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<TITLE>CHINA EASTERN AIRLINES</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
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<DIV align="center" style="font-size: 10pt; margin-top: 12pt">As
filed with Securities and Exchange Commission on July 7, 2006</DIV>


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<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, DC 20549<BR>
<DIV align="center"><DIV style="font-size: 3pt; margin-top: 1pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></B>
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<DIV align="center" style="font-size: 18pt; margin-top: 1pt"><B>FORM 20-F</B>
</DIV>

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    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES
EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>OR</B></DIV>

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    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the fiscal year ended December&nbsp;31, 2005</B>
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>OR</B></DIV>

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    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt">Commission file number 1-14550<BR>
<DIV align="center"><DIV style="font-size: 3pt; margin-top: 1pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="h00592h0059200.gif" alt="(CHINEES CHARECTOR)">
</DIV>




<DIV align="center" style="font-size: 10pt">(Exact Name of Registrant as Specified in Its Charter)
<DIV align="center"><DIV style="font-size: 3pt; margin-top: 1pt; width:39%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>


<DIV align="center">
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    <TD align="center" valign="top">China Eastern Airlines Corporation Limited
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">The People&#146;s Republic of China</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(Translation of Registrant&#146;s Name Into English)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Jurisdiction of Incorporation or Organization)</TD>
</TR>
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<DIV align="center" style="font-size: 10pt; margin-top: 1pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 40%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
2550 Hong Qiao Road<BR>
Hong Qiao International Airport<BR>
Shanghai 200335<BR>
The People&#146;s Republic of China<BR>
(8621)&nbsp;6268-6268<BR>
(Address and Telephone Number of Principal Executive Offices)<BR>
<DIV align="center"><DIV style="font-size: 3pt; margin-top: 1pt; width: 40%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities registered or to be registered pursuant to Section&nbsp;12(b) of the Act:</DIV>

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    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Name of Each Exchange</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Title of Each Class
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">on Which Registered</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">American Depositary Shares
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">The New York Stock Exchange</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Ordinary H Shares, par value RMB1.00 per share
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">The New York Stock Exchange*</TD>
</TR>
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<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">* Not for trading, but only in connection with the registration of American Depositary Shares. The
Ordinary H<br> Shares are also listed and traded on The Stock Exchange of Hong Kong Limited.</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities registered or to be registered pursuant to Section&nbsp;12(g) of the Act:</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">None<BR>
(Title of Class)<BR>
Securities for which there is a reporting obligation pursuant to Section&nbsp;15(d) of the Act:</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">None<BR>
(Title of Class)<BR>
Indicate the number of outstanding shares of each of the issuer&#146;s classes of capital or common
stock as of the close<br> of the period covered by the annual report.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, 3,300,000,000 Ordinary Domestic Shares, par value RMB1.00 per
share, were issued and outstanding, and 1,566,950,000 Ordinary H Shares par value RMB1.00 per
share, were issued and outstanding. H Shares are Ordinary Shares of the Company listed on The Stock
Exchange of Hong Kong Limited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark if the registrant is a well-known seasoned issuers, as defined in Rule
405 of the Securities Act. Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this report is an annual or transition report, indicate by check mark if the registrant is
not required to file reports pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of
1934. Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant: (1)&nbsp;has filed all reports required to be filed
by Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or
for such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days. Yes <FONT face="Wingdings">&#254;</FONT> No <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of &#147;accelerated filer and large accelerated
filer&#148; in Rule&nbsp;12b-2 of the Exchange Act.
</DIV>
<DIV align="center">
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</TR>
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<TR valign="bottom">
    <TD align="left" valign="top">Large Accelerated Filer <FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Accelerated Filer <FONT face="Wingdings">&#254;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Non-Accelerated Filer <FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
</TR>
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</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark which financial statement item the registrant has elected to follow.
Item&nbsp;17 <FONT face="Wingdings">&#111;</FONT> Item&nbsp;18 <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this is an annual report, indicate by check mark whether the registrant is a shell company
(as defined in Rule&nbsp;12b-2 of the Exchange Act). Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





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<DIV style="font-family: 'Times New Roman',Times,serif">





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<A name="tocpage"></A>
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>China Eastern Airlines Corporation Limited</B>

</DIV>
<DIV align="center">
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    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Page</TD>
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<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#101">SUPPLEMENTAL INFORMATION AND EXCHANGE RATES
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#102">CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#103">GLOSSARY OF TECHNICAL TERMS
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#104">PART I</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#105">Item&nbsp;1. Identity of Directors, Senior Management and Advisers</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#106">Item&nbsp;2. Offer Statistics and Expected Timetable</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#107">Item&nbsp;3. Key Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#108">Item&nbsp;4. Information on the Company</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#130">Item&nbsp;4A.
Unresolved Staff Comments</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">34</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#109">Item&nbsp;5. Operating and Financial Review and Prospects</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">34</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#110">Item&nbsp;6. Directors, Senior Management and Employees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">50</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#111">Item&nbsp;7. Major Shareholders and Related Party Transactions</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">57</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#112">Item&nbsp;8. Financial Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">61</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#113">Item&nbsp;9. The Offer and Listing</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">62</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#114">Item&nbsp;10. Additional Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">63</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#115">Item&nbsp;11. Quantitative and Qualitative Disclosures About Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">71</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#116">Item&nbsp;12. Description of Securities Other than Equity Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">71</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#117">PART II</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#118">Item&nbsp;13. Defaults, Dividend Arrearages and Delinquencies</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">72</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#119">Item&nbsp;14. Material Modifications to the Rights of Security Holders and Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">72</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#120">Item&nbsp;15. Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">74</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#121">Item&nbsp;16A. Audit Committee Financial Expert</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">74</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#122">Item&nbsp;16B. Code of Ethics
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">74</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#123">Item&nbsp;16C. Principal Accountant Fees and Services
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">74</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#124">Item&nbsp;16D. Exemptions from the Listing Standards for Audit Committees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">74</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#125">Item&nbsp;16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">74</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#126">PART III</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#127">Item&nbsp;17. Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">74</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#128">Item&nbsp;18. Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">74</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#129">Item&nbsp;19. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">75</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00592exv1w1.txt">EX-1.1 ARTICLES OF ASSOCIATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00592exv4w12.txt">EX-4.12 AIRCRAFT PURCHASE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00592exv4w13.txt">EX-4.13 AIRCRAFT PURCHASE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00592exv4w14.txt">EX-4.14 AIRCRAFT PURCHASE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00592exv8w1.txt">EX-8.1 LIST OF SUBSIDIARY OF CEA</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00592exv12w1.txt">EX-12.1 CEO CERTIFICATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00592exv12w2.txt">EX-12.2 CFO CERTIFICATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00592exv13w1.txt">EX-13.1 CEO CERTIFICATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00592exv13w2.txt">EX-13.2 CFO CERTIFICATION</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SUPPLEMENTAL INFORMATION AND EXCHANGE RATES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this annual report, unless otherwise specified, the term &#147;dollars&#148;, &#147;U.S. dollars&#148; or &#145;US$&#148;
refers to United States dollars, the legal tender currency of the United States of America, or the
United States or the U.S.; the term &#147;Renminbi&#148; or &#147;RMB&#148; refers to Renminbi, the legal tender
currency of The People&#146;s Republic of China, or China or the PRC; and the term &#147;Hong Kong dollars&#148;
or &#147;HK$&#148; refers to Hong Kong dollars, the legal tender currency of the Hong Kong Special
Administrative Region of China, or Hong Kong.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this annual report, the term &#147;we&#148;, &#147;us&#148;, &#147;our&#148;, &#147;our company&#148; or &#147;China Eastern&#148; refers to
China Eastern Airlines Corporation Limited, a joint stock limited company incorporated under the
laws of the PRC on April&nbsp;14, 1995, and, unless the context otherwise requires, its subsidiaries,
or, in respect of references to any time prior to the incorporation of China Eastern Airlines
Corporation Limited, the core airline business carried on by its predecessor, China Eastern
Airlines, which was assumed by China Eastern Airlines Corporation Limited pursuant to the
restructuring described in this annual report. The term &#147;CEA Holding&#148; refers our parent, China
Eastern Air Holding Company, which was established on October&nbsp;11, 2002 as a result of the merger of
our former controlling shareholder, Eastern Air Group Company, or EA Group, with China Northwest
Airlines Company and Yunnan Airlines Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purpose of this annual report, references to The People&#146;s Republic of China, China and the
PRC do not include Hong Kong, the Macau Special Administrative Region of China, or Macau, or
Taiwan.
</DIV>
<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This annual report contains certain forward-looking statements that are, by their nature,
subject to significant risks and uncertainties. These forward-looking statements include, without
limitation, statements relating to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our fleet development plans, including, without limitation, related
financing, schedule, intended use and planned disposition;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the planned expansion of our cargo operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the impact of changes in the policies of the Civil Aviation
Administration of China, or the CAAC, regarding route rights;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the impact of the CAAC policies regarding the restructuring of the
airline industry in China;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our expansion plans, including acquisition of other airlines;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our marketing plans, including the establishment of additional sales offices;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our plan to add new pilots; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the impact of unusual events on our business and operations.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The words &#147;anticipate&#148;, &#147;plan&#148;, &#147;believe&#148;, &#147;estimate&#148;, &#147;expect&#148;, &#147;intend&#148; and similar
expressions, as they relate to our company or its management, are intended to identify some of
these forward-looking statements. These forward-looking statements reflect our current view with
respect to future events. Actual events or results may differ materially from information contained
in these forward-looking statements as a result of a number of factors, including, without
limitation:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any changes in regulatory policies of the CAAC;
</TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the effects of competition on the demand for and price of our services;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the availability of qualified flight personnel and airport facilities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any significant depreciation of Renminbi or Hong Kong dollars against
U.S. dollars, Japanese yen or Euro, the currencies in which the majority of our
borrowings are denominated;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the availability and cost of the aviation fuel;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in political, economic, legal and social conditions in China;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the fluctuation of interest rates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to obtain adequate financing, including any required external
debt and acceptable bank guarantees; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>general economic conditions in markets where our company operates.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">-2-
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GLOSSARY OF TECHNICAL TERMS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="53%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><I>Capacity measurements</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>ATK (available tonne kilometers)</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the number of tonnes of capacity available for the carriage of
revenue load (passengers and cargo) multiplied by the distance
flown</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>ASK (available seat kilometers)</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the number of seats made available for sale multiplied by the
distance flown</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>AFTK (available freight tonne-kilometers)</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the number of tonnes of capacity available for the carriage of
cargo and mail multiplied by the distance flown</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><I>Traffic measurements</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>revenue passenger-kilometers or RPK</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the number of passengers carried multiplied by the distance flown</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>revenue freight tonne-kilometers or RFTK</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">cargo and mail load in tonnes multiplied by the distance flown</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>revenue passenger tonne-kilometers or RPTK</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">passenger load in tonnes multiplied by the distance flown</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>revenue tonne-kilometers or RTK</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">load (passenger and cargo) in tonnes multiplied by the distance
flown</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><I>Load factors</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>overall load factor</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">tonne-kilometers expressed as a percentage of ATK</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>passenger load factor</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">passenger-kilometers expressed as a percentage of ASK</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>break-even load factor</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">the load factor required to equate traffic revenue with our
operating costs assuming that our total operating surplus is
attributable to scheduled traffic operations</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><I>Yield and cost measurements</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px"><B>passenger yield (revenue per
passenger-kilometer)</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">revenue from passenger operations divided by passenger-kilometers</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>cargo yield (revenue per
cargo tonne-kilometer)</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">revenue from cargo operations divided by cargo tonne-kilometers</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>average yield (revenue per
total tonne-kilometer)</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">revenue from airline operations divided by tonne-kilometers</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>unit cost</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">operating expenses divided by ATK</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>tonne</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">a metric ton, equivalent to 2,204.6 lbs</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">-3-
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART I</B>
</DIV>

