Air China Announces 2006 Results.

Profitability Increased Despite Challenging Operating Environment

Financial Highlights:

* Operating Revenue increased 17.4% to RMB44.9 billion

* Net profit attributable to shareholders increased 11.7%

* Basic earnings per share were RMB26.2 cents

* Recommended year-end dividend: RMB4.92 cents per share 

HONG KONG -- Air China Limited (the "Company", including Air China and Air Macau, together with its subsidiaries, collectively the "Group", HKEX: 753; LSE: AIRC; SSE: 601111; ADR OTC: AIRYY) announced its results for the year ended December 31, 2006 (the "Period").

In 2006, Air China's operating revenue grew despite the high cost of jet fuel during the first half of the year. Operating revenue increased by 17.4% to RMB44.9 billion. Net profit attributable to shareholders was RMB2,688 million, up 11.7% compared to 2005. Basic earnings per share were RMB26.2 cents. The Board of Directors of the Company recommended a year-end dividend of RMB4.92 cents per share.

During the Period, total operating expenses for the Group were RMB42.4 billion, up 22.5% from 2005 due to increases in the price and consumption of jet fuel, although fuel prices dropped in the second half of the year. The total cost of jet fuel for the Group in the Period was RMB15.7 billion. This was 37.0% of total operating expenses, up 3 percentage points over 2005.

"2006 was a critical year for the Company", commented Mr. Li Jiaxiang, Chairman of Air China. "We had several highlights this year, including our A-share listing in Shanghai and the restructuring of our cross shareholding with Cathay Pacific Airways. The share listing helped stabilize our capital structure and provide us the resources to continue our fleet expansion while the share restructuring strengthens our relationship with Cathay and provides us with valuable know-how in flight services. From an operating standpoint, we saw a break in the high global oil prices in the second half of the year, which helped bring some relief to the most significant cost pressure we have been facing. As a result, we were able to post a substantial increase in earnings and reward our shareholders with a year-end dividend."

Robust growth in passengers

During the Period, the total number of passengers carried by the Company increased 14.2% to 33.97 million. Passenger traffic measured by revenue passenger kilometer ("RPK") was 63.36 billion, an increase of 15.5% over 2005. RPK on international routes, domestic routes, and Hong Kong and Macau routes was 25.37 billion, 32.9 billion and 1.98 billion respectively, representing YoY increases of 16.5%, 14.2% and 13.1%.

Passenger capacity ("ASK") of Air China increased 12.4% to 79.4 billion during the Period. Passenger load factor increased 1.9 percentage points to 75.9%. Average passenger yield per RPK was RMB0.59, an increase of 1.8% compared to 2005.

Expansion of hub and route networks

As of December 31, 2006, the total number of aircraft assigned to the Company's Beijing hub was 123, giving the Company a market share of 44% at the nation's largest domestic and international airport. Meanwhile, Chengdu's position as a secondary hub in the Southwestern region of the country was further strengthened. The Chengdu-based fleet consisted of 38 aircraft. The Company continued to add new capacity in Shanghai, which serves as an international gateway. The Shanghai-based fleet has 30 aircraft. Air China also accelerated the build-up of its operational base in Southern China.

During the Period, the Company introduced 35 new routes and began new services to four additional countries. As of December 31, 2006, Air China and Air China Cargo operated a total of 285 routes, which includes 196 domestic routes, 81 international routes and 8 regional routes. The Company continued to refine its route network to increase operating efficiency. Internationally, the Company started new services from Beijing to Ho Chi Ming city, Delhi, Madrid and Sao Palo; from Tian Jin to Seoul; from Dalian to Seoul; and from Hangzhou to Pusan. A dozen new domestic routes, which mainly originate from the Company's hubs were also added.

Fleet expansion and upgrade

During the Period, Air China introduced 31 new aircraft. As of December 31, 2006, the Company (including Air China Cargo) operated a fleet of 207 aircraft. The average aircraft age was 7.1 years.

In order to promote service on international routes, the Company upgraded the business and first class cabins of 9 Boeing 747 and 4 Airbus A340 aircraft. The upgrades were finished on schedule by December 31, 2006, and a new program of upgrading the cabin facilities of other A340 aircraft has begun.

Increased marketing efforts and expanded partnership

In 2006, the sale of electronic tickets was RMB10.65 billion, an increase of 202.9%. Air China inaugurated a call center, a North American sales website and a European call center, which have helped strengthen its sales network. The Company is also promoting its frequent flyer program. During the Period, a total of 1.1 million new members joined the program, bringing the total membership of the program to 4.1 million as of December 31, 2006.

On 22 May 2006, the Company signed a Memorandum of Understanding with the Star Alliance, demonstrating its intention to join Star. While further strengthening cooperation with long time business partners such as Lufthansa and United, the Company also introduced code sharing arrangements with new partners, including Varig, Virgin Atlantic, Qantas and Air New Zealand. Additionally, a comprehensive code sharing arrangement was implemented with Shangdong Airlines on China-Korea routes.

Cargo operation

Cargo traffic experienced growth of 19% to 3.29 billion RTK in the Period. Cargo capacity ("AFTK") increased 20.8% to 6.1 billion. The cargo load factor was 53.7%, a decrease of 0.8 percentage points.

Outlook

Looking forward, Chairman Li Jiaxiang said, "Although the high price of jet fuel creates significant cost a pressure, the PRC economy has maintained its fast pace of growth and has been the driving force behind our rapid growth. The coming Olympic Games in 2008 will present business opportunities as the Company leverages its status as the sole passenger airline partner of the Games. Furthermore, our strategic relationship with Cathay Pacific Airways and our prospective membership in the Star Alliance will further add to the momentum."

About Air China

Air China Limited (Air China) is the national flag carrier of China and a leading provider of air passenger, air cargo and airline-related services in China. Its operational head office is in Beijing. It has an extensive route network serving major Chinese cities and international destinations, with dominant market share measured by total traffic volume for the Beijing Capital International Airport. It also provides airline-related services, including aircraft maintenance, ground services and in-flight catering services in Beijing, Chengdu, Hong Kong and other locations through its own business units and joint ventures. In the year ended December 31, 2006, it operated a fleet of 207 aircrafts, operated 196 domestic routes, 81 international routes and 8 regional routes.

Air China was listed on the Hong Kong Stock Exchange and the London Stock Exchange on December 15, 2004 under codes 0753 and AIRC respectively. On July 2, 2006, Air China issued its Level I American Depositary Receipt (ADR) listing in New York under the code AIRYY. On August 18, 2006, Air China's A share was listed on the Shanghai Stock Exchange under code 601111. Air China was designated on August 4, 2004 as the sole airline partner of the Beijing Olympic Games. For further details, please visit Air China's website: www.airchina.com.cn.

Notice

Air China Limited will announce 2006 results on March 20, 2007. Results will be published in the South China Morning Post and the Hong Kong Economic Times on March 20, 2007. An archived webcast to discuss Air China's results will be posted on March 21, 2007, on the Company's website at www.airchina.com.cn.

Disclaimer

This press release contains projections and forward-looking statements that reflect the company's current views with respect to future events and financial performance. These views are based on current assumptions which are subject to various risks and which may change over time. No assurance can be given that future events will occur that projections will be achieved, or that the company's assumptions are correct. Actual results may differ materially from those projected.