SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM20-F

OR

For the fiscal year ended December 31, 2016

2017

OR

Commission file number1-14550

中国东方航空股份有限公司

(Exact Name of Registrant as Specified in Its Charter)

Kong Gang San Road, Number 92

Shanghai, 200335

People'sPeople’s Republic of China

Tel: (8621) 6268-6268

Fax: (8621) 6268-6116

(Address and Contact Details of the Board Secretariat'sSecretariat’s Office)

Securities
registered or to be registered pursuant to Section 12(b) of the Act:

* Not for trading, but only in connection with the registration of American Depositary Shares. The Ordinary H Shares are also listed and traded on The Stock

Exchange of Hong Kong Limited.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer'sissuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of December 31, 2016,2017, 9,808,485,682 Ordinary Domestic Shares, par value RMB1.00 per share, were issued and outstanding, and 4,659,100,000 Ordinary H Shares par value RMB1.00 per share, were issued and outstanding. H Shares are Ordinary Shares of the Company listed on The Stock Exchange of Hong Kong Limited. Each American Depositary Share represents 50 Ordinary H Shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes¨  ☐    Nox  ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934. ..    Yes¨  ☐    Nox  ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yesx  ☒    No¨  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulationS-Tduring the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes¨  ☒    Nox

  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer or a non-accelerated filer.an emerging growth company. See definition of "accelerated filer“large accelerated filer”, “accelerated filer” and large accelerated filer"“emerging growth company” in Rule12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.¨  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If "Other"“Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17¨  ☐    Item 18¨

  ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).     Yes  ☐    No  ☒

Yes¨Nox

SUPPLEMENTAL INFORMATION AND EXCHANGE RATES

In this Annual Report, unless otherwise specified, the term "dollars"“dollars”, "U.S. dollars"“U.S. dollars” or "US$"“US$” refers to United States dollars, the lawful currency of the United States of America, or the United States or the U.S.; the term "Renminbi"“Renminbi” or "RMB"“RMB” refers to Renminbi, the lawful currency of The People'sPeople’s Republic of China, or China or the PRC; and the term "Hong“Hong Kong dollars"dollars” or "HK$"“HK$” refers to Hong Kong dollars, the lawful currency of the Hong Kong Special Administrative Region of China, or Hong Kong.

Kong; the term “SGD” refers to Singapore dollars, the lawful currency of the Republic of Singapore; the term “JPY” refers to Japan Yen, the lawful currency of Japan; the term “EUR” refers to EURO, the lawful currency of EMU member countries and the term “KRW” refers to Korea Won, the lawful currency of the Republic of Korea. Any discrepancies in the tables included herein between the amounts listed and the totals are due to rounding.

In this Annual Report, the term "we"“we”, "us"“us”, "our"“our”, "our/“our/the Company"Company”, or "our Group"“our Group” refers to China Eastern Airlines Corporation Limited, a joint stock limited company incorporated under the laws of the PRC on April 14, 1995, and our subsidiaries, or, in respect of references to any time prior to the incorporation of China Eastern Airlines Corporation Limited, the core airline business carried on by its predecessor, China Eastern Airlines, which was assumed by China Eastern Airlines Corporation Limited pursuant to the restructuring described in this Annual Report. The term "CEA Holding"“CEA Holding” refers to our parent, China Eastern Air Holding Company, which was established on October 11, 2002 as a result of the merger of our former controlling shareholder, Eastern Air Group Company, or EA Group, with China Northwest Airlines Company and Yunnan Airlines Company.

For the purpose of this Annual Report, references to The People'sPeople’s Republic of China, China and the PRC do not include Hong Kong, Taiwan, or the Macau Special Administrative Region of China, or Macau.

See "Item“Item 3. Key Information — Exchange Rate Information"Information” for details of exchange rates.

CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS

Certain information contained in this Annual Report may be deemed to constitute forward-looking statements. These forward-looking statements include, without limitation, statements relating to:

The words or phrases "aim"“aim”, "anticipate"“anticipate”, "believe"“believe”, "continue"“continue”, "could"“could”, "estimate"“estimate”, "expect"“expect”, "going forward"“going forward”, "intend"“intend”, "may"“may”, "ought to"“ought to”, "plan"“plan”, "potential"“potential”, "predict"“predict”, "project"“project”, "seek"“seek”, "should"“should”, "will"“will”, "would"“would”, and similar expressions or the negatives thereof, as they relate to our Company or its management, are intended to identify "forward-looking statements"“forward-looking statements” within the meaning of Section 27A of theSecurities Act of 1933, as amended, and Section 21E of theSecurities and Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements are based on current plans and estimates, and speak only as of the date they are made. We undertake no obligation to update or revise any forward-looking statement in light of new information, future events or otherwise. Forward-looking statements are, by their nature, subject to inherent risks and uncertainties, some of which are beyond our control, and are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in particular circumstances. We caution you that a number of important factors could cause actual outcomes to differ, or to differ materially, from those expressed in any forward-looking statement, including, without limitation:

GLOSSARY OF TECHNICAL TERMS

PART I

Not applicable.

Not applicable.

Item 3. Key Information

Pursuant to U.S. Securities and Exchange Commission (“SEC” or “Securities and Exchange Commission”) Release33-8879 " “Acceptance from Foreign Private Issuers of Financial Statements Prepared in Accordance with International Financial Reporting Standards without Reconciliation to U.S. GAAP" “ eliminating the requirement for foreign private issuers to reconcile their financial statements to U.S. GAAP, we prepare our financial statements based on International Financial Reporting Standards, or IFRSs, as issued by the International Accounting Standards Board, or the IASB, and no longer provide a reconciliation between IFRSs and U.S. GAAP.

Our consolidated financial statements as of December 31, 20152016 and 20162017 and for the years ended December 31, 2014, 2015, 2016 and 20162017 included in this Annual Report on Form20-F have been prepared in accordance with IFRSs.

We make an explicit and unreserved statement of compliance with IFRSs with respect to our consolidated financial statements as of December 31, 20152016 and 20162017 and for the years ended December 31, 2014, 2015, 2016 and 20162017 included in this Annual Report. Ernst & Young Hua Ming LLP, our current independent registered public accounting firm in Hong Kong,the PRC, has issued an unqualified auditors’auditor’s report on our consolidated statement of financial position as of December 31, 2014, 2015 and 20162017 and the related consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the yearsyear ended December 31, 2014,2015 and 2016. 2017. The selected financial data from the consolidated profit or loss and other comprehensive income for the years ended December 31, 2014, 2015 and 2016 and the selected financial data from the consolidated financial position as of December 31, 2014, 2015 and 2016 have been derived from our audited consolidated financial statements, which have been prepared in accordance with IFRSs, and audited by Ernst & Young, an independent registered public accounting firm in Hong Kong. The selected financial data from the consolidated profit or loss and other comprehensive income for the year ended December 31, 2013 and the selected financial data from the consolidated financial position as of December 31, 2013 have been derived from our audited consolidated financial statements, which have been prepared in accordance with IFRSs, and audited by Ernst & Young Hua Ming LLP, an independent registered public accounting firm in the PRC. The selected financial data from the consolidated income statements for the years ended December 31, 2012 and the selected financial data from the balance sheets as of December 31, 2012 have been derived from our audited consolidated financial statements, which have been prepared in accordance with IFRSs, and audited by PricewaterhouseCoopers, an independent registered public accounting firm in Hong Kong.

The following tables present selected consolidated profit or loss and comprehensive income data for the years ended December 31, 2012, 2013, 2014, 2015, 2016 and 20162017 and selected consolidated statements of financial position data as of December 31, 2012, 2013, 2014, 2015, 2016 and 20162017 that were prepared under IFRSs. The selected financial information as of December 31, 20152016 and 20162017 and for the years ended December 31, 2014, 2015, 2016 and 20162017 has been derived from, and should be read in conjunction with, the audited consolidated financial statements and their notes included elsewhere in this Annual Report.

Exchange Rate Information

We present our historical consolidated financial statements in Renminbi. For the convenience of the reader, certain pricing information is presented in U.S. dollars and certain contractual and other amounts that are in Renminbi or Hong Kong dollars amounts include a U.S. dollar equivalent. Unless otherwise noted, all translations from RMB to U.S. dollars, from Hong Kong dollars to U.S. dollars, from U.S. dollars to RMB and from U.S. dollars to Hong Kong dollars in this Annual Report were made at the rate of RMB6.9430RMB6.5063 to US$1.00 and HK$7.75347.8128 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve Board on December 30, 2016.29, 2017. We make no representation that the Renminbi, Hong Kong dollar or U.S. dollar amounts referred to in this Annual Report could have been or could be converted into U.S. dollars, Hong Kong dollars or Renminbi, as the case may be, at any particular rate or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade.

On April 21, 2017,13, 2018, the exchange rates as set forth in the H.10 statistical release of the Federal Reserve Board were RMB6.8845=RMB6.2725=US$1.00 and HK$7.7757=7.8499=US$1.00. The following table sets forth information concerning exchange rates between the RMB, Hong Kong dollar and the U.S. dollar for the periods indicated. The source of these rates is the Federal Reserve Statistical Release.

The following table sets forth the average rates between Renminbi and U.S. dollars and between Hong Kong dollars and U.S. dollars for each of the periods indicated. The exchange rate refers to the exchange rate as set forth in the G. 5A statistical release of the Federal Reserve Board.

Source: Federal Reserve Statistical Release

Selected Operating Data

The following table sets forth certain of our operating data for the five years ended December 31, 2016,2017, which is not audited. All references in this Annual Report to our cargo operations, statistics or revenues include figures for cargo and mail.

		Year Ended December 31,
		2013				2014				2015				2016				2016				2017
														(non-comparable basis) (1)				(comparable basis)(2)
Selected Airline Operating Data:
Capacity:
ATK (millions)			21,714.8				22,538.5				25,203.0				28,002.3				25,097.6				27,396.9
ASK (millions)			152,075.2				160,585.1				181,792.9				206,249.3				—				225,996.3
AFTK (millions)			8,028.0				8,085.8				8,841.7				9,439.9				6,535.2				7,057.3
Traffic:
Revenue passenger-kilometers (millions)			120,461.1				127,749.9				146,342.43				167,529.2				—				183,182.0
Revenue tonne-kilometers (millions)			15,551.8				16,122.4				17,820.4				19,712.9				17,333.1				18,856.1
Revenue freight tonne-kilometers (millions)			4,857.2				4,802.4				4,865.1				4,875.2				2,495.4				2,663.0
Hours flown (thousands)			1,540.4				1,625.1				1,804.4				1,956.5				1,918.8				2,072.7
Number of passengers carried (thousands)			79,093.7				83,811.5				93,780.0				101,741.6				—				110,811.4
Weight of cargo carried (millions of kilograms)			1,410.3				1,363.3				1,399.4				1,395.0				929.3				933.3
Load Factor:
Overall load factor (%)			71.6				71.5				70.7				70.4				69.1				68.8
Passenger load factor (%)			79.2				79.6				80.5				81.2				—				81.1
Yield and Cost Statistics (including fuel surcharge) (RMB):
Passenger yield (passenger revenue/ passenger- kilometers)			0.61				0.61				0.56				0.52				—				0.52
Cargo and mail yield (cargo and mail revenue/cargo and mail tonne-kilometers)			1.57				1.55				1.33				1.25				1.25				1.36
Average yield (passenger and cargo revenue/ tonne- kilometers)			5.18				5.28				4.94				4.71				5.18				5.25
Unit cost (operating expenses/ATK)			4.12				3.90				3.44				3.28				3.66				3.67

Notes:

Not applicable.

Not applicable.

Risks Relating to our Business

We may suffer losses in the event of an accident or incident involving our aircraft or the aircraft of any other airline.

As an airline company operating a large fleet, an accident or incident involving one of our aircraft could result in delays and require repair or replacement of a damaged aircraft, which could result in consequential temporary or permanent losses from disruption of service and/or significant liability to injured passengers and others. Unforeseeable or unpredictable events such as inclement weather, mechanical failures, human error, aircraft defects and other force majeure events may affect flight safety, which could result in accidents and/or incidents of passenger injuries or deaths that could lead to significant injury and loss claims. Although we believe that we currently maintain liability insurance in amounts and of the types generally consistent with industry practice, the amount of such coverage may not be adequate to cover the costs related to an accident or incident in full, which could damage our results of operations and financial condition. In addition, any aircraft accident or incident, even if fully insured, could cause a public perception that we are not as safe or reliable as other airlines, which could harm our competitive position and result in a decrease in our operating revenues. Moreover, a major accident or incident involving an aircraft of our competitors may cause the demand for air travel in general to decrease. In particular, certain of our competitors in the Asia Pacific region experienced major aircraft accidents and incidents in 2014, some of which involved destinations and routes that we cover. These accidents and incidents were highly publicized in the media and may have affected public perception of certain air travel routes. The occurrence of any of the foregoing could adversely affect our results of operations and financial condition.

Our indebtedness and other financial obligations may have a material adverse effect on our liquidity and operations.

We have a substantial amount of debt, lease and other financial obligations, and will continue to do so in the future. As of December 31, 2017, our total liabilities were approximately RMB170,949 million and our current liabilities exceeded our current assets by approximately RMB62,035 million. Our total interest-bearing liabilities (including long-term and short-term borrowings, finance leases payable and bonds payable) as of December 31, 2016 and 2017 were approximately RMB117,773 million and RMB130,669 million, respectively, of which short-term liabilities accounted for approximately 30.0% and 37.0%, respectively. Our substantial indebtedness and other financial obligations could materially and adversely affect our business and operations, including being required to dedicate additional cash flow from operations to the payment of principal and interest on our indebtedness, thereby reducing the funds available for operations, maintenance and service improvements and future business opportunities, increasing our vulnerability to economic recessions, reducing our flexibility in responding to changing business and economic conditions, placing us at a disadvantage compared to competitors with lower debt, limiting our ability to arrange for additional financing for working capital, capital expenditures and other general corporate purposes, at all or on terms that are acceptable to us.

Moreover, we are largely dependent upon cash flows generated from our operations and external financing to meet our debt repayment obligations and working capital requirements, which may reduce the funds available for other business purposes. If our operating cash flow is materially and adversely affected by factors such as increased competition, a significant decrease in demand for our services, or a significant increase in jet fuel prices, our liquidity would be materially and adversely affected. We also try to secure sufficient financing through financing arrangements with domestic and foreign banks in China as well as from debt and equity capital markets. However, our ability to obtain financing may be affected by our financial position and leverage, our credit rating and investor perception of the aviation industry, as well as prevailing economic conditions and the cost of financing in general. If we are unable to obtain adequate financing for our capital requirements, our liquidity and operations would be materially and adversely affected.

In addition, the airline industry overall is characterized by a high degree of operating leverage. Due to high fixed costs, including payments made in connection with aircraft leases, and landing and infrastructure fees which are set by government authorities and not within our control, the expenses relating to flight operations do not vary proportionately with the number of passengers carried, while revenues generated from a particular flight are directly related to the number of passengers carried and the fare structure of the flight. Accordingly, a decrease in revenues may result in a disproportionately higher decrease in profits.

We may not be able to secure future financing at terms acceptable to us or at all.

We require significant amounts of external financing to meet our capital commitments for acquiring and upgrading aircraft and flight equipment and for other general corporate needs. As of December 31, 2017, we had total unutilized credit facilities of approximately RMB59.47 billion from various banks. We expect to roll over these bank facilities in the near future. In addition, we generally acquire aircraft through either long-term capital leases or operating leases. In the past, we have obtained guarantees from Chinese banks in respect of payments under our foreign loan and capital lease obligations. However, we cannot assure you that we will be able to roll over our bank facilities or continue to obtain bank guarantees in the future. Unavailability of credit facilities or guarantees from Chinese banks or the increased cost of such guarantees may materially and adversely affect our ability to borrow additional funds or enter into international aircraft lease financing or other additional financing on acceptable terms In addition, if we are not able to arrange financing for our aircraft on order, we may seek to defer aircraft deliveries or use cash from operations or other sources to acquire the aircraft.

