Note: Please refer to the actual operation for the introduction and phase-out of the Group's fleet in the future.

 BUSINESS OVERVIEW

Containing the Pandemic

The Group insisted to give pandemic control top priority, stayed committed to "preventing the coronavirus from entering the country, stemming its domestic resurgence and implementing joint pandemic containment measures for individuals and goods" and actively responded to coronavirus resurgence in certain areas in China and the overseas imported cases. The Group timely adjusted and optimized the mechanism for leading pandemic prevention and control practices, timely deploying phased prevention and control work, updating the prevention and control operating procedures, following up and implementing prevention and control measures to ensure coordinated operation of such mechanism. With the thorough application of the pandemic data sharing platform, the Group improved the production planning and management efficiency of the flight attendant team. In response to the sudden outbreak in Beijing at the beginning of the year, the Group quickly organized full staff examination and implemented nucleic acid tests for all employees to ensure the responsibilities of joint pandemic prevention and control were in place. Specific inspection was conducted to remove loopholes, optimize management and undertake the responsibility in relation to pandemic prevention and control. The Group upheld that "all people eligible for vaccination have access to it", and the vaccination rate for key frontline staff reached 100%. The Group swiftly responded to the sudden outbreaks in various areas, coordinated the pandemic prevention and control, production planning and passenger service and prevented the domestic resurgence in an effective and orderly manner. The Group enhanced the identification and control of passengers on transit flights from third countries and implemented remote prevention and information control mechanism of "zero reporting". The Group also strictly implemented pandemic prevention measures for international flights and ensured effective disinfection management of flights, sites and incoming goods. Besides, the Group set high management standards for international flight attendants by selecting and assigning fully vaccinated personnel and


carrying out medical examination as well as quarantine inspections for inbound flights stringently. Meanwhile, the Group expressed in-depth care for its employees by allocating pandemic prevention materials, improving security conditions and offering counseling service, thereby timely solved the employees' difficulties and maintained a stable workforce.

Safe Operation

The Group is well aware that safety responsibility is a kind of political responsibility and the guarantee for safe flight underlies the foundation of the Group's original aspiration and mission. The Group has firmly established the concept of safety development, under which the Group recognized and grasped the extreme importance of safety from an overall perspective, continued to implement 30 measures for safety development, completed operational organization for ongoing pandemic management and firmly promoted the construction of four operational safety systems including safety management, flight training, aircraft maintenance and operation management. The Group carried out in-depth safety hazard investigation work and carried out supervision and inspection on 10 key aspects including the specific three-year safety rectification action, safety hazard investigation and centralized rectification, style development and air crew rectification, safety and security and pandemic prevention and control. To ensure smooth and safe operation, the Group actively conducted specific risk assessment and effectively implemented various risk control measures for special operation conditions, such as seasonal changes, flying in extreme weather and the "one city, two airports" pattern in Beijing and Chengdu. The Group constantly pushed forward the style development work and the reform of the flight attendant team by enhancing cautionary education and the building of a better style for the professional team. During the Reporting Period, the Group recorded 0.86 million safe flight hours while transporting 38.61 million passengers safely. The Group maintained stable and safe operation in general and successfully safeguarded the provision of important transportation services for various events, such as the 100th anniversary of the founding of the Communist Party of China.

Maximising Operating Performance

During the Reporting Period, the Company adhered to the general principle of pursuing progress while ensuring stability, for which the Company improved production and operation and strived to reduce costs, improve efficiency, cut losses and control risks. Based on the new development pattern of domestic economic circle playing a leading role, the Company has been optimizing the structure of transport capacity allocation in accordance with the principle of maximizing profit margins and closely monitoring the market trends to adjust the allocation swiftly. The Company took advantage of opportunities arising from market recovery, and maintained the capacity input of wide-body aircraft through operating in popular routes and converting passenger aircraft for cargo operations. As a result, the domestic transport capacity of wide-body aircraft increased by 69% year-on-year. In terms of the international market, the Company continued to promote the conversion of passenger aircraft for cargo operations. During the Reporting Period, the Company operated 7,935 cargo flights by passenger aircraft, which enabled the sharing of fixed costs of passenger aircraft while maintaining its industry-leading position in terms of business scale. The Company strengthened marketing control and continued dynamic monitoring and control, seized he opportunity of domestic market recovery in the second quarter, made full use of the network, built a high-quality and prosperous system and took various measures to maintain the stability and improve yield level of the main base and major routes. Taking the commencement of operation of Chengdu Tianfu International Airport as

