Current Report by Foreign Issuer (SEC Filing - 6-K)

Exhibit 99.1

Contents

1

Definitions

Unless the context otherwise requires, the following terms should have the following meanings in this report:

2

3

Corporate Profile

The Group is the biggest airline in

China with the largest fleet,

the most extensive route network and

the largest annual passenger turnover.

The Group's headquarters is located in Guangzhou. It has 16 branches in Beijing, Shenzhen, and other cities and 8 holding aviation subsidiaries including Xiamen Airlines. The Company has set up SAGA in Zhuhai, and has set up 23 domestic offices in Hangzhou, Qingdao and other places, and 55 overseas offices in Sydney, New York, Tokyo and other places. By the end of 2020, the Company has operated a total of 867 passenger and cargo transport aircraft including Boeing 787, 777, 737 series, Airbus 380, 350, 330, 320 series. In 2020, the Group's passenger turnover ranked first among Chinese airlines for 42 consecutive years, and continued to rank first in Asia and at the forefront of the world. The Company has maintained the best safety record among Chinese airlines. The Company was awarded 'Two-Star Diamond Award for Flight Safety', the top award for flight safety from the CAAC, in June 2018 and has been an airline with the highest safety star in China.

4

In recent years, the Company has striven to build two comprehensive international hubs in Guangzhou and Beijing, and a network-based airlines has gradually taken shape. In 2020, the Company continued to strengthen the integrated construction of the Guangdong-Hong Kong-Macao Greater Bay Area, which promoted the flow of people, logistics, information and capital in Guangdong Province and the entire Guangdong-Hong Kong-Macao Greater Bay Area, and promoted the connectivity between the Guangdong-Hong Kong-Macao Greater Bay Area city cluster and major global city clusters. In 2020, the Company completed the transit of all flights in Beijing hub to Daxing Airport, and the construction of Beijing hub has entered a new era. The Group plans to operate an average of more than 400 flights per day at Daxing Airport, reaching more than 40 domestic destinations. By connecting with ground transportation, the Group forms an airlines network that radiates the Beijing-Tianjin-Hebei region and the Xiong' an New Area and connects the country and the world, with utilised time slots accounting for 45%, becoming the largest main base airlines in Daxing Airport.

AS OF 2020, THE GROUP'S PASSENGER TURNOVER RANKED FIRST AMONG CHINESE AIRLINES FOR 42 CONSECUTIVE YEARS, AND CONTINUED TO RANK FIRST IN ASIA AND AT THE FOREFRONT OF THE WORLD.

5

Corporate Information

6

7

Company

Business Summary

I.

The Principal Business and

Operating Model of the Company and the

Industry Summary during the Reporting Period

(I) Principal Business

The scope of business of the Company covers: (1) provision of scheduled and non-scheduled domestic, regional and international air transportation services for passengers, cargo, mail and luggage; (2) undertaking general aviation services; (3) provision of aircraft repair and maintenance services; (4) acting as agent for other domestic and international airlines; (5) provision of air catering services (operated by branch office only); (6) engaging in other airline or airline-related business, including advertising for such businesses; (7) engaging in other aviation businesses and related businesses (limited to insurance agency business personal accident insurance); provision of airline ground services; civil aircraft training (operated by branch office only according to licence); asset leasing services; project management and technical consultancy services; sales of aviation equipment; travel agency business; merchandise retail and wholesale. (For all projects subject to approval in accordance with laws, the business activities can only be carried out after obtaining approval by relevant authorities in accordance with the laws.)

(II) Profit Model, Operating Characteristics and Development Strategies

It has always been the intent and purpose of the Company to build a strategic framework of 'three-two-four-five-three' of world-class air transport enterprise. Guided by the development goals of the '14th Five-Year Plan' and the Long-Range Objectives Through the Year 2035, we will further focus on quality and efficiency, and have determined the overarching approach for quality development, being 'adhering to five concepts of development, implementing five strategies, promoting six campaigns, and achieving six transformations'.

8

The Company adheres to the 'five development' concepts of safety, high quality, innovation, cooperation and sharing; focuses on the 'five strategies' in relation to hub network, ecosystem, innovation-driven, lean management and control, and brand management; carries out 'six campaigns' on promoting safety production, grasping major strategic opportunities, deepening reforms in key areas, enhancing management to first class, optimizing and adjusting five major structures, improving service quality; and strives for 'six transformations' from speed-oriented to quality-oriented, from comprehensive market expansion to exploring key areas, from a relatively single industry to high relevance and diversified industries, from planning management and control to market operation, from the traditional business model to digitalization and ecological circle, and from extensive management to refined management.

(III) Development of Civil Aviation Industry and

Industrial Position of the Company

1. Information of Development of International and Domestic Aviation Industry

(1) Development of International Aviation Industry

Passenger demand dropped sharply and the revenue plummeted. According to data released by IATA, the global aviation industry has been deeply affected by the COVID-19 pandemic. In 2020, the global passenger traffic demand significantly decreased by 65.9% year-on-year in terms of RPK, among which, the international passenger transport demand significantly decreased by 75.6% year-on-year. The industry-wide passenger revenue was expected to fall to US$191.0 billion, representing a decrease of two-thirdsyear-on-year. The passenger load factor was 62.8%, representing a decrease of 19.2 percentage points year-on-year.

Cargo volumes fallen, but prices raised, and cargo revenues bucked the trend. According to data released by IATA, driven largely by the precipitous fall in global passenger demand and flight groudings, the capacity for cargo decreased by 23% year-on-year. The global air cargo volume was 54.20 million tonnes, down from 61.30 million tonnes in 2019. At the same time, due to strong demand for the transportation of anti-pandemic supplies, cargo revenues grew against the trend. The total cargo revenues of global airlines increased to US$117.7 billion, representing an increase of 30% year-on-year.