<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1. Identity of Directors, Senior Management and Advisers.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;2. Offer Statistics and Expected Timetable.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3. Key Information.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>A. Selected Financial Data</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selected financial data of the consolidated statements of operations for the years ended
December&nbsp;31, 2001, 2002, 2003, 2004 and 2005 and the selected financial data of the balance sheets
as of December&nbsp;31, 2001, 2002, 2003, 2004 and 2005 have been derived from our audited consolidated
financial statements, which have been prepared in accordance with the International Financial
Reporting Standards, or IFRS, and audited by PricewaterhouseCoopers, an independent registered
public accounting firm in Hong Kong. PricewaterhouseCoopers&#146; reports in respect of the consolidated
statements of operations for the years ended December&nbsp;31, 2003, 2004 and 2005 and the consolidated
balance sheets as of December&nbsp;31, 2004 and 2005 and the related footnotes are included in this annual
report. PricewaterhouseCoopers&#146; reports in respect of the consolidated statements of operations for the
years ended December&nbsp;31, 2001 and 2002 and the consolidated
balance sheets as of December&nbsp;31, 2001,
2002 and 2003 and the related footnotes are not included in this annual report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As required under IFRS, the acquisition accounting method was applied to account for our
acquisitions of certain assets and liabilities relating to the aviation businesses of CEA Northwest
(as defined below) and CEA Yunnan (as defined below) in 2005, as described in &#147;Item&nbsp;4. Information
on the Company &#151; The History and Development of the
Company&#148;, such that as, of June&nbsp;30, 2005, only
the acquired assets and liabilities were included in the consolidated financial statements. The
results of the acquired operations and their related cash flows were included in the consolidated
financial statements of the Company beginning July&nbsp;1, 2005. In contrast, under the generally
accepted accounting principles in the United States, or U.S. GAAP, such transactions are considered
to be &#147;combination of entities under common control&#148; since we and the aviation businesses of CEA
Northwest and CEA Yunnan were under the common control of CEA Holding. Such transactions were
accounted for in a manner similar to &#147;pooling-of-interests&#148;, retroactively restating all years
presented on a combined basis as if the acquisitions had been in effect since inception, whereby
related assets and liabilities of the acquired aviation businesses would be accounted for at
historical cost and the related results of operations would be included in the consolidated
financial statements from the earliest year presented. For a summary of significant differences
between IFRS and U.S. GAAP as they relate to us and the effects of such differences on net profit
(loss)&nbsp;attributable to equity holders and net assets for all years presented, see Note 43 to our
audited consolidated financial statements included in this annual report. Our condensed
consolidated financial statements prepared and presented in accordance with U.S. GAAP to reflect
the effect of the acquisitions of CEA Northwest&#146;s and CEA Yunnan&#146;s aviation businesses under common
control for the relevant periods are set forth in Note 44 to our audited consolidated financial
statements included in this annual report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We omitted the selected U.S. GAAP selected financial data as of, and for the year ended
December&nbsp;31, 2001 because no reliable financial information as of, and for the year ended December
31, 2001 with respect to the acquired aviation businesses of CEA Yunnan and CEA Northwest can be
produced without unreasonable expenses or efforts.
</DIV>

<P align="center" style="font-size: 10pt">-4-
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following information should be read in conjunction with, and is qualified in its entirety
by our audited consolidated financial statements included in this annual report.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23" style="border-bottom: 1px solid #000000"><B>(Restated except for the year ended December 31, 2005)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>RMB</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>RMB</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>RMB</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>RMB</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>RMB</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>US$</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>(in millions, except per share or per ADS data)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income Statement Data:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>IFRS</B>:<SUP style="font-size: 85%; vertical-align: text-top">(1)(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,454</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,402</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,341</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,350</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14,454</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20,239</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27,685</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,431</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Finance costs, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(777</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(775</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(641</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(578</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(72</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Profit (loss) before income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(741</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(577</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(72</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Profit (loss) for the year
attributable to equity holders
of the Company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,097</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(467</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(58</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic and fully diluted
earnings (loss)&nbsp;per
share<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.23</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.10</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.01</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic and fully diluted
earnings (loss)&nbsp;per ADS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(22.54</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9.60</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.19</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>U.S. GAAP:</B><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Profit (loss)&nbsp;attributable to
equity holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(365</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,391</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,383</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(171</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic and fully diluted
earnings (loss)&nbsp;per
share<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.08</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.29</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.28</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.04</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic and fully diluted
earnings (loss)&nbsp;per ADS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7.51</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(28.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(28.42</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.52</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23"><B>As of December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23" style="border-bottom: 1px solid #000000"><B>(Restated except for data as of December 31, 2005)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>RMB</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>RMB</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>RMB</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>RMB</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>RMB</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>US$</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23"><B>(in millions)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance Sheet Data:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>IFRS</B>:<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">231</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,232</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,504</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,982</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,491</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(25,598</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,172</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,812</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,605</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long term borrowing, including
current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,569</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Obligations under finance
lease, including current
portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,314</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total share capital and reserves</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">755</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>U.S. GAAP</B>:<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,338</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Owner&#146;s equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">750</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Certain incomes and expenses for the years ended December&nbsp;31, 2001, 2002, 2003 and 2004 have
been reclassified under the IFRS. Such reclassifications have no effect on the profit (loss)
attributable to equity holders for each of those affected years.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Certain expenses for the years ended December&nbsp;31, 2001, 2002, 2003 and 2004 have been
restated as a result of the retrospective application of changes to our accounting policy
relating to the costs of overhaul of owned and finance leased aircraft and engines. Such
adjustments resulted in a 2.8% increase in the profit attributable to equity holders for the
year ended December&nbsp;31, 2001, a 25.6% decrease in the profit attributable to equity holders for
the year ended December&nbsp;31, 2002, a 15.5% increase in the loss attributable to equity holders
for the year ended December&nbsp;31, 2003 and a 37.5% decrease in the profit attributable to
equity holders for the year ended December&nbsp;31, 2004 . See Note 2(a) to our audited consolidated
financial statements included in this annual report.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">-5-
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>The calculation of earnings (loss)&nbsp;per share is based on the consolidated profit (loss)
attributable to equity holders and 4,866,950,000 shares in issue.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Selected U.S. GAAP financial data for the years ended December&nbsp;31, 2002, 2003 and 2004 have
been restated to reflect our acquisitions of the assets and liabilities relating to the
aviation businesses of CEA Northwest and CEA Yunnan in 2005. See
Note 44 to our audited
consolidated financial statements included in this annual report.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Selected balance sheet data for the years ended December&nbsp;31, 2001, 2002, 2003 and 2004 have
been restated as a result of the retrospective application of changes to our accounting
policy relating to the costs of overhaul of owned and finance leased aircraft and engines. See
Note 2(a) to our audited consolidated financial statements included in this annual report.</TD>
</TR>

</TABLE>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Exchange Rate Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This annual report contains translations of certain amounts into U.S. dollars solely for your
convenience. Except where otherwise specified, translations of amounts from Renminbi to U.S.
dollars have been made at the noon buying rate, or the Noon Buying Rate, in New York City for cable
transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of
New York on December&nbsp;31, 2005 of US$1.00 = RMB8.0702. You should not construe the translations as
representations that the Renminbi amounts could have been, or could be, converted into U.S. dollars
at that rate or at any other rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The noon buying rate in New York City for cable transfers as certified for customs purposes by
the Federal Reserve Bank of New York was RMB7.9943 = US$1.00, on
June&nbsp;30, 2006. The following
tables set forth certain information concerning exchange rates between Renminbi and U.S. dollars
for the periods indicated:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>

</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Average</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></SUP><B>
Noon Buying
Rate</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(2)</B></SUP> <B>(RMB per US$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="9" style="border-bottom: 1px solid #000000"><B>Noon Buying Rate (RMB per US$)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff" >
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top" >8.1826</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;2006
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">8.0596</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">8.0702</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2004
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">8.2768</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">February&nbsp;2006
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">8.0616</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">8.0415</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2003
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">8.2771</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">March&nbsp;2006
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">8.0505</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">8.0167</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2002
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">8.2772</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">April&nbsp;2006
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">8.0248</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">8.0040</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2001
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">8.2772</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">May&nbsp;2006
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">8.0300</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">8.0005</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June&nbsp;2006
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">8.0225</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="center" valign="top">7.9943</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Determined by averaging the rates on the last business day of each month during the relevant
period.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Noon Buying Rate in New York City for cable transfers payable in foreign currencies as
certified for customs purpose by the Federal Reserve Bank of New York.</TD>
</TR>

