China Southern Airlines Announces Major Cargo Moves; Airline Looks to New Airport Opening as Boom to Chinese Freight Market.

Business/Travel Editors

SINGAPORE--(BUSINESS WIRE)--Feb. 24, 2004

China Southern Airlines (NYSE:ZNH)(HKSE:1055), www.cs-air.com/en, the largest airline in The People's Republic of China, has outlined a bold program for its cargo operations for 2004.

Addressing the AirFreight Expo & Conference 2004 here, Mr. Zhang Weixi, Deputy General Manager, China Southern Airlines, announced the airline's major business expansion period commencing with the opening of the new Baiyun International Airport with the goal of generating cargo revenue in the airline's total main business revenue beyond 20%.

China Southern Airlines will also set up wholly owned or joint-venture cargo companies in order to heighten the strategic position of our cargo business.

According to Mr. Zhang, China Southern Airlines is pledged to hold to a three-step development strategy to quicken the growth of its cargo business.

Step one was initiated April 2000 to June 2002 with the major task of operating freighters from the United States and Europe to China on a wet-lease base, in order to accumulate the freighter-operation experience and build a solid foundation for the 2nd step development.

Step two began June 2002 through June 2004 with the main task of operating independent freighters. This goal is to break even or show a profit in the freighter operations. During this current period, China Southern Airlines continues to focus on the operation of its route network, ground distribution network and the IT network.

According to Mr. Zhang, "China Southern Airlines will make full use of our large domestic route network to further expand the size of its freighter fleet. On the foundation of the freighter services to the US and Europe, we will launch additional freighter services to Russia and Japan, to expand our share in the international cargo market. The cargo network will be extended to North America, Europe, Russia, and East Asia. A strong and extensive domestic network of belly cargo transportation in our passenger aircraft will be formed to support the international freighter services with Guangzhou, Beijing as the hubs with Shenyang, Urumqi and Wuhan as the regional hubs."

He added that, "In terms of ground distribution network construction, China Southern Airlines will focus on strengthening the construction of the cargo bases. This June, the cargo terminal at The New Guangzhou Baiyun International Airport -- in which China Southern Airlines holds a 70% share -- is to be put into daily service. The cargo terminal has been designed on the concept of a modern logistics center with a total 105,000 square meters.

"There will be five freighter aprons and the cargo terminal will be equipped with 50 X-ray security-check machines, warehouses for special cargo such as animals, frozen or dangerous goods. The annual cargo handling capacity is expected to reach 800,000 tons in the 1st phase, four times of the capacity of our current Guangzhou cargo base. After the completion of the new cargo terminal, due to the advanced automatic cargo handling system/Electronic Transportation Vehicle and the automatic documentation transmission system, the whole procedure including cargo acceptance, pallet build-up and cargo dispatching will be handled automatically, which will speed up the cargo handling procedure."

He added that China Southern Airlines plans to firm up its own trucking group, which will result in the ground to air transportation network of connecting the Pearl River Delta and radiating central and southern regions.

In terms of IT network construction, in August 2003, China Southern Airlines officially launched the exclusive TANG Cargo Sales & Marketing System and began utilizing the system on a global scope. The TANG system is the largest and also the pioneering cargo sales and marketing system in China, which is fully and independently developed with full intellectual property rights by a Chinese airline. Compared with similar types of domestic cargo on-line products, TANG offers clients five significant characteristics, specifically: 24-hour online cargo tracking, global network coverage, visual cargo monitoring, convenient operation profile and multiple-end information. Of these many functions, the new online cargo function is the first innovative product of its type available in China.

Users can access TANG via the World Wide Web, 24-hours a day and conduct their cargo business anytime and anywhere, including using new features such as Online Waybill, Online Booking and Online Information. The new TANG program is a fully functional IT program which will expand China Southern Cargo by tapping into network transportation and logistical distribution as it further implements China Southern Airlines' strategic cargo goals.

Quoting Mr. Zhang, "We have made substantial investments in the cargo logistics business in recent years. On November 20, 2001, China Southern Airlines created its own independent Cargo Department. Now with passenger and cargo businesses under separate management, we are embarking on a bold new venture to simultaneously develop our passenger and cargo services. We have also established a new market strategy of 'network transportation, logistics distribution and promised service.'"

Mr. Zhang said that, "In accordance with this new service mantra, we have gradually enlarged our investment in the cargo business. In 2002, China Southern Airlines introduced two new Boeing 747-400 freighters, the largest of its kind in China, which have served us well on the Sino-American and Sino-European cargo routes. In June 2002, China Southern Airlines invested RMB150 Million in China Postal Airlines. China Southern Airlines also continues to construct significant cargo bases in Guangzhou, Shenzhen, Shanghai and other major metropolitan cities throughout China.

In 2003, China Southern Airlines' total cargo and mail volume reached 464,000 tons, which was No. 1 in China for three consecutive years.

The largest airline in The People's Republic of China for the past 24 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, Islamabad, Kuala Lumpur, Jakarta, Los Angeles, Manila, Melbourne, Moscow, Osaka, Penang, Phnom Penh, Seoul, Singapore, Sydney and Tokyo.

For China Southern Airlines reservations and information, please contact your local travel agent.