The recovery of the industry faces multiple challenges. According to IATA, the COVID-19 pandemic has caused severe financial damage to the industry. The debt level of global airlines has further risen, which weakens their ability to respond to risks. The process of global relaxation of travel restrictions and quarantine measures is still uncertain, which depends on the progress of global vaccination. According to IATA, the global air transport industry will remain in the red in 2021, and will not even turn a profit until 2022. As the crisis lasts longer than expected, more government assistance is needed to recover the industry.

9

(2) Development of China Aviation Industry

According to the data released by CAAC:

Safety and operation. In 2020, China's civil aviation transport achieved a safety record in continuous safety flight of 124 months and 89.43 million hours, and secured aviation safety for 18 consecutive years. The flight on-time performance rate in the China's civil aviation industry reached 88.52%, representing an increase of 20 percentage points from the end of the '12th Five-Year Plan' period. 233 airports were able to provide 'paperless' travel service for domestic flights, and 41 domestic airlines implemented the 'step rate' for ticket refunds and changes.

Production and results. In 2020, China's civil aviation achieved a total traffic volume of 79.85 billion ton-kilometers, a passenger traffic volume of 420 million and a cargo and mail transportation volume of 6.766 million tonnes. As of the end of 2020, the scale of China's civil aviation fleet reached 6,747 aircraft; the total mileage of air routes in China reached 237,000 kilometers; and the number of certified transportation airports nationwide amounted to 241, of which 39 were ten-million-level airports.

10

2. Features of Aviation Industry

(1) The development level of

civil aviation industry is an important display of

the comprehensive national strength

The civil aviation industry is an important strategic industry of the national economy. On one hand, its development level reflects the modernisation level, economy structure, opening level and other conditions of a country or a region. On the other hand, it is an important indicator to measure the national or regional economic competitiveness.

(2) Civil aviation industry is featured with commonality

Civil aviation industry plays a role that other transport methods cannot replace in promotion of international communication, providing service for public travel, emergency rescue and disaster relief, and many other social and public services. Aviation passenger transport is the basis for the development of the tourism industry and a safeguard for international political, economic and cultural communications. Aviation transport is routinely used for international transoceanic passenger transport. Aviation cargo transport is a must for the development of trade, logistics, high-tech and many other industries and the basis for the development of courier and postal industry.

(3) Civil aviation industry is featured with

high degree of technology content

Civil aviation industry is featured with high degree of technology content, long industry chains and advanced technology-integration. The development of the civil aviation industry provides vast room for the technological innovation of related fields. Especially, the upstream aviation manufacturing industry may drive the development and innovation of material, metallurgy, chemical, mechanical manufacturing, special processing, electronics, information and many other industries. It is a strategic industry and forerunner high-tech industry for a country's economic development and an important symbol of a country's modernization, industrialization, science and technology, and comprehensive national strength.

11

(4) Civil aviation industry is featured with

high risks and high investments

On one hand, high risks are reflected in uncertainties in air transport. The unsafe risk sources are very complex and diverse. There are many uncontrollable factors. Once there is any problem, the consequences are unthinkable. On the other hand, air transport are largely affected by political and economic situations, natural disasters and pandemic. The COVID-19 pandemic has caused a significant impact on the global aviation industry. At the same time, fluctuation of exchange rates, interest rates and aviation oil price will also affect the profits to a large extent. High investments are reflected in that airlines need to make huge investments in fixed assets, including investment in capacity input, infrastructure and technology reconstruction, among which, the cost of introducing aircraft, operation cost, and maintenance cost are huge. Airlines also need to input a huge fund for supporting infrastructure, facility, equipment and technology transformation.

3. Industrial Position of the Company

The Group is the biggest airline in China with the largest fleet, the most extensive route network and the largest annual passenger throughput. As at the end of reporting period, the Group has operated a total of 867 passenger and cargo transport aircraft including Boeing 787, 777, 737 series, Airbus 380, 350, 330, 320 series, etc. The Company maintains the best safety record among Chinese airlines. In June 2018, the Company was awarded 'Two-Star Diamond Award for Flight Safety', the top award for flight safety from the CAAC. The Company has been an airline with the highest safety star in China.

12

In recent years, the Company has striven to build two comprehensive international hubs in Guangzhou and Beijing, and a network-based airline has gradually taken shape. In 2020, the Company continued to strengthen the integrated construction of the Guangdong-Hong Kong-Macao Greater Bay Area, which promoted the flow of people, logistics, information and capital in Guangdong Province and the entire Guangdong-Hong Kong-Macao Greater Bay Area, and promoted the connectivity between the Guangdong-Hong Kong-Macao Greater Bay Area city cluster and major global city clusters. In 2020, the Company completed the transit of all flights in Beijing hub to Daxing Airport, and the construction of Beijing hub has entered a new era. The Group plans to operate an average of more than 400 flights per day at Daxing Airport, reaching more than 40 domestic destinations, through the connection with ground transportation, thus forming a network that radiates the Beijing-Tianjin-Hebei region and the Xiong'an New Area and an airline network that connects the country and the world, with utilised time slots accounting for 45%, becoming the largest main base airline at Daxing Airport.

(IV) Challenges

The major challenges faced by the Group include:

1. Impact of COVID-19 pandemic

In 2020, the COVID-19 pandemic spread globally. In order to control the pandemic, countries around the world successively adopted travel restrictions, which resulted in a sharp drop in global aviation passenger transport demand. China adopted strong pandemic prevention and control measures to take the lead in controlling domestic outbreaks. Both China's economy and the domestic aviation demand gradually recovered. However, the overseas outbreak has not been effectively controlled, the restriction policies for international routes remain strict, and the possible sporadic domestic outbreaks still have an adverse impact on the Company's operations. The travel restrictions of various nations are expected to be gradually lifted with the promotion of vaccination in the future. However, there are still huge uncertainties in the future recovery of aviation demand as affected by the vaccination production and global distribution.