</TABLE>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Selected Operating Data</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain operating data of our company for the five years ended
December&nbsp;31, 2005, which have been derived from financial information prepared in accordance with
IFRS and other data provided by us and are not audited. All references in this annual report to our
cargo operations, cargo statistics or cargo revenues include figures for cargo and mail.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selected Airline Operating Data:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capacity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">ATK (millions)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,188.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,366.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,774.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,071.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,751.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">ASK (millions)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,813.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,962.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,780.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,599.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,427.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">AFTK (millions)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,865.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,850.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,094.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,327.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,033.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Traffic:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Revenue passenger-kilometers (millions)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,911.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,206.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,002.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,580.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,380.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Revenue tonne-kilometers (millions)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,373.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,652.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,907.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,340.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,395.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Revenue passenger tonne-kilometers (millions)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,423.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,629.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,611.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,466.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,273.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Revenue freight tonne-kilometers (millions)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">949.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,023.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,296.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,874.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,151.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Kilometers flown (millions)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">287.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Hours flown (thousands)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">259.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">360.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">467.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Number of passengers carried (thousands)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,371.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,533.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,040.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,711.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,290.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Weight of cargo carried (millions of kilograms)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">302.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">459.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">663.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">775.5</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">-6-
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Average distance flown (kilometers per passenger)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,534.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,578.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,495.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,557.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,497.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Load Factor:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Overall load factor (%)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Passenger load factor (%)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Break-even load factor (based on ATK) (%)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Yield and Cost Statistics (RMB):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Passenger yield (passenger revenue/passenger-kilometers)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cargo yield (cargo revenue/cargo tonne-kilometers)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Average yield (passenger and cargo revenue/
tonne-kilometers)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.79</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unit cost (operating expenses/ATK)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.16</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>B. Capitalization and Indebtedness</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>C. Reasons for the Offer and Use of Proceeds</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>D. Risk Factors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An investment in our company involves a number of risks, some of which may be special or
significantly different from risks that are normally associated with an investment in a U.S.
company. You should carefully consider the following information about the risks in investing in
our company, along with the other information presented in this annual report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Fuel
supply and costs</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
availability and costs of the aviation fuel has a significant impact
on our financial condition and results of operations. In the past,
jet fuel shortages have occurred in China and, on limited occasions,
required us to delay or cancel flights. Although jet fuel shortages
have not occurred since the end of 1993, we cannot assure you that
jet fuel shortages will not occur in the future. Fuel prices continue
to be susceptible to, among other factors, political unrest in
various parts of the world, Organization of Petroleum Exporting
Countries policy, the rapid growth of economies in China and India,
the levels of inventory carried by industries, the amounts of
reserves built by governments, disruptions to production and refining
facilities and weather. These and other factors that impact the
global supply and demand for aircraft fuel may affect our financial
performance due to its sensitivity to fuel prices. Our financial
performance may be especially susceptible to recent trends of
escalating fuel prices worldwide. Between May 31, 2005 and May 31,
2006, the official domestic fuel price in China increased by 19.9%.
This increase is consistent with other incidents of rising fuel
prices that we have seen during the past few years, and there can be
no assurance that fuel prices will remain constant or decline in the
future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fuel
costs constitute a significant portion of our operating costs and, in
2005, accounted for approximately 32.1% of our operating expenses.
Between 2004 and 2005, our expenses for fuel rose by 63.7%, partially
as a result of increased weighted average domestic adn international
fuel prices, and partially as a result of the expansion of our fleet.
Between 2004 and 2005, the weighted average domestic and
international fuel prices that we paid increased by approximately
24.5% and 39.8%, respectively. Due to the highly competitive nature
of the airline industry and government regulation on airfare pricing,
we may be unable to fully or effectively pass on to our customers any
increased fuel costs we may encounter in the future. Any jet fuel
shortages or any increase in domestic or international jet fuel price
may materially and adversely affect our financial condition and
results of operations. From time to time, we may hedge some of our
future fuel purchases to protect against potential spikes in price.
However, these hedging strategies may not always be effective and can
result in losses depending on price changes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Competition</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
face intense competition in each of the domestic, Hong Kong regional
and international markets that we serve. In our domestic markets, we
compete against smaller domestic airline companies that operate with
costs that are lower than ours. We also increasingly face competition
from entrants to our domestic markets, as new investments into
China&#146;s civil aviation industry are made following the
CAAC&#146;s relaxation of certain private-sector investment rules in
July 2005. See the section headed &#147;Item 4. Information on the
Company &#151; Business Overview &#151; Competition&#148; for more
details. In our Hong Kong regional and international markets, we
compete against international airline companies that have
significantly longer operating history, greater name recognition,
more resources or larger sales networks than our company, or
participate in reservation systems that are more convenient that
ours. The public&#146;s perception of the safety records of Chinese
airlines also materially and adversely affects our ability to compete
against our international competitors. In response to competition,
we have, from time to time in the past, lowered our airfares for
certain of our routes, and we may be required to do the same in the
future. Increased competition and pricing pressures from compeition
may have a material adverse effect on our financial condition and
results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Government regulation</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chinese civil aviation industry is subject to a high degree of regulation by the CAAC.
Regulatory policies issued or implemented by the CAAC encompass virtually every aspect of airline
operations, including, among other things:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>route allocation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>pricing of domestic airfare;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the administration of air traffic control systems and certain airports; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>aircraft registration and aircraft airworthiness certification.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result, we may face significant constraints on our flexibility and ability to expand our
business operations or to maximize our profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Government ownership and control of our company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of the major airline companies in China are currently majority owned either by the
central government of China or by provincial or municipal governments in China. CEA Holding
currently holds approximately 61.64% of our company&#146;s equity interests on behalf of the Chinese
government. As a result, CEA Holding will be able to elect our entire board of directors and
otherwise be able to control us. CEA Holding will also have sufficient voting control to effect
transactions without the concurrence of our minority shareholders. The interests of the Chinese
government as the ultimate controlling person of our company and most of other major Chinese
airlines could conflict with the interests of our minority shareholders. Although
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the CAAC currently has a policy of equal treatment for all Chinese airlines, we cannot assure
you that the CAAC will not favor other Chinese airlines over our company.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Insurance coverage and cost</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of the events of September&nbsp;11, 2001, aviation insurers have significantly reduced
the maximum amount of insurance coverage available to commercial air carriers for liability to
persons other than employees or passengers for claims resulting from acts of terrorism, war or
similar events, or war-risk coverage. At the same time, they have significantly increased the
premiums for such coverage, as well as for aviation insurance in general. Also, Our company has
further extended our insurance coverage purchased prior to the September&nbsp;11 events to November&nbsp;30,
2006. However, if the insurance carriers reduce further the amount of insurance coverage available
or increase the premium for such coverage when we renew our insurance coverage, our financial
condition and results of operations may be materially and adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Direct air link between China&#146;s mainland and Taiwan</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently, our operations on the Hong Kong regional routes benefit from traffic between Hong
Kong and mainland China ultimately originating in Taiwan. During the Lunar Chinese New Year peak
travel season in 2003, from late-January to mid-February, the Chinese government allowed special
chartered flights between Shanghai and Taiwan for the first time. During the Lunar Chinese New
Year peak travel seasons in 2005 and 2006, from late-January to mid-February, airlines from both
mainland China and Taiwan (including our company) operated 48 and 72, respectively, non-stop direct
chartered flights between selected cities of mainland China and Taiwan. Although regular direct
flights between Taiwan and mainland China are still not permitted, our Hong Kong regional routes
may be materially and adversely affected if such regular direct flights are permitted in the
future. We cannot assure you that we will obtain sufficient Taiwan-mainland China routes, or that
the yields on these routes will be adequate, to offset any material adverse effect on our revenues
derived from our Hong Kong regional routes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Chinese aviation infrastructure limitations and safety</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The rapid increase in air traffic volume in China in recent years has put pressure on many
components of the Chinese airline industry, including air traffic control systems, the availability
of qualified flight personnel and airport facilities. Our ability to provide safe air
transportation depends on the availability of qualified and experienced pilots in China and the
improvement of maintenance services, national air traffic
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">control and navigational systems and ground control operations at Chinese airports. If any of
these is not available or is inadequate, our ability to provide safe air transportation will be
compromised and our financial condition and results of operations may be materially and adversely
affected.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating leverage</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The airline industry is characterized by a high degree of operating leverage. Due to high
fixed costs, including payments made in connection with aircraft leases, the expenses relating to
the operation of any given flight do not vary proportionately with the number of passengers
carried, while revenues generated from a particular flight are directly related to the number of
passengers carried and the fare structure of the flight. Accordingly, a decrease in revenues may
result in a proportionately higher decrease in profits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Liquidity</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have substantial debts, and will continue to have substantial debts in the future. In
addition, we have recently entered into contractual commitments to acquire a number of new aircraft
for delivery over the next few years. See the section headed &#147;Item&nbsp;4. Information on the
Company&#151;Description of Property&#151;Fleet&#148;. As of December&nbsp;31, 2005, our total outstanding debt was
RMB52,403 million, and our long-term debt to equity ratio was 3.4. As of the same date, our current
liabilities exceeded our current assets by RMB25,598&nbsp;million. Short-term bank loans outstanding
totaled RMB13,711&nbsp;million as of December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We largely rely on cash flow generated from our operations and external financing (including
short-term bank loans) to meet our debt repayment obligations and working capital requirements. If
our
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">operating cash flow is materially and adversely affected by factors such as increased
competition, significant decrease in demand for our services, or significant increase in jet fuel
price, our liquidity would be materially and adversely affected. We have arranged financing with
domestic and foreign-funded banks in China as necessary to meet our working capital requirements.
We have also tried to ensure our liquidity by structuring a substantial portion of our short-term
bank loans to be rolled over upon maturity. These efforts, however, may ultimately prove
insufficient. Our ability to obtain financing may be affected by our financial position and
leverage and our credit rating, as well as by prevailing economic conditions and the cost of
financing in general. If we are unable to obtain adequate financing for our capital requirements,
our liquidity and operations would be materially and adversely affected.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Future financing requirements</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We require significant amounts of external financing to meet our capital commitments for
adding and upgrading aircraft and flight equipment and for other business expansion needs. In the
past, we have obtained, sometimes with the assistance of the CAAC, guarantees from Bank of China
and other Chinese banks in respect of payments under our foreign loan and capital lease
obligations. However, we cannot assure you that we will be able to continue to obtain bank
guarantees in the future. The unavailability of guarantees from Bank of China or other acceptable
banks or the increased cost of such guarantees may materially and adversely affect our ability to
borrow internationally or enter into international aircraft lease financings on acceptable terms.
The ability of our company to obtain financing may also be affected by our financial position and
leverage and our credit rating as well as by prevailing economic conditions and the cost of
financing generally. If we were unable to obtain financing for a significant portion of our capital
requirements, our ability to acquire new aircraft or expand our operations may be impaired. We have
and in the future will likely continue to have substantial debts. As a result, the interest cost
associated with these debts might impair our future profitability and cause our earnings to be
subject to a higher degree of volatility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Related party transactions; conflict of interests</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have engaged in, from time to time, and may continue to engage in, in the future, a variety
of transactions with CEA Holding and its various members, from whom we receive a number of
important services, including support for in-flight catering and assistance with importation of
aircraft, flight equipment and spare parts. Our transactions with CEA Holding and its members are
conducted through a series of arm&#146;s length contracts, which we have entered into with CEA Holding
and its members in the ordinary course of business. However, because we are controlled by CEA
Holding and CEA Holding may have interests that are different from our interests, we cannot assure
you that CEA Holding will not take actions that will serve its interests or the interests of its
members over our interests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Acquisitions</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may expand our business through acquisition of airline companies or airline-related
businesses. Such acquisitions involve uncertainties and risks, including the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>difficulty with integrating the assets and operations of the acquired
airline companies or airline-related businesses, including their employees, corporate
cultures, managerial systems, processes and procedures and management information
systems and services;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>failure to achieve the anticipated synergies, cost savings or
revenue-enhancing opportunities resulting from the acquisition of such airline
companies or airline-related businesses;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>difficulty with exercising control and supervision over the newly
acquired operations; and</TD>
</TR>

