中国东方航空股份有限公司H股-2012年年报

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)


                                                  Stock Code




                             ANNUAL REPORT 2012
GO
 READY
CONTENTS
2     International Airline Network
4     Financial Highlights (prepared in accordance with
      International Financial Reporting Standards)
5     Summary of Accounting and Business Data (prepared in
      accordance with PRC Accounting Standards)
6     Summary of Selected Operating Data
8     Fleet
10    Significant Events
12    Chairman’s Statement
20    Review of Operations and Management’s Discussion
      and Analysis
29    Report of Directors
59    Corporate Governance
82    Report of the Supervisory Committee
85    Social Responsibilities
88    Financial Statements prepared in accordance with
      International Financial Reporting Standards
       Independent Auditor’s Report                             
       Consolidated Statement of Comprehensive Income            
       Consolidated Balance Sheet                                
       Company’s Balance Sheet                                  
       Consolidated Cash Flow Statement                          
       Consolidated Statement of Changes in Equity               
       Notes to the Financial Statements                         
209   Supplementary Financial Information
213   Corporate Information
216   Company Profile




                   C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




INTERNATIONAL AIRLINE NETWORK




                                                                                                               Korea                           1 Seoul, Inchon, Gimpo

                                                                                                                                               2 Ch'ongju

                                                                                                                                               3 Wuan, Kwangju

                                                                                                                                               4 Cheju


                                                                                                                             3                 5 Pusan


                                                                                                                                               6 Taegu
                        Hamburg

                                          Moscow
  London
                   Frankfurt am Main


           Paris




                          Rome
                                                                                                                                   Beijing
                                                                                     Kathmandu          Dhaka

                                                                                                                Mandalay
                                                                                                                                        Shanghai
                                                                                 New Delhi                                                               Okinawa
                                                                                                                                                                       Saipan
                                                               Dubai
                                                                                                     Kolkata               Vientiane


                                                                                                Krung Thep (Bangkok)            Siem Reap

                                                                                                        Phuket              Phnom Penh



                                                                                  Male
                                                                                                        Kuala Lumpur

                                                                                                                 Singapore
                                                                                                                                          Bali


                                                                                                                                                                        Cairns



                                                                                                                                       Perth                                  Brisbane

                                                                                                                                                                   Adelaide      Sydney


                                                                                                                                                              Melbourne             Canberra




 Code-Sharing Flights





                                                              ANNU AL RE POR T 2 0 1 2




                                                                                         Chicago


                                    Vancouver

                                                                                                                   Boston


                             San Francisco                                                                      New York
                                                         Las Vegas


                                                                                                   Washington
                                                Los Angeles                     Dallas

                Hawaii
                                                                                             Miami




                                                                                            1 Sapporo            10 Nagoya

                                                                            1               2 Niigata            11 Tokyo


                                                                                            3 Komatsu            12 Shizuoka


                                                                                            4 Okayama            13 Osaka

                                                                        9                   5 Hiroshima          14 Matsuyama

                                                                                            6 Fukuoka            15 Kagoshima
                                                     3
                                                         12 11
                                        5 4     14 13                                       7 Nagasaki


                                   15                                                       8 Sendai
                                                                Japan
   Auckland
                                                                                            9 Fukushima

   Wellington



Christchurch





                                C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




FINANCIAL HIGHLIGHTS

(Prepared in accordance with International Financial Reporting Standards)



      Expressed in RMB millions
                                                                                         2008                2009         2010                2011         2012
      Year ended 31 December


      Revenues                                                                            41,073              38,989       73,804              82,403       85,253
      Other operating income                                                                 672                1,288         658               1,062         1,720
      Operating expenses                                                                 (56,828)            (38,456)     (68,765)            (79,292)     (82,745)
      Operating profit/(loss)                                                            (15,083)               1,821       5,697               4,173         4,228
      Finance income/(cost), net                                                            (267)              (1,549)       (347)                561        (1,349)
      Profit/(loss) before income tax                                                    (15,256)                 249       5,418               4,841         3,012
      Profit/(loss) for the year
         attributable to the equity
         shareholders of the Company                                                     (15,269)                169          4,958            4,576         2,808
      Earning/(loss) per share
         attributable to the equity
         shareholders of the Company                              (1)

         (RMB)(1)                                                                           (3.14)              0.03           0.44              0.41         0.26


      At 31 December


      Cash and cash equivalents                                                            3,451               1,735        3,078            3,861            2,512
      Net current liabilities                                                            (43,458)            (28,648)     (27,184)         (29,679)         (35,948)
      Non-current assets                                                                  62,652              64,988       91,254         101,031          111,144
      Long term borrowings, including
    current portion                                                                  (15,628)            (16,928)     (27,373)            (30,321)     (32,856)
      Obligations under finance leases,
    including current portion                                                        (20,809)            (19,370)     (19,208)            (20,261)     (21,858)
      Total share capital and reserves
    attributable to the equity
    shareholders of the Company                                                      (13,097)              1,235      15,271              20,126        22,926

(1)     The calculation of earnings/(loss) per share for 2007 and 2008 are based on the consolidated profit/(loss) attributable to the equity shareholders of the
    Company and 4,866,950,000 shares in issue. The calculation of earnings per share for 2009 is based on the consolidated profit attributable to the equity
    shareholders of the Company divided by the weighted average number of shares of 6,436,828,000; the calculation of earnings per share for 2010 is based
    on the consolidated profit attributable to the equity shareholders of the Company divided by the weighted average number of 11,149,426,000 ordinary
    shares in issue. The calculation of earnings per share for 2011 and 2012 is based on the consolidated profit attributable to the equity shareholders of the
    Company divided by 11,276,538,860 ordinary shares in issue.
(1)                                                                                                                           4,866,950,000
                                                                                                     6,436,828,000
                                                                        11,149,426,000
                                        11,276,538,860

REVENUES                                                                                    OPERATING PROFIT/(LOSS)
(RMB millions)                                                                              (RMB millions)
                                                         85,253




                                                                                                                                                   4,228




                       08     09      10      11      12                                                            08   09      10    11        12



                                                                 ANNU AL RE POR T 2 0 1 2




SUMMARY OF ACCOUNTING AND BUSINESS DATA

(Prepared in accordance with PRC Accounting Standards)



PROFIT FOR THE YEAR ENDED 31 DECEMBER 2012


                                                                                                                                    RMB million

 Net profit                                                                                                                                           3,300
 Income from main operations                                                                                                                          9,878
 Income from other operations
 Income from investments
 Net income outside business                                                                                                                          2,688


MAJOR ACCOUNTING DATA & FINANCIAL INDICATORS

(Expressed in RMB Million)

                                                                                                                           2011
 1. Operation revenue                                                                                                   83,974.51                  85,569.25
 2. Net profit attributable to the equity shareholders of
      the Company                                                                                                        4,886.70                   3,430.11
 3. Total assets                                                                                                       112,215.15                 120,962.48
 4. Shareholders’ equity                                                                                               22,145.41                  25,042.64
 5. Earnings per share (RMB)                                                                                                 0.43                       0.30
 6. Net assets per share (RMB)                                                                                               1.78                       2.22


Notes:
1. Calculation of major financial indicators:
    Earnings per share = net profit ÷ weighted average number of ordinary shares outstanding
    Net assets per share = shareholders’ equity at the end of the year ÷ total number of ordinary shares at the end of the year


1.





                        C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




SUMMARY OF SELECTED OPERATING DATA



                                                                                                        2012         2011      Change


Capacity
  ATK (available tonne – kilometres)                             (ATK)                               19,721.41    18,662.50     5.67%
    (million)
    – Domestic routes                                                                                10,531.56     9,908.43      6.29%
    – International routes                                                                            8,493.45     7,975.16      6.50%
    – Regional routes                                                                                   696.40       778.91    -10.59%


  ASK (available seat – kilometres)                              (ASK)                              136,723.95   127,890.81     6.91%
    (million)
    – Domestic routes                                                                                95,167.75    88,012.97      8.13%
    – International routes                                                                           36,472.11    34,685.25      5.15%
    – Regional routes                                                                                 5,084.09     5,192.59     -2.09%


  AFTK (available freight tonne –                                     (AFTK)                          7,416.25     7,152.33     3.69%
    kilometres) (million)
    – Domestic routes                                                                                 1,966.46     1,987.26     -1.05%
    – International routes                                                                            5,210.96     4,853.49      7.37%
    – Regional routes                                                                                   238.84       311.58    -23.35%


  Hours flown (thousand)                                                                               1,404.52     1,288.40     9.01%


Traffic
  RTK (revenue tonne – kilometres)                               (RTK)                               14,406.48    13,402.08     7.49%
     (million)
     – Domestic routes                                                                                7,705.32     7,256.76     6.18%
     – International routes                                                                           6,243.40     5,659.85    10.31%
     – Regional routes                                                                                  457.76       485.47    -5.71%

  RPK (revenue passenger –                                       (RPK)                              109,112.68   100,895.06     8.14%
    kilometres) (million)
    – Domestic routes                                                                                76,155.58    70,932.87     7.36%
    – International routes                                                                           29,105.09    26,151.29    11.30%
    – Regional routes                                                                                 3,852.01     3,810.90     1.08%


  RFTK (revenue freight tonne –                                       (RFTK)                          4,700.90     4,420.57     6.34%
    kilometres) (million)
    – Domestic routes                                                                                   922.68       934.14     -1.23%
    – International routes                                                                            3,661.41     3,338.13      9.68%
    – Regional routes                                                                                   116.82       148.30    -21.23%


  Number of passengers carried                                                                        73,077.06    68,724.96     6.33%
    (thousand)
    – Domestic routes                                                                                62,360.47    58,761.38     6.12%
    – International routes                                                                            7,903.00     7,246.70     9.06%
    – Regional routes                                                                                 2,813.59     2,716.88     3.56%


  Weight of freight carried (kg) (million)                                                             1,416.48     1,443.05     -1.84%
   – Domestic routes                                                                                    679.85       699.43     -2.80%
   – International routes                                                                               641.94       626.26      2.50%
   – Regional routes                                                                                     94.69       117.37    -19.32%





                                       ANNU AL RE POR T 2 0 1 2




SUMMARY OF SELECTED OPERATING DATA




                                                                  2012    2011     Change


Load factors
  Overall load factor (%)                    (%)                  73.05    71.81      1.24pts
    – Domestic routes                                            73.16    73.24    -0.08 pts
    – International routes                                       73.51    70.97     2.54 pts
    – Regional routes                                            65.73    62.33     3.40 pts


  Passenger load factor (%)            (%)                        79.81    78.89     0.92 pts
    – Domestic routes                                            80.02    80.59    -0.57 pts
    – International routes                                       79.80    75.40     4.40 pts
    – Regional routes                                            75.77    73.39     2.38 pts


  Freight load factor (%)                    (%)                  63.39    61.81     1.58 pts
    – Domestic routes                                            46.92    47.01    -0.09 pts
    – International routes                                       70.26    68.78    1.48 pts
     – Regional routes                                           48.91    47.60    1.31 pts


Yields and costs
  Revenue tonne - kilometres yield
     (RMB)                                                         5.51     5.71     -3.49%
     – Domestic routes                                            6.68     6.93     -3.65%
     – International routes                                       3.89     3.97     -1.96%
     – Regional routes                                            8.04     7.71      4.24%


  Passenger - kilometres yield (RMB)                               0.65     0.68     -4.17%
    – Domestic routes                                             0.66     0.69     -4.39%
    – International routes                                        0.62     0.63     -1.09%
    – Regional routes                                             0.84     0.81      4.00%

  Freight tonne - kilometres yield                 (AFTK)
    (AFTK) (RMB)                                                   1.71     1.83     -6.44%
    – Domestic routes                                             1.44     1.44     -0.32%
    – International routes                                        1.70     1.82     -6.41%
    – Regional routes                                             3.94     4.49    -12.33%





                       C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




FLEET



FLEET STRUCTURE AS AT 31 DECEMBER 2012



                                                                                                 Self-
                                                                                         owned and                   Under
                                                                                        under finance             operating
No.                                            Model                                            lease                 lease    Sub-total


Passenger aircraft


Wide-body aircraft


                                               A340–600                                                5                 –
                                               A330–300                                                8                 7
                                               A330–200                                               10                 3
                                               A300-600R                                                7                 –
                                               B767                                                     6                 1

Narrow-body aircraft


                                               A321                                                    27                 –
                                               A320                                                    98                33
                                               A319                                                    12                 8
                                               B757-200                                                 5                 5
                                               B737–800                                               17                56
                                               B737–700                                               37                18
                                               B737–300                                               16                 –
                                               CRJ–200                                                 8                 –
                                               EMB–145LR                                              10                 –

Total number of passenger aircraft
                                                                                                      266               131

Freighter


                                               MD-11F                                                   –                3
                                               A300-600R                                                3                 –
                                               B747–400ER                                              2                 3
                                               B757–200F                                               –                2
                                               B777F                                                    –                6

Total number of freighters
                                                                                                        5                14

Total number of passenger
   aircraft and freighters
                                                                                                      271               145

                                                                                                    No. of custody

Business aircraft


Total number of aircraft






                                                             ANNU AL RE POR T 2 0 1 2




FLEET




FUTURE AIRCRAFT PLAN


                                            2013                    2014                    2015                    2016

 Model                             Introduction Retirement Introduction Retirement Introduction Retirement Introduction Retirement Introduction Retirement



 Passenger aircraft ( )
 A320 Series (A320 )                       22           4          26           –         31           –         20           –         15            –
 A330 Series (A330 )                        8           –          8           –          7           –          –          –          –           –
 A340 Series (A340 )                        –          –          –          1           –          4           –          –          –           –
 B737NG                                    26           5          24           –         35           –         15           –          –           –
 B757                                       –          –          –          1           –          1           –          –          –           –
 B777-300ER                                 –          –          4           –          5           –          5           –          3            –
 Regional aircraft (  )                     –          –          –          8           –          5           –          5           –           –
 Freighter ( )
 A300-600F                                  –          3           –          –          –          –          –          –           –         –
 B747                                       –          –          –          1           –          1           –          –           –         1
 B757F                                      –          –          –          –          –          2           –          –           –         –
 MD11                                       –          2           –          –          –          –          –          –           –         –

 Total                                     56          14          62          11          78          13          40           5          18


Note: The abovementioned quantity and timing for the introduction and retirement of
      aircraft shall be subject to adjustment based on market conditions.





                          C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




SIGNIFICANT EVENTS




27 February 2012                                        5 May 2012                                     1 July 2012
The Company and CAE Canada entered                      The Company’s air-rail transportation         The Company and WestJet Airlines
into an agreement for the introduction of               product “Air-Rail Service” served the        Ltd., based in Canada, commenced
a Gulfstream G450/550 flight simulator,                 first batch of travelers, marking the          code sharing cooperation on flights from
                                                                                                       Vancouver to the Company’s domestic
which is the first flight simulator for business        official commencement of the first air-rail
                                                                                                       destinations.
aircraft to be introduced in China.                     transportation product in China.




                                                                                                       24 August 2012
                                                                                                       Eastern Air Overseas, a subsidiary of the
                                                                                                       Company, entered into a shareholders’
2 March 2012                                            6 June 2012                                    agreement with respect to JetStar Hong
The Company’s “Xinhuanet” Aircraft made              China Cargo Airlines made an official          Kong with JetStar International, a wholly-
its first flight. This colorful aircraft is the         announcement regarding its intent to join      owned subsidiary of Qantas, to establish
                                                                                                       JetStar Hong Kong as a Hong Kong-based
first in China named after a network media              the SkyTeam Cargo Alliance at the China
                                                                                                       and Jetstar-branded low-cost carrier.
entity.                                                 Aviation Logistics Exhibition.




                                                        21 June 2012                                   2 September 2012
20 March 2012                                           The Company entered into a loan facility       The Company entered into a cooperation
The Company was ranked among the                        agreement in the amount of RMB20 billion       agreement with Niulanshan No. 1
“2012 Top 25 Companies in China with                   and strategic cooperation with Shanghai        Secondary School in Beijing regarding
                                                                                                       aviation experiment class, pursuant to
the Best Corporate Social Responsibility”              Pudong Development Bank Co., Ltd.
                                                                                                       which an “Aviation Experiment Class”
by Fortune China Magazine.                                                                             would be jointly established for training
                                                                                                       talented individuals for aviation.





                                                      ANNU AL RE POR T 2 0 1 2




SIGNIFICANT EVENTS




30 October 2012                                26 November 2012                              12 December 2012
The Company made its first flight from         China United Airlines, a wholly-owned         The Company was ranked 25th among the
Shanghai to Cairns in Australia. This is the   subsidiary of the Company, completed its      “Top 50 Most Valuable Chinese Brands”
first scheduled direct flight from China to    joint reorganization with the former Hebei    by WPP, a global brand communication
Cairns.                                        Branch of the Company and became              firm.
                                               the New China United Airlines, which is
                                               principally based at the Nanyuan Airport in
                                               Beijing.



16 November 2012                                                                             December 2012
The Company was awarded the “Golden                                                         The Company was recognized among the
Tripod Award” at the 8th Annual Meeting                                                     “Top 100 Employer in China” in 2012.
of China’s Securities Market.                 22 November 2012
                                               The Company was recognized as a “Listed
                                               Company with the Most Valuable Brand”
                                               at the 2012 Hong Kong China Securities
                                               Golden Bauhinia Award ceremony, and Mr.
                                               Liu Shaoyong, Chairman of the Company,
                                               was recognized as a “Most Influential
                                               Leader”.





                       C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




CHAIRMAN’S STATEMENT


Dear shareholders,


I am pleased to present the report on the operating results of China Eastern Airlines Corporation
Limited (the “Company” or “CEA”) and its subsidiaries (collectively, the “Group”) for the year ended 31
December 2012. On behalf of the entire staff of the Group, I would like to extend my sincere thanks to
the shareholders of the Company (the “Shareholders”).




                                                                                               Liu Shaoyong
                                                                                               Chairman


                                                         ANNU AL RE POR T 2 0 1 2




CHAIRMAN’S STATEMENT




In 2012, the global economic downturn resulted in: (i) decreased demand
in both international and domestic passenger traffic and freight markets; (ii)
greater cost pressures brought by consistently high crude oil prices; and (iii)
intensified competition in domestic routes due to preference passengers for
railway over airline transportation becoming more common. Meanwhile, the
Group’s international routes were also affected by unforeseen international
events. Facing this complex international and domestic environment,
the Group has, under the premise of ensuring flight safety, maintained
positive profitability by optimising route and fleet structure, enhancing sales
management in both passenger transportation and freight transportation,
maintaining stringent cost control, strengthening the development of
information technology and improving the quality of its services.

Safety management

The Group maintained a stable safety system in 2012. The Group continued
to strengthen its construction of the Safety Management System (SMS);               (SMS)   SMS
promulgated and issued work plans and implementation proposals of the
SMS with the relevant teams; commenced specific restoring measures
regarding the risks such as lighting strike, hard landing and communication
failure; established the Nantong airport training base to reinforce training on
flying skills; and formulated the “                                (Assessment
and Remuneration Packages of Star-rating Flight Crew Members)”, which
commenced star-rating assessment of all flight crew members in terms of
flight safety, flight quality, practice and discipline and services. Such rating
system not only optimised our incentive programs, but also enhanced our
environment and culture to promote safe operations. The Company assessed
and appointed 361 five-star captains during the first assessment at the end of
2012.





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CHAIRMAN’S STATEMENT




Passenger traffic business

Developing hub networks


In 2012, for domestic routes, the Group increased the frequency of flights in
certain express and sub-express routes, including Shanghai to Guangzhou,
Chongqing, Zhengzhou and Changsha. The Group essentially provided full
coverage over routes from Kunming to other provincial capitals in the PRC
by leveraging on opportunities arising from the release of time slots at the
new Kunming airport, which introduced new destinations such as Yinchuan,
Jinan and Xining. The Group introduced new flights from Ningbo, Hefei and
Nanchang to Northwest China via Xi’an and increased the frequency of
flights from Xi’an to Northwest China by leveraging on opportunities arising
from the release of time slots at a new terminal at the Xi’an airport. For
international routes, the Group introduced four weekly routes from Shanghai
to Cairns, Australia, and increased the frequency of flights from Shanghai to
Paris, Rome, Sydney and Hawaii during peak seasons. Given the change of
relationship between China and Japan and related market factors, the Group
reduced its flight capacity allocated to routes between the two countries after
September 2012, and reallocated resources to Southeast Asian routes, as
well as increased the frequency of flights from Shanghai to Ho Chi Minh, Kuala
Lumpur, Bangkok and New Delhi.


The Group steadily fostered the construction of flight system for its core hub
in Shanghai and regional hubs in Kunming and Xi’an by introducing new flight
destinations and increasing the frequency of certain flights, thereby enhancing
its transfer and connection capability in these hub markets. By the end of
2012, a preliminary flight frequency of “four-in-four-out” was established
at Shanghai Pudong International Airport, with “four-in-four-out” currently
also being established at Kunming Airport, which increased the transfer and
connection services via Kunming to Southeast Asia, South Asia and Western
Asia. Xi’an Airport is also in the process of establishing a “three-in-three-out”
flight frequency.


In addition, the Group actively strengthened its position in the Beijing market.
Facing the relatively saturated time slots and flight resources at Beijing Capital
International Airport, the Group integrated China United Airlines Co., Ltd.
(“China United Airlines”), the sole operator of Beijing Nanyuan Airport and
the Hebei Branch of the Company, to establish the new China United Airlines.
The new China United Airlines has fully utilized time slots at Nanyuan Airport                   B737
and added six B737 aircraft, which increased the frequency of flights from
Beijing Nanyuan to Shenzhen, Xiamen and Changsha, and has enhanced the
Group’s market share in Beijing.


In 2012, the Company implemented code-sharing programs covering 274
destinations along 429 routes with SkyTeam member airlines, as well as 130                              429
destinations along 142 routes with non-SkyTeam member airlines, which has
further broadened the coverage of the Group’s route network.





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CHAIRMAN’S STATEMENT




Enriching the categories of marketing products


In 2012, the Group took the initiative to develop marketing products based
on the characteristics of different markets and routes to expand its sales
channels, broaden its customer base and increase its flight revenue.


The Group designed four core products of the “               (Eastern Series)”
in accordance with different levels of demand and consumption, including
“         (Eastern Premium)” which targets high-quality business travelers,
providing them with concierge-style, full accompaniment services;
   (Eastern Privileges) which targets potential high-value travelers, providing
them with upgraded experiences and door-to-door pickup services to and
from the airport;            (Eastern Far Reach) which targets travelers with
special needs, providing them with one-stop services covering visa application
before departure to ticketing reservation; and          (Eastern Shuttle) which
targets travelers to Yunnan, providing them with itinerary design, transit and
destination value-added services.


In 2012, the Group cooperated with the Shanghai Railway Bureau to launch
“Air-Rail Pass Transportation” products in 13 cities in the Yangtze River         13
Delta including Nanjing, Hangzhou and Suzhou. The Group’s domestic and
international flights together with its high-speed railway products at Shanghai
Hongqiao International Airport and Shanghai Pudong International Airport have
formed a air-rail two-way transportation product, which has helped the Group
broaden its customer base.


Meanwhile, in response to the low seasons, the Group launched travel
products such as “Journey to the Three Regions in Southern China” (Yunnan,
Hainan and Jiangnan) and “Journey to the West” (trip to Greater Western
China via Xi’an), which has effectively enhanced passenger load factor for
flights during low seasons.


Developing customer resources


The Group actively explored and expanded its customer base of high-end
business travelers to accelerate the development of group clients. In 2012,                           200
the Group added over 200 group clients, of which 15 are global group clients.                                   4,500
Currently, the total number of group clients amounts to over 4,500, which has
contributed to increased sales revenues.


The Group fully promoted the development of Eastern Miles membership
business. In order to attract more members, and to provide members better
experience in terms of diversity, comprehensiveness and flexibility, the Group
strengthened its cooperation with retail store owners by increasing the number
of co-operative stores where members may accumulate and redeem points                    74
to 74, covering various industries such as financial services, hotel, car rental
and health services. The total number of exchangeable goods through this
program has increased to over 850 items. By the end of 2012, the Group had                    1,800
over 3 million new Eastern Miles members, with a total of 18 million members.
Members of Eastern Miles can participate in the frequent flyer mileage
accumulation and the redemption programs of 19 SkyTeam member airlines,
as well as enjoy other member benefits. Elite members also have access to
our 525 VIP lounges across the world.





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CHAIRMAN’S STATEMENT




Freight transportation business

In 2012, the Group reduced its allocation of flight capacity for freight
transportation in response to weak demand in the freight transportation
market. Meanwhile, the Group adjusted and optimised its freight transportation
flight routes by changing the interline routes of “Shanghai Pudong-
Copenhagen-Paris-Shanghai Pudong” to “Shanghai Pudong-Copenhagen”
and “Shanghai Pudong-Paris” routes, and canceled our inbound domestic
destination at Tianjin for the Shanghai Pudong-Chicago route.


In terms of marketing of freight transportation, the Group promoted the
construction of cabin space and freight price control system and strengthened
its income management by establishing sales models at headquarters;
increased sales efforts for early flight express mail products so as to boost
the sales of seasonal goods; facilitated the integration of Yangtze River Delta
market while planning a regional sales network in Yangtze River Delta to
conduct joint sales in the region.


In order to enhance the management of its freight transportation business
and increase the efficiency and quality of operations, the Group established a
global freight transportation command center to fully control the management                                     20
of 58 freight terminals; completed the implementation of 20 domestic and 22                     Cargo2000
international station benchmarks in accordance with Cargo2000 (a quality
management standard for international aviation freight transportation industry);
strengthened the construction of quality management system; and revised the
operation standard of general cargo and express mail, which reduced the time
between receipt and delivery of goods at its Shanghai station.


In addition, the Group’s various efforts facilitated the entering of China Cargo
Airlines Co., Ltd. (“China Cargo Airlines”) to the SkyTeam Cargo Alliance.
On 6 June 2012, the Company formally signed a letter of intent to join the
SkyTeam Cargo Alliance, with official membership to commence in 2013.

Cost control

The Group strictly controlled its budget and reinforced cost control by adopting
a comprehensive budget management system. The Group also proactively
promoted all-levels integration of its procurement resources and streamlined
and optimised the procurement process, as well as implemented entire-                                       IT
process control over procurement. The Group implemented approximately 700
instances of centralised procurement with respect to information technology,                                          DOC
automobile, jet fuel and in-flight supplies in 2012. Meanwhile, the Group
also strengthened DOC (Direct Operation Cost) control and management by                                                    1.3
streamlining aircraft models and optimising route structure. The Group also
reduced fuel consumption by way of precise refueling based on its flight plans,
which effectively reduced fuel costs by approximately RMB130 million in 2012.
In addition, the Group actively explored financing channels and sought to
reduce its finance costs by means of various financial instruments. In 2012,
the Company issued super short-term commercial paper of RMB4 billion with
a consolidated finance costs that were lower than The People’s Bank of China
benchmark interest rate.





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CHAIRMAN’S STATEMENT




Information technology

The Group has always attached great importance to the enhancement of
information technology, and has sought to implement information technology
that contributes to the continued development of the Group’s business.                       E
In 2012, the Group further optimised its electronic sales service system,
including its official website, call centres and mobile application “
E (China Eastern Mobile E)”, which serves to enhance customer experience
while increasing the Group’s direct sales. The Group upgraded its official
domestic website and launched nine overseas websites. The Group fostered
the transformation and upgrade of call centres and gradually expanded this                E
system to all branches, subsidiaries and sales departments. In view of the
increasing popularity of smart phones, the Group introduced the new version
“        E (China Eastern Mobile E)” in 2012, providing a streamlined
customer experience with tickets booking, flight status checking and online
check-in and international tickets sales services via a domestic mobile phone
application.


Meanwhile, the Group took a proactive approach towards the development
of self-service check-in functions and continuous improvement of an online
check-in system to offer more convenient self-services for passengers.

Service quality

Adhering to the concept of “customer satisfaction above all else” and “providing
heart-to-heart service to our customers”, the Group optimised and adjusted its
fleet structure while proactively pushing the enhancement and renovation of its
hardware and software service products. In 2012, the Group’s newly upgraded
infrastructure and facilities, including ground VIP lounges, waiting areas and
check-in areas in regional hubs and key markets such as Xi’an, Kunming
and Beijing Nanyuan, as well as commenced operations of the Company’s
exclusive VIP lounges at Guangzhou and Shenzhen airports. The Group
advocated a green, environmentally friendly and healthy catering concept and
joined hands with world-renowned hotel groups to design innovative cuisine to
be served in first class and business class cabins. The Group also promoted
customized service of “Inflight Meals Ordered Before Flight” for first class and
business class cabins and high-end customers. The content of entertainment
systems in the passenger cabins has been continuously improved to ensure
diversified in-flight entertainment experience of passengers. In addition, under
circumstances where flights were substantially affected due to bad weather
and other unexpected events, the Group increased the number of information
dissemination platforms and optimised procedures to address such issues
by providing timely flight status information for customers to facilitate itinerary
adjustments.





