China Southern Airlines Announces 2005 Interim Results.

HONG KONG -- China Southern Airlines Company Limited ("China Southern Airlines" or the "Company") (NYSE:ZNH) (HKSE:1055) (SHA:600029) today announced the unaudited consolidated interim results of the Company and its subsidiaries (collectively, the "Group") for the six months ended 30 June 2005 (the "Period"). In accordance with the PRC Accounting Rules and Regulations ("PRC GAAP"), the Group recorded a turnover of RMB18,053 million (Corresponding period in 2004: RMB11,167 million); loss attributable to equity holders amounted to RMB843 million (Corresponding period in 2004: RMB333 million profit). In accordance with International Financial Reporting Standards ("IFRS"), the Group recorded a turnover of RMB17,844 million (Corresponding period in 2004: RMB11,094 million); loss attributable to equity holders amounted to RMB907 million (Corresponding period in 2004: RMB266 million profit). The Board of Directors of the Company did not recommend any interim dividend for the first half of 2005.

Mr. Liu Shao Yong, the Company's Chairman, said, "During the first half of 2005, with a continuous and steady growth of the PRC economy, coupled with the Company's completion in acquiring the airline operations and certain related assets of China Northern Airlines Company and Xinjiang Airlines Company, the Group has achieved growth to different degrees in its passenger volume and traffic revenue. However, oil prices continued to escalate, driving up the jet fuel prices which has in turn led to a substantial increase of operating costs. Meanwhile, competition in the domestic civil aviation market was very intense, leading to unstable yield. Furthermore, after restructuring, it would take the Group a period of time for the benefits of business integration to materialise and for business synergy to take effect. Due to the above factors, a net loss was resulted during the Period."

For the Period, the Group's total traffic revenue amounted to RMB17,443 million, an increase of 61.0% over the same period last year. Total traffic volume increased by 52.9% to RMB3,343 million revenue tonne kilometres ("RTKs"). The aggregate utilisation rate of the Group's aircraft was 9.87 hours per day for the Period, an increase of 0.47 hours or 5.0% over the same period last year.

For the Period, the Group's passenger revenue amounted to RMB15,967 million, a rise of 63.3% over the same period last year, representing 91.5% of the Group's total traffic revenue. Passenger traffic volume increased by 65.2% to 28,478 million revenue passenger kilometres ("RPKs"). As a breakdown, passenger revenues on domestic routes, Hong Kong regional routes and international routes amounted to RMB12,956 million, RMB599 million and RMB2,412 million respectively, representing increases of 64.4%, 12.0% and 77.5% respectively, compared to same period last year. Passenger traffic volume of these three regional routes increased by 72.1%, 21.3% and 42.3% respectively, compared to the same period last year.

For the Period, the Group's cargo and mail revenue amounted to RMB1,476 million, an increase of 39.5% over the same period last year, representing 8.5% of the Group's total traffic revenue. Cargo and mail volume grew 24.5% to 804 million RTKs.

Total operating expenses amounted to RMB18,260 million for the Period, an increase of 76.6% over the same period last year. This is primarily due to the general increases in fuel costs, aircraft repairs and maintenance expenses, landing and navigation fees and sales commission expenses, all as a result of increased traffic volume during the Period. Of such increases, fuel costs increased by 104.6% to RMB5,549 million.

According to "Notice of the National Development and Reform Commission (NDRC) and the General Administration of Civil Aviation of China (CAAC) Concerning the Relevant Questions on Collecting Fuel Surcharge to Domestic Routes", effective from 1 August 2005 (flight time), airlines are allowed to impose fuel surcharge on all domestic routes (other than routes between Mainland and Hong Kong/Macau). The resumption of fuel surcharge collection will lighten the Group's burden of jet oil costs.

Looking ahead, Mr. Liu said, "The enlarged scale of the Group due to its joint restructuring will provide more opportunities for the development of the Company's business and operations. The Group will adjust its flight network deployment and increase traffic capacity to fill up uncovered routes, and will maintain or even increase its domestic and regional market shares, so as to assure its leadership position in the PRC civil aviation industry."

Approved by the Board of Directors, the Company will set up its Beijing branch in Tianzhu Airport Industrial Zone in Beijing. Mr. Liu said, "With the integration of the Group's core airline business, the Company's business development in Beijing Capital Airport will provide a better hub base for the Group's existing 'Azure Big Delta' (Guangzhou-Shenyang-Urumqi) network services. Meanwhile, the Group can also take an active part in, and share the opportunities brought to, the Beijing airlines market by the Beijing Olympics 2008."

The Group is one of the largest airlines in the PRC in terms of passenger volume, number of scheduled flights per week, number of hours flown, route networks and size of aircraft fleet. The Group operates the most extensive route network among all PRC airlines. As of 30 June 2005, the Group operated a total of 498 routes, of which 399 were domestic, 26 were Hong Kong regional and 73 were international. For the six months ended 30 June 2005, the number of landings and takeoffs per week totalled 7,929, serving 134 cities. As at 30 June 2005, the Group operated a fleet of 242 aircraft, of which 136 were Boeing aircraft and 56 were Airbus aircraft.

Encl. Unaudited Consolidated Profit and Loss Account

China Southern Airlines Company Limited
            Unaudited Consolidated Profit and Loss Account
                 For the Six Months ended 30 June 2005
   (In accordance with International Financial Reporting Standards)

                                                      2005        2004
                                               RMB million RMB million
Operating revenue
 Traffic revenue                                   17,443      10,834
 Other operating revenue                              401         260
                                               ----------- -----------
Total operating revenue                            17,844      11,094
                                               ----------- -----------

Operating expenses
 Flight operations                                  9,084       4,722
 Maintenance                                        2,320       1,410
 Aircraft and traffic servicing                     2,560       1,689
 Promotion and sales                                1,220         874
 General and administrative                           912         552
 Depreciation and amortisation                      2,094       1,083
 Other                                                 70           8
                                               ----------- -----------
Total operating expenses                           18,260      10,338
                                               ----------- -----------

Operating (loss)/profit                              (416)        756
                                               ----------- -----------

Non-operating income/(expenses)
 Interest income                                       17           9
 Interest expense                                    (750)       (344)
 Share of associates' results                         (28)         21
 Share of jointly controlled entities' results         24           4
 (Loss)/profit on sale of property,                   (35)          3
   plant and equipment
 Exchange gain, net                                   197          15
 Other, net                                           (34)          5
                                               ----------- -----------
Total net non-operating expenses                     (609)       (287)
                                               ----------- -----------

(Loss)/profit before taxation                      (1,025)        469
Taxation credit/(expense)                              61         (95)
                                               ----------- -----------
(Loss)/profit for the period                         (964)        374
                                               =========== ===========

Attributable to
 Equity holders of the parent                        (907)        266
 Minority interests                                   (57)        108
                                               ----------- -----------
(Loss)/profit for the period                         (964)        374
                                               =========== ===========

Basic (loss)/earnings per share                  (RMB0.21)     RMB0.06
                                               =========== ===========