MAJOR TRANSACTION

Air China Ld
03 July 2006

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION





If you are in any doubt as to any aspect of this circular, you should
consult a stockbroker or other registered dealer in securities, bank 
manager, solicitor, professional accountant or other professional 
adviser.

If you have sold or transferred all your shares of Air China Limited,
you should at once hand this circular and the accompanying form of 
proxy and the notice of attendance to the purchaser or transferee
or to the bank, stockbroker or other agent through whom the sale 
or transfer was effected for transmission to the purchaser or 
the transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility 
for the contents of this circular, makes no representation as to
its accuracy or completeness and expressly disclaims any liability
whatsoever for any loss however arising from or in reliance upon 
the whole or any part of the contents of this circular.



                        AIR CHINA LIMITED

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

                       (Stock Code: 753)

                    (1) MAJOR TRANSACTION

                (i) ACQUISITION OF CATHAY SHARES

         (ii) ACQUISITION OF CATHAY SHARES BY CNAC LIMITED



                    (2) CONNECTED TRANSACTIONS

                  (i) ACQUISITION OF CATHAY SHARES

                   (ii) ISSUE OF AIR CHINA H SHARES



                    (3) CONNECTED TRANSACTIONS

              (i) SALE OF DRAGONAIR SHARES BY CNAC LIMITED

            (ii) ACQUISITION OF CATHAY SHARES BY CNAC LIMITED



     Exclusive Financial Advisers to Air China Limited and China 
                   National Aviation Company Limited




China International Capital              Merrill Lynch
Corporation (Hong Kong) Limited   (Asia Pacific) Limited


     Independent Financial Adviser to the Independent Board 
           Committee and the Independent Shareholders



                      BNP PARIBAS PEREGRINE




It is important to note that the purpose of distributing this 
circular is to provide the shareholders of the Company with 
information, inter alia, on the proposed issue of H Shares by the 
Company, so that the shareholders of the Company may make an 
informed decision on voting in respect of certain resolution(s) 
to be tabled at the EGM of the Company. This circular does not 
constitute, or form part of, an offer or invitation, or 
solicitation or inducement of an offer, to subscribe for or 
purchase any of the H Shares or other securities of the Company, 
nor is this circular calculated to invite offers for any shares or
other securities of the Company.

A letter from the Board is set out on pages 6 to 25 of this
circular.

A letter from the Independent Board Committee, containing its 
advice to the Independent Shareholders of the Company, is set 
out on pages 26 to 27 of this circular.

A letter from BNP, the independent financial adviser, 
containing its advice to the Independent Board Committee and 
the Independent Shareholders of the Company is set out on 
pages 28 to 42 of this circular.

Notices convening Foreign Shareholders Class Meeting (as 
appropriate) of the Company to be held on 22 August 2006 at 
2:30 p.m. (or immediately after the conclusion or adjournment
of the EGM), and the EGM on 22 August 2006 at 2:00 p.m. at 
The Conference Room, Air China Building, 36 Xiaoyun Road, 
Chaoyang District, Beijing, PRC, together with the notice of 
attendance and form of proxy are enclosed herein.

Whether or not you intend to attend the Class Meetings or 
the EGM, you are requested to complete and return the form of 
proxy in accordance with the instruction printed thereon, as 
soon as possible in any event not later than 24 hours before the 
time appointed for the meetings or any adjourned meetings
thereof. Completion and return of the form(s) of proxy will 
not preclude you from attending and voting in person at the 
meetings or at any adjourned meetings should you so wish.






3 July 2006


                                    CONTENTS





DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1
LETTER FROM THE BOARD
1.     Introduction . . . . . . . . . . . . . . . . . . 6
2.     Description of the Transaction . . . . . . . . . 7
3.     Other relevant information in relation 
       to the Transaction . . . . . . . .. . . . .     14
4.     Regulatory implications of the Listing Rules . .16
5.     Reasons for and benefits of the Transaction 
       and related Operating Agreement . . . . . . . . 19
6.     Shareholders approval . . . . . . . . . . . . . 22
7.     EGM and Class Meetings . . . . . . . . . . . . .24
8.     Recommendation of the Board . . . . . . . . . . 24
9.     Additional information . . . . . . . . . . . .  25
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . .  26
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . .  28
APPENDIX I      - FINANCIAL INFORMATION OF THE GROUP . 43
I.     Summary of Consolidated Income Statements and
       Consolidated Balance Sheets of the Group . . .  43
II.    Consolidated Financial Statements of the Group
       for the Year Ended 31 December 2005 . . . . . . 46
III.   Indebtedness . . . . . . . . . . . . . . . . . 121
IV.    Unaudited Pro Forma Statement of 
       Financial Position . .  . . . . . . . .. . . . 124
APPENDIX II - FINANCIAL INFORMATION OF CATHAY . . . . 132
APPENDIX III - GENERAL INFORMATION           . . . . .194
NOTICE OF FOREIGN SHAREHOLDERS CLASS MEETING . . . . .207
NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . 209



To view the full text of this press release, paste the following link 
into your web browser: 


http://www.rns-pdf.londonstockexchange.com/rns/4349f_-2006-7-3.pdf


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