</TABLE>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increased financial pressure resulting from the assumption of recorded
and unrecorded liabilities of the acquired airline companies or airline-related
businesses.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we are unable to manage or integrate the newly acquired airlines or airline-related
businesses successfully without substantial expense, delay or other operational or financial
problems, we may be unable to achieve the objectives or anticipated synergies of such acquisitions
and such acquisitions may adversely impact the operations and financial results of our existing
businesses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Limitation on foreign ownership</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The current CAAC policies limit foreign ownership in Chinese airlines. Under these limits,
non-Chinese residents and Hong Kong, Macau or Taiwan residents cannot hold majority equity interest
in a Chinese airline company. At present, approximately 32.2% of our total outstanding shares are
held by non-Chinese residents and Hong Kong, Macau or Taiwan residents (excluding the qualified
foreign institutional investors that are approved to invest in the A-share market of the PRC). As
a result, our access to international equity capital markets may be limited. This restriction may
also limit the opportunities available to our company to obtain funding or other benefits through
the creation of equity-based strategic alliances with foreign carriers. We cannot assure you that
the CAAC will increase these limits in the near future or at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Adverse public health epidemics or pandemics</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adverse public health epidemics or pandemics could disrupt businesses and the national economy
of China and other countries where we do business. From December&nbsp;2002 to June&nbsp;2003, China and
other countries experienced an outbreak of a new and highly contagious form of atypical pneumonia
now known as severe acute respiratory syndrome, or SARS. On July&nbsp;5, 2003, the World Health
Organization declared that the SARS outbreak had been contained. However, a number of isolated new
cases of SARS were subsequently reported, most recently in central China in April&nbsp;2004. During May
and June of 2003, many businesses in China were closed by the PRC government to prevent
transmission of SARS. Moreover, some Asian countries, including China, have recently encountered
incidents of the H5N1 strain of bird flu, or avian flu. We are unable to predict the effect, if
any, that avian flu may have on our business. Any future outbreak of SARS, avian flu or similar
adverse public health developments may, among other things, severely restrict the level of economic
activity in the affected areas, which may in turn significantly reduce demand for our services and
have a material adverse effect on our financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Changes in the economic policies of the Chinese government</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since the late 1970s, the Chinese government has been reforming the Chinese economic system.
These reforms have resulted in significant economic growth and social progress. These policies and
measures, however, may from time to time be modified or revised. Adverse changes in economic and
social conditions in China, in the policies of the Chinese government or in the laws and
regulations in China, if any, may have a material adverse effect on the overall economic growth of
China and investments in the airline industry in China. These developments, in turn, may have
material adverse effects on our business operations and may also materially and adversely affect
our financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Convertibility of Renminbi</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A significant portion of our revenue and operating expenses are denominated in Renminbi, while
a portion of our revenue, capital expenditures and debts are denominated in U.S. dollars and other
foreign currencies. Renminbi is currently freely convertible under the current account, which
includes dividends, trade and service-related foreign currency transactions, but not under the
capital account, which includes foreign direct investment, unless the prior approval of the State
Administration of Foreign Exchange, or
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SAFE, is obtained. As a foreign invested enterprise approved by the PRC Ministry of Commerce,
or MOC, we can purchase foreign currency without the approval of SAFE for settlement of current
account transactions, including payment of dividends, by providing commercial documents evidencing
these transactions. We can also retain foreign exchange in our current accounts, subject to a
maximum amount approved by SAFE, to satisfy foreign currency liabilities or to pay dividends.
However, the relevant Chinese government authorities may limit or eliminate our ability to purchase
and retain foreign currencies in the future. Foreign currency transactions under the capital
account are still subject to limitations and require approvals from SAFE. This may affect our
ability to obtain foreign exchange through debt or equity financing, including by means of loans or
capital contributions. We cannot assure you that we will be able to obtain sufficient foreign
exchange to pay dividends or satisfy our foreign exchange liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Fluctuations in exchange rates</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The value of Renminbi fluctuates and is subject to significant changes in China&#146;s political
and economic conditions. Any revaluation of Renminbi may materially and adversely affect the value
of dividends, if any, payable on our H shares in foreign currency terms. We use currency forward
contracts to reduce risks of changes in currency exchange rates in respect of ticket sales and
expenses denominated in foreign currencies. These currency forward contracts will expire between
2007 and 2010. Since we may not be able to fully hedge against Renminbi devaluations, future
movements in the exchange rate of Renminbi and other currencies may have a material adverse effect
on our financial condition and results of operations<B>.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Uncertainties embodied in the Chinese legal system</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chinese legal system is a civil law system based on written statutes. Unlike common law
systems, it is a system in which decided legal cases have little precedential value. In 1979, the
Chinese government began to promulgate a comprehensive system of laws and regulations governing
economic matters in general. Legislation over the past 20&nbsp;years has significantly enhanced the
protection afforded to foreign investment in China. However, the interpretation and enforcement of
some of these laws, regulations and other legal requirements involve uncertainties that may limit
the legal protection available to you.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Compliance with requirements under Section&nbsp;404 of the Sarbanes-Oxley Act of 2002</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
company will become subject to Section 404 of the Sarbanes-Oxley Act
of 2002 in the fiscal year ending December 31, 2006, and will need to
evaluate and test our abilities to comply with the statute as well as
take such remedial actions that may be necessary to ensure our
compliance. We cannot be certain that evaluations, tests and remedial
actions will all be timely completed. We also do not know how
compliance with Section 404 of the Sarbanes-Oxley Act of 2002 will
affect our operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002
may present us with significant challenges. In connection with their
audit of our consolidated financial statements as of and for the
year ended December 31, 2005, our independent auditors,
PricewaterhouseCoopers, identified to our management and audit
committee certain internal control deficiencies in our internal
control over financial reporting that they considered to constitute
material weakness in our internal control over financial reporting.
See the section headed &#147;Item 15 &#151; Controls and
Procedures&#148;. If during the fiscal year ending December 31, 2006,
we are unable to effectively implement the measures necessary for our
compliance with Section 404 of the Sarbanes-Oxley Act of 2002,
including any remedial actions that are required to address any
internal control weakness already detected by our independent auditors, our independent
auditors may not be able to provide us with a written attestation
regarding the effectiveness of our internal control over financial
reporting, which we will need for the filling of our annual report
next year. Even if our management concludes that our internal control
over financial reporting is effective, our independent auditors may
disagree. In addition, if our independent auditors are not satisfied
with our internal control over financial reporting or the level at
which our controls are documented, designed, operated, reviewed or
evaluated, or if our independent auditors interpret the relevant
requirements, rules or regulations differently from us, then they may
decline to attest to our management&#146;s assessment or may issue an
adverse opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
of these possible outcomes may result in an adverse reaction in the
financial marketplace and/or a loss of investor confidence in the
reliability of our consolidated financial statements. We could also
become subject to regulatory investigations and sanctions by
regulators such as the Securities and Exchange Commission. We may
also be required to incur greater than expected costs to improve our
internal control processes. All of these factors could materially and
adversely affect the market prices of our shares and ADSs.
</DIV>

<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. Information on the Company.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>History and Development of the Company</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
registered office is located at 66 Airport Street, Pudong International Airport, Shanghai, China,
201202. Our principal executive office is located at 2550 Hong Qiao Road, Hong Qiao International
Airport, Shanghai, China, 200335. The telephone number of our principal executive office is (86-21)
6268-6268. We currently do not have an agent for service of process
in the United States.</div>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our company was established on April 14, 1995
under the laws of China as a company limited by shares in connection
with the restructuring of our predecessor and our initial public
offering. Our
predecessor was one of the six original airlines established in 1988 as part of the
decentralization of the airline industry in China undertaken in connection with China&#146;s overall
economic reform efforts. Prior to 1988, the CAAC was responsible for all aspects of civil aviation
in China, including the regulation and operation of China&#146;s airlines and airports. In connection
with our initial public offering, our predecessor was restructured into two separate legal
entities, our company and EA Group. According to the restructuring arrangement, by operation of
law, our company succeeded to substantially all of the assets and liabilities relating to the
airline business of our predecessor. EA Group succeeded to our predecessor&#146;s assets and liabilities
that do not directly relate to the airline operations and do not compete with our businesses.
Assets transferred to EA Group included our predecessor&#146;s equity interests
</DIV>

