Interim Report

Air China Ld
12 September 2007


CONTENTS

Important Notice                                                       2
Corporate Information                                                  3
Summary of Financial Information                                       4
Summary of Operating Data                                              5
Chairman's Statement                                                   7
Operating Results Review                                               9
Management Discussion and Analysis                                    13
Major Events                                                          18
Shareholdings of Directors,
 Supervisors and Senior
 Management and Substantial
 shareholders of the Company                                          19
Corporate Governance                                                  22
Miscellaneous                                                         23
Review Report                                                         24
Financial Information prepared
 under International Financial
 Reporting Standards                                                  25
Financial Information prepared under
 China Accounting Standards and
 Supplementary Information                                            48
Glossary of Technical Terms                                           70




IMPORTANT NOTICE

The board of directors (the 'Board') and directors  ('Directors') of the Company
hereby confirm that there are no false representations, misleading statements or
material  omissions  in this report,  and the  Directors  severally  and jointly
accept full  responsibility  for the truthfulness,  accuracy and completeness of
the contents of this report.

The Chairman Mr. Li Jiaxiang,  the Chief Financial Officer Mr. Fan Cheng and the
General Manager of the Finance  Department Mr. Li Youqiang of the Company hereby
jointly  declare that the unaudited  interim  condensed  consolidated  financial
statements set out in this interim report is true and complete.




CORPORATE INFORMATION

CHINESE REGISTERED NAME


ENGLISH NAME
Air China Limited

REGISTERED OFFICE
9/F, Blue Sky Mansion
28 Tianzhu Road
Zone A, Tianzhu Airport Industrial Zone
Shunyi District
Beijing
China

PRINCIPAL PLACE OF BUSINESS IN HONG KONG
5th Floor, CNAC House
12 Tung Fai Road
Hong Kong International Airport
Hong Kong

WEBSITE ADDRESS
www.airchina.com.cn

DIRECTORS
Li Jiaxiang
Kong Dong
Wang Shixiang
Yao Weiting
Christopher Dale Pratt
Chen Nan Lok, Philip
Ma Xulun
Cai Jianjiang
Fan Cheng
Hu Hung Lick, Henry
Wu Zhipan
Zhang Ke
Jia Kang

SUPERVISORS
Zhang Xianlin
Liao Wei
Zhang Huilan
Liu Feng
Liu Guoqing

LEGAL REPRESENTATIVE OF THE COMPANY
Li Jiaxiang

JOINT COMPANY SECRETARIES
Huang Bin
Li Man Kit (ACIS, ACS)

QUALIFIED ACCOUNTANT
Tze-kin Ng, David (CPA)

AUTHORISED REPRESENTATIVES
Cai Jianjiang
Li Man Kit

LEGAL ADVISER TO THE COMPANY
Haiwen & Partners (as to PRC Law)
Freshfields Bruckhaus Deringer
 (as to Hong Kong and English Law)

INDEPENDENT AUDITORS
Ernst & Young

H SHARE REGISTRAR AND TRANSFER OFFICE
Computershare Hong Kong Investor Services Limited
Rooms 1712-1716, 17th Floor
Hopewell Centre
183 Queen's Road East
Wanchai
Hong Kong

LISTING VENUES
Hong Kong, London and Shanghai


SUMMARY OF FINANCIAL INFORMATION

                                                           For the          For the
                                                        six months       six months
                                                             ended            ended
                                                           30 June          30 June
                                                              2007             2006            Change
                                                           RMB'000          RMB'000               (%)

Operating revenue(1)                                    23,352,820       19,930,907             17.17
Profit from operations                                   1,366,652          893,265             53.00
Profit before tax                                        2,072,407          660,482            213.77
Profit after tax (including profit attributable
   to equity holders of the Company and
 minority interests)                                     1,476,035          477,653            209.02
Profit attributable to minority interests                  (92,544)          19,679           (570.27)
Profit attributable to equity holders
   of the Company                                        1,568,579          457,974            242.50
EBITDA(2)                                                4,063,013        3,557,871             14.20
EBITDAR(3)                                               5,387,864        4,638,167             16.16
Earnings per share attributable to
   equity holders of the Company (RMB)                       0.132            0.049            169.39
Return on equity (%)(4)                                       5.39             2.26            138.50


(1)  Operating revenue include air traffic revenue and other operating revenue.

(2)  EBITDA represents  earnings before finance revenue,  finance costs,  income
     taxes,  share of profits  less losses of  associates  and  depreciation  as
     computed under the International Financial Reporting Standards.

(3)  EBITDAR  represents  EBITDA before  deducting  operating  lease expenses on
     aircraft and engines as well as other operating lease expenses.

(4)  Return on equity  represents  profit  for the  period  attributable  to the
     equity holders divided by the Group's equity as at period end.

                                                           30 June      31 December
                                                              2007             2006            Change
                                                           RMB'000          RMB'000               (%)

Total assets                                            85,763,284       83,963,601              2.14
Total liabilities                                       56,468,446       52,227,908              8.12
Minority interests                                         174,707        2,011,435            (91.31)
Equity attributable to equity holders
 of the Company                                         29,120,131       29,724,258             (2.03)
Equity per share (RMB)                                        2.45             2.50             (2.00)
 




SUMMARY OF OPERATING DATA

                                                 For the           For the
                                              six months        six months
                                                   ended             ended
                                                 30 June           30 June                     Change
                                                    2007              2006                        (%)

Traffic

RPKs (in millions)                             33,286.32         29,104.08                      14.37
International                                  14,154.97         12,157.66                      16.43
Domestic                                       17,594.30         15,449.60                      13.88
Hong Kong and Macau                             1,537.05          1,496.83                       2.69

RFTKs (in millions)                             1,866.92          1,566.32                      19.19
International                                   1,417.89          1,165.33                      21.67
Domestic                                          381.90            333.20                      14.62
Hong Kong and Macau                                67.12             67.79                      (0.99)

Passengers carried (in thousands)              17,870.13         15,722.06                      13.66
International                                   3,510.78          3,044.28                      15.32
Domestic                                       13,430.80         11,744.70                      14.36
Hong Kong and Macau                               928.55            933.08                      (0.49)

Cargo and mail carried (in tonnes)            535,716.64        464,705.25                      15.28

Kilometres flown (in millions)                    257.12            228.09                      12.73

Block hours (in thousands)                        405.43            355.59                      14.01

Number of flights                                146,752           132,283                      10.94
International                                     27,503            23,718                      15.96
Domestic                                         109,633            98,739                      11.03
Hong Kong and Macau                                9,616             9,826                      (2.14)

RTKs (in millions)                              4,861.89          4,184.72                      16.18

Capacity

ASKs (in millions)                             43,891.33         39,434.98                      11.30
International                                  19,057.40         16,821.03                      13.30
Domestic                                       22,622.90         20,450.50                      10.62
Hong Kong and Macau                             2,211.03          2,163.45                       2.20

AFTKs (in millions)                             3,515.47          2,873.34                      22.35
International                                   2,611.64          2,033.83                      28.41
Domestic                                          789.50            714.60                      10.48
Hong Kong and Macau                               114.33            125.01                      (8.55)

ATKs (in millions)                              7,485.27          6,441.71                      16.20

Load factor

Passenger load factor (RPKs/ASKs)                 75.84%            73.80%      2.04 percentage point
International                                     74.28%            72.28%      2.00 percentage point
Domestic                                          77.77%            75.55%      2.23 percentage point
Hong Kong and Macau                               69.52%            69.19%      0.33 percentage point

Cargo and mail load factor
 (RFTKs/AFTKs)                                    53.11%            54.51%     -1.41 percentage point
International                                     54.29%            57.30%     -3.01 percentage point
Domestic                                          48.37%            46.63%      1.74 percentage point
Hong Kong and Macau                               58.71%            54.23%      4.48 percentage point

                                                           For the          For the
                                                        six months       six months
                                                             ended            ended
                                                           30 June          30 June             Change
                                                              2007             2006               (%)

Yield

Yield per RPK (RMB)                                         0.5939           0.5670              4.74
International                                               0.5747           0.5260              9.26
Domestic                                                    0.5991           0.5865              2.15
Hong Kong and Macau                                         0.7107           0.6992              1.64

Yield per RFTK (RMB)                                        1.8377           2.1032           (12.62)
International                                               1.8196           2.2180           (17.96)
Domestic                                                    1.4790           1.2971             14.02
Hong Kong and Macau                                         4.2618           4.0915              4.16

Fleet
Total number of aircraft in service
 at period end                                                 230              210              9.52
Daily utilization (block hours per day
 per aircraft)                                                9.99             9.97              0.20


Note: The above summary of operating  data for the six months ended 30 June 2007
     includes the entire Air China Cargo and Air Macau. Accordingly, the summary
     of operating  data for the six months ended 30 June 2006 has been  adjusted
     to conform to the basis of the current period's presentation.




CHAIRMAN'S STATEMENT

Dear Shareholders,

During the first half of 2007,  with the macro  economy of China  continuing  to
grow rapidly and steadily and the total demand in the aviation market  expanding
at a greater  pace,  the Company has  proactively  taken good  advantage  of the
opportunities  arising in the market and successfully  offset the adverse impact
of high oil price and achieved  remarkable economic growth.  Meanwhile,  we have
been  developing our strategic  cooperation and making  significant  progress in
organization  transformation,  hub integration,  service network  improvement as
well as brand  building,  laying a solid  foundation for achieving the strategic
goal of 'becoming  the  recognised  airline of mainstream  passengers,  the most
valuable and  profitable  airline in China,  and an airline  with  international
competitive strength'.

The Company has always been putting  safety on the first place in its production
and operation,  handling  properly the  correlation  between safety and economic
benefits, safety and development,  safety and reform, and aiming at establishing
a long-term and effective  mechanism for the Company's  safety  management.  The
first measure is to implement the accountability system for safety in operation,
the second is to reinforce the construction of the safety system,  and the third
is to constantly  reexamine and review the principles and methodology for safety
management.   Only  with  the  further  improvement  of  safety  management  and
enhancement of management capability, can safety in operation be guaranteed.

During the  reporting  period,  the  Company's  operating  performance  improved
steadily,   and  the  Group   (including  the  Company,   its  subsidiaries  and
joint-ventures) recorded an operating revenue (including air traffic revenue and
other  operating  revenue) of  RMB23.353  billion,  representing  an increase of
17.17% from the same period of the previous year. While ensuring absolute flight
safety,  cheerful  results  have  been  achieved  in both  passenger  and  cargo
services, with passenger volume reaching 17.870 million passengers and cargo and
mail volume reaching 535.717 thousand tonnes,  representing an increase of 13.7%
and 15.3%, respectively,  from the same period of the previous year. Profit from
operations amounted to RMB1.367 billion,  securing its leading position in terms
of profitability among the airlines in China.

In order to maintain a long-term  competitive strength and continuously generate
sound returns to the shareholders,  the Company  implemented  important plans in
the following aspects during the first half of 2007:

Commencing  aviation alliance  cooperation and building a global network.  
The Company  continued to implement  the  business  cooperation  plans with Star
Alliance and Project Star, and has met 21 out of the 57 entry  requirements  for
Star  Alliance.  The Company has enabled free sales  through  code-sharing  with
Cathay Pacific Airways Limited and has designated Beijing,  Hong Kong and Taiwan
to be the pilot  sales  regions for the  reciprocal  sales  representation.  The
Company has also embarked on a number of  cooperation  projects with  Lufthansa,
United Airlines, SAS Scandinavian  Airlines, Air New Zealand,  Austrian Airlines
and Asiana Airlines.

Integrating  regional hubs and optimizing  route  networks.  
The  Company has  steadily  improved  the  quality in  building  the three major
domestic  hubs in Beijing,  Chengdu and Shanghai  and  increased  the  operation
capacity  of those  three  places,  so that the  number  of  connecting  flights
available has  experienced  a stable  growth with a significant  increase in the
volume of transit  passengers.  The  Company  also  stressed on  developing  its
international  routes  such as those  to North  America  and  Europe  as well as
improving the quality of its brand and service of highly  profitable routes such
as those to Japan and South Korea, aiming to expand its existing market share.

Boosting  organization   transformation  and  making  progressive  breakthrough.
Through entering into new performance  evaluation contracts and establishing new
evaluation  system for both its  divisions  and  individuals,  the  Company  has
further optimized its management models and resources allocation and boosted the
transformation of our core values and adjustment of personnel  structure,  which
laid down a solid foundation for the  establishment of a  market-oriented  human
resources management system.

Perfecting  service  system and improving  service  management.  
The function of complaint management through the call centre and service hotline
has been brought into full play; and the renovation  work for both the first and
business class cabins has been completed;  the Global Luggage Enquiry System has
been put into use; the building of call centres and electronic payment platforms
in China  and  other  countries  has  been  accelerated;  self-service  check-in
equipment  have been installed in major  airports;  and check-in areas for first
and business classes passengers have been put into use .

Taking  advantage of serving the Olympics to enhance  brand  recognition.  
As an air-transportation  service partner of the 2008 Beijing Olympic Games, the
Company has launched a series of  Olympics-related  promotional  activities  and
been actively participating in highly influential social charity activities. Our
Olympic   marketing   campaign   has  made   significant   progress,   with  the
Olympics-oriented  products  designed and put to the market with sound  feedback
from our customers.

According to Forbes'  ranking of the global  leading  enterprises  in 2007,  the
Company was among The World's 2000 Largest Public Companies,  ranking 13th among
international  airlines;  and 9th among the same in terms of profitability.  The
Company was also ranked 461st among the top 500  international  brands,  and the
first ever among Chinese  airlines to receive an award of 'the Most  Competitive
Chinese  Enterprises  in the World',  representing  that the Company has secured
itself a place among the world-class prestigious brands.

With further  opening up of China's  aviation  market,  and benefiting  from the
continuing growth in passenger and cargo transportation  capability, the Company
will secure its leading  role in China's  aviation  industry and devote to build
and  promote  the brand of Air  China's  services,  aiming at  achieving  better
operating results and fulfilling our commitment to the shareholders.

Finally, on behalf of the Board, I would like to thank the dedicated  management
and staff of the Company for their hard work,  who have  demonstrated  excellent
professional  quality and  devotion in their  endeavour in creating the greatest
value for our shareholders.






Li Jiaxiang
Chairman

Beijing, PRC
28 August 2007

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