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CHAIRMAN’S STATEMENT




Transformation and development

Working around the transformation target of “transforming from an air
passenger and freight carrier to an integrated aviation services and logistics
services provider”, the Group took a first step towards transformation by
making a concerted effort to push forward the integration and allocation of
internal resources in 2012. Driven by information technology, passenger
transportation transformation was driven by improved network capability,
product marketing and customer demand. The Group further explored
customer resources and steadily promoted the construction of the Group’s
electronic business platform and mobile service platform. As for freight traffic
transformation, the Group integrated China Cargo Airlines and
                 (Shanghai Eastern Airlines Logistics Co., Ltd) (“Eastern
Logistics”), which developed new businesses such as freight expressway,
logistics solutions and aviation trading on the basis of its existing strong
traditional storage and freight transportation business, which enabled the
Group to build a general logistics platform for logistics services.


Meanwhile, in its proactive response to the rapid development of low-
cost airlines around the world, the Group entered into a shareholders’
agreement with Qantas Airways Limited (“Qantas”) in 2012, pursuant to
which a joint venture low-cost carrier will be established in Hong Kong that
will adopt the low-cost “Jetstar” brand owned by Qantas. As of the date of
this announcement, Jetstar Hong Kong Limited (“Jetstar Hong Kong”) had
obtained the certificate of incorporation issued by the Hong Kong Special
Administrative Region.


OUTLOOK FOR 2013

The Group cautions readers of this report. As an air transport enterprise that
provides public service functions, the operations of the Group are closely
linked to political and economic developments both in the PRC and abroad. As
such, the Group’s operations as well as that of the aviation industry are, to a
significant extent, subject to risks associated with unforeseen occurrences of
geopolitical events and other significant events.


The 2012 annual results of the Group includes certain forward-looking
statements with respect to the future plans of the Group and the outlook of
international and domestic economic conditions and the general condition of
the global aviation industry. Such forward-looking statements are subject to
many uncertainties and risks beyond our control, and the actual results of the
Group may vary materially from these forward-looking statements. You are
cautioned not to place undue reliance on such forward-looking statements.


In 2013, there is still uncertainty in the global economy as China’s economic
growth has generally slowed down but has maintained relatively steady
and rapid development. Under this operation environment, the Group, with
the premise of maintaining safe operations, intends to achieve its goal of
strengthening its management of passenger and freight carriers and strictly
controlling cost to achieve improved operational efficiency.





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CHAIRMAN’S STATEMENT




For the passenger traffic business, the Group expects to allocate flight
capacity and routes precisely and properly and to maintain accurate control of
cabin space and refine pricing management. The Group will seek to increase
the proportion of direct sales by expanding its sales and marketing platform;
and step up its efforts to develop transition and tourism products by leveraging
on its 72-hours visa-free stay policy in Shanghai and Beijing. The Group
also seeks to further enhance its cooperation with both members and non-
members airlines of the SkyTeam Alliance. Performance efficiency will also be
enhanced through strengthened sales and marketing management measures
and increased operating efficiency.


In terms of freight logistics, the Group will seek to adjust the structure of its
freight fleet and route network, based on existing market conditions. Operating
costs are expected to be reduced by controlling the allocation of flight
capacity. Building on its steady freight carrier business, the Group will seek
to enhance the operation management of bellyhold space to increase freight
traffic revenue. Meanwhile, the Group will actively expand its presence in the
freight logistics market by enhancing its ability to provide logistics solutions.


The Group will continue to implement comprehensive budget management
measures and strengthen the overall control in implementating this budget.
Fuels cost can be decreased through reduced fuel consumption by way of
continued route optimisation, continued operational management refinement
and continued weight reduction on board flights. Procurement costs will
also be reduced by implementing centralised procurement measures and
increasing bargaining power on bulk purchase. Maintenance cost can
be reduced by enhancing engine overhaul capabilities and increasing
maintenance monitoring. Finance cost can be reduced by the use of various
financial instruments. Through these various efforts and controls over various
costs and expenses, the Group’s profitability can be enhanced.


While the Group will focus on traditional passenger and freight transportation
operation, it will also actively promote the transformation and development of
both operations. The Group will also further improve its electronic business
platforms and mobile service platforms to facilitate the transformation of
passenger traffic operation through optimisation of network flight capacity,
expansion of aviation value chains, and enrichment of product portfolio and
exploration of customer resources. For the transformation of freight logistics,
the Group will benefit from economies of scale from the consolidation of its
freight logistics business, which will speed up the transformation of freight
transportation business and establish a platform for freight expressway to
create a competitive freight expressway brand. The Group will also strengthen
its truck transportation business to establish new revenue streams for freight
transportation. An innovative storage approach will be adopted to expand the
single storage function of cargo warehouses into a distribution centre with
multiple functions such as storage, cargo management and cargo delivery.





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REVIEW OF OPERATIONS AND
MANAGEMENT’S DISCUSSION AND ANALYSIS

With Shanghai as its core hub and Xi’an and Kunming as regional hubs, the Group has established an
air transport network throughout China and extending to Asia, Europe, North America and Oceania.
After joining the SkyTeam Alliance, the route network of the Group expanded to cover more than 1,000
destinations in 187 countries around the world. To date, the number of Eastern Miles members of the
frequent flyer program of the Group has exceeded 18 million members.




Ma Xulun
Vice Chairman, President





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REVIEW OF OPERATIONS AND
MANAGEMENT’S DISCUSSION AND ANALYSIS


The Group currently has 10 branches and 50 overseas operation units and                                   10       50
offices around the world, in addition to 24 wholly or partly owned subsidiaries
including                        (Shanghai Airlines Co., Ltd.) (“Shanghai
Airlines”),                          (China Eastern Airlines Yunnan Co., Ltd.),                24
                               (Shanghai Eastern Airlines Logistics Co., Ltd)
and China United Airlines. The fleet of CEA comprises over 400 large- and           7,300
medium-sized aircraft with an average age of less than seven years, providing
services to over 73 million travelers around the world every year.


In 2012, the total traffic volume of the Group was 14,406.48 million tonne-                                       14,406.48
kilometres, representing an increase of 7.49% from last year. Revenue of the                    7.49%                  852.53
Group was RMB85,253 million with total profit of RMB2,808 million. Net profit                     28.08
attributable to the equity shareholders of the Company was RMB2,954 million.                29.54

In 2012, the Company accounted for 50.20% and 38.40% of the total market
share at Hongqiao International Airport and Pudong International Airport,                                      50.20%   38.40%
respectively, in terms of total flight take-offs and landings and accounted
for 48.20% and 36.60% of the total market share at Hongqiao International                   48.20%   36.60%
Airport and Pudong International Airport, respectively, in terms of passenger
throughput.





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REVIEW OF OPERATIONS AND
MANAGEMENT’S DISCUSSION AND ANALYSIS



REVIEW OF OPERATING RESULTS

The following discussion and analysis should be read together with the
Group’s audited financial statements and the accompanying notes prepared in
accordance with International Financial Reporting Standards (“IFRS”) that are
included elsewhere in this annual report. The financial data presented in this
section are derived from the Group’s audited financial statements prepared in
accordance with IFRS.

Operational revenues

In 2012, the Group’s revenues was RMB85,253 million, representing an                                                         852.53
increase of 3.46% from the previous year. Transportation revenue amounted                       3.46%                         794.44
to RMB79,444 million, representing an increase of 3.83% from the previous                       3.83%                                    14,406.48
year. In 2012, the Group’s total traffic volume was 14,406.48 million tonne-                                     7.49%
kilometres, representing an increase of 7.49% from the previous year.


In 2012, the Group’s passenger revenues amounted to RMB71,419 million,                                                       714.19
representing an increase of 4.36% from the previous year, and accounted for                        4.36%                                   89.90%
89.90% of the Group’s traffic revenues in 2012. Passenger traffic volume was                                    109,112.68
109,112.68 million passenger-kilometres, representing a 8.14% increase from                     8.14%
the previous year.


The Group’s domestic passenger traffic volume was 76,156 million                                                        76,156
passenger-kilometres, representing an increase of 7.36% from the previous                               7.36%             501.41
year. Compared to 2011, domestic passenger revenues increased by 2.41%                          2.41%              70.21%
to RMB50,141 million, accounting for 70.21% of the Group’s passenger
revenues.


The passenger traffic volume of the Group’s international routes was                                                    29,105.09
29,105.09 million passenger-kilometres, representing a 11.30% increase                                11.30%                180.57
from the previous year. Compared to 2011, international passenger revenues                      10.15%               25.28%
increased by 10.15% to RMB18,057 million, accounting for 25.28% of the
Group’s passenger revenues.


The passenger traffic volume of the Group’s regional routes was 3,852.01                                               3,852.01
million passenger-kilometres, representing a 1.08% increase from last year.                              1.08%             32.21
Compared to 2011, regional passenger revenues increased by 4.65% to                             4.65%              4.51%
RMB3,221 million, accounting for 4.51% of the Group’s passenger revenues.


In 2012, the Group’s cargo and mail traffic revenues decreased by 0.67%                                                         80.25
to RMB8,025 million, as compared to 2011, accounting for 10.10% of the                                 0.67%                               10.10%
Group’s traffic revenues in 2012. Cargo and mail traffic volume was 4,700.90                                    4,700.90
million tonne-kilometres, representing a 6.34% increase from last year.                         6.34%





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REVIEW OF OPERATIONS AND
MANAGEMENT’S DISCUSSION AND ANALYSIS



Operating expenses

In 2012, the Group’s total operating costs was RMB82,745 million,                                                                827.45
representing an increase of 4.35% from previous year.                                         4.35%

Analysis of the changes in other items under operating costs of the Group is
set out as follows:


Aviation fuel costs account for the most substantial part of the Group’s
operating costs. In 2012, total aviation fuel consumption was approximately                         417.77                       7.22%
4,177,700 tonnes, representing a 7.22% increase compared to last year. In                       2.14%
2012, the average price of jet fuel increased by 2.14% compared to last year.        298.72
Aviation fuel expenditures of the Group reached RMB29,872 million (based               36%                        2.20%
on value-added tax), which accounted for 36% of the Group’s operating                                292.29
expenses, representing an increase of 2.20% from RMB29,229 million last
year. The Company implemented a policy of transforming its business tax to                                                9.52%
value-added tax in 2012. If calculated in line with the business tax, aviation                            6.71
fuel costs for 2012 grew by 9.52% from last year, and the increase in price of                           21.11
jet fuel increased aviation fuel expenditures by approximately RMB671 million.
The increase in aviation fuel consumption resulted in an increase in aviation
fuel expenditures of approximately RMB2,111 million.


Take-off and landing charges amounted to RMB9,066 million, or an increase                             90.66                         8.57%
of 8.57% from last year, and was primarily due to the increase in the number
of take-off and landings, as well as an increase in average unit price of take-off
and landing charges.


Depreciation and amortisation amounted to RMB7,557 million, or a growth                                   75.57                   8.49%
of 8.49% from last year, and was primarily due to the addition of new aircraft
and engines by the Group in 2012, resulting in a greater base number for
depreciation and amortisation.


Wages, salaries and benefits amounted to RMB10,059 million, or an increase                                             100.59
of 16.09% from last year, and was primarily due to an increase in the number         16.09%
of staff and an increase in hours flown.


Food and beverage expenses were RMB2,031 million, representing an                                                      20.31
increase of 0.45% from last year.                                                    0.45%

Aircraft operating lease rentals amounted to RMB4,438 million, or an increase                                           44.38
of 7.50% from last year, and was primarily due to an increase in the number of       7.50%
aircraft held through an operating lease in 2012.


Other operating lease rentals amounted to RMB609 million, or an increase of                                              6.09
23.83% from last year, and was primarily due to an increase in the number of         23.83%
leases for warehouses and VIP lounges at airports.


Sales and marketing expenses were RMB3,727 million, representing a                                             37.27                 0.33%
decrease of 0.33% from last year.


The amount of civil aviation infrastructure levies payable to Civil Aviation
Administration of China (“CAAC”) amounted to RMB1,414 million, representing                  14.14                     7.04%
an increase of 7.04% compared to last year, and was primarily due to an 8%                                               8%
increase of miles flown by the Company in 2012.





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REVIEW OF OPERATIONS AND
MANAGEMENT’S DISCUSSION AND ANALYSIS


Ground services and other charges were RMB594 million, representing an                                                         5.94
increase of 4.67% from last year.                                                               4.67%

Office, administration and other operating expenses amounted to RMB8,983                                                          89.83
million, representing an increase of 1.46% from last year primarily due to an                      1.46%
increase in the number of staff.

Other operating income

In 2012, other operating income of the Group amounted to RMB1,720 million,                                                                     17.20
an increase of 62.01% from the same period last year, primarily due to an                                       62.01%
increase in operations subsidy from the government.

Finance income/costs

In 2012, the Group’s finance income was RMB349 million, a decrease of                                                                3.49
RMB1,675 million from the same period last year, primarily due to the minimal                                  16.75
appreciation of the Renminbi against the U.S. dollar in 2012, which had
substantially appreciated in 2011. Finance costs amounted to RMB1,697                                                  16.97                    2.35
million, an increase of RMB235 million, primarily due to an increase in interest
expenses arising from increased borrowings and finance leases.


Profit

As a result of the foregoing, the Group’s profit attributable to the equity
shareholders of the Company in 2012 was RMB2,954 million, representing a                                      29.54
35.45% decrease as compared to the Group’s profit attributable to the equity                                                     45.76
shareholders of the Company of RMB4,576 million in 2011.                                        35.45%

Liquidity and Capital Structure

The Group’s primary capital requirements are for its daily operations and to
fund capital expenditures for the purchase of aircraft and flight equipment.
Cash generated from the ordinary course of the Group’s business was
generally able to satisfy the cash required for the Group’s daily operation and
generate cash surplus. In 2011 and 2012, net cash inflow from the Group’s
operating activities amounted to RMB13,623 million and RMB12,617 million,                       136.23              126.17
respectively. Capital expenditures for the purchase of aircraft and flight
equipment was partly funded by internal funds, the balance of which was
mainly financed by long-term and short-term borrowings and finance leasing.
In 2011 and 2012, net cash outflow from the Group’s investment activities                                 149.39            117.89
were RMB14,939 million and RMB11,789 million, respectively. Net cash inflow                                                           21.36
from the Group’s financing activities in 2011 was RMB2,136 million. Net cash                                                                  21.74
outflow from the Group’s financing activities in 2012 was RMB2,174 million.


The Group generally operates with net current liabilities. As at 31 December
2012, the Group’s current liabilities exceeded its current assets by                                                                         359.48
RMB35,948 million. The Group has been and believes it will continue to be
capable of financing its working capital by obtaining borrowings from domestic
and foreign banks in China. In addition, the Group proactively explored its
financing channels and continued to optimise its debt structure and lower its
finance costs by issuing various kinds of bonds.





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REVIEW OF OPERATIONS AND
MANAGEMENT’S DISCUSSION AND ANALYSIS


The Group monitors its capital on the basis of its debt ratio, which is
calculated as total liabilities divided by total assets. As at 31 December 2012,
the debt ratio of the Group was 80.17%.                                                     80.17%

As at 31 December 2011 and 2012, the amount of the Group’s borrowings
due within one year were RMB18,171 million and RMB22,640 million,                                                          181.71
respectively. As at 31 December 2011, the Group’s borrowings payable               226.4
from one to two years, from three to five years, and beyond five years were
RMB8,408 million, RMB9,391 million and RMB5,804 million, respectively, as                    84.08                 93.91                    58.04
compared to RMB7,273 million, RMB7,906 million and RMB7,918 million,
respectively, as at 31 December 2012.                                                           72.73                    79.06
                                                                                    79.18

The Group’s obligations under finance leases as at 31 December 2011 and
2012 were RMB20,261 million and RMB21,858 million, respectively. As at 31                                                  202.61
December 2011, the Group’s lease obligations payable within two years, from        218.58
three to five years and beyond five years were RMB5,017 million, RMB7,235
million and RMB8,009 million, respectively, as compared to RMB5,309 million,                             50.17                72.35
RMB7,925 million and RMB8,624 million, respectively, as at 31 December                  80.09
2012.                                                                                                            53.09                 79.25
                                                                                                86.24

As at 31 December 2012, the Group’s borrowings comprised USD-
denominated borrowings of USD5,028 million and RMB-denominated                                50.28                                      138.27
borrowings of RMB13,827 million. Fixed-rate borrowings and floating-                                                         22.91%
rate borrowings accounted for 22.91% and 77.09% of total borrowings,                                        77.09%
respectively, in 2012. As at 31 December 2011, the Group’s borrowings                                                           39.67
comprised USD-denominated borrowings of USD3,967 million and RMB-                                          167.80
denominated borrowings of RMB16,780 million. Fixed-rate borrowings and                            15.6%
floating-rate borrowings accounted for 15.6% and 84.4% of total borrowings,         84.4%
respectively, in 2011.


As at 31 December 2012, the Group’s obligations under finance leases
comprised USD-denominated obligations of USD2,983 million, Singapore                         29.83                              2.45
dollar-denominated obligations of S$245 million, Hong Kong dollar-                           14.68                          91.36
denominated obligations of HK$1,468 million, and Japanese Yen-denominated
obligations of JPY9,136 million. As at 31 December 2011, the Group’s                   28.40                                    10.90
obligations under finance leases comprised USD-denominated obligations                            2.63
of USD2,840 million, RMB-denominated obligations of RMB1,090 million
and Singapore dollar-denominated obligations of S$263 million. The Group’s
finance leases were floating-rate obligations in 2011 and 2012.


CAPITAL EXPENDITURES

According to the contracted agreements, as at 31 December 2012, we expect
our capital expenditures for aircraft, engines and related equipment to be, in
the aggregate, approximately RMB172,092 million, including approximately                                                   1,720.92
RMB26,321 million in 2013 and RMB44,435 million in 2014, in each case                                                       263.21
subject to contractually stipulated changes or any change relating to inflation.                      444.35
We plan to finance our capital commitments through a combination of funds
generated from operation, existing bank credit facilities, bank loans, leasing
arrangements and other external financing arrangement.





                            C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




REVIEW OF OPERATIONS AND
MANAGEMENT’S DISCUSSION AND ANALYSIS



CRITICAL ACCOUNTING POLICIES

Critical accounting policies are defined as those that are reflective of significant
judgments and uncertainties and potentially result in materially different results
under different assumptions and conditions.


Our audited consolidated financial statements have been prepared in
accordance with IFRS. Our principal accounting policies are set forth in Note 2
to our audited consolidated financial statements. IFRS requires that we adopt
the accounting policies and make estimates that our directors believe are most
appropriate in the circumstances for the purposes of giving a true and fair
view of our results and financial position. However, different policies, estimates
and assumptions in critical areas could lead to materially different results. The
critical accounting policies adopted and estimates and assumptions made
in the preparation of these financial statements are identified and set forth in
Note 4 to our audited consolidated financial statements.


RISK ANALYSIS

Interest rate fluctuation risk

The Group’s total interest-bearing liabilities (including long-term and short-
term borrowings, finance leases and bonds payable) as at 31 December 2011                                        620.35              675.94
and 2012 were RMB62,035 million and RMB67,594 million, respectively, of
which short-term liabilities accounted for 33.26% and 37.35%, respectively,                                        33.26%   37.35%
for those years. A portion of long-term interest-bearing liabilities were liabilities
with variable interest rates, and were affected by fluctuations in current market
interest rates.


The Group’s interest-bearing liabilities were primarily denominated in US
dollars and Renminbi. As at 31 December 2011 and 2012, the Group’s
liabilities denominated in US dollars accounted for 69.14% and 74.5%,                                             69.14% 74.5%
respectively, of total liabilities while liabilities denominated in Renminbi                                     28.81% 20.46%
accounted for 28.81% and 20.46%, respectively, of total liabilities during
those periods. Fluctuations in the US dollar and Renminbi interest rates have
significantly affected the Group’s finance costs.

Exchange rate fluctuation risk

Since 21 July 2005, the Chinese government has adjusted the Renminbi
exchange rate system and established a floating exchange rate system by
which the exchange rate would be adjusted and managed based on market
supply and demand, with reference to a basket of foreign currencies. The
fluctuation in the Renminbi exchange rate is affected by domestic and
international economic and political conditions and general currency supply
and demand dynamics.





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REVIEW OF OPERATIONS AND
MANAGEMENT’S DISCUSSION AND ANALYSIS


The Group operates its business in many countries and territories and
generates revenue in different currencies. As such, its foreign currency
liabilities are generally much higher than its foreign currency assets at the end
of the period. The Group’s major liability item (purchases or leases of aircraft)
is mainly priced and settled in currencies such as US dollars. In addition,
fluctuations in foreign exchange rates will affect the Group’s costs incurred
from foreign purchases such as aircraft, flight equipment and jet fuel, and                                           537.67
take-off and landing charges at foreign airports. As at 31 December 2012,                                 93.66%
the Group’s total interest-bearing liabilities denominated in foreign currencies,
converted to Renminbi, amounted to RMB53,767 million, of which US dollar
liabilities accounted for 93.66% of this amount. Therefore, a significant
fluctuation in foreign exchange rates will subject the Group to foreign
exchange loss arising from the translation of foreign currency denominated
liabilities, which will also affect the profitability and development of the Group.
The Group typically uses hedging contracts for foreign currencies to reduce                0.58                             0.46
the foreign exchange risks for foreign currency revenue generated from ticket
sales, and expenses to be paid in foreign currencies. The Group’s foreign
currency hedging contracts mainly involve the sales of Japanese Yen and the
purchase of US dollars at fixed exchange rates. As at 31 December 2012,
foreign currency hedging contracts held by the Group amounted to a notional
amount of USD58 million (31 December 2011: USD46 million), and will expire
between 2013 and 2017.


The Group recorded a decrease in net foreign exchange gains in 2012. As
at 31 December 2011 and 2012, the Group’s foreign exchange gains were
RMB1,872 million and RMB148 million, respectively. Due to the significant                         18.72      1.48
amount of existing net foreign currency liabilities, the Group’s results will be
materially and adversely affected if the Renminbi depreciates against the US
dollar, or if the rate of appreciation of the Renminbi against the US dollar
decreases in the future.

Risk associated with the fluctuation of fuel prices

Jet fuel is one of the Group’s major operating expenses. The fluctuation of jet
fuel prices has significant impact on the Group’s operating results. Foreign
fuel prices are mainly affected by supply and demand dynamics in the global
market. In addition, domestic jet fuel prices are supervised by governmental
authorities such as the National Development and Reform Commission and
CAAC of PRC. The Group generally reduces the fuel price impact on operating
results arising from increasing jet fuel prices by imposing passenger fuel
surcharges, reducing fuel consumption by route optimisation and enhancing
cost controls.


In 2012, assuming constant factors but excluding the effects of crude oil
option contracts, if the average price of jet fuel had increased or decreased
by 5%, jet fuel costs of the Group would have increased or decreased by               5%                            14.94
approximately RMB1,494 million.





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REVIEW OF OPERATIONS AND
MANAGEMENT’S DISCUSSION AND ANALYSIS



Pledges on assets and contingent liabilities

The Group generally finances the purchases of aircraft through finance leases
and bank loans secured by its assets. As at 31 December 2012, the value
of the Group’s assets used to secure certain bank loans was RMB22,544                                                                      225.44
million, representing an increase of 23.08% from RMB18,317 million as at 31                                                    183.17
December 2011.                                                                                  23.08%

As at 31 December 2012, the Group had no significant contingent liabilities.



EFFECT OF POLICIES

Effective 1 January 2012, the pilot programme for the transformation from
business tax to value-added tax regarding the transportation industry
commenced in Shanghai, which affects our CEA headquarters, Shanghai
Airlines, China Cargo Airlines, Eastern Logistics and Eastern Business Airlines
and has affected the Group’s income and costs.


On 25 July 2012, the PRC State Council extended the scope of this pilot
programme, and effective 1 August 2012 until year end, the scope of the pilot
programme regarding the transportation and certain modern service industries
was gradually extended from Shanghai to ten provinces and municipalities,
including Beijing, Tianjin and Jiangsu Province. Certain of the Company’s
subsidiaries, including China United Airlines, CEA Jiangsu and CEA Wuhan,
began to enforce the policies.


As at 1 January 2012, the pilot programme affected the Group as revenues
of the Group (excluding tax) decreased by RMB2,954 million, while operating
expenses of the Group decreased by RMB3,132 million, and total profit                                  29.54                        31.32
increased by RMB178 million.                                                                                      1.78


HUMAN RESOURCES

As at 31 December 2012, the Group had 66,207 employees, the majority                                                                        66,207
of whom worked in or were based in China. The wages of the Group’s
employees generally consisted of basic salary and performance-based bonus.
There were no material labor disputes between the Group and its employees,
and the Group did not experience a significant turnover of employees or
encounter any major difficulties in recruiting new employees.


TAXATION

The Company is subject to income tax at a rate of 25% (2011: 24%). Our                                     25%                               24%
effective tax rate, however, may be lower than the rate of 25% because certain
subsidiaries were incorporated in jurisdictions where the applicable income                                      16.5%   25%
tax rate is 16.5% rather than 25%. We had carried forward tax losses of                                    25%
approximately RMB6,169 million as at 31 December 2012 (2011: RMB9,713                                                            61.69
million), which can be used to set off future taxable income between 2013 and                                  97.13
2017.





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REPORT OF DIRECTORS



The board of directors of the Company (the ”Board”) is pleased to present the
audited financial report of the Group for the year ended 31 December 2012 (the
“Reporting Period”).


GROUP ACTIVITIES AND RESULTS
The Company is one of the three largest air carriers in the PRC based on the
total tonne-kilometres and number of passengers carried in 2012 and is an
important base airline facilitating the development of the “International Financial
Centre” and the “International Shipping Centre” of Shanghai. The results of the
Group for the year ended 31 December 2012 and the financial position of the
Company and the Group as at that date, prepared in accordance with IFRS
and PRC Accounting Standards, are set out in the financial statements.

Details of the Company’s principal subsidiaries are set out in note 22 to the
financial statements of the Group prepared in accordance with IFRS.

The geographical analysis of the Group’s revenue from its business is as
follows:


REVENUE

                                                                                                PRC Accounting
                                                                                                      Standard              IFRS



                                                                                                      RMB’000          RMB’000


 Domestic                                                                                            57,612,675        57,115,231
 Regional (Hong Kong, Macau and Taiwan)                                                               3,704,064         3,704,064
 International                                                                                       24,252,511        24,434,022

 Total                                                                                               85,569,250        85,253,317


DIVIDENDS
According to the financial statements prepared in accordance with PRC
Accounting Standards, the Company’s net profit was RMB2,987 million for the
year ended 31 December 2012, and the accumulated losses of the Company                  29.87
as at 31 December 2012 amounted to RMB1,516 million. The Board does not                             15.16
recommend payment of any dividend for the year ended 31 December 2012.


SHARE CAPITAL STRUCTURE
As at 31 December 2012, the share capital structure of the Group is set out as
follows:


                                                                                                                   Approximate
                                                                                                                  percentage in
                                                                                                  Total number       total share
                                                                                                      of shares      capital (%)
                                                                                                                             (%)

 A shares                                                A                                        7,782,213,860            69.01
 H shares                                                H                                        3,494,325,000            30.99
 Total number of shares                                                                          11,276,538,860           100.00




                               C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




REPORT OF DIRECTORS




NUMBER OF SHAREHOLDERS

As at 31 December 2012, the total number of registered Shareholders was
250,268, of which 249,578 are holders of A shares and 690 are holders of H                                      250,268            A        249,578        H
shares.