<P align="center" style="font-size: 10pt">-12-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">in companies engaged in import and export, real estate, advertising, in-flight catering,
tourism and certain other businesses. In connection with the restructuring, we entered into various
agreements with EA Group and its subsidiaries for the provision of certain services to our company.
CEA Holding assumed the rights and liabilities of EA Group under these agreements after it was
formed by merging EA Group, Yunnan Airlines Company and China Northwest Airlines Company in October
2002. See &#147;Item&nbsp;7. Major Shareholders and Related Party Transactions&#148; for more details. In 2005,
our company&#146;s total revenue accounted for approximately 87.8 % of CEA Holding&#146;s total revenue. The
following chart sets forth the organizational structure of our company and our significant
subsidiaries, all of which were incorporated in China, as of
June&nbsp;30, 2006.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="h00592h0059201.gif" alt="(FLOW CHART)">
</DIV>

<TABLE width="90%">
<TR><TD style="font-size: 1pt; color: #FFFFFF">China Eastern Airlines Corporation Limited
99%
63%
95%
86%
70%</TD>
</TR>
</TABLE>


<TABLE width="90%">
<TR><TD style="font-size: 1pt; color: #FFFFFF">Shanghai
Eastern Airlines Investment
Co., Ltd.
China Eastern
Airlines Jiangsu
Co., Ltd.
Shanghai Eastern
Flight Training
Co., Ltd.
Eastern Airlines
Hotel
Co., Ltd.
China Cargo Airlines Co., Ltd.
Shanghai Eastern Logistics Co., Ltd.</TD>
</TR>
</TABLE>


<TABLE width="90%">
<TR><TD style="font-size: 1pt; color: #FFFFFF">70%</TD>
</TR>
</TABLE>


<TABLE width="90%">
<TR><TD style="font-size: 1pt; color: #FFFFFF">China Eastern Airlines Wuhan Limited</TD>
</TR>
</TABLE>


<TABLE width="90%">
<TR><TD style="font-size: 1pt; color: #FFFFFF">96%</TD>
</TR>
</TABLE>


<TABLE width="90%">
<TR><TD style="font-size: 1pt; color: #FFFFFF">Shanghai Eastern Maintenance Co., Ltd.
China Eastern Fudart Transportation Service Co., Ltd.</TD>
</TR>
</TABLE>


<TABLE width="90%">
<TR><TD style="font-size: 1pt; color: #FFFFFF">60%<BR>
51%</TD>
</TR>
</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;1997, we completed our initial public offering of 1,566,950,000 ordinary H
shares, par value RMB1.00 per share, and listed our ordinary H shares on The Stock Exchange of Hong
Kong Limited, or the Hong Kong Stock Exchange, and American Depositary Shares, or ADSs,
representing our H shares, on the New York Stock Exchange. Prior to our initial public offering,
all of the issued and outstanding shares of our capital stock, consisting of 3,000,000,000 ordinary
domestic shares, par value RMB1.00 per share, were owned by EA Group, which exercises, on behalf of
the Chinese government and under the supervision and direction of the CAAC, the shareholder rights
in our company. In October&nbsp;1997, we completed a public offering of 300,000,000 new ordinary
domestic shares in the form of A shares to public shareholders in China and listed such new shares
on the Shanghai Stock Exchange. Following the A share offering, EA Group continued to own
3,000,000,000 ordinary domestic shares, which represent 90.91% of our total ordinary domestic
shares and 61.64% of our issued and outstanding share capital as of December&nbsp;31, 2005. H shares
are our ordinary shares listed on the Hong Kong Stock Exchange, and A shares are our ordinary
shares listed on the Shanghai Stock Exchange. Our H shares and A shares are identical in respect of
all rights and preferences, except that the listed A shares may only be held by Chinese domestic
investors and certain qualified foreign institutional investors. In addition, dividends on the A
shares are payable in Renminbi.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since our initial public offering, we have expanded our operations through acquisitions and
joint ventures. In July&nbsp;1998, our company and China Ocean Shipping (Group) Company jointly
established China Cargo Airlines Co., Ltd., which specializes in the air freight business. Our
total investment in this joint venture was approximately RMB350&nbsp;million, representing 70% of the
equity interest of China Cargo Airlines Co., Ltd. In addition, we purchased from EA Group the
assets and liabilities relating to airline operations of China General Aviation Company, for
approximately RMB88&nbsp;million in November&nbsp;1999. China General
</DIV>

<P align="center" style="font-size: 10pt">-13-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Aviation Company was based in Shanxi Province in China and served primarily the northern
region of China. Moreover, we completed our acquisition of Air Great Wall in June&nbsp;2001 and
established our Ningbo Branch following the acquisition. Air Great Wall was based in Ningbo,
Zhejiang Province in China and served primarily the southeastern region of China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2002, our company, jointly with Shanghai Civil Aviation Eastern China Kaiya System
Integration Co., Ltd., established Shanghai Eastern Airlines Investment Co., Ltd., or SEAI. We hold
a 99% equity interest in SEAI. The joint venture serves as one of the investment vehicles of our
company for our investments in other industrial projects and provides consulting services. In
August&nbsp;2002, our company, jointly with Wuhan Municipal State-owned Assets Management Committee
Office and two other independent third parties, established China Eastern Airlines Wuhan Limited,
or CEA Wuhan, in which our company held a 40% equity interest. In March, 2006, we completed our
acquisition of a 38% equity interest and a 18% equity interest in CEA Wuhan from Wuhan Municipal
State-owned Assets Supervision and Administration Committee and Shanghai Junyao Aviation Investment
Company Limited, respectively, for an aggregate consideration of approximately RMB418&nbsp;million. As a
result, our equity interest in CEA Wuhan has increased to 96%. CEA Wuhan serves primarily the
market in Hubei Province. We also entered into an agreement with Rockwell Collins International
Inc. of the United States to establish a joint venture avionics maintenance service company in
China in September&nbsp;2002. Moreover, in November&nbsp;2002, our company, jointly with China Aircraft
Services Limited, established Shanghai Eastern Aircraft Maintenance Limited, in which our company
holds a 60% equity interest. In order to expand our company&#146;s operations in Jiangsu Province of
China, we increased our investment in China Eastern Airlines Jiangsu Co., Ltd., or Eastern Jiangsu,
in December&nbsp;2002, together with other shareholders of Eastern Jiangsu. In 2004, our company
contributed additional capital of approximately RMB408&nbsp;million to Eastern Jiangsu. As a result, our
equity interest in Eastern Jiangsu increased from 55% to 63%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2003, we entered into a share transfer agreement with CEA Holding, pursuant to which
we have acquired from CEA Holding a 45% equity interest in China Eastern Aviation Import and Export
Company, or CEAIEC, for a consideration of approximately RMB44&nbsp;million. CEAIEC was a wholly-owned
subsidiary of CEA Holding prior to the transaction. Under the share transfer agreement, our company
and CEA Holding each undertakes to the other party that it will not establish any other entity
engaging in any business similar in nature or scope to the business conducted by CEAIEC. We believe
that the acquisition of 45% equity interest in CEAIEC could reduce our company&#146;s cost of importing
aviation raw materials and enhance our company&#146;s profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2003, we also entered into a joint venture agreement with CEA Holding to establish
China Eastern Air Catering Investment Company Ltd., or CEA Catering. The registered capital of CEA
Catering is RMB350&nbsp;million. Pursuant to the joint venture agreement, CEA Holding and our company
made capital contributions of approximately RMB192.5&nbsp;million and RMB157.5&nbsp;million, respectively. As
a result, CEA Holding and our company hold a 55% and a 45% equity interest in CEA Catering,
respectively. CEA Catering is primarily engaged in the business of providing air and ground
catering services, food and beverage supplies and other related services. Our board believes that
our investment in CEA Catering is beneficial to our company and its shareholders, and expects it to
reduce the cost incurred by our company in providing catering services and to enhance our
profitability and competitiveness in the domestic aviation industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, also in December&nbsp;2003, we entered into an equity transfer and capital increase
agreement with CEA Holding and Shanghai Eastern Development Corporation Limited, or SEDC, pursuant
to which our company acquired 10% of SEDC&#146;s then equity interest and 35% of CEA Holding&#146;s then
equity interest in Shanghai Dong Mei Aviation Travel Corporation Limited, a company that is
primarily engaged in the business of selling air tickets, hotel reservation, travel agency and
other related services. After the transaction, our company holds a 45% equity interest in Shanghai
Dong Mei. Our aggregate investment in Shanghai Dong Mei was approximately RMB14.9&nbsp;million.
</DIV>

