Joint Announcement

Air China Ld
09 June 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 whatsoever arising from or in   
reliance upon the whole or any part of the contents of this       
announcement.                                                     

                                                                   

             AIR CHINA LIMITED      CATHAY PACIFIC AIRWAYS LIMITED   

           (a joint stock limited   (Incorporated in Hong Kong with  
            company incorporated          limited liability)         
              in the People's                                       
           Republic of China with                                    
             limited liability)                                      
             (Stock Code: 753)             (Stock Code: 293)         

                                                                                
                                                                  
                        JOINT ANNOUNCEMENT                        
                                                                  
                                                                  
This joint announcement is made under Listing Rule 13.09.         
                                                                  
Reference is made to (a) the MOU Announcement made by Air China   
and Cathay on 20 October 2004, and (b) the joint announcement made
by Air China, Cathay, CNAC Limited, CITIC and SPAC on 8 June 2006.
                                                                  
Air China and Cathay announced in the MOU Announcement that they  
had entered into the MOU, which, amongst other things, set out the
framework for discussing the objective of the parties of exploring
opportunities for cooperation in respect of certain operational   
matters. On 8 June 2006, Air China and Cathay entered into the    
Operating Agreement to record the agreement of the parties as to  
the carrying into effect of certain matters referred to in the MOU
so as to enhance cooperation between Air China and Cathay in a    
number of key operational areas. Air China and Cathay believe that
the close cooperation contemplated by the Operating Agreement will
further the development of Beijing Capital International Airport  
and Hong Kong International Airport as gateways to and hubs for   
Mainland China, and will enable Air China and Cathay to optimise  
the allocation of their current operating resources and streamline
the organisation of their sales functions. The Operating Agreement
will take effect upon the Restructuring Agreement becoming        
unconditional.                                                    
                                                                  
Introduction                                                      
                                                                  
This joint announcement is made under Listing Rule 13.09.         
                                                                  
Reference is made to (a) the MOU Announcement made by Air China   
and Cathay on 20 October 2004, and (b) the joint announcement made
by Air China, Cathay, CNAC Limited, CITIC and SPAC on 8 June 2006.
                                                                  
Air China and Cathay announced in the MOU Announcement that they  
had entered into the MOU, which, amongst other things, set out the
framework for discussing the objective of the parties of exploring
opportunities for cooperation in respect of certain operational   
matters. On 8 June 2006, Air China and Cathay entered into the    
Operating Agreement to record the agreement of the parties as to  
the carrying into effect of certain matters referred to in the MOU
so as to enhance cooperation between Air China and Cathay in a    
number of key operational areas. Air China and Cathay believe that
the close cooperation contemplated by the Operating Agreement will
further the development of Beijing Capital International Airport  
and Hong Kong International Airport as gateways to and hubs for   
Mainland China, and will enable Air China and Cathay to optimise  
the allocation of their current operating resources and streamline
the organisation of their sales functions. The Operating Agreement
will take effect upon the Restructuring Agreement becoming        
unconditional.                                                    
                                                                  
Key Cooperation Areas                                             
                                                                  
Sales and Marketing: With a view to streamlining the organisation 
of the sales functions of Air China and Cathay, Air China and     
Cathay will implement reciprocal sales representation for         
passenger services in Mainland China, Hong Kong, Macau and Taiwan.
Cathay will be responsible for passenger sales for Air China in   
Hong Kong, Macau and Taiwan, and Air China will be responsible for
passenger sales for Cathay in Mainland China. Air China and Cathay
will comply with any relevant requirements of the Listing Rules   
prior to such sales and marketing taking effect.                  
                                                                  
Code Share and Joint Ventures: Air China and Cathay will operate  
all the passenger services of Cathay and Air China between Hong   
Kong and Mainland China under a code-share arrangement. In        
addition, Air China and Cathay will, over time, operate all shared
routes between Hong Kong and Mainland China as joint venture      
routes under revenue and cost pooling arrangements. As a general  
principle, revenues of Air China and Cathay earned from, and costs
incurred by Air China and Cathay in operating, each joint venture 
route will be shared equally between Air China and Cathay.        
However, where the capacities of Air China and Cathay are         
different on any route, such revenues and costs will be shared    
between them on an equitable and proportionate basis, having      
regard to such difference. Air China and Cathay will comply with  
any relevant requirements of the Listing Rules prior to such joint
ventures taking effect.                                           
                                                                  
Cargo Joint Venture: Air China and Cathay intend to establish a   
jointly-owned cargo airline based in Shanghai, in which their     
respective economic interests will be 51% and 49%. Air China and  
Cathay will comply with the relevant requirements of the Listing  
Rules upon establishment of the cargo joint venture.              
                                                                  
Dragonair: Cathay will maintain Dragonair (including its brand and
identity) as a principal airline within the Cathay group for a    
period of six years. During that period, Dragonair will continue  
to operate substantial air services between Hong Kong and Mainland
China.                                                            
                                                                  
As Cathay currently owns 10% of the total issued shares of Air    
China, it is a substantial shareholder of Air China and is        
therefore a connected person of Air China as defined under Chapter
14A of the Listing Rules. After the proposed restructuring        
contemplated by the Restructuring Agreement, Air China is expected
to own more than 10% of the enlarged issued share capital of      
Cathay and therefore it will also be a connected person of Cathay.
Accordingly, the transactions contemplated by the Operating       
Agreement will constitute connected transactions on normal        
commercial terms for each of Air China and Cathay under Chapter   
14A of the Listing Rules.                                         
                                                                  
Definition                                                        
                                                                  
In this announcement, unless the context otherwise requires, the  
following terms shall have the following meanings:                

 
'Air China'        Air China Limited, a company incorporated in the 
                   People's Republic of China and whose H shares   
                   are listed on the Exchange as its primary listing
                   venue and on the Official List of the UK Listing 
                   Authority as its secondary listing venue         
                                                                    
'Cathay'           Cathay Pacific Airways Limited, a company        
                   incorporated in Hong Kong and whose shares are   
                   listed on the Exchange                           
                                                                    
'CITIC'            CITIC Pacific Limited, a company incorporated in 
                   Hong Kong and whose shares are listed on the     
                   Exchange                                         
                                                                    
'CNAC Limited'     China National Aviation Company Limited, a       
                   company incorporated in Hong Kong and whose      
                   shares are listed on the Exchange                
                                                                    
'Dragonair'        Hong Kong Dragon Airlines Limited, a company     
                   incorporated in Hong Kong                        
                                                                    
'Exchange'         The Stock Exchange of Hong Kong Limited          
                                                                    
'Listing Rules'    The Rules Governing the Listing of Securities on 
                   The Stock Exchange of Hong Kong Limited          
                                                                    
'Mainland China'   The People's Republic of China excluding Hong   
                   Kong, Macau and Taiwan but including (for the    
                   avoidance of doubt) the Pearl River Delta        
                                                                    
'MOU'              A non-binding Memorandum of Understanding between
                   Cathay and Air China relating to the matters     
                   referred to in the MOU Announcement              
                                                                    
'MOU Announcement' The joint announcement made by Cathay and Air    
                   China on 20 October 2004                         
                                                                    
'Operating         The operating agreement dated 8 June 2006        
Agreement'         pursuant to which Air China and Cathay have      
                   agreed to cooperate in various operational areas 
                                                                    
'Restructuring     The restructuring agreement dated 8 June 2006    
Agreement'         entered into by SPAC, CITIC, CNAC Limited, Air   
                   China and Cathay                                 
                                                                    
'SPAC'             Swire Pacific Limited, a company incorporated in 
                   Hong Kong and whose shares are listed on the     
                   Exchange                                         

 
Directors                                                         
                                                                  
As at the date of this announcement, the directors of Air China   
are:                                                              
                                                                  
Non-Executive Directors: Li Jiaxiang (Chairman), Kong Dong, Wang  
Shixiang, Yao Weiting;                                            
Executive Directors: Ma Xulun, Cai Jianjiang, Fan Cheng; and      
Independent Non-Executive Directors: Hu Hung Lick, Henry, Wu      
Zhipan and Zhang Ke.                                              
                                                                  
As at the date of this announcement, the directors of Cathay are: 
                                                                  
Executive Directors: Christopher Pratt (Chairman), Robert         
Atkinson, Philip Chen, Derek Cridland and Tony Tyler;             
Non-Executive Directors: Martin Cubbon, Henry Fan, James          
Hughes-Hallett, Davy Ho, Vernon Moore, Carl Yung and Zhang        
Xianlin; and                                                      
Independent Non-Executive Directors: Peter Lee, Raymond Or, Jack  
So and Tung Chee Chen.                                            

 
               By Order of the Board         By Order of the Board  
                 Air China Limited          Cathay Pacific Airways  
                                                    Limited         
             Zheng Baoan    Li Man Kit             David Fu         
             Joint Company Secretaries         Company Secretary    
                                                                    
               Beijing, 8 June 2006         Hong Kong, 8 June 2006  


                      This information is provided by RNS
            The company news service from the London Stock Exchange