海航控股(600221) - 2020 Q4 - 年度财报

Report Summary Executive Summary In 2020, *ST Hainan Airlines suffered a 64 billion yuan loss, resulting in 28.4 billion yuan negative net assets and severe insolvency, leading PwC Zhongtian to issue a "disclaimer of opinion" due to reorganization uncertainties | Indicator | 2020 | 2019 | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Operating Revenue | 29.401 billion yuan | 72.389 billion yuan | -59.38% | | Net Profit Attributable to Parent | -64.003 billion yuan | 0.519 billion yuan | -12431.16% | | Net Assets Attributable to Parent | -28.372 billion yuan | 5.1498 billion yuan | Severely Insolvent | | Net Cash Flow from Operating Activities | -0.506 billion yuan | 13.733 billion yuan | -103.69% | - PwC Zhongtian issued a "disclaimer of opinion" on the company's 2020 financial report, primarily due to significant uncertainties arising from the company's bankruptcy reorganization, making it impossible to obtain sufficient and appropriate audit evidence regarding key matters such as related-party guarantees, fund occupation, debt transfers, and asset fair value[3][97][188] - The company was ruled by the Hainan Provincial High People's Court to accept reorganization on February 10, 2021, and is currently in the bankruptcy reorganization phase, facing the risk of being declared bankrupt if reorganization fails, which could lead to delisting[5][83][103] - The company has severe issues with non-operating fund occupation by related parties, with an outstanding balance of 38.003 billion yuan at year-end, alongside significant unapproved external guarantees, exposing serious internal control deficiencies[94][122][170] Company Profile and Key Financial Indicators Company Basic Information Hainan Airlines Holding Co., Ltd. (*ST Hainan Airlines, 600221; *ST Hainan Airlines B, 900945) is a company listed on the Shanghai Stock Exchange, with Liu Weijing as its legal representative, and PwC Zhongtian (Special General Partnership) as its domestic accounting firm - The company's A-share stock ticker is “*ST Hainan Airlines” (600221), and its B-share stock ticker is “*ST Hainan Airlines B” (900945)[13] - PwC Zhongtian (Special General Partnership) served as the auditor for the company's 2020 financial report[14] Key Financial Data and Indicators In 2020, the company's financial condition sharply deteriorated, with operating revenue down 59.38% to 29.401 billion yuan, a net loss of 64.003 billion yuan, and negative net assets of 28.372 billion yuan, indicating severe insolvency Key Accounting Data (RMB) | Key Accounting Data (RMB) | 2020 | 2019 (Adjusted) | Year-over-Year Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenue | 29.401 billion yuan | 72.389 billion yuan | -59.38 | | Net Profit Attributable to Parent | -64.003 billion yuan | 0.519 billion yuan | -12431.16 | | Net Profit Attributable to Parent (Excluding Non-recurring Items) | -55.700 billion yuan | -2.392 billion yuan | / | | Net Cash Flow from Operating Activities | -0.506 billion yuan | 13.733 billion yuan | -103.69 | | Net Assets Attributable to Parent | -28.372 billion yuan | 5.1498 billion yuan | / | | Total Assets | 164.577 billion yuan | 209.938 billion yuan | -21.61 | Key Financial Indicators | Key Financial Indicators | 2020 | 2019 (Adjusted) | Change | | :--- | :--- | :--- | :--- | | Basic Earnings Per Share (yuan/share) | -3.834 | 0.006 | -64000% | | Weighted Average Return on Net Assets (%) | -646.43% | 0.22% | Decreased by 646.65 percentage points | 2020 Quarterly Financial Data (RMB) | 2020 Quarterly Financial Data (RMB) | Q1 | Q2 | Q3 | Q4 | | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | 6.889 billion yuan | 4.823 billion yuan | 8.133 billion yuan | 9.556 billion yuan | | Net Profit Attributable to Parent | -6.295 billion yuan | -5.529 billion yuan | -3.804 billion yuan | -48.376 billion yuan | - The company's total non-recurring gains and losses in 2020 amounted to -8.304 billion yuan, primarily due to significant losses of 8.852 billion yuan from fair value changes of financial instruments[19][20][21] Company Business and Core Competencies Business Overview and Industry Status The company's main business is air passenger and cargo transport; in 2020, the global aviation industry was severely impacted by the pandemic, while China's market led recovery, with the company, as China's only SKYTRAX five-star airline, facing significant challenges - The company's main business includes international and domestic air passenger, cargo, and mail transportation, and related services[22] - In 2020, global airline Revenue Passenger Kilometers (RPK) decreased by 70% year-over-year, with international markets down 85%, not expected to recover to 2019 levels until 2024[23] - China's civil aviation market showed the fastest global recovery, with passenger traffic in 2020 recovering to 63.3% of 2019 levels, and domestic route transportation recovering to 94.5% in the fourth quarter[24] Significant Changes in Major Assets The company's assets saw dramatic changes due to large-scale disposals and impairments, including significant write-downs on trust assets, Bohai Leasing equity, and related-party receivables and deposits, totaling over 30 billion yuan, a core reason for the 2020 loss - The company sold equity in multiple subsidiaries, including 100% equity in three companies like Hainan Guoshan for 2.944 billion yuan, and 100% equity in Tianyu Feixun for 0.749 billion yuan[26] - Recognized a fair value change loss of 7.240 billion yuan on trust asset income rights of Tianjin Airlines and Grand China Air[26] - Due to HNA Group and others entering reorganization, a total credit impairment loss of 10.292 billion yuan was provisioned for deposits in HNA Group Finance Company and related-party receivables[26][27] - Recognized an impairment of 0.738 billion yuan on trading financial assets held in Bohai Leasing, and accumulated asset impairment and fair value change losses of 15.550 billion yuan on other long-term equity investments, fixed assets, etc[27] Core Competencies Analysis Despite financial difficulties, the company emphasizes its core competencies, including 28 consecutive years of safe operations, a differentiated network focusing on hubs with a dominant position in Hainan, improved flight punctuality (87.68% in 2020), innovative marketing models like "Fly at Will" with over 50% direct sales revenue, and a decade-long "SKYTRAX Five-Star Airline" brand image - Safety Brand: Accumulated over 8.35 million safe flight hours, with 28 consecutive years of safe operations, leading the industry in safety standards[29] - Network Layout: Maintained the largest market share in Hainan, and ranked first in the number of intercontinental routes in Shenzhen, Chongqing, and other cities[30] - Operational Quality: Flight punctuality rate reached 87.68% in 2020, a year-over-year increase of 6.55 percentage points[31] - Marketing Innovation: Launched products like "Fly at Will," with direct sales revenue accounting for over 50%, ranking among the industry leaders[32] - Brand Image: Consistently awarded "SKYTRAX Five-Star Airline" for ten consecutive years, the only airline in mainland China to receive this honor[34] Discussion and Analysis of Operations Operating Performance Analysis In 2020, the company's operating performance was severely impacted, with total revenue plummeting by 59.38% to 29.401 billion yuan and a net loss of 68.743 billion yuan, primarily due to the pandemic and massive non-operating losses - The company actively resumed work and production, with domestic output recovering to 2019 levels from Q4 2020, while also maintaining some operations through "passenger-to-cargo" charter flights[35] Operating Indicators | Operating Indicators | 2020 | 2019 | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Passenger Traffic (thousand persons) | 37,032 | 81,690 | -54.67% | | Cargo and Mail (tons) | 308,363 | 582,576 | -47.07% | | Passenger Load Factor | 74.28% | 83.38% | -9.10 pct | | Aircraft Daily Utilization (hours) | 5.85 | 8.76 | -2.91 | - As of the end of 2020, the company operated 346 aircraft, primarily Boeing series (264 aircraft), with an average age of 6.16 years[37][38] - The massive loss was primarily driven by non-core business activities, including 29.996 billion yuan in credit impairment losses (mainly related-party deposits and receivables), 9.265 billion yuan in investment losses, and 12.293 billion yuan in asset impairment and fair value change losses[52] Major Cost Components | Major Cost Components | 2020 Amount (million yuan) | Proportion of Total Costs (%) | Year-over-Year Change (%) | | :--- | :--- | :--- | :--- | | Lease Expenses | 11,339,170 | 27.33 | -7.25 | | Aviation Fuel Costs | 6,239,361 | 15.04 | -69.18 | | Employee Compensation | 5,682,022 | 13.69 | -1.27 | | Landing and Take-off Costs | 4,251,712 | 10.25 | -54.78 | Asset and Liability Analysis As of year-end 2020, the company's asset-liability structure was severely imbalanced, with total assets of 164.577 billion yuan and total liabilities of 186.831 billion yuan, resulting in a debt-to-asset ratio of 113.52% and severe insolvency, with significant assets pledged Balance Sheet Items (RMB) | Balance Sheet Items (RMB) | Period-end Balance | Period-beginning Balance | Change (%) | | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | 8.236 billion yuan | 20.144 billion yuan | -59.11 | | Other Receivables | 48.452 billion yuan | 25.018 billion yuan | 93.67 | | Long-term Equity Investments | 10.250 billion yuan | 21.315 billion yuan | -51.91 | | Accounts Payable | 20.664 billion yuan | 11.068 billion yuan | 86.70 | | Non-current Liabilities Due Within One Year | 102.864 billion yuan | 68.573 billion yuan | 50.01 | - Other receivables surged by 93.67%, primarily due to the company's funds being deducted by banks and other financial institutions for providing guarantees on related-party debts[54] - Non-current liabilities due within one year significantly increased by 50.01%, mainly due to the reclassification of perpetual bonds and provisions to this category, indicating immense short-term repayment pressure[54] - As of the end of the reporting period, the total amount of restricted major assets was 51.626 billion yuan, including cash and cash equivalents, fixed assets, intangible assets, and investment properties, accounting for approximately 31.4% of total assets[55][56] Investment Analysis As of year-end 2020, the company's total external equity investments were 19.821 billion yuan, with significant losses on fair-valued financial assets, and multiple major asset and equity disposals undertaken to manage liquidity - As of the end of 2020, the company's total external equity investments amounted to 19.821 billion yuan, including 10.250 billion yuan in long-term equity investments and 4.103 billion yuan in other equity instruments[61] Equity Held in Other Listed Companies | Equity Held in Other Listed Companies | Period-end Book Value (million yuan) | Profit/Loss for the Reporting Period (million yuan) | | :--- | :--- | :--- | | Bohai Leasing | 1,265,239 | -738,056 | | China National Aviation Information Network | 916,372 | 0 | | CDB Leasing | 770,038 | 0 | | Meilan Airport | 182,893 | 0 | - During the reporting period, the company and its subsidiaries completed multiple significant asset and equity disposals, including aircraft disposal to related party HNA Aviation Hong Kong, transfer of equity in three sub-subsidiaries to Hainan Development Holdings Real Estate Group (valued at 2.944 billion yuan), and transfer of Tianyu Feixun equity to HNA Infrastructure Industry Group (valued at 0.749 billion yuan)[64][65] Future Outlook and Risk Analysis The company anticipates slow global aviation recovery but faster recovery in China, focusing its strategy on core markets; however, it faces multiple significant risks, including macro-pandemic, market competition, financial fluctuations, and critically, its own reorganization risk, with PwC Zhongtian emphasizing going concern uncertainties - The company's development strategy is to build a world-class aviation brand rooted in Hainan and facing globally, with mid-to-long-term plans to increase resource investment in core markets such as Hainan, Beijing, Guangzhou-Shenzhen, and Chengdu-Chongqing[70][71] - The company's primary risk is reorganization failure; if declared bankrupt, its stock faces the risk of delisting[83] - The company's controlling shareholder, Grand China Air, and significant shareholder, HNA Group, have both entered reorganization proceedings, which may impact the company's equity structure[84] - The company faces severe liquidity risk, with a 64.0 billion yuan net loss in 2020, 0.5 billion yuan net cash outflow from operations, current liabilities far exceeding current assets, and a large volume of overdue debts and external guarantees[85][195] - Exchange rate and aviation fuel price fluctuations are major operating risks; a 5% change in RMB against USD would impact pre-tax profit by approximately 1.904 billion yuan, and a 5% change in aviation fuel prices would impact operating costs by approximately 0.312 billion yuan[81][82] Significant Matters Profit Distribution Policy The company has a detailed cash dividend policy but has not distributed profits or converted capital reserves into share capital for three consecutive years (2018, 2019, 2020), and given the massive 2020 loss, it does not meet the conditions for dividend distribution - The company did not distribute dividends or convert capital reserves into share capital for the 2020, 2019, and 2018 fiscal years[90] Commitment Fulfillment and Related Party Issues HNA Group's commitment to resolve horizontal competition was extended to July 2021; more critically, the company faces significant non-operating fund occupation by related parties, with a year-end balance of 38.003 billion yuan, which it plans to resolve through debt transfers during reorganization - HNA Group's commitment to resolve horizontal competition (involving Capital Airlines and West Air) has been extended to July 2021[92] Fund Occupation by Controlling Shareholder and Related Parties (million yuan) | Fund Occupation by Controlling Shareholder and Related Parties (million yuan) | Amount | | :--- | :--- | | Beginning Balance of Occupation | 13,866,847 | | New Occupation Amount During Reporting Period | 24,136,218 | | Ending Balance of Occupation | 38,003,065 | | Total Repaid During Reporting Period | 3,365,021 | - The company plans to resolve related-party fund occupation through debt transfers and other means before the completion of the bankruptcy reorganization plan[96] Bankruptcy Reorganization Matters On January 29, 2021, the company received a creditor's reorganization application, and on February 10, 2021, the Hainan Provincial High People's Court officially ruled to accept the reorganization application; the first creditors' meeting was held on April 12, 2021, with the reorganization ongoing and its outcome uncertain - On February 10, 2021, the Hainan Provincial High People's Court ruled to accept the creditor's reorganization application against the company[103] Major Litigation and Guarantees The company faces multiple major lawsuits and arbitrations, primarily contract disputes; more critically, it has substantial external guarantees totaling 61.770 billion yuan, with 50.112 billion yuan for related parties, most overdue, posing significant contingent liability risks and contributing to the auditor's disclaimer of opinion - The company is involved in multiple contract dispute lawsuits arising from overdue payments for aviation fuel, aircraft leases, and other expenses[106][107] External Guarantees (million yuan) | External Guarantees (million yuan) | Amount | | :--- | :--- | | Total Guarantees at Period-end (A+B) | 61,769,575 | | Proportion of Total Guarantees to Company's Net Assets (%) | -277.57 | | Amount of Guarantees Provided for Shareholders, Actual Controllers, and Related Parties (C) | 50,112,294 | | Total Overdue Guarantees | 25,752,593 | - As of year-end 2020, the outstanding balance of interest, penalties, and liquidated damages for guarantees provided to related parties was approximately 4.480 billion yuan[126] Major Related Party Transactions The company has extensive and significant daily operating related-party transactions with HNA Group and its affiliates, totaling 9.605 billion yuan in 2020, covering various aviation business aspects and highlighting deep reliance on the related-party system - In 2020, the company's total daily operating related-party transactions amounted to 9.605 billion yuan, a decrease from 11.114 billion yuan in the previous year[110] Major Daily Related Party Transactions (Current Period Amount, million yuan) | Major Daily Related Party Transactions (Current Period Amount, million yuan) | Transaction Content | Amount | | :--- | :--- | :--- | | Bohai Leasing | Aircraft Leasing | 2,021,121 | | Tianhang Jinfu | Aircraft Leasing | 1,127,186 | | Hong Kong Airlines | Mileage Points Revenue, Aircraft Leasing, etc | 995,946 | | Tianjin Airlines | Providing Personnel Training, Maintenance Services, etc | 758,831 | | HNA Aviation Group | Property Leasing, Aircraft Leasing | 702,291 | Corporate Governance and Internal Control Corporate Governance Overview The company claims to have established a modern corporate governance structure comprising the Shareholders' Meeting, Board of Directors, Board of Supervisors, and management, with the Board of Directors having four special committees; however, significant related-party fund occupation and illegal guarantee issues exposed during the reporting period indicate serious deficiencies in corporate governance and internal control - The company's Board of Directors consists of 9 directors, including 3 independent directors, and has four special committees[162] - HNA Group had pledged to resolve horizontal competition issues with Capital Airlines and West Air through equity trusteeship, but this issue has not yet been fully resolved[168] Internal Control Evaluation and Audit The company's internal control self-assessment report admitted significant deficiencies, specifically shareholder and related-party fund occupation and unapproved external guarantees; correspondingly, PwC Zhongtian issued a "negative opinion" on the company's 2020 internal control audit report, further confirming the severity of the company's internal control failures - The company's internal control self-assessment report acknowledged significant deficiencies, including fund occupation by shareholders and related parties, and external guarantees without proper approval[170] - PwC Zhongtian issued a "negative opinion" on the company's 2020 internal control audit report[171] Corporate Bonds Related Information Corporate Bond Overview and Ratings As of the end of the reporting period, the company and its subsidiary Lucky Air had multiple outstanding corporate bonds, medium-term notes, and USD bonds; after entering 2021, all outstanding bonds ceased accruing interest due to the company's bankruptcy reorganization, and major rating agencies continuously downgraded the company's and related bond's credit ratings to "C" (default level), reflecting extremely high repayment risk - The company and its subsidiaries have multiple outstanding bonds, including "11 HNA 02," "18 HNA Y1-Y5" series, USD bonds, and medium-term notes[173][174] - Due to the company entering bankruptcy reorganization, all outstanding bonds ceased accruing interest on February 10, 2021[175] - In early 2021, rating agencies including Shanghai Brilliance, China Chengxin International, and Lianhe Ratings downgraded the company's and related subsidiaries' issuer and bond credit ratings to "C" (default level)[179] Debt Repayment Capacity and Impact of Significant Matters During the reporting period, the company's debt repayment capacity indicators completely collapsed, with a debt-to-asset ratio of 113.52%, an interest coverage ratio of -7.33, and an EBITDA to total debt ratio of -0.32, indicating a complete loss of ability to repay debts through its own operations; the company's bankruptcy reorganization, massive losses due to the pandemic, and large volumes of overdue debts and related-party guarantees have had a devastating impact on its operations and solvency Debt Repayment Capacity Indicators | Debt Repayment Capacity Indicators | 2020 | 2019 | Trend | | :--- | :--- | :--- | :--- | | Debt-to-Asset Ratio (%) | 113.52 | 70.76 | Significantly Deteriorated | | Current Ratio | 0.37 | 0.49 | Deteriorated | | Interest Coverage Ratio | -7.33 | 1.18 | Severely Deteriorated | | EBITDA to Total Debt Ratio | -0.32 | 0.10 | Severely Deteriorated | - The company's entry into bankruptcy reorganization, massive losses due to the pandemic, current liabilities far exceeding current assets, large volumes of overdue debts, and significant guarantees provided for related parties have fundamentally negatively impacted its operations and debt repayment capacity[187] Financial Report and Audit Opinion Auditor's Opinion PwC Zhongtian issued a "disclaimer of opinion" on the company's 2020 financial statements due to significant uncertainties from its bankruptcy reorganization, preventing sufficient audit evidence on debt transfers, related-party guarantees, fund occupation, and fair value measurement of trust assets, also emphasizing going concern uncertainties - Auditor PwC Zhongtian issued a "disclaimer of opinion" audit report, one of the most severe types of audit opinions, indicating fundamental issues with the reliability of the financial statements[188] - One basis for the disclaimer of opinion is the inability to determine the impact of debt transfer matters related to the company's reorganization, involving financial guarantee losses (guarantee balance of 54.6 billion yuan), deposits in HNA Finance Company (4.4 billion yuan), and bad debt provisions for related-party receivables (54.9 billion yuan)[188][189][190] - Another basis is the inability to confirm the fair value of trust asset income rights from Grand China Air and Tianjin Airlines (year-end balance of 11.0 billion yuan), for which a significant fair value change loss of 7.2 billion yuan was recognized in the current period[193] - The audit report specifically highlighted significant uncertainties related to going concern, noting the company's 64.0 billion yuan loss in 2020, negative net assets, current liabilities far exceeding current assets, numerous debt defaults, and entry into bankruptcy reorganization[195] Financial Statements Summary Financial statements indicate a full-blown crisis, with the balance sheet showing severe insolvency (total assets 164.6 billion yuan, total liabilities 186.8 billion yuan, owner's equity -22.3 billion yuan), the income statement revealing a 64.0 billion yuan net loss due to high costs and massive impairments, and the cash flow statement showing net outflows from all activities, indicating inability to generate positive cash flow from operations Consolidated Balance Sheet Summary (2020-12-31) | Consolidated Balance Sheet Summary (2020-12-31) | Amount (million yuan) | | :--- | :--- | | Total Assets | 164,576,692 | | Total Current Assets | 66,278,917 | | Total Non-current Assets | 98,297,775 | | Total Liabilities | 186,830,599 | | Total Current Liabilities | 178,867,988 | | Total Non-current Liabilities | 7,962,611 | | Total Owner's Equity | -22,253,907 | | Equity Attributable to Parent Company Shareholders | -28,371,512 | Consolidated Income Statement Summary (2020) | Consolidated Income Statement Summary (2020) | Amount (million yuan) | | :--- | :--- | | Total Operating Revenue | 29,401,026 | | Total Operating Costs | 50,699,425 | | Credit Impairment Losses | -29,996,413 | | Investment Income | -9,225,597 | | Fair Value Change Gains | -8,852,355 | | Total Profit | -71,301,881 | | Net Profit Attributable to Parent Company Shareholders | -64,003,308 | Consolidated Cash Flow Statement Summary (2020) | Consolidated Cash Flow Statement Summary (2020) | Amount (million yuan) | | :--- | :--- | | Net Cash Flow from Operating Activities | -506,068 | | Net Cash Flow from Investing Activities | -3,224,558 | | Net Cash Flow from Financing Activities | -433,613 | | Net Increase in Cash and Cash Equivalents | -4,169,546 |