China Southern Airlines & MTU Ink New Engine Overhaul Pact; $180M Facility To Open In 2002; Largest In China.

Business/Travel Editors

ZHUHAI, China--(BUSINESS WIRE)--May 23, 2000

China Southern Airlines (NYSE:ZNH) (HKSE:1055), the largest airline in The People's Republic of China, is pleased to announce that it has reached an agreement with MTU Munchen to construct and operate the new MTU Maintenance Zhuhai Co. Ltd., the largest aero engine maintenance overhaul facility in China. The investment of this joint project is $180M (US).

The announcement was made today at a signing ceremony in Zhuhai. During the official ceremony, China Southern Airlines' Chairman Yu Yanen said, "China Southern Airlines boasts the largest modern air fleet and the greatest number of aircraft engines in China. We will be setting up our own engine overhaul base to provide critical maintenance services for China Southern Airlines, numerous Chinese airlines and carriers based throughout Southeast Asia."

He added, "The foundation of this new engine overhaul facility can minimize the expense of sending aircraft engines to Europe or the U.S. for repair, thus meeting the demand of further expansion of our fleet."

MTU's Maintenance group is the world's leading player in the global commercial engine maintenance business. This joint venture will enable MTU to enter the high-growth Chinese market and offers many of its present customers a new maintenance base in Asia.

The location of the new engine overhaul facility in Zhuhai is close to Hong Kong and Macao, offering easy transportation for airline companies seeking new aircraft maintenance work from the new facility which will work on V2500 and other aircraft engines. The engine maintenance center is expected to open in 2002. By 2006 the aircraft overhaul capability will be 150 engines per year.

The newly announced MTU Maintenance Zhuhai Co. Ltd. will be located near China Southern Airlines' Flight Training Center, Zhuhai Helicopter Co. and the Zhuhai Airlines Co. Ltd.

China Southern Airlines will profit from the infusion of new technology from a globally leading maintenance provider and from the opportunity to build its overhaul capacities while significantly cutting its own maintenance costs.

Ranked No. 1 in passengers carried in China for the past 20 years, China Southern Airlines (www.cs-air.com/en) connects more than 80 cities around the globe. Major business and vacation destinations served in China include: Beijing, Chengdu, Guangzhou, Guilin, Hong Kong, Kunming, Shanghai, Shenzhen and Wuhan, and as well as international service, including: Amsterdam, Bangkok, Hanoi, Ho Chi Minh City, Kuala Lumpur, Jakarta, Los Angeles, Osaka, Penang, Phom Penh, Seoul and Singapore.