737-8, 737-9, 737-10, 747-8, 777-200LR, and 777-300ER the Airframe Price includes the engine price at its basic thrust level).

1.2 Article 2.1.3, “Engine Price” of the basic articles of the AGTA is revised to read as follows:

Engine Price is defined as the price set by the engine manufacturer for a specific engine to be installed on the model of aircraft described in a purchase agreement (not applicable to Models 737-600, 737-700, 737-800, 737-900, 737-7, 737-8, 737-9, 737-10, 747-8, 777-200LR, and 777-300ER).

1.3 Article 2.1.5, “Escalation Adjustment” of the basic articles of the AGTA is revised to read as follows:

Escalation Adjustment is defined as the price adjustment to the Airframe Price (which includes the basic engine price for Models 737-600, 737-700, 737-800, 737-900, 737-7, 737-8, 737-9, 737-10, 747-8, 777-200LR, and 777-300ER) and the Optional Features Prices resulting from the calculation using the economic price formula contained in the Airframe and Optional Features Escalation Adjustment supplemental exhibit to the applicable purchase agreement. The price adjustment to the Engine Price for all other models of aircraft will be calculated using the economic price formula in the Engine Escalation Adjustment supplemental exhibit to the applicable purchase agreement.

LA-1301950R1	SA-3
AGTA Matters for 737-7, 737-8, 737-9 and 737-10 Aircraft	Page 1
BOEING PROPRIETARY

2. Appendices to the AGTA.

Appendix I, entitled “SAMPLE Insurance Certificate” the Combined Single Limit Bodily Injury and Property Damage: U.S. Dollars ($) any one occurrence each Aircraft (with aggregates as applicable) is added for the 737-7, 737-8, 737-9, and 737-10 aircraft in the amount of US[*CTR]

3. Exhibit C to the AGTA, “Product Assurance Document”.

Part 2, Article 3.1, subsection (i), of Exhibit C of the AGTA is revised to read as follows:

for Boeing aircraft models 777F, 777-200, 777-300, 737-600, 737-700, 737-800, 737-900, 737-7, 737-8, 737-9, 737-10, 787 or new aircraft models designed and manufactured with similar, new technology and for the model 747-8, the warranty period ends forty-eight (48) months after Delivery.

Upon execution of this Letter Agreement, the Purchase Agreement will be amended to the extent provided herein and will continue in full force and effect.

LA-1301950R1		SA-3
AGTA Matters for 737-7, 737-8, 737-9 and 737-10 Aircraft		Page 2
	BOEING PROPRIETARY

Very truly yours,

THE BOEING COMPANY

By                                                                

Its Attorney-In-Fact

ACCEPTED AND AGREED TO this

Date:                                                              

Xiamen Airlines

By                                                                

Its                                                                

LA-1301950R1		SA-3
AGTA Matters for 737-7, 737-8, 737-9 and 737-10 Aircraft		Page 2
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

XIA-PA-03807-LA-1704707

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject:	Aircraft Performance Guarantees – Table 1B 737-8 Aircraft
Reference:	Purchase Agreement No. PA-03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen Airlines (Customer) relating to Model 737 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

Boeing agrees to provide Customer with the performance guarantees in the Attachment for Model 737-8 Table 1B Aircraft. These guarantees are exclusive and expire upon delivery of the 737-8 Table 1B Aircraft to Customer.

1. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer’s becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

2. Confidential Treatment.

Customer understands and agrees that the information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer agrees to limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

LA-1704707	SA-3
Performance Guarantees – Table 1B 737-8 Aircraft	Page 1
BOEING PROPRIETARY

Very truly yours,

THE BOEING COMPANY

By                                                                

Its Attorney-In-Fact

ACCEPTED AND AGREED TO this

Date:                                                            

Xiamen Airlines

By                                                                

Its                                                                

LA-1704707		SA-3
Performance Guarantees – Table 1B Aircraft		Page 2
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1704707

LEAP-1B27 Engines

Page 1

MODEL 737-8 PERFORMANCE GUARANTEES

FOR XIAMEN AIRLINES

SECTION	CONTENTS
1	AIRCRAFT MODEL APPLICABILITY
2	FLIGHT PERFORMANCE
3	AIRCRAFT CONFIGURATION
4	GUARANTEE CONDITIONS
5	GUARANTEE COMPLIANCE
6	EXCLUSIVE GUARANTEES

P.A. No. 03807
AERO-B-BBA4-M17-0911		SS17-0655
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1704707

LEAP-1B27 Engines

Page 2

1 AIRCRAFT MODEL APPLICABILITY

The guarantees contained in this Attachment (the “Performance Guarantees”) are applicable to the 737-8 Aircraft with a maximum [*CTR] kilograms, and equipped with Boeing furnished LEAP-1B27 engines.

2 FLIGHT PERFORMANCE

2.1 Takeoff

The FAA-approved takeoff field length at a gross weight at the start of the ground roll of [*CTR] will not be more than the following guarantee value:

GUARANTEE: [*CTR]

2.2 Landing

The FAA-approved landing field length at a gross weight of [*CTR] will not be more than the following guarantee value:

GUARANTEE: [*CTR]

2.3 Mission

2.3.1  Mission Payload

The payload for a stage length of [*CTR] using the conditions and operating rules defined below, will not be less than the following guarantee value:

NOMINAL: [*CTR]

TOLERANCE: [*CTR]

GUARANTEE: [*CTR]

Conditions and operating rules:

P.A. No. 3807
AERO-B-BBA4-M17-0911		SS17-0655
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1704707

LEAP-1B27 Engines

Page 3

Stage Length:	The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.
Takeoff:	The airport altitude is [*CTR]
	The airport temperature is [*CTR]
	The takeoff runway available (TORA) is [*CTR]
	The takeoff distance available [*CTR]
	The accelerate-stop distance available [*CTR]
	The runway slope is [*CTR]
	The following obstacle definition is based on a straight out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:
	Height     Distance
	1.  [*CTR]   [*CTR]
	Maximum takeoff thrust is used for the takeoff.
	The takeoff gross weight will conform to FAA Regulations.
Climbout Maneuver:	Following the takeoff to [*CTR]
Climb:	The Aircraft climbs from the initial climb altitude to [*CTR]
	The Aircraft then accelerates at a rate of climb of [*CTR]

P.A. No. 3807
AERO-B-BBA4-M17-0911		SS17-0655
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1704707

LEAP-1B27 Engines

Page 4

	The climb contiues at [*CTR]
	The climb contiues at [*CTR] altitude.
	The temperature is [*CTR] during climb.
	Maximum climb thrust is used during climb.
Cruise:	The Aircraft cruises at [*CTR] number.
	The cruise altitude is [*CTR]
	The temperature [*CTR] during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at [*CTR] feet above the destination airport altitude.
	Throughout the descent, the cabin pressure is controlled to a [*CTR]
	The temperature is [*CTR] during descent.
	Minimum flight idle thrust is used except as required at the top of descent to satisfy the above [*CTR] criteria.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending flaps and landing gear, then descends and lands.
	The destination airport altitude is [*CTR]
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following will be used as fixed quantities and allowances:

P.A. No. 3807
AERO-B-BBA4-M17-0911		SS17-0655
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1704707

LEAP-1B27 Engines

Page 5

Taxi-Out:

Fuel [*CTR]

Takeoff and Climbout Maneuver:

Fuel [*CTR]

Distance [*CTR]

Approach and Landing Maneuver:

Fuel [*CTR]

Taxi-In (will be consumed from the reserve

fuel):

Fuel [*CTR]

Usable reserve fuel remaining upon completion of the approach and landing maneuver: [*CTR]

For information purposes, the reserve fuel is based on a standard day temperature and a) a contingency fuel allowance equivalent to[*CTR]

2.3.2 Mission Block Fuel

The block fuel for a stage length of [*CTR] using the conditions and operating rules defined below, will not be more than the following guarantee value:

NOMINAL:	[*CTR]
TOLERANCE:	[*CTR]
GUARANTEE:	[*CTR]
Conditions and operating rules:

P.A. No. 3807
AERO-B-BBA4-M17-0911		SS17-0655
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1704707

LEAP-1B27 Engines

Page 6

Stage Length:	The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.
Block Fuel:	The block fuel is defined as the sum of the fuel used for taxi-out, takeoff and climbout maneuver, climb, cruise, descent, approach and landing maneuver, and taxi-in.
Takeoff:	The airport altitude is [*CTR]
	The airport temperature is [*CTR]
	The takeoff runway available [*CTR]
	The takeoff distance available [*CTR]
	The accelerate-stop distance available [*CTR]
	The runway slope is [*CTR]
	The following obstacle definition is based on a straight out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:
	Height     Distance
	1.  [*CTR]   [*CTR]
	Maximum takeoff thrust is used for the takeoff.
	The takeoff gross weight will conform to FAA Regulations.
Climbout Maneuver	Following the takeoff to [*CTR]
Climb:	The Aircraft climbs from the initial climb altitude to[*CTR]

P.A. No. 3807
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No. LA-1704707

LEAP-1B27 Engines

Page 7

	The Aircraft then accelerates at a rate of climb of [*CTR]
	The climb contiues at [*CTR] number is reached.
	The climb contiues at [*CTR]
	The temperature is [*CTR] during climb.
	Maximum climb thrust is used during climb.
Cruise:	The Aircraft cruises at [*CTR] number.
	The cruise altitude is [*CTR].
	The temperature is [*CTR] during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at [*CTR] above the destination airport altitude.
	Throughout the descent, the cabin pressure is controlled to a maximum rate of descent equivalent to [*CTR]
	The temperature is [*CTR] C during descent.
	Minimum flight idle thrust is used except as required at the top of descent to satisfy the above [*CTR] criteria.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending flaps and landing gear, then descends and lands.
	The destination airport altitude is [*CTR]

P.A. No. 3807
AERO-B-BBA4-M17-0911		SS17-0655
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Attachment to Letter Agreement

No. LA-1704707

LEAP-1B27 Engines

Page 8

Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following will be used as fixed quantities and allowances:
	Taxi-Out:
	Fuel [*CTR]
	Takeoff and Climbout Maneuver:
	Fuel [*CTR]
	Distance [*CTR]
	Approach and Landing Maneuver:
	Fuel [*CTR]
	Taxi-In (will be consumed from the reserve fuel):
	Fuel [*CTR]
	Usable reserve fuel remaining upon completion of the approach and landing maneuver: [*CTR]
	For information purposes, the reserve fuel is based on a standard day temperature and [*CTR]

2.3.3 Operational Empty Weight Basis

The Operational Empty Weight (OEW) derived in paragraph 2.3.4 is the basis for the mission guarantees of paragraphs 2.3.1 through 2.3.2.

P.A. No. 3807
AERO-B-BBA4-M17-0911		SS17-0655
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1704707

LEAP-1B27 Engines

Page 9

2.3.4 737-8 Weight Summary—Xiamen Airlines

	Kilograms
Standard Model Specification MEW	[*CTR]
Configuration Specification D019A008, Rev. P, Dated May 1, 2017
175 Tourist Class Passengers
CFM LEAP-1B Engines
[*CTR] Maximum Taxi Weight
Changes for Xiamen Airlines
Interior Change to 170 Passengers (8 FC / 162 EC) * (Ref: LOPA—378-3267 Rev. A) Boeing Sky Interior [*CTR] Maximum Taxi Weight	[*CTR]
Audio Entertainment System Video Entertainment System Extended Operations (ETOPS) Standby Power - [*CTR] Heavy Duty Cargo Compartment Linings/Panels (Fwd and Aft) Centerline Overhead Stowage Compartments (3) Additional Customer Options	[*CTR] [*CTR] [*CTR] [*CTR] [*CTR] [*CTR] [*CTR]
Xiamen Airlines Manufacturer’s Empty Weight (MEW)	[*CTR]
Standard and Operational Items Allowance   (Paragraph 2.3.5)	[*CTR]
Xiamen Airlines Operational Empty Weight (OEW)	[*CTR]

	Quantity	Kilograms	Kilograms
* Seat Weight Included:			[*CTR]
First Class Double	[*CTR]	[*CTR]
Economy Class Triple	[*CTR]	[*CTR]
Economy Class Triple w/3 In-Arm Food
Trays	[*CTR]	[*CTR]

P.A. No. 3807
AERO-B-BBA4-M17-0911		SS17-0655
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1704707

LEAP-1B27 Engines

Page 10

2.3.5 Standard and Operational Items Allowance

	Qty	Kilograms	Kilograms	Kilograms
Standard Items Allowance				[*CTR]
Unusable Fuel			[*CTR]
Oil			[*CTR]
Oxygen Equipment			[*CTR]
Passenger Portable	[*CTR]	[*CTR]
Crew Masks and Goggles	[*CTR]	[*CTR]
Miscellaneous Equipment			[*CTR]
Crash Axe	[*CTR]	[*CTR]
Megaphones	[*CTR]	[*CTR]
Flashlights	[*CTR]	[*CTR]
Smoke Hoods	[*CTR]	[*CTR]
Galley Structure & Fixed Inserts
Operational Items Allowance				[*CTR]
Crew and Crew Baggage			[*CTR]
Flight Crew	[*CTR]	[*CTR]
Cabin Crew	[*CTR]	[*CTR]
Navigation Bags & Manuals	[*CTR]	[*CTR]
Catering Allowance & Removable Inserts			[*CTR]
First Class	[*CTR]	[*CTR]
Economy Class	[*CTR]	[*CTR]
Crew Catering Allowance	[*CTR]	[*CTR]
Galley Carts: 2 Half Size and 8 Full Size	[*CTR]	[*CTR]
Passenger Service Equipment	[*CTR]		[*CTR]
Potable Water—60 USG			[*CTR]
Waste Tank Disinfectant			[*CTR]
Emergency Equipment			[*CTR]
Escape Slides—Forward and Aft	[*CTR]	[*CTR]
Escape Slides—Aft	[*CTR]	[*CTR]
Life Vests—Crew and Passengers	[*CTR]	[*CTR]
Life Rafts	[*CTR]	[*CTR]
Auto Radio Beacon (ELT)	[*CTR]	[*CTR]
Total Standard and Operational Items Allowance				[*CTR]

P.A. No. 3807
AERO-B-BBA4-M17-0911		SS17-0655
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1704707

LEAP-1B27 Engines

Page 11

3	AIRCRAFT CONFIGURATION
3.1	The guarantees contained in this Attachment are based on the Aircraft configuration as defined in D019A008, Revision P, “Configuration Specification, Model 737-7, 737-8, 737-8200, 737- 9, 737-10”, dated May 1, 2017, plus any changes mutually agreed upon or otherwise allowed by the Purchase Agreement to be incorporated into the Customer’s Detail Specification (herein referred to as the Detail Specification). Appropriate adjustment will be made for changes in such Detail Specification approved by the Customer and Boeing or otherwise allowed by the Purchase Agreement which cause changes to the flight performance and/or weight and balance of the Aircraft. Such adjustment will be accounted for by Boeing in its evidence of compliance with the guarantees.
3.2	The guarantee payload of paragraph 2.3.1, and the specified payload of the paragraph 2.3.2 block fuel guarantee will be adjusted by Boeing for the effect of the following on OEW in its evidence of compliance with the guarantees: (1) Changes to the Detail Specification or any other changes mutually agreed upon between the Customer and Boeing or otherwise allowed by the Purchase Agreement. (2) The difference between the component weight allowances given in Appendix E of the Detail Specification and the actual weights.
4	GUARANTEE CONDITIONS
4.1	All guaranteed performance data are based on the International Standard Atmosphere (ISA) and specified variations therefrom; altitudes are pressure altitudes.
4.2	The Federal Aviation Administration (FAA) regulations referred to in this Attachment are, unless otherwise specified, the 737-8 Certification Basis regulations specified in the Type Certificate Data Sheet A16WE, Revision 58, dated March 8, 2017.
4.3	In the event a change is made to any law, governmental regulation or requirement, or in the interpretation of any such law, governmental regulation or requirement that affects the certification basis for the Aircraft as described in Paragraph 4.2, and as a result thereof, a change is made to the configuration and/or the performance of the Aircraft in order to obtain certification, the guarantees set forth in this Attachment will be appropriately modified to reflect any such change.

P.A. No. 3807
AERO-B-BBA4-M17-0911	SS17-0655
BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1704707

LEAP-1B27 Engines

Page 12

4.4 The takeoff and landing guarantees, and the takeoff portion of the mission guarantees are based on [*CTR]

4.5 The climb, cruise and descent portions of the mission guarantees [*CTR]

4.6 [*CTR]

4.7 Performance, where applicable [*CTR]

5 GUARANTEE COMPLIANCE

5.1 Compliance with the guarantees of Section 2 will be based on the conditions specified in those sections, the Aircraft configuration of Section 3 and the guarantee conditions of Section 4.

5.2 Compliance with the takeoff and landing guarantees and the takeoff portion of the mission guarantee will be based on the FAA-approved Airplane Flight Manual for the Model 737-8.

P.A. No. 3807
AERO-B-BBA4-M17-0911	SS17-0655
BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1704707

LEAP-1B27 Engines

Page 13

5.3 Compliance with the climb, cruise and descent portions of the mission guarantees will be established by calculations based on flight test data obtained from an aircraft in a configuration similar to that defined by the Detail Specification.

5.4 Compliance with the mission block fuel guarantees may exceed the design weights in the FAA-approved Airplane Flight Manual for convenience of calculating block fuel for the specified payload. Such exceedance is not to be construed as authorization to operate the aircraft above the weights in the FAA-approved Airplane Flight Manual.

5.5 The OEW used for compliance with the mission guarantees will be the actual MEW plus the Standard and Operational Items Allowance in Appendix E of the Detail Specification.

5.6 The data derived from tests will be adjusted as required by conventional methods of correction, interpolation or extrapolation in accordance with established engineering practices to show compliance with these guarantees.

5.7 Compliance will be based on the performance of the airframe and engines in combination, and will not be contingent on the engine meeting its manufacturer’s performance specification.

6 EXCLUSIVE GUARANTEES

The only performance guarantees applicable to the Aircraft are those set forth in this Attachment.

P.A. No. 3807
AERO-B-BBA4-M17-0911	SS17-0655
BOEING PROPRIETARY

XIA-PA-03807-LA-1704708

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject:      Performance Guarantee Remedies – Table 1B 737-8 Aircraft

Reference:  Purchase Agreement No. PA-03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen

 Airlines (Customer) relating to Model 737 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

The Attachment to Letter Agreement No. XIA-PA-03807-LA-1704707 contains performance guarantees for the Aircraft (Performance Guarantees).

For the purposes of this Letter Agreement, the defined term Aircraft shall mean Table 1B 737-8 Aircraft.

1. Block Fuel Commitment

Section 2.3.2 of the Performance Guarantees contains the block fuel commitment (BFC) for the Aircraft. The BFC for the Aircraft is based on the assumptions, conditions and operating rules described in the Performance Guarantees.

1.1 Compliance with the Block Fuel Commitment. Boeing will determine compliance with the BFC as described in Section 5 of the Performance Guarantees. Such determination will be based on Customer’s first Aircraft and engineering interpretations and calculations pursuant to Article 5.4 of the AGTA (BF Standard Method of Compliance). Boeing will provide a compliance report using the BF Standard Method of Compliance (BF Compliance Report) to Customer at the time of delivery of Customer’s first Aircraft. The BF Compliance Report will contain the demonstrated block fuel (DBF) for the Aircraft. Deviation from the BFC will be calculated using the following formula:

[*CTR]

Boeing will provide a BF Compliance Report, as required, for subsequently delivered Aircraft in the event such Aircraft fails to meet the applicable BFC.

1.2 Block Fuel Remedies. [*CTR]

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1.2.1 [*CTR] from the delivery of the Aircraft, Boeing or the engine manufacturer may design airframe improvement parts or engine improvement parts (Block Fuel Improvement Parts) which, when installed on such Aircraft, would reduce or eliminate the BFD.

(i) Block Fuel Improvement Parts may include [*CTR].

(ii) If Boeing elects to provide, or to cause to be provided, Block Fuel Improvement Parts for such Aircraft, then Customer and Boeing will mutually agree upon the details of a Block Fuel Improvement Parts program. Block Fuel Improvement Parts [*CTR]

(iii) If Customer elects to install Block Fuel Improvement Parts in such Aircraft, then the parts [*CTR] to Customer if such installation can be accomplished during Aircraft line maintenance. Block Fuel Improvement Parts which cannot be installed during Aircraft line maintenance will be installed [*CTR]. All Block Fuel Improvement Parts will be installed in accordance with Boeing and the engine manufacturer instructions.

(iv) Boeing will provide or will cause the engine manufacturer to provide reimbursement of Customer’s reasonable Direct Labor and Direct Material costs to install Block Fuel Improvement Parts [*CTR]. Boeing or the engine manufacturer, as applicable, will give Customer reasonable advance written notice of the estimated on-dock date at Customer’s maintenance base for any such Block Fuel Improvement Parts.

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1.2.2 If [*CTR] delivery of each Aircraft, Boeing or the engine manufacturer has not eliminated the applicable BFD by providing Block Fuel Improvement Parts in accordance with Paragraph 1.2.1 above and, if Block Fuel Improvement Parts have been provided, Customer has elected not to install such Block Fuel Improvement Parts in accordance with Paragraph 1.2.1 above, then Boeing will issue to Customer a Fuel Bum Credit Memorandum (FBCM). The amount of the FBCM will be calculated using the following formula:

[*CTR]

The BFD used to calculate the FBCM will be adjusted for the availability of fuel bum improvement resulting from the development of Block Fuel Improvement Parts as described in Paragraph 1.2.1 above. [*CTR] The amount of the FBCM issued for each Aircraft will not exceed the aggregate sum of [*CTR]

1.3 Applicability of Block Fuel Remedies.

1.3.1 If an applicable BFD exists at the delivery of the Customer’s first Aircraft, then Boeing will provide the remedies described in Paragraph 1.2 above for the first Aircraft and for each subsequent Aircraft delivered to Customer until such time as Boeing improves the fuel bum performance for the model 737-8 aircraft to reduce or eliminate the BFD.

1.3.2 If Boeing improves the fuel burn performance to reduce or eliminate a BFD, then Boeing will calculate the amount of performance improvement based on data certified to be correct by Boeing. The amount of such improvement will be deemed to be the amount of improvement as calculated using reasonable engineering interpretations based on data furnished pursuant to Article 5.4 of the AGTA and data furnished pursuant to this Paragraph 1.3.2 in accordance with Boeing’s Standard Method of Compliance.

1.3.3 Following Boeing’s completion of the analysis described in Paragraph 1.3.2 above, Boeing will provide Customer with a new BF Compliance Report. Such new BF Compliance Report will be applicable to any undelivered Aircraft. If the new BF Compliance Report still shows a BFD, then the remedies contained in Paragraph 1.2 above will apply to the undelivered Aircraft until Boeing may further improve the fuel burn performance. If the new BF Compliance Report shows no remaining BFD then no further remedy will be due to Customer for any undelivered Aircraft.

2. Mission Payload Commitment.

Section 2.3.1 of the Performance Guarantees contains the mission payload commitment (MPC) for the Aircraft. The MPC is based on the assumptions, conditions, and operating rules described in the Performance Guarantees.

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Compliance with the Mission Payload Commitment. Boeing will determine compliance with the Mission Payload Commitment as described in Section 5 of the Performance Guarantees and based on Customer’s first Aircraft, and engineering interpretations and calculations pursuant to Article 5.4 of the AGTA (MP Standard Method of Compliance). Boeing will provide a compliance report using the MP Standard Method of Compliance (MP Compliance Report) to Customer at the time of delivery of Customer’s first Aircraft. The MP Compliance Report contains the demonstrated mission payload (DMP) for the MPC. Deviation from the MPC will be calculated using the following formula:

[*CTR]

Boeing will provide a MP Compliance Report, as required, for subsequently delivered Aircraft in the event such Aircraft fails to meet the applicable MPC.

2.1 Mission Payload Remedies. If the MPD for Customer’s first Aircraft is less than or equal to zero, then all Aircraft will be deemed to comply with the MPC and no remedy will be required. However, if the MP Compliance Report shows an MPD greater than or equal to zero, then Boeing will provide Customer with the following remedies:

2.1.1 Within one year from the delivery of the Aircraft, Boeing or the engine manufacturer may design airframe improvement parts and/or engine improvement parts (Mission Payload Improvement Parts) which, when installed on such Aircraft, would reduce or eliminate the MPD.

(i) Mission Payload Improvement Parts may include, but are not limited to, the following [*CTR]

(ii) If Boeing elects to provide, or to cause to be provided by the engine manufacturer, Mission Payload Improvement Parts for such Aircraft, [*CTR]

(iii) If Customer elects to install Mission Payload Improvement Parts on such Aircraft [*CTR] to Customer if such installation can be accomplished during Aircraft line maintenance. Mission Payload Improvement Parts which cannot be installed during Aircraft line maintenance will be installed [*CTR] All Mission Payload Improvement Parts will be installed in accordance with Boeing and the engine manufacturer instructions.

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(iv) Boeing will provide or will cause the engine manufacturer to provide reimbursement of Customer’s reasonable Direct Labor and Direct Material costs to install Mission Payload Improvement Parts a [*CTR] Boeing or the engine manufacturer, as applicable, will give Customer reasonable advance written notice of the estimated on-dock date at Customer’s maintenance base for any such Mission Payload Improvement Parts.

2.1.2 If after one year from delivery of each Aircraft, Boeing or the engine manufacturer has not fully cured the MPD by providing Mission Payload Improvement Parts in accordance with Paragraph 2.1.1 above, then Boeing will issue to Customer a Mission Payload Credit Memorandum (MPCM). The amount of the MPCM will be calculated using the following formula:

[*CTR]

The MPD used to calculate the MPCM will be adjusted for the availability of mission payload improvement resulting from the development of Mission Payload Improvement Parts as described in Paragraph 2.1.1. Issuance of an MPCM for any Aircraft is subject to the limitation of Paragraph 2.2 below. Customer may request that the MPCM be issued as cash or goods and services. The amount of the MPCM issued for each Aircraft will [*CTR]

2.2 Applicability of Mission Payload Remedies.

2.2.1 If an MPD exists at the time of delivery of the first Aircraft, then Boeing will provide the remedies described in Paragraph 2.1 above for the first Aircraft and for each subsequent Aircraft delivered to Customer until such time as Boeing improves the mission payload performance to reduce or eliminate the MPD.

2.2.2 If Boeing improves the mission payload performance to reduce or eliminate an MPD, then Boeing will calculate the amount of performance improvement based on data certified to be correct by Boeing. The amount of such improvement will be deemed to be the amount of improvement as calculated using reasonable engineering interpretations based on data furnished pursuant to Article 5.4 of the AGTA and data furnished pursuant to this Paragraph 2.2.2 in accordance with Boeing’s Standard Method of Compliance.

2.3 Following Boeing’s completion of the analysis described in Paragraph 2.2.2 above, Boeing will provide Customer with a new MP Compliance Report. Such new MP Compliance Report will be applicable to any Aircraft yet to be delivered to Customer. If the new MP Compliance Report shows that an MPD still exists, then the remedies contained in Paragraph 2.1 above will apply to the undelivered Aircraft until such time as Boeing may further improve the mission payload performance. If the new MP Compliance Report shows no MPD, then no remedy will be due to Customer for undelivered Aircraft.

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3. Rights and Obligations in the Event of a Compliance Deviation.

3.1 In the event of a compliance deviation for any Aircraft, at the time Boeing tenders that Aircraft for delivery, Boeing will provide the applicable remedies set forth in Paragraph 1 and 2. Customer cannot refuse to accept delivery of such Aircraft because of such compliance deviation.

4. Duplication of Benefits.

Boeing and Customer agree it is not the intent of the parties to provide benefits hereunder that duplicate the benefits to be provided (a) by Boeing under the Purchase Agreement, or any other agreement between Boeing and Customer, or (b) by the engine manufacturer under any agreement between engine manufacturer and Customer, due to the Aircraft not satisfying any performance metric similar to the Payload Guarantee or any performance metric that otherwise impacts payload. Boeing may offset its obligation to provide benefits hereunder against the benefits provided or to be provided to Customer by the engine manufacturer or Boeing pursuant to such other guarantee.

5. Exclusive Remedy.

Customer agrees that the remedies contained in this Letter Agreement herein are Customer’s exclusive remedies for purposes of resolving all issues with respect to the Performance Guarantees of Customer’s Aircraft and are in lieu of all other rights, remedies, claims and causes of action Customer may have, arising at law or otherwise, in connection therewith and shall constitute complete, full and final settlement and satisfaction of any and all of Boeing’s obligations and liabilities to Customer in connection therewith. Customer releases Boeing and its successors, affiliates and subsidiaries from all present, past and future rights, remedies, claims and causes of action, whether arising at law or otherwise, known or unknown, relating to or arising from such Performance Guarantees.

6. Assignment.

Notwithstanding any other provIs1ons of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer’s becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

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7. Confidential Treatment

Customer understands and agrees that the information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer agrees to limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

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Very truly yours,

THE BOEING COMPANY
By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this

Date:

XIAMEN AIRLINES

By

Its

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The Boeing Company      P.O. Box 3707                 Seattle, WA 98124-2207

XIA-PA-03807-LA-1704709

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject:         Aircraft Performance Guarantees – Table 1C 737-10 Aircraft

Reference:     Purchase Agreement No. PA-03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen

Airlines (Customer) relating to Model 737 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

Boeing agrees to provide Customer with the performance guarantees in the Attachment for Model 737-10 Table 1C Aircraft. These guarantees are exclusive and expire upon delivery of the 737-10 Table 1C Aircraft to Customer.

1. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer’s becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

2. Confidential Treatment.

Customer understands and agrees that the information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer agrees to limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

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Very truly yours,

THE BOEING COMPANY
By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this

Date:

Xiamen Airlines

By

Its

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Attachment to Letter Agreement

No. LA-1704709

LEAP-1B27 Engines

Page 1

MODEL 737-10 PERFORMANCE GUARANTEES

FOR XIAMEN AIRLINES

SECTION CONTENTS

1 AIRCRAFT MODEL APPLICABILITY

2 FLIGHT PERFORMANCE

3 AIRCRAFT CONFIGURATION

4 GUARANTEE CONDITIONS

5 GUARANTEE COMPLIANCE

6 EXCLUSIVE GUARANTEES

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1 AIRCRAFT MODEL APPLICABILITY

The guarantees contained in this Attachment (the “Performance Guarantees”) are applicable to the 737-10 Aircraft with a [*CTR] and equipped with Boeing furnished LEAP-1B27 engines.

2 FLIGHT PERFORMANCE

2.1 Takeoff

The FAA-approved takeoff field length at a gross weight at the start of [*CTR] at a temperature of [*CTR] will not be more than the following guarantee value:

NOMINAL:	[*CTR]
TOLERANCE:	[*CTR]
GUARANTEE:	[*CTR]

2.2 Landing

The FAA-approved landing field length at a gross weight of [*CTR], will not be more than the following guarantee value:

NOMINAL:	[*CTR]
TOLERANCE:	[*CTR]
GUARANTEE:	[*CTR]

2.3 Mission

2.3.1 Mission Payload

The payload for a stage lengt [*CTR] using the conditions and operating rules defined below, will not be less than the following guarantee value:

NOMINAL:	[*CTR]
TOLERANCE:	[*CTR]
GUARANTEE:	[*CTR]

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The above payload may require special attention to payload distribution and operational procedures.

Conditions and operating rules:

Stage Length:	The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.
Takeoff:	The airport altitude is [*CTR] The airport temperature is [*CTR] The takeoff runway available (TORA) is [*CTR] The takeoff distance available (TODA) is [*CTR] The accelerate-stop distance available (ASDA) is [*CTR] The runway slope is [*CTR]
	The following obstacle definition is based on a straight out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:
		Height                 Distance
	1.	[*CTR]                [*CTR]
	2.	[*CTR]                [*CTR]
	3.	[*CTR]                [*CTR]
	4.	[*CTR]                [*CTR]
	[*CTR]
	The takeoff gross weight will conform to FAA Regulations.
Climbout Maneuver:	Following the takeoff [*CTR]

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Climb: The Aircraft climbs from the initial climb altitude to [*CTR]

The Aircraft then accelerates at a rate of climb of [*CTR] to the recommended climb speed for minimum block fuel.

The climb continues at the recommended climb speed for minimum block fuel to the final climb altitude.

The temperature is [*CTR] during climb.

Maximum climb thrust is used during climb.

Cruise: The Aircraft cruises at the Long Range Cruise (LRC) speed.

The Aircraft cruises [*CTR].

The temperature is [*CTR] during cruise.

The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.

Descent: The Aircraft descends from the final cruise altitude at [*CTR] the destination airport altitude.

Throughout the descent, the cabin pressure is controlled to a [*CTR] equivalent to 300 feet per minute at sea level.

The temperature is [*CTR] during descent.

Minimum flight idle thrust is used during descent.

Approach The Aircraft decelerates to the final approach and Landing speed while extending flaps and landing gear, Maneuver: then descends and lands.

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The destination airport altitude [*CTR]

Fixed Allowances: For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following will be used as fixed quantities and allowances:

Taxi-Out:

Fuel [*CTR]

Takeoff and Climbout Maneuver:

Fuel [*CTR]

Distance [*CTR]

Approach and Landing Maneuver:

Fuel [*CTR]

Taxi-In (will be consumed from the reserve fuel):

Fuel [*CTR]

Usable reserve fuel remaining upon completion of the approach and landing maneuver: [*CTR]

For information purposes, the reserve fuel is based on [*CTR]

2.3.2 Mission Block Fuel

The block fuel for a stage length of [*CTR] payload using the conditions and operating rules defined below, will not be more than the following guarantee value: [*CTR]

NOMINAL: [*CTR]

TOLERANCE: [*CTR]

GUARANTEE: [*CTR]

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The above payload may require special attention to payload distribution and operational procedures.

Conditions and operating rules:

Stage The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.

Length:

Block Fuel: The block fuel is defined as the sum of the fuel used for taxi-out, takeoff and climbout maneuver, climb, cruise, descent, approach and landing maneuver, and taxi-in.

Takeoff: The airport altitude is [*CTR]

The takeoff gross weight is not limited by the airport conditions.

Climbout Following the takeoff to [*CTR]

Maneuver:

Climb: The Aircraft climbs from the initial climb altitude to [*CTR]

The Aircraft then accelerates at a rate of climb of [*CTR]

The climb continues at the recommended climb speed for minimum block fuel to the final climb altitude.

The temperature is standard day during climb.

Maximum climb thrust is used during climb.

Cruise: The Aircraft cruises at the Long Range Cruise (LRC) speed.

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	The Aircraft cruises at [*CTR] The temperature is [*CTR] The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at [*CTR]
	Throughout the descent, the cabin pressure is controlled to a [*CTR] The temperature is standard day during descent. Minimum flight idle thrust is used during descent.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending flaps and landing gear, then descends and lands.
	The destination is a [*CTR]
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following will be used as fixed quantities and allowances:
	Taxi-Out: Fuel [*CTR] Takeoff and Climbout Maneuver: Fuel [*CTR] Distance [*CTR] Approach and Landing Maneuver: Fuel [*CTR]

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Taxi-In (will be consumed from the reserve fuel):

Fuel [*CTR]

Usable reserve fuel remaining upon completion of the approach and landing maneuver: [*CTR]

For information purposes, the reserve fuel is based on a [*CTR]

2.3.3 Mission Payload

The payload for a stage length of [*CTR] using the conditions and operating rules defined below, will not be less than the following guarantee value:

NOMINAL: [*CTR]

TOLERANCE: [*CTR]

GUARANTEE: [*CTR]

The above payload may require special attention to payload distribution and operational procedures.

Conditions and operating rules:

Stage The stage length is defined as the sum of the distances for the climbout maneuver, climb, cruise, and descent.

Length:

Takeoff:   The airport altitude is [*CTR]

The airport temperature is [*CTR]

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The takeoff [*CTR]

The takeoff distance available (TODA) is [*CTR]

The accelerate-stop distance available [*CTR]

The runway slope is [*CTR]

The following obstacle definition is based on a straight out departure where obstacle height and distance are specified with reference to the liftoff end of the runway:

	Height	Distance
1.	[*CTR]	[*CTR]
2.	[*CTR]	[*CTR]
3.	[*CTR]	[*CTR]
4.	[*CTR]	[*CTR]

Maximum takeoff thrust is used for the takeoff.

The takeoff gross weight will conform to FAA Regulations. [*CTR]

Climbout Following the takeoff to [*CTR]

Maneuver:

Climb: The Aircraft climbs from the initial climb altitude to [*CTR]

The Aircraft then accelerates at a rate of climb of [*CTR]

The climb continues at the recommended climb speed for minimum block fuel to the final climb altitude.

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	The temperature is [*CTR] climb.
	Maximum climb thrust is used during climb.
Cruise:	The Aircraft cruises at the Long Range Cruise (LRC) speed.
	The Aircraft cruises at [*CTR]
	The temperature is [*CTR] during cruise.
	The cruise thrust is not to exceed maximum cruise thrust except during a step climb when maximum climb thrust may be used.
Descent:	The Aircraft descends from the final cruise altitude at [*CTR]
	Throughout the descent, the cabin pressure is controlled to a maximum rate of descent equivalent to [*CTR]
	The temperature is [*CTR] during descent.
	Minimum flight idle thrust is used during descent.
Approach and Landing Maneuver:	The Aircraft decelerates to the final approach speed while extending flaps and landing gear, then descends and lands.
	The destination airport altitude [*CTR]
Fixed Allowances:	For the purpose of this guarantee and for the purpose of establishing compliance with this guarantee, the following will be used as fixed quantities and allowances:
	Taxi-Out:       Fuel [*CTR]

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Takeoff and Climbout Maneuver:

                                    Fuel [*CTR]

 Distance [*CTR]

Approach and Landing Maneuver:

 Fuel [*CTR]

Taxi-In (will be consumed from the reserve fuel):

 Fuel [*CTR]

Usable reserve fuel remaining upon completion of the approach and landing maneuver: 4,766 kilograms

For information purposes, the reserve fuel is based on a standard day temperature and [*CTR]

2.3.4     Operational Empty Weight Basis

              The Operational Empty Weight (OEW) derived in paragraph 2.3.5 is the basis for the mission guarantees of paragraphs

              2.3.1 through 2.3.3.

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2.3.5 737-10 Weight Summary—Xiamen Airlines

	Kilograms
Standard Model Specification Manufacturer’s Empty Weight (MEW)	[*CTR]
Configuration Specification D019A008, Rev. P, Dated May 1, 2017
230 Tourist Class Passengers
CFM LEAP-1B Engines
[*CTR] Maximum Taxi Weight
Changes for Xiamen Airlines	[*CTR]
Interior Change to 200 Passengers (8 FC / 192 TC) * (Ref: LOPA—B3714326) Boeing Sky Interior 198,400 lb (89,992 kg) Maximum Taxi Weight	[*CTR]
Overhead Video System with BC In-Seat AVOD / Power Outlets Dual HF / Triple VHF Communications SATCOM Head-Up Display (HUD) Flight Deck Entry Video Surveillance Extended Operations (ETOPS) Standby Power - [*CTR] Heavy Duty Cargo Compartment Linings/Panels Centerline Overhead Stowage Compartments ( [*CTR] Customer Options Allowance	[*CTR] [*CTR] [*CTR] [*CTR] [*CTR] [*CTR] [*CTR] [*CTR] [*CTR] [*CTR]
Xiamen Airlines MEW	[*CTR]
Standard and Operational Items Allowance   (Paragraph 2.3.6)	[*CTR]
Xiamen Airlines OEW	[*CTR]

	Quantity	Kilograms	Kilograms
* Seat Weight Included:			[*CTR]
First Class Double	[*CTR]	[*CTR]
Tourist Class Triple	[*CTR]	[*CTR]
Tourist Class Triple w/3 In-Arm Food Trays	[*CTR]	[*CTR]
Tourist Class Triple w/1 In-Arm Food Tray	[*CTR]	[*CTR]
Tourist Class Double	[*CTR]	[*CTR]

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2.3.6 Standard and Operational Items Allowance

	Quantity	Kilograms			Kilograms		Kilograms
								[*CTR]
Standard Items Allowance								[*CTR]
Unusable Fuel						[*CTR]
Oil						[*CTR]
Oxygen Equipment						[*CTR]
Miscellaneous Equipment						[*CTR]
Galley Structure & Fixed Inserts
Operational Items Allowance								[*CTR]
Crew and Crew Baggage						[*CTR]
Flight Crew	[*CTR]		[	*CTR]
Cabin Crew	[*CTR]		[	*CTR]
[*CTR] Bags & Manuals	[*CTR]		[	*CTR]
Catering Allowance & Removable Inserts						[*CTR]
First Class	[*CTR]		[	*CTR]
Tourist Class	[*CTR]		[	*CTR]
Service Carts (9 Full Size & 7 Half Size)			[	*CTR]
Passenger Service Equipment	[*CTR]					[*CTR]
Potable Water [*CTR]						[*CTR]
Waste Tank Disinfectant						[*CTR]
Emergency Equipment (Including Overwater Equipment)						[*CTR]
Total Standard and Operational Items Allowance								[*CTR]

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Page 14

3	AIRCRAFT CONFIGURATION
3.1	The guarantees contained in this Attachment are based on the Aircraft configuration as defined in D019A008, Revision P, “Configuration Specification, Model 737-7, 737-8, 737-8200, 737- 9, 737-10”, dated May 1, 2017, plus any changes mutually agreed upon or otherwise allowed by the Purchase Agreement to be incorporated into the Customer’s Detail Specification (herein referred to as the Detail Specification). Appropriate adjustment will be made for changes in such Detail Specification approved by the Customer and Boeing or otherwise allowed by the Purchase Agreement which cause changes to the flight performance and/or weight and balance of the Aircraft. Such adjustment will be accounted for by Boeing in its evidence of compliance with the guarantees.
3.2	The guarantee payloads of paragraphs 2.3.1 and 2.3.3, and the specified payload of the paragraph 2.3.2 block fuel guarantee will be adjusted by Boeing for the effect of the following on OEW in its evidence of compliance with the guarantees:
	(1) Changes to the Detail Specification or any other changes mutually agreed upon between the Customer and Boeing or otherwise allowed by the Purchase Agreement.
	(2) The difference between the component weight allowances given in Appendix E of the Detail Specification and the actual weights.
4	GUARANTEE CONDITIONS
4.1	All guaranteed performance data are based on the International Standard Atmosphere (ISA) and specified variations therefrom; altitudes are pressure altitudes.
4.2	For the purposes of these 737-10 guarantees the Federal Aviation Administration (FAA) regulations referred to in this Attachment are, unless otherwise specified, 14 CFR Part 25 effective February 1, 1965, including Amendments 25-1 through 25-141 with the exceptions permitted by 14CFR21.101.
4.3	In the event a change is made to any law, governmental regulation or requirement, or in the interpretation of any such law, governmental regulation or requirement that affects the certification basis for the Aircraft as described in Paragraph 4.2, and as a result thereof, a change is made to the configuration and/or the performance of the Aircraft in order to obtain certification, the guarantees set forth in this Attachment will be appropriately modified to reflect any such change.

P.A. No. 03807
AERO-B-BBA4-M17-0875A		SS17-0631
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1704709

LEAP-1B27 Engines

Page 15

4.4 [*CTR]

4.5 [*CTR]

4.6 [*CTR]

4.7 [*CTR]

4.8 Performance, where applicable [*CTR]

5	GUARANTEE COMPLIANCE
5.1	Compliance with the guarantees of Section 2 will be based on the conditions specified in those sections, the Aircraft configuration of Section 3 and the guarantee conditions of Section 4.

P.A. No. 3807
AERO-B-BBA4-M17-0875A		SS17-0631
	BOEING PROPRIETARY

Attachment to Letter Agreement

No. LA-1704709

LEAP-1B27 Engines

Page 16

5.2	Compliance with the takeoff and landing guarantees and the takeoff portion of the mission guarantee will be based on the FAA-approved Airplane Flight Manual for the Model 737-10.
5.3	Compliance with the climb, cruise and descent portions of the mission guarantees will be established by calculations based on flight test data obtained from an aircraft in a configuration similar to that defined by the Detail Specification.
5.4	Compliance with the mission block fuel guarantees may exceed the design weights in the FAA-approved Airplane Flight Manual for convenience of calculating block fuel for the specified payload. Such exceedance is not to be construed as authorization to operate the aircraft above the weights in the FAA-approved Airplane Flight Manual.
5.5	The OEW used for compliance with the mission guarantees will be the actual MEW plus the Standard and Operational Items Allowance in Appendix E of the Detail Specification.
5.6	The data derived from tests will be adjusted as required by conventional methods of correction, interpolation or extrapolation in accordance with established engineering practices to show compliance with these guarantees.
5.7	Compliance will be based on the performance of the airframe and engines in combination, and will not be contingent on the engine meeting its manufacturer’s performance specification.

6 EXCLUSIVE GUARANTEES

The only performance guarantees applicable to the Aircraft are those set forth in this Attachment.

P.A. No. 3807
AERO-B-BBA4-M17-0875A		SS17-0631
	BOEING PROPRIETARY

XIA-PA-03807-LA-1704710

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject:	Performance Guarantee Remedies – Table 1C 737-10 Aircraft
Reference:	Purchase Agreement No. PA-03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen Airlines (Customer) relating to Model 737 MAX Aircraft

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

The Attachment to Letter Agreement No. XIA-PA-03807-LA-1704709 contains performance guarantees for the Aircraft (Performance Guarantees).

For the purposes of this Letter Agreement, the defined term Aircraft shall mean the Boeing model 737-10 aircraft shown on Table 1C.

1. Block Fuel Commitment

Section 2.3.2 of the Performance Guarantees contains the block fuel commitments (BFC) for the Aircraft. The BFC for the Aircraft is based on the assumptions, conditions and operating rules described in the Performance Guarantees.

1.1 Compliance with the Block Fuel Commitment. Boeing will determine compliance with the BFC as described in Section 5 of the Performance Guarantees. Such determination will be based on Customer’s first Aircraft and engineering interpretations and calculations pursuant to Article 5.4 of the AGTA (BF Standard Method of Compliance). Boeing will provide a compliance report using the BF Standard Method of Compliance (BF Compliance Report) to Customer at the time of delivery of Customer’s first Aircraft. The BF Compliance Report will contain the demonstrated block fuel (DBF) for the Aircraft. Deviation from the BFC will be calculated using the following formula:

[*CTR]

Boeing will provide a BF Compliance Report, as required, for subsequently delivered Aircraft in the event such Aircraft fails to meet the applicable BFC.

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1.2 Block Fuel Remedies [*CTR]

1.2.1 [*CTR] from the delivery of the Aircraft, Boeing or the engine manufacturer may design airframe improvement parts or engine improvement parts (Block Fuel Improvement Parts) which, when installed on such Aircraft, would reduce or eliminate the BFD.

(i) Block Fuel Improvement Parts may include, but are not limited to, the following: airplane drag improvement parts, engine fuel flow improvement parts.

(ii) If Boeing elects to provide, or to cause to be provided, Block Fuel Improvement Parts for such Aircraft, then Customer and Boeing will mutually agree upon the details of a Block Fuel Improvement Parts program. Block Fuel Improvement Parts [*CTR]

(iii) If Customer elects to install Block Fuel Improvement Parts in such Aircraft, then the parts will be installed within ninety (90) days after the delivery of such Block Fuel Improvement Parts to Customer if such installation can be accomplished during Aircraft line maintenance. Block Fuel Improvement Parts which cannot be installed during Aircraft line maintenance will be installed [*CTR]. All Block Fuel Improvement Parts will be installed in accordance with Boeing and the engine manufacturer instructions.

(iv) Boeing will provide or will cause the engine manufacturer to provide reimbursement of Customer’s reasonable Direct Labor and Direct Material costs to install Block Fuel Improvement Parts [*CTR]. Boeing or the engine manufacturer, as applicable, will give Customer reasonable advance written notice of the estimated on-dock date at Customer’s maintenance base for any such Block Fuel Improvement Parts.

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1.2.2 If [*CTR] delivery of each Aircraft, Boeing or the engine manufacturer has not eliminated the applicable BFD by providing Block Fuel Improvement Parts in accordance with Paragraph 1.2.1 above and, if Block Fuel Improvement Parts have been provided, Customer has elected not to install such Block Fuel Improvement Parts in accordance with Paragraph 1.2.1 above, then Boeing will issue to Customer a Fuel Bum Credit Memorandum (FBCM). The amount of the FBCM will be calculated using the following formula:

[*CTR]

The BFD used to calculate the FBCM will be adjusted for the availability of fuel bum improvement resulting from the development of Block Fuel Improvement Parts as described in Paragraph 1.2.1 above. [*CTR] he amount of the FBCM issued for each Aircraft will not exceed the aggregate sum of [*CTR]).

1.3 Applicability of Block Fuel Remedies.

1.3.1 If an applicable BFD exists at the delivery of the Customer’s first Aircraft, then Boeing will provide the remedies described in Paragraph 1.2 above for the first Aircraft and for each subsequent Aircraft delivered to Customer until such time as Boeing improves the fuel burn performance for the model 737-10 aircraft to reduce or eliminate the BFD.

1.3.2 If Boeing improves the fuel burn performance to reduce or eliminate a BFD, then Boeing will calculate the amount of performance improvement based on data certified to be correct by Boeing. The amount of such improvement will be deemed to be the amount of improvement as calculated using reasonable engineering interpretations based on data furnished pursuant to Article 5.4 of the AGTA and data furnished pursuant to this Paragraph 1.3.2 in accordance with Boeing’s Standard Method of Compliance.

1.3.3 Following Boeing’s completion of the analysis described in Paragraph 1.3.2 above, Boeing will provide Customer with a new BF Compliance Report. Such new BF Compliance Report will be applicable to any undelivered Aircraft. If the new BF Compliance Report still shows a BFD, then the remedies contained in Paragraph 1.2 above will apply to the undelivered Aircraft until Boeing may further improve the fuel burn performance. If the new BF Compliance Report shows no remaining BFD then no further remedy will be due to Customer for any undelivered Aircraft.

2. Mission Payload Commitment.

Section 2.3.1 and Section 2.3.3 of the Performance Guarantees contains the mission payload commitment (MPC) for the Aircraft. The MPC is based on the assumptions, conditions, and operating rules described in the Performance Guarantees. The Adjusted Mission Payload Commitment (AMPC) is defined as the MPC adjusted for changes to the airplanes as discussed in Section 5 of the Performance Guarantees.

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Compliance with the Mission Payload Commitment. Boeing will determine compliance with the Mission Payload Commitment as described in Section 5 of the Performance Guarantees and based on Customer’s first Aircraft, and engineering interpretations and calculations pursuant to Article 5.4 of the AGTA (MP Standard Method of Compliance). Boeing will provide a compliance report using the MP Standard Method of Compliance (MP Compliance Report) to Customer at the time of delivery of Customer’s first Aircraft. The MP Compliance Report contains the demonstrated mission payload (DMP) for the MPC. Deviation from the MPC will be calculated using the following formula:

[*CTR] a MP Compliance Report, as required, for subsequently delivered Aircraft in the event such Aircraft fails to meet the applicable MPC.

2.1 Mission Payload Remedies. If the MPD for Customer’s first Aircraft is less than or equal to zero, then all Aircraft will be deemed to comply with the MPC and no remedy will be required. However, if the MP Compliance Report shows an MPD greater than or equal to zero, then Boeing will provide Customer with the following remedies:

2.1.1 Within one year from the delivery of the Aircraft, Boeing or the engine manufacturer may design airframe improvement parts and/or engine improvement parts (Mission Payload Improvement Parts) which, when installed on such Aircraft, would reduce or eliminate the MPD.

(i) Mission Payload Improvement Parts may include, but are not limited to, the following: [*CTR]

(ii) If Boeing elects to provide, or to cause to be provided by the engine manufacturer, Mission Payload Improvement Parts for such Aircraft, [*CTR]

(iii) If Customer elects to install Mission Payload Improvement Parts on such Aircraft [*CTR] to Customer if such installation can be accomplished during Aircraft line maintenance. Mission Payload Improvement Parts which

cannot be installed during Aircraft line maintenance will be installed [*CTR]. All Mission Payload Improvement Parts will be installed in accordance with Boeing and the engine manufacturer instructions.

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(iv) Boeing will provide or will cause the engine manufacturer to provide reimbursement of Customer’s reasonable Direct Labor and Direct Material costs to install Mission Payload Improvement Parts at [*CTR] Boeing or the engine manufacturer, as applicable, will give Customer reasonable advance written notice of the estimated on-dock date at Customer’s maintenance base for any such Mission Payload Improvement Parts.

2.1.2 If after one year from delivery of each Aircraft, Boeing or the engine manufacturer has not fully cured the MPD by providing Mission Payload Improvement Parts in accordance with Paragraph 2.1.1 above, then Boeing will issue to Customer a Mission Payload Credit Memorandum (MPCM). The amount of the MPCM will be calculated using the following formula:

[*CTR]

The MPD used to calculate the MPCM will be adjusted for the availability of mission payload improvement resulting from the development of Mission Payload Improvement Parts as described in Paragraph 2.1.1. Issuance of an MPCM for any Aircraft is subject to the limitation of Paragraph 2.2 below. Customer may request that the MPCM be issued as cash or goods and services. The amount of the MPCM issued for each Aircraft will not exceed [*CTR]

2.2 Applicability of Mission Payload Remedies.

2.2.1 If an MPD exists at the time of delivery of the first Aircraft, then Boeing will provide the remedies described in Paragraph 2.1 above for the first Aircraft and for each subsequent Aircraft delivered to Customer until such time as Boeing improves the mission payload performance to reduce or eliminate the MPD.

2.2.2 If Boeing improves the mission payload performance to reduce or eliminate an MPD, then Boeing will calculate the amount of performance improvement based on data certified to be correct by Boeing. The amount of such improvement will be deemed to be the amount of improvement as calculated using reasonable engineering interpretations based on data furnished pursuant to Article 5.4 of the AGTA and data furnished pursuant to this Paragraph 2.2.2 in accordance with Boeing’s Standard Method of Compliance.

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2.3 Following Boeing’s completion of the analysis described in Paragraph 2.2.2 above, Boeing will provide Customer with a new MP Compliance Report. Such new MP Compliance Report will be applicable to any Aircraft yet to be delivered to Customer. If the new MP Compliance Report shows that an MPD still exists, then the remedies contained in Paragraph 2.1 above will apply to the undelivered Aircraft until such time as Boeing may further improve the mission payload performance. If the new MP Compliance Report shows no MPD, then no remedy will be due to Customer for undelivered Aircraft.

3. Rights and Obligations in the Event of a Compliance Deviation.

In the event of a compliance deviation for any Aircraft, at the time Boeing tenders that Aircraft for delivery, Boeing will provide the applicable remedies set forth in Paragraph 1 and 2. Customer cannot refuse to accept delivery of such Aircraft because of such compliance deviation.

4. Duplication of Benefits.

Boeing and Customer agree it is not the intent of the parties to provide benefits hereunder that duplicate the benefits to be provided (a) by Boeing under the Purchase Agreement, or any other agreement between Boeing and Customer, or (b) by the engine manufacturer under any agreement between engine manufacturer and Customer, due to the Aircraft not satisfying any performance metric similar to the Payload Guarantee or any performance metric that otherwise impacts payload. Boeing may offset its obligation to provide benefits hereunder against the benefits provided or to be provided to Customer by the engine manufacturer or Boeing pursuant to such other guarantee.

5. Exclusive Remedy.

Customer agrees that the remedies contained in this Letter Agreement herein are Customer’s exclusive remedies for purposes of resolving all issues with respect to the Performance Guarantees of Customer’s Aircraft and are in lieu of all other rights, remedies, claims and causes of action Customer may have, arising at law or otherwise, in connection therewith and shall constitute complete, full and final settlement and satisfaction of any and all of Boeing’s obligations and liabilities to Customer in connection therewith. Customer releases Boeing and its successors, affiliates and subsidiaries from all present, past and future rights, remedies, claims and causes of action, whether arising at law or otherwise, known or unknown, relating to or arising from such Performance Guarantees.

6. Assignment.

Notwithstanding any other provIs1ons of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer’s becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

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7. Confidential Treatment

Customer understands and agrees that the information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer agrees to limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

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	BOEING PROPRIETARY

Very truly yours,

THE BOEING COMPANY

By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date:
XIAMEN AIRLINES
By
Its

LA-1704710		SA-3
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	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

XIA-PA-03807-LA-1704711

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject:	Special Escalation Program – Table 1B 737-8 and 1C 737-10 Aircraft
Reference:	Purchase Agreement No. PA-03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen Airlines (Customer) relating to Model 737 Aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

1. Definitions.

Escalation Notice means the written communication provided by Boeing to Customer in accordance with the requirements of Article 4.1, below.

Program Aircraft means each Aircraft specified in Table 1B and Table 1C of the Purchase Agreement as of the date of this Letter Agreement. Note: Letter Agreement No. 1301968R1 “Special Escalation Program” only applies to those aircraft on Table 1A which has superseded Table 1.

2. Applicability.

Notwithstanding any other provision of the Purchase Agreement to the contrary, the parties agree that the Escalation Adjustment for the Airframe Price and Optional Features Prices for each Program Aircraft shall be determined in accordance with this Letter Agreement.

3. Escalation Forecast.

Boeing will release an escalation forecast in February and August of each year based on Boeing’s then current standard [*CTR] escalation formula. Only one escalation forecast shall be used to conduct the escalation analysis performed in accordance with Article 4.1, below, for a given Program Aircraft. The escalation forecast applicable to a given Program Aircraft is set forth in Attachment A.

4. [*CTR]

4.1 [*CTR]

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	BOEING PROPRIETARY

4.1.1 [*CTR]

4.1.2 [*CTR]

4.1.3 If neither 4.1.1 nor 4.1.2 occurs, then [*CTR]

4.2 If Boeing or Customer exercise the option described in Article 4.1.3 above, [*CTR]

4.2.2 Within [*CTR]

4.2.3 [*CTR]

4.3 [*CTR]

5. [*CTR]

If the cumulative annual escalation rate as determined in accordance with Supplemental Exhibit AE1 to the Purchase Agreement is [*CTR]

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	BOEING PROPRIETARY

6. [*CTR]

7. [*CTR]

8. Applicability to Other Financial Consideration

The escalation adjustment for any other sum, identified in the Purchase Agreement as subject to escalation pursuant to Supplemental Exhibit AE1, and which pertains to the Program Aircraft shall be calculated using the escalation methodology established in this Letter Agreement for such Program Aircraft notwithstanding any other provisions of the Purchase Agreement to the contrary.

9. Assignment

Except for an assignment by Customer to a wholly-owned subsidiary as permitted under Article 9, entitled “Assignment, Resale, or Lease” of the AGTA, this Letter Agreement is provided as an accommodation to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned in whole or in part.