<P align="center" style="font-size: 10pt">-14-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;18, 2004, we entered into a joint venture agreement with CEA Holding to establish
China Eastern Real Estate Investment Co. Ltd., or CEA Real Estate, a limited liability company
established under the laws of the PRC. The registered capital of CEA Real Estate is RMB100&nbsp;million.
Pursuant to the joint venture agreement, our company has made its capital contribution of RMB5
million in cash. As a result, our company owns a 5% equity interest in CEA Real Estate. CEA Real
Estate is primarily engaged in the real estate business, including the development and sales of
commercial premises and property leasing in Shanghai, China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;10, 2003, we entered into a joint venture agreement with Singapore Technologies
Aerospace Ltd. to establish Shanghai Technologies Aerospace Company Limited, or STAC, a
Sino-foreign joint venture limited liability company established under the laws of the PRC. The
registered capital of STAC is US$73&nbsp;million with a total investment of US$98&nbsp;million. Pursuant to
the joint venture agreement, our company shall make an in-kind capital contribution of US$37.23
million (which includes but not limited to flight equipment and land use right) in installments to
STAC. Our company owns a 51% equity interest in STAC. STAC is primarily engaged in the provision of
commercial aircraft maintenance, repair and overhaul services. STAC started operation in late 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;18, 2004, we entered into a joint venture agreement with China Ocean Shipping
(Group) Company and China Cargo Airlines Co., Ltd. to establish Shanghai Eastern Logistics Co.,
Ltd., or Eastern Logistics, a limited liability company established under the laws of the PRC. The
registered capital of Eastern Logistics is RMB200&nbsp;million. Pursuant to the joint venture agreement,
our company has made its capital contribution of RMB138.6&nbsp;million in cash to Eastern Logistica. Our
company, directly and indirectly, owns a 70% equity interest in Eastern Logistics. Eastern
Logistics is primarily engaged in the provision of cargo logistics services. Eastern Logistics
started operation after it obtained its business license from the relevant government authority on
August&nbsp;23, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;2, 2005, we entered into an agreement with United Technologies Far East Limited, or
UTFEL, to establish Hamilton Sundstrand (Shanghai) Aerospace Technology Limited, or HSSATL, a
jointly controlled entity which will be principally engaged in the provision of repair and
maintenance services for auxiliary power units of aircraft in the PRC. The registered capital of
HSSATL is US$8.9&nbsp;million, which is to be contributed by us and UTFEL in proportion of 51% and 49%,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the CAAC&#146;s airline industry restructuring plan, EA Group merged with Yunnan
Airlines Company and China Northwest Airlines Company and formed CEA Holding in October&nbsp;2002.
Yunnan Airlines Company and China Northwest Airlines Company were restructured as wholly-owned
subsidiaries of CEA Holding after the merger and renamed as China Eastern Air Yunnan Company, or
CEA Yunnan, and China Eastern Air Northwest Company, or CEA Northwest, respectively. CEA Northwest
is based in Xi&#146;an, Shannxi Province in China with approximately 30 jet aircraft and serves
primarily the western region of China. CEA Yunnan is based in Kunming, Yunnan Province in China
with approximately 26 jet aircraft and serves primarily the southwestern region of China. The
airline operations conducted by CEA Yunnan and CEA Northwest previously competed with our company,
in particular, on the Shanghai-Wenzhou route, Shanghai-Harbin route, Shanghai-Qingdao route,
Shanghai-Changsha route, Changchun-Kunming route, Changsha-Ningbo route, Changsha-Kunming route and
Changsha-Nanjing route.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to further expand our business and enhance our market competitiveness, we acquired
from CEA Holding certain assets and liabilities relating to the aviation businesses of CEA Yunnan
and CEA Northwest pursuant to a conditional assets transfer agreement, or Acquisition Agreement,
entered into by our company, CEA Holding, CEA Yunnan and CEA Northwest on May&nbsp;12, 2005. The assets
acquired by our company included aircraft, engines and aviation equipment and facilities, certain
employees and operating contracts, and other fixed and current assets (whether owned or leased
assets). We also assumed aggregate debts of RMB9,421&nbsp;million. Following the completion of the
acquisitions of these assets and liabilities in June&nbsp;2005, our company assumed and took over the
aviation operations and businesses previously carried out
</DIV>

<P align="center" style="font-size: 10pt">-15-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">by CEA Yunnan and CEA Northwest in accordance with the Acquisition Agreement. The air routes
of CEA Yunnan and CEA Northewest were also injected into our company with such assets and
liabilities. The total consideration paid by our company under the Acquisition Agreement was
approximately RMB640&nbsp;million in cash.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Acquisition Agreement, each of CEA Holding, CEA Northwest and CEA Yunnan has
undertaken that at any time after completion of the Acquisition Agreement, it will not, and will
procure its respective subsidiaries and associated companies (including members of CEA Holding) not
to, carry out, engage in or otherwise become involved or interested in any business which competes
or may compete, either directly or indirectly, with our company&#146;s aviation business. The
undertaking is not made for any definite period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of our continuing effort to upgrade our fleet, we disposed old aircraft and added new
aircraft to our fleet. Our aircraft dispositions have reduced the average age of our fleet. All of
our aircraft are registered with the CAAC. The table below sets forth our significant aircraft
dispositions and additions since December&nbsp;31, 2002 (including the 60 aircraft for which we acquired
ownership in or lease as part of our acquisition of the aviation businesses of CEA Yunnan and CEA
Northwest in 2005):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">2006</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Additions (Finance
Leases and
Purchases)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4 Boeing 737-700<br>
aircraft
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10 Airbus 320<br>
aircraft<br>
3 Airbus 340-600 <br>
aircraft
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="left" valign="top">2 Airbus 340-600<br>
aircraft<br>
2 Airbus 321<br>
aircraft<br>
5 Airbus 320<br>
aircraft
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2 Airbus 321<br>
aircraft<br>
12 Airbus 320<br>
aircraft<br>
3 Airbus 310-200<br>
aircraft<br>
3 Airbus 300-600<br>
aircraft<br>
3 ERJ145 aircraft<br>
10 Boeing 737-300<br>
aircraft<br>
4 Boeing 737-700<br>
aircraft<br>
3 Boeing 767-300<br>
aircraft<br>
5 CRJ-200<br>
7 BAE146-300<br>
aircraft<br>
3 BAE146-100
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5 Airbus A330-300<br>
aircraft<SUP style="font-size: 85%; vertical-align: text-top">(1)</sup><br>
2 Airbus A321<br>
aircraft<br>
3 Airbus A319<br>
aircraft<br>
7 Boeing 737-700<br>
aircraft<br>
4 ERJ145 aircraft<br>
1 Boeing 747F<br>
aircraft</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Additions
(Operating Leases
and Wet Leases)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2 Airbus 319<br>
aircraft<br>
2 Boeing 737-700<br>
aircraft
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5 Boeing 737-700<BR>
aircraft
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="left" valign="top">1 Airbus 300F<br>
aircraft
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">16 Airbus A320<br>
aircraft<br>
7 Boeing 737-700<br>
aircraft<br>
3 Boeing 737-800<br>
aircraft<br>
3 Boeing 737-300<br>
aircraft<br>
1 Airbus A300F<br>
freighter<br>
2 Boeing 747F<br>
freighter
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3 Airbus A330-200<br>
aircraft<br>
2 Airbus A330-300<br>
aircraft</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dispositions
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2 Airbus 310<BR>
aircraft
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3 Boeing 737-200<BR>
aircraft
</TD>
    <TD>&nbsp;</TD>

    <TD align="left" valign="top">0</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>

    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1 BAE 146-100
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2 Boeing 737-300</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>It is to be determined if these five Airbus A330-300 aircraft will be acquired by purchase,
finance lease or operating lease.</TD>
</TR>

</TABLE>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Business Overview</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our company is one of the three largest air carriers in China in terms of tonne-kilometers and
number of passengers carried in 2005, and is the primary air carrier serving Shanghai, China&#146;s
eastern gateway. We
</DIV>

<P align="center" style="font-size: 10pt">-16-
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">accounted for approximately 21.7% of the total commercial air traffic (as measured in
tonne-kilometers) handled by Chinese airlines in 2005. We operate primarily from Shanghai&#146;s Hong
Qiao International Airport and Pudong International Airport. In 2005, we accounted for 41.0% and
32.5% of all the flight traffic at Hong Qiao International Airport and Pudong International
Airport, respectively. In 2005, we accounted for approximately 34.6% of the total passenger traffic
volume and 22.1% of the total freight volume on routes to and from Shanghai. We have been
consistently ranked as one of the best Chinese airlines in terms of service quality in each of the
past six years according to a poll conducted by the China Civil Aviation Association.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compared to 2004, our traffic volume increased by approximately 24.3% in 2005. Our passenger
traffic volume increase from 27,580.8&nbsp;million passenger-kilometers in 2004 to 36,380.6&nbsp;million
passenger-kilometers in 2005, or 31.9%. Our cargo and mail traffic volume increase by 14.8% from
1,874.7&nbsp;million tonne-kilometers in 2004 to 2,151.5&nbsp;million tone-kilometers in 2005. In 2005, our
average on-time performance rate was approximately 82.9%, which was slightly higher than the
industry average rate of 80.0% in China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Airline Operations and Route Network</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our traffic revenues by activity for each of the five years
ended December&nbsp;31, 2005:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2001</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(millions of<br> RMB)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(millions of<br> RMB)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(millions of<br> RMB)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(millions of<br> RMB)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(millions of<br> RMB)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(millions of<br> US$)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Traffic Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Passengers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,584</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cargo and mail</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">615</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Traffic Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,199</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>





























<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Passenger Operations</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain passenger operating statistics of our company by
geographic region for each of the five years ended December&nbsp;31, 2005:
</DIV>

<P align="center" style="font-size: 10pt">-17-
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2001</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Passenger Traffic (millions of passenger kilometers)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,381</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,276</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,284</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,819</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ASK (millions)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,428</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,468</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,288</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,672</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Passenger Yield (passenger revenues/passenger kilometers,
in RMB)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.76</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Passenger Load Factor (%)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69.39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73.82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62.10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65.16</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The primary focus of our business is the provision of domestic, Hong Kong regional and
international passenger airline services. In 2005, our passenger operations generated revenues of
approximately RMB20,853&nbsp;million (approximately US$2,584&nbsp;million), or approximately 76.0% of our
revenues. We operated approximately 4,860 scheduled flights per week (excluding charter flights),
serving a route network that covers 118 cities within China and abroad. In 2005, we operated
approximately 380 routes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, we operated approximately 3,749 domestic flights per week on 257 routes. Our domestic
routes generated approximately 54.9% of our passenger revenues. Our most heavily traveled domestic
routes generally link Shanghai to the large commercial and business centers of China, such as
Beijing, Guangzhou and Shenzhen.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, we also operated approximately 670 flights per week on 16 routes to and from Hong
Kong, originating from Shanghai and 15 other major cities in eastern, northern and western China.
Our Hong Kong regional routes accounted for approximately 12.0% of our passenger revenues in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, we operated approximately 441 international flights per week on 107 routes, serving
41 cities in 18 countries, primarily linking Shanghai to major cities in Asian and Southeast Asian
countries (such as Japan, Korea, India, Singapore, Thailand and Bangladesh) and certain strategic
locations in Europe, the United States and Australia. In 2005, we successfully introduced three new
international routes including Shanghai-Bombay, Shanghai-Moscow and Shanghai-Dhaka to further
enhance the function of Shanghai as our passenger hub. In addition, we plan to launched new
international routes of Shanghai-Frankfurt and Shanghai-New York in 2006. Revenues derived from our
operations on international routes accounted for approximately 33.2% of our passenger revenues.
Revenues derived from our operations on our 21 routes to and from Japan accounted for approximately
9.6% of our passenger revenues and approximately 29.0% of our international passenger revenues in
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of our international and Hong Kong regional flights and a substantial portion of our
domestic flights either originate or terminate in Shanghai, the central hub of our route network.
Our operations in Shanghai are conducted primarily at Hong Qiao International Airport and Pudong
International Airport. All of our international flights to or from Shanghai originate or terminate
at Pudong International Airport. Pudong
</DIV>

