Edgar Filing: CHINA EASTERN AIRLINES CORP LTD

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

For the month of September 2017

Commission File Number: 001-14550

China Eastern Airlines Corporation Limited

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(Translation of Registrant’s name into English)

Board Secretariat’s Office

Kong Gang San Lu, Number 88

Shanghai, China 200335

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(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: x Form 20-F ¨ Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934: ¨ Yes x No

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): n/a

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		China Eastern Airlines Corporation Limited
		(Registrant)

Date	September 25, 2017	By	/s/ Wang Jian
			Name: Wang Jian
			Title: Company Secretary

Certain statements contained in this announcement may be regarded as "forward-looking statements" within the meaning of the U.S. Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial condition or results of operations of the Company to be materially different from any future performance, financial condition or results of operations implied by such forward-looking statements. Further information regarding these risks, uncertainties and other factors is included in the Company's filings with the U.S. Securities and Exchange Commission. The forward-looking statements included in this announcement represent the Company's views as of the date of this announcement. While the Company anticipates that subsequent events and developments may cause the Company's views to change, the Company specifically disclaims any obligation to update these forward-looking statements, unless required by applicable laws. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to the date of this announcement.

INTERIM REPORT 2017(A joint stock limited company incorporated in the People’s Republic of China with limited liability)(Stock Code: 00670)

The directors of China Eastern Airlines Corporation Limited herebypresent the unaudited interim consolidated financial information of theCompany and its subsidiaries for the six months ended 30 June 2017(which were reviewed and approved by the board of directors and theaudit and risk management committee of the Company on 29 August2017), with comparative figures for the corresponding period in 2016.The interim consolidated financial information of the Group for thesix months ended 30 June 2017 is unaudited and is not necessarilyindicative of annual or future results of the Group. Investors should notplace undue reliance on the unaudited interim consolidated financialinformation of the Group for the six months ended 30 June 2017.

China Eastern Airlines Corporation LimitedInterim Report 2017 02DefinitionsIn this report, unless the context otherwise requires, the following expressions have the followingmeanings:AFK means Air France – KLMArticles means the articles of association of the CompanyAudit and Risk ManagementCommitteemeans the audit and risk management committee of the CompanyAvailable freight tonne –kilometres (AFTK)means the sum of the maximum tonnes of capacity available for thecarriage of cargo and mail multiplied by the distance flown for everyrouteAvailable seat – kilometres(ASK)means the sum of the maximum number of seats made available forsale multiplied by the distance flown for every routeAvailable tonne – kilometres(ATK)means the sum of capacity available for the carriage multiplied bythe distance flown for every routeBoard means the board of directors of the CompanyCAAC means the Civil Aviation Administration of China. Please refer to thewebsite www.caac.gov.cn for more details about the CAACCEA Holding means (China Eastern Air Holding Company),the controlling shareholder of the CompanyCES Finance means (CES Finance Holding Co., Ltd.),a wholly-owned subsidiary of CEA Holding and a substantialshareholder of the CompanyCES Global means (CES Global Holdings (HongKong) Limited), a wholly-owned subsidiary of CES Finance, a wholly-ownedsubsidiary of CEA Holding and a substantial shareholder ofthe CompanyCES Leasing means (CES International FinancialLeasing Corporation Limited)China Cargo Airlines means (China Cargo Airlines Co., Limited), acontrolled subsidiary of Eastern Logistics

03DefinitionsChina Eastern Airlines, CEA,or the Companymeans (China Eastern AirlinesCorporation Limited)China National Aviation Fuel means (China National Aviation Fuel HoldingCompany), one of the shareholders of the CompanyChina United Airlines means (China United Airlines Co., Ltd.), awholly-owned subsidiary of the CompanyCode means the Corporate Governance Code set out in Appendix 14 tothe Listing RulesCode-share means a widely adopted marketing arrangement for all airlinesacross the world. Pursuant to the code-share agreements enteredinto with other airlines, an airline may conduct sales for the seats ofcode-share flights operated by other airlines as its own productsCSRC means the China Securities Regulatory CommissionCtrip means (Ctrip ComputerTechnology (Shanghai) Co., Ltd), the controlling shareholder ofShanghai Licheng Information Technology Consulting Co., Ltd, ashareholder of the CompanyDelta Air Lines means Delta Air Lines, Inc., one of the shareholders of the CompanyDirectors means the directors of the CompanyEastern Air Overseas means (Eastern Air Overseas (Hong Kong)Corporation Limited), a wholly-owned subsidiary of the CompanyEastern Logistics means (Eastern Airlines Logistics Co., Ltd.),a wholly-owned subsidiary of the Company during the ReportingPeriod before the Company completed the transfer of its 100%equity interest to Eastern Airlines Industries Investment in February2017Freight load factor means the ratio of freight traffic volume to AFTKFreight tonne –kilometres yieldmeans the ratio of the sum of freight transportation and relatedrevenue to freight traffic volume

China Eastern Airlines Corporation LimitedInterim Report 2017 04DefinitionsGroup means the Company and its subsidiariesHong Kong Stock Exchange means The Stock Exchange of Hong Kong LimitedListing Rules means the Rules Governing the Listing of Securities on The StockExchange of Hong Kong LimitedModel Code means the Model Code for Securities Transactions by Directors ofListed Issuers as set out in Appendix 10 to the Listing RulesOverall load factor means the ratio of total traffic volume to ATKPassenger – kilometres yield means the ratio of the sum of passenger traffic and related revenueto passenger traffic volumePassenger load factor means the ratio of passenger traffic volume to ASKQantas means Qantas AirwaysRevenue freight tonne –kilometres (RFTK)means the freight traffic volume, the sum of cargo and mail load intonnes multiplied by the distance flown for every routeRevenue passenger –kilometres (RPK)means the passenger traffic volume, the sum of the number ofpassengers carried multiplied by the distance flown for every routeRevenue tonne –kilometres (RTK)means the total traffic volume, the sum of load (passenger andcargo) in tonnes multiplied by the distance flown for every routeRevenue tonne –kilometres yieldmeans the ratio of the sum of transportation and related revenue tototal traffic volumeSFO means the Securities and Futures Ordinance (Chapter 571 of theLaws of Hong Kong)Shanghai Airlines means (Shanghai Airlines Co., Ltd.), a whollyownedsubsidiary of the CompanySkyTeam Alliance means the SkyTeam Alliance, one of the three major airline alliancesin the world. Please refer to the website http://www.skyteam.comfor more details about the SkyTeam AllianceSupervisors means the supervisors of the CompanyThe Reporting Period means the six months from 1 January 2017 to 30 June 2017

05INTERIM FINANCIAL INFORMATIONINTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFor the six months ended 30 June 2017 For the six months ended 30 June 2017 2016 Notes RMB million RMB million (Unaudited) (Unaudited)Revenues 5 48,423 46,335Other operating income and gains 6 4,766 2,772Gain on fair value changes of derivative financialinstruments – 2Operating expensesAircraft fuel (12,139) (8,363)Take-off and landing charges (6,430) (5,794)Depreciation and amortisation (6,547) (5,801)Wages, salaries and benefits (8,860) (8,314)Aircraft maintenance (2,165) (2,259)Impairment charges (9) (3)Food and beverages (1,501) (1,401)Aircraft operating lease rentals (2,235) (2,317)Other operating lease rentals (401) (345)Selling and marketing expenses (1,593) (1,631)Civil aviation development fund (1,004) (945)Ground services and other expenses (1,916) (2,769)Indirect operating expenses (2,059) (2,009)Total operating expenses (46,859) (41,951)Operating profit 6,330 7,158Share of results of associates 113 73Share of results of joint ventures 31 23Finance income 703 34Finance costs 8 (1,404) (2,717)Profit before income tax 5,773 4,571Income tax expense 9 (1,152) (1,041)Profit for the period 4,621 3,530

China Eastern Airlines Corporation LimitedInterim Report 2017 06INTERIM FINANCIAL INFORMATIONINTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFor the six months ended 30 June 2017 For the six months ended 30 June 2017 2016 Notes RMB million RMB million (Unaudited) (Unaudited) Other comprehensive income for the period Other comprehensive income to be reclassified to profit or loss in subsequent periods Cash flow hedges, net of tax (137) (178) Fair value changes of available-for-sale investments, net of tax 99 35 Fair value changes of available-for-sale investments held by an associate, net of tax 5 (7) Net other comprehensive income to be reclassified to profit or loss in subsequent periods (33) (150) _ Other comprehensive income not to be reclassified to profit or loss in subsequent periods Actuarial gains on the post-retirement benefit obligations, net of tax 184 30 _ Net other comprehensive income not to be reclassified to profit or loss in subsequent periods 184 30 _ Other comprehensive income, net of tax 151 (120) _ Total comprehensive income for the period 4,772 3,410 _ Profit attributable to: Equity holders of the Company 4,341 3,230 Non-controlling interests 280 300 _ Profit for the period 4,621 3,530 _ Total comprehensive income attributable to: Equity holders of the Company 4,486 3,107 Non-controlling interests 286 303 _ Total comprehensive income for the period 4,772 3,410 _ Earnings per share attributable to the equity holders of the Company during the period – Basic and diluted (RMB) 10 0.30 0.25

07INTERIM FINANCIAL INFORMATIONINTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 30 June 2017 30 June 31 December 2017 2016 Notes RMB million RMB million (Unaudited) (Audited)Non-current assetsProperty, plant and equipment 12 158,117 153,180Investment properties 315 321Lease prepayments 1,734 2,064Intangible assets 13 11,592 11,624Advanced payments on acquisition of aircraft 14 25,032 23,357Investments in associates 1,611 1,536Investments in joint ventures 555 524Available-for-sale investments 777 645Other non-current assets 2,521 2,969Deferred tax assets 84 79Derivative financial instruments 87 137 202,425 196,436Current assetsFlight equipment spare parts 2,353 2,248Trade and notes receivables 15 2,867 2,660Prepayments and other receivables 9,706 9,231Derivative financial instruments 11 11Restricted bank deposits and short-term bankdeposits 40 43Cash and cash equivalents 8,563 1,695 23,540 15,888Current liabilitiesSales in advance of carriage 7,190 7,677Trade and bills payables 16 3,119 3,376Other payables and accruals 18,239 20,250Current portion of obligations under finance leases 17 7,123 6,447Current portion of borrowings 18 40,176 28,842Income tax payable 323 304Current portion of provision for return conditionchecks for aircraft under operating leases 904 1,175Derivative financial instruments 149 11 77,223 68,082Net current liabilities (53,683) (52,194)Total assets less current liabilities 148,742 144,242

China Eastern Airlines Corporation LimitedInterim Report 2017 08INTERIM FINANCIAL INFORMATIONINTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 30 June 2017 30 June 31 December 2017 2016 Notes RMB million RMB million (Unaudited) (Audited)Non-current liabilitiesObligations under finance leases 17 57,298 54,594Borrowings 18 25,842 27,890Provision for return condition checks for aircraftunder operating leases 1,947 2,495Other long-term liabilities 3,836 3,874Post-retirement benefit obligations 2,510 2,890Deferred tax liabilities 68 86Derivative financial instruments 38 47 91,539 91,876Net assets 57,203 52,366EquityEquity attributable to the equity holdersof the Company– Share capital 19 14,467 14,467– Reserves 39,469 34,983 53,936 49,450Non-controlling interests 3,267 2,916Total equity 57,203 52,366

09INTERIM FINANCIAL INFORMATIONINTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the six months ended 30 June 2017 Attributable to equity holders of the Company Non- Share Other Retained controlling Total capital reserves profits Subtotal interests equity RMB million RMB million RMB million RMB million RMB million RMB million (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)Balance at 1 January 2017 14,467 26,199 8,784 49,450 2,916 52,366Profit for the period – – 4,341 4,341 280 4,621Other comprehensive income – 145 – 145 6 151Total comprehensive incomefor the period – 145 4,341 4,486 286 4,772Disposal of a subsidiary(Note 20) – – – – 87 87Dividends paid to non-controllinginterests – – – – (22) (22)Balance at 30 June 2017 14,467 26,344* 13,125* 53,936 3,267 57,203 Attributable to equity holders of the Company Non- Share Other Retained controlling Total capital reserves profits Subtotal interests equity RMB million RMB million RMB million RMB million RMB million RMB million (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)Balance at 1 January 2016 13,140 19,103 5,168 37,411 2,520 39,931Profit for the period – – 3,230 3,230 300 3,530Other comprehensive income – (123) – (123) 3 (120)Total comprehensive incomefor the period – (123) 3,230 3,107 303 3,410Issue of shares 1,327 7,213 – 8,540 – 8,540Dividends paid to non-controllinginterests – – – – (57) (57)Balance at 30 June 2016 14,467 26,193 8,398 49,058 2,766 51,824* These reserve accounts comprise the unaudited consolidated reserve of RMB39,469 million in theunaudited interim condensed consolidated statement of financial position.

China Eastern Airlines Corporation LimitedInterim Report 2017 10INTERIM FINANCIAL INFORMATIONINTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSFor the six months ended 30 June 2017 For the six months ended 30 June 2017 2016 RMB million RMB million (Unaudited) (Unaudited)Cash flows from operating activitiesProfit before tax 5,773 4,571Adjustments to reconcile profit before tax to net cash flows:Depreciation of property, plant and equipment 6,445 5,705Depreciation of investment properties 6 5Amortisation of intangible assets 70 63Amortisation of lease prepayments 26 28Amortisation of other long term assets 180 181Impairment of trade receivables 2 –Loss/(gain) on disposal of property, plant and equipment 2 (44)Fair value adjustment of derivative financial instrument – (2)Share of results of associates and joint ventures (144) (96)Gain on disposal of available-for-sale investments – (95)Gain on disposal of investment in a subsidiary (1,754) –Gain on disposal of an associate (12) –Dividend income from available-for-sale investments (5) (20)Net foreign exchange (gains)/losses (535) 1,725Interest income (29) (34)Interest expense 1,353 1,317Provisions for flight equipment spare parts 7 3Increase in flight equipment spare parts (170) (133)Increase in trade and other receivables and prepayments (3,214) (1,090)Increase/(decrease) in trade and other payables 423 (732)Cash generated from operations 8,424 11,352Income tax paid (1,152) (817)Net cash flows from operating activities 7,272 10,535

11INTERIM FINANCIAL INFORMATIONINTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSFor the six months ended 30 June 2017For the six months ended30 June2017 2016RMB million RMB million(Unaudited) (Unaudited)Cash flows from investing activitiesAdditions to property, plant and equipment (5,341) (3,602)Additions to intangible assets (50) (142)Advanced payments on acquisition of aircraft (7,569) (13,239)Investment in an associate (33) –Proceeds from disposal of a subsidiary 1,897 –Proceeds from disposal of assets classified as held for sale – 168Proceeds from disposal of property, plant and equipment 172 356Proceeds from disposal of investment in an associate 12 –Increase in short-term deposits (4) –Proceeds from disposal of lease payments – 39Interest received 29 34Dividends received 29 18Loans to a joint venture – (4)Net cash flows used in investing activities (10,858) (16,372)Cash flows from financing activitiesProceeds from issue of shares – 8,540Proceeds from draw-down of short-term bank loans 25,103 35,438Repayments of short-term debentures (21,000) (12,000)Repayments of short-term bank loans (11,165) (31,665)Proceeds from issuance of short-term debentures 19,000 35,500Proceeds from issuance of long-term debenturesand bonds – 3,000Proceeds from draw-down of long-term bank loansand other financing activities 6,466 12,283Repayments of long-term bank loans (2,832) (28,251)Repayments of long-term bonds – (5,497)Repayments of principal of finance lease obligations (3,276) (5,652)Interest paid (1,826) (1,758)Dividends paid to non-controlling interests of subsidiaries (22) (57)Net cash flows from financing activities 10,448 9,881Net increase in cash and cash equivalents 6,862 4,044Cash and cash equivalents at beginning of period 1,695 9,080Effect of foreign exchange rate changes 6 90Cash and cash equivalents at 30 June 8,563 13,214

China Eastern Airlines Corporation LimitedInterim Report 2017 12Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 2017121. CORPORATE AND GROUP INFORMATIONChina Eastern Airlines Corporation Limited (the “Company”), a joint stock company limitedby shares, was established in the People’s Republic of China (the “PRC”) on 14 April 1995.The address of the Company’s registered office is 66 Airport Street, Pudong InternationalAirport, Shanghai, the PRC. The Company and its subsidiaries (together, the “Group”) areprincipally engaged in the operation of civil aviation, including the provision of passenger,cargo, mail delivery, tour operations and other extended transportation services.In the opinion of the directors, the holding company and ultimate holding company of theCompany is China Eastern Air Holding Company (“CEA Holding”), a state-owned enterpriseestablished in the PRC.The A shares, H shares and American Depositary Receipts are listed on the Shanghai StockExchange, The Stock Exchange of Hong Kong Limited and The New York Stock Exchange,respectively.The unaudited interim condensed consolidated financial statements were approved for issueby the Company’s Board on 29 August 2017.2. BASIS OF PREPARATIONThe unaudited interim condensed consolidated financial statements, comprising interimcondensed consolidated statement of financial position as at 30 June 2017, interimcondensed consolidated statement of profit or loss and other comprehensive income,interim condensed consolidated statement of changes in equity and interim condensedconsolidated statement of cash flows for the six months ended 30 June 2017 (collectivelyrefer to as the “interim financial information”), have been prepared in accordance withInternational Accounting Standard (“IAS”) 34 “Interim Financial Reporting”. The interimfinancial information does not include all the information and disclosures required in theannual financial statements and should be read in conjunction with the annual financialstatements for the year ended 31 December 2016, which were prepared in accordancewith International Financial Reporting Standards (“IFRS”) as issued by the InternationalAccounting Standard Board (“IASB”).

13Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20172. BASIS OF PREPARATION (cont’d)As at 30 June 2017, the Group’s current liabilities exceeded its current assets byapproximately RMB53.68 billion. In preparing the interim financial information, the Boardconducts adequate and detailed review over the Group’s going concern ability based on thecurrent financial situation.The Board has taken actions to deal with the situation that current liabilities exceeded itscurrent assets, and the Board is confident that the Group has obtained adequate creditfacility from the banks to support the floating capital. As at 30 June 2017, the Group had totalunutilised credit facilities of approximately RMB56.98 billion from banks.Based on the bank facility obtained by the Group, the past record of the financing and thegood working relationship with major banks and financial institutions, the Board considersthat the Group will be able to obtain sufficient financing to enable it to operate, as well as tomeet its liabilities as and when they become due, and the capital expenditure requirementsfor the upcoming twelve months. Accordingly, the Board believes that it is appropriateto prepare these financial statements on a going concern basis without including anyadjustments that would be required should the Company and the Group fail to continue as agoing concern.3. NEW STANDARDS, INTERPRETATIONS AND AMENDMENTSADOPTED BY THE GROUPThe accounting policies adopted in the preparation of the interim condensed consolidatedfinancial statements are consistent with those followed in the preparation of the Group’sannual consolidated financial statements for the year ended 31 December 2016, except forthe adoption of new standards and interpretations effective as of 1 January 2017. The Grouphas not early adopted any other standard, interpretation or amendment that has been issuedbut is not yet effective.The nature and the effect of these changes are disclosed below. Although theseamendments apply for the first time in 2017, they do not have a material impact on theinterim condensed consolidated financial statements of the Group. The nature and theimpact of each amendment is described below:

China Eastern Airlines Corporation LimitedInterim Report 2017 14Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20173. NEW STANDARDS, INTERPRETATIONS AND AMENDMENTSADOPTED BY THE GROUP (cont’d)Amendments to IAS 7 Statement of Cash Flows: DisclosureInitiativeThe amendments require entities to provide disclosures about changes in their liabilitiesarising from financing activities, including both changes arising from cash flows and noncashchanges (such as foreign exchange gains or losses). On initial application of theamendment, entities are not required to provide comparative information for precedingperiods. The Group is not required to provide additional disclosures in its condensed interimconsolidated financial statements, but will disclose additional information in its annualconsolidated financial statements for the year ending 31 December 2017.Amendments to IAS 12 Income Taxes: Recognition of DeferredTax Assets for Unrecognised LossesThe amendments clarify that an entity needs to consider whether tax law restricts thesources of taxable profits against which it may make deductions on the reversal of thatdeductible temporary difference. Furthermore, the amendments provide guidance on howan entity should determine future taxable profits and explain the circumstances in whichtaxable profit may include the recovery of some assets for more than their carrying amount.The adoption of these amendments has no effect on the Group’s financial position andperformance as there is no such tax law for the group which restricts the sources of taxableprofits against which it may make deductions on the reversal of that deductible temporarydifference.Annual Improvements Cycle – 2014-2016Amendments to IFRS 12 Disclosure of Interests in Other Entities: Clarification ofthe scope of disclosure requirements in IFRS 12The amendments clarify that the disclosure requirements in IFRS 12, other than those inparagraphs B10 – B16, apply to an entity’s interest in a subsidiary, a joint venture or anassociate (or a portion of its interest in a joint venture or an associate) that is classified (orincluded in a disposal group that is classified) as held for sale.The Group has adopted the amendments retrospectively. However, the adoption hasno effect on the Group’s financial position and performance as the Group has no suchinvestments that are classified as held for sale.

15Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20174. FINANCIAL RISK MANAGEMENT(a) Financial risk factorsThe Group’s activities expose it to a variety of financial risks: market risk (includingcurrency risk, fair value interest rate risk, cash flow interest rate risk and fuel pricerisk), credit risk, and liquidity risk. The Group’s overall risk management programmefocuses on the unpredictability of financial markets and seeks to minimise potentialadverse effects on the Group’s financial performance. The Group uses derivativefinancial instruments to manage risk exposures whenever management considersnecessary.The interim financial information does not include all financial risk managementinformation and disclosures required in the annual financial statements, and shouldbe read in conjunction with the Group’s annual financial statements for the yearended 31 December 2016.There have been no changes in the risk management department since the 2016 yearend or in any risk management policies.Liquidity riskThe Group’s primary cash requirements are for day-to-day operations, additionsof and upgrades to aircraft, engines and flight equipment and repayments ofrelated borrowings. The Group finances its working capital requirements througha combination of funds generated from operations and borrowings including bankloans, debentures and bonds (both short-term and long-term). The Group generallyfinances the acquisition of aircraft through long-term finance leases or bank loans.

China Eastern Airlines Corporation LimitedInterim Report 2017 16Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20174. FINANCIAL RISK MANAGEMENT (cont’d)(a) Financial risk factors (cont’d)Liquidity risk (cont’d)The table below analyses the Group’s financial liabilities that will be settled intorelevant maturity groupings based on the remaining period at the reporting date tothe contractual maturity date. The amounts disclosed in the table are the contractualundiscounted cash flows.Less than1 year 1 and 2 years 2 and 5 years Over 5 years TotalRMB million RMB million RMB million RMB million RMB million(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)At 30 June 2017Borrowings 41,999 7,904 10,581 10,339 70,823Derivative financialinstruments 149 24 6 8 187Obligations underfinance leases 8,967 8,742 22,969 33,889 74,567Trade, bills and otherpayables 15,390 – – – 15,390Total 66,505 16,670 33,556 44,236 160,967Less than1 year 1 and 2 years 2 and 5 years Over 5 years TotalRMB million RMB million RMB million RMB million RMB million(Audited) (Audited) (Audited) (Audited) (Audited)At 31 December 2016Borrowings 30,262 5,670 14,961 10,813 61,706Derivative financialinstruments 11 33 8 6 58Obligations underfinance leases 8,123 7,526 21,905 33,277 70,831Trade, bills and otherpayables 16,318 – – – 16,318Total 54,714 13,229 36,874 44,096 148,913

17Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20174. FINANCIAL RISK MANAGEMENT (cont’d)(b) Fair value estimation of financial assets and liabilitiesFinancial instruments not measured at fair valueThe carrying amounts and fair values of the Group’s financial instruments, other thanthose with carrying amounts that reasonably approximate to fair values, were asfollows:30 June 2017 31 December 2016Carryingamounts Fair valuesCarryingamounts Fair valuesRMB million RMB million RMB million RMB million(Unaudited) (Unaudited) (Audited) (Audited)Financial assetsDeposits relating to aircraftheld under operating leasesincluded in othernon-current assets 238 216 285 258Financial liabilitiesLong-term borrowings 25,842 25,330 27,890 28,075Obligations under financeleases 57,298 53,767 54,594 50,408Total 83,140 79,097 82,484 78,483Management has assessed that the fair values of cash and cash equivalents,restricted bank deposits and short-term bank deposits, trade and notes receivables,trade and bills payables, financial assets included in prepayments and otherreceivables, financial liabilities included in other payables and accruals, short-termbank borrowings, short-term debentures and short-term bonds approximate to theircarrying amounts largely due to the short term maturities of these instruments.

China Eastern Airlines Corporation LimitedInterim Report 2017 18Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20174. FINANCIAL RISK MANAGEMENT (cont’d)(b) Fair value estimation of financial assets and liabilities (cont’d)Financial instruments not measured at fair value (cont’d)The fair values of the deposits relating to aircraft held under operating leases includedin other non-current assets, long-term borrowings and obligations under financeleases have been measured using significant observable inputs and calculatedby discounting the expected future cash flows using rates currently available forinstruments with similar terms, credit risk and remaining maturities.Financial instruments measured at fair valueThe Group enters into derivative financial instruments, including forward currencycontracts and interest rate swaps with various counterparties, principally financialinstitutions with high credit ratings.Derivative financial instruments are measured using valuation techniques similarto forward pricing and swap models, using present value calculations. The modelsincorporate various market observable inputs including the foreign exchange spotand forward rates and interest rate curves. As at 30 June 2017, the marked tomarket value of the derivative asset position is net of a credit valuation adjustmentattributable to derivative counterparty default risk. The changes in counterparty creditrisk had no material effect on the hedge effectiveness assessment for derivativesdesignated in hedge relationship and other financial instruments recognised at fairvalue.

19Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20174. FINANCIAL RISK MANAGEMENT (cont’d)(b) Fair value estimation of financial assets and liabilities (cont’d)Fair value hierarchyThe following tables illustrate the fair value measurement hierarchy of the Group’sfinancial instruments:Assets and liabilities measured at fair value:As at 30 June 2017Fair value measurement usingQuoted pricesin activemarkets(Level 1)Significantobservableinputs(Level 2)Significantunobservableinputs(Level 3) TotalRMB million RMB million RMB million RMB million(Unaudited) (Unaudited) (Unaudited) (Unaudited)AssetsDerivative financial instruments– Forward foreignexchange contracts – 11 – 11– Interest rate swaps – 87 – 87Available-for-sale investments 670 – – 670Total 670 98 – 768LiabilitiesDerivative financial instruments– Forward foreignexchange contracts – 149 – 149– Interest rate swaps – 38 – 38Total – 187 – 187

China Eastern Airlines Corporation LimitedInterim Report 2017 20Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20174. FINANCIAL RISK MANAGEMENT (cont’d)(b) Fair value estimation of financial assets and liabilities (cont’d)Fair value hierarchy (cont’d)Assets and liabilities measured at fair value: (cont’d)As at 31 December 2016Fair value measurement usingQuoted pricesin activemarkets(Level 1)Significantobservableinputs(Level 2)Significantunobservableinputs(Level 3) TotalRMB million RMB million RMB million RMB million(Audited) (Audited) (Audited) (Audited)AssetsDerivative financial instruments– Forward foreignexchange contracts – 11 – 11– Interest rate swaps – 137 – 137Available-for-sale investments 538 – – 538Total 538 148 – 686LiabilitiesDerivative financial instruments– Forward foreignexchange contracts – 11 – 11– Interest rate swaps – 47 – 47Total – 58 – 58

21Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20174. FINANCIAL RISK MANAGEMENT (cont’d)(b) Fair value estimation of financial assets and liabilities (cont’d)Fair value hierarchy (cont’d)Assets and liabilities measured at fair value: (cont’d)The fair value of financial instruments traded in active markets was based on quotedmarket prices at the reporting dates. Available-for-sale investments are listed A shareand listed H share stock investments.The fair values of derivative financial instruments are determined by using valuationtechniques. These valuation techniques use applicable models and maximise the useof observable market data where it is available and also use quoted market prices ordealer quotes for reference.Assets and liabilities for which fair values are disclosed:As at 30 June 2017Fair value measurement usingQuoted pricesin activemarkets(Level 1)Significantobservableinputs(Level 2)Significantunobservableinputs(Level 3) TotalRMB million RMB million RMB million RMB million(Unaudited) (Unaudited) (Unaudited) (Unaudited)AssetsDeposits relating to aircraftheld under operating leasesincluded in other long-termassets – 216 – 216LiabilitiesLong-term borrowings – 25,330 – 25,330Obligations under financeleases – 53,767 – 53,767– 79,097 – 79,097

China Eastern Airlines Corporation LimitedInterim Report 2017 22Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20174. FINANCIAL RISK MANAGEMENT (cont’d)(b) Fair value estimation of financial assets and liabilities (cont’d)Fair value hierarchy (cont’d)Assets and liabilities for which fair values are disclosed: (cont’d)As at 31 December 2016Fair value measurement usingQuoted pricesin activemarkets(Level 1)Significantobservableinputs(Level 2)Significantunobservableinputs(Level 3) TotalRMB million RMB million RMB million RMB million(Audited) (Audited) (Audited) (Audited)AssetsDeposits relating to aircraftheld under operating leasesincluded in other long-termassets – 258 – 258LiabilitiesLong-term borrowings – 28,075 – 28,075Obligations under financeleases – 50,408 – 50,408– 78,483 – 78,483

23Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20175. REVENUESThe Group is principally engaged in the operation of civil aviation, including the provision ofpassenger, cargo, mail delivery, tour operations and other extended transportation services.For the six months ended30 June2017 2016RMB million RMB million(Unaudited) (Unaudited)Traffic revenues– Passenger 43,106 39,298– Cargo and mail 1,777 2,690Tour operations income 1,070 1,392Ground service income 701 1,327Cargo handling and processing income 69 217Commission income 56 15Others 1,644 1,39648,423 46,3356. OTHER OPERATING INCOME AND GAINSFor the six months ended30 June2017 2016RMB million RMB million(Unaudited) (Unaudited)Subsidy income (Note (a)) 2,742 2,364Gain on disposal of property, plant and equipment 2 46Gain on disposal of lease prepayments – 3Gain on disposal of available-for-sale investments – 95Dividend income from available-for-sale investments 5 20Gain on disposal of an associate 12 –Compensation from ticket sales agents 126 100Gain on disposal of investment in a subsidiary(Note 20) 1,754 –Others 125 1444,766 2,772

China Eastern Airlines Corporation LimitedInterim Report 2017 24Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20176. OTHER OPERATING INCOME AND GAINS (cont’d)Notes:(a) Subsidy income mainly represents (i) subsidies granted by various local governments based oncertain amounts of tax paid; (ii) subsidies granted by various local governments and other partiesto 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 wererecognised for the six months ended 30 June 2017 and 2016.7. SEGMENT INFORMATION(a) CODM, office of the General Manager, reviews the Group’sinternal reporting in order to assess performance andallocate resources.The Group has one reportable operating segment, reported as “airline transportationoperations”, which comprises the provision of passenger, cargo, mail delivery, groundservice and cargo handling services.Other services including primarily tour operations, air catering and othermiscellaneous services are not included within the airline transportation operationssegment, as their internal reports are separately provided to the CODM. The results ofthese operations are included in the “other segments” column.Inter-segment transactions are entered into under normal commercial terms andconditions that would be available to unrelated third parties.In accordance with IFRS 8, segment disclosure has been presented in a manner thatis consistent with the information used by the Group’s CODM. The Group’s CODMmonitors the results, assets and liabilities attributable to each reportable segmentbased on financial results prepared under the PRC Accounting Standards for BusinessEnterprises (the “PRC Accounting Standards”), which differ from IFRS in certainaspects. The amount of each material reconciling items from the Group’s reportablesegment revenues and profit before income tax, arising from different accountingpolicies are set out in Note 7(c) below.

25Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20177. SEGMENT INFORMATION (cont’d)(a) CODM, office of the General Manager, reviews the Group’sinternal reporting in order to assess performance andallocate resources. (cont’d)The segment results for the six months ended 30 June 2017 were as follows:AirlinetransportationoperationsOthersegments Eliminations Unallocated* TotalRMB million RMB million RMB million RMB million RMB million(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)Reportable segment revenuesfrom external customers 46,340 1,680 – – 48,020Inter-segment sales – 334 (334) – –Reportable segment revenues 46,340 2,014 (334) – 48,020Reportable segment profit beforeincome tax 3,818 46 – 1,915 5,779Other segment informationDepreciation and amortisation 6,636 85 – – 6,721Impairment charges 9 – – – 9Interest expenses 1,337 117 (50) – 1,404Capital expenditure 15,259 184 – – 15,443

China Eastern Airlines Corporation LimitedInterim Report 2017 26Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20177. SEGMENT INFORMATION (cont’d)(a) CODM, office of the General Manager, reviews the Group’sinternal reporting in order to assess performance andallocate resources. (cont’d)The segment results for the six months ended 30 June 2016 were as follows:AirlinetransportationoperationsOthersegments Eliminations Unallocated* TotalRMB million RMB million RMB million RMB million RMB million(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)Reportable segment revenuesfrom external customers 44,416 1,916 – – 46,332Inter-segment sales 108 287 (395) – –Reportable segment revenues 44,524 2,203 (395) – 46,332Reportable segment profitbefore income tax 4,272 92 – 210 4,574Other segment informationDepreciation and amortisation 5,903 76 – – 5,979Impairment charges 3 – – – 3Interest expenses 1,271 180 (89) – 1,362Capital expenditure 15,333 357 – – 15,690

27Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20177. SEGMENT INFORMATION (cont’d)(a) CODM, office of the General Manager, reviews the Group’sinternal reporting in order to assess performance andallocate resources. (cont’d)The segment assets and liabilities as at 30 June 2017 and 31 December 2016 were asfollows:AirlinetransportationoperationsOthersegments Eliminations Unallocated* TotalRMB million RMB million RMB million RMB million RMB million(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)At 30 June 2017Reportable segment assets 216,308 10,644 (6,199) 2,945 223,698Reportable segment liabilities 166,289 8,611 (6,199) 58 168,759AirlinetransportationoperationsOthersegments Eliminations Unallocated* TotalRMB million RMB million RMB million RMB million RMB million(Audited) (Audited) (Audited) (Audited) (Audited)At 31 December 2016Reportable segment assets 205,024 11,218 (8,896) 2,705 210,051Reportable segment liabilities 159,437 9,373 (8,896) 41 159,955* Unallocated assets primarily represent investments in associates and joint ventures, andavailable-for-sale investments. Unallocated results primarily represent gain on disposal ofinvestment in a subsidiary, the share of results of associates and joint ventures, incomerelating to available-for-sale investments and impairment charge on available-for-saleinvestments.

China Eastern Airlines Corporation LimitedInterim Report 2017 28Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20177. SEGMENT INFORMATION (cont’d)(b) The Group’s business operates in three main geographicalareas, even though they are managed on a worldwide basis.The Group’s revenues by geographical area are analysed based on the followingcriteria:1) Traffic revenue from services within the Mainland China (the PRC excludingthe Hong Kong Special Administrative Region (“Hong Kong”), Macau SpecialAdministrative Region (“Macau”) and Taiwan, collectively known as “Regional”)is classified as domestic operations. Traffic revenue from inbound andoutbound services between overseas markets excluding Regional is classified asinternational operations.2) Revenue from ticket handling services, ground services, cargo handling serviceand other miscellaneous services are classified on the basis of where theservices are performed.For the six months ended30 June2017 2016RMB million RMB million(Unaudited) (Unaudited)Domestic (the PRC, excluding Hong Kong,Macau and Taiwan) 32,142 29,965Regional (Hong Kong, Macau and Taiwan) 1,753 1,785International 14,528 14,58548,423 46,335The major revenue-earning assets of the Group are its aircraft, all of which areregistered in the PRC. Since the Group’s aircraft are deployed flexibly acrossits route network, there is no suitable basis of allocating such assets and therelated liabilities by geographic area and hence segment non-current assetsand capital expenditure by geographic area are not presented. Except theaircraft, most non-current assets (except financial instruments) are registeredand located in the PRC.

29Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20177. SEGMENT INFORMATION (cont’d)(c) Reconciliation of reportable segment revenues, profit, assetsand liabilities to the consolidated figures as reported in theconsolidated financial statements:For the six months ended30 June2017 2016Note RMB million RMB million(Unaudited) (Unaudited)RevenuesReportable segment revenues 48,020 46,332– Reclassification of business taxand expired sales in advance ofcarriage (i) 403 3Consolidated revenues 48,423 46,335For the six months ended30 June2017 2016Note RMB million RMB million(Unaudited) (Unaudited)Profit before income taxReportable segment profit 5,779 4,574– Differences in depreciation chargesfor aircraft and engines due todifferent depreciation lives (ii) (6) (3)Consolidated profit before income tax 5,773 4,571

China Eastern Airlines Corporation LimitedInterim Report 2017 30Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20177. SEGMENT INFORMATION (cont’d)(c) Reconciliation of reportable segment revenues, profit, assetsand liabilities to the consolidated figures as reported in theconsolidated financial statements: (cont’d)30 June201731 December2016Notes RMB million RMB million(Unaudited) (Audited)AssetsReportable segment assets 223,698 210,051– Differences in depreciation chargesfor aircraft and engines due todifferent depreciation lives (ii) 25 31– Difference in intangible assetarising from the acquisition ofShanghai Airlines (iii) 2,242 2,242Consolidated assets 225,965 212,32430 June201731 December2016RMB million RMB million(Unaudited) (Audited)LiabilitiesReportable segment liabilities 168,759 159,955– Others 3 3Consolidated liabilities 168,762 159,958Notes:(i) The difference represents the different classification of business tax and expired sales inadvance of carriage under the PRC Accounting Standards and IFRS.(ii) The difference is attributable to the differences in the useful lives and residual valuesof aircraft and engines adopted for depreciation purposes in prior years under the PRCAccounting Standards and IFRS. Despite the depreciation policies of these assets whichhave been unified under IFRS and the PRC Accounting Standards in recent years, thechanges were applied prospectively as changes in accounting estimates which result inthe differences in the carrying amounts and related depreciation charges under IFRS andthe PRC Accounting Standards.

31Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20177. SEGMENT INFORMATION (cont’d)(c) Reconciliation of reportable segment revenues, profit, assetsand liabilities to the consolidated figures as reported in theconsolidated financial statements: (cont’d)Notes: (cont’d)(iii) The difference represents the different measurement of the fair value of acquisition cost ofthe shares from Shanghai Airlines between the PRC Accounting standards and IFRS, whichresults in the different measurement of goodwill.8. FINANCE COSTSFor the six months ended30 June2017 2016RMB million RMB million(Unaudited) (Unaudited)Interest on bank borrowings 688 859Interest relating to obligations under finance leases 827 564Interest relating to post-retirement benefits 53 47Interest on bonds and debentures 184 211Interest relating to interest rate swaps 39 71Interest relating to bills discounted 18 51,809 1,757Exchange losses, net (Note (b)) – 1,355Less: amounts capitalised into advanced paymentson acquisition of aircraft (Note (a)) (405) (395)1,404 2,717Notes:(a) The weighted average interest rate used for interest capitalization is 3.46% per annum for the sixmonths ended 30 June 2017 (for the six months ended 30 June 2016: 3.44%).(b) The exchange losses primarily related to the translation of the Group’s foreign currencydenominated borrowings and obligations under finance leases for the six months ended 30 June2016.

China Eastern Airlines Corporation LimitedInterim Report 2017 32Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 20179. INCOME TAX EXPENSEIncome tax charged to profit or loss was as follows:For the six months ended30 June2017 2016RMB million RMB million(Unaudited) (Unaudited)Income tax 1,166 925Deferred taxation (14) 1161,152 1,041Pursuant to the “Notice of the Ministry of Finance, the State Administration of Taxationand the General Administration of Customs on Issues Concerning Relevant Tax Policies forEnhancing the Implementation of Western Region Development Strategy” (Cai Shui [2011]No.58), and other series of tax regulations, enterprises located in the western regions andengaged in the industrial activities as listed in the “Catalogue of Encouraged Industries inWestern Regions”, will be entitled to a reduced corporate income tax rate of 15% from 2011to 2020 upon approval from tax authorities. CEA Yunnan, a subsidiary of the Company,obtained approval from tax authorities and has been entitled to a reduced corporate incometax rate of 15% from 1 January 2011. The Company’s Sichuan branch, Gansu branch andXibei branch also obtained approvals from respective tax authorities and are entitled to areduced corporate income tax rate of 15%. The subsidiaries incorporated in Hong Kong aresubject to Hong Kong profits tax rate of 16.5%.The Company and its subsidiaries except for CEA Yunnan, Sichuan branch, Gansu branchand Xibei branch and those incorporated in Hong Kong, are generally subject to the PRCstandard corporate income tax rate of 25% (2016: 25%).10. EARNINGS PER SHAREThe calculation of basic earnings per share is based on the unaudited consolidated profitattributable to equity holders of the Company of approximately RMB4,341 million and theweighted average number of shares of 14,467 million in issue during the six months ended30 June 2017. The Company has no potentially dilutive ordinary shares in issue for the sixmonths ended 30 June 2017 (for the six months ended 30 June 2016: Nil).

33Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201711. PROFIT APPROPRIATIONNo appropriation to the statutory reserves has been made for the six months ended 30June 2017 (for the six months ended 30 June 2016: Nil). Such appropriations will be made atyear end in accordance with the relevant PRC regulations and the Articles of Association ofindividual group companies.12. PROPERTY, PLANT AND EQUIPMENTAircraft,enginesand flightequipment Others TotalRMB million RMB million RMB million(Unaudited) (Unaudited) (Unaudited)Carrying amount at 1 January 2017 141,913 11,267 153,180Transfers from advanced paymentson acquisition of aircraft (Note 14) 6,761 – 6,761Other additions 5,842 975 6,817Depreciation charges (6,013) (432) (6,445)Transfer to intangible assets (Note 13) – (3) (3)Transfer to other non-current assets – (1) (1)Disposal of a subsidiary (Note 20) (1,419) (600) (2,019)Disposals (165) (8) (173)Carrying amount at 30 June 2017 146,919 11,198 158,117Aircraft,enginesand flightequipment Others TotalRMB million RMB million RMB million(Unaudited) (Unaudited) (Unaudited)Carrying amount at 1 January 2016 122,962 10,280 133,242Transfers from advanced paymentson acquisition of aircraft (Note 14) 13,644 – 13,644Other additions 1,868 959 2,827Depreciation charges (5,301) (404) (5,705)Transfer to assets classifiedas held for sale (11) – (11)Transfer to other non-current assets – (8) (8)Disposals (264) (64) (328)Carrying amount at 30 June 2016 132,898 10,763 143,661

China Eastern Airlines Corporation LimitedInterim Report 2017 34Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201713. INTANGIBLE ASSETSGoodwill(Note (a))ComputersoftwareOthers(Note (b)) TotalRMB million RMB million RMB million RMB million(Unaudited) (Unaudited) (Unaudited) (Unaudited)Carrying amount at 1 January 2017 11,270 288 66 11,624Transfer from property, plant andequipment (Note 12) – 3 – 3Other additions – 50 – 50Disposals – (1) – (1)Amortisation – (54) (16) (70)Disposal of a subsidiary (Note 20) – (14) – (14)Carrying amount at 30 June 2017 11,270 272 50 11,592Goodwill(Note (a))Computersoftware TotalRMB million RMB million RMB million(Unaudited) (Unaudited) (Unaudited)Carrying amount at 1 January 2016 11,270 252 11,522Additions – 142 142Disposals – – –Amortisation – (63) (63)Carrying amount at 30 June 2016 11,270 331 11,601Note:(a) The balance represents goodwill arising from the acquisition of Shanghai Airlines. Goodwill isattributable to strengthening the competitiveness of the Group’s airline transportation operations,attaining synergy through integration of the resources and providing the evolution of Shanghaiinternational air transportation centre. For the purpose of impairment assessment, goodwill wasallocated to the CGU that the Group operates and benefits from the acquisition.(b) The balance represents the costs incurred to acquire the use right of certain flight schedules (i.e.timeslots for flights’ taking off/landing).

35Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201714. ADVANCED PAYMENTS ON ACQUISITION OF AIRCRAFTFor the six months ended30 June2017 2016RMB million RMB million(Unaudited) (Unaudited)At 1 January 23,357 21,207Additions 8,031 11,929Interest capitalised (Note 8) 405 395Transfer to property, plant and equipment (Note 12) (6,761) (13,644)Carrying amount at 30 June 25,032 19,88715. TRADE AND NOTES RECEIVABLESThe credit terms given to trade customers are determined on an individual basis.An aged analysis of the trade and notes receivables as at the end of the reporting period,based on the invoice date was as follows:30 June201731 December2016RMB million RMB million(Unaudited) (Audited)Within 90 days 2,381 2,32491 to 180 days 111 167181 to 365 days 243 102Over 365 days 232 1822,967 2,775Provision for impairment of trade and notesreceivables (100) (115)2,867 2,660Balances with related parties included in trade and notes receivables are summarised inNote 22(c)(i).

China Eastern Airlines Corporation LimitedInterim Report 2017 36Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201716. TRADE AND BILLS PAYABLESAn aged analysis of the trade and bills payables as at the end of the reporting period was asfollows:30 June201731 December2016RMB million RMB million(Unaudited) (Audited)Within 90 days 2,612 2,99491 to 180 days 136 57181 to 365 days 57 831 to 2 years 74 77Over 2 years 240 1653,119 3,376Balances with related parties included in trade and bills payables are summarised in Note22(c)(ii).17. OBLIGATIONS UNDER FINANCE LEASES30 June201731 December2016RMB million RMB million(Unaudited) (Audited)Within one year 7,123 6,447In the second year 7,141 6,054In the third to fifth year inclusive 19,282 18,415After the fifth year 30,875 30,125Total 64,421 61,041Less: amount repayable within one year (7,123) (6,447)Long-term portion 57,298 54,594

37Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201718. BORROWINGS30 June201731 December2016RMB million RMB million(Unaudited) (Audited)Non-currentLong-term borrowings– secured 5,357 7,169– unsecured 3,167 3,435Guaranteed bonds 8,497 8,476Unsecured bonds 8,821 8,81025,842 27,890CurrentCurrent portion of long-term borrowings– secured 1,183 1,724– unsecured 94 135Short-term bank borrowings– unsecured 23,899 9,983Short-term debentures Note Note 15,000 17,00040,176 28,84266,018 56,732Note:As at 30 June 2017, the balance represented short-term debentures of RMB15,000 million (31 December2016: RMB17,000 million) and bore interests at the rates ranging from 2.50% to 4.25% per annum withmaturity ranging from 60 days to 270 days.

China Eastern Airlines Corporation LimitedInterim Report 2017 38Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201719. SHARE CAPITAL30 June201731 December2016RMB million RMB million(Unaudited) (Audited)Registered, issued and fully paid of RMB1.00 eachA shares listed on The Shanghai Stock Exchange(“A Shares”) 9,808 9,808– Tradable shares held by Shanghai LichengInformation Technology Consulting Co., Ltd.with trading moratorium 466 466– Tradable shares held by China National AviationFuel Holding Company with trading moratorium 466 466– Tradable shares held by China COSCO ShippingCorporation Limited with trading moratorium 233 233– Tradable shares held by Caitong FundManagement Co., Ltd. with trading moratorium 162 162– Tradable shares without trading moratorium 8,481 8,481H shares listed on The Stock Exchange ofHong Kong Limited (“H Shares”)– Tradable shares without trading moratorium 4,659 4,65914,467 14,467Pursuant to the Company’s articles of association, both the listed A shares and listed Hshares are registered ordinary shares and carry equal rights.

39Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201720. DISPOSAL OF A SUBSIDIARYOn 29 November 2016, the Company entered into Share Purchase Agreement with EasternAirlines Industry Investment, a wholly-owned subsidiary of CEA Holding, to transfer 100%equity interest in Eastern Logistics, a wholly-owned subsidiary of the Company (“theTransfer”). At of 8 February 2017, the Transfer has been completed.As at 1 February2017RMB million(Unaudited)Net assets disposed of:Intangible assets 14Property, plant and equipment 2,019Lease prepayments 305Other long term assets 429Deferred tax assets 4Flight equipment spare parts 59Trade receivables 1,097Prepayments and other receivables 670Cash and cash equivalents 536Restricted bank deposits 1Sales in advance of carriage (124)Trade payables (1,915)Other payables and accruals (1,090)Income tax payable (26)Obligations under finance leases (409)Borrowings (262)Provision for return condition checks for aircraft underoperating leases (511)Other long-term liabilities (47)Post-retirement benefit obligations (158)Non-controlling interests 87679Gain on disposal of a subsidiary 1,754Satisfied by Cash: 2,433

China Eastern Airlines Corporation LimitedInterim Report 2017 40Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201720. DISPOSAL OF A SUBSIDIARY (cont’d)An analysis of the net inflow of cash and cash equivalents in respect of the disposal of asubsidiary is as follows:For thesix monthsended30 June 2017RMB million(Unaudited)Cash consideration 2,433Cash and bank balances disposed of (536)Net inflow of cash and cash equivalents in respect of the disposalof a subsidiary 1,897

41Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201721. COMMITMENTS(a) Capital commitmentsThe Group had the following capital commitments:30 June201731 December2016RMB million RMB million(Unaudited) (Audited)Contracted for:– Aircraft, engines and flight equipment(Note) 103,588 123,019– Other property, plant and equipment 4,775 9,550– Investments 140 140108,503 132,709Note:Contracted expenditures for the above aircraft, engines and flight equipment, including depositsprior to delivery, subject to future inflation increase built into the contracts were expected to bepaid as follows:30 June201731 December2016RMB million RMB million(Unaudited) (Audited)Within one year 27,380 28,384In the second year 26,767 32,306In the third year 21,922 28,983In the fourth year 15,375 18,334Over four years 12,144 15,012103,588 123,019

China Eastern Airlines Corporation LimitedInterim Report 2017 42Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201721. COMMITMENTS (cont’d)(b) Operating lease commitmentsAs at the reporting date, the Group had commitments under operating leases to payfuture minimum lease rentals as follows:30 June201731 December2016RMB million RMB million(Unaudited) (Audited)Aircraft, engines and flight equipmentWithin one year 3,842 3,814In the second year 3,044 3,124In the third to fifth years, inclusive 7,895 7,616After the fifth year 8,154 7,60522,935 22,159Land and buildingsWithin one year 239 362In the second year 127 225In the third to fifth years, inclusive 106 411After the fifth year 20 732492 1,73023,427 23,889

43Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201722. RELATED PARTY TRANSACTIONSThe Group is controlled by CEA Holding, which directly owns 35.06% of the Company’sshares as at 30 June 2017 (2016: 35.06%). In addition, through CES Global Holdings (HongKong) Limited and CES Finance Holding Co., Ltd., two wholly-owned subsidiaries of CEAHolding, CEA Holding indirectly owns additional shares of the Company of approximately18.15% and 3.16% respectively as at 30 June 2017 (2016: 18.15% and 3.16%).The Company is a state-owned enterprise established in the PRC and is controlled by thePRC 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 theirsubsidiaries, directly or indirectly controlled, jointly controlled or significantly influencedby the PRC government are defined as related parties of the Group. On that basis, relatedparties include CEA Holding and its subsidiaries (other than the Group), other government-relatedentities and their subsidiaries (“Other State-owned Enterprises”), other entitiesand corporations over which the Company is able to control or exercise significant influenceand 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 Companybelieve that meaningful information in respect of related party transactions has beenadequately disclosed.

China Eastern Airlines Corporation LimitedInterim Report 2017 44Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201722. RELATED PARTY TRANSACTIONS (cont’d)(a) Nature of related parties that do not control or controlled bythe Group:Name of related party Relationship with the GroupEastern Air Group Finance Co., Ltd.(“Eastern Air Finance Company”)Associate of the CompanyEastern Aviation Import & Export Co., Ltd. and itssubsidiaries (“Eastern Import & Export”)Associate of the CompanyShanghai Pratt & Whitney Aircraft Engine Maintenance Co.,Ltd. (“Shanghai P&W”)Associate of the CompanyEastern Aviation Advertising Service Co., Ltd.(“Eastern Advertising”)Associate of the CompanyShanghai Collins Aviation Maintenance Service Co., Ltd.(“Collins Aviation”)Associate of the CompanyCAE Melbourne Flight Training Pty Limited(“CAE Melbourne”)Joint venture of the CompanyShanghai Eastern Union Aviation Wheels & BrakesMaintenance Services Overhaul Engineering Co., Ltd.(“Wheels & Brakes”)Joint venture of the CompanyShanghai Technologies Aerospace Co., Ltd.(“Technologies Aerospace”)Joint venture of the CompanyEastern China Kaiya System Integration Co., Ltd.(“China Kaiya”)Joint venture of the CompanyShanghai Hute Aviation Technology Co., Ltd.(“Shanghai Hute”)Joint venture of the CompanyCEA Development Co., Limited and its subsidiaries(“CEA Development”)Controlled by the same parent companyChina Eastern Air Catering Investment Co., Limited and itssubsidiaries (“Eastern Air Catering”)Controlled by the same parent companyCES International Financial Leasing Corporation Limited andits subsidiaries (“CES Lease Company”)Controlled by the same parent companyEastern Air Logistics Co., Ltd. and its subsidiaries(“Eastern Logistics”) (Note)Controlled by the same parent companyEastern Airlines Industry Investment Company Limited(“Eastern Airlines Industry Investment”)Controlled by the same parent companyTravelSky Technology Limited(“TravelSky”)A director and vice president ofthe Company is a director of TravelskyChina Aviation Supplies Holding Company and itssubsidiaries (“CASC”)A director and vice president ofthe Company is a director of CASC

45Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201722. RELATED PARTY TRANSACTIONS (cont’d)(a) Nature of related parties that do not control or controlled bythe Group: (cont’d)Note: Eastern Logistics has become a related party of the Group as it was acquired by EasternAirlines Industry Investment in February 2017 and ceased to be a subsidiary of theCompany.(b) Related party transactionsIncome or receipts/(expense or payments)For the six months ended 30 JuneNature of transaction Related partyPricing policy anddecision process2017 2016RMB million RMB million(Unaudited) (Unaudited)Supply of food and beverages Eastern Air Catering (i) (556) (483)CEA Development (i) (37) (25)Eastern Import & Export (i) (22) (19)Handling charges for purchaseof aircraft, flight equipment,flight equipment spare parts,other property, plant and flightequipment and repairs foraircraft and enginesEastern Import & Export (ii) (63) (45)Repairs and maintenanceexpense for aircraft and enginesShanghai P&W (ii) (957) (1,084)Technologies Aerospace (ii) (135) (96)Shanghai Hute (ii) (26) (82)Wheels & Brakes (ii) (78) (40)Supply of system services China Kaiya (ii) (2) (56)Supply of cabin cleaning services Eastern Advertising (ii) (9) –Advertising expense Eastern Advertising (ii) (9) (10)Media royalty fee Eastern Advertising (iii) 7 5

China Eastern Airlines Corporation LimitedInterim Report 2017 46Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 2017Income or receipts/(expense or payments)For the six months ended 30 JuneNature of transaction Related partyPricing policy anddecision process2017 2016RMB million RMB million(Unaudited) (Unaudited)Automobile maintenance service,aircraft maintenance, providingtransportation automobile andother productsCEA Development (ii) (38) (37)Equipment maintenance fee Collins Aviation (ii) (16) (17)CEA Development (ii) (22) (6)Property management and greenmaintenance expensesCEA Development (ii) (20) (20)Supply of hotel accommodationserviceCEA Development (ii) (19) (33)Interest income on deposits Eastern Air Finance Company (iv) 8 14Interest expense on loans Eastern Air Finance Company (iv) – (9)Payments on finance leases CES Lease Company (ii) (664) (2,428)Civil aviation information networkservicesTravelSky (ii) (343) (282)Flight training fee CAE Melbourne (ii) (28) –Land and building rental CEA Holding (ii) (27) (27)Disposal of a subsidiary Eastern Airlines IndustryInvestment(v) 2,433 –22. RELATED PARTY TRANSACTIONS (cont’d)(b) Related party transactions (cont’d)

47Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 2017Income or receipts/(expense or payments)For the six months ended 30 JuneNature of transaction Related partyPricing policy anddecision process2017 2016RMB million RMB million(Unaudited) (Unaudited)Cargo terminal business supportservicesEastern Logistics (ii) (2) –Bellyhold space management Eastern Logistics (ii) (44) –Transfer of the pilots Eastern Logistics (ii) (7) –Freight logistics support services Eastern Logistics (iii) 42 –Flight equipment spare partsmaintenanceCASC (ii) (67) –(i) The Group’s pricing policies on products purchased from related parties aremutually agreed between contract parties.(ii) The Group’s pricing policies on services provided by related parties aremutually agreed between contract parties.(iii) The Group’s pricing policies on services provided to related parties are mutuallyagreed between contract parties.(iv) The Group’s pricing policies on related party interest rates are mutually agreedbased on benchmark interest rates.(v) The Group’s pricing policies on transfer of equity or disposal of investments aremutually agreed based on the valuation prices.22. RELATED PARTY TRANSACTIONS (cont’d)(b) Related party transactions (cont’d)

China Eastern Airlines Corporation LimitedInterim Report 2017 48Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201722. RELATED PARTY TRANSACTIONS (cont’d)(c) Balances with related parties(i) Amounts due from related parties30 June201731 December2016RMB million RMB million(Unaudited) (Audited)Trade and notes receivablesEastern Logistics (Note) 988 –30 June201731 December2016RMB million RMB million(Unaudited) (Audited)Prepayments and other receivablesEastern Import & Export 257 536Technologies Aerospace – 16Eastern Air Catering 125 57CEA Holding 10 –CEA Development 3 –Others 7 7402 616All the amounts due from related parties are trade in nature, interest-free andpayable within normal credit terms.Note:Under the Management Agreement between the Company and China Cargo Airlines Co.,Ltd. (“China Cargo Airlines”), a controlled subsidiary of Eastern Logistics, China CargoAirlines is entrusted to manage the bellyhold space freight business of the Group and shallcollect the revenue from the end customers in respect of bellyhold space transportationon behalf of the Company.

49Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201722. RELATED PARTY TRANSACTIONS (cont’d)(c) Balances with related parties (cont’d)(ii) Amounts due to related parties30 June201731 December2016RMB million RMB million(Unaudited) (Audited)Trade and bills payablesEastern Import & Export 185 85Eastern Air Catering 30 37Technologies Aerospace 3 45Wheels & Brakes 11 –CEA Development 17 19Collins Aviation 4 2Shanghai Hute 23 19CEA Holding 3 3CASC 23 –Others 3 4302 214

China Eastern Airlines Corporation LimitedInterim Report 2017 50Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201722. RELATED PARTY TRANSACTIONS (cont’d)(c) Balances with related parties (cont’d)(ii) Amounts due to related parties (cont’d)30 June201731 December2016RMB million RMB million(Unaudited) (Audited)Other payables and accrualsEastern Import & Export 1,093 240Eastern Air Catering 221 166CEA Holding 136 303TravelSky 386 963CEA Development 58 72Technologies Aerospace 100 29Shanghai P&W 379 324Shanghai Hute 4 20Wheels & Brakes 16 26Eastern Advertising 7 18CAE Melbourne 357 –Others 13 52,770 2,16630 June201731 December2016RMB million RMB million(Unaudited) (Audited)Obligations under finance leasesCES Lease Company 11,792 5,521Except for the amounts due to CES Lease Company, which are related to theaircraft under finance leases, all other amounts due to related parties areinterest-free and payable within normal credit terms given by trade creditors.

51Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201722. RELATED PARTY TRANSACTIONS (cont’d)(c) Balances with related parties (cont’d)(iii) Short-term deposits and borrowings with associates and CEA HoldingAverage interest rateFor the six months ended30 June 30 June 31 December2017 2016 2017 2016RMB million RMB million(Unaudited) (Unaudited) (Unaudited) (Audited)Short-term deposits (included incash and cash equivalents)Eastern Air Finance Company 0.35% 0.34% 1,658 1,296Long-term borrowings(included in borrowings)CEA Holding 3.48% – 28 28(d) Guarantees by the holding companyAs at 30 June 2017, bonds of the Group guaranteed by CEA Holding amounted toRMB7.8 billion (2016: RMB7.8 billion).23. SEASONALITYThe civil aviation industry is subject to seasonal fluctuations, with peak demand duringthe holiday season in the second half of the year. As such, the revenues and results of theGroup in the first half of the year are generally lower than those in the second half of theyear.24. DIVIDENDThe Board has not recommended any dividend for the six months ended 30 June 2017 (forthe six months ended 30 June 2016: It was recommended by the Board that the 2016 interimdistribution shall be RMB0.51 per ten shares (inclusive of tax) in cash).

China Eastern Airlines Corporation LimitedInterim Report 2017 52Notes to the Interim Condensed Consolidated Financial InformationFor the six months ended 30 June 201725. EVENTS AFTER THE REPORTING PERIODUp to 29 August 2017, the Company issued two phases of short-term debentures withtotal principal for RMB6.0 billion and the maturity from 150 days to 270 days to institutionalinvestors in the national interbank bond market. The debentures bear interest at the rate of4.16% per annum to 4.25% per annum.Since 3 July 2017, the 1,327,406,822 listed A shares with trading moratorium which wereheld by Shanghai Licheng Information Technology Consulting Co., Ltd., China NationalAviation Fuel Holding Company, China COSCO Shipping Corporation Limited and CaitongFund Management Co., Ltd. have been listed for trading on the Shanghai Stock Exchange.

53Summary of Operating DataFor the six months ended 30 June2017 2016 ChangePassenger transportation dataASK (available seat – kilometres)(millions) 108,403.95 98,936.46 9.6%– Domestic routes 67,552.82 62,155.29 8.7%– International routes 37,944.63 33,934.58 11.8%– Regional routes 2,906.49 2,846.58 2.1%RPK (revenue passenger – kilometres)(millions) 88,147.44 80,013.45 10.2%– Domestic routes 56,164.23 50,639.91 10.9%– International routes 29,688.00 27,179.13 9.2%– Regional routes 2,295.21 2,194.41 4.6%Number of passengers carried(thousands) 53,320.69 48,848.07 9.2%– Domestic routes 44,473.44 40,191.63 10.7%– International routes 7,148.13 7,028.39 1.7%– Regional routes 1,699.13 1,628.05 4.4%Passenger load factor (%) 81.31 80.87 0.44pts– Domestic routes 83.14 81.47 1.67pts– International routes 78.24 80.09 –1.85pts– Regional routes 78.97 77.09 1.88ptsPassenger – kilometres yield (RMB)(including fuel surcharge) 0.510 0.511 –0.20%– Domestic routes 0.535 0.527 1.52%– International routes 0.448 0.466 –3.86%– Regional routes 0.714 0.729 –2.06%Passenger – kilometres yield (RMB)(excluding fuel surcharge) 0.479 0.474 1.05%– Domestic routes 0.535 0.527 1.52%– International routes 0.359 0.363 –1.10%– Regional routes 0.656 0.642 2.18%

China Eastern Airlines Corporation LimitedInterim Report 2017 54Summary of Operating DataFor the six months ended 30 June20172016(comparablebasis) Note 1 Change2016(non-comparablebasis) Note 1Freight transportation dataAFTK (available freight tonne – kilometres)(millions) 3,579.53 3,346.62 7.0% 4,627.67– Domestic routes 1,147.53 1,094.92 4.8% 1,129.80– International routes 2,332.12 2,169.50 7.5% 3,359.49– Regional routes 99.88 82.20 21.5% 138.38RFTK (revenue freight tonne – kilometres)(millions) 1,366.40 1,265.36 8.0% 2,298.73– Domestic routes 427.55 434.98 –1.7% 456.76– International routes 914.52 808.10 13.2% 1,781.63– Regional routes 24.34 22.27 9.3% 60.34Weight of freight carried (million kg) 462.17 455.98 1.4% 660.06– Domestic routes 308.99 314.79 –1.8% 335.91– International routes 132.83 122.44 8.5% 274.92– Regional routes 20.35 18.75 8.5% 49.24Freight load factor (%) 38.17 37.81 0.36pts 49.67– Domestic routes 37.26 39.73 –2.47pts 40.43– International routes 39.21 37.25 1.96pts 53.03– Regional routes 24.37 27.09 –2.72pts 43.60Freight tonne – kilometres yield (RMB)(including fuel surcharge) 1.306 1.170– Domestic routes 1.097 N/A N/A 1.053– International routes 1.350 1.146– Regional routes 3.328 2.784Freight tonne – kilometres yield (RMB)(excluding fuel surcharge) 1.238 1.084– Domestic routes 0.982 N/A N/A 0.974– International routes 1.306 1.061– Regional routes 3.205 2.602

55Summary of Operating DataFor the six months ended 30 June20172016(comparablebasis) Note 1 Change2016(non-comparablebasis) Note 1Consolidated dataATK (available tonne – kilometres)(millions) 13,335.88 12,250.90 8.9% 13,531.95– Domestic routes 7,227.28 6,688.89 8.0% 6,723.78– International routes 5,747.14 5,223.61 10.0% 6,413.60– Regional routes 361.46 338.40 6.8% 394.57RTK (revenue tonne – kilometres)(millions) 9,177.72 8,361.82 9.8% 9,395.20– Domestic routes 5,410.81 4,935.32 9.6% 4,957.10– International routes 3,539.85 3,210.34 10.3% 4,183.87– Regional routes 227.06 216.16 5.0% 254.23Overall load factor (%) 68.82 68.25 0.57pts 69.43– Domestic routes 74.87 73.78 1.09pts 73.72– International routes 61.59 61.46 0.13pts 65.23– Regional routes 62.82 63.88 –1.06pts 64.43Revenue tonne – kilometres yield (RMB)(including fuel surcharge) 5.094 4.642– Domestic routes 5.639 N/A N/A 5.477– International routes 4.102 3.512– Regional routes 7.571 6.950Revenue tonne – kilometres yield (RMB)(excluding fuel surcharge) 4.783 4.303– Domestic routes 5.630 N/A N/A 5.470– International routes 3.348 2.807– Regional routes 6.972 6.156Note:1. Under comparable basis, the operating data of the Group in the first half of 2016 did not include the wholecargo flight data of the Group during the period from February to June 2016. Under non-comparablebasis, the operating data of the Group in the first half of 2016 comprised of the whole cargo flight data ofthe Group for the same period.

China Eastern Airlines Corporation LimitedInterim Report 2017 56Fleet StructureIn the first half of 2017, the Group introduced a total of 23 aircraft of major models and a total of 12aircraft were retired. The fleet age structure has been made younger.As at 30 June 2017, the Group operated a fleet of 593 aircraft, which included 583 passengeraircraft and 10 business aircraft held under trust. As the Company completed the transfer of100% equity interest in Eastern Logistics to Eastern Airlines Industry Investment, a wholly-ownedsubsidiary of the Company’s controlling shareholder, CEA Holding, on 8 February 2017, the fleetof the Group ceased to include the 9 freighters operated by China Cargo Airlines, a controlledsubsidiary of Eastern Logistics.(Units)Fleet structure as at 30 June 2017No. ModelSelf-ownedUnderfinanceleaseUnderoperatinglease Sub-totalAveragefleet age(Years)Total number ofpassenger aircraft 222 234 127 583 5.53Wide-body aircraft 28 41 10 79 5.611 B777-300ER 9 10 – 19 1.472 A330-300 1 13 7 21 7.643 A330-200 12 18 3 33 4.784 B767 6 – – 6 16.22Narrow-body aircraft 194 193 117 504 5.515 A321 34 36 – 70 4.346 A320 75 56 40 171 6.877 A319 10 23 3 36 4.588 B737-800 38 60 72 170 3.959 B737-700 37 18 2 57 8.14Total number of businessaircraft held under trust 10Total number of aircraft 593

57Management Discussion and AnalysisREVIEW OF OPERATIONIn the first half of 2017, global economic recovery gradually became stable. The economic growthof the USA was lower than expected, while the economic recovery of the eurozone, Japan andmajor emerging economies were further accelerated. As China’s economy continued to grow in astable manner, the economic structures further optimized and consumer spending had a strongereffect on the economic growth. Due to favourable factors such as the continual recovery of theglobal economy, stable and positive demand for business trips and tourism spending, the airpassenger transportation market continued to report stable growth. Meanwhile, the internationalcrude oil prices have increased significantly from a lower comparison base in the same period lastyear. The intensified industry competition which resulted in a drop in revenue from internationalroutes, turbulent geo-political landscape in certain countries and regions, and overseas terroristthreats, have caused adverse impact on the air transportation industry.In face of the complex and changing business environment, the management and all staff of theGroup made concerted efforts and achieved smooth progress to promote production, operation,reform and transformation. The Group highly emphasized and comprehensively enhanced itscorporate party building works. On the pre-condition of ensuring safe operations, the Group hasstrengthened its sales and marketing, enhanced service quality, proactively promoted multilevelexternal partnerships and expedited the pace of its business transformation, making newachievements in all aspects.In the first half of 2017, the Group recorded revenue of RMB48,423 million, an increase of 4.51%over the same period last year; total profit before income tax was RMB5,773 million, an increase of26.30% over the same period last year; profit attributable to equity holders of the parent companyamounted to RMB4,341 million, representing an increase of 34.40% over the same period last year.

China Eastern Airlines Corporation LimitedInterim Report 2017 58Management Discussion and AnalysisOPERATIONS Safe OperationThe Group placed great emphasis on striving to ensure safe operation and will continueto do so. In the first half of 2017, the Group revised the regulatory system on rewards andpenalties for flight safety to improve its safety management system, and proceeded withsafety supervision and inspection which focused on management optimization, capabilityenhancement and risk prevention to strengthen the enforcement of safety responsibilities.It also conducted operational safety audit of its routes and completed the compiling of a riskdatabase covering 53 designated airports and strengthened risk control of particular routesand airports. In addition, the Group further refined the training system for its core technicalpersonnel by improving its crew resource management and training on coordinatingcapability. The Group undertook integrated anti-terrorism drills and enhanced its ability inhandling air security-related contingencies and practical standard, and strictly implementedsafety requirements for its flights.The passenger aircraft fleet of the Group had 1,001,600 safe flying hours and 422,000 take-offand landing flights, which have increased by 7.5% and 6.8%, respectively, over the sameperiod last year. MarketingIn the first half of 2017, the Group achieved passenger transportation revenue of RMB43,106million or an increase of 9.69% over the same period last year.Faced with challenges such as intense industry competition, unstable geo-politicallandscape in certain countries and regions as well as expansion and acceleration offormation of high-speed railway network, the Group flexibly adjusted its allocation of flightcapacity, continuously strengthened its management of freight rate and revenue andenhanced its direct sales ability. The revenue passenger-kilometres (RPK) yield of domesticpassenger transportation of the Group increased by 1.52% over the same period last year,while the decline in RPK yield of the international RPK of the Group yield decreased by 11.90percentage points. The Group continued to foster the construction of hubs in Shanghai,Kunming and Xi’an and actively captured key market resources. Based on changing market

59Management Discussion and Analysisdemands, the Group timely reduced the flight capacity for the Korean market and increasedthe flight capacity for more profitable routes with higher demand for business trips suchas Japan, Beijing-Shanghai, Shanghai-Guangzhou, Shanghai-Shenzhen and Shanghai-Chengdu routes as well as flight capacity for Southeast Asia routes. At the same time, theGroup continued to strengthen its control over freight rate and cabin seat of internationalroutes and achieved effective results. The Group’s sales revenue from first-class cabin andbusiness cabin of international routes increased by 21.5% over the same period last year,while the revenue contributed by first-class cabin and business class cabin towards the totalrevenue of the Group for international routes increased by 2.9 percentage points over thesame period last year. Through the utilization of big-data analysis, the Group strengthenedits sales via its mobile application and official website, and enhanced its direct sales ability.Both of its direct sales income and contribution of direct sales income towards total incomecontinued to rise. During the first half of 2017, the Group’s direct sales and contribution ofdirect sales income increased by 29.4% and 9.4 percentage points over the same period lastyear, respectively.The Group valued services for frequent flyer members under “Eastern Miles” and activelymaintained and developed its pool of frequent flyer members and group client resources.In the first half of 2017, the number of new frequent flyer members developed by theGroup increased by 19% over the same period last year. As at the end of June 2017, thetotal number of frequent flyer members of “Eastern Miles” reached 31.46 million, increasedby 14.8% over the same period last year. The Group improved its customers’ experienceand enhanced the value of frequent flyer members through expanding credit redemptionchannels, enriching gifts for redemption, enhancing flight waiting experience of VIP loungesand continually optimizing platinum card service procedures and privileges. At the sametime, the Group enhanced customer service and maintenance ability, strengthened supportcapacity of systems and continually enhanced sales to direct corporate customers. Inthe first half of 2017, the revenue from direct corporate customers between the Group’scompanies increased by 22.5% over the same period last year and the total number of directcorporate customers between the Group’s companies reached 3,198, the Group deepenedcooperation with Delta Air Lines and secured more quality customers by sharing customerresources.

China Eastern Airlines Corporation LimitedInterim Report 2017 60Management Discussion and Analysis Service QualityAdhering to the service philosophy of “Customer-Oriented and Dedicated Service”, theGroup continuously enhanced both the software and hardware of its services based oncustomer demands, while persistently improving customers’ experience so as to establishthe service brand image of the Group. In the first half of 2017, the Group carried a total of53.3207 million passengers, representing an increase of 9.2% from the same period lastyear.With respect to service system construction, the Group commenced service qualitystandardization project and strengthened the analysis and application of service data, toenhance the service control standard. The Group improved its standard of service qualityand strengthened the whole process control of services offered to its platinum cardmembers, forging ahead to become a dedicated brand for high-end services. With regardsto ground services and in-flight services, the Group has been steadily pushing ahead withthe construction of 23 VIP lounges and has put into use the VIP flagship lounge at the BeijingCapital International Airport and the SkyTeam Alliance VIP lounges at Terminal 2 of theBeijing Capital International Airport, and offered festival gifts featuring special themes as wellas VIP lounge catering services. All of these enhanced passengers’ waiting experience. TheGroup introduced new series of cuisines and increased the choice of beverages offered infirst-class and business cabins of Beijing-Shanghai route and international long-haul routesto enhance flight experience of its passengers. In-flight emergency rescue service systemwas improved by recruiting 146 in-flight doctors, effectively enhancing the response time ofin-flight rescue and transition from air to ground rescue.With respect to the integrated online services, the Group further optimized and expandedthe service functions of its official website and mobile application, enriched the varietyof service functions and introduced functions such as “advance payment for overweightbaggage” and “self-service return and refund of irregular flights”. The Group carried forwardself check-in services by introducing self check-in services for 81 international round-triproutes and 75 international one-way routes. The rate of self check-in reached 68.2% in thefirst half of 2017, increased by 7.6 percentage points over the same period last year. TheGroup activated a global baggage operation control center and promoted a luggage inquirysystem, strengthened the whole monitoring process of luggage transport. In the first half of2017, the rate of mishandled luggage decreased by 5.24%, as compared to the same periodlast year.

61Management Discussion and Analysis External PartnershipsThe Group continued to strengthen its multi-level partnerships with internationally wellknownairlines and tourism brands, expanded the scope of cooperation and deepened thelevel of partnership.In the first half of 2017, the Group continued to deepen the strategic partnerships withDelta Air Lines and AFK. The Group and Delta Air Lines further enhanced the transportationnetworks connecting China and the USA, launched 10 international main routes betweenChina and the USA, and Code-share cooperation in 166 domestic routes in China and theUSA, effectively shortened the transit waiting time, and proactively launched training andexchanges in multiple sectors such as safety, operation and informatization. The Groupfurther expanded the Code-share coverage with AFK, improved the service standards andprocedures for serving high-end customers to enhance their waiting experience at theCharles de Gaulle Airport in Paris, France, and further advanced resource developmentand joint marketing to the corporate customers in the French market, which in turnfurther increased the mutual sales income and common market shares. Capitalized onthe cooperation platform of the SkyTeam Alliance, the Group has newly launched Code-sharecooperation with Air Europa Líneas Aéreas, S.A.U. from Spain and Czech Airlines a.s.As at the end of June 2017, the Group commenced to launch Code-share cooperation for709 routes with 14 SkyTeam Alliance members, and launched single check-in for transitpassengers in 23 transit stations with 9 SkyTeam Alliance members.The Group attached importance to and continued to strengthen the cooperation with airlineswhich are not members of the SkyTeam Alliance. In collaborating with Qantas, the Grouplaunched Code-share cooperation focusing around 69 routes, and launched enhancedcooperation in joint sales and ground services. The Group further extended the content ofits new model of “aviation + internet” cooperation with Ctrip, to launch multi-level businesscooperation in joint sales, data sharing, product research and development, customerservices and redemption of points.

China Eastern Airlines Corporation LimitedInterim Report 2017 62Management Discussion and Analysis Reform and TransformationThe Group focused on developing the passenger transport business, optimized thee-commerce platform functions, enhanced the operations of China United Airlines, a lowcostairline, deepened the market reform of supporting business, and continued to enhancethe effect of reform and transformation on production and operation.In the first half of 2017, the Group completed the transfer of 100% equity interest in EasternLogistics to Eastern Airlines Industry Investment, achieved a gain on disposal of investmentin a subsidiary amounting to RMB1,754 million. Upon the completion of equity transfer ofEastern Logistics, the Group will utilize the relevant resources mainly in the developmentof the passenger transport business, and further establish the Group’s brand image andcompetitiveness in the air passenger transportation segment.For e-commerce, the Group continued to facilitate the construction of e-commerce platform,under which internet access has become available in 67 long-haul wide-body aircraft,ranked at the top nationwide in terms of scale. The updates and replacements of mobileapplication were accelerated by introducing multiple new functions such as online pre-flightordering of in-flight meals, self check-in and irregular flight enquiry, and optimized the priceenquiry and ticket return application modules on the official website. The Group also furtherdeveloped aviation contact resources, further enriched the applications of aviation pointsand the variety of integrated products, and recorded significant increase of nearly 200% inits revenue from the sales of aviation points and integrated products, respectively.In the low-cost airline business area, China United Airlines achieved revenue of RMB2,375million in the first half of 2017, representing a growth of 29.71% as compared to thesame period last year. The net profit of China United Airlines achieved RMB359 million,representing a 50.21% increase from the same period last year. Benefiting from the all-economyclass cabin of its fleet, China United Airlines’ B737 Series fleet size amounted to35 aircraft after newly introduced three B737-800 aircraft. The total number of passengerscarried and passenger load factor of China United Airlines increased by 15.1% and 1.1percentage points from the same period last year, respectively. Through improving the

63Management Discussion and Analysisfunctions of the official website platform, optimizing the interface settings of mobile userterminals and launching brand marketing through self-owned media, direct sales channelswere further broadened. The revenue of China United Airlines contributed by direct salesrepresented 75.2% of the Group’s total revenue, representing an increase of 2.8 percentagepoints as compared to the same period last year. The Group continues to expand its value-addedservices such as baggage charges, in-flight sales and paid lounge services, andlaunched online sales of new insurance products, to increase its non-aviation revenue.Regarding the market reform of supporting businesses, the Group continued to foster themarket-oriented operation of its ground service business, and gradually formed replicableand promotable reform experience. The service support capabilities and productionoperation efficiency of the Group have been enhanced through measures such asautomated work assignment by the resource management system and full coverage ofquantified assessments. Compared to the period prior to market-based reform, the averagenumber of passengers served by ground services in the Shanghai hub by the Group, both ofthe total operating revenue and revenue from third-party business have increased by over10% as compared to the same period last year, respectively. Party Building and Corporate CultureThe Group further promoted the normalization and systematization of corporate partybuilding by rigorously implementing the requirements under the comprehensive tighteningof party discipline, persistently strengthening the construction of ideology and politics, andthe building of a culture of integrity in the party. In pursuing the vision of a “world-class andhappy CEA”, the Group pushed ahead with the construction of corporate culture to increaseemployees’ recognition and loyalty towards the Group, which in turn firmly fostered andcreated a sound atmosphere for the successful launching and continuous improvementin areas including safe operation, customer services, marketing and sales, and reform anddevelopment of the Group.

China Eastern Airlines Corporation LimitedInterim Report 2017 64Management Discussion and Analysis Social ResponsibilitiesActively responding to the five development visions of the State and adapting to thedevelopment trends of the global aviation industry, the Group managed and balanced theexpectations of its stakeholders, including customers, shareholders, staff members andsociety at large by fusing economic, social and environmental responsibilities into theGroup’s organization and operating activities. The Group responded to the needs of itsstakeholders and endeavoured to create maximized comprehensive value.In the first half of 2017, the Group implemented a unified group-wide deployment andfully capitalized on the strengths of the aviation industry and resource advantages, tofacilitate the development of tourism resources in underprivileged areas and to promotepoverty alleviation through agriculture and education as well as infrastructure construction,which fully materialized the Group’s poverty alleviation strategies. The Group’s large-scalecharitable programme “Love at CEA” launched 419 projects in total, with 25,500 participantsfrom its staff team, provided an aggregate of 101,235 hours of social services, and serviceda total of 33,745 people.In the first half of 2017, the Group was once again selected as one of the BrandZTM Top 500Most Valuable Global Brands and has been selected as one of the BrandZTM Top 30 MostValuable Chinese Brands for the sixth consecutive year. It also received the “Best ChinaAirline” award at the “Travel Trade Gazette China Tourism Awards” for the third consecutiveyear.

65Management Discussion and AnalysisFINANCIAL OVERVIEWOperating RevenuesIn the first half of 2017, the Group’s passenger revenue amounted to RMB43,106 million,representing an increase of 9.69% from the same period last year, and accounted for 96.04% ofthe Group’s traffic revenues. Passenger traffic volume was 88,147.44 million passenger-kilometres,representing an increase of 10.2% from the same period last year.The passenger revenue of domestic routes amounted to RMB28,558 million, representing anincrease of 12.94% from the same period last year, and accounted for 66.25% of the passengerrevenue. The passenger traffic volume was 56,164.23 million passenger-kilometres, representingan increase of 10.9% from the same period last year.The passenger revenue of international routes amounted to RMB12,915 million, representing anincrease of 3.97% from the same period last year, and accounted for 29.96% of the passengerrevenue. The passenger traffic volume was 29,688.00 million passenger-kilometres, representingan increase of 9.2% from the same period last year.The passenger revenue of regional routes amounted to RMB1,633 million, representing an increaseof 2.64% from the same period last year, and accounted for 3.79% of the passenger revenue. Thepassenger traffic volume was 2,295.21 million passenger-kilometres, representing an increase of4.6% from the same period last year.In the first half of 2017, the Group’s cargo and mail traffic revenues amounted to RMB1,777 million,accounting for 3.96% of the Group’s traffic revenue. Cargo and mail traffic volume was 1,366.40million tonne-kilometres.In the first half of 2017, the Group’s other revenue were RMB3,540 million, representing a decreaseof 18.56% from the same period last year.

China Eastern Airlines Corporation LimitedInterim Report 2017 66Management Discussion and AnalysisOperating ExpensesIn the first half of 2017, the Group’s total operating expenses was RMB46,859 million, representingan increase of 11.70% from the same period last year. Analysis of the changes in items underoperating costs of the Group is set out as follows:Aircraft fuel costs accounted for the most substantial part of the Group’s operating expenses. Inthe first half of 2017, the Group’s total aircraft fuel cost was RMB12,139 million, representing anincrease of 45.15% from the same period last year, mainly due to a year-on-year increase in thevolume of refueling of 5.06% for the Group, leading to an increase in aircraft fuel costs of RMB423million. The average price of fuel increased by 38.16%, and the aircraft fuel costs increased byRMB3,353 million.In the first half of 2017, the Group’s take-off and landing charges amounted to RMB6,430 million,representing an increase of 10.98% from the same period last year, and was primarily due to theincrease in the number of take-offs and landings of the Group. In particular, since the second halfof 2016, the Group has launched a number of new international long-haul routes, resulting in anincrease in the take-off and landing charges. In addition, due to the adjustments effect of domesticairport charges (as announced by the Civil Aviation Administration of China 2017 Notice No. 18),the domestic take-off and landing charges were increased.In the first half of 2017, the Group’s depreciation and amortisation amounted to RMB6,547 million,representing an increase of 12.86% from the same period last year, and was primarily due to anet increase of 41 self-owned aircraft and aircraft held under finance leases and an increase inthe number of aircraft and engines since the second half of 2016, resulting in an increase in theoriginal value of fixed assets and an increase in depreciation.In the first half of 2017, the Group’s wages, salaries and benefits amounted to RMB8,860 million,representing an increase of 6.57% from the same period last year, and was primarily due toincreases in headcount of flight personnel, engineers and ground crew, and flying hours andallowance standard.

67Management Discussion and AnalysisIn the first half of 2017, the Group’s food and beverage expenses amounted to RMB1,501 million,representing an increase of 7.14% from the same period last year, and was primarily due to theincrease in the number of passengers carried by the Group.In the first half of 2017, the Group’s aircraft operating lease rentals amounted to RMB2,235 million,representing a decrease of 3.54% from the same period last year, and was primarily due to a netdecrease of 8 aircraft held under operating leases by the Group.In the first half of 2017, the Group’s other operating lease rentals amounted to RMB401 million,representing an increase of 16.23% from the same period last year, and was primarily due to theincrease in leased VIP lounges by the Group.In the first half of 2017, the Group’s selling and marketing expenses were RMB1,593 million,representing a decrease of 2.33% from the same period last year, and was primarily due to theincrease in the proportion of direct sales of the Group, which caused a decrease in the handlingfees of the agency businesses as compared to the same period last year.In the first half of 2017, the Group’s amount of civil aviation infrastructure levies payable to theCAAC was RMB1,004 million, representing an increase of 6.24% as compared to the same periodlast year. This increase was primarily due to the increase in the length of miles flown by the Group.In the first half of 2017, the Group’s ground services and other expenses were RMB1,916 million,representing a decrease of 30.81% from the same period last year. The decrease was primarilydue to the transfer of 100% equity interests in Eastern Logistics by the Group, and the fact that thefigure for the first half of 2016 included the figure regarding ground services and other expensesof Eastern Logistics for the period from January to June of 2016, while the figure for the first halfof 2017 included the figure regarding ground services and other expenses of Eastern Logistics forJanuary 2017 only. After deducting the impact of the figure of Eastern Logistics for the period fromFebruary to June 2016, ground services and other expenses decreased by 11.91% over the sameperiod last year, and was primarily due to a decrease in the Group’s tourism operations expenses.In the first half of 2017, the Group’s indirect operating expenses were RMB2,059 million,representing an increase of 2.49% as compared to the same period last year. This was primarilyattributable to the increase in the costs associated with the expansion in the size of the Group’sfleet.

China Eastern Airlines Corporation LimitedInterim Report 2017 68Management Discussion and AnalysisOther operating income and gainsIn the first half of 2017, other operating income and gains of the Group amounted to RMB4,766million, which represented an increase of 71.93% from the same period last year. The increase wasprimarily due to gain from the transfer of 100% equity interests in Eastern Logistics by the Group.Finance Income/CostsIn the first half of 2017, the Group’s finance income was RMB703 million, which represented anincrease of 1,967.65% from the same period last year. Finance costs amounted to RMB1,404million, representing a decrease of 48.33% from the same period last year, primarily due to netexchange gains amounted to RMB674 million arose from the appreciation of RMB in the first halfof 2017 which was recorded in the Group’s finance income; and net exchange losses amountedto RMB1,355 million arose from the weakening of RMB during the same period of 2016 which wasrecorded in the Group’s finance costs.ProfitProfit attributable to equity holders of the Company in the first half of 2017 was RMB4,341million, representing a growth of 34.40% from the same period last year. The earnings per shareattributable to the equity holders of the Company were RMB0.30.Liquidity and Capital StructureAs at 30 June 2017, the Group had total assets of RMB225,965 million, an increase of 6.42% fromthe end of 2016. Its debt ratio was 74.69%, representing a 0.65 percentage points decrease fromthe end of 2016.In particular, the Group’s total current assets amounted to RMB23,540 million, accounted for10.42% of the total assets and represented an increase of 48.16% from the end of 2016. TheGroup’s non-current assets amounted to RMB202,425 million, accounted for 89.58% of the totalassets and represented an increase of 3.05% from the end of 2016.As at 30 June 2017, the Group had total liabilities of RMB168,762 million, comprised of currentliabilities of RMB77,223 million which accounted for 45.76% of total liabilities, and non-currentliabilities of RMB91,539 million which accounted for 54.24%.The Group’s interest-bearing liabilities mainly included short-term bank borrowings, short-termdebentures, bonds payable, long-term borrowings and obligations under finance leases.

69Management Discussion and AnalysisAmong the current liabilities, interest-bearing liabilities (short-term bank borrowings, short-termdebentures, long-term borrowings due within one year and obligations under finance leases duewithin one year) amounted to RMB47,299 million or an increase of 34.03% from the end of 2016.Among the non-current liabilities, interest-bearing liabilities (long-term borrowings, bonds payableand obligations under finance leases) amounted to RMB83,140 million or an increase of 0.80% fromthe end of 2016.In the first half of 2017, the Group further optimized the structure of its foreign-currency obligationsin response to exchange fluctuations in order to lower its exchange rate risk. As at 30 June 2017,the breakdown of the Group’s interest-bearing obligations by currencies is as follows:Unit: RMB millionRMB equivalentAs at 30 June 2017 As at 31 December 2016Currency AmountPercentage(%) AmountPercentage(%)Movement(%)USD 44,516 34.13 52,866 44.89 –15.79RMB 76,866 58.93 57,793 49.07 33.00Others 9,057 6.94 7,114 6.04 27.31Total 130,439 100.00 117,773 100.00 10.75

China Eastern Airlines Corporation LimitedInterim Report 2017 70Management Discussion and AnalysisAs at 30 June 2017, the Group’s interest-bearing liabilities included long-term borrowings, shorttermbank borrowings, bonds payable and short-term debentures equivalent to RMB66,018 million,an increase of 16.37% from the end of 2016 (RMB56,732 million). The breakdown by currencies is asfollows:Unit: RMB millionRMB equivalentCurrencyAs at30 June2017As at31 December2016Movement(%)USD 7,097 7,953 –10.76EUR 6,275 4,215 48.87KRW 1,026 994 3.22RMB 51,620 43,570 18.48Total 66,018 56,732 16.37

71Management Discussion and AnalysisAs at 30 June 2017, the Group’s interest-bearing liabilities included obligations under finance leasesequivalent to RMB64,421 million, an increase of 5.54% from the end of 2016 (RMB61,041 million).The breakdown by currencies is as follows:Unit: RMB millionRMB equivalentCurrencyAs at30 June2017As at31 December2016Movement(%)USD 37,419 44,913 –16.69SGD 694 739 –6.09JPY 304 326 –6.75HKD 758 840 –9.76RMB 25,246 14,223 77.50Total 64,421 61,041 5.54Interest Rate FluctuationThe Group’s total interest-bearing liabilities (including long-term borrowings, short-term bankborrowings, obligations under finance leases, bonds payable and short-term debentures) as at 31December 2016 and 30 June 2017 were equivalent to RMB117,773 million and RMB130,439 million,respectively, of which short-term interest-bearing liabilities accounted for 29.96% and 36.26%,respectively. Most of the long-term interest-bearing liabilities were liabilities with floating interestrates. Both the short-term and long-term interest-bearing liabilities were affected by fluctuations incurrent market interest rates.The Group’s interest-bearing liabilities were primarily denominated in USD and RMB. As at 31December 2016 and 30 June 2017, the Group’s liabilities denominated in USD accounted for 44.89%and 34.13%, respectively, of total interest-bearing liabilities while liabilities denominated in RMBaccounted for 49.07% and 58.93%, respectively, of total interest-bearing liabilities. Fluctuations inthe USD and RMB interest rates have and will continue to have significant impact on the Group’sfinance costs.As at 31 December 2016 and 30 June 2017, the notional amounts of the outstanding interest rateswap agreements of the Group were USD1,636 million and USD1,528 million, respectively. Theseagreements will expire between 2018 and 2025.

China Eastern Airlines Corporation LimitedInterim Report 2017 72Management Discussion and AnalysisExchange Rate FluctuationAs at 30 June 2017, the Group’s total interest-bearing liabilities denominated in foreign currencies,amounted to RMB53,573 million, of which USD liabilities accounted for 83.09% of the total amount.Therefore, a significant fluctuation in the exchange rates will subject the Group to significantforeign exchange loss/gain arising from the exchange of foreign currency denominated liabilities,which affects the profitability and development of the Group. The Group typically uses hedgingcontracts for foreign currencies to reduce the foreign exchange risks for foreign currency revenuesgenerated from flight ticket sales and liabilities required to be paid in foreign currencies. Thehedging contracts for foreign currencies partly involve the sales of Japanese Yen and the purchaseof USD at fixed exchange rates. As at 31 December 2016 and 30 June 2017, the outstanding foreigncurrency hedging contracts held by the Group amounted to a notional amount of USD440 millionand USD1,244 million, respectively, and will expire between the second half of 2017 and 2018.In the first half of 2016, the Group’s net exchange losses amounted to RMB1,355 million ascompared to the net exchange gains of RMB674 million in the first half of 2017.Fluctuation of Jet Fuel PricesIn the first half of 2017, if the average price of jet fuel had increased or decreased by 5%, jet fuelcosts of the Group would have increased or decreased by approximately RMB607 million, assumingall other variables remain constant.In the first half of 2017, the Group did not conduct any aviation fuel hedging activities.Pledges on Assets and Contingent LiabilitiesThe Group generally finances its purchases of aircraft through finance leases and bank loanssecured by its assets. As at 30 June 2017, the value of the Group’s assets used to secure certainbank loans decreased by 28.50% to RMB12,555 million as compared to RMB17,559 million as at theend of 2016.As at 30 June 2017, the Group had no significant contingent liabilities.Human ResourcesAs at 30 June 2017, the Group had 72,377 employees, the majority of whom were located in thePRC. The wages of the Group’s employees generally consisted of basic salaries and performancebonuses.

73Management Discussion and AnalysisCOMPLIANCE WITH THE RELEVANT LAWS AND REGULATIONS WHICHMAY HAVE A SIGNIFICANT IMPACT ON THE COMPANYAs at 30 June 2017, the Board was not aware of any significant matters which may cause impacton the Group or any non-compliance with the laws and regulations which may have a significantimpact on the Group.RISK ANALYSIS1. Macro-economic RiskThe aviation transportation industry is closely connected to macro-economic development.The civil aviation transportation industry is more sensitive to macro-economic climate, whichdirectly affects the development of economic activities, disposable income of residents,degree of trade protectionism and changes in the amount of import and export activities.These factors will in turn affect the demand for passenger and cargo services. If the macro-economicclimate worsens, the Company’s results of operations and financial condition maybe adversely affected.The Company paid close attention to the changes in international and national macroeconomicconditions and proactively capitalized on the opportunities derived from the “OneBelt One Road” initiative of the Chinese government, establishment of Xiongan New District,economic restructuring, upgrade of consumption level of residents, development of tourismeconomy and the construction of Beijing’s new airport to optimize allocation of flightcapacity, production structure and marketing and sales, in order to achieve favorable resultsof operations.2. Policy and Regulation RiskThe aviation transportation industry is relatively sensitive to policies and regulations.Changes in domestic and foreign economic environment and the continuous developmentof the aviation industry could result in the relevant laws and regulations as well as industryand visa policies being adjusted accordingly. Such changes may, to a certain extent, resultin uncertainties in the future business development and operating results of the Company.With respect to industrial policies and regulations, the Company played an active role invarious discussions concerning formulation and refinement, and considered the latestchanges so as to seize the development opportunities arising from such updates andprudently respond to the uncertainties arising from the changes in policies and regulations.

China Eastern Airlines Corporation LimitedInterim Report 2017 74Management Discussion and Analysis3. Flight Safety RiskFlight safety is the precondition and foundation for airlines to maintain normal operationsand good reputation. Bad weather, mechanical failure, human errors, aircraft and equipmentirregularities or failures and other force majeure events may have an adverse effect on theflight safety of the Company.The Company regularly convened flight safety meetings, analyzed and reported on theCompany’s flight status in a timely manner and planned for flight safety management.Through effective measures such as the enforcement of safety responsibilities, assessmenton the efficiency of the safety management system and establishment of a comprehensiveflight training control mechanism, the Company strengthened its risk prevention ability asregards to flight safety to ensure operational safety on an ongoing basis.4. Terrorist Attack RiskInternational terrorist attacks targeting aircraft and airport not only directly threatensflight safety, aviation security, operational safety and the safety of overseas institutionsand employees, but also brings about on-going adverse impact on the outbound tourismdemand for places where terrorist attacks have taken place.During the first half of 2017, the Company strictly implemented the aviation securityrequirements imposed by the CAAC and revised the aviation security proposal to improve itsaviation safety system. With reference to the typical cases regarding aviation safety in recentyears, the Company conducted simulated trainings and comprehensive counter-terrorismdrills onboard, with a view to enhancing the aviation security team’s ability to performtheir duties and their service quality, which would in turn improve their responsiveness inhandling emergencies. The Company has launched an online electronic information platformfor its aviation safety system and kicked off the construction of the intelligence informationsystem of aviation safety to increase the utilization of information technology in aviationsafety.In light of the shrunken demand for passenger transportation induced by the domesticand overseas terrorist attacks, the Company will rely on the dynamic marketing analysismechanism so as to study, optimize and adjust the flight capacity of the relevant routes in atimely manner.

75Management Discussion and Analysis5. Core Resources RiskThe rapid growth in the aviation transportation industry has caused competition amongairlines for core human resources (such as management personnel in key positions andprofessional technical staff), air traffic rights resources and time slot resources. If thecore resources reserves of the Company fail to adequately support the rapid growth ofthe Company’s operational scale, the business and operations of the Company may beadversely affected.The Company promoted the building of corporate culture of “Love at China Eastern Airlines”and further improved its incentive scheme for core technical staff to inspire loyalty of corepersonnel. The Group proactively developed a core back-up workforce through providingtraining programs to a pool of multi-tier back-up management personnel and launching ofcore technical staff recruitment plan. Meanwhile, the Company proactively coordinated withthe industry regulators with respect to air traffic rights and time slot resources, by activelyinitiating the application of international air traffic rights, and proactively participatingin the market competition for time slot resources. In the future, as a main base airline,the Company will further leverage on the market opportunities brought about by thecommencement of operation of the new airport in Beijing and continuously expand andoptimize its routes through utilizing the cooperation platform of the SkyTeam Alliance.6. Competition RiskWith the liberalisation of the domestic aviation market, development of low-cost airlines andthe international airlines’ increasing inputs on flight capacity in the Chinese market, futurecompetition in the domestic and overseas aviation transportation industries may intensifyand may bring uncertainty to the Company’s resources of air traffic rights and time slots,ticket price levels and market shares, and the results of operations of the Company may beadversely affected accordingly.There is a certain level of overlap between railway transportation, highway transportation,ship transportation and air transportation in certain markets. As the impact from railway,highway and ship transportation on the domestic civil aviation market has becomenormalised and webified, certain routes of the Company will experience larger competitivepressure.

China Eastern Airlines Corporation LimitedInterim Report 2017 76Management Discussion and AnalysisThe Company actively responded to the industry competition, strove for additions of airtraffic rights and time slot resources in hub markets and core markets, steadily improvedthe aircraft utilization rate and consolidated and expanded market share in the hub marketsand core markets. Leveraging on the SkyTeam Alliance platform, the Company enhancedits strategic cooperation with Delta Air Lines and AFK and consolidated its cooperation withnon-SkyTeam Alliance members such as Qantas to develop a highly efficient and convenientflight network which covered the whole of PRC and connected to the whole world.Under the impact of other means of transportation, the Company focused on the hubmarkets and core markets, expanded its route network, improved flight connection andreinforced complete access to the network and the sale of international interline transitproducts. Meanwhile, the Company put great effort into maintaining its punctuality rate at arelatively high level and capitalized on the speed advantage of aviation transportation.7. Risk Associated with the Fluctuation of Jet Fuel PricesJet fuel is one of the major expenses of airlines. Significant fluctuations of internationaloil prices will significantly impact jet fuel prices and the Company’s revenue from fuelsurcharge and accordingly the Company’s results of operations.In the first half of 2017, setting aside the adjustment in factors such as fuel surcharge, if theaverage price of jet fuel had increased or decreased by 5%, jet fuel costs of the Companywould have increased or decreased by approximately RMB607 million. In the first half of2017, the Company has not conducted aviation fuel hedging activities.The Company will actively review the trend of oil prices and captialise on the favourablemarket opportunities to carefully conduct aviation fuel hedging activities.8. Exchange Rate Fluctuation RiskAs the Company’s foreign currency liabilities are mainly USD-denominated, if the exchangerate of USD against RMB fluctuates significantly, USD-denominated liabilities will thereforegenerate a large amount of foreign exchange loss/gain, which directly affects the Company’sprofit for that period and causes larger impact on the Company’s operating results.

77Management Discussion and AnalysisAs at 30 June 2017, if USD had strengthened or weakened by 1% against RMB with all othervariables held constant, the effect on the Company’s net profit and other comprehensiveincome would have been as follows:Unit: RMB millionEffect onthe net profitEffect on othercomprehensive incomeAppreciation Depreciation Appreciation DepreciationUSD –322 322 63 –63In the first half of 2017, the Company continued to expand its financing channels andproactively optimized the mix of currency denomination of the Company’s debts. As at 30June 2017, the proportion of USD-denominated debts in the Company’s interest-bearingdebts decreased to 34.13%.In the future, the Company will reinforce its review on the foreign exchange market, furtherexpand the variety of its financing instruments and improve the Company’s debt andcurrency structure in order to minimize the adverse impacts arising from exchange ratefluctuations on the Company’s operation.9. Interest Rate Fluctuation RiskThe majority of the Company’s liabilities are attributable to USD-denominated liabilities andRMB-denominated liabilities generated from introduction of aircraft, engines and aviationequipment. The adjustment in interest rates of USD and RMB may cause changes in theborrowing costs of the Company’s existing loans that carry floating interest rates, as well asfuture finance costs, which in turn may affect the Company’s finance costs.As at 30 June 2017, assuming all other variables remain constant, if the interest rate hadincreased or decreased by 25 basis points, the effect on the Company’s net profit and othercomprehensive income would have been as follows:Unit: RMB millionEffect onthe net profitEffect on othercomprehensive incomeAppreciation Depreciation Appreciation DepreciationFloating rate instruments –129 129 19 –19

China Eastern Airlines Corporation LimitedInterim Report 2017 78Management Discussion and AnalysisThe Company will further strengthen research on interest rate market, seize favourablemarket opportunities, reasonably utilise financial instruments such as derivatives andfurther optimise the proportion of floating-rate debts to the USD-denominated debts of theCompany in the future. At the same time, the Company will make good use of the trend ofthe RMB interest rate to minimize RMB finance costs.10. Information Technology Safety RiskThe development of all businesses in the Company’s operational process is closely relatedto the information network system which imposes new requirements on traditionalmanagement and work processes of the Company. If there are any design discrepancies,operational default or interruption in the information network system of the Company, orif it experiences external network attacks, the Company’s business and operations may beaffected or customers’ data may be leaked. The occurrence of any of the foregoing mayhave an adverse effect on the brand image of the Company. Future upgrades of informationtechnology that are required will challenge the reliability of the Company’s existing systems.Focusing on the “three centres in two locations” plan, the Company forged ahead withthe construction of the Xi’an data centre and disaster backup facility, in order to constructa global-based security and servicing system. The Company implemented securityprotection around the boundaries of the internet and the data centre and optimized themulti-dimensional security protection system, which effectively defended the WANNACRYransomware virus. The Company also conducted information system emergency responsetraining and security code review through the code quality analytics platform, whichsystematically elevated the overall security protection level on the Company’s informationsystem.11. Development and Transformation RiskWhile the Company expands to new international markets, carries out external investments,mergers and acquisitions and conducts structural adjustments in its existing businessesand assets, it may face risks including business decision making, laws, management andcompetition risks which may affect the results of implementing the development strategiesof the Company.During the process of transformation, the Company explores the e-commerce marketto reduce aviation operation costs and innovative asset management methods, andcommences structural adjustments in its existing businesses and assets, with newrequirements for the overall operating management abilities of the Company. Some ofthe Company’s transforming projects or adjusted businesses may be unable to achieveexpected goals.

79Management Discussion and AnalysisThe Company has been making improvements to the foreign investment managementsystem and will enhance the research and substantiation of projects and refine the riskmanagement mechanism through conducting due diligence and asset valuation duringthe process of expansion into the new international markets, external investment andacquisition and mergers, and structural adjustments in its existing businesses and assets.12. Suppliers RiskThe aviation transportation industry requires advanced technology and high operating costs.There are limited available suppliers in respect of key operating resources including aircraft,engines, flight spare parts, jet fuel and information technology services. Airlines generallyobtain operating resources through centralised purchases to reduce operating costs. If theCompany’s major suppliers are adversely affected, this may have an adverse impact on thebusiness and operations of the Company.The Company has been focusing on the suppliers who are closely related to the Company’sproduction and operation, while the supplier management team analyzed the contractualperformance of suppliers and conducted assessment on suppliers regularly. The Companypaid close attention to the changing market conditions of the types of material highlyrelevant to its production and operation, whereas the collection and analysis of thefluctuations in price was conducted by the procurement department.13. Securities Market Fluctuations RisksThe Company’s share price is not only dependent on its current results and projection forfuture operations, but also on factors including policy environment, macroeconomy, flowof market capital and investor sentiment. The Company’s share price may be subject tosignificant changes due to the aforementioned factors, which may directly or indirectlyresult in loss to the investors, which in turn will reduce the travel demand from businesstravelers and affect the Company’s capital operations and implementation of projects.The Company continued to enhance its corporate governance standards, fulfill its obligationsof information disclosure, improve its management ability and strive for outstandingoperating results. In the meantime, the Company strengthened communication with thecapital markets and various investors, paid close attention to the Company’s share priceperformance and media coverage and gave timely response to the market to minimise thepossibility of unusual movement of the Company’s share prices.

China Eastern Airlines Corporation LimitedInterim Report 2017 80Management Discussion and Analysis14. Other Force Majeure and Unforeseeable RisksThe aviation transportation industry is highly sensitive to external factors. Natural disasters,public health emergencies, geopolitical instability and even outbreak of local wars aroundthe globe may affect market demand and the normal operation of airlines. Flight suspension,decrease in passenger capacity and income, as well as increased safety and insurance costsmay adversely affect the business and operations of the Company.The Company strove to develop and refine its emergency response mechanism andemergency response plan in order to mitigate the adverse impacts arising from other forcemajeure and unforeseeable risks.OUTLOOK FOR THE SECOND HALF OF 2017The Group would like to bring to the attention of readers of this report that this report containscertain forward-looking statements, including a general outlook of international and domesticeconomies and the aviation industry, and descriptions of the Group’s future operating plansfor the second half of 2017 and beyond. Such forward-looking statements are subject to manyuncertainties and risks. The actual events that occur may be different from these forward-lookingstatements which, therefore, do not constitute any commitment by the Group to the futureoperating results.Looking into the second half of 2017, the global economic recovery will continue its growingtrend. However, turbulent geo-political landscape in certain countries and regions and rising trendof trade protectionism will still give rise to certain uncertainties underlying the global economicrecovery. Benefited from the further implementation of supply-side structural reforms and theaccelerated implementation of innovation-driven development strategies, the stable and positivedevelopment momentum of China’s economy is expected to be further sustained with a moderategrowth.In view of a relatively complicated external environment and intense market competition, theGroup will actively embrace challenges by focusing on the following areas and steadily promotethe materialization of all work plans:1. with respect to safe operation, the Group will conduct safety inspection on the projectsof key operating units, strengthen targeted flight training and prevention of risks in flying,improve the standardization of process of aircraft maintenance and repair and strengthenthe protection for special flights, in order to secure the safe operation of the Group;

81Management Discussion and Analysis2. in terms of marketing, the Group will enhance its ability in market projection and responseto changes, as well as allocation of flight capacity, ensure sufficient flight capacity during thepeak season in summer through securing time slot resources, and increase the proportionof direct sales and scale of customer base by strengthening its pricing control, with a viewto striving for improvement and enhancement of the revenue level;3. for customer services, the Group will improve service standard, commence projectservices enhancement programme, further uplift the standardization of services, promoteand increase the utilization of self check-in machines and self-service bag drop services,innovate in-flight sales of gift items and improve the quality of in-flight catering to enhancepassenger experience, and facilitate the service system construction of new generationcabin; with the introduction of the new generation of B787 and A350 remote wide-bodyaircraft, to promote the construction of a new generation cabin service system;4. for reform and transformation, the Group will promote the implementation of strategies inrelation to going international and online. China Eastern Airlines E-Commerce Co., Limitedwill actively broaden the application of frequent flyers points and increase the variety ofnon-aviation products to improve its ability in realising resources. China United Airlines willexpand the scale of its direct sales business to explore revenue from non-aviation businessand further enhance the operating quality as a low-cost airline. Market-oriented reformof ground services will be fostered to optimize the review and management of humanresources and to continuously deepen reform in mechanism and system;5. in relation to streamlining management, the Company will further optimize its qualificationmanagement, resource allocation, unified operations and response mechanism, promotethe establishment of an information technology-based operating system to streamline andincrease the efficiency of the system. The Company will expand its financing channels andoptimize its debt structure through tightened cost control to increase overall operatingefficiency; and6. for the Party building, the Company will further strengthen the Party’s disciplinecomprehensively and adopt a more systematic, scientific and normalized approach towardsParty building, in order to reinforce the leading role of the Party building.

China Eastern Airlines Corporation LimitedInterim Report 2017 82Management Discussion and AnalysisFLEET PLANIntroduction and Retirement Plan of Aircraft for the Second Half of2017 to 2019(Units)Second Half of 2017 2018 2019Model Introduction Retirement Introduction Retirement Introduction RetirementWide-body aircraft 5 2 14 14 11 –B777 Series 1 – – – – –A330 Series 4 – 8 10 – –A350 Series – – 2 – 5 –B787 Series – – 4 – 6 –B767 Series – 2 – 4 – –Narrow-body aircraft 45 4 53 1 63 –A320 Series 15 1 16 – 25 –B737 Series 30 3 37 1 38 –Total 50 6 67 15 74 –Notes:1. As at 30 June 2017, according to confirmed orders, the Group planned to introduce 72 aircraft and retire26 aircraft between 2020 and 2022.2. The abovementioned models, quantity and timing for the introduction and retirement of aircraft will besubject to adjustment based on market conditions and flight capacity allocation of the Group.

83Management Discussion and AnalysisSIGNIFICANT EVENTS1. Share CapitalAs at 30 June 2017 and up to the date of this report, the share structure of the Group is setout as follows:As at 30 June 2017Up to the date ofthis reportTotal numberof sharesApproximatepercentage inshareholding(%)Total numberof sharesApproximatepercentage inshareholding(%)I A shares 9,808,485,682 67.80 9,808,485,682 67.801. Listed shares with trading moratorium 1,327,406,822 9.18 – –2. Listed shares without trading moratorium 8,481,078,860 58.62 9,808,485,682 67.80II H shares 4,659,100,000 32.20 4,659,100,000 32.20III Total number of shares 14,467,585,682 100.00 14,467,585,682 100.00Note:Since 3 July 2017, the 1,327,406,822 listed A shares with trading moratorium which were held by ShanghaiLicheng Information Technology Consulting Co., Ltd., China National Aviation Fuel, China COSCO ShippingCorporation Limited and Caitong Fund Management Co., Ltd. have been listed for trading on the ShanghaiStock Exchange.

China Eastern Airlines Corporation LimitedInterim Report 2017 84Management Discussion and Analysis2. Substantial ShareholdersSo far as the Directors are aware, each of the following persons, not being a Director,chief executive, Supervisor or member of senior management, had, as at 30 June 2017,an interest and/or short position in the Company’s shares or underlying shares (as thecase may be) which would fall to be disclosed to the Company and the Hong Kong StockExchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or was otherwise, asat 30 June 2017, interested in 5% or more of any class of the then issued share capital of theCompany, or was otherwise, as at 30 June 2017, a substantial shareholder (as defined in theListing Rules) of the Company:As at 30 June 2017Name of ShareholdersType ofsharesNumber ofshares heldApproximatepercentage ofshareholdingin theCompany’stotal issuedshare capitalApproximatepercentage ofshareholdingin theCompany’stotal issuedA sharesApproximatepercentage ofshareholdingin theCompany’stotal issuedH sharesCEA Holding (Note 1) A shares 5,530,240,000 38.23% 56.38% –CEA Holding (Note 2) H shares 2,626,240,000 18.15% – 56.37%HKSCC Nominees Limited(Note 3)H shares 4,182,285,289 28.91% – 89.77%Delta Air Lines (Note 4) H shares 465,910,000 3.22% – 10.00%China National Aviation Fuel(Note 5)A shares 580,920,725 4.02% 5.92% –China Securities FinanceCorporation Limited(Note 6)A shares 573,643,758 3.97% 5.85% –

85Management Discussion and AnalysisNotes:Based on the information available to the Directors as at 30 June 2017 (including such information as wasavailable on the website of the Hong Kong Stock Exchange) and so far as they are aware of, as at 30 June2017:1. Among such A shares, 5,072,922,927 A shares (representing approximately 51.72% of theCompany’s then total issued A shares) were held by CEA Holding in the capacity of beneficialowner; and 457,317,073 A shares (representing approximately 4.66% of the Company’s then totalissued A shares) were held by CES Finance in the capacity of beneficial owner, and CES Financewas 100% held by CEA Holding.2. Such H shares were held by CES Global in the capacity of beneficial owner, and CES Global was100% held by CEA Holding.3. Among the 4,182,285,289 H shares held by HKSCC Nominees Limited, 2,626,240,000 H shares(representing approximately 56.37% of the Company’s then total issued H shares) were held byCES Global in the capacity of beneficial owner, and CES Global was 100% held by CEA Holding.4. Such H shares were held by Delta Air Lines in the capacity of beneficial owner, and representedapproximately 10.00% of the Group’s then total issued H shares.5. Such A shares were held by China National Aviation Fuel in the capacity of beneficial owner, andrepresented approximately 5.92% of the Group’s then total issued A shares.6. Such A shares were held by China Securities Finance Corporation Limited in the capacity ofbeneficial owner, and represented approximately 5.85% of the Group’s then total issued A shares.Save as disclosed above, based on the information available to the Directors and so faras they are aware, as at 30 June 2017, among the 4,182,285,289 H shares held by HKSCCNominees Limited, no other person had any interest or short position in the Company’sshares or underlying shares (as the case may be) which would fall to be and was disclosedto the Company and the Hong Kong Stock Exchange under the provisions of Divisions 2 and3 of Part XV of the SFO.

