Net profit losses for China Southern Airlines

Turnover reached RMB8,070.4M – up 14.3%

Traffic revenue increased 16.6% to RMB7,900.3M

Net profit attributable to shareholders decreased by 42.1% to RMB201.5M
China Southern Airlines<.> Company Limited together with its subsidiaries announced the unaudited consolidated interim results of the Group for the six months ended 30 June 2001, prepared in accordance with the requirements of the Main Board Listing Rules of The Stock Exchange of Hong Kong Limited.

During the period, net profit attributable to shareholders decreased by 42.1% to RMB201.5 Million, compared with RMB348.0 Million in the first half of 2000. Turnover was RMB8,070.4 Million, representing an increase of 14.3% while traffic revenue recorded an increase of 16.6% to RMB7,900.3 Million.

Earnings per share amounted to RMB0.06, a decrease of 42.1% from the same period last year.

The Board of Directors of the Company did not recommend any interim dividend for the year 2001. During the period under review, the Group`s load factors and aircraft utilization recorded steady growth as a result of the improving PRC economy and growing domestic demand for aviation. The growth in passenger volume and market transparency have been further improved by the policies on discounting domestic airfares, control over agency market and the revenue-sharing scheme for domestic routes implemented by the Civil Aviation Administration of China (CAAC). However, the persistently high fuel pricing has adversely affected the net profit of the Group.

Traffic revenue reported an increase of 16.6% to RMB7,900 million from the same period last year. Traffic volume surged by 23.0% to 1,449 Million RTKs while aggregate utilization rate of the Group`s Boeing and Airbus aircraft was 9.08 hours, representing an increase of 0.56 hour from the same period last year.

Passenger revenue surged by 16.6% to RMB7,207 Million as passenger traffic volume increased 19.4% to 12,007 Million RPKs from the same period last year.

Domestic passenger revenue and international passenger revenue recorded an 18.2% and 22.5% growth respectively, to RMB5,758 Million and RMB889 Million from the first half of 2000. Passenger revenue on the Hong Kong regional routes recorded a decrease of 4.1%.

The first half of 2001 was a challenging period for the entire aviation industry in China, said Mr. Yan Zhi Qing, Chairman of the Board of Directors. He added that thanks to our Group`s experienced management and effective measures, particularly in increasing market share and enhancing efficiency, negative impact from the market has been minimized.

In spite of the intensified competitions in the PRC aviation industry, we are expecting a brighter outlook for the second half of 2001. In addition, the PRC entering WTO and the award to Beijing to host the 2008 Olympic Games will surely boost the demand in the aviation market from all over the world.

Being one of the largest airlines in China, we are fully prepared for such events and our Group is likely to become one of the biggest beneficiaries in the market, added Mr. Yan Zhi Qing.

Southern Airlines (Group), the controlling shareholder of the Company, has been voluntarily participating in the consolidation and restructuring scheme in the PRC aviation industry under government proposals. During the first half of the year, in order to further expand its marketing network and market exposures, the Group reached an agreement with the State Post Bureau of China regarding postal transportation, ticketing agency, freight agency, delivery services and cargo transportation services. Furthermore, the Group entered into code-sharing schemes on eight domestic routes with Yunnan Airlines, China Northern Airlines, hanghai Airlines and Sichuan Airlines. Other upcoming measures including the exploration of more opportunities in the consolidation and restructuring of domestic airlines, measurement on cost and quality control and the enhancement of the overall management level are expected to further increase the Group`s market share and improve its operating efficiency.