an opportunity, the Company strived to help develop Chengdu into an international aviation hub, where the Company would develop a core route network covering domestic and major markets such as Southeast Asia, Europe and North America, and established the aviation business prescence of Air China at Tianfu base. The Company aimed to build the "Air China Express" brand and focused its strengths and resources to establish 10 boutique routes and express flights with excellent service quality providing "fast ground door-to-door services, frequent flights, outstanding onboard services, punctual flights and smooth ticket change" in order to achieve growth in both the number of flights and passenger load factor. The Company also actively tapped the growth points in the market and supported the integrated innovation and development of civil aviation and red tourism. During the Reporting Period, the Company provided red tourism routes to more than 73,710 travelers. By promoting mileage products, business charter cooperation products, elderly Rights Cards and interline products with targeted positioning, the Company boosted revenue growth and garnered a good reputation among customers. Furthermore, the Company exercised strict cost control and closely monitored major expenses, enhanced the cost management on comprehensive security, and defined the responsibilities for all segments of the aircraft cost management chain for facilitating effective cost control. Apart from that, the Company strengthened capital management and control as well as the internal and external financing mechanism, and rationalized the debt structure so as to offer protection for capital safety.

Enhancing Services

The Company was dedicated to the provision of "people-oriented" services as its core philosophy, focusing on all areas in the whole service process, continuing to enhance service quality, improving service and product quality, and giving play to the leading role of digitalization and intelligence development on an ongoing basis. During the Reporting Period, the overall traveler satisfaction of the Company increased steadily, as the service quality and traveler experience further improved. Pursuing the "user-oriented" design approach, the Company renovated and built nine self-operated lounges to create "oriental culture and arts" rest area of Air China. In order to create an exclusive cabin environment, the Company developed new aircraft seat products and launched the new interior design products under the "Dancing Phoenix" (鳳舞雲端) series. The Group has installed in-cabin WiFi system on a total of 359 aircraft, and such system commenced full operation. The Company also improved the overall quality of services, hardware and products, which highlighted the core competitiveness of its services and brand. For the purpose of further strengthening the soft power of services and products, the Company stood on the passengers' shoes and updated the service standards, passenger rules, ticketing rules and luggage transportation rules. The Company optimized the regular pandemic prevention and control mechanism by formulating and implementing 26 special ticketing measures. Based on the analysis of passenger travel behavior and operating data, the Company formulated a development plan to improve inflight entertainment and adjust the allocation of media resources. In order to provide more inflight meal options, the Company introduced new menus of "Henishuo" (盒你說) food box for different seasons and festivals, thereby offering diversified, targeted and customized services for passengers who wanted to choose and tailor-made their own meals in advance. In addition, the Company empowered "intelligent civil aviation" service and drove digitalization with innovation. The Company developed paperless and contactless service applications and

optimized the functions and service experience of self-service channels. During the Reporting Period, the self-service check-in rate of passengers reached 79.27% and the online check-in rate of passengers reached 65.27%. The Company fully adopted RFID luggage tags with China-developed chips and promoted the luggage tracking service for the whole process. Nine routes had provided the whole-journey baggage tracking and passenger baggage status query service. Besides, the Company developed and upgraded several system platforms including the service quality management system and the passenger services payment system, which as a result, improved the service digitalization and innovation capability.

 MANAGEMENT DISCUSSION AND ANALYSIS ON FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

The following discussion and analysis are based on the Group's interim condensed consolidated financial statements and notes thereto which were prepared in accordance with the International Accounting Standard 34 "Interim Financial Reporting" as well as the applicable disclosure requirements under Appendix 16 to the Listing Rules and are designed to assist the readers in further understanding the information provided in this announcement so as to better understand the financial conditions and results of operations of the Group as a whole.

OPERATION ANALYSIS

During the first half of 2021, the Group's available seat kilometres for air passenger amounted to 82,500 million, representing a year-on-year increase of 25.83%; the total air passenger traffic amounted to 58,253 million RPK, representing a year-on-year increase of 31.73%; passenger load factor was 70.61%, representing a year-on-year increase of 3.16 percentage points. The available freight tonne kilometres for freight amounted to 5,494 million, representing a year-on-year increase of 36.15%; the total cargo and mail traffic amounted to 2,067 million tonne kilometres, representing a year-on-year increase of 41.70%; cargo and mail load factor was 37.63%, representing a year-on-year increase of 1.47 percentage points. During the Reporting Period, the Group recorded a loss attributable to equity shareholders of the Company of RMB6,781 million, representing a year-on-year decrease in loss of RMB2,658 million.

Revenue

During the Reporting Period, the Group's revenue was RMB37,664 million, representing a year-on-year increase of RMB8,018 million or 27.05%. Among the revenues, air traffic revenue was RMB35,470 million, representing a year-on-year increase of RMB8,331 million or 30.70%. Other operating revenue was RMB2,194 million, representing a year-on-year decrease of RMB313 million or 12.49%.