PURCHASE OF 15 BOEING 737

Air China Ld
20 April 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                           
 (a joint stock limited company incorporated in the People's Republic 
                   of China with limited liability)                   
                          (Stock Code: 753)                           
                                                                      
        MAJOR TRANSACTION: PURCHASE OF 15 BOEING 737 AIRCRAFT         
                                                                      
                                                                      
                                                                      
The Company hereby announces that on 19 April 2006, the Company and   
AIE entered into the Boeing Aircraft Purchase Agreement with Boeing   
Company, pursuant to which the Company has agreed to purchase 15      
Boeing 737 aircraft from Boeing Company.                              
                                                                      
CNAHC, which currently directly owns approximately 51.16% of the total
issued share capital of the Company, has approved the Transaction.    
CNAHC does not have any interest in the Transaction other than as a   
shareholder of the Company.                                           
                                                                      
The Transaction constitutes a major transaction of the Company under  
the Listing Rules. The Company shall, pursuant to the Listing Rules,  
dispatch a circular containing the information required under the     
Listing Rules in relation to the Transaction within 21 days after the 
publication of this announcement.                                     
                                                                      
BOEING AIRCRAFT PURCHASE AGREEMENT                                    
                                                                      
On 19 April 2006 the Company and AIE entered into the Boeing Aircraft 
Purchase Agreement with Boeing Company, pursuant to which the Company 
has agreed to purchase 15 Boeing 737 aircraft from Boeing Company. The
Boeing Aircraft Purchase Agreement was entered into pursuant to a     
framework agreement entered into between Boeing Company and the China 
Aviation Supplies Import and Export Group Corporation on 11 April 2006
(the 2006 Framework Agreement).                                       
                                                                      
The details of the Transaction are summarized as follows:             
                                                                      
Date of the Transaction:                                              
                                                                      
19 April 2006                                                         
                                                                      
Parties to the Transaction:                                           
                                                                      
(i)         the Company, as the purchaser, the principal business     
activity of which is air passenger, air cargo and airline-related     
services;                                                             
                                                                      
(ii)        AIE, as the import agent for the Company; and             
                                                                      
(iii)       Boeing Company, as the vendor, one of whose principal     
business activity is aircraft manufacturing.                          
                                                                      
The Company confirms that, to the best of the Directors' knowledge,  
information and belief having made all reasonable enquiry, Boeing     
Company and each of the ultimate beneficial owner of Boeing Company   
are independent third parties and not connected persons (as defined in
the Listing Rules) of the Company.                                    
                                                                      
Aircraft to be acquired:                                              
                                                                      
Boeing Aircraft, i.e. 15 Boeing 737 aircraft                          
                                                                      
Consideration:                                                        
                                                                      
The aircraft basic price comprises the airframe price, optional       
features prices and engine price. The aircraft basic price of the     
Boeing Aircraft in aggregate is US$982.8 million (HK$7,626.5 million).
The aircraft price is subject to price escalation by applying a       
formula. Boeing has granted to the Company significant price          
concessions with regard to the Boeing Aircraft. These will take the   
form of credit memoranda which may be used by the Company towards the 
purchase of the Boeing Aircraft or spare parts, goods and services or 
may be used towards the final delivery invoice payment of the Boeing  
Aircraft. Such credit memoranda were determined after arm's length   
negotiations between the parties and as a result, the actual          
consideration for the Boeing Aircraft is lower than the aircraft basic
price mentioned above. The Transaction was negotiated and entered into
in accordance with customary business practice. Taking into account   
all the factors relating to the purchase of aircraft by the Company,  
including the market condition, the type, number and delivery schedule
of aircraft being purchased, and the terms of the 2006 Framework      
Agreement, the extent of the price concessions granted to the Company 
in the Transaction is comparable with the price concessions that the  
Company had obtained in the previous aircraft purchase entered into   
between the Company and Boeing Company on 8 August 2005 (the 2005     
Aircraft Purchase). The Company believes that there is no material    
difference between the effect of the price concessions obtained in the
Transaction and the 2005 Aircraft Purchase on the Company's operating
costs taken as a whole. The Company has applied to the Stock Exchange 
for a waiver from strict compliance of Rule 14.58(4) of the Listing   
Rules in respect of disclosure of the actual consideration of the     
Boeing Aircraft.                                                      
                                                                      
The Boeing Aircraft Purchase Agreement was signed pursuant to the 2006
Framework Agreement. The 2005 Aircraft Purchase was entered into      
pursuant to an umbrella agreement entered into between Boeing Company 
and airline companies including the Company in January 2005. The      
aircraft purchase agreement entered into between the Company, AIE and 
Boeing Company on 17 January 2006 (the 2006 Aircraft Purchase) was    
entered into pursuant to an umbrella agreement entered into between   
Boeing Company and the China Aviation Supplies Import and Export Group
Corporation in November 2005. The purchase of the Boeing Aircraft was 
not in contemplation at the time of the 2005 Aircraft Purchase and    
2006 Aircraft Purchase. Accordingly, the Transaction, the 2005        
Aircraft Purchase and the 2006 Aircraft Purchase are not part of the  
same series of transactions and are not treated as if they were one   
transaction and these transactions are not required to be aggregated  
for the relevant classification of the Transaction pursuant to Rule   
14.22. As the relevant percentage ratio under Rule 14.07 of the       
Listing Rules for the Transaction is above 25% but less than 100%, the
Transaction constitutes a major transaction and is therefore subject  
to approval by the Company's shareholders under the Listing Rules.   
                                                                      
