China Southern Airlines Announces 2007 Interim Results.

Actively Optimizing Flight Network, Achieving Significant Increase in Profits

HONG KONG -- China Southern Airlines Company Limited ("China Southern Airlines" or the "Company") (NYSE:ZNH) (HKSE:1055) (SHA:600029) today announced the unaudited consolidated results of the Company and its subsidiaries (the "Group") for the six months ended 30 June 2007 (the "Period"), prepared in accordance with International Financial Reporting Standards ("IFRS") and PRC Accounting Standards ("PRC GAAP").

Under IFRS, the Group's total operating revenue amounted to approximately RMB24,556 million, an increase of 19.2% from the same period last year; profit attributable to equity shareholders of the Company amounted to approximately RMB168 million (2006 interim: loss RMB825 million). Basic earnings per share was RMB0.04 (2006 interim: basic loss per share RMB0.19). Under PRC GAAP, the Group's operating revenue amounted to approximately RMB25,210 million, an increase of 19.2% from the same period last year; net profit attributable to equity shareholders of the Company amounted to approximately RMB308 million (2006 interim: loss RMB854 million). Basic earnings per share was RMB0.07 (2006 interim: basic loss per share RMB0.20). The Board of Directors of the Company did not recommend any interim dividend for the first half of 2007.

The Company said, "In the first half of 2007, taking advantage of a persistent strong national economy, a stable increase of market demand and an appreciation of Renminbi against major currencies such as US dollar, the Group's operating condition improved significantly. During the Period, the Group continued to implement its strategy on scheduled flight network optimization and hub development, as well as striving to enhance service quality so as to satisfy customer needs and meet the entrance requirements of the international airlines alliances. Meanwhile, the Group continued to strengthen budget management and cost controls; to rationalize the way of acquiring aircraft so as to maintain a healthy gearing level and reduce financing costs; and to optimize the management performance assessment system based on efficiency of operation, thereby elevating the overall operating level and performance benchmarks of the Group."

During the Period, the Group, with assuring flight safety as the premise, recorded a total traffic turnover of 4,250 million tonne kilometres, carried 26.4 million passengers and handled 403 thousand tonnes of cargo and mail, representing increases of 14.6%, 16.6% and 7.2%, respectively as compared to the same period last year. The passenger load factor was 71.9%, representing an increase of 1.7% year-on-year. Passenger revenue increased by 20.2% year-on-year to RMB22,392 million, while revenue from cargo and mail increased by 6.1% year-on-year to RMB1,694 million.

During the Period, the Group continued to push forward its implementation of the "dual-hub" operating strategy. Through building Beijing and Guangzhou as its regional hubs, the Company strived to enlarge its service network and to provide better air transportation solutions to its existing and potential customers. During the first half of the year, the Company launched 56 new flight routes including 9 international flight routes. Chongqing Airlines, a joint venture established by the Group and Chongqing Development and Investment Co., Ltd., was formally established on June 16, 2007, in which the Company holds 60% of its equity interests. The first flight of Chongqing Airlines was launched in July 2007, which added new momentum to the Group's development in the central and western regions of the PRC.

With a view to achieving economies of scale of its air cargo transportation, the Group is actively seeking cooperation with members of the Sky Team Alliance to increase the proportion of air cargo in the overall transportation business. Aircraft A300-600, the first passenger aircraft converted into cargo aircraft, is expected to come into operation during the year. In regard to the Company's accession to the SkyTeam Alliance, China Southern Airlines said, "Various preparation work for admission to the SkyTeam Alliance has progressed smoothly, and the Company aims to be admitted by the end of this year. The membership will facilitate the Company to benefit from the rapid growth in air transportation demand as a result of the development of the global economy, thereby leading the Group to become an international airline with promising growth."

Looking ahead, the Company said, "In view of the stable growth of the PRC economy, it is anticipated that in the second half of 2007, domestic airlines will continue to benefit from the increasing market demand. However, persistent high oil prices and increasing market competition, as well as anticipated macro-economic control measures of the PRC government, will affect the operation of the industry to a certain extent. Therefore, the Group will continue to appropriately implement its overall development strategies, proactively adjust itself to market needs, modify its flight network and capacity deployment, reinforce the market forecasting and revenue analysis of each route, and strengthen its sales and market efforts. The Group will strive to enhance its service quality whilst continuously improving its passenger load factor and yield, thereby achieving all operating targets for the year and benefiting from the stable economic growth of the PRC."

The Group is one of the largest airlines in the PRC in terms of number of passengers carried, number of hours flown, number of scheduled flights per week, route networks and size of aircraft fleet. The Group operates the most extensive route networks among all PRC airlines. As at June 30, 2007, the Group operated a total of 592 routes, of which 478 were domestic, 21 were Hong Kong and Macau, and 93 were international, to 154 cities. As at June 30, 2007, the Group operated a fleet of 318 aircraft and the average age of the Group's fleet was 6.89 years.

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