<P align="center" style="font-size: 10pt">-18-
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">International Airport is a newly constructed airport and is relatively further away from the
central business district of Shanghai.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to our core Shanghai-based operations, we currently also have 11 provincial hubs
in eastern, northern and western China, each of which primarily serves, and is located in a
principal commercial center of, one of the following provinces: Anhui, Jiangsu, Jiangxi, Shandong,
Shanxi, Hebei, Zhejiang, Hubei, Shannxi and Yunnan. Jiangsu, Zhejiang and Shandong are among the
most economically developed provinces in China. We believe that we will benefit from the level of
development and growth opportunities in eastern, northern and western China as a whole by providing
direct services between various cities in those regions and between those regions and other major
cities in China. The provincial hubs also enable us to provide convenient connections for
passengers on certain flights to and from Shanghai. Aircraft used for regional operations are
mainly maintained by us on site at the hubs, and our sales offices are also based at each
provincial hub. We are also in the process of developing our operations in Beijing and Guangzhou as
our principal bases for northern China and southern China, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cargo and Mail Operations</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain cargo and mail operating statistics of our company by
geographic region for each of the five years ended December&nbsp;31, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2001</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2002</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cargo and Mail Tonne-Kilometers (millions)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,152</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">410</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,607</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weight of Cargo and Mail Carried (millions of kilograms)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">776</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">316</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">348</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cargo and Mail Yield (cargo and mail revenues/cargo and
mail tonne-kilometers, in RMB)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.31</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our cargo and mail business generated revenues of approximately RMB4,967 million
(approximately US$615&nbsp;million) in 2005, representing approximately 19.2% of our traffic revenues
for the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We must obtain from the CAAC the right to carry passengers or cargo on any domestic or
international route. Our cargo and mail business generally utilizes the same route network used by
our passenger airline business. China Cargo Airlines Co., Ltd. also maintains 14 cargo routes. We
carry cargo and mail on our freight aircraft as well as in available cargo space on our passenger
aircraft. Our most significant cargo and mail routes are international routes. Revenues derived
from our operations on international cargo and mail routes accounted for approximately 80.1% of our
total cargo and mail revenues in 2005. Revenues derived from our operations on routes to and from
Japan accounted for approximately 12.6% of our international cargo and mail revenues in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The development of cargo operations is an important part of our company&#146;s growth strategy. We
have six MD-11 freight aircraft for cargo and mail operations, three of which were converted from
passenger aircraft after the establishment of China Cargo Airlines Co., Ltd. We also wet-leased two
Airbus A300F and two Boeing 747F freighters on a short-term for our cargo operations in 2005.
</DIV>

<P align="center" style="font-size: 10pt">-19-
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Regulation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The PRC Civil Aviation Law provides the framework for regulation of many important aspects of
civil aviation activities in China, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the administration of airports and air traffic control systems;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>aircraft registration and aircraft airworthiness certification;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>operational safety standards; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the liabilities of carriers.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chinese airline industry is also subject to a high degree of regulation by the CAAC.
Regulations issued or implemented by the CAAC encompass virtually every aspect of airline
operations, including route allocation, domestic airfare, licensing of pilots, operational safety
standards, aircraft acquisition, aircraft airworthiness certification, fuel prices, standards for
aircraft maintenance and air traffic control and standards for airport operations. Although China&#146;s
airlines operate under the supervision and regulation of the CAAC, they are accorded a significant
degree of operational autonomy. These areas of operational autonomy include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether to apply for any route;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the allocation of aircraft among routes;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the airfare pricing for the international and Hong Kong passenger routes;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the airfare pricing within the limit provided by the CAAC for the
domestic passenger routes;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the training and supervision of personnel; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>many other areas of day-to-day operations.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we have generally been allocated adequate routes in the past to accommodate our
expansion plans and other changes in our operations, those routes are subject to allocation and
re-allocation in response to changes in governmental policies or otherwise at the discretion of the
CAAC. Consequently, we cannot assure you that our route structure will be adequate to satisfy our
expansion plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The CAAC has established regulatory policies intended to promote controlled growth of the
Chinese airline industry. We believe those policies would be beneficial to the development of and
prospects for the Chinese airline industry as a whole. Nevertheless, those regulatory policies
could limit our flexibility to respond to changes in market conditions, competition or our cost
structure. Moreover, while our company generally benefits from regulatory policies that are
beneficial to the airline industry in China as a whole, the implementation of specific regulatory
policies may from time to time materially and adversely affect our business operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because our company provides services on international routes, we are also subject to a
variety of bilateral civil air transport agreements between China and other countries. In addition,
China is a contracting state as well as a permanent member of the International Civil Aviation
Organization, an agency of the United Nations established in 1947 to assist in the planning and
development of the international air transportation. International Civil Aviation Organization
establishes technical standards for the international airline industry. China is also a party to a
number of other international aviation conventions. The business operations of our company are
subject to those international aviation conventions as well.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Domestic Route Rights</I>. Chinese airlines must obtain from the CAAC the right to carry
passengers or cargo on any domestic route. The CAAC&#146;s policy on domestic route rights is to assign
routes to the airline or airlines suitable for a particular route. The CAAC will take into account
whether an applicant for a route is based at the point of origin or termination of a particular
route. This policy benefits airlines, such as our company, that have a hub located at each of the
active air traffic centers in China. The CAAC also considers other factors that will make a
particular airline suitable for an additional route, including the applicant&#146;s safety record,
previous on-time performance and level of service and availability of aircraft and pilots. The CAAC
will consider the market conditions applicable to any given route before such route is allocated to
one or more airlines. Generally, the CAAC will permit additional airlines to service a route that
is already being serviced only when there is strong demand for a particular route relative to the
available supply. The CAAC&#146;s current general policy is to require the passenger load factor of one
or two airlines on a particular route to reach a certain level before another carrier is permitted
to commence operations on such route.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Hong Kong Route Rights. </I>Hong Kong routes and the corresponding landing rights were formerly
derived from the Sino-British air services agreement. In February&nbsp;2000, the Chinese central
government, acting through the CAAC, and Hong Kong signed the Air Transportation Arrangement
between mainland China and Hong Kong. The Air Transportation Arrangement provides for equal
opportunity for airlines based in Hong Kong and mainland China. Competition from airlines based in
Hong Kong increased after the execution of the Air Transportation Arrangement. The CAAC allocates
route and landing rights among the 8 Chinese airlines currently permitted to fly to Hong Kong. The
CAAC normally will not allocate an international route or a Hong Kong route to more than one
domestic airline unless certain criteria, including minimum load factors on existing flights, are
met. There are more than one Chinese airline company on certain of our Hong Kong routes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
CAAC and the Economic Development and Labor Bureau of Hong Kong
recently announced that they have reached an agreement to further
expand the Air Transaction Arrangement. This agreement will increase
the routes between Hong Kong and mainland China to expand coverage to
most major cities in mainland China. The capacity limits for
passenger and/or cargo services on most routes will also be gradually
lifted. Starting from the winter in 2007, each side can designate
three airline companies to operate passenger and/or cargo flights and
another airline company to operate all-cargo flights on the majority
of the routes between Hong Kong and mainland China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>International Route Rights. </I>International route rights, along with the corresponding landing
rights, are derived from air services agreements negotiated between the Chinese central government,
acting through the CAAC, and the government of the relevant foreign country. Each government grants
to the other the right to designate one or more domestic airlines to operate scheduled services
between certain points within each country. Upon entering into an air services agreement, the CAAC
seeks applications from the eight Chinese airlines currently approved to fly international
passenger routes. The CAAC awards the relevant route to an airline based on various criteria, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>availability of appropriate aircraft and flight personnel;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>safety record;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>on-time performance; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>hub location.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although hub location is an important criterion, an airline may be awarded a route which does
not originate from an airport where it has a hub. The route rights awarded do not have a fixed
expiry date and can be terminated at the discretion of the CAAC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Airfare Pricing Policy. </I>The PRC Civil Aviation Law provides that airfare for domestic routes
are determined jointly by the CAAC and the agency of the State Council responsible for price
control, primarily based upon average airline operating costs and market conditions. From February
1999 to March&nbsp;2001, all domestic airlines were required to adhere to unified domestic airfare
published by the CAAC from time to time and discounted sales were prohibited. In 2001, the CAAC
gradually relaxed its control over domestic airfare pricing and, effective March&nbsp;1, 2001, domestic
airlines were permitted to offer discounts on several major domestic routes.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;17, 2004, China&#146;s State Council approved the Pricing Reform Plan for the Domestic
Civil Aviation Industry, or the Pricing Reform Plan, effective April&nbsp;20, 2004. Pursuant to the
Pricing Reform Plan, the governmental authorities responsible for price control no longer directly
set the airfare for domestic routes, but indirectly control the airfare for domestic routes by
setting basic airfare levels and permitted ranges within which the actual airfare of Chinese
airlines can deviate from such basic airfare levels. Chinese airlines are able to set their own
airfare for their domestic routes within the permitted ranges and adopt more flexible sales
policies to promote their services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The CAAC and the National Development and Reform Commission jointly publish the pricing
guidelines from time to time, which set forth the basic airfare levels and permitted ranges.
Pursuant to the current pricing guidelines, the basic airfares for domestic routes are the
published airfares implemented by Chinese airlines immediately prior to the approval of the Pricing
Reform Plan (the average basic airfare for domestic routes is RMB0.75 per passenger-kilometer).
Except for certain domestic routes, the actual airfare set by each Chinese airline for its domestic
routes cannot be 25% higher and 45% lower than the basic airfare. Domestic routes that are not
subject to the deviation range restrictions include short-haul routes between cities in the same
province or autonomous region, or between a municipality and adjacent provinces, autonomous regions
or another municipality. Certain tourist routes and routes served by only one Chinese airline are
not subject to the bottom range restriction. The CAAC and the National Development and Reform
Commission will announce the routes that are not subject to the deviation range restrictions
through the airfare information system known as Airtis.net. Chinese airlines may apply to the CAAC
and the National Development and Reform Commission for exemption from the bottom range restriction
for a particular route. Chinese airlines are also required to file the actual airfare they set for
their domestic routes within the ranges through Airtis.net 30&nbsp;days prior to its implementation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The CAAC and the National Development and Reform Commission will regularly review the average
operating costs of Chinese airlines, and may adjust the basic airfare for particular domestic
routes which, in their view, is not at a reasonable level. We expect that, as reforms continue in
2006, we will have more flexibility in operating our aviation business in the future. The promotion
by Chinese regulators of a regulated and orderly market and a fair and positive competition
mechanism will also provide a favorable environment for the growth of our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the PRC Civil Aviation Law, maximum airfare on Hong Kong and international routes is set
in accordance with the terms of the air services agreements pursuant to which these routes are
operated. In the absence of an air services agreement, the airfare is set by the airlines
themselves or by the CAAC with reference to comparable market prices, taking into account the
international airfare standards established through the coordination of the International Air
Transport Association, which organizes periodic air traffic conferences for the purpose of
coordinating international airfare. Discount is permitted on Hong Kong and international routes.
For the airline industry in China as a whole, airfare per kilometer is substantially higher for
Hong Kong and international routes than for domestic routes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Acquisition of Aircraft and Spare Parts. </I>Most Chinese airlines are required to purchase their
aircraft, aircraft spare parts and other aviation equipment through the China Aviation Supplies
Corporation, or the CASC, an entity controlled by the CAAC. However, our company is permitted to
import aircraft, aircraft spare parts and other equipment for our own use from manufacturers
through CEAIEC<B>, </B>which is 55% owned by CEA Holding and 45% owned by our company. This gives us
freedom in rationalizing our maintenance practices by allowing us to maintain a relatively lower
overall inventory level of aircraft parts and equipment than we otherwise would have to maintain.
We are still required to obtain an approval from the National Development and Reform Commission for
any import of aircraft. We generally pay a commission to CEAIEC in connection with these imports.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Domestic Fuel Supply and Pricing. </I>The Civil Aviation Oil Supply Company, or CAOSC, which is
controlled by the CAAC, is currently the dominant civil aviation fuel supply company in China. We
currently
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">purchase a significant portion of our domestic fuel supply from CAOSC. The Chinese government
determines the fuel price at which the CAOSC acquires fuel from domestic suppliers and the CAAC
issues guidance price and the retail price at which the CAOSC resells fuel to airline customers
will be set within a specified range of such guidance price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Safety. </I>The CAAC has made the improvement of air traffic safety in China a high priority. The
CAAC is responsible for the establishment of operational safety, maintenance and training standards
for all Chinese airlines, which have been formulated based on international standards. Each Chinese
airline is required to provide flight safety reports to the CAAC, including reports of flight
incidents or accidents involving its aircraft occurred during the relevant reporting period and
other safety related problems. The CAAC conducts safety inspections on each airline periodically.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The CAAC oversees the training of most Chinese airline pilots through its operation of the
pilot training college. The CAAC implements a unified pilot certification process applicable to all
Chinese airline pilots and is responsible for the issuance, renewal, suspension and cancellation of
pilot licenses. Each pilot is required to pass the CAAC-administered examinations before obtaining
a pilot license and is subject to an annual examination in order to have such certification
renewed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All aircraft operated by Chinese airlines, other than a limited number of leased aircraft
registered in foreign countries, are required to be registered with the CAAC. All of our aircraft
are registered with the CAAC. All aircraft operated by Chinese airlines must have a valid
certificate of airworthiness issued and annually renewed by the CAAC. In addition, maintenance
permits are issued to a Chinese airline only after the maintenance capabilities of that Chinese
airline have been examined and assessed by the CAAC. These maintenance permits are renewed
annually. All aircraft operated by Chinese airlines may be maintained and repaired only by the CAAC
certified maintenance facilities, whether located within or outside China. Aircraft maintenance
personnel must be certified by the CAAC before assuming aircraft maintenance posts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Security. </I>The CAAC establishes and oversees the implementation of security standards and
regulations based on the PRC laws and standards established by international civil aviation
organizations. Each airline is required to submit to the CAAC an aviation security handbook
describing specific security procedures established by the airline for the day-to-day operations of
the civil aviation and security training for staff of such airline. Such security procedures must
be formulated based on the relevant CAAC regulations. Chinese airlines that operate international
routes must also adopt security measures in accordance with the requirements of the relevant
international agreements. We believe that our company is in compliance with all applicable security
regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Noise and Environmental Regulation. </I>All airlines and airports in China are required to comply
with noise and environmental regulations of the State Environmental Protection Agency that are
modeled after international standards. The CAAC regulations allow Chinese airports to refuse
take-off and landing rights to any aircraft that does not comply with state noise regulations. We
believe that our company is in compliance with all applicable noise and environmental regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Chinese Airport Policy. </I>Prior to September&nbsp;2003, all civilian airports in China were operated
directly by the CAAC or by provincial or municipal governments. In September&nbsp;2003, as part of the
restructuring of the aviation industry in China, the CAAC handed over 93 civilian airports to
provincial or municipal governments. The CAAC retained the authority to determine the take-off and
landing charges, as well as charges on airlines for the use of airports and airport services. Prior
to 2004, Chinese airlines were generally required to collect from their passengers on behalf of the
CAAC a levy for contribution to the civil aviation infrastructure fund, which was used for
improving China&#146;s civilian airport facilities. Our revenue for the previous years is shown net of
this levy. In 2003, the levy was 5% of domestic airfare for domestic routes and 2% of international
airfare for international routes. The levy was waived by the CAAC from May&nbsp;1, 2003 to December&nbsp;31,
2003. We were officially notified by the CAAC that effective from January&nbsp;1, 2004, the CAAC
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">no longer charges such levy. However, we cannot be sure that the CAAC will not charge other
similar levies in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Limitation on Foreign Ownership. </I>The CAAC&#146;s present policies limit foreign ownership in
Chinese airlines. Under these limits, non-Chinese residents and Hong Kong, Macau or Taiwan
residents cannot hold a majority of our total outstanding shares. Currently, approximately 32.2% of
our total outstanding shares are held by non-Chinese residents and Hong Kong, Macau or Taiwan
residents (excluding the qualified foreign institutional investors that are approved to invest in
the A-share market of the PRC).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Competition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Domestic. </I>Domestic competition from other Chinese airlines has been increasing recently as our
competitors have increased capacity and expanded operations by adding new routes or additional
flights to existing routes and acquiring other airlines. We expect that competition in the future
from other Chinese airlines on our routes will further increase as the CAAC promotes controlled
competition in order to advance the growth of the domestic airline industry as a whole. Our company
competes against our domestic competitors primarily on the basis of safety, quality of service and
frequency of scheduled flights. With the combination of our dominant position in Shanghai, our
route network and our continued commitment to safety and service quality, we believe that our
company is well-positioned to compete against our domestic competitors in the growing airline
industry in China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are currently approximately 14 Chinese passenger airlines operating in China, and our
company competes with many of them on various domestic routes. All of these airlines operate under
the regulatory supervision of the CAAC. In July&nbsp;2005, the CAAC introduced new rules to further open
the civil aviation industry to domestic investors, including private-sector investors, which may
result in the establishment of more new Chinese airlines and create more competition. Our company,
Air China Limited, or Air China, which is based in Beijing and listed on the Hong Kong Stock
Exchange and the London Stock Exchange, and China Southern Airlines Company Limited, or China
Southern, which is based in Guangzhou and listed on the Hong Kong Stock Exchange and the New York
Stock Exchange, are the three leading air carriers in China, both in terms of revenue
tonne-kilometers and size of operations. Each of these three airlines operates at least 100 routes
and has a fleet of at least 60 jet aircraft. As of December&nbsp;31, 2005, our company, Air China and
China Southern accounted for approximately 72.2% of the total commercial air traffic (as measured
in tonne-kilometers) handled by Chinese airlines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of the domestic airlines competes against other airlines operating the same routes or
flying indirect routes to the same destinations. Our principal competitors in the domestic market
are China Southern and Air China, which provide transportation services on some of our routes as
well, principally routes originating from the major air transportation hubs in China, such as
Shanghai, Guangzhou and Beijing. Some of these routes are among our most heavily traveled routes.
Since most of the major domestic airlines operate routes from their respective hubs to Shanghai,
our company also competes against virtually all of the major domestic airlines on these routes. The
number of airlines operating flights to and from Shanghai has increased significantly in recent
years. We also face domestic competition from Shanghai Airlines, an airline based in Shanghai which
is smaller than our company. Competition between Shanghai Airlines and us has increased as Shanghai
Airlines expands its long-haul capacity and operates routes to more cities served by our company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Hong Kong. </I>Our high yielding Hong Kong routes are highly competitive. The primary competitor
on our Hong Kong routes is Hong Kong Dragon Airlines Limited, or Dragon Air. We currently operate
approximately 670 flights per week on routes between 16 Chinese cities and Hong Kong. Dragon Air
competes with us on several of these routes. Moreover, in April&nbsp;2003, Cathay Pacific Airways
Limited, or Cathay, obtained the licenses to fly to Beijing, Shanghai and Xiamen in China. Cathay
commenced its services on the routes of Hong Kong-Beijing, Hong Kong-Shanghai and Hong Kong-Xiamen
in December&nbsp;2003, January&nbsp;2005 and February&nbsp;2005, respectively. With Cathay commencing its
operations on
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the Hong Kong<FONT style="font-family: Symbol">&#045;</FONT>Shanghai route, we face more intensified competition on our Hong
Kong<FONT style="font-family: Symbol">&#045;</FONT>Shanghai route. In addition to the frequency and convenience of our flights and the
number of routes offered, our company&#146;s competitive strategy for the Hong Kong routes also stresses
safety and service quality. The new Air Transportation Arrangement signed between the Chinese
central government and the administrative government of Hong Kong in February&nbsp;2000 provides for
equal opportunity for airlines based in Hong Kong and mainland China. As a result, Dragon Air has
increased the frequency of its flights on several of our Hong Kong routes and intensified the
competition.</div>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;8, 2006, Cathay, which owns approximately 17.79% of Dragon Air, offered to
acquire from all other shareholders of Dragon Air their ownership interests in Dragon Air with a
view to converting Dragon Air into a wholly-owned operating
subsidiary of Cathