ShandongAirlinesCo.,Ltd.SummaryofAnnualReport2018I.ImportantNotice Thesummaryisabstractfromfull-textofannualreport,formoredetailsofoperatingresults,financialconditionandfuture developmentplanoftheCompany;investorsshouldfoundinthefull-textofannualreportthatpublishedonmediaappointedby CSRC. OtherdirectorsattendingtheMeetingforannualreportdeliberationexceptforthefollowed Titleofthedirectornot Directornotpersonallyattended Reasonsforabsent Mandatory personallyattended WangMingyuan Director Job-relatedreason XuChuanyu WangJieming Director Job-relatedreason LiXiuqin LvHongbing IndependentDirector Job-relatedreason XuXiangyi DuanYalin IndependentDirector Job-relatedreason HuYuanmu Promptofnon-standardauditopinion □Applicable √Notapplicable TheprofitdistributionplanthatdeliberatedandapprovedbytheBoardis:Basedontotalstockissued400,000,000shares,distributed2.00Yuan(taxincluded)bonusincashforevery10-shareholdbyallshareholders,0sharesbonusissued(taxincluded)andnocapitalizingofcommonreservescarriedout. Profitdistributionpre-planofpreferredstockdeliberatedandapprovedbytheBoardinthereportingperiod □Applicable √Notapplicable II.Basicinformationofthecompany 1.Companyprofile Shortformofthestock Shanhang-B Stockcode 200152 Stockexchangeforlisting ShenzhenStockExchange Person/Waytocontact SecretaryoftheBoard Rep.ofsecurityaffairs Name DongQiantang FanPeng 1/F,TiangongOfficeBuilding,Northof 3/F,TiangongOfficeBuilding,Northof Red-crowedcranesHotel,Yaoqiang Red-crowedcranesHotel,Yaoqiang Officeadd. InternationalAirlines,LichengDistrict, InternationalAirlines,LichengDistrict, Jinan,Shandong Jinan,Shandong Fax. 0531-85698034 0531-85698034 Tel. 0531-82085939 0531-82085586 E-mail dongqt@sda.cn fanp@sda.cn 2.Mainbusinessorproductintroductioninthereportingperiod TheCompanyismainlyengagedininternationalanddomesticairpassengerandcargotransportationbusiness;hotelcatering;aircraft maintenance;civilaviationpersonneltraining;insuranceagency;airlineagencybusiness;groundservicesrelatedtomainbusiness;salesofaviationmaterials,generalmerchandise,food,healthfoods,handicrafts,souvenirs,etc.,andretailsalesoftobacco;leasingofaviationmaterials;leasingofpremises,rentalofhouses;businessservices;hotelaccommodationagentsandticketagents;conferenceservices;transportagencyservices,aircargostorage;andlaborservices.Amongthem,internationalanddomesticairpassengerandcargotransportationbusinessistheCompany'smainbusiness. Formorethan20years,thecompanyhasalwaysbeengivingfirstpriorityto“ensuresafety,paycloseattentiontoefficiency,andstrivetopunctualityandqualityservice”.Asoftheendof2018,thecompanyhas122airplanesofBoeingB737series,andstridingintotheranksoflargeairlines.Atpresent,thecompanybasesitsheadquartersinJinanandhasbranchofficesandflightbasesinQingdao,Yantai,Xiamen,Chongqing,Beijing,UrumqiandGuiyang.Thecompanyoperatesmorethan200domestic,internationalandregionalairroutes,everyweekmorethan3,700flightsflytomorethan80largeandmedium-sizedcitiesacrossthecountry,aswellastheregionalroutestoTaiwanregionofChina,andtheinternationalroutestoSouthKorea,Japan,Thailand,CambodiaandIndia. 