SUBSTANTIAL SHAREHOLDERS

So far as the directors of the Company (the “Directors”) are aware, each
of the following persons, not being a Director, chief executive, supervisor
of the Company (the “Supervisors”) or member of the Company’s senior
management, had, as at 31 December 2012, an interest and/or short position
in the Company’s shares or underlying shares (as the case may be) which                                  XV      2   3
would fall to be disclosed to the Company and The Stock Exchange of Hong
Kong Limited (the “Hong Kong Stock Exchange”) under the provisions
of Divisions 2 and 3 of Part XV of the Securities and Futures Ordinance (the                                                           5%
“SFO”), or was otherwise, as at 31 December 2012, interested in 5% or
more of any class of the then issued share capital of the Company, or was
otherwise, as at 31 December 2012, a substantial shareholder (as defined in
the Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited (the “Listing Rules”)) of the Company:


                                                                                                                          As at 31 December 2012

                                                                                                          Percentage of        Percentage of       Percentage of
                                                                                                           shareholding         shareholding        shareholding
                                                                                                                   in the               in the              in the
                                                                                                            Company’s           Company’s          Company’s
                                                    Type of                        Number of                total issued         total issued        total issued
 Name of Shareholders                               shares held                   shares held              share capital            A shares            H shares


                                                                                                                                   A                   H



 China Eastern Air Holding Company                  A shares                    4,831,375,000                    42.84%                62.08%                  —
   (“CEA Holding”)                                A



 CEA Holding (Note 1)                               H shares                    1,927,375,000                    17.09%                     —             55.16%
                    1                               H

 HKSCC Nominees Limited                             H shares                    3,478,742,299                    30.85%                     —             99.55%
   (Note 2 to 3)                                    H


                                2        3


Notes:

Based on the information available to the Directors as at 31 December 2012 (including
such information as was available on the website of the Hong Kong Stock Exchange) and
so far as they are aware of, as at 31 December 2012:

1.       Such H shares were held by CES Global Holdings (Hong Kong) Limited (“CES                   1.           H
         Global”), in the capacity of beneficial owner, which in turn was 100% held by CEA
         Holding.                                                                                              100%




                                                             ANNU AL RE POR T 2 0 1 2




REPORT OF DIRECTORS




2.   Among the 3,478,742,299 H shares held by HKSCC Nominees Limited,                    2.                                         3,478,742,299
     1,927,375,000 H shares (representing approximately 55.16% of the Company’s              H         1,927,375,000 H                       H
     then total issued H shares) were held by CES Global in the capacity of beneficial              55.16%
     owner, which in turn was 100% held by CEA Holding.                                                              100%

3.   Among the 3,478,742,299 H shares held by HKSCC Nominees Limited, JPMorgan           3.                                           3,478,742,299
     Chase & Co. had, through controlled corporations, an interest in an aggregate              H      JPMorgan Chase & Co.
     of 247,350,702 H shares (representing approximately 7.08% of the Company’s                247,350,702 H                              H
     then total issued H shares). JPMorgan Chase & Co. had interest in the aforesaid            7.08%    JPMorgan Chase & Co.
     247,350,702 H shares of the Company in manner as follows:                                247,350,702 H

     (a)   117,538,000 H shares (representing approximately 3.36% of the Company’s           (a)    117,538,000 H                             H
           then total issued H shares) were held by JF Asset Management Limited                              3.36%   JF Asset Management Limited
           in the capacity of investment manager, which in turn was 100% held by                                                  JPMorgan Asset
           JPMorgan Asset Management (Asia) Inc., which in turn was 100% held by                     Management (Asia) Inc.      100%
           JPMorgan Asset Management Holdings Inc., which in turn was 100% held                      JPMorgan Asset Management Holdings Inc.
           by JPMorgan Chase & Co.;                                                                  100%         JPMorgan Chase & Co.  100%;

     (b)   45,142,000 H shares (representing approximately 1.29% of the Company’s            (b)    45,142,000   H                         H
           then total issued H shares) were held in lending pool by JPMorgan Chase                       1.29%    JPMorgan Chase Bank, N.A.
           Bank, N.A. in the capacity of custodian corporation/approved lending agent,
           which in turn was 100% held by JPMorgan Chase & Co..                                            JPMorgan Chase & Co.     100%

     (c)   31,250,000 H shares (representing approximately 0.89% of the Company’s            (c)    31,250,000 H                             H
           then total issued H shares) were held by China International Fund                              0.89% China International Fund Management
           Management Co Ltd in the capacity of investment manager, which in turn                    Co Ltd                               JPMorgan
           was 49% held by JPMorgan Asset Management (UK) Limited, which in turn                     Asset Management (UK) Limited      49%
           was 100% held by JPMorgan Asset Management Holdings (UK) Limited,                         JPMorgan Asset Management Holdings (UK) Limited
           which in turn was 100% held by JPMorgan Asset Management International                         100%           JPMorgan Asset Management
           Limited, which in turn was 100% held by JPMorgan Asset Management                         International Limited   100%          JPMorgan
           Holdings Inc., which in turn was 100% held by JPMorgan Chase & Co.; and                   Asset Management Holdings Inc.      100%
                                                                                                       JPMorgan Chase & Co.      100%

     (d)   24,688,000 H shares (representing approximately 0.71% of the Company’s            (d)    24,688,000 H                           H
           then total issued H shares) were held by JPMorgan Asset Management                               0.71%     JPMorgan Asset Management
           (Taiwan) Limited in the capacity of investment manager, which in turn was                 (Taiwan) Limited
           100% held by JPMorgan Asset Management (Asia) Inc., which in turn was                     JPMorgan Asset Management (Asia) Inc.
           100% held by JPMorgan Asset Management Holdings Inc., which in turn                       100%             JPMorgan Asset Management
           was 100% held by JPMorgan Chase & Co.;                                                    Holdings Inc.   100%       JPMorgan Chase &
                                                                                                     Co.     100%

     (e)   21,050,000 H shares (representing approximately 0.60% of the Company’s            (e)    21,050,000 H                            H
           then total issued H shares) were held by JPMorgan Asset Management                               0.60%    JPMorgan Asset Management
           (Singapore) Limited in the capacity of investment manager, which in turn                  (Singapore) Limited
           was 100% held by JPMorgan Asset Management (Asia) Inc., which in turn                       JPMorgan Asset Management (Asia) Inc.
           was 100% held by JPMorgan Asset Management Holdings Inc., which in                        100%            JPMorgan Asset Management
           turn was 100% held by JPMorgan Chase & Co.;                                               Holdings Inc.  100%       JPMorgan Chase &
                                                                                                     Co.     100%

     (f)   4,000,000 H shares (representing approximately 0.11% of the Company’s             (f)    4,000,000 H                           H
           then total issued H shares) were held by J.P. Morgan Markets Limited in                     0.11% J.P. Morgan Markets Limited
           the capacity of beneficial owner, which in turn was 100% held by Bear                                      Bear Stearns Holdings Limited
           Stearns Holdings Limited, which in turn was 100% held by Bear Stearns                          100%          Bear Stearns UK Holdings
           UK Holdings Limited, which in turn was 100% held by The Bear Stearns                      Limited     100%            The Bear Stearns
           Companies LLC, which in turn was 100% held by JPMorgan Chase & Co.;                       Companies LLC      100%             JPMorgan
                                                                                                     Chase & Co.   100%





                           C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




REPORT OF DIRECTORS




     (g)   3,576,000 H shares (representing approximately 0.10% of the Company’s                       (g)   3,576,000 H                               H
           then total issued H shares) were held by JF International Management Inc.                                  0.10%   JF International Management
           in the capacity of investment manager, which in turn was 100% held by                              Inc.                               JPMorgan
           JPMorgan Asset Management (Asia) Inc., which in turn was 100% held by                              Asset Management (Asia) Inc.    100%
           JPMorgan Asset Management Holdings Inc., which in turn was 100% held                               JPMorgan Asset Management Holdings Inc.
           by JPMorgan Chase & Co.;                                                                           100%         JPMorgan Chase & Co.    100%

     (h)   106,702 H shares (representing approximately 0.003% of the Company’s                        (h)   106,702 H                               H
           then total issued H shares) were held by J.P. Morgan Whitefriars Inc. in the                         0.003% J.P. Morgan Whitefriars Inc.
           capacity of beneficial owner, which in turn was 100% held by J.P. Morgan                                                    J.P. Morgan Overseas
           Overseas Capital Corporation, which in turn was 100% held by J.P. Morgan                           Capital Corporation    100%         J.P. Morgan
           International Finance Limited, which in turn was 100% held by Bank One                             International Finance Limited    100%
           International Holdings Corporation, which in turn was 100% held by J.P.                            Bank One International Holdings Corporation
           Morgan International Inc., which in turn was 100% held by JPMorgan Chase                           100%          J.P. Morgan International Inc.
           Bank, N.A., which in turn was 100% held by JPMorgan Chase & Co.;                                   100%           JPMorgan Chase Bank, N.A.
                                                                                                              100%          JPMorgan Chase & Co.     100%;

4.   Among the 3,478,742,299 H shares held by HKSCC Nominees Limited, JPMorgan                   4.                                                3,478,742,299
     Chase & Co. also had, through controlled corporations, a short position in an                        H        JPMorgan Chase & Co.
     aggregate of 4,785,114 H shares (representing approximately 0.14% of the                                  4,785,114 H                                H
     Company’s then total issued H shares). Among such short position of 4,785,114                       0.14%            4,785,114 H              (a) 4,000,000
     H shares, (a) 4,000,000 H shares were held by J.P. Morgan Markets Limited in                         H      J.P. Morgan Markets Limited
     the capacity of beneficial owner, which in turn was 100% held by Bear Stearns                                  Bear Stearns Holdings Limited       100%
     Holdings Limited, which in turn was 100% held by Bear Stearns UK Holdings                              Bear Stearns UK Holdings Limited         100%
     Limited, which in turn was 100% held by The Bear Stearns Companies LLC, which                        The Bear Stearns Companies LLC           100%
     in turn was 100% held by JPMorgan Chase & Co., and (b) 785,114 H shares were                       JPMorgan Chase & Co.          100%     (b) 785,114 H
     held by J.P. Morgan Whitefriars (UK) in the capacity of beneficial owner, which in                   J.P. Morgan Whitefriars (UK)
     turn was 100% held by J.P. Morgan Whitefriars Inc., which in turn was 100% held                           J.P. Morgan Whitefriars Inc.   100%            J.P.
     by J.P. Morgan Overseas Capital Corporation, which in turn was 100% held by J.P.                   Morgan Overseas Capital Corporation          100%
     Morgan International Finance Limited, which in turn was 100% held by Bank One                        J.P. Morgan International Finance Limited       100%
     International Holdings Corporation, which in turn was 100% held by J.P. Morgan                            Bank One International Holdings Corporation
     International Inc., which in turn was 100% held by JPMorgan Chase Bank, N.A.,                      100%           J.P. Morgan International Inc.     100%
     which in turn was 100% held by JPMorgan Chase & Co..                                                      JPMorgan Chase Bank, N.A.           100%
                                                                                                        JPMorgan Chase & Co.       100%.


Save as disclosed above, based on the information available to the Directors
and so far as they are aware, as at 31 December 2012, among the
3,478,742,299 H shares held by HKSCC Nominees Limited, no other person                                                   3,478,742,299      H
had any interest or short position in the Company’s shares or underlying
shares (as the case may be) which would fall to be disclosed to the Company                                                                      XV      2   3
and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3
of Part XV of the SFO.





                                                            ANNU AL RE POR T 2 0 1 2




REPORT OF DIRECTORS




According to the relevant disclosure requirements laid down by the China
Securities Regulatory Commission (“CSRC”), as at the end of the Reporting
Period, the 10 largest registered Shareholders and the 10 largest registered
listed stock Shareholders on the register of members of the Company and
their respective shareholdings are as follows:


 THE 10 LARGEST REGISTERED SHAREHOLDERS OF THE COMPANY AND THEIR RESPECTIVE SHAREHOLDINGS
   10
                                              Increase/
                                           (decrease) in Shareholding                                            Charged or
                                           shareholding at the end of Percentage                                  locked-up    Nature of
 Name of Shareholders                        in the year     the year        (%)         Type of shares              shares    shares held

                                                                                   (%)

 1.     CEA Holding                                   0    4,831,375,000         42.84   Listed                          Nil   A shares
                                                                                                                               A
 2.     HKSCC NOMINEES LIMITED                  642,000    3,478,742,299         30.85   Listed (1,927,375,000      Unknown    H shares
          (including CES Global)                                                            shares held by CES                 H
                                                                                            Global)


                                                                                            1,927,375,000
 3.     Shanghai Alliance Investment                  0     427,085,429           3.79   Listed                     Unknown    A shares
          Limited                                                                                                              A

 4.     China National Aviation Fuel                  0     421,052,632           3.73   Listed                     Unknown    A shares
          Holding Company                                                                                                      A

 5.     Jin Jiang International Holdings              0     343,288,860           3.04   Listed                     Unknown    A shares
           Company Limited                                                                                                     A

 6.     Aerospace Capital Holding                     0      99,088,580           0.88   Listed                     Unknown    A shares
          Co., Ltd.                                                                                                            A

 7.     Sinotrans Air Transportation                  0      83,157,894           0.74   Listed                     Unknown    A shares
           Development Co., Ltd.                                                                                               A

 8.     China Construction Bank –            36,441,131     36,441,131           0.32   Listed                     Unknown    A shares
          CIFM Alpha Stock Securities                                                                                          A
          Investment Fund


 9.     Bank of Communications – Hua         30,000,000     30,000,000           0.27   Listed                     Unknown    A shares
          An Strategy Selective Equity                                                                                         A
          Securities Investment Fund


 10.    China Minsheng Banking Corp.,         28,009,934     28,009,934           0.25   Listed                     Unknown    A shares
          Ltd. – Orient Selective Mixed                                                                                       A
          Open-end Securities Investment
          Fund




Description of any related party relationship among the 10 largest
Shareholders: the Company is not aware of any related party or concert party
relationship among the above Shareholders.





                         C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




REPORT OF DIRECTORS




 THE 10 LARGEST REGISTERED LISTED STOCK SHAREHOLDERS OF THE COMPANY AND THEIR RESPECTIVE SHAREHOLDINGS
   10
                                                                                                         Shareholding
                                                                                                       of listed stocks
                                                                                                              at the end       Type of
 Name of Shareholders                                                                                        of the year   shares held




 1.     CEA Holding                                                                                      4,831,375,000        A shares
                                                                                                                                  A
 2.     HKSCC NOMINEES LIMITED (including CES Global)                                                    3,478,742,299        H shares
                                                                                                                                  H
 3.     Shanghai Alliance Investment Limited                                                               427,085,429        A shares
                                                                                                                                  A
 4.     China National Aviation Fuel Holding Company                                                       421,052,632        A shares
                                                                                                                                  A
 5.     Jin Jiang International Holdings Company Limited                                                   343,288,860        A shares
                (   )                                                                                                             A
 6.     Aerospace Capital Holding Co., Ltd.                                                                 99,088,580        A shares
                                                                                                                                  A
 7.     Sinotrans Air Transportation Development Co., Ltd.                                                  83,157,894        A shares
                                                                                                                                  A
 8.     China Construction Bank – CIFM Alpha Stock Securities Investment Fund                              36,441,131        A shares
                                                                                                                                  A
 9.     Bank of Communications – Hua An Strategy Selective Equity Securities Investment                    30,000,000        A shares
         Fund                                                                                                                     A


 10.    China Minsheng Banking Corp., Ltd. – Orient Selective Mixed Open-end Securities                    28,009,934        A shares
         Investment Fund                                                                                                          A




Description of any related party or concert party relationship among the 10
largest listed stock Shareholders: the Company is not aware of any related
party or concert party relationship among the above listed stock Shareholders.





                                                         ANNU AL RE POR T 2 0 1 2




REPORT OF DIRECTORS




CONTROLLING SHAREHOLDER

There has been no change in the Company’s controlling shareholder in the
year.


CEA Holding is the parent company of the Company and its registered
capital amounts to RMB12,876,321,000. Mr. Liu Shaoyong is the legal                 12,876,321,000
representative of CEA Holding. CEA Holding’s scope of business includes
the management of all state-owned assets and state-owned equity of its
group and its investment enterprises which are formed by state investment.
CEA Holding, headquarter based in Shanghai, is one of the three largest core
state-owned aviation transportation group as central enterprises under the
State-owned Assets Supervision and Administration Commission of the State
Council (“SASAC”). Since 2009, CEA Holding made new development with a                    A        3A
fresh outlook and earned total profit of over RMB10 billion in the consecutive
three years. It was classified as enterprise under category A by SASAC for
consecutive two years in 2010 and 2011, and has a credit rating of “3A” in the
capital market. As at 31 December 2012, no share of the Company held by
CEA Holding was pledged.


PURCHASE, SALE OR REDEMPTION OF
SECURITIES

Save as otherwise disclosed, during the year ended 31 December 2012,
neither the Company nor any of its subsidiaries purchased, sold or redeemed
any of its listed securities (“securities” having the meaning ascribed thereto
under paragraph 1 of Appendix 16 to the Listing Rules), without taking into
account any issue of new securities.





                          C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




REPORT OF DIRECTORS




SIGNIFICANT DIFFERENCES BETWEEN THE
CORPORATE GOVERNANCE PRACTICES OF THE
COMPANY AND THE CORPORATE GOVERNANCE
PRACTICES REQUIRED TO BE FOLLOWED BY
U.S. COMPANIES UNDER THE NEW YORK STOCK
EXCHANGE’S LISTING STANDARDS

As a company incorporated in the PRC and listed on the Shanghai Stock
Exchange, the Hong Kong Stock Exchange and the New York Stock
Exchange (the “NYSE”), the Company is subject to not only applicable PRC
laws and regulations, including the PRC Company Law, the PRC Securities
Law, the Corporate Governance Standards for Listed Companies and
Guidance Opinions regarding the Establishment of the Independent Director
System in Listed Companies (the “Independent Director Guidance”), but also
Hong Kong laws and regulations, including the Listing Rules, the Companies
Ordinance and the SFO, as well as applicable U.S. federal securities laws
and regulations, including the U.S. Securities Exchange Act of 1934, as
amended, and the Sarbanes-Oxley Act of 2002. Based on NYSE’s listing
standards, the NYSE imposes a series of corporate governance standards
for companies listed on the NYSE. However, the NYSE permits foreign
private issuers to follow their respective “home country” practices and grants
waivers for compliance with certain corporate governance standards. One
of the conditions for such waiver is for the foreign private issuer to disclose
in its annual report how the corporate governance practices in its “home
country” differ from those required of U.S. companies under the NYSE’s listing
standards.


In accordance with the requirements of Section 303A.11 of the NYSE Listed                                        303A.11
Company Manual, the following is a summary of the significant differences
between the Company’s corporate governance practices and those required
to be followed by U.S. companies under the NYSE’s listing standards:


Section 303A.01 of the NYSE Listed Company Manual provides that the                                         303A.01
Board of the listed companies must have a majority of independent Directors.
As a company listed in the PRC, the Company is subject to the requirement
under the Independent Director Guidance that at least one-third of the Board
be independent as determined thereunder. As a company listed in Hong
Kong, the Company is also subject to the requirement under the Listing
Rules that at least three members of the Board shall be independent, and
at least one of whom must have appropriate professional qualifications
or accounting or related financial management expertise. The Company
currently has four independent non-executive Directors out of a total of eleven
Directors. The standards for establishing independence set forth under either                          303A.03
the Independent Director Guidance or the Listing Rules differ from those set
forth in the NYSE Listed Company Manual. Section 303A.03 of the NYSE
Listed Company Manual provides that listed companies must schedule
regular executive sessions in which non-management directors meet without
management participation. The Company is not required under the applicable
PRC law to hold such executive sessions.





                                                         ANNU AL RE POR T 2 0 1 2




REPORT OF DIRECTORS




Section 303A.04 of the NYSE Listed Company Manual provides that listed                              303A.04
companies must have a nominating/corporate governance committee
composed entirely of independent directors. The establishment of the
Nomination Committee was considered and resolved and its charter was
passed at the third regular meeting of the fifth session of the Board held on 28
April 2009. The merging of the Nomination Committee and the Remuneration
and Appraisal Committee into the Nominations and Remuneration Committee
was agreed at the 36th ordinary meeting of the fifth session of the Board
held on 19 March 2010 and the “Working Rules of the Nominations and
Remuneration Committee” was passed. The Nominations and Remuneration                     303A.04
Committee consists of three members, two of which are independent non-
executive Directors of the Company. Section 303A.04 of the NYSE Listed
Company Manual also provides that the nominating/corporate governance
committee of a listed company must have a written charter that addresses
the committee’s purpose and responsibilities, which include, among others,
the development and recommendation of corporate governance guidelines to
the listed company’s board of directors. The Board is directly responsible for
developing the Company’s corporate governance guidelines.


Section 303A.05 of the NYSE Listed Company Manual provides that listed                              303A.05
companies must have a compensation committee composed entirely of
independent directors. Under the Listing Rules, a majority of the members of
the remuneration committee must be independent non-executive directors.
The merging of the Nomination Committee and the Remuneration and
Appraisal Committee into the Nominations and Remuneration Committee
was agreed at the 36th ordinary meeting of the fifth session of the Board held
on 19 March 2010. The Nominations and Remuneration Committee of the
Company is composed of two independent non-executive Directors and one
Director.


Section 303A.10 of the NYSE Listed Company Manual provides that listed                              303A.10
companies must adopt and disclose a code of business conduct and ethics
for directors, officers and employees. As required under the Sarbanes-Oxley
Act of 2002, the Company has adopted a code of ethics that is applicable to
the Company’s Directors, Supervisors, President, Chief Financial Officer and
other members of senior management.


PRE-EMPTIVE RIGHTS

Under the articles of association of the Company (the “Articles of
Association”) and the PRC laws, no pre-emptive right exists, which requires
the Company to offer new shares to its existing Shareholders on a pro rata
basis.


SUFFICIENCY OF PUBLIC FLOAT

Based on information that is publicly available to the Company and within the
knowledge of the Directors as at the latest practicable date prior to the issue
of this annual report, the Directors believe that the Company has at all times
during the year ended 31 December 2012 maintained the relevant applicable           8.08(1)(a)
minimum percentage of listed securities as prescribed by Rule 8.08(1)(a) of the
Listing Rules.





                        C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




REPORT OF DIRECTORS




SHAREHOLDINGS OF DIRECTORS,
SUPERVISORS AND SENIOR MANAGEMENT

Names, relevant information of and shares held by the Directors, the
Supervisors and members of senior management of the Company as at 31
December 2012 are as follows:


                                                                      Number of listed
                                                                           A shares of               Capacity in
                                                                         the Company                  which the
                                                                       held – personal                A shares       Effective date and expiry
 Name              Position                               Age         interest (shares)               were held         date of appointment
                                                                                    A
                                                                                                        A

 Liu Shaoyong      Chairman                               54                             0                             28 June 2010      28 June 2013




 Ma Xulun          Vice Chairman                          49                             0                         11 November 2011      28 June 2013


                   President                                                                                           28 June 2010      28 June 2013




 Xu Zhao           Director                               44                             0                             28 June 2012      28 June 2013




 Gu Jiadan         Director                               57                             0                             28 June 2012      28 June 2013




 Li Yangmin        Director                               50               3,960 (Note 1)       Beneficial Owner       29 June 2011      28 June 2013


                   Vice President                                                                                      28 June 2010      28 June 2013




 Tang Bing         Director                               46                             0                             28 June 2012      28 June 2013


                   Vice President                                                                                      28 June 2010      28 June 2013




 Luo Zhuping       Director                               60             11,616 (Note 2)        Beneficial Owner       28 June 2010      28 June 2013


                   Board Secretary, Company                                                                            28 June 2010       6 April 2012
                   Secretary



 Sandy Ke-Yaw Liu Independent non-executive               65                             0                             28 June 2010      28 June 2013
                    Director





                                                   ANNU AL RE POR T 2 0 1 2




REPORT OF DIRECTORS




                                                          Number of listed
                                                               A shares of         Capacity in
                                                             the Company            which the
                                                           held – personal          A shares          Effective date and expiry
Name            Position                      Age         interest (shares)         were held            date of appointment
                                                                        A
                                                                                      A

Wu Xiaogen      Independent non-executive     47                          0                           28 June 2010        28 June 2013
                  Director


Ji Weidong      Independent non-executive     56                          0                           28 June 2010        28 June 2013
                  Director


Shao Ruiqing    Independent non-executive     56                          0                           28 June 2010        28 June 2013
                  Director


Yu Faming       Chairman of the Supervisory   59                          0                           29 June 2011        28 June 2013
                Committee


Xi Sheng        Supervisor                    50                          0                           28 June 2012        28 June 2013




Liu Jiashun     Supervisor                    56              3,960 (Note 1)   Beneficial Owner       28 June 2010        28 June 2013



Feng Jinxiong   Supervisor                    51                          0                           28 June 2010        28 June 2013




Yan Taisheng    Supervisor                    59                          0                           28 June 2010        28 June 2013




Shu Mingjiang   Vice President                45                          0                       13 December 2011        28 June 2013




Wu Yongliang    Vice President                50              3,696 (Note 3)   Beneficial Owner 13 December 2011          28 June 2013


                Chief Financial Officer                                                               28 June 2010        28 June 2013




Tian Liuwen     Vice President                54                          0                       13 December 2011        28 June 2013




Wang Jian       Board Secretary,              40                          0                             6 April 2012      28 June 2013
                  Joint Company Secretary



Total           —                            —                     23,232                                      —                —





                            C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




REPORT OF DIRECTORS




Note 1: representing approximately 0.000035% of the Company’s total issued shares as
    at 31 December 2012                                                                                   0.000035%

Note 2: representing approximately 0.0001% of the Company’s total issued shares as
    at 31 December 2012                                                                                   0.0001%

Note 3: representing approximately 0.000033% of the Company’s total issued shares as
    at 31 December 2012                                                                                   0.000033%

H Shares Appreciation Rights                                                                      H
On 9 November 2012, the Company’s general meeting approved the “H
Shares Appreciation Rights Scheme of China Eastern Airlines Company                                                             H
Limited” with an aim to provide medium to long term incentive to certain
Directors, senior management, key technical and managerial personnel of the
Company and promote the continuous development of the business of the
Group.

As at 31 December 2012, the particulars of H shares appreciation rights                                             H
granted to the Directors and senior management were as follows:

                                                                                                                The proportion of
                                                                                  Number of shares            shares appreciation      The proportion of
                                                                                       appreciation                rights granted    shares appreciation
                                                                                     rights granted                to total issued        rights granted
                                                                                    (Ten thousand                 share capital of        to total issued
    Name                        Position                                                shares)                 the Company                 H Shares


                                                                                                                                            H

 1      Liu Shaoyong                Chairman                                                          100                 0.0089%               0.0286%


 2      Ma Xulun                    Vice Chairman, President                                          100                 0.0089%               0.0286%


 3      Xu Zhao                     Director                                                             86               0.0076%               0.0246%


 4      Gu Jiadan                   Director                                                             86               0.0076%               0.0246%


 5      Li Yangmin                  Director, Vice President                                             86               0.0076%               0.0246%


 6      Tang Bing                   Director, Vice President                                             86               0.0076%               0.0246%


 7      Luo Zhuping                 Director                                                             86               0.0076%               0.0246%


 8      Shu Mingjiang               Vice President                                                       71               0.0063%               0.0203%


 9      Wu Yongliang                Vice President,                                                      71               0.0063%               0.0203%
                                      Chief Financial Officer


 10     Tian Liuwen                 Vice President                                                       71               0.0063%               0.0203%


 11     Wang Jian                   Board secretary, Joint Company                                       57               0.0051%               0.0163%
                                     Secretary





                                                         ANNU AL RE POR T 2 0 1 2




REPORT OF DIRECTORS




Brief biographical details in respect of each of the Directors, Supervisors and
members of senior management of the Company are as follows:

Mr. Liu Shaoyong is currently the Chairman of the Company and president
and deputy party secretary of CEA Holding. Mr. Liu joined the civil aviation
industry in 1978 and was appointed as vice president of China General
Aviation Corporation, deputy director of Shanxi Provincial Civil Aviation
Administration of the PRC, general manager of the Shanxi Branch of the
Company, and director general of Flight Standard Department of CAAC. Mr.
Liu served as President of the Company from December 2000 to October
2002, vice minister of the CAAC from October 2002 to August 2004,
president of China Southern Air Holding Company from August 2004 to
December 2008, chairman of China Southern Airlines Co., Ltd. (a company
listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange)
from November 2004 to December 2008. In December 2008, Mr. Liu was
appointed as president and deputy party secretary of CEA Holding, and
became the Chairman of the Company since 3 February 2009. Mr. Liu is also
currently the board member of International Air Transport Association, the          (EMBA)
board member of Association for Relations Across the Taiwan Straits and
the vice chairman of the first session of the supervisory committee of China’s
Listed Companies Association. Mr. Liu graduated from the China Civil Aviation
Flight College and obtained an Executive Master of Business Administration
(EMBA) degree from Tsinghua University. Mr. Liu holds the title of commanding
pilot.