10. Confidential Treatment.

Customer understands and agrees that the information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer agrees to limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

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	BOEING PROPRIETARY

Very truly yours,

THE BOEING COMPANY

By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date:
XIAMEN AIRLINES
By
Its

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	BOEING PROPRIETARY

ATTACHMENT A

Escalation Forecast & Escalation Notice Date

Escalation Forecast	Applicable to Program Aircraft Delivering in Time Period	Escalation Notice Date
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]
[*CTR]	[*CTR]	[*CTR]

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ATTACHMENT B

Capped Period Escalation Factors - [*CTR]

Delivery Date	[*CTR] Escalation Factors	[*CTR] Escalation Factors	[*CTR] Escalation Factors	[*CTR] Escalation Factors
Aug-19	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Sep-19	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Oct-19	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Nov-19	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Dec-19	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jan-20	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Feb-20	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Mar-20	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Apr-20	[*CTR]	[*CTR]	[*CTR]	[*CTR]
May-20	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jun-20	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jul-20	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Aug-20	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Sep-20	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Oct-20	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Nov-20	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Dec-20	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jan-21	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Feb-21	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Mar-21	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Apr-21	[*CTR]	[*CTR]	[*CTR]	[*CTR]
May-21	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jun-21	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jul-21	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Aug-21	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Sep-21	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Oct-21	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Nov-21	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Dec-21	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jan-22	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Feb-22	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Mar-22	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Apr-22	[*CTR]	[*CTR]	[*CTR]	[*CTR]
May-22	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jun-22	[*CTR]	[*CTR]	[*CTR]	[*CTR]

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Delivery Date	[*CTR] Escalation Factors	[*CTR] Escalation Factors	[*CTR] Escalation Factors	[*CTR] Escalation Factors
Jul-22	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Aug-22	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Sep-22	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Oct-22	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Nov-22	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Dec-22	[*CTR]	[*CTR]	[*CTR]	[*CTR]

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XIA-PA-03807-LA-1704712

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject:	Special Matters – Table 1B 737-8 and Table 1C 737-10 Aircraft
Reference:	Purchase Agreement No. PA-03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen Airlines (Customer) relating to Model 737 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. Credit Memoranda. In consideration of Customer’s purchasing and taking delivery of the Aircraft identified in Table 1B and Table 1C of the Purchase Agreement, at the time of delivery of each such Aircraft, unless otherwise noted, Boeing will provide to Customer the following credit memoranda:

1.1 Model 737-8 Aircraft Credit Memoranda. In consideration of Customer’s purchasing and taking delivery of the Aircraft, at the time of delivery of each such Table 1B Model 737- 8 Aircraft, unless otherwise noted, Boeing will provide to Customer the following credit memoranda listed in paragraphs 1.1.1 through 1.1.8 below:

1.1.1 Basic Credit Memorandum. Boeing will issue to Customer a basic credit memorandum (Basic Credit Memorandum) in an amount of [*CTR].

1.1.2 Loyal Customer Credit Memorandum. For Customer’s continued loyalty to Boeing, Boeing will issue to Customer a loyal customer credit memorandum (Loyal Customer Credit Memorandum) in an amount of [*CTR]

1.1.3 Additional MAX Credit Memorandum. For Customer’s purchase of an additional thirty (30) Model 737 MAX series aircraft, Boeing will issue to Customer an additional MAX credit memorandum (Additional MAX Credit Memorandum) in an amount of [*CTR]).

1. 1.4 Training and Services Credit Memorandum. For Customer’s purchase of an additional thirty (30) Model 737 MAX series aircraft, Boeing will issue to Customer a training and service credit memorandum (Training and Services Credit Memorandum) in an amount of [*CTR]

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1.1.5 Fleet Disposition Credit Memorandum. Boeing will issue to Customer a fleet disposition credit memorandum (Fleet Disposition Credit Memorandum) in an amount of [*CTR]

1.1.6 Special Credit Memorandum. Boeing will issue to Customer a special credit memorandum (Special Credit Memorandum) in an amount of [*CTR].

1.1.7 Executive Closing Credit Memorandum. Boeing will issue to Customer an executive closing credit memorandum (Executive Closing Credit Memorandum) in an amount of [*CTR]

1.1.8 737-8 Special Thrust Credit Memorandum. In consideration of Customer’s purchase of the Table 1B Aircraft and subject to Customer’s purchase of [*CTR] for applicable Table 1B Aircraft, Boeing will provide to Customer a 737-8 special thrust credit memorandum (737-8 Special Thrust Credit Memorandum) in an amount o [*CTR] ustomer must provide sufficient lead time for the thrust to be incorporated prior to delivery.

1.2 Model 737- 10 Aircraft Credit Memoranda. In consideration of Customer’s purchase of the Aircraft, at the time of delivery of each such Table 1C Model 737-10 Aircraft, unless otherwise noted, Boeing will provide to Customer the following credit memoranda listed in paragraphs 1.2.1 through 1.2.8:

1.2.1 Basic Credit Memorandum. Boeing will issue to Customer a basic credit memorandum (Basic Credit Memorandum) in an amount of [*CTR].

1.2.2 Customer Loyalty Credit Memorandum. For Customer’s continued loyalty to Boeing, Boeing will issue to Customer a customer loyalty credit memorandum (Customer Loyalty Credit Memorandum) in an amount of [*CTR]

1. 2.3 Training and Services Credit Memorandum. For Customer’s purchase of an additional thirty (30) Model 737 MAX series aircraft, Boeing will issue to Customer a training and service credit memorandum (Training and Services Credit Memorandum) in an amount of [*CTR]

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1.2.4 China Launch Customer for 737-10 Credit Memorandum. For Customer being the launch customer in China of the Model 737-10 aircraft and making an announcement at the Paris Airshow in June 2017, for Customer’s intent to make this purchase, Boeing will issue to Customer a China launch customer for 737-10 credit memorandum (China Launch Customer for 737-10 Credit Memorandum) in an amount of [*CTR]

1.2.5 Fleet Disposition Credit Memorandum. Boeing will issue to Customer a fleet disposition credit memorandum (Fleet Disposition Credit Memorandum) in an amount of [*CTR]

1.2.6 Special Credit Memorandum. Boeing will issue to Customer a special credit memorandum (Special Credit Memorandum) in an amount of [*CTR]

1.2.7 Executive Closing Credit Memorandum. Boeing will issue to Customer an executive closing credit memorandum (Executive Closing Credit Memorandum) in an amount of [*CTR].

1.2.8 737-10 Thrust Credit Memorandum. Should Customer purchase increased thrust for the 737- 10 model aircraft, increasing the thrust from CFM 1B27 to CFM 1B28 Boeing will issue to Customer a 737-10 thrust credit memorandum (737-10 Thrust Credit Memorandum) in an amount of Nine Hundred and Nine Thousand U.S. Dollars ($909,000). This credit memorandum is only available for the purchase of the increased CFM 1B27 to the CFM 1B28 thrust.

2. Escalation of Credit Memoranda.

Unless otherwise noted, the credit memoranda amounts in paragraphs 1.1.1 through 1.1.8 and 1.2.1 through 1.2.8 are [*CTR] and will be escalated to the scheduled delivery month pursuant to the Airframe Escalation formula set forth in the Purchase Agreement applicable to the respective Aircraft. Customer may apply the credit memoranda (i) against the Aircraft Price of the respective Aircraft at the time of delivery; or (ii) against the purchase of other Boeing goods and services; but not for advance payments.

3. Additional Business Considerations.

3.1 [*CTR]

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	BOEING PROPRIETARY

3.2 Subject [*CTR]

3.3 [*CTR]

3.4 The credit memoranda amounts in paragraphs 3.1 and 3.2 are in [*CTR] Customer may apply the credit memoranda (i) against the Aircraft Price of the respective Aircraft at the time of delivery; or (ii) against the purchase of other Boeing goods and services; but not for advance payments.

3.5 The credit memorandum amounts in paragraphs 3.3 are in [*CTR] and will be escalated to the scheduled delivery month pursuant to the Airframe Escalation formula set forth in the Purchase Agreement applicable to the respective Aircraft. Customer may apply the credit memoranda (i) against the Aircraft Price of the respective Aircraft at the time of delivery; or (ii) against the purchase of other Boeing goods and services; but not for advance payments.

4. [*CTR]

[*CTR]

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	BOEING PROPRIETARY

5. Currency.

All monetary amounts shown in this Letter Agreement are in United States Dollars.

6. Assignment.

Unless otherwise noted herein, the Credit Memoranda described in this Letter Agreement are provided as a financial accommodation to Customer and in consideration of Customer’s taking title to the Aircraft at time of delivery and becoming the operator of the Aircraft. This Letter Agreement cannot be assigned, in whole or in part, without the prior written consent of Boeing.

7. Confidentiality.

Customer understands and agrees that the information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer agrees to limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

LA-1704712		SA-3
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	BOEING PROPRIETARY

Very truly yours,

THE BOEING COMPANY

By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date:
XIAMEN AIRLINES
By
Its

LA-1704712		SA-3
Special Matters – Table 1B 737-8 and 1C 737-10 Aircraft		Page 6
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

XIA-PA-03807-LA-1704713

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject:	Open Configuration Matters – Table 1C 737-10 Model Aircraft
Reference:	Purchase Agreement No. 03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen Airlines (Customer) relating to Model 737 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. Aircraft Configuration.

1.1 Initial Configuration. The initial configuration of the Table 1C 737-10 Model Aircraft is defined by Boeing Model 737-10 Detail Specification D019A008, Revision O, dated September 30, 2016. Due to the long period of time between Purchase Agreement signing and delivery of the first Aircraft, the final configuration of the Aircraft will be completed as described below.

1.2 Final Configuration. The Table 1C 737-10 Model Aircraft configuration will be completed using the Boeing then- current basic model aircraft configuration documentation applicable to the Table 1C 737-10 Model Aircraft. Boeing and Customer will incorporate certain other configuration changes into the Table 1C 737-10 Model Aircraft as such changes are offered by Boeing and accepted by Customer (Final Configuration) in accordance with the following schedule:

1.2.1 [*CTR] Boeing and Customer will meet to discuss potential optional features.

1.2.2 [*CTR] with a proposal for those optional features that can be incorporated into the Table 1C 737-10 Model Aircraft during production.

1.2.3 [*CTR] the optional features.

2. Effect on Purchase Agreement.

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2.1 Following Final Configuration, Boeing will provide a written amendment to the Purchase Agreement (Amendment). Customer will execute the Amendment within [*CTR] addressing the items below:

2.1.1 Changes to the basic model aircraft which are applicable to the Table 1C 737-10 Model Aircraft and have been developed by Boeing between the date of signing of the Purchase Agreement and date of Final Configuration;

2.1.2 Optional features accepted by Customer pursuant to Article 1.2 above (Customer Configuration Changes);

2.1.3 Update the Table 1C 737-10 Model Aircraft configuration definition contained in Exhibit A3 of the Purchase Agreement and referenced in Table 1C of the Purchase Agreement; and

2.1.4 Update the prices contained in Table 1C of the Purchase Agreement to adjust for the difference, [*CTR]

2.2 Revisions to the Performance Guarantees may be included in the Amendment when such Customer Configuration Changes have a significant effect on Table 1C 737- 10 Model Aircraft performance, otherwise such performance impact will be addressed at the time Boeing demonstrates compliance to the Performance Guarantees.

2.3 [*CTR]

3. Other Letter Agreements.

As the definition of the Table 1C 737-10 Model Aircraft progresses, there may be a need to execute additional letter agreements addressing one or more of the following subjects:

3.1 Software. Additional provisions relating to software.

3.2 Installation of Cabin Systems Equipment. Additional provisions relating to the terms under which Boeing will offer and install in-flight entertainment systems in the Table 1C 737-10 Model Aircraft.

3.3 Seller Purchased Equipment (SPE) and/or Buyer Furnished Equipment (BFE). Provisions relating to the terms under which Boeing may offer or install SPE and/or BFE in the Table 1C 737-10 Model Aircraft.

LA-1704713		SA-3
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	BOEING PROPRIETARY

Very truly yours,

THE BOEING COMPANY

By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date:
XIAMEN AIRLINES
By
Its

LA-1704713		SA-3
Open Configuration Matters – Table 1C 737-10 Model Aircraft		Page 3
	BOEING PROPRIETARY

	The Boeing Company
	P.O. Box 3707
	Seattle, WA 98124 2207

XIA-PA-03807-LA-1705506

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject:	Aircraft Model Substitution – Table 1B 737-8 Aircraft
Reference:	Purchase Agreement No. 03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen Airlines (Customer) relating to Model 737 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

Customer may substitute the purchase of Boeing Model 737- 7 Aircraft, Boeing Model 737-9 Aircraft, Boeing Model 737-10 Aircraft or Boeing Model 737-8200 Aircraft (Substitute Aircraft) in place of Table 1B Aircraft with the scheduled month of delivery [*CTR] subject to the following terms and conditions:

1. Customer’s Written Notice.

Customer shall provide written notice of its intention to substitute the purchase of an Aircraft with the purchase of a Substitute Aircraft,

(i) [*CTR]

(ii) [*CTR]

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BOEING PROPRIETARY

2. Boeing’s Production Capability.

2.1 Customer’s substitution right is conditioned upon Boeing having production capability for the Substitute Aircraft in the same scheduled delivery month as the Aircraft for which it will be substituted. Boeing will provide a written response to Customer’s notice of intent indicating whether or not Boeing’s production capability will support the scheduled delivery month.

2.2 If Boeing, after making good faith effort to retain the same scheduled delivery month, is unable to manufacture the Substitute Aircraft in the same scheduled delivery month as the Aircraft for which it will be substituted, then Boeing shall promptly make a written offer of an alternate delivery month for Customer’s consideration and written acceptance within [*CTR]

2.3 All of Boeing’s quoted delivery positions for Substitute Aircraft shall be considered preliminary until such time as the parties enter into a definitive agreement in accordance with paragraph 4 below.

3. [*CTR]

[*CTR]

4. Definitive Agreement.

Customer’s substitution right and Boeing obligation in this Letter Agreement are further conditioned upon Customer and Boeing’s executing a definitive agreement for the purchase of the Substitute Aircraft [*CTR] of Customer’s substitution notice to Boeing or of Customer’s acceptance of an alternate delivery month in accordance with paragraph 2 above.

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	BOEING PROPRIETARY

5. Price and Advance Payments.

5.1    [*CTR]

5.2    [*CTR]

5.3    [*CTR]

6. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer’s becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

7. Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

LA-1705506		SA-3
Aircraft Model Substitution – Table 1B 737-8 Aircraft		Page 3
	BOEING PROPRIETARY

Very truly yours,

THE BOEING COMPANY
By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date:
XIAMEN AIRLINES
By
Its

LA-1705506		SA-3
Aircraft Model Substitution – Table 1B 737-8 Aircraft		Page 4
	BOEING PROPRIETARY

XIA-PA-03807- LA-1705511

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject:	Liquidated Damages – Non-Excusable Delay – Table 1B 737-8 and 1C 737-10 Aircraft
Reference:	Purchase Agreement No. 03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen Airlines (Customer) relating to Model 737 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement with regards to Table 1B 737-8 and Table 1C 737-10 Aircraft only. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

Definition of Terms:

Non-Excusable Delay: Delay in delivery of any Table 1B 737-8 or Table 1C 737-10 Aircraft beyond the last day of the delivery month (Scheduled Delivery Month) established in the Purchase Agreement by any cause that is not an Excusable Delay pursuant to Article 7 of the AGTA and for which Customer is otherwise entitled to a remedy from Boeing pursuant to applicable law.

1. Liquidated Damages.

Boeing agrees to pay Customer liquidated damages for each day of Non-Excusable Delay [*CTR] (collectively the Non-Excusable Delay Payment Period). [*CTR]

2. Interest.

In addition to the Liquidated Damages in section 1, for each day of Non-Excusable Delay [*CTR] the Scheduled Delivery Month, Boeing will pay Customer interest calculated as follows (Interest):

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The product of the daily interest rate, computed by dividing the interest rate in effect for each day [*CTR] times the entire amount of advance payments received by Boeing for such Aircraft. The interest rate in effect for each day shall be computed using the [*CTR]

3. [*CTR]

4. Return of Advance Payments.

If the Purchase Agreement is terminated with respect to any Aircraft for a Non-Excusable Delay, Boeing will, in addition to paying Liquidated Damages and Interest as described above, [*CTR]

5. Exclusive Remedies.

The remedies set forth in this Letter Agreement are Customer’s exclusive remedies for a Non-Excusable Delay and are in lieu of all other damages, claims, and remedies of Customer arising at law or otherwise for any Non-Excusable Delay in the Aircraft delivery. Customer hereby waives and renounces all other claims and remedies arising at law or otherwise for any such Non-Excusable Delay.

6. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned, in whole or in part, without the prior written consent of Boeing.

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	BOEING PROPRIETARY

7. Confidentiality.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

LA-1705511		SA-3
Liquidated Damages Non-Excusable Delay – Table 1B 737-8 and 1C 737-10 Aircraft		Page 3
	BOEING PROPRIETARY

Very truly yours,

THE BOEING COMPANY
By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date:
XIAMEN AIRLINES
By
Its

LA-1705511		SA-3
Liquidated Damages Non-Excusable Delay – Table 1B 737-8 and 1C 737-10 Aircraft		Page 4
	BOEING PROPRIETARY

	The Boeing Company
	P.O. Box 3707
	Seattle, WA 98124-2207

XIA-PA-03807-LA-1705512

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject:	Promotional Support – Table 1C 737-10 Aircraft
Reference:	Purchase Agreement No. 03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen Airlines (Customer) relating to Model 737 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

Boeing and Customer wish to enter into an agreement pursuant to which each party will contribute equally to promotional programs in support of the entry into service of the Aircraft as more specifically provided below.

1. Definitions.

1.1 Commitment Limit will have the meaning set forth in Article 2, below.

1.2 Covered Aircraft will mean those Aircraft identified on Table 1C 737-10 to the Purchase Agreement as of the date of signing of this Letter Agreement, this letter agreement will not apply to aircraft that are substituted to 737-8 aircraft.

1.3 [*CTR]

1.4 Promotional Support will mean mutually agreed marketing and promotion programs that promote the entry into service of the Covered Aircraft such as marketing research, tourism development, corporate identity, direct marketing, videotape or still photography, planning, design and production of collateral materials, management of promotion programs, advertising campaigns or such other marketing and promotional activities as the parties may mutually agree.

1.5 [*CTR]

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2. Commitment.

As more particularly set forth in this Letter Agreement, Boeing agrees to provide Promotional Support to Customer during the Performance Period in a value not to [*CTR]

3. Methods of Performance.

3.1 Subject to the Commitment Limit, [*CTR]

3. 2 Notwithstanding the above, at Customer’s request and subject to a mutually agreed project, Boeing will provide certain Promotional Support during the Performance Period directly to Customer. [*CTR]

3.3 In the event Customer does not [*CTR] Boeing will have no further obligation to Customer for such unused Commitment Limit or to reimburse Customer for such Qualifying Third Party Fees, respectively.

4. Project Approval.

Following the execution of this Letter Agreement,

5. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned, in whole or in part, without the prior written consent of Boeing.

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	BOEING PROPRIETARY

6. Confidentiality.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

LA-1705512		SA-3
Promotional Support – Table 1C 737-10 Aircraft		Page 3
	BOEING PROPRIETARY

Very truly yours,
THE BOEING COMPANY
By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date:
XIAMEN AIRLINES
By
Its

LA-1705512		SA-3
Promotional Support –Table 1C 737-10 Aircraft		Page 4
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

XIA-PA-03807-LA-1705513

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject: Aircraft Model Substitution – Table 1C 737-10 Aircraft

Reference: Purchase Agreement No. 03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen Airlines (Customer) relating to Model 737 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

Customer may substitute the purchase of Boeing Model 737- 7 Aircraft, Boeing Model 737-8 Aircraft, Boeing Model 737- 9 Aircraft or Boeing Model 737-8200 Aircraft (Substitute Aircraft) in place of Table 1C 737-10 Aircraft which has been slid subject to the slide rights as defined in LA-1704712, Article 4, and subject to the following terms and conditions:

1. Customer’s Written Notice.

Customer shall provide written notice of its intention to substitute the purchase of an Aircraft with the purchase of a Substitute Aircraft,

(i) [*CTR]

(ii) [*CTR]

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2. Boeing’s Production Capability.

2.1 Customer’s substitution right is conditioned upon Boeing having production capability for the Substitute Aircraft in the same scheduled delivery month as the Aircraft for which it will be substituted. Boeing will provide a written response to Customer’s notice of intent indicating whether or not Boeing’s production capability will support the scheduled delivery month.

2.2 If Boeing, after making good faith effort to retain the same scheduled delivery month, is unable to manufacture the Substitute Aircraft in the same scheduled delivery month as the Aircraft for which it will be substituted, then Boeing shall promptly make a written offer of an alternate delivery month for Customer’s consideration and written acceptance within thirty days of such offer.

2.3 All of Boeing’s quoted delivery positions for Substitute Aircraft shall be considered preliminary until such time as the parties enter into a definitive agreement in accordance with paragraph 4 below.

3. [*CTR]

[*CTR]

4. Definitive Agreement.

Customer’s substitution right and Boeing obligation in this Letter Agreement are further conditioned upon Customer and Boeing’s executing a definitive agreement for the purchase of the Substitute Aircraft [*CTR] Customer’s substitution notice to Boeing or of Customer’s acceptance of an alternate delivery month in accordance with paragraph 2 above.

5. Price and Advance Payments.

5.1 [*CTR]

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	BOEING PROPRIETARY

5.2 [*CTR]

5.3 [*CTR]

6. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer’s becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

7. Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

LA-1705513		SA-3
Aircraft Model Substitution – Table 1C 737-10 Aircraft		Page 3
	BOEING PROPRIETARY

Very truly yours,
THE BOEING COMPANY
By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date:
XIAMEN AIRLINES
By
Its

LA-1705513		SA-3
Aircraft Model Substitution – Table 1C 737-10 Aircraft		Page 4
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

XIA-PA-03807-LA-1705514

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject: Delivery Flight Fuel Mileage Verification – 737-10 Model Aircraft

Reference: a) Purchase Agreement No. PA-03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen Airlines (Customer) relating to Model 737-10 aircraft (Aircraft)

b) Attachment to Aero-B-BBA6-M13-0551, “The determination of cruise fuel mileage by flight testing Boeing commercial production airplanes”, dated TBD.

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

In this offer, the term “Aircraft” means the first Boeing model 737-10 aircraft delivered to Customer under the Purchase Agreement.

1. Delivery Flight Performance Evaluation Program.

In order for Boeing to support Customer’s request for delivery flight cruise fuel mileage data on the Aircraft, Customer has agreed to allow Boeing employee(s) on its delivery flight of the Aircraft for the purpose of gathering cruise fuel mileage data (Delivery Flight Performance Evaluation Program). Customer will assign a performance engineer to work with the Boeing employee(s) during the delivery flight of the aircraft.

1.1 Statement of Work.

1.1.1 Boeing will provide the services of [*CTR] (Boeing Employees) to accompany the delivery flight of the Aircraft for the purpose of acquiring cruise fuel mileage data (Evaluation Data).

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1.1.2 Boeing will record and analyze Evaluation Data in accordance with the normal engineering practices as detailed in Reference b) and as may be revised by Boeing from time to time.

1.1.2.1 Boeing will use the procedures defined in Reference

b) to collect data and will use reasonable efforts to collect such data during times when atmospheric and airplane stability best meets the criteria set forth in such document.

1.1.2.2 Relevant data will be recorded from airplane systems with appropriate calibration corrections applied to such data. The applicable instruments shall be calibrated in Boeing laboratories or equivalent prior to the test.

1.1.3 The Boeing Employees, working with Customer flight crew [*CTR]

1.1.4 Upon Customer’s request the Boeing Employees will meet with Customer [*CTR]

1.1.5 As soon as [*CTR] Boeing will provide to Customer a final written report for the Aircraft delivery flight, containing a detailed analysis of Evaluation Data.

1.2 Customer Responsibilities. Customer will ensure that the Boeing Employees have the needed access to the flight deck prior to and during the delivery flight and that the customer’s operating crew are briefed on the nature and scope of the Boeing Employees’ responsibilities and methods. The customer is also responsible for acquiring regulatory authority approval for delivery flight use of the laptop computer-based RETINA data acquisition system. Up to two (2) of Customer’s personnel (including at least one performance engineer) may be aboard such flight as witnesses.

1.3 Evaluation Period. The Boeing Employee(s) will obtain Delivery Data on the delivery flight of the Aircraft as specified herein.

2. Price.

The activities described herein are provided by each of the parties at no charge to the other party.

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	BOEING PROPRIETARY

3. Entire Agreement.

This Agreement contains the entire agreement between the parties and supersedes all previous proposals, understandings, commitments or representations whatsoever, oral or written, with respect to the subject matter hereof, and may be changed only in writing signed by authorized representatives of the parties.

4. Confidential Treatment.

Customer understands and agrees that this Letter Agreement is considered by Boeing to be confidential. Customer agrees that it will treat this Letter Agreement and the information contained herein as confidential and will use the same degree of care to prevent unauthorized disclosure to and use of the information contained herein by any third party as Customer would use to prevent disclosure and use of its own data, documents and information of the same or similar nature and which it considers proprietary or confidential.

LA-1705514		SA-3
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	BOEING PROPRIETARY

Very truly yours,
THE BOEING COMPANY
By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date:
Xiamen Airlines
By
Its

LA-1705514		SA-3
Delivery Flight Fuel Verification – 737-10 Model Aircraft		Page 4
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

XIA-PA-03807-LA-1705515

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject: Government Approval Matters – Table 1B and 1C Aircraft

Reference: Purchase Agreement No. PA-03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen Airlines (Customer) relating to Model 737 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

1. Government Approval.

Boeing and Customer both acknowledge that it is necessary for Customer to obtain government approval to import the Aircraft into the People’s Republic of China (Government Approval). Customer agrees to use best efforts to obtain Government Approval and notify Boeing promptly in writing as soon as approval has been obtained. In cooperation with Customer, Boeing shall provide reasonable assistance to Customer in preparing informational materials relating to the Purchase Agreement and the Aircraft which Customer advises are reasonably required for the Government Approval process. Customer shall advise Boeing as soon as practical of the specific assistance which Customer plans to request from Boeing.

2. Flexibility.

Boeing and Customer shall work together to ensure the delivery schedule and advance payments as specified in Tables 1B and 1C and paragraph 1 in Letter Agreement XIA-PA-03807-LA-1705516 are met. If Boeing has not received written notification from Customer that Government Approval has been obtained [*CTR]

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	BOEING PROPRIETARY

2.1. [*CTR]

2.1.1. [*CTR]

2.1.2. [*CTR]

2.1.3. [*CTR]

2.1.4. [*CTR]

2.2. [*CTR]

3. Confidential Treatment.

Boeing and Customer understand that certain information contained in this Letter Agreement is considered to be confidential. The parties agree that they will treat this Letter Agreement and the information contained herein as confidential and will not, without the prior written consent of the other party, disclose this Letter Agreement or any information contained herein to any other person or entity.

LA-1705515		SA-3
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	BOEING PROPRIETARY

Very truly yours,
THE BOEING COMPANY
By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date:
XIAMEN AIRLINES
By
Its

LA-1705515		SA-3
Government Approval Matters – Table 1B and 1C Aircraft		Page 3
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

XIA-PA-03807-LA-1705516

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject: Payment Matters – Table 1B 737-8 and 1C 737-10 Aircraft

Reference: Purchase Agreement No. PA-03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen Airlines (Customer) relating to Model 737 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. Advance Payment Schedule.

Notwithstanding the Aircraft advance payment schedule provided in Table 1B and Table 1C of the Purchase Agreement, Boeing agrees Customer may, as an alternative to the payments schedule in Table 1B and Table 1C of the Purchase Agreement, make advance payments according to the schedule immediately below (Alternate Advance Payment Schedule) Customer will notify Boeing

[*CTR] to Definitive Agreement payment that Customer elects to pay the Alternate Advance Payment Schedule for all Aircraft under the Purchase Agreement. In the absence of such notice to elect the Alternative Advance Payment Schedule, Customer will make advance payments according to Table 1B and Table 1C of the Purchase Agreement for those Aircraft under the Purchase Agreement. Attachments A and B reflect the Alternate Advance Payment Schedule for Table 1B and 1C Aircraft respectively.

Month Prior to Delivery	Amount Due
[*CTR]	[*CTR]
[*CTR]	[*CTR]
[*CTR]	[*CTR]
[*CTR]	[*CTR]
[*CTR]	[*CTR]
[*CTR]	[*CTR]

2. Advance Payments for the Aircraft – Due on the Effective Date of the Purchase Agreement.

LA-1705516		SA-3
Payment Matters – Table 1B 737-8 and 1C 737-10 Aircraft		Page 1
	BOEING PROPRIETARY

It is understood that Customer’s ability to make the initial [*CTR] payments described in Article 4.2 of the Purchase Agreement may be impacted due to monetary issues, therefore Boeing agrees that such advance payments due on the effective date of the Purchase Agreement may be deferred without interest [*CTR] after the effective date of the Purchase Agreement, by which time Customer will pay all such advance payments as being due on or before that date.

3. Other Scheduled Advance Payments.

As defined in Article 4.2 of the Purchase Agreement, advance payments are required for each Aircraft in the percentages and at the times shown in Table 1B and Table 1C of the Purchase Agreement. Boeing will strive to provide Customer with an invoice for advance payment due to Boeing [*CTR] to the date the payment is due. This is done as an accommodation for Customer and in no way relieves Customer from providing advance payments to Boeing on time per the Purchase Agreement.

4. Payment at Aircraft Delivery.

Pursuant to Article 4.4 of the Purchase Agreement, Customer will pay the balance of the Aircraft Price of each Aircraft at delivery. Boeing will provide the invoices for such payment approximately [*CTR] prior to Aircraft delivery.

5. Rescheduling of Aircraft.

Letter Agreement XIA-PA-03807-LA-1705515 Government Approval Matters specifies the date by which government approval is to be obtained. After Customer obtains government approval and if Customer does not make all advance payments as specified in the Purchase Agreement, [*CTR]

6. [*CTR]

[*CTR] advance notice is given.

7. Confidential Treatment.

Customer understands and agrees that the information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer agrees to limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

LA-1705516		SA-3
Payment Matters – Table 1B 737-8 and 1C 737-10 Aircraft		Page 2
	BOEING PROPRIETARY

Very truly yours,
THE BOEING COMPANY
By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date:
XIAMEN AIRLINES
By
Its

LA-1705516		SA-3
Payment Matters – Table 1B 737-8 and 1C 737-10 Aircraft		Page 3
	BOEING PROPRIETARY

Attachment A To LA-1705516

Aircraft Delivery, Description, Price and Advance Payments - 20% Alternate Schedule

Airframe Model/MTOW:	737-8	[*CTR]	Detail Specification:	D019A008-N (6/10/2016)
Engine Model/Thrust:	CFMLEAP-1B27	[*CTR]	Airframe Price Base Year/Escalation Formula:	[*CTR]		[*CTR]
Airframe Price:		[*CTR]	Engine Price Base Year/Escalation Formula:
Optional Features:		[*CTR]
Sub-Total of Airframe and Features:		[*CTR]	Airframe Escalation Data:
Engine Price (Per Aircraft):		[*CTR]	Base Year Index (ECI):		[*CTR]
Aircraft Basic Price (Excluding BFE/SPE):		[*CTR]	Base Year Index (ICI):		[*CTR]
Buyer Furnished Equipment (BFE) Estimate:		[*CTR]
Seller Purchased Equipment (SPE)/In-Flight En		[*CTR]
Deposit per Aircraft:		[*CTR]

		Escalation Estimate	Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
Delivery	Number of	Adv Payment Base	At Signing	30 Mos.	27/24/21/18/ Mos.	12 Mos.	Total
Date	Aircraft	Price Per A/P	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jul-2019	2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Oct-2019	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Dec-2019	2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jan-2020	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jun-2020	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jul-2020	3	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Sep-2020	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Oct-2020	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jul-2021	2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Aug-2021	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Oct-2021	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Nov-2021	2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Dec-2021	2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Total	20	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]

[*CTR]

XIA-PA-03807 107411-1F.txt		SA-3
		Page 1
	Boeing Proprietary

Attachment B To LA-1705516

Aircraft Delivery, Description, Price and Advance Payments - 20% Alternate Schedule

Airframe Model/MTOW:	737-10	[*CTR]	Detail Specification:	D019A008-O (9/30/2016)
Engine Model/Thrust:	CFMLEAP-1B27	[*CTR]	Airframe Price Base Year/Escalation Formula:	[*CTR]		[*CTR]
Airframe Price:		[*CTR]	Engine Price Base Year/Escalation Formula:
Optional Features:		[*CTR]
Sub-Total of Airframe and Features:		[*CTR]	Airframe Escalation Data:
Engine Price (Per Aircraft):		[*CTR]	Base Year Index (ECI):		[*CTR]
Aircraft Basic Price (Excluding BFE/SPE):		[*CTR]	Base Year Index (ICI):		[*CTR]
Buyer Furnished Equipment (BFE) Estimate:		[*CTR]
//Seller Purchased Equipment (SPE)/In-Flight En		[*CTR]
Deposit per Aircraft:		[*CTR]

		Escalation Estimate	Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
Delivery	Number of	Adv Payment Base	At Signing	30 Mos.	27/24/21/18/15/12 Mos.	12 Mos.	Total
Date	Aircraft	Price Per A/P	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jun-2021	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jul-2021	2	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Sep-2021	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Oct-2021	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Nov-2021	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Dec-2021	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Jan-2022	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Feb-2022	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Mar-2022	1	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]
Total	10	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]	[*CTR]

[*CTR]

XIA-PA-03807 105224-1F.txt		SA-3
		Page 1
	Boeing Proprietary

The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207

XIA-PA-03807-LA-1705517

Xiamen Airlines

22 Dailiao Road

Xaimen, Fujian Province, 361006

People’s Republic of China

Subject: Purchase Right Aircraft

Reference: Purchase Agreement No. PA-03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen Airlines (Customer) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

1. Right to Purchase Incremental Aircraft.

Subject to the terms and conditions contained herein, in addition to the Aircraft described in Table 1A, 1B and 1C to the Purchase Agreement as of the date of execution of this Letter Agreement, Customer will have the right to purchase [*CTR]

2. Delivery.

The Purchase Right Aircraft [*CTR]

3. Configuration.

3.1 Subject to the provisions of Article 3.2, below, the configuration for the Purchase Right Aircraft will be the Detail Specification for Model 737-8 aircraft at the revision level in effect at the time of the Notice of Exercise. Such Detail Specification will be revised to include (i) changes applicable to such Detail Specification that are developed by Boeing between the date of the Notice of Exercise (as defined below) and the signing of the Definitive Agreement (as defined below), (ii) changes required to obtain required regulatory certificates, and (iii) other changes as mutually agreed.

3.2 Boeing reserves the right to configure the Purchase Right Aircraft starting from a different configuration specification, provided that it can achieve the same configuration which would result pursuant to the provisions of Article 3.1

XIA-PA-03807-LA-1705517		SA-3
Purchase Right Aircraft		Page 1
	BOEING PROPRIETARY

4. Price.

4.1 [*CTR]

4.2 [*CTR]

4.3 [*CTR]

4.4 [*CTR]

5. Payment.

At Definitive Agreement, advance payments will be payable as set forth Table 1. The remainder of the Aircraft Price for each Purchase Right Aircraft will be paid at the time of delivery. The Advance Payment Base Price used to determine the advance payment amounts will be developed in accordance with the terms of the Purchase Agreement and determined at the time of Definitive Agreement.

6. Notice of Exercise and Payment of Deposit.

6.1 Customer may exercise a Purchase Right by giving written notice to Boeing on or before the first day of the month twenty-four (24) months prior to the desired delivery month within the Delivery Period, specifying the desired month(s) of delivery within the Delivery Period (Notice of Exercise). Such Notice of Exercise shall be accompanied by payment, by electronic transfer to the account specified below, of Boeing’s then standard proposal deposit for model 737-8 aircraft (Deposit) for each Purchase Right Aircraft subject to the Notice of Exercise. The Deposit will be applied against the first advance payment due for each such Purchase Right Aircraft.

JPMorgan Chase Bank

SWIFT No. CHASUS33

ABA No. 021000021

Bank Account No. 9101012764

XIA-PA-03807-LA-1705517		SA-3
Purchase Right Aircraft		Page 2
	BOEING PROPRIETARY

At the time of its receipt of each Notice of Exercise and related Deposit(s), Boeing will advise Customer as to the availability of the delivery month(s) requested.

6.2 If Boeing must make production decisions which would affect the delivery of any or all Purchase Right Aircraft during the Delivery Period, Boeing shall provide written notification to Customer and the Delivery Period shall be adjusted accordingly. If the [*CTR] Upon receipt, Boeing will advise Customer as to the availability of the delivery month(s) requested.

7. Definitive Agreement.

Following Customer’s exercise of a Purchase Right in accordance with the terms and conditions stated herein and Boeing’s identification of an available delivery position acceptable to Customer, the parties will sign a definitive agreement for the purchase of such Purchase Right Aircraft (Definitive Agreement) [*CTR] (Purchase Right Exercise). The Definitive Agreement will include the provisions then contained in the Purchase Agreement as modified to reflect the provisions of this Letter Agreement and any additional mutually agreed terms and conditions.

8. General Expiration of Rights.

8.1 [*CTR]

9. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

10. Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

XIA-PA-03807-LA-1705517		SA-3
Purchase Right Aircraft		Page 3
	BOEING PROPRIETARY

Very truly yours,
THE BOEING COMPANY
By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date:
Xiamen Airlines
By
Its

XIA-PA-03807-LA-1705517		SA-3
Purchase Right Aircraft		Page 4
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

XIA-PA-03807-LA-1705518

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject: Miscellaneous Matters – Table 1B and Table 1C Aircraft

Reference: Purchase Agreement No. 03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen Airlines (Customer) relating to Model 737 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

1. Delivery Scheduling.

Customer has requested that Aircraft deliveries not take place during specific holiday periods. Provided Customer supplies to Boeing a listing of those requested holidays in a timely manner, Boeing will use reasonable efforts to avoid delivering aircraft during such periods.

2. 737-10 Performance.

Customer has requested Boeing to provide information on 737-10 model aircraft performance as it becomes available in service. Customer understands that Boeing cannot provide specific airline customer performance, [*CTR]

3. Delivery Payment Refund.

Refund overpayments are courtesy, and as such, follow Boeing internal process. If customer has made the business decision to provide more funds than required at delivery as part of its financing of the aircraft, Boeing will use [*CTR]

4. [*CTR]

[*CTR]

LA-1705518		SA-3
Miscellaneous Matters – Table 1B and 1C Aircraft		Page 1
	BOEING PROPRIETARY

5. Spare Parts Initial Provisioning.

At the time of signing of Supplemental Agreement No. 3, Boeing has not identified any part numbers unique to the 737-10 model aircraft. If any unique parts are identified that would be added to the Recommended Spare Parts List, those parts would be covered by the same terms as found in LA 1301959.

6. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

7. Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

LA-1705518		SA-3
Miscellaneous Matters – Table 1B and 1C Aircraft		Page 2
	BOEING PROPRIETARY

Very truly yours,
THE BOEING COMPANY
By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date:
XIAMEN AIRLINES
By
Its

LA-1705518		SA-3
Miscellaneous Matters – Table 1B and 1C Aircraft		Page 3
	BOEING PROPRIETARY

The Boeing Company P.O. Box 3707 Seattle, WA 98124 2207

XIA-PA-03807-LA-1707602

Xiamen Airlines

22 Dailiao Road

Xiamen, Fujian Province, 361006

People’s Republic of China

Subject: Promotional Support – Table 1B Aircraft

Reference: Purchase Agreement No. PA-03807 (Purchase Agreement) between The Boeing Company (Boeing) and Xiamen Airlines (Customer) relating to Model 737-8 aircraft (Aircraft)

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement will have the same meaning as in the Purchase Agreement.

Boeing and Customer wish to enter into an agreement pursuant to which each party will contribute equally to promotional programs in support of the entry into service of the Aircraft as more specifically provided below.

1. Definitions.

1.1 Commitment Limit will have the meaning set forth in Article 2, below.

1.2 Covered Aircraft will mean those Aircraft identified on Table 1B to the Purchase Agreement as of the date of signing of this Letter Agreement. [*CTR]

1.3 [*CTR]

1.4 Promotional Support will mean [*CTR] promote the entry into service of the Covered Aircraft such as marketing research, tourism development, corporate identity, direct marketing, videotape or still photography, planning, design and production of collateral materials, management of promotion programs, advertising campaigns or such other marketing and promotional activities as the parties may mutually agree.

1.5 [*CTR]

LA-1707602		SA-3
Promotional Support – Table 1B Aircraft		Page 1
	BOEING PROPRIETARY

2. Commitment.

As more particularly set forth in this Letter Agreement, Boeing agrees to provide Promotional Support to Customer during the Performance Period in a value [*CTR]

3. Methods of Performance.

3.1 Subject to the Commitment Limit, [*CTR]

3. 2 Notwithstanding the above, at Customer’s request and subject to a mutually agreed project, Boeing will provide certain Promotional Support during the Performance Period directly to Customer. [*CTR]

3.3 In the event Customer does not [*CTR] Boeing will have no further obligation to Customer for such unused Commitment Limit or to reimburse Customer for such Qualifying Third Party Fees, respectively.

4. Project Approval.

Following the execution of this Letter Agreement, [*CTR]

5. Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer becoming the operator of the Aircraft and cannot be assigned, in whole or in part, without the prior written consent of Boeing.

6. Confidentiality.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

LA-1707602		SA-3
Promotional Support – Table 1B Aircraft		Page 2
	BOEING PROPRIETARY

Very truly yours,
THE BOEING COMPANY
By
Its	Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date:
XIAMEN AIRLINES
By
Its

LA-1707602		SA-3
Promotional Support – Table 1B Aircraft		Page 3
	BOEING PROPRIETARY

EX-8.1

Exhibit 8.1

SUBSIDIARIES OF CHINA SOUTHERN AIRLINES COMPANY LIMITED

The particulars of the Company’s principal subsidiaries as of December 31, 2017 are as follows:

Name of Company	Jurisdiction of Incorporation
Shantou Airlines Company Limited	PRC
Zhuhai Airlines Company Limited	PRC
Xiamen Airlines Company Limited	PRC
Guizhou Airlines Company Limited	PRC
Chongqing Airlines Company Limited	PRC
Guangzhou Nanland Air Catering Company Limited	PRC
Guangzhou Baiyun International Logistic Company Limited	PRC
Nan Lung International Freight Limited	Hong Kong
Beijing Southern Airlines Ground Services Company Limited	PRC
China Southern Airlines Henan Airlines Company Limited	PRC
Southern Airlines Group Import and Export Trading Company	PRC
Southern Airlines General Aviation Company Limited	PRC

EX-12.1

Exhibit 12.1

CERTIFICATION

I, Tan Wan Geng, certify that:

1. I have reviewed this annual report on Form 20-F of China Southern Airlines Company Limited;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)    Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit and risk management committee of the company’s board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: April 26, 2018	By:	/s/ Tan Wan Geng
	Name:	Tan Wan Geng
	Title:	Vice Chairman of our Board and President

EX-12.2

Exhibit 12.2

CERTIFICATION

I, Xiao Li Xin, certify that:

1. I have reviewed this annual report on Form 20-F of China Southern Airlines Company Limited;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)    Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit and risk management committee of the company’s board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: April 26, 2018	By:	/s/ Xiao Li Xin
	Name:	Xiao Li Xin
	Title:	Executive Vice President and Chief Financial Officer

EX-13.1

Exhibit 13.1

CERTIFICATION

Pursuant to 18 U.S.C. Section 1350

as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of China Southern Airlines Company Limited (the “Company”) on Form 20-F for the year ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Tan Wan Geng, Vice Chairman of our Board and President of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 26, 2018	By:	/s/ Tan Wan Geng
	Name:	Tan Wan Geng
	Title:	Vice Chairman of our Board and President

* This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.

* A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-13.2

Exhibit 13.2

CERTIFICATION

Pursuant to 18 U.S.C. Section 1350

as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of China Southern Airlines Company Limited (the “Company”) on Form 20-F for the year ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Xiao Li Xin, Executive Vice President and Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 26, 2018	By:	/s/ Xiao Li Xin
	Name:	Xiao Li Xin
	Title:	Executive Vice President and Chief Financial Officer

* This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.

* A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information	12 Months Ended
	Dec. 31, 2017 shares
Document Information [Line Items]
Document Type	20-F
Amendment Flag	false
Document Period End Date	Dec. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Trading Symbol	ZNH
Entity Registrant Name	CHINA SOUTHERN AIRLINES CO LTD
Entity Central Index Key	0001041668
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
A Shares (par value RMB1.00 per share) [member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	7,022,650,000
H Shares (par value RMB1.00 per share) [member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	3,065,523,272

XML

CONSOLIDATED INCOME STATEMENTS - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Operating revenue
Traffic revenue	¥ 121,873	¥ 109,693	¥ 107,099
Other operating revenue	5,933	5,288	4,553
Total operating revenue	127,806	114,981	111,652
Operating expenses
Flight operation expenses	62,978	51,461	50,412
Maintenance expenses	11,877	11,318	10,407
Aircraft and transportation service expenses	22,935	20,215	17,908
Promotion and selling expenses	6,881	6,304	6,976
General and administrative expenses	3,391	2,815	2,464
Depreciation and amortization	13,162	12,619	11,845
Impairment on property, plant and equipment	324	71	90
Others	1,550	1,401	1,390
Total operating expenses	123,098	106,204	101,492
Other net income	4,448	3,835	3,278
Operating profit	9,156	12,612	13,438
Interest income	89	89	253
Interest expense	(2,747)	(2,465)	(2,188)
Share of associates' results	431	509	460
Share of joint ventures' results	99	102	108
Exchange gain/(loss), net	1,801	(3,276)	(5,953)
Fair value movement of derivative financial instruments	(64)
Gain on deemed disposal of a subsidiary		90
Remeasurement of the originally held equity interests in a joint venture	109
Profit before income tax	8,874	7,661	6,118
Income tax	(1,976)	(1,763)	(1,300)
Profit for the year	6,898	5,898	4,818
Profit attributable to:
Equity shareholders of the Company	5,961	5,044	3,736
Non-controlling interests	937	854	1,082
Profit for the year	¥ 6,898	¥ 5,898	¥ 4,818
Earnings per share
Basic and diluted	¥ 0.60	¥ 0.51	¥ 0.38

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement of comprehensive income [abstract]
Profit for the year	¥ 6,898	¥ 5,898	¥ 4,818
Other comprehensive income: Items that may be reclassified subsequently to profit or loss
Cash flow hedge: fair value movement of derivative financial instruments	25	8	13
Fair value movement of available-for-sale financial assets	123	362
Share of other comprehensive income (loss) of associates	2	(2)	(7)
Deferred tax relating to above items	(37)	(92)	(3)
Other comprehensive income for the year	113	276	3
Total comprehensive income for the year	7,011	6,174	4,821
Total comprehensive income attributable to:
Equity shareholders of the Company	6,028	5,196	3,742
Non-controlling interests	983	978	1,079
Total comprehensive income for the year	¥ 7,011	¥ 6,174	¥ 4,821

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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Non-current assets
Property, plant and equipment, net	¥ 158,926	¥ 146,746
Construction in progress	30,233	28,910
Lease prepayments	2,923	2,687
Goodwill	237	182
Interest in associates	3,031	2,590
Interest in joint ventures	1,015	1,522
Other investments in equity securities	103	103
Aircraft lease deposits	642	725
Available-for-sale financial assets	622	499
Derivative financial instruments	46	21
Deferred tax assets	1,662	1,685
Other assets	1,394	1,008
Total non-current assets	200,834	186,678
Current assets
Inventories	1,622	1,588
Trade receivables	2,675	2,989
Other receivables	5,232	3,387
Cash and cash equivalents	6,826	4,152
Assets held for sale	8
Restricted bank deposits	111	135
Prepaid expenses and other current assets	1,334	1,415
Amounts due from related companies	76	98
Total current assets	17,884	13,764
Current liabilities
Derivative financial instruments	64
Borrowings	27,568	26,746
Current portion of obligations under finance leases	8,341	8,695
Trade payables	2,125	1,903
Sales in advance of carriage	7,853	8,420
Deferred revenue	1,502	1,299
Current income tax	919	647
Amounts due to related companies	101	103
Accrued expenses	15,370	15,147
Other liabilities	5,734	4,972
Total current liabilities	69,577	67,932
Non-current liabilities
Borrowings	20,719	18,758
Obligations under finance leases	59,583	53,527
Deferred revenue	1,849	1,622
Provision for major overhauls	2,808	2,089
Provision for early retirement benefits	3	6
Deferred benefits and gains	1,053	691
Deferred tax liabilities	583	841
Total non-current liabilities	86,598	77,534
Net assets	62,543	54,976
Capital and reserves
Share capital	10,088	9,818
Reserves	39,848	33,638
Total equity attributable to equity shareholders of the Company	49,936	43,456
Non-controlling interests	12,607	11,520
Total equity	¥ 62,543	¥ 54,976

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - CNY (¥) ¥ in Millions	Total	Share capital [Member]	Share premium [member]	Fair value reserve [member]	Other reserves [member]	Retained earnings [member]	Total attributable to equity shareholders of the Company [Member]	Non-controlling interests [member]
Beginning balance at Dec. 31, 2014	¥ 44,493	¥ 9,818	¥ 14,131	¥ 44	¥ 1,486	¥ 10,269	¥ 35,748	¥ 8,745
Changes in equity
Profit for the year	4,818					3,736	3,736	1,082
Other comprehensive income	3			11	(5)		6	(3)
Total comprehensive income	4,821			11	(5)	3,736	3,742	1,079
Appropriations to reserves					246	(246)
Dividends relating to the prior year	(393)					(393)	(393)
Capital injection of non-controlling interests in a subsidiary	1,360							1,360
Acquisition of non-controlling interests in a subsidiary	(626)				(52)		(52)	(574)
Distributions to non-controlling interests	(31)							(31)
Ending balance at Dec. 31, 2015	49,624	9,818	14,131	55	1,675	13,366	39,045	10,579
Changes in equity
Profit for the year	5,898					5,044	5,044	854
Other comprehensive income	276			154	(2)		152	124
Total comprehensive income	6,174			154	(2)	5,044	5,196	978
Appropriations to reserves					405	(405)
Dividends relating to the prior year	(785)					(785)	(785)
Capital injection of non-controlling interests in a subsidiary	260							260
Decrease in non-controlling interests as a result of loss of control of a subsidiary	(83)							(83)
Distributions to non-controlling interests	(214)							(214)
Ending balance at Dec. 31, 2016	54,976	9,818	14,131	209	2,078	17,220	43,456	11,520
Changes in equity
Profit for the year	6,898					5,961	5,961	937
Other comprehensive income	113			66	1		67	46
Total comprehensive income	7,011			66	1	5,961	6,028	983
Appropriations to reserves					492	(492)
Dividends relating to the prior year	(982)					(982)	(982)
Issuance of shares (Note 47(ii))	1,321	270	1,051				1,321
Capital injection of non-controlling interests in a subsidiary	404							404
Dilution and change in non-controlling interests and other reserves	74				113		113	(39)
Distributions to non-controlling interests	(261)							(261)
Ending balance at Dec. 31, 2017	¥ 62,543	¥ 10,088	¥ 15,182	¥ 275	¥ 2,684	¥ 21,707	¥ 49,936	¥ 12,607

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CONSOLIDATED CASH FLOW STATEMENTS - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Operating activities
Cash generated from operating activities	¥ 23,478	¥ 27,681	¥ 27,857
Interest received	119	118	313
Interest paid	(3,758)	(2,629)	(2,274)
Income tax paid	(2,107)	(1,406)	(2,162)
Net cash generated from operating activities	17,732	23,764	23,734
Investing activities
Acquisition of subsidiaries, net of cash acquired	(682)	(189)	(69)
Deemed disposal of a subsidiary		(67)
Proceeds from disposal of property, plant and equipment and lease prepayments	5,922	3,111	3,196
Proceeds from sale of a joint venture	7	2
Dividends received from associates	195	143	67
Dividends received from joint ventures	9	18	6
Dividends received from other investments in equity securities and available-for-sale financial assets	18	14	13
Acquisition of term deposits	(313)	(263)	(278)
Proceeds from maturity of term deposits	568	456	1,971
Additions of property, plant and equipment, lease prepayments and other assets	(13,846)	(18,967)	(12,139)
Capital injection into associates	(185)	(34)	(40)
Payments for aircraft lease deposits	(40)	(55)	(123)
Refund of aircraft lease deposits	111	81	141
Withdrawal of pledged bank deposits			324
Net cash used in investing activities	(8,236)	(15,750)	(6,931)
Financing activities
Dividends paid to equity shareholders of the Company	(982)	(785)	(393)
Proceeds from issuance of shares	1,321
Proceeds from bank borrowings	42,854	17,539	34,170
Proceeds from ultra-short-term financing bills	1,000	33,886	8,000
Proceeds from corporate bond		10,000	3,000
Proceeds from medium-term notes		4,689
Repayment of bank borrowings	(18,311)	(46,695)	(62,212)
Repayment of principal under finance lease obligations	(9,835)	(6,994)	(8,209)
Repayment of ultra-short-term financing bills	(22,986)	(19,900)	(3,000)
Capital injection from the non-controlling interests of subsidiaries	404	260	1,360
Dividends paid to non-controlling interests	(261)	(221)	(23)
Payment for purchase of non-controlling interests		(238)	(388)
Net cash used in financing activities	(6,796)	(8,459)	(27,695)
Net increase/(decrease) in cash and cash equivalents	2,700	(445)	(10,892)
Cash and cash equivalents at January 1	4,152	4,560	15,414
Exchange (loss)/gain on cash and cash equivalents	(26)	37	38
Cash and cash equivalents at December 31	¥ 6,826	¥ 4,152	¥ 4,560

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Corporate information

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Corporate information

1 Corporate information

China Southern Airlines Company Limited (the “Company”), a joint stock limited company, was incorporated in the People’s Republic of China (the “PRC”) on March 25, 1995. The address of the Company’s registered office is Unit 301, 3/F, Office Tower, Guanhao Science Park Phase I, 12 Yuyan Street, Huangpu District, Guangzhou, Guangdong Province, the PRC. The Company and its subsidiaries (the “Group”) are principally engaged in the operation of civil aviation, including the provision of passenger, cargo, mail delivery and other extended transportation services.

The Company’s majority interest is owned by China Southern Air Holding Limited Company (“CSAH”), formerly known as China Southern Air Holding Company, a state-owned enterprise incorporated in the PRC.

The Company’s shares are traded on the Shanghai Stock Exchange, The Stock Exchange of Hong Kong Limited and the New York Stock Exchange.

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Significant accounting policies

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Significant accounting policies

2 Significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

(a) Basis of preparation

The consolidated financial statements have been prepared in accordance with all applicable International Financial Reporting Standards (“IFRSs”), which collective term includes all applicable individual IFRSs, International Accounting Standards (“IASs”) and Interpretations issued by the International Accounting Standards Board (the “IASB”). The measurement basis used in the preparation of the financial statements is the historical cost basis, except that available-for-sale equity securities and derivative financial instruments are stated at their fair value as explained in the accounting policies set out in Note 2(f) and Note 2(g). Non-current assets and disposal groups held for sale are stated at the lower of carrying amount and fair value less costs to sell (Note 2(q)).

The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgments made by management in the application of IFRSs that have significant effect on the financial statements and major sources of estimation uncertainty are discussed in Note 3.

The consolidated financial statements comprise the Company and its subsidiaries and the Group’s interest in associates and joint ventures.

(b) Changes in accounting policies

The IASB has issued several amendments to IFRSs that are first effective for the current accounting period of the Group. None of these developments have had a material effect on how the Group’s results and financial position for the current or prior periods have been prepared or presented. However, additional disclosure has been included in Note 35(c) to satisfy the new disclosure requirements introduced by the amendments to IAS 7, Statement of cash flows: Disclosure initiative, which require entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period. Note 58 provides information on the possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended December 31, 2017.

(c) Subsidiaries and non-controlling interests

Subsidiaries are all entities over which the Group has control. The Group controls an entity when 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 over the entity. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered.

An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group transactions, balances and cash flows and any unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies.

Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. With regards to each business combination, the Group recognized non-controlling interests based on the proportion of the net identifiable assets of the subsidiary owned by the non-controlling interests.

Non-controlling interests are presented in the consolidated statements of financial position within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented on the face of the consolidated income statements and the consolidated statements of comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests and the equity shareholders of the Company. Loans from holders of non-controlling interests and other contractual obligations towards these holders are presented as financial liabilities in the consolidated statements of financial position in accordance with Note 2(o) or Note 2(p) depending on the nature of the liability.

Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognized.

When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognized in consolidated income statements. Any interest retained in that former subsidiary at the date when control is lost is recognized at fair value and this amount is regarded as the fair value on initial recognition of a financial asset (Note 2(f)) or, when appropriate, the cost on initial recognition of an investment in an associate or joint venture (Note 2(d)).

The Group applies the acquisition method to account for business combinations. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Transaction costs are expensed as incurred.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognized in profit or loss.

(d) Associates and joint arrangements

An associate is an entity in which the Group has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions.

The Group has applied IFRS 11, Joint Arrangements (“IFRS 11”) to all joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures.

An investment in an associate or a joint venture is accounted for in the consolidated financial statements under the equity method and is initially recorded at cost, adjusted for any excess of the Group’s share of the acquisition-date fair values of the investee’s identifiable net assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the post acquisition change in the Group’s share of the investee’s net assets and any impairment loss relating to the investment (Notes 2(e) and 2(l)). The Group’s share of the post-acquisition, post-tax results of the investees, adjusted for any acquisition-date excess over cost and any impairment losses for the year are recognized in the consolidated income statements, whereas the Group’s share of the post-acquisition post-tax items of the investees’ other comprehensive income is recognized in the consolidated statements of comprehensive income.

When the Group’s share of losses exceeds its interest in the associate or the joint venture, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investee. For this purpose, the Group’s interest is the carrying amount of the investment under the equity method together with the Group’s long-term interests that in substance form part of the Group’s net investment in the associate or the joint venture.

Unrealized profits and losses resulting from transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in the investee, except where unrealized losses provide evidence of an impairment of the asset transferred, in which case they are recognized immediately in the consolidated income statements.

(e) Goodwill

Goodwill represents the excess of

(i) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group’s previously held equity interest in the acquiree; over

(ii) the net fair value of the acquiree’s identifiable assets and liabilities measured as at the acquisition date.

When (ii) is greater than (i), then this excess is recognized immediately in the consolidated income statements as a gain on a bargain purchase.

Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating unit, or groups of cash generating units, that is expected to benefit from the synergies of the combination and is tested annually for impairment (Note 2(l)).

(f) Other investments in equity securities

The Group’s policies for investments in equity securities, other than investments in subsidiaries, associates and joint ventures, are as follows:

Investments in equity securities are initially stated at fair value, which is their transaction price unless fair value can be more reliably estimated using valuation techniques whose variables include only data from observable markets. Cost includes attributable transaction costs, except where indicated otherwise below. These investments are subsequently accounted for as follows, depending on their classification:

Available-for-sale equity securities are those non-derivative financial assets that are designated as available for sale or that are not classified as loans and receivables, held-to-maturity investments, or financial assets at fair value through profit or loss. At the end of each reporting period the fair value is remeasured, with any resultant gain or loss being recognized in other comprehensive income and accumulated separately in equity in the fair value reserve. Dividend income from these investments is recognized in the consolidated income statements in accordance with the policy set out in Note 2(x) (iv). When these investments are derecognized or impaired (Note 2(l)), the cumulative gain or loss is reclassified from equity to profit or loss.

The Group’s other investments in equity securities represent investments in equity securities that do not have a quoted price in an active market for an identical instrument and whose fair value cannot otherwise be reliably measured. Accordingly, they are recognized in the consolidated statements of financial position at cost less impairment losses (Note 2(l)). Dividend income from equity securities is recognized in profit or loss in accordance with the policy set out in Note 2(x) (iv).

Investments are recognized on the date the Group commits to purchase the investments, and are derecognized on the date the Group commits to sell investments or the Group’s rights to the cash flows from the investments expired.

(g) Derivative financial instruments

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

Derivative financial instruments that do not qualify for hedge accounting are accounted for as trading instruments and any unrealized gains or losses, being changes in fair value of the derivatives, are recognized in the profit or loss immediately.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges and that are highly effective, are recorded in the profit or loss, along with any changes in the fair value of the hedged assets or liabilities that are attributable to the hedged risk.