China Eastern Airlines Corporation LimitedInterim Report 2017 86Management Discussion and Analysis3. Shareholdings of Directors, Supervisors and Senior ManagementNames, relevant information of and shares held by the Directors, the Supervisors andmembers of senior management of the Company as at 30 June 2017 are as follows:Name Position AgeEffective date and expirydate of appointmentNumber oflistedA shares ofthe Companyheld–personalinterestCapacity inwhich theA shareswere held(shares)Liu Shaoyong Chairman 59 15 June 2016 30 June 2019 0 –Ma Xulun Vice Chairman, President 53 15 June 2016 30 June 2019 0 –Li Yangmin Director, Vice President 54 15 June 2016 30 June 2019 3,960(Note 1)Beneficial OwnerXu Zhao Director 48 15 June 2016 30 June 2019 0 –Gu Jiadan Director 61 15 June 2016 30 June 2019 0 –Tang Bing Director, Vice President 50 15 June 2016 30 June 2019 0 –Tian Liuwen Director, Vice President 58 15 June 2016 30 June 2019 0 –Li Ruoshan IndependentNon-executive Director68 15 June 2016 30 June 2019 0 –Ma Weihua IndependentNon-executive Director69 15 June 2016 30 June 2019 0 –Shao Ruiqing IndependentNon-executive Director60 15 June 2016 30 June 2019 0 –Cai Hongping IndependentNon-executive Director63 15 June 2016 30 June 2019 0 –Xi Sheng Chairman of the SupervisoryCommittee54 15 June 2016 30 June 2019 0 –Ba Shengji Supervisor 59 15 June 2016 30 June 2019 0 –Hu Jidong Supervisor 59 15 June 2016 30 June 2019 0 –Feng Jinxiong Supervisor 55 15 June 2016 30 June 2019 0 –

87Management Discussion and AnalysisName Position AgeEffective date and expirydate of appointmentNumber oflistedA shares ofthe Companyheld–personalinterestCapacity inwhich theA shareswere held(shares)Jia Shaojun Supervisor 50 15 June 2016 30 June 2019 0 –Wu Yongliang Vice President, Chief FinancialOfficer54 15 June 2016 30 June 2019 3,696(Note 2)Beneficial OwnerFeng Liang Vice President 53 15 June 2016 30 June 2019 0 –Jiang Jiang Vice President 53 22 February 2017 30 June 2019 0 –Wang Jian Board Secretary, CompanySecretary and AuthorisedRepresentative44 15 June 2016 30 June 2019 0 –Sun Youwen Vice President 57 15 June 2016 22 February 2017 62,731(Note 3)–Total – – – – 70,38 7 –Note 1: representing approximately 0.000027% of the Company’s total issued shares as at 30 June 2017.Note 2: representing approximately 0.000026% of the Company’s total issued shares as at 30 June 2017.Note 3: representing approximately 0.00043% of the Company’s total issued shares as at 30 June 2017.Save as disclosed above, as at 30 June 2017, none of the Directors, chief executive,Supervisors or members of senior management of the Company and their respectiveassociates had any other interest or short position in the shares, underlying shares and/ordebentures (as the case may be) of the Company and/or any of its associated corporations(within the meaning of Part XV of the SFO) which was required to be (i) notified to theCompany and the Hong Kong Stock Exchange pursuant to the provisions of Divisions 7 and8 of Part XV of the SFO (including any interest or short position which were taken or deemedto have under such provisions of the SFO), or (ii) recorded in the register required to be keptby the Company pursuant to section 352 of the SFO, or (iii) notified to the Company and theHong Kong Stock Exchange pursuant to the Model Code as set out in the Appendix 10 tothe Listing Rules (which shall be deemed to apply to the Supervisors to the same extent as itapplied to the Directors for this purpose).

China Eastern Airlines Corporation LimitedInterim Report 2017 88Management Discussion and Analysis4. Transfer of Equity Interest in Eastern LogisticsOn 29 November 2016, the Company entered into the “Eastern Logistics Share TransferAgreement” with Eastern Airlines Industry Investment, a wholly-owned subsidiary of CEAHolding, the controlling shareholder of the Company, and transferred 100% equity interest inEastern Logistics to Eastern Airlines Industry Investment. The above connected transactionof equity transfer was approved at the Company’s first extraordinary general meeting in2017. As at 8 February 2017, the Company had transferred 100% equity interest in EasternLogistics to Eastern Airlines Industry Investment and completed industrial and commercialregistration.5. DividendsThe Board did not recommend the payment of an interim dividend for the half year ended30 June 2017.6. Purchase, Sale or Redemption of SecuritiesDuring the first half of 2017, neither the Company nor its subsidiaries purchased, sold orredeemed any of its listed securities (“securities”, having the meaning ascribed theretounder Section 1 of Appendix 16 to the Listing Rules).During the six months ended 30 June 2017, the Company has adopted the Model Code asthe securities transactions code for the Directors. Having made specific enquiries to allthe Directors, it is the Company’s understanding that the Directors have complied with therequirements as set forth in the Model Code regarding Directors’ securities transactions.7. Material LitigationDuring the six months ended 30 June 2017, the Group was not involved in any materiallitigation, arbitration or claim.

89Management Discussion and Analysis8. Corporate GovernanceThe Board has reviewed the relevant provisions and corporate governance practices underthe codes of corporate governance adopted by the Company, and is of the view that theCompany’s corporate governance practices during the six months ended 30 June 2017 metthe requirements under the code provisions in the Code set out in Appendix 14 to the ListingRules.Pursuant to the latest regulations promulgated by the CSRC, the Shanghai Stock Exchange,the Hong Kong Stock Exchange and in line with the Company’s development needs, theCompany comprehensively reviewed the relevant regulations regarding the Board andsecurities affairs, and revised the Articles and rules of meeting of general meetings, toeffectively safeguard the standardised operation of the Company.To further strengthen the awareness of compliance among the Directors, Supervisors andsenior management of the Company, and to enhance their understanding and applicationof the relevant rules, the Company has comprehensively reviewed and implemented writtenmonitoring rules for listed companies promulgated by regulatory bodies including the CSRC,the Shanghai Stock Exchange, the Hong Kong Stock Exchange and the New York StockExchange in the half year, as well as the latest development of the relevant laws, rules andregulations regarding the duties and responsibilities of Directors, Supervisors and seniormanagement of a listed company, and arranged training and learning sessions.9. Audit and Risk Management CommitteeThe Audit and Risk Management Committee has reviewed with the management of theCompany the accounting principles and methods adopted by the Group, and has discussedwith the Board the internal controls and financial reporting issues, including a review of theconsolidated results for the six months ended 30 June 2017 prepared in accordance withIFRS.The Audit and Risk Management Committee of the Company has no disagreement with theaccounting principles and methods adopted by the Group.

China Eastern Airlines Corporation LimitedInterim Report 2017 90Management Discussion and Analysis10. Changes in PersonnelOn 22 February 2017, the fourth ordinary meeting of the eighth session of the Board hasresolved to appoint Mr. Jiang Jiang as a vice president of the Company for a term of office inline with the current session of the Board. On the same date, Mr. Sun Youwen ceased to bea vice president of the Company due to change of job assignments.11. Change of Particulars of Directors or Supervisors under Rule13.51B(1) of the Listing RulesNameName ofother entitiesPosition(s) heldin other entitiesDate ofappointmentDate ofcessationMa Weihua China Resources Land Limited Independent Director July 2013 June 2017Cai Hongping Bank of Communications Co., Ltd. Independent Director June 2017Jia Shaojun CES International FinancialLeasing Corporation LimitedChairman July 2017Feng Liang Xi’an Eastern Safran Landing GearSystem Maintenance Co., Ltd.Chairman July 2017Jiang Jiang China Eastern AirlinesWuhan Co., Ltd.Director and president June 2014 April 2017Eastern Business AirlinesService Co., Ltd.Executive Director April 2017

91Management Discussion and Analysis12. Provision of guaranteesUnit: RMB thousandGuarantees provided by the Company and its subsidiaries for subsidiariesTotal amount of guarantees provided for subsidiariesduring the Reporting Period 3,042,330Total amount of guarantees for subsidiaries outstandingat the end of the Reporting Period 6,173,332Total amount of guarantees of the Company (including those providedfor subsidiaries)Total amount of guarantees 6,173,332Total amount of guarantees as a percentage of the Company’snet assets (%) 13.92Including:Guarantees provided for shareholders, de facto controllers andrelated parties –Amount of debt guarantees provided directly or indirectly forcompanies with debt ratio of over 70% 6,042,330The amount of guarantees in excess of 50% of the net assets –Total amount of the above three guarantee items 6,042,330Note: The debt guarantees provided by the Company directly or indirectly for companies with debtratio of over 70% as described above amounted to RMB6.042 billion and were provided by theCompany to Eastern Air Overseas, its wholly-owned subsidiary, which serves as an overseasfinancing platform of the Company. The amount of guarantees is within the mandate limitgranted at the general meeting.

China Eastern Airlines Corporation LimitedInterim Report 2017 92Management Discussion and Analysis13. MiscellaneousThe Group wishes to highlight the following information:1. From January to August 2017, the Company redeemed the 2016 seventh, twelfth toseventeenth, 2017 first to fourth and sixth tranches of super short-term commercialpaper. For details, please refer to the announcements of the Company dated 6January, 24 February, 12 April, 19 April, 28 April, 17 May, 9 June, 14 June, 10 July and16 August 2017 published on the website of the Hong Kong Stock Exchange.2. From January to August 2017, the Company completed the issuance of the 2017 firstto eighth tranches of super short-term commercial paper. For details, please referto the announcements of the Company dated 19 January, 24 February, 2 March, 25April, 15 June, 29 June, 21 August and 22 August 2017 published on the website of theHong Kong Stock Exchange.3. On 1 January 2017, the Company entered into the Bellyhold Space ManagementAgreement with China Cargo Airlines. For details, please refer to the announcementsof the Company dated 3 January and 17 January 2017 published on the website of theHong Kong Stock Exchange.4. On 17 January 2017, the resolution regarding the provision of guarantee to some ofthe Company’s subsidiaries was considered and approved by the Board at the 2017first regular meeting. For details, please refer to the announcement of the Companydated 17 January 2017 published on the website of the Hong Kong Stock Exchange.5. On 20 March 2017, the Company paid for the accrued interest from 18 March 2016 to17 March 2017 of the 2012 first tranche of corporate bonds. For details, please referto the announcement of the Company dated 10 March 2017 published on the websiteof the Hong Kong Stock Exchange.

93Management Discussion and Analysis6. On 28 March 2017, the Company paid for the accrued interest from 28 September2016 to 27 March 2017 of the bonds denominated in Korean Won. For details, pleaserefer to the announcement of the Company dated 21 March 2017 published on thewebsite of the Hong Kong Stock Exchange.7. In April 2017, Dagong Global Credit Rating Co., Ltd, a credit rating agency, issued theTracking Credit Rating Report of China Eastern Airlines Corporation Limited and itsRelevant Debt of 2017. For details, please refer to the announcement of the Companydated 8 May 2017 published on the website of the Hong Kong Stock Exchange.8. On 15 June 2017, the Company paid for the accrued interest from 15 June 2016to 14 June 2017 of the 2016 first tranche of medium-term notes. On 14 July 2017,the Company paid for the accrued interest from 15 July 2016 to 14 July 2017 of the2016 second tranche of medium-term notes. On 20 July 2017, the Company paid forthe accrued interest from 20 July 2016 to 19 July 2017 of the 2016 third tranche ofmedium-term notes. For details, please refer to the announcements of the Companydated 7 June, 26 June and 13 July 2017 published on the website of the Hong KongStock Exchange.9. On 28 June 2017, the 2016 annual profit distribution proposal was considered andapproved at the 2016 general meeting of the Company. It was approved that the2016 annual distribution be approximately RMB708.9 million in cash. Based on thetotal share capital of 14,467,585,682 shares of the Company, the cash distribution pershare would be RMB0.049 (inclusive of tax) in cash, and will be distributed to holdersof A shares of the Company in RMB and to holders of H shares of the Company inHKD. For details, please refer to the announcements of the Company dated 12 Mayand 28 June 2017 published on the website of the Hong Kong Stock Exchange.10. On 28 June 2017, the resolution in relation to the Company’s appointment of the PRCdomestic auditors and international auditors for financial reporting for the year 2017,and to authorise the Board to determine their remuneration and the resolution inrelation to the Company’s appointment of the auditors for internal control for the year2017, and to authorise the Board to determine their remuneration were consideredand approved at the 2016 general meeting of the Company. For details, please referto the announcements of the Company dated 30 March and 28 June 2017 publishedon the website of the Hong Kong Stock Exchange.

China Eastern Airlines Corporation LimitedInterim Report 2017 94Management Discussion and Analysis11. On 28 June 2017, the resolution in relation to the amendments to the article in theArticles of Association of the Company was considered and approved at the 2016general meeting of the Company. For details, please refer to the announcements ofthe Company dated 27 April and 28 June 2017 published on the website of the HongKong Stock Exchange.12. On 28 June 2017, the resolution in relation to the amendments to parts of the terms ofthe rules of procedures for general meeting was considered and approved at the 2016general meeting of the Company. For details, please refer to the announcements ofthe Company dated 27 April and 28 June 2017 published on the website of the HongKong Stock Exchange.13. On 27 July 2017, the Company entered into the Marketing Agreement with AFK.For details, please refer to the announcement of the Company dated 28 July 2017published on the website of the Hong Kong Stock Exchange.14. On 10 August 2017, the Company entered into a novation agreement with CESLeasing (which is directly held as to 50% by CEA Holding and 35% by CES Global, anindirect wholly-owned subsidiary of CEA Holding) or its wholly-owned subsidiary(ies)(the “CES Leasing Group”), pursuant to which, the Company agreed to novate andCES Leasing Group agreed to assume, from the date of the novation agreement,the rights (including the purchase rights) and obligations in and under the purchaseagreement entered into on 9 July 2015 by the Company (as purchaser) with BoeingCompany (as seller) in respect of five Boeing 737-800 aircraft (the “Five BoeingAircraft”) at nil consideration. The transaction constituted a connected transactionof the Company. For details, please refer to the announcement published by theCompany on the website of the Hong Kong Stock Exchange on 10 August 2017.15. On 10 August 2017, the Company (as lessee) entered into an aircraft operating leaseagreement with CES Leasing Group (as lessor(s)), pursuant to which, CES LeasingGroup agreed to provide operating leasing to the Company in respect of the FiveBoeing Aircraft. The transaction constitutes a continuing connected transaction of theCompany. For details, please refer to the announcement published by the Companyon the website of the Hong Kong Stock Exchange on 10 August 2017.

95Management Discussion and Analysis16. The estimated transaction caps for the continuing connected transactions, whichwere considered and approved by the Board and at the general meetings of theCompany, and their actual amounts incurred up to 30 June 2017, are set out asfollows:Unit: RMB thousandApproved categoryActual amountincurred up to30 June 20172017estimatedtransaction capsProperty leasing 27,000 80,000Financial services – balance of deposit 1,657,521 10,000,000Financial services – balance of loans – 10,000,000Catering supply services 556,215 1,450,000Import and export services 62,608 430,000Flight support services 135,525 560,000Advertising agency services 9,210 75,000Aircraft finance lease services 664,130 USD2,415 millionor equivalent RMB

China Eastern Airlines Corporation LimitedInterim Report 2017 96Management Discussion and AnalysisApproved categoryActual amountincurred up to30 June 20172017estimatedtransaction capsCivil aviation information network services(pursuant to the Rules Governingthe Listing of Stocks on theShanghai Stock Exchange) 343,021 950,000Aviation supplies maintenance services 67,405 240,000Freight logistics support services(the Company provides servicesto Eastern Logistics) 41,459 300,000Cargo terminal business support services (EasternLogistics provides servicesto the Company) 1,666 500,000Bellyhold space management(pursuant to the Rules Governingthe Listing of Stockson the Shanghai Stock Exchange) 43,538 300,000By order of the BoardChina Eastern Airlines Corporation LimitedLiu ShaoyongChairmanShanghai, the People’s Republic of China29 August 2017As at the date of this report, the Directors include Liu Shaoyong (Chairman), Ma Xulun (ViceChairman, President), Li Yangmin (Director, Vice President), Xu Zhao (Director), Gu Jiadan (Director),Tang Bing (Director, Vice President), Tian Liuwen (Director, Vice President), Li Ruoshan (Independentnon-executive Director), Ma Weihua (Independent non-executive Director), Shao Ruiqing(Independent non-executive Director) and Cai Hongping (Independent non-executive Director).