13

2. Expansion of high-speed rail network

According to the data released by China State Railway Group Co., Ltd., by the end of 2020, China's railway operating mileage had reached 146,300 kilometers, of which high-speed rail mileage attained 37,900 kilometers. By 2035, the national railway network will reach about 200,000 kilometers, including about 70,000 kilometers of high-speed rail. Cities with a population of over 500,000 will be connected with high-speed rail lines so as to form the 1-2-3 hour travel range with high-speed rail. The operating speed of high-speed rail has continued to increase since 2007, with the maximum operating speed increasing from 250 kilometers per hour to 350 kilometers per hour. Further improvements are expected in the future. The operating results of the Company's routes that overlap with the high-speed rail network (especially routes with mileage of no more than 800 kilometers) will be impacted in the future to a certain extent.

3. Intensifying competition in the industry

In the domestic market, due to the impact of the COVID-19 pandemic, large transport capacity of international routes has been transferred to domestic routes. Thus, the supply-demand imbalance of the industry has intensified competition, and the ticket price of domestic routes may decline to a certain extent. In the international market, as the integration of the global aviation industry is accelerating, small airlines may be acquired or go bankrupt, while large airlines seek government assistance, which will impact the original structure of international cooperation.

4. Exchange rate fluctuation

In 2020, as global trade shrank sharply due to the impact of the COVID-19 pandemic, the monetary policies of developed countries were loosened accordingly, and the level of government debt reached a new high. The international financial market experienced substantial turbulence. The flexibility of RMB exchange rate continued to increase, but the overall trend was still relatively stable compared to other major currencies. Throughout the year, the spot exchange rate of RMB against US dollar showed an N-shaped trend of first rising, then falling and rising again. Exchange rate fluctuations have led to changes in the Company's financial expenses and will directly affect the Company's performance.

5. Crude oil prices

In 2020, due to the complex and changeable global political landscape, and the increasing downward pressure on the global economy, there were uncertainties for both supply and demand sides of international crude oil. At the beginning of 2020, international crude oil prices continued to fall and fluctuated sharply, and then slowly rebounded in a V-shaped trend. Fluctuations in crude oil prices have led to changes in the Company's fuel costs and will directly affect the Company's performance.

14

(V) Security Ensurence Input

During the reporting period, the Company always insisted on the principle of 'safety first', actively carried out a campaign to improve safety, deeply promoted the construction of seven major safety systems, and comprehensively improved safety management and control capabilities.

First, we carried out a three-year campaign to improve safety production. We specialized in the prevention and control of key risks such as pandemic prevention and control, and passenger-to-freighter shift, with focus on runway safety, dangerous cargo transportation and other risks. We established a joint prevention and control mechanism for mechanical failure and defect risks, and launched a risk prevention analysis project on transportation airport operation.

Second, we made efforts to promote the construction of seven major safety systems. We have actively promoted the construction of seven major safety systems centered on safety responsibility, regulations and manuals, training, process control, risk management and control, safety culture and technological innovation, as a way to build and improve the safety management and control system, and further strengthen the systematicness and coordination of the Company's safety management.

By the end of the reporting period, the Group continued to maintain the best safety records among Chinese airlines by successively realizing 21 aviation safety years.

II.

Analysis on the Core Competitiveness

during the Reporting Period

The Company's five core competitive strengths have begun to take shape, including its powerful and well-rounded scale and network advantages, its hub operations and management capability with Guangzhou-Beijing as its dual core hubs, its resource synergy capabilities combined with integrated operation and matrix management, its influential, high quality brand service and comprehensive leading information technology standards.

15

16

17

Adhering to five concepts of development,

namely safety, high quality, innovation, cooperation and sharing development.

18

Principal Accounting Information and Financial Indicators

Principal Accounting Information

Principal Financial Indicators

19

Summary of Operating Data

20

21

22

23

24

Summary of Fleet Data

As at 31 December 2020, the scale and structure of fleet and the delivery and disposal of aircraft of the Group were as follows:

25

From 2021 to 2023, the delivery and disposal plan of aircraft of the Group will be as follows:

Note:

The introduction and disposal plan of the fleet of the Company may be subject to adjustment based on future agreements and delivery of aircraft.

26

Highlights of the Year

24 January

Being the Chinese New Year's Eve, China Southern Airlines urgently arranged the first chartered flight of China's civil aviation to support the anti-pandemic in Wuhan.

9 February

China Southern Airlines donated RMB10.00 million, 10,000 sets of protective clothing and 30,000 masks to Hubei Province and related institutions. 28,059 party members in the Company voluntarily donated RMB4.0395 million.

23 March

The chartered flight of China Southern Airlines to send China's first anti-pandemic medical team to ASEAN countries arrived in Cambodia.

19 June

China Southern Airlines officially launched the construction of integrated service, and was positioned to offer 'affinity and refinement' service as a way to build a world-class service brand.

28 June

The first home-made passenger aircraft ARJ21 was introduced to China Southern Airlines.

27

28 July

The domestic travel package named 'Happy Flight (快樂飛)' of China Southern Airlines was officially launched. Passengers could 'redeem tickets for any domestic flight without limitation on weekends or working days' to meet the new travel needs of passengers.

8 September

The chief flight corps Boeing 777 fleet and chief attendant Tian Jing of China Southern Airlines were awarded the titles of 'Outstanding Team' and 'Outstanding Individual' at the commendation conference for national anti-pandemic held at the Great Hall of the People!

25 October

As all flights of China Southern Airlines in Beijing hub were transferred to Daxing Airport, CSA ushered in a new era for Beijing hub construction.

27 November

China Southern Airlines was once again awarded the title of 'National Benchmarking Enterprise of Customer Satisfaction' and certified as AAA-level, the highest of market quality and credit. 'Affinity and refinement' service has been favored by travelers.