Payment and delivery terms:                                           
                                                                      
The aggregate consideration for the acquisition of Boeing Aircraft is 
payable by cash in instalments. The Company is expecting to take      
delivery of the Boeing Aircraft in stages from early 2009 to 2010.    
                                                                      
Source of funding:                                                    
                                                                      
The Transaction will be funded through cash generated from the 
Company's business operations, commercial bank loans and other debt         
instruments of the Company.                                           
                                                                      
REASONS FOR AND BENEFITS OF THE TRANSACTION                           
                                                                      
The Boeing Aircraft will expand the fleet capacity of the Company and 
will principally 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 Company expects the   
Boeing Aircraft will deliver more cost-efficient performance and      
provide more comfortable services to passengers.                      
                                                                      
Although the Boeing Aircraft was purchased with other aircrafts under 
a package acquisition plan, which is coordinated by the NDRC, the     
decision to purchase the Boeing Aircraft was made independently by the
Company. The negotiations under the acquisition plan were done as a   
package to increase bargaining power.                                 
                                                                      
The Directors believe that the terms of the Transaction are fair and  
reasonable and in the interests of the shareholders of the Company as 
a whole.                                                              
                                                                      
FURTHER INFORMATION                                                   
                                                                      
CNAHC currently directly owns approximately 51.16% of the total issued
share capital of the Company. Each of CNAHC and its associates (as    
defined in the Listing Rules) does not have any interest in the       
Transaction other than as a shareholder of the Company (where         
applicable). No shareholder of the Company is required to abstain from
voting if the Company was to convene a general meeting for the        
approval of the Transaction. CNAHC has approved the Transaction by way
of a written approval pursuant to Rule 14.44 of the Listing Rules. The
Company shall, pursuant to the Listing Rules, dispatch a circular     
containing the information required under the Listing Rules in        
relation to the Transaction within 21 days after the publication of   
this announcement.                                                    
                                                                      
DEFINITION                                                            
                                                                      
In this announcement, unless the context otherwise requires, the      
following terms shall have the following meanings:                    

 
'AIE'                    Air China Group Import and Export Trading Co.,
                         a company incorporated in the People's       
                         Republic of China and a wholly-owned          
                         subsidiary of the Company                     
                                                                       
'Boeing Aircraft'        15 Boeing 737 aircraft to be purchased by the 
                         Company pursuant to the Boeing Aircraft       
                         Purchase Agreement                            
                                                                       
'Boeing Aircraft         the aircraft purchase agreement dated 19 April
Purchase Agreement'      2006 pursuant to which the Company has agreed 
                         to purchase and Boeing Company has agreed to  
                         sell the Boeing Aircraft                      
                                                                       
'Boeing Company'         Boeing Company, a company incorporated in     
                         Delaware of the United States                 
                                                                       
'Company'                Air China Limited, a company incorporated in  
                         the People's Republic of China with primary  
                         listing on The Stock Exchange of Hong Kong    
                         Limited and secondary listing on the Official 
                         List of the UK Listing Authority              
                                                                       
'CNAHC'                  China National Aviation Holding Company, a    
                         company incorporated in the People's Republic
                         of China                                      
                                                                       
'Director(s)'            the director(s) of the Company                
                                                                       
'Hong Kong Stock         The Stock Exchange of Hong Kong Limited       
Exchange'                                                             
                                                                       
'Listing Rules'          The Rules Governing the Listing of Securities 
                         on The Stock Exchange of Hong Kong Limited    
                                                                       
'NDRC'                   the National Development and Reform Commission
                         of the People's Republic of China            
                                                                       
'Transaction'            the acquisition by the Company of the Boeing  
                         Aircraft pursuant to the Boeing Aircraft      
                         Purchase Agreement                            

 

 
                        By order of the Board                         
                                                                      
                          Air China Limited                           
                                                                      
                     Zheng Baoan      Li Man Kit                      
                                                                      
                      Joint Company Secretaries                       
                                                                      
Beijing, 19 April 2006                                                
                                                                      
As at the date of this announcement, the Directors of the Company are 
Messrs Li Jiaxiang, Kong Dong, Wang Shixiang, Yao Weiting, Ma Xulun,  
Cai Jianjiang, Fan Cheng, Hu Hung Lick, Henry*, Wu Zhipan* and Zhang  
Ke*.                                                                  
                                                                      
*  Independent non-executive Director of the Company                  



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