China Southern Airlines Announces Developments From Zhongyuan Airlines Merger; 30-day ``Progress Report'' Issued.

Business Editors

GUANGZHOU, China--(BUSINESS WIRE)--Oct. 10, 2000

China Southern Airlines (NYSE:ZNH)(HKSE:1055)(www.cs-air.com/en), the largest airline in The People's Republic of China reported the developments of its merger with Zhongyuan Airlines.

"In the 30 days since the merger between Zhongyuan Airlines and China Southern Airlines, we have increased our cargo, luggage and mail transportation loads by more than 33 percent," said Zhang Rui'ai, vice president, China Southern Airlines.

Zhang reported that daily aircraft use has increased 0.5 per hour and China Southern Airlines' market share has grown from 60 percent (before the merger) to the current 65.6 percent.

"Our plan with this merger has been to effectively use both airlines' existing physical resources and route network, optimize the route structure and expand our marketing activities," said Zhang, adding that, "we are also blending joint flight schedules, seat management and in-flight and ground handling services."

Prior to the merger, China Southern Airlines and Zhongyuan Airlines operated from two different areas within Xinzheng Airport in Zhengzhou. This resulted in a series of "post-merger" challenges as several flights had similar time schedules on multiple routes that duplicated flights and lowered passenger loads.

China Southern Airlines optimized its route network and deleted three duplicate routes from the previous Zhongyuan Airlines. The airline did so by combining two flights into one and transferred the additional capacity into four other routes.

Within one month, the merged company has operated 1,071 flights with 2,237 hours flown. This included 48 additional domestic flights, eight charter flights between Zhengzhou and Hong Kong and nine international tourist charter flights.

China Southern Airlines also reconfigured two Zhongyuan Airlines' Boeing 737s, adding first class cabins to be used on its routes to Beijing and Shanghai, providing additional comfort and benefits to the frequent business traveler.

In late August, China Southern Airlines held a meeting for sales agencies in Zhengzhou. In attendance were 139 representatives from 94 sales agencies of the previous China Southern Henan Branch and Zhongyuan Airlines. This sales "blitz" allowed China Southern Airlines to present the new merged airline to its sales agents and clarify the carrier's policies and procedures.

Additional steps taken by China Southern Airlines include:

-- Closing of three unprofitable cargo stations in Zhengzhou, Mengzhou and
Qinyang

-- Opening of two new cargo offices in Luoyang

-- Adjusted cargo pricing for on-time delivery and raised fares 30 percent that
had been artificially lowered by the recent ticket fare "wars"

-- Added a new "Air Mail Transit Service" that has generated approximately
427,000 yuan RMB in new revenue.

All of the Zhongyuan Airlines' 15 ticketing offices, including Beijing, Guangzhou, Shanghai and Shenzhen, will be unified with the China Southern Airlines corporate logo and colors.

Ranked No. 1 in passengers carried in China for the past 21 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; as well as international service, including Amsterdam, Bangkok, Fukuoka, Hanoi, Ho Chi Minh City, Kuala Lumpur, Jakarta, Los Angeles, Manila, Osaka, Penang, Phnom Penh, Seoul and Singapore.