Derivative financial instruments that qualify for hedge accounting and which are designated as a specific hedge of the variability in cash flows of a highly probable forecast transaction, are accounted for as follows:

(i) The effective portion of any gains or losses on remeasurement of the derivative financial instrument to fair value are recognized in other comprehensive income and accumulated separately in equity in the fair value reserve. The cumulative gain or loss on the derivative financial instrument recognized in other comprehensive income is reclassified from equity to profit or loss in the same period during which the hedged forecast cash flows affects profit or loss; and

(ii) The ineffective portion of any gains or losses on remeasurement of the derivative financial instrument to fair value is recognized in the profit or loss immediately.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gains or losses existing in equity at that time remains in equity and is recognized in the profit or loss when the committed or forecast transaction ultimately occurs. When a committed or forecast transaction is no longer expected to occur, the cumulative gains or losses that was recorded in equity is immediately transferred to the profit or loss.

(h) Investment properties

Investment properties are land and/or buildings which are owned to earn rental income and/or for capital appreciation.

Investment properties are stated at cost, less accumulated depreciation and impairment losses (Note 2(l)). Depreciation is calculated to write off the cost of items of investment properties, less their estimated residual value, if any, using the straight-line method over their estimated useful lives. Rental income from investment properties is accounted for as described in
Note 2(x) (iii).

(i) Other property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (Note 2(l)).

The cost of self-constructed items of property, plant and equipment includes the cost of materials, direct labor, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads and borrowing costs (Note 2(aa)).

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the consolidated income statements during the financial period in which they are incurred.

When each major aircraft overhaul is performed, its cost is recognized in the carrying amount of the component of aircraft and is depreciated over the appropriate maintenance cycles. Components related to overhaul cost, are depreciated on a straight-line basis over 3 to 12 years. Upon completion of an overhaul, any remaining carrying amount of the cost of the previous overhaul is derecognized and charged to the consolidated income statements.

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognized in consolidated income statements on the date of retirement or disposal.

Except for components related to overhaul costs, the depreciation of other property, plant and equipment is calculated to write off the cost of items, less their estimated residual value, if any, using the straight line method over their estimated useful lives as follows:

Buildings	5 to 35 years
Owned and finance leased aircraft	15 to 20 years
Other flight equipment
– Jet engines	15 to 20 years
– Others, including rotables	3 to 15 years
Machinery and equipment	4 to 10 years
Vehicles	6 to 8 years

Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

(j) Construction in progress

Construction in progress represents advance payments for the acquisition of aircraft and flight equipment, office buildings, various infrastructure projects under construction and equipment pending for installation, and is stated at cost less impairment losses (Note 2(l)). Capitalization of these costs ceases and the construction in progress is transferred to property, plant and equipment when the asset is substantially ready for its intended use, notwithstanding any delay in the issue of the relevant commissioning certificates by the relevant PRC authorities.

No depreciation is provided in respect of construction in progress.

(k) Leased assets

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

(i) Classification of assets leased to the Group

Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases, except for land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. For these purposes, the inception of the lease is the time that the lease was first entered into by the Group, or taken over from the previous lessee.

(ii) Assets acquired under finance leases

Where the Group acquires the use of assets under finance leases, the amounts representing the fair value of the leased asset, or, if lower, the present value of the minimum lease payments, of such assets are included in property, plant and equipment and the corresponding liabilities, net of finance charges, are recorded as obligations under finance leases. Depreciation is provided at rates which write off the cost or valuation of the assets over the term of the relevant lease or, where it is likely the Group will obtain ownership of the asset, the life of the asset, as set out in Note 2(i). Impairment losses are accounted for in accordance with the accounting policy as set out in Note 2(l). Finance charges implicit in the lease payments are charged to consolidated income statements over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period. Contingent rentals are charged to consolidated income statements in the accounting period in which they are incurred.

(iii) Operating lease charges

Where the Group has the use of assets held under operating leases, payments made under the leases are charged to consolidated income statements in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognized in consolidated income statements as an integral part of the aggregate net lease payments made. Contingent rentals are charged to consolidated income statements in the accounting period in which they are incurred.

The cost of acquiring land held under an operating lease is amortized on a straight-line basis over the respective periods of lease terms which range from 30 to 70 years.

(iv) Sale and leaseback transactions

Gains or losses on aircraft sale and leaseback transactions which result in finance leases are deferred and amortized over the terms of the related leases.

Gains or losses on aircraft sale and leaseback transactions which result in operating leases are recognized immediately if the transactions are established at fair value. If the sale price is below fair value then the gain or loss is recognized immediately. However, if a loss is compensated for by future rentals at a below-market price, then the loss is deferred and amortized over the period that the aircraft is expected to be used. If the sale price is above fair value, then any gain is deferred and amortized over the useful life of the assets.

(l) Impairment of assets

(i) Impairment of investments in equity securities and receivables

Investments in equity securities and current and non-current receivables that are stated at cost or amortized cost or are classified as available-for-sale equity securities are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events:

• significant financial difficulty of the debtor;

• a breach of contract, such as a default or delinquency in interest or principal payments;

• it becoming probable that the debtor will enter bankruptcy or other financial reorganization;

• significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and

• a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

If any such evidence exists, any impairment loss is determined and recognized as follows:

• For investments in associates and joint ventures accounted for under the equity method in the consolidated financial statements (Note 2(d)), the impairment loss is measured by comparing the recoverable amount of the investment with its carrying amount in accordance with Note 2(l) (ii). The impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount in accordance with Note 2(l) (ii).

• For unquoted equity securities carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material. Impairment losses for equity securities carried at cost are not reversed.

• For trade and other current receivables and other financial assets carried at amortized cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where these financial assets share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognized, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognized in prior years.

• For available-for-sale equity securities, the cumulative loss that has been recognized in the fair value reserve is reclassified to profit or loss. The amount of the cumulative loss that is recognized in consolidated income statements is the difference between the acquisition cost and current fair value, less any impairment loss on that asset previously recognized in consolidated income statements.

Impairment losses recognized in consolidated income statements in respect of available-for-sale equity securities are not reversed through profit or loss. Any subsequent increase in the fair value of such assets is recognized directly in other comprehensive income.

Impairment losses are written off against the corresponding asset directly, except for impairment losses recognized in respect of trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade and other receivables directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognized in consolidated income statements.

(ii) Impairment of other assets

Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognized no longer exists or may have decreased:

• Investment properties;

• Other property, plant and equipment;

• Construction in progress;

• Lease prepayments;

• Goodwill;

• Investments in subsidiaries, associates and joint ventures in the company’s statement of financial position;

• Aircraft lease deposits; and

• Other assets

If any such indication exists, the asset’s recoverable amount is estimated. The recoverable amount of goodwill is estimated annually whether or not there is any indication of impairment.

• Calculation of recoverable amount

The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

• Recognition of impairment losses

An impairment loss is recognized in consolidated income statements if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs of disposal, or value in use, if determinable.

• Reversals of impairment losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognized in prior years. Reversals of impairment losses are credited to consolidated income statements in the year in which the reversals are recognized.

(iii) Interim financial reporting and impairment

Under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the Group is required to prepare an interim financial report in compliance with IAS 34, Interim financial reporting, in respect of the first six months of the financial year. At the end of the interim period, the Group applies the same impairment testing, recognition, and reversal criteria as it would at the end of the financial year (Notes 2(l) (i) and (ii)).

Impairment losses recognized in an interim period in respect of goodwill, available-for-sale equity securities and unquoted equity securities carried at cost are not reversed in a subsequent period. This is the case even if no loss, or a smaller loss, would have been recognized had the impairment been assessed only at the end of the financial year to which the interim period relates. Consequently, if the fair value of an available-for-sale equity security increases in the remainder of the annual period, or in any other period subsequently, the increase is recognized in other comprehensive income and not profit or loss.

(m) Inventories

Inventories, which consist primarily of consumable spare parts and supplies, are stated at cost less any applicable provision for obsolescence, and are charged to consolidated income statements when used in operations. Cost represents the average unit cost.

Inventories held for sale or disposal are carried at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognized as an expense in the period in which the related revenue is recognized. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs.

(n) Trade and other receivables

Trade and other receivables are initially recognized at fair value and thereafter stated at amortized cost using the effective interest method, less allowance for impairment of doubtful debts (Note 2(l)), except where the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of bad and doubtful debts.

(o) Interest-bearing borrowings

Interest-bearing borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost with any difference between the amount initially recognized and redemption value being recognized in consolidated income statements over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

(p) Trade and other payables

Trade and other payables are initially recognized at fair value. Except for financial guarantee liabilities measured in accordance with (Note 2(s) (i)), trade and other payables are subsequently stated at amortized cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(q) Non-current assets held for sale

A non-current asset (or disposal group) is classified as held for sale if it is highly probable that its carrying amount will be recovered through a sale transaction rather than through continuing use and the asset (or disposal group) is available for sale in its present condition. A disposal group is a group of assets to be disposed of together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction.

Immediately before classification as held for sale, the measurement of the non-current assets (and all individual assets and liabilities in a disposal group) is brought up-to-date in accordance with the accounting policies before the classification. Then, on initial classification as held for sale and until disposal, the non-current assets (except for certain assets as explained below), or disposal groups, are recognized at the lower of their carrying amount and fair value less costs to sell. The principal exceptions to this measurement policy so far as the consolidated financial statements of the Group are concerned are deferred tax assets, assets arising from employee benefits, financial assets (other than investments in associates and joint ventures) and investment properties. These assets, even if held for sale, would continue to be measured in accordance with the policies set out elsewhere in Note 2.

Impairment losses on initial classification as held for sale, and on subsequent remeasurement while held for sale, are recognized in profit or loss. As long as a non-current asset is classified as held for sale, or is included in a disposal group that is classified as held for sale, the noncurrent asset is not depreciated or amortized.

(r) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been generally within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated cash flow statements.

(s) Financial guarantees issued, provisions and contingent liabilities

(i) Financial guarantees issued

Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the “holder”) for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

Where the Group issues a financial guarantee, the fair value of the guarantee (being the transaction price, unless the fair value can otherwise be reliably estimated) is initially recognized.

The amount of the guarantee initially recognized is amortized in consolidated income statements over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognized in accordance with Note 2(s) (ii) if and when (i) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognized, less accumulated amortization.

(ii) Provisions and contingent liabilities

Provisions are recognized for other liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(t) Dividend distribution

Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s consolidated financial statements in the period in which the dividends are approved by the Company’s shareholders.

(u) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

(v) Deferred benefits and gains

In connection with the acquisitions or leases of certain aircraft and engines, the Group receives various credits. Such credits are deferred until the aircraft and engines are delivered, at which time they are either applied as a reduction of the cost of acquiring the aircraft and engines, resulting in a reduction of future depreciation, or amortized as a reduction of rental expense for aircraft and engines under leases.

(w) Income tax

Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognized in the consolidated income statements except to the extent that they relate to items recognized in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognized in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting year, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilized, are recognized. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilized.

The limited exception to the recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries, associates and joint ventures to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future and it is probable that future taxable profit will be available against which the temporary difference can be utilized.

The amount of deferred tax recognized is measured based on the expected manner of realization or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period and are expected to apply when related deferred tax asset is realized or the deferred tax liability is settled. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilized. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

• in the case of current tax assets and liabilities, the Group intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously; or

• in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:

• the same taxable entity; or

• different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realize the current tax assets and settle the current tax liabilities on a net basis or realize and settle simultaneously.

(x) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognized in income statement as follows:

(i) Passenger, cargo and mail revenue

Passenger revenue is recognized at the fair value of the consideration received when the transportation service is provided. Unearned passenger revenue at the reporting date is included within sales in advance of carriage in the consolidated statements of financial position.

Cargo and mail revenue are recognized when the transportation is provided.

Revenue from airline-related business are recognized when services are rendered.

(ii) Frequent flyer revenue

The Group maintains two major frequent flyer award programs, namely, the China Southern Airlines Sky Pearl Club and the Xiamen Airlines’ Egret Card Frequent Flyer Program, which provide travel and other awards to members based on accumulated mileages.

The amount received in relation to mileage earning flights is allocated, based on fair value, between the flight and mileage earned by members of the Group’s frequent flyer award programs. The value attributed to the awarded mileage is deferred as a liability, within deferred revenue, until the mileage is redeemed and the related benefits are received or used or they expire.

The amount received from third parties for the issue of mileage under the Group’s frequent flyer award programs is also deferred as a liability, within deferred revenue.

As members of the frequent flyer award programs redeem mileages for an award, revenue in relation to flight awards is recognized when the transportation is provided; revenue in relation to non-flight rewards is recognized at the point of redemption where non-flight rewards are selected.

(iii) Operating rental income

Receivable under operating leases is recognized in income statement in equal instalments over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognized in income statement as an integral part of the aggregate net lease payments receivable. Contingent rentals are recognized as income in the accounting period in which they are earned.

(iv) Dividends

• Dividend income from unlisted investments is recognized when the shareholder’s right to receive payment is established.

• Dividend income from listed investments is recognized when the share price of the investment goes ex-dividend.

(v) Government grants

Government grants are recognized in consolidated statements of financial position initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognized as other net income in income statement on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted from the carrying amount of the asset and consequently are effectively recognized in income statement over the useful life of the asset by way of reduced depreciation expense.

(vi) Interest income

Interest income is recognized as it accrues using the effective interest method.

(y) Traffic commissions

Traffic commissions are expensed in income statement when the transportation is provided and the related revenue is recognized. Traffic commissions for transportation not yet provided are recorded on the consolidated statements of financial position as prepaid expense.

(z) Maintenance and overhaul costs

Routine maintenance, repairs and overhauls are charged to income statement as and when incurred.

In respect of owned and finance leased aircraft, components within the aircraft subject to replacement during major overhauls are depreciated over the average expected life between major overhauls. When each major overhaul is performed, its cost is recognized in the carrying amount of property, plant and equipment and is depreciated over the estimated period between major overhauls. Any remaining carrying amount of cost of previous major overhaul is derecognized and charged to income statement.

In respect of aircraft held under operating leases, the Group has responsibility to fulfil certain return conditions under relevant lease agreements. In order to fulfil these return conditions, major overhauls are required to be conducted. Accordingly, estimated costs of major overhauls are accrued and charged to the income statement over the estimated overhaul period. Differences between the estimated costs and the actual costs of overhauls are charged to income statement in the period when the overhaul is performed.

(aa) Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

Borrowing costs include interest expense, finance charges in respect of finance leases and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

(ab) Employee benefits

(i) Short-term employee benefits and contributions to defined contribution retirement schemes

Salaries, annual bonuses and contributions to defined contribution retirement schemes are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

(ii) Termination benefits

Termination benefits are recognized when, and only when, the Group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.

(iii) Share-based payment

The fair value of the amount payable to employee in respect of share appreciation rights (“SARs”), which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the vesting period. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized as staff cost in the consolidated income statements.

(ac) Translation of foreign currencies

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 consolidated financial statements are presented in Renminbi, which is the Company’s functional and the Group’s presentation currency.

Foreign currencies transactions during the year are translated into Renminbi at the applicable rates of exchange quoted by the People’s Bank of China (“PBOC”) prevailing at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into Renminbi at the PBOC exchange rates prevailing at the end of the reporting period. Exchange gains and losses are recognized in income statement.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated into Renminbi at the PBOC exchange rates prevailing at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into Renminbi at the PBOC exchange rates prevailing at the dates the fair value was determined.

(ad) Related parties

(a) A person, or a close member of that person’s family, is related to the Group if that person:

(i) has control or joint control over the Group;

(ii) has significant influence over the Group; or

(iii) is a member of the key management personnel of the Group or the Group’s parent.

(b) An entity is related to the Group if any of the following conditions applies:

(i) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group.

(vi) The entity is controlled or jointly controlled by a person identified in (a).

(vii) A person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(viii) The entity, or any member of a Group of which it is a part, provides key management personnel services to the Group or to the Group’s parent.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

(ae) Segment reporting

Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial information provided regularly to the Group’s most senior executive management, who is the chief operating decision maker, for the purposes of allocating resources to, and assessing the performance of, the Group’s various lines of business and geographical locations.

Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

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Accounting estimates and judgments

12 Months Ended

Dec. 31, 2017

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Accounting estimates and judgments

3 Accounting estimates and judgments

The Groups’ financial position and results of operations are sensitive to accounting methods, assumptions and estimates that underlie the preparation of the financial statements. The Group bases the assumptions and estimates on historical experience and on various other assumptions that the Group believes to be reasonable and which form the basis for making judgments about matters that are not readily apparent from other sources. On an ongoing basis, management evaluates its estimates. Actual results may differ from those estimates as facts, circumstances and conditions change.

The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in condition and assumptions are factors to be considered when reviewing the financial statements. In addition to the assumptions and estimates regarding fair value measurements of financial instruments disclosed in Note 4(g), the Group believes the following also involve key accounting estimates and judgments used in the preparation of the financial statements.

(a) Accounting estimates

(i) Impairment of long-lived assets (other than goodwill)

If circumstances indicate that the carrying amount of a long-lived asset may not be recoverable, the asset may be considered “impaired”, and an impairment loss may be recognized in accordance with IAS 36, Impairment of Assets. The carrying amounts of long-lived assets are reviewed periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. These assets are tested for impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to the recoverable amount. The recoverable amount is the higher of the fair value less costs of disposal and value in use. In particular, in determining the value in use of the Group’s aircraft fleet, expected future cash flows to be generated by the asset are discounted to their present value, which requires significant judgment relating to forecast traffic revenue, forecast operating costs and discount rate applied. The Group uses all readily available information in determining an amount that is a reasonable approximation of recoverable amount, including estimates based on reasonable and supportable assumptions for projections of traffic revenue and operating costs and application of discount rate.

(ii) Provision for major overhauls

Provision for the cost of major overhauls to fulfil the lease return conditions for airframes and engines held under operating leases are accrued and charged to the income statement over the estimated overhaul period. This requires estimation of the expected overhaul cycles and overhaul costs, which are based on the historical experience of actual costs incurred for overhauls of airframes and engines of the same or similar types and current economic and airline-related developments. Different estimates could significantly affect the estimated provision and the results of operations.

(iii) Frequent flyer revenue

The amount of revenue attributable to the mileage earned by the members of the Group’s frequent flyer award programs is estimated based on the fair value of the mileage awarded and the expected redemption rate. The fair value of mileage awarded is estimated by reference to external sales. The expected redemption rate is estimated based on historical experience, anticipated redemption patterns and the frequent flyer programs’ design. Different estimates could significantly affect the estimated deferred revenue and the results of operations.

(iv) Depreciation

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 Group reviews the estimated useful lives of assets annually in order to determine the amount of depreciation expense to be recorded during any financial year. The useful lives are based on the Group’s historical experience with similar assets and take into account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates.

(v) Provision for consumable spare parts and maintenance materials

Provision for consumable spare parts and maintenance materials is made based on the difference between the carrying amount and the net realizable value. The net realizable value is estimated based on current market condition, historical experience and the Group’s future operation plan for the consumable spare parts and maintenance materials. The net realizable value may be adjusted due to the change of market condition and the future plan for the consumable spare parts and maintenance materials.

(vi) Income tax

There are certain transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional tax will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the year in which such determination is made.

(vii) Impairment of trade receivables

When there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables, a provision for impairment of trade receivables is established based on the difference between the receivable’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

(b) Accounting judgments

Retirement benefits

According to IAS 19, Employee Benefits, an entity shall account not only for its legal obligation under the formal terms of a defined benefit plan, but also for any constructive obligation that arises from the entity’s informal practices where the entity has no realistic alternative but to pay the employee benefits. The Group believes the payments of welfare subsidy to those retirees who retired before the establishment of Pension Scheme (as defined in Note 51(a)) are discretionary and have not created a legal or constructive obligation. Such payments are made according to the Group’s business performance, and can be suspended at any time (Note 14).

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Financial risk management and fair values

12 Months Ended

Dec. 31, 2017

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Financial risk management and fair values

4 Financial risk management and fair values

The Group is exposed to liquidity, interest rate, currency, credit risks and commodity jet fuel price risk in the normal course of business. The Group’s overall risk management program focuses on the unpredictability of financial market and seeks to minimize the adverse effects on the Group’s financial performance. The Group’s exposure to these risks and the financial risk management policies and practices used by the Group to manage these risks are described below.

(a) Liquidity risk

As at December 31, 2017, the Group’s current liabilities exceeded its current assets by RMB51,693 million. For the year ended December 31, 2017, the Group recorded a net cash inflow from operating activities of RMB17,732 million, a net cash outflow from investing activities of RMB8,236 million and a net cash outflow from financing activities of RMB6,796 million, which in total resulted in a net increase in cash and cash equivalents of RMB2,700 million.

The Group is dependent on its ability to maintain adequate cash inflow from operations, its ability to maintain existing external financing, and its ability to obtain new external financing to meet its debt obligations as they fall due and to meet its committed future capital expenditures. The Group’s policy is to regularly monitor its liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term. As at December 31, 2017, the Group had banking facilities with several banks and financial institutions for providing bank financing up to approximately RMB181,922 million, of which approximately RMB142,239 million was unutilized. The Directors of the Company believe that sufficient financing will be available to the Group when and where needed.

The following tables show the remaining contractual maturities at the end of the reporting period of the Group’s non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the end of the reporting period) and the earliest date the Group can be required to pay:

	2017 Contractual undiscounted cash outflow
	Within 1 year or on demand RMB million		More than 1 year but less than 2 years RMB million		More than 2 years but less than 5 years RMB million		More than 5 years RMB million		Total RMB million		Carrying amount at December 31 RMB million
Borrowings		28,776		9,676		11,975		28		50,455		48,287
Obligations under finance leases		10,764		10,257		29,627		28,251		78,899		67,924
Trade and other payables and accrued charges		19,701		—		—		—		19,701		19,701
		59,241		19,933		41,602		28,279		149,055		135,912

	2016 Contractual undiscounted cash outflow
	Within 1 year or on demand RMB million		More than 1 year but less than 2 years RMB million		More than 2 years but less than 5 years RMB million		More than 5 years RMB million		Total RMB million		Carrying amount at December 31 RMB million
Borrowings		27,654		1,039		19,124		61		47,878		45,504
Obligations under finance leases		10,663		8,683		24,795		27,247		71,388		62,222
Trade and other payables and accrued charges		19,015		—		—		—		19,015		19,015
		57,332		9,722		43,919		27,308		138,281		126,741

(b) Interest rate risk

The interest rates and maturity information of the Group’s borrowings and obligations under finance leases are disclosed in Note 37 and Note 38, respectively. The Group’s borrowings and obligations under finance leases issued at floating and fixed interest rates expose the Group to cash flow interest rate risk and fair value interest rate risk, respectively. The Group determines the ratio of fixed-rate and floating-rate instruments according to the market environment, and maintains an appropriate combination of fixed-rate and floating-rate instruments by reviewing and monitoring it on a regular basis.

Interest rate swaps, denominated in United States Dollars (“USD”), have been entered into to mitigate its cash flow interest rate risk. Under the interest rate swaps, the Group agrees with other third parties to exchange, at specified intervals (primarily quarterly), the difference between fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional amounts (Note 29).

Cross currency swaps have been entered into to mitigate its interest rate risk and foreign currency risk. Under the cross currency swaps, the Group agrees with other third parties to exchange the floating interest and principal payments in USD for fixed interest and principal payments in RMB for certain USD bank loans (Note 29).

As at December 31, 2017, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would have decreased/increased the Group’s profit after tax and retained profits by approximately RMB530 million (2016: RMB376 million; 2015: RMB416 million).

The sensitivity analysis above indicates the instantaneous change in the Group’s profit after tax and retained profits and other components of consolidated equity that would arise assuming that the change in interest rates had occurred at the end of the reporting period and had been applied to re-measure those financial instruments held by the Group which expose the Group to fair value interest rate risk at the end of the reporting period. In respect of the exposure to cash flow interest rate risk arising from floating rate non-derivative instruments held by the Group at the end of the reporting period, the impact on the Group’s profit after tax (and retained profits) and other components of consolidated equity is estimated as an annualized impact on interest expense or income of such a change in interest rates. This analysis is performed on the same basis as that for 2016 and 2015.

(c) Foreign currency risk

Renminbi is not freely convertible into foreign currencies. All foreign exchange transactions involving Renminbi must take place either through the PBOC or other institutions authorized to buy and sell foreign exchange or at a swap center.

The Group has significant exposure to foreign currency risk as majority of the Group’s obligations under finance leases (Note 38) and certain of the bank borrowings (Note 37) are denominated in foreign currencies, principally USD, Euro and Japanese Yen. Depreciation or appreciation of Renminbi against foreign currencies affects the Group’s results significantly because the Group’s foreign currency liabilities generally exceed its foreign currency assets.

The following table indicates the instantaneous change in the Group’s profit after tax and retained profits that would arise if foreign exchange rates to which the Group has significant exposure at the end of the reporting period had changed at that date, assuming all other risk variables remained constant. The range of such sensitivity was considered to be reasonably possible at the end of the reporting date.

	2017
	Appreciation/(depreciation) of Renminbi against foreign currency			Increase/(decrease) on profit after tax and retained profits RMB million
USD		1	%		278
		(1	%)		(278	)
Euro		1	%		31
		(1	%)		(31	)
Japanese Yen		10	%		116
		(10	%)		(116	)

	2016
	Appreciation/(depreciation) of Renminbi against foreign currency			Increase/(decrease) on profit after tax and retained profits RMB million
USD		1	%		305
		(1	%)		(305	)
Euro		1	%		31
		(1	%)		(31	)
Japanese Yen		10	%		134
		(10	%)		(134	)

	2015
	Appreciation/(depreciation) of Renminbi against foreign currency			Increase/(decrease) on profit after tax and retained profits RMB million
USD		1	%		453
		(1	%)		(453	)
Euro		1	%		38
		(1	%)		(38	)
Japanese Yen		10	%		135
		(10	%)		(135	)

Results of the analysis as presented in the above table represent an aggregation of the instantaneous effects on each of the Group entities’ profit after tax and retained profits measured in the respective functional currencies, translated into Renminbi at the exchange rate ruling at the end of the reporting period for presentation purposes.

The sensitivity analysis assumes that the change in foreign exchange rates had been applied to re-measure those financial instruments, borrowings, and finance lease obligations held by the Group which expose the Group to foreign currency risk at the end of the reporting period, including inter-company payables and receivables within the Group which are denominated in a currency other than the functional currencies of the lender or the borrower. The analysis excludes differences that would result from the translation of the financial statements of foreign operations into the Group’s presentation currency. The analysis is performed on the same basis for 2016 and 2015.

(d) Credit risk

The Group’s credit risk is primarily attributable to cash and cash equivalents, trade receivables and the guarantees on personal bank loans provided to the Group’s pilot trainees.

Substantially all of the Group’s cash and cash equivalents are deposited with major reputable PRC financial institutions, which management believes are of high credit quality.

A significant portion of the Group’s air tickets are sold by agents participating in the Billing and Settlement Plan (“BSP”), a clearing scheme between airlines and sales agents organized by International Air Transportation Association. The use of the BSP reduces credit risk to the Group. As at December 31, 2017, the balance due from BSP agents amounted to RMB1,015 million (December 31, 2016: RMB1,267 million). The credit risk exposure to BSP and the remaining trade receivables balance are monitored by the Group on an ongoing basis and the allowance for impairment of doubtful debts is within management’s expectations. Further quantitative disclosures in respect of the Group’s exposure to credit risk arising from trade receivables is set out in Note 33.

The Company and its subsidiary, Xiamen Airlines Company Limited (“Xiamen Airlines”), entered into agreements with their pilot trainees and certain banks to provide guarantees on personal bank loans amounting to RMB696 million (December 31, 2016: RMB696 million) that can be drawn by the pilot trainees to finance their respective flight training expenses. As at December 31, 2017, total personal bank loans of RMB361 million (December 31, 2016: RMB409 million), under these guarantees, were drawn down from the banks. During the year, the Group has paid RMB5 million (2016: RMB4 million) to the banks due to the default of payments of certain pilot trainees (Note 53(b)).

(e) Jet fuel price risk

The Group’s results of operations may be significantly affected by fluctuations in fuel prices since the jet fuel expenses are a significant cost for the Group. A reasonable possible increase/decrease of 10% (2016 and 2015:10%) in jet fuel price, with volume of fuel consumed and all other variables held constant, would have increased/decreased the fuel costs by approximately RMB3,190 million (2016: RMB2,380 million; 2015: RMB2,627 million). The sensitivity analysis indicates the instantaneous change in the Group’s jet fuel costs that would arise assuming that the change in fuel price had occurred at the beginning of the financial year.

(f) Capital management

The Group’s primary objectives in managing capital are to safeguard the Group’s ability to continue as a going concern, and to generate sufficient profit to maintain growth and provide returns to its shareholders, by securing access to finance at a reasonable cost.

The Group manages the amount of capital in proportion to risk and manages its debt portfolio in conjunction with projected financing requirements. The Group monitors capital on the basis of the debt ratio, which is calculated as total liabilities divided by total assets. During 2017, the Group’s strategy, which was unchanged from 2016 and 2015, was to maintain a debt ratio at a range of levels to support the operations and development of the Group’s business in the long run. In order to maintain or adjust the debt ratio, the Group may adjust the amount of dividends paid to shareholders, issue new shares, return capital to shareholders, raise new debt financing or sell assets to reduce debt.

The Group’s debt ratio was 71% as at December 31, 2017 (December 31, 2016: 73%).

Except for the compliance of certain financial covenants for maintaining the Group’s banking facilities and borrowings, the Group is not subject to any externally imposed capital requirements. The Group complied with the financial covenants attached to borrowings as at December 31, 2017.

(g) Fair value

(i) Financial instruments carried at fair value

Fair value hierarchy

The following table presents the carrying value of financial instruments measured at the end of the reporting period on a recurring basis, categorized into the three-level fair value hierarchy as defined in IFRS 13, Fair value measurement. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as follows:

• Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date

• Level 2 valuations: Fair value measured using Level 2 inputs i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available

• Level 3 valuations: Fair value measured using significant unobservable inputs

						Fair value measurements as at December 31, 2017 categorized into
Recurring fair value measurement	Note		Fair value at December 31 2017 RMB million			Level 1 RMB million		Level 2 RMB million			Level 3 RMB million
Financial assets:
Available-for-sale equity securities:
-Listed shares		28		85			85		—			—
-Non-tradable shares		28		537			—		—			537
Derivative financial instruments:
-Interest rate swaps		29		46			—		46			—
Financial liabilities:
Derivative financial instruments:
-Cross currency swaps		29		(64	)		—		(64	)		—

					Fair value measurements as at December 31, 2016 categorized into
Recurring fair value measurement	Note		Fair value at December 31 2016 RMB million		Level 1 RMB million		Level 2 RMB million		Level 3 RMB million
Financial assets:
Available-for-sale equity securities:
-Listed shares		28		88		88		—		—
-Non-tradable shares		28		411		—		—		411
Derivative financial instruments:
-Interest rate swaps		29		21		—		21		—

During the years ended December 31, 2017 and 2016, there were no transfers among level 1, level 2 and level 3. The Group’s policy is to recognize transfers between levels of fair value hierarchy as at the end of the reporting period in which they occur.

Valuation techniques and inputs used in Level 2 fair value measurements

Fair value of interest rate swaps in derivative financial instruments is measured by discounting the expected receivable or payable amounts under the assumption that these swaps had been terminated at the end of the reporting period. The discount rates used are the US Treasury bond yield curve as at the end of the reporting period.

The fair value of cross currency swaps is the estimated amount that the Group would receive or pay to terminate the swaps at the end of the reporting period, taking into account current exchange rates and interest rates and the current creditworthiness of the swap counterparties.

Information about Level 3 fair value measurements

	Valuation technique	Significant unobservable inputs	Range
Available-for-sale equity securities:
-Non-tradable shares	Discounted cash flow	Expected profit growth rate during the projection period		10% to 15%
		Terminal growth rate		9%
		Expected dividend payout rate		27%
		Discount rate		12.29%

The fair value of non-tradable available-for-sale equity securities is determined by discounting a projected cash flow series associated with the investment. The valuation takes into account the expected profit growth rates and expected dividend payout rate of the investee. The discount rate used have been adjusted to reflect specific risks relating to the investments. The fair value measurement is positively correlated to the expected profit growth rates and expected dividend rate of the investee, and negatively correlated to the discount rate.

For the year ended December 31, 2017, the net unrealized gains of RMB126 million (2016: RMB378 million) relating to the available-for sale equity securities – non-tradable shares are recognized in fair value reserve in other comprehensive income.

(ii) Financial instruments not carried at fair value

(a) Other investments in equity securities represent investments in equity securities that do not have a quoted price in an active market for an identical instrument and whose fair value cannot otherwise be reliably measured. Accordingly, they are recognized in the consolidated statements of financial position at cost less impairment losses.

(b) All other financial instruments, including cash and cash equivalents, amounts due from/to related companies, trade and other receivables, trade and other payables, borrowings and obligations under finance leases are carried at amounts not materially different from their fair values as at December 31, 2017 and 2016.

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Traffic revenue

12 Months Ended

Dec. 31, 2017

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Traffic revenue

5 Traffic revenue

	2017 RMB million		2016 RMB million		2015 RMB million
Passenger		107,947		97,135		94,677
Cargo and mail		8,571		6,760		6,122
Fuel surcharge income		5,355		5,798		6,300
		121,873		109,693		107,099

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Segment reporting

12 Months Ended

Dec. 31, 2017

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Segment reporting

6 Segment reporting

(a) Business segments

The Group has two reportable operating segments “airline transportation operations” and “other segments”, according to internal organization structure, managerial needs and internal reporting system. “Airline transportation operations” comprises the Group’s passenger and cargo and mail operations. “Other segments” includes hotel and tour operation, air catering services, ground services, cargo handling and other miscellaneous services.

For the purposes of assessing segment performance and allocating resources between segments, the Group’s chief operating decision maker (“CODM”) monitors the results, assets and liabilities attributable to each reportable segment based on financial results prepared under the People’s Republic of China Accounting Standards for Business Enterprises (“PRC GAAP”). As such, the amount of each material reconciling item from the Group’s reportable segment revenue, profit before taxation, assets and liabilities arising from different accounting policies are set out in Note 6(c). The comparative figures in the Group’s financial statements prepared in accordance with PRC GAAP are restated as the Group acquired a subsidiary under common control in 2017 (Note 24(v)). Management considered the impact of the above restatement is not material. Therefore, the Group’s segment results for the year ended December 31, 2016 and 2015, and its segment assets and liabilities as at December 31, 2016 as disclosed in these financial statements have not been restated.

Inter-segment sales and transfers are transacted with reference to the selling prices used for sales made to third parties at the then prevailing market prices.

Information regarding the Group’s reportable segments as provided to the Group’s CODM for the purposes of resource allocation and assessment of segment performance is set out below.

The segment results of the Group for the year ended December 31, 2017 are as follows:

	Airline transportation operations		Other segments		Elimination			Unallocated*			Total
	RMB million		RMB million		RMB million			RMB million			RMB million
Revenue from external customers		126,077		1,412		—			—			127,489
Inter-segment sales		159		2,823		(2,982	)		—			—
Reportable segment revenue		126,236		4,235		(2,982	)		—			127,489
Reportable segment profit before taxation		7,708		529		—			561			8,798
Reportable segment profit after taxation		5,875		381		—			577			6,833
Other segment information
Income tax		1,833		148		—			(16	)		1,965
Interest income		74		15		—			—			89
Interest expense		2,724		23		—			—			2,747
Depreciation and amortization		13,112		201		—			—			13,313
Impairment loss		440		2		—			—			442
Share of associates’ results		—		—		—			420			420
Share of joint ventures’ results		—		—		—			99			99
Remeasurement of the originally held equity interests in a joint venture		—		—		—			88			88
Fair value movement of derivative financial instruments		—		—		—			(64	)		(64	)
Non-current assets additions during the year#		30,776		1,828		—			—			32,604

The segment results of the Group for the year ended December 31, 2016 are as follows:

	Airline transportation operations		Other segments		Elimination			Unallocated*		Total
	RMB million		RMB million		RMB million			RMB million		RMB million
Revenue from external customers		113,490		1,302		—			—		114,792
Inter-segment sales		101		2,231		(2,332	)		—		—
Reportable segment revenue		113,591		3,533		(2,332	)		—		114,792
Reportable segment profit before taxation		6,471		459		—			717		7,647
Reportable segment profit after taxation		4,834		337		—			717		5,888
Other segment information
Income tax		1,637		122		—			—		1,759
Interest income		79		10		—			—		89
Interest expense		2,458		7		—			—		2,465
Depreciation and amortization		12,693		96		—			—		12,789
Impairment loss		127		3		—			—		130
Share of associates’ results		—		—		—			511		511
Share of joint ventures’ results		—		—		—			102		102
Gain on deemed disposal of a subsidiary		—		—		—			90		90
Non-current assets additions during the year#		29,126		120		—			—		29,246

The segment results of the Group for the year ended December 31, 2015 are as follows:

	Airline transportation operations		Other segments		Elimination			Unallocated*		Total
	RMB million		RMB million		RMB million			RMB million		RMB million
Revenue from external customers		110,067		1,400		—			—		111,467
Inter-segment sales		114		1,528		(1,642	)		—		—
Reportable segment revenue		110,181		2,928		(1,642	)		—		111,467
Reportable segment profit before taxation		5,480		279		—			582		6,341
Reportable segment profit after taxation		4,199		205		—			582		4,986
Other segment information
Income tax		1,281		74		—			—		1,355
Interest income		244		9		—			—		253
Interest expense		2,156		32		—			—		2,188
Depreciation and amortization		11,915		97		—			—		12,012
Impairment loss		105		3		—			—		108
Share of associates’ results		—		—		—			462		462
Share of joint ventures’ results		—		—		—			107		107
Non-current assets additions during the year#		24,242		98		—			—		24,340

The segment assets and liabilities of the Group as at December 31, 2017 and December 31, 2016 are as follows:

	Airline transportation operations		Other segments		Elimination			Unallocated*		Total
	RMB million		RMB million		RMB million			RMB million		RMB million
As at December 31, 2017
Reportable segment assets		208,116		5,799		(402	)		4,816		218,329
Reportable segment liabilities		154,391		2,111		(402	)		64		156,164
As at December 31, 2016
Reportable segment assets		192,881		3,201		(376	)		4,755		200,461
Reportable segment liabilities		144,768		1,355		(370	)		—		145,753

* Unallocated assets primarily include goodwill, interest in associates and joint ventures, available-for-sale financial assets, derivative financial instruments and other investments in equity securities. Unallocated results primarily include the share of results of associates and joint ventures, dividend income from available-for-sale financial assets and other investments in equity securities, remeasurement of the originally held equity interests in a joint venture, gain on deemed disposal of a subsidiary, and the fair value movement of derivative financial instruments recognized through profit or loss.

# The additions of non-current assets do not include goodwill, interests in associates and joint ventures, other investments in equity securities, available-for-sale financial assets, derivative financial instruments and deferred tax assets.

(b) The Group’s business segments operate in three main geographical areas, even though they are managed on a worldwide basis.

The Group’s revenue by geographical segment are analyzed based on the following criteria:

(1) Traffic revenue from services of both origin and destination within the PRC (excluding Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan (“Hong Kong, Macau and Taiwan”)), is classified as domestic revenue. Traffic revenue with origin and destination among PRC, Hong Kong, Macau and Taiwan is classified as Hong Kong, Macau and Taiwan revenue; while that with origin and destination from/to other overseas markets is classified as international revenue.

(2) Revenue from commission income, hotel and tour operation, ground services, cargo handling and other miscellaneous services are classified on the basis of where the services are performed.

	2017		2016		2015
	RMB million		RMB million		RMB million
Domestic		92,986		84,380		82,981
International		32,117		28,096		25,872
Hong Kong, Macau and Taiwan		2,386		2,316		2,614
		127,489		114,792		111,467

The major revenue earning asset of the Group is its aircraft fleet which is registered in the PRC and is deployed across its worldwide route network. Majority of the Group’s other assets are located in the PRC. CODM considers that there is no suitable basis for allocating such assets and related liabilities to geographical locations. Accordingly, geographical segment assets and liabilities are not disclosed.

(c) Reconciliation of reportable segment revenues, profit before income tax, assets and liabilities to the consolidated figures as reported in the consolidated financial statements.

			2017				2016				2015
	Note		RMB million				RMB million				RMB million
Revenue
Reportable segment revenue				127,489				114,792				111,467
Reclassification of expired sales in advance of carriage	(i)			396				376				459
Reclassification of sales tax	(ii)			(65	)			(161	)			(274	)
Adjustments arising from business combinations under common control	(v)			(14	)			(26	)			—
Consolidated revenue				127,806				114,981				111,652
			2017				2016				2015
	Note		RMB million				RMB million				RMB million
Profit before income tax
Reportable segment profit before taxation				8,798				7,647				6,341
Capitalization of exchange difference of specific loans	(iii)			47				48				(222	)
Government grants	(iv)			21				1				1
Adjustments arising from business combinations under common control	(v)			8				(35	)			(2	)
Consolidated profit before income tax				8,874				7,661				6,118
					2017				2016
	Note				RMB million				RMB million
Assets
Reportable segment assets						218,329				200,461
Capitalization of exchange difference of specific loans		(iii)				196				149
Government grants		(iv)				(8	)			(316	)
Adjustments arising from business combinations under common control		(v)				237				184
Others						(36	)			(36	)
Consolidated total assets						218,718				200,442

			2017		2016
	Note		RMB million		RMB million
Liabilities
Reportable segment liabilities				156,164		145,753
Government grants		(iv)		—		(287	)
Others				11		—
Consolidated total liabilities				156,175		145,466

Notes:

(i) Expired sales in advance of carriage are recorded under non-operating income in the PRC GAAP financial statements. Such income is recognized as other operating revenue in the IFRS financial statements.

(ii) In accordance with the PRC GAAP, sales tax is separately disclosed rather than deducted from revenue under IFRSs.

(iii) In accordance with the PRC GAAP, exchange difference arising on translation of specific loans and related interest denominated in a foreign currency is capitalized as part of the cost of qualifying assets. Under IFRSs, such exchange difference is recognized in income statement unless the exchange difference represents an adjustment to interest.

(iv) Prior to the year 2017, under the PRC GAAP, special funds granted by the government are accounted for as increase in capital reserve if they are clearly defined on approval documents as part of “capital reserve”. Government grants that relate to the purchase of assets are recognized as deferred income and amortized to profit or loss on a straight line basis over the useful life of the related assets.

Pursuant to the accounting policy change under PRC GAAP which became effective in 2017, the Group deducted the government grants related to the purchase of assets (other than special funds) from the cost of the related assets. The accounting treatment is consistent with IFRSs.

(v) In accordance with the PRC GAAP, the Group accounts for the business combination under common control by applying the pooling-of-interest method. Under the pooling-of-interest method, the difference between the historical carrying amount of the acquiree and the consideration paid is accounted for as an equity transaction. Business combinations under common control are accounted for as if the acquisition had occurred at the beginning of the earliest comparative year presented or, if later, at the date that common control was established; for this purpose, comparative figures are restated under PRC GAAP. Under IFRSs, the Group adopts the purchase accounting method for acquisition of business under common control.

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Other operating revenue

12 Months Ended

Dec. 31, 2017

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Other operating revenue

7 Other operating revenue

	2017		2016		2015
	RMB million		RMB million		RMB million
Commission income		2,781		2,518		1,545
Expired sales in advance of carriage		396		376		459
Hotel and tour operation income		547		625		621
General aviation income		467		461		490
Ground services income		429		384		345
Air catering income		335		253		239
Cargo handling income		241		201		230
Rental income		184		179		182
Others		553		291		442
		5,933		5,288		4,553

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Flight operation expenses

12 Months Ended

Dec. 31, 2017

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Flight operation expenses

8 Flight operation expenses

	2017		2016		2015
	RMB million		RMB million		RMB million
Jet fuel costs		31,895		23,799		26,274
Flight personnel payroll and welfare		10,574		9,215		8,070
Aircraft operating lease charges		8,022		7,330		6,153
Air catering expenses		3,379		2,965		2,680
Civil Aviation Development Fund		2,720		2,565		2,482
Training expenses		1,184		1,120		1,003
Aircraft insurance		175		197		168
Others		5,029		4,270		3,582
		62,978		51,461		50,412

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Maintenance expenses

12 Months Ended

Dec. 31, 2017

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Maintenance expenses

9 Maintenance expenses

	2017		2016		2015
	RMB million		RMB million		RMB million
Aviation repair and maintenance charges		7,930		7,952		7,396
Staff payroll and welfare		2,620		2,363		2,131
Maintenance materials		1,327		1,003		880
		11,877		11,318		10,407

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Aircraft and transportation service expenses

12 Months Ended

Dec. 31, 2017

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Aircraft and transportation service expenses

10 Aircraft and transportation service expenses

	2017		2016		2015
	RMB million		RMB million		RMB million
Landing and navigation fees		14,910		13,109		11,510
Ground service and other charges		8,025		7,106		6,398
		22,935		20,215		17,908

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Promotion and selling expenses

12 Months Ended

Dec. 31, 2017

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Promotion and selling expenses

11 Promotion and selling expenses

	2017		2016		2015
	RMB million		RMB million		RMB million
Sales commissions		1,935		1,926		3,150
Ticket office expenses		3,160		2,875		2,605
Computer reservation services		835		777		605
Advertising and promotion		196		173		122
Others		755		553		494
		6,881		6,304		6,976

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General and administrative expenses

12 Months Ended

Dec. 31, 2017

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General and administrative expenses

12 General and administrative expenses

	2017		2016		2015
	RMB million		RMB million		RMB million
General corporate expenses		3,218		2,671		2,325
Auditors’ remuneration		14		13		15
- Audit services		14		13		15
- Non-audit services		—		—		—
Other taxes and levies		159		131		124
		3,391		2,815		2,464

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Depreciation and amortization

12 Months Ended

Dec. 31, 2017

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Depreciation and amortization

13 Depreciation and amortization

	2017			2016			2015
	RMB million			RMB million			RMB million
Depreciation
– Owned assets		8,080			7,569			7,082
– Assets acquired under finance leases		4,883			4,849			4,684
Amortization of deferred benefits and gains		(161	)		(131	)		(148	)
Other amortization		360			332			227
		13,162			12,619			11,845

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Staff costs

12 Months Ended

Dec. 31, 2017

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Staff costs

14 Staff costs

	2017		2016		2015
	RMB million		RMB million		RMB million
Salaries, wages and welfare		21,400		18,774		16,636
Defined contribution retirement scheme		2,114		1,886		1,726
Other retirement welfare subsidy		194		183		177
Early retirement benefits (Note 45)		1		3		3
		23,709		20,846		18,542

Staff costs relating to flight operation and maintenance are also included in the respective total amounts disclosed separately in Note 8 and Note 9 above.

Staff costs arising from the SARs, which have all been expired in 2015 (Note 51(c)), were included in “salaries, wages and welfare” above.

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Other net income

12 Months Ended

Dec. 31, 2017

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Other net income

15 Other net income

	2017		2016		2015
	RMB million		RMB million		RMB million
Government grants (Note)		3,075		2,837		2,331
Gains/(losses) on disposal of property, plant and equipment and construction in progress
– Aircraft and spare engines and relating construction in progress		960		523		414
– Other property, plant and equipment		29		34		(102	)
Others		384		441		635
		4,448		3,835		3,278

Note:

Government grants mainly represent (i) subsidies based on certain amount of tax paid granted by governments to the Group; (ii) subsidies granted by various local governments to encourage the Group to operate certain routes to cities where these governments are located.

There are no unfulfilled conditions and other contingencies related to subsidies that have been recognized during the year ended December 31, 2017.

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Interest expense

12 Months Ended

Dec. 31, 2017

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Interest expense

16 Interest expense

	2017			2016			2015
	RMB million			RMB million			RMB million
Interest on borrowings		1,628			1,444			1,320
Interest relating to obligations under finance leases		2,009			1,598			1,248
Interest relating to provision for early retirement benefits (Note 45)		1			1			2
Total interest expense on financial liabilities not at fair value through profit or loss		3,638			3,043			2,570
Less: interest expense capitalized (Note)		(908	)		(624	)		(382	)
		2,730			2,419			2,188
Interest rate swaps: cash flow hedge, reclassified from equity (Note 18)		17			46			—
		2,747			2,465			2,188

Note:

The weighted average interest rate used for interest capitalization was 3.32% per annum in 2017 (2016: 3.22%; 2015: 2.77%).

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Income tax

12 Months Ended

Dec. 31, 2017

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Income tax

17 Income tax

(a) Income tax expense in the consolidated income statements

	2017			2016			2015
	RMB million			RMB million			RMB million
PRC income tax
– Provision for the year		2,280			2,203			1,700
– (Over) /under-provision in prior year		(2	)		47			(41	)
		2,278			2,250			1,659
Deferred tax (Note 30)
Origination and reversal of temporary differences		(302	)		(487	)		(359	)
Tax expense		1,976			1,763			1,300

In respect of majority of the Group’s airlines operation outside mainland China, the Group has either obtained exemptions from overseas taxation pursuant to the bilateral aviation agreements between the overseas governments and the PRC government, or has sustained tax losses in those overseas jurisdictions. Accordingly, no provision for overseas income tax has been made for overseas airlines operation in the current and prior years.

Under the Corporate Income Tax Law of the PRC, the Company and majority of its PRC subsidiaries are subject to PRC income tax at 25% (2016: 25%; 2015:25%). Certain PRC subsidiaries of the Company are subject to preferential income tax rate at 15% either because they are qualified as Advanced and New Technology Enterprises, or according to the preferential tax policy in locations, where those subsidiaries are located.

(b) Reconciliation between actual tax expense and calculated tax based on accounting profit at applicable tax rates

	2017			2016			2015
	RMB million			RMB million			RMB million
Profit before income tax		8,874			7,661			6,118
Notional tax on profit before taxation, calculated at the rates applicable to profits in the tax jurisdictions concerned (Note 17(a))		2,179			1,857			1,482
Adjustments for tax effect of:
Non-deductible expenses		9			4			3
Share of results of associates and joint ventures and other non-taxable income		(137	)		(154	)		(144	)
Taxable temporary differences for which no deferred tax liabilities were recognized		(27	)		—			—
Unused tax losses and deductible temporary differences for which no deferred tax assets were recognized		26			48			23
Utilization of unused tax losses and deductible temporary differences for which no deferred tax assets were recognized in prior years		(72	)		(39	)		(18	)
(Over)/under-provision in prior year		(2	)		47			(41	)
Others		—			—			(5	)
Tax expense		1,976			1,763			1,300

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Other comprehensive income

12 Months Ended

Dec. 31, 2017

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Other comprehensive income

18 Other comprehensive income

	2017			2016			2015
	RMB million			RMB million			RMB million
Cash flow hedges:
Effective portion of changes in fair value of hedging instruments recognized during the year		8			(38	)		13
Reclassification adjustments for amounts transferred to profit or loss:
- interest expense (Note 16)		17			46			—
Net deferred tax debited to other comprehensive income		(6	)		(2	)		(3	)
Net movement in the fair value reserve during the year recognized in other comprehensive income		19			6			10
Available-for-sale financial assets:
Changes in fair value recognized during the year		123			362			—
Net deferred tax debited to other comprehensive income		(31	)		(90	)		—
Net movement in the fair value reserve during the year recognized in other comprehensive income		92			272			—

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Earnings per share

12 Months Ended

Dec. 31, 2017

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Earnings per share

19 Earnings per share

The calculation of basic earnings per share for the year ended December 31, 2017 is based on the profit attributable to equity shareholders of the Company of RMB5,961 million (2016: RMB5,044 million; 2015: RMB3,736 million) and the weighted average of 9,923,585,348 shares in issue during the year (2016 and 2015: 9,817,567,000 shares).

	2017		2016		2015
	million		million		million
Issued ordinary shares at January 1		9,818		9,818		9,818
Effect of issuance of H shares (Note 47)		106		—		—
Weighted average number of ordinary shares at December 31		9,924		9,818		9,818

The amounts of diluted earnings per share are the same as basic earnings per share as there were no dilutive potential ordinary shares in existence for the years ended December 31, 2017, 2016 and 2015.

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Property, plant and equipment, net

12 Months Ended

Dec. 31, 2017

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Property, plant and equipment, net

20 Property, plant and equipment, net

							Aircraft
	Investment properties			Buildings			Owned			Acquired under finance leases			Other flight equipment including			Machinery, equipment and vehicles			Total
	RMB million			RMB million			RMB million			RMB million			rotables RMB million			RMB million			RMB million
Cost:
At January 1, 2016		730			10,074			93,708			86,832			18,970			6,109			216,423
Acquisitions through business combinations		—			5			—			—			—			2			7
Additions		—			39			1,675			5,112			1,148			453			8,427
Transfer from construction in progress (Note 21)		—			1,145			—			6,745			203			143			8,236
Transfer to lease prepayments		(21	)		—			—			—			—			—			(21	)
Transfer to buildings upon cease of lease intention		(64	)		64			—			—			—			—			—
Transfer to investment properties upon lease out		148			(148	)		—			—			—			—			—
Reclassification on exercise of purchase option		—			—			4,470			(4,470	)		—			—			—
Disposals		—			(32	)		(2,536	)		(347	)		(751	)		(466	)		(4,132	)
Deemed disposal of a subsidiary		(124	)		(79	)		—			—			—			(41	)		(244	)
At December 31, 2016		669			11,068			97,317			93,872			19,570			6,200			228,696
At January 1, 2017		669			11,068			97,317			93,872			19,570			6,200			228,696
Acquisitions through business combinations (Note 24(iv))		—			326			—			—			1,136			94			1,556
Additions		—			28			1,336			7,592			1,635			569			11,160
Transfer from construction in progress (Note 21)		—			1,506			1,098			10,684			317			77			13,682
Transfer to lease prepayments		(18	)		(143	)		—			—			—			—			(161	)
Transfer to buildings upon cease of lease intention		(75	)		75			—			—			—			—			—
Transfer to investment properties upon lease out		225			(225	)		—			—			—			—			—
Reclassification on exercise of purchase option		—			—			12,669			(12,669	)		—			—			—
Transfer to assets held for sale (Note 36)		—			(20	)		—			—			—			—			(20	)
Disposals		(7	)		(4	)		(6,446	)		(112	)		(752	)		(311	)		(7,632	)
At December 31, 2017		794			12,611			105,974			99,367			21,906			6,629			247,281

							Aircraft
	Investment properties			Buildings			Owned			Acquired under finance leases			Other flight equipment including			Machinery, equipment and vehicles			Total
	RMB million			RMB million			RMB million			RMB million			rotables RMB million			RMB million			RMB million
Accumulated depreciation and impairment losses:
At January 1, 2016		223			3,349			40,782			14,586			10,600			4,013			73,553
Depreciation charge for the year		20			358			5,476			4,849			1,159			556			12,418
Transfer to lease prepayments		(5	)		—			—			—			—			—			(5	)
Transfer to buildings upon cease of lease intention		(21	)		21			—			—			—			—			—
Transfer to investment properties upon lease out		39			(39	)		—			—			—			—			—
Reclassification on exercise of purchase options		—			—			2,141			(2,141	)		—			—			—
Disposals		—			(18	)		(2,468	)		(347	)		(736	)		(426	)		(3,995	)
Deemed disposal of a subsidiary		(27	)		(25	)		—			—			—			(39	)		(91	)
Provision for impairment losses		—			—			21			50			—			—			71
Impairment losses written off on disposal		—			—			—			—			(1	)		—			(1	)
At December 31, 2016		229			3,646			45,952			16,997			11,022			4,104			81,950
At January 1, 2017		229			3,646			45,952			16,997			11,022			4,104			81,950
Depreciation charge for the year		29			390			5,783			4,883			1,280			598			12,963
Transfer to lease prepayments		(5	)		(36	)		—			—			—			—			(41	)
Transfer to buildings upon cease of lease intention		(26	)		26			—			—			—			—			—
Transfer to investment properties upon lease out		48			(48	)		—			—			—			—			—
Reclassification on exercise of purchase options		—			—			4,757			(4,757	)		—			—			—
Transfer to assets held for sale (Note 36)		—			(12	)		—			—			—			—			(12	)
Disposals		(5	)		(1	)		(5,351	)		(112	)		(623	)		(266	)		(6,358	)
Provision for impairment losses (Note 20(e))		—			—			324			—			—			—			324
Impairment losses written off on disposal (Note 20(d))		—			—			(470	)		—			(1	)		—			(471	)
At December 31, 2017		270			3,965			50,995			17,011			11,678			4,436			88,355
Net book value:
At December 31, 2017		524			8,646			54,979			82,356			10,228			2,193			158,926
At December 31, 2016		440			7,422			51,365			76,875			8,548			2,096			146,746

(a) As at December 31, 2017, the accumulated impairment provision of aircraft and flight equipment of the Group is RMB1,495 million and RMB123 million respectively (December 31, 2016: RMB1,641 million and RMB124 million respectively).

(b) As at December 31, 2017, certain aircraft of the Group with an aggregate carrying value of approximately RMB83,687 million (December 31, 2016: RMB78,318 million) were mortgaged under certain loans or certain lease agreements (Note 37(a) (iii) and Note 38).

(c) As at December 31, 2017, other flight equipment of the Group with an aggregate carrying value of approximately RMB206 million (December 31, 2016: Nil) were mortgaged under certain loans (Note 37(a) (iii)).

(d) For the year ended December 31, 2017, 3 Boeing 737-300 aircraft and 2 Boeing 777-200 aircraft against which impairment provision had been provided in previous years were disposed of and the impairment provision of RMB470 million for these aircraft was written off on disposal.

(e) During the year, the Group estimated the recoverable amounts of certain aged fleet based on the disposal plans, and made an impairment provision of RMB314 million towards the fleet and related assets. The Group also made an additional impairment of RMB10 million for certain EMB 190 aircraft. The estimates of recoverable amounts were based on the greater of the assets’ fair value less cost to sell and the value in use. The fair value on which the recoverable amount is based on is categorized as a level 3 measurement and it was determined by reference to the recent observable market prices for the aircraft fleet and flight equipment. In cases when value in use are based, the pre-tax discount rate used in the estimate is 9.74% (2016: 8.87%).

(f) As at December 31, 2017 and up to the date of approval of these financial statements, the Group is in the process of applying for the property title certificates in respect of the properties located in Guangzhou (including Guangzhou Baiyun International Airport), Guangxi, Guizhou, Chengdu, Xiamen, Heilongjiang, Jilin, Dalian, Hunan, Beijing, Zhuhai, Shenyang, Shenzhen, Henan, Shantou, Xinjiang, Hainan, Shanghai, Hubei, Chongqing, and Hangzhou, in which the Group has interests and for which such certificates have not been granted. As at December 31, 2017, carrying value of such properties of the Group amounted to RMB5,196 million (December 31, 2016: RMB4,294 million). The Directors of the Company are of the opinion that the use of and the conduct of operating activities at the properties referred to above are not affected by the fact that the Group has not yet obtained the relevant property title certificates.

(g) The Group leased out investment properties under operating leases. The leases typically run for an initial period of one to fourteen years, with an option to renew the leases after that date at which time all terms are renegotiated. None of the leases includes contingent rentals. In this connection, rental income totaling RMB184 million (2016: RMB179 million; 2015: RMB 182 million) was received by the Group during the year in respect of the leases. Directors estimated the fair value of these investment properties approximate the carrying amount.

The properties are reclassified between investment properties and other property, plant and equipment, upon the intention of commencement or cease of lease.

The Group’s total future minimum lease income under non-cancellable operating leases are as follows:

	2017		2016
	RMB million		RMB million
Within 1 year		61		91
After 1 year but within 5 years		70		59
After 5 years		14		54
		145		204

(h) As at December 31, 2017, certain investment properties of the Group with an aggregate carrying value of approximately RMB20 million (December 31, 2016: RMB34 million) were mortgaged for certain bank borrowings (Note 37(a) (ii)).

