PURCHASE OF 24 AIRBUS 320

Air China Ld
15 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.                                                     
                                                                  
   (a joint stock limited company incorporated in the People's    
            Republic of China with limited liability)             
                        (Stock Code: 753)                         
                                                                  
   MAJOR TRANSACTION: PURCHASE OF 24 AIRBUS 320-series AIRCRAFT   
                                                                  
The Company hereby announces that on 14 June 2006, the Company and
AIE entered into the Airbus Aircraft Purchase Agreement with      
Airbus Company, pursuant to which the Company has agreed to       
purchase 24 Airbus 320-series aircraft from Airbus 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.        
                                                                  
AIRBUS AIRCRAFT PURCHASE AGREEMENT                                
                                                                  
On 14 June 2006 the Company and AIE entered into the Airbus       
Aircraft Purchase Agreement with Airbus Company, pursuant to which
the Company has agreed to purchase 24 Airbus 320-series aircraft  
from Airbus Company. The Airbus Aircraft Purchase Agreement was   
entered into pursuant to a framework agreement entered into       
between Airbus Company and the China Aviation Supplies Import and 
Export Group Corporation on 5 November 2005 (the 2005 Framework   
Agreement).                                                       
                                                                  
The details of the Transaction are summarized as follows:         
                                                                  
Date of the Transaction:                                          
                                                                  
14 June 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)   Airbus 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, Airbus Company and each of the ultimate beneficial owner 
of Airbus Company are independent third parties and not connected 
persons (as defined in the Listing Rules) of the Company.         
                                                                  
Aircraft to be acquired:                                          
                                                                  
Airbus Aircraft, i.e. 24 Airbus 320-series aircraft               
                                                                  
Consideration:                                                    
                                                                  
The aircraft basic price comprises the airframe price, optional   
features prices and engine price. The aircraft basic price of the 
Airbus Aircraft in aggregate is USD1,744.08 million (HKD13,563.19 
million). The aircraft price is subject to price escalation by    
applying a formula. Airbus Company has granted to the Company     
significant price concessions with regard to the Airbus Aircraft. 
These will take the form of credit memoranda which may be used by 
the Company towards the purchase of the Airbus Aircraft, goods and
services or may be used towards the final price payment of the    
Airbus Aircraft. Such credit memoranda were determined after arm's
length negotiations between the parties and as a result, the      
actual consideration for the Airbus 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 2005 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 Airbus Company on 26
January 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 Airbus   
Aircraft.                                                         
                                                                  
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 Airbus Aircraft
is payable by cash in instalments. The Company is expecting to    
take delivery of the Airbus Aircraft in stages from 2007 to 2010. 
                                                                  
Source of funding:                                                
                                                                  
The Transaction will be funded through cash generated from the    
Company's business operations, commercial bank loans and other    
financing instruments of the Company.                             
                                                                  
REASONS FOR AND BENEFITS OF THE TRANSACTION                       
                                                                  
The Airbus 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 Airbus Aircraft will deliver more
cost-efficient performance and provide more comfortable services  
to passengers.                                                    
                                                                  
Although the Airbus Aircraft was purchased with other aircrafts   
under a package acquisition plan, which is coordinated by the     
NDRC, the decision to purchase the Airbus 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
                                                                    
'Airbus Aircraft' 24 Airbus 320-series aircraft, which includes     
                  Airbus 319, Airbus 320 and Airbus 321, to be      
                  purchased by the Company pursuant to the Airbus   
                  Aircraft Purchase Agreement                       
                                                                    
'Airbus Aircraft  the aircraft purchase agreement dated 14 June 2006
Purchase          pursuant to which the Company has agreed to       
Agreement'        purchase and Airbus Company has agreed to sell the
                  Airbus Aircraft                                   
                                                                    
'Airbus Company'  Airbus S.A.S., a company incorporated in Toulouse,
                  France                                            
                                                                    
'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 Airbus      
                  Aircraft pursuant to the Airbus Aircraft Purchase 
                  Agreement                                         

 
                      By order of the Board                       
                        Air China Limited                         
                      Zheng Baoan Li Man Kit                      
                    Joint Company Secretaries                     
                                                                  
Beijing, 14 June 2006                                             
                                                                  
As at the date of this announcement, the Directors of the Company 
are Messrs Li Jiaxiang, Kong Dong, Wang Shixiang, Yao Weiting,    
Christopher Dale Pratt, Ma Xulun, Cai Jianjiang, Fan Cheng, Hu    
Hung Lick, Henry*, Wu Zhipan* and Zhang Ke*.                      
                                                                  
*  Independent non-executive Director of the Company              
 


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