Issue of Equity

Air China Ld
10 February 2006

The Stock Exchange of Hong Kong Limited takes no responsibility
for the contents of this announcement, makes no representation
as to its accuracy or completeness and expressly disclaims any
liability whatsoever for any loss howsoever arising from or in
reliance upon the whole or any part of the contents of this
announcement. This announcement does not constitute an offer or
an invitation to induce an offer by any person to acquire,
subscribe for or purchase any securities.

  (a joint stock limited company incorporated in the People's
           Republic of China with limited liability)
                       (Stock Code: 753)

                   (1) PROPOSED A SHARE ISSUE
     (2) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION



PROPOSED A SHARE ISSUE

The Board is pleased to announce that at the Board meeting of
the Company held on 8 February 2006, it was resolved that,
subject to Shareholders' approval, the Company shall apply to
the relevant authorities in the PRC for the allotment and issue
of not more than 2.7 billion A Shares to qualified institutional
investors as approved by CSRC and the placees through online
offering based on market share value, and subscribers allowed by
the regulatory bodies and by the applicable laws and regulations
at the time of A Shares Issue in the PRC and shall apply to the
Shanghai Stock Exchange for the listing of such A Shares.

The net proceeds from the A Share Issue are intended to be used
to part finance the purchase of 20 Airbus A330-200 aircraft, 15
Boeing 787 aircraft and 10 Boeing 737-800 aircraft and the
project relating to the expansion of existing operating support
facilities at the Beijing Capital International Airport, details
of which are set out below in this announcement.

The A Share Issue is subject to approvals from (a) Shareholders
to be sought at separate Class Meetings and the EGM; and (b) the
relevant PRC authorities.

2.7 billion A Shares represent approximately 28.62% of the
existing issued share capital of the Company and approximately
22.25% of the enlarged issued share capital of the Company
immediately after completion of the proposed A Share Issue.

PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

In light of the A Share Issue and pursuant to the statutory
requirements of the applicable PRC laws and regulations, certain
amendments are proposed to be made to the Articles of
Association.

Details regarding the proposed amendments to the Articles of
Association will be set out in the circular and the notices of
Foreign Shareholders Class Meeting and the EGM to the
Shareholders.

A circular containing, among other things, details of the A
Share Issue, amendments to the Articles of Association, and
notices of the Foreign Shareholders Class Meeting and the EGM
will be dispatched to Shareholders as soon as practicable.

There is no assurance that the A Share Issue will proceed.
Investors are advised to exercise caution in dealing in the H
Shares. Further details about the A Share Issue will be
disclosed by the Company in the newspapers in the PRC when the A
Share Issue materialises and an extract of which will be
disclosed by the Company in the newspapers in Hong Kong
concurrently in accordance with the Listing Rules.




A.      PROPOSED A SHARE ISSUE

1.        General

At the Board meeting of the Company held on 8 February 2006, it
was resolved that the Company shall apply to the relevant
authorities in the PRC for the allotment and issue of not more
than 2.7 billion A Shares to institutional and public investors
in the PRC and such A Shares are proposed to be listed on the
Shanghai Stock Exchange. It is expected that such investors will
not include connected persons (as defined under the Listing
Rules) of the Company. If any of such investors includes any
connected persons of the Company, the Company will take steps to
comply with the relevant connected transaction requirements
under the Listing Rules. At present, the H Shares are listed on
the main board of the Hong Kong Stock Exchange and are admitted
for trading on the market for listed securities on the London
Stock Exchange.

2.        Structure of the A Share Issue

Type of securities  RMB denominated ordinary shares
to be issued:

Number of A Shares  Not more than 2.7 billion A Shares,
to be issued:       representing approximately 28.62% of the
                    existing issued share capital of the Company
                    and approximately 22.25% of the enlarged issued
                    share capital of the Company immediately after
                    completion of the proposed A Share Issue

Nominal value:      RMB1.00 each

Rights attached to  The A Shares to be issued are listed Domestic
A Share:            Shares and, except as otherwise provided for in
                    the Articles of Association, will rank pari
                    passu with the existing Domestic Shares, H
                    Shares and Non-H Foreign Shares in all
                    respects.

Target subscribers: Qualified institutional investors as approved
                    by CSRC and the placees through online offering
                    based on market share value, and subscribers
                    allowed by the regulatory bodies and by the
                    applicable laws and regulations at the time of
                    A Shares Issue

Basis for           The issue price will not be lower than 90% of
determining the     the average closing price of the Company's H
issue price:        Shares on the Hong Kong Stock Exchange during
                    the Price Consultation Period of the A Share
                    Issue. The issue price for the proposed A Share
                    Issue will be determined based on the PRC
                    securities market conditions at the time when
                    the A Share Issue takes place and in accordance
                    with the applicable CSRC regulations. Thus the
                    amount to be raised from the A Share Issue
                    cannot be ascertained as at the date of this
                    announcement.

Use of proceeds:    The net proceeds from the A Share Issue are
                    intended to be used to part finance the
                    following projects ('Proposed Projects'):

                    (a)  purchase of 20 Airbus A330-200 aircraft;

                    (b)  purchase of 15 Boeing 787 aircraft;

                    (c)  purchase of 10 Boeing 737-800 aircraft;
                         and

                    (d)  Air China's project relating to the
                         expansion of existing operating support
                         facilities at the Beijing Capital
                         International Airport.

                    It will be proposed to the Shareholders at the
                    EGM that the Company be authorised to apply the
                    proceeds from the A Share Issue to any payment
                    due in relation to the Proposed Projects or to
                    repay any outstanding bank loan in relation to
                    the Proposed Projects that occurred before the
                    completion of the A Share Issue; after above
                    prescribed use of the proceeds, any balance of
                    it shall be applied to the working capital of
                    the Company.


3.        Information on the Proposed Projects

Investment amount

It is intended the net proceeds from A Share Issue will be used
to part finance the Company's purchase of 20 Airbus A330-200
aircraft, 15 Boeing 787 aircraft and 10 Boeing 737-800 aircraft
and Air China's project relating to the expansion of existing
operating support facilities at the Beijing Capital
International Airport. The total purchase amount for these
aircraft will be less than the aggregate catalog price of
US$5.68 billion, and the total investment amount for the project
relating to the expansion of existing operating support
facilities will be approximately RMB600 million.

Benefit for the Proposed Projects

The Company entered into a purchase agreement with Air China
Group Import and Export Trading Co., and Airbus S.A.S. on 26
January 2005, pursuant to which the Company agreed to purchase
20 Airbus A330-200 aircraft from Airbus S.A.S.. The Company also
entered into a purchase agreement with Boeing Company on 8
August 2005 and 17 January 2006, pursuant to which the Company
agreed to purchase 15 Boeing 787 aircraft and 10 Boeing 737-800
aircraft, respectively. Further information on the purchases of
the 20 Airbus A330-200 aircraft and 15 Boeing 787 aircraft is
set out in the announcements made by the Company dated 26
January 2005 and 8 August 2005, respectively.

The purchases of aircraft will expand the fleet capacity of the
Company and the aircraft from the purchases will principally
serve the routes to international destinations in Europe,
Australia, North America and certain key domestic destinations
such as Lhasa. The aircraft from the purchases are expected to
replace certain aircraft in the existing fleet of the Company.
The purchase of the Boeing 737-800 aircraft will also reinforce
Beijing's position as a transportation hub and increase
frequency of flights, departing originally from Beijing, of a
number of key domestic flight courses. The purchases of aircraft
will enable the Company to provide more cost-efficient and
comfortable services to the passengers.

The Company obtained approval from the National Development and
Reform Commission of the People's Republic of China in September
2005 to commence a project relating to the expansion of the
existing operating support facilities at the Beijing Capital
International Airport. The total investment amount of the
project is approximately RMB600 million. The project involves
the expansion of various operating support facilities including
the acquisition of a piece of land with an area of approximately
1 million square metres and the expansion of ground services
facilities and other facilities.

4.        Shareholders' approval and other approvals

The Class Meetings and the EGM will be held on or around 28
March 2006 to consider and, if thought fit, approve, among other
things, the A Share Issue. At the Foreign Shareholders Class
Meeting, the votes of all holders of Foreign Shares and the
holders of overseas listed foreign shares, that is, holders of H
Shares, in respect of the special resolution to be proposed at
the Foreign Shareholders Class Meeting will be counted
separately. As advised by the Company's PRC counsel, Haiwen &
Partners ('Haiwen'), the separate counting of the votes of the
holders of H Shares is valid. The Company will treat the special
resolution of the Foreign Shareholders Class Meeting to be
passed if it attains a two-thirds majority of the voting rights
of holders of Foreign Shares and that of holders of H Shares
attending the meeting. As advised by Haiwen, this arrangement
does not contravene any PRC laws, and the special resolution, if
passed, would be valid. It should be noted that the A Share
Issue, upon the approval of the Shareholders at the Class
Meetings and the EGM, is still subject to the approval of the
CSRC and other government authorities, if necessary. In
addition, the approval of the Shanghai Stock Exchange as to the
listing and dealings in the A Shares on the Shanghai Stock
Exchange is also required. Upon obtaining the requisite
Shareholders' approval at the Class Meetings and the EGM, it is
expected that the listing application will be made around the
end of March 2006.

5.        Reasons for and benefits of the A Share Issue

The Company believes that the A Share Issue will establish a new
financing platform for the Company and will broaden the
Company's access to different securities markets. This will
enable the Company to enhance the development of its operations
and to further improve its competitiveness. The Company believes
that the A Share Issue will provide the financial resources
required to part finance the development of the Proposed
Projects. The Company expects that after the Proposed Projects,
carrying capacity of the Group will be further enhanced.
Furthermore, the Company also believes that the capital raised
from the A Share Issue will result in improvements in its
debt-to-equity ratio and accordingly, will lower operating
risks.

The Directors believe that the A Share Issue will benefit the
Company and the Shareholders as a whole.

6.        Effect of the A Share Issue on the Company's
shareholding structure

Set out below is the shareholding structure of the Company as at
the date of this announcement and immediately upon completion of
the A Share Issue based on the assumption that an aggregate of
2.7 billion new A Shares will be issued under the A Share Issue:

                     As at the date       Immediately after
                  of this announcement       completion
                                           of the A Share 
                                               Issue
                    Number of Shares    %    Number of       %
                                               Shares

(1) Non-Listed       4,826,195,989  51.16  4,826,195,989   39.78
    Domestic
    Shares

(2) Non-H            1,380,482,920  14.64  1,380,482,920   11.38
    Foreign
    Shares

(3) Listed
    Shares
    - H Share        3,226,532,000  34.20  3,226,532,000   26.59
    - A Share                    -      -  2,700,000,000   22.25               
                                       

    Total            3,226,532,000  34.20  5,926,532,000   48.84
    number of
    Listed
    Shares

(4) Total            9,433,210,909    100 12,133,210,909     100
    number of
    Shares

As advised by Haiwen, the Company is not required to implement
the share conversion reform in the PRC as it is not an existing
A Share company that is currently listed on the Shanghai Stock
Exchange. As set out in the table above, the shareholding
structure of the Company immediately after the completion of the
A Share Issue under existing laws and regulations is currently
expected to comprise non-listed Domestic Shares, non-H Foreign
Shares, H Shares and A Shares, although certain new developments
as set out below are expected.

According to the Guidelines on Share Conversion Reform of Listed
Companies issued by the CSRC and other relevant authorities and
committees in 2005, companies seeking an A Share listing in the
PRC will no longer have both tradeable shares and non-tradeable
shares. As the laws and regulations relating to the conversion
of non-tradeable shares into tradable shares upon listing (the
'New Rules') have not been promulgated, the CSRC has temporarily
suspended giving final approvals for A Share offerings.

It is expected that CSRC will only approve new A Share listing
after the New Rules have been promulgated. Although the
conversion procedures under the New Rules are still uncertain at
this stage, it is expected that under the New Rules, the
existing non-listed Domestic Shares may be converted into
tradeable shares eligible for listing and thus become A Shares,
which will carry the same rights as the other A Shares issued by
the Company. It is expected that, if approved, the conversion of
non-listed Domestic Shares into A Shares will not involve any
payment of compensation by the holders of the non-listed
Domestic Shares to the holders of A Shares and will also not
require approval by Shareholders at separate Class Meetings.

B.       PROPOSED AMENDMENTS TO THE ARTICLES of association

In light of the A Share Issue and pursuant to the requirements
of the applicable PRC laws and regulations, certain amendments
are proposed to be made to the Articles of Association. Such
proposed amendments to the Articles of Association are subject
to Shareholders' approval at the EGM, and the obtaining of any
approval, endorsement or registration (as applicable) from or
with the relevant PRC authorities.

The proposed amendments deal with matters relating to a number
of areas, including, among other things:

(a)      alteration of the Company's registered capital and
shareholding structure;

(b)      regulations on the proceedings of general meetings;

(c)      regulations on the election and appointment of
Directors and supervisors;

(d)      regulations on the rights and obligations of
shareholders, Directors, supervisors and managers;

(e)      provisions in relation to the rules and procedures of
general meetings, Board meetings and Supervisory Committee
meetings;

(f)       procedures for approving connected transactions (in
accordance with the requirements of CSRC); and

(g)      other provisions as required by any applicable laws and
regulations for companies with A Shares in issue.

Details regarding the proposed amendments to the Articles of
Association will be set out in the circular and the notice to
the Shareholders.

C.       CIRCULAR

A circular containing, among other things, details of the A
Share Issue, amendments to the Articles of Association, and the
notices of the Foreign Shareholders Class Meeting and the EGM
will be dispatched to the Shareholders as soon as practicable
(the 'Circular').

DEFINITIONS

In this announcement, unless the context otherwise requires, the
following terms shall have the following meanings:

'A Shares'                  the Domestic Shares which are proposed
                            to be allotted and issued to
                            institutional and public investors in
                            the PRC by the Company and listed on
                            the Shanghai Stock Exchange

'A Share Issue'             the proposed issue of not more than
                            2.7 billion A Shares to institutional
                            and public investors in the PRC by the
                            Company, which are proposed to be
                            listed on the Shanghai Stock Exchange

'Articles of Association'   the articles of association of the
                            Company from time to time

'Board'                     the board of Directors of the Company

'Class Meetings'            the class meeting of the holders of
                            Domestic Shares and the class meeting
                            of the holders of Foreign Shares to be
                            held on or around 28 March 2006 to
                            approve, inter alia, the A Share Issue

'Company'                   (Air China Limited), a joint stock
                            limited company incorporated in the
                            PRC, with primary listing on The Stock
                            Exchange of Hong Kong Limited with
                            stock code 753 and secondary listing
                            on the Official List of the UK Listing
                            Authority

'CSRC'                      China Securities Regulatory Commission

'Directors'                 the directors of the Company

'Domestic Shareholders      the class meeting for holders of
Class Meeting'              Domestic Shares to be held on 28 March
                            2006 to approve, inter alia, the 
                            A Share Issue

'Domestic Shares'           the ordinary shares of RMB1.00 each
                            issued by the Company, which are
                            subscribed for or credited as fully
                            paid up in Renminbi by PRC nationals

'EGM'                       the extraordinary general meeting of
                            the Company to be held immediately
                            after the conclusion or adjournment of
                            the Class Meetings on or around 28
                            March 2006 to approve, inter alia, the
                            A Share Issue

'Foreign Shareholders       the class meeting for holders of H
Class Meeting'              Shares and Non-H Foreign Shares to be
                            held on 28 March 2006 at 2:00 p.m. to
                            approve, inter alia, the A Share Issue

'Foreign Shares'            both Non-H Foreign Shares and H Shares

'Group'                     the Company and its subsidiaries and
                            joint ventures

'Hong Kong Stock            The Stock Exchange of Hong Kong
Exchange'                   Limited
  

'H Shares'                  overseas listed foreign shares of
                            RMB1.00 each in the share capital of
                            the Company which are listed on the
                            Hong Kong Stock Exchange and traded in
                            Hong Kong dollars and admitted to the
                            Official List of the UK Listing
                            Authority and are traded on the market
                            for listed securities of the London
                            Stock Exchange

'Listing Rules'             the Rules Governing the Listing of
                            Securities on the Hong Kong Stock
                            Exchange

'Non-H Foreign Shares'      the ordinary shares of RMB1.00 each in
                            share capital of the Company which are
                            subscribed and held by China National
                            Aviation Corporation (Group) Limited

'PRC'                       the People's Republic of China,
                            excluding, for the purpose of this
                            Announcement only, Hong Kong, Macau,
                            and Taiwan

'Price Consultation         the period commencing from the date
Period'                     the Company makes the preliminary
                            offer document  relating to the A Share
                            Issue publicly available and ending on
                            the date on which the bookbuilding
                            process with the institutional
                            investors  is completed

'RMB'                       Renminbi, the lawful currency of the
                            PRC

'SFO'                       Hong Kong Securities and Futures
                            Ordinance (Cap. 571)

'Shareholders'              holders of Domestic Shares, H Shares
                            and Non-H Foreign Shares

'Shares'                    Domestic Shares, H Shares, Non-H
                            Foreign Shares and A Shares

As at the date of this announcement, the board of directors of
the Company comprises the following members:

Li Jiaxiang (Chairman, non-executive director)
Kong Dong (vice chairman, non-executive director)
Wang Shixiang (vice chairman, non-executive director)
Yao Weiting (non-executive director)
Ma Xulun (executive director)
Cai Jianjiang (executive director)
Fan Cheng (executive director)
Hu Hung Lick, Henry (independent non-executive director)
Wu Zhipan (independent non-executive director)
Zhang Ke (independent non-executive director)

                     By order of the Board
                       Air China Limited
                          Li Jiaxiang
                            Chairman

Beijing, the PRC
9 February 2006




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