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Construction in progress

12 Months Ended

Dec. 31, 2017

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Construction in progress

21 Construction in progress

	Advance payment for aircraft and flight equipment			Others			Total
	RMB million			RMB million			RMB million
At January 1, 2016		17,700			1,733			19,433
Additions		18,930			1,362			20,292
Transferred to property, plant and equipment (Note 20)		(6,948	)		(1,288	)		(8,236	)
Transferred to other assets upon completion of development (Note 31)		—			(128	)		(128	)
Disposals		(2,415	)		(36	)		(2,451	)
At December 31, 2016		27,267			1,643			28,910
At January 1, 2017		27,267			1,643			28,910
Additions		16,319			2,920			19,239
Transferred to property, plant and equipment (Note 20)		(12,099	)		(1,583	)		(13,682	)
Transferred to other assets upon completion of development (Note 31)		—			(211	)		(211	)
Transferred to lease prepayments		—			(79	)		(79	)
Disposals		(3,944	)		—			(3,944	)
At December 31, 2017		27,543			2,690			30,233

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Lease prepayments

12 Months Ended

Dec. 31, 2017

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Lease prepayments

22 Lease prepayments

Lease prepayments relate to the Group’s land use rights. In 2017, the amount of amortization charged to consolidated income statements was RMB78 million (2016: RMB75 million; 2015: RMB64 million).

A majority of the Group’s properties are located in the PRC. The Group was formally granted the rights to use certain parcels of land in Guangzhou, Shenzhen, Zhuhai, Beihai, Changsha, Shantou, Haikou, Zhengzhou, Jilin, Guiyang and other PRC cities by the relevant PRC authorities for periods of 30 to 70 years, which expire between 2020 and 2073.

As at December 31, 2017 and up to the date of approval of these financial statements, the Group is in the process of applying for land use right certificates in respect of certain land used by the Group. As at December 31, 2017, carrying value of such land use rights of the Group amounted to RMB827 million (December 31, 2016: RMB866 million). The Directors of the Company are of the opinion that the use of and the conduct of operating activities at the land referred to above are not affected by the fact that the Group has not yet obtained the relevant land use right certificates.

As at December 31, 2017, certain land use rights of the Group with an aggregate carrying value of approximately RMB90 million (December 31, 2016: RMB79 million) were mortgaged for certain bank borrowings (Note 37(a) (ii)).

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Goodwill

12 Months Ended

Dec. 31, 2017

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Goodwill

23 Goodwill

	2017		2016
	RMB million		RMB million
Cost and carrying amount:
At January 1		182		—
Acquisitions through business combination (Note 24(v)&(vi))		55		182
At December 31		237		182

Impairment tests for cash-generating units containing goodwill

	2017		2016
	RMB million		RMB million
Southern Airlines Group Import and Export Trading Company (“SAIETC”)(Note 24(vi))		182		182
Xiamen Airlines Culture and Media Co., Ltd. (“XACM”) (Note 24(v))		55		—
Total		237		182

The recoverable amount of the CGU is determined based on value-in-use calculation. The calculation uses cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using an estimated weighted average growth rate which does not exceed the long-term average growth rates for the business in which the CGU operates.

The cash flows of SAIETC are discounted using a pre-tax discount rate of 13.40% (2016: 13.40%).

The cash flows of XACM are discounted using a pre-tax discount rate of 11.10%.

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Subsidiaries

12 Months Ended

Dec. 31, 2017

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Subsidiaries

24 Subsidiaries

All the subsidiaries of the Company are unlisted. The following list contains only the particulars of subsidiaries which principally affect the results, assets or liabilities of the Group.

Name of company	Place of establishment/ operation	Registered capital		Proportion of ownership interest held by the Company			Principal activity
Henan Airlines Company Limited (i)	PRC		RMB6,000,000,000		60	%	Airline transportation
Xiamen Airlines (i)&(v)	PRC		RMB8,000,000,000		55	%	Airline transportation
Chongqing Airlines Company Limited (i)	PRC		RMB1,200,000,000		60	%	Airline transportation
Shantou Airlines Company Limited (i)	PRC		RMB280,000,000		60	%	Airline transportation
Zhuhai Airlines Company Limited (i)	PRC		RMB250,000,000		60	%	Airline transportation
Guizhou Airlines Company Limited (i)	PRC		RMB910,000,000		60	%	Airline transportation
Guangzhou Nanland Air Catering Company Limited (ii)	PRC		RMB240,000,000		70.5	%	Air catering
Guangzhou Baiyun International Logistic Company Limited (i)	PRC		RMB50,000,000		61	%	Logistics operations
Beijing Southern Airlines Ground Services Company Limited (i)	PRC		RMB18,000,000		100	%	Airport ground services
Nan Lung International Freight Limited	Hong Kong		HKD3,270,000		51	%	Freight services
Southern Airlines General Aviation Company Limited(i)	PRC		RMB1,000,000,000		100	%	General aviation
SAIETC (i)	PRC		RMB15,000,000		100	%	Import and export agent services
Zhuhai Xiang Yi Aviation Technology Company Limited (“Zhuhai Xiang Yi”)(i)&(iv)	PRC		RMB469,848,000		100	%	Flight simulation services

(i) These subsidiaries are PRC limited liability companies.

(ii) This subsidiary is a sino-foreign equity joint venture company established in the PRC.

(iii) Certain subsidiaries of the Group are PRC equity joint ventures which have limited terms pursuant to the PRC law.

(iv) Pursuant to the equity transfer agreement entered into between the Company and a third party, the Company acquired 49% equity interests in Zhuhai Xiang Yi, a former joint venture of the Company, at a cash consideration of USD99.52 million (equivalent to RMB678 million) on July 10, 2017. Zhuhai Xiang Yi became a wholly-owned subsidiary of the Company upon completion of the acquisition. The acquisition of Zhuhai Xiang Yi enables the Group to engage in flight simulation services.

In the period from the acquisition date to December 31, 2017, Zhuhai Xiang Yi contributed revenue of RMB196 million and profit of RMB15 million to the Group’s results. If the acquisition had occurred on January 1, 2017, management estimates that consolidated revenue would have been increased by RMB424 million, and consolidated profit for the year would have been increased by RMB53 million. In determining these amounts, management have assumed that the fair value adjustments that arose on the acquisition date would have been the same if the acquisition had occurred on January 1, 2017. The information above is the amount before inter-company eliminations.

The above acquisitions had the following effect on the Group’s assets and liabilities on acquisition date:

	Note		Recognized values on acquisition RMB million
Property, plant and equipment, net		20		1,556
Lease prepayments				115
Trade and other receivables				70
Cash and cash equivalents				41
Other assets				32
Trade and other payables				(34	)
Borrowings		35(c)		(342	)
Deferred tax liabilities				(30	)
Other liabilities				(24	)
Total net identifiable assets				1,384

Analysis of the net outflow of cash and cash equivalents in respect of the acquisitions:

Cash consideration paid	678
Cash and cash equivalents acquired	(41	)
Net cash outflow	637

Effect of the acquisition on the Group’s consolidated income statements

Fair value of the originally held 51% equity interests	706
Less: carrying value of the originally held 51% equity interests	(597	)
Remeasurement of the originally held 51% equity interests	109

Acquisition-related costs were minimal and included in “general and administrative expenses” in the consolidated income statements.

(v) Pursuant to the equity transfer agreement entered into between the Company’s subsidiary, Xiamen Airlines, and Southern Airlines Culture and Media Co., Ltd. (“SACM”, an associate of the Company) on October 13, 2017, Xiamen Airlines acquired 51% equity interests in XACM, at a consideration of RMB47 million. Xiamen Airlines held 49% equity interest in XACM before the acquisition. XACM became a wholly-owned subsidiary of the Xiamen Airlines upon completion of the acquisition. The acquisition of XACM enables the Group to engage in advertising agency business.

In the period from the acquisition date to December 31, 2017, XACM contributed revenue of RMB7 million and profit of RMB1 million to the Group’s results. If the acquisition had occurred on January 1, 2017, management estimates that consolidated revenue would have been increased by RMB44 million, and consolidated profit for the year would have been increased by RMB2 million. In determining these amounts, management have assumed that the fair value adjustments that arose on the acquisition date would have been the same if the acquisition had occurred on January 1, 2017. The information above is the amount before inter-company eliminations.

The above acquisitions had the following effect on the Group’s assets and liabilities on acquisition date:

	Recognized values on acquisition RMB million
Trade and other receivables		46
Cash and cash equivalents		2
Trade and other payables		(11	)
Total net identifiable assets		37

Analysis of the net outflow of cash and cash equivalents in respect of the acquisitions:

Cash consideration paid	47
Cash and cash equivalents acquired	(2	)
Net cash outflow	45

Goodwill

Goodwill was recognized as a result of the acquisitions as follows:

	Recognized values on acquisition RMB million
Total consideration transferred		47
The fair value of 49% equity of XACM on the acquisition date		45
Less: fair value of identifiable net assets		(37	)
Goodwill (Note 23)		55

The goodwill resulting from this acquisition represented the expected synergies from combining operations of XACM and the Group.

Acquisition-related costs were minimal and included in “general and administrative expenses” in the consolidated income statements.

(vi) Pursuant to the equity transfer agreement entered into between the Company and CSAH on February 2, 2016, the Company acquired 100% equity interests in SAIETC, a wholly owned subsidiary of CSAH, at a cash consideration of RMB400 million in August 2016. SAIETC became a wholly owned subsidiary of the Company upon completion of the acquisition. The acquisition of SAIETC enables the Group to engage in import and export trading transactions.

In the period from the acquisition date to December 31, 2016, SAIETC contributed revenue of RMB68 million and profit of RMB14 million to the Group’s results. If the acquisition had occurred on January 1, 2016, management estimate that consolidated revenue would have been increased by RMB154 million, and consolidated profit for the year would have been increased by RMB39 million. In determining these amounts, management have assumed that the fair value adjustments that arose on the acquisition date would have been the same if the acquisition had occurred on January 1, 2016. The information above is the amount before inter-company eliminations.

The above acquisitions had the following effect on the Group’s assets and liabilities on acquisition date:

	Note		Recognized values on acquisition RMB million
Property, plant and equipment		20		7
Trade and other receivables				124
Cash and cash equivalents				211
Trade and other payables				(124	)
Total net identifiable assets				218
Consideration, satisfied by cash				400

Analysis of the net outflow of cash and cash equivalents in respect of the acquisitions:

Cash consideration paid	400
Cash and cash equivalents acquired	(211	)
Net cash outflow	189

Goodwill

Goodwill was recognized as a result of the acquisitions as follows:

	Recognized values on acquisition RMB million
Total consideration transferred		400
Fair value of identifiable net assets		(218	)
Goodwill (Note 23)		182

(vii) The Company previously held 51.84% equity interests in Xinjiang Civil Aviation Property Management Limited (“XJCAPM”) and XJCAPM used to be the subsidiary of the Company. During the year of 2016, a third party non-controlling interests holder of XJCAPM injected capital amounting to RMB73 million to XJCAPM. This diluted the Company’s interest in XJCAPM from 51.84% to 42.80%. XJCAPM became an associate of the Company since December 2016. Details are as follows:

	Note		Net book value as of the deemed disposal date RMB million
Assets deemed disposed of:
Property, plant and equipment		20		153
Other non-current assets				15
Trade and other receivables				5
Cash and cash equivalents				67
Other current assets				15
Trade and other payables				(32	)
Other current liabilities				(48	)
Non-current liabilities				(2	)
Net identifiable assets				173
Non-controlling interests in the former subsidiary				(83	)
				90
Fair value of the remaining 42.80% equity interests				180
Net gain on deemed disposal and losing control				90
Net cash outflow from the deemed disposal				67

(viii) Material non-controlling interests:

As at December 31, 2017, the balance of total non-controlling interests is RMB12,607 million (December 31, 2016: RMB11,520 million), of which RMB8,547 million (December 31, 2016:RMB7,623 million) is for Xiamen Airlines. The rest of non-controlling interests are not individually material.

Set out below are the summarized financial information for Xiamen Airlines.

	2017 RMB million			2016 RMB million
Non-controlling interests percentage		45	%		45	%
Current assets		2,422			2,386
Non-current assets		39,689			41,689
Current liabilities		(9,963	)		(13,739	)
Non-current liabilities		(14,086	)		(13,997	)
Net assets		18,062			16,339
Carrying amount of non-controlling interests		8,547			7,623
Revenue		26,114			21,874
Profit for the year		1,477			1,223
Total comprehensive income		1,578			1,500
Profit allocated to non-controlling interests		651			532
Dividend paid to non-controlling interests		73			—
Net cash generated from operating activities		3,696			4,510
Net cash generated from/(used in) investing activities		3,671			(7,776	)
Net cash (used in) / generated from financing activities		(7,613	)		2,764

The information above is the amount before inter-company eliminations.

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Interest in associates

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Interest in associates

25 Interest in associates

	2017 RMB million		2016 RMB million
Share of net assets		3,031		2,590

All the Group’s associates are unlisted without quoted market price. The particulars of the Group’s principal associates as at December 31, 2017 are as follows:

						Proportion of ownership interest held by
	Place of establishment / operation		Group’s effective interest			The Company			Subsidiaries			Proportion of voting rights held by the Group			Principal activity
Southern Airlines Group Finance Co., Ltd. (“SA Finance”)		PRC		33.98	%		25.28	%		8.70	%		33.98	%	Provision of Airlines financial services
Sichuan Airlines Co., Ltd. (“Sichuan Airlines”)		PRC		39	%		39	%		—			39	%	Airline transportation
SACM		PRC		40	%		40	%		—			40	%	Advertising services
Xinjiang Civil Aviation Property Management Limited		PRC		42.80	%		42.80	%		—			42.80	%	Property management

There is no associate that is individually material to the Group.

The Group has interests in a number of individually immaterial associates that are accounted for using the equity method. The aggregate financial information of these associates is summarized as following:

	2017 RMB million		2016 RMB million			2015 RMB million
Aggregate carrying amount of individually immaterial associates		3,031		2,590			1,995
Aggregate amounts of the Group’s share of:
Profit from continuing operations		431		509			460
Other comprehensive income		2		(2	)		(7	)
Total comprehensive income		433		507			453

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Interest in joint ventures

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Interest in joint ventures

26 Interest in joint ventures

	2017 RMB million		2016 RMB million
Share of net assets		1,015		1,522

All the Group’s joint ventures are unlisted without quoted market price. The particulars of the Group’s principal joint ventures as at December 31, 2017 are as follows:

						Proportion of ownership interest held by
	Place of establishment/ operation		Group’s effective interest			The Company			Subsidiaries		Proportion of voting rights held by the Group			Principal activity
Guangzhou Aircraft Maintenance Engineering Co., Ltd. (”GAMECO”)		PRC		50	%		50	%		—		50	%	Aircraft repair and maintenance services
Guangzhou China Southern Zhongmian Dutyfree Store Co., Limited		PRC		50	%		50	%		—		50	%	Sales of duty free goods in flight
China Southern West Australian Flying College Pty Ltd. (“Flying College”)		Australia		48.12	%		48.12	%		—		50	%	Pilot training services

There is no joint venture that is individually material to the Group.

The Group has interest in a number of individually immaterial joint ventures that are accounted for using the equity method. The aggregate financial information of these joint ventures is summarized as following:

	2017 RMB million		2016 RMB million		2015 RMB million
Aggregate carrying amount of individually immaterial joint ventures		1,015		1,522		1,440
Aggregate amounts of the Group’s share of:
Profit from continuing operations and total comprehensive income		99		102		108

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Other investments in equity securities

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Other investments in equity securities

27 Other investments in equity securities

	2017 RMB million		2016 RMB million
Unlisted equity securities, at cost		103		103

Dividend income from unlisted equity securities of the Group amounted to RMB1 million during the year ended December 31, 2017 (2016: RMB1 million, 2015: RMB10 million).

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Available-for-sale financial assets

12 Months Ended

Dec. 31, 2017

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Available-for-sale financial assets

28 Available-for-sale financial assets

	2017 RMB million		2016 RMB million
Available-for-sale financial assets
- Listed shares		85		88
- Non-tradable shares		537		411
		622		499

Dividend income from available-for-sale financial assets of the Group amounted to RMB17 million during the year ended December 31, 2017 (2016: RMB13 million, 2015: RMB3 million).

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Derivative financial instruments

12 Months Ended

Dec. 31, 2017

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Derivative financial instruments

29 Derivative financial instruments

	2017 RMB million		2016 RMB million
Asset:
Interest rate swaps (a)		46		21
Liability
Cross currency swaps (b)		64		—

(a) In 2015, the Group entered into interest rate swaps to mitigate its cash flow interest rate risk. The interest rate swaps allow the Group to pay at fixed rate from 1.64% to 1.72% to receive LIBOR. The notional principal of the outstanding interest rate swap contracts as at December 31, 2017 amounted to USD460 million (December 31, 2016: USD527 million).

(b) In 2017, the Group entered into cross currency swaps to mitigate its interest rate risk and currency risk. Under the cross currency swaps, the Group agrees with other third parties to exchange the floating interest and principal payments in USD for fixed interest (ranging from 3.58% to 4.04%) and principal payments in RMB. At December 31, 2017, the fair value of the cross currency swaps amounted to RMB64 million (December 31, 2016: Nil). The notional principal of the outstanding cross currency swaps amounted to USD920 million (December 31, 2016: Nil).

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Deferred tax assets/ (liabilities)

12 Months Ended

Dec. 31, 2017

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Deferred tax assets/ (liabilities)

30 Deferred tax assets/ (liabilities)

(a) Movements of net deferred tax assets are as follows:

	At the beginning of the year			Acquired in business combination			(Charged)/ credited to consolidated income statements			Charged to other comprehensive income			At the end of the year
	RMB million			RMB million			RMB million			RMB million			RMB million
For the year ended December 31, 2017
Deferred tax assets:
Accrued expenses		1,065			—			(45	)		—			1,020
Provision for major overhauls		505			—			186			—			691
Deferred revenue		87			—			1			—			88
Provision for impairment losses		174			—			74			—			248
Provision for tax losses		—			—			10			—			10
Change in fair value of derivative financial instruments		—			—			16			—			16
Others		86			—			(4	)		—			82
		1,917			—			238			—			2,155
Deferred tax liabilities:
Provision for major overhauls		(261	)		—			45			—			(216	)
Depreciation allowances under tax in excess of the related depreciation under accounting		(659	)		—			26			—			(633	)
Change in fair value of derivative financial instruments		(5	)		—			—			(6	)		(11	)
Change in fair value of available-for-sale equity securities		(110	)		—			—			(31	)		(141	)
Fair value remeasurement of identifiable assets in business combination		—			(30	)		4			—			(26	)
Others		(38	)		—			(11	)		—			(49	)
		(1,073	)		(30	)		64			(37	)		(1,076	)
Net deferred tax assets		844			(30	)		302			(37	)		1,079

	At the beginning of the year			Credited/ (charged) to consolidated income statements			Charged to other comprehensive income			At the end of the year
	RMB million			RMB million			RMB million			RMB million
For the year ended December 31, 2016
Deferred tax assets:
Accrued expenses		751			314			—			1,065
Provision for major overhauls		472			33			—			505
Deferred revenue		82			5			—			87
Provision for impairment losses		201			(27	)		—			174
Others		62			24			—			86
		1,568			349			—			1,917
Deferred tax liabilities:
Provision for major overhauls		(384	)		123			—			(261	)
Depreciation allowances under tax in excess of the related depreciation under accounting		(687	)		28			—			(659	)
Change in fair value of derivative financial instruments		(3	)		—			(2	)		(5	)
Change in fair value of available-for-sale equity securities		(20	)		—			(90	)		(110	)
Others		(25	)		(13	)		—			(38	)
		(1,119	)		138			(92	)		(1,073	)
Net deferred tax assets		449			487			(92	)		844

(b) Deferred tax assets not recognized

Tax losses in the PRC are available for carrying forward to set off future assessable income for a maximum period of five years. As at December 31, 2017, the Group’s unused tax losses of RMB543 million (December 31, 2016: RMB704 million) have not been recognized as deferred tax assets, as it was determined by management that it is not probable that future taxable profits against which the losses can be utilized will be available before they expire. The expiry dates of unrecognized unused tax losses are analyzed as follows:

	2017		2016
	RMB million		RMB million
Expiring in:
2017		—		200
2018		171		214
2019		193		194
2020		—		—
2021		96		96
2022		83		—
		543		704

As at December 31, 2017, the Group’s other deductible temporary differences amounting to RMB653 million (December 31, 2016: RMB626 million) have not been recognized as deferred tax assets as it was determined by management that it is not probable that future taxable profits will be available for these deductible temporary differences to reverse in the foreseeable future.

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Other assets

12 Months Ended

Dec. 31, 2017

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Other assets

31 Other assets

	Prepayment for exclusive use right of an airport terminal			Software			Leasehold improvement			Others			Total
	RMB million			RMB million			RMB million			RMB million			RMB million
At January 1, 2016		240			247			118			283			888
Additions		—			4			5			268			277
Transferred from construction in progress (Note 21)		—			91			36			1			128
Disposals		—			(2	)		—			(26	)		(28	)
Amortization for the year		(10	)		(85	)		(40	)		(122	)		(257	)
At December 31, 2016		230			255			119			404			1,008
At January 1, 2017		230			255			119			404			1,008
Additions		—			33			44			402			479
Acquisitions through business combinations		—			2			—			—			2
Transferred from construction in progress (Note 21)		—			142			56			13			211
Disposals		—			(4	)		—			(20	)		(24	)
Amortization for the year		(10	)		(112	)		(38	)		(122	)		(282	)
At December 31, 2017		220			316			181			677			1,394

Representing:

		2017		2016
	Note	RMB million		RMB million
Amount due from related parties	41(a) & 50(c)		160		—
Amount due from third parties and others			1,234		1,008
			1,394		1,008

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Inventories

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Inventories

32 Inventories

	2017			2016
	RMB million			RMB million
Consumable spare parts and maintenance materials		1,638			1,534
Other supplies		210			198
		1,848			1,732
Less: impairment		(226	)		(144	)
		1,622			1,588

Impairment of inventory is shown as below:

	2017			2016
	RMB million			RMB million
At January 1		144			110
Provision for impairment of inventories		110			44
Provision written off in relation to disposal of inventories		(28	)		(10	)
At December 31		226			144

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Trade and Other receivables

12 Months Ended

Dec. 31, 2017

Trade and Other receivables

33 Trade receivables

	2017			2016
	RMB million			RMB million
Trade receivables		2,712			3,026
Less: allowance for doubtful debts		(37	)		(37	)
		2,675			2,989

(a) Ageing analysis

Credit terms granted by the Group to sales agents and other customers generally range from one to three months. Ageing analysis of trade receivables based on transaction date is set out below:

	2017			2016
	RMB million			RMB million
Within 1 month		2,067			2,536
More than 1 month but less than 3 months		497			321
More than 3 months but less than 12 months		112			142
More than 1 year		36			27
		2,712			3,026
Less: allowance for doubtful debts		(37	)		(37	)
		2,675			2,989

All of the trade receivables are expected to be recovered within one year.

(i) Impairment loss in respect of trade receivables is recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade receivables directly (Note 2(l) (i)).

The movements in the allowance for doubtful debts during the year are as follows:

	2017			2016
	RMB million			RMB million
At January 1		37			33
Impairment loss recognized		8			14
Impairment loss written back		—			(1	)
Uncollectible amounts written off		(8	)		(9	)
At December 31		37			37

(ii) As at December 31, 2017, trade receivables of RMB36 million (December 31, 2016: RMB31 million) were past due but not impaired. These relate to a number of independent customers for whom there is no significant financial difficulty and based on experience, the overdue amounts can be recovered.

The ageing analysis of these trade receivables is as follows:

	2017		2016
	RMB million		RMB million
3 to 12 months		31		26
More than 1 year		5		5
		36		31

(iii) As at December 31, 2017, trade receivables of RMB40 million (December 31, 2016: RMB50 million) were impaired. The amount of the provision was RMB37 million as at December 31, 2017 (December 31, 2016: RMB37 million). The impaired receivables mainly relate to customers which are in unexpectedly difficult economic situations. It was assessed that a portion of the receivables is expected to be recovered. The ageing of these receivables is as follows:

	2017		2016
	RMB million		RMB million
3 to 12 months		9		28
More than 1 year		31		22
		40		50

(b) Trade receivables that are not impaired

The ageing analysis of trade receivables that are neither individually nor collectively considered to be impaired is as follows:

	2017 RMB million		2016 RMB million
Neither past due nor impaired		2,636		2,945

Trade receivables that were neither past due nor impaired relate to customers for whom there was no recent history of default.

(c) Trade receivables by currencies

The carrying amounts of the Group’s trade receivables are denominated in the following currencies:

	2017		2016
	RMB million		RMB million
RMB		2,061		2,303
USD		179		268
EURO		171		129
AUD		52		53
TWD		33		40
GBP		36		23
Others		180		210
		2,712		3,026

As at December 31, 2017, the fair value of trade receivables approximates its carrying amount.

Other receivables [member]

Trade and Other receivables

34 Other receivables

	2017			2016
	RMB million			RMB million
VAT recoverable		3,684			1,404
Rebate receivables on aircraft acquisitions		699			749
Term deposits		313			568
Deposits for aircraft purchase		—			13
Interest receivables		1			33
Others		538			623
		5,235			3,390
Less: allowance for doubtful debts		(3	)		(3	)
		5,232			3,387

Term deposits have a maturity over 3 months at acquisition. The weighted average annualized interest rate of term deposits as at December 31, 2017 is 2.01% (December 31, 2016: 3.22%).

As at December 31, 2017, the fair value of other receivables approximates its carrying amount.

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Cash and cash equivalents

12 Months Ended

Dec. 31, 2017

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Cash and cash equivalents

35 Cash and cash equivalents

(a) Cash and cash equivalents comprise:

	2017 RMB million		2016 RMB million
Deposits in banks and other financial institutions		—		26
Cash at bank and other financial institutions and on hand		6,826		4,126
Cash and cash equivalents in the consolidated statements of financial position		6,826		4,152

As at December 31, 2017, the fair value of cash and cash equivalents approximates its carrying amount.

The carrying amounts of the Group’s cash and cash equivalents are denominated in the following currencies:

	2017 RMB million		2016 RMB million
RMB		4,377		3,494
USD		2,038		472
EURO		71		31
JPY		27		15
HKD		123		13
Others		190		127
		6,826		4,152

(b) Reconciliation of profit before income tax to cash generated from operating activities:

	Note		2017 RMB million			2016 RMB million			2015 RMB million
Profit before income tax				8,874			7,661			6,118
Depreciation charges		13		12,963			12,418			11,766
Other amortisation		13		360			332			227
Amortisation of deferred benefits and gains		13		(161	)		(131	)		(148	)
Impairment losses on property, plant, equipment		20		324			71			90
Share of associates’ results		25		(431	)		(509	)		(460	)
Share of joint ventures’ results		26		(99	)		(102	)		(108	)
Gain on disposal of property, plant and equipment and construction in progress		15		(989	)		(557	)		(312	)
Gain on deemed disposal of equity interest in a subsidiary				—			(90	)		—
Fair value movement of derivative financial instruments		29		64			—			—
Remeasurement of the originally held equity interests in a joint venture		24(iv)		(109	)		—			—
Interest income				(89	)		(89	)		(253	)
Interest expense		16		2,747			2,465			2,188
Dividend income from other investments in equity securities and available-for-sale financial assets		27 & 28		(18	)		(14	)		(13	)
Exchange (gain)/losses, net				(642	)		3,368			5,516
(Increase)/decrease in inventories				(34	)		18			55
Decrease/(increase) in trade receivables				314			(409	)		103
(Increase)/decrease in other receivables				(1,840	)		637			418
Decrease/(increase) in prepaid expenses and other current assets				81			(224	)		(184	)
Increase/(decrease) in net amounts due to related companies				15			186			(153	)
Increase/(decrease) in trade payables				222			(597	)		843
(Decrease)/increase in sales in advance of carriage				(567	)		1,289			1,030
Increase in accrued expenses				223			2,066			695
Increase/(decrease) in other liabilities				762			(186	)		(277	)
Increase/(decrease) in deferred revenue				430			86			(75	)
Increase in provision for major overhauls				719			194			630
Decrease in provision for early retirement benefits				(3	)		(7	)		(20	)
Increase/(decrease) in deferred benefits and gains				362			(195	)		181
Cash generated from operating activities				23,478			27,681			27,857

(c) Reconciliation of liabilities arising from financing activities

	Bank loans and other borrowings			Obligations under finance leases			Interest rate swaps held to hedge borrowings (assets)			Cross currency swaps		Total
	RMB million			RMB million			RMB million			RMB million		RMB million
	(Note 37)			(Note 38)			(Note 29)			(Note 29)
At January 1, 2017		45,504			62,222			(21	)		—		107,705
Changes from financing cash flows:
Proceeds from bank borrowings		42,854			—			—			—		42,854
Proceeds from ultra-short-term financing bills		1,000			—			—			—		1,000
Repayment of bank borrowings		(18,311	)		—			—			—		(18,311	)
Repayment of ultra-short-term financing bills		(22,986	)		—			—			—		(22,986	)
Repayment of principal under finance lease obligations		—			(9,835	)		—			—		(9,835	)
Total changes from financing cash flows		2,557			(9,835	)		—			—		(7,278	)
Exchange adjustments		(116	)		(1,746	)		—			—		(1,862	)
Changes in fair value		—			—			(25	)		64		39
Other changes:
Acquisitions through business combinations (Note 24(iv))		342			—			—			—		342
Additions of obligations under finance leases (Note 52)		—			17,283			—			—		17,283
Total other changes		342			17,283			—			—		17,625
At December 31, 2017		48,287			67,924			(46	)		64		116,229

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Assets held for sale

12 Months Ended

Dec. 31, 2017

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Assets held for sale

36 Assets held for sale

Assets held for sale mainly represent buildings which are planned to be sold in the next 12 months and are measured at the lower of their carrying amounts and fair values less costs to sell.

	Note		Recognized values RMB million
Property, plant and equipment		20		8

As at December 31, 2017, the carrying amount of the assets held for sale is RMB8 million, while their fair value less cost to sell is RMB27 million. The fair value on which the recoverable amount is based on is categorized as a level 3 measurement.

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Borrowings

12 Months Ended

Dec. 31, 2017

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Borrowings

37 Borrowings

(a) As at December 31, 2017 and 2016, borrowings are analyzed as follows:

	2017		2016
	RMB million		RMB million
Non-current
Long-term borrowings
– secured (Notes (i)&(ii)&(iii))		596		755
– unsecured		5,427		314
		6,023		1,069
Corporate bond
– unsecured (Note (iv))		10,000		13,000
Medium-term notes
– unsecured (Note (v))		4,696		4,689
		20,719		18,758
Current
Current portion of long-term borrowings
– secured (Notes (i)&(ii)&(iii))		208		220
– unsecured		3,734		345
Short-term borrowings
– unsecured		20,626		4,195
Ultra short-term financing bills
– unsecured		—		21,986
		24,568		26,746
Current portion of corporate bond
– unsecured (Note (iv))		3,000		—
		27,568		26,746
Total borrowings		48,287		45,504
The borrowings are repayable:
Within one year		27,568		26,746
In the second year		9,126		440
In the third to fifth year		11,566		18,260
After the fifth year		27		58
Total borrowings		48,287		45,504

Notes:

(i) As at December 31, 2017, bank borrowings of the Group totaling RMB440 million (December 31, 2016: RMB660 million) were secured by mortgages over certain of the Group’s aircraft with aggregate carrying amounts of RMB1,331 million (December 31, 2016: RMB1,443 million).

(ii) As at December 31, 2017, bank borrowings of the Group amounting to RMB265 million (December 31, 2016: RMB315 million) were secured by certain land use rights of RMB90 million (December 31, 2016: RMB79 million) and investment properties of RMB20 million (December 31, 2016: RMB34 million).

(iii) As at December 31, 2017, bank borrowings of the Group totaling RMB99 million (December 31, 2016: Nil) were secured by certain of the other flight equipment with aggregate carrying amounts of RMB206 million (December 31, 2016: Nil).

(iv) The Group issued corporate bonds with aggregate nominal value of RMB3,000 million on November 20, 2015 at a bond rate of 3.63%. The corporate bonds mature in five years. The Company will be entitled at its option to adjust its bond rate and the investors will be entitled to request the Company to redeem all or a portion of the bonds after three years of the issue date.

The Group issued corporate bonds with aggregate nominal value of RMB5,000 million on March 3, 2016 at a bond rate of 2.97%. The corporate bonds mature in three years.

The Group issued corporate bonds with aggregate nominal value of RMB5,000 million on May 25, 2016 at a bond rate of 3.12%. The corporate bonds mature in five years. The Company will be entitled at its option to adjust its bond rate and the investors will be entitled to request the Company to redeem all or a portion of the bonds after three years of the issue date.

(v) Xiamen Airlines issued medium-term notes with aggregate nominal value of RMB1,300 million on August 15, 2016 at an interest rate of 2.97%. The medium-term notes mature in three years.

Xiamen Airlines issued medium-term notes with aggregate nominal value of RMB1,600 million on October 20, 2016 at an interest rate of 3.11%. The medium-term notes mature in five years.

Xiamen Airlines issued medium-term notes with aggregate nominal value of RMB1,800 million on November 21, 2016 at an interest rate of 3.38%. The medium-term notes mature in three years.

(b) As at December 31, 2017, the Group’s weighted average interest rates on short-term borrowings were 3.76% per annum (December 31, 2016: 3.92% per annum).

(c) Details of borrowings with original maturity over one year are as follows:

	2017			2016
	RMB million			RMB million
Renminbi denominated loans
Fixed interest rate at 1.20% per annum as at December 31, 2017, with maturities through 2027		20			20
Corporate Bond - Fixed bond rate at 2.97%~3.63%		13,000			13,000
Medium-term notes- Fixed interest rate at 2.97%~3.38%		4,696			4,689
Floating interest rates 90%, 95%,100% of benchmark interest rate (stipulated by PBOC) as at December 31, 2017, with maturities through 2023		9,781			1,406
USD denominated loans
Floating interest rates at three-month LIBOR + 3.30% per annum as at December 31, 2017, with maturities through 2019		98			—
Floating interest rates at three-month LIBOR + 2.1% per annum as at December 31, 2017, with maturities through 2018		66			208
		27,661			19,323
Less: loans due within one year classified as current liabilities		(6,942	)		(565	)
		20,719			18,758

(d) The carrying amounts of the borrowings are denominated in the following currencies:

	2017		2016
	RMB million		RMB million
Renminbi		40,086		45,296
USD		8,201		208
		48,287		45,504

The Group has certain borrowings as well as significant obligations under finance leases (Note 37) which are denominated in USD as at December 31, 2017. The net exchange gain of RMB1,801 million for the year ended December 31, 2017 (2016: net exchange loss of RMB3,276 million; 2015: net exchange loss of RMB5,953 million) was mainly attributable to the translation of balances of borrowings and obligations under finance lease which are denominated in USD

(e) The balance of short-term borrowings as at December 31, 2017 included entrusted loans from CSAH via SA Finance to the Group amounted to RMB105 million (December 31, 2016: RMB105 million) (Note 50(d)(ii)).

(f) As at December 31, 2017, the fair value of borrowings approximate their carrying amount. The fair value is within level 2 of the fair value hierarchy.

(g) Certain of the Group’s banking facilities are subject to the fulfilment of covenants relating to certain of the Group’s balance sheet ratios, as are commonly found in lending arrangements with financial institutions. If the Group were to breach the covenants, the drawn down facilities would become payable on demand. The Group regularly monitors its compliance with these covenants. Further details of the Group’s management of liquidity risk are set out in Note 4(a). As at December 31, 2017 and 2016 none of the covenants relating to drawn down facilities had been breached.

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Obligations under finance leases

12 Months Ended

Dec. 31, 2017

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Obligations under finance leases

38 Obligations under finance leases

The Group has commitments under finance lease agreements in respect of aircraft and related equipment. The majority of these leases have terms of 10 to 15 years expiring during the years 2018 to 2032. The Group has made careful assessment on the classification of leased aircraft pursuant to IAS 17 and believes all leased aircraft classified as finance lease meet one or more of the criteria as set out in IAS 17 that would lead to a lease being classified as a finance lease.

As at December 31, 2017 and 2016, future payments under these finance leases are as follows:

	2017							2016
	Present value of the minimum lease payments RMB million			Total minimum lease payments RMB million		Interest RMB million		Present value of the minimum lease payments RMB million			Total minimum lease payments RMB million		Interest RMB million
Within 1 year		8,341			10,764		2,423		8,695			10,663		1,968
After 1 year but within 2 years		8,145			10,257		2,112		6,973			8,683		1,710
After 2 years but within 5 years		25,376			29,627		4,251		21,583			24,795		3,212
After 5 years		26,062			28,251		2,189		24,971			27,247		2,276
		67,924			78,899		10,975		62,222			71,388		9,166
Less: balance due within one year classified as current liabilities		(8,341	)						(8,695	)
		59,583							53,527

Details of obligations under finance leases are as follows:

	2017		2016
	RMB million		RMB million
USD denominated obligations
Fixed interest rates ranging from 1.75% to 5.03% per annum as at December 31, 2017		7,803		9,761
Floating interest rates ranging from three-month LIBOR + 0.18% to three-month LIBOR + 2.95% per annum as at December 31, 2017		12,544		15,878
Floating interest rates ranging from six-month LIBOR + 0.03% to six-month LIBOR + 3.30% per annum as at December 31, 2017		11,327		15,720
Singapore Dollars denominated obligations
Floating interest rate at six-month SIBOR + 1.44% per annum as at December 31, 2017		292		341
Japanese Yen denominated obligations
Floating interest rate at three-month TIBOR + 0.75% to three-month TIBOR + 1.90% per annum as at December 31, 2017		1,279		1,502
Floating interest rate at six-month TIBOR + 3.00% per annum as at December 31, 2017		295		332
Renminbi denominated obligations
Fixed rate at 4.1% to 4.3% as at December 31, 2017		856		—
Floating interest rate ranging from 75.0% to 106.5% of five-year RMB loan benchmark interest rate announced by the PBOC per annum as at December 31, 2017		28,804		13,852
Floating interest rate at three-month CHN HIBOR + 0.38% as at December 31, 2017		455		503
Euro denominated obligations
Floating interest rate ranging from three-month EURIBOR + 0.32% to three-month EURIBOR + 2.20% per annum as at December 31, 2017		2,701		2,785
Floating interest rate ranging from six-month EURIBOR + 1.45% to six-month EURIBOR + 1.80% per annum as at December 31, 2017		1,568		1,548
		67,924		62,222

As at December 31, 2017, certain of the Group’s aircraft with carrying amounts of RMB82,356 million (December 31, 2016: RMB76,875 million) secured finance lease obligations totaling RMB67,924 million (December 31, 2016: RMB62,222 million).

As at December 31, 2017, the fair value of obligation under finance leases approximate their carrying amount. The fair value is within level 2 of the fair value hierarchy.

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Trade payables

12 Months Ended

Dec. 31, 2017

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Trade payables

39 Trade payables

Ageing analysis of trade payables based on transaction date is set out below:

	2017		2016
	RMB million		RMB million
Within 1 month		465		612
More than 1 month but less than 3 months		533		529
More than 3 months but less than 6 months		497		484
More than 6 months but less than 1 year		443		173
More than 1 year		187		105
		2,125		1,903

As at December 31, 2017, the fair value of trade payables approximate their carrying amount.

The carrying amounts of the Group’s trade payables are denominated in the following currencies:

	2017		2016
	RMB million		RMB million
Renminbi		1,832		1,809
USD		209		85
Others		84		9
		2,125		1,903

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Deferred revenue

12 Months Ended

Dec. 31, 2017

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Deferred revenue

40 Deferred revenue

Deferred revenue represents the unredeemed credits under the frequent flyer award program.

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Amounts due from/to related companies

12 Months Ended

Dec. 31, 2017

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Amounts due from/to related companies

41 Amounts due from/to related companies

(a) Amounts due from related companies

	Note		2017 RMB million		2016 RMB million
Current
CSAH and its affiliates				9		7
Associates				18		15
Joint ventures				49		76
		50(c)		76		98
Non-current
CSAH and its affiliates		31 & 50(c)		160		—
				236		98

The amounts due from related companies are unsecured, interest free and have no fixed terms of repayment. They are expected to be recovered within one year.

(b) Amounts due to related companies

			2017		2016
	Note		RMB million		RMB million
CSAH and its affiliates				28		20
Joint ventures of CSAH				22		1
Associates				1		4
A joint venture				48		76
Other related companies				2		2
		50(c)		101		103

The amounts due to related companies are unsecured, interest free and have no fixed terms of repayment. They are expected to be settled within one year.

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Accrued expenses

12 Months Ended

Dec. 31, 2017

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Accrued expenses

42 Accrued expenses

	2017		2016
	RMB million		RMB million
Repairs and maintenance		4,806		5,290
Jet fuel costs		1,345		1,530
Salaries and welfare		3,362		2,851
Landing and navigation fees		2,757		2,327
Computer reservation services		541		436
Provision for major overhauls (Note 44)		562		768
Interest expense		740		844
Air catering expenses		148		504
Provision for early retirement benefits (Note 45)		4		7
Others		1,105		590
		15,370		15,147

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Other liabilities

12 Months Ended

Dec. 31, 2017

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Other liabilities

43 Other liabilities

	2017		2016
	RMB million		RMB million
Civil Aviation Development Fund and airport tax payable		1,788		1,559
Payable for purchase of property, plant and equipment		1,194		900
Sales agent deposits		507		430
Other taxes payable		569		508
Deposit received for chartered flights		191		216
Others		1,485		1,359
		5,734		4,972

As at December 31, 2017, the fair value of the balance approximate their carrying amount.

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Provision for major overhauls

12 Months Ended

Dec. 31, 2017

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Provision for major overhauls

44 Provision for major overhauls

Details of provision for major overhauls in respect of aircraft held under operating leases are as follows:

	2017			2016
	RMB million			RMB million
At January 1		2,857			2,365
Additional provision		1,063			1,020
Utilization		(550	)		(528	)
At December 31		3,370			2,857
Less: current portion (Note 42)		(562	)		(768	)
		2,808			2,089

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Provision for early retirement benefits

12 Months Ended

Dec. 31, 2017

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Provision for early retirement benefits

45 Provision for early retirement benefits

Details of provision for early retirement benefits in respect of obligations to early retired employees are as follows:

	2017			2016
	RMB million			RMB million
At January 1		13			25
Provision for the year (Note 14)		1			3
Financial cost (Note 16)		1			1
Payments made during the year		(8	)		(16	)
At December 31		7			13
Less: current portion (Note 42)		(4	)		(7	)
		3			6

The Group has implemented an early retirement plan for certain employees. The benefits of the early retirement plan 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 salary amount on the date of early retirement of the employees. The present value of the future cash flows expected to be required to settle the obligations is recognized as provision for early retirement benefits.

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Deferred benefits and gains

12 Months Ended

Dec. 31, 2017

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Deferred benefits and gains

46 Deferred benefits and gains

	2017		2016
	RMB million		RMB million
Leases rebates (Note (i))		54		77
Maintenance rebates (Note (ii))		807		419
Gains relating to sale and leaseback (Note (iii))		28		51
Government grants		149		127
Others		15		17
		1,053		691

Notes:

(i) The Group was granted rebates by the lessors under certain lease arrangements when it fulfilled certain requirements. The rebates are deferred and amortized using the straight line method over the remaining lease terms.

(ii) The Group was granted rebates by the engine suppliers under certain arrangements when it fulfilled certain requirements. The rebates are deferred and amortized over the beneficial period.

(iii) The Group entered into sale and leaseback transactions with certain third parties under operating leases. The gains are deferred and amortized over the lease terms of the aircraft.

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Share capital

12 Months Ended

Dec. 31, 2017

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Share capital

47 Share capital

	2017		2016
	RMB million		RMB million
Registered, issued and paid up capital:
4,039,228,665 domestic state-owned shares of RMB1.00 each (2016: 4,039,228,665 shares of RMB1.00 each)		4,039		4,039
2,983,421,335 A shares of RMB1.00 each (2016: 2,983,421,335 shares of RMB1.00 each)		2,984		2,984
3,065,523,272 H shares of RMB1.00 each (2016: 2,794,917,000 shares of RMB1.00 each)		3,065		2,795
		10,088		9,818

(i) All the domestic state-owned, H and A shares rank pari passu in all material respects.

(ii) On August 10, 2017, the Company issued 270,606,272 H shares to American Airlines, Inc. for a cash consideration equivalent to RMB1,321 million, of which RMB270 million was credited to share capital and RMB1,051 million was credited to share premium (Note 48 and Note 57). According to the Share Subscription Agreement signed by the Company and American Airlines, the H shares are subject to a lock-up period of three years.

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Reserves

12 Months Ended

Dec. 31, 2017

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Reserves

48 Reserves

	2017			2016
	RMB million			RMB million
Share premium
At January 1		14,131			14,131
Addition (Note 47(ii))		1,051			—
At December 31		15,182			14,131
Fair value reserve
At January 1		209			55
Change in fair value of available-for-sale equity securities		47			148
Change in fair value of derivative financial instruments		19			6
At December 31		275			209
Statutory and discretionary surplus reserve
At January 1		1,957			1,552
Appropriations to reserves (Note (a))		492			405
At December 31		2,449			1,957
Other reserve
At January 1		121			123
Share of an associate’s reserves movement		1			(2	)
Dilution and change in non-controlling interests and other reserves		113			—
At December 31		235			121
Retained profits
At January 1		17,220			13,366
Profit for the year		5,961			5,044
Appropriations to reserves (Note (a))		(492	)		(405	)
Dividends approved in respect of the previous year		(982	)		(785	)
At December 31		21,707			17,220
Total		39,848			33,638

(a) Appropriations to reserves

According to the PRC Company Law and the Articles of Association of the Company and certain of its subsidiaries, the Company and the relevant subsidiaries are required to transfer 10% of their annual net profits after taxation, as determined under the PRC accounting rules and regulations, to a statutory surplus reserve until the reserve balance reaches 50% of the registered capital. The transfer to this reserve must be made before distribution of dividend to shareholders and when there are retained profits at the end of the financial year.

Statutory surplus reserve can be used to offset prior years’ losses, if any, and may be converted into share capital by the issue of new shares to shareholders in proportion to their existing shareholding or by increasing the par value of the shares currently held by them, provided that the balance after such issue is not less than 25% of the registered capital.

(b) Dividends

Dividends payable to equity shareholders of the Company attributable to the year:

	2017		2016
	RMB million		RMB million
Final dividend proposed after the end of the reporting year of RMB0.10 per share (2016: RMB0.10 per share) (inclusive of applicable tax)		1,009		982

A dividend in respect of the year ended December 31, 2017 of RMB1.00 per 10 shares (inclusive of applicable tax) (2016: RMB1.00 per 10 shares (inclusive of applicable tax)), amounting to a total dividend of RMB1,009 million (2016: RMB982 million), was proposed by the directors on March 26, 2018. The dividend proposed after the end of the financial year has not been recognized as a liability at the end of the financial year.

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Commitments

12 Months Ended

Dec. 31, 2017

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Commitments

49 Commitments

(a) Capital commitments

Capital commitments outstanding as at December 31, 2017 and 2016 not provided for in the financial statements were as follows:

	2017		2016
	RMB million		RMB million
Commitments in respect of aircraft and flight equipment
– authorized and contracted for		86,834		83,532
Investment commitments
– authorized and contracted for
– capital contributions for acquisition of interests in associates		—		170
– share of capital commitments of a joint venture		18		25
		18		195
– authorized but not contracted for
– share of capital commitments of a joint venture		22		19
		40		214
Commitments for other property, plant and equipment
– authorized and contracted for		6,386		2,297
– authorized but not contracted for		15,636		19,312
		22,022		21,609
		108,896		105,355

As at December 31, 2017 and 2016, the approximate total future payments, including estimated amounts for price escalation through anticipated delivery dates for aircraft and flight equipment are as follows:

	2017		2016
	RMB million		RMB million
2017		—		25,971
2018		28,125		24,355
2019		28,370		17,878
2020		22,686		13,871
2021 and afterwards		7,653		1,457
		86,834		83,532

(b) Operating lease commitments

As at December 31, 2017 and 2016, the total future minimum lease payments under non-cancellable operating leases in respect of properties, aircraft and flight equipment are as follows:

	2017		2016
	RMB million		RMB million
Payments due:
Within 1 year		8,283		7,948
After 1 year but within 5 years		31,175		27,140
After 5 years		30,007		26,127
		69,465		61,215

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Material related party transactions

12 Months Ended

Dec. 31, 2017

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Material related party transactions

50 Material related party transactions

(a) Key management personnel remuneration

Remuneration for key management personnel of the Group, including amounts paid to the Company’s directors (excluding independent non-executive directors) as disclosed in Note 57, is as follows:

	2017		2016		2015
	RMB ’000		RMB ’000		RMB ’000
Salaries, wages and welfare		12,151		8,219		8,907
Retirement scheme contributions		1,841		1,594		1,868
		13,992		9,813		10,775
	2017		2016		2015
	RMB ’000		RMB ’000		RMB ’000
Directors and supervisors (Note 57)		2,952		2,159		2,471
Senior management		11,040		7,654		8,304
		13,992		9,813		10,775

Total remuneration is included in “staff costs” (Note 14).

(b) Transactions with CSAH and its affiliates (the “CSAH Group”), associates, joint ventures and other related companies of the Group

The Group provided various operational services to the CSAH Group, associates, joint ventures and other related companies of the Group during the normal course of its business. The Group also received operational services provided by these entities.

Details of the significant transactions carried out by the Group are as follows:

	Note	2017 RMB million		2016 RMB million		2015 RMB million
Income received from the CSAH Group
Charter flight and pallet income	(i)		—		—		19
Cargo handling income and rental income	(i)		3		6		1
Aviation material sales income	(ii)		4		—		—
Rental income	(iii)		7		—		—
Others			1		1		2
Expenses paid to the CSAH Group
Cargo handling charges	(i)		112		117		109
Commission expenses	(i)		44		99		98
Maintenance material purchase expense and lease charges for aviation material	(ii)		43		—		—
Software service expenses	(ii)		4		—		—
Air catering supplies expenses	(iii)		125		124		100
Repairing charges	(iv)		1,537		1,877		1,324
Lease charges for land and buildings	(v)		189		193		193
Handling charges	(vi)		—		60		114
Property management fee	(vii)		72		70		73
Others			12		14		6
Expenses paid to joint ventures and associates
Repairing charges	(ix)		2,424		2,032		1,714
Maintenance material purchase expenses	(ix)		68		41		29
Flight simulation service charges	(x)		194		342		324
Training expenses	(xi)		36		110		112
Ground service expenses	(xii)		123		120		119
Air catering supplies	(xiii)		109		115		108
Advertising expenses	(xiv)		74		71		67
Property management fee	(xv)		26		—		—
Others			6		3		4
Income received from joint ventures and associates
Maintenance material sales and handling income	(xvi)		28		10		—
Disposal of equipment	(xvi)		—		39		—
Rental income	(x)		27		37		37
Entrustment income for advertising media business	(xiv)		20		22		21
Repairing income	(xvii)		1		12		12
Air catering supplies expenses	(xvii)		26		23		23
Commission income	(xviii)		26		26		17
Ground service income	(xix)		10		9		8
Labor service income	(xx)		15		—		—
Others			3		4		3
Income received from other related company
Air tickets income	(xxi)		6		9		10
Expenses paid to other related company
Advertising expenses	(xxi)		10		9		—
Computer reservation services	(xxii)		576		523		515
Aviation supplies expenses	(xxiii)		39		36		—
Canteen Service	(xxiii)		15		—		—
Others			4		—		—
Acquisition from CSAH Group
Acquisition of a subsidiary	(vi)&(xiv)		47		400		—
Acquisition of property, plant and equipment	(xxiv)		—		56		—
Leases from CSAH Group
Finance lease of aircraft	(viii)		6,831		—		—

(i) China Southern Airlines Group Ground Services Co., Ltd. (“GSC”), is a wholly-owned subsidiary of CSAH. Cargo handling income/charges are earned/payable by the Group in respect of the cargo handling services with GSC.

Commission is earned by GSC in connection with the air tickets sold by them on behalf of the Group. Commission is calculated based on the rates stipulated by the Civil Aviation Administration of China and International Air Transportation Association.

In addition, the Group leased certain equipment to GSC under operating lease agreements.

(ii) China Aviation Supplies Holding Company (“CASC”), a joint venture of CSAH.

The Group purchases software service, as well as purchases and leases maintenance material and from CASC, and CASC also purchases maintenance material from the Group.

(iii) Shenzhen Air Catering Co., Ltd. (“SACC”), a joint venture of CSAH.

Air catering supplies income/expenses are earned/payable by the Group in respect of certain in-flight meals and related services with SACC.

In addition, the Group leased certain buildings to SACC under operating lease agreements.

(iv) MTU Maintenance Zhuhai Co., Ltd., a joint venture of CSAH, provides comprehensive maintenance services to the Group.

(v) The Group leases certain land and buildings in the PRC from CSAH Group. The amount represents rental payments for land and buildings paid or payable to CSAH Group.

(vi) The Group acquires aircraft, flight equipment and other airline-related facilities through SAIETC and pays handling charges to SAIETC, which used to be a wholly-owned subsidiary of CSAH. In August 2016, the Company acquired 100% equity interests in SAIETC from CSAH at a consideration of approximately RMB400 million. SAIETC became a wholly-owned subsidiary of the Company since then.

(vii) China Southern Airlines Group Property Management Co., Ltd., a wholly-owned subsidiary of CSAH. Citic Southern Airlines Construction and Development Company Limited, an associate of CSAH. Both of them provide property management services to the Group.

(viii) China Southern Airlines International Finance Leasing Co., Ltd., a wholly-owned subsidiary of CSAH, provides financial lease of aircraft services to the Group.

(ix) GAMECO and Shenyang Northern Aircraft Maintenance Ltd., joint ventures of the Group, provide comprehensive maintenance services to the Group.

The Group also purchases maintenance material from GAMECO.

(x) Zhuhai Xiang Yi, a joint venture of the Group, provides flight simulation services to the Group. In addition, the Group leased certain flight training facilities and buildings to Zhuhai Xiang Yi under operating lease agreements.

In July 2017, the Company acquired 49% equity interests in Zhuhai Xiang Yi, which then became a wholly-owned subsidiary of the Company upon completion of the acquisition (Note 24(iv)). The amount represents the transactions in 2017 which incurred prior to the acquisition.

(xi) Flying College, a joint venture of the Group, provides training services to the Group.

(xii) Beijing Aviation Ground Services Co., Ltd., and Shenyang Konggang Logistic Co., Ltd., associates of the Group provides ground service to the Group.

(xiii) Beijing Airport Inflight Kitchen Co., Ltd., is an associate of the Group and provides air catering related services to the Group.

(xiv) SACM, an associate of the Group, provides advertising services to the Group.

XACM, originally an associate of Xiamen Airlines with 49% equity interests held, also a subsidiary of SACM, provided advertising service to Xiamen Airlines. In October 2017, Xiamen Airlines acquired the remaining 51% equity interests in XACM at a consideration of RMB47 million. XACM became a wholly-owned subsidiary of Xiamen Airlines upon completion of the acquisition since then (Note 24(v)). Xiamen Airlines provides certain media resources to Xiamen Airlines Media Co., Ltd., before the acquisition.

(xv) Xinjiang Civil Aviation Property Management Ltd., an associate of the Group, provides property management services to the Group.

(xvi) The Group imports and sales maintenance material to GAMECO and earns maintenance material sales and handling income. The Group disposed of equipment to GAMECO in 2016.

(xvii) The Group provides repairing service and Air catering supplies service to Sichuan Airlines.

(xviii) The Group provides certain website resources to SA Finance for the sales of air insurance.

(xix) The Group provides ground services to Shenyang Konggang Logistic Co., Ltd., and Sichuan Airlines, which are associates of the Group.

(xx) The Group provides labor service to Shenyang Northern Aircraft Maintenance Limited, and the charge rates are determined by reference to prevailing market price.

(xxi) Phoenix Satellite Television Holdings Ltd., (“the Phoenix Group”) is a related party of the Group as the board chairman of the Phoenix Group was appointed as a non-executive director of the Group. It provides advertising services to the Group.

In addition, the Group sells tickets to the Phoenix Group on market price.

(xxii) China Travel Sky Holding Company is a related party of the Group as a director of the Group was appointed as the director of China Travel Sky Holding Company. It provides computer reservation services to the Group.

(xxiii) The Chairman of Guangdong Southern Airline Pearl Aviation Services Company Limited (“Pearl Aviation Services”) is the executive director of the Company. The Group purchases aviation supplies and canteen services from Pearl Aviation Services.

(xxiv) The Group acquires properties from Citic Southern Airlines Construction and Development Company Limited, which is an associate of CSAH.

(c) Balances with the CSAH Group, associates, joint ventures and other related companies of the Group

Details of amounts due from/to the CSAH Group, associates, joint ventures and other related company of the Group:

			2017		2016
	Note		RMB million		RMB million
Receivables:
The CSAH Group				9		7
Associates				18		15
Joint ventures				49		76
		41(a)		76		98
			2017		2016
	Note		RMB million		RMB million
Prepayments of acquisition of long-term assets:
The CSAH Group				160		—
		31 & 41(a)		160		—
			2017		2016
	Note		RMB million		RMB million
Payables:
The CSAH Group				50		21
Associates				1		4
A joint venture				48		76
Other related companies				2		2
		41(b)		101		103

	2017		2016
	RMB million		RMB million
Accrued expenses:
The CSAH Group		1,023		1,117
Associates		95		121
Joint ventures		1,086		864
Other related companies		571		256
		2,775		2,358
	2017		2016
	RMB million		RMB million
Obligations under finance leases:
The CSAH Group		6,656		—
		6,656		—

Except the obligations under finance leases, the amounts due from/to the CSAH Group, associates, joint ventures and other related companies of the Group are unsecured, interest-free and have no fixed terms of repayment.

(d) Loans from and deposits placed with related parties

(i) Loans from related parties

At December 31, 2017, loans from SA Finance to the Group amounted to RMB431 million (December 31, 2016: Nil).

The unsecured loans are repayable as follows:

	2017		2016
	RMB million		RMB million
Within 1 year		273		—
After 1 year but within 2 years		58		—
After 2 years but within 5 years		100		—
		431		—

Interest expense paid on such loans amounted to RMB14 million (2016: RMB7 million) and the interest rates range from 3.92% to 4.51% per annum during the year ended December 31, 2017 (2016: 3.92%).

(ii) Entrusted loans from CSAH

In 2017, CSAH, SA Finance and the Group entered into an entrusted loan agreement, pursuant to which, CSAH, as the lender, entrusted SA Finance to lend RMB105 million to the Group from April 28, 2017 to April 28, 2018. The interest rate is 90% of benchmark interest rate stipulated by PBOC per annum.

The unsecured entrusted loans are repayable as follows:

		2017		2016
	Note	RMB million		RMB million
Within 1 year	37(e)		105		105

Interest expense paid on such loans amounted to RMB4 million (2016: RMB4 million) at interest rate 3.92% per annum during the year ended December 31, 2017 (2016: 3.92% per annum).

(iii) Deposits placed with SA Finance

As at December 31, 2017, the Group’s deposits with SA Finance are presented in the table below. The applicable interest rates are determined in accordance with the rates published by the PBOC.

	2017		2016
	RMB million		RMB million
Deposits placed with SA Finance		6,095		3,759

Interest income received on such deposits amounted to RMB72 million during the year ended December 31, 2017 (2016: RMB37 million).

(e) Commitments to CSAH

As at December 31, 2017, the Group had operating lease commitments to CSAH in respect of lease payments for land and buildings of RMB334 million (December 31, 2016: RMB476 million).