Mr. Ma Xulun is currently the Vice Chairman, President and Deputy Party
Secretary of the Company, and party secretary of CEA Holding. Mr. Ma was
previously vice president of China Commodities Storing and Transportation
Corporation, deputy director general of the Finance Department of the CAAC
and vice president of Air China International Corporation Limited. In 2002, after
the restructuring of civil aviation industry he was appointed as vice president
of general affairs of Air China International Corporation Limited. Later on, Mr.
Ma served as president and deputy party secretary of Air China International
Corporation Limited (a company listed on the Shanghai Stock Exchange and
the Hong Kong Stock Exchange) from September 2004 to January 2007. Mr.
Ma became a party member of China National Aviation Holding Company
from December 2004 to December 2008, and deputy general manager of
China National Aviation Holding Company from January 2007 to December
2008. In December 2008, Mr. Ma was appointed as President and Deputy
Party Secretary of the Company and deputy party secretary of CEA Holding.
Since February 2009, Mr. Ma has become a Director of the Company. Mr. Ma
served as party secretary of CEA Holding and Vice Chairman of the Company
with effect from November 2011. Mr Ma is also currently the Deputy Director-
General of Association of Shanghai Listed Companies. Mr. Ma graduated
from Shanxi University of Finance and Economics and Huazhong University
of Science and Technology. Mr. Ma holds a master’s degree and is a certified
accountant.

Mr. Xu Zhao is currently a Director of the Company, and the chief accountant
of CEA Holding. Mr. Xu served as engineer and accountant of Dongfeng Motor
Group Company Limited, manager of the finance department of Shanghai
Yanhua High Technology Limited Company, and chief financial officer of
Shaanxi Heavy Duty Automobile Co., Limited. Since November 2006, Mr.
Xu has served as the chief accountant of CEA Holding. He was a Supervisor
of the Company from June 2007 to November 2011. Mr. Xu was appointed
as an independent non-executive director of Yingde Gases Group Company
Limited (a company listed on the Hong Kong Stock Exchange) with effect from
September 2009. He has served as a Director of the Company since June
2012. Mr. Xu graduated from Chongqing University, majoring in moulding, and
The Chinese University of Hong Kong, majoring in accounting, and holds a
master’s degree. Mr. Xu is qualified as an engineer and an accountant, and is
a certified public accountant in the PRC.




                         C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




REPORT OF DIRECTORS




Mr. Gu Jiadan is currently a Director of the Company, and vice president and
a party member of CEA Holding. Mr. Gu was the assistant to president, and
the general manager and the party secretary of the commerce department
of Shanghai Airlines Co., Ltd. (                       ). From May 2005 to
August 2009, he was a party member and vice president of Shanghai Airlines
Co., Ltd.. From August 2009 to January 2010, he was the acting president
of Shanghai Airlines Co., Ltd.. From January 2010 to July 2011, he was vice
president and a party member of CEA Holding and the party secretary of
Shanghai Airlines. Since July 2011, Mr. Gu has served as the vice president
and a party member of CEA Holding. He was appointed a Director of the
Company with effect from June 2012. Mr. Gu Jiadan holds a master’s degree
and is a senior economist.


Mr. Li Yangmin is currently a Director, Party Secretary and Vice President
of the Company, and a party member of CEA Holding. Mr. Li joined the
civil aviation industry in 1985. He was previously deputy general manager
of the aircraft maintenance base and the manager of air route department
(        ) of Northwest Company (               ), general manager of the
aircraft maintenance base of China Eastern Air Northwest Company and vice
president of China Eastern Air Northwest Company. Since October 2005,
he has also been a Vice President of the Company. He served as Safety
Director of the Company from July 2010 to December 2012. He has become
a party member of CEA Holding since May 2011. He was appointed the
Party Secretary and Director of the Company with effect from June 2011.
He was the chairman of China Cargo Airlines, a subsidiary of the Company,
from February 2012 to January 2013. Mr. Li graduated from Northwestern
Polytechnical University with a master’s degree. He is a qualified senior
engineer.


Mr. Tang Bing is currently a Director, Vice President of the Company, and
party member of CEA Holding. Mr. Tang joined the civil aviation industry in
1993. He served as vice executive president (general manager in China Office)
of                                  (MTU Maintenance Zhuhai Co., Ltd.),
office director of China Southern Airlines Holding Company and president of
                    (Chongqing Airlines Company Limited). From December
2007 to May 2009, he served as chief engineer and general manager of the
Aircraft Engineering Department of China Southern Airlines Company Limited
(a company listed on the Shanghai Stock Exchange and the Hong Kong
Stock Exchange). From May 2009 to December 2009, he was appointed as
president of the Beijing Branch of the Company and was the president of
Shanghai Airlines from January 2010 to December 2011. He was appointed
as the chairman of Shanghai Airlines in January 2012. He served as a Vice
President of the Company since February 2010, and was appointed a                              (MBA)   (EMBA)
party member of CEA Holding in May 2011 and a Director of the Company
in June 2012. Mr. Tang graduated from Nanjing University of Aeronautics
and Astronautics majoring in electrical technology. He obtained a Master of
Business Administration (MBA) degree from the Administration Institute of Sun
Yat-sen University and an EMBA degree from the School of Economics and
Management of Tsinghua University.





                                                        ANNU AL RE POR T 2 0 1 2




REPORT OF DIRECTORS




Mr. Luo Zhuping is currently a Director of the Company. Mr. Luo joined CEA
in 1988. He was Deputy Chief and then Chief of the Enterprise Management
Department and Deputy Head of the Share System Office of China Eastern
Airlines. He served as the Board Secretary of the Company for 15 years
from December 1996 to April 2012. He was also the Head of the Board
Secretariat of the Company from 1997 to 2008. He was appointed a Director
of the Company with effect from June 2004. Mr. Luo has been responsible
for domestic and overseas exchange listing and capital management of
the Company since 1993. He has gained rich experience in certain value-
added measures of an enterprise, such as enterprise reform, stock issuance,
corporate governance, merger and acquisition and reorganization. Mr. Luo
graduated from Anhui University majoring in Philosophy and Law. He also
holds a Master in Global Economics from Eastern China Normal University.
He participated in the training programme for senior managers of large
scale enterprises organised in the U.S. by the State Economic and Trade
Commission and Morgan Stanley.


Mr. Sandy Ke-Yaw Liu is currently an Independent Non-executive Director
of the Company. Mr. Sandy Ke-Yaw Liu joined the civil aviation industry in
Taiwan in 1969. He served in                        (China Airlines) in various
capacities, including airport manager in Honolulu Airport, marketing director
for the Americas, general manager for Hawaii District, regional director for
Europe, director of corporate planning and director of marketing planning
in its Corporate Office in Taiwan. With China Airlines, he also served as vice
president for marketing and sales and vice president for commerce, and
president in the Corporate Office. In addition, Mr. Liu served as a director of
                (Taiwan Mandarin Airlines),                (Taiwan Far Eastern
Air Transport),               (Taiwan China Pacific Catering Service) and
                     (Taiwan Taoyuan International Airport Service Company),
as well as chairman of                       (Taiwan Air Cargo Terminal). He
relocated to Hong Kong to act as chief operating officer for the Asia Region in
Expeditors International of Washington, Inc., a global logistics company. Mr.
Liu graduated from Taiwan Shih Hsin University and attended advanced study
programmes at Stanford University in 1990 and 1993.


Mr. Wu Xiaogen is currently an Independent Non-executive Director of the
Company. Mr. Wu previously served as assistant to the general manager
and deputy general manager of the securities department of
                        (China Jingu International Trust Investment Company
Limited), deputy general manager of the securities management department
and general manager of the institutional management department of
                        (China Technology International Trust Investment
Company), and head of the audit teaching and research unit and deputy dean
of the School of Accountancy of Central University of Finance and Economics.
He was chief accountant of China First Heavy Industries from November
2004 to June 2010. He has been a professional external director for central
enterprises since June 2010 and holds the title of researcher. Mr. Wu served
as an independent non-executive director of China Petroleum & Chemical
Corporation (a company listed on the Shanghai Stock Exchange and the Hong
Kong Stock Exchange) from May 2010 to May 2012. Mr. Wu is also a director
and a member of the Ethics Committee of the Chinese Institute of Certified
Public Accountants, an external director of China National Machinery Industry
Corporation and an external director of China Three Gorges Corporation. Mr.
Wu graduated from the Department of Economics and Management of the
Central University of Finance and Economics and also obtained a Doctoral
Degree in Economics.

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REPORT OF DIRECTORS




Mr. Ji Weidong is currently an Independent Non-executive Director of the
Company. Mr. Ji was an associate professor and professor at the School of
Law of Kobe University, Japan. Since 2008, he has been the dean and chair
professor of Koguan Law School of Shanghai Jiao Tong University. In addition,
he is currently an honorary professor at Kobe University, Japan. Mr. Ji
graduated from the Department of Law of Peking University. Mr. Ji completed
his Master and Doctoral Degrees in Law at the Graduate School of Kyoto
University, Japan and obtained his doctoral degree from Kyoto University,
Japan. From September 1991 to July 1992, he was a visiting scholar at
Stanford Law School.


Mr. Shao Ruiqing is currently an Independent Non-executive Director of the
Company. Mr. Shao was deputy dean and dean of the School of Economics
and Management of Shanghai Maritime University. He served as deputy dean
at Shanghai Lixin University of Commerce since March 2004, and was also a
professor in accounting and mentor to doctoral students. From June 2007 to
August 2011, Mr. Shao served as an external supervisor of China Merchants
Bank Co., Ltd. (a company listed on the Shanghai Stock Exchange and the
Hong Kong Stock Exchange). Mr. Shao served as an independent non-
executive director of SAIC Motor Corporation Limited (a company listed on
the Shanghai Stock Exchange) from June 2008 to May 2012. Mr. Shao was
awarded the special allowance by the State Council of the PRC in 1995. He
is currently a consultative committee member of the Ministry of Transport of
the PRC, as an expert in finance and accounting. Mr. Shao graduated from
Shanghai Maritime University, Shanghai University of Finance and Economics
and Tongji University with a Bachelor Degree in Economics, and Master and
Doctoral Degrees in Management. Mr. Shao has spent two and a half years
studying and being senior visiting scholar in the U.K. and Australia.


Mr. Yu Faming is currently the Chairman of the Supervisory Committee
of the Company, and a party member and the head of party disciplinary
inspection group of CEA Holding. Mr. Yu served as deputy head of the Survey
and Research Department of the Policy Research Office of the Ministry of
Labour and Human Resources of the PRC, head of the Integration Division
of the Department of Policy and Regulation of the Ministry of Labour of the
PRC, deputy head of the Labour Science Research Institute of the Ministry of
Labour of the PRC, deputy head and head of the Labour Science Research
Institute of the Ministry of Labour Protection of the PRC and head of the
Training and Employment Department of the Ministry of Labour Protection
of the PRC. From June 2008 to May 2011, he served as head of the
Employment Department of the Ministry of Human Resources and Social
Security of the PRC. Since May 2011, he has been party member and head of
party disciplinary inspection group of CEA Holding. Since June 2011, he has
served as the Chairman of the Supervisory Committee of the Company. Mr.
Yu graduated from Shandong University majoring in philosophy. He holds the
title of associate research fellow.





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REPORT OF DIRECTORS




Mr. Xi Sheng is currently a Supervisor of the Company and chief auditor
of CEA Holding. Mr. Xi served as the deputy head of the foreign affairs
department II of the foreign funds utilization and application audit department
and the head of the liaison and reception office of the foreign affairs
department of the National Audit Office of the PRC and the deputy head of
the PRC Audit Institute (                  ). He was also the head of the fixed
assets investment audit department of the National Audit Office of the PRC,
and the party secretary and a special commissioner of the Harbin office of the
National Audit Office of the PRC. He served as the head of the personnel and
education department of the National Audit Office of the PRC from January
2007 to September 2009. He was the head of the audit department of CEA
Holding from September 2009 to November 2012. Mr. Xi has served as the
chief auditor of CEA Holding since September 2009. Mr. Xi is also the council
member of China Institute of Internal Audit and a member of International
Institute of Internal Auditors. Mr. Xi graduated from Jiangxi University of
Finance and Economics (                      ) with undergraduate education
background. He is a senior auditor.


Mr. Liu Jiashun is currently a Supervisor of the Company. Mr. Liu was party
secretary, deputy president and secretary of the disciplinary committee of
China Aviation Fuel Hainan Company, as well as chairman of the board and
president of Hainan Nanyang Air Transport Co., Ltd. He was also the chief
director in charge of fuel supply engineering at Haikou’s Meilan Airport and
served as a director of Meilan Airport Co., Ltd. and the vice chairman of the
board and president of                      (Meiya Company). From 1999 to
2007 he was deputy party secretary, and subsequently the secretary of the
disciplinary committee of China Aviation Fuel East China Company and he
served as the general manager of                           (Shanghai Pudong
Airport Fuel Co., Ltd) from 2006 to March 2009. Since October 2009, Mr. Liu
has served as the party secretary of                          (China Aviation
Fuel Huadong Company). He was appointed a Supervisor of the Company in
2000. Mr. Liu received post-graduate education and is qualified as a senior
political work instructor.


Mr. Feng Jinxiong is currently a Supervisor and General Manager of the
Audit Department of the Company and a deputy general manager of the Audit
Department of CEA Holding. Mr. Feng joined the civil aviation industry in 1982,
and served as Deputy Head and Head of the Planning Department of the
Company, head of the Finance Department and deputy chief accountant of
CEA Holding, Manager of the Human Resources Department of the Company,
vice president of                            (CES Finance Holding Co. Ltd),
and Deputy General Manager of the Shanghai Security Department of the
Company. He also served as president of the China Eastern Airlines Wuhan
Co., Ltd. from 2007 to 2009. Since February 2009, he has been General
Manager of the Audit Department of the Company. He has been a Supervisor
of the Company since March 2009. Mr. Feng graduated from the Civil Aviation
University of China and the Graduate School of the Chinese Academy of
Social Sciences, holding a master’s degree.





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REPORT OF DIRECTORS




Mr. Yan Taisheng is currently a Supervisor and the Vice Chairman of the
Labour Union of the Company. Mr. Yan joined the civil aviation industry in
1973, and served as Chief of the Board Secretariat of the General Office of the
Company, general manager of                            (Shanghai Civil Aviation
Dong Da Industry Company) and Deputy Head and Head of the General Office
of the Labour Union of the Company. He has been the Vice Chairman of the
Labour Union of the Company since 2005. He served as a Supervisor since
March 2009. Mr. Yan graduated from East China Normal University.


Mr. Shu Mingjiang is currently a Vice President of the Company. Mr. Shu
joined the civil aviation industry in 1989. He served as vice president of general
affairs of                                (Shanghai Eastern Flight Training Co.,
Ltd.), a subsidiary of the Company, Deputy Head of the Safety Monitoring
Division, Vice Manager and subsequently Manager of the Safety Monitoring
Department of the Company, Deputy General Manager of the Shanghai Flight
Division of the Company and Vice President of the Yunnan Branch of the
Company. From November 2006 to December 2009, he was the Chief Pilot
and General Manager of the Operating Control Division of the Company. From
December 2009 to November 2011, Mr. Shu was President of the Beijing
Branch of the Company. He has been a Vice President of the Company
since December 2011. Mr. Shu graduated from the Flight College of Civil                                 (EMBA)
Aviation Flight University of China, majoring in aviation flying, and obtained
a Master in Flight Safety Management jointly held by Civil Aviation University
of China, ENAC, France and ENSICA, France, and an Executive Master of
Business Administration (EMBA) degree from School of Management of Fudan
University.


Mr. Wu Yongliang is currently a Vice President and Chief Financial Officer
of the Company. Mr. Wu joined the civil aviation industry in 1984 and served
as Deputy Head and subsequently Head of the Finance Department of the
Company, Head of Planning and Finance Department of the Company and
head of the Finance Department of CEA Holding. From 2001 to March 2009,
he served as deputy chief accountant and head of the Finance Department
of CEA Holding. From April 2009 onwards, he has served as Chief Financial                                          (MBA)
Officer of the Company. He has been a Vice President of the Company
since December 2011. Mr. Wu graduated from the Faculty of Economic
Management of Civil Aviation University of China, majoring in planning and
finance. He also graduated from Fudan University, majoring in business
administration (MBA). Mr. Wu was awarded the postgraduate qualification and
is a certified accountant.


Mr. Tian Liuwen is currently a Vice President of the Company and president
of Shanghai Airlines. Mr. Tian served as manager of the Beijing Sales
Department under the Marketing and Sales Division of China General Aviation
Corporation. He was also the Head of the General Manager Office and
Chairman of the Labour Union and Deputy General Manager of the Shanxi
Branch of the Company. From June 2002 to January 2008, he was the Vice
President and subsequently President of the Hebei Branch of the Company.
From April 2005 to January 2008, he was President of the Beijing Base of the
Company. He served as general manager of China Eastern Airlines Jiangsu                                          (EMBA)
Co., Ltd, a subsidiary of the Company, since January 2008. Since December
2011, he has been Vice President of the Company and president of Shanghai
Airlines. He obtained an EMBA degree from Nanjing University and is qualified
as senior economist.




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REPORT OF DIRECTORS




Mr. Wang Jian is currently the Board Secretary, Joint Company Secretary
and the Head of the Board secretariat of the Company. Mr. Wang joined the
Company in 1995 and served as Deputy Head of the Company’s office and
Deputy General Manager of the Shanghai Business Office of the Company.
From September 2006 to May 2009, he was the deputy general manager in
the Shanghai Base of China Southern Airlines Company Limited (a company
listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange).
Since May 2009, he has served as the Head of the Board secretariat of the
Company. He was a representative of the Company’s Securities affairs from
May 2009 to April 2012. He was appointed as the Board Secretary and Joint                       (MBA)
Company Secretary of the Company in April 2012. Mr. Wang graduated from               (EMBA)
Shanghai Jiao Tong University and has an MBA postgraduate degree from
East China University of Science and Technology and an EMBA degree from
Tsinghua University as well as a qualification certificate for board secretaries of
listed companies issued by the Shanghai Stock Exchange.


Mr. Ngai Wai Fung is currently a Joint Company Secretary of the Company.
Mr. Ngai is a fellow and vice president of the Hong Kong Institute of Chartered
Secretaries, and a fellow of the Institute of Chartered Secretaries and
Administrators in the United Kingdom. Mr. Ngai is currently a director and
chief executive officer of SW Corporate Services Group Limited. Mr. Ngai has
become an adjunct professor of the Faculty of Law of Hong Kong Shue Yan
University in September 2012. He was appointed as a non-official member of
the Working Group on Professional Services of the Economic Development
Commission by the chief executive of the Hong Kong Special Administrative
Region and also a committee member of Qualification and Examination
Board by the Hong Kong Institute of Certified Public Accounts in January
2013. He used to serve as joint company secretary in several companies and
has rich experience in being a company secretary, as well as in enterprise
management, legal matters, finance and corporate governance. He is also
a member of the Hong Kong Institute of Certified Public Accountants and
a fellow of the Association of Chartered Certified Accountants in the United
Kingdom. In April 2012, Mr. Ngai was appointed as the Joint Company
Secretary of the Company. Mr. Ngai has a Doctorate in Finance from the
Shanghai University of Finance and Economics, a Master in Corporate Finance
from the Hong Kong Polytechnic University, an MBA from Andrews University
in the United States and a Bachelor’s degree (Honours) in Law from the
University of Wolverhampton in the United Kingdom.


Each of the independent non-executive Directors has issued a confirmation in                   3.13
respect of the factors set out in the Listing Rules concerning his independence
pursuant to Rule 3.13 of the Listing Rules. The Company considers all of the
independent non-executive Directors to be independent.





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REPORT OF DIRECTORS




CHANGES IN THE MEMBERS OF THE BOARD
AND MANAGEMENT PERSONNEL

Appointment



Name            Date of appointment                    Approval Organization                      Position



Xu Zhao         28 June 2012                           2011 annual general meeting                Director



Gu Jiadan       28 June 2012                           2011 annual general meeting                Director



Tang Bing       28 June 2012                           2011 annual general meeting                Director



Xi Sheng        28 June 2012                           2011 annual general meeting                Supervisor



Wang Jian       6 April 2012                           13th meeting of the sixth session of       Board Secretary, Joint Company Secretary,
                                                          the Board                                 Authorised Representative in Hong Kong



Ngai Wai Fung   6 April 2012                           13th meeting of the sixth session of       Joint Company Secretary
                                                          the Board

Resignation



Name            Date of resignation                                                               Position



Luo Zhuping     6 April 2012                                                                      Board Secretary, Company Secretary,
                                                                                                    Authorised Representative in Hong Kong





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REPORT OF DIRECTORS




CHANGE OF PARTICULARS OF DIRECTORS OR                                                           13.51B (1)
SUPERVISORS UNDER RULE 13.51B(1) OF THE
LISTING RULES
Mr. Li Yangmin, a Director, was appointed as an executive director of
                          (Shanghai Eastern Airlines Logistics Co., Ltd.), a
subsidiary of the Company, with effect from December 2012 and ceased to
act as the chairman of China Cargo Airlines, a subsidiary of the Company, with
effect from January 2013.

Mr. Tang Bing, a Director, was appointed as the chairman of Shanghai
Airlines, a subsidiary of the Company, with effect from January 2012 and the
chairman of Jetstar Hong Kong with effect from October 2012.

Mr. Wu Xiaogen, an independent non-executive Director, ceased to act
as an independent non-executive director of China Petroleum & Chemical
Corporation (a company listed on the Shanghai Stock Exchange and the Hong
Kong Stock Exchange) with effect from May 2012.

Mr. Shao Ruiqing, an independent non-executive Director, ceased to act as
an independent non-executive director of SAIC Motor Corporation Limited (a
company listed on the Shanghai Stock Exchange) with effect from May 2012.


SHAREHOLDINGS OF DIRECTORS, CHIEF
EXECUTIVE, SUPERVISORS AND SENIOR
MANAGEMENT
Save as disclosed above, as at 31 December 2012, none of the Directors,
chief executive, Supervisors or members of senior management of the
Company and their respective associates had any other interest or short
position in the shares, underlying shares and/or debentures (as the case
may be) of the Company and/or any of its associated corporations (within                   XV
the meaning of Part XV of the SFO) which was required to be notified to the                                  XV   7   8
Company and the Hong Kong Stock Exchange pursuant to the provisions
of Divisions 7 and 8 of Part XV of the SFO and as recorded in the register
required to be kept by the Company pursuant to section 352 of the SFO
(including any interest or short position which any of such Directors, chief
executive, Supervisors or members of senior management of the Company
and their respective associates were taken or deemed to have under such
provisions of the SFO), or which was otherwise required to be notified to the
Company and the Hong Kong Stock Exchange pursuant to the Model Code
for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as
set out in Appendix 10 to the Listing Rules (which shall be deemed to apply to
the Supervisors to the same extent as it applied to the Directors).

In 2012 and as at 31 December 2012, none of the Directors, chief executive,
Supervisors, members of senior management of the Company and/or any of
their spouses or children under the age of eighteen were granted any right,
and the Company had not made any arrangement enabling any of them, to
subscribe for equity securities or debt securities of the Company.

As at the date of this report, Mr. Liu Shaoyong (the Chairman of the Company),
Mr. Xu Zhao and Mr. Gu Jiadan (Directors), Mr. Yu Faming (the chairman of
the Supervisory Committee of the Company) and Mr. Xi Sheng (a Supervisor)
are employees of CEA Holding, which is a company having an interest in the                      XV   2   3
Company’s shares required to be disclosed to the Company and the Hong
Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of
the SFO.



                          C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




REPORT OF DIRECTORS




SERVICE CONTRACTS OF DIRECTORS AND
SUPERVISORS

None of the Directors or Supervisors has entered into any service contract
with the Company, which is not terminable by the Company within one year
without payment of compensation (other than statutory compensation).


INTERESTS OF DIRECTORS AND SUPERVISORS
IN CONTRACTS

None of the Directors or Supervisors had a material interest, directly or
indirectly, in any contract of significance to which the Company or any of its
subsidiaries was a party to during the Reporting Period (the term ‘contract of
significance’ having the meaning ascribed thereto in paragraph 15 of Appendix
16 to the Listing Rules).


REMUNERATION

Directors and Supervisors

Details of the remuneration of Directors and Supervisors are set out in note 9
to the financial statements prepared in accordance with IFRS.

H Shares Appreciation Rights Scheme                                                             H

Details of the grant of the H shares appreciation rights of the Company are set                            H
out in the section headed “Report of Directors—H Shares Appreciation Rights”                                 H
of this report.


Employees

As at 31 December 2012, the Group had 66,207 employees, a majority of
whom worked in the PRC. The wages of the Group’s employees generally                           66,207
consisted of basic salary and performance-based bonus.


MEDICAL INSURANCE

The majority of the Group’s PRC employees participate in the medical
insurance schemes organised by the municipal governments, under which                                                               12%
the Group and its employees are required to contribute to the schemes                           2%
approximately 12% and 2%, respectively, of the employee’s basic salaries. For
those employees who participate in these schemes, the Group has no other                                                     3.91
obligation for the payment of medical expense beyond such contributions.                            3.74
For the year ended 31 December 2012, the Group’s medical insurance
contributions charged to the income statement amounted to RMB391 million
(2011: RMB374 million).


BANK LOANS AND OTHER BORROWINGS

Details of bank loans and other borrowings of the Company and the Group
as at 31 December 2012 are set out in note 34 to the financial statements
prepared in accordance with IFRS.





                                                        ANNU AL RE POR T 2 0 1 2




REPORT OF DIRECTORS




INTEREST CAPITALIZED
Interest capitalized by the Group as calculated in accordance with IFRS for the
year ended 31 December 2012 was RMB297 million.                                                           2.97

PROPERTY, PLANT AND EQUIPMENT
Movements in property, plant and equipment of the Company and the Group
during the year are set out in note 19 to the financial statements prepared in
accordance with IFRS.


RESERVES
Details of movements in reserves of the Company and the Group for the year
ended 31 December 2012 and profit appropriation by the Company are set
out in note 43 to the financial statements prepared in accordance with IFRS.

STATUTORY COMMON WELFARE FUND
Details in relation to the statutory common welfare fund, such as the nature
and application of and movements in the fund, and the basis of its calculation,
including the percentage used for calculating the amounts, are set out in note
43 to the financial statements prepared in accordance with IFRS.


DONATIONS
During the year, the Group made donations for charitable purposes amounting                                   150,000
to approximately RMB150,000.


EMPLOYEES’ RETIREMENT SCHEME
Details of the Company’s employee retirement scheme and post retirement
benefits are set out in note 38 to the financial statements prepared in
accordance with IFRS.


MAJOR SUPPLIERS AND CUSTOMERS
In 2012, purchases by the Company from the largest and five largest
suppliers accounted for 13.82% and 33.39%, respectively, of the total annual                   13.82%   33.39%
purchases of the Company. Total income from sales to the Company’s five           5                     81.73
largest customers amounted to approximately RMB8,173 million, accounting                9.6%
for 9.6% of the Company’s total revenue.

None of the Directors, Supervisors or any of their respective associates nor
any Shareholders who, to the knowledge of the Directors, hold 5% or more of        5%
the Company’s share capital has any interest in any of the above mentioned
suppliers and customers.





                        C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




REPORT OF DIRECTORS




CONNECTED TRANSACTIONS
1.   On 4 November 2011, in order to be more focused on the core aviation                     1.
     business and the related business of the Company, the Company
     entered into an equity transfer agreement with
     (Shanghai Eastern Airlines Investment Co., Ltd.) (“SEA Investment”),
     pursuant to which the Company agreed to transfer 5% of the equity                                                              5%
     interest in                            (CEA Real Estate Investment Co.,
     Ltd.) (“CEA Real Estate Investment”) held by the Company to SEA                                                        100,663,590
     Investment. SEA Investment agreed to pay a sum of RMB100,663,590
     in cash to the Company, subject to modification, as the consideration
     for this transaction. SEA Investment, which is a wholly-owned subsidiary
     of CEA Holding (a substantial shareholder of the Company), is a
     connected person of the Company and thus, the transaction constitutes
     a connected transaction of the Company. The transaction completed
     in 2012. For additional details, please refer to the announcement of the
     Company issued in Hong Kong dated 4 November 2011.

