Revenue recognition and sales in advance of carriage
Revenue comprises the fair value of the consideration received or receivable for the provision of services and the sale of goods in the ordinary course of the Group’s activities. Revenue is stated net of business taxes or value-added taxes, returns, rebates and discounts and after eliminating sales within the Group.
Revenue is recognized when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following basis:
| (i) | Traffic revenues |
Passenger, cargo and mail revenues are recognized as traffic revenues when the transportation services are provided. The value of sold but unused tickets is recognized as sales in advance of carriage (“SIAC”).
| (ii) | Ground service income and tour operation revenues |
Revenues from the provision of ground services, tour, travel services and other travel related services are recognized when the services are rendered.
| (iii) | Cargo handling income |
Revenues from the provision of cargo handling services are recognized when the services are rendered.
| (iv) | Commission income |
Commission income represents amounts earned from other carriers in respect of sales made by the Group on their behalf, and is recognized in profit or loss upon ticket sales.
| (v) | Other revenue |
Revenues from other operating businesses, including income derived from the provision of freight forwarding, are recognized when the services are rendered.
| (vi) | Frequent flyer programs |
The Group operates frequent flyer programs that provide travel awards to program members based on accumulated miles. A portion of passengers revenue attributable to the award of frequent flyer benefits is deferred and recognized when the miles have been redeemed or have expired.
| (vii) | Interest income |
Interest income is recognized on a time-proportion basis using the effective interest rate method.
The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.