| 47 | RELATED PARTY TRANSACTIONS |
The Group is controlled by CEA Holding, which directly owns 35.06% of the Company’s shares as at 31 December 2017 (2016: 35.06%). In addition, through CES Global Holdings (Hong Kong) Limited and CES Finance Holding Co., Ltd., two wholly-owned subsidiaries of CEA Holding, CEA Holding indirectly owns additional shares of the Company of approximately 18.15% and 3.16% respectively as at 31 December 2017 (2016: 18.15% and 3.16% ).
The Company is a state-owned enterprise established in the PRC and is controlled by the PRC government, which also owns a significant portion of the productive assets in the PRC. In accordance with IAS 24 “Related Party Disclosures”, government-related entities and their subsidiaries, directly or indirectly controlled, jointly controlled or significantly influenced by the PRC government are defined as related parties of the Group. On that basis, related parties include CEA Holding and its subsidiaries (other than the Group), other government-related entities and their subsidiaries (“Other State-owned Enterprises”), other entities and corporations over which the Company is able to control or exercise significant influence and key management personnel of the Company as well as their close family members.
For the purpose of the related party transaction disclosures, the directors of the Company believe that meaningful information in respect of related party transactions has been adequately disclosed.
| (a) | Nature of related parties that do not control or controlled by the Group: |
| Name of related party | Relationship with the Group | |
|
Eastern Air Finance Company |
Associate of the Company | |
|
Eastern Aviation Import & Export Co., Ltd. and its subsidiaries (“Eastern Import & Export”) |
Associate of the Company | |
|
Shanghai P&W |
Associate of the Company | |
|
Eastern Advertising |
Associate of the Company | |
|
Collins Aviation |
Associate of the Company | |
|
CAE Melbourne |
Joint venture of the Company | |
|
Wheels & Brakes |
Joint venture of the Company | |
|
Technologies Aerospace |
Joint venture of the Company | |
|
China Kaiya |
Joint venture of the Company | |
|
Shanghai Hute |
Joint venture of the Company | |
|
CEA Development Co., Limited and its subsidiaries (“CEA Development”) |
Controlled by the same parent company | |
|
China Eastern Air Catering Investment Co., Limited and its subsidiaries (“Eastern Air Catering”) |
Controlled by the same parent company | |
|
CES International Financial Leasing Corporation Limited and its subsidiaries (“CES Lease Company”) |
Controlled by the same parent company | |
|
Shanghai Eastern Airlines Investment Co., Ltd. (“Eastern Investment”) |
Controlled by the same parent company | |
|
Shanghai Eastern Airlines Logistics Co., Ltd. and its subsidiaries (“Eastern Logistics”) (note) |
Controlled by the same parent company | |
|
Eastern Airlines Industry Investment Company Limited (“Eastern Airlines Industry Investment”) |
Controlled by the same parent company | |
|
TravelSky Technology Limited (“TravelSky”) |
A director and vice president of the Company is a director of Travelsky | |
|
China Aviation Supplies Holding Company and its |
A director and vice president of the | |
|
subsidiaries (“CASC”) |
Company is a director of CASC | |
|
Air France-KLM Group (“AFK”) |
A director and vice president of the Company is a director of AFK |
Note:
Eastern Logistics has become a related party of the Group as it was acquired by Eastern Airlines Industry Investment at of 8 February 2017 and ceased to be a subsidiary of the Company.
| (b) | Related party transactions |
| Income or receipts/ | ||||||||||||||||||
| (expense or payments) | ||||||||||||||||||
| Pricing policy | 2017 | 2016 | ||||||||||||||||
| Nature of transaction decision | Related party | and process | RMB million | RMB million | ||||||||||||||
|
Interest income on deposits |
Eastern Air Finance Company | (iv) | 29 | 23 | ||||||||||||||
|
Interest expense on loans |
Eastern Air Finance Company | (iv) | (2 | ) | (10 | ) | ||||||||||||
| CEA Holding | (iv) | (1 | ) | (1 | ) | |||||||||||||
|
Handling charges for purchase of aircraft, flight, equipment, flight equipment spare parts, other property, plant and flight equipment and repairs for aircraft and engines* |
Eastern Import & Export | (ii) | (145 | ) | (105 | ) | ||||||||||||
|
Repairs and maintenance expense for aircraft and engines |
Wheels & Brakes | (ii) | (152 | ) | (176 | ) | ||||||||||||
| Technologies Aerospace | (ii) | (276 | ) | (252 | ) | |||||||||||||
| Shanghai P&W | (ii) | (2,538 | ) | (2,049 | ) | |||||||||||||
| Shanghai Hute | (ii) | (60 | ) | (84 | ) | |||||||||||||
|
Supply of cabin cleaning services |
Eastern Advertising | (ii) | (22 | ) | (21 | ) | ||||||||||||
|
Advertising expense* |
Eastern Advertising | (ii) | (23 | ) | (36 | ) | ||||||||||||
|
Media royalty fee |
Eastern Advertising | (iii) | 15 | 17 | ||||||||||||||
|
Supply of logistics services |
Eastern Import & Export | (ii) | (87 | ) | (72 | ) | ||||||||||||
|
Supply of system services |
China Kaiya | (ii) | (44 | ) | (79 | ) | ||||||||||||
|
Supply of food and beverages* |
Eastern Air Catering | (i) | (1,254 | ) | (1,054 | ) | ||||||||||||
| CEA Development | (i) | (72 | ) | (51 | ) | |||||||||||||
| Eastern Import & Export | (i) | (58 | ) | (50 | ) | |||||||||||||
|
Cargo handling income |
Eastern Import & Export | (iii) | — | 15 | ||||||||||||||
|
Automobile maintenance service, aircraft maintenance, providing transportation automobile and other products* |
CEA Development | (ii) | (68 | ) | (86 | ) | ||||||||||||
|
Equipment maintenance fee |
Collins Aviation | (ii) | (62 | ) | (30 | ) | ||||||||||||
| CEA Development | (ii) | (53 | ) | (11 | ) | |||||||||||||
|
Property management and green maintenance expenses* |
CEA Development | (ii) | (75 | ) | (59 | ) | ||||||||||||
|
Supply of hotel accommodation service |
CEA Development | (ii) | (104 | ) | (91 | ) | ||||||||||||
|
Land and building rental* |
CEA Holding | (ii) | (54 | ) | (54 | ) | ||||||||||||
|
Cargo terminal business support services* |
Eastern Logistics | (ii)&(vi) | (281 | ) | — | |||||||||||||
|
Bellyhold space management* |
Eastern Logistics | (ii)&(vi) | (117 | ) | — | |||||||||||||
|
Transfer of the pilots |
Eastern Logistics | (ii)&(vi) | (7 | ) | — | |||||||||||||
|
Freight logistics support services* |
Eastern Logistics | (ii)&(vi) | 100 | — | ||||||||||||||
|
Bellyhold container management |
Eastern Logistics | (ii)&(vi) | (9 | ) | — | |||||||||||||
|
Payments on finance leases* |
CES Lease Company | (ii) | (1,997 | ) | (2,721 | ) | ||||||||||||
|
Payments on operating leases* |
CES Lease Company | (ii) | (25 | ) | — | |||||||||||||
|
Disposal of a subsidiary |
Eastern Airlines Industry Investment | (v) | 1,754 | — | ||||||||||||||
|
Civil aviation information network services** |
TravelSky | (ii) | (551 | ) | (590 | ) | ||||||||||||
|
Flight training fee |
CAE Melbourne | (ii) | (138 | ) | (68 | ) | ||||||||||||
|
Flight equipment spare parts maintenance** |
CASC | (ii) | (98 | ) | — | |||||||||||||
|
Payments on aviation transportation cooperation and support services** |
AFK | (ii) | (399 | ) | — | |||||||||||||
|
Aviation transportation cooperation and support services** |
AFK | (ii) | 622 | — | ||||||||||||||
| (i) | The Group’s pricing policies on products purchased from related parties are mutually agreed between the contract parties. |
| (ii) | The Group’s pricing policies on services provided by related parties are mutually agreed between the contract parties. |
| (iii) | The Group’s pricing policies on services provided to related parties are mutually agreed between the contract parties. |
| (iv) | The Group’s pricing policies on related party interest rates are mutually agreed between the contract parties by reference to the benchmark interest rates. |
| (v) | The Group’s pricing policies on transfer of equity or disposal of investments are mutually agreed based on the valuation prices. |
| (vi) | The Group’s related party transactions with Eastern logistics only includes the transactions made after the disposal (note 43). |
| * | These related party transactions also constitute connected transactions or continuing connected transactions as defined in Chapter 14A of the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”). |
| ** | This related party transaction constitutes a continuing connected transaction pursuant to the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange. |
During the years ended December 31, 2017 and 2016, the Group’s significant transactions with entities that are controlled, jointly controlled or significantly influenced by the PRC government mainly include most of its bank deposits/borrowings and the corresponding interest income/expense and part of sales and purchases of goods and services. The price and other terms of such transactions are set out in the agreements governing these transactions or as mutually agreed.
| (c) | Balances with related parties |
| (i) | Amounts due from related parties |
| 2017 | 2016 | |||||||
| RMB million | RMB million | |||||||
|
Trade receivables |
||||||||
|
Eastern Logistics |
194 | — | ||||||
|
Eastern Air Catering |
1 | — | ||||||
|
|
|
|
|
|||||
| 195 | — | |||||||
|
|
|
|
|
|||||
| 2017 | 2016 | |||||||
| RMB million | RMB million | |||||||
|
Prepayments and other receivables |
||||||||
|
Eastern Import & Export |
379 | 536 | ||||||
|
Technologies Aerospace |
10 | 16 | ||||||
|
Eastern Air Catering |
135 | 57 | ||||||
|
Eastern Advertising |
29 | — | ||||||
|
CEA development |
2 | 2 | ||||||
|
CEA Holding |
9 | — | ||||||
|
TravelSky |
5 | — | ||||||
|
Others |
— | 5 | ||||||
|
|
|
|
|
|||||
| 569 | 616 | |||||||
|
|
|
|
|
|||||
All the amounts due from related parties are trade in nature, interest-free and payable within normal credit terms.
| (ii) | Amounts due to related parties |
| 2017 | 2016 | |||||||
| RMB million | RMB million | |||||||
|
Trade and bills payables |
||||||||
|
Eastern Import & Export |
51 | 85 | ||||||
|
Eastern Air Catering |
31 | 37 | ||||||
|
Technologies Aerospace |
105 | 45 | ||||||
|
CEA development |
25 | 19 | ||||||
|
Collins Aviation |
1 | 2 | ||||||
|
CEA Holding |
4 | 3 | ||||||
|
CASC |
9 | 18 | ||||||
|
Shanghai Hute |
14 | 19 | ||||||
|
Others |
1 | 4 | ||||||
|
|
|
|
|
|||||
| 241 | 232 | |||||||
|
|
|
|
|
|||||
|
Other payables and accruals |
||||||||
|
Eastern Import & Export |
2 | 240 | ||||||
|
Shanghai P&W |
578 | 324 | ||||||
|
Eastern Air Catering |
10 | 166 | ||||||
|
CEA Holding |
302 | 303 | ||||||
|
Shanghai Hute |
11 | 20 | ||||||
|
Technologies Aerospace |
1 | 29 | ||||||
|
Wheels & Brakes |
16 | 26 | ||||||
|
CEA Development |
50 | 72 | ||||||
|
TravelSky |
551 | 963 | ||||||
|
Eastern Advertising |
2 | 18 | ||||||
|
CAE Melbourne |
316 | 368 | ||||||
|
Eastern Investment |
269 | — | ||||||
|
Others |
3 | 5 | ||||||
|
|
|
|
|
|||||
| 2,111 | 2,534 | |||||||
|
|
|
|
|
|||||
| 2017 | 2016 | |||||||
| RMB million | RMB million | |||||||
|
Obligations under finance leases |
||||||||
|
CES Lease Company |
11,934 | 5,521 | ||||||
|
|
|
|
|
|||||
Except for the amounts due to CES Lease Company, which are related to the aircraft under finance leases, all other amounts due to related parties are interest-free and payable within normal credit terms given by trade creditors.
| (iii) | Short-term deposits and borrowings with associates and CEA Holding |
| Average interest rate | ||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| RMB million | RMB million | |||||||||||||||
|
Short-term deposits (included in cash and cash equivalents) |
||||||||||||||||
|
Eastern Air Finance Company |
0.35 | % | 0.35 | % | 4,053 | 1,296 | ||||||||||
|
Long-term borrowings (included in borrowings) |
||||||||||||||||
|
CEA Holding |
3.48 | % | 3.48 | % | 28 | 28 | ||||||||||
| (d) | Guarantees by the holding company |
As at December 31, 2017, bonds of the Group guaranteed by CEA Holding amounted to RMB7.8 billion (2016: RMB7.8 billion) (note 34(b)).
| (e) | Key management compensation |
The compensation paid or payable to key management for employee services mainly comprising of salaries and other short-term employee benefits was analyzed as follows:
| 2017 | 2016 | |||||||
| RMB million | RMB million | |||||||
|
Directors and supervisors |
3 | 2 | ||||||
|
Senior management |
6 | 4 | ||||||
|
|
|
|
|
|||||
| 9 | 6 | |||||||
|
|
|
|
|
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