| 7 | SEGMENT INFORMATION |
| (a) | CODM, office of the General Manager, reviews the Group’s internal reporting in order to assess performance and allocate resources. |
The Group has one reportable operating segment, reported as “airline transportation operations”, which comprises the provision of passenger, cargo, mail delivery, ground service and cargo handling services.
Other services including primarily tour operations, air catering and other miscellaneous services are not included within the airline transportation operations segment, as their internal reports are separately provided to the CODM. The results of these operations are included in the “other segments” column.
Inter-segment transactions are entered into under normal commercial terms and conditions that would be available to unrelated third parties.
In accordance with IFRS 8, segment disclosure has been presented in a manner that is consistent with the information used by the Group’s CODM. The Group’s CODM monitors the results, assets and liabilities attributable to each reportable segment based on financial results prepared under the PRC Accounting Standards for Business Enterprises (the “PRC Accounting Standards”), which differ from IFRSs in certain aspects. The amount of each material reconciling items from the Group’s reportable segment revenue and profit or loss, arising from different accounting policies are set out in note 7(c) below.
The segment results for the year ended December 31, 2017 were as follows:
| Airline | ||||||||||||||||||||
| transportation | Other | |||||||||||||||||||
| operations | segments | Eliminations | Unallocated* | Total | ||||||||||||||||
| RMB million | RMB million | RMB million | RMB million | RMB million | ||||||||||||||||
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Reportable segment revenue from external customers |
97,698 | 4,023 | — | — | 101,721 | |||||||||||||||
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Inter-segment sales |
— | 1,018 | (1,018 | ) | — | — | ||||||||||||||
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Reportable segment revenue |
97,698 | 5,041 | (1,018 | ) | — | 101,721 | ||||||||||||||
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Reportable segment profit before income tax |
6,517 | 363 | — | 1,740 | 8,620 | |||||||||||||||
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Other segment information |
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Depreciation and amortization |
13,769 | 190 | — | — | 13,959 | |||||||||||||||
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Impairment charges (note 10) |
489 | 2 | — | — | 491 | |||||||||||||||
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Interest income |
2,309 | (96 | ) | (101 | ) | — | 2112 | |||||||||||||
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Interest expenses |
3,080 | 205 | (101 | ) | — | 3,184 | ||||||||||||||
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Capital expenditure |
32,149 | 657 | — | — | 32,806 | |||||||||||||||
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The segment results for the year ended December 31, 2016 were as follows:
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| Airline | ||||||||||||||||||||
| transportation | Other | |||||||||||||||||||
| operations | segments | Eliminations | Unallocated* | Total | ||||||||||||||||
| RMB million | RMB million | RMB million | RMB million | RMB million | ||||||||||||||||
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Reportable segment revenue from external customers |
94,338 | 4,222 | — | — | 98,560 | |||||||||||||||
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Inter-segment sales |
— | 782 | (782 | ) | — | — | ||||||||||||||
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Reportable segment revenue |
94,338 | 5,004 | (782 | ) | — | 98,560 | ||||||||||||||
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Reportable segment profit before income tax |
5,788 | 397 | — | 322 | 6,507 | |||||||||||||||
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Other segment information |
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Depreciation and amortization |
12,378 | 160 | — | — | 12,538 | |||||||||||||||
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Impairment charges (note 10) |
22 | 7 | — | — | 29 | |||||||||||||||
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Interest income |
100 | 100 | (104 | ) | — | 96 | ||||||||||||||
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Interest expenses |
2,553 | 280 | (104 | ) | — | 2,729 | ||||||||||||||
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Capital expenditure* |
34,631 | 776 | — | — | 35,407 | |||||||||||||||
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| * | Capital expenditure consists of additions to property, plant and equipment, investment properties and intangible assets and long-term deferred assets. |
The segment results for the year ended December 31, 2015 were as follows:
| Airline | ||||||||||||||||||||
| transportation | Other | |||||||||||||||||||
| operations | segments | Eliminations | Unallocated* | Total | ||||||||||||||||
| RMB million | RMB million | RMB million | RMB million | RMB million | ||||||||||||||||
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Reportable segment revenue from external customers |
89,013 | 4,831 | — | — | 93,844 | |||||||||||||||
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Inter-segment sales |
555 | 468 | (1,023 | ) | — | — | ||||||||||||||
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Reportable segment revenue |
89,568 | 5,299 | (1,023 | ) | — | 93,844 | ||||||||||||||
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Reportable segment profit before income tax |
5,327 | 238 | — | 106 | 5,671 | |||||||||||||||
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Other segment information |
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Depreciation and amortization |
10,727 | 128 | — | — | 10,855 | |||||||||||||||
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Impairment charges (note 10) |
93 | 1 | — | 134 | 228 | |||||||||||||||
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Interest income |
69 | 13 | (16 | ) | — | 66 | ||||||||||||||
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Finance expenses |
1,935 | 270 | (16 | ) | — | 2,189 | ||||||||||||||
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Capital expenditure |
37,706 | 591 | — | — | 38,297 | |||||||||||||||
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The segment assets and liabilities as at December 31, 2017 and December 31, 2016 were as follows:
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| Airline | ||||||||||||||||||||
| transportation | Other | |||||||||||||||||||