2.   On 22 August 2012, in order to manage and conduct internal integration                   2.
     of the Group, the Company entered into an equity transfer agreement
     with CEA Holding, pursuant to which the Company agreed to acquire                                                                                83,951,873.97
     20% equity interests in China United Airlines from CEA Holding in                                                              20%
     consideration of RMB83,951,873.97 (the “China United Airlines
     Acquisition”). As CEA Holding is a controlling shareholder of the
     Company, the China United Airlines Acquisition constituted a connected
     transaction of the Company. The China United Airlines Acquisition has
     completed and China United Airlines is now a wholly-owned subsidiary
     of the Company. For details, please refer to the announcement of the
     Company issued in Hong Kong dated 22 August 2012.

3.   On 11 September 2012, CEA Holding and its wholly-owned subsidiary,                       3.
                                   (CES Finance Holding Co. Ltd) (“CES
     Finance”) entered into an A shares subscription agreement (the “A                                        A                    A                                 A
     Shares Subscription Agreement”) with the Company. Pursuant                                                    (a)                                               3.28
     to the A Shares Subscription Agreement: (a) CEA Holding will, at                                             241,547,927      A
     the subscription price of RMB3.28 per share, subscribe in cash                                        792,277,200.56       (b)
     for 241,547,927 new A shares with a total subscription price of                                             3.28               457,317,073
     RMB792,277,200.56; and (b) CES Finance will, at the subscription price                          A                     1,499,999,999.44     A
     of RMB3.28 per share, subscribe in cash for 457,317,073 new A shares
     with a total subscription price of RMB1,499,999,999.44 (the “A Share
     Subscription”).

     Simultaneously with the entering into of the A Shares Subscription                                    A
     Agreement, CES Global, a wholly-owned subsidiary of CEA Holding,                                                                    H                     H
     entered into an H shares subscription agreement (the “ H Shares                                                     H
     Subscription Agreement”) with the Company. Pursuant to the H                                       2.32                            698,865,000           H
     Shares Subscription Agreement, CES Global will, at the subscription                                        1,621,366,800                 H
     price of HK$2.32 per share, subscribe in cash for 698,865,000 new
     H shares with a total subscription price of HK$1,621,366,800 (the “H
     Share Subscription”).

     As CEA Holding holds approximately 59.94% of the then issued share
     capital of the Company, and CES Finance and CES Global are wholly                               59.94%
     owned subsidiaries of CEA Holding, each of the A Shares Subscription                                                     (i)            (ii)
     Agreement entered into between (i) the Company and (ii) CEA Holding                                        A                                   (i)       (ii)
     and CES Finance, and the H Shares Subscription Agreement entered                                               H
     into between (i) the Company and (ii) CES Global constitutes a                                             A                        H
     connected transaction of the Company. The purpose of the A Share
     Subscription and the H Share Subscription is to improve the financial
     position of the Company and in the long term, enhance the Company’s
     competitiveness and help to improve its operational position.





                                                         ANNU AL RE POR T 2 0 1 2




REPORT OF DIRECTORS




     The A Share Subscription and the H Share Subscription have been                     A                H
     approved by the Shareholders on 9 November 2012, but still are subject
     to approval from the relevant governmental and regulatory authorities.
     For details, please refer to the announcements of the Company issued
     in Hong Kong dated 11 September 2012, 9 November 2012, 4 February
     2013, 25 February 2013 and 10 April 2013 and the circular of the
     Company dated 24 September 2012.


4.   On 6 December 2012, the Company entered into an equity transfer                4.
     agreement with                                  (Shanghai Aviation Import
     & Export Co., Ltd.) (“SAIE”, a non-wholly-owned subsidiary of CEA
     Holding), pursuant to which the Company agreed to acquire the                           20,693,900
     remaining 13.98% equity interests in                                                                                           13.98%
        (Shanghai Airlines Tours, International (Group) Co., Ltd.) (“Shanghai
     Tours”) from SAIE in consideration of RMB20,693,900 (the “Shanghai
     Tours Acquisition”). As SAIE is an indirect non wholly-owned subsidiary
     of CEA Holding, the Shanghai Tours Acquisition constituted a connected
     transaction of the Company. The main purpose of the Shanghai Tours
     Acquisition is to resolve the issue of intra-group competition between the
     Company and CEA Holding in the areas of tourism operation caused by
     the absorption of the former Shanghai Airlines Co., Ltd (
               ). The Shanghai Tours Acquisition has completed and Shanghai
     Tours is now a wholly-owned subsidiary of the Company. For details,
     please refer to the announcement of the Company issued in Hong Kong
     dated 6 December 2012.


5.   On 6 December 2012, the Company entered into an equity transfer                5.
     agreement with                                     (China Ocean Shipping
     (Group) Company) (“COSCO Group”), pursuant to which the Company                                                562,266,000
     agreed to acquire 29.7% equity interests in Eastern Logistics from                                       29.7%
     COSCO Group in consideration of RMB562,266,000 (the “Eastern
     Logistics Acquisition”). COSCO Group was a substantial shareholder
     of Eastern Logistics, which in turn was a non-wholly owned subsidiary
     of the Company. COSCO Group is thus a connected person of the
     Company. Accordingly, Eastern Logistics Acquisition constituted a
     connected transaction of the Company. The main purpose of the Eastern
     Logistics Acquisition is to integrate the freight transportation business of
     the Group. The Eastern Logistics Acquisition has completed and Eastern
     Logistics is now a wholly-owned subsidiary of the Company. For details,
     please refer to the announcement of the Company issued in Hong Kong
     dated 6 December 2012.


6.   On 27 December 2012, Shanghai Tours, a wholly-owned subsidiary                 6.
     of the Company, entered into an equity transfer agreement with
                                 (Eastern Air Tourism Investment Group Co.,
     Ltd) (“Eastern Tourism”) and                               (Shanghai
     Dongmei Aviation Travel Co., Ltd) (“Shanghai Dongmei”), pursuant                          3,300,400
     to which Shanghai Tours agreed to acquire the entire equity interests
     in                                (Xi’an Dongmei Aviation Travel Co.,
     Ltd) (“Xi’an Dongmei”) from Eastern Tourism and Shanghai Dongmei
     in consideration of RMB3,300,400 in total (the “Xi’an Dongmei
     Acquisition”).





                          C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




REPORT OF DIRECTORS




     On 27 December 2012, Shanghai Tours entered into an equity transfer
     agreement with Eastern Tourism and Shanghai Dongmei, pursuant to
     which Shanghai Tours agreed to acquire the entire equity interests of                                           10,551,000
                             (Kunming Dongmei Aviation Travel Co., Ltd)
     (“Kunming Dongmei”) from Eastern Tourism and Shanghai Dongmei
     in consideration of RMB10,551,000 in total (the “Kunming Dongmei
     Acquisition”).


     On 10 January 2013, Shanghai Tours entered into an equity transfer
     agreement with Eastern Tourism, pursuant to which Shanghai Tours
     agreed to acquire the entire equity interests of                                                  11,876,200
                 (Shanghai Eastern Air International Travel Service Co.,
     Ltd) (“Eastern Travel”) from Eastern Tourism in consideration of
     RMB11,876,200 in total (the “Eastern Travel Acquisition”).


     Eastern Tourism is a wholly-owned subsidiary of CEA Holding, which in
     turn is a controlling shareholder of the Company. Eastern Tourism is thus
     a connected person of the Company under the Listing Rules. Shanghai
     Dongmei is interested as to 72.84% by, and is thus an associate of, CEA                           72.84%
     Holding. Shanghai Dongmei is thus a connected person of the Company
     under the Listing Rules.


     Therefore, each of the Xi’an Dongmei Acquisition, the Kunming Dongmei
     Acquisition and the Eastern Travel Acquisition constitutes a connected
     transaction of the Company. The main purpose of the Xi’an Dongmei
     Acquisition, the Kunming Dongmei Acquisition and the Eastern Travel
     Acquisition is to reorganise and integrate the tourism business of the
     Group. For details, please refer to the announcements of the Company
     issued in Hong Kong dated 10 January 2013.

CONTINUING CONNECTED TRANSACTIONS

The estimated transaction caps for the continuing connected transactions,
which were considered and approved by the Board and at the general
meetings of the Company, and their actual amounts incurred up to 31
December 2012, are set out as follows:


                                                                                                                                     The approved
                                                                                                               Incurred up to       2012 estimated
                                                                                                           31 December 2012       transaction caps




 Category
                                                                                                                    (RMB’000)          (RMB’000)



 Financial services (balance of deposit)                                                                            1,451,526            4,000,000
 Catering services                                                                                                    783,384              980,000
 Import and export agency services                                                                                     78,756               98,300
 Production and maintenance services                                                                                  121,854              123,980
 Property leasing                                                                                                      66,763               95,760
 Advertising agency services                                                                                           38,846               46,000
 Sales agency services (agency fee)                                                                                    19,836               96,000
 Media resources operation services                                                                                    36,030               50,000



                                                         ANNU AL RE POR T 2 0 1 2




REPORT OF DIRECTORS




On 16 January 2013, the Company entered into a supplemental agreement
with                                 (Eastern Air Group Finance Co., Ltd.)
(“Eastern Finance”), to further regulate the balances of the Group’s deposits
and loans with the Eastern Finance and its subsidiaries on a pre-condition
that the agreed maximum daily balance of each of the deposits and the loans
under the financial services agreement dated 15 October 2010 remains
unchanged. For details, please refer to the announcement of the Company
issued in Hong Kong dated 16 January 2013.


For further details regarding the above continuing connected transactions,
please refer to the Company’s 2010 annual report.


The Company’s independent non-executive Directors have reviewed such
continuing connected transactions during the year 2012 and confirmed that:


(a)   the transactions have been entered into by the Group in the ordinary and      (a)
      usual course of its business;


(b)   the transactions have been entered into either (i) on normal commercial       (b)            (i)          (ii)
      terms or (ii) (where there are not sufficient comparable transactions
      to judge whether they are on normal commercial terms) on terms no
      less favourable to the Company than terms available to or from (as
      appropriate) independent third parties; and


(c)   the transactions have been entered into in accordance with the relevant       (c)
      agreement governing them on terms that are fair and reasonable and in
      the interests of the Shareholders as a whole.


For the purpose of Rule 14A.38 of the Listing Rules, the auditors of the                  14A.38
Company have carried out procedures on the above connected transactions
disclosed herein for the year ended 31 December 2012 in accordance with
the Hong Kong Standard on Assurance Engagements 3000 “Assurance
Engagement Other Than Audits or Reviews of Historical Financial
Information” and with reference to Practice Note 740 “Auditor’s Letter
on Continuing Connected Transactions under the Hong Kong Listing
Rules” issued by the Hong Kong Institute of Certified Public Accountants and
reported that, in respect of the above connected transactions:


a.    nothing has come to our attention that causes us to believe that the          a.
      disclosed continuing connected transactions have not been approved
      by the Board.


b.    for transactions involving the provision of goods or services by the          b.
      Group, nothing has come to our attention that causes us to believe that
      the transactions were not, in all material respects, in accordance with
      the pricing policies of the Company.


c.    nothing has come to our attention that causes us to believe that              c.
      the transactions were not entered into, in all material respects, in
      accordance with the relevant agreements governing such transactions.





                          C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




REPORT OF DIRECTORS




d.   with respect to the aggregate amount of each of the continuing                             d.
     connected transactions as set out in the appendix to this letter, nothing
     has come to our attention that causes us to believe that the disclosed
     continuing connected transactions have exceeded the maximum
     aggregate annual value disclosed in the previous announcement dated
     15 October 2010 made by the Company in respect of each of the
     disclosed continuing connected transactions.


In respect of each related party transaction disclosed in note 47 to the
financial statements prepared in accordance with IFRS, the Company confirms
that it has complied with the relevant requirements under the Listing Rules (if
applicable).


Save as disclosed above, the related party transactions set out in note 47 to
the financial statements prepared in accordance with IFRS do not constitute
connected transactions under the Listing Rules.


STAFF HOUSING BENEFITS

Details of the Group’s staff housing benefits are set out in note 39 to the
financial statements prepared in accordance with IFRS.


MATERIAL LITIGATION

As at 31 December 2012, the Company was not involved in any litigation,
arbitration or claim of material importance.


SIGNIFICANT EVENTS

1.   On 23 March 2012, the Company entered into a binding memorandum                            1.
     of understanding with Jetstar Airways Pty Limited (a wholly-owned
     subsidiary of Qantas) for the establishment of a low-cost airline in
     Hong Kong. On 24 August 2012, Eastern Air Overseas (Hong Kong)
     Corporation Limited (“Eastern Air Overseas”, a wholly-owned
     subsidiary of the Company) entered into a shareholders’ agreement                                                     Jetstar International Group
     with Jetstar International Group Holdings Co., Limited (“Jetstar                                 Holdings Co., Limited
     International”, a wholly-owned subsidiary of Qantas), pursuant to which
     Eastern Air Overseas and Jetstar International agreed to establish a
     Hong Kong-based, Jetstar-branded low-cost carrier. For details, please
     refer to the announcements of the Company issued in Hong Kong dated
     23 March 2012 and 24 August 2012.


2.   On 27 April 2012, the Company entered into a purchase agreement                            2.
     with Boeing Company in Shanghai, China regarding the purchase of
     twenty Boeing B777-300ER aircraft. On the same date, the Company                                  20         B777-300ER
     entered into a disposal agreement with Boeing Company regarding the
     disposal of five Airbus A340-600 aircraft. For details, please see the                                 A340-600
     announcements of the Company issued in Hong Kong dated 27 April
     2012 and 28 June 2012 and the circular of the Company dated 14 May
     2012.





                                                       ANNU AL RE POR T 2 0 1 2




REPORT OF DIRECTORS




3.   On 27 April 2012, the resolution on the Company’s issuance of super         3.
     short-term commercial paper was considered and approved by the
     Board. The Company intended to issue within the PRC the super short-
     term commercial paper with an aggregate principal amount of not more              100
     than RMB10 billion and for a term of not more than 270 days (in multiple
     tranches on a rolling basis). The proposal was considered and approved
     at the general meeting of the Company held on 28 June 2012. The
     Company completed the issuance of the 2012 first tranche of the super                              40
     short-term commercial paper on 13 September 2012. The issuance                               100                    4.1%
     amount of such commercial paper was RMB4 billion with a maturity
     of 270 days whereas the nominal value was RMB100 per unit and the
     issuance interest rate was 4.1%. The proceeds from the first tranche of
     the super short-term commercial paper will be principally used to repay
     bank loans, improve its financing structure and replenish short-term
     operational working capital. For details, please see the announcements
     of the Company issued in Hong Kong dated 27 April 2012, 28 June
     2012 and 13 September 2012.


4.   On 12 June 2012, the Board considered and approved resolutions               4.
     concerning the issuance of corporate bonds. The Company intended to
     issue within the PRC the corporate bonds with a principal amount of not
     more than RMB8.8 billion (including RMB8.8 billion) and for a term of not
     more than 10 years (in one tranche or multiple tranches). The proposal
     was considered and approved at the Shareholders’ meeting of the
     Company held on 28 June 2012. On 13 December 2012, the Company
     received the “Approval for the Non-public Issuance of Corporate Bonds
     by China Eastern Airlines Corporation Limited” (
                             ) issued by the CSRC. The first tranche of the            48                        100
     corporate bonds are 10-year fixed interest rate bonds, with an amount of                                    5.05%
     RMB4.8 billion, issue price of RMB100 each and a coupon interest rate
     of 5.05%, the issuance of which completed on 20 March 2013. After
     deducting issuance expenses, the proceeds from the first tranche of the
     corporate bonds will be used to purchase aircraft. For details, please
     refer to the announcements of the Company issued in Hong Kong dated
     12 June 2012, 28 June 2012, 14 December 2012, 13 March 2013, 18
     March 2013 and 20 March 2013.


5.   On 25 August 2012, the “H Shares Appreciation Rights Scheme of              5.
     China Eastern Airlines Corporation Limited (Draft)” and “Initial Grant                                H
     Scheme of the H Shares Appreciation Rights of China Eastern Airlines                                                H
     Corporation Limited (Draft)” were considered and approved by the
     Board. On 19 October 2012, the revised “Initial Grant Scheme of the H                                       H
     Shares Appreciation Rights of China Eastern Airlines Corporation Limited
     (Draft)” (the “Initial Grant Scheme”) was considered and approved                                                    H
     by the Board. The Company granted the H shares appreciation rights
     pursuant to the Initial Grant Scheme on 7 December 2012. For details,
     please see the announcements of the Company issued in Hong Kong
     dated 28 August 2012, 19 October 2012, 9 November 2012, 30
     November 2012 and 7 December 2012 and the circular of the Company
     dated 20 October 2012.





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REPORT OF DIRECTORS




6.   On 30 August 2012, the Board considered and approved the resolution                        6.
     of proposed amendments to the Articles of Association in relation to
     profit distribution. The resolution was considered and approved at the
     Shareholders’ meeting on 9 November 2012. For details, please refer
     to the announcements of the Company issued in Hong Kong dated 30
     August 2012 and 9 November 2012 and the circular of the Company
     dated 24 September 2012.


7.   On 23 November 2012, the Company entered into a purchase                                   7.
     agreement with Airbus SAS in Shanghai, China regarding the purchase
     of sixty Airbus A320 series aircraft. On the same date, the Company                                60   A320
     entered into a disposal agreement with Airbus SAS regarding the
     disposal of eight CRJ aircraft and ten EMB aircraft. For details, please                          CRJ   10   EMB
     see the announcement of the Company issued in Hong Kong dated 23
     November 2012 and the circular of the Company dated 26 November
     2012.


INDEPENDENT NON-EXECUTIVE DIRECTORS’
OPINION

Independent non-executive Directors have performed auditing work and
issued an independent opinion on the external guarantees the Company
has provided, as required by the relevant requirements of the CSRC. The
Company has strictly observed the relevant laws and regulations as well as its
Articles of Association while it has also imposed strict control on the external
guarantees provided. As at 31 December 2012, none of the Company and its
subsidiaries included in the consolidated financial statements has provided any
guarantee to the Company’s controlling shareholder and other related parties,
other non-corporate bodies and individuals.


AUDITORS

PricewaterhouseCoopers (Certified Public Accountants) and
PricewaterhouseCoopers Zhong Tian CPAs Limited Company (registered
accountants in the PRC) were the Company’s international and domestic
auditors in 2012, respectively.



On behalf of the Board




Liu Shaoyong
Chairman


Shanghai, the PRC
26 March 2013





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CORPORATE GOVERNANCE




CORPORATE GOVERNANCE PRACTICES

The Company has established a formal and appropriate corporate governance
structure. The Company has also placed emphasis on the corporate
governance principle of having transparency, accountability and safeguarding
the interests of all Shareholders.


The Board believes that sound corporate governance is essential to the
development of the Company’s operations. The Board regularly reviews
our corporate governance practices to ensure that the Company operates
in accordance with the laws, regulations and requirements of the listing
jurisdictions, and that the Company continuously implements corporate
governance of a high efficiency.


The Company’s corporate governance practices include but are not limited to
the following:


Articles of Association, rules of meeting of general meetings, rules of meeting
of the Board, rules of meeting of the Supervisory Committee, working
regulations of independent directors, management regulations of connected
transactions and articles of association of the audit and risk management
committee, articles of association of the planning and development
committee, detailed working rules for the Nominations and Remuneration
Committee, detailed working rules for the aviation safety and environment
committee, working regulations of presidents, management regulations of
investor relationship, detailed implementation rules for the management of
investor relationship, detailed implementation rules for connected transactions,
regulations on external guarantee and the interim administrative regulations
concerning hedging businesses.


For the year ended 31 December 2012 and as at the date of publication of this
annual report, the Board has reviewed the relevant provisions and corporate
governance practices under the codes of corporate governance adopted by
the Company, and took the view that the Company’s corporate governance
practices during the year ended 31 December 2012 met the requirements
under the code provisions in the Code on Corporate Governance Practices
(for the period from 1 January 2012 to 31 March 2012) and Corporate
Governance Code (for the period from 1 April 2012 to 31 December 2012)
set out in Appendix 14 to the Listing Rules (the “Code”). In certain aspects,
the code of corporate governance adopted by the Company is more stringent
than the provisions set out in the Code. The following sets out the major
aspects which are more stringent than the Code.


Major aspects which are more stringent than provisions set out in the Code:


–   all members of the audit and risk management committee are
     independent non-executive Directors.


–   13 meetings of the Board were held during the financial year of 2012.
     The Board is responsible for the leading and control of the Company.
     The Directors are jointly responsible for the affairs of the Company by
     directing and supervising the affairs of the Company.





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CORPORATE GOVERNANCE




DIRECTORS
As at 31 December 2012, the Board consists of eleven Directors, including
four independent non-executive Directors. At the Company’s 2011 annual
general meeting held on 28 June 2012, the Shareholders approved the
appointment of Mr. Xu Zhao, Mr. Gu Jiadan and Mr. Tang Bing as Directors
of the sixth session of the Board. All Directors shall retire in the third annual
general meeting following their appointment, but are eligible for re-election.
Names, personal particulars and conditions of appointment of the Directors
are set out in page 38 of this report.

Independent non-executive Directors shall possess specialised knowledge
and experience. They shall be able to play their roles of supervising and
balancing to the fullest extent to protect the interests of Shareholders and
the Company as a whole. The Board considers that they shall be able to                                       3.13
exercise independent judgment effectively, which complies with guidelines                                  3.13
on assessment of independence pursuant to Rule 3.13 of the Listing Rules.
Pursuant to Rule 3.13 of the Listing Rules, the Company has received the
annual confirmation letters from each of the independent non-executive
Directors on their independence. All Directors (including independent
non-executive Directors) are appointed for a term of 3 years. The formal
appointment letters and the Articles of Association have set out the terms and
conditions of their appointment. Other than working relationships, Directors,
Supervisors and members of senior management of the Company do not
have any financial, business or family connection with one another.


POWERS OF THE BOARD
On a periodic basis, the Board reviews the relevant performance against
proposed budgets and business objectives of each operating unit. It also
exercises a number of powers retained by the Board, including the following:

–   responsibility for convening general meetings and reporting to
     Shareholders on its work in such meeting;

–   implementing resolutions passed in general meetings;

–   deciding on the operating plan and investment proposals of the
     Company;

–   formulating the annual preliminary and final budget proposals;

–   formulating the Company’s profit distribution proposal and the proposal
     to offset losses;

–   formulating the Company’s proposals to increase or reduce the
     registered capital and proposals to issue debt securities;

–   drawing up proposals for the Company’s merger, demerger and
     dissolution;

–   deciding on the Company’s internal management structure;

–   employing or dismissing the Company’s President and Board Secretary;
     appointment or dismissal of the Vice President and Chief Financial
     Officer of the Company on the nomination of the President, and the
     determination of their remuneration;



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CORPORATE GOVERNANCE




–   formulating the basic management systems of the Company;

–   formulating proposals to amend the Articles of Association;

–   discharging any other powers and functions granted in general meeting.

The Board and the relevant specialized committees are also responsible for
the completeness of financial information and are responsible for maintaining
an effective internal control system and for risk management of the Group,
as well as preparing the financial statements of the Company. Setting the
business objectives and overseeing the daily operations of the Company are
the responsibilities of the Chief Executive Officer. The Articles of Association
specify the duties and authorities of the Board and management. The Board
periodically reviews the duties and functions of the Chief Executive Officer
and the powers delegated to him to ensure that such arrangements are
appropriate. In order to ensure the balance of powers and authorization,
the roles of the Chairman and the Chief Executive Officer have been clearly
defined. The Chairman of the Company is Mr. Liu Shaoyong, and the
Chief Executive Officer is Mr. Ma Xulun, a Director and the President of the
Company. There are also other senior officers who are responsible for the
daily management of the Company within their scope of duties.

The Board continued to made strenuous efforts to establish and improve
the Company’s corporate governance policies, apart from the formulation of
corporate governance policies such as Rules of Meeting of General Meetings,
Rules of Meeting of the Board, Working Regulations of Presidents and
Working Regulations of Independent Directors, the Company also drew up
the Information Disclosure Management System, Management Regulations of
Connected Transactions and Management Regulations of External Guarantees
for specific operations.

During the Reporting Period, in order to strengthen the work related to
registration and management of insiders of the Company, the Board
considered and approved the Registration and Management Regulation
of Insiders in January 2012. On 30 August 2012, pursuant to the new
requirements in respect of strengthening the risk management of financial
derivative businesses of the Company, the Board considered and amended
the Risk Management Manual of Derivative Business (
       ) in a timely manner. In addition, with a view to enhance the basic
management of the Company and strengthen system building, the Company
streamlined the relevant constitutional documents and policies considered
and approved by the Board and amended and supplemented certain policies
which are incompatible with the Company’s development requirement, based
on the new changes of regulatory requirements and the actual conditions of
the production and operation of the Company, and repealed the “Rules on
Operating Procedures for Aircraft Purchase and Leasing (
               )”, “Provisional Regulations on Approval Process of Investment
Decisions and Disposals of Asset (                                           )”
and “China Eastern Administrative Rules on External Investment (
                   ) (28 October 2005 edition)”. Based on the Company’s need
to issue debt securities, the Board considered and approved the Management
Regulation of the Information Disclosure in the Interbank Bond Market on
30 October 2012. Meanwhile, in order to strengthen the Company’s risk
management of specific connected transaction, the Board considered and
approved the “Risk Control Regulation of the Connected Transaction with
Eastern Air Group Finance Co., Ltd. (
                   )”.





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CORPORATE GOVERNANCE




GENERAL MEETINGS

The procedures for Shareholders to convene an extraordinary general
meeting and to send enquiries to the Board, and the procedure for proposing
resolutions at general meetings are as follows:


According to the relevant requirements of the Articles of Association and rules
of meeting of general meetings of the Company, Shareholders may convene a
general meeting on their own, the major rules of which are as follows:


–   Shareholder(s) either individually or jointly holding over 10% of the                                          10%
     Company’s shares may request the Board to convene an extraordinary
     general meeting. Such request shall be made to the Board in writing. The
     Board shall, in accordance with the requirement of laws, administrative
     regulations and the Articles of Association, make a response in writing
     on whether or not it agrees to convene an extraordinary general meeting
     within 10 days upon receipt of such request.


–   If the Board refuses to convene the extraordinary general meeting, or
     fails to make a response within 10 days upon receipt of such request,
     Shareholder(s) either individually or jointly holding over 10% of the                             10%
     Company’s shares may propose to convene an extraordinary general
     meeting to the Supervisory Committee. Such proposal shall be made to
     the Supervisory Committee in writing.


–   If the Supervisory Committee agrees to convene the extraordinary
     general meeting, a notice convening the general meeting shall be
     issued within 5 days upon receipt of such request. Should there be any
     amendments to the original proposal in the notice, the consent of the
     relevant Shareholders shall be obtained.


–   If the Supervisory Committee fails to give the notice of the general
     meeting within the specified time limit, it shall be deemed to have
     failed to convene or preside over the general meeting, in which case,                                    10%
     Shareholder(s) either individually or jointly holding over 10% of the
     Company’s shares for more than 90 consecutive days shall have the
     right to convene and preside over the meeting by themselves.


Pursuant to the relevant requirements of the Articles of Association and rules
of meeting of general meetings of the Company, Shareholders have the right
to inspect or make copies of the Articles of Association, minutes of general
meetings, resolutions of Board meetings, resolutions of meetings of the
Supervisory Committee and financial or accounting reports. Shareholders may
request to inspect the accounting books of the Company. In such case, such
request shall be made to the Board secretariat of the Company in writing and
state its purposes. If the Company, on reasonable grounds, considers that
the Shareholders are inspecting the accounting books for improper purposes
and may result in damage to the Company’s legal interests, the Company
may refuse the inspection and make written response to the Shareholders
stating its reasons within 15 days upon delivery of the written request by the
Shareholders. If the Company refuses the inspection, Shareholders may make
proposal to the People’s Court to request the Company to provide inspection
of the accounting books of the Company.





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CORPORATE GOVERNANCE




Pursuant to the relevant requirements of the Articles of Association and rules
of meeting of general meetings of the Company, the procedures for the
Shareholders to propose resolutions at the general meeting are as follows:


–   Shareholder(s) either individually or jointly holding over 3% of the
     issued shares of the Company carrying the right to vote may propose
     extraordinary resolutions and submit the same in writing to the convener
     prior to the holding of the general meeting. However, subject to the
     requirement of the Rules Governing the Listing of Securities on The
     Stock Exchange of Hong Kong Limited, the Company shall issue
     supplemental circular of the new extraordinary resolutions and the
     relevant materials to the Shareholders at least 14 days before the date
     of holding the general meeting, therefore, the time for the proposing
     Shareholders to propose new extraordinary resolutions shall not be
     later than such time limit for issuing the supplemental circular to the
     Shareholders and shall consider and provide the Company reasonable
     time to prepare and despatch the supplemental circular.