20 December

The 'Green Flight' project of China Southern Airlines sent out green flight invitations to a total of 13.80 million passengers, and reduced 1.10 million in-flight meals wastage, thus achieving initial results in both 'affinity and refinement' service and effective operation.

22 December

The Freight and Logistic Company officially implemented the mixed ownership reform and became one of the national backbone aviation logistics enterprises with mixed ownership. China Southern Airlines achieved satisfactory results for the 'Double Hundred Action' in respect of the reform of state-owned enterprises.

28

Implementing five strategies,

namely hub network, ecosystem, innovation-driven, lean management and control, and brand management.

29

Management Discussion and Analysis

During the reporting period, with the joint efforts of the management and all staff, the Group effectively prevented and controlled the pandemic, continuously consolidated the safety foundation, achieved remarkable results in business respond, and accelerated the implementation of development strategies.

I.

Business Review

In 2020, the global COVID-19 pandemic caused the world economy to sink into its worst recession since the Great Depression, and the supply and demand loop of world economy was blocked. According to the World Economic Outlook issued by the International Monetary Fund, in 2020, the global economy experienced negative growth for the first time in nearly 10 years, with a decrease rate of 3.5%. China coordinated pandemic prevention and control with economic and social development, and took the lead in controlling the pandemic. It has gradually built a dual circulation development paradigm, in which domestic and overseas markets reinforce each other, making it the only major economy to achieve positive growth in 2020. With an annual economic growth of 2.3%, the annual GDP of China exceeded RMB100 trillion for the first time, and the poverty alleviation targets for the new era have been accomplished on schedule.

30

COVID-19 pandemic caused a significant impact on the global aviation industry. With aviation demand falling sharply, the global aviation industry, especially airlines, was struggling, and China's aviation industry also faced an unprecedentedly severe situation. Facing the severe challenges posed by the pandemic, the Group effectively organized pandemic prevention and control, ensured a stable security situation, seized market opportunities, reduced costs and enhanced efficiency, and steadily promoted the reform of systems and mechanisms. During the reporting period, with the joint efforts of the management and all staff, the Group effectively prevented and controlled the pandemic, continuously consolidated the safety foundation, achieved remarkable results in business operation, and accelerated the implementation of development strategies. In 2020, the Group achieved 2.08 million hours of safe flight, served approximately 96.86 million passengers, and recorded a substantial increase in profit from cargo logistics. The Company once again was awarded the title of the 'National Benchmarking Enterprise of Customer Satisfaction'.

1. Pandemic Prevention and Control

During the reporting period, the Group resolutely discharged the responsibilities for pandemic prevention and control, and coordinated the work at all levels. We immediately established a leading group for pandemic prevention and control, and initiated the highest level response to public health emergency; formulated a plan to provide full support for anti-pandemic transportation, and was the first in China to adopt a policy of free transportation for anti-pandemic supplies; and strictly implemented the anti-pandemic policies of China, reduced flights to key countries and regions, and continued to strengthen the overall control of passengers and all-round protection of employees. During the reporting period, the Group operated a total of 19,000 anti-pandemic flights, transported 25,000 medical personnel and 29,000 tonnes anti-pandemic supplies, and brought back 24,000 stranded compatriots; the Group recorded zero infection among passengers on board in international and domestic flights, and zero infection among all employees at work; and numbers of meritorious models emerged and were highly praised by the central government, superiors and all sectors of society.

Recorded

zero infection among passengers

on board in international

and domestic flights

Recorded

zero infection among

all employees

at work

31

The Group

continued to keep

the best safety record among

Chinese airlines.

2. Safety Management

During the reporting period, the Group firmly upheld safety baseline and formulated an outline for the construction of seven safety systems. We carried out a three-year campaign to improve safety production, in which a variety of technical means were applied in a comprehensive way to continuously promote the identification of work style issues, and conducted work style construction with the 'three awes' as the core. We improved the risk monitoring and early warning mechanism to identify and manage potential safety hazards. Close attention was paid to key areas and key risks, and prior and procedural control was strengthened so as to move ahead the safety threshold. As at the end of the reporting period, the Group had secured flight safety for 21 consecutive years and aviation security for 26 consecutive years, and continued to keep the best safety record among Chinese airlines.

3. Management Response

During the reporting period, the Group proactively adjusted its operating strategies in response to the development of the pandemic and the direction of government policy. We spared no efforts to secure passenger revenue, closely followed the changes in the pandemic, rollingly optimized domestic routes and flights, and seized international inbound passenger sources. To actively grasp the opportunity to increase revenue from freight logistics, we comprehensively improved the utilization rate of freighters, and organized 8,431 freight flight converted from passenger aircraft throughout the year, which achieved remarkable operating results. We strove to strengthen cost control, actively sought policy support, and drastically reduced costs. We took the initiative to reduce investment and adjusted the pace of aircraft capacity introduction in a timely manner. We expedited the revitalization and disposal of assets, and further enhanced the utilization rate of real estate.

32

Implemented over 1,100 cost-reduction and efficiency- enhancement measures

4. Hub Network

During the reporting period, the Group further advanced its hub network strategy and accelerated the construction of two comprehensive international hubs in Guangzhou and Beijing. We continued to establish the Guangzhou-Shenzhen joint hub and build a product system with 'Bay Area Link' products as the mainstay as a way to promote the integration of market, product, service, and network in the Guangdong-Hong Kong-Macao Greater Bay Area. We accelerated the construction of the Beijing hub, and completed relocation of all flights to Daxing Airport ahead of schedule. Efforts were made to strive for the reward of slots, optimize airport slots, and strengthen publicity and promotion as a way to operate the Beijing hub with all our strength. We positioned Hainan as a strategic key market and signed a strategic cooperation agreement with Hainan Province, strengthened collaboration with Xiamen Airlines and Sichuan Airlines to jointly build quality routes in Chengdu and other key markets, and signed new cooperation agreements with 20 international partners including American Airlines, Etihad Airways, and Aeroflot-Russian Airlines.