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Employee benefits plan

12 Months Ended

Dec. 31, 2017

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Employee benefits plan

51 Employee benefits plan

(a) Retirement benefits

Employees of the Group participate in several defined contribution retirement schemes organized separately by the PRC municipal and provincial governments in regions where the major operations of the Group are located. The Group is required to contribute to these schemes at rates ranging from 13% to 20% (2016: 13% to 20%; 2015: 13% to 21%) of salary costs including certain allowances. A member of the retirement schemes is entitled to pension benefits from the Local Labor and Social Security Bureau upon his/her retirement. The retirement benefit obligations of all retired staff of the Group are assumed by these schemes. The Group, at its sole discretion, had made certain welfare subsidy payments to these retirees.

In 2014, the Company and its major subsidiaries joined a new defined contribution retirement scheme (“Pension Scheme”) that was implemented by CSAH. The annual contribution to the Pension Scheme is based on a fixed specified percentage of prior year’s annual wage. There will be no further obligation beyond the annual contribution according to the Pension Scheme. The total contribution into the Pension Scheme in 2017 was approximately RMB546 million (2016: RMB486 million ; 2015: RMB438 million).

(b) Housing benefits

The Group contributes on a monthly basis to housing funds organized by municipal and provincial governments based on certain percentages of the salaries of employees. The Group’s liability in respect of these funds is limited to the contributions payable in each year.

The Group also pays cash housing subsidies on a monthly basis to eligible employees. The monthly cash housing subsidies are charged to income statement.

(c) Share Appreciation Rights Scheme

On November 30, 2011, the Company’s General Meeting approved the “H Share Appreciation Rights Scheme of China Southern Airlines Company Limited” and “Initial Grant under the H Share Appreciation Rights Scheme of China Southern Airlines Company Limited” (“the Scheme”).

Under the Scheme, 24,660,000 units of SARs were granted to 118 employees of the Group. No shares will be issued under the Scheme and each SAR is notionally linked to one existing H share of the Company. Upon exercise of the SARs, a recipient will receive an amount of cash equal to the difference between the market share price of the relevant H share and the exercise price.

The SARs will have an exercise period of six years from the date of grant. Upon the satisfaction of certain performance conditions after the second, third and fourth anniversary of the date of grant, each one third of the SARs will become exercisable.

All of the 24,660,000 units of SARs granted by the Company have been expired by the end of 2015.

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Supplementary information to the consolidated cash flow statements

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Supplementary information to the consolidated cash flow statements

52 Supplementary information to the consolidated cash flow statements

Non-cash transactions-acquisition of aircraft

During the year ended December 31, 2017, aircraft acquired under finance leases amounted to RMB17,283 million (2016: RMB10,487 million; 2015: RMB11,251 million).

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Contingent liabilities

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Contingent liabilities

53 Contingent liabilities

(a) The Group leased certain properties and buildings from CSAH which located in Guangzhou, Wuhan and Haikou, etc. However, to the knowledge of the Group, such properties and buildings lack adequate documentation evidencing CSAH’s rights thereto.

Pursuant to the indemnification agreement dated May 22, 1997 between the Group and CSAH, CSAH has agreed to indemnify the Group against any loss or damage arising from any challenge of the Group’s right to use such properties and buildings.

In addition, as disclosed in Note 20 and Note 22, the Group is applying title certificates for certain of the Group’s properties and land use rights certificates for certain properties and parcels of land. The Company is of the opinion that the use of and the conduct of operating activities at these properties and these parcels of land are not affected by the fact that the Group has not yet obtained the relevant certificates.

(b) The Company and its subsidiary, Xiamen Airlines, entered into agreements with certain pilot trainees and certain banks to provide guarantees on personal bank loans amounting to RMB696 million (December 31, 2016: RMB696 million) that can be drawn by the pilot trainees to finance their respective flight training expenses. As at December 31, 2017, total personal bank loans of RMB361million (December 31, 2016: RMB409 million), under these guarantees, were drawn down from the banks. During the year, the Group paid RMB5 million (2016: RMB4 million) to the banks due to the default of payments of certain pilot trainees.

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Immediate and ultimate controlling party

12 Months Ended

Dec. 31, 2017

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Immediate and ultimate controlling party

54 Immediate and ultimate controlling party

As at December 31, 2017, the Directors of the Company consider the immediate parent and ultimate controlling party of the Group to be CSAH, a state-owned enterprise established in the PRC. CSAH does not produce financial statements available for public use.

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Approval of financial statements

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Approval of financial statements

55 Approval of financial statements

The financial statements were approved by the Board of Directors on April 26, 2018.

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Non-adjusting events after the financial year end

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Non-adjusting events after the financial year end

56 Non-adjusting events after the financial year end

(a) On March 26, 2018, the Directors of the Company proposed a final dividend in respect of the year ended December 31, 2017. Further details are disclosed in Note 48(b).

(b) On June 26, 2017, the Company entered into the A Share Subscription Agreement with CSAH, pursuant to which the Company is to issue not more than 1,800,000,000 (inclusive) new A Shares to not more than 10 specific investors (including CSAH) (“the A Share Issuance”). The total funds to be raised from the A Share Issuance will be not more than RMB9,500 million (inclusive). CSAH will subscribe for no less than 31% of the new A Shares, the consideration of which shall be satisfied by transfer of assets and cash. In the meantime, the Company entered into the H Share Subscription Agreement with Nan Lung (a wholly-owned subsidiary of CSAH), pursuant to which the Company is to issue not more than 600,925,925 (inclusive and adjusted) new H shares at the subscription price of HK$6.156 per H Share (“the H Share Issuance”). The total funds to be raised from the H Share Issuance will be not more than HKD3,699 million (inclusive). The consideration will be satisfied by cash. Both of the A Share Issuance and the H Share Issuance were approved by the Extraordinary General Meeting and the respective Class Meetings on November 8, 2017. On March 12, 2018, the H Share Issuance was approved by China Securities Regulatory Commission. The A Share Issuance and the H Share Issuance are inter-conditional upon each other, and the Company shall obtain all of the approvals required under the applicable laws and regulations before issuance.

(c) On March 21, 2018, Xiamen Airlines, a subsidiary of the Company, entered into an agreement with Boeing Company to purchase 20 Boeing B373-8 aircraft and 10 Boeing B737-10 aircraft, which are scheduled for delivery from 2019 to 2022. According the information provided in the market, the total catalogue price for the aircraft is around USD$3.24 billion.

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Directors' and supervisors' emoluments

12 Months Ended

Dec. 31, 2017

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Directors' and supervisors' emoluments

57 Directors’ and supervisors’ emoluments

The remuneration of every director and supervisor for the year ended December 31, 2017 is set out below:

Emoluments paid or receivable in respect of a person’s services as a director or supervisor, whether of the Company or its subsidiary undertaking:

	Directors’ fees		Salaries, wages and welfare		Housing allowance		Employer’s contribution to a retirement benefit scheme		Remunerations paid or receivable in respect of accepting office as director or supervisor		Emoluments paid or receivable in respect of director’s or supervisor’s other services in connection with the management of the affairs of the Company or its subsidiary undertaking		Total
Name	RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000
Non-executive directors
Yuan Xin An (Note (i) & (ii))		—		—		—		—		—		—		—
Yang Li Hua (Note (i) & (ii))		—		—		—		—		—		—		—
Executive directors
Wang Chang Shun (Note (i) & (v))		—		—		—		—		—		—		—
Tan Wan Geng (Note (i))		—		—		—		—		—		—		—
Zhang Zi Fang (Note (i))		—		—		—		—		—		—		—
Li Shao Bin (Note (ii))		—		812		—		123		—		—		935
Supervisors
Pan Fu (Note (i))		—		—		—		—		—		—		—
Li Jia Shi		—		901		—		126		—		—		1,027
Zhang Wei (Note (i) & (ii))		—		—		—		—		—		—		—
Yang Yi Hua (Note (ii) & (iv))		—		—		—		—		—		—		—
Wu De Ming (Note (ii))		—		419		—		127		—		—		546
Mao Juan (Note (iii))		—		324		—		120		—		—		444

	Directors’ fees		Salaries, wages and welfare		Housing allowance		Employer’s contribution to a retirement benefit scheme		Remunerations paid or receivable in respect of accepting office as director or supervisor		Emoluments paid or receivable in respect of director’s or supervisor’s other services in connection with the management of the affairs of the Company or its subsidiary undertaking		Total
Name	RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000
Independent non-executive directors
Ning Xiang Dong (Note (ii))		150		—		—		—		—		—		150
Liu Chang Le (Note (ii))		150		—		—		—		—		—		150
Tan Jin Song		150		—		—		—		—		—		150
Guo Wei (Note (ii))		150		—		—		—		—		—		150
Jiao Shu Ge		150		—		—		—		—		—		150
Zheng Fan (Note (iii))		—		—		—		—		—		—		—
Gu Hui Zhong (Note (iii))		—		—		—		—		—		—		—

For the year ended December 31, 2016:

Emoluments paid or receivable in respect of a person’s services as a director or supervisor, whether of the Company or its subsidiary undertaking:

	Directors’ fees		Salaries, wages and welfare		Housing allowance		Employer’s contribution to a retirement benefit scheme		Remunerations paid or receivable in respect of accepting office as director or supervisor		Emoluments paid or receivable in respect of director’s or supervisor’s other services in connection with the management of the affairs of the Company or its subsidiary undertaking		Total
Name	RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000
Non-executive directors
Wang Chang Shun (Note (i) & (v))		—		—		—		—		—		—		—
Yuan Xin An (Note (i) & (ii))		—		—		—		—		—		—		—
Yang Li Hua (Note (i) & (ii))		—		—		—		—		—		—		—
Executive directors
Tan Wan Geng (Note (i))		—		—		—		—		—		—		—
Zhang Zi Fang (Note (i))		—		—		—		—		—		—		—
Li Shao Bin (Note (ii))		—		639		—		130		—		—		769
Supervisors
Pan Fu (Note (i))		—		—		—		—		—		—		—
Li Jia Shi		—		711		—		133		—		—		844
Zhang Wei (Note (i) & (ii))		—		—		—		—		—		—		—
Yang Yi Hua (Note (ii) & (iv))		—		—		—		—		—		—		—
Wu De Ming (Note (ii))		—		413		—		133		—		—		546
Independent non-executive directors
Ning Xiang Dong (Note (ii))		150		—		—		—		—		—		150
Liu Chang Le (Note (ii))		150		—		—		—		—		—		150
Tan Jin Song		150		—		—		—		—		—		150
Guo Wei (Note (ii))		150		—		—		—		—		—		150
Jiao Shu Ge		150		—		—		—		—		—		150

For the year ended December 31, 2015:

Emoluments paid or receivable in respect of a person’s services as a director or supervisor, whether of the Company or its subsidiary undertaking:

	Directors’ fees		Salaries, wages and welfare		Housing allowance		Employer’s contribution to a retirement benefit scheme		Remunerations paid or receivable in respect of accepting office as director or supervisor		Emoluments paid or receivable in respect of director’s or supervisor’s other services in connection with the management of the affairs of the Company or its subsidiary undertaking		Total
Name	RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000
Non-executive directors
Wang Quan Hua (Note (i) & (ii))		—		—		—		—		—		—		—
Yuan Xin An (Note (i))		—		—		—		—		—		—		—
Yang Li Hua (Note (i))		—		—		—		—		—		—		—
Executive directors
Tan Wan Geng (Note (i))		—		—		—		—		—		—		—
Zhang Zi Fang (Note (i))		—		—		—		—		—		—		—
Li Shao Bin		—		636		—		137		—		—		773
Supervisors
Pan Fu (Note (i))		—		—		—		—		—		—		—
Li Jia Shi		—		636		—		139		—		—		775
Zhang Wei (Note (i))		—		—		—		—		—		—		—
Yang Yi Hua (Note (iv))		—		240		—		92		—		—		332
Wu De Ming		—		451		—		140		—		—		591
Independent non-executive directors
Ning Xiang Dong		150		—		—		—		—		—		150
Liu Chang Le		150		—		—		—		—		—		150
Tan Jin Song		150		—		—		—		—		—		150
Wei Jin Cai (Note (iii))		75		—		—		—		—		—		75
Guo Wei (Note (iv))		75		—		—		—		—		—		75
Jiao Shu Ge (Note (iv))		75		—		—		—		—		—		75

Note:

(i) These directors or supervisors did not receive any remuneration for their services in the capacity of the directors or supervisors of the Company. They also held management positions in CSAH and their salaries were borne by CSAH.

(ii) Resigned on December 20, 2017.

(iii) Appointed on December 20, 2017.

(iv) Ms. Yang Yi Hua retired in September 2015, while still served as supervisor before December 20, 2017. Ms. Yang Yi Hua did not receive any remuneration for her service in the capacity of the supervisor of the Company since September 2015.

(v) Mr. Wang Chang Shun was a non-executive director of the Company before December 20, 2017 and was appointed to be the executive director since December 20, 2017.

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Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended December 31, 2017

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended December 31, 2017

58 Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended December 31, 2017

Up to the date of issue of these financial statements, the IASB has issued a number of amendments and new standards which are not yet effective for the year ended December 31, 2017 and which have not been adopted in these financial statements. These include the following which may be relevant to the Group.

	Effective for accounting periods beginning on or after
IFRS 9, Financial instruments		January 1, 2018
IFRS 15, Revenue from contracts with customers		January 1, 2018
Amendments to IFRS 2, Share-based payment: Classification and measurement of share-based payment transactions		January 1, 2018
Amendments to IAS 40, Transfers of investment property		January 1, 2018
IFRIC 22, Foreign currency transactions and advance consideration		January 1, 2018
IFRS 16, Leases		January 1, 2019

The Group has made an assessment of IFRS 9 and IFRS 15, and is in the process of making an assessment of IFRS 16, for the impact of these new standards in the period of initial application. So far the Group has identified some aspects of the new standards which may have a significant impact on the consolidated financial statements. Further details of the expected impacts are discussed below. As the Group has not completed its assessment of IFRS 16, further impacts may be identified in due course and will be taken into consideration when determining the adoption of these new requirements and which transitional approach to take, where there are alternative approaches allowed under the new standards.

IFRS 9, Financial instruments

IFRS 9 “Financial Instruments” is relevant to the Group and becomes effective for accounting periods beginning on or after 1 January 2018. IFRS 9 contains three principal classification categories for financial assets: measured at (a) amortized cost, (b) fair value through profit or loss and (c) fair value through other comprehensive income. If an equity security is designated as fair value through other comprehensive income, then only dividend income on that security will be recognized in profit or loss. Gains, losses and impairments on that security will be recognized in other comprehensive income without recycling. With respect to the Group’s financial assets currently classified as “available-for-sale financial assets” and “other investments in equity securities”, these are investments in equity securities which now default to fair value through profit or loss unless there is an irrevocable election to designate as fair value through other comprehensive income (without recycling) on transition to IFRS 9. The Group has decided to irrevocably designate those investments it considers to be long term strategic investments as fair value through other comprehensive income. This standard, and the irrevocable election, gives rise to a change in accounting policy as: 1) for available-for-sale equity investments, the current accounting policy is to recognize fair value changes in other comprehensive income until disposal or impairment, when gains or losses are recycled to profit or loss; and 2) for other investments in equity securities, the current accounting policy is to recognize such investments in the consolidated statements of financial position at cost less impairment losses, and dividend income from such equity securities is recognized in profit or loss. This change in policy will have no impact on the Group’s net assets and total comprehensive income but the Group expects there to be a credit adjustment to opening reserves on adoption of IFRS 9.

IFRS 15, Revenue from contracts with customers

IFRS 15 “Revenue from Contracts with Customers” is relevant to the Group and became effective for accounting periods beginning from the 1 January 2018. The standard establishes a framework for reporting to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The Group has assessed the impact of the new standard, and expects there to be a credit adjustment to opening reserves on adoption of IFRS 15 in respect to the timing of recognition of unflown ticket breakage income and the transaction price allocated to mileage awarded. For the unflown ticket breakage income, the Group currently adopts a more prudent policy than that required under IFRS 15 where breakage is to be recognized on each flight based on an assessment that it is highly probable that the income will not result in a significant reversal of the cumulative revenue recognized in the future. This assessment will be based on the historic patterns of breakage. For the transaction price allocated to mileage awarded, the Group currently allocates the amount received in relation to mileage earning flights based on fair value, between the flight and mileage earned by members of the Group’s frequent flyer award programs. Under IFRS 15, the Group shall estimate the stand-alone selling price of mileage awarded by the members of the Group’s frequent flyer award programs and allocates the transaction price to performance obligation for flight and mileage awarded. IFRS 15 is also expected to impact the classification, presentation and disclosure of ancillary income, change fees and interline cargo transactions, albeit the impact is not expected to be material. The Group will adopt the cumulative effect approach when applying the new standard at the date of initial application.

IFRS 16, Leases

IFRS 16 “Leases” is relevant to the Group and becomes effective for accounting periods beginning on or after 1st January 2019. The standard eliminates the lessee’s classification of leases as either operating leases or finance leases and, instead, introduces a single lease accounting model. Applying that model, a lessee is required to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value, and depreciation of lease assets separately from interest on lease liabilities in the statement of profit or loss. IFRS 16 will primarily affect the Group’s accounting as a lessee of leases for aircraft and related equipment, and buildings and other equipment which are currently classified as operating leases. The application of the new accounting model is expected to lead to a material increase in both assets and liabilities and to impact on the timing of the expense recognition in the statement of profit or loss over the period of the lease. The Group is in the process of making an assessment of IFRS 16 to determine the amounts of new assets and liabilities arising from operating lease commitments on adoption of IFRS 16.

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Significant accounting policies (Policies)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Basis of preparation

(a) Basis of preparation

The consolidated financial statements have been prepared in accordance with all applicable International Financial Reporting Standards (“IFRSs”), which collective term includes all applicable individual IFRSs, International Accounting Standards (“IASs”) and Interpretations issued by the International Accounting Standards Board (the “IASB”). The measurement basis used in the preparation of the financial statements is the historical cost basis, except that available-for-sale equity securities and derivative financial instruments are stated at their fair value as explained in the accounting policies set out in Note 2(f) and Note 2(g). Non-current assets and disposal groups held for sale are stated at the lower of carrying amount and fair value less costs to sell (Note 2(q)).

The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgments made by management in the application of IFRSs that have significant effect on the financial statements and major sources of estimation uncertainty are discussed in Note 3.

The consolidated financial statements comprise the Company and its subsidiaries and the Group’s interest in associates and joint ventures.

Changes in accounting policies

(b) Changes in accounting policies

The IASB has issued several amendments to IFRSs that are first effective for the current accounting period of the Group. None of these developments have had a material effect on how the Group’s results and financial position for the current or prior periods have been prepared or presented. However, additional disclosure has been included in Note 35(c) to satisfy the new disclosure requirements introduced by the amendments to IAS 7, Statement of cash flows: Disclosure initiative, which require entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period. Note 58 provides information on the possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended December 31, 2017.

Subsidiaries and non-controlling interests

(c) Subsidiaries and non-controlling interests

Subsidiaries are all entities over which the Group has control. The Group controls an entity when 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 over the entity. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered.

An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group transactions, balances and cash flows and any unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies.

Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. With regards to each business combination, the Group recognized non-controlling interests based on the proportion of the net identifiable assets of the subsidiary owned by the non-controlling interests.

Non-controlling interests are presented in the consolidated statements of financial position within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented on the face of the consolidated income statements and the consolidated statements of comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests and the equity shareholders of the Company. Loans from holders of non-controlling interests and other contractual obligations towards these holders are presented as financial liabilities in the consolidated statements of financial position in accordance with Note 2(o) or Note 2(p) depending on the nature of the liability.

Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognized.

When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognized in consolidated income statements. Any interest retained in that former subsidiary at the date when control is lost is recognized at fair value and this amount is regarded as the fair value on initial recognition of a financial asset (Note 2(f)) or, when appropriate, the cost on initial recognition of an investment in an associate or joint venture (Note 2(d)).

The Group applies the acquisition method to account for business combinations. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Transaction costs are expensed as incurred.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognized in profit or loss.

Associates and joint arrangements

(d) Associates and joint arrangements

An associate is an entity in which the Group has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions.

The Group has applied IFRS 11, Joint Arrangements (“IFRS 11”) to all joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures.

An investment in an associate or a joint venture is accounted for in the consolidated financial statements under the equity method and is initially recorded at cost, adjusted for any excess of the Group’s share of the acquisition-date fair values of the investee’s identifiable net assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the post acquisition change in the Group’s share of the investee’s net assets and any impairment loss relating to the investment (Notes 2(e) and 2(l)). The Group’s share of the post-acquisition, post-tax results of the investees, adjusted for any acquisition-date excess over cost and any impairment losses for the year are recognized in the consolidated income statements, whereas the Group’s share of the post-acquisition post-tax items of the investees’ other comprehensive income is recognized in the consolidated statements of comprehensive income.

When the Group’s share of losses exceeds its interest in the associate or the joint venture, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investee. For this purpose, the Group’s interest is the carrying amount of the investment under the equity method together with the Group’s long-term interests that in substance form part of the Group’s net investment in the associate or the joint venture.

Unrealized profits and losses resulting from transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in the investee, except where unrealized losses provide evidence of an impairment of the asset transferred, in which case they are recognized immediately in the consolidated income statements.

Goodwill

(e) Goodwill

Goodwill represents the excess of

(i) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group’s previously held equity interest in the acquiree; over

(ii) the net fair value of the acquiree’s identifiable assets and liabilities measured as at the acquisition date.

When (ii) is greater than (i), then this excess is recognized immediately in the consolidated income statements as a gain on a bargain purchase.

Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating unit, or groups of cash generating units, that is expected to benefit from the synergies of the combination and is tested annually for impairment (Note 2(l)).

Other investments in equity securities

(f) Other investments in equity securities

The Group’s policies for investments in equity securities, other than investments in subsidiaries, associates and joint ventures, are as follows:

Investments in equity securities are initially stated at fair value, which is their transaction price unless fair value can be more reliably estimated using valuation techniques whose variables include only data from observable markets. Cost includes attributable transaction costs, except where indicated otherwise below. These investments are subsequently accounted for as follows, depending on their classification:

Available-for-sale equity securities are those non-derivative financial assets that are designated as available for sale or that are not classified as loans and receivables, held-to-maturity investments, or financial assets at fair value through profit or loss. At the end of each reporting period the fair value is remeasured, with any resultant gain or loss being recognized in other comprehensive income and accumulated separately in equity in the fair value reserve. Dividend income from these investments is recognized in the consolidated income statements in accordance with the policy set out in Note 2(x) (iv). When these investments are derecognized or impaired (Note 2(l)), the cumulative gain or loss is reclassified from equity to profit or loss.

The Group’s other investments in equity securities represent investments in equity securities that do not have a quoted price in an active market for an identical instrument and whose fair value cannot otherwise be reliably measured. Accordingly, they are recognized in the consolidated statements of financial position at cost less impairment losses (Note 2(l)). Dividend income from equity securities is recognized in profit or loss in accordance with the policy set out in Note 2(x) (iv).

Investments are recognized on the date the Group commits to purchase the investments, and are derecognized on the date the Group commits to sell investments or the Group’s rights to the cash flows from the investments expired.

Derivative financial instruments

(g) Derivative financial instruments

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

Derivative financial instruments that do not qualify for hedge accounting are accounted for as trading instruments and any unrealized gains or losses, being changes in fair value of the derivatives, are recognized in the profit or loss immediately.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges and that are highly effective, are recorded in the profit or loss, along with any changes in the fair value of the hedged assets or liabilities that are attributable to the hedged risk.

Derivative financial instruments that qualify for hedge accounting and which are designated as a specific hedge of the variability in cash flows of a highly probable forecast transaction, are accounted for as follows:

(i) The effective portion of any gains or losses on remeasurement of the derivative financial instrument to fair value are recognized in other comprehensive income and accumulated separately in equity in the fair value reserve. The cumulative gain or loss on the derivative financial instrument recognized in other comprehensive income is reclassified from equity to profit or loss in the same period during which the hedged forecast cash flows affects profit or loss; and

(ii) The ineffective portion of any gains or losses on remeasurement of the derivative financial instrument to fair value is recognized in the profit or loss immediately.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gains or losses existing in equity at that time remains in equity and is recognized in the profit or loss when the committed or forecast transaction ultimately occurs. When a committed or forecast transaction is no longer expected to occur, the cumulative gains or losses that was recorded in equity is immediately transferred to the profit or loss.

Investment properties

(h) Investment properties

Investment properties are land and/or buildings which are owned to earn rental income and/or for capital appreciation.

Investment properties are stated at cost, less accumulated depreciation and impairment losses (Note 2(l)). Depreciation is calculated to write off the cost of items of investment properties, less their estimated residual value, if any, using the straight-line method over their estimated useful lives. Rental income from investment properties is accounted for as described in
Note 2(x) (iii).

Other property, plant and equipment

(i) Other property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (Note 2(l)).

The cost of self-constructed items of property, plant and equipment includes the cost of materials, direct labor, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads and borrowing costs (Note 2(aa)).

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the consolidated income statements during the financial period in which they are incurred.

When each major aircraft overhaul is performed, its cost is recognized in the carrying amount of the component of aircraft and is depreciated over the appropriate maintenance cycles. Components related to overhaul cost, are depreciated on a straight-line basis over 3 to 12 years. Upon completion of an overhaul, any remaining carrying amount of the cost of the previous overhaul is derecognized and charged to the consolidated income statements.

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognized in consolidated income statements on the date of retirement or disposal.

Except for components related to overhaul costs, the depreciation of other property, plant and equipment is calculated to write off the cost of items, less their estimated residual value, if any, using the straight line method over their estimated useful lives as follows:

Buildings	5 to 35 years
Owned and finance leased aircraft	15 to 20 years
Other flight equipment
– Jet engines	15 to 20 years
– Others, including rotables	3 to 15 years
Machinery and equipment	4 to 10 years
Vehicles	6 to 8 years

Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

Construction in progress

(j) Construction in progress

Construction in progress represents advance payments for the acquisition of aircraft and flight equipment, office buildings, various infrastructure projects under construction and equipment pending for installation, and is stated at cost less impairment losses (Note 2(l)). Capitalization of these costs ceases and the construction in progress is transferred to property, plant and equipment when the asset is substantially ready for its intended use, notwithstanding any delay in the issue of the relevant commissioning certificates by the relevant PRC authorities.

No depreciation is provided in respect of construction in progress.

Leased assets

(k) Leased assets

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

(i) Classification of assets leased to the Group

Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases, except for land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. For these purposes, the inception of the lease is the time that the lease was first entered into by the Group, or taken over from the previous lessee.

(ii) Assets acquired under finance leases

Where the Group acquires the use of assets under finance leases, the amounts representing the fair value of the leased asset, or, if lower, the present value of the minimum lease payments, of such assets are included in property, plant and equipment and the corresponding liabilities, net of finance charges, are recorded as obligations under finance leases. Depreciation is provided at rates which write off the cost or valuation of the assets over the term of the relevant lease or, where it is likely the Group will obtain ownership of the asset, the life of the asset, as set out in Note 2(i). Impairment losses are accounted for in accordance with the accounting policy as set out in Note 2(l). Finance charges implicit in the lease payments are charged to consolidated income statements over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period. Contingent rentals are charged to consolidated income statements in the accounting period in which they are incurred.

(iii) Operating lease charges

Where the Group has the use of assets held under operating leases, payments made under the leases are charged to consolidated income statements in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognized in consolidated income statements as an integral part of the aggregate net lease payments made. Contingent rentals are charged to consolidated income statements in the accounting period in which they are incurred.

The cost of acquiring land held under an operating lease is amortized on a straight-line basis over the respective periods of lease terms which range from 30 to 70 years.

(iv) Sale and leaseback transactions

Gains or losses on aircraft sale and leaseback transactions which result in finance leases are deferred and amortized over the terms of the related leases.

Gains or losses on aircraft sale and leaseback transactions which result in operating leases are recognized immediately if the transactions are established at fair value. If the sale price is below fair value then the gain or loss is recognized immediately. However, if a loss is compensated for by future rentals at a below-market price, then the loss is deferred and amortized over the period that the aircraft is expected to be used. If the sale price is above fair value, then any gain is deferred and amortized over the useful life of the assets.

Impairment of assets

(l) Impairment of assets

(i) Impairment of investments in equity securities and receivables

Investments in equity securities and current and non-current receivables that are stated at cost or amortized cost or are classified as available-for-sale equity securities are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events:

• significant financial difficulty of the debtor;

• a breach of contract, such as a default or delinquency in interest or principal payments;

• it becoming probable that the debtor will enter bankruptcy or other financial reorganization;

• significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and

• a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

If any such evidence exists, any impairment loss is determined and recognized as follows:

• For investments in associates and joint ventures accounted for under the equity method in the consolidated financial statements (Note 2(d)), the impairment loss is measured by comparing the recoverable amount of the investment with its carrying amount in accordance with Note 2(l) (ii). The impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount in accordance with Note 2(l) (ii).

• For unquoted equity securities carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material. Impairment losses for equity securities carried at cost are not reversed.

• For trade and other current receivables and other financial assets carried at amortized cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where these financial assets share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognized, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognized in prior years.

• For available-for-sale equity securities, the cumulative loss that has been recognized in the fair value reserve is reclassified to profit or loss. The amount of the cumulative loss that is recognized in consolidated income statements is the difference between the acquisition cost and current fair value, less any impairment loss on that asset previously recognized in consolidated income statements.

Impairment losses recognized in consolidated income statements in respect of available-for-sale equity securities are not reversed through profit or loss. Any subsequent increase in the fair value of such assets is recognized directly in other comprehensive income.

Impairment losses are written off against the corresponding asset directly, except for impairment losses recognized in respect of trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade and other receivables directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognized in consolidated income statements.

(ii) Impairment of other assets

Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognized no longer exists or may have decreased:

• Investment properties;

• Other property, plant and equipment;

• Construction in progress;

• Lease prepayments;

• Goodwill;

• Investments in subsidiaries, associates and joint ventures in the company’s statement of financial position;

• Aircraft lease deposits; and

• Other assets

If any such indication exists, the asset’s recoverable amount is estimated. The recoverable amount of goodwill is estimated annually whether or not there is any indication of impairment.

• Calculation of recoverable amount

The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

• Recognition of impairment losses

An impairment loss is recognized in consolidated income statements if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs of disposal, or value in use, if determinable.

• Reversals of impairment losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognized in prior years. Reversals of impairment losses are credited to consolidated income statements in the year in which the reversals are recognized.

(iii) Interim financial reporting and impairment

Under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the Group is required to prepare an interim financial report in compliance with IAS 34, Interim financial reporting, in respect of the first six months of the financial year. At the end of the interim period, the Group applies the same impairment testing, recognition, and reversal criteria as it would at the end of the financial year (Notes 2(l) (i) and (ii)).

Impairment losses recognized in an interim period in respect of goodwill, available-for-sale equity securities and unquoted equity securities carried at cost are not reversed in a subsequent period. This is the case even if no loss, or a smaller loss, would have been recognized had the impairment been assessed only at the end of the financial year to which the interim period relates. Consequently, if the fair value of an available-for-sale equity security increases in the remainder of the annual period, or in any other period subsequently, the increase is recognized in other comprehensive income and not profit or loss.

Inventories

(m) Inventories

Inventories, which consist primarily of consumable spare parts and supplies, are stated at cost less any applicable provision for obsolescence, and are charged to consolidated income statements when used in operations. Cost represents the average unit cost.

Inventories held for sale or disposal are carried at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognized as an expense in the period in which the related revenue is recognized. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs.

Trade and other receivables

(n) Trade and other receivables

Trade and other receivables are initially recognized at fair value and thereafter stated at amortized cost using the effective interest method, less allowance for impairment of doubtful debts (Note 2(l)), except where the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of bad and doubtful debts.

Interest-bearing borrowings

(o) Interest-bearing borrowings

Interest-bearing borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost with any difference between the amount initially recognized and redemption value being recognized in consolidated income statements over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

Trade and other payables

(p) Trade and other payables

Trade and other payables are initially recognized at fair value. Except for financial guarantee liabilities measured in accordance with (Note 2(s) (i)), trade and other payables are subsequently stated at amortized cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

Assets held for sale

(q) Non-current assets held for sale

A non-current asset (or disposal group) is classified as held for sale if it is highly probable that its carrying amount will be recovered through a sale transaction rather than through continuing use and the asset (or disposal group) is available for sale in its present condition. A disposal group is a group of assets to be disposed of together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction.

Immediately before classification as held for sale, the measurement of the non-current assets (and all individual assets and liabilities in a disposal group) is brought up-to-date in accordance with the accounting policies before the classification. Then, on initial classification as held for sale and until disposal, the non-current assets (except for certain assets as explained below), or disposal groups, are recognized at the lower of their carrying amount and fair value less costs to sell. The principal exceptions to this measurement policy so far as the consolidated financial statements of the Group are concerned are deferred tax assets, assets arising from employee benefits, financial assets (other than investments in associates and joint ventures) and investment properties. These assets, even if held for sale, would continue to be measured in accordance with the policies set out elsewhere in Note 2.

Impairment losses on initial classification as held for sale, and on subsequent remeasurement while held for sale, are recognized in profit or loss. As long as a non-current asset is classified as held for sale, or is included in a disposal group that is classified as held for sale, the noncurrent asset is not depreciated or amortized.

Cash and cash equivalents

(r) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been generally within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated cash flow statements.

Financial guarantees issued, provisions and contingent liabilities

(s) Financial guarantees issued, provisions and contingent liabilities

(i) Financial guarantees issued

Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the “holder”) for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

Where the Group issues a financial guarantee, the fair value of the guarantee (being the transaction price, unless the fair value can otherwise be reliably estimated) is initially recognized.

The amount of the guarantee initially recognized is amortized in consolidated income statements over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognized in accordance with Note 2(s) (ii) if and when (i) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognized, less accumulated amortization.

(ii) Provisions and contingent liabilities

Provisions are recognized for other liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

Dividend distribution

(t) Dividend distribution

Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s consolidated financial statements in the period in which the dividends are approved by the Company’s shareholders.

Share capital

(u) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

Deferred benefits and gains

(v) Deferred benefits and gains

In connection with the acquisitions or leases of certain aircraft and engines, the Group receives various credits. Such credits are deferred until the aircraft and engines are delivered, at which time they are either applied as a reduction of the cost of acquiring the aircraft and engines, resulting in a reduction of future depreciation, or amortized as a reduction of rental expense for aircraft and engines under leases.

Income tax

(w) Income tax

Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognized in the consolidated income statements except to the extent that they relate to items recognized in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognized in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting year, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilized, are recognized. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilized.

The limited exception to the recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries, associates and joint ventures to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future and it is probable that future taxable profit will be available against which the temporary difference can be utilized.

The amount of deferred tax recognized is measured based on the expected manner of realization or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period and are expected to apply when related deferred tax asset is realized or the deferred tax liability is settled. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilized. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

• in the case of current tax assets and liabilities, the Group intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously; or

• in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:

• the same taxable entity; or

• different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realize the current tax assets and settle the current tax liabilities on a net basis or realize and settle simultaneously.

Revenue recognition

(x) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognized in income statement as follows:

(i) Passenger, cargo and mail revenue

Passenger revenue is recognized at the fair value of the consideration received when the transportation service is provided. Unearned passenger revenue at the reporting date is included within sales in advance of carriage in the consolidated statements of financial position.

Cargo and mail revenue are recognized when the transportation is provided.

Revenue from airline-related business are recognized when services are rendered.

(ii) Frequent flyer revenue

The Group maintains two major frequent flyer award programs, namely, the China Southern Airlines Sky Pearl Club and the Xiamen Airlines’ Egret Card Frequent Flyer Program, which provide travel and other awards to members based on accumulated mileages.

The amount received in relation to mileage earning flights is allocated, based on fair value, between the flight and mileage earned by members of the Group’s frequent flyer award programs. The value attributed to the awarded mileage is deferred as a liability, within deferred revenue, until the mileage is redeemed and the related benefits are received or used or they expire.

The amount received from third parties for the issue of mileage under the Group’s frequent flyer award programs is also deferred as a liability, within deferred revenue.

As members of the frequent flyer award programs redeem mileages for an award, revenue in relation to flight awards is recognized when the transportation is provided; revenue in relation to non-flight rewards is recognized at the point of redemption where non-flight rewards are selected.

(iii) Operating rental income

Receivable under operating leases is recognized in income statement in equal instalments over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognized in income statement as an integral part of the aggregate net lease payments receivable. Contingent rentals are recognized as income in the accounting period in which they are earned.

(iv) Dividends

• Dividend income from unlisted investments is recognized when the shareholder’s right to receive payment is established.

• Dividend income from listed investments is recognized when the share price of the investment goes ex-dividend.

(v) Government grants

Government grants are recognized in consolidated statements of financial position initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognized as other net income in income statement on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted from the carrying amount of the asset and consequently are effectively recognized in income statement over the useful life of the asset by way of reduced depreciation expense.

(vi) Interest income

Interest income is recognized as it accrues using the effective interest method.

Traffic commissions

(y) Traffic commissions

Traffic commissions are expensed in income statement when the transportation is provided and the related revenue is recognized. Traffic commissions for transportation not yet provided are recorded on the consolidated statements of financial position as prepaid expense.

Maintenance and overhaul costs

(z) Maintenance and overhaul costs

Routine maintenance, repairs and overhauls are charged to income statement as and when incurred.

In respect of owned and finance leased aircraft, components within the aircraft subject to replacement during major overhauls are depreciated over the average expected life between major overhauls. When each major overhaul is performed, its cost is recognized in the carrying amount of property, plant and equipment and is depreciated over the estimated period between major overhauls. Any remaining carrying amount of cost of previous major overhaul is derecognized and charged to income statement.

In respect of aircraft held under operating leases, the Group has responsibility to fulfil certain return conditions under relevant lease agreements. In order to fulfil these return conditions, major overhauls are required to be conducted. Accordingly, estimated costs of major overhauls are accrued and charged to the income statement over the estimated overhaul period. Differences between the estimated costs and the actual costs of overhauls are charged to income statement in the period when the overhaul is performed.

Borrowing costs

(aa) Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

Borrowing costs include interest expense, finance charges in respect of finance leases and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

Employee benefits

(ab) Employee benefits

(i) Short-term employee benefits and contributions to defined contribution retirement schemes

Salaries, annual bonuses and contributions to defined contribution retirement schemes are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

(ii) Termination benefits

Termination benefits are recognized when, and only when, the Group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.

(iii) Share-based payment

The fair value of the amount payable to employee in respect of share appreciation rights (“SARs”), which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the vesting period. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized as staff cost in the consolidated income statements.

Translation of foreign currencies

(ac) Translation of foreign currencies

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 consolidated financial statements are presented in Renminbi, which is the Company’s functional and the Group’s presentation currency.

Foreign currencies transactions during the year are translated into Renminbi at the applicable rates of exchange quoted by the People’s Bank of China (“PBOC”) prevailing at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into Renminbi at the PBOC exchange rates prevailing at the end of the reporting period. Exchange gains and losses are recognized in income statement.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated into Renminbi at the PBOC exchange rates prevailing at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into Renminbi at the PBOC exchange rates prevailing at the dates the fair value was determined.

Related parties

(ad) Related parties

(a) A person, or a close member of that person’s family, is related to the Group if that person:

(i) has control or joint control over the Group;

(ii) has significant influence over the Group; or

(iii) is a member of the key management personnel of the Group or the Group’s parent.

(b) An entity is related to the Group if any of the following conditions applies:

(i) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group.

(vi) The entity is controlled or jointly controlled by a person identified in (a).

(vii) A person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(viii) The entity, or any member of a Group of which it is a part, provides key management personnel services to the Group or to the Group’s parent.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

Segment reporting

(ae) Segment reporting

Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial information provided regularly to the Group’s most senior executive management, who is the chief operating decision maker, for the purposes of allocating resources to, and assessing the performance of, the Group’s various lines of business and geographical locations.

Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

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Significant accounting policies (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Estimated Useful Lives for Depreciation Using Straight Line Method of Other Property, Plant and Equipment

Except for components related to overhaul costs, the depreciation of other property, plant and equipment is calculated to write off the cost of items, less their estimated residual value, if any, using the straight line method over their estimated useful lives as follows:

Buildings	5 to 35 years
Owned and finance leased aircraft	15 to 20 years
Other flight equipment
– Jet engines	15 to 20 years
– Others, including rotables	3 to 15 years
Machinery and equipment	4 to 10 years
Vehicles	6 to 8 years

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Financial risk management and fair values (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Remaining Contractual Maturities of Non-derivative Financial Liabilities Based on Contractual Undiscounted Cash Flows

The following tables show the remaining contractual maturities at the end of the reporting period of the Group’s non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the end of the reporting period) and the earliest date the Group can be required to pay:

	2017 Contractual undiscounted cash outflow
	Within 1 year or on demand RMB million		More than 1 year but less than 2 years RMB million		More than 2 years but less than 5 years RMB million		More than 5 years RMB million		Total RMB million		Carrying amount at December 31 RMB million
Borrowings		28,776		9,676		11,975		28		50,455		48,287
Obligations under finance leases		10,764		10,257		29,627		28,251		78,899		67,924
Trade and other payables and accrued charges		19,701		—		—		—		19,701		19,701
		59,241		19,933		41,602		28,279		149,055		135,912

	2016 Contractual undiscounted cash outflow
	Within 1 year or on demand RMB million		More than 1 year but less than 2 years RMB million		More than 2 years but less than 5 years RMB million		More than 5 years RMB million		Total RMB million		Carrying amount at December 31 RMB million
Borrowings		27,654		1,039		19,124		61		47,878		45,504
Obligations under finance leases		10,663		8,683		24,795		27,247		71,388		62,222
Trade and other payables and accrued charges		19,015		—		—		—		19,015		19,015
		57,332		9,722		43,919		27,308		138,281		126,741

Sensitivity Analysis of Significant Foreign Exchange Rates and Impact on Profit after Tax and Retained Profits

The following table indicates the instantaneous change in the Group’s profit after tax and retained profits that would arise if foreign exchange rates to which the Group has significant exposure at the end of the reporting period had changed at that date, assuming all other risk variables remained constant. The range of such sensitivity was considered to be reasonably possible at the end of the reporting date.

	2017
	Appreciation/(depreciation) of Renminbi against foreign currency			Increase/(decrease) on profit after tax and retained profits RMB million
USD		1	%		278
		(1	%)		(278	)
Euro		1	%		31
		(1	%)		(31	)
Japanese Yen		10	%		116
		(10	%)		(116	)

	2016
	Appreciation/(depreciation) of Renminbi against foreign currency			Increase/(decrease) on profit after tax and retained profits RMB million
USD		1	%		305
		(1	%)		(305	)
Euro		1	%		31
		(1	%)		(31	)
Japanese Yen		10	%		134
		(10	%)		(134	)

	2015
	Appreciation/(depreciation) of Renminbi against foreign currency			Increase/(decrease) on profit after tax and retained profits RMB million
USD		1	%		453
		(1	%)		(453	)
Euro		1	%		38
		(1	%)		(38	)
Japanese Yen		10	%		135
		(10	%)		(135	)

Carrying Value of Financial Instruments Measured at Fair Value on a Recurring Basis

						Fair value measurements as at December 31, 2017 categorized into
Recurring fair value measurement	Note		Fair value at December 31 2017 RMB million			Level 1 RMB million		Level 2 RMB million			Level 3 RMB million
Financial assets:
Available-for-sale equity securities:
-Listed shares		28		85			85		—			—
-Non-tradable shares		28		537			—		—			537
Derivative financial instruments:
-Interest rate swaps		29		46			—		46			—
Financial liabilities:
Derivative financial instruments:
-Cross currency swaps		29		(64	)		—		(64	)		—

					Fair value measurements as at December 31, 2016 categorized into
Recurring fair value measurement	Note		Fair value at December 31 2016 RMB million		Level 1 RMB million		Level 2 RMB million		Level 3 RMB million
Financial assets:
Available-for-sale equity securities:
-Listed shares		28		88		88		—		—
-Non-tradable shares		28		411		—		—		411
Derivative financial instruments:
-Interest rate swaps		29		21		—		21		—

Quantitative Information of Valuation Technique and Significant Unobservable Inputs Used in Measuring Financial Instruments at Fair Value on a Recurring Basis

Information about Level 3 fair value measurements

	Valuation technique	Significant unobservable inputs	Range
Available-for-sale equity securities:
-Non-tradable shares	Discounted cash flow	Expected profit growth rate during the projection period		10% to 15%
		Terminal growth rate		9%
		Expected dividend payout rate		27%
		Discount rate		12.29%

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Traffic revenue (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Traffic Revenue

	2017 RMB million		2016 RMB million		2015 RMB million
Passenger		107,947		97,135		94,677
Cargo and mail		8,571		6,760		6,122
Fuel surcharge income		5,355		5,798		6,300
		121,873		109,693		107,099

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Segment reporting (Tables) - Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member]

12 Months Ended

Dec. 31, 2017

Information of Reportable Segments Provided to Chief Operating Decision Maker for Purposes of Resource Allocation and Assessment of Segment Performance

The segment results of the Group for the year ended December 31, 2017 are as follows:

	Airline transportation operations		Other segments		Elimination			Unallocated*			Total
	RMB million		RMB million		RMB million			RMB million			RMB million
Revenue from external customers		126,077		1,412		—			—			127,489
Inter-segment sales		159		2,823		(2,982	)		—			—
Reportable segment revenue		126,236		4,235		(2,982	)		—			127,489
Reportable segment profit before taxation		7,708		529		—			561			8,798
Reportable segment profit after taxation		5,875		381		—			577			6,833
Other segment information
Income tax		1,833		148		—			(16	)		1,965
Interest income		74		15		—			—			89
Interest expense		2,724		23		—			—			2,747
Depreciation and amortization		13,112		201		—			—			13,313
Impairment loss		440		2		—			—			442
Share of associates’ results		—		—		—			420			420
Share of joint ventures’ results		—		—		—			99			99
Remeasurement of the originally held equity interests in a joint venture		—		—		—			88			88
Fair value movement of derivative financial instruments		—		—		—			(64	)		(64	)
Non-current assets additions during the year#		30,776		1,828		—			—			32,604

The segment results of the Group for the year ended December 31, 2016 are as follows:

	Airline transportation operations		Other segments		Elimination			Unallocated*		Total
	RMB million		RMB million		RMB million			RMB million		RMB million
Revenue from external customers		113,490		1,302		—			—		114,792
Inter-segment sales		101		2,231		(2,332	)		—		—
Reportable segment revenue		113,591		3,533		(2,332	)		—		114,792
Reportable segment profit before taxation		6,471		459		—			717		7,647
Reportable segment profit after taxation		4,834		337		—			717		5,888
Other segment information
Income tax		1,637		122		—			—		1,759
Interest income		79		10		—			—		89
Interest expense		2,458		7		—			—		2,465
Depreciation and amortization		12,693		96		—			—		12,789
Impairment loss		127		3		—			—		130
Share of associates’ results		—		—		—			511		511
Share of joint ventures’ results		—		—		—			102		102
Gain on deemed disposal of a subsidiary		—		—		—			90		90
Non-current assets additions during the year#		29,126		120		—			—		29,246

The segment results of the Group for the year ended December 31, 2015 are as follows:

	Airline transportation operations		Other segments		Elimination			Unallocated*		Total
	RMB million		RMB million		RMB million			RMB million		RMB million
Revenue from external customers		110,067		1,400		—			—		111,467
Inter-segment sales		114		1,528		(1,642	)		—		—
Reportable segment revenue		110,181		2,928		(1,642	)		—		111,467
Reportable segment profit before taxation		5,480		279		—			582		6,341
Reportable segment profit after taxation		4,199		205		—			582		4,986
Other segment information
Income tax		1,281		74		—			—		1,355
Interest income		244		9		—			—		253
Interest expense		2,156		32		—			—		2,188
Depreciation and amortization		11,915		97		—			—		12,012
Impairment loss		105		3		—			—		108
Share of associates’ results		—		—		—			462		462
Share of joint ventures’ results		—		—		—			107		107
Non-current assets additions during the year#		24,242		98		—			—		24,340

The segment assets and liabilities of the Group as at December 31, 2017 and December 31, 2016 are as follows:

	Airline transportation operations		Other segments		Elimination			Unallocated*		Total
	RMB million		RMB million		RMB million			RMB million		RMB million
As at December 31, 2017
Reportable segment assets		208,116		5,799		(402	)		4,816		218,329
Reportable segment liabilities		154,391		2,111		(402	)		64		156,164
As at December 31, 2016
Reportable segment assets		192,881		3,201		(376	)		4,755		200,461
Reportable segment liabilities		144,768		1,355		(370	)		—		145,753

* Unallocated assets primarily include goodwill, interest in associates and joint ventures, available-for-sale financial assets, derivative financial instruments and other investments in equity securities. Unallocated results primarily include the share of results of associates and joint ventures, dividend income from available-for-sale financial assets and other investments in equity securities, remeasurement of the originally held equity interests in a joint venture, gain on deemed disposal of a subsidiary, and the fair value movement of derivative financial instruments recognized through profit or loss.

# The additions of non-current assets do not include goodwill, interests in associates and joint ventures, other investments in equity securities, available-for-sale financial assets, derivative financial instruments and deferred tax assets.

Revenues by Geographical Segment

The Group’s revenue by geographical segment are analyzed based on the following criteria:

(1) Traffic revenue from services of both origin and destination within the PRC (excluding Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan (“Hong Kong, Macau and Taiwan”)), is classified as domestic revenue. Traffic revenue with origin and destination among PRC, Hong Kong, Macau and Taiwan is classified as Hong Kong, Macau and Taiwan revenue; while that with origin and destination from/to other overseas markets is classified as international revenue.

(2) Revenue from commission income, hotel and tour operation, ground services, cargo handling and other miscellaneous services are classified on the basis of where the services are performed.

	2017		2016		2015
	RMB million		RMB million		RMB million
Domestic		92,986		84,380		82,981
International		32,117		28,096		25,872
Hong Kong, Macau and Taiwan		2,386		2,316		2,614
		127,489		114,792		111,467

Reconciliation of Reportable Segment Revenues, Profit before Income Tax, Assets and Liabilities to Consolidated Figures

Reconciliation of reportable segment revenues, profit before income tax, assets and liabilities to the consolidated figures as reported in the consolidated financial statements.

			2017				2016				2015
	Note		RMB million				RMB million				RMB million
Revenue
Reportable segment revenue				127,489				114,792				111,467
Reclassification of expired sales in advance of carriage	(i)			396				376				459
Reclassification of sales tax	(ii)			(65	)			(161	)			(274	)
Adjustments arising from business combinations under common control	(v)			(14	)			(26	)			—
Consolidated revenue				127,806				114,981				111,652
			2017				2016				2015
	Note		RMB million				RMB million				RMB million
Profit before income tax
Reportable segment profit before taxation				8,798				7,647				6,341
Capitalization of exchange difference of specific loans	(iii)			47				48				(222	)
Government grants	(iv)			21				1				1
Adjustments arising from business combinations under common control	(v)			8				(35	)			(2	)
Consolidated profit before income tax				8,874				7,661				6,118
					2017				2016
	Note				RMB million				RMB million
Assets
Reportable segment assets						218,329				200,461
Capitalization of exchange difference of specific loans		(iii)				196				149
Government grants		(iv)				(8	)			(316	)
Adjustments arising from business combinations under common control		(v)				237				184
Others						(36	)			(36	)
Consolidated total assets						218,718				200,442

			2017		2016
	Note		RMB million		RMB million
Liabilities
Reportable segment liabilities				156,164		145,753
Government grants		(iv)		—		(287	)
Others				11		—
Consolidated total liabilities				156,175		145,466

Notes:

(i) Expired sales in advance of carriage are recorded under non-operating income in the PRC GAAP financial statements. Such income is recognized as other operating revenue in the IFRS financial statements.

(ii) In accordance with the PRC GAAP, sales tax is separately disclosed rather than deducted from revenue under IFRSs.

(iii) In accordance with the PRC GAAP, exchange difference arising on translation of specific loans and related interest denominated in a foreign currency is capitalized as part of the cost of qualifying assets. Under IFRSs, such exchange difference is recognized in income statement unless the exchange difference represents an adjustment to interest.

(iv) Prior to the year 2017, under the PRC GAAP, special funds granted by the government are accounted for as increase in capital reserve if they are clearly defined on approval documents as part of “capital reserve”. Government grants that relate to the purchase of assets are recognized as deferred income and amortized to profit or loss on a straight line basis over the useful life of the related assets.

Pursuant to the accounting policy change under PRC GAAP which became effective in 2017, the Group deducted the government grants related to the purchase of assets (other than special funds) from the cost of the related assets. The accounting treatment is consistent with IFRSs.

(v) In accordance with the PRC GAAP, the Group accounts for the business combination under common control by applying the pooling-of-interest method. Under the pooling-of-interest method, the difference between the historical carrying amount of the acquiree and the consideration paid is accounted for as an equity transaction. Business combinations under common control are accounted for as if the acquisition had occurred at the beginning of the earliest comparative year presented or, if later, at the date that common control was established; for this purpose, comparative figures are restated under PRC GAAP. Under IFRSs, the Group adopts the purchase accounting method for acquisition of business under common control.

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Other operating revenue (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Other Operating Revenue

	2017		2016		2015
	RMB million		RMB million		RMB million
Commission income		2,781		2,518		1,545
Expired sales in advance of carriage		396		376		459
Hotel and tour operation income		547		625		621
General aviation income		467		461		490
Ground services income		429		384		345
Air catering income		335		253		239
Cargo handling income		241		201		230
Rental income		184		179		182
Others		553		291		442
		5,933		5,288		4,553

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Flight operation expenses (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Flight Operation Expenses

	2017		2016		2015
	RMB million		RMB million		RMB million
Jet fuel costs		31,895		23,799		26,274
Flight personnel payroll and welfare		10,574		9,215		8,070
Aircraft operating lease charges		8,022		7,330		6,153
Air catering expenses		3,379		2,965		2,680
Civil Aviation Development Fund		2,720		2,565		2,482
Training expenses		1,184		1,120		1,003
Aircraft insurance		175		197		168
Others		5,029		4,270		3,582
		62,978		51,461		50,412

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Maintenance expenses (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Maintenance Expenses

	2017		2016		2015
	RMB million		RMB million		RMB million
Aviation repair and maintenance charges		7,930		7,952		7,396
Staff payroll and welfare		2,620		2,363		2,131
Maintenance materials		1,327		1,003		880
		11,877		11,318		10,407

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Aircraft and transportation service expenses (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Aircraft and Transportation Service Expenses

	2017		2016		2015
	RMB million		RMB million		RMB million
Landing and navigation fees		14,910		13,109		11,510
Ground service and other charges		8,025		7,106		6,398
		22,935		20,215		17,908

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Promotion and selling expenses (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Promotion and Selling Expenses

	2017		2016		2015
	RMB million		RMB million		RMB million
Sales commissions		1,935		1,926		3,150
Ticket office expenses		3,160		2,875		2,605
Computer reservation services		835		777		605
Advertising and promotion		196		173		122
Others		755		553		494
		6,881		6,304		6,976

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General and administrative expenses (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of General and Administrative Expenses

	2017		2016		2015
	RMB million		RMB million		RMB million
General corporate expenses		3,218		2,671		2,325
Auditors’ remuneration		14		13		15
- Audit services		14		13		15
- Non-audit services		—		—		—
Other taxes and levies		159		131		124
		3,391		2,815		2,464

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Depreciation and amortization (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Depreciation and Amortization

	2017			2016			2015
	RMB million			RMB million			RMB million
Depreciation
– Owned assets		8,080			7,569			7,082
– Assets acquired under finance leases		4,883			4,849			4,684
Amortization of deferred benefits and gains		(161	)		(131	)		(148	)
Other amortization		360			332			227
		13,162			12,619			11,845

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Staff costs (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Staff Costs

	2017		2016		2015
	RMB million		RMB million		RMB million
Salaries, wages and welfare		21,400		18,774		16,636
Defined contribution retirement scheme		2,114		1,886		1,726
Other retirement welfare subsidy		194		183		177
Early retirement benefits (Note 45)		1		3		3
		23,709		20,846		18,542

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Other net income (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Other Net Income

	2017		2016		2015
	RMB million		RMB million		RMB million
Government grants (Note)		3,075		2,837		2,331
Gains/(losses) on disposal of property, plant and equipment and construction in progress
– Aircraft and spare engines and relating construction in progress		960		523		414
– Other property, plant and equipment		29		34		(102	)
Others		384		441		635
		4,448		3,835		3,278

Note:

Government grants mainly represent (i) subsidies based on certain amount of tax paid granted by governments to the Group; (ii) subsidies granted by various local governments to encourage the Group to operate certain routes to cities where these governments are located.

There are no unfulfilled conditions and other contingencies related to subsidies that have been recognized during the year ended December 31, 2017.

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Interest expense (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Interest Expense

	2017			2016			2015
	RMB million			RMB million			RMB million
Interest on borrowings		1,628			1,444			1,320
Interest relating to obligations under finance leases		2,009			1,598			1,248
Interest relating to provision for early retirement benefits (Note 45)		1			1			2
Total interest expense on financial liabilities not at fair value through profit or loss		3,638			3,043			2,570
Less: interest expense capitalized (Note)		(908	)		(624	)		(382	)
		2,730			2,419			2,188
Interest rate swaps: cash flow hedge, reclassified from equity (Note 18)		17			46			—
		2,747			2,465			2,188

Note:

The weighted average interest rate used for interest capitalization was 3.32% per annum in 2017 (2016: 3.22%; 2015: 2.77%).

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Income tax (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Income Tax Expense in Consolidated Income Statements

(a) Income tax expense in the consolidated income statements

	2017			2016			2015
	RMB million			RMB million			RMB million
PRC income tax
– Provision for the year		2,280			2,203			1,700
– (Over) /under-provision in prior year		(2	)		47			(41	)
		2,278			2,250			1,659
Deferred tax (Note 30)
Origination and reversal of temporary differences		(302	)		(487	)		(359	)
Tax expense		1,976			1,763			1,300

Reconciliation between Actual Tax Expense and Calculated Tax Based on Accounting Profit at Applicable Tax Rates

(b) Reconciliation between actual tax expense and calculated tax based on accounting profit at applicable tax rates

	2017			2016			2015
	RMB million			RMB million			RMB million
Profit before income tax		8,874			7,661			6,118
Notional tax on profit before taxation, calculated at the rates applicable to profits in the tax jurisdictions concerned (Note 17(a))		2,179			1,857			1,482
Adjustments for tax effect of:
Non-deductible expenses		9			4			3
Share of results of associates and joint ventures and other non-taxable income		(137	)		(154	)		(144	)
Taxable temporary differences for which no deferred tax liabilities were recognized		(27	)		—			—
Unused tax losses and deductible temporary differences for which no deferred tax assets were recognized		26			48			23
Utilization of unused tax losses and deductible temporary differences for which no deferred tax assets were recognized in prior years		(72	)		(39	)		(18	)
(Over)/under-provision in prior year		(2	)		47			(41	)
Others		—			—			(5	)
Tax expense		1,976			1,763			1,300

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Other comprehensive income (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Other Comprehensive Income

	2017			2016			2015
	RMB million			RMB million			RMB million
Cash flow hedges:
Effective portion of changes in fair value of hedging instruments recognized during the year		8			(38	)		13
Reclassification adjustments for amounts transferred to profit or loss:
- interest expense (Note 16)		17			46			—
Net deferred tax debited to other comprehensive income		(6	)		(2	)		(3	)
Net movement in the fair value reserve during the year recognized in other comprehensive income		19			6			10
Available-for-sale financial assets:
Changes in fair value recognized during the year		123			362			—
Net deferred tax debited to other comprehensive income		(31	)		(90	)		—
Net movement in the fair value reserve during the year recognized in other comprehensive income		92			272			—

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Earnings per share (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Earnings per Share

	2017		2016		2015
	million		million		million
Issued ordinary shares at January 1		9,818		9,818		9,818
Effect of issuance of H shares (Note 47)		106		—		—
Weighted average number of ordinary shares at December 31		9,924		9,818		9,818

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Property, plant and equipment, net (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Property, plant and equipment, net

							Aircraft
	Investment properties			Buildings			Owned			Acquired under finance leases			Other flight equipment including			Machinery, equipment and vehicles			Total
	RMB million			RMB million			RMB million			RMB million			rotables RMB million			RMB million			RMB million
Cost:
At January 1, 2016		730			10,074			93,708			86,832			18,970			6,109			216,423
Acquisitions through business combinations		—			5			—			—			—			2			7
Additions		—			39			1,675			5,112			1,148			453			8,427
Transfer from construction in progress (Note 21)		—			1,145			—			6,745			203			143			8,236
Transfer to lease prepayments		(21	)		—			—			—			—			—			(21	)
Transfer to buildings upon cease of lease intention		(64	)		64			—			—			—			—			—
Transfer to investment properties upon lease out		148			(148	)		—			—			—			—			—
Reclassification on exercise of purchase option		—			—			4,470			(4,470	)		—			—			—
Disposals		—			(32	)		(2,536	)		(347	)		(751	)		(466	)		(4,132	)
Deemed disposal of a subsidiary		(124	)		(79	)		—			—			—			(41	)		(244	)
At December 31, 2016		669			11,068			97,317			93,872			19,570			6,200			228,696
At January 1, 2017		669			11,068			97,317			93,872			19,570			6,200			228,696
Acquisitions through business combinations (Note 24(iv))		—			326			—			—			1,136			94			1,556
Additions		—			28			1,336			7,592			1,635			569			11,160
Transfer from construction in progress (Note 21)		—			1,506			1,098			10,684			317			77			13,682
Transfer to lease prepayments		(18	)		(143	)		—			—			—			—			(161	)
Transfer to buildings upon cease of lease intention		(75	)		75			—			—			—			—			—
Transfer to investment properties upon lease out		225			(225	)		—			—			—			—			—
Reclassification on exercise of purchase option		—			—			12,669			(12,669	)		—			—			—
Transfer to assets held for sale (Note 36)		—			(20	)		—			—			—			—			(20	)
Disposals		(7	)		(4	)		(6,446	)		(112	)		(752	)		(311	)		(7,632	)
At December 31, 2017		794			12,611			105,974			99,367			21,906			6,629			247,281

							Aircraft
	Investment properties			Buildings			Owned			Acquired under finance leases			Other flight equipment including			Machinery, equipment and vehicles			Total
	RMB million			RMB million			RMB million			RMB million			rotables RMB million			RMB million			RMB million
Accumulated depreciation and impairment losses:
At January 1, 2016		223			3,349			40,782			14,586			10,600			4,013			73,553
Depreciation charge for the year		20			358			5,476			4,849			1,159			556			12,418
Transfer to lease prepayments		(5	)		—			—			—			—			—			(5	)
Transfer to buildings upon cease of lease intention		(21	)		21			—			—			—			—			—
Transfer to investment properties upon lease out		39			(39	)		—			—			—			—			—
Reclassification on exercise of purchase options		—			—			2,141			(2,141	)		—			—			—
Disposals		—			(18	)		(2,468	)		(347	)		(736	)		(426	)		(3,995	)
Deemed disposal of a subsidiary		(27	)		(25	)		—			—			—			(39	)		(91	)
Provision for impairment losses		—			—			21			50			—			—			71
Impairment losses written off on disposal		—			—			—			—			(1	)		—			(1	)
At December 31, 2016		229			3,646			45,952			16,997			11,022			4,104			81,950
At January 1, 2017		229			3,646			45,952			16,997			11,022			4,104			81,950
Depreciation charge for the year		29			390			5,783			4,883			1,280			598			12,963
Transfer to lease prepayments		(5	)		(36	)		—			—			—			—			(41	)
Transfer to buildings upon cease of lease intention		(26	)		26			—			—			—			—			—
Transfer to investment properties upon lease out		48			(48	)		—			—			—			—			—
Reclassification on exercise of purchase options		—			—			4,757			(4,757	)		—			—			—
Transfer to assets held for sale (Note 36)		—			(12	)		—			—			—			—			(12	)
Disposals		(5	)		(1	)		(5,351	)		(112	)		(623	)		(266	)		(6,358	)
Provision for impairment losses (Note 20(e))		—			—			324			—			—			—			324
Impairment losses written off on disposal (Note 20(d))		—			—			(470	)		—			(1	)		—			(471	)
At December 31, 2017		270			3,965			50,995			17,011			11,678			4,436			88,355
Net book value:
At December 31, 2017		524			8,646			54,979			82,356			10,228			2,193			158,926
At December 31, 2016		440			7,422			51,365			76,875			8,548			2,096			146,746

(a) As at December 31, 2017, the accumulated impairment provision of aircraft and flight equipment of the Group is RMB1,495 million and RMB123 million respectively (December 31, 2016: RMB1,641 million and RMB124 million respectively).

(b) As at December 31, 2017, certain aircraft of the Group with an aggregate carrying value of approximately RMB83,687 million (December 31, 2016: RMB78,318 million) were mortgaged under certain loans or certain lease agreements (Note 37(a) (iii) and Note 38).

(c) As at December 31, 2017, other flight equipment of the Group with an aggregate carrying value of approximately RMB206 million (December 31, 2016: Nil) were mortgaged under certain loans (Note 37(a) (iii)).

(d) For the year ended December 31, 2017, 3 Boeing 737-300 aircraft and 2 Boeing 777-200 aircraft against which impairment provision had been provided in previous years were disposed of and the impairment provision of RMB470 million for these aircraft was written off on disposal.

(e) During the year, the Group estimated the recoverable amounts of certain aged fleet based on the disposal plans, and made an impairment provision of RMB314 million towards the fleet and related assets. The Group also made an additional impairment of RMB10 million for certain EMB 190 aircraft. The estimates of recoverable amounts were based on the greater of the assets’ fair value less cost to sell and the value in use. The fair value on which the recoverable amount is based on is categorized as a level 3 measurement and it was determined by reference to the recent observable market prices for the aircraft fleet and flight equipment. In cases when value in use are based, the pre-tax discount rate used in the estimate is 9.74% (2016: 8.87%).

(f) As at December 31, 2017 and up to the date of approval of these financial statements, the Group is in the process of applying for the property title certificates in respect of the properties located in Guangzhou (including Guangzhou Baiyun International Airport), Guangxi, Guizhou, Chengdu, Xiamen, Heilongjiang, Jilin, Dalian, Hunan, Beijing, Zhuhai, Shenyang, Shenzhen, Henan, Shantou, Xinjiang, Hainan, Shanghai, Hubei, Chongqing, and Hangzhou, in which the Group has interests and for which such certificates have not been granted. As at December 31, 2017, carrying value of such properties of the Group amounted to RMB5,196 million (December 31, 2016: RMB4,294 million). The Directors of the Company are of the opinion that the use of and the conduct of operating activities at the properties referred to above are not affected by the fact that the Group has not yet obtained the relevant property title certificates.

(g) The Group leased out investment properties under operating leases. The leases typically run for an initial period of one to fourteen years, with an option to renew the leases after that date at which time all terms are renegotiated. None of the leases includes contingent rentals. In this connection, rental income totaling RMB184 million (2016: RMB179 million; 2015: RMB 182 million) was received by the Group during the year in respect of the leases. Directors estimated the fair value of these investment properties approximate the carrying amount.

The properties are reclassified between investment properties and other property, plant and equipment, upon the intention of commencement or cease of lease.

(h) As at December 31, 2017, certain investment properties of the Group with an aggregate carrying value of approximately RMB20 million (December 31, 2016: RMB34 million) were mortgaged for certain bank borrowings (Note 37(a) (ii)).

Future Minimum Lease Income under Non-cancellable Operating Leases

The Group’s total future minimum lease income under non-cancellable operating leases are as follows:

	2017		2016
	RMB million		RMB million
Within 1 year		61		91
After 1 year but within 5 years		70		59
After 5 years		14		54
		145		204

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Construction in progress (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Construction in Progress

	Advance payment for aircraft and flight equipment			Others			Total
	RMB million			RMB million			RMB million
At January 1, 2016		17,700			1,733			19,433
Additions		18,930			1,362			20,292
Transferred to property, plant and equipment (Note 20)		(6,948	)		(1,288	)		(8,236	)
Transferred to other assets upon completion of development (Note 31)		—			(128	)		(128	)
Disposals		(2,415	)		(36	)		(2,451	)
At December 31, 2016		27,267			1,643			28,910
At January 1, 2017		27,267			1,643			28,910
Additions		16,319			2,920			19,239
Transferred to property, plant and equipment (Note 20)		(12,099	)		(1,583	)		(13,682	)
Transferred to other assets upon completion of development (Note 31)		—			(211	)		(211	)
Transferred to lease prepayments		—			(79	)		(79	)
Disposals		(3,944	)		—			(3,944	)
At December 31, 2017		27,543			2,690			30,233

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Goodwill (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Goodwill

	2017		2016
	RMB million		RMB million
Cost and carrying amount:
At January 1		182		—
Acquisitions through business combination (Note 24(v)&(vi))		55		182
At December 31		237		182

Goodwill Allocated Cash-Generating Units

Impairment tests for cash-generating units containing goodwill

	2017		2016
	RMB million		RMB million
Southern Airlines Group Import and Export Trading Company (“SAIETC”)(Note 24(vi))		182		182
Xiamen Airlines Culture and Media Co., Ltd. (“XACM”) (Note 24(v))		55		—
Total		237		182

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Subsidiaries (Tables)

12 Months Ended

Dec. 31, 2017

List of Particular Subsidiaries Principally Affect Results, Assets or Liabilities

All the subsidiaries of the Company are unlisted. The following list contains only the particulars of subsidiaries which principally affect the results, assets or liabilities of the Group.

Name of company	Place of establishment/ operation	Registered capital		Proportion of ownership interest held by the Company			Principal activity
Henan Airlines Company Limited (i)	PRC		RMB6,000,000,000		60	%	Airline transportation
Xiamen Airlines (i)&(v)	PRC		RMB8,000,000,000		55	%	Airline transportation
Chongqing Airlines Company Limited (i)	PRC		RMB1,200,000,000		60	%	Airline transportation
Shantou Airlines Company Limited (i)	PRC		RMB280,000,000		60	%	Airline transportation
Zhuhai Airlines Company Limited (i)	PRC		RMB250,000,000		60	%	Airline transportation
Guizhou Airlines Company Limited (i)	PRC		RMB910,000,000		60	%	Airline transportation
Guangzhou Nanland Air Catering Company Limited (ii)	PRC		RMB240,000,000		70.5	%	Air catering
Guangzhou Baiyun International Logistic Company Limited (i)	PRC		RMB50,000,000		61	%	Logistics operations
Beijing Southern Airlines Ground Services Company Limited (i)	PRC		RMB18,000,000		100	%	Airport ground services
Nan Lung International Freight Limited	Hong Kong		HKD3,270,000		51	%	Freight services
Southern Airlines General Aviation Company Limited(i)	PRC		RMB1,000,000,000		100	%	General aviation
SAIETC (i)	PRC		RMB15,000,000		100	%	Import and export agent services
Zhuhai Xiang Yi Aviation Technology Company Limited (“Zhuhai Xiang Yi”)(i)&(iv)	PRC		RMB469,848,000		100	%	Flight simulation services

(i) These subsidiaries are PRC limited liability companies.

(ii) This subsidiary is a sino-foreign equity joint venture company established in the PRC.

(iii) Certain subsidiaries of the Group are PRC equity joint ventures which have limited terms pursuant to the PRC law.

Southern Airlines Culture And Media Co., Ltd. [member]

Financial Information Related to Acquisition

The above acquisitions had the following effect on the Group’s assets and liabilities on acquisition date:

	Recognized values on acquisition RMB million
Trade and other receivables		46
Cash and cash equivalents		2
Trade and other payables		(11	)
Total net identifiable assets		37

Analysis of the net outflow of cash and cash equivalents in respect of the acquisitions:

Cash consideration paid	47
Cash and cash equivalents acquired	(2	)
Net cash outflow	45

Goodwill

Goodwill was recognized as a result of the acquisitions as follows:

	Recognized values on acquisition RMB million
Total consideration transferred		47
The fair value of 49% equity of XACM on the acquisition date		45
Less: fair value of identifiable net assets		(37	)
Goodwill (Note 23)		55

Xinjiang Civil Aviation Property Management Limited [member]

Disclosure of Disposal of Subsidiaries

(vii) The Company previously held 51.84% equity interests in Xinjiang Civil Aviation Property Management Limited (“XJCAPM”) and XJCAPM used to be the subsidiary of the Company. During the year of 2016, a third party non-controlling interests holder of XJCAPM injected capital amounting to RMB73 million to XJCAPM. This diluted the Company’s interest in XJCAPM from 51.84% to 42.80%. XJCAPM became an associate of the Company since December 2016. Details are as follows:

	Note		Net book value as of the deemed disposal date RMB million
Assets deemed disposed of:
Property, plant and equipment		20		153
Other non-current assets				15
Trade and other receivables				5
Cash and cash equivalents				67
Other current assets				15
Trade and other payables				(32	)
Other current liabilities				(48	)
Non-current liabilities				(2	)
Net identifiable assets				173
Non-controlling interests in the former subsidiary				(83	)
				90
Fair value of the remaining 42.80% equity interests				180
Net gain on deemed disposal and losing control				90
Net cash outflow from the deemed disposal				67

Xiamen Airlines Company Limited [member]

Financial Information Related to Subsidiary with Material non-controlling Interests

Set out below are the summarized financial information for Xiamen Airlines.

	2017 RMB million			2016 RMB million
Non-controlling interests percentage		45	%		45	%
Current assets		2,422			2,386
Non-current assets		39,689			41,689
Current liabilities		(9,963	)		(13,739	)
Non-current liabilities		(14,086	)		(13,997	)
Net assets		18,062			16,339
Carrying amount of non-controlling interests		8,547			7,623
Revenue		26,114			21,874
Profit for the year		1,477			1,223
Total comprehensive income		1,578			1,500
Profit allocated to non-controlling interests		651			532
Dividend paid to non-controlling interests		73			—
Net cash generated from operating activities		3,696			4,510
Net cash generated from/(used in) investing activities		3,671			(7,776	)
Net cash (used in) / generated from financing activities		(7,613	)		2,764

The information above is the amount before inter-company eliminations.

Zhuhai Xiang Yi Aviation Technology Company Limited [member]

Financial Information Related to Acquisition

The above acquisitions had the following effect on the Group’s assets and liabilities on acquisition date:

	Note		Recognized values on acquisition RMB million
Property, plant and equipment, net		20		1,556
Lease prepayments				115
Trade and other receivables				70
Cash and cash equivalents				41
Other assets				32
Trade and other payables				(34	)
Borrowings		35(c)		(342	)
Deferred tax liabilities				(30	)
Other liabilities				(24	)
Total net identifiable assets				1,384

Analysis of the net outflow of cash and cash equivalents in respect of the acquisitions:

Cash consideration paid	678
Cash and cash equivalents acquired	(41	)
Net cash outflow	637

Effect of the acquisition on the Group’s consolidated income statements

Fair value of the originally held 51% equity interests	706
Less: carrying value of the originally held 51% equity interests	(597	)
Remeasurement of the originally held 51% equity interests	109

Southern Airlines Group Import and Export Trading Company [member]

Financial Information Related to Acquisition

The above acquisitions had the following effect on the Group’s assets and liabilities on acquisition date:

	Note		Recognized values on acquisition RMB million
Property, plant and equipment		20		7
Trade and other receivables				124
Cash and cash equivalents				211
Trade and other payables				(124	)
Total net identifiable assets				218
Consideration, satisfied by cash				400

Analysis of the net outflow of cash and cash equivalents in respect of the acquisitions:

Cash consideration paid	400
Cash and cash equivalents acquired	(211	)
Net cash outflow	189

Goodwill

Goodwill was recognized as a result of the acquisitions as follows:

	Recognized values on acquisition RMB million
Total consideration transferred		400
Fair value of identifiable net assets		(218	)
Goodwill (Note 23)		182

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Interest in associates (Tables)

12 Months Ended

Dec. 31, 2017

Summary of Principal Associates

	2017 RMB million		2016 RMB million
Share of net assets		3,031		2,590

All the Group’s associates are unlisted without quoted market price. The particulars of the Group’s principal associates as at December 31, 2017 are as follows:

						Proportion of ownership interest held by
	Place of establishment / operation		Group’s effective interest			The Company			Subsidiaries			Proportion of voting rights held by the Group			Principal activity
Southern Airlines Group Finance Co., Ltd. (“SA Finance”)		PRC		33.98	%		25.28	%		8.70	%		33.98	%	Provision of Airlines financial services
Sichuan Airlines Co., Ltd. (“Sichuan Airlines”)		PRC		39	%		39	%		—			39	%	Airline transportation
SACM		PRC		40	%		40	%		—			40	%	Advertising services
Xinjiang Civil Aviation Property Management Limited		PRC		42.80	%		42.80	%		—			42.80	%	Property management

Aggregated individually immaterial associates [member]

Summarized Financial Information

The Group has interests in a number of individually immaterial associates that are accounted for using the equity method. The aggregate financial information of these associates is summarized as following:

	2017 RMB million		2016 RMB million			2015 RMB million
Aggregate carrying amount of individually immaterial associates		3,031		2,590			1,995
Aggregate amounts of the Group’s share of:
Profit from continuing operations		431		509			460
Other comprehensive income		2		(2	)		(7	)
Total comprehensive income		433		507			453

Aggregated individually immaterial joint ventures [member]

Summarized Financial Information

. The aggregate financial information of these joint ventures is summarized as following:

	2017 RMB million		2016 RMB million		2015 RMB million
Aggregate carrying amount of individually immaterial joint ventures		1,015		1,522		1,440
Aggregate amounts of the Group’s share of:
Profit from continuing operations and total comprehensive income		99		102		108

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Interest in joint ventures (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Principal Joint Ventures

	2017 RMB million		2016 RMB million
Share of net assets		1,015		1,522

All the Group’s joint ventures are unlisted without quoted market price. The particulars of the Group’s principal joint ventures as at December 31, 2017 are as follows:

						Proportion of ownership interest held by
	Place of establishment/ operation		Group’s effective interest			The Company			Subsidiaries		Proportion of voting rights held by the Group			Principal activity
Guangzhou Aircraft Maintenance Engineering Co., Ltd. (”GAMECO”)		PRC		50	%		50	%		—		50	%	Aircraft repair and maintenance services
Guangzhou China Southern Zhongmian Dutyfree Store Co., Limited		PRC		50	%		50	%		—		50	%	Sales of duty free goods in flight
China Southern West Australian Flying College Pty Ltd. (“Flying College”)		Australia		48.12	%		48.12	%		—		50	%	Pilot training services

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Other investments in equity securities (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Other Investments in Equity Securities

	2017 RMB million		2016 RMB million
Unlisted equity securities, at cost		103		103

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Available-for-sale financial assets (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Available-for-sale Financial Assets

	2017 RMB million		2016 RMB million
Available-for-sale financial assets
- Listed shares		85		88
- Non-tradable shares		537		411
		622		499

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Derivative financial instruments (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Derivative Financial Instruments

	2017 RMB million		2016 RMB million
Asset:
Interest rate swaps (a)		46		21
Liability
Cross currency swaps (b)		64		—

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Deferred tax assets/ (liabilities) (Tables)

12 Months Ended

Dec. 31, 2017

Temporary differences [member]

Detailed Information about Temporary Differences and Tax Losses

 The expiry dates of unrecognized unused tax losses are analyzed as follows:

	2017		2016
	RMB million		RMB million
Expiring in:
2017		—		200
2018		171		214
2019		193		194
2020		—		—
2021		96		96
2022		83		—
		543		704

Unused tax losses [member]

Detailed Information about Temporary Differences and Tax Losses

(a) Movements of net deferred tax assets are as follows:

	At the beginning of the year			Acquired in business combination			(Charged)/ credited to consolidated income statements			Charged to other comprehensive income			At the end of the year
	RMB million			RMB million			RMB million			RMB million			RMB million
For the year ended December 31, 2017
Deferred tax assets:
Accrued expenses		1,065			—			(45	)		—			1,020
Provision for major overhauls		505			—			186			—			691
Deferred revenue		87			—			1			—			88
Provision for impairment losses		174			—			74			—			248
Provision for tax losses		—			—			10			—			10
Change in fair value of derivative financial instruments		—			—			16			—			16
Others		86			—			(4	)		—			82
		1,917			—			238			—			2,155
Deferred tax liabilities:
Provision for major overhauls		(261	)		—			45			—			(216	)
Depreciation allowances under tax in excess of the related depreciation under accounting		(659	)		—			26			—			(633	)
Change in fair value of derivative financial instruments		(5	)		—			—			(6	)		(11	)
Change in fair value of available-for-sale equity securities		(110	)		—			—			(31	)		(141	)
Fair value remeasurement of identifiable assets in business combination		—			(30	)		4			—			(26	)
Others		(38	)		—			(11	)		—			(49	)
		(1,073	)		(30	)		64			(37	)		(1,076	)
Net deferred tax assets		844			(30	)		302			(37	)		1,079

	At the beginning of the year			Credited/ (charged) to consolidated income statements			Charged to other comprehensive income			At the end of the year
	RMB million			RMB million			RMB million			RMB million
For the year ended December 31, 2016
Deferred tax assets:
Accrued expenses		751			314			—			1,065
Provision for major overhauls		472			33			—			505
Deferred revenue		82			5			—			87
Provision for impairment losses		201			(27	)		—			174
Others		62			24			—			86
		1,568			349			—			1,917
Deferred tax liabilities:
Provision for major overhauls		(384	)		123			—			(261	)
Depreciation allowances under tax in excess of the related depreciation under accounting		(687	)		28			—			(659	)
Change in fair value of derivative financial instruments		(3	)		—			(2	)		(5	)
Change in fair value of available-for-sale equity securities		(20	)		—			(90	)		(110	)
Others		(25	)		(13	)		—			(38	)
		(1,119	)		138			(92	)		(1,073	)
Net deferred tax assets		449			487			(92	)		844

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Other assets (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Other Assets

	Prepayment for exclusive use right of an airport terminal			Software			Leasehold improvement			Others			Total
	RMB million			RMB million			RMB million			RMB million			RMB million
At January 1, 2016		240			247			118			283			888
Additions		—			4			5			268			277
Transferred from construction in progress (Note 21)		—			91			36			1			128
Disposals		—			(2	)		—			(26	)		(28	)
Amortization for the year		(10	)		(85	)		(40	)		(122	)		(257	)
At December 31, 2016		230			255			119			404			1,008
At January 1, 2017		230			255			119			404			1,008
Additions		—			33			44			402			479
Acquisitions through business combinations		—			2			—			—			2
Transferred from construction in progress (Note 21)		—			142			56			13			211
Disposals		—			(4	)		—			(20	)		(24	)
Amortization for the year		(10	)		(112	)		(38	)		(122	)		(282	)
At December 31, 2017		220			316			181			677			1,394

Representing:

		2017		2016
	Note	RMB million		RMB million
Amount due from related parties	41(a) & 50(c)		160		—
Amount due from third parties and others			1,234		1,008
			1,394		1,008

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Inventories (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Inventories

	2017			2016
	RMB million			RMB million
Consumable spare parts and maintenance materials		1,638			1,534
Other supplies		210			198
		1,848			1,732
Less: impairment		(226	)		(144	)
		1,622			1,588

Impairment of Inventory

Impairment of inventory is shown as below:

	2017			2016
	RMB million			RMB million
At January 1		144			110
Provision for impairment of inventories		110			44
Provision written off in relation to disposal of inventories		(28	)		(10	)
At December 31		226			144

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Trade and Other receivables (Tables)

12 Months Ended

Dec. 31, 2017

Summary of Trade Receivables

	2017			2016
	RMB million			RMB million
Trade receivables		2,712			3,026
Less: allowance for doubtful debts		(37	)		(37	)
		2,675			2,989

Ageing Analysis of Trade Receivables Based on Transaction Date

(a) Ageing analysis

Credit terms granted by the Group to sales agents and other customers generally range from one to three months. Ageing analysis of trade receivables based on transaction date is set out below:

	2017			2016
	RMB million			RMB million
Within 1 month		2,067			2,536
More than 1 month but less than 3 months		497			321
More than 3 months but less than 12 months		112			142
More than 1 year		36			27
		2,712			3,026
Less: allowance for doubtful debts		(37	)		(37	)
		2,675			2,989

Movements in Allowance for Doubtful Debts of Trade Receivables

The movements in the allowance for doubtful debts during the year are as follows:

	2017			2016
	RMB million			RMB million
At January 1		37			33
Impairment loss recognized		8			14
Impairment loss written back		—			(1	)
Uncollectible amounts written off		(8	)		(9	)
At December 31		37			37

Trade Receivables by Currencies

The carrying amounts of the Group’s trade receivables are denominated in the following currencies:

	2017		2016
	RMB million		RMB million
RMB		2,061		2,303
USD		179		268
EURO		171		129
AUD		52		53
TWD		33		40
GBP		36		23
Others		180		210
		2,712		3,026

Summary of Other Receivables

	RMB million			RMB million
VAT recoverable		3,684			1,404
Rebate receivables on aircraft acquisitions		699			749
Term deposits		313			568
Deposits for aircraft purchase		—			13
Interest receivables		1			33
Others		538			623
		5,235			3,390
Less: allowance for doubtful debts		(3	)		(3	)
		5,232			3,387

Past due but not impaired [member]

Ageing Analysis of Trade Receivables Based on Past Due Status

The ageing analysis of these trade receivables is as follows:

	2017		2016
	RMB million		RMB million
3 to 12 months		31		26
More than 1 year		5		5
		36		31

Impaired [member]

Ageing Analysis of Trade Receivables Based on Past Due Status

 The ageing of these receivables is as follows:

	2017		2016
	RMB million		RMB million
3 to 12 months		9		28
More than 1 year		31		22
		40		50

Neither past due nor impaired [member]

Ageing Analysis of Trade Receivables Based on Past Due Status

The ageing analysis of trade receivables that are neither individually nor collectively considered to be impaired is as follows:

	2017 RMB million		2016 RMB million
Neither past due nor impaired		2,636		2,945

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Cash and cash equivalents (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Cash and Cash Equivalents

(a) Cash and cash equivalents comprise:

	2017 RMB million		2016 RMB million
Deposits in banks and other financial institutions		—		26
Cash at bank and other financial institutions and on hand		6,826		4,126
Cash and cash equivalents in the consolidated statements of financial position		6,826		4,152

Cash and Cash Equivalents by Currencies

The carrying amounts of the Group’s cash and cash equivalents are denominated in the following currencies:

	2017 RMB million		2016 RMB million
RMB		4,377		3,494
USD		2,038		472
EURO		71		31
JPY		27		15
HKD		123		13
Others		190		127
		6,826		4,152

Reconciliation of Profit before Income Tax to Cash Generated from Operating Activities

(b) Reconciliation of profit before income tax to cash generated from operating activities:

	Note		2017 RMB million			2016 RMB million			2015 RMB million
Profit before income tax				8,874			7,661			6,118
Depreciation charges		13		12,963			12,418			11,766
Other amortisation		13		360			332			227
Amortisation of deferred benefits and gains		13		(161	)		(131	)		(148	)
Impairment losses on property, plant, equipment		20		324			71			90
Share of associates’ results		25		(431	)		(509	)		(460	)
Share of joint ventures’ results		26		(99	)		(102	)		(108	)
Gain on disposal of property, plant and equipment and construction in progress		15		(989	)		(557	)		(312	)
Gain on deemed disposal of equity interest in a subsidiary				—			(90	)		—
Fair value movement of derivative financial instruments		29		64			—			—
Remeasurement of the originally held equity interests in a joint venture		24(iv)		(109	)		—			—
Interest income				(89	)		(89	)		(253	)
Interest expense		16		2,747			2,465			2,188
Dividend income from other investments in equity securities and available-for-sale financial assets		27 & 28		(18	)		(14	)		(13	)
Exchange (gain)/losses, net				(642	)		3,368			5,516
(Increase)/decrease in inventories				(34	)		18			55
Decrease/(increase) in trade receivables				314			(409	)		103
(Increase)/decrease in other receivables				(1,840	)		637			418
Decrease/(increase) in prepaid expenses and other current assets				81			(224	)		(184	)
Increase/(decrease) in net amounts due to related companies				15			186			(153	)
Increase/(decrease) in trade payables				222			(597	)		843
(Decrease)/increase in sales in advance of carriage				(567	)		1,289			1,030
Increase in accrued expenses				223			2,066			695
Increase/(decrease) in other liabilities				762			(186	)		(277	)
Increase/(decrease) in deferred revenue				430			86			(75	)
Increase in provision for major overhauls				719			194			630
Decrease in provision for early retirement benefits				(3	)		(7	)		(20	)
Increase/(decrease) in deferred benefits and gains				362			(195	)		181
Cash generated from operating activities				23,478			27,681			27,857

Summary of Reconciliation of Liabilities Arising from Financing Activities

(c) Reconciliation of liabilities arising from financing activities

	Bank loans and other borrowings			Obligations under finance leases			Interest rate swaps held to hedge borrowings (assets)			Cross currency swaps		Total
	RMB million			RMB million			RMB million			RMB million		RMB million
	(Note 37)			(Note 38)			(Note 29)			(Note 29)
At January 1, 2017		45,504			62,222			(21	)		—		107,705
Changes from financing cash flows:
Proceeds from bank borrowings		42,854			—			—			—		42,854
Proceeds from ultra-short-term financing bills		1,000			—			—			—		1,000
Repayment of bank borrowings		(18,311	)		—			—			—		(18,311	)
Repayment of ultra-short-term financing bills		(22,986	)		—			—			—		(22,986	)
Repayment of principal under finance lease obligations		—			(9,835	)		—			—		(9,835	)
Total changes from financing cash flows		2,557			(9,835	)		—			—		(7,278	)
Exchange adjustments		(116	)		(1,746	)		—			—		(1,862	)
Changes in fair value		—			—			(25	)		64		39
Other changes:
Acquisitions through business combinations (Note 24(iv))		342			—			—			—		342
Additions of obligations under finance leases (Note 52)		—			17,283			—			—		17,283
Total other changes		342			17,283			—			—		17,625
At December 31, 2017		48,287			67,924			(46	)		64		116,229

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Assets held for sale (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Assets Held for Sale

	Note		Recognized values RMB million
Property, plant and equipment		20		8

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Borrowings (Tables)

12 Months Ended

Dec. 31, 2017

Summary of Borrowings

(a) As at December 31, 2017 and 2016, borrowings are analyzed as follows:

	2017		2016
	RMB million		RMB million
Non-current
Long-term borrowings
– secured (Notes (i)&(ii)&(iii))		596		755
– unsecured		5,427		314
		6,023		1,069
Corporate bond
– unsecured (Note (iv))		10,000		13,000
Medium-term notes
– unsecured (Note (v))		4,696		4,689
		20,719		18,758
Current
Current portion of long-term borrowings
– secured (Notes (i)&(ii)&(iii))		208		220
– unsecured		3,734		345
Short-term borrowings
– unsecured		20,626		4,195
Ultra short-term financing bills
– unsecured		—		21,986
		24,568		26,746
Current portion of corporate bond
– unsecured (Note (iv))		3,000		—
		27,568		26,746
Total borrowings		48,287		45,504
The borrowings are repayable:
Within one year		27,568		26,746
In the second year		9,126		440
In the third to fifth year		11,566		18,260
After the fifth year		27		58
Total borrowings		48,287		45,504

Notes:

(i) As at December 31, 2017, bank borrowings of the Group totaling RMB440 million (December 31, 2016: RMB660 million) were secured by mortgages over certain of the Group’s aircraft with aggregate carrying amounts of RMB1,331 million (December 31, 2016: RMB1,443 million).

(ii) As at December 31, 2017, bank borrowings of the Group amounting to RMB265 million (December 31, 2016: RMB315 million) were secured by certain land use rights of RMB90 million (December 31, 2016: RMB79 million) and investment properties of RMB20 million (December 31, 2016: RMB34 million).

(iii) As at December 31, 2017, bank borrowings of the Group totaling RMB99 million (December 31, 2016: Nil) were secured by certain of the other flight equipment with aggregate carrying amounts of RMB206 million (December 31, 2016: Nil).

(iv) The Group issued corporate bonds with aggregate nominal value of RMB3,000 million on November 20, 2015 at a bond rate of 3.63%. The corporate bonds mature in five years. The Company will be entitled at its option to adjust its bond rate and the investors will be entitled to request the Company to redeem all or a portion of the bonds after three years of the issue date.

The Group issued corporate bonds with aggregate nominal value of RMB5,000 million on March 3, 2016 at a bond rate of 2.97%. The corporate bonds mature in three years.

The Group issued corporate bonds with aggregate nominal value of RMB5,000 million on May 25, 2016 at a bond rate of 3.12%. The corporate bonds mature in five years. The Company will be entitled at its option to adjust its bond rate and the investors will be entitled to request the Company to redeem all or a portion of the bonds after three years of the issue date.

(v) Xiamen Airlines issued medium-term notes with aggregate nominal value of RMB1,300 million on August 15, 2016 at an interest rate of 2.97%. The medium-term notes mature in three years.

Xiamen Airlines issued medium-term notes with aggregate nominal value of RMB1,600 million on October 20, 2016 at an interest rate of 3.11%. The medium-term notes mature in five years.

Xiamen Airlines issued medium-term notes with aggregate nominal value of RMB1,800 million on November 21, 2016 at an interest rate of 3.38%. The medium-term notes mature in three years.

Borrowings by Currencies

(d) The carrying amounts of the borrowings are denominated in the following currencies:

	2017		2016
	RMB million		RMB million
Renminbi		40,086		45,296
USD		8,201		208
		48,287		45,504

Non-current borrowings [member]

Summary of Borrowings

(c) Details of borrowings with original maturity over one year are as follows:

	2017			2016
	RMB million			RMB million
Renminbi denominated loans
Fixed interest rate at 1.20% per annum as at December 31, 2017, with maturities through 2027		20			20
Corporate Bond - Fixed bond rate at 2.97%~3.63%		13,000			13,000
Medium-term notes- Fixed interest rate at 2.97%~3.38%		4,696			4,689
Floating interest rates 90%, 95%,100% of benchmark interest rate (stipulated by PBOC) as at December 31, 2017, with maturities through 2023		9,781			1,406
USD denominated loans
Floating interest rates at three-month LIBOR + 3.30% per annum as at December 31, 2017, with maturities through 2019		98			—
Floating interest rates at three-month LIBOR + 2.1% per annum as at December 31, 2017, with maturities through 2018		66			208
		27,661			19,323
Less: loans due within one year classified as current liabilities		(6,942	)		(565	)
		20,719			18,758

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Obligations under finance leases (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Future Payments under Finance Leases

As at December 31, 2017 and 2016, future payments under these finance leases are as follows:

	2017							2016
	Present value of the minimum lease payments RMB million			Total minimum lease payments RMB million		Interest RMB million		Present value of the minimum lease payments RMB million			Total minimum lease payments RMB million		Interest RMB million
Within 1 year		8,341			10,764		2,423		8,695			10,663		1,968
After 1 year but within 2 years		8,145			10,257		2,112		6,973			8,683		1,710
After 2 years but within 5 years		25,376			29,627		4,251		21,583			24,795		3,212
After 5 years		26,062			28,251		2,189		24,971			27,247		2,276
		67,924			78,899		10,975		62,222			71,388		9,166
Less: balance due within one year classified as current liabilities		(8,341	)						(8,695	)
		59,583							53,527

Details of Obligations under Finance Leases

Details of obligations under finance leases are as follows:

	2017		2016
	RMB million		RMB million
USD denominated obligations
Fixed interest rates ranging from 1.75% to 5.03% per annum as at December 31, 2017		7,803		9,761
Floating interest rates ranging from three-month LIBOR + 0.18% to three-month LIBOR + 2.95% per annum as at December 31, 2017		12,544		15,878
Floating interest rates ranging from six-month LIBOR + 0.03% to six-month LIBOR + 3.30% per annum as at December 31, 2017		11,327		15,720
Singapore Dollars denominated obligations
Floating interest rate at six-month SIBOR + 1.44% per annum as at December 31, 2017		292		341
Japanese Yen denominated obligations
Floating interest rate at three-month TIBOR + 0.75% to three-month TIBOR + 1.90% per annum as at December 31, 2017		1,279		1,502
Floating interest rate at six-month TIBOR + 3.00% per annum as at December 31, 2017		295		332
Renminbi denominated obligations
Fixed rate at 4.1% to 4.3% as at December 31, 2017		856		—
Floating interest rate ranging from 75.0% to 106.5% of five-year RMB loan benchmark interest rate announced by the PBOC per annum as at December 31, 2017		28,804		13,852
Floating interest rate at three-month CHN HIBOR + 0.38% as at December 31, 2017		455		503
Euro denominated obligations
Floating interest rate ranging from three-month EURIBOR + 0.32% to three-month EURIBOR + 2.20% per annum as at December 31, 2017		2,701		2,785
Floating interest rate ranging from six-month EURIBOR + 1.45% to six-month EURIBOR + 1.80% per annum as at December 31, 2017		1,568		1,548
		67,924		62,222

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Trade payables (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Ageing Analysis of Trade Payables Based on Transaction Date

Ageing analysis of trade payables based on transaction date is set out below:

	2017		2016
	RMB million		RMB million
Within 1 month		465		612
More than 1 month but less than 3 months		533		529
More than 3 months but less than 6 months		497		484
More than 6 months but less than 1 year		443		173
More than 1 year		187		105
		2,125		1,903

Trade Payables by Currencies

The carrying amounts of the Group’s trade payables are denominated in the following currencies:

	2017		2016
	RMB million		RMB million
Renminbi		1,832		1,809
USD		209		85
Others		84		9
		2,125		1,903

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Amounts due from/to related companies (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Amounts Due from/to Related Companies

(a) Amounts due from related companies

	Note		2017 RMB million		2016 RMB million
Current
CSAH and its affiliates				9		7
Associates				18		15
Joint ventures				49		76
		50(c)		76		98
Non-current
CSAH and its affiliates		31 & 50(c)		160		—
				236		98

(b) Amounts due to related companies

			2017		2016
	Note		RMB million		RMB million
CSAH and its affiliates				28		20
Joint ventures of CSAH				22		1
Associates				1		4
A joint venture				48		76
Other related companies				2		2
		50(c)		101		103

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Accrued expenses (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Accrued Expenses

	2017		2016
	RMB million		RMB million
Repairs and maintenance		4,806		5,290
Jet fuel costs		1,345		1,530
Salaries and welfare		3,362		2,851
Landing and navigation fees		2,757		2,327
Computer reservation services		541		436
Provision for major overhauls (Note 44)		562		768
Interest expense		740		844
Air catering expenses		148		504
Provision for early retirement benefits (Note 45)		4		7
Others		1,105		590
		15,370		15,147

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Other liabilities (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Other Liabilities

	2017		2016
	RMB million		RMB million
Civil Aviation Development Fund and airport tax payable		1,788		1,559
Payable for purchase of property, plant and equipment		1,194		900
Sales agent deposits		507		430
Other taxes payable		569		508
Deposit received for chartered flights		191		216
Others		1,485		1,359
		5,734		4,972

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Provision for major overhauls (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Details of Provision for Major Overhauls in Respect of Aircraft Held under Operating Leases

Details of provision for major overhauls in respect of aircraft held under operating leases are as follows:

	2017			2016
	RMB million			RMB million
At January 1		2,857			2,365
Additional provision		1,063			1,020
Utilization		(550	)		(528	)
At December 31		3,370			2,857
Less: current portion (Note 42)		(562	)		(768	)
		2,808			2,089

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Provision for early retirement benefits (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Details of Provision for Early Retirement Benefits in Respect of Obligations to Early Retired Employees

Details of provision for early retirement benefits in respect of obligations to early retired employees are as follows:

	2017			2016
	RMB million			RMB million
At January 1		13			25
Provision for the year (Note 14)		1			3
Financial cost (Note 16)		1			1
Payments made during the year		(8	)		(16	)
At December 31		7			13
Less: current portion (Note 42)		(4	)		(7	)
		3			6

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Deferred benefits and gains (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Deferred Benefits and Gains

	2017		2016
	RMB million		RMB million
Leases rebates (Note (i))		54		77
Maintenance rebates (Note (ii))		807		419
Gains relating to sale and leaseback (Note (iii))		28		51
Government grants		149		127
Others		15		17
		1,053		691

Notes:

(i) The Group was granted rebates by the lessors under certain lease arrangements when it fulfilled certain requirements. The rebates are deferred and amortized using the straight line method over the remaining lease terms.

(ii) The Group was granted rebates by the engine suppliers under certain arrangements when it fulfilled certain requirements. The rebates are deferred and amortized over the beneficial period.

(iii) The Group entered into sale and leaseback transactions with certain third parties under operating leases. The gains are deferred and amortized over the lease terms of the aircraft.

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Share capital (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Share Capital

	2017		2016
	RMB million		RMB million
Registered, issued and paid up capital:
4,039,228,665 domestic state-owned shares of RMB1.00 each (2016: 4,039,228,665 shares of RMB1.00 each)		4,039		4,039
2,983,421,335 A shares of RMB1.00 each (2016: 2,983,421,335 shares of RMB1.00 each)		2,984		2,984
3,065,523,272 H shares of RMB1.00 each (2016: 2,794,917,000 shares of RMB1.00 each)		3,065		2,795
		10,088		9,818

(i) All the domestic state-owned, H and A shares rank pari passu in all material respects.

(ii) On August 10, 2017, the Company issued 270,606,272 H shares to American Airlines, Inc. for a cash consideration equivalent to RMB1,321 million, of which RMB270 million was credited to share capital and RMB1,051 million was credited to share premium (Note 48 and Note 57). According to the Share Subscription Agreement signed by the Company and American Airlines, the H shares are subject to a lock-up period of three years.

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Reserves (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Summary of Reserves

	2017			2016
	RMB million			RMB million
Share premium
At January 1		14,131			14,131
Addition (Note 47(ii))		1,051			—
At December 31		15,182			14,131
Fair value reserve
At January 1		209			55
Change in fair value of available-for-sale equity securities		47			148
Change in fair value of derivative financial instruments		19			6
At December 31		275			209
Statutory and discretionary surplus reserve
At January 1		1,957			1,552
Appropriations to reserves (Note (a))		492			405
At December 31		2,449			1,957
Other reserve
At January 1		121			123
Share of an associate’s reserves movement		1			(2	)
Dilution and change in non-controlling interests and other reserves		113			—
At December 31		235			121
Retained profits
At January 1		17,220			13,366
Profit for the year		5,961			5,044
Appropriations to reserves (Note (a))		(492	)		(405	)
Dividends approved in respect of the previous year		(982	)		(785	)
At December 31		21,707			17,220
Total		39,848			33,638

Final Dividend Proposed after the End of Reporting Year Payable to Equity Shareholders of the Company

Dividends payable to equity shareholders of the Company attributable to the year:

	2017		2016
	RMB million		RMB million
Final dividend proposed after the end of the reporting year of RMB0.10 per share (2016: RMB0.10 per share) (inclusive of applicable tax)		1,009		982

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Commitments (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Capital Commitments Outstanding not Provided for in Financial Statements

Capital commitments outstanding as at December 31, 2017 and 2016 not provided for in the financial statements were as follows:

	2017		2016
	RMB million		RMB million
Commitments in respect of aircraft and flight equipment
– authorized and contracted for		86,834		83,532
Investment commitments
– authorized and contracted for
– capital contributions for acquisition of interests in associates		—		170
– share of capital commitments of a joint venture		18		25
		18		195
– authorized but not contracted for
– share of capital commitments of a joint venture		22		19
		40		214
Commitments for other property, plant and equipment
– authorized and contracted for		6,386		2,297
– authorized but not contracted for		15,636		19,312
		22,022		21,609
		108,896		105,355

Approximate Total Future Payments, Including Estimated Amounts for Price Escalation through Anticipated Delivery Dates for Aircraft and Flight Equipment

As at December 31, 2017 and 2016, the approximate total future payments, including estimated amounts for price escalation through anticipated delivery dates for aircraft and flight equipment are as follows:

	2017		2016
	RMB million		RMB million
2017		—		25,971
2018		28,125		24,355
2019		28,370		17,878
2020		22,686		13,871
2021 and afterwards		7,653		1,457
		86,834		83,532

Total Future Minimum Lease Payments under Non-cancellable Operating Leases in Respect of Properties, Aircraft and Flight Equipment

As at December 31, 2017 and 2016, the total future minimum lease payments under non-cancellable operating leases in respect of properties, aircraft and flight equipment are as follows:

	2017		2016
	RMB million		RMB million
Payments due:
Within 1 year		8,283		7,948
After 1 year but within 5 years		31,175		27,140
After 5 years		30,007		26,127
		69,465		61,215

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Material related party transactions (Tables)

12 Months Ended

Dec. 31, 2017

Key Management Personnel Remuneration

Remuneration for key management personnel of the Group, including amounts paid to the Company’s directors (excluding independent non-executive directors) as disclosed in Note 57, is as follows:

	2017		2016		2015
	RMB ’000		RMB ’000		RMB ’000
Salaries, wages and welfare		12,151		8,219		8,907
Retirement scheme contributions		1,841		1,594		1,868
		13,992		9,813		10,775
	2017		2016		2015
	RMB ’000		RMB ’000		RMB ’000
Directors and supervisors (Note 57)		2,952		2,159		2,471
Senior management		11,040		7,654		8,304
		13,992		9,813		10,775

Details of Significant Transactions with Related Parties

Details of the significant transactions carried out by the Group are as follows:

	Note	2017 RMB million		2016 RMB million		2015 RMB million
Income received from the CSAH Group
Charter flight and pallet income	(i)		—		—		19
Cargo handling income and rental income	(i)		3		6		1
Aviation material sales income	(ii)		4		—		—
Rental income	(iii)		7		—		—
Others			1		1		2
Expenses paid to the CSAH Group
Cargo handling charges	(i)		112		117		109
Commission expenses	(i)		44		99		98
Maintenance material purchase expense and lease charges for aviation material	(ii)		43		—		—
Software service expenses	(ii)		4		—		—
Air catering supplies expenses	(iii)		125		124		100
Repairing charges	(iv)		1,537		1,877		1,324
Lease charges for land and buildings	(v)		189		193		193
Handling charges	(vi)		—		60		114
Property management fee	(vii)		72		70		73
Others			12		14		6
Expenses paid to joint ventures and associates
Repairing charges	(ix)		2,424		2,032		1,714
Maintenance material purchase expenses	(ix)		68		41		29
Flight simulation service charges	(x)		194		342		324
Training expenses	(xi)		36		110		112
Ground service expenses	(xii)		123		120		119
Air catering supplies	(xiii)		109		115		108
Advertising expenses	(xiv)		74		71		67
Property management fee	(xv)		26		—		—
Others			6		3		4
Income received from joint ventures and associates
Maintenance material sales and handling income	(xvi)		28		10		—
Disposal of equipment	(xvi)		—		39		—
Rental income	(x)		27		37		37
Entrustment income for advertising media business	(xiv)		20		22		21
Repairing income	(xvii)		1		12		12
Air catering supplies expenses	(xvii)		26		23		23
Commission income	(xviii)		26		26		17
Ground service income	(xix)		10		9		8
Labor service income	(xx)		15		—		—
Others			3		4		3
Income received from other related company
Air tickets income	(xxi)		6		9		10
Expenses paid to other related company
Advertising expenses	(xxi)		10		9		—
Computer reservation services	(xxii)		576		523		515
Aviation supplies expenses	(xxiii)		39		36		—
Canteen Service	(xxiii)		15		—		—
Others			4		—		—
Acquisition from CSAH Group
Acquisition of a subsidiary	(vi)&(xiv)		47		400		—
Acquisition of property, plant and equipment	(xxiv)		—		56		—
Leases from CSAH Group
Finance lease of aircraft	(viii)		6,831		—		—

(i) China Southern Airlines Group Ground Services Co., Ltd. (“GSC”), is a wholly-owned subsidiary of CSAH. Cargo handling income/charges are earned/payable by the Group in respect of the cargo handling services with GSC.

Commission is earned by GSC in connection with the air tickets sold by them on behalf of the Group. Commission is calculated based on the rates stipulated by the Civil Aviation Administration of China and International Air Transportation Association.

In addition, the Group leased certain equipment to GSC under operating lease agreements.

(ii) China Aviation Supplies Holding Company (“CASC”), a joint venture of CSAH.

The Group purchases software service, as well as purchases and leases maintenance material and from CASC, and CASC also purchases maintenance material from the Group.

(iii) Shenzhen Air Catering Co., Ltd. (“SACC”), a joint venture of CSAH.

Air catering supplies income/expenses are earned/payable by the Group in respect of certain in-flight meals and related services with SACC.

In addition, the Group leased certain buildings to SACC under operating lease agreements.

(iv) MTU Maintenance Zhuhai Co., Ltd., a joint venture of CSAH, provides comprehensive maintenance services to the Group.

(v) The Group leases certain land and buildings in the PRC from CSAH Group. The amount represents rental payments for land and buildings paid or payable to CSAH Group.

(vi) The Group acquires aircraft, flight equipment and other airline-related facilities through SAIETC and pays handling charges to SAIETC, which used to be a wholly-owned subsidiary of CSAH. In August 2016, the Company acquired 100% equity interests in SAIETC from CSAH at a consideration of approximately RMB400 million. SAIETC became a wholly-owned subsidiary of the Company since then.

(vii) China Southern Airlines Group Property Management Co., Ltd., a wholly-owned subsidiary of CSAH. Citic Southern Airlines Construction and Development Company Limited, an associate of CSAH. Both of them provide property management services to the Group.

(viii) China Southern Airlines International Finance Leasing Co., Ltd., a wholly-owned subsidiary of CSAH, provides financial lease of aircraft services to the Group.

(ix) GAMECO and Shenyang Northern Aircraft Maintenance Ltd., joint ventures of the Group, provide comprehensive maintenance services to the Group.

The Group also purchases maintenance material from GAMECO.

(x) Zhuhai Xiang Yi, a joint venture of the Group, provides flight simulation services to the Group. In addition, the Group leased certain flight training facilities and buildings to Zhuhai Xiang Yi under operating lease agreements.

In July 2017, the Company acquired 49% equity interests in Zhuhai Xiang Yi, which then became a wholly-owned subsidiary of the Company upon completion of the acquisition (Note 24(iv)). The amount represents the transactions in 2017 which incurred prior to the acquisition.

(xi) Flying College, a joint venture of the Group, provides training services to the Group.

(xii) Beijing Aviation Ground Services Co., Ltd., and Shenyang Konggang Logistic Co., Ltd., associates of the Group provides ground service to the Group.

(xiii) Beijing Airport Inflight Kitchen Co., Ltd., is an associate of the Group and provides air catering related services to the Group.

(xiv) SACM, an associate of the Group, provides advertising services to the Group.

XACM, originally an associate of Xiamen Airlines with 49% equity interests held, also a subsidiary of SACM, provided advertising service to Xiamen Airlines. In October 2017, Xiamen Airlines acquired the remaining 51% equity interests in XACM at a consideration of RMB47 million. XACM became a wholly-owned subsidiary of Xiamen Airlines upon completion of the acquisition since then (Note 24(v)). Xiamen Airlines provides certain media resources to Xiamen Airlines Media Co., Ltd., before the acquisition.

(xv) Xinjiang Civil Aviation Property Management Ltd., an associate of the Group, provides property management services to the Group.

(xvi) The Group imports and sales maintenance material to GAMECO and earns maintenance material sales and handling income. The Group disposed of equipment to GAMECO in 2016.

(xvii) The Group provides repairing service and Air catering supplies service to Sichuan Airlines.

(xviii) The Group provides certain website resources to SA Finance for the sales of air insurance.

(xix) The Group provides ground services to Shenyang Konggang Logistic Co., Ltd., and Sichuan Airlines, which are associates of the Group.

(xx) The Group provides labor service to Shenyang Northern Aircraft Maintenance Limited, and the charge rates are determined by reference to prevailing market price.

(xxi) Phoenix Satellite Television Holdings Ltd., (“the Phoenix Group”) is a related party of the Group as the board chairman of the Phoenix Group was appointed as a non-executive director of the Group. It provides advertising services to the Group.

In addition, the Group sells tickets to the Phoenix Group on market price.

(xxii) China Travel Sky Holding Company is a related party of the Group as a director of the Group was appointed as the director of China Travel Sky Holding Company. It provides computer reservation services to the Group.

(xxiii) The Chairman of Guangdong Southern Airline Pearl Aviation Services Company Limited (“Pearl Aviation Services”) is the executive director of the Company. The Group purchases aviation supplies and canteen services from Pearl Aviation Services.

(xxiv) The Group acquires properties from Citic Southern Airlines Construction and Development Company Limited, which is an associate of CSAH.

Details of Balances with Related Parties

(i) Loans from related parties

The unsecured loans are repayable as follows:

	2017		2016
	RMB million		RMB million
Within 1 year		273		—
After 1 year but within 2 years		58		—
After 2 years but within 5 years		100		—
		431		—

(ii) Entrusted loans from CSAH

The unsecured entrusted loans are repayable as follows:

		2017		2016
	Note	RMB million		RMB million
Within 1 year	37(e)		105		105

(iii) Deposits placed with SA Finance

As at December 31, 2017, the Group’s deposits with SA Finance are presented in the table below. The applicable interest rates are determined in accordance with the rates published by the PBOC.

	2017		2016
	RMB million		RMB million
Deposits placed with SA Finance		6,095		3,759

Southern Airlines Group Finance Co., Ltd [member]

Details of Balances with Related Parties

Details of amounts due from/to the CSAH Group, associates, joint ventures and other related company of the Group:

			2017		2016
	Note		RMB million		RMB million
Receivables:
The CSAH Group				9		7
Associates				18		15
Joint ventures				49		76
		41(a)		76		98
			2017		2016
	Note		RMB million		RMB million
Prepayments of acquisition of long-term assets:
The CSAH Group				160		—
		31 & 41(a)		160		—
			2017		2016
	Note		RMB million		RMB million
Payables:
The CSAH Group				50		21
Associates				1		4
A joint venture				48		76
Other related companies				2		2
		41(b)		101		103

	2017		2016
	RMB million		RMB million
Accrued expenses:
The CSAH Group		1,023		1,117
Associates		95		121
Joint ventures		1,086		864
Other related companies		571		256
		2,775		2,358
	2017		2016
	RMB million		RMB million
Obligations under finance leases:
The CSAH Group		6,656		—
		6,656		—

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Directors' and supervisors' emoluments (Tables)

12 Months Ended

Dec. 31, 2017

Text block1 [abstract]

Remuneration of Every Director and Supervisor

	Directors’ fees		Salaries, wages and welfare		Housing allowance		Employer’s contribution to a retirement benefit scheme		Remunerations paid or receivable in respect of accepting office as director or supervisor		Emoluments paid or receivable in respect of director’s or supervisor’s other services in connection with the management of the affairs of the Company or its subsidiary undertaking		Total
Name	RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000
Non-executive directors
Yuan Xin An (Note (i) & (ii))		—		—		—		—		—		—		—
Yang Li Hua (Note (i) & (ii))		—		—		—		—		—		—		—
Executive directors
Wang Chang Shun (Note (i) & (v))		—		—		—		—		—		—		—
Tan Wan Geng (Note (i))		—		—		—		—		—		—		—
Zhang Zi Fang (Note (i))		—		—		—		—		—		—		—
Li Shao Bin (Note (ii))		—		812		—		123		—		—		935
Supervisors
Pan Fu (Note (i))		—		—		—		—		—		—		—
Li Jia Shi		—		901		—		126		—		—		1,027
Zhang Wei (Note (i) & (ii))		—		—		—		—		—		—		—
Yang Yi Hua (Note (ii) & (iv))		—		—		—		—		—		—		—
Wu De Ming (Note (ii))		—		419		—		127		—		—		546
Mao Juan (Note (iii))		—		324		—		120		—		—		444

	Directors’ fees		Salaries, wages and welfare		Housing allowance		Employer’s contribution to a retirement benefit scheme		Remunerations paid or receivable in respect of accepting office as director or supervisor		Emoluments paid or receivable in respect of director’s or supervisor’s other services in connection with the management of the affairs of the Company or its subsidiary undertaking		Total
Name	RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000
Independent non-executive directors
Ning Xiang Dong (Note (ii))		150		—		—		—		—		—		150
Liu Chang Le (Note (ii))		150		—		—		—		—		—		150
Tan Jin Song		150		—		—		—		—		—		150
Guo Wei (Note (ii))		150		—		—		—		—		—		150
Jiao Shu Ge		150		—		—		—		—		—		150
Zheng Fan (Note (iii))		—		—		—		—		—		—		—
Gu Hui Zhong (Note (iii))		—		—		—		—		—		—		—

For the year ended December 31, 2016:

Emoluments paid or receivable in respect of a person’s services as a director or supervisor, whether of the Company or its subsidiary undertaking:

	Directors’ fees		Salaries, wages and welfare		Housing allowance		Employer’s contribution to a retirement benefit scheme		Remunerations paid or receivable in respect of accepting office as director or supervisor		Emoluments paid or receivable in respect of director’s or supervisor’s other services in connection with the management of the affairs of the Company or its subsidiary undertaking		Total
Name	RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000
Non-executive directors
Wang Chang Shun (Note (i) & (v))		—		—		—		—		—		—		—
Yuan Xin An (Note (i) & (ii))		—		—		—		—		—		—		—
Yang Li Hua (Note (i) & (ii))		—		—		—		—		—		—		—
Executive directors
Tan Wan Geng (Note (i))		—		—		—		—		—		—		—
Zhang Zi Fang (Note (i))		—		—		—		—		—		—		—
Li Shao Bin (Note (ii))		—		639		—		130		—		—		769
Supervisors
Pan Fu (Note (i))		—		—		—		—		—		—		—
Li Jia Shi		—		711		—		133		—		—		844
Zhang Wei (Note (i) & (ii))		—		—		—		—		—		—		—
Yang Yi Hua (Note (ii) & (iv))		—		—		—		—		—		—		—
Wu De Ming (Note (ii))		—		413		—		133		—		—		546
Independent non-executive directors
Ning Xiang Dong (Note (ii))		150		—		—		—		—		—		150
Liu Chang Le (Note (ii))		150		—		—		—		—		—		150
Tan Jin Song		150		—		—		—		—		—		150
Guo Wei (Note (ii))		150		—		—		—		—		—		150
Jiao Shu Ge		150		—		—		—		—		—		150

For the year ended December 31, 2015:

Emoluments paid or receivable in respect of a person’s services as a director or supervisor, whether of the Company or its subsidiary undertaking:

	Directors’ fees		Salaries, wages and welfare		Housing allowance		Employer’s contribution to a retirement benefit scheme		Remunerations paid or receivable in respect of accepting office as director or supervisor		Emoluments paid or receivable in respect of director’s or supervisor’s other services in connection with the management of the affairs of the Company or its subsidiary undertaking		Total
Name	RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000		RMB ’000
Non-executive directors
Wang Quan Hua (Note (i) & (ii))		—		—		—		—		—		—		—
Yuan Xin An (Note (i))		—		—		—		—		—		—		—
Yang Li Hua (Note (i))		—		—		—		—		—		—		—
Executive directors
Tan Wan Geng (Note (i))		—		—		—		—		—		—		—
Zhang Zi Fang (Note (i))		—		—		—		—		—		—		—
Li Shao Bin		—		636		—		137		—		—		773
Supervisors
Pan Fu (Note (i))		—		—		—		—		—		—		—
Li Jia Shi		—		636		—		139		—		—		775
Zhang Wei (Note (i))		—		—		—		—		—		—		—
Yang Yi Hua (Note (iv))		—		240		—		92		—		—		332
Wu De Ming		—		451		—		140		—		—		591
Independent non-executive directors
Ning Xiang Dong		150		—		—		—		—		—		150
Liu Chang Le		150		—		—		—		—		—		150
Tan Jin Song		150		—		—		—		—		—		150
Wei Jin Cai (Note (iii))		75		—		—		—		—		—		75
Guo Wei (Note (iv))		75		—		—		—		—		—		75
Jiao Shu Ge (Note (iv))		75		—		—		—		—		—		75

Note:

(i) These directors or supervisors did not receive any remuneration for their services in the capacity of the directors or supervisors of the Company. They also held management positions in CSAH and their salaries were borne by CSAH.