Our ability to obtain financing may also be impaired by our financial position, leverage and credit rating. In addition, factors beyond our control, such as recent global market and economic conditions, volatile oil prices, and the tightening of credit markets may result in limited availability of financing and increased volatility in credit and equity markets, which may materially adversely affect our ability to secure financing at reasonable costs or at all. If we are unable to obtain financing for a significant portion of our capital requirements, our ability to expand our operations, purchase new aircraft, pursue business opportunities we believe to be desirable, withstand any future downturn in our business, or respond to increased competition or changing economic conditions may be impaired. We have and in the future will likely continue to have substantial debts. As a result, the interest costs associated with these debts might impair our future profitability.

We are subject to the risk of fuel price fluctuations.

Jet fuel is one of the major expenses of airlines. Significant fluctuations of international oil prices will significantly impact jet fuel prices and our revenue from fuel surcharge and accordingly our results of operations. In 2017, our total aircraft fuel cost was approximately RMB25,131 million, representing an increase of approximately 28.1% from approximately RMB19,626 million in 2016, which was mainly due to an increase in average price of oil as the Organization of Petroleum Exporting Countries (“OPEC”) and other oil suppliers efficiently squeezed excess supply of oil in the market and the political upheaval in the Middle East increased the uncertainty of oil production, and to a lesser extent, an increase in the volume of refueling from 2016 to 2017. In 2017, our total aircraft fuel cost accounted for approximately 25.0% of our total operating expenses, as compared to approximately 21.4% in 2016.

The fluctuations of international crude oil prices and adjustments on domestic jet fuel prices by the National Development and Reform Commission (the “NDRC”) have a significant impact on our profitability. Our results of operation and financial condition are affected by any significant fluctuations that may occur, which are generally due to factors beyond our control. As such, we generally alleviate the pressure from the rise in operating costs arising from the increase in aviation fuel by imposing fuel surcharges, which, however, are subject to government regulations. In order to control fuel costs, we have also entered into fuel hedging transactions using financial derivative products linked to the price of underlying assets such as United States WTI crude oil and Singapore jet fuel during previous years.

Since 2009, the PRC government required prior governmental approval for entering into fuel hedging contracts. We may, from time to time, seek approval from the PRC government to enter into overseas fuel hedging contracts. However, these hedging strategies may not always be effective and high fluctuations in aviation fuel prices exceeding thelocked-in price ranges may result in losses. Significant decline in fuel prices may substantially increase the costs associated with such fuel hedging arrangements. In addition, where we may, from time to time, seek to manage the risk of fuel price increases by using derivative contracts, we cannot assure you that, at any given point in time, such fuel hedging transactions will provide any particular level of protection against increased fuel costs. In 2017, we did not engage in any aviation fuel hedging activities.

We are subject to the risk of exchange rate fluctuations.

We operate our business in many countries and territories. We generate revenue in different currencies, and our foreign currency liabilities are typically much higher than our foreign currency assets. Our purchases and leases of aircraft are mainly priced and settled in foreign currencies such as U.S. dollars. Fluctuations in exchange rates will affect our costs incurred from foreign purchases such as aircraft, flight equipment and aviation fuel, andtake-off and landing charges in foreign airports. As of December 31, 2017, our total interest-bearing liabilities denominated in foreign currencies, amounted to approximately RMB46,789 million, of which U.S. dollar liabilities accounted for approximately 78.7% of the total amount. Therefore, a significant fluctuation in the U.S. dollar exchange rates will subject us to significant foreign exchange loss/gain arising from the exchange of foreign currency denominated liabilities, which would affect our profitability and business development. We typically use hedging contracts for foreign currencies to reduce the foreign exchange risks for foreign currency revenues generated from flight ticket sales and expenses required to be paid in foreign currencies. As of December 31, 2017, the outstanding foreign currency hedging contracts held by us amounted to a notional amount of US$829 million, which will expire in 2018, compared with US$440 million as of December 31, 2016.

We recorded net foreign exchange gains of approximately RMB2,001 million in 2017, whereas our net foreign exchange losses were approximately RMB3,574 million for 2016. As a result of the large value of existing net foreign currency liabilities denominated in U.S. dollars, our results would be adversely affected if the Renminbi depreciates against the U.S. dollar or the rate of appreciation of the Renminbi against the U.S. dollar decreases in the future. In 2017 and the first quarter of 2018, we expanded our financing channels by issuing guaranteed bonds and credit enhanced bonds denominated in SGD and JPY, and proactively optimized the mix of currency denomination of our debts. As of December 31, 2017, our proportion of U.S. dollar-denominated debts out of our total liabilities decreased to approximately 28.2%. Our foreign exchange fluctuation risks are also subject to other factors beyond our control.

We are subject to the risk of interest rate fluctuations.

Our total interest-bearing liabilities (including long-term and short-term loans and finance leases payable) as of December 31, 2016 and 2017 were approximately RMB117,773 million and RMB130,669 million, respectively, of which short-term liabilities accounted for approximately 30.0% and 37.0%, respectively, and long-term liabilities accounted for approximately 70.0% and 63.0%, respectively. Most of the long-term interest-bearing liabilities were liabilities with floating interest rates. Both the short-term liabilities and long-term interest-bearing liabilities were affected by fluctuations in current market interest rates.

Our interest-bearing liabilities were primarily denominated in RMB and USD. As of December 31, 2016 and December 31, 2017, our liabilities denominated in RMB accounted for approximately 49.1% and 64.2% of our total liabilities, respectively, and liabilities denominated in USD accounted for approximately 44.9% and 28.2% of our total liabilities, respectively. Fluctuations in interest rates of interest-bearing liabilities denominated in these two currencies have and will continue to have significant impact on our finance costs. As of December 31, 2017, the average interest rates of ourRMB-denominated liabilities,USD-denominated liabilities,EUR-denominated liabilities,SGD-denominated liabilities andKRW-denominated liabilities was approximately 3.9%, 2.6%, 0.3%, 2.8% and 2.3%, respectively. In the first quarter of 2018, we also issued credit enhanced bonds denominated in JPY with total principal of JPY50.0 billion due in 2021, bearing fixed interest at the rate of 0.33% per annum and 0.64% per annum for different tranches. To cope with the risk of interest rate fluctuation, we strategically changed our debt portfolio by replacing ourUSD-denominated liabilities with floating interest rates withUSD-denominated liabilities with fixed interest rates. As of December 31, 2017, ourUSD-denominated liabilities with fixed interest rate was approximately USD1,980 million and accounted for approximately 49.8% of our total long-termUSD-denominated liabilities, increasing from approximately 16.7% as of December 31, 2015. As of December 31, 2017, our outstanding foreign currency interest rate swap contracts amounted to a notional amount of USD1,420 million, as compared to USD1,636 million as of December 31, 2016. These contracts will expire between 2018 and 2025. We will continue to optimize our liability structure to lower relevant risks by taking consideration of various factors including the market environment, interest rates and strategic plan. However, we cannot assure you that the relevant lending rates may not increase in the future for reasons beyond our control, which may adversely affect our business, prospects, cash flows, financial condition and results of operations. In addition, we expect to issue bonds and notes or enter into additional loan agreements and aircraft leases in the future to fund our operations and capital expenditures, and the cost of financing for these obligations will depend greatly on market interest rates.

Increases in insurance costs or reductions in insurance coverage may have adverse impact our results of operations and financial condition.

We could be exposed to significant liability or loss if our property or operations were to be affected by a natural catastrophe or other event, including aircraft accidents. We maintain insurance policies but we are not fully insured against all potential hazards and risks incident to our business. If we are unable to obtain sufficient insurance with acceptable terms or if the coverage obtained is insufficient relative to actual liability or losses that we experience, whether due to insurance market conditions, policy limitations and exclusions or otherwise, our results of operations and financial condition could be adversely affected.

We may experience difficulty integrating our acquisitions, which could result in a material adverse effect on our operations and financial condition.

We may from time to time expand our business through acquisition of airlines or airline-related businesses. We are devoting significant resources to the integration of our operations in order to achieve the anticipated synergies and benefits of the absorption and acquisitions mentioned above. See “Item 4. Information on the Company” for details. However, such acquisitions involve uncertainties and a number of risks, including:

We cannot assure you that we will not have difficulties in assimilating the operations, technologies, services and products of newly acquired companies or businesses. Moreover, the continued integration of our acquired companies into our Company depends significantly on integrating the employees of our acquired companies with our employees and on maintaining productive employee relations. In the event that we are unable to efficiently and effectively integrate newly acquired companies or airline-related businesses into our Company, we may be unable to achieve the objectives or anticipated synergies of such acquisitions and such acquisitions may adversely impact the operations and financial results of our existing businesses.

ChangesWe may be unable to retain key management personnel or pilots.

We are dependent on the experience and industry knowledge of our key management personnel and pilots, and there can be no assurance that we will be able to retain them. Any inability to retain our key management employees or pilots, or attract and retain additional qualified management employees or pilots, could have a negative impact on our operations and profitability.

Our controlling shareholder, CEA Holding, holds a majority interest in our Company, and its interests may not be aligned with other shareholders.

Most of the economic policiesmajor airlines in China are currently majority-owned by either the central government or provincial or municipal governments in China. As of December 31, 2017, CEA Holding holds directly or indirectly 56.38% of our Company’s equity stake on behalf of the PRC government. As a result, CEA Holding could potentially elect the majority of the board of directors of the Company (“Board of Directors” or the “Board”) and otherwise be able to control us. CEA Holding also has sufficient voting control to effect transactions without the concurrence of our minority shareholders. The interests of the PRC government as the ultimate controlling shareholder of our Company and most of the other major PRC airlines could conflict with the interests of our minority shareholders. Although the CAAC currently has a policy of equal treatment of all PRC airlines, we cannot assure you that the CAAC will not favor other PRC airlines over our Company.

As our controlling shareholder, CEA Holding has the ability to exercise controlling influence over our business and affairs, including, but not limited to, decisions with respect to:

We engage in related party transactions, which may materiallyresult in conflict of interests.

We have engaged in, from time to time, and may continue to engage in, in the future, a variety of transactions with CEA Holding and its various members, from whom we receive a number of important services, including support forin-flight catering and assistance with importation of aircraft, flight equipment and spare parts. Because we are controlled by CEA Holding and CEA Holding may have interests that conflict with our interests, we cannot assure you that CEA Holding will not take actions that will serve its interests over the Company’s interests.

We may not be able to accurately report our financial results or prevent fraud if we fail to maintain effective internal controls over financial reporting, resulting in adverse investor perception, which in turn could have a material adverse effect on our reputation and the performance of our shares and ADSs.

We are required under relevant United States securities laws and regulations to disclose in the reports that we file or submit under the Exchange Act to the SEC, including our annual report on Form20-F, a management report assessing the effectiveness of our internal controls over financial reporting at the end of the fiscal year. Our registered public accounting firm is also required to provide an attestation report on the effectiveness of our internal controls over financial reporting. Our management concluded that our internal controls over financial reporting were effective as of December 31, 2017. However, we may discover other deficiencies or material weaknesses in the course of our future evaluation of our internal controls over financial reporting and we may be unable to address and rectify such deficiencies in a timely manner. Any failure to maintain effective internal controls over financial reporting could lead to diminished investor confidence in the reliability of our consolidated financial statements, thereby adversely affecting our business, operations, and reputation, including negatively affecting our performance in the securities markets and decreasing potential opportunities to obtain financing in the capital markets.

As part of our business strategy, we have adopted various measures to develop the international side of our business and to enhance our competitiveness in the international long-distance flight routes. Due to the differences in certain legal and market environments, we have encountered certain challenges during the course of developing our overseas business. We have already adopted and will continue to implement measures in order to enhance the internal controls of our overseas offices and to continue the development of our overseas business.

Any failure or disruption of our computer, communications, flight equipment or other technology systems could have an adverse impact on our business operations, profitability, reputation and customer services.

We rely heavily on computer, communications, flight equipment and other technology systems to operate our business and enhance customer service. Substantially all of our tickets are issued to passengers as electronic tickets, and we depend on our computerized reservation system to be able to issue, track and accept these electronic tickets. In addition, we rely on other automated systems for crew scheduling, flight dispatch and other operational needs. These systems could be disrupted due to various events, including natural disasters, power failures, terrorist attacks, equipment failures, software failures, computer viruses, cyber attacks and other events beyond our control. We cannot assure you that the measures we have taken to reduce the risk of some of these potential disruptions are adequate to prevent disruptions to or failures of these systems. Any substantial or repeated failure of or disruption to these systems could result in the loss of important data and/or flight delays, and could have an adverse impact on our business operations, profitability, reputation and customer services, including being liable for paying compensation to our customers.

We are subject to cyber security risks and may incur increasing costs in an effort to minimize those risks.

The nature of our business involves the receipt and storage of personal information about our customers. We have a program in place to detect and respond to data security incidents. To date, all incidents we have encountered have been insignificant.If we commit a significant data security breach or fail to detect and appropriately respond to a significant data security breach, we could be exposed to government enforcement actions and private litigation. In addition, our customers could lose confidence in our ability to protect their personal information, which could cause them to stop using our services. The loss of consumer confidence from a significant data security breach could hurt our reputation and adversely affect our business, result of operations and financial condition.

Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants, costs incurred in connection with the notifications to employees, suppliers or the general public as part of our notification obligations to the various government authorities that govern our business, or costs to dedicate significant resources to system repairs or other increase cyber security protection. We may also be required to pay fines in connection with stolen customer, employee or other confidential information, or incur significant litigation or other costs.

Interruptions or disruptions of service at one or more airports in our primary market could have an adverse impact on us.

Our business is heavily dependent on our operations at our core hub airports in Shanghai, namely, Hongqiao International Airport and Pudong International Airport and our regional hub airports in Xi’an and Kunming. Each of these operations includes flights that connect our primary market to other major cities. Any significant interruptions or disruptions of service at one or more of our primary market airports could adversely impact our operations.

Any adverse public health developments, including SARS, Ebola, avian flu, or influenza A (H1N1), or the occurrence of natural disasters may, among other things, lead to travel restrictions and reduced levels of economic activity in the affected areas, which may in turn significantly reduce demand for our services and have a material adverse effect on our financial condition and results of operations.

SinceAdverse public health epidemics or pandemics could disrupt businesses and the late 1970s,national economy of China and other countries where we do business. The outbreak of Severe Acute Respiratory Syndrome, or SARS, in early 2003 led to a significant decline in travel volumes and business activities and substantially affected businesses in Asia. Moreover, some Asian countries, including China, have encountered incidents of the PRC government has been reforming the Chinese economic system. These reformsH5N1 strain of avian flu, many of which have resulted in significant economic growthfatalities. In addition, outbreaks of, and social progress. These policiessporadic human infection with, influenza A (H1N1) in 2009, a highly contagious acute respiratory disease, were reported in Mexico and measures may be modified or revised from time to time. Adverse changesan increasing number of countries around the world, some cases resulting in economicfatalities. In addition, in April 2013, there has been an ongoing outbreak of the H7N9 strain of avian flu, which has largely been centered in eastern China, and social conditionshas resulted in China,fatalities in that region, including Shanghai. Furthermore, in 2014, an outbreak of Ebola virus, a highly contagious hemorrhagic fever with a relatively high fatality rate, in certain African countries resulted in confirmed cases in the policies ofUnited States and Europe. We are unable to predict the PRC government or in the laws and regulations of China,potential impact, if any, that the outbreak of influenza A (H1N1) or any other serious contagious disease or the effects of another outbreak of SARS, any strain of avian flu or Ebola may have a material adverse effect on our business.