–   The aforesaid proposed resolutions shall be reviewed by the Board and
     shall be included in the agenda of such meeting if the matters fall within
     the scope of terms of reference of the general meeting. The convener
     shall announce the content of the extraordinary resolutions by issuing a
     supplemental notice of the general meeting upon receipt of the proposed
     resolutions as soon as possible. If the Board considers that the content
     of the proposed resolutions do not fall within the scope of terms of
     reference of the general meeting, explanation and description shall be
     given at such general meeting, which, together with the content of such
     proposed resolutions and explanation of the Board, shall be published
     along with the resolutions of the general meeting in announcement after
     the conclusion of the meeting.





                           C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




CORPORATE GOVERNANCE




–    the Board shall review the proposed resolutions in accordance with the
      following principles:


      (1)   Relevance. The Board shall review the resolutions proposed by the
            Shareholders. Matters in resolutions proposed by the Shareholders
            which have direct impact on the Company and are not outside the
            terms of reference of the general meeting as stipulated in the laws,
            regulations and the Articles of Association shall be submitted to
            the general meeting for discussion. For matters which fail to meet
            the above requirements, it is recommended not to submit the
            proposed resolutions for discussion at the general meeting.


      (2)   Procedural issues. The Board may make decisions on procedural
            issues concerning resolutions proposed by the Shareholders.
            Consent of the proposing Shareholders shall be obtained if the
            proposed resolutions will be split up or combined for voting.
            In the event of any objection to the change by the proposing
            Shareholders, the convener of the general meeting may present
            the procedural issues to the general meeting for decision and
            discussions shall be conducted in accordance with the procedures
            decided by the general meeting.


Please refer to the section headed “Corporate Governance – Investor
Relations” of this report for details of the contact information for Shareholders
to inspect the relevant information and propose extraordinary resolutions.





                                                      ANNU AL RE POR T 2 0 1 2




CORPORATE GOVERNANCE




The Company held two general meetings in 2012, details of which are set out
as follows:


The 2011 annual general meeting of the Company was held on 28 June 2012
at the Meeting Centre, Shanghai International Airport Hotel (
  ), 2550 Hongqiao Road, Shanghai, the PRC. For details, please refer to the
Company’s announcement dated 28 June 2012.


The 2012 first extraordinary general meeting of the Company was held on
9 November 2012 at Shanghai International Airport Hotel (
  ), 2550 Hongqiao Road, Shanghai, the PRC. For details, please refer to the
Company’s announcement dated 9 November 2012.


Attendance of Directors at general meetings of the Company was as follows:


                                                                                        Attendance/
                                                                                           Eligibility   Attendance
 Directors                                                                              of Meetings             rate




 Liu Shaoyong                                                                                     1/2          50%


 Ma Xulun                                                                                         2/2         100%


 Xu Zhao                                                                                          2/2         100%


 Gu Jiadan                                                                                        1/2          50%


 Li Yangmin                                                                                       2/2         100%

 Tang Bing                                                                                        1/2          50%


 Luo Zhuping                                                                                      2/2         100%


 Sandy Ke-Yaw Liu                                                                                 2/2         100%


 Wu Xiaogen                                                                                       2/2         100%


 Ji Weidong                                                                                       2/2         100%


 Shao Ruiqing                                                                                     2/2         100%





                          C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




CORPORATE GOVERNANCE




MEETING OF THE BOARD

The Chairman leads the Board to ensure that the Board performs its various
duties effectively and he is responsible for drawing up the agenda of the
meeting of the Board and considering other matters that the other Directors
propose to be included in the agenda. The agenda together with documents
of the Board should be, as far as practicable, circulated at least 3 days prior
to the meeting of the Board or its specialized committees. The Chairman is
also obliged to ensure that all the Directors are suitably briefed on matters
to be raised in the meeting of the Board. The Chairman ensures that the
Directors receive information that is accurate, timely and clear. Through on-
the-job training of Directors, continuous participation in meetings of the Board
and of specialized committees of the Board and meetings with key persons in
headquarters and other departments, the Directors are encouraged to update
their skills, knowledge and their understanding of the Group.


The Company has established a specialised organisation, i.e. the secretariat of
the Board, to work for the Board. All the Directors have access to the service
of the Company Secretary. The Company Secretary periodically updates the
Board of the latest information on governance and regulatory matters. The
Directors may seek independent professional advice through the Chairman for
the purpose of performing their duties, with the cost borne by the Company.
Specialized committees may also seek professional advice. The Company
Secretary is responsible for the records of the Board meetings. These minutes
of meetings together with other related documents for the Board meetings
shall be made available to all members of the Board. Board meetings are
meant to enable the Directors to have open and frank discussions.


In order to ensure sound corporate governance, as at the date of the
announcement of this annual report, the Board had 4 committees in place:
Audit and Risk Management Committee, Nominations and Remuneration
Committee, Planning and Development Committee and Aviation Safety and
Environment Committee with their terms of reference drawn up in accordance
with the principles set out in the Code. The Company Secretary drafts the
minutes of meetings for these committees, and the committees report to the
Board.





                                                             ANNU AL RE POR T 2 0 1 2




CORPORATE GOVERNANCE




The Board held 13 meetings in 2012. Details of attendance of each Director at
the Board meetings were as follows:


                                                                                        Attendance/
                                                                                           Eligibility   Attendance
 Directors                                                                              of Meetings             rate




 Liu Shaoyong                                                                                  13/13          100%


 Ma Xulun                                                                                      13/13          100%


 Xu Zhao                                                                                          7/7         100%


 Gu Jiadan                                                                                        7/7         100%


 Li Yangmin                                                                                    13/13          100%


 Tang Bing                                                                                        7/7         100%


 Luo Zhuping                                                                                   13/13          100%


 Sandy Ke-Yaw Liu                                                                              13/13          100%


 Wu Xiaogen                                                                                    13/13          100%


 Ji Weidong                                                                                    13/13          100%


 Shao Ruiqing                                                                                  13/13          100%



Note: Each Director attended the respective Board meetings in person.


DIRECTORS’ INTERESTS

All the Directors shall declare to the Board upon their first appointment their
capacities as directors or any other positions held in other companies or
institutions, the declaration of which shall be renewed once a year. When
the Board discusses any motion or transaction and considers any Director
has any conflict of interest, the Director shall declare his interest and abstain
from voting, and will excuse himself as appropriate. The Company shall,
pursuant to guidelines applicable to the Company, request from Directors their
confirmation if they or their associates are connected with any transactions
entered into by the Company or its subsidiaries during the Reporting Period.
Material transactions which have been confirmed as having been entered into
with any connected person have been disclosed in the notes to the financial
statements prepared in accordance with IFRS of this annual report.





                          C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




CORPORATE GOVERNANCE




SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code as set out in Appendix 10 to the
Listing Rules as the securities transactions code for the Directors. Each of the
Directors and the Supervisors has been provided with a copy of the Model
Code upon his appointment.


All the Directors and the Supervisors have confirmed that they have complied
with the Model Code in 2012.


The Company has also adopted the related provisions set out in Appendix 14
to the Listing Rules, and has established its Code of Conduct for Securities
Transactions by Employees of the Company according to its own situation
and with reference to the Model Code as set out in Appendix 10 to the Listing
Rules. The aforesaid code of conduct shall apply to the conduct of dealings
in the securities of the Company by the Supervisors and members of senior
management of the Company.


In addition, pursuant to the requirements of the Rules Governing the Listing of
Stock on Shanghai Stock Exchange, the shares of the Company transferred
by each of the Directors, Supervisors and members of senior management of                                        25%
the Company every year shall not exceed 25% of the total number of shares
held by each of them, and they are not allowed to purchase the shares of the
Company within six months after they have sold their shares. They are also not
allowed to sell the shares of the Company within six months after they have
bought the shares of the Company. Additionally, within six months after their
retirement, they are not allowed to transfer the shares of the Company held by
them.


All the employees who may have inside information related to the Group are
also required to comply with the Model Code. During the Reporting Period,
the Company is not aware of any breach of laws and regulations.


DIRECTORS’ RESPONSIBILITIES IN RESPECT OF
FINANCIAL STATEMENTS

The Directors confirm that they are responsible for the preparation of the
financial statements of the Group.


The Auditor’s Report of the Company’s auditors in respect of the financial
statements is set out on page 88 to page 89 of this annual report.                                     88   89





                                                         ANNU AL RE POR T 2 0 1 2




CORPORATE GOVERNANCE




TRAINING OF DIRECTORS

 Content of development of skills and training                                      Directors participated



 Participated in training on amendments to the Listing Rules and Corporate          Liu Shaoyong, Ma Xulun, Xu Zhao, Gu Jiadan, Li
   Governance Codes in February 2012                                                   Yangmin, Tang Bing, Luo Zhuping, Sandy Ke-Yaw
                                                                                       Liu, Wu Xiaogen, Ji Weidong, Shao Ruiqing




 On-site training conducted by Hong Kong securities partners of Baker &             Liu Shaoyong, Ma Xulun, Xu Zhao, Gu Jiadan, Li
  McKenzie regarding amendments to the Listing Rules and case study                    Yangmin, Tang Bing, Luo Zhuping, Sandy Ke-Yaw
  thereof in April 2012                                                                Liu, Wu Xiaogen, Ji Weidong, Shao Ruiqing
                            



 Lecture on the basic concept and typical case study of the anti-corruption         Liu Shaoyong, Ma Xulun, Xu Zhao, Gu Jiadan, Li
   laws of the United States by US securities partners of Baker & McKenzie             Yangmin, Tang Bing, Luo Zhuping, Sandy Ke-Yaw
   in April 2012                                                                       Liu, Wu Xiaogen, Ji Weidong, Shao Ruiqing
                            



 Participated in 4-day training on independent directors qualification              Luo Zhuping
   organized by the Shanghai Stock Exchange, covering a total of 7 areas
   of operation framework and information disclosure of a listed company, in
   April 2012



 Provided the book “Corporate Governance – An Obstacle Impossible to              Liu Shaoyong, Ma Xulun, Xu Zhao, Gu Jiadan, Li
   Overcome for Entrepreneur (                                 )” to all the          Yangmin, Tang Bing, Luo Zhuping, Sandy Ke-Yaw
   Directors, Supervisors and members of the senior management for study               Liu, Wu Xiaogen, Ji Weidong, Shao Ruiqing
   in June 2012




 Participated in training for directors and supervisors organized by the            Xu Zhao, Gu Jiadan
   Association of Shanghai Listed Companies in September 2012



 Participated in training for directors and supervisors organized by the            Luo Zhuping
   Association of Shanghai Listed Companies in December 2012




The board secretariat of the Company is responsible to arrange and review
the training and continuous professional development of the Directors and the
members of the senior management of the Company.





                          C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




CORPORATE GOVERNANCE




AUDIT AND RISK MANAGEMENT COMMITTEE

As at 31 December 2012, the Audit and Risk Management Committee of the
Company comprises Mr. Shao Ruiqing, Mr. Wu Xiaogen and Mr. Ji Weidong,
all of whom are independent non-executive Directors. Mr. Shao Ruiqing,
the chairman of the committee, possesses professional qualifications in
accounting.


The Audit and Risk Management Committee is a specialized committee under
the Board. It is responsible for checking and monitoring the financial reports
and internal control of the Company, checking and evaluating the overall risk
management of the Company, in particular the risk management and risk
control policy for material decision, significant events and major business, and
overseeing their implementation.


(1) INTERNAL CONTROL

     Internal control system

     The Board shall be responsible for the overall internal control system
     of the Company/Group and periodically review the effectiveness of the
     internal control system of the Company through the Audit and Risk
     Management Committee. The internal control system is essential to risk
     management which, in turn, is important in ensuring that operational
     objectives can be achieved. Internal control procedures are designed
     to prevent assets from unauthorised use or disposal, to ensure the
     maintenance of appropriate accounting records and to provide reliable
     financial information either for internal use or for dissemination externally.
     However, the control procedures aim at reasonably (but not absolutely)
     assuring that there will not be material misrepresentation, loss or
     misconduct. The internal control system is prepared in accordance with
     the relevant laws, subsidiary regulations and constitutional documents.


     The Company reviews the effectiveness of its internal control system
     annually, which includes control over finance, operations, compliance
     with laws and regulations as well as risk management. The results of
     the review have been reported to the Audit and Risk Management
     Committee and the Board.


     The Board confirms that the Company has systems and procedures
     in place to identify, manage and report material risks in the course of
     achieving its strategic objectives. The Board continues to monitor risks
     with the support of the specialised committees and senior management.


(2) INTERNAL AUDIT

     The Company’s internal audit department is responsible for conducting
     an independent audit of whether or not the internal control system
     is sufficient and effective. The auditing plan is prepared using a risk
     based approach and is discussed and finalized by the Audit and Risk
     Management Committee annually. Other than the pre-determined scope
     of work for each year, the department is also required to conduct other
     specific audits.





                                                         ANNU AL RE POR T 2 0 1 2




CORPORATE GOVERNANCE




     The Group’s internal audit department primarily reports to the President;
     it may also report directly to the chairman of the Audit and Risk
     Management Committee. All the internal audit reports are delivered to
     the Chairman of the Board, the President, Chief Financial Officer, the
     management of the department being audited and related departments.
     The outcome of each audit, in summary, will also be discussed with
     the Audit and Risk Management Committee. The Board and the Audit
     and Risk Management Committee of the Company actively monitor
     the number and seriousness of the inspection results submitted by the
     internal audit department, and the relevant corrective measures taken by
     the relevant department.

(3) RISK MANAGEMENT
     The Audit and Risk Management Committee of the Company is
     responsible for checking and evaluating the overall risk management
     of the Company and overseeing their implementation; checking and
     evaluating the risk management and risk control system and duties on
     developing aviation fuel, foreign exchange and interest rate hedging
     businesses and overseeing their implementation.

     The internal audit department of the Company has undertaken
     related risk management duties and reports to the Audit and Risk
     Management Committee periodically. It is responsible for coordinating
     the implementation of appropriate procedures to manage the operational
     risks of the Group.

The Audit and Risk Management Committee held eight meetings in 2012. In
each meeting, senior management and external and internal auditors were
invited to attend. Based on the reports of the external and internal auditors,
according to the accounting principles and practices, and internal controls
adopted by the Group with a view to comply with the requirements of the
Listing Rules, the Audit and Risk Management Committee conducted reviews
of audits, internal control, risk management and financial statements. The
Group’s first quarterly results, interim results and third quarterly results for
2012 and the final results for 2012 had been discussed in the Audit and Risk
Management Committee’s meetings before they were submitted to the Board
for approval.

Attendance of members of the Audit and Risk Management Committee
meetings is as follows:


                                                                                    Attendance/
                                                                                       Eligibility   Attendance
 Members                                                                            of Meetings             rate




 Shao Ruiqing                                                                                 8/8         100%

 Wu Xiaogen                                                                                   8/8         100%

 Ji Weidong                                                                                   8/8         100%



Note: All members of Audit and Risk Management Committee attended the respective
      Audit and Risk Management Committee meetings in person.





                          C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




CORPORATE GOVERNANCE




Additionally, the Audit and Risk Management Committee also conducted
other compliance work to comply with PRC and US reporting requirements in
2012, including guiding and overseeing the development of internal controls,
hearing and reviewing the overall plan for risk management, implementing
risk management work in accordance with the requirements of the relevant                               (Sarbanes-Oxley)
regulatory authorities in full scale, reviewing the Company’s compliance
with the Sarbanes-Oxley Act and considering the work undertaken by the
management, including management assessment, to ensure the Company’s
compliance with internal control regulations under Section 404 of the
Sarbanes-Oxley Act.


The articles of association of the Audit and Risk Management Committee is
posted on the website of the Company and the website of the Hong Kong
Stock Exchange.


EXTERNAL AUDITORS

For the Reporting Period, the annual audit fees payable to the external auditors
(both international and domestic auditors) is estimated to be RMB12.88
million for the regular annual audit of the Group’s 2012 financial statements                  20F
prepared under IFRS and PRC Accounting Standards and the other relevant                                               12.88
documents applicable for the purpose of Annual Report in Form 20-F filing.
A service fee of RMB1.5 million is also payable to the external auditors for                              1.5
approved non-audit services rendered during the Reporting Period. The
auditors’ remuneration shall be approved by the Audit and Risk Management
Committee and the Board.


The Audit and Risk Management Committee obtained a brief understanding of
the scope of the non-audit service and related fees and was satisfied that the
non-audit service (in respect of the nature of service and the total cost of non-
regular audit services compared to regular audit service fee) had not affected
the independence of the accounting firm.


PLANNING AND DEVELOPMENT COMMITTEE

As of 31 December 2012, the Planning and Development Committee of the
Company comprises three members: Mr. Li Yangmin, Mr. Luo Zhuping and
Mr. Shao Ruiqing, all of whom are Directors. Mr. Li Yangmin, a Director, is the
chairman of the committee.


The Planning and Development Committee is a specialized committee under
the Board. It is responsible for studying, considering and making plans or
recommendation in regard to the long term development plans and material
investment decisions of the Company and overseeing their implementation. Its
main duties are:


–   to consider the annual operational goals of the Company and make
     recommendations to the Board;


–   to consider the annual investment proposal of the Company and make
     recommendations to the Board;





                                                        ANNU AL RE POR T 2 0 1 2




CORPORATE GOVERNANCE




–      to consider the material investments (other than the annual investment
    proposal) of the Company and make recommendations to the Board;


–      to consider the development plan of the Company and make
    recommendations to the Board;


–      to study and consider the fleet development plan and aircraft purchase
    plan of the Company and submit independent report to the Board;


–      to study other major events which may have influence on the
    development of the Company and make recommendations in
    connection with the same;


–      to oversee the implementation of the above matters and conduct
    inspection of the same;


–      to consider other matters as authorized by the Board and oversee their
    implementation.


Attendance of members of the Planning and Development Committee
meetings is as follows:


                                                                                   Attendance/
                                                                                      Eligibility   Attendance
     Members                                                                       of Meetings             rate




     Li Yangmin                                                                              7/7         100%


     Luo Zhuping                                                                             7/7         100%


     Shao Ruiqing                                                                            7/7         100%



Note: All members of Planning and Development Committee attended the respective
      Planning and Development Committee meetings in person.


The Detailed Working Rules for the Planning and Development Committee are
posted on the website of the Company.





                            C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




CORPORATE GOVERNANCE




NOMINATIONS AND REMUNERATION
COMMITTEE

The Nominations and Remuneration Committee of the Board comprises three
members: Liu Shaoyong, Sandy Ke-Yaw Liu and Ji Weidong. Liu Shaoyong
is the chairman of the committee (Note), while both Sandy Ke-Yaw Liu and Ji
Weidong are independent non-executive Directors.

Note: With effect from 1 April 2012, when considering and approving nomination related
      matters, the Nominations and Remuneration Committee shall be chaired by Mr.
      Liu Shaoyong; when considering and approving remuneration related matters, the
      Nominations and Remuneration Committee shall be chaired by Mr. Sandy Ke-Yaw
      Liu or Mr. Ji Weidong.


The main duties of the Nominations and Remuneration Committee of the
Board are:


–    to make recommendations to the Board regarding its size and
      composition based on the relevant provisions of the Company Law and
      in the light of specific circumstances such as the characteristics of the
      Company’s equity structure;


–    to study the criteria and procedures for selecting Directors and
      management personnel, and to make recommendations to the Board;


–    to conduct wide-ranging searches for qualified candidates to become
      Directors and members of the management personnel;


–    to examine the candidates for the positions of Director and manager and
      make recommendations in connection with the same;


–    to examine candidates for other senior management positions
      whose engagement is subject to approval by the Board and make
      recommendations in connection with the same;


–    to study and review the policies and plans for remuneration of the
      Directors and senior management personnel;


–    to study the criteria for assessing the Directors and senior management
      personnel, carry out such assessments, and make recommendations in
      connection with the same;


–    to evaluate the performance of the Directors and senior management
      personnel based on the Company’s actual business circumstances, and
      make recommendations in connection with the same;


–    to be responsible for monitoring the implementation of the Company’s
      remuneration system;


–    other matters delegated by the Board.


The Nominations and Remuneration Committee is responsible to make
recommendations to the Board on the remuneration packages of individual
executive Directors and the members of the Senior Management.





                                                       ANNU AL RE POR T 2 0 1 2




CORPORATE GOVERNANCE




In 2012, under the leadership of the Board, the Nominations and
Remuneration Committee performed their duties diligently to standardize the
election of Directors and members of senior management of the Company,
establish and refine the incentive and assessment mechanism of Directors and
members of senior management of the Company and realize the long-term
goals of the Company pursuant to the requirements of the “Detailed Working
Rules for the Nominations and Remuneration Committee of the Board of
Directors”. Major tasks completed by the Nominations and Remuneration
Committee in 2012 were as follows:

1)   Standardizing the election of Directors and                                  1)
     members of senior management and nominating
     candidates to become Directors and members of
     senior management to the Board

     In 2012, pursuant to the relevant requirements of the Detailed Working
     Rules for the Nominations and Remuneration Committee of the Board of
     Directors, the Nominations and Remuneration Committee, after review
     and study, nominated Mr. Tang Bing to the Board as a candidate for
     Director of the sixth session of the Board. Also, according to the actual
     work needs of the Company, the Nominations and Remuneration
     Committee, after review and study, nominated Mr. Wang Jian to the
     Board as a candidate for Board Secretary and Company Secretary of
     the Company.

2)   Guiding and considering the share incentive plan of                          2)
     the Company

     In order to establish a long-term incentive mechanism which is closely
     linked to the results and the long-term strategy of the Company, as
     well as optimize the overall remuneration structure and system of the
     senior management personnel and key management personnel of the
     Company, the Nominations and Remuneration Committee held three
     meetings in 2012 to listen to the specific presentation on the share
     incentive plan of the Company, and actively studied and considered
     the share incentive plan in a timely manner. With the coordination and
     efforts in the earlier stages, the plan was officially approved by SASAC
     in October 2012. The resolution was approved by a majority vote at the
     Company’s general meeting held on 9 November 2012 and the initial
     grant was completed on 30 November 2012.

3)   Revising and considering the Detailed Working                                3)
     Rules for the Nominations and Remuneration
     Committee

     According to the requirements of the new amendments to the Rules
     Governing the Listing of Securities on The Stock Exchange of Hong
     Kong Limited in 2012, the Nominations and Remuneration Committee
     revised and considered the Detailed Working Rules for the Nominations
     and Remuneration Committee based on its actual working conditions.





                          C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




CORPORATE GOVERNANCE




4)    Considering the remuneration of the Directors and                                         4)
      members of senior management for year 2011

      The members of the Nominations and Remuneration Committee
      seriously reviewed the remuneration of the Company’s paid Directors
      and members of senior management for year 2011 and have requested
      the Company to make disclosure in its 2011 annual report in accordance
      with the relevant requirements.


According to the Detailed Working Rules for the Nominations and
Remuneration Committee of the Board of Directors, the procedure for electing
Directors and management personnel is as follows:


(1)   the Nominations and Remuneration Committee shall actively liaise with                     (      )
      the relevant departments of the Company to study the requirement for
      Directors and management personnel, and produce a written document
      thereon;


(2)   the Nominations and Remuneration Committee may conduct a wide-                            (      )
      ranging search for candidates for the positions of Director and manager
      within the Company, within enterprises controlled by the Company or
      within enterprises in which the Company holds equity, and on the human
      resources market;


(3)   the profession, academic qualifications, professional titles, detailed work               (      )
      experience and all concurrently held positions of the initial candidates
      shall be compiled as a written document;


(4)   the Nominations and Remuneration Committee shall listen fully to the                      (      )
      opinion of the nominee regarding his/her nomination;


(5)   a meeting of the Nominations and Remuneration Committee shall                             (      )
      be convened, and the qualifications of the initial candidates shall be
      examined on the basis of the conditions for appointment of Directors
      and managers;


(6)   before the selection of a new Director and the engagement of a new                        (      )
      member of the management personnel, the recommendations of and
      relevant information on the relevant candidate(s) shall be submitted to
      the Board;


(7)   the Nominations and Remuneration Committee shall carry out other                          (      )
      follow-up tasks based on the decisions of and feedback from the Board.





                                                       ANNU AL RE POR T 2 0 1 2




CORPORATE GOVERNANCE




Attendance of members of the Nominations and Remuneration Committee
meetings are as follows:


                                                                                  Attendance/
                                                                                     Eligibility   Attendance
 Members                                                                          of Meetings             rate




 Liu Shaoyong                                                                               5/5         100%


 Sandy Ke-Yaw Liu                                                                           5/5         100%


 Ji Weidong                                                                                 5/5         100%



Note: All members of Nominations and Remuneration Committee attended the
      respective Nominations and Remuneration Committee meetings in person.


The Detailed Working Rules for the Nominations and Remuneration Committee
are posted on the website of the Company and the website of the Hong Kong
Stock Exchange.


REMUNERATION POLICY OF DIRECTORS

Directors generally do not receive remuneration from the Company except
independent non-executive Directors who receive a fixed remuneration.
However, Directors who serve in other administrative positions of the
Company will receive salary separately for those positions.


Certain Directors received emoluments from CEA Holding, the parent
company, in respect of their directorship or senior management positions in
the Company and its subsidiaries.


Generally, the policy regarding the remuneration packages of Directors are
aimed primarily at linking the remuneration of Directors and their performance
to the objectives of the Company, in order to motivate them in their
performance and retain them. Pursuant to the policy, the Directors are not
allowed to approve their own remuneration.


The remuneration of the Directors mainly comprises basic salary and bonus.


BASIC SALARY

The Directors review the basic salary of each Director on an annual basis
pursuant to the remuneration policy of the Company. In 2012, pursuant to
the service contracts entered into between the Company and each of the
Directors, the Directors are entitled to receive a fixed basic salary.


BONUS

Bonuses are calculated based on the measurable performance and
contribution of the operating units for which the Directors are responsible.





                            C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




CORPORATE GOVERNANCE




REMUNERATION POLICY OF INDEPENDENT
NON-EXECUTIVE DIRECTORS

Remuneration (before tax) received by the Company’s independent non-
executive Directors in 2012 were as follows:


 Sandy Ke-Yaw Liu                                                                                         HK$120,000
                                                                                                             120,000
 Wu Xiaogen

 Ji Weidong                                                                                               RMB120,000
                                                                                                             120,000
 Shao Ruiqing                                                                                             RMB120,000
                                                                                                             120,000


REMUNERATION OF SENIOR MANAGEMENT

The remuneration payable to the members of the senior management of the
Company in 2012 are set out as follows:


                                                                                                         Remuneration
 Name                                          Position                                                     before tax


                                                                                                                (RMB)



 Ma Xulun                                      Vice Chairman, President                                        696,500


 Li Yangmin                                    Director, Vice President                                        624,750


 Tang Bing                                     Director, Vice President                                        592,025


 Shu Mingjiang                                 Vice President                                                1,267,576


 Wu Yongliang                                  Vice President, Chief Financial Officer                         544,320


 Tian Liuwen                                   Vice President                                                  544,320


 Wang Jian                                     Board Secretary, Joint Company Secretary                        385,560



Notes:
1.     Mr. Shu Mingjiang, our Vice President, is a pilot. His remuneration includes air           1.
       crewman packages.

2.    Mr. Wang Jian, was appointed as our Board Secretary and Joint Company                       2.
      Secretary from April 2012. His remuneration covers period from April 2012 to
      December 2012.





                                                        ANNU AL RE POR T 2 0 1 2




CORPORATE GOVERNANCE




AVIATION SAFETY AND ENVIRONMENT
COMMITTEE

The Aviation Safety and Environment Committee comprises Mr. Ma Xulun,
Mr. Li Yangmin and Mr. Sandy Ke-Yaw Liu, and Mr. Ma Xulun serves as the
chairman of the committee.


The Aviation Safety and Environment Committee is a specialized committee
under the Board. It is responsible for consistent implementation of the
relevant laws and regulations of national aviation safety and environmental
protection, examining and overseeing the aviation safety management of the
Company, studying, considering and making recommendation on aviation
safety plans and major issues of the related safety duties and overseeing their
implementation, studying, considering and making recommendation on major
environmental protection issues in relation to aviation carbon emission on
domestic and international levels and overseeing their implementation.


Attendance of members of the Aviation Safety and Environment Committee
meetings are as follows:


                                                                                   Attendance/
                                                                                      Eligibility   Attendance
 Members                                                                           of Meetings             rate




 Ma Xulun                                                                                    2/2         100%


 Li Yangmin                                                                                  2/2         100%


 Sandy Ke-Yaw Liu                                                                            2/2         100%




The Detailed Working Rules for the Aviation Safety and Environment
Committee are posted on the website of the Company.





