Air China Limited ("Air China" or the "Company", together with its subsidiaries, collectively the "Group") today announced its results for the three months ended September 30, 2006 (the "Review Period" or the "Period"). (Important notice: All figures in this report were not audited and are prepared in accordance with PRC GAAP.)

Air China recorded satisfactory operating results for the first nine months of 2006. Revenue from the principal business amounted to RMB34.806 billion, and the profit from the principal business was RMB5.4 billion. Net profit was RMB3.345 billion while earnings per share and net return on asset were RMB0.27 and 10.6% respectively. Air China was able to maintain its leading market position within the PRC airline market. The Company's stable growth was mainly attributable to the favorable turnaround in the industry that was driven by the drop in international oil prices, an upward adjustment of fuel surcharges and the continued appreciation of the Renminbi.

Market Turnaround Leads to Growth in Passenger & Cargo Traffic

Seasonal factors of the airline industry also led Air China to higher revenue in the third quarter since the period marks the traditional peak traveling season in the Chinese market. For the July to September 2006 period, revenue and profit from the principal business were RMB13.94 billion and RMB2.714 billion respectively, while net profit was RMB3.3 billion. The strong market demand further spurred the operating performance to a historical high and contributed to improved passenger and cargo results. With the relatively steady increase in capacity, passenger traffic reached 9.045 million, an increase of 14% over the same period of the previous year. The average passenger load factor increased 2.2 percentage points to hit a record high of 80.6%. Cargo and mail traffic reached 225,000 tones, up 16.4% over the same period last year. The cargo and mail load factor increased 1.9 percentage points to 51.4%.

Passenger traffic measured by revenue passenger kilometer ("RPK") was 17,357 million, an increase of 16.4% over the same period of 2005. RPK on international routes, domestic routes, and Hong Kong and Macau routes was 7,432 million, 9,357 million and 568 million respectively, representing increases of 18%, 15.1% and 16.9%. International operations experienced the fastest growth, reflecting rapidly rising market demand. Passenger capacity measured by available seat-kilometers ("ASK") increased 13.2% to 21,531 million in the third quarter. The passenger load factor increased 2.2 percentage points to 80.6%. The passenger yield per RPK was RMB0.68.

Cargo traffic experienced growth of 21% to 873 million revenue freight tonne kilometres ("RFTK") during the review period. Cargo capacity measured by available freight tonne kilometers ("AFTK") increased 25.6% to 1,699 million. The cargo load factor was 51.4%, an increase of 1.9 percentage points. The cargo yield per RFTK was RMB2.19.

Cost Relief Brought by Decline in Oil Prices & Increase in Fuel Surcharge

The General Administration of Civil Aviation of China ("CAAC") has further adjusted the fuel surcharge of mainland airlines to approximately 80% on average, relieving Air China's cost pressure on jet fuel and thus improving the Company's profitability. The gradual reduction in International oil prices since September this year also helped to relieve pressure on jet fuel costs.

The mainland airline industry benefited from the market rebound and saw growth accelerate. The Company will continue it efforts to increase capacity, expand route networks and explore new markets. Additionally, the Company benefited from the substantial progress made in the strategic partnership with Cathay Pacific. The Company completed its shareholder realignment with Cathay Pacific, CNAC Limited, CITIC Pacific Limited and Swire Pacific Limited on September 28, 2006.