| operations | segments | Eliminations | Unallocated* | Total | ||||||||||||||||
| RMB million | RMB million | RMB million | RMB million | RMB million | ||||||||||||||||
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At December 31, 2017 |
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Reportable segment assets |
216,591 | 13,376 | (5,514 | ) | 3,011 | 227,464 | ||||||||||||||
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Reportable segment liabilities |
165,148 | 11,301 | (5,514 | ) | 11 | 170,946 | ||||||||||||||
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At December 31, 2016 |
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Reportable segment assets |
205,024 | 11,218 | (8,896 | ) | 2,705 | 210,051 | ||||||||||||||
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Reportable segment liabilities |
159,437 | 9,373 | (8,896 | ) | 41 | 159,955 | ||||||||||||||
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| * | Unallocated assets primarily represent investments in associates and joint ventures, and available-for-sale investments. Unallocated results primarily represent the share of results of associates and joint ventures, income relating to available-for-sale investments. |
| (b) | The Group’s business operates in three main geographical areas, even though they are managed on a worldwide basis. |
The Group’s revenues by geographical area are analysed based on the following criteria:
| 1) | Traffic revenue from services within the PRC (excluding the Hong Kong Special Administrative Region (“Hong Kong”), the Macau Special Administrative Region (“Macau”) and Taiwan, (collectively known as “Regional”)) is classified as domestic operations. Traffic revenue from inbound and outbound services between overseas markets excluding Regional is classified as international operations. |
| 2) | Revenue from ticket handling services, ground services, cargo handling service and other miscellaneous services is classified on the basis of where the services are performed. |
| 2017 | 2016 | 2015 | ||||||||||
| RMB million | RMB million | RMB million | ||||||||||
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Domestic (the PRC, excluding Hong Kong, |
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Macau and Taiwan) |
67,923 | 63,730 | 61,222 | |||||||||
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Regional (Hong Kong, Macau and Taiwan) |
3,624 | 3,516 | 3,569 | |||||||||
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International |
30,928 | 31,658 | 29,178 | |||||||||
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Total |
102,475 | 98,904 | 93,969 | |||||||||
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The major revenue-earning assets of the Group are its aircraft, all of which are registered in the PRC. Since the Group’s aircraft are deployed flexibly across its route network, there is no suitable basis of allocating such assets and the related liabilities by geographic area and hence segment non-current assets and capital expenditure by geographic area are not presented. Except the aircraft, most non-current assets (except financial instruments) are registered and located in the PRC.
| (c) | Reconciliation of reportable segment revenue, profit, assets and liabilities to the consolidated figures as reported in the consolidated financial statements: |
| 2017 | 2016 | 2015 | ||||||||||||
| Note | RMB million | RMB million | RMB million | |||||||||||
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Revenue |
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Reportable segment revenue |
101,721 | 98,560 | 93,844 | |||||||||||
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- Reclassification of expired sales in advance of carriage |
(i) | 754 | 344 | 125 | ||||||||||
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Consolidated revenue |
102,475 | 98,904 | 93,969 | |||||||||||
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| 2017 | 2016 | 2015 | ||||||||||||
| Note | RMB million | RMB million | RMB million | |||||||||||
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Profit before income tax |
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Reportable segment profit before income tax |
8,620 | 6,507 | 5,671 | |||||||||||
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- Differences in depreciation charges for aircraft and engines due to different depreciation lives |
(ii) | (10 | ) | (10 | ) | (4 | ) | |||||||
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Consolidated profit before income tax |
8,610 | 6,497 | 5,667 | |||||||||||
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| 2017 | 2016 | |||||||||||
| Notes | RMB million | RMB million | ||||||||||
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Assets |
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Reportable segment assets |
227,464 | 210,051 | ||||||||||
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- Differences in depreciation charges for aircraft and engines due to different depreciation lives |
(ii) | 21 | 31 | |||||||||
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- Difference in intangible asset arising from the acquisition of Shanghai Airlines |
(iii) | 2,242 | 2,242 | |||||||||
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Consolidated assets |
229,727 | 212,324 | ||||||||||
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| 2017 | 2016 | |||||||||||
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Liabilities |
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Reportable segment liabilities |
170,946 | 159,955 | ||||||||||
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- Others |
3 | 3 | ||||||||||
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Consolidated liabilities |
170,949 | 159,958 | ||||||||||
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Notes:
| (i) | The difference represents the different classification of expired sales in advance of carriage under the PRC Accounting Standards and IFRSs. |
| (ii) | The difference is attributable to the differences in the useful lives and residual values of aircraft and engines adopted for depreciation purposes in prior years under the PRC Accounting Standards and IFRSs. Despite the depreciation policies of these assets have been unified under IFRSs and the PRC Accounting Standards in recent years, the changes were applied prospectively as changes in accounting estimates which result in the differences in the carrying amounts and related depreciation charges under IFRSs and the PRC Accounting Standards. |
| (iii) | The difference represents the different measurement of the fair value of acquisition cost of the shares from Shanghai Airlines between the PRC Accounting standards and IFRSs, which results in the different measurement of goodwill. |