Natural disasters, such as earthquakes, snowstorms, floods or volcanic eruptions such as that of Eyjafjallajökull in Iceland in April and May of 2010 and the overall economic growthnatural disasters in Japan in early 2011 may disrupt or seriously affect air travel activity. Any period of China and investments in and profitability ofsustained disruption to the domestic airline industry. These developments, in turn,industry may have a material adverse effect on our business, financial condition and results of operations.

ChangesTerrorist attacks or the fear of such attacks, even if not made directly on the airline industry, could negatively affect the Company and the airline industry as a whole. The travel industry continues to faceon-going security concerns and cost burdens.

The aviation industry as a whole has been beset with high-profile terrorist attacks, most notably on September 11, 2001 in the foreign exchange regulationsUnited States. The CAAC has also implemented increased security measures in relation to the PRCpotential threat of terrorist attacks. Terrorist attacks, even if not made directly towards us or on the airline industry, or the fear of or the precautions taken in anticipation of such attacks (including elevated threat warnings or selective cancellation or redirection of flights) could materially and adversely affect us and the entire airline industry. In addition, potential or actual terrorist attacks may result in fluctuationssubstantial flight disruption costs caused by grounding of the Renminbifleet, significant increase of security costs and adversely affectassociated passenger inconvenience, increased insurance costs, substantially higher ticket refunds and significantly decreased traffic and RPK. International terrorist attacks targeting aircraft and airport not only directly threatens our ability to pay dividends or to satisfy our foreign currency liabilities.

A significant portion of our revenue and operating expenses are denominated in Renminbi, while a portion of our revenue, capital expenditures and debts are denominated in U.S. dollars and other foreign currencies. The Renminbi is currently freely convertible in the current account, which includes payment of dividends, trade and service-related foreign currency transactions, but not in the capital account, which includes foreign direct investment, unless approval from or registration or filing with the relevant authorities, is obtained. As a foreign invested enterprise approved by the PRC Ministry of Commerce (the "MOFCOM"), we can purchase foreign currencies without the approval of State Administration of Foreign Exchange (the "SAFE") for settlement of current account transactions, including for the purpose of dividend payment, by providing commercial documents evidencing these transactions. We can also retain foreign currencies in our current accounts, subject to a maximum amount approved by SAFE, to satisfy foreign currency liabilities or pay dividends. The relevant PRC government authorities may limit or eliminate our ability to purchase and retain foreign currencies in the future. Foreign currency transactions in the capital account are still subject to limitations and require approvals from SAFE. This may affect our ability to raise foreign capital through debt or equity financing, including through loans or capital contributions. We cannot assure you that we will be able to obtain sufficient foreign currencies to pay dividends, if any, or satisfy our foreign currency liabilities.

Furthermore, the value of the Renminbi against the U.S. dollar and other currencies may fluctuate significantly and is affected by, among other things, the PRC government policies, domestic and international economic and political conditions and changes in the supply and demand of the currency. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy resulted in appreciation of the Renminbi against the U.S. dollar by approximately 7.0% in 2008. While there was no material appreciation of Renminbi against the U.S. dollar in 2009, the Renminbi appreciated by approximately 3.0% against the U.S. dollar in 2010 and by approximately 5.1% in 2011. In April 2012, the PBOC widened the daily trading band of the Renminbi against the U.S. dollar,flight safety, aviation security, operational safety and the Renminbi was allowed to appreciate or depreciate by 1.0% from the PBOC central parity rate, effective April 16, 2012. In March 2014, the PBOC further widened the daily trading bandsafety of the Renminbi against the U.S. dollar,overseas institutions and the Renminbi was allowed to appreciate or depreciate by 2% against the U.S. dollar from the daily central parity rate, effective March 17, 2014. On August 11, 2015, the PBOC executed a 2% devaluation in the Renminbi. Within the following two days, the Renminbi depreciated 3.5% against the U.S. dollar. The Renminbi depreciated 6.7% against the U.S. dollar from January 4, 2016 to December 30, 2016. However, it remains unclear what further fluctuations may occur or whatemployees, but also brings abouton-going adverse impact this will have on the value of the Renminbi. It is possible that the PRC government could adopt a more flexible foreign exchange policy, which could result in further and more significant revaluations of the Renminbi against the U.S. dollar or any other foreign currency. Any resulting fluctuations in exchange rates as a result of such policy changes mayoutbound tourism demand for places where terrorist attacks have an adverse effect on our financial condition and results of operations.taken place.

Our operations may be adversely affected by rising inflation rates in the PRC.

Inflation rates in the PRC have been on a sharp uptrend in recent years. The PRC government has undertaken numerous contractionary policies, including raising interest rates and reserve requirement ratios, and curbing bank lending, to slow down excessive economic growth and control price hikes. Increase in inflation is due to many factors beyond our control, such as rising production and labor costs, high debts, changes in the PRC and foreign governmental policy and regulations, and movements in exchange rates and interest rates. PRC inflation rates have been in a general downtrend after peaking in the middle of 2011, and increased to 3.6% as of March 2012. In 2013, PRC inflation rates fluctuated with two peaks of 3.2% in February and October 2013. In 2014, the inflation rates fluctuated with two peaks in May and July 2014. In 2015, the inflation rates fluctuated, reaching a peak of 2.0% in August 2015. In 2016, the inflation rates fluctuated, peaking at 2.3% in February, March, April and November 2016. The national consumer price index was 2.6% in 2013, equal to that of 2012. The national consumer price index was 2.1%, 1.4% and 2.0% in 2014, 2015 and 2016, respectively. We cannot assure you that inflation rates will not increase in the future. If inflation rates rise beyond our expectations, the costs of our business operations may become significantly higher than anticipated, and we may be unable to pass on such higher costs to consumers in amounts that are sufficient to cover those increasing operating costs. As a result, further inflationary pressures in the PRC may have a material adverse effect on our business, financial condition and results of operations, as well as our liquidity and profitability.

Any withdrawal of, or changes to, tax incentives in the PRC may adversely affect our results of operations and financial condition.

Prior to January 1, 2008, except for a number of preferential tax treatment schemes available to various enterprises, industries and locations, business enterprises in China were subject to an enterprise income tax rate of 33% under the relevant PRC Enterprise Income Tax Law. On March 16, 2007, China passed a new enterprise income tax law, or the EIT Law, which took effect on January 1, 2008. The EIT Law imposes a uniform income tax rate of 25% for domestic enterprises and foreign invested enterprises. Business enterprises enjoying preferential tax treatment that was extended for a fixed term prior to January 1, 2008 will still be entitled to such treatment until such fixed term expires. Certain of our subsidiaries are entitled to preferential tax treatment, allowing us to enjoy a lower effective tax rate that would not otherwise be available to us. To the extent that there are any increases in the applicable effective tax rate, withdrawals of, or changes in, our preferential tax treatment or tax exemptions, our tax liability may increase correspondingly.

Uncertainties embodied in the PRC legal system may limit certain legal protection available to investors.

The PRC legal system is a civil law system based on written statutes. Unlike common law systems, decided legal cases have little precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. Legislation over the past 20 years has significantly enhanced the protection afforded to foreign investors in China. However, the interpretation and enforcement of some of these laws and regulations involve uncertainties that may limit the legal protection available to investors. Such uncertainties pervade as the legal system in the PRC continues to evolve. Even where adequate laws exist in the PRC, the enforcement of the existing laws or contracts may be uncertain and sporadic, and it may be difficult to obtain swift and equitable enforcement, including enforcing a foreign judgment. In addition, the PRC legal system is based on written statutes and their interpretation; prior court decisions may be cited as reference but have limited authority as precedents. As such, any litigation in the PRC may be protracted and result in substantial costs and diversion of our resources and management attention. We have full or majority board control over the management and operation of all of our subsidiaries established in the PRC. The control over these PRC entities and the exercise of shareholder rights are subject to their respective articles of association and PRC laws applicable to foreign-invested enterprises in the PRC, which may be different from the laws of other developed jurisdictions.

The PRC has not developed a fully integrated legal system and certain recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in the PRC. The relative lack of experience of the PRC's judiciary in many cases also creates additional uncertainty as to the outcome of any litigation. In addition, interpretation of statutes and regulations may be subject to government policies reflecting domestic political changes. Furthermore, in case of new laws and regulations, the interpretation, implementation and enforcement of these laws and regulations would involve uncertainties due to the lack of established practice or published court decisions available for reference. We cannot predict the future legal development in the PRC, including promulgation of new laws, changes to existing laws or interpretation or enforcement thereof, or inconsistencies between the local rules and regulations and the national law. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have a retroactive effect. As a result, we may not be aware of any violations until sometime after the violation has occurred. This may also limit the remedies available to investors and to us in the event of any claims or disputes with third parties.

The auditors’ reports included in this annual report are prepared by relying on audit work which is not inspected by the Public Company Accounting Oversight Board and, as such, investors may be deprived of the benefits of such inspection.

Auditors of companies that are registered with the SEC and traded publicly in the United States, including our independent registered public accounting firm, must be registered with the Public Company Accounting Oversight Board (United States), or the PCAOB, and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards. Because we have substantial operations within China, our auditor relied on its China affiliate to perform audits on our consolidated financial statements, and the PCAOB is currently unable to conduct inspections of the work done by our auditor as it relates to our operations without the approval of the Chinese authorities, our auditor’s work related to our operations in China is not currently inspected by the PCAOB. This lack of PCAOB inspection of audit work performed in China prevents the PCAOB from regularly evaluating the audit work performed by any auditor in China including our auditor. As a result, investors may be deprived of the full benefits of PCAOB inspections.

The inability of the PCAOB to conduct inspections of audit work performed in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures as compared to auditors in other jurisdictions that are subject to PCAOB inspections for all their work. Investors may lose confidence in our reported financial information and procedures and the quality of our consolidated financial statements.

Proceedings instituted by the SEC against certain PRC-based accounting firms, including the China affiliate of our independent registered public accounting firm, could result in financial statements being determined not to comply with the requirements of the Exchange Act.

In December 2012, the SEC brought administrative proceedings against five accounting firms in China, including the Chinese affiliate of our independent registered public accounting firm, alleging that they had refused to produce audit work papers and other documents related to certain other China-based companies under investigation by the SEC. On January 22, 2014, an initial administrative law decision was issued, censuring these accounting firms and suspending four of these firms from practicing before the SEC for a period of six months. The decision is neither final nor legally effective unless and until reviewed and approved by the SEC. On February 12, 2014, four of these PRC-based accounting firms appealed to the SEC against this decision. In February 2015, each of the four PRC-based accounting firms agreed to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC. The settlement requires the firms to follow detailed procedures to provide the SEC with access to the Chinese firms’ audit documents via the CSRC. If the firms do not follow these procedures, the SEC could impose sanctions such as suspensions, or it could restart the administrative proceedings.

In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, listed companies in the United States with major PRC operations may find it difficult or impossible to retain auditors in respect of their operations in the PRC, which could result in financial statements being determined not to be in compliance with the requirements of the Exchange Act, and possibly delisting of the securities. Moreover, any negative news about the proceedings against these audit firms may cause investor uncertainty regarding China-based U.S.-listed companies and the market price of our ADSs may be adversely affected.

If the Chinese affiliate of our independent registered public accounting firm was denied, even temporarily, the ability to practice before the SEC and we were unable to find another registered public accounting firm in a timely manner to audit and issue an opinion on our financial statements, our financial statements could be determined not to be in compliance with the requirements of the Exchange Act. Such determination could ultimately lead to our delisting from the NYSE or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States.

Risks Relating to the Aviation Industry

Our business is subject to extensive government regulation.

The Chinese civil aviation industry is subject to a high degree of regulation by the CAAC. Regulatory policies issued or implemented by the CAAC encompass virtually every aspect of airline operations, including, among other things:

Our ability to provide services on international routes is subject to a variety of bilateral civil air transport agreements between China and other countries, international aviation conventions and local aviation laws. As a result of government regulations, we may face significant constraints on our flexibility and ability to expand our business operations or to maximize our profitability.

The downward trend in domestic and global economy could affect air travel.

The airline industry is highly cyclical, and the level of demand for air travel is correlated to the strength of domestic and global economies. Robust demand for our air transportation services depends largely on favorable general economic conditions, including the strength of global and local economies, low unemployment, strong consumer confidence and availability of consumer and business credit. In 20082017, the global economy had a steady recovery. Simultaneous economic growth were shown in developed economies, major emerging economies and 2009,developing countries. China’s economy had a steady to good growth which was better than expected. The economic structures continued to optimize and the economiescontributions of the United States, Europe and certain countries in Asia experienced a severe and prolonged recession and China experienced a slowdown in overall economic growth, which led to a reduction in economic activity. As a result, we continued to experience significantly weaker demand for air travel, especially for international routes in 2009. In response to these market conditions, we reduced our international flights and reallocated our capacity by focusing more on the domestic market.

In 2016, global economic growth slowed down. The economic growth rate of China ranked at the top among major economies, with promising progress being made in adjusting its economic structure and gradually increasing consumption expenditure. As the standard of household income rises, bringing robust demand for outbound tourism and consumption, the air passenger transportation market continued to report stable growth. Due to a variety of factors, including the slowdown in the growth rate of total world trade volume and fierce market competition, the air cargo transportation industry has relatively underperformed in 2016. In 2016, the air transportationservice industry continued to benefitincrease. Benefited from the relatively low international crude oil prices, but was adversely affected by exchange rate fluctuations, international political volatility and terrorist incidents overseas.

In addition, whilefavorable continual recovery of the PRC government has instituted and is expected to continue implementing certain initiatives in response to periods of slowdownglobal economy, the global aviation industry had a continuous rise in the PRC economy, a rapid increase in liquiditydemand of travelers. The China’s civil aviation maintained its relatively fast growth rate. However, we cannot assure you that such recovery and growth will continue in the marketfuture. The global economy is facing uncertainties, such as a resultthe rise of fiscal stimulus measures led totrade protectionism and the PRC government implementing a numberoccasional occurrence of measures to control such rapid increases, including adjusting interest rates. These foregoing factorsgeopolitical risks. If the macroeconomic climate worsens or trading dispute and any further decline in economic activity may reduce domestic or international demand for air travel andconflicts are created, our growth in the domestic and international aviation markets may slow down significantly, which could have a material adverse effect on our revenues, results of operations and liquidity. For example, our cargo business is highly dependent upon servicing the logistics needs of the semi-conductor industry. A slowdown in this particular industry couldfinancial condition may be adversely affect our cargo business segment.affected.

We operate in a highly competitive industry.

We face intense competition in each of the domestic, regional and international markets that we serve. In our domestic market, we compete against all airlines that have the same routes, including smaller domestic airlines that have lower operating costs. In the regional and international markets, we compete against international airlines that have significantly longer operating history, better brand recognition, or more resources, such as large sales networks or sophisticated reservation systems. See the section headed "Item“Item 4. Information on the Company — Business Overview — Competition"Competition” for more details. The public'spublic’s perception of safety of Chinese airlines could also materially and adversely affect our ability to compete against our international competitors. To stay competitive, we have, from time to time in the past, lowered airfares for certain of our routes, and we may continue to do so in the future. Increased competition and pricing pressures may have a material adverse effect on our financial condition and results of operations.

We expect to face substantial competition from the rapid development of the Chinese rail network.

