China Southern Airlines Announces 2006 Annual Results.

HONG KONG -- China Southern Airlines Company Limited ("China Southern Airlines" or the "Company") today announced the audited consolidated results of the Company and its subsidiaries (the "Group") for the year ended 31 December 2006 (the "Year"), prepared in accordance with International Financial Reporting Standards ("IFRS") and PRC Accounting Rules and Regulations ("PRC GAAP").

Under IFRS, the Group's total operating revenue amounted to approximately RMB46,219 million (2005: RMB38,293 million); operating profit amounted to approximately RMB 312 million (2005: loss 1,305 million); profit attributable to shareholders of the Company amounted to approximately RMB188 million (2005: loss RMB1,848 million). Basic earnings per share was RMB0.04 (2005: basic loss per share RMB0.42). Under PRC GAAP, the Group's sales from principal activities amounted to approximately RMB47,047 million (2005: RMB39,052 million); profit before income tax was RMB 306 million (2005: loss RMB 1,773 million); net profit amounted to approximately RMB118 million (2005: loss RMB1,794 million). The Board of Directors of the Company did not recommend any final dividend for year 2006.

The Company said, "In 2006, China's economy continued to grow at a healthy and steady pace while market demand for air transportation remained strong. This has led to increases in the Group's passenger and cargo traffic volumes and their income levels to various extents, resulting in a corresponding increase in the overall operating income of the Group. However, with the opening of the international and domestic airline transportation market, the fleet capacity and number of flights provided have significantly increased. With intensified competition within the airline industry and soaring jet fuel prices which hovered at a historic high level, the Group's operations have been faced with strong pressure."

During the Year, total number of passengers carried increased by 11.5% to 49.21 million passengers; passenger revenue increased by 21.0% to RMB41,549 million, of which passenger revenues on domestic routes, Hong Kong and Macau routes and international routes amounted to RMB34,174 million, RMB1,230 million and RMB6,145 million, respectively, representing increases of 21.3%, 3.0% and 24.1%, respectively over the previous year. Total cargo and mail carried increased by 5.7% to 819 thousand tonnes. Revenue from cargo and mail also increased by 14.5% to RMB3,538 million.

In order to enhance economies of scale, the Company is gradually implementing its strategic shift from a point-to-point linear operational model to a hub-network operational model; in order to improve the flight network structure of air transport hubs and enhance the business profiting model. Meanwhile, by targeting customer needs, the Company improved product quality and increased the introduction of innovative services through promoting electronic ticketing and customized services, so as to steadily achieve the long-term objectives of the business strategies of the Group.

In 2006, the Group expedited its pace to become an international player by entering into an operation agreement for joining the SkyTeam Alliance. Through strategic partnerships with foreign airlines, the Group broadened its global market penetration and coverage and successfully added 16 new international routes including Lagos and Tehran and 9 international destinations, representing the largest number of newly launched international flight routes in recent years.

Looking ahead, the Company said, "In 2007, it is expected that China's economic growth will remain robust and soaring jet fuel prices will gradually slow down. Meanwhile, domestic airlines are expected to benefit from the appreciation of Renminbi through foreign exchange conversion from various business opportunities arising from 2008 Beijing Olympics, Shanghai 2010 World Expo and the Asian Game to be held in Guangzhou, PRC. However, due to rapidly increasing flight capacity, fierce market competition among airlines is inevitable. Therefore, the Company will continue to reinforce the risk detection and risk prevention ability as regards operational safety, further enhancing its customer service and optimizing its resource allocation among different routes to enhance cargo carrying capacity, as well as reinforcing its financial planning management and improving its internal control system, with a view to sustaining the Group's growth and market competitiveness."

The Group is one of the largest airlines in the PRC in terms of volume of passenger traffic, number of scheduled flights per week, number of hours flown, number of routes and size of aircraft fleet. The Group operates the most extensive route network among all PRC airlines. For the year ended 31 December 2006, the Group operated a total of 616 routes, of which 501 were domestic, 90 were international and 25 were Hong Kong and Macau. As at 31 December 2006, the Group operated an average of 9,333 landings and take-offs per week, serving 152 destinations. As at 31 December 2006, the Group operated a fleet of 298 aircraft and the average age of the Group's fleet was 6.37 years.

Encl.

1. Audited Consolidated Income Statement (Prepared in accordance with IFRS)

2. Audited Consolidated Income Statement (Prepared in accordance with PRC GAAP)

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