3.Mainaccountingdataandfinancialindexes (1)Mainaccountingdataandfinancialindexesforrecentlythreeyears InRMB 2018 2017 Changesoverlastyear 2016 Operatingincome 18,765,953,326.74 16,484,713,152.23 13.84%13,742,365,545.56 Netprofitattributabletoshareholdersof thelistedcompany 347,379,314.89 490,353,408.15 -29.16% 532,834,567.17 Netprofitattributabletoshareholdersof the listed company after deducting 132,549,289.96 388,452,214.55 -65.88% 409,577,360.28 non-recurringgainsandlosses Netcashflowarisingfromoperating activities 2,450,017,519.48 1,870,048,122.23 31.01% 2,427,055,988.42 Basicearningspershare(RMB/Share) 0.87 1.23 -29.27% 1.33 Dilutedearningspershare(RMB/Share) 0.87 1.23 -29.27% 1.33 4.25percentagepoints WeightedaverageROE 7.94% 12.19% 14.88% down Changesoverendoflast Endof2018 Endof2017 Endof2016 year Totalassets 16,563,979,100.41 13,351,422,839.91 24.06%12,741,974,788.53 Netassetsattributabletoshareholderof listedcompany 4,471,325,978.28 4,253,141,013.93 5.13% 3,836,172,828.06 (2)Quarterlymainfinancialindex InRMB Firstquarter Secondquarter Thirdquarter Fourthquarter Operatingincome 4,496,320,014.09 4,232,958,550.56 5,715,619,936.36 4,321,054,825.73 Net profit attributable to shareholdersofthelistedcompany 248,925,753.30 -45,195,048.65 612,878,294.50 -469,229,684.26 Net profit attributable to shareholdersofthelistedcompany afterdeductingnon-recurringgains 186,835,480.93 -124,926,168.36 582,643,401.11 -512,003,423.72 andlosses Net cash flow arising from operatingactivities 607,015,387.20 251,882,775.68 1,769,003,548.15 -177,884,191.55 Whethertherearesignificantdifferencesbetweentheabove-mentionedfinancialindexoritstotalnumberandtherelevantfinancialindexdisclosedinthecompany’squarterlyreportandsemi-annualreport □Yes√No 4.Sharesandshareholders (1)Particularsaboutcommonstockshareholders,preferenceshareholderswithvotingrightsrecoveredandtoptenshareholders InShare Totalcommon Totalpreference Totalcommonstock Totalpreferenceshareholderswith stock shareholderswith shareholdersatendoflast votingrightsrecoveredatendof shareholdersin 15,411 15,381votingrights 0 0 monthbeforeannualreport lastmonthbeforeannualreport reporting recoveredatendof disclosed disclosed period-end reportingperiod Toptenshareholders Numberofshares Proportion Amountof pledged/frozen Natureof Amountof FullnameofShareholders ofshares restrictedshares shareholder sharesheld Stateof held held Amount share State-ownedlegal ShandongAviationGroup 42.00% 168,004,000 168,004,000 person State-ownedlegal AirChinaLimited 22.80% 91,200,000 91,200,000 person Foreignlegal NORGESBANK 0.87% 3,498,479 0 person VANGUARDEMERGING Foreignlegal 0.74% 2,960,917 0 MARKETSSTOCKINDEXFUND person WANXIANGINTERNATIONAL Foreignlegal 0.66% 2,636,000 0 INVESTMENTCORPORATION person ISHARESCOREMSCIEMERGINGForeignlegal 0.51% 2,035,324 0 MARKETSETF person VANGUARDTOTAL Foreignlegal 0.47% 1,872,902 0 INTERNATIONALSTOCKINDEXperson FUND Domesticnature HouChunhu 0.43% 1,731,045 0 person Domesticnature ChenJingjian 0.40% 1,595,200 0 person Domesticnature WangJingqing 0.32% 1,279,053 0 person 1.ShandongAviationGroup(SDA)isthefirstlargestshareholderofthe Company,whoholdsthesharesoftheCompanyonbehalfoftheState withunlistedshares; 2.AirChinaLimitedisthesecondlargestshareholderoftheCompany, whoholdsthesharesoftheCompanyonbehalfoftheStatewith Explanationonrelatedrelationshiporconcertedactionunlistedshares; amongtheabovementionedshareholders 3.Amongtheabovetoptenshareholders,AirChinaLimitedisthefirst largestshareholderoftheSDA,andthereexistsnoassociated relationshipbetweenSDAandAirChinaandtheothershareholders,and theydon’tbelongtothepersonsactinginconcertregulatedbythe ManagementRegulationofInformationDisclosureonChangeof ShareholdingforListedCompanieswiththeothershareholders. (2)TotalpreferredstockshareholdersoftheCompanyandsharesheldbytoptenshareholderswithpreferredstockheld TheCompanyhadnoshareholderswithpreferredstockheldinthereporting. (3)PropertyrightandcontrollingrelationshipsbetweentheactualcontrollersoftheCompanyandtheCompanyisasfollows: ShandongAviationGroup 42% ShandongAirlinesCo.,Ltd. 5.Corporatebonds WhetherornottheCompanypublicofferingcorporationbondsinstockexchange,whichundueorwithoutpaymentinfullatmaturityontheapprovaldateforannualreportdisclosed No III.Discussionandanalysisofbusiness 1.Introductionofoperationinthereportingperiod In2018,theCompanyhasbasicallycompletedtheintendedtarget,andvariousworksofoperationaremaintaininghealthydevelopmentwithsteadyprogress. ――Safetypositionisgenerallystable:Intranspiration,wehaveensuredsecurityflightofabout434,100hoursand205,800vehicles,arespectiveincreaseof8.1%and6.1%onayear-on-yearbasis. ――Obviousimprovementinoperationefficiency:On-timeperformancewas81.64%,a11.48percentagepointsupfromayearearlier,andrankstheNo.2intheindustry;atsecondhalfoftheyear,wewonthechampionshipsixtimesinsuccessionofpunctualityrateforlargeairlinesinChinawithintheAsiaPacificArea. ――Maintainsustainableprofitability:wecompletedaRTKof3538millionTKintheyear,andpassengertrafficvolumecameto25,462,000person-time,cargoandmailtransportvolumereached170,100tons,anincreaseof11.10%,9.88%and4.86%onay-o-ybasisrespectively;theoperationrevenuereached18.77billionYuan,anincreaseof13.84%fromayearearlier;netprofithas0.35billionYuan,adecreaseof29.16%fromayearearlier.Thepassengerloadfactor(PLF)comesto83.90%,a0.75percentagepointsuponay-o-ybasis;freightrategoesto40.44%,a0.32percentagepointsdownfromayearearlier. ――Steadyimprovementinservicequality:Passengersatisfactionachieved93.78scores,risenby2.06scoreonayear-on-yearbasis;passengercomplaintratewas0.692times/10thousandperson,a0.07times/10thousandpersondown;theacceptanceofpassengercomplaintratehasthelowestrateinmainairlinesforfiveconsecutiveyears;wonthetitleof“BestAirlinesforCivilAviationService”forcontinuousfiveyears;awardedasthe“Top500MostValuableBrandinChina”forelevenyearsinarowwithbrandvalueupto41,652millionYuan,whichrankingincreasedtoninety-ninth. TheCompanymainlycarriedoutthefollowingwork: 1.Continuouslyperfectsafetymanagementmechanism,improvingthesafetymanagement&controllingefficiency Firstly,improvethepoliticalpositionsandvigorouslyadvocatetheconceptofsafedevelopment.SeriouslystudyandimplementGeneralSecretaryXiJinping’simportantinstructionsforcivilaviationwork,correctlyhandletherelationshipbetweensafetyanddevelopment,safetyandefficiency,safetyandnormality,andsafetyandservice,continuetostrengthentheorganizationandleadershipofsafetywork,andimplementtheconceptofsafedevelopment.Secondly,focusonthesystemefficiencyandcontinuetopromotetheconstructionofsafetymanagementsystem.Teaseouttheblocksafetyresponsibilityinterface,adjustthebranchofficestructureandbusinessprocesses,andthecoordinationofregionalsecuritycontrolareenhanced.Thirdly,strengthenthemanagementandcontrolofqualificationsandsolidlycarryouttheconstructionof“threebasics”.Fourthly,persistintheproblem-oriented,anddeepenthehiddenproblemmanagementandtheriskpreventionandcontrol. 2.Optimizetheoperationalmanagementorganizationmechanism,andtheoperationqualityissignificantlyimproved Thefirstistoimprovetheflightnormalitycontrolsystemandconsolidatetheoperationqualityfoundation.Focusontheadjustmentofflightoperationguaranteedutiesofbranchofficesandsalesdepartments,andconsolidatetheresponsibilityofgrassrootssecurity.Thesecondistostrengthenthesynergylinkage,andtheoperationalefficiencyisconstantlyimproved.Thethirdistogiveplaytothetechnologicaladvantagesandimprovethescientificlevelofoperationalmanagement.Basedontheoperationalneedsoflargecorps,buildaproductionandoperationinformationplatform.SteadilypromotetheEFB(ElectronicFlightBag)projectwhichhasbasicallyreachedtheindustryleadinglevel.VigorouslypromotetheapplicationofHUD(Head-UpDisplay)andrealizethetakeoffatthecapitalairportwiththelowvisibilityof90meters. 