The PRC government is aggressively implementing the expansion of its high-speed rail network, which has provided train services at a speed of up to 350 kilometers per hour connecting major cities such as Beijing, Shanghai, Guangzhou and Hong Kong. The expansion of rail network, improvements in railway service quality, increased passenger capacity and urban center accessibility could enhance the competitiveness of the railway service and negatively affect our market share on some of our key routes, in particular our routes of between 500km500 km to 800km.800 km. The high-speed railway routes between Shanghai and Kunming, Baoji and Lanzhou and Xi’an and Chengdu commenced operations in 2017, and has affected our Xi’an and Chengdu route, Guiyang and Kunming route, Xi’an and Xining route and Xi’an and Lanzhou route. Increased competition and pricing pressures from the railway service may have an adverse effect on our business, financial condition and results of operations.

Limitations on foreign ownership of PRC airlines may affect our access to funding in the international equity capital markets or pursuing business opportunities.

The current CAAC policies limit foreign ownership of PRC airlines. Under these rules,non-PRC, Hong Kong, Macau or Taiwan residents cannot hold a majority equity interest in a PRC airline. As of December 31, 2016,2017, approximately 32.20% of our total outstanding shares were held bynon-PRC, Hong Kong, Macau or Taiwan residents or legal entities (excluding the qualified foreign institutional investors that are approved to invest in the A Share market of the PRC). As a result, our access to funding in the international equity capital markets may be limited. This restriction may also limit the opportunities available to us to obtain funding or other benefits through the creation of equity-based strategic alliances with foreign carriers. We cannot assure you that the CAAC will not increase these limits on foreign ownership of PRC airlines in the future.

Any jet fuel shortages or any increase in jet fuel prices may materially and adversely affect our financial condition and results of operations.

The availability and prices of jet fuel have a significant impact on our financial condition and results of operations. In the past, jet fuel shortages have occurred in China and, on limited occasions, required us to delay or cancel flights. Although jet fuel shortages have not occurred since the end of 1993, we cannot assure you that jet fuel shortages will not occur in the future. Fuel prices continue to be susceptible to, among other factors, political unrest in various parts of the world, Organization of Petroleum Exporting CountriesOPEC policies, the rapid growth of the economies of certain countries, including China and India, the inventory levels carried by industries, the amount of reserves built by governments, disruptions to production and refining facilities and weather conditions. Fuel efficiency of our aircraft decreases as they advance in age which results in an overall increase in our aviation fuel costs. The foregoing and other factors that impact the global supply and demand for jet fuel may affect our financial performance due to its sensitivity to fuel prices.

JetIn 2017, fuel prices were volatile in 2013recovered from the previous decline as the OPEC and 2014, with heightened political tensions and continued political instability in certain Middle Eastern countries and in Crimea bordering Ukraine. In 2014, the average priceother oil suppliers efficiently squeezed excess supply of fuel decreased by 4.7% compared to 2013. Fuel prices continued to decrease during 2015. At the beginning of 2016, the price of the jet fuel rebounded after hitting the lowest price recorded to date. As a result, certain OPEC countries and Russia agreed to restrict production which caused the price of Brent oil to increase by approximately 5.0%. However, due to the relatively higher jet fuel price in the first half of 2015,market and the average price of the jet fuel in 2016 declined, representing a year-on-year decrease of 15.0% (15.1%political upheaval in the PRC domestic market and 14.7%Middle East increased the uncertainty of oil production. Setting aside the adjustment in the international market). In 2016, setting aside adjustment factors such as fuel surcharge, if the average price of jet fuel had increased or decreased by 5%, our jet fuel costs of would have increased or decreased by approximately RMB981 million.RMB1,257 million in 2017. In addition, the National Development and Reform Commission (the "NDRC")NDRC adjusts gasoline and diesel prices in China from time to time, taking into account the changes in international oil prices, thereby affecting aviation fuel prices. In 2016,2017, we didhave not engage in anyconducted aviation fuel hedging activities. As such, we cannot assure you that jet fuel prices will not fluctuate further in the future. Due to the highly competitive nature of the airline industry, we may be unable to fully or effectively pass on to our customers any future increase in jet fuel costs.

The airline industry is subject to increasing environmental regulations, which would increase costs and affect profitability.

In recent years, regulatory authorities in China and other countries have issued a number of directives and other regulations to address, among other things, aircraft noise and engine emissions, the use and handling of hazardous materials, aircraft age and environmental contamination remedialclean-up measures. These requirements impose high fees, taxes and substantial ongoing compliance costs on airlines, particularly as new aircraft brought into service will have to meet the environmental requirements during their entire service life.

We have significant expenditures in respect of environmental compliance, which may affect our operations and financial condition. For example, we implemented a low-carbon emissions scheme, which over 90% of our planes are complying with and aligns with our environmentally-friendly growth strategy to minimize the environmental impact of our operations. We expedited the application of new civil aviation technologies, continuously focused on the development of renewable resources and concentrated on the invention and application of new technologies and applications to achieve "greener" flying. We have worked with the China National Petroleum Corporation (the "CNPC") to conduct experimental research on bio-fuels, which are being developed as a possible alternative to kerosene jet fuel and could lead to a 30% reduction in carbon dioxide emissions. In addition, all of our B737NG and some of our A320 series aircraft newly introduced are equipped with a winglet or sharklet, an additional lifting surface to reduce fuel consumption and noises. We also took measures to reduce the impact of our operations on the environment by optimizing our route network and flight schedules as well as installing energy-saving environmentally friendly engines. In addition, we continue to improve the energy efficiency of our fleet by introducing aircraft with energy-saving technologies, such asB737-8 Max and by retiring old aircraft. However, these measures have resulted in significant costs and expenditures. We expect to continue to incur significant costs and expenditures on an ongoing basis to comply with environmental regulations, which could restrict our ability to modify or expand facilities or continue operations.

Our results of operations tend to be volatile and fluctuate due to seasonality.

The aviation industry is characterized by annual high and low travel seasons. Our operating revenue is substantially dependent on the passenger and cargo traffic volume carried, which is subject to seasonal and other changes in traffic patterns, the availability of appropriate time slots for our flights and alternative routes, the degree of competition from other airlines and alternate means of transportation, as well as other factors that may influence passenger travel demand and cargo and mail volume. As a result, our results tend to be volatile and subject to rapid and unexpected change.

Risks Relating to the Company

PRC

We may suffer lossesChanges in the eventeconomic policies of an accident or incident involvingthe PRC government may materially affect our aircraft or the aircraftbusiness, financial condition and results of any other airline.operations.

As an airline company operating a large fleet, an accidentSince the late 1970s, the PRC government has been reforming the Chinese economic system. These reforms have resulted in significant economic growth and social progress. These policies and measures may be modified or incident involving one of our aircraft could resultrevised from time to time. Adverse changes in delayseconomic and require repair or replacement of a damaged aircraft, which could resultsocial conditions in consequential temporary or permanent losses from disruption of service and/or significant liability to injured passengers and others. Unforeseeable or unpredictable events such as inclement weather, mechanical failures, human error, aircraft defects and other force majeure events may affect flight safety, which could resultChina, in accidents and/or incidents of passenger injuries or deaths that could lead to significant injury and loss claims. Although we believe that we currently maintain liability insurance in amounts andthe policies of the types generally consistent with industry practice, the amount of such coverage may not be adequate to cover the costs related to an accidentPRC government or incident in full, which could damage our results of operations and financial condition. In addition, any aircraft accident or incident, even if fully insured, could cause a public perception that we are not as safe or reliable as other airlines, which could harm our competitive position and result in a decrease in our operating revenues. Moreover, a major accident or incident involving an aircraft of our competitors may cause the demand for air travel in general to decrease. In particular, certain of our competitors in the Asia Pacific region experienced major aircraft accidentslaws and incidents in 2014, someregulations of which involved destinations and routes that we cover. These accidents and incidents were highly publicized in the media and may have affected public perception of certain air travel routes. The occurrence ofChina, if any, of the foregoing could adversely affect our results of operations and financial condition.

Our indebtedness and other financial obligations may have a material adverse effect on our liquidity and operations.

We have a substantial amount of debt, lease and other financial obligations, and will continue to do so in the future. During the period between the end of 2008 and April 2009, the amount of our total liabilities exceeded our total assets. In 2014, we added a total of 75 aircraft to our fleet, by purchase or finance lease (excluding operating lease), including B777 series for long-haul flights, A330 series for long and medium-haul flights and A320 series and B737NG series for medium and short-haul flights. On February 28, 2014, we entered into an agreement with Airbus SAS regarding the purchase of 70 new A320NEO aircraft, which are expected to be delivered to us in stages from 2018 to 2020. On June 13, 2014, we entered into agreements with Boeing Company to purchase 80 new B737 series aircraft, to be delivered in stages from 2016 to 2020. On July 9, 2015, we entered into a purchase agreement with Boeing Company to purchase 50 new Boeing B737 series aircraft, which are expected to be delivered to us in stages from 2017 to 2019. On August 14, 2015, we entered into a purchase agreement with Airbus SAS to purchase 15 new Airbus A330 series aircraft, which are expected to be delivered to us in stages from 2017 to 2018.On April 28, 2016, we entered into an airbus purchase agreement with Airbus SAS to purchase 20 brand new Airbus A350-900 aircraft. On the same date, we also entered into a Boeing purchase agreement with Boeing Company to purchase 15 brand new Boeing B787-9 aircraft. See the section headed "Item 4. Information on the Company — Property, Plant and Equipment — Fleet." As of December 31, 2016, our total liabilities were RMB159,958 million and our current liabilities exceeded our current assets by RMB52,194 million. Our total interest-bearing liabilities (including long-term and short-term borrowings, finance leases payable and bonds payable) as of December 31, 2015 and 2016 were RMB119,111 million and RMB117,773 million, respectively, of which short-term liabilities accounted for 37.2% and 30.0%,, respectively. Our substantial indebtedness and other financial obligations could materially and adversely affect our business and operations, including being required to dedicate additional cash flow from operations to the payment of principal and interest on our indebtedness, thereby reducing the funds available for operations, maintenance and service improvements and future business opportunities, increasing our vulnerability tooverall economic recessions, reducing our flexibility in responding to changing business and economic conditions, placing us at a disadvantage compared to competitors with lower debt, limiting our ability to arrange for additional financing for working capital, capital expenditures and other general corporate purposes, at all or on terms that are acceptable to us.

Moreover, we are largely dependent upon cash flows generated from our operations and external financing (including short-term bank loans) to meet our debt repayment obligations and working capital requirements, which may reduce the funds available for other business purposes. If our operating cash flow is materially and adversely affected by factors such as increased competition, a significant decrease in demand for our services, or a significant increase in jet fuel prices, our liquidity would be materially and adversely affected. We have arranged financing with domestic and foreign banks in China as necessary to meet our working capital requirements. We have also tried to ensure our liquidity by structuring a substantial portion of our short-term bank loans to be rolled over upon maturity. These efforts, however, may ultimately prove to be insufficient. Our ability to obtain financing may be affected by our financial position and leverage, our credit rating and investor perception of the aviation industry, as well as prevailing economic conditions and the cost of financing in general. If we are unable to obtain adequate financing for our capital requirements, our liquidity and operations would be materially and adversely affected.

In addition, the airline industry overall is characterized by a high degree of operating leverage. Due to high fixed costs, including payments made in connection with aircraft leases, and landing and infrastructure fees which are set by government authorities and not within our control, the expenses relating to flight operations do not vary proportionately with the number of passengers carried, while revenues generated from a particular flight are directly related to the number of passengers carried and the fare structure of the flight. Accordingly, a decrease in revenues may result in a disproportionately higher decrease in profits.

We may not be able to secure future financing at terms acceptable to us or at all.

We require significant amounts of external financing to meet our capital commitments for acquiring and upgrading aircraft and flight equipment and for other general corporate needs. As of December 31, 2016, we had total unutilized credit facilities of RMB46.38 billion from various banks. We expect to roll over these bank facilities in the near future. In addition, we generally acquire aircraft through either long-term capital leases or operating leases. In the past, we have obtained guarantees from Chinese banks in respect of payments under our foreign loan and capital lease obligations. However, we cannot assure you that we will be able to roll over our bank facilities or continue to obtain bank guarantees in the future. Unavailability of credit facilities or guarantees from Chinese banks or the increased cost of such guarantees may materially and adversely affect our ability to borrow additional funds or enter into international aircraft lease financing or other additional financing on acceptable terms In addition, if we are not able to arrange financing for our aircraft on order, we may seek to defer aircraft deliveries or use cash from operations or other sources to acquire the aircraft.

Our ability to obtain financing may also be impaired by our financial position, leverage and credit rating. In addition, factors beyond our control, such as recent global market and economic conditions, volatile oil prices, and the tightening of credit markets may result in limited availability of financing and increased volatility in credit and equity markets, which may materially adversely affect our ability to secure financing at reasonable costs or at all. If we are unable to obtain financing for a significant portion of our capital requirements, our ability to expand our operations, purchase new aircraft, pursue business opportunities we believe to be desirable, withstand any future downturn in our business, or respond to increased competition or changing economic conditions may be impaired. We have and in the future will likely continue to have substantial debts. As a result, the interest costs associated with these debts might impair our future profitability.

We are subject to the risk of fuel price fluctuations.

Aircraft fuel costs constitute the most significant part of our operating costs. In 2016, our total aircraft fuel cost was RMB19,626 million, accounting for approximately 21.4% of our total operating costs. The fluctuations of international crude oil prices and adjustments on domestic jet fuel prices by the NDRC have a significant impact on our profitability. Our results of operation and financial condition are affected by any significant fluctuations that may occur, which are generally due to factors beyond our control. As such, we generally alleviate the pressure from the rise in operating costs arising from the increase in aviation fuel by imposing fuel surcharges, which, however, are subject to government regulations. In order to control fuel costs, we have also entered into fuel hedging transactions using financial derivative products linked to the price of underlying assets such as United States WTI crude oil and Singapore jet fuel during previous years.

Since 2009, the PRC government required prior governmental approval for entering into fuel hedging contracts. We may, from time to time, seek approval from the PRC government to enter into overseas fuel hedging contracts. However, these hedging strategies may not always be effective and high fluctuations in aviation fuel prices exceeding the locked-in price ranges may result in losses. Significant decline in fuel prices may substantially increase the costs associated with such fuel hedging arrangements. In addition, where we may, from time to time, seek to manage the risk of fuel price increases by using derivative contracts, we cannot assure you that, at any given point in time, suchfuel hedging transactions will provide any particular level of protection against increased fuel costs. In 2016, we did not engage in any aviation fuel hedging activitiesand all fuel hedging contracts signed in past years had been settled before December 31, 2016.

We are subject to the risk of exchange rate fluctuations.

We operate our business in many countries and territories. We generate revenue in different currencies, and our foreign currency liabilities are typically much higher than our foreign currency assets. Our purchases and leases of aircraft are mainly priced and settled in foreign currencies such as U.S. dollars. Fluctuations in exchange rates will affect our costs incurred from foreign purchases such as aircraft, flight equipment and aviation fuel, and take-off and landing charges in foreign airports. As of December 31, 2016, our total interest-bearing liabilities denominated in foreign currencies, amounted to RMB59,980 million, of which U.S. dollar liabilities accounted for 88.14% of the total amount. Therefore, a significant fluctuation in the U.S. dollar exchange rates will subject us to significant foreign exchange loss/ gain arising from the exchange of foreign currency denominated liabilities, which would affect our profitability and business development. We typically use hedging contracts for foreign currencies to reduce the foreign exchange risks for foreign currency revenues generated from flight ticket sales and expenses required to be paid in foreign currencies. As of December 31, 2016, the outstanding foreign currency hedging contracts held by us amounted to a notional amount of US$440 million, which will expire in 2017, compared with US$12 million as of December 31, 2015. We use cross currency swap contracts to reduce the risks from exchange rate and interest rate. Our cross currency swap contracts qualify for hedge accounting. The contracts are generally for swapping U.S. dollars floating interest rates (“LIBOR”), into Euro floating interest rates (“EURIBOR”). All the aforementioned contracts were closed out during the reporting period in 2016. In 2016, net cash inflow from our cross currency swap contracts amounted to RMB5 million. As of December 31, 2016, we did not have any outstanding cross currency swap contracts.

We recorded net foreign exchange losses of RMB3,573 million for 2016, whereas our net foreign exchange losses were RMB4,987 million for 2015. As a result of the large value of existing net foreign currency liabilities denominated in U.S. dollars, our results would be adversely affected if the Renminbi depreciates against the U.S. dollar or the rate of appreciation of the Renminbi against the U.S. dollar decreases in the future. In 2016, we expanded our financing channels by issuing super short-term commercial paper and entering into financings in RMB, and proactively optimized the mix of currency denomination of our debts. As of December 31, 2016, our proportion of U.S. dollar-denominated debts decreased to 44.9%. Our foreign exchange fluctuation risks are also subject to other factors beyond our control. See "Item 3D. Risk Factors - Risks Relating to the PRC - Foreign exchange regulations in the PRC may result in fluctuations of the Renminbi and affect our ability to pay any dividends or to satisfy our foreign exchange liabilities."

We are subject to the risk of interest rate fluctuations.

Our total interest-bearing liabilities (including long-term and short-term loans and finance leases payable) as of December 31, 2015 and 2016 were RMB119,111 million and RMB117,773 million, respectively, of which short-term liabilities accounted for 37.2% and 30.0%, respectively, and long-term liabilities accounted for 62.8% and 70.0%, respectively, for those years. A portion of the long-term interest-bearing liabilities carried variable interest rates. Both our variable and fixed rate obligations were affected by fluctuations in current market interest rates.

In 2016, our interest-bearing liabilities were mainly denominated in U.S. dollars and Renminbi. As of December 31, 2016, our total interest-bearing liabilities denominated in foreign currencies amounted to RMB59,980 million, of which U.S. dollars liabilities accounted for 88.1% of the total amount. Fluctuations in the U.S. dollar and Renminbi interest rates have significantly affected our financing costs. A substantial majority of our borrowings denominated in Renminbi are linked to benchmark five-year lending rates published by the PBOC. The PBOC raised the benchmark five-year lending rate five times from 5.94% to 7.05% in July 2011, but reduced the rate subsequently twice, on the last occasion to 6.4% in July 2012. The benchmark five-year lending rate remained steady and did not change during 2013 and into the first quarter of 2014. A substantial majority of our borrowings denominated in U.S. dollars are linked to floating LIBOR rates which increased overall in 2012, decreased overall in 2013 and 2014, and increased overall in 2015 and 2016. We cannot assure you that the relevant lending rates may not increase in the future for reasons beyond our control, which may adversely affect our business, prospects, cash flows, financial condition and results of operations. In addition, we expect to issue bonds and notes or enter into additional loan agreements and aircraft leases in the future to fund our operations and capital expenditures, and the cost of financing for these obligations will depend greatly on market interest rates.

Our insurance coverage and costs have increased substantially, and could have an adverse effect on our operations.

As a result of the events of September 11, 2001, aviation insurers have significantly reduced the maximum amount of insurance coverage available to commercial air carriers for liability to persons other than employees or passengers for claims resulting from acts of terrorism, war or similar events. At the same time, they have significantly increased the premiums for such coverage, as well as for aviation insurance in general. In response to the reduced insurance coverage from aviation insurers, the PRC government has provided insurance coverage to PRC airlines for third party war liability claims. Such insurance provided by the government is subject to annual review and approval by the government. We renew our insurance policies on a yearly basis. However, if the insurers further reduce the amount of insurance coverage available or increase the premiums for such coverage upon renewal and/or if the PRC government declines to renew our insurance policies, our financial condition and results of operations may be materially and adversely affected. For the year ended December 31, 2016, our medical insurance contributions charged to profit or loss amounted to RMB606 million, representing an increase of 7.6% from RMB563 million in 2015.

We may experience difficulty integrating our acquisitions, which could result in a material adverse effect on our operations and financial condition.

We may from time to time expand our business through acquisition of airlines or airline-related businesses. For example, we entered into an agreement with Shanghai Airlines Co., Ltd. ("Shanghai Airlines") on July 10, 2009 to issue a maximum of 1,694,838,860 A Shares to the shareholders of Shanghai Airlines in exchange for all the existing issued shares of Shanghai Airlines. The acquisition price was RMB9,118 million, which was determined based on the quoted market price of our shares issued as of the date nearest to the acquisition date, with adjustments to reflect specific restrictions to certain shares that were issued. On January 28, 2010, we completed the exchange of 1,694,838,860 A Shares for all existing issued shares of Shanghai Airlines. In addition, on December 20, 2010, our subsidiary, China Cargo Airlines, entered into separate acquisition agreements with Great Wall Airlines and Shanghai Cargo Airlines to acquire each carrier's cargo business and related assets. China Cargo Airlines also purchased relevant business and assets from Shanghai International Freight Airlines Co., Ltd. In relation to these acquisitions we have obtained the approval from CAAC, NDRC, and MOFCOM, and the transactions were completed on June 1, 2011. In addition, we entered into an equity transfer agreement on August 22, 2012 with our controlling shareholder, CEA Holding, by which we acquired the remaining 20% of the equity interest in China United Airlines Co., Ltd. ("China United Airlines") for consideration of RMB83.95 million (the "China United Airlines Acquisition") from CEA Holding. China United Airlines primarily provides domestic passenger and freight air transportation services, and is now a wholly-owned subsidiary of our Company.

On December 27, 2012, our wholly-owned subsidiary, Shanghai Airlines Tours, International (Group) Co., Ltd. (“Shanghai Airlines Tours”) entered into an agreement with Eastern Air Tourism Investment Group Co., Ltd. ("Eastern Tourism") and Shanghai Dongmei Aviation Travel Co., Ltd ("Shanghai Dongmei") to acquire 45% and 55% issued share capital of Xi’an Dongmei Aviation Travel Co., Ltd held by them respectively for consideration of approximately RMB3.3 million comprising approximately RMB1.5 million payable to Eastern Tourism and approximately RMB1.8 million payable to Shanghai Dongmei. On December 27, 2012, our wholly-owned subsidiary, Shanghai Airlines Tours also entered into another agreement with Eastern Tourism and Shanghai Dongmei to acquire 45% and 55% issued share capital of Kunming Dongmei Aviation Travel Co., Ltd ("Kunming Dongmei") held by them respectively for consideration of approximately RMB10.5 million comprising RMB4.7 million payable to Eastern Tourism and approximately RMB5.8 million payable to Shanghai Dongmei. On January 10, 2013, Shanghai Airlines Tours entered into an agreement with Eastern Tourism to acquire the entire issued share capital of Eastern Air International Travel Service Co., Ltd ("Eastern Travel") held by Eastern Tourism for consideration of approximately RMB11.9 million. On August 15, 2014, Shanghai Airlines Tours entered into an equity transfer agreement with Eastern Air Tourism pursuant to which, Shanghai Airlines Tours acquired 72.84% equity interest in Shanghai Dongmei from Eastern Tourism at a consideration of RMB32,147,700. This acquisition had been completed and Shanghai Dongmei became our indirect holding subsidiary. On December 22, 2014, our Company, CEA Holding and CES Finance Holding Co., Ltd ("CES Finance") (as shareholders of Eastern Air Group Finance Company Limited (“Eastern Air Finance”)) agreed to inject a total of RMB1,500 million into Eastern Air Finance in proportion according to their respective shareholding in Eastern Air Finance. In February 2015, we contributed a pro-rata amount of RMB375 million in cash.

We are devoting significant resources to the integration of our operations in order to achieve the anticipated synergies and benefits of the absorption and acquisitions mentioned above. See "Item 4. Information on the Company" for details. However, such acquisitions involve uncertainties and a number of risks, including:

We cannot assure you that we will not have difficulties in assimilating the operations, technologies, services and products of newly acquired companies or businesses. Moreover, the continued integration of Shanghai Airlines, China United Airlines and other acquisitions into our Company depends significantly on integrating the employees of Shanghai Airlines, China United Airlines and other acquired companies with our employees and on maintaining productive employee relations. In the event that we are unable to efficiently and effectively integrate newly acquired companies or airline-related businesses into our Company, we may be unable to achieve the objectives or anticipated synergies of such acquisitions and such acquisitions may adversely impact the operations and financial results of our existing businesses.

We may be unable to retain key management personnel or pilots.

We are dependent on the experience and industry knowledge of our key management personnel and pilots, and there can be no assurance that we will be able to retain them. Any inability to retain our key management employees or pilots, or attract and retain additional qualified management employees or pilots, could have a negative impact on our operations and profitability.

Our controlling shareholder, CEA Holding, holds a majority interest in our Company, and its interests may not be aligned with other shareholders.

Most of the major airlines in China are currently majority-owned by either the central government or provincial or municipal governments in China. As of December 31, 2016, CEA Holding holds directly or indirectly 56.38% of our Company's equity stake on behalf of the PRC government. As a result, CEA Holding could potentially elect the majority of our Board of Directors and otherwise be able to control us. CEA Holding also has sufficient voting control to effect transactions without the concurrence of our minority shareholders. The interests of the PRC government as the ultimate controlling shareholder of our Company and most of the other major PRC airlines could conflict with the interests of our minority shareholders. Although the CAAC currently has a policy of equal treatment of all PRC airlines, we cannot assure you that the CAAC will not favor other PRC airlines over our Company.

As our controlling shareholder, CEA Holding has the ability to exercise controlling influence over our business and affairs, including, but not limited to, decisions with respect to:

We engage in related party transactions, which may result in conflict of interests.

We have engaged in, from time to time, and may continue to engage in, in the future, a variety of transactions with CEA Holding and its various members, from whom we receive a number of important services, including support for in-flight catering and assistance with importation of aircraft, flight equipment and spare parts. Because we are controlled by CEA Holding and CEA Holding may have interests that conflict with our interests, we cannot assure you that CEA Holding will not take actions that will serve its interests over the Company's interests.

We may not be able to accurately report our financial results or prevent fraud if we fail to maintain effective internal controls over financial reporting, resulting in adverse investor perception, which in turn could have a material adverse effect on our reputation and the performance of our shares and ADSs.

We are required under relevant United States securities laws and regulations to disclose in the reports that we file or submit under the Exchange Act to the SEC, including our annual report on Form 20-F, a management report assessing the effectiveness of our internal controls over financial reporting at the end of the fiscal year. Our registered public accounting firm is also required to provide an attestation report on the effectiveness of our internal controls over financial reporting. Our management concluded that our internal controls over financial reporting were effective as of December 31, 2016. However, we may discover other deficiencies or material weaknesses in the course of our future evaluation of our internal controls over financial reporting and we may be unable to address and rectify such deficiencies in a timely manner. Any failure to maintain effective internal controls over financial reporting could lead to diminished investor confidence in the reliability of our consolidated financial statements, thereby adversely affecting our business, operations, and reputation, including negatively affecting our performance in the securities markets and decreasing potential opportunities to obtain financing in the capital markets.

As part of our business strategy, we have adopted various measures to develop the international side of our business and to enhance our competitiveness in the international long-distance flight routes. Due to the differences in certain legal and market environments, we have encountered certain challenges during the course of developing our overseas business. We have already adopted and will continue to implement measures in order to enhance the internal controls of our overseas offices and to continue the development of our overseas business.

Any failure or disruption of our computer, communications, flight equipment or other technology systems could have an adverse impact on our business operations, profitability, reputation and customer services.

We rely heavily on computer, communications, flight equipment and other technology systems to operate our business and enhance customer service. Substantially all of our tickets are issued to passengers as electronic tickets, and we depend on our computerized reservation system to be able to issue, track and accept these electronic tickets. In addition, we rely on other automated systems for crew scheduling, flight dispatch and other operational needs. These systems could be disrupted due to various events, including natural disasters, power failures, terrorist attacks, equipment failures, software failures, computer viruses, and other events beyond our control. We cannot assure you that the measures we have taken to reduce the risk of some of these potential disruptions are adequate to prevent disruptions to or failures of these systems. Any substantial or repeated failure of or disruption to these systems could result in the loss of important data and/or flight delays, and could have an adverse impact on our business operations, profitability, reputation and customer services, including being liable for paying compensation to our customers.

If our efforts to protect the security of personal information about our customers are unsuccessful, we could be subject to costly government enforcement actions and private litigation and our reputation may suffer.

The nature of our business involves the receipt and storage of personal information about our customers. We have a program in place to detect and respond to data security incidents. To date, all incidents we have encountered have been insignificant. If we commit a significant data security breach or fail to detect and appropriately respond to a significant data security breach, we could be exposed to government enforcement actions and private litigation. In addition, our customers could lose confidence in our ability to protect their personal information, which could cause them to stop using our services. The loss of consumer confidence from a significant data security breach could hurt our reputation and adversely affect our business, result of operations and financial condition.

Interruptions or disruptions of service at one or more airports in our primary market could have an adverse impact on us.

Our business is heavily dependent on our operations at our primary market airports in Shanghai, namely, Hongqiao International Airport and Pudong International Airport and our regional hub airports in Xi'an and Kunming. Each of these operations includes flights that connect our primary market to other major cities. Any significant interruptions or disruptions of service at one or more of our primary market airports could adversely impact our operations.

Any adverse public health developments, including SARS, Ebola, avian flu, or influenza A (H1N1), or the occurrence of natural disasters may, among other things, lead to travel restrictions and reduced levels of economic activity in the affected areas, which may in turn significantly reduce demand for our services and have a material adverse effect on our financial condition and results of operations.

Adverse public health epidemics or pandemics could disrupt businesses and the national economygrowth of China and other countries where we do business. The outbreak of Severe Acute Respiratory Syndrome, or SARS,investments in early 2003 led to a significant decline in travel volumes and business activities and substantially affected businesses in Asia. Moreover, some Asian countries, including China, have encountered incidentsprofitability of the H5N1 strain of avian flu, many of which have resulteddomestic airline industry. These developments, in fatalities. In addition, outbreaks of, and sporadic human infection with, influenza A (H1N1) in 2009, a highly contagious acute respiratory disease, were reported in Mexico and an increasing number of countries around the world, some cases resulting in fatalities. In addition, in April 2013, there has been an ongoing outbreak of the H7N9 strain of avian flu, which has largely been centered in eastern China, and has resulted in fatalities in that region, including Shanghai. Furthermore, in 2014, an outbreak of Ebola virus, a highly contagious hemorrhagic fever with a relatively high fatality rate, in certain African countries resulted in confirmed cases in the United States and Europe. We are unable to predict the potential impact, if any, that the outbreak of influenza A (H1N1) or any other serious contagious disease or the effects of another outbreak of SARS, any strain of avian flu or Ebola may have on our business.

Natural disasters, such as earthquakes, snowstorms, floods or volcanic eruptions such as that of Eyjafjallajökull in Iceland in April and May of 2010 and the natural disasters in Japan in early 2011 may disrupt or seriously affect air travel activity. Any period of sustained disruption to the airline industryturn, may have a material adverse effect on our business, financial condition and results of operations.

Changes in the foreign exchange regulations in the PRC may result in fluctuations of the Renminbi and adversely affect our ability to pay dividends or to satisfy our foreign currency liabilities.