(ii) Resigned on December 20, 2017.

(iii) Appointed on December 20, 2017.

(iv) Ms. Yang Yi Hua retired in September 2015, while still served as supervisor before December 20, 2017. Ms. Yang Yi Hua did not receive any remuneration for her service in the capacity of the supervisor of the Company since September 2015.

(v) Mr. Wang Chang Shun was a non-executive director of the Company before December 20, 2017 and was appointed to be the executive director since December 20, 2017.

XML

Significant Accounting Policies - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2017
Bottom of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Term for amortization using straight line method of acquiring cost of land held under operating lease	30 years
Top of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Term for amortization using straight line method of acquiring cost of land held under operating lease	70 years
Components related to overhaul costs [member] | Bottom of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Estimated useful lives for depreciation using straight line method	P3Y
Components related to overhaul costs [member] | Top of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Estimated useful lives for depreciation using straight line method	P12Y

XML

Significant Accounting Policies - Estimated Useful Lives for Depreciation Using Straight Line Method of Other Property, Plant and Equipment (Detail)	12 Months Ended
	Dec. 31, 2017
Buildings [Member] | Bottom of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Estimated useful lives for depreciation using straight line method	P5Y
Buildings [Member] | Top of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Estimated useful lives for depreciation using straight line method	P35Y
Owned and finance leased aircraft [member] | Bottom of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Estimated useful lives for depreciation using straight line method	P15Y
Owned and finance leased aircraft [member] | Top of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Estimated useful lives for depreciation using straight line method	P20Y
Jet engines [member] | Bottom of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Estimated useful lives for depreciation using straight line method	P15Y
Jet engines [member] | Top of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Estimated useful lives for depreciation using straight line method	P20Y
Other property, plant and equipment [member] | Bottom of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Estimated useful lives for depreciation using straight line method	P3Y
Other property, plant and equipment [member] | Top of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Estimated useful lives for depreciation using straight line method	P15Y
Machinery and equipment [member] | Bottom of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Estimated useful lives for depreciation using straight line method	P4Y
Machinery and equipment [member] | Top of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Estimated useful lives for depreciation using straight line method	P10Y
Vehicles [member] | Bottom of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Estimated useful lives for depreciation using straight line method	P6Y
Vehicles [member] | Top of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Estimated useful lives for depreciation using straight line method	P8Y

XML

Financial Risk Management and Fair Values - Additional Information (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of detailed information about financial instruments [line items]
Amount of current liabilities exceeding current assets	¥ 51,693
Net cash generated from operating activities	17,732	¥ 23,764	¥ 23,734
Net cash used in investing activities	8,236	15,750	6,931
Net cash used in financing activities	6,796	8,459	27,695
Net increase/(decrease) in cash and cash equivalents	2,700	(445)	(10,892)
Approximate maximum amount available of banking facilities with PRC banks and financial institutions for providing bank financing	181,922
Approximate unutilised bank financing	142,239
Trade receivables	¥ 2,675	¥ 2,989
Debt ratio	71.00%	73.00%
Available-for-sale equity securities: Non-tradable shares [member]
Disclosure of detailed information about financial instruments [line items]
Net unrealized gains recognized in fair value reserve in other comprehensive income	¥ 126	¥ 378
Pilot trainees [member]
Disclosure of detailed information about financial instruments [line items]
Guarantees provided on personal bank loans	696	696
Personal bank loans drawn under guarantees	361	409
Amount paid to banks due to default of payments	5	4
Billing and Settlement Plan agents [Member]
Disclosure of detailed information about financial instruments [line items]
Trade receivables	1,015	1,267
100 basis points increase in interest rates [member]
Disclosure of detailed information about financial instruments [line items]
Increase/(decrease) on profit after tax and retained profits	(530)	(376)	(416)
100 basis points decrease in interest rates [member]
Disclosure of detailed information about financial instruments [line items]
Increase/(decrease) on profit after tax and retained profits	530	376	416
10 percent increase in jet fuel price [Member]
Disclosure of detailed information about financial instruments [line items]
Increase/(decrease) on fuel cost	3,190	2,380	2,627
10 percent decrease in jet fuel price [Member]
Disclosure of detailed information about financial instruments [line items]
Increase/(decrease) on fuel cost	¥ (3,190)	¥ (2,380)	¥ (2,627)

XML

Financial Risk Management and Fair Values - Remaining Contractual Maturities of Non-derivative Financial Liabilities Based on Contractual Undiscounted Cash Flows (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of maturity analysis for non-derivative financial liabilities [line items]
Borrowings, Contractual undiscounted cash outflow	¥ 50,455	¥ 47,878
Obligations under finance leases, Contractual undiscounted cash outflow	78,899	71,388
Trade and other payables and accrued charges, Contractual undiscounted cash outflow	19,701	19,015
Non-derivative financial liabilities, Total contractual undiscounted cash outflow	149,055	138,281
Borrowings, Carrying amount	48,287	45,504
Obligations under finance leases, Carrying amount	67,924	62,222
Trade and other payables and accrued charges, Carrying amount	19,701	19,015
Non-derivative financial liabilities, Total carrying amount	135,912	126,741
Within 1 year [member]
Disclosure of maturity analysis for non-derivative financial liabilities [line items]
Borrowings, Contractual undiscounted cash outflow	28,776	27,654
Obligations under finance leases, Contractual undiscounted cash outflow	10,764	10,663
Trade and other payables and accrued charges, Contractual undiscounted cash outflow	19,701	19,015
Non-derivative financial liabilities, Total contractual undiscounted cash outflow	59,241	57,332
Borrowings, Carrying amount	27,568	26,746
Obligations under finance leases, Carrying amount	8,341	8,695
After 1 year but within 2 years [member]
Disclosure of maturity analysis for non-derivative financial liabilities [line items]
Borrowings, Contractual undiscounted cash outflow	9,676	1,039
Obligations under finance leases, Contractual undiscounted cash outflow	10,257	8,683
Non-derivative financial liabilities, Total contractual undiscounted cash outflow	19,933	9,722
Borrowings, Carrying amount	9,126	440
Obligations under finance leases, Carrying amount	8,145	6,973
After 2 years but within 5 years [member]
Disclosure of maturity analysis for non-derivative financial liabilities [line items]
Borrowings, Contractual undiscounted cash outflow	11,975	19,124
Obligations under finance leases, Contractual undiscounted cash outflow	29,627	24,795
Non-derivative financial liabilities, Total contractual undiscounted cash outflow	41,602	43,919
Borrowings, Carrying amount	11,566	18,260
Obligations under finance leases, Carrying amount	25,376	21,583
After 5 years [member]
Disclosure of maturity analysis for non-derivative financial liabilities [line items]
Borrowings, Contractual undiscounted cash outflow	28	61
Obligations under finance leases, Contractual undiscounted cash outflow	28,251	27,247
Non-derivative financial liabilities, Total contractual undiscounted cash outflow	28,279	27,308
Borrowings, Carrying amount	27	58
Obligations under finance leases, Carrying amount	¥ 26,062	¥ 24,971

XML

Financial Risk Management and Fair Values - Sensitivity Analysis of Significant Foreign Exchange Rates and Impact on Profit after Tax and Retained Profits (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
1 percent appreciation of Renminbi against foreign currency [member] | USD [member]
Disclosure of nature and extent of risks arising from financial instruments [line items]
Appreciation/ (depreciation of Remninbi against foreign currency	1.00%	1.00%	1.00%
Increase/(decrease) on profit after tax and retained profits	¥ 278	¥ 305	¥ 453
1 percent appreciation of Renminbi against foreign currency [member] | EURO [member]
Disclosure of nature and extent of risks arising from financial instruments [line items]
Appreciation/ (depreciation of Remninbi against foreign currency	1.00%	1.00%	1.00%
Increase/(decrease) on profit after tax and retained profits	¥ 31	¥ 31	¥ 38
1 percent depreciation of Renminbi against foreign currency [member] | USD [member]
Disclosure of nature and extent of risks arising from financial instruments [line items]
Appreciation/ (depreciation of Remninbi against foreign currency	(1.00%)	(1.00%)	(1.00%)
Increase/(decrease) on profit after tax and retained profits	¥ (278)	¥ (305)	¥ (453)
1 percent depreciation of Renminbi against foreign currency [member] | EURO [member]
Disclosure of nature and extent of risks arising from financial instruments [line items]
Appreciation/ (depreciation of Remninbi against foreign currency	(1.00%)	(1.00%)	(1.00%)
Increase/(decrease) on profit after tax and retained profits	¥ (31)	¥ (31)	¥ (38)
10 percent appreciation of Renminbi against foreign currency [member] | JPY [member]
Disclosure of nature and extent of risks arising from financial instruments [line items]
Appreciation/ (depreciation of Remninbi against foreign currency	10.00%	10.00%	10.00%
Increase/(decrease) on profit after tax and retained profits	¥ 116	¥ 134	¥ 135
10 percent depreciation of Renminbi against foreign currency [member] | JPY [member]
Disclosure of nature and extent of risks arising from financial instruments [line items]
Appreciation/ (depreciation of Remninbi against foreign currency	(10.00%)	(10.00%)	(10.00%)
Increase/(decrease) on profit after tax and retained profits	¥ (116)	¥ (134)	¥ (135)

XML

Financial Risk Management and Fair Values - Carrying Value of Financial Instruments Measured at Fair Value on a Recurring Basis (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of fair value measurement of assets [line items]
Available-for-sale financial assets	¥ 622	¥ 499
Derivative financial instruments	46	21
Available-for-sale equity securities: Listed shares [member]
Disclosure of fair value measurement of assets [line items]
Available-for-sale financial assets	85	88
Available-for-sale equity securities: Non-tradable shares [member]
Disclosure of fair value measurement of assets [line items]
Available-for-sale financial assets	537	411
Recurring fair value measurement [member] | Available-for-sale equity securities: Listed shares [member]
Disclosure of fair value measurement of assets [line items]
Available-for-sale financial assets	85	88
Recurring fair value measurement [member] | Available-for-sale equity securities: Non-tradable shares [member]
Disclosure of fair value measurement of assets [line items]
Available-for-sale financial assets	537	411
Recurring fair value measurement [member] | Interest rate swaps [member]
Disclosure of fair value measurement of assets [line items]
Derivative financial instruments	46	21
Recurring fair value measurement [member] | Cross Currency Swaps [Member]
Disclosure of fair value measurement of assets [line items]
Derivative financial liabilities	(64)
Level 1 [Member] | Recurring fair value measurement [member] | Available-for-sale equity securities: Listed shares [member]
Disclosure of fair value measurement of assets [line items]
Available-for-sale financial assets	85	88
Level 2 [Member] | Recurring fair value measurement [member] | Interest rate swaps [member]
Disclosure of fair value measurement of assets [line items]
Derivative financial instruments	46	21
Level 2 [Member] | Recurring fair value measurement [member] | Cross Currency Swaps [Member]
Disclosure of fair value measurement of assets [line items]
Derivative financial liabilities	(64)
Level 3 [Member] | Recurring fair value measurement [member] | Available-for-sale equity securities: Non-tradable shares [member]
Disclosure of fair value measurement of assets [line items]
Available-for-sale financial assets	¥ 537	¥ 411

XML

Financial Risk Management and Fair Values - Quantitative Information of Valuation Technique and Significant Unobservable Inputs Used in Measuring Financial Instruments at Fair Value on a Recurring Basis (Detail) - Recurring fair value measurement [member] - Available-for-sale equity securities: Non-tradable shares [member] - Level 3 [Member] - Discounted cash flow [member]	12 Months Ended
	Dec. 31, 2017
Disclosure of significant unobservable inputs used in fair value measurement of assets [line items]
Terminal growth rate	9.00%
Expected dividend payout rate	27.00%
Discount rate	12.29%
Bottom of range [member]
Disclosure of significant unobservable inputs used in fair value measurement of assets [line items]
Expected profit growth rate during the projection period	10.00%
Top of range [member]
Disclosure of significant unobservable inputs used in fair value measurement of assets [line items]
Expected profit growth rate during the projection period	15.00%

XML

Traffic Revenue - Summary of Traffic Revenue (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Revenue [abstract]
Passenger	¥ 107,947	¥ 97,135	¥ 94,677
Cargo and mail	8,571	6,760	6,122
Fuel surcharge income	5,355	5,798	6,300
Traffic revenue	¥ 121,873	¥ 109,693	¥ 107,099

XML

Segment Reporting - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2017 Segment
Disclosure of operating segments [abstract]
Number of reportable operating segments	2

XML

Segment Reporting - Information of Reportable Segments Provided to Chief Operating Decision Maker for Purposes of Resource Allocation and Assessment of Segment Performance (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of operating segments [line items]
Total operating revenue	¥ 127,806	¥ 114,981	¥ 111,652
Profit before income tax	8,874	7,661	6,118
Profit for the year	6,898	5,898	4,818
Income tax	1,976	1,763	1,300
Interest income	89	89	253
Interest expense	2,747	2,465	2,188
Depreciation and amortization	13,162	12,619	11,845
Share of associates' results	431	509	460
Share of joint ventures' results	99	102	108
Remeasurement of the originally held equity interests in a joint venture	109
Gain on deemed disposal of a subsidiary		90
Fair value movement of derivative financial instruments	(64)
Total assets	218,718	200,442
Total liabilities	156,175	145,466
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member]
Disclosure of operating segments [line items]
Total operating revenue	127,489	114,792	111,467
Profit before income tax	8,798	7,647	6,341
Profit for the year	6,833	5,888	4,986
Income tax	1,965	1,759	1,355
Interest income	89	89	253
Interest expense	2,747	2,465	2,188
Depreciation and amortization	13,313	12,789	12,012
Impairment loss	442	130	108
Share of associates' results	420	511	462
Share of joint ventures' results	99	102	107
Remeasurement of the originally held equity interests in a joint venture	88
Gain on deemed disposal of a subsidiary		90
Fair value movement of derivative financial instruments	(64)
Non-current assets additions during the year#	32,604	29,246	24,340
Total assets	218,329	200,461
Total liabilities	156,164	145,753
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | Reportable operating segments [Member] | Airline transportation operations [Member]
Disclosure of operating segments [line items]
Total operating revenue	126,236	113,591	110,181
Profit before income tax	7,708	6,471	5,480
Profit for the year	5,875	4,834	4,199
Income tax	1,833	1,637	1,281
Interest income	74	79	244
Interest expense	2,724	2,458	2,156
Depreciation and amortization	13,112	12,693	11,915
Impairment loss	440	127	105
Non-current assets additions during the year#	30,776	29,126	24,242
Total assets	208,116	192,881
Total liabilities	154,391	144,768
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | Reportable operating segments [Member] | Other segments [Member]
Disclosure of operating segments [line items]
Total operating revenue	4,235	3,533	2,928
Profit before income tax	529	459	279
Profit for the year	381	337	205
Income tax	148	122	74
Interest income	15	10	9
Interest expense	23	7	32
Depreciation and amortization	201	96	97
Impairment loss	2	3	3
Non-current assets additions during the year#	1,828	120	98
Total assets	5,799	3,201
Total liabilities	2,111	1,355
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | Elimination [Member]
Disclosure of operating segments [line items]
Total operating revenue	(2,982)	(2,332)	(1,642)
Total assets	(402)	(376)
Total liabilities	(402)	(370)
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | Unallocated [Member]
Disclosure of operating segments [line items]
Profit before income tax	561	717	582
Profit for the year	577	717	582
Income tax	(16)
Share of associates' results	420	511	462
Share of joint ventures' results	99	102	107
Remeasurement of the originally held equity interests in a joint venture	88
Gain on deemed disposal of a subsidiary		90
Fair value movement of derivative financial instruments	(64)
Total assets	4,816	4,755
Total liabilities	64
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | External customers [Member]
Disclosure of operating segments [line items]
Total operating revenue	127,489	114,792	111,467
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | External customers [Member] | Reportable operating segments [Member] | Airline transportation operations [Member]
Disclosure of operating segments [line items]
Total operating revenue	126,077	113,490	110,067
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | External customers [Member] | Reportable operating segments [Member] | Other segments [Member]
Disclosure of operating segments [line items]
Total operating revenue	1,412	1,302	1,400
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | Intersegment [Member] | Reportable operating segments [Member] | Airline transportation operations [Member]
Disclosure of operating segments [line items]
Total operating revenue	159	101	114
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | Intersegment [Member] | Reportable operating segments [Member] | Other segments [Member]
Disclosure of operating segments [line items]
Total operating revenue	2,823	2,231	1,528
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | Intersegment [Member] | Elimination [Member]
Disclosure of operating segments [line items]
Total operating revenue	¥ (2,982)	¥ (2,332)	¥ (1,642)

XML

Segment Reporting - Revenues by Geographical Segment (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of geographical areas [line items]
Total operating revenue	¥ 127,806	¥ 114,981	¥ 111,652
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member]
Disclosure of geographical areas [line items]
Total operating revenue	127,489	114,792	111,467
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | Domestic [Member]
Disclosure of geographical areas [line items]
Total operating revenue	92,986	84,380	82,981
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | International [Member]
Disclosure of geographical areas [line items]
Total operating revenue	32,117	28,096	25,872
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | Hong Kong, Macau and Taiwan [Member]
Disclosure of geographical areas [line items]
Total operating revenue	¥ 2,386	¥ 2,316	¥ 2,614

XML

Segment Reporting - Reconciliation of Reportable Segment Revenues, Profit before Income Tax, Assets and Liabilities to Consolidated Figures (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of operating segments [line items]
Total operating revenue	¥ 127,806	¥ 114,981	¥ 111,652
Profit before income tax	8,874	7,661	6,118
Total assets	218,718	200,442
Total liabilities	156,175	145,466
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member]
Disclosure of operating segments [line items]
Total operating revenue	127,489	114,792	111,467
Profit before income tax	8,798	7,647	6,341
Total assets	218,329	200,461
Total liabilities	156,164	145,753
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | Capitalization of exchange difference of specific loans [Member]
Disclosure of operating segments [line items]
Profit before income tax	47	48	(222)
Total assets	196	149
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | Government grants [Member]
Disclosure of operating segments [line items]
Profit before income tax	21	1	1
Total assets	(8)	(316)
Total liabilities		(287)
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | Adjustments arising from business combinations under common control [Member]
Disclosure of operating segments [line items]
Total operating revenue	(14)	(26)
Profit before income tax	8	(35)	(2)
Total assets	237	184
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | Others [Member]
Disclosure of operating segments [line items]
Total assets	(36)	(36)
Total liabilities	11
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | Reclassification of expired sales in advance of carriage [Member]
Disclosure of operating segments [line items]
Total operating revenue	396	376	459
Financial Results Prepared under the People's Republic of China Accounting Standards for Business Enterprises ("PRC GAAP") [Member] | Reclassification of sales tax [Member]
Disclosure of operating segments [line items]
Total operating revenue	¥ (65)	¥ (161)	¥ (274)

XML

Other Operating Revenue - Summary of Other Operating Revenue (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Revenue [abstract]
Commission income	¥ 2,781	¥ 2,518	¥ 1,545
Expired sales in advance of carriage	396	376	459
Hotel and tour operation income	547	625	621
General aviation income	467	461	490
Ground services income	429	384	345
Air catering income	335	253	239
Cargo handling income	241	201	230
Rental income	184	179	182
Others	553	291	442
Other operating revenue	¥ 5,933	¥ 5,288	¥ 4,553

XML

Flight Operation Expenses - Summary of Flight Operation Expenses (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Analysis of income and expense [abstract]
Jet fuel costs	¥ 31,895	¥ 23,799	¥ 26,274
Flight personnel payroll and welfare	10,574	9,215	8,070
Aircraft operating lease charges	8,022	7,330	6,153
Air catering expenses	3,379	2,965	2,680
Civil Aviation Development Fund	2,720	2,565	2,482
Training expenses	1,184	1,120	1,003
Aircraft insurance	175	197	168
Others	5,029	4,270	3,582
Flight operation expenses	¥ 62,978	¥ 51,461	¥ 50,412

XML

Maintenance Expenses - Summary of Maintenance Expenses (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Analysis of income and expense [abstract]
Aviation repair and maintenance charges	¥ 7,930	¥ 7,952	¥ 7,396
Staff payroll and welfare	2,620	2,363	2,131
Maintenance materials	1,327	1,003	880
Maintenance expenses	¥ 11,877	¥ 11,318	¥ 10,407

XML

Aircraft and Transportation Service Expenses - Summary of Aircraft and Transportation Service Expenses (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Analysis of income and expense [abstract]
Landing and navigation fees	¥ 14,910	¥ 13,109	¥ 11,510
Ground service and other charges	8,025	7,106	6,398
Airport and transportation service expenses	¥ 22,935	¥ 20,215	¥ 17,908

XML

Promotion and Selling Expenses - Summary of Promotion and Selling Expenses (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Analysis of income and expense [abstract]
Sales commissions	¥ 1,935	¥ 1,926	¥ 3,150
Ticket office expenses	3,160	2,875	2,605
Computer reservation services	835	777	605
Advertising and promotion	196	173	122
Others	755	553	494
Promotion and selling expenses	¥ 6,881	¥ 6,304	¥ 6,976

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General and Administrative Expenses - Summary of General and Administrative Expenses (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Analysis of income and expense [abstract]
General corporate expenses	¥ 3,218	¥ 2,671	¥ 2,325
Auditors' remuneration	14	13	15
- Audit services	14	13	15
- Non-audit services	0	0	0
Other taxes and levies	159	131	124
General and administrative expenses	¥ 3,391	¥ 2,815	¥ 2,464

XML

Depreciation and Amortization - Summary of Depreciation and Amortization (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Depreciation and amortization expense [Line Items]
Depreciation	¥ 12,963	¥ 12,418	¥ 11,766
Depreciation and amortization	13,162	12,619	11,845
Owned assets [member]
Depreciation and amortization expense [Line Items]
Depreciation	8,080	7,569	7,082
Assets acquired under finance leases [member]
Depreciation and amortization expense [Line Items]
Depreciation	4,883	4,849	4,684
Deferred benefits and gains [member]
Depreciation and amortization expense [Line Items]
Amortization	(161)	(131)	(148)
Other [member]
Depreciation and amortization expense [Line Items]
Amortization	¥ 360	¥ 332	¥ 227

XML

Staff Costs - Summary of Staff Costs (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Analysis of income and expense [abstract]
Salaries, wages and welfare	¥ 21,400	¥ 18,774	¥ 16,636
Defined contribution retirement scheme	2,114	1,886	1,726
Other retirement welfare subsidy	194	183	177
Early retirement benefits (Note 45)	1	3	3
Staff costs	¥ 23,709	¥ 20,846	¥ 18,542

XML

Other Net Income - Summary of Other Net Income (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of other operating income [Line Items]
Government grants	¥ 3,075	¥ 2,837	¥ 2,331
Gains/(losses)on disposal of property, plant and equipment and construction in progress	989	557	312
Others	384	441	635
Other net income	4,448	3,835	3,278
Aircraft and spare engines and relating construction in progress [member]
Disclosure of other operating income [Line Items]
Gains/(losses)on disposal of property, plant and equipment and construction in progress	960	523	414
Other property, plant and equipment [member]
Disclosure of other operating income [Line Items]
Gains/(losses)on disposal of property, plant and equipment and construction in progress	¥ 29	¥ 34	¥ (102)

XML

Interest Expense - Summary of Interest Expense (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Interest costs [abstract]
Interest on borrowings	¥ 1,628	¥ 1,444	¥ 1,320
Interest relating to obligations under finance leases	2,009	1,598	1,248
Interest relating to provision for early retirement benefits (Note 45)	1	1	2
Total interest expense on financial liabilities not at fair value through profit or loss	3,638	3,043	2,570
Less: interest expense capitalized (Note)	(908)	(624)	(382)
Interest expense net of capitalized	2,730	2,419	2,188
Interest rate swaps: cash flow hedge, reclassified from equity	17	46
Interest expense	¥ 2,747	¥ 2,465	¥ 2,188

XML

Interest Expense - Summary of Interest Expense (Parenthetical) (Detail)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Interest costs [abstract]
Weighted average interest rate per annum used for interest capitalization	3.32%	3.22%	2.77%

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Income Tax - Income Tax Expense in Consolidated Income Statements (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
PRC income tax
Provision for the year	¥ 2,280	¥ 2,203	¥ 1,700
(Over) /under-provision in prior year	(2)	47	(41)
Current tax expense	2,278	2,250	1,659
Deferred tax (Note 30)
Origination and reversal of temporary differences	(302)	(487)	(359)
Tax expense	¥ 1,976	¥ 1,763	¥ 1,300

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Income Tax - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Major components of tax expense (income) [abstract]
PRC corporate income tax rate	25.00%	25.00%	25.00%
Preferential income tax rate for certain PRC subsidiaries	15.00%

XML

Income Tax - Reconciliation between Actual Tax Expense and Calculated Tax Based on Accounting Profit at Applicable Tax Rates (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Reconciliation of accounting profit multiplied by applicable tax rates [abstract]
Profit before income tax	¥ 8,874	¥ 7,661	¥ 6,118
Notional tax on profit before taxation, calculated at the rates applicable to profits in the tax jurisdictions concerned (Note 17(a))	2,179	1,857	1,482
Non-deductible expenses	9	4	3
Share of results of associates and joint ventures and other non-taxable income	(137)	(154)	(144)
Taxable temporary differences for which no deferred tax liabilities were recognized	(27)
Unused tax losses and deductible temporary differences for which no deferred tax assets were recognized	26	48	23
Utilization of unused tax losses and deductible temporary differences for which no deferred tax assets were recognized in prior years	(72)	(39)	(18)
(Over)/under-provision in prior year	(2)	47	(41)
Others			(5)
Tax expense	¥ 1,976	¥ 1,763	¥ 1,300

XML

Other Comprehensive Income - Summary of Other Comprehensive Income (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash flow hedges:
Effective portion of changes in fair value of hedging instruments recognized during the year	¥ 8	¥ (38)	¥ 13
Reclassification adjustments for amounts transferred to profit or loss: - interest expense (Note 16)	17	46
Net deferred tax debited to other comprehensive income	(6)	(2)	(3)
Net movement in the fair value reserve during the year recognized in other comprehensive income	19	6	¥ 10
Available-for-sale financial assets:
Changes in fair value recognized during the year	123	362
Net deferred tax debited to other comprehensive income	(31)	(90)
Net movement in the fair value reserve during the year recognized in other comprehensive income	¥ 92	¥ 272

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Earnings Per Share - Additional Information (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Earnings per share [abstract]
Profit attributable to equity shareholders of the Company	¥ 5,961	¥ 5,044	¥ 3,736
Weighted average number of shares in issue	9,923,585,348	9,817,567,000	9,817,567,000
Number of dilutive potential ordinary shares	0	0	0

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Earning Per Share - Summary of Earnings per Share (Detail) - shares shares in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Earnings per share [line items]
Issued ordinary shares at January 1	9,818	9,818	9,818
Weighted average number of ordinary shares at December 31	9,924	9,818	9,818
Class H shares [member]
Earnings per share [line items]
Effect of issuance of H shares (Note 47)	106

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Property, Plant and Equipment, Net - Summary of Property, Plant and Equipment, Net (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	¥ 146,746
Provision for impairment losses	324	¥ 71	¥ 90
Ending balance	158,926	146,746
Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	228,696	216,423
Acquisitions through business combinations (Note 24(iv))	1,556	7
Additions	11,160	8,427
Transfer from construction in progress	13,682	8,236
Transfer to lease prepayments	(161)	(21)
Transfer to assets held for sale (Note 36)	(20)
Disposals		(4,132)
Deemed disposal of a subsidiary	(7,632)	(244)
Ending balance	247,281	228,696	216,423
Accumulated depreciation and impairment losses [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	81,950	73,553
Depreciation charge for the year	12,963	12,418
Transfer to lease prepayments	(41)	(5)
Transfer to assets held for sale (Note 36)	(12)
Disposals	(6,358)	(3,995)
Deemed disposal of a subsidiary		(91)
Provision for impairment losses	324	71
Impairment losses written off on disposal	(471)	(1)
Ending balance	88,355	81,950	73,553
Investment properties [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	440
Ending balance	524	440
Investment properties [member] | Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	669	730
Transfer to lease prepayments	(18)	(21)
Transfer to buildings upon cease of lease intention	(75)	(64)
Transfer to investment properties upon lease out	225	148
Deemed disposal of a subsidiary	(7)	(124)
Ending balance	794	669	730
Investment properties [member] | Accumulated depreciation and impairment losses [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	229	223
Depreciation charge for the year	29	20
Transfer to lease prepayments	(5)	(5)
Transfer to buildings upon cease of lease intention	(26)	(21)
Transfer to investment properties upon lease out	48	39
Disposals	(5)
Deemed disposal of a subsidiary		(27)
Ending balance	270	229	223
Buildings [Member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	7,422
Ending balance	8,646	7,422
Buildings [Member] | Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	11,068	10,074
Acquisitions through business combinations (Note 24(iv))	326	5
Additions	28	39
Transfer from construction in progress	1,506	1,145
Transfer to lease prepayments	(143)
Transfer to buildings upon cease of lease intention	75	64
Transfer to investment properties upon lease out	(225)	(148)
Transfer to assets held for sale (Note 36)	(20)
Disposals		(32)
Deemed disposal of a subsidiary	(4)	(79)
Ending balance	12,611	11,068	10,074
Buildings [Member] | Accumulated depreciation and impairment losses [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	3,646	3,349
Depreciation charge for the year	390	358
Transfer to lease prepayments	(36)
Transfer to buildings upon cease of lease intention	26	21
Transfer to investment properties upon lease out	(48)	(39)
Transfer to assets held for sale (Note 36)	(12)
Disposals	(1)	(18)
Deemed disposal of a subsidiary		(25)
Ending balance	3,965	3,646	3,349
Owned aircraft [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	51,365
Ending balance	54,979	51,365
Owned aircraft [member] | Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	97,317	93,708
Additions	1,336	1,675
Transfer from construction in progress	1,098
Reclassification on exercise of purchase option	12,669	4,470
Disposals		(2,536)
Deemed disposal of a subsidiary	(6,446)
Ending balance	105,974	97,317	93,708
Owned aircraft [member] | Accumulated depreciation and impairment losses [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	45,952	40,782
Depreciation charge for the year	5,783	5,476
Reclassification on exercise of purchase option	4,757	2,141
Disposals	(5,351)	(2,468)
Provision for impairment losses	324	21
Impairment losses written off on disposal	(470)
Ending balance	50,995	45,952	40,782
Aircraft acquired under finance leases [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	76,875
Ending balance	82,356	76,875
Aircraft acquired under finance leases [member] | Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	93,872	86,832
Additions	7,592	5,112
Transfer from construction in progress	10,684	6,745
Reclassification on exercise of purchase option	(12,669)	(4,470)
Disposals		(347)
Deemed disposal of a subsidiary	(112)
Ending balance	99,367	93,872	86,832
Aircraft acquired under finance leases [member] | Accumulated depreciation and impairment losses [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	16,997	14,586
Depreciation charge for the year	4,883	4,849
Reclassification on exercise of purchase option	(4,757)	(2,141)
Disposals	(112)	(347)
Provision for impairment losses		50
Ending balance	17,011	16,997	14,586
Other property, plant and equipment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	8,548
Ending balance	10,228	8,548
Other property, plant and equipment [member] | Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	19,570	18,970
Acquisitions through business combinations (Note 24(iv))	1,136
Additions	1,635	1,148
Transfer from construction in progress	317	203
Disposals		(751)
Deemed disposal of a subsidiary	(752)
Ending balance	21,906	19,570	18,970
Other property, plant and equipment [member] | Accumulated depreciation and impairment losses [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	11,022	10,600
Depreciation charge for the year	1,280	1,159
Disposals	(623)	(736)
Impairment losses written off on disposal	(1)	(1)
Ending balance	11,678	11,022	10,600
Machinery, equipment and vehicles [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	2,096
Ending balance	2,193	2,096
Machinery, equipment and vehicles [member] | Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	6,200	6,109
Acquisitions through business combinations (Note 24(iv))	94	2
Additions	569	453
Transfer from construction in progress	77	143
Disposals		(466)
Deemed disposal of a subsidiary	(311)	(41)
Ending balance	6,629	6,200	6,109
Machinery, equipment and vehicles [member] | Accumulated depreciation and impairment losses [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	4,104	4,013
Depreciation charge for the year	598	556
Disposals	(266)	(426)
Deemed disposal of a subsidiary		(39)
Ending balance	¥ 4,436	¥ 4,104	¥ 4,013

XML

Property, Plant and Equipment, Net - Additional Information (Detail) ¥ in Millions	12 Months Ended
	Dec. 31, 2017 CNY (¥) Aircraft	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment	¥ 158,926	¥ 146,746
Impairment on property, plant and equipment	324	71	¥ 90
Rental income for investment properties and certain flight training facilities under operating leases	¥ 184	179	¥ 182
Bottom of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Lease term for investment properties and certain flight training facilities under operating leases	One year
Top of range [member]
Disclosure of detailed information about property, plant and equipment [line items]
Lease term for investment properties and certain flight training facilities under operating leases	Fourteen years
Owned and finance leased aircraft [member]
Disclosure of detailed information about property, plant and equipment [line items]
Approximate aggregate carrying value of certain property, plant and equipment mortgaged under certain obligations	¥ 83,687	78,318
Owned and finance leased aircraft [member] | Accumulated impairment provision [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment	1,495	1,641
Flight equipment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Approximate aggregate carrying value of certain property, plant and equipment mortgaged under certain obligations	206	0
Flight equipment [member] | Accumulated impairment provision [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment	¥ 123	¥ 124
Boeing 737-300 aircraft [member]
Disclosure of detailed information about property, plant and equipment [line items]
Number of aircraft | Aircraft	3
Boeing 777-200 aircraft [member]
Disclosure of detailed information about property, plant and equipment [line items]
Number of aircraft | Aircraft	2
Boeing 737-300 and aircraft Boeing 777-200 aircraft [member]
Disclosure of detailed information about property, plant and equipment [line items]
Impairment on property, plant and equipment	¥ 470
EMB 190 [member]
Disclosure of detailed information about property, plant and equipment [line items]
Discount rate used in determining recoverable amount of the CGU based on value-in-use calculation	9.74%	8.87%
In the process of applying for certain title/right certificates [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment	¥ 5,196	¥ 4,294
Investment properties [member]
Disclosure of detailed information about property, plant and equipment [line items]
Property, plant and equipment	524	440
Approximate aggregate carrying value of certain property, plant and equipment mortgaged under certain obligations	¥ 20	¥ 34

XML

Property, Plant and Equipment, Net - Future Minimum Lease Income under Non-cancellable Operating Leases (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of detailed information about property, plant and equipment [line items]
Future minimum lease income under non-cancellable operating leases	¥ 145	¥ 204
Within 1 year [member]
Disclosure of detailed information about property, plant and equipment [line items]
Future minimum lease income under non-cancellable operating leases	61	91
After 1 year but within 5 years [member]
Disclosure of detailed information about property, plant and equipment [line items]
Future minimum lease income under non-cancellable operating leases	70	59
After 5 years [member]
Disclosure of detailed information about property, plant and equipment [line items]
Future minimum lease income under non-cancellable operating leases	¥ 14	¥ 54

XML

Construction in Progress - Summary of Construction in Progress (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	¥ 28,910	¥ 19,433
Additions	19,239	20,292
Transferred to property, plant and equipment	(13,682)	(8,236)
Transferred to other assets upon completion of development	(211)	(128)
Transferred to lease prepayments	(79)
Disposals	(3,944)	(2,451)
Ending balance	30,233	28,910
Advance payment for aircraft and flight equipment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	27,267	17,700
Additions	16,319	18,930
Transferred to property, plant and equipment	(12,099)	(6,948)
Disposals	(3,944)	(2,415)
Ending balance	27,543	27,267
Others [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	1,643	1,733
Additions	2,920	1,362
Transferred to property, plant and equipment	(1,583)	(1,288)
Transferred to other assets upon completion of development	(211)	(128)
Transferred to lease prepayments	(79)
Disposals		(36)
Ending balance	¥ 2,690	¥ 1,643

XML

Lease Prepayments - Additional Information (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of Lease Prepayments [Line Items]
Approximate aggregate carrying value of certain land use rights mortgaged for certain bank borrowings	¥ 90	¥ 79
In the process of applying for certain title/right certificates [member]
Disclosure of Lease Prepayments [Line Items]
Land use rights	¥ 827	866
Bottom of range [member]
Disclosure of Lease Prepayments [Line Items]
Term for amortization using straight line method of acquiring cost of land held under operating lease	30 years
Top of range [member]
Disclosure of Lease Prepayments [Line Items]
Term for amortization using straight line method of acquiring cost of land held under operating lease	70 years
Land use rights [member]
Disclosure of Lease Prepayments [Line Items]
Amortization	¥ 78	¥ 75	¥ 64

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Goodwill - Summary of Goodwill (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Disclosure of reconciliation of changes in goodwill [abstract]
Beginning balance	¥ 182
Acquisitions through business combination (Note 24(v) & (vi))	55	¥ 182
Ending balance	¥ 237	¥ 182

XML

Goodwill Allocation to Cash Generating Units CGU Identified According to Type of Operation (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Oct. 13, 2017	Dec. 31, 2016
Disclosure of reconciliation of changes in goodwill [line items]
Goodwill	¥ 237		¥ 182
Southern Airlines Group Import and Export Trading Company [member]
Disclosure of reconciliation of changes in goodwill [line items]
Goodwill	182		¥ 182
Xiamen Airlines Company Limited [member]
Disclosure of reconciliation of changes in goodwill [line items]
Goodwill	¥ 55	¥ 55

XML

Goodwill - Additional Information (Detail)	Dec. 31, 2017	Dec. 31, 2016
Southern Airlines Group Import and Export Trading Company [member]
Disclosure of information for cash-generating units [line items]
Discount rate used in determining recoverable amount of the CGU based on value-in-use calculation	13.40%	13.40%
Xiamen Airlines Company Limited [member]
Disclosure of information for cash-generating units [line items]
Discount rate used in determining recoverable amount of the CGU based on value-in-use calculation	11.10%

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Subsidiaries - List of Particular Subsidiaries Principally Affect Results Assets or Liabilities (Detail)	12 Months Ended
	Dec. 31, 2017 CNY (¥)	Dec. 31, 2017 HKD ($)	Dec. 31, 2016 CNY (¥)
Disclosure of subsidiaries [line items]
Registered capital	¥ 10,088,000,000		¥ 9,818,000,000
Henan Airlines Company Limited [member]
Disclosure of subsidiaries [line items]
Place of establishment/operation	PRC
Registered capital	¥ 6,000,000,000
Proportion of ownership interest held by the Company	60.00%
Principal activity	Airline transportation
Xiamen Airlines Company Limited [member]
Disclosure of subsidiaries [line items]
Place of establishment/operation	PRC
Registered capital	¥ 8,000,000,000
Proportion of ownership interest held by the Company	55.00%
Principal activity	Airline transportation
Chongqing Airlines Company Limited [member]
Disclosure of subsidiaries [line items]
Place of establishment/operation	PRC
Registered capital	¥ 1,200,000,000
Proportion of ownership interest held by the Company	60.00%
Principal activity	Airline transportation
Shantou Airlines Company Limited [member]
Disclosure of subsidiaries [line items]
Place of establishment/operation	PRC
Registered capital	¥ 280,000,000
Proportion of ownership interest held by the Company	60.00%
Principal activity	Airline transportation
Zhuhai Airlines Company Limited [member]
Disclosure of subsidiaries [line items]
Place of establishment/operation	PRC
Registered capital	¥ 250,000,000
Proportion of ownership interest held by the Company	60.00%
Principal activity	Airline transportation
Guizhou Airlines Company Limited [member]
Disclosure of subsidiaries [line items]
Place of establishment/operation	PRC
Registered capital	¥ 910,000,000
Proportion of ownership interest held by the Company	60.00%
Principal activity	Airline transportation
Guangzhou Nanland Air Catering Company Limited [member]
Disclosure of subsidiaries [line items]
Place of establishment/operation	PRC
Registered capital	¥ 240,000,000
Proportion of ownership interest held by the Company	70.50%
Principal activity	Air catering
Guangzhou Baiyun International Logistic Company Limited [member]
Disclosure of subsidiaries [line items]
Place of establishment/operation	PRC
Registered capital	¥ 50,000,000
Proportion of ownership interest held by the Company	61.00%
Principal activity	Logistics operations
Beijing Southern Airlines Ground Services Company Limited [member]
Disclosure of subsidiaries [line items]
Place of establishment/operation	PRC
Registered capital	¥ 18,000,000
Proportion of ownership interest held by the Company	100.00%
Principal activity	Airport ground services
Nan Lung International Freight Limited [member]
Disclosure of subsidiaries [line items]
Place of establishment/operation	Hong Kong
Registered capital | $		$ 3,270,000
Proportion of ownership interest held by the Company	51.00%
Principal activity	Freight services
Southern Airlines General Aviation Company Limited [member]
Disclosure of subsidiaries [line items]
Place of establishment/operation	PRC
Registered capital	¥ 1,000,000,000
Proportion of ownership interest held by the Company	100.00%
Principal activity	General aviation
Southern Airlines Group Import and Export Trading Company [member]
Disclosure of subsidiaries [line items]
Place of establishment/operation	PRC
Registered capital	¥ 15,000,000
Proportion of ownership interest held by the Company	100.00%
Principal activity	Import and export agent services
Zhuhai Xiang Yi Aviation Technology Company Limited [member]
Disclosure of subsidiaries [line items]
Place of establishment/operation	PRC
Registered capital	¥ 469,848,000
Proportion of ownership interest held by the Company	100.00%
Principal activity	Flight simulation services

XML

Subsidiaries - List of Particular Subsidiaries Principally Affect Results Assets or Liabilities (Parenthetical) (Detail) $ in Thousands, ¥ in Millions	12 Months Ended
	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015	Jul. 31, 2017 CNY (¥)	Jul. 31, 2017 USD ($)	Aug. 31, 2016 CNY (¥)
Xinjiang Civil Aviation Property Management Limited [member]
Disclosure of subsidiaries [line items]
Capital injection from non-controlling interests holder		¥ 73
Group's effective interest in associate	42.80%	42.80%	51.84%
Southern Airlines Group Import and Export Trading Company [member]
Disclosure of subsidiaries [line items]
Percentage of voting equity interests acquired						100.00%
Consideration, satisfied by cash	¥ 400					¥ 400
Zhuhai Xiang Yi Aviation Technology Company Limited [member]
Disclosure of subsidiaries [line items]
Percentage of voting equity interests acquired				49.00%	49.00%
Consideration, satisfied by cash				¥ 678	$ 99,520

XML

Subsidiaries - Additional Information (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Disclosure of subsidiaries [line items]
Non-controlling interests	¥ 12,607	¥ 11,520
Zhuhai Xiang Yi Aviation Technology Company Limited [member]
Disclosure of subsidiaries [line items]
Revenue from the acquisition date to year end	196
Profit from the acquisition date to year end	15
Consolidated revenue increase if acquisition had occurred at beginning of year	424
Consolidated profit increase if acquisition had occurred at beginning of year	53
Xiamen Airlines Company Limited [member]
Disclosure of subsidiaries [line items]
Revenue from the acquisition date to year end	7
Profit from the acquisition date to year end	1
Consolidated revenue increase if acquisition had occurred at beginning of year	44
Consolidated profit increase if acquisition had occurred at beginning of year	2
Non-controlling interests	¥ 8,547	7,623
Southern Airlines Group Import and Export Trading Company [member]
Disclosure of subsidiaries [line items]
Revenue from the acquisition date to year end		68
Profit from the acquisition date to year end		14
Consolidated revenue increase if acquisition had occurred at beginning of year		154
Consolidated profit increase if acquisition had occurred at beginning of year		¥ 39

XML

Subsidiaries - Financial Information Related to Acquisition of Zhuhai Xiang Yi Aviation Technology Company Limited (Detail) $ in Thousands, ¥ in Millions	1 Months Ended	12 Months Ended
	Jul. 31, 2017 CNY (¥)	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)	Jul. 31, 2017 USD ($)	Dec. 31, 2014 CNY (¥)
Disclosure of detailed information about business combination [line items]
Property, plant and equipment, net		¥ 158,926	¥ 146,746
Cash and cash equivalents		6,826	4,152	¥ 4,560		¥ 15,414
Borrowings		(48,287)	(45,504)
Deferred tax liabilities		(583)	(841)
Net cash outflow		682	¥ 189	¥ 69
Zhuhai Xiang Yi Aviation Technology Company Limited [member]
Disclosure of detailed information about business combination [line items]
Property, plant and equipment, net	¥ 1,556
Lease prepayments	115
Trade and other receivables	70
Cash and cash equivalents	41
Other assets	32
Trade and other payables	(34)
Borrowings	(342)
Deferred tax liabilities	(30)
Other liabilities	(24)
Less: fair value of identifiable net assets	1,384
Cash consideration paid	678				$ 99,520
Cash and cash equivalents acquired	(41)
Net cash outflow	¥ 637
Fair value of the originally held 51% equity interests		706
Less: carrying value of the originally held 51% equity interests		(597)
Remeasurement of the originally held 51% equity interests		¥ 109

XML

Subsidiaries - Additional Information (Parenthetical) (Detail) - Xiamen Airlines Company Limited [member] ¥ in Millions	Oct. 13, 2017 CNY (¥)
Disclosure of subsidiaries [line items]
Percentage of voting equity interests acquired	51.00%
Percentage of equity interest before acquisition	49.00%
Cash consideration paid	¥ 47

XML

Subsidiaries - Financial Information Related to Acquisition of Xiamen Airlines Company Limited (Detail) - CNY (¥) ¥ in Millions		12 Months Ended
	Oct. 13, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Disclosure of detailed information about business combination [line items]
Cash and cash equivalents		¥ 6,826	¥ 4,152	¥ 4,560	¥ 15,414
Net cash outflow		682	189	¥ 69
Goodwill		237	¥ 182
Xiamen Airlines Company Limited [member]
Disclosure of detailed information about business combination [line items]
Trade and other receivables	¥ 46
Cash consideration paid	47
Cash and cash equivalents	2
Cash and cash equivalents acquired	(2)
Trade and other payables	(11)
Net cash outflow	45
Total consideration transferred	47
The fair value of 49% equity of XACM on the acquisition date	45
Less: fair value of identifiable net assets	37
Goodwill	¥ 55	¥ 55

XML

Subsidiaries - Summary of Financial Information Related to Acquisition (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Aug. 31, 2016	Dec. 31, 2014
Disclosure of detailed information about business combination [line items]
Property, plant and equipment	¥ 158,926	¥ 146,746
Cash and cash equivalents	6,826	4,152	¥ 4,560		¥ 15,414
Net cash outflow	682	189	¥ 69
Goodwill	237	182
Southern Airlines Group Import and Export Trading Company [member]
Disclosure of detailed information about business combination [line items]
Property, plant and equipment	7
Trade and other receivables	124
Cash and cash equivalents	211
Trade and other payables	(124)
Less: fair value of identifiable net assets	218
Consideration, satisfied by cash	400			¥ 400
Cash consideration paid	400			400
Cash and cash equivalents acquired	(211)
Net cash outflow	189
Total consideration transferred	400			¥ 400
Fair value of identifiable net assets	(218)
Goodwill	¥ 182	¥ 182

XML

Subsidiaries - Disclosure of Disposal of Subsidiaries (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Assets deemed disposed of:
Property, plant and equipment	¥ (158,926)	¥ (146,746)
Other non-currentassets	(1,394)	(1,008)	¥ (888)
Cash and cash equivalents	(6,826)	(4,152)	¥ (4,560)	¥ (15,414)
Other current liabilities	5,734	4,972
Non-current liabilities	15	¥ 17
Xinjiang Civil Aviation Property Management Limited [member]
Assets deemed disposed of:
Property, plant and equipment	153
Other non-currentassets	15
Trade and other receivables	5
Cash and cash equivalents	67
Other current assets	15
Trade and other payables	(32)
Other current liabilities	(48)
Non-current liabilities	(2)
Net identifiable assets	173
Non-controlling interests in the former subsidiary	(83)
Gain on deemed disposal of subsidiary	90
Fair value of the remaining equity interests	180
Net gain on deemed disposal and losing control	90
Net cash outflow from the deemed disposal	¥ 67

XML

Subsidiaries - Disclosure of Disposal of Subsidiaries (Parenthetical) (Detail)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Xinjiang Civil Aviation Property Management Limited [member]
Disclosure of Operating Profit [line items]
Group's effective interest in associate	42.80%	42.80%	51.84%

XML

Subsidiaries - Summarized Financial Information of Subsidiary with Material Non-controlling Interests: Xiamen Airlines Company Limited (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of subsidiaries [line items]
Current assets	¥ 17,884	¥ 13,764
Non-current assets	200,834	186,678
Current liabilities	(69,577)	(67,932)
Non-current liabilities	(86,598)	(77,534)
Net assets	62,543	54,976
Carrying amount of non-controlling interests	12,607	11,520
Revenue	127,806	114,981	¥ 111,652
Profit for the year	6,898	5,898	4,818
Total comprehensive income	7,011	6,174	4,821
Profit allocated to non-controlling interests	937	854	1,082
Net cash generated from operating activities	17,732	23,764	23,734
Net cash generated from/(used in) investing activities	(8,236)	(15,750)	(6,931)
Net cash (used in) / generated from financing activities	¥ (6,796)	¥ (8,459)	¥ (27,695)
Xiamen Airlines Company Limited [member]
Disclosure of subsidiaries [line items]
Non-controlling interests percentage	45.00%	45.00%
Current assets	¥ 2,422	¥ 2,386
Non-current assets	39,689	41,689
Current liabilities	(9,963)	(13,739)
Non-current liabilities	(14,086)	(13,997)
Net assets	18,062	16,339
Carrying amount of non-controlling interests	8,547	7,623
Revenue	26,114	21,874
Profit for the year	1,477	1,223
Total comprehensive income	1,578	1,500
Profit allocated to non-controlling interests	651	532
Dividend paid to non-controlling interests	73
Net cash generated from operating activities	3,696	4,510
Net cash generated from/(used in) investing activities	3,671	(7,776)
Net cash (used in) / generated from financing activities	¥ (7,613)	¥ 2,764

XML

Interest in Associates - Summary of Principal Associates (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of associates [line items]
Interest in associates	¥ 3,031	¥ 2,590
Southern Airlines Group Finance Co., Ltd [member]
Disclosure of associates [line items]
Place of establishment/operation	PRC
Group's effective interest	33.98%
Proportion of ownership interest held by The Company	25.28%
Proportion of ownership interest held by Subsidiaries	8.70%
Proportion of voting rights held by the Group	33.98%
Principal activity	Provision of Airlines financial services
Sichuan Airlines Co., Ltd [member]
Disclosure of associates [line items]
Place of establishment/operation	PRC
Group's effective interest	39.00%
Proportion of ownership interest held by The Company	39.00%
Proportion of voting rights held by the Group	39.00%
Principal activity	Airline transportation
Southern Airlines Culture And Media Co., Ltd. [member]
Disclosure of associates [line items]
Place of establishment/operation	PRC
Group's effective interest	40.00%
Proportion of ownership interest held by The Company	40.00%
Proportion of voting rights held by the Group	40.00%
Principal activity	Advertising services
Xinjiang Civil Aviation Property Management Limited [member]
Disclosure of associates [line items]
Place of establishment/operation	PRC
Group's effective interest	42.80%	42.80%	51.84%
Proportion of ownership interest held by The Company	42.80%
Proportion of voting rights held by the Group	42.80%
Principal activity	Property management

XML

Interest in Associates - Summarized Financial Information of Aggregated Individually Immaterial Associates (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of associates [line items]
Interest in associates	¥ 3,031	¥ 2,590
Aggregated individually immaterial associates [member]
Disclosure of associates [line items]
Interest in associates	3,031	2,590	¥ 1,995
Aggregate amounts of the Group's share of Profit from continuing operations	431	509	460
Aggregate amounts of the Group's share of other comprehensive income	2	(2)	(7)
Aggregate amounts of the Group's share of total comprehensive income	¥ 433	¥ 507	¥ 453

XML

Interest in Joint Ventures - Summary of Principal Joint Ventures (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Disclosure of joint ventures [line items]
Interest in joint ventures	¥ 1,015	¥ 1,522
Guangzhou Aircraft Maintenance Engineering Co., Ltd [member]
Disclosure of joint ventures [line items]
Place of establishment/operation	PRC
Group's effective interest	50.00%
Proportion of ownership interest held by The Company	50.00%
Proportion of ownership interest held by Subsidiaries	0.00%
Proportion of voting rights held by the Group	50.00%
Principal activity	Aircraft repair and maintenance services
Guangzhou China Southern Zhongmian Dutyfree Store Co., Limited [member]
Disclosure of joint ventures [line items]
Place of establishment/operation	PRC
Group's effective interest	50.00%
Proportion of ownership interest held by The Company	50.00%
Proportion of ownership interest held by Subsidiaries	0.00%
Proportion of voting rights held by the Group	50.00%
Principal activity	Sales of duty free goods in flight
China Southern West Australian Flying College Pty Limited [member]
Disclosure of joint ventures [line items]
Place of establishment/operation	Australia
Group's effective interest	48.12%
Proportion of ownership interest held by The Company	48.12%
Proportion of ownership interest held by Subsidiaries	0.00%
Proportion of voting rights held by the Group	50.00%
Principal activity	Pilot training services

XML

Interest in Joint Ventures - Summarized Financial Information of Aggregated Individually Immaterial Joint Ventures (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of joint ventures [line items]
Interest in joint ventures	¥ 1,015	¥ 1,522
Aggregated individually immaterial joint ventures [member]
Disclosure of joint ventures [line items]
Interest in joint ventures	1,015	1,522	¥ 1,440
Aggregate amounts of the Group's share of total comprehensive income	¥ 99	¥ 102	¥ 108

XML

Other Investments in Equity Securities - Summary of Other Investments in Equity Securities (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of financial assets [abstract]
Unlisted equity securities, at cost	¥ 103	¥ 103

XML

Other Investments in Equity Securities - Additional Information (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of financial assets [line items]
Dividend income	¥ 18	¥ 14	¥ 13
Unlisted equity securities [member]
Disclosure of financial assets [line items]
Dividend income	¥ 1	¥ 1	¥ 10

XML

Available-for-sale Financial Assets - Summary of Available-for-sale Financial Assets (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of financial assets [line items]
Available-for-sale financial assets	¥ 622	¥ 499
Available-for-sale equity securities: Listed shares [member]
Disclosure of financial assets [line items]
Available-for-sale financial assets	85	88
Available-for-sale equity securities: Non-tradable shares [member]
Disclosure of financial assets [line items]
Available-for-sale financial assets	¥ 537	¥ 411

XML

Available-for-sale Financial Assets - Additional Information (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of financial assets [line items]
Dividend income	¥ 18	¥ 14	¥ 13
Available-for-sale financial assets [member]
Disclosure of financial assets [line items]
Dividend income	¥ 17	¥ 13	¥ 3

XML

Derivative Financial Instruments - Summary of Derivative Financial Instruments (Detail) - Interest rate swaps [member] - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of detailed information about financial instruments [line items]
Interest rate swap	¥ 46	¥ 21
Cross Currency Swaps [Member]
Disclosure of detailed information about financial instruments [line items]
Cross currency swap	¥ 64

XML

Derivative Financial Instruments - Additional Information (Parenthetical) (Detail) - Interest rate swaps [member] - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of detailed information about financial instruments [line items]
Notional principal of the outstanding derivative contracts	$ 460	$ 527
Bottom of range [member] | Fixed rate from 1.64% to 1.72% [member]
Disclosure of detailed information about financial instruments [line items]
Borrowings interest rate	1.64%
Top of range [member] | Fixed rate from 1.64% to 1.72% [member]
Disclosure of detailed information about financial instruments [line items]
Borrowings interest rate	1.72%

XML

Derivative Financial Instruments - Summary of Derivative Financial Instruments (Parenthetical) (Detail) - Cross Currency Swaps [Member] - CNY (¥)	Dec. 31, 2017	Dec. 31, 2016
Disclosure of detailed information about financial instruments [line items]
Notional principal of the outstanding derivative contracts	¥ 920,000,000	¥ 0
Fair value of the cross currency swap	¥ 64,000,000	¥ 0
Bottom of range [member] | Fixed rate from 1.64% to 1.72% [member]
Disclosure of detailed information about financial instruments [line items]
Borrowings interest rate	3.58%
Top of range [member] | Fixed rate from 1.64% to 1.72% [member]
Disclosure of detailed information about financial instruments [line items]
Borrowings interest rate	4.04%

XML

Deferred Tax Assets/(Liabilities) - Movements of Net Deferred Tax Assets (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Beginning balance	¥ 844	¥ 449
Acquired in business combination	(30)
(Charged)/credited to consolidated income statement	302	487
Charged to other comprehensive income	(37)	(92)	¥ (3)
Ending balance	1,079	844	449
Deferred tax liabilities [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Beginning balance	(1,073)	(1,119)
Acquired in business combination	(30)
(Charged)/credited to consolidated income statement	64	138
Charged to other comprehensive income	(37)	(92)
Ending balance	(1,076)	(1,073)	(1,119)
Deferred tax liabilities [member] | Provision for major overhauls [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Beginning balance	(261)	(384)
(Charged)/credited to consolidated income statement	45	123
Ending balance	(216)	(261)	(384)
Deferred tax liabilities [member] | Others [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Beginning balance	(38)	(25)
(Charged)/credited to consolidated income statement	(11)	(13)
Ending balance	(49)	(38)	(25)
Deferred tax liabilities [member] | Property, plant and equipment [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Beginning balance	(659)	(687)
(Charged)/credited to consolidated income statement	26	28
Ending balance	(633)	(659)	(687)
Deferred tax liabilities [member] | Change in fair value of derivative financial instruments [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Beginning balance	(5)	(3)
Charged to other comprehensive income	(6)	(2)
Ending balance	(11)	(5)	(3)
Deferred tax liabilities [member] | Available-for-sale financial assets [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Beginning balance	(110)	(20)
Charged to other comprehensive income	(31)	(90)
Ending balance	(141)	(110)	(20)
Deferred tax liabilities [member] | Fair value remeasurement of identifiable assets in business combination [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Acquired in business combination	(30)
(Charged)/credited to consolidated income statement	4
Ending balance	(26)
Deferred tax assets [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Beginning balance	1,917	1,568
(Charged)/credited to consolidated income statement	238	349
Ending balance	2,155	1,917	1,568
Deferred tax assets [member] | Accrued expenses [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Beginning balance	1,065	751
(Charged)/credited to consolidated income statement	(45)	314
Ending balance	1,020	1,065	751
Deferred tax assets [member] | Provision for major overhauls [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Beginning balance	505	472
(Charged)/credited to consolidated income statement	186	33
Ending balance	691	505	472
Deferred tax assets [member] | Deferred revenue [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Beginning balance	87	82
(Charged)/credited to consolidated income statement	1	5
Ending balance	88	87	82
Deferred tax assets [member] | Provision for impairment losses [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Beginning balance	174	201
(Charged)/credited to consolidated income statement	74	(27)
Ending balance	248	174	201
Deferred tax assets [member] | Unused tax losses [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
(Charged)/credited to consolidated income statement	10
Ending balance	10
Deferred tax assets [member] | Gain (Loss) on Derivative Instruments [Member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
(Charged)/credited to consolidated income statement	16
Ending balance	16
Deferred tax assets [member] | Others [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Beginning balance	86	62
(Charged)/credited to consolidated income statement	(4)	24
Ending balance	¥ 82	¥ 86	¥ 62

XML

Deferred Tax Assets/(Liabilities) - Additional Information (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Disclosure of temporary difference, unused tax losses and unused tax credits [abstract]
Maximum period available in the PRC for tax losses carrying forward to set off future assessable income	P5Y
Unused tax losses for which no deferred tax assets has been recognized	¥ 543	¥ 704
Other deductible temporary differences for which no deferred tax assets has been recognized	¥ 653	¥ 626

XML

Deferred Tax Assets/(Liabilities) - Analysis of Expiry Dates of Unrecognized Unused Tax Losses (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Unused tax losses for which no deferred tax assets has been recognized	¥ 543	¥ 704
Expiring in 2017 [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Unused tax losses for which no deferred tax assets has been recognized		200
Expiring in 2018 [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Unused tax losses for which no deferred tax assets has been recognized	171	214
Expiring in 2019 [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Unused tax losses for which no deferred tax assets has been recognized	193	194
Expiring in 2021 [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Unused tax losses for which no deferred tax assets has been recognized	96	¥ 96
2022 [member]
Disclosure of temporary difference, unused tax losses and unused tax credits [line items]
Unused tax losses for which no deferred tax assets has been recognized	¥ 83

XML

Other Assets - Summary of Other Assets (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Disclosure of other non-current assets [line items]
Beginning balance	¥ 1,008	¥ 888
Amount due from related parties	160
Additions	479	277
Amount due from third parties and others	1,234	1,008
Acquisitions through business combinations	2
Transferred from construction in progress	211	128
Disposals	(24)	(28)
Amortisation for the year	(282)	(257)
Ending balance	1,394	1,008
Prepayment for exclusive use right of an airport terminal [member]
Disclosure of other non-current assets [line items]
Beginning balance	230	240
Amortisation for the year	(10)	(10)
Ending balance	220	230
Software [member]
Disclosure of other non-current assets [line items]
Beginning balance	255	247
Additions	33	4
Acquisitions through business combinations	2
Transferred from construction in progress	142	91
Disposals	(4)	(2)
Amortisation for the year	(112)	(85)
Ending balance	316	255
Leasehold improvement [member]
Disclosure of other non-current assets [line items]
Beginning balance	119	118
Additions	44	5
Transferred from construction in progress	56	36
Amortisation for the year	(38)	(40)
Ending balance	181	119
Others [member]
Disclosure of other non-current assets [line items]
Beginning balance	404	283
Additions	402	268
Transferred from construction in progress	13	1
Disposals	(20)	(26)
Amortisation for the year	(122)	(122)
Ending balance	¥ 677	¥ 404

XML

Inventories - Summary of Inventories (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of inventories [line items]
Inventories	¥ 1,622	¥ 1,588
Gross carrying amount [member]
Disclosure of inventories [line items]
Consumable spare parts and maintenance materials	1,638	1,534
Other supplies	210	198
Inventories	1,848	1,732
Accumulated impairment provision [member]
Disclosure of inventories [line items]
Inventories	¥ (226)	¥ (144)

XML

Inventories - Impairment of Inventory (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Analysis of income and expense [abstract]
Beginning balance	¥ 144	¥ 110
Provision for impairment of inventories	110	44
Provision written off in relation to disposal of inventories	(28)	(10)
Ending balance	¥ 226	¥ 144

XML

Trade Receivables - Summary of Trade Receivables (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of financial assets [line items]
Trade receivables	¥ 2,675	¥ 2,989
Gross carrying amount [member]
Disclosure of financial assets [line items]
Trade receivables	2,712	3,026
Allowance for doubtful debts [member]
Disclosure of financial assets [line items]
Trade receivables	¥ (37)	¥ (37)

XML

Trade Receivables - Additional Information (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Disclosure of financial assets [line items]
Trade receivables	¥ 2,675	¥ 2,989
Gross carrying amount [member]
Disclosure of financial assets [line items]
Trade receivables	2,712	3,026
Gross carrying amount [member] | Past due but not impaired [member]
Disclosure of financial assets [line items]
Trade receivables	36	31
Gross carrying amount [member] | Impaired [member]
Disclosure of financial assets [line items]
Trade receivables	40	50
Allowance for doubtful debts [member]
Disclosure of financial assets [line items]
Trade receivables	(37)	(37)
Allowance for doubtful debts [member] | Impaired [member]
Disclosure of financial assets [line items]
Trade receivables	¥ 37	¥ 37
Bottom of range [member]
Disclosure of financial assets [line items]
Credit terms granted to sales agents and other customers	P1M
Top of range [member]
Disclosure of financial assets [line items]
Credit terms granted to sales agents and other customers	P3M

XML

Trade Receivables - Ageing Analysis of Trade Receivables Based on Transaction Date (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of financial assets [line items]
Trade receivables	¥ 2,675	¥ 2,989
Gross carrying amount [member]
Disclosure of financial assets [line items]
Trade receivables	2,712	3,026
Gross carrying amount [member] | Within 1 month [member]
Disclosure of financial assets [line items]
Trade receivables	2,067	2,536
Gross carrying amount [member] | More than 1 month but less than 3 months [member]
Disclosure of financial assets [line items]
Trade receivables	497	321
Gross carrying amount [member] | More than 3 months but less than 12 months [member]
Disclosure of financial assets [line items]
Trade receivables	112	142
Gross carrying amount [member] | More than 1 year [member]
Disclosure of financial assets [line items]
Trade receivables	36	27
Allowance for doubtful debts [member]
Disclosure of financial assets [line items]
Trade receivables	¥ (37)	¥ (37)

XML

Trade Receivables - Movements in Allowance for Doubtful Debts of Trade Receivables (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Disclosure of financial assets [abstract]
Beginning balance	¥ 37	¥ 33
Impairment loss recognized	8	14
Impairment loss written back		(1)
Uncollectible amounts written off	(8)	(9)
Ending balance	¥ 37	¥ 37

XML

Trade Receivables - Ageing Analysis of Trade Receivables Past Due but not Impaired (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of financial assets [line items]
Trade receivables	¥ 2,675	¥ 2,989
Gross carrying amount [member]
Disclosure of financial assets [line items]
Trade receivables	2,712	3,026
Gross carrying amount [member] | Past due but not impaired [member]
Disclosure of financial assets [line items]
Trade receivables	36	31
Gross carrying amount [member] | Past due but not impaired [member] | More than 3 months but less than 12 months [member]
Disclosure of financial assets [line items]
Trade receivables	31	26
Gross carrying amount [member] | Past due but not impaired [member] | More than 1 year [member]
Disclosure of financial assets [line items]
Trade receivables	¥ 5	¥ 5

XML

Trade Receivables - Ageing Analysis of Trade Receivables Impaired (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of financial assets [line items]
Trade receivables	¥ 2,675	¥ 2,989
Gross carrying amount [member]
Disclosure of financial assets [line items]
Trade receivables	2,712	3,026
Gross carrying amount [member] | Impaired [member]
Disclosure of financial assets [line items]
Trade receivables	40	50
Gross carrying amount [member] | Impaired [member] | More than 3 months but less than 12 months [member]
Disclosure of financial assets [line items]
Trade receivables	9	28
Gross carrying amount [member] | Impaired [member] | More than 1 year [member]
Disclosure of financial assets [line items]
Trade receivables	¥ 31	¥ 22

XML

Trade Receivables - Ageing Analysis of Trade Receivables Neither Past Due Nor Impaired (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of financial assets [line items]
Trade receivables	¥ 2,675	¥ 2,989
Gross carrying amount [member]
Disclosure of financial assets [line items]
Trade receivables	2,712	3,026
Gross carrying amount [member] | Neither past due nor impaired [member]
Disclosure of financial assets [line items]
Trade receivables	¥ 2,636	¥ 2,945

XML

Trade Receivables - Trade Receivables by Currencies (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of financial assets [line items]
Trade receivables	¥ 2,675	¥ 2,989
Gross carrying amount [member]
Disclosure of financial assets [line items]
Trade receivables	2,712	3,026
Gross carrying amount [member] | RMB [member]
Disclosure of financial assets [line items]
Trade receivables	2,061	2,303
Gross carrying amount [member] | USD [member]
Disclosure of financial assets [line items]
Trade receivables	179	268
Gross carrying amount [member] | EURO [member]
Disclosure of financial assets [line items]
Trade receivables	171	129
Gross carrying amount [member] | AUD [Member]
Disclosure of financial assets [line items]
Trade receivables	52	53
Gross carrying amount [member] | TWD [Member]
Disclosure of financial assets [line items]
Trade receivables	33	40
Gross carrying amount [member] | GBP [Member]
Disclosure of financial assets [line items]
Trade receivables	36	23
Gross carrying amount [member] | Others [member]
Disclosure of financial assets [line items]
Trade receivables	¥ 180	¥ 210

XML

Other Receivables - Summary of Other Receivables (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of financial assets [line items]
Other receivables	¥ 5,235	¥ 3,390
Other receivables	¥ 5,232	¥ 3,387
Weighted average annualized interest rate of term deposit	2.01%	3.22%
Gross carrying amount [member]
Disclosure of financial assets [line items]
VAT recoverable	¥ 3,684	¥ 1,404
Rebate receivables on aircraft acquisitions	699	749
Term deposits	313	568
Deposits for aircraft purchase		13
Interest receivables	1	33
Others	538	623
Allowance for Doubtful Accounts, Current [Member]
Disclosure of financial assets [line items]
Other receivables	¥ (3)	¥ (3)

XML

Cash and Cash Equivalents - Summary of Cash and Cash Equivalents (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Disclosure of financial assets [abstract]
Deposits in banks and other financial institutions		¥ 26
Cash at bank and other financial institutions and on hand	¥ 6,826	4,126
Cash and cash equivalents	¥ 6,826	¥ 4,152	¥ 4,560	¥ 15,414

XML

Cash and Cash Equivalents - Cash and Cash Equivalents by Currencies (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Disclosure of financial assets [line items]
Cash and cash equivalents	¥ 6,826	¥ 4,152	¥ 4,560	¥ 15,414
RMB [member]
Disclosure of financial assets [line items]
Cash and cash equivalents	4,377	3,494
USD [member]
Disclosure of financial assets [line items]
Cash and cash equivalents	2,038	472
EURO [member]
Disclosure of financial assets [line items]
Cash and cash equivalents	71	31
JPY [member]
Disclosure of financial assets [line items]
Cash and cash equivalents	27	15
Hong Kong Dollars [Member]
Disclosure of financial assets [line items]
Cash and cash equivalents	123	13
Others [member]
Disclosure of financial assets [line items]
Cash and cash equivalents	¥ 190	¥ 127

XML

Cash and Cash Equivalents - Reconciliation of Profit before Income Tax to Cash Generated from Operating Activities (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of financial assets [line items]
Profit before income tax	¥ 8,874	¥ 7,661	¥ 6,118
Depreciation charges	12,963	12,418	11,766
Impairment on property, plant and equipment	324	71	90
Share of associates' results	(431)	(509)	(460)
Share of joint ventures' results	(99)	(102)	(108)
Gain on disposal of property, plant and equipment and construction in progress	(989)	(557)	(312)
Gain on deemed disposal of a subsidiary		(90)
Fair value movement of derivative financial instruments	64
Remeasurement of the originally held equity interests in a joint venture	(109)
Interest income	(89)	(89)	(253)
Interest expense	2,747	2,465	2,188
Dividend income from other investments in equity securities and available-for-sale financial assets	(18)	(14)	(13)
Exchange (gain)/losses, net	(642)	3,368	5,516
(Increase)/decrease in inventories	(34)	18	55
Decrease/(increase) in trade receivables	314	(409)	103
(Increase)/decrease in other receivables	(1,840)	637	418
Decrease/(increase) in prepaid expenses and other current assets	81	(224)	(184)
Increase/(decrease) in net amounts due to related companies	15	186	(153)
Increase/(decrease) in trade payables	222	(597)	843
(Decrease)/increase in sales in advance of carriage	(567)	1,289	1,030
Increase in accrued expenses	223	2,066	695
Increase/(decrease) in other liabilities	762	(186)	(277)
Increase/(decrease) in deferred revenue	430	86	(75)
Increase in provision for major overhauls	719	194	630
Decrease in provision for early retirement benefits	(3)	(7)	(20)
Increase/(decrease) in deferred benefits and gains	362	(195)	181
Cash generated from operating activities	23,478	27,681	27,857
Other [member]
Disclosure of financial assets [line items]
Amortization	360	332	227
Deferred benefits and gains [member]
Disclosure of financial assets [line items]
Amortization	¥ (161)	¥ (131)	¥ (148)

XML

Cash and Cash Equivalents - Summary of Reconciliation of Liabilities Arising from Financing Activities (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of reconciliation of liabilities arising from financing activities [line items]
Beginning balance	¥ 107,705
Changes from financing cash flows:
Proceeds from bank borrowings	42,854	¥ 17,539	¥ 34,170
Proceeds from ultra-short-term financing bills	1,000
Repayment of bank borrowings	(18,311)	(46,695)	(62,212)
Repayment of ultra-short-term financing bills	(22,986)
Repayment of principal under finance lease obligations	(9,835)	(6,994)	¥ (8,209)
Total changes from financing cash flows	(7,278)
Exchange adjustments	(1,862)
Changes in fair value	39
Acquisitions through business combinations (Note 24(iv))	342
Additions of obligations under finance leases (Note 52)	17,283
Total other changes	17,625
Ending Balance	116,229	107,705
Bank loans and other borrowings [member]
Disclosure of reconciliation of liabilities arising from financing activities [line items]
Beginning balance	45,504
Changes from financing cash flows:
Proceeds from bank borrowings	42,854
Proceeds from ultra-short-term financing bills	1,000
Repayment of bank borrowings	(18,311)
Repayment of ultra-short-term financing bills	(22,986)
Total changes from financing cash flows	2,557
Exchange adjustments	(116)
Acquisitions through business combinations (Note 24(iv))	342
Total other changes	342
Ending Balance	48,287	45,504
Lease liabilities [member]
Disclosure of reconciliation of liabilities arising from financing activities [line items]
Beginning balance	62,222
Changes from financing cash flows:
Repayment of principal under finance lease obligations	(9,835)
Total changes from financing cash flows	(9,835)
Exchange adjustments	(1,746)
Additions of obligations under finance leases (Note 52)	17,283
Total other changes	17,283
Ending Balance	67,924	62,222
Assets held to hedge liabilities arising from financing activities [member]
Disclosure of reconciliation of liabilities arising from financing activities [line items]
Beginning balance	(21)
Changes from financing cash flows:
Changes in fair value	(25)
Ending Balance	(46)	¥ (21)
Liabilities held to hedge liabilities arising from financing activities [member]
Changes from financing cash flows:
Changes in fair value	64
Ending Balance	¥ 64

XML

Asset Held For Sale - Summary of Assets Held for Sale (Detail) ¥ in Millions	Dec. 31, 2017 CNY (¥)
Assets held for sale [line items]
Assets held for sale	¥ 8
Property, plant and equipment [member]
Assets held for sale [line items]
Assets held for sale	¥ 8

XML

Asset Held For Sale - Additional Information (Detail) ¥ in Millions	12 Months Ended
	Dec. 31, 2017 CNY (¥)
Non-current assets or disposal groups classified as held for sale or as held for distribution to owners [abstract]
Carrying amount of assets held for sale	¥ 8
Fair value less cost to sell	¥ 27

XML

Borrowings - Summary of Borrowings (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Non-current
- secured	¥ 596	¥ 755
- unsecured	5,427	314
Long-term bank borrowings	6,023	1,069
Corporate bond - unsecured	10,000	13,000
Medium-term notes - unsecured	4,696	4,689
Non-current borrowings	20,719	18,758
Current
Secured	208	220
Unsecured	3,734	345
Short-term borrowings - unsecured	20,626	4,195
Ultra short-term financing bills - unsecured		21,986
Current borrowings except current portion of corporate bond	24,568	26,746
Current portion of corporate bond
- unsecured	3,000
Current borrowings	27,568	26,746
Borrowings
Total borrowings	48,287	45,504
Within 1 year [member]
Borrowings
Total borrowings	27,568	26,746
After 1 year but within 2 years [member]
Borrowings
Total borrowings	9,126	440
After 2 years but within 5 years [member]
Borrowings
Total borrowings	11,566	18,260
After 5 years [member]
Borrowings
Total borrowings	¥ 27	¥ 58

XML

Borrowings - Summary of Borrowings (Parenthetical) (Detail) - CNY (¥) ¥ in Millions	Nov. 21, 2016	Oct. 20, 2016	Aug. 15, 2016	May 25, 2016	Mar. 03, 2016	Nov. 20, 2015	Dec. 31, 2017	Dec. 31, 2016
Owned and finance leased aircraft [member]
Disclosure of detailed information about borrowings [line items]
Carrying amount of assets used as security for bank borrowings							¥ 83,687	¥ 78,318
Investment properties [member]
Disclosure of detailed information about borrowings [line items]
Carrying amount of assets used as security for bank borrowings							20	34
Secured bank borrowings [member] | Owned and finance leased aircraft [member]
Disclosure of detailed information about borrowings [line items]
Bank borrowings used to secure assets							440	660
Carrying amount of assets used as security for bank borrowings							1,331	1,443
Secured bank borrowings [member] | Right-of-use assets and investment properties [member]
Disclosure of detailed information about borrowings [line items]
Bank borrowings used to secure assets							265	315
Secured bank borrowings [member] | Land use rights [member]
Disclosure of detailed information about borrowings [line items]
Carrying amount of assets used as security for bank borrowings							90	79
Secured bank borrowings [member] | Investment properties [member]
Disclosure of detailed information about borrowings [line items]
Carrying amount of assets used as security for bank borrowings							20	34
Secured bank borrowings [member] | Other flight equipment [member]
Disclosure of detailed information about borrowings [line items]
Bank borrowings used to secure assets							99	0
Carrying amount of assets used as security for bank borrowings							¥ 206	¥ 0
Corporate bond [member]
Disclosure of detailed information about borrowings [line items]
Aggregate nominal value				¥ 5,000	¥ 5,000	¥ 3,000
Borrowings interest rate				3.12%	2.97%	3.63%
Borrowings maturity period				Five years	Three years	Five years
Medium- term notes 1 [member]
Disclosure of detailed information about borrowings [line items]
Aggregate nominal value	¥ 1,800	¥ 1,600	¥ 1,300
Borrowings interest rate	3.38%	3.11%	2.97%
Borrowings maturity period	Three years	Five years	Three years

XML

Borrowings - Additional Information (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of detailed information about borrowings [line items]
Net foreign exchange gain/(loss)	¥ 1,801	¥ (3,276)	¥ (5,953)
Southern Airlines Group Finance Co., Ltd [member]
Disclosure of detailed information about borrowings [line items]
Borrowings interest rate	3.92%	3.92%
Loan received from related party	¥ 105	¥ 105
Short-term borrowings [member] | Weighted average [member]
Disclosure of detailed information about borrowings [line items]
Borrowings interest rate	3.76%	3.92%

XML

Borrowings - Details of Borrowings with Original Maturity over One Year (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of detailed information about borrowings [line items]
Borrowings with original maturity over one year	¥ 27,661	¥ 19,323
Less: loans due within one year classified as current liabilities	(6,942)	(565)
Borrowings	20,719	18,758
RMB [member] | Fixed interest rate at 1.20% per annum as at December 31, 2017, with maturities through 2027 [member]
Disclosure of detailed information about borrowings [line items]
Borrowings with original maturity over one year	20	20
RMB [member] | Corporate bond - fixed bond rate at 2.97%-3.63% [member]
Disclosure of detailed information about borrowings [line items]
Borrowings with original maturity over one year	13,000	13,000
RMB [member] | Medium-term notes- fixed interest rate at 2.97%-3.38% [member]
Disclosure of detailed information about borrowings [line items]
Borrowings with original maturity over one year	4,696	4,689
RMB [member] | Floating interest rates 90%, 95%, 100% of benchmark interest rate (stipulated by PBOC) as at December 31, 2017, with maturities through 2023 [Member]
Disclosure of detailed information about borrowings [line items]
Borrowings with original maturity over one year	9,781	1,406
USD [member] | Floating interest rates at three-month LIBOR + 3.30% per annum as at December 31, 2017, with maturities through 2019 [member]
Disclosure of detailed information about borrowings [line items]
Borrowings with original maturity over one year	98
USD [member] | Floating interest rates at three-month LIBOR + 2.1% per annum as at December 31, 2017, with maturities through 2018 [member]
Disclosure of detailed information about borrowings [line items]
Borrowings with original maturity over one year	¥ 66	¥ 208

XML

Borrowings - Details of Borrowings with Original Maturity over One Year (Parenthetical) (Detail)	Dec. 31, 2017	Dec. 31, 2016
RMB [member] | Fixed interest rate at 1.20% per annum as at December 31, 2017, with maturities through 2027 [member]
Disclosure of detailed information about borrowings [line items]
Borrowings interest rate	1.20%	1.20%
RMB [member] | Corporate bond - fixed bond rate at 2.97%-3.63% [member] | Bottom of range [member]
Disclosure of detailed information about borrowings [line items]
Borrowings interest rate	2.97%	2.97%
RMB [member] | Corporate bond - fixed bond rate at 2.97%-3.63% [member] | Top of range [member]
Disclosure of detailed information about borrowings [line items]
Borrowings interest rate	3.63%	3.63%
RMB [member] | Medium-term notes- fixed interest rate at 2.97%-3.38% [member] | Bottom of range [member]
Disclosure of detailed information about borrowings [line items]
Borrowings interest rate	2.97%	2.97%
RMB [member] | Medium-term notes- fixed interest rate at 2.97%-3.38% [member] | Top of range [member]
Disclosure of detailed information about borrowings [line items]
Borrowings interest rate	3.38%	3.38%
RMB [member] | Floating interest rates 90%, 95%, 100% of benchmark interest rate (stipulated by PBOC) as at December 31, 2017, with maturities through 2023 [Member] | Bottom of range [member]
Disclosure of detailed information about borrowings [line items]
Percentage of benchmark interest rate	90.00%	90.00%
RMB [member] | Floating interest rates 90%, 95%, 100% of benchmark interest rate (stipulated by PBOC) as at December 31, 2017, with maturities through 2023 [Member] | Top of range [member]
Disclosure of detailed information about borrowings [line items]
Percentage of benchmark interest rate	100.00%	100.00%
RMB [member] | Floating interest rates 90%, 95%, 100% of benchmark interest rate (stipulated by PBOC) as at December 31, 2017, with maturities through 2023 [Member] | Middle Range [Member]
Disclosure of detailed information about borrowings [line items]
Percentage of benchmark interest rate	95.00%	95.00%
USD [member] | Floating interest rates at three-month LIBOR + 3.30% per annum as at December 31, 2017, with maturities through 2019 [member]
Disclosure of detailed information about borrowings [line items]
Borrowings interest rate basis	Three-month LIBOR + 3.30%	Three-month LIBOR + 3.30%
Borrowings interest rate basis adjustment	3.30%	3.30%
USD [member] | Floating interest rates at three-month LIBOR + 2.1% per annum as at December 31, 2017, with maturities through 2018 [member]
Disclosure of detailed information about borrowings [line items]
Borrowings interest rate basis	Three-month LIBOR + 2.1%	Three-month LIBOR + 2.1%
Borrowings interest rate basis adjustment	2.10%	2.10%

XML

Borrowings - Borrowings by Currencies (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of detailed information about borrowings [line items]
Borrowings	¥ 48,287	¥ 45,504
RMB [member]
Disclosure of detailed information about borrowings [line items]
Borrowings	40,086	45,296
USD [member]
Disclosure of detailed information about borrowings [line items]
Borrowings	¥ 8,201	¥ 208

XML

Obligations under Finance Leases - Additional Information (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Disclosure of finance lease and operating lease by lessee [line items]
Carrying amount of aircraft secured finance lease obligations	¥ 82,356	¥ 76,875
Secured finance lease obligation	¥ 67,924	¥ 62,222
Bottom of range [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease term	10 years
Top of range [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease term	15 years

XML

Obligations under Finance Leases - Future Payments under Finance Leases (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of finance lease and operating lease by lessee [line items]
Present value of the minimum lease payments	¥ 67,924	¥ 62,222
Total minimum lease payments	78,899	71,388
Interest	10,975	9,166
Current finance lease liabilities	(8,341)	(8,695)
Noncurrent finance lease liabilities	59,583	53,527
Within 1 year [member]
Disclosure of finance lease and operating lease by lessee [line items]
Present value of the minimum lease payments	8,341	8,695
Total minimum lease payments	10,764	10,663
Interest	2,423	1,968
After 1 year but within 2 years [member]
Disclosure of finance lease and operating lease by lessee [line items]
Present value of the minimum lease payments	8,145	6,973
Total minimum lease payments	10,257	8,683
Interest	2,112	1,710
After 2 years but within 5 years [member]
Disclosure of finance lease and operating lease by lessee [line items]
Present value of the minimum lease payments	25,376	21,583
Total minimum lease payments	29,627	24,795
Interest	4,251	3,212
After 5 years [member]
Disclosure of finance lease and operating lease by lessee [line items]
Present value of the minimum lease payments	26,062	24,971
Total minimum lease payments	28,251	27,247
Interest	¥ 2,189	¥ 2,276

XML

Obligations under Finance Leases - Details of Obligations under Finance Leases (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease liabilities	¥ 67,924	¥ 62,222
USD [member] | Fixed interest rates ranging from 1.75% to 5.03% per annum as at December 31, 2017 [Member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease liabilities	7,803	9,761
USD [member] | Floating interest rates ranging from three-month LIBOR + 0.18% to three-month LIBOR + 2.95% per annum as at December 31, 2017 [Member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease liabilities	12,544	15,878
USD [member] | Floating interest rates ranging from six-month LIBOR + 0.03% to six-month LIBOR + 3.30% per annum as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease liabilities	11,327	15,720
Singapore Dollars [member] | Floating interest rate at six-month SIBOR + 1.44% per annum as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease liabilities	292	341
JPY [member] | Floating interest rate at three-month TIBOR + 0.75% to three-month TIBOR + 1.90% per annum as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease liabilities	1,279	1,502
JPY [member] | Floating interest rate at six-month TIBOR + 3.00% per annum as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease liabilities	295	332
RMB [member] | Fixed rate at 4.1% to 4.3% as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease liabilities	856
RMB [member] | Floating interest rate ranging from 75.0% to 106.5% of five-year RMB loan benchmark interest rate announced by the PBOC [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease liabilities	28,804	13,852
RMB [member] | Floating interest rate at three-month CHN HIBOR 0.38% as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease liabilities	455	503
EURO [member] | Floating interest rate ranging from three-month EURIBOR + 0.32% to three-month EURIBOR + 2.20% per annum as at 31 December 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease liabilities	2,701	2,785
EURO [member] | Floating interest rate ranging from six-month EURIBOR + 1.45% to six-month EURIBOR + 1.80% per annum as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease liabilities	¥ 1,568	¥ 1,548

XML

Obligations under Finance Leases - Details of Obligations under Finance Leases (Parenthetical) (Detail)	12 Months Ended
	Dec. 31, 2017
USD [member] | Bottom of range [member] | Fixed interest rates ranging from 1.75% to 5.03% per annum as at December 31, 2017 [Member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate	1.75%
USD [member] | Bottom of range [member] | Floating interest rates ranging from three-month LIBOR + 0.18% to three-month LIBOR + 2.95% per annum as at December 31, 2017 [Member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate basis	Three-month LIBOR
Finance lease interest rate basis adjustment	0.18%
USD [member] | Bottom of range [member] | Floating interest rates ranging from six-month LIBOR + 0.03% to six-month LIBOR + 3.30% per annum as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate basis	Six-month LIBOR
Finance lease interest rate basis adjustment	0.03%
USD [member] | Top of range [member] | Fixed interest rates ranging from 1.75% to 5.03% per annum as at December 31, 2017 [Member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate	5.03%
USD [member] | Top of range [member] | Floating interest rates ranging from three-month LIBOR + 0.18% to three-month LIBOR + 2.95% per annum as at December 31, 2017 [Member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate basis	Three-month LIBOR
Finance lease interest rate basis adjustment	2.95%
USD [member] | Top of range [member] | Floating interest rates ranging from six-month LIBOR + 0.03% to six-month LIBOR + 3.30% per annum as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate basis	Six-month LIBOR
Finance lease interest rate basis adjustment	3.30%
Singapore Dollars [member] | Floating interest rate at six-month SIBOR + 1.44% per annum as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate basis	Six-month SIBOR
Finance lease interest rate basis adjustment	1.44%
JPY [member] | Floating interest rate at six-month TIBOR + 3.00% per annum as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate basis	Six-month TIBOR
Finance lease interest rate basis adjustment	3.00%
JPY [member] | Bottom of range [member] | Floating interest rate at three-month TIBOR + 0.75% to three-month TIBOR + 1.90% per annum as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate basis	Three-month TIBOR
Finance lease interest rate basis adjustment	0.75%
JPY [member] | Top of range [member] | Floating interest rate at three-month TIBOR + 0.75% to three-month TIBOR + 1.90% per annum as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate basis	Three-month TIBOR
Finance lease interest rate basis adjustment	1.90%
RMB [member] | Floating interest rate at three-month CHN HIBOR 0.38% as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate basis	Three-month CHN HIBOR
Finance lease interest rate basis adjustment	0.38%
RMB [member] | Bottom of range [member] | Fixed rate at 4.1% to 4.3% as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate	4.10%
RMB [member] | Bottom of range [member] | Floating interest rate ranging from 75.0% to 106.5% of five-year RMB loan benchmark interest rate announced by the PBOC [member]
Disclosure of finance lease and operating lease by lessee [line items]
Percentage of benchmark interest rate	75.00%
Finance lease interest rate basis	Five-year RMB loan benchmark interest rate announced by the PBOC
RMB [member] | Top of range [member] | Fixed rate at 4.1% to 4.3% as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate	4.30%
RMB [member] | Top of range [member] | Floating interest rate ranging from 75.0% to 106.5% of five-year RMB loan benchmark interest rate announced by the PBOC [member]
Disclosure of finance lease and operating lease by lessee [line items]
Percentage of benchmark interest rate	106.50%
Finance lease interest rate basis	Five-year RMB loan benchmark interest rate announced by the PBOC
EURO [member] | Bottom of range [member] | Floating interest rate ranging from three-month EURIBOR + 0.32% to three-month EURIBOR + 2.20% per annum as at 31 December 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate basis	Three-month EURIBOR
Finance lease interest rate basis adjustment	0.32%
EURO [member] | Bottom of range [member] | Floating interest rate ranging from six-month EURIBOR + 1.45% to six-month EURIBOR + 1.80% per annum as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate basis	Six-month EURIBOR
Finance lease interest rate basis adjustment	1.45%
EURO [member] | Top of range [member] | Floating interest rate ranging from three-month EURIBOR + 0.32% to three-month EURIBOR + 2.20% per annum as at 31 December 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate basis	Three-month EURIBOR
Finance lease interest rate basis adjustment	2.20%
EURO [member] | Top of range [member] | Floating interest rate ranging from six-month EURIBOR + 1.45% to six-month EURIBOR + 1.80% per annum as at December 31, 2017 [member]
Disclosure of finance lease and operating lease by lessee [line items]
Finance lease interest rate basis	Six-month EURIBOR
Finance lease interest rate basis adjustment	1.80%

XML

Trade Payables - Ageing Analysis of Trade Payables Based on Transaction Date (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of financial liabilities [line items]
Trade payables	¥ 2,125	¥ 1,903
Within 1 month [member]
Disclosure of financial liabilities [line items]
Trade payables	465	612
More than 1 month but less than 3 months [member]
Disclosure of financial liabilities [line items]
Trade payables	533	529
More than 3 months but less than 6 months [member]
Disclosure of financial liabilities [line items]
Trade payables	497	484
More than 6 months but less than 1 year [member]
Disclosure of financial liabilities [line items]
Trade payables	443	173
More than 1 year [member]
Disclosure of financial liabilities [line items]
Trade payables	¥ 187	¥ 105

XML

Trade Payables - Trade Payables by Currencies (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of financial liabilities [line items]
Trade payables	¥ 2,125	¥ 1,903
RMB [member]
Disclosure of financial liabilities [line items]
Trade payables	1,832	1,809
USD [member]
Disclosure of financial liabilities [line items]
Trade payables	209	85
Others [member]
Disclosure of financial liabilities [line items]
Trade payables	¥ 84	¥ 9

XML

Amounts Due from/to Related Companies - Summary of Amounts Due from/to Related Companies (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Current
Amounts due from related companies, current	¥ 76	¥ 98
Amounts due to related companies	101	103
Non-current
Amounts due from related companies	236	98
CSAH and its affiliates [member]
Current
Amounts due from related companies, current	9	7
Amounts due to related companies	28	20
Non-current
Amounts due from related companies, Non-current	160
Associates [member]
Current
Amounts due from related companies, current	18	15
Amounts due to related companies	1	4
Joint ventures [member]
Current
Amounts due from related companies, current	49	76
Amounts due to related companies	48	76
Joint ventures of CSAH [member]
Current
Amounts due to related companies	22	1
Other related companies [member]
Current
Amounts due to related companies	¥ 2	¥ 2

XML

Accrued Expenses - Summary of Accrued Expenses (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Subclassifications of assets, liabilities and equities [abstract]
Repairs and maintenance	¥ 4,806	¥ 5,290
Jet fuel costs	1,345	1,530
Salaries and welfare	3,362	2,851
Landing and navigation fees	2,757	2,327
Computer reservation services	541	436
Provision for major overhauls (Note 44)	562	768
Interest expense	740	844
Air catering expenses	148	504
Provision for early retirement benefits (Note 45)	4	7
Others	1,105	590
Accrued expenses	¥ 15,370	¥ 15,147

XML

Other Liabilities - Summary of Other Liabilities (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Subclassifications of assets, liabilities and equities [abstract]
Civil Aviation Development Fund and airport tax payable	¥ 1,788	¥ 1,559
Payable for purchase of property, plant and equipment	1,194	900
Sales agent deposits	507	430
Other taxes payable	569	508
Deposit received for chartered flights	191	216
Others	1,485	1,359
Total	¥ 5,734	¥ 4,972

XML

Provision for Major Overhauls - Details of Provision for Major Overhauls in Respect of Aircraft Held under Operating Leases (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Reconciliation of changes in other provisions [abstract]
Beginning balance	¥ 2,857	¥ 2,365
Additional provision	1,063	1,020
Utilization	(550)	(528)
Ending balance	3,370	2,857
Less: current portion	(562)	(768)
Total	¥ 2,808	¥ 2,089

XML

Provision for Early Retirement Benefits - Details of Provision for Early Retirement Benefits in Respect of Obligations to Early Retired Employees (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Provisions [abstract]
Beginning balance	¥ 13	¥ 25
Provision for the year (Note 14)	1	3
Financial cost (Note 16)	1	1	¥ 2
Payments made during the year	(8)	(16)
Ending balance	7	13	¥ 25
Less: current portion	(4)	(7)
Total	¥ 3	¥ 6

XML

Deferred Benefits and Gains - Summary of Deferred Benefits and Gains (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Subclassifications of assets, liabilities and equities [abstract]
Leases rebates (Note (i))	¥ 54	¥ 77
Maintenance rebates (Note (ii))	807	419
Gains relating to sale and leaseback (Note (iii))	28	51
Government grants	149	127
Others	15	17
Deferred benefits and gains	¥ 1,053	¥ 691

XML

Share Capital - Summary of Share Capital (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of classes of share capital [line items]
Issued capital	¥ 10,088	¥ 9,818
Domestic state owned shares [member]
Disclosure of classes of share capital [line items]
Issued capital	4,039	4,039
A Shares (par value RMB1.00 per share) [member]
Disclosure of classes of share capital [line items]
Issued capital	2,984	2,984
H Shares (par value RMB1.00 per share) [member]
Disclosure of classes of share capital [line items]
Issued capital	¥ 3,065	¥ 2,795

XML

Share Capital - Summary of Share Capital (Parenthetical) (Detail) - CNY (¥) ¥ / shares in Units, ¥ in Millions		12 Months Ended
	Aug. 10, 2017	Dec. 31, 2017	Dec. 31, 2016
Disclosure of classes of share capital [line items]
Cash consideration received for share issue		¥ 1,321
Domestic state owned shares [member]
Disclosure of classes of share capital [line items]
Number of shares issued		4,039,228,665	4,039,228,665
Par value of share		¥ 1.00	¥ 1.00
A Shares (par value RMB1.00 per share) [member]
Disclosure of classes of share capital [line items]
Number of shares issued		2,983,421,335	2,983,421,335
Par value of share		¥ 1.00	¥ 1.00
H Shares (par value RMB1.00 per share) [member]
Disclosure of classes of share capital [line items]
Number of shares issued		3,065,523,272	2,794,917,000
Par value of share		¥ 1.00	¥ 1.00
Class H shares [member]
Disclosure of classes of share capital [line items]
Shares issued, value		106,000,000
American Airlines, Inc. [member] | Class H shares [member]
Disclosure of classes of share capital [line items]
Number of shares issued	270,606,272
Cash consideration received for share issue	¥ 1,321
Lock-up period	3 years
American Airlines, Inc. [member] | Share capital [member]
Disclosure of classes of share capital [line items]
Shares issued, value	270,000,000
American Airlines, Inc. [member] | Share premium [member]
Disclosure of classes of share capital [line items]
Shares issued, value	1,051,000,000

XML

Reserves - Summary of Reserves (Detail) - CNY (¥) ¥ in Millions, shares in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of reserves within equity [line items]
Beginning balance	¥ 54,976	¥ 49,624	¥ 44,493
Profit for the year	6,898	5,898	4,818
Share of an associate's reserves movement	2	(2)	(7)
Dilution and change in non-controlling interests and other reserves	74
Dividends approved in respect of the previous year	(982)	(785)	(393)
Ending balance	62,543	54,976	49,624
Share premium [member]
Disclosure of reserves within equity [line items]
Beginning balance	¥ 14,131	14,131	14,131
Addition (Note 47)	1,051
Ending balance	¥ 15,182	14,131	14,131
Fair value reserve [member]
Disclosure of reserves within equity [line items]
Beginning balance	209	55	44
Change in fair value of available-for-sale equity securities	47	148
Change in fair value of derivative financial instruments	19	6
Ending balance	275	209	55
Statutory and discretionary surplus reserve [member]
Disclosure of reserves within equity [line items]
Beginning balance	1,957	1,552
Appropriations to reserves (Note (a))	492	405
Ending balance	2,449	1,957	1,552
Other reserve [member]
Disclosure of reserves within equity [line items]
Beginning balance	121	123
Share of an associate's reserves movement	1	(2)
Dilution and change in non-controlling interests and other reserves	113
Ending balance	235	121	123
Retained earnings [member]
Disclosure of reserves within equity [line items]
Beginning balance	17,220	13,366	10,269
Profit for the year	5,961	5,044	3,736
Appropriations to reserves (Note (a))	(492)	(405)	(246)
Dividends approved in respect of the previous year	(982)	(785)	(393)
Ending balance	21,707	17,220	¥ 13,366
Reserves [member]
Disclosure of reserves within equity [line items]
Beginning balance	33,638
Ending balance	¥ 39,848	¥ 33,638

XML

Reserves - Additional Information (Detail) - CNY (¥) ¥ / shares in Units, ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Disclosure of reserves within equity [abstract]
Mandatory percentage of annual net profits after taxation required to be transfered to reserve	10.00%
Maximum reserve balance expressed as percentage of registered capital	50.00%
Minimum reserve balance expressed as percentage of registered capital	25.00%
Final dividend proposed after the end of the reporting year	¥ 0.10	¥ 0.10
Final dividend proposed to ordinary share, ratio	10.00%	10.00%
Total dividend proposed by directors	¥ 1,009	¥ 982

XML

Reserves - Final Dividend Proposed after the End of Reporting Year Payable to Equity Shareholders of the Company (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Disclosure of reserves within equity [abstract]
Final dividend proposed after the end of the reporting year of RMB0.10 per share (2016: RMB0.10 per share) (inclusive of applicable tax)	¥ 1,009	¥ 982

XML

Reserves - Final Dividend Proposed after the End of Reporting Year Payable to Equity Shareholders of the Company (Parenthetical) (Detail) - ¥ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Disclosure of reserves within equity [abstract]
Final dividend proposed after the end of the reporting year	¥ 0.10	¥ 0.10

XML

Commitments - Capital Commitments Outstanding not Provided for in Financial Statements (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of detailed information about capital commitment [line items]
Capital commitments	¥ 108,896	¥ 105,355
Aircraft and flight equipment [member]
Disclosure of detailed information about capital commitment [line items]
Authorised and contracted for	86,834	83,532
Associates [member]
Disclosure of detailed information about capital commitment [line items]
Authorised and contracted for		170
Joint ventures [member]
Disclosure of detailed information about capital commitment [line items]
Authorised and contracted for	18	25
Authorised but not contracted for	22	19
Investments accounted for using equity method [member]
Disclosure of detailed information about capital commitment [line items]
Authorised and contracted for	18	195
Capital commitments	40	214
Other property, plant and equipment [member]
Disclosure of detailed information about capital commitment [line items]
Authorised and contracted for	6,386	2,297
Authorised but not contracted for	15,636	19,312
Capital commitments	¥ 22,022	¥ 21,609

XML

Commitments - Approximate Total Future Payments, Including Estimated Amounts for Price Escalation through Anticipated Delivery Dates for Aircraft and Flight Equipment (Detail) - Aircraft and flight equipment [member] - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of detailed information about property, plant and equipment [line items]
Capital commitments	¥ 86,834	¥ 83,532
2017 [member]
Disclosure of detailed information about property, plant and equipment [line items]
Capital commitments		25,971
2018 [member]
Disclosure of detailed information about property, plant and equipment [line items]
Capital commitments	28,125	24,355
2019 [member]
Disclosure of detailed information about property, plant and equipment [line items]
Capital commitments	28,370	17,878
2020 [member]
Disclosure of detailed information about property, plant and equipment [line items]
Capital commitments	22,686	13,871
2021 and afterwards [member]
Disclosure of detailed information about property, plant and equipment [line items]
Capital commitments	¥ 7,653	¥ 1,457

XML

Commitments - Total Future Minimum Lease Payments under Non-cancellable Operating Leases in Respect of Properties, Aircraft and Flight Equipment (Detail) - CNY (¥)	Dec. 31, 2017	Dec. 31, 2016
Disclosure of operating lease by lessee [Line Items]
Future minimum lease payments payable under non-cancellable operating lease	¥ 69,465,000,000	¥ 61,215,000,000
Within 1 year [member]
Disclosure of operating lease by lessee [Line Items]
Future minimum lease payments payable under non-cancellable operating lease	8,283,000,000	7,948,000,000
After 1 year but within 5 years [member]
Disclosure of operating lease by lessee [Line Items]
Future minimum lease payments payable under non-cancellable operating lease	31,175,000,000	27,140,000,000
After 5 years [member]
Disclosure of operating lease by lessee [Line Items]
Future minimum lease payments payable under non-cancellable operating lease	¥ 30,007,000,000	¥ 26,127,000,000

XML

Material Related Party Transactions - Key Management Personnel Remuneration (Detail) - CNY (¥) ¥ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of transactions between related parties [line items]
Salaries, wages and welfare	¥ 12,151	¥ 8,219	¥ 8,907
Retirement scheme contributions	1,841	1,594	1,868
Remuneration for key management personnel	13,992	9,813	10,775
Directors and supervisors [member]
Disclosure of transactions between related parties [line items]
Remuneration for key management personnel	2,952	2,159	2,471
Senior management [member]
Disclosure of transactions between related parties [line items]
Remuneration for key management personnel	¥ 11,040	¥ 7,654	¥ 8,304

XML

Material Related Party Transactions - Details of Significant Transactions with Related Parties (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
CSAH and its affiliates [member]
Disclosure of transactions between related parties [line items]
Acquisition of a subsidiary	¥ 47	¥ 400
Acquisition of property, plant and equipment		56
CSAH and its affiliates [member] | Charter flight and pallet income [member]
Disclosure of transactions between related parties [line items]
Revenue from rendering of services related party transactions			¥ 19
CSAH and its affiliates [member] | Cargo handling income and rental income [member]
Disclosure of transactions between related parties [line items]
Revenue from rendering of services related party transactions	3	6	1
CSAH and its affiliates [member] | Aviation material sales income [member]
Disclosure of transactions between related parties [line items]
Revenue from rendering of services related party transactions	4
CSAH and its affiliates [member] | Rental income [member]
Disclosure of transactions between related parties [line items]
Revenue from rendering of services related party transactions	7
CSAH and its affiliates [member] | Others [member]
Disclosure of transactions between related parties [line items]
Revenue from rendering of services related party transactions	1	1	2
CSAH and its affiliates [member] | Cargo handling charges [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	112	117	109
CSAH and its affiliates [member] | Commission expenses [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	44	99	98
CSAH and its affiliates [member] | Maintenance material purchase expense and lease charges for aviation material [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	43
CSAH and its affiliates [member] | Software service expenses [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	4
CSAH and its affiliates [member] | Air catering supplies expenses [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	125	124	100
CSAH and its affiliates [member] | Repairing charges [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	1,537	1,877	1,324
CSAH and its affiliates [member] | Lease charges for land and buildings [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	189	193	193
CSAH and its affiliates [member] | Handling charges [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions		60	114
CSAH and its affiliates [member] | Property management fee [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	72	70	73
CSAH and its affiliates [member] | Others [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	12	14	6
CSAH and its affiliates [member] | Finance lease of aircraft [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	6,831
Joint ventures and associates [member] | Rental income [member]
Disclosure of transactions between related parties [line items]
Revenue from rendering of services related party transactions	27	37	37
Joint ventures and associates [member] | Others [member]
Disclosure of transactions between related parties [line items]
Revenue from rendering of services related party transactions	3	4	3
Joint ventures and associates [member] | Repairing charges [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	2,424	2,032	1,714
Joint ventures and associates [member] | Property management fee [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	26
Joint ventures and associates [member] | Others [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	6	3	4
Joint ventures and associates [member] | Maintenance material purchase expenses [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	68	41	29
Joint ventures and associates [member] | Flight simulation service charges [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	194	342	324
Joint ventures and associates [member] | Training expenses [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	36	110	112
Joint ventures and associates [member] | Ground service expenses [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	123	120	119
Joint ventures and associates [member] | Air catering supplies [member]
Disclosure of transactions between related parties [line items]
Revenue from rendering of services related party transactions	26	23	23
Services received related party transactions	109	115	108
Joint ventures and associates [member] | Advertising expenses [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	74	71	67
Joint ventures and associates [member] | Maintenance material sales and handling income [member]
Disclosure of transactions between related parties [line items]
Revenue from rendering of services related party transactions	28	10
Joint ventures and associates [member] | Disposal of equipment [member]
Disclosure of transactions between related parties [line items]
Revenue from rendering of services related party transactions		39
Joint ventures and associates [member] | Entrustment income for advertising media business [member]
Disclosure of transactions between related parties [line items]
Revenue from rendering of services related party transactions	20	22	21
Joint ventures and associates [member] | Repairing income [member]
Disclosure of transactions between related parties [line items]
Revenue from rendering of services related party transactions	1	12	12
Joint ventures and associates [member] | Commission income [member]
Disclosure of transactions between related parties [line items]
Revenue from rendering of services related party transactions	26	26	17
Joint ventures and associates [member] | Ground service income [member]
Disclosure of transactions between related parties [line items]
Revenue from rendering of services related party transactions	10	9	8
Joint ventures and associates [member] | Labor service income [member]
Disclosure of transactions between related parties [line items]
Revenue from rendering of services related party transactions	15
Other related companies [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	4
Other related companies [member] | Advertising expenses [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	10	9
Other related companies [member] | Air tickets income [member]
Disclosure of transactions between related parties [line items]
Revenue from rendering of services related party transactions	6	9	10
Other related companies [member] | Computer reservation services [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	576	523	¥ 515
Other related companies [member] | Aviation supplies expenses [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	39	¥ 36
Other related companies [member] | Canteen service [member]
Disclosure of transactions between related parties [line items]
Services received related party transactions	¥ 15

XML

Material Related Party Transactions - Details of Significant Transactions with Related Parties (Parenthetical) (Detail) $ in Thousands, ¥ in Millions	Oct. 13, 2017 CNY (¥)	Jul. 31, 2017 CNY (¥)	Jul. 31, 2017 USD ($)	Aug. 31, 2016 CNY (¥)
Xiamen Airlines Company Limited [member]
Disclosure of transactions between related parties [line items]
Percentage of voting equity interests acquired	51.00%
Percentage of equity interest before acquisition	49.00%
Consideration, satisfied by cash	¥ 47
Zhuhai Xiang Yi Aviation Technology Company Limited [member]
Disclosure of transactions between related parties [line items]
Percentage of voting equity interests acquired		49.00%	49.00%
Consideration, satisfied by cash		¥ 678	$ 99,520
Southern Airlines Group Import and Export Trading Company [member]
Disclosure of transactions between related parties [line items]
Percentage of voting equity interests acquired				100.00%
Consideration, satisfied by cash				¥ 400

XML

Material Related Party Transactions - Details of Balances with Related Parties (Detail) - CNY (¥) ¥ in Millions	Dec. 31, 2017	Dec. 31, 2016
Disclosure of transactions between related parties [line items]
Receivables	¥ 76	¥ 98
Accrued expenses	2,775	2,358
Prepayments of acquisition of long-term assets	160
Obligations under finance leases	6,656
Payables	101	103
CSAH and its affiliates [member]
Disclosure of transactions between related parties [line items]
Receivables	9	7
Accrued expenses	1,023	1,117
Prepayments of acquisition of long-term assets	160
Obligations under finance leases	6,656
Payables	50	21
Associates [member]
Disclosure of transactions between related parties [line items]
Receivables	18	15
Accrued expenses	95	121
Payables	1	4
Joint ventures [member]
Disclosure of transactions between related parties [line items]
Receivables	49	76
Accrued expenses	1,086	864
Payables	48	76
Other related companies [member]
Disclosure of transactions between related parties [line items]
Accrued expenses	571	256
Payables	¥ 2	¥ 2

XML

Material Related Party Transactions - Additional Information (Detail) - CNY (¥)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of transactions between related parties [line items]
Loans from related party	¥ 48,287,000,000	¥ 45,504,000,000
Interest expense paid	1,628,000,000	1,444,000,000	¥ 1,320,000,000
Southern Airlines Group Finance Co., Ltd [member]
Disclosure of transactions between related parties [line items]
Loans from related party	431,000,000	0
Interest expense paid	¥ 14,000,000	¥ 7,000,000
Interest rate	3.92%	3.92%
Interest income received on deposits	¥ 72,000,000	¥ 37,000,000
Southern Airlines Group Finance Co., Ltd [member] | Bottom of range [member]
Disclosure of transactions between related parties [line items]
Interest rate	3.92%
Southern Airlines Group Finance Co., Ltd [member] | Top of range [member]
Disclosure of transactions between related parties [line items]
Interest rate	4.51%
Southern Airlines Group Finance Co., Ltd [member] | CSAH [member]
Disclosure of transactions between related parties [line items]
Loans from related party	¥ 105,000,000
Interest expense paid	¥ 4,000,000	¥ 4,000,000
Interest rate	3.92%	3.92%
Percentage of benchmark interest rate	90.00%
CSAH and its affiliates [member]
Disclosure of transactions between related parties [line items]
Operating lease commitments	¥ 334,000,000	¥ 476,000,000
CSAH and its affiliates [member] | CSAH [member]
Disclosure of transactions between related parties [line items]
Loans from related party	¥ 105,000,000	¥ 105,000,000

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Material Related Party Transactions - Loans from and Deposits Placed with Southern Airlines Group Finance Co., Ltd (Detail) - CNY (¥)	Dec. 31, 2017	Dec. 31, 2016
Disclosure of transactions between related parties [line items]
Borrowings	¥ 48,287,000,000	¥ 45,504,000,000
Deposits placed with SA Finance	6,826,000,000	4,126,000,000
Within 1 year [member]
Disclosure of transactions between related parties [line items]
Borrowings	27,568,000,000	26,746,000,000
After 1 year but within 2 years [member]
Disclosure of transactions between related parties [line items]
Borrowings	9,126,000,000	440,000,000
After 2 years but within 5 years [member]
Disclosure of transactions between related parties [line items]
Borrowings	11,566,000,000	18,260,000,000
CSAH and its affiliates [member] | CSAH [member]
Disclosure of transactions between related parties [line items]
Borrowings	105,000,000	105,000,000
Southern Airlines Group Finance Co., Ltd [member]
Disclosure of transactions between related parties [line items]
Borrowings	431,000,000	0
Deposits placed with SA Finance	6,095,000,000	¥ 3,759,000,000
Southern Airlines Group Finance Co., Ltd [member] | Unsecured loans [Member]
Disclosure of transactions between related parties [line items]
Borrowings	431,000,000
Southern Airlines Group Finance Co., Ltd [member] | Unsecured loans [Member] | Within 1 year [member]
Disclosure of transactions between related parties [line items]
Borrowings	273,000,000
Southern Airlines Group Finance Co., Ltd [member] | Unsecured loans [Member] | After 1 year but within 2 years [member]
Disclosure of transactions between related parties [line items]
Borrowings	58,000,000
Southern Airlines Group Finance Co., Ltd [member] | Unsecured loans [Member] | After 2 years but within 5 years [member]
Disclosure of transactions between related parties [line items]
Borrowings	100,000,000
Southern Airlines Group Finance Co., Ltd [member] | CSAH [member]
Disclosure of transactions between related parties [line items]
Borrowings	¥ 105,000,000

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Employee Benefits Plan - Additional Information (Detail) ¥ in Millions		12 Months Ended
	Nov. 30, 2011 Employee Equity	Dec. 31, 2017 CNY (¥)	Dec. 31, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Classes of Employee Benefits Expense [Line Items]
Total contribution into the Pension Scheme | ¥		¥ 546	¥ 486	¥ 438
Share Appreciation Rights [Member]
Classes of Employee Benefits Expense [Line Items]
Number of other equity instruments granted | Equity	24,660,000
Number of employees granted euity | Employee	118
Exercise period	6 years
Bottom of range [member]
Classes of Employee Benefits Expense [Line Items]
Percentage of salary costs contributed to defined contribution retirement schemes		13.00%	13.00%	13.00%
Top of range [member]
Classes of Employee Benefits Expense [Line Items]
Percentage of salary costs contributed to defined contribution retirement schemes		20.00%	20.00%	21.00%

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Supplementary Information to the Consolidated Cash Flow Statements - Additional Information (Detail) - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement of cash flows [abstract]
Non-cash transactions - acquisition of aircraft under finance leases	¥ 17,283	¥ 10,487	¥ 11,251

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Contingent Liabilities - Additional Information (Detail) - Pilot trainees [member] - CNY (¥) ¥ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Disclosure of contingent liabilities [line items]
Guarantees provided on personal bank loans	¥ 696	¥ 696
Personal bank loans drawn under guarantees	361	409
Amount paid to banks due to default of payments	¥ 5	¥ 4

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Non-Adjusting Events After the Financial Year End - Additional Information (Detail) $ / shares in Units, ¥ in Millions, $ in Millions, $ in Millions			12 Months Ended
	Jun. 26, 2017 CNY (¥)	Jun. 26, 2017 HKD ($) Investor $ / shares shares	Dec. 31, 2017 CNY (¥)	Mar. 21, 2018 USD ($)
Disclosure of non-adjusting events after reporting period [line items]
Number of shares issued | ¥			¥ 1,321
Xiamen Airlines Company Limited [member] | Major ordinary share transactions [member]
Disclosure of non-adjusting events after reporting period [line items]
Catalogue price | $				$ 3,240
Class A share subscription agreement [member] | CSAH and its affiliates [member]
Disclosure of non-adjusting events after reporting period [line items]
Number of shares authorized | shares		1,800,000,000
Number of investors | Investor		10
Number of shares issued | ¥	¥ 9,500
Percentage of share subscription	31.00%	31.00%
Class H Share subscription agreement [member] | CSAH and its affiliates [member]
Disclosure of non-adjusting events after reporting period [line items]
Number of shares authorized | shares		600,925,925
Number of shares issued | $		$ 3,699
Par value per share | $ / shares		$ 6.156

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Directors' and Supervisors' Emoluments - Remuneration of Every Director and Supervisor (Detail) - CNY (¥) ¥ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Disclosure of transactions between related parties [line items]
Salaries, wages and welfare	¥ 12,151	¥ 8,219	¥ 8,907
Employer's contribution to a retirement benefit scheme	1,841	1,594	1,868
Total	13,992	9,813	10,775
Wei Jin Cai [member]
Disclosure of transactions between related parties [line items]
Directors' fees			75
Total			75
Wang Chang Shun [member]
Disclosure of transactions between related parties [line items]
Housing allowance	0
Remunerations paid or receivable in respect of accepting office as director or supervisor	0
Emoluments paid or receivable in respect of director's or supervisor's other services in connection with the management of the affairs of the Company or its subsidiary undertaking	0
Li Shao Bin [member]
Disclosure of transactions between related parties [line items]
Salaries, wages and welfare	812	639	636
Employer's contribution to a retirement benefit scheme	123	130	137
Total	935	769	773
Li Jia Shi [member]
Disclosure of transactions between related parties [line items]
Salaries, wages and welfare	901	711	636
Employer's contribution to a retirement benefit scheme	126	133	139
Total	1,027	844	775
Yang Yi Hua [member]
Disclosure of transactions between related parties [line items]
Salaries, wages and welfare			240
Employer's contribution to a retirement benefit scheme			92
Total			332
Wu De Ming [member]
Disclosure of transactions between related parties [line items]
Salaries, wages and welfare	419	413	451
Employer's contribution to a retirement benefit scheme	127	133	140
Total	546	546	591
Mao Juan [member]
Disclosure of transactions between related parties [line items]
Salaries, wages and welfare	324
Employer's contribution to a retirement benefit scheme	120
Total	444
Ning Xiang Dong [member]
Disclosure of transactions between related parties [line items]
Directors' fees	150	150	150
Total	150	150	150
Liu Chang Le [member]
Disclosure of transactions between related parties [line items]
Directors' fees	150	150	150
Total	150	150	150
Tan Jin Song [member]
Disclosure of transactions between related parties [line items]
Directors' fees	150	150	150
Total	150	150	150
Guo Wei [member]
Disclosure of transactions between related parties [line items]
Directors' fees	150	150	75
Total	150	150	75
Jiao Shu Ge [member]
Disclosure of transactions between related parties [line items]
Directors' fees	150	150	75
Total	150	¥ 150	¥ 75
Zheng Fan [member]
Disclosure of transactions between related parties [line items]
Housing allowance	0
Remunerations paid or receivable in respect of accepting office as director or supervisor	0
Emoluments paid or receivable in respect of director's or supervisor's other services in connection with the management of the affairs of the Company or its subsidiary undertaking	0
Gu Hui Zhong [member]
Disclosure of transactions between related parties [line items]
Housing allowance	0
Remunerations paid or receivable in respect of accepting office as director or supervisor	0
Emoluments paid or receivable in respect of director's or supervisor's other services in connection with the management of the affairs of the Company or its subsidiary undertaking	¥ 0