The annual fuel consumption per

ATK decreased by 6.6%

year-on-year

5. Lean Control

During the reporting period, the Group initially established a comprehensive market-based accounting system. We carried out lean cost management special activities, and developed new ideas for cost control, with implementation of over 1,100 cost-reduction and efficiency- enhancement measures, among which the best were incorporated as cost control instruments into the regulatory manual, so as to achieve standardization and institutionalization. Strict control was executed in terms of the cost on jet fuel, and landing fees. Adhering to green flight concept, we optimized air routes and balanced loading accurately so that the annual fuel consumption per ATK decreased by 6.6% year-on-year. We achieved diversified low-cost financing, which further optimized the Company's debt structure. We prevented and resolved risks in terms of oil prices, exchange rate, interest rate, cash flow, and receivables, and carried out foreign exchange and jet fuel hedging businesses with prudence.

33

6. Operation Service

During the reporting period, the Group deepened the construction of integrated operation and promoted the integrated services program. We continued to optimize our management and control model and carry out projects to increase flight on-time performance rates. By doing this, we maintained leading position in the industry in flight on-time performance rate for five consecutive years. We implemented value contribution accounting regarding quick-turn in stations to further improve operational efficiency. Efforts were made to continuously improve maintenance capabilities and strengthen technological innovation in engineering as a way to make operations more reliable. Positioned to offer 'affinity and refinement' service, we improved the service management and control system, and continuously optimized the travel experience of passengers with sincere service, so that we recorded the lowest complaint rate among the three major Chinese airlines. We launched the 'family service 360' and 'Kapok Brand' campaign. Passengers were encouraged to cancel meals in exchange for mileage, a green flight service of CSA. Our baggage tracking project obtained IATA Network-wide Compliance Certificate.

Maintained

Leading Position

in the industry in flight

on-time performance rate for

five consecutive years

Our baggage tracking project

obtained IATA

Network-wide Compliance Certificate

Awarded the title of the

'National Benchmarking Enterprise of Customer Satisfaction' again

34

7. Reform and Development

During the reporting period, the Group formulated a three-year action plan to deepen reforms, launched a campaign to improve management to first class of the world, and prepared the '14th Five-Year Plan' from a high starting point. We adjusted and optimized five major structures for fleet, market, manpower, industry, assets and liabilities, and focused on solving bottleneck problems that restricted high quality development. We conducted private placement of stocks and public issuance of convertible bonds to raise approximately RMB32 billion in total as a way to lay a solid foundation for development. Efforts were continuously made to improve the market-oriented operation mechanism, with introduction of tenure system and contract management measures. An IT framework of 'cloud platform & dual middle-platform' was established to initially build up a business sharing capability system. During the reporting period, the 'Double Hundred Action' mixed ownership reform of the Group was successfully implemented. Freight and Logistic Company and SAGA introduced strategic investors, improved corporate governance structure, reformed three systems and built market-oriented operating mechanism, which further broadened the development space for enterprises which performed the mixed ownership reform.

8. Social Responsibility

During the reporting period, the Group firmly promoted the green flight concept, deepened its work on poverty alleviation, and actively fulfilled its social responsibilities. We continued to optimize aircraft models and routes, focus on improving the efficiency of aviation fuel usage, and reduce greenhouse gas emissions. We continued to promote the application of new energy vehicles, and advance the inclusion of 'large-scale dynamic map route planning (大規模動態圖航路規劃)' into the national key research and development projects. The Company was awarded the title of 'Outstanding Units for Blue Sky Protection Campaign (藍天保衛戰工作先進單位)' by the CAAC. Continuous efforts were made to deepen the poverty alleviation model with CSA's characteristics. The Group carried out poverty alleviation work in 2 counties and 22 villages from 12 provinces, and dispatched 83 officials to take temporary posts or work in villages to alleviate poverty. As a result, all designated areas have been lifted out of poverty. The Company received the top recognition in the targeted poverty alleviation assessment of central enterprises in 2019.

35

II.

Financial Performance

Part of the financial information presented in this section below is derived from the Group's audited consolidated financial statements that have been prepared in accordance with IFRSs.

The net loss attributable to equity shareholders of the Company of RMB10,847 million was recorded in 2020 as compared to the net profit attributable to equity shareholders of the Company of RMB2,640 million in 2019. The Group's total operating revenue decreased by RMB61,761 million or 40.02% from RMB154,322 million in 2019 to RMB92,561 million in 2020. Passenger load factor decreased by 11.35 percentage points from 82.81% in 2019 to 71.46% in 2020. Yield per RPK decreased by 6.12% from RMB0.49 in 2019 to RMB0.46 in 2020. Yield per RTK decreased by 7.93% from RMB4.54 in 2019 to RMB4.18 in 2020. Operating expenses decreased by RMB39,497 million or 26.58% from RMB148,608 million in 2019 to RMB109,111 million in 2020. Mainly affected by the impact of the COVID-19 pandemic on the aviation industry, operating loss of RMB11,864 million was recorded in 2020 as compared to operating profit of RMB10,838 million in 2019.

III.

Operating Revenue

36

Substantially all of the Group's operating revenue is attributable to airlines transport operations. Traffic revenue accounted for 95.98% and 94.02% of the total operating revenue in 2019 and 2020, respectively. Passenger revenue and cargo and mail revenue accounted for 81.05% and 18.95%, respectively, of the total traffic revenue in 2020. During the reporting period, the Group's total traffic revenue was RMB87,027 million, representing a decrease of RMB61,090 million or 41.24% from prior year, because of the decrease in passenger revenue which is partially offset by the increase in cargo revenue. The decrease in passenger revenue was caused by the decrease of of traffic volume and air ticket price resulted from insufficient passenger confidence for travel and travel restriction due to the impact of COVID-19 pandemic. The other operating revenue of the Group is mainly derived from commission income, hotel and tour operation income, general aviation income, cargo handling income and ground services income.