A significant portion of our revenue and operating expenses are denominated in Renminbi, while a portion of our revenue, capital expenditures and debts are denominated in U.S. dollars and other foreign currencies. The Renminbi is currently freely convertible in the current account, which includes payment of dividends, trade and service-related foreign currency transactions, but not in the capital account, which includes foreign direct investment, unless approval from or registration or filing with the relevant authorities, is obtained. As a foreign invested enterprise approved by the PRC Ministry of Commerce (the “MOFCOM”), we can purchase foreign currencies without the approval of State Administration of Foreign Exchange (the “SAFE”) for settlement of current account transactions, including for the purpose of dividend payment, by providing commercial documents evidencing these transactions. We can also retain foreign currencies in our current accounts, subject to a maximum amount approved by SAFE, to satisfy foreign currency liabilities or pay dividends. The relevant PRC government authorities may limit or eliminate our ability to purchase and retain foreign currencies in the future. Foreign currency transactions in the capital account are still subject to limitations and require approvals from SAFE. This may affect our ability to raise foreign capital through debt or equity financing, including through loans or capital contributions. We cannot assure you that we will be able to obtain sufficient foreign currencies to pay dividends, if any, or satisfy our foreign currency liabilities.

Furthermore, the value of the Renminbi against the U.S. dollar and other currencies may fluctuate significantly and is affected by, among other things, the PRC government policies, domestic and international economic and political conditions and changes in the supply and demand of the currency. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy resulted in appreciation of the Renminbi against the U.S. dollar by approximately 7.0% in 2008. While there was no material appreciation of Renminbi against the U.S. dollar in 2009, the Renminbi appreciated by approximately 3.0% against the U.S. dollar in 2010 and by approximately 5.1% in 2011. In April 2012, the PBOC widened the daily trading band of the Renminbi against the U.S. dollar, and the Renminbi was allowed to appreciate or depreciate by 1.0% from the PBOC central parity rate, effective April 16, 2012. In March 2014, the PBOC further widened the daily trading band of the Renminbi against the U.S. dollar, and the Renminbi was allowed to appreciate or depreciate by 2% against the U.S. dollar from the daily central parity rate, effective March 17, 2014. On August 11, 2015, the PBOC executed a 2% devaluation in the Renminbi. Within the following two days, the Renminbi depreciated 3.5% against the U.S. dollar. The Renminbi depreciated 6.7% against the U.S. dollar from January 4, 2016 to December 30, 2016. The Renminbi appreciated 6.3% against the U.S. dollar for the year ended December 31, 2017. However, it remains unclear what further fluctuations may occur or what impact this will have on the value of the Renminbi. It is possible that the PRC government could adopt a more flexible foreign exchange policy, which could result in further and more significant revaluations of the Renminbi against the U.S. dollar or any other foreign currency. Any resulting fluctuations in exchange rates as a result of such policy changes may have an adverse effect on our financial condition and results of operations.

Terrorist attacksOur operations may be adversely affected by rising inflation rates in the PRC.

Increase in inflation is due to many factors beyond our control, such as rising production and labor costs, high debts, changes in the PRC and foreign governmental policy and regulations, and movements in exchange rates and interest rates. The national consumer price index, which is an indicator of the inflation, was 1.4%, 2.0% and 1.6% in 2015, 2016 and 2017, respectively. The national consumer price index was 1.5%, 2.9% and 2.1% in January, February and March, 2018, respectively. We cannot assure you that inflation rates will not increase in the future. If inflation rates rise beyond our expectations, the costs of our business operations may become significantly higher than anticipated, and we may be unable to pass on such higher costs to consumers in amounts that are sufficient to cover those increasing operating costs. As a result, further inflationary pressures in the PRC may have a material adverse effect on our business, financial condition and results of operations, as well as our liquidity and profitability.

Any withdrawal of, or changes to, tax incentives in the PRC may adversely affect our results of operations and financial condition.

Prior to January 1, 2008, except for a number of preferential tax treatment schemes available to various enterprises, industries and locations, business enterprises in China were subject to an enterprise income tax rate of 33% under the relevant PRC Enterprise Income Tax Law. On March 16, 2007, China passed a new enterprise income tax law, or the fearEIT Law, which took effect on January 1, 2008 and amended on February 24, 2017. The EIT Law imposes a uniform income tax rate of 25% for domestic enterprises and foreign invested enterprises. Business enterprises enjoying preferential tax treatment that was extended for a fixed term prior to January 1, 2008 will still be entitled to such treatment until such fixed term expires. Certain of our subsidiaries are entitled to preferential tax treatment, allowing us to enjoy a lower effective tax rate that would not otherwise be available to us. To the extent that there are any increases in the applicable effective tax rate, withdrawals of, or changes in, our preferential tax treatment or tax exemptions, our tax liability may increase correspondingly.

Uncertainties embodied in the PRC legal system may limit certain legal protection available to investors.

The PRC legal system is a civil law system based on written statutes. Unlike common law systems, decided legal cases have little precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. Legislation over the past 20 years has significantly enhanced the protection afforded to foreign investors in China. However, the interpretation and enforcement of some of these laws and regulations involve uncertainties that may limit the legal protection available to investors. Such uncertainties pervade as the legal system in the PRC continues to evolve. Even where adequate laws exist in the PRC, the enforcement of the existing laws or contracts may be uncertain and sporadic, and it may be difficult to obtain swift and equitable enforcement, including enforcing a foreign judgment. In addition, the PRC legal system is based on written statutes and their interpretation; prior court decisions may be cited as reference but have limited authority as precedents. As such, any litigation in the PRC may be protracted and result in substantial costs and diversion of our resources and management attention. We have full or majority board control over the management and operation of all of our subsidiaries established in the PRC. The control over these PRC entities and the exercise of shareholder rights are subject to their respective articles of association and PRC laws applicable to foreign-invested enterprises in the PRC, which may be different from the laws of other developed jurisdictions.

The PRC has not developed a fully integrated legal system and certain recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in the PRC. The relative lack of experience of the PRC’s judiciary in many cases also creates additional uncertainty as to the outcome of any litigation. In addition, interpretation of statutes and regulations may be subject to government policies reflecting domestic political changes. Furthermore, in case of new laws and regulations, the interpretation, implementation and enforcement of these laws and regulations would involve uncertainties due to the lack of established practice or published court decisions available for reference. We cannot predict the future legal development in the PRC, including promulgation of new laws, changes to existing laws or interpretation or enforcement thereof, or inconsistencies between the local rules and regulations and the national law. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have a retroactive effect. As a result, we may not be aware of any violations until sometime after the violation has occurred. This may also limit the remedies available to investors and to us in the event of any claims or disputes with third parties.

The auditors’ reports included in this annual report are prepared by relying on audit work which is not inspected by the Public Company Accounting Oversight Board and, as such, investors may be deprived of the benefits of such attacks, even if not made directly on the airline industry, could negatively affect the Company and the airline industry as a whole. The travel industry continues to face on-going security concerns and cost burdens.inspection.

The aviation industry as a whole has been besetAuditors of companies that are registered with high-profile terrorist attacks, most notably on September 11, 2001the SEC and traded publicly in the United States. States, including our independent registered public accounting firm, must be registered with the Public Company Accounting Oversight Board (United States), or the PCAOB, and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards. Because we have substantial operations within China, our auditor relied on its China affiliate to perform audits on our consolidated financial statements, and the PCAOB is currently unable to conduct inspections of the work done by our auditor as it relates to our operations without the approval of the Chinese authorities, our auditor’s work related to our operations in China is not currently inspected by the PCAOB. This lack of PCAOB inspection of audit work performed in China prevents the PCAOB from regularly evaluating the audit work performed by any auditor in China including our auditor. As a result, investors may be deprived of the full benefits of PCAOB inspections.

The CAAC has also implemented increased security measuresinability of the PCAOB to conduct inspections of audit work performed in relationChina makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures as compared to auditors in other jurisdictions that are subject to PCAOB inspections for all their work. Investors may lose confidence in our reported financial information and procedures and the quality of our consolidated financial statements.

Proceedings instituted by the SEC against certainPRC-based accounting firms, including the China affiliate of our independent registered public accounting firm, could result in financial statements being determined not to comply with the requirements of the Exchange Act.

In December 2012, the SEC brought administrative proceedings against five accounting firms in China, including the Chinese affiliate of our then independent registered public accounting firm, alleging that they had refused to produce audit work papers and other documents related to certain other China-based companies under investigation by the SEC. On January 22, 2014, an initial administrative law decision was issued, censuring these accounting firms and suspending four of these firms from practicing before the SEC for a period of six months. The decision is neither final nor legally effective unless and until reviewed and approved by the SEC. On February 12, 2014, four of thesePRC-based accounting firms appealed to the potential threatSEC against this decision. In February 2015, each of terrorist attacks. Terrorist attacks,the fourPRC-based accounting firms agreed to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC. The settlement requires the firms to follow detailed procedures to provide the SEC with access to the Chinese firms’ audit documents via the China Securities Regulatory Commission ( the “CSRC” ). If the firms do not follow these procedures, the SEC could impose sanctions such as suspensions, or it could restart the administrative proceedings.

In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, listed companies in the United States with major PRC operations may find it difficult or impossible to retain auditors in respect of their operations in the PRC, which could result in financial statements being determined not to be in compliance with the requirements of the Exchange Act, and possibly delisting of the securities. Moreover, any negative news about the proceedings against these audit firms may cause investor uncertainty regarding China-based U.S.-listed companies and the market price of our ADSs may be adversely affected.

If the Chinese affiliate of our independent registered public accounting firm was denied, even iftemporarily, the ability to practice before the SEC and we were unable to find another registered public accounting firm in a timely manner to audit and issue an opinion on our financial statements, our financial statements could be determined not made directly towards usto be in compliance with the requirements of the Exchange Act. Such determination could ultimately lead to our delisting from the NYSE or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States.

Item 4. Information on the airline industry, or the fear of or the precautions taken in anticipation of such attacks (including elevated threat warnings or selective cancellation or redirection of flights) could materially and adversely affect us and the entire airline industry. In addition, potential or actual terrorist attacks may result in substantial flight disruption costs caused by grounding of fleet, significant increase of security costs and associated passenger inconvenience, increased insurance costs, substantially higher ticket refunds and significantly decreased traffic and RPK. International terrorist attacks targeting aircraft and airport not only directly threatens our flight safety, aviation security, operational safety and the safety of overseas institutions and employees, but also brings about on- going adverse impact on the outbound tourism demand for places where terrorist attacks have taken place.Company

Our registered office is located at 66 Airport Street, Pudong International Airport, Shanghai, China, 201202. Our principal executive office and mailing address is Kong Gang San Road, Number 92, Shanghai, 200335, China. The telephone number of our principal executive office is(86-21) 6268-6268 and the fax number for the Board Secretariat'sSecretariat’s office is(86-21) 6268-6116. We currently do not have an agent for service of process in the United States.

Our Company, China Eastern Airlines Corporation Limited was established on April 14, 1995 under the laws of China as a company limited by shares in connection with the restructuring of our predecessor and our initial public offering. We are commercially known in the industry as China Eastern Airlines. Our predecessor was one of the six original airlines established in 1988 as part of the decentralization of the airline industry in China undertaken in connection with China'sChina’s overall economic reform efforts. Prior to 1988, the CAAC was responsible for all aspects of civil aviation in China, including the regulation and operation of China'sChina’s airlines and airports. In connection with our initial public offering, our predecessor was restructured into two separate legal entities, our Company and EA Group. According to the restructuring arrangement, by operation of law, our Company succeeded to substantially all of the assets and liabilities relating to the airline business of our predecessor. EA Group succeeded to our predecessor'spredecessor’s assets and liabilities that do not directly relate to the airline operations and do not compete with our businesses. Assets transferred to EA Group included our predecessor'spredecessor’s equity interests in companies engaged in import and export, real estate, advertising,in-flight catering, tourism and certain other businesses. In connection with the restructuring, we entered into various agreements with EA Group and its subsidiaries for the provision of certain services to our Company. CEA Holding assumed the rights and liabilities of EA Group under these agreements after it was formed by merging EA Group, Yunnan Airlines Company and China Northwest Airlines Company in October 2002. See "Item“Item 7. Major Shareholders and Related Party Transactions"Transactions” for more details.

The following chart sets forth the organizational structure of our Company and our significant subsidiaries as of December 31, 2016:2017:

* Except for Eastern Air Overseas (Hong Kong) Co., Limited (which was incorporated in Hong Kong), all other subsidiaries in the above chart were incorporated in the PRC.

In February 1997, we completed our initial public offering of 1,566,950,000 ordinary H Shares, par value RMB1.00 per share, and listed our ordinary H Shares on The Stock Exchange of Hong Kong Limited, or the Stock Exchange of Hong Kong Limited (the "Hong“Hong Kong Stock Exchange"Exchange”), and American Depositary Shares, or ADSs, representing our H Shares, on the New York Stock Exchange. In October 1997, we completed a public offering of 300,000,000 new ordinary domestic shares in the form of A Shares to public shareholders in China and listed such new shares on the Shanghai Stock Exchange. H Shares are our ordinary shares listed on the Hong Kong Stock Exchange, and A Shares are our ordinary shares listed on the Shanghai Stock Exchange. Our H Shares and A Shares are identical in respect of all rights and preferences, except that the listed A Shares may only be held by Chinese domestic investors and certain qualified foreign institutional investors. For information regarding our share capital structure, see "Item“Item 10.B Memorandum and Articles of Association – Description of the Shares."” In addition, dividends on the A Shares are payable in Renminbi.

Since our initial public offering, we have expanded our operations through acquisitions and joint ventures.

On June 12, 2012, the Board of Directors resolved and approved to issue corporate bonds in the aggregate principal amount of not more than RMB8.8 billion and for a term of not more than ten years for a single or multiple issuances. We received the CSRC approval for this issuance on December 12, 2012. On March 20, 2013, we issued the first tranche of the corporate bonds in the amount of RMB4.8 billion at 5.05% due 2023. The use of proceeds from this issuance was to repay bank loans, improve our financing structure and replenish our short-term working capital.

On September 11, 2012, the Board of Directors resolved and approved the "Proposal“Proposal for thenon-public issuance of A Shares to specific placees by China Eastern Airlines Corporation Limited"Limited” and the "Proposal“Proposal for thenon-public issuance of H Shares to specific placees by China Eastern Airlines Corporation Limited,"” according to which, (i) CEA Holdings and CES Finance would subscribe in cash for 241,547,927 and 457,317,073 new A Shares, respectively, at the subscription price of RMB3.28 per share; and (ii) CES Global Holdings (Hong Kong) Limited, an overseas wholly-owned subsidiary of CEA Holding, ("(“CES Global"Global”) would subscribe in cash for 698,865,000 new H Shares (nominal value of RMB1.00 each) at the subscription price of HK$2.32 per share. On January 31, 2013, the CSRC approved our proposed issue of no more than 698,865,000 new H Shares with a nominal value of RMB1.00 each. The Public Offering Review Committee of the CSRC reviewed and conditionally approved our application relating to thenon-public issue of new A Shares of the Company on February 25, 2012.

On December 27, 2012, our wholly-owned subsidiary, Shanghai Airlines Tours entered into an agreement with Eastern Tourism and Shanghai Dongmei to acquire 45% and 55% of the issued share capital of Xi’an Dongmei Aviation Travel Co. Ltd, held by them respectively for a consideration of approximately RMB3.3 million comprising approximately RMB1.5 million payable to Eastern Tourism and approximately RMB1.8 million payable to Shanghai Dongmei.

On December 27, 2012, our wholly-owned subsidiary, Shanghai Airlines Tours also entered into another agreement with Eastern Tourism and Shanghai Dongmei to acquire 45% and 55% of the issued share capital of Kunming Dongmei, held by them respectively for a consideration of approximately RMB10.6 million comprising RMB4.7 million payable to Eastern Tourism and approximately RMB5.8 million payable to Shanghai Dongmei.

On January 10, 2013, our wholly-owned subsidiary, Shanghai Airlines Tours entered into an agreement with Eastern Tourism to acquire the entire issued share capital of Eastern Travel held by Eastern Tourism Investment Group Co., Ltd for consideration of approximately RMB11.9 million.

On April 9, 2013, the Company obtained an approval from the CSRC, pursuant to which the CSRC approved thenon-public issue by the Company for no more than 698,865,000 new A Shares. On April 16, 2013, the procedure for registration of the new A Shares with the Shanghai Branch of China Securities Depository & Clearing Co. Ltd. was completed. The 698,865,000 new A Shares, at an issue price of RMB3.28 per share, under this issue are subject to a lock- uplock-up period of 36 months from the completion date of the issue and are expected to be listed on April 17, 2016.

WeOn June 21, 2013, we completed the issuance of new H Shares on June 21, 2013.Shares. A total of 698,865,000 new H Shares were issued, at the price of HK$2.32 per share, to CES Global.

On October 29, 2013, the Board of Directors resolved and approved that the Company inject RMB36 million into CES Media.

On July 17, 2014, Eastern Air Overseas (Hong Kong) Corporation Limited ("EAO,"(“EAO”) our wholly-owned subsidiary, and Jetstar Hong Kong Airways Limited ("(“Jetstar Hong Kong"Kong”), an associated company of the Company, entered into a loan agreement, pursuant to which EAO will provide a loan of US$60 million to Jetstar Hong Kong at fair market interest rates. The principal of the loan was repaid on April 30, 2015.

On August 15, 2014, Shanghai Airlines Tours, our wholly- ownedwholly-owned subsidiary, entered into an equity transfer agreement with Eastern Tourism, pursuant to which, Shanghai Airlines Tours acquired 72.84% equity interest in Shanghai Dongmei from Eastern Tourism with consideration of RMB32,147,700. This acquisition has been completed and Shanghai Dongmei has become our indirect holding company.

On December 22, 2014, our Company, CEA Holding and CES Finance (as shareholders of Eastern Air Finance agreed to inject a total of RMB1,500 million into Eastern Air Finance in proportion according to their respective shareholding in Eastern Air Finance. In February 2015, we contributed apro-rata amount of RMB375 million in cash.

On March 29, 2015, China United Airlines, our wholly-owned subsidiary, fully adopted thelow-cost carrier service model.

On May 30, 2015, we received approval from the Ministry of Industry and Information Technology to offer in-flight Wi-Fiin-flightWi-Fi services usingKU-band satellite onboard 21 aircraft.

On July 9, 2015 we entered into the B737 Aircraft Purchase Agreement with Boeing Company in Shanghai to purchase fifty B737 series aircraft from Boeing Company.

On July 27, 2015, we entered into a conditional subscription agreement (“Subscription Agreement”) with Delta Air Lines, Inc. (“Delta Air Lines”), pursuant to which Delta Air Lines agreed to subscribe for 465,910,000 shares of the newly issued ordinary H shares of the Company in an amount of HK$3,488,895,000, representing approximately 3.5% of the total share capital of the Company. On September 9, 2015, we completed the issue of 465,910,000 ordinary H shares to Delta Airlines, with a par value of RMB1.00 each at an issue price of HK$7.49 per share.

On August 14, 2015, the Board of Directors approved the “Resolution on the Termination of the Proposed Establishment of Jetstar Hong Kong and its Winding Up”. The Board of Directors considers that the termination of the proposed establishment of Jetstar Hong Kong will have no material adverse impact on the financial conditions and production and operation of the Company. See the announcement furnished to the SEC on Form 6-K dated August 17, 2015.

On August 28, 2015, we formally established the foreign airlines service centre.

center.

On September 1, 2015, Delta Air Lines and we entered into a marketing agreement and a letter of confirmation on the Subscription Agreement. Pursuant to the marketing agreement, both parties will have greater cooperation in terms of code-share, revenue management, schedule coordination, sales cooperation, airport facilities sharing, frequent-flyer program, lounge and system investment as well as staff exchange. Pursuant to the letter of confirmation on the Subscription Agreement, as of September 1, 2015, all conditions precedent to the Subscription Agreement had been fulfilled except for those conditions that will be fulfilled on the completion date of share subscription. On September 9, 2015, we completed the issue of 465,910,000 ordinary H shares with a par value of RMB1.00 each at an issue price of HK$7.49 per share.

On November 6, 2015, the Civil Aviation Administration of China officially announced and granted the “Safe Flight Diamond Award”, the highest award for flight safety in the PRC civil aviation industry, to the Company.

In January 2016, we received the “Approval for theNon-Public Issuance of A Shares by China Eastern Airlines Corporation Limited” (Zheng Jian Xu Ke [2016] No. 8) issued by the CSRC, approving us to issue not more than 2,329,192,546 A Shares by way ofnon-public issuance.

On February 8, 2017, we completed the transfer of 100% equity interest in Eastern Logistics to Eastern Airlines Industry Investment and the nine freighters operated by China Cargo Airlines ceased to be included in our fleet.

On November 16, 2017, EAO issued corporateSGD-denominated guaranteed bonds in an amount of SGD500,000,000 at 2.8% due 2020, which was listed on the Hong Kong Stock Exchange on November 17, 2017. The Company guaranteed the bond issue. See Note 34 to the consolidated financial statements for more information.

On March 1, 2018, we entered into contractual operation agreement and operation cost agreement with China Cargo Airlines, pursuant to which, China Cargo Airlines (as contractor) will operate the bellyhold space business and reimburse the contractual fee to us, and we will reimburse the operation cost of the bellyhold space business to China Cargo Airlines.

On March 9, 2018, the Company issuedJPY-denominated credit enhanced bonds (Series 1 JPY10,000,000,000 0.33% Bonds due 2021, Series 2 JPY20,000,000,000 0.64% Bonds due 2021 and Series 3 JPY20,000,000,000 0.64% Bonds due 2021), which was listed on the professional oriented TOKYOPRO-BOND Market of the Tokyo Stock Exchange on March 19, 2018. See Note 49 to the consolidated financial statements for the issuance of JPY bonds.

The material development of our indebtedness is set out in Note 34 and Note 49 to the consolidated financial statements. The capital expenditure is set out in Item 5 in this Annual Report.

The table below sets forth details of our operating fleet as of December 31, 2014:

The table below sets forth details of our operating fleet as of December 31, 2015:

The table below sets forth details of our operating fleet as of December 31, 2016:

We were one of the three largest air carriers in China in terms of revenue, tonne, kilometers andseveral indicators including number of passengers carried, ATK and ASK in 2016,2017 and is an important domestic airline based in and serving Shanghai, which is considered to be the international financial and shipping center of China. The primary focus of our business is the operation of civil aviation, including the provision of passenger, cargo, mail delivery, tour operations and other extended transportation services.

We operate most of our flights through our three hubs located in eastern, northwestern and southwestern China, namely Shanghai, Xi’an and Kunming, respectively. With Shanghai as our core hub and Xi’an and Kunming as our regional hubs, we believe that we will benefit from the level of development and growth opportunities in eastern, northern and western China as a whole by providing direct services between various cities in those regions and between those regions and other major cities in China. We have steadily fostered the construction of a flight system for these core hubs by introducing new flight destinations and increasing the frequency of certain flights, thereby enhancing our transfer and connection capability in these hub markets.

Our domestic routes contributed approximately 65.7% of our total passenger revenues in 2017. Our most heavily traveled domestic routes generally link Shanghai to the large commercial and business centers of China, such as Beijing, Guangzhou and Shenzhen. We have set up subsidiaries in 15 provinces and cities including Shanghai, Beijing, Yunnan, Shaanxi, Jiangsu, Zhejiang, Anhui, Jiangxi, Shandong, Hubei, Shanxi, Gansu, Sichuan, Hebei and Guangdong by the end of 2017. Our flight routes include all provincial capital cities in China and specifically designated cities. In 2017, we opened new routes including routes to Cebu, Jakarta from Shanghai Pudong and to Prague from Xi’an, and cancelled routes to Bangkok from Zhengzhou and Jeju from Beijing. As of December 31, 2016,2017, we served a route network that covers 1,0621,074 domestic and foreign destinations in 177 countries through SkyTeam, an international airlines alliance. We operate primarily

Our passenger traffic volume (as measured in revenue passenger-kilometers, or RPKs) increased by 9.3% from approximately 167,529 million in 2016 to approximately 183,182 million in 2017. As we transferred 100% equity interest in Eastern Logistics to Eastern Airlines Industry Investment in February 2017, our core hubcargo and mail traffic volume (as measured in Shanghairevenue freight tonne-kilometers, or RFTKs) decreased by 45.4% from approximately 4,875 million in 2016 to approximately 2,663 million in 2017 under the basis that our operating data in 2016 include our whole cargo freight data during the period from February to December 2016 (“undernon-comparable basis”). Our cargo and regional hubsmail traffic volume (as measured in Kunmingrevenue freight tonne-kilometers, or RFTK) increased by 6.7% from approximately 2,495 million in 2016 to approximately 2,663 million in 2017 under the basis that our operating data in 2016 did not include our whole cargo freight data during the period from February to December 2016 (“under comparable basis”). As a result, our traffic volume (as measured in RTKs) decreased by 4.3% from approximately 19,713 million in 2016 to approximately 18,856 million in 2017 under thenon-comparable basis and Xi’an.increased by 8.8% from approximately 17,333 million in 2016 to approximately 18,856 million in 2017 under the comparable basis.

Awards

We have received many awards, recognitions and accolades through the years. Fortune Magazine recognized us as one of the "Most“Most Innovative PRC Companies"Companies” in 2011, and our "China“China Eastern Airlines"Airlines” brand was awarded "China's“China’s Famous Trademark"Trademark” by the State Administration for Industry and Commerce in 2011. In addition, in 2012 we received various recognitions and awards, including "Golden“Golden Tripod Prize"Prize”, which was the highest award awarded at the 8th Annual Meeting of China'sChina’s Securities Market, "Golden Bauhinia"“Golden Bauhinia” Award for "The“The Listed Company with Best Brand Value 2012"2012” by China Securities, "2012“2012 BestMid-Cap Company and Best Managed Company in China"China” by Asiamoney Magazine, "Top“Top 50 Most Valuable Chinese Brands"Brands” by WPP, a global brand communication and public relations firm, "2012“2012 TOP 25 CSR (Corporate Social Responsibility) Ranking"Ranking” by Fortune China Magazine, "2012“2012 China State-owned Listed Enterprise Social Responsibility Rankings Top 20"20” by Southern Weekly, "The“The Best Board of Directors of State-owned Listed Holding Companies of China Top 20"20” by various major financial media, including Moneyweek, "Healthy“Healthy China – Best Employee Health & Benefit Unit"Unit” by Health Times, a major newspaper in China focusing on health and lifestyle, and Tsinghua University, "Internal“Internal Audit Leading Enterprises in terms of Risk Management and Internal Audit"Audit” by China Institute of Internal Audit, "Best“Best 100 Employers"Employers” by zhaopin.com, a major online recruiting website in China, and "The World's“The World’s Most Improved Airline"Airline” by SKYTRAX, a United Kingdom-based aviation research organization. In 2013, we received the National 1 May Award Certificate and were honored as one of the "2013“2013 Top Ten Companies with the Best Corporate Social Responsibility"Responsibility” by Fortune China Magazine, “BestMid-cap Company” by Hong Kong Asiamoney Magazine for the second consecutive year, “Top 50 Most Valuable Chinese Brands in 2013” by WPP, a global brand communication and public relations firm, the “Golden Bauhinia Award” of the “Best Listed Company” and “Listed Company with the Best Investor’s Relations Management” by Ta Kung Pao and one of the “Best 100 Employers” by zhaopin.com. In 2014, our charity campaign “Love at China Eastern Airlines” was awarded the Gold Award at the First Chinese Young Volunteers Services Contest. The “Love at China Eastern Airlines” campaign has organized activities such as visiting welfare and nursing homes, subsidizing Hope Schools and schools for urban and rural migrant workers’ children and teaching school children with hearing and speaking impairment, running blood donation programs, and other activities for environmental protection. The campaign launched 5,179 projects with 274,979 staff and members taking participation, serving a total of 233,353 people in need. Through interaction with the community, we have established a charity brand image of “delivering love and serving the community”. In 2015, “Love at China Eastern Airlines” launched 530 projects all year round, with 26,119 staff participating, serving a total of 40,166 people.

In 2014, we were recognized as “Top 50 Most Valuable Chinese Brands” by WPP, a global brand communication firm, as well as being awarded the “China Securities Golden Bauhinia Award” and ranked first as the “Best Listed Company Award” by Ta Kung Pao in Hong Kong for three consecutive years; and ranked among top 10 in terms of “Most Competitive Asia Airline 2014” and “Most Popular Asia Airline 2014” in the 5th World Airline Competitiveness Rankings.

In 2015, we were bestowed a number of awards, such as “Best China Airline” at the 8th TTG (Asia Media) China Travel Awards, “China Securities Golden Bauhinia Award – Listed Company with the Most Valuable Brand” for four consecutive years and "Best“Best Innovative Listed Company"Company” granted by Hong Kong Ta Kung Pao, as well as "2014-2015“2014-2015 Most Respectable Chinese Enterprise"Enterprise” and "2015“2015 Chinese Best Business Model Innovation Award"Award” by the Economic Observer and 21st Century Business Herald, respectively.

In 2016,we successively won the 9th TTG China Tourism Awards “Best China Airlines”, and waswere awarded “2016 Asian Tourism Red Coral Award – Most Popular Airline Brand”, “Asia Pacific 2016 Excellence Aviation Award” and “International Carbon Gold Award – Social Citizenship Award” by the 2016 Asian Tourism Industry Annual Conference, the CAPA Communication Center and the World Environmental Protection (Economy and Environment) Conference respectively.

Compared to 2015, our traffic volume (as measuredIn 2017, we were awarded the “International Carbon-Value Award – Social Citizen Award” by the World Economic and Environmental Conference and were rated as a “Targeted Poverty Alleviation Demonstration Enterprise” by the World Charity Forum. We were granted “China Securities Golden Bauhinia Award” for six consecutive years, recognized as one of the “Top 30 Most Valuable Chinese Brand” by Wire & Plastic Products Group (WPP), the world’s largest brand communication group. We were also awarded as one of the “World’s 500 Most Valuable Brands” by the famous brand appraisal organization Brand Finance, “Gold Ranking” accredited by IATA, and awards such as “Feike Travel Awards”, “Best Employer Award in RTKs) increasedAviation Industry”, “The Most Admired Company in China”, “Top 10 Influencing Airlines”, “Top 50 Chinese Brand with Overseas Social Influence” and “The Best Performing Airline” by 10.6% from 17,820 million in 2015 to 19,712 million in 2016. Our passenger traffic volume (as measured in revenue passenger-kilometers, or RPKs) increased by 14.5% from 146,342 million in 2015 to 167,529 million in 2016. Our cargo and mail traffic volume (as measured in revenue freight tonne-kilometers, or RFTKs) increased by 0.2% from 4,865 million in 2015 to 4,875 million in 2016.various authoritative institutions.

Our Operations by Activity

The following table sets forth our traffic revenues by activity for each of the years ended December 31, 2014, 2015, 2016 and 2016:2017:

Passenger Operations

The following table sets forth our certain passenger operating statistics by route for each of the years ended December 31, 2014, 2015, 2016 and 2016:

Our domestic routes generated approximately 64.8% of our passenger revenues in 2016. Our most heavily traveled domestic routes generally link Shanghai to the large commercial and business centers of China, such as Beijing, Guangzhou and Shenzhen.2017:

We have set up subsidiaries in 15 provinces and cities including Shanghai, Beijing, Yunnan, Shaanxi, Jiangsu, Zhejiang, Anhui, Jiangxi, Shandong, Hubei, Shanxi, Gansu, Sichuan, Hebei and Guangdong by the end of 2016. Our flight routes include all provincial capital cities in China and specifically designated cities.

In 2016, we opened new routes to Prague, St. Petersburg, Amsterdam, Madrid, Chicago and Brisbane, and cancelled routes to Kathmandu from Shanghai Pudong via Kunming. As of the end of 2016, by connecting to the route networks of other SkyTeam member airlines, our flights had access to 1,062 destinations in 177 countries.

In 2014, with Shanghai as a core hub and Kunming and Xi’an as regional hubs, we continued to expand our route network to provide additional connecting opportunities and strengthen our market position in these three major hubs. New routes from Pudong to Toronto and Auckland were introduced at Shanghai Pudong hub while more frequent flights were added for international routes to New York, Los Angeles, London and Paris to maximize the coverage of the Shanghai hub network. The Kunming hub launched a new route from Kunming to Paris, which is the first inter-continental route in Yunnan Province, and continued to optimize route network and flight schedules for Kunming to East Asia, Southeast Asia and West Asia. We proactively utilized aircraft to expand our route network and flight destinations of Xi’an hub were increased to 70. According to our strategic plan to seize the opportunity for sales in the market, the early termination of leases regarding A300, 767 and 757 aircraft, the relatively early termination of wide-body aircraft and, in addition, the early retirement of EMB and one 733 aircraft, in terms of static seat growth, increased by 5.9% in 2014 compared to 2013. Moreover, there were less aircraft introduced in the first half of the year than those introduced in the second half of the year, leading to capacity not fully utilized in the peak season of July to August, thus leading to slowing down of the overall growth in capacity. Apart from the number of static seats, there were more busy airports and bottleneck issues slowed down the growth of domestic routes of traditional airlines. In particular, the capacity of the Shanghai region did not grow quickly and was affected by military exercises during the peak season. The routes between China and Southeast Asia were affected by the Malaysia Airlines Flight 370 incident, the political instability in the region and anti-China atmosphere, leading to a slow-down of capacity growth. We also experienced competitive pressures from low-cost airlines which also adversely affected revenues and capacity.

In 2015, we conducted significant optimization of our fleet structure, and increased our fleet to 551 aircrafts as atof the end of 2015, and the variety of our aircraft models was streamlined to 13 models by the end of 2015. In respect of passenger transportation, we actively seized the opportunities brought about by international low oil prices and robust demand for outbound tourism, and achieved impressive growth in passenger transportation by responding proactively to adverse factors such as geopolitical instability around the globe, terrorist attacks outside China, MERS cases in South Korea and impact on short-haul routes due to formation of a high-speed railway network in 2015. Efforts have been made to foster the construction of hubs and negotiate time slots in hub and core markets in order to promote superb connectivity. In respect of freight transportation and logistics, we tightened our cost control, optimized production structure, broadened marketing channels and strived to stabilize transportation prices in 2015. In 2015, we further strengthened our cooperation with both member andnon-member airlines of SkyTeam Alliance to widen the scope of cooperation and improve the quality of cooperation. In September 2015, we entered into a strategic partnership with Delta Air Lines to deepen our cooperation in terms of code-share, cabin sharing and joint sales. By forming an industry-leading route network, both parties implemented codeshare on 123 routes, including 9 international major routes and 114 domestic routes in the PRC and the USA. Through offering joint sales to corporate customers, the influential power of the North American corporate customers was increased. As for the European market, the Groupwe and Air France have realized interline transit services for flights departing and arriving at Shanghai, Dalian, Paris and Nice. In the Australian market, the joint operation with Qantas was officially commenced to launch codeshare on major routes such as Shanghai-Sydney and Shanghai- MelbourneShanghai-Melbourne routes, in order to launchin-depth cooperative projects including customer base sharing.

In 2015, we put in available seat – kilometers (ASK) of approximately 181,792.90 million passenger-kilometers, representing an increase of approximately 13.2% from 2014. Number of passengers carried in 2015 was approximately 93.8 million, representing an increase of approximately 11.9% from 2014. Passenger load factor in 2015 was approximately 80.5%, representing an increase of approximately 1.2% from 2014. Passenger revenue in 2015 amounted to approximately RMB78,585 million, representing an increase of approximately 4.4% from 2014.

In 2015, we enhanced Shanghai core hub and Xi’an and Kunming regional hubs, and established and extended our aviation transportation network in major markets with high market influence such as Beijing, Nanjing and Qingdao to cover 1,057 destinations in 179 countries. We strove for additions of air traffic rights and time slot resources in hub markets and core markets, steadily improved the aircraft utilization rate and consolidated and expanded market share in the three largest hubs and core markets. Based on the SkyTeam Alliance platform, we enhanced our strategic cooperation with Delta Air Lines and cooperated with Air France and Qantas to develop a highly efficient and convenient flight network which covered the whole country and connected to the whole wide world.

In 2016, we continued to update and optimize our fleet structure, introducing new aircrafts continually and retiring outdated model aircrafts. As of the end of 2016, our average flight age was 5.4 years. We mainly introduce long – haul B777 series aircrafts in trans-Pacific routes;mid-to-long-haul A330 series aircrafts in China-Europe routes, China-Australia and domestic business routes; A320 series and B737 series aircrafts in domestic and surrounding countries and regions routes, which we believe enhances the matching level between fleet models and routes, transportation capacities and relevant markets. In 2016, we continued to deepen and expand our cooperation with external partners. Relying on the SkyTeam Alliance platform, we continued to enhance our cooperation with member airlines in the SkyTeam Alliance. In collaboration with Delta Air Lines, based onpre-existing trans-Pacific routes and destinations in the PRC and the USA, we further extended our network of cooperative routes to Canada, Mexico, Southeast Asian and South American regions, achieving a total of 252 codeshare routes. In collaboration with AirFrance-KLM Group (“AirFrance-KLM”), based on our jointly operated routes and code-share coverage, we increased our joint marketing efforts to corporate customers in the French market.

In 2016, we proactively promoted the establishment of transportation hubs with the opening of various international routes for long-haul flights and an enhanced coverage of our transportation network. With Shanghai as the core hub, we added six international routes for long-haul flights to our network, connecting Shanghai and Prague, Amsterdam, Madrid, St. Petersburg, Chicago and Brisbane, respectively. We provided more frequent flight services on routes connecting Shanghai and New York City, Los Angeles, Sydney and Melbourne. We added routes connecting Kunming and Sydney, Qingdao and San Francisco, Nanjing and Vancouver and Hangzhou and Sydney. Last, we stabilized the allocation of our flight capacities for Japan, Korea and Southeast Asia markets. As a result of these enhanced transit connection and expanded transit routes structures, in 2016, we experienced approximately 26.8%, 63.8% and 43.1%year-on-year growth in passenger flight capacity for Europe, North America and Australia markets, respectively; and our inter-airline transit volume and revenue grew by 24.2% and 21.4%, respectively. As of the end of 2016, by connecting to the route networks of other SkyTeam member airlines, our flights had access to 1,062 destinations in 177 countries.

In 2016, we put in available seat – kilometers (ASK) of approximately 206,249.27 million passenger-kilometers, representing an increase of approximately 13.5% from 2015. Number of passengers carried in 2016 was approximately 101.74 million, representing an increase of approximately 8.5% from 2015. Passenger load factor in 2016 was approximately 81.2%, representing an increase of approximately 0.7% from 2015. Passenger revenue in 2016 amounted to approximately RMB83,577 million, representing an increase of approximately 6.4% from 2015.

We operate most of our flights through our three hubs located in eastern, northwestern and southwestern China, namely Shanghai, Xi'an and Kunming, respectively. With Shanghai as our main hub and Xi'an and Kunming as our regional hubs, we believe that we will benefit from the level of development and growth opportunities in eastern, northern and western China as a whole by providing direct services between various cities in those regions and between those regions and other major cities in China. We have steadily fostered the construction of a flight system for these core hubs by introducing new flight destinations and increasing the frequency of certain flights, thereby enhancing our transfer and connection capability in these hub markets.

In 2014 we established in a sequence 6 on schedule navigation points, namely the Delingha, Daocheng, Luzhou, Luliang, Zhanjiang and Hanzhong; three international on schedule navigation points including Bangkok, Osaka, Krabi. We also expanded the above-plateau routes: newly stablished Xi’an - Daocheng Yading, Xi’an - Jiuzhai - Nanjing; frequency increased: Xi’an - Golmud, Xi’an - Jiuzhai, Xi’an - Lhasa, Xi’an - Delingha, Sining - Lhasa.

In 2015, we enhanced Shanghai core hub and Xi’an and Kunming regional hubs, and established and extended our aviation transportation network in major markets with high market influence such as Beijing, Nanjing and Qingdao to cover 1,057 destinations in 179 countries. We strove for additions of air traffic rights and time slot resources in hub markets and core markets, steadily improved the aircraft utilization rate and consolidated and expanded market share in the three largest hubs and core markets. Based on the SkyTeam Alliance platform, we enhanced our strategic cooperation with Delta Air Lines and cooperated with Air France and Qantas to develop a highly efficient and convenient flight network which covered the whole country and connected to the whole wide world.

In 2016, we further strengthened our Shanghai core hub and Xi'anXi’an and Kunming regional hubs. The aggregated number of transits connecting “origin to destination” of the three hubs reached 6,075, an increase of 13.8% as compared to last year.2015. In respect of the number of transits connecting "origin“origin to destination"destination”, Pudong reached 4,083, an increase of 17.9% as compared to last year,2015, Kunming reached 1,384, an increase of 9.1% as compared to last year,2015, and Xi’an reached 608, which was similar to last year.2015. The three hubs transported approximately 4.51 million passengers, an increase of 27.0% as compared to 2015. Among them, our Shanghai hub transported approximately 2.99 million passengers, an increase of 27.2% as compared to 2015, comprising 25.6% of transit flights; our Kunming hub transported approximately 1.18 million passengers, an increase of 18.7% as compared with 2015, comprising 16.1% of transit flights; and Xi’an hub transported approximately 340,000 passengers, an increase of 64.7% as compared to 2015, comprising of 6.9% transit flights.

In 2017, in view of a relatively complicated external environment and intensifying competition, we embrace challenges by seizing new development opportunities such as the “One Belt One Road” initiative, free trade port in Shanghai, the construction of the new airport in Beijing and the full access to electronic devices on aircraft.

According to the “Approval of the feasibility study report of the construction of new airport in Beijing” by the NDRC and the “Notice regarding the matters of the construction of airline base project at the new airport in Beijing” by CAAC, the new airport in Beijing is located along the north bank of Yongding River, and between Yu Fa Town and Li Xian Town, Daxing District, Beijing and Guangyang District, Lang Fang, Hebei. Being the major base airline of the new airport in Beijing, we will undertake base construction according to the target of bearing 40% of the traffic flow of the new airport in Beijing. In February 2017, we have gained the approval from the NDRC in regards of the base project at the new airport in Beijing. After the commencement of operation of the new airport in Beijing in 2019, we will grasp the developmental opportunities derived from the coordinated development of Beijing, Tianjin and Hebei, especially the construction of Xiong’an New District by the State, to actively strive for routes and time slot resources. Leveraging on the SkyTeam Airline Alliance platform, we will construct international coverage of our route networks to provide convenient, highly efficient and quality outbound travelling services for travelers.

In 2017, we focused on the operation and development of the passenger transportation business. We continued to optimizee-commerce platform functions. Fore-commerce, we expedited the construction of ourin-flight internet connection platform. The scale of the aircraft fleet withWi-Fi installed ranked at the top nationwide and we took the lead in allowing the use of portable electronic devices on flight in the PRC. As at the end of 2017, internet access has become available in all our 74 wide-body aircraft with the coverage of major business routes in Europe, the U.S., Australia and China. “Internet Access In the Air” enhanced customers’in-flight experience. We also upgraded and improved our 11 overseas websites, and a total of 12 updates were made to our mobile application. Furthermore, we introduced new service products such aspre-flight ordering ofin-flight meals via mobile application, with an aim to optimize service experiences of customers. We strengthened the shopping mall points operations by introducing diversified point redemption products such as oversized baggage redemption and continued to increase the revenue from the sales ofnon-aviation points, where the revenue from the sales of nonaviation points increased by 149% compared to last year.

In 2017, we continued to optimized our fleet structure. We introduced a total of 73 aircraft of major models and a total of 18 aircraft retired. With the introduction of B737-8MAX series aircraft and the gradual retirement of B767 series aircraft, our fleet structure has been made younger. In 2017, we continued to deepen and expand our cooperation with external partners. We deepened the comprehensive partnership with Delta by further expanding the code-share coverage and jointly deepened marketing cooperation by expanding channels and markets. We also strengthened our business partnership with AFK by further expanding our code-share coverage with it. Capitalized on the cooperation platform of SkyTeam Airline Alliance, we have newly launched code-share cooperation with Air Europa Líneas Aéreas, S.A.U. (IATA code: UX) from Spain and Czech Airlines j.s.c. (IATA code: OK). In addition, we attached importance to and continued to strengthen the cooperation with airlines which are not members of SkyTeam Airline Alliance. In collaborating with Qantas Airways Limited (IATA code: QF), we launched enhanced cooperation in joint operation and sales, and points earning and redeeming of frequent flyer program. We commenced to launch code-sharing cooperation with Jet Airways (India) Ltd. (IATA code: 9W) and Air Mauritius Limited (IATA code: MK), and discussion on bilateral cooperation of frequent flyers with WestJet Airlines Ltd. (IATA code: WS).

In 2017, we strengthened the research on the route network planning of Beijing’s new hub, and actively promoted the construction project of our base in the new airport in Beijing. We conducted seasonal improvements and adjustments on transportation capacity, and introducedBeijing-Hangzhou-Sydney, Kunming-Sydney and Wuhan-Sydney routes in accordance with the characteristics of European, American and Australian markets in recent years. In view of the changing demand for the Korean market, we reduced transportation capacity and changed to use smaller aircraft. We also introduced routes such as Shanghai-Jakarta, Shanghai-Cebu,Xi’an-Prague andShenzhen-Krabi so as to be in line with the State’s “One Belt One Road” initiative. As at the end of 2017, with the matching route networks with the SkyTeam Airline Alliance members, our route networks reached 177 countries and 1,074 destinations.

In 2017, we put in available seat – kilometers (ASK) of approximately 225,996 million passenger-kilometers, representing an increase of approximately 9.6% from 2016. Number of passengers carried in 2017 was approximately 111 million, representing an increase of approximately 8.9% from 2016. Passenger load factor in 2017 was approximately 81.1%, representing a decrease of approximately 0.17 percentage point from 2016. Passenger revenue in 2017 amounted to approximately RMB91,564 million, representing an increase of approximately 9.6% from 2016.

In 2017, we further strengthened our Shanghai core hub and Xi’an and Kunming regional hubs. The aggregated number of transits connecting “origin to destination” of the three hubs reached 6,489, an increase of 6.8% as compared to last year. In respect of the number of transits connecting “origin to destination”, Pudong reached 4,225, an increase of 3.5% as compared to last year, Kunming reached 1,608, an increase of 16.2% as compared to last year, and Xi’an reached 656, an increase of 7.9% as compared to last year. The three hubs transported approximately 4.98 million passengers, an increase of approximately 10.5% as compared to last year. Among them, our Shanghai hub transported 2.99approximately 3.02 million passengers, an increase of 27.2%approximately 1.2% as compared to last year, comprising 25.6%24.3% of transit flights; our Kunming hub transported 1.18approximately 1.45 million passengers, an increase of 18.7%approximately 22.7% as compared with last year, comprising 16.1%17.7% of transit flights; and Xi’an hub transported 340,000approximately 0.51 million passengers, an increase of 64.7%approximately 50.3% as compared to last year, comprising of 6.9%8.6% transit flights.

Cargo and Mail Operations

The following table sets forth certain of our cargo and mail operations statistics by route for each of the years ended December 31, 2014, 2015, 2016 and 2016:2017: