Based on a jet fuel price reform beginning April 2006, it is projected that jet fuel price will have a fluctuation of 8%. The rapid development of domestic tourism, China's accession to the WTO, the 2008 Beijing Olympics Games, a western China development strategy and the integration and restructuring of China's domestic aviation industry will all contribute to the development in China's aviation industry.

The company achieved an 8.89% increase in its operating revenue in 1H 2008 from a year earlier and a 368.16% increase in its net profit from a year earlier, with an EPS of RMB 0.19.

Remarks from rating agencies:

1. Tian Xiang Investment Consulting Co., Ltd.
The company's share price fell by 66.64% within the period from 2 Jan 2008 to 9 Jun 2008, a sign of uncertainty in its 2008 performance growth. The company's EPS guidances for 2008 and 2009 were respectively downgraded to RMB 0.81 and RMB 0.78 at Tian Xiang on 9 Jun 2008.

2. CITIC Securities Co., Ltd.
The company's share price fell by 71.94% within the period from 2 Jan 2008 to 18 Jun 2008, with its seat factor dropping for the first time. CITIC thus downgraded the company's rating on 18 Jun 2008 to 'hold' and anticipated the company's EPS guidance for 2008, 2009, and 2010 respectively to be RMB 0.73, RMB 1.04 and RMB 1.33.

3. CITIC Securities Co., Ltd.
The company's share price fell by 75.45% within the period from 2 Jan 2008 to 2 Jul 2008. CITIC thus downgraded the company's rating on 2 Jul 2008 to 'neutral' and reduced the company's EPS guidance for 2008 and 2009 respectively to RMB 0.697 and RMB 0.825 , RMB (0.04) and RMB (0.08) after deducting non-recurring gains and losses.

Source: Securities Daily

Date: 21 Aug 2008

CN01/NW/DM/BT/KM