3.Vigorouslyincreaseincomeandreduceexpenditures,andstrivetoachievebetterreturns Thefirstistocontinuetoimprovetheroutenetworkstructureandoptimizetheproductiveresourceallocation.Sparenoeffortinstrivingforthemomentresourceandimprovethecontrolofmainbases.Thesecondistoimplementtherefinedmarketingcontrolandactivelyexpandtherevenuechannels.Onlinemarketingcontrolplatform,marketanalysisandsalescontrolbecomemoreaccurateandefficient.Improvetherefundandreschedulingpolicies,increasetheproportionofdirectselling,andstrengthenthedevelopmentandmaintenanceoflargecustomers.Thethirdistovigorouslyimplementthecostcontrol,andthecuttingdownofcostbringsnotable results.Thefourthistoactivelyobtainthesynergyincomeandachievestrongsupportforefficiencywork.Thefifthistoscientificallygraspthemarketfeatures,andtheinputandoutputaremorematched.MakeplansearlyaccordingtothemarketfeaturessuchastheSpringFestivaltravelseason,theshoulderseason,thesummervacation,andtheoffseason.Throughtheoverallarrangementofproductioninputs,theincome-increasingabilityinthepeakseasonandtheloss-reducingabilityintheoffseasonhavebeenimproved,therefore,thecostpressuressuchasoilpricesandexchangehavebeeneffectivelyovercome,andbetterreturnswereachieved. 4.Solidlypromotetheserviceinnovationandcontinuouslyoptimizethepassengerexperience Thefirstistocontinuetoimprovethestandardspecificationsandimprovetheservicecontroleffectiveness.Thesecondistopromotetheapplicationofnewtechnologiesandimplementtheserviceinnovationandupgrading.Thethirdistoadheretotheproblem-oriented,andimprovetheserviceweakness.Vigorouslycarryoutthespecialtreatmentofluggagetransport,continuouslyimproveon-boardbroadcastingservices,andoptimizethefoodpairing.Thefourthistoenrichthecarrier,strengthenthepublicity,anddeepenthehonestbrand. 2.Whetherthemainbusinesshadmajorchangeinthereportingperiod □Yes√No 3.Abouttheindustries,products,orregionsaccountingforover10%ofthecompany’soperatingincomeoroperatingprofit InRMB Increase/decreaseIncrease/decreaseIncrease/decreaseof Grossprofit Name Operatingrevenue Operatingcost ofoperating ofoperatingcost grossprofitratio ratio revenuey-o-y y-o-y y-o-y Airtransport 2.79percentage service 18,061,328,802.95 960,942,787.74 5.32% 12.95% -25.87% pointsdown 4.Whetherthecharacteristicsofmanagementseasonalorcyclicalneedspecialattention □Yes√No 5.Inthereportingperiod,noteofmajorchangesinoperatingincome,operatingcost,totalnetprofitattributabletocommonstockshareholdersoflistedcompanyorcomposingthepreviousreportingperiod□Applicable√Notapplicable 6.Particularaboutsuspendedanddelisting □Applicable√Notapplicable 7.Relevantitemsinvolvingfinancialreport (1)Particularsaboutthechangesinaspectofaccountingpolicy,estimatesandcalculationmethodcomparedwiththefinancialreportoflastyear ThereCompanyhasnoaccountingpolicy,estimatesandcalculationmethodchangedintheperiod (2)Majoraccountingerrorswithinreportingperiodthatneedsretrospectiverestatement NomajoraccountingerrorswithinreportingperiodthatneedsretrospectiverestatementfortheCompanyintheperiod. (3)Comparewithlastyear’sfinancialreport;explainchangesinconsolidationstatement’sscope Nochangesinconsolidationstatementscopeinthereportingperiod ShandongAirlinesCo.,Ltd. Legalrepresentative:SunXiujiang 23March2019