                          C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




CORPORATE GOVERNANCE




INVESTOR RELATIONS

The Company undertakes that the disclosure it makes is fair and the reports
it provides are comprehensive and transparent. The ultimate responsibility of
the Chairman of the Board is to ensure effective communication with investors
and to ensure that the Board is aware of the views of substantial shareholders.
Accordingly, the Chairman is required to meet the Shareholders in this regard
and the routine communication of the Board with the substantial shareholders is
mainly conducted through the Company Secretary.


The Company has drawn up and implemented the Information Disclosure
Management System and has further improved the Company’s information
disclosure system in order to ensure the accuracy, completeness and
timeliness of information disclosed to public; the Company has also
established an information disclosure office for which the Company Secretary
is responsible. The information disclosure office is mainly responsible for
the collection, collation and compilation of basic information for disclosure,
and is also responsible for drawing up the rules and systems for information
disclosure and related internal control and procedures. It is responsible for
monitoring the correct implementation of the various control measures.


The Company has also drawn up and implemented the Investor Relations
Management System and Investor Relations Management Detailed
Implementation Rules, which specifies the basic principles and the institutional
structure of investor relations management, as well as the duties and
responsibilities of investor relations work, so as to further foster corporate
integrity and self-discipline, and to realize standardized operation, with the
ultimate aim of maximizing corporate value and Shareholders’ interests, and
ensuring that interests of investors are protected.


The Company has released information in relation to its quarterly results.
The latest annual general meeting was held on 29 June 2012 in Shanghai.
The meeting was open to all the Shareholders and the media. A total of 13
Shareholders attended in person or by proxy.


In the annual general meeting, each matter was proposed as an individual
resolution and voted by poll.


Investors and the public may access our website and download related
document briefings. The website also sets out details of each of the Group’s
operations. Announcements, notices or other documents issued by the
Company may also be downloaded from the website of the Company.


CHANGES IN CONSTITUTIONAL DOCUMENTS

Please refer to section headed “Report of Directors – Significant Events” of
the annual report for details of the amendments of the Articles of Association
made in 2012.


The Company Secretary and the managers of the investor relations department
and the capital investment market department held two specialized meetings
with securities analysts in respect of the 2011 annual financial results and the                       2
2012 interim financial results and one press conference with financial media
and organized 16 one-to-one roadshows and investors’ meetings.




                                                        ANNU AL RE POR T 2 0 1 2




CORPORATE GOVERNANCE




Based on publicly available information and to the best knowledge of the
Directors, at least 25% of the total issued share capital of the Company is         25%
held by the public. As at 31 December 2012, there were a total of 250,268                                                      250,268
Shareholders on the Company’s register of members.


For any enquiries of the Board, Shareholders may contact the Company                                                                 8621–
Secretary by phone at 8621-22330928, 22330921 or by e-mail at                      22330928 22330921            ir@ceair.com
ir@ceair.com or they may put forward their questions in the annual general
meeting or extraordinary general meetings. In respect of the procedures for
Shareholders to convene annual general meeting or extraordinary general
meetings and propose resolutions, they may enquire with the Company
Secretary through the aforesaid channels.


Shareholders may also contact the Company Secretary or Representative
of the Company’s securities affairs to inspect the relevant information and
propose extraordinary resolutions at the contact given below:


                            Board Secretary,                                        Representative of
                            Joint Company Secretary                                 the Company’s securities affairs



 Name                       Wang Jian                                               Yang Hui


 Address                    The Secretariat of the Board, China Eastern Airlines    The Secretariat of the Board, China Eastern Airlines
                              Corporation Limited, 92 Konggang 3rd Road,              Corporation Limited, 92 Konggang 3rd Road,
                              Changning District, Shanghai                            Changning District, Shanghai
                                                   92

 Telephone                  021-22330928                                            021-22330921

 Fax                        021-62686116                                            021-62686116

 Email                      ir@ceair.com                                            davidyang@ceair.com




On behalf of the Board




Liu Shaoyong
Chairman


Shanghai, the PRC
26 March 2013





                          C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




REPORT OF THE SUPERVISORY COMMITTEE



Dear Shareholders,


In the new year, the Supervisory Committee will, as in the past, conscientiously
exercise the powers bestowed upon it by the Articles of Association and
perform corresponding obligations, further strengthen its supervision of the
Company’s financial affairs and ensure compliant business practices. It will
continue to explore a monitoring and control mechanism which is useful in
protecting the investors and promoting the Company’s development.


I.   Meetings Convened by the Supervisory Committee


1.   On 23 March 2012, the Supervisory Committee held a meeting, at                             1.
     which it adopted the Report of the Supervisory Committee for the year
     2011; the Supervisory Committee considered the financial report of
     the Company for the year 2011 truly reflected the financial position and
     operating results of the Company which was objective and fair, and
     resolved that it would be put forward to the 2011 annual general meeting
     of the Company for consideration; the Supervisory Committee adopted
     the 2011 profit distribution proposal of the Company, and resolved
     that it would be put forward to the 2011 annual general meeting of
     the Company for consideration; the Supervisory Committee reviewed
     the full text and summary of the annual report for 2011 prepared by
     the Company and expressed a written audit opinion. Meanwhile, the
     Supervisory Committee reviewed the resolution on the day-to-day
     connected transactions of the Company for the year 2011 and the self-
     assessment report on the internal control of the Company for the year
     2011;


2.   On 26 April 2012, the Supervisory Committee held a meeting, at which it                    2.
     reviewed the full text and summary of the Company’s 2012 first quarterly
     report and expressed a written audit opinion;


3.   On 25 August 2012, the Supervisory Committee held a meeting, at                            3.
     which it considered and approved the Opinion on the List of Incentive                             H
     Recipients of Initial Grant Scheme of the H Shares Appreciation Rights
     Scheme of China Eastern Airlines Corporation Limited (
                H                                                     ) and
     expressed an audit opinion;


4.   On 30 August 2012, the Supervisory Committee held a meeting, at                            4.
     which it reviewed the 2012 interim financial report, full text and summary
     of the Company’s interim report for 2012 and expressed a written audit
     opinion;


5.   On 11 September 2012, the Supervisory Committee held a meeting, at                         5.
     which it considered and approved the Resolution on the Description of
     Use of Proceeds of the Previous Fund-Raising Activities (
                               ) and expressed an audit opinion;


6.   On 30 October 2012, the Supervisory Committee held a meeting, at                           6.
     which it reviewed the full text and summary of the Company’s 2012 third
     quarterly report and expressed a written audit opinion.





                                                           ANNU AL RE POR T 2 0 1 2




REPORT OF THE SUPERVISORY COMMITTEE




II.   Independent Opinion of the Supervisory Committee


1.    Legality of the Operation of the Company:                                       1.

      In 2012, the Supervisory Committee monitored the procedures of
      convening the general meetings and Board meetings of the Company
      and their resolutions, execution of the resolutions passed in the general
      meetings by the Board, and execution of the resolutions passed in the
      Board meetings by the management. It is of the view that the Company
      has strictly complied with the Company Law, the Securities Law, the
      Rules Governing the Listing of Stocks on Shanghai Stock Exchange,
      the Rules Governing the Listing of Securities on The Stock Exchange of
      Hong Kong Limited, the Articles of Association and other regulations in
      drawing operational decisions, monitored its operations based on law,
      continuously optimized the internal control system and further enhanced
      its corporate governance standards. The Directors and the senior
      management of the Company were able to protect the interests of the
      Shareholders and the Company as a whole and carry out their duties
      with dedication. The Supervisory Committee did not discover any of
      their actions that in any way violated laws, regulations, or the Articles of
      Association or were prejudicial to the interests of the Company.


2.    Financial Position of the Company:                                              2.

      The Supervisory Committee seriously reviewed the Company’s 2012
      financial report, 2012 profit distribution proposal, 2012 annual report
      and the 2012 financial audit report issued by the PRC and international
      auditors expressing unqualified opinions. The Supervisory Committee
      resolved that the Company’s 2012 financial report truly reflects the
      financial position and operating results of the Company for the year
      2012. The Supervisory Committee agreed to the 2012 financial audit
      report issued by the auditors and the 2012 profit distribution proposal of
      the Company.


3.    Purchases or Sale of Assets of the Company:                                     3.

      In 2012, the Supervisory Committee conducted examination on the
      resolutions in respect of major acquisitions, asset disposal and connect
      transactions. The Supervisory Committee did not discover any acts of
      insider trading, any acts prejudicial to the interests of the Shareholders or
      resulting in loss of assets or prejudice to the interests of the Company.





                         C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




REPORT OF THE SUPERVISORY COMMITTEE




4.   Connected Transactions of the Company:                                                    4.

     In 2012, the Supervisory Committee conducted examination on the
     resolutions in respect of the connected transactions of the Company.
     The Supervisory Committee conducted examinations on all the
     connected transactions of the Company in the current year, and believes
     that all the contracts, agreements and other relevant documents related
     to the connected transactions of the Company in the current year had
     complied with the legal procedures and the terms of the transactions
     were fair and reasonable to the Company and the Shareholders as a
     whole. The connected transactions were dealt with under stringent
     principles of “fairness, impartiality and transparency”. The Supervisory
     Committee did not discover any acts of insider trading or breach of
     good faith by the Board in making decisions, signing agreements and
     information disclosure.


5.   Internal Control of the Company:                                                          5.

     The Supervisory Committee reviewed the Assessment Report of the
     Company’s Internal Control for the year 2012 in a prudent and cautious
     manner and has no objection with the self-assessment report of the
     Board. The Supervisory Committee also seriously reviewed the internal
     control audit report issued by the auditor. The Supervisory Committee
     considers that the Company has a developed internal control regulation
     system in place and the implementation in actual circumstances is
     satisfactory.


The Supervisory Committee is extremely grateful for the continuous support
for its work offered by all the Shareholders, the Board and its staff.



On behalf of the Supervisory Committee




Yu Faming
Chairman of the Supervisory Committee


Shanghai, the PRC
26 March 2013





                                                          ANNU AL RE POR T 2 0 1 2




SOCIAL RESPONSIBILITIES




SOCIAL RESPONSIBILITIES

The Group adhered to the philosophy of “cherished by staff, preferred by
customers, satisfactory to shareholders and trusted by society” for its social
responsibility. While pursuing sustainable development of enterprise, the
Group incorporates its social responsibility philosophy into the whole process
of corporate decision and production operation, with a view to unify corporate
development and social responsibilities.


LOW-CARBON FLYING

The Group advocate the idea of low-carbon flying and initiate an operational
mode of “Consuming and emitting less but performing more efficiently” to
establish an environmentally friendly and resource conservative enterprise, and                                                 98%
achieve harmonious development of the enterprise, the environment and the                          90%
community. Jet fuel consumption accounted for more than 98% of the energy
consumption of the Group. More than 90% of the Group’s flights undergo
refueling and flying in accordance with the “low-carbon flying” scheme. “Low-
carbon flying” is implemented via standardized and regulated management.
Fuel consumption and carbon emission are lowered through approaches such
as system restrictions, procedural enhancement and technological innovation.

Optimization of Fleet

The Group strives to enhance the environmental protection functionality of
its operating fleet by eliminating and surrendering the lease of old aircraft
and introducing high performance and environmental friendly aircraft on an
annual basis. The Group also adopted new engines with higher fuel efficiency                               5                  A340-300
but lower noise pollution and refitted its existing fleet. In 2012, the Group                      20    B777-300ER    60   A320
disposed five A340-300 aircraft which have higher fuel consumption per hour                   18
and entered into purchase agreement of twenty B777-300ER aircraft and                B737NG
sixty A320 aircraft as well as disposal agreement of eighteen regional aircraft.
Meanwhile, additional winglets were installed in twelve B737NG aircraft to
save fuels.

Optimization of Routes

The Company strengthened its control and management over the DOC (Direct              DOC
Operation Control) system, facilitated precise refueling according to flight plans
and stringently implemented cost-saving flight control requirement and weight
and balance operation. The Group also reduced the flying time of flights and                                     6.7
thus effectively lowered fuel consumption by selecting the most economical
route. The Group saved 67,000 tons of jet fuel in 2012.


APPLICATION OF NEW TECHNOLOGIES

Emphasizing and promoting the application of new technologies are important
measures adopted by the Group to achieve continuous flight safety, ensure
regular flights and realise low carbon flying.





                            C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




SOCIAL RESPONSIBILITIES




 PBN (Performance-based Navigation Technology Flying Program)                                       PBN

The application of PBN technology is an important reform of the flight                            PBN
operation. It can effectively facilitate the continuous safety of the civil aviation,
increase airspace capacities, decrease input of ground navigation facilities,
decrease fuel consumption and increase energy saving and emission
reduction. In 2012, the Group has completed the verification of trail flying of                            9        PBN                          A330
PBN program in 9 airports, namely Yangzhou, Nantong, Kunming, Zhoushan,                           A320     B737NG     RNP APCH
Ningpo, Yulin, Linyi, Hangzhou and Xining, thereby establishing operation                                    B737-700 A319-133    RNP AR
capacities of RNP APCH (Approach) for A330, A320 and B737NG aircrafts
at those airports; and established operation capacities of RNP AR (required
navigation functionality which require specific authorization) for B737-700 and
A319-133 aircraft at Jiuzhai Airport.

 ADS-B (Air Traffic Control and Surveillance Technology – Automatic                                ADS-B
 Dependent Surveillance-Broadcast)

CEA is the pilot unit that is appointed by CAAC to operate with ADS-B                                                 ADS-B
(Automatic Dependent Surveillance-Broadcast) in the early stage. The ADS-B                                 A340-600                        ADS-B
operation verification of trail flying of A340-600 aircraft in the airspace of                                                    2012          A330
Hudson Bay, Canada has been completed and approved by CAAC in 2011.                                                       ADS-B
In 2012, CEA has successfully completed the ADS-B verification of trial flying                    ADS-B
of its A330 aircraft along the Hawaii routes. With the application of ADS-B, the
workload of the flight crew and fuel consumption would decrease while the
flying capacity would increase, providing better assurance of flight safety.

 EFB (Electronic Flight Bag)                                                                        EFB

On 26 December, CEA was approved to implement Class 1 EFB trial flying                            12     26              A330       1    EFB
for its A330 fleet, which is the first airline being approved to adopt Class 1                                           1 EFB                  EFB
EFB in China. EFB is an electronic equipment which provide the flight crew
various types of flight information including manuals, documents, flight                                                                         EFB
maps, navigation notices and climatological data in the aircraft cockpit.
The promotion and application of EFB can realise electronisation of aircraft
information, thereby reducing operation cost, increasing operation efficiency
and enhancing the level of safety operation.


ENERGY MANAGEMENT
The Group continued to promote energy saving and emission reduction.
Capacities has increased year by year while fuel consumption per traffic
volume has decreased year by year, resulting in a decrease in energy
consumption intensity and an increase in energy utilization rate every year.                             22.5
In 2012, the carbon dioxide emission reduced by 225,000 tons through the
implementation of various energy saving and emission reduction measures.

GREEN OFFICE
The Group actively promotes the application of the internet office system
and advocates the concept of a paperless office. The energy consumption at
ground facilities is also reduced by promoting energy-saving measures, such
as video conferencing and telephone conferencing, double-sided printing and
“turning off lights as you leave”, and through other measures such as the oil-                           T2
to-gas boiler conversion project, central air-conditioning refitting project and
energy-saving lighting refitting project. Meanwhile, traveler rest card of upper
class cabins have been canceled at Terminal T2 of Hongqiao International
Airport. Eligible travelers may take rest in the VIP lounges directly with their
boarding pass, thereby reducing waste of resources resulted from printing of
the rest cards.




                                                         ANNU AL RE POR T 2 0 1 2




SOCIAL RESPONSIBILITIES




COMMUNITY CHARITY

The Group proactively supported and participated in social charitable events.
During 2012, the Group continuously strengthened its effort in supporting
poverty relief activities, including providing a special subsidy for Shuangjiang
and Cangyuan, Yunnan and selecting two young talented individuals for
secondment to develop their experience in these regions. Over the past ten
years, the aggregate amount of subsidies given to Yunnan has exceeded
RMB10 million.


Meanwhile, the Group continued its large-scale voluntary service campaign
called “Love at China Eastern”. In 2012, 693 activities were held with 55,609                            693            55,609
staff members participated, serving a total of over 34,000 people. Activities                          34,000
which have brought about great impact on the society included “LingYan Crew                        
bring you back to Wenchuan County (                          )”, “China Eastern
Airlines Provides Study Subsidy to Children in Lincang, Yunnan to fulfill their
dreams (                                  )”. The Company has engaged nine
university students from Hong Kong to join our internship program, reinforcing
exchange between young talented individuals in Hong Kong and Mainland
China.


KEY AWARDS IN 2012

The Company was awarded the “Golden Tripod Award”, the highest award, at
  the 8th Annual Meeting of China’s Securities Market.
The Company was awarded the “Golden Bauhinia Award” of “Listed Company
  with the Most Valuable Brand 2012 (                          2012)” by China
  Securities.
The Company was awarded “2012 Best Mid-cap Company of the Best Managed
  Company in China” by Hong Kong Asiamoney Magazine.
The Company was recognized as “Top 50 Most Valuable Chinese Brands” by                                            WPP
  WPP, a global brand communication and public relations firm, for consecutive         50     2012
  two years, ranking 25th in 2012.
The Company was recognized as one of the 2012 Top 25 Companies in
  China with the Best Corporate Social Responsibility (                               25    2013
    25 ) by Fortune China Magazine; and was named 2013 CSR Ranking
  Top 10.
The Company was named “2012 China State-owned Listed Enterprise                             2012
  Social Responsibility Top 20 (2012                                  20 )” by
  Southern Weekly.
The Company was named “The Best Board of Directors of State-owned Listed
  Holding Companies of China Top 20 (                                    20 )”        20
  by various major financial media, including Moneyweek.
The Company was named as “Healthy China – Best Employee Health & Benefit
  Unit (                                    )” by Health Times (         ) and
  Tsinghua University.
The Company was named as “Internal Audit Leading Enterprises in terms of
  Risk Management and Internal Audit (
         )“by China Institute of Internal Audit.
The Company was named as “Best 100 Employer (                100 )” by Zhilian
  Zhaopin (           ).
The Company was awarded “The World’s Most Improved Airline” by SKYTRAX.             SKYTRAX





                           C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




INDEPENDENT AUDITOR’S REPORT



TO THE SHAREHOLDERS OF
CHINA EASTERN AIRLINES CORPORATION LIMITED
(Incorporated in the People’s Republic of China with limited liability)


We have audited the consolidated financial statements of China Eastern                                  90   208
Airlines Corporation Limited (the “Company”) and its subsidiaries (together,
the “Group”) set out on pages 90 to 208, which comprise the consolidated
and company balance sheets as at 31 December 2012, and the consolidated
statement of comprehensive income, the consolidated statement of changes
in equity and the consolidated cash flow statement for the year then ended,
and a summary of significant accounting policies and other explanatory
information.


DIRECTORS’ RESPONSIBILITY FOR THE
CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation of
consolidated financial statements that give a true and fair view in accordance
with International Financial Reporting Standards and the disclosure
requirements of the Hong Kong Companies Ordinance, and for such internal
control as the directors determine is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement,
whether due to fraud or error.


AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated financial
statements based on our audit. We conducted our audit in accordance with
International Standards on Auditing. Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free from
material misstatement.


An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the consolidated financial statements.
The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity’s preparation of
the consolidated financial statements that give a true and fair view in order to
design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates
made by the directors, as well as evaluating the overall presentation of the
consolidated financial statements.


We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.





                                                         ANNU AL RE POR T 2 0 1 2




INDEPENDENT AUDITOR’S REPORT




OPINION

In our opinion, the consolidated financial statements give a true and fair view
of the state of affairs of the Company and of the Group as at 31 December
2012, and of the Group’s profit and cash flows for the year then ended in
accordance with International Financial Reporting Standards and have been
properly prepared in accordance with the disclosure requirements of the Hong
Kong Companies Ordinance.


OTHER MATTERS

This report, including the opinion, has been prepared for and only for you, as a
body, and for no other purpose. We do not assume responsibility towards or
accept liability to any other person for the contents of this report.




PricewaterhouseCoopers
Certified Public Accountants


Hong Kong, 26 March 2013





                             C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




                                                                                                                       2012


                                                                                                          Note     RMB’000       RMB’000


Revenues                                                                                                   5     85,253,317     82,403,130
Other operating income                                                                                     6      1,719,626      1,061,451


Operating expenses
  Aircraft fuel                                                                                                  (29,871,506)   (29,229,011)
  Gain on fair value movements of derivatives
     financial instruments                                                                                 8          24,831          86,851
  Take-off and landing charges                                                                                    (9,065,649)     (8,350,181)
  Depreciation and amortisation                                                                                   (7,556,910)     (6,965,570)
  Wages, salaries and benefits                                                                             9     (10,059,043)     (8,664,854)
  Aircraft maintenance                                                                                            (4,432,741)     (4,405,900)
  Impairment reversals/(charges)                                                                          10          13,467        (638,316)
  Food and beverages                                                                                              (2,031,425)     (2,022,367)
  Aircraft operating lease rentals                                                                                (4,438,169)     (4,128,420)
  Other operating lease rentals                                                                                     (609,111)       (491,901)
  Selling and marketing expenses                                                                                  (3,727,437)     (3,739,682)
  Civil aviation infrastructure levies                                                                            (1,414,457)     (1,321,373)
  Ground services and other charges                                                                                 (594,057)       (567,552)
  Office, administrative and other expenses                                                                       (8,982,628)     (8,853,751)
Total operating expenses                                                                                         (82,744,835)   (79,292,027)

Operating profit                                                                                          11       4,228,108      4,172,554
 Share of results of associates                                                                           23         103,209         75,435
 Share of results of jointly controlled entities                                                          24          29,960         31,437
 Finance income                                                                                           12         348,601      2,024,002
 Finance costs                                                                                            13      (1,697,474)    (1,462,727)

Profit before income tax                                                                                          3,012,404      4,840,701
  Income tax                                                                                              14       (204,801)      (264,229)

Profit for the year                                                                                               2,807,603      4,576,472

Other comprehensive (loss)/income
  for the year
  Cash flow hedges, net of tax                                                                            40          (9,211)      (132,446)
  Fair value movements of available-for-sale
    investments                                                                                                         (389)
  Fair value movements of available-for-sale
    investments held by an associate                                                                      23           2,188         (2,701)

Total comprehensive income for the year                                                                           2,800,191      4,441,811





                                                               ANNU AL RE POR T 2 0 1 2




CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




                                                                                                              2012         2011


                                                                                               Note       RMB’000     RMB’000


Profit attributable to:
  Equity shareholders of the Company                                                                      2,953,645    4,575,732
  Non-controlling interests                                                                                (146,042)         740

                                                                                                          2,807,603    4,576,472

Total comprehensive income
  attributable to:
  Equity shareholders of the Company                                                                      2,946,271    4,441,071
  Non-controlling interests                                                                                (146,080)         740

                                                                                                          2,800,191    4,441,811

Earnings per share attributable to the
  equity shareholders of the Company
  during the year
  Basic and diluted (RMB)                                                                      17              0.26         0.41


The notes on page 99 to 208 are an integral part of these financial statements.           99        208


                                                                                                              2012         2011


                                                                                               Note       RMB’000     RMB’000


 Dividends                                                                                     15                 –          –





                             C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




CONSOLIDATED BALANCE SHEET

(Prepared in accordance with International Financial Reporting Standards)
As at 31 December 2012




                                                                                                                        2012


                                                                                                          Note     RMB’000       RMB’000


Non-current assets
 Intangible assets                                                                                        18      11,449,099     11,353,590
 Property, plant and equipment                                                                            19      82,518,761     73,757,795
 Lease prepayments                                                                                        20       1,781,846      1,471,272
 Advanced payments on acquisition of aircraft                                                             21      11,894,891     10,968,344
 Investments in associates                                                                                23         833,472        837,589
 Investments in jointly controlled entities                                                               24         418,159        423,256
 Available-for-sale financial assets                                                                                 234,690        240,380
 Other long-term assets                                                                                   25       1,958,256      1,929,834
 Deferred tax assets                                                                                      37          54,561         44,418
 Derivative assets                                                                                        40               –         4,365
                                                                                                                 111,143,735    101,030,843
Current assets
 Flight equipment spare parts                                                                             26       2,087,978      1,555,544
 Trade receivables                                                                                        27       2,962,181      2,504,026
 Prepayments and other receivables                                                                        28       3,368,648      2,410,895
 Derivative assets                                                                                        40          18,074              –
 Restricted bank deposits and short-term
    bank deposits                                                                                         29       1,726,251      2,894,287
 Cash and cash equivalents                                                                                30       2,511,696      3,860,973
 Assets held for sale                                                                                     44               –       482,313
                                                                                                                  12,674,828     13,708,038
Current liabilities
 Sales in advance of carriage                                                                                      3,094,427      3,197,649
 Trade payables and notes payable                                                                         31       3,075,325      2,692,624
 Other payables and accrued expenses                                                                      32      16,256,225     16,267,287
 Current portion of obligations under
    finance leases                                                                                        33       2,605,269      2,459,259
 Current portion of borrowings                                                                            34      22,639,955     18,171,130
 Income tax payable                                                                                                  181,788        172,319
 Current portion of provision for return
    condition checks for aircraft under
    operating leases                                                                                      35         734,205        375,409
 Derivative liabilities                                                                                   40          35,813         51,063
                                                                                                                  48,623,007     43,386,740

Net current liabilities                                                                                          (35,948,179)   (29,678,702)

Total assets less current liabilities                                                                             75,195,556     71,352,141





                                                               ANNU AL RE POR T 2 0 1 2




CONSOLIDATED BALANCE SHEET

(Prepared in accordance with International Financial Reporting Standards)
As at 31 December 2012




                                                                                                            2012         2011


                                                                                               Note     RMB’000     RMB’000


Non-current liabilities
 Obligations under finance leases                                                               33     19,252,709   17,801,563
 Borrowings                                                                                     34     23,096,163   23,603,463
 Provision for return condition checks
   for aircraft under operating leases                                                          35      3,064,557    2,923,717
 Other long-term liabilities                                                                    36      1,635,537    2,047,099
 Deferred tax liabilities                                                                       37         29,326       29,326
 Post-retirement benefit obligations                                                           38(b)    3,259,529    2,859,945
 Derivative liabilities                                                                         40        304,338      281,921
                                                                                                       50,642,159   49,547,034

Net assets                                                                                             24,553,397   21,805,107

Equity
Capital and reserves attributable to the equity
  shareholders of the Company
  Share capital                                                                                 42     11,276,539   11,276,539
  Reserves                                                                                      43     11,649,259    8,849,353
                                                                                                       22,925,798   20,125,892
  Non-controlling interests                                                                             1,627,599    1,679,215

Total equity                                                                                           24,553,397   21,805,107


The notes on pages 99 to 208 are an integral part of these financial                      99    208
statements.


The financial statements were approved by the Board of Directors on 26
March 2013 and were signed on its behalf.




Liu Shaoyong                                                                 Ma Xulun


Director                                                                     Director





                             C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




COMPANY’S BALANCE SHEET

(Prepared in accordance with International Financial Reporting Standards)
As at 31 December 2012




                                                                                                                       2012


                                                                                                          Note     RMB’000       RMB’000


Non-current assets
 Intangible assets                                                                                        18     11,431,806     11,343,374
 Property, plant and equipment                                                                            19     56,015,173     50,246,293
 Lease prepayments                                                                                        20        781,146        497,301
 Advanced payments on acquisition of aircraft                                                             21     10,733,899     10,195,340
 Investments in subsidiaries                                                                              22     10,455,900      7,104,106
 Investments in associates                                                                                23        578,836        578,836
 Investments in jointly controlled entities                                                               24        323,238        323,238
 Available-for-sale financial assets                                                                                216,256        221,557
 Other long-term assets                                                                                   25      1,077,036        980,434
 Derivative assets                                                                                        40              –         4,365
                                                                                                                 91,613,290     81,494,844
Current assets
 Flight equipment spare parts                                                                             26      1,794,447      1,270,586
 Trade receivables                                                                                        27      3,601,021      2,462,623
 Prepayments and other receivables                                                                        28      6,908,992      3,647,648
 Derivative assets                                                                                        40         18,074              –
 Restricted bank deposits and short-term
    bank deposits                                                                                         29        109,543        360,168
 Cash and cash equivalents                                                                                30        617,422        852,012
 Assets held for sale                                                                                     44              –       482,313
                                                                                                                 13,049,499      9,075,350
Current liabilities
 Sales in advance of carriage                                                                                     2,808,175      2,817,980
 Trade payables and notes payable                                                                         31      7,558,342      3,480,109
 Other payables and accrued expenses                                                                      32     11,087,271     10,661,352
 Current portion of obligations under
    finance leases                                                                                        33      1,978,018      2,010,988
 Current portion of borrowings                                                                            34     20,335,797     14,830,480
 Income tax payable                                                                                                   1,528
 Current portion of provision for return
    condition checks for aircraft under
    operating leases                                                                                      34         88,081        174,151
 Derivative liabilities                                                                                   40         35,813         51,063
                                                                                                                 43,893,025     34,026,148

Net current liabilities                                                                                          (30,843,526)   (24,950,798)

Total assets less current liabilities                                                                            60,769,764     56,544,046





                                                               ANNU AL RE POR T 2 0 1 2




COMPANY’S BALANCE SHEET

(Prepared in accordance with International Financial Reporting Standards)
As at 31 December 2012




                                                                                                            2012         2011


                                                                                               Note     RMB’000     RMB’000


Non-current liabilities
 Obligations under finance leases                                                               33     15,498,192   14,123,184
 Borrowings                                                                                     34     15,087,334   15,184,868
 Provision for return condition checks
   for aircraft under operating leases                                                          35      1,674,553    1,546,944
 Other long-term liabilities                                                                    36        962,719    1,331,811
 Post-retirement benefit obligations                                                           38(b)    2,508,450    2,191,722
 Derivative liabilities                                                                         40        304,338      281,921
                                                                                                       36,035,586   34,660,450

Net assets                                                                                             24,734,178   21,883,596

Equity
  Share capital                                                                                 42     11,276,539   11,276,539
  Reserves                                                                                      43     13,457,639   10,607,057

Total equity                                                                                           24,734,178   21,883,596


The notes on page 99 to 208 are an integral part of these financial statements.           99    208


The financial statements were approved by the Board of Directors on 26
March 2013 and were signed on its behalf.




Liu Shaoyong                                                                 Ma Xulun


Director                                                                     Director





                             C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




CONSOLIDATED CASH FLOW STATEMENT

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




                                                                                                                        2012


                                                                                                          Note      RMB’000       RMB’000


Cash flows from operating activities
 Cash generated from operations                                                                           45(a)   12,822,835     13,781,419
 Income tax paid                                                                                                    (205,476)      (158,394)
Net cash inflow from operating activities                                                                         12,617,359     13,623,025
Cash flows from investing activities
 Additions of property, plant and equipment                                                                        (6,148,139)    (5,414,101)
 Payment of short-term deposits with original
    maturity over three months                                                                                              –    (1,963,289)
 Advanced payments on acquisition of aircraft                                                              21      (7,328,529)    (8,180,128)
 Investment in available-for-sale financial assets                                                                          –         (1,472)
 Acquisition of cargo business of Great Wall
    Airlines Co., Ltd. (“Great Wall Airlines”),
    netting of cash acquired                                                                                         (87,316)        (60,736)
 Proceeds from disposal of assets held for sale                                                                      209,586        411,535
 Proceeds from disposal of property,
    plant and equipment                                                                                              181,246         33,881
 Proceeds of short-term deposits with original
    maturity over three months                                                                             29        958,489              –
 Interest received                                                                                                   215,789        146,529
 Dividends received                                                                                                  112,446         82,294
 Proceeds from disposal of interests in an
    associate                                                                                                           2,439               –
 Proceeds from disposal of interests in
    available-for-sale financial assets                                                                                94,890          6,426
Net cash outflow from investing activities                                                                        (11,789,099)   (14,939,061)





                                                               ANNU AL RE POR T 2 0 1 2




CONSOLIDATED CASH FLOW STATEMENT

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




                                                                                                            2012


                                                                                               Note     RMB’000       RMB’000


Cash flows from financing activities
 Proceeds from draw down of short-term
    bank loans                                                                                         23,101,136     19,647,120
 Repayments of short-term bank loans                                                                  (25,619,898)   (18,514,150)
 Proceeds from issuance of short-term
    debentures and bonds                                                                               4,000,000      2,490,417
 Proceeds from draw down of long-term
    bank loans                                                                                        10,887,474       5,693,281
 Repayments of long-term bank loans                                                                   (8,352,313)     (5,245,147)
 Principal repayments of finance lease
    obligations                                                                                        (4,094,636)    (2,191,369)
 Receipts of restricted bank deposits                                                                     236,475      1,108,726
 Interest paid                                                                                         (1,936,842)    (1,701,253)
 Capital contribution from non-controlling
    interests of subsidiaries                                                                            453,850      1,004,500
 Acquisition of non-controlling interests in
    subsidiaries                                                                                        (670,956)              –
 Dividends paid to non-controlling interests of
    subsidiaries                                                                                        (178,580)       (156,526)
Net cash (outflow)/inflow from financing
 activities                                                                                            (2,174,290)    2,135,599

Net (decrease)/increase in cash and
 cash equivalents                                                                                      (1,346,030)      819,563
 Cash and cash equivalents at 1 January                                                                 3,860,973     3,078,228
 Exchange adjustments                                                                                      (3,247)       (36,818)

Cash and cash equivalents at 31 December
                                                                                               30      2,511,696      3,860,973


The notes on page 99 to 208 are an integral part of these financial statements.           99    208





                                 C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




                                                                                 Attributable to equity shareholders of the Company
                                                                                                                                                  Non-
                                                                                    Share            Other Accumulated                      controlling
                                                                                   capital        reserves      losses          Subtotal      interests   Total equity


                                                                                 RMB’000         RMB’000       RMB’000      RMB’000       RMB’000       RMB’000


Balance at 1 January 2011                                                      11,276,539      16,950,255      (12,955,507)   15,271,287     1,290,599     16,561,886


Total comprehensive income
  for the year                                                                           –       (134,661)     4,575,732      4,441,071           740      4,441,811
  – Profit for the year                                                                 –              –     4,575,732      4,575,732           740      4,576,472
  – Other comprehensive loss                                                            –       (134,661)             –      (134,661)            –      (134,661)
Accumulated losses shared
  by non-controlling interests after
  capital injection in a subsidiary                                                      –        426,439               –     426,439       (427,264)          (825)
Dividends paid to non-controlling
  interests of subsidiaries                                                              –               –             –            –     (156,526)      (156,526)
Capital contribution by non-controlling
  interests in a subsidiary                                                              –               –             –            –    1,004,500      1,004,500
Acquisition of non-controlling interests
  in subsidiaries                                                                        –        (12,905)              –      (12,905)      (32,834)       (45,739)

Balance at 31 December 2011                                                    11,276,539      17,229,128       (8,379,775)   20,125,892     1,679,215     21,805,107

Balance at 1 January 2012                                                      11,276,539      17,229,128       (8,379,775)   20,125,892     1,679,215     21,805,107
Total comprehensive income
  for the year                                                                           –          (7,374)    2,953,645      2,946,271      (146,080)     2,800,191
  – Profit for the year                                                                 –               –    2,953,645      2,953,645      (146,042)     2,807,603
  – Other comprehensive loss                                                            –          (7,374)            –        (7,374)          (38)        (7,412)
Dividends paid to non-controlling
  interests of subsidiaries                                                              –               –             –            –     (178,580)      (178,580)
Capital contribution by non-
  controlling interests in subsidiaries
  (Note 22(a)&(b))                               22(a)&(b)                               –               –             –            –      453,850        453,850
Acquisition of non-controlling
  interests in subsidiaries
  (Note 22(c)&(d))                               22(c)&(d)                               –       (490,151)              –     (490,151)     (180,806)      (670,957)
Others                                                                                   –        343,786               –      343,786             –       343,786

Balance at 31 December 2012                                                    11,276,539      17,075,389       (5,426,130)   22,925,798     1,627,599     24,553,397


The notes on page 99 to 208 are an integral part of these financial statements.                           99      208





                                                               ANNU AL RE POR T 2 0 1 2




NOTES TO THE FINANCIAL STATEMENTS

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




1. CORPORATE INFORMATION                                                                  1.
      China Eastern Airlines Corporation Limited (the “Company”), a joint
      stock company limited by shares, was incorporated 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 International
      Airport, Shanghai, the PRC. The Company and its subsidiaries (together,
      the “Group”) are principally engaged in the operation of civil aviation,
      including the provision of passenger, cargo, mail delivery, tour operations
      and other extended transportation services.


      The Company is majority owned by China Eastern Air Holding Company
      (“CEA Holding”), a state-owned enterprise incorporated in the PRC.



      The Company’s shares are traded on Shanghai Stock Exchange,
      The Stock Exchange of Hong Kong Limited and The New York Stock
      Exchange.


      These financial statements were approved for issue by the Company’s
      Board of Directors (the “Board”) on 26 March 2013.


2. SUMMARY OF SIGNIFICANT ACCOUNTING                                                      2.
   POLICIES

      The principal accounting policies applied in the preparation of these
      financial statements are set out below. These policies have been
      consistently applied to all the years presented, unless otherwise stated.

      (a) Basis of preparation                                                                 (a)

             The financial statements of the Group have been prepared in
             accordance with International Financial Reporting Standards
             (“IFRS”) as issued by the International Accounting Standard Board
             and the disclosure requirements of the Hong Kong Companies
             Ordinance. The financial statements have been prepared under
             the historical cost convention, as modified by the revaluation of
             available-for-sale financial assets, and financial assets and financial
             liabilities (including derivative instruments) at fair value through
             profit or loss.


             (i)   Going concern                                                                     (i)

                   As at 31 December 2012, the Group’s accumulated losses
                   were approximately RMB5.43 billion and its current liabilities                                      54.3
                   exceeded its current assets by approximately RMB35.95                                                      359.5
                   billion. For the year ended 31 December 2012, cash and
                   cash equivalents of the Group decreased by RMB1.35 billion.
                   In preparing the financial statements, the Board considers                              13.5
                   the adequacy of cash inflows from operations and financing
                   to meet its financial obligations as and when they fall due.





                             C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




NOTES TO THE FINANCIAL STATEMENTS

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




2. SUMMARY OF SIGNIFICANT ACCOUNTING                                                               2.
   POLICIES (continued)

      (a) Basis of preparation (continued)                                                                (a)

             (i)    Going concern (continued)                                                                   (i)

                    As at 31 December 2012, the Group had total unutilised
                    credit facilities of approximately RMB27.09 billion from
                    banks. The Board believes that, based on experience to                                                270.9
                    date, it is likely that these facilities will be rolled over in future
                    years if required.


                    With the cash inflows from operations and available credit
                    facilities, the Board considers that the Group will be able to
                    obtain sufficient financing to enable it to operate, as well as
                    to meet its liabilities as and when they become due, and the
                    capital expenditure requirements for the upcoming twelve
                    months. Accordingly, the Board believes that it is appropriate
                    to prepare these financial statements on a going concern
                    basis without including any adjustments that would be
                    required should the Company and the Group fail to continue
                    as a going concern.


             (ii)   New and amended standards adopted by the Group                                              (ii)

                    The Group has adopted the following new standards and
                    amendments to existing standards which are relevant for the
                    Group’s existed business and mandatory for the first time for
                    the financial year beginning 1 January 2012:


                          Amendments to IFRS 7, Financial instruments:
                          Disclosures – Transfer of financial assets: this
                          amendment promotes transparency in the reporting of
                          transfer transactions and improve users’ understanding
                          of the risk exposures relating to transfers of financial
                          assets and the effect of those risks on the Company’s
                          financial position. The Group did not have any
                          significant transfers of financial assets in previous year
                          or the current year which require disclosures in current
                          accounting year under the amendments and these
                          amendments have had no material impact on the
                          Group.





                                                                ANNU AL RE POR T 2 0 1 2




NOTES TO THE FINANCIAL STATEMENTS

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




2. SUMMARY OF SIGNIFICANT ACCOUNTING                                                       2.
   POLICIES (continued)

      (a) Basis of preparation (continued)                                                      (a)

             (ii)    New and amended standards adopted by the Group                                   (ii)
                     (continued)


                           Amendment related to IAS12, “Income taxes”.
                           Currently IAS 12, ‘Income taxes’ requires an entity
                           to measure the deferred tax relating to an asset
                           depending on whether the entity expects to recover
                           the carrying amount of the asset through use or sale.
                           It can be difficult and subjective to assess whether
                           recovery will be through use or through sale when the
                           asset is measured using the fair value model in IAS
                           40 “Investment Property”. Hence, this amendment
                           introduces an exception to the existing principle for
                           the measurement of deferred tax assets or liabilities
                           arising on investment property measured at fair value.
                           As a result of the amendments, SIC 21, ‘Income tax –
                           recovery of revalued non-depreciable assets’, would
                           no longer apply to investment properties carried at fair
                           value. The amendments also incorporate into IAS 12
                           the remaining guidance previously contained in SIC 21,
                           which is accordingly withdrawn. This improvement has
                           no material impact on the Group.




             (iii)   New and amended standards, and interpretations                                   (iii)
                     mandatory for the first time for the financial year
                     beginning 1 January 2012 but not currently relevant to
                     the Group


                     IFRS 1 (Amendment)        First-time Adoption of IFRSs – Limited
                                                  Exemptions from Comparative IFRS 7
                                                  Disclosures for First-time Adopters
                     IFRS 1 (Amendment)        First time adoption on hyperinflation and
                                                  fixed dates





                             C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




NOTES TO THE FINANCIAL STATEMENTS

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




2. SUMMARY OF SIGNIFICANT ACCOUNTING                                                               2.
   POLICIES (continued)

      (a) Basis of preparation (continued)                                                                (a)

             (iv)   New standards, amendments and interpretations                                               (iv)
                    to existing standards have been issued but not yet
                    effective for the financial year beginning 1 January
                    2012 and which are relevant for the Group’s operations


                    The following standards and amendments to existing
                    standards have been published and are mandatory for the
                    Group’s accounting periods beginning on after 1 January
                    2013, but the Group has not early adopted them:


                          IAS 19 (Amendment) (effective from 1 January 2013).
                          This amendment eliminate the corridor approach
                          and calculate finance costs on a net funding basis.
                          “Remeasurements” replace “actuarial gains and losses”
                          and include the difference between actual investment
                          returns and the return implied by the net interest cost
                          and any effect of an asset ceiling. They are recognised
                          in other comprehensive income and not recycled
                          to income. The “corridor” method and the option to
                          recognise immediately in the income statement are
                          no longer available. This will increase balance sheet
                          volatility for many entities. The Group will apply the
                          standard retrospectively from 1 January 2013 and the
                          “actuarial gains and losses” will be recognised in other
                          comprehensive income. As at 31 December 2012, the
                          unrecognised actuarial losses is RMB2.89 billion.


                                                                                                                          28.9





                                                               ANNU AL RE POR T 2 0 1 2




NOTES TO THE FINANCIAL STATEMENTS

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




2. SUMMARY OF SIGNIFICANT ACCOUNTING                                                      2.
   POLICIES (continued)

      (a) Basis of preparation (continued)                                                     (a)

             (iv)   New standards, amendments and interpretations                                    (iv)
                    to existing standards have been issued but not yet
                    effective for the financial year beginning 1 January
                    2012 and which are relevant for the Group’s operations
                    (continued)


                          IFRS 9 ‘Financial Instruments’ (effective from January
                          1, 2013). The standard addresses classification and
                          measurement of financial assets, introducing the
                          following changes: (i) Introduces a single model that
                          has only two classification categories: amortised                                          (i)
                          cost and fair value, which are driven by the entity’s
                          business model for managing the financial assets
                          and the contractual characteristics of the financial
                          assets. (ii) Removes the requirement to separate                                                                     (ii)
                          embedded derivatives from financial asset hosts,
                          and requires a hybrid contract to be classified in
                          its entirety at either amortised cost or fair value. (iii)
                          Prohibits reclassifications except in rare circumstances                                             (iii)
                          when the entity’s business model changes and the
                          changes apply prospectively. (iv) Provides specific
                          guidance for contractually linked instruments that
                          create concentrations of credit risk, which is often
                          the case with investment tranches in a securitisation.
                          (v) Indicates that all equity investments should be                                               (iv)
                          measured at fair value. However, management has
                          an option to present in other comprehensive income
                          unrealised and realised fair value gains and losses on
                          equity investments that are not held for trading. (vi)                               (v)
                          Removes the cost exemption for unquoted equities and
                          derivatives on unquoted equities but provides guidance
                          on when cost may be an appropriate estimate of fair
                          value. The management is in the process of evaluating
                          the impact of IFRS 9 on the Group and will apply the
                          standard from 1 January 2013.                                                              (vi)





                             C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




NOTES TO THE FINANCIAL STATEMENTS

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




2. SUMMARY OF SIGNIFICANT ACCOUNTING                                                               2.
   POLICIES (continued)

      (a) Basis of preparation (continued)                                                                (a)

             (iv)   New standards, amendments and interpretations                                               (iv)
                    to existing standards have been issued but not yet
                    effective for the financial year beginning 1 January
                    2012 and which are relevant for the Group’s operations
                    (continued)


                          IFRS 10 “Consolidated financial statements” (effective
                          from 1 January 2013). The objective of IFRS 10 is to
                          establish principles for the presentation and preparation
                          of consolidated financial statements when an entity
                          controls one or more other entity (an entity that controls
                          one or more other entities) to present consolidated
                          financial statements. Defines the principle of control,
                          and establishes controls as the basis for consolidation.
                          Set out how to apply the principle of control to identify
                          whether an investor controls an investee and therefore
                          must consolidate the investee. Sets out the accounting
                          requirements for the preparation of consolidated
                          financial statements. The management is in the process
                          of evaluating the impact of IFRS 10 on the Group and
                          will apply the standard from 1 January 2013.


                          IFRS 13 “Fair value measurement” (effective from 1
                          January 2013). IFRS 13 aims to improve consistency
                          and reduce complexity by providing a precise
                          definition of fair value and a single source of fair value
                          measurement and disclosure requirements for use
                          across IFRSs. The requirements, which are largely
                          aligned between IFRSs and United States Generally
                          Accepted Accounting Principles (“US GAAP”), do not
                          extend the use of fair value accounting but provide
                          guidance on how it should be applied where its use is
                          already required or permitted by other standards within
                          IFRSs or US GAAP. The management is in the process
                          of evaluating the impact of IFRS 13 on the Group and
                          will apply the standard from 1 January 2013.





                                                               ANNU AL RE POR T 2 0 1 2




NOTES TO THE FINANCIAL STATEMENTS

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




2. SUMMARY OF SIGNIFICANT ACCOUNTING                                                      2.
   POLICIES (continued)

      (a) Basis of preparation (continued)                                                     (a)

             (iv)   New standards, amendments and interpretations                                    (iv)
                    to existing standards have been issued but not yet
                    effective for the financial year beginning 1 January
                    2012 and which are relevant for the Group’s operations
                    (continued)


                          IAS 1 (Amendment) (effective from 1 July 2013)
                          “Financial statements presentation” regarding other
                          comprehensive income. The main change resulting
                          from these amendments is a requirement for entities
                          to group items presented in “other comprehensive
                          income” (OCI) on the basis of whether they are
                          potentially reclassifiable to profit or loss subsequently
                          (reclassification adjustments). The amendments do not
                          address which items are presented in OCI. The Group
                          will apply the standard from 1 July 2013 and it is not
                          expected to have material impact on the Group’s or
                          Company’s financial statement.


                          IFRS 11 (effective from 1 January 2013) “Joint
                          arrangement”. IFRS 11 is a more realistic reflection
                          of joint arrangement by focusing on the right and
                          obligation of the arrangement rather than its legal
                          form. There are two types of joint arrangement:
                          joint operations and joint ventures. Joint operations
                          arise where a joint operation has right to assets
                          and obligations relating to the arrangement and
                          hence accounts for its interest in assets, liabilities,
                          revenue and expenses. Joint ventures arise where
                          the joint operation has rights to the net assets of
                          the arrangement and hence equity accounts for its
                          interest. Proportional consolidation of joint ventures is
                          no longer allowed. The Group will apply the standard
                          from 1 January 2013 and it is not expected to have
                          material impact on the Group’s or Company’s financial
                          statement.





                             C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




NOTES TO THE FINANCIAL STATEMENTS

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




2. SUMMARY OF SIGNIFICANT ACCOUNTING                                                               2.
   POLICIES (continued)

      (a) Basis of preparation (continued)                                                                (a)

             (iv)   New standards, amendments and interpretations                                               (iv)
                    to existing standards have been issued but not yet
                    effective for the financial year beginning 1 January
                    2012 and which are relevant for the Group’s operations
                    (continued)


                          IAS 28 (Revised 2011) (effective from 1 January 2013)
                          “Associates and joint ventures”. The amendment
                          includes the requirements for joint ventures, as well
                          as associates, to be equity accounted following the
                          issue of IFRS 11. The management is in the process of
                          evaluating the impact of IAS 28 on the Group and will
                          apply the standard from 1 January 2013.




                          IFRS 12 (effective from 1 January 2013) “Disclosure of
                          interests in other entities”. The amendment includes
                          the disclosure requirements for all forms of interests in
                          other entities, including joint arrangements, associates,
                          special purpose vehicles and other off balance
                          sheet vehicles. The management is in the process of
                          evaluating the impact of IFRS 12 on the Group and will
                          apply the standard from 1 January 2013.



                          IAS 27 (revised 2011) (effective from 1 January 2013)
                          “Separate financial statements”. The amendment
                          includes the provisions on separate financial statements
                          that are left after the control provisions of IAS 27 have
                          been included in the new IFRS 10. The management
                          is in the process of evaluating the impact of IAS 27 on
                          the Group and will apply the standard from 1 January
                          2013.





                                                               ANNU AL RE POR T 2 0 1 2




NOTES TO THE FINANCIAL STATEMENTS

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




2. SUMMARY OF SIGNIFICANT ACCOUNTING                                                      2.
   POLICIES (continued)

      (b) Consolidation                                                                        (b)

             The Group’s consolidated financial statements include the financial
             statements of the Company and all of its subsidiaries made up to
             31 December.


             (i)   Subsidiaries                                                                      (i)

                   Subsidiaries are all entities (including special purpose
                   entities) over which the Group has the power to govern the
                   financial and operating policies, generally accompanying
                   a shareholding of more than one half of the voting rights.
                   The existence and effect of potential voting rights that are
                   currently exercisable or convertible are considered when
                   assessing whether the Group controls another entity. The                                50%
                   Group also assesses existence of control where it does
                   not have more than 50% of the voting power but is able to
                   govern the financial and operating policies by virtue of de-
                   facto control. De-facto control may arise in circumstances
                   where the size of the Group’s voting rights relative to the
                   size and dispersion of holdings of other shareholders give
                   the Group the power to govern the financial and operating
                   policies, etc.


                   Subsidiaries are fully consolidated from the date on which
                   control is transferred to the Group. They are de-consolidated
                   from the date that control ceases.


                   The Group applies the acquisition method of accounting
                   to account for business combinations. The consideration
                   transferred for the acquisition of a subsidiary is the fair
                   values of the assets transferred, the liabilities incurred and
                   the equity interests issued by the Group. The consideration
                   transferred includes the fair value of any asset or liability
                   resulting from a contingent consideration arrangement. The
                   Group recognises any non-controlling interest in the acquiree
                   on an acquisition-by-acquisition basis, either at fair value or
                   at the non-controlling interest’s proportionate share of the
                   recognised amounts of acquiree’s identifiable net assets.


                   Acquisition-related costs are expensed as incurred.
                   Identifiable assets acquired and liabilities and contingent
                   liabilities assumed in a business combination are measured
                   initially at their fair values at the acquisition date.


                   If the business combination is achieved in stages, the
                   acquisition date fair value of the acquirer’s previously held
                   equity interest in the acquiree is remeasured to fair value at
                   the acquisition date through profit or loss.





                             C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




NOTES TO THE FINANCIAL STATEMENTS

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




2. SUMMARY OF SIGNIFICANT ACCOUNTING                                                               2.
   POLICIES (continued)

      (b) Consolidation (continued)                                                                       (b)

             (i)    Subsidiaries (continued)                                                                    (i)

                    Any contingent consideration to be transferred by the
                    Group is recognised at fair value at the acquisition date.
                    Subsequent changes to the fair value of the contingent
                    consideration that is deemed to be an asset or liability is
                    recognised in accordance with IAS 39 either in profit or loss
                    or as a change to other comprehensive income. Contingent
                    consideration that is classified as equity is not remeasured,
                    and its subsequent settlement is accounted for within equity.


                    Investments in subsidiaries are accounted for at cost
                    less impairment. Cost is adjusted to reflect changes
                    in consideration arising from contingent consideration
                    amendments. Cost also includes direct attributable costs of
                    investment.


                    Goodwill is initially measured as the excess of the aggregate
                    of the consideration transferred and the fair value of non-
                    controlling interest over the net identifiable assets acquired                                                (k)
                    and liabilities assumed (Note (k)(i)). If this consideration is                                    (i)
                    lower than the fair value of the net assets of the subsidiary
                    acquired, the difference is recognised in profit or loss.


                    Inter-company transactions, balances, income and expenses
                    on transactions between Group companies are eliminated.
                    Profits and losses resulting from inter-company transactions
                    that are recognised in assets are also eliminated. Accounting
                    policies of subsidiaries have been changed where necessary
                    to ensure consistency with the policies adopted by the
                    Group.


             (ii)   Changes in ownership interests in subsidiaries without                                      (ii)
                    change of control


                    Transactions with non-controlling interests that do not result
                    in loss of control are accounted for as equity transactions
                    – that is, as transactions with the owners in their capacity
                    as owners. The difference between fair value of any
                    consideration paid and the relevant share acquired of the
                    carrying value of net assets of the subsidiary is recorded
                    in equity. Gains or losses on disposals to non-controlling
                    interests are also recorded in equity.





                                                                ANNU AL RE POR T 2 0 1 2




NOTES TO THE FINANCIAL STATEMENTS

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




2. SUMMARY OF SIGNIFICANT ACCOUNTING                                                        2.
   POLICIES (continued)

      (b) Consolidation (continued)                                                              (b)

             (iii)   Disposal of subsidiaries                                                          (iii)

                     When the Group ceases to have control, any retained
                     interest in the entity is re-measured to its fair value at the
                     date when control is lost, with the change in carrying amount
                     recognised in profit or loss. The fair value is the initial carrying
                     amount for the purposes of subsequently accounting for the
                     retained interest as an associate, joint venture or financial
                     asset. In addition, any amounts previously recognised in
                     other comprehensive income in respect of that entity are
                     accounted for as if the Group had directly disposed of the
                     related assets or liabilities. This may mean that amounts
                     previously recognised in other comprehensive income are
                     reclassified to profit or loss.


             (iv)    Associates                                                                        (iv)

                     Associates are all entities over which the Group has
                     significant influence but not control, generally accompanying                                   20%
                     a shareholding of between 20% and 50% of the voting                                       50%
                     rights. Investments in associates are accounted for using the
                     equity method of accounting and are initially recognised at
                     cost. The Group’s investment in associates includes goodwill
                     identified on acquisition, net of any accumulated impairment
                     loss.


                     The Group’s share of its associates’ post-acquisition
                     profits or losses is recognised in the consolidated income
                     statement, and its share of post-acquisition movements in
                     other comprehensive income is recognised in reserves. The
                     cumulative post-acquisition movements are adjusted against
                     the carrying amount of the investment. When the Group’s
                     share of losses in an associate equals or exceeds its interest
                     in the associate, including any other unsecured receivables,
                     the Group does not recognise further losses, unless it has
                     incurred obligations or made payments on behalf of the
                     associate.


                     Unrealised gains on transactions between the Group and its
                     associates are eliminated to the extent of the Group’s interest
                     in the associates. Unrealised losses are also eliminated
                     unless the transaction provides evidence of an impairment of
                     the asset transferred. Accounting policies of associates have
                     been changed where necessary to ensure consistency with
                     the policies adopted by the Group.





                             C H I N A E A S T E R N A I R L I N E S C O R P O R AT I O N L I M I T E D




NOTES TO THE FINANCIAL STATEMENTS

(Prepared in accordance with International Financial Reporting Standards)
For the year ended 31 December 2012




2. SUMMARY OF SIGNIFICANT ACCOUNTING                                                               2.
   POLICIES (continued)

      (b) Consolidation (continued)                                                                       (b)

             (iv)   Associates (continued)                                                                      (iv)

                    Dilution gains and losses in associates are recognised in the
                    consolidated income statement.


                    In the Company’s balance sheet, the investments in
                    associates are stated at cost less provision for impairment
                    losses (Note 2(n)). The results of associates are accounted                                        2(n)
                    for by the Company on the basis of dividend received and
            &en