The decrease in operating revenue was primarily due to a decrease in passenger revenue by 49.07% from RMB138,502 million in 2019 to RMB70,534 million in 2020. The total number of passengers carried decreased by 36.12% to 96.86 million passengers in 2020. RPKs decreased by 46.15% from 284,921 million in 2019 to 153,440 million in 2020, primarily due to the decrease in number of passengers carried resulted from insufficient passenger confidence for travel due to the impact of COVID-19 pandemic.

Domestic passenger revenue, which accounted for 81.94% of the total passenger revenue in 2020, decreased by 43.32% from RMB101,955 million in 2019 to RMB57,793 million in 2020. Domestic passenger traffic in RPKs decreased by 28.22%, while passenger capacity in ASKs decreased by 17.55%, resulting in a decrease in passenger load factor by 10.74 percentage points from 83.00% in 2019 to 72.26% in 2020. Yield per RPK decreased by 21.15% from RMB0.52 in 2019 to RMB0.41 in 2020.

Hong Kong, Macau and Taiwan passenger revenue, which accounted for 0.36% of total passenger revenue, decreased by 89.70% from RMB2,437 million in 2019 to RMB251 million in 2020. For Hong Kong, Macau and Taiwan flights, passenger traffic in RPKs decreased by 92.66%, while passenger capacity in ASKs decreased by 87.39%, resulting in a decrease in passenger load factor by 31.20 percentage points from 74.61% in 2019 to 43.41% in 2020. Passenger yield per RPK increased by 40.00% from RMB0.75 in 2019 to RMB1.05 in 2020.

37

International passenger revenue, which accounted for 17.71% of total passenger revenue, decreased by 63.38% from RMB34,110 million in 2019 to RMB12,490 million in 2020. For international flights, passenger traffic in RPKs decreased by 84.88%, while passenger capacity in ASKs decreased by 80.63%, resulting in a decrease in passenger load factor by 18.15 percentage points from 82.72% in 2019 to 64.57% in 2020. Passenger yield per RPK increased by 146.15% from RMB0.39 in 2019 to RMB0.96 in 2020.

Cargo and mail revenue, which accounted for 18.95% of the Group's total traffic revenue and 17.82% of total operating revenue, increased by 71.53% from RMB9,615 million in 2019 to RMB16,493 million in 2020. The increase was mainly attributable to the significant increase of demand for freight, especially international freight, due to the impact of COVID-19 pandemic.

Other operating revenue decreased by 10.81% from RMB6,205 million in 2019 to RMB5,534 million in 2020. The decrease was primarily due to the decrease of commission income, ground services income, general aviation income, and hotel and tour operation income.

IV.

Operating Expenses

Total operating expenses in 2020 amounted to RMB109,111 million, representing a decrease of RMB39,497 million or 26.58% comparing to that of 2019, as a result of the decrease of various traffic expenses due to the impact of COVID-19 pandemic. Total operating expenses as a percentage of total operating revenue increased from 96.30% in 2019 to 117.88% in 2020.

38

Flight operation expenses, which accounted for 34.41% of total operating expenses, decreased by 46.79% from RMB70,566 million in 2019 to RMB37,545 million in 2020, mainly resulted from the decrease of traffic volume due to the impact of COVID-19 pandemic and the decrease of employee emolument.

Maintenance expenses, which accounted for 12.26% of total operating expenses, stayed at the same level in amounts as compared to 2019.

Aircraft and transportation service expenses, which accounted for 17.18% of total operating expenses, decreased by 29.51% from RMB26,591 million in 2019 to RMB18,743 million in 2020. The decrease was primarily due to a decrease in the amounts of take-off and landing fees and navigation fees, from RMB17,658 million in 2019 to RMB10,857 million in 2020, resulting from the decrease of the number of flights due to the impact of COVID-19 pandemic.

Promotion and selling expenses, which accounted for 4.59% of total operating expenses, decreased by 35.44% from RMB7,755 million in 2019 to RMB5,007 million in 2020, mainly due to the decrease in sales commission and computer reservation services charges due to the impact of COVID-19 pandemic.

General and administrative expenses, which accounted for 3.75% of the total operating expenses, stayed at the same level in amounts as compared to 2019.

Depreciation and amortisation, which accounted for 22.53% of the total operating expenses, stayed at the same level in amounts as compared to 2019.

Impairment losses on property, plant and equipment and right-of-use assets, which accounted for 3.63% of the total operating expenses, increased from RMB18 million in 2019 to RMB3,961 million in 2020, mainly due to the increase of impairment provision for aircraft and related equipment.

V.

Operating (Loss)/Profit

Operating loss of RMB11,864 million was recorded in 2020 (2019: Operating profit of RMB10,838 million). The decrease in operating profit was mainly resulting from the decrease in traffic revenue due to the impact of the COVID-19 pandemic on the aviation industry.

VI.

Other Net Income

Other net income decreased by RMB438 million from RMB5,124 million in 2019 to RMB4,686 million in 2020, mainly resulted from the decrease in penalty income from group tickets along with the decreased number of international flights, and the decrease in airport construction fees and overseas airport taxes which are overdue and no need to refund, both due to the impact of the COVID-19 pandemic.

39

VII.

Income Tax

Income tax gains of RMB3,368 million was recorded in 2020 (2019: income tax expenses of RMB971 million was recorded), as the Company recorded operating loss as impacted by the COVID-19 pandemic, and recognised deferred tax asset for tax losses.

VIII.

Liquidity, Financial Resources and Capital Structure

As at 31 December 2020, the Group's net current liabilities was RMB56,696 million. For the year ended 31 December 2020, the Group recorded a net cash inflow from operating activities of RMB2,698 million, a net cash outflow from investing activities of RMB8,049 million and a net cash inflow from financing activities of RMB28,945 million, which in total resulted in an increase in cash and cash equivalents of RMB23,594 million. The increase in cash and cash equivalents was mainly attributable to the funds raised during the reporting period which included issuance of stocks and convertable bonds, and other sources of funding.

The Group's liquidity is dependent on its ability to maintain adequate cash inflow from operations, and its ability to obtain external financing to meet its debt obligations as they fall due and to meet its committed future capital expenditures. The Group's policy is to regularly monitor its liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term. As at 31 December 2020, the Group had banking facilities with several PRC banks and financial institutions for providing bank financing up to approximately RMB315,452 million (31 December 2019: RMB308,343 million), of which RMB228,188 million (31 December 2019: RMB251,165 million) was unutilised. The Directors of the Company believe that sufficient financing will be available to the Group.

The analyses of the Group's total interest-bearing liabilities are as follows:

Composition of interest-bearing liabilities

40

Analysis of interest-bearing liabilities by currency

Maturity analysis of interest-bearing liabilities

Interest expense and net exchange gain/(loss)

Interest expense increased by RMB871 million from RMB5,845 million in 2019 to RMB6,716 million in 2020, mainly due to the decrease in capitalized interest.

Net exchange gains of RMB3,485 million was recorded in 2020, as compared with a net exchange loss of RMB1,477 million in 2019. Net exchange gain was primarily attributable to the exchange difference arising from the lease liabilities denominated in USD, along with the appreciation of Renminbi against the U.S. dollar.

The Group's capital structure at the end of the year is as follows:

The Group monitors capital on the basis of debt ratio, which is calculated as total liabilities divided by total assets. The debt ratio decreased by 0.89 percentage point compared to that of the end of 2019, mainly due to the increase in cash and cash equivalents of the Group's financing activities during the reporting period.

41

IX.

Major Charge on Assets

As at 31 December 2020, no property, plant and equipment of the Group were mortgaged under loans (31 December 2019: RMB339 million).

X.

Commitments and Contingencies

Commitments

As at 31 December 2020, the Group had capital commitments (excluding investment commitment) of RMB66,996 million (31 December 2019: RMB86,246 million). Of which, RMB56,547 million (31 December 2019: RMB71,224 million) related to the acquisition of aircraft and related flight equipment and RMB10,449 million (31 December 2019: RMB15,022 million) related to other projects of the Group.

The Group had investment commitments as follows:

Contingent liabilities

42

XI.

Reconciliation of Differences in Financial Statements Prepared under PRC GAAP and IFRSs

Difference in net (loss)/profit and equity attributable to equity shareholders of the Company

disclosed in financial reports under IFRSs and PRC GAAP

Unit: RMB million

Explanation of differences between PRC GAAP and IFRSs

43

XII.

Capital Needs for Maintaining the Existing Business Operation and Completing the Investment Projects under Construction

Based on forecast on the cash flows for the eighteen months ending 30 June 2022, the Group is of the view that the Group will have sufficient funds to meet the needs for working capital and capital expenditures during such period. The Group's ability to pay off the payable due liabilities mainly depends on the Group's net inflow of working capital and the ability to obtain external financing. As for future capital commitment and other financing demand, as of 31 December 2020, the Group has obtained a maximum banking facilities of approximately RMB315,452 million for 2020 and subsequent years from several PRC banks, of which, the unused banking facilities reached approximately RMB228,188 million. The Group believes that it will be able to obtain such financing.

XIII.

Analysis of Operational Information from Industrial Perspective

1. Major information of operations

44

2. Capital arrangement for introducing aircraft and

related equipment during the reporting period

3. Capital expenditure plan and relevant financing plan for aircraft

and related equipment during 2021-2023

4. New flight routes during the reporting period and future launching plan

During the reporting period, the Company increased flights frequency for Beijing Daxing-Chongqing, Beijing Daxing-Chengdu, Beijing Daxing-Urumqi-Kashgar, Beijing Daxing-Xiamen, Guangzhou-Lanzhou-Dunhuang and other routes around the Guangzhou-Beijing core hub. At the same time, the Company also launched new domestic routes including Shanghai Pudong-Lanzhou, Shanghai Hongqiao-Nanning, Fuzhou-Nanjing-Dalian, Kunming-Hangzhou, Qingdao-Xi'an, and Nanning-Taiyuan, and continued to improve the route network. For international routes, as affected by the 'five ones' policy and the 'One Country, One Policy' of the CAAC, the international flights of the Company were substantially canceled or reduced during the reporting period, and the recovery will depend on policy adjustments. In 2020, the Company newly launched several international routes including Shenzhen-Nairobi, Wuhan-Islamabad, Fuzhou-Sapporo and Fuzhou-Fukuoka.

In 2021, with an aim of maximizing marginal contribution, the Company will increase capacity in the domestic market and improve the quality of revenue from international routes. For domestic routes, we plan to launch Beijing Daxing-Wuxi, Beijing Daxing-Ganzhou,Guangzhou-Tengchong,Guangzhou-Yibin,Guangzhou-Shashi,Guangzhou-Changbaishan etc., and for international routes, we will gradually recover flights, increase frequency and launch new routes depending on policy adjustments.

45

XIV.

Analysis on Investments

1. Major equity investment

On 21 December 2020, it was agreed by the Board of the Company that, the Company, Xiamen C&D Corporation Limited ('Xiamen C&D') and Fujian Investment Group Co., Ltd. ('Fujian Investment') would make capital contribution to Xiamen Airlines in an amount proportional to their respective equity interest in Xiamen Airlines. The total amount of capital contribution is RMB4.0 billion, of which RMB2.2 billion will be contributed by the Company in cash and physical assets in phases, RMB1.36 billion will be contributed by Xiamen C&D, and RMB440 million will be contributed by Fujian Investment. Upon completion of the capital contribution, shareholding of the Company, Xiamen C&D and Fujian Investment in Xiamen Airlines will remain unchanged as 55%, 34%, and 11%, respectively. For details, please refer to the section headed 'Connected Transactions' in this annual report and the announcement of the Company dated 21 December 2020 in relation to the capital contribution in Xiamen Airlines.

2. Financial assets carried at fair value

46

XV.

Major Assets and Shareholding Disposal

On 25 November 2020, the Company, SAGA, China Southern Power Grid Industry Investment Group Co., Ltd. (南方電網產業投資集團有限責任公司) ('CSP Investment Group'), Guoxin Shuangbai No. 1 (Hangzhou) Equity Investment Partnership (Limited Partnership) (國新雙百壹號(杭州)股權投資合夥企業 (有限合夥)) ('Shuangbai No. 1'), China Southern Airlines Group Capital Holding Limited (中國南航集團資本控股有限公司) ('Southern Airlines Capital') and Zhuhai General Aviation Investment Partnership (Limited Partnership) (珠海通航通投資合夥企業(有限合夥)) ('ZGA') entered into the Capital Increase and Equity Transfer Agreement, pursuant to which, the registered capital of SAGA was increased from RMB1 billion to RMB1.34228 billion through the capital contribution to be made by CSP Investment Group, Shuangbai No. 1, Southern Airlines Capital and ZGA, and the Company agreed to transfer part of its equity interests in SAGA to CSP Investment Group, Shuangbai No. 1 and Southern Airlines Capital. Prior to the completion of, the capital contribution and the equity transfer under the Capital Increase and Equity Transfer Agreement, SAGA is a wholly-owned subsidiary of the Company. After completion of the capital contribution and the equity transfer under the Capital Increase and Equity Transfer Agreement, SAGA was owned as to approximately 57.9%, 10.0%, 14.1%, 10.0% and 8.0% by the Company, CSP Investment Group, Shuangbai No. 1, Southern Airlines Capital and ZGA, respectively, and continued to be a subsidiary of the Company. Please refer to the section headed 'Connected Transactions' in this annual report and the announcement of the Company dated 25 November 2020 in relation to the (1) capital contribution and deemed disposal of SAGA; and the (2) disposal of equity interests in SAGA for details.

On 22 December 2020, the Company and Shanghai Yinnan Enterprise Management Partnership (Limited Partnership) (上海隱南企業管理合夥企業(有限合夥)), Taicang Zhongding Yuanxiang Equity Investment Partnership (Limited Partnership) (太倉市鐘鼎遠祥股權投資合夥企業(有限合夥)), Shuangbai No. 1, Zhuhai Junlian Yige Equity Investment Enterprise (Limited Partnership) (珠海君聯逸格股權投資企業(有限合夥)), Zhongjin Qichen (Suzhou) Emerging Industry Equity Investment Fund Partnership (Limited Partnership) (中金啟辰(蘇州)新興產業股權投資基金合夥企業(有限合夥)), Zhongjin Pucheng Investment Co., Ltd. (中金浦成投資有限公司), Sinotrans Limited (中國外運股份有限公司) and Zhuhai Yuanqi Enterprise Management Partnership (Limited Partnership) (珠海員祺企業管理合夥企業(有限合夥)) (the 'Investors') entered into the Capital Increase Agreement in relation to Southern Airlines Freight and Logistic (Guangzhou) Co., Ltd., pursuant to which, the Investors made capital contribution of RMB3,354,545,462 in total to the Freight and Logistic Company. After completion of the capital contribution, Freight and Logistic Company was owned as to approximately 55%, 10%, 10%, 10%, 5%, 1.9%, 0.6%, 3% and 4.5% by the Company, Shanghai Yinnan Enterprise Management Partnership (Limited Partnership), Taicang Zhongding Yuanxiang Equity Investment Partnership (Limited Partnership), Shuangbai No. 1, Zhuhai Junlian Yige Equity Investment Enterprise (Limited Partnership), Zhongjin Qichen (Suzhou) Emerging Industry Equity Investment Fund Partnership (Limited Partnership), Zhongjin Pucheng Investment Co., Ltd., Sinotrans Limited and Zhuhai Yuanqi Enterprise Management Partnership (Limited Partnership), respectively.

47

XVI.

Analysis on Major Subsidiaries and Joint Ventures and Associates

1. Major operational data of major holding aviation subsidiaries of the Group:

2. Information of Xiamen Airlines

Xiamen Airlines was established in August 1984 with registered capital of RMB14.0 billion. The legal representative is Wang Zhi Xue. The Company holds 55% of the shares in Xiamen Airlines; Xiamen C&D and Fujian Investment also hold 34% and 11% in Xiamen Airlines, respectively.

In 2020, Xiamen Airlines earned operating revenue of RMB20,675 million, representing a decrease of 36.60% as compared to the previous year; and net loss of RMB181 million was recorded in 2020 as compared to net profit of RMB784 million in 2019. As at 31 December 2020, Xiamen Airlines' total assets amounted to RMB53,267 million and net assets amounted to RMB18,803 million.

3. Information of Freight and Logistic Company

Freight and Logistic Company was established in June 2018 with registered capital of RMB1.8 billion. The legal representative is He Xiao Qun (何曉群). The Company holds 55% of the shares in Freight and Logistic Company.

In 2020, Freight and Logistic Company earned operating revenue of RMB15,397 million and a net profit of RMB4,013 million, representing an increase of 80.29% and 990.49%, respectively. As at 31 December 2020, Freight and Logistic Company's total assets amounted to RMB9,211 million and net assets amounted to RMB6,391 million.

48

4. Information of other major joint ventures and associates