China Southern Airlines Full-Year Net Profit Surged Over Five Times.

Business Editors & Travel Writers

HONG KONG--(BUSINESS WIRE)--April 18, 2001

China Southern Airlines (NYSE:ZNH)(HKSE:1055):

-- Turnover reached RMB15,178 million, up 14.1%

-- Net profit attributable to shareholders was RMB502 million, soared by 509%

-- Total traffic volume was 2,453 million ton-km, rose by 22.5%

China Southern Airlines Co. Ltd. ("China Southern Airlines" or the "company"), together with its subsidiaries (collectively, the "group"), announced the audited consolidated results of the group for the year ended Dec. 31, 2000, prepared in accordance with International Accounting Standards ("IAS").

Net profit to shareholders was RMB502 million in 2000, representing an increase of over five times as compared with RMB82 million in 1999. Earnings per share were RMB0.15 in 2000 as compared with RMB0.02 in 1999. Turnover increased 14.1% Year-on-Year to RMB15,178 million in 2000. The board of directors recommended no final dividend.

During the year, amid the Civil Aviation Administration of China's (the "CAAC") introduction of the "Merger and Restructuring" policy of the People's Republic of China aviation industry, the company has been actively seeking merger and acquisition opportunities in pursuit of economies of scale with a more extensive network and better service quality. Notwithstanding the inflated fuel prices and intensified market competition, the company was able to record substantial profit growth, thanks to the company's success in cost control, active development of new markets and the improvement in operating environment.

China Southern Airlines' satisfactory operating results were underpinned by the reviving Asian and Chinese economies, which stimulated demand for aviation services and boosted the company's passenger and freight traffic. Total traffic revenue of the group in 2000 was RMB14,706 million, up 14.7% from 1999. The total number of passengers carried increased 11% to 16.8 million passengers in 2000. Cargo and mail volume increased 13% to 440 thousand tons, of which the growth of international cargo business was particularly impressive.

The strong performance of the group's international cargo business was driven by robust demand for international cargo transportation from the region and the group's newly opened cargo route servicing between Shenzhen and Chicago, launched in April 2000.

Yan Zhi Qing, chairman of the board of directors, said, "To maintain our leading market share in the PRC, our group intends to fully capture the opportunities brought by the 'Merger and Restructuring' policy. During 2000, we participated in the restructuring of Zhongyuan Airlines. The group will continue to look for expansion opportunities arising from 'Merger and Restructuring' and utilize our economies of scale."

In August 2000, the Southern Airlines (group), the company's parent company, came to an agreement to acquire Zhongyuan Airlines, and the company acquired the operating rights of its flying routes. Not only did the transaction help expand the group's domestic network, it also enhanced the group's operation efficiency and market share in central China.

The group also extended its international routes in a prudent manner. In addition to the introduction of the Shenzhen-Chicago cargo route in April 2000, two international passenger routes between Guangzhou to Sydney and Melbourne in Australia were launched in late 2000. Meanwhile, the group has entered into code-sharing agreements with a number of Asian airlines. Such operating measures will help expand the flying routes of the group.

In recent years, China Southern Airlines won a number of international trophies and awards on its products and services, including "Emerging Market Leader" named by World Economic Forum in January 2001 and was recently named "The Best Airline in China" by Airlinequality.com of Skytrax Research, the authoritative world civil aviation service assessment institute.

As of year-end 2000, the group operated a fleet of 109 aircraft.

To improve operation and management efficiency, the group has developed a number of advanced computerized management systems. On the cost side, effective cost-control measures have been taken. As a result, the group was able to contain unit cost at the 1999 level despite the consistently high fuel price last year.

2001 is a year of hopes and challenges. With the upcoming entry of the PRC into the World Trade Organization and the implementation of the PRC government's plan to develop China Midwest, domestic demand for aviation services is likely to receive further boost. As to the group, capacity for regional flights and traffic capacity on international routes will be further improved and strengthened.

Yan, chairman of the group, is optimistic on the development of China's aviation industry and the group. "The new century is filled with new hopes and challenges. The merger and restructuring will be able to lift overall operating efficiency of China's aviation industry," said Yan.

The group continued to rank first among Chinese airlines 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. As of year-end 2000, the group operated 361 routes, which are composed of 300 domestic routes, 22 Hong Kong regional routes and 39 international routes.

                 CONSOLIDATED PROFIT AND LOSS ACCOUNT
                   For the year ended Dec. 31, 2000

                                                   2000         1999
                                                 RMB'000      RMB'000
Traffic revenue
  Passenger                                   13,254,714   11,819,160
  Cargo and mail                               1,451,445    1,005,886
                                              14,706,159   12,825,046
Other revenue                                    472,159      474,618
Total operating revenue                       15,178,318   13,299,664
Operating expenses:
  Flight operations                            6,109,021    4,412,554
  Maintenance                                  1,758,581    1,405,504
  Aircraft and traffic servicing               2,069,114    1,875,740
  Promotion and sales                          1,377,682    1,184,456
  General and administrative                     809,225      754,647
  Depreciation and amortization                1,863,789    1,807,619
  Other                                            8,805        9,215
Total operating expenses                      13,996,217   11,449,735
Operating profit                               1,182,101    1,849,929
Non-operating income/(expenses):
  Share of associated companies' results          45,949       36,061
  Profit on sale of long-term investments             --       16,804
  Profit/(loss) on sale of fixed assets          372,596      (18,640)
  Interest income                                 90,283      107,385
  Interest expense                            (1,074,236)  (1,192,179)
  Exchange gain/(loss), net                      318,502     (426,535)
  Other, net                                      (3,965)      (4,280)
Total non-operating expenses                    (250,871)  (1,481,384)
Profit before taxation and
 minority interests                              931,230      368,545
Taxation                                        (338,907)    (128,023)
Profit before minority interests                 592,323      240,522
Minority interests                               (90,552)    (158,124)
Profit attributable to shareholders              501,771       82,398

Basic earnings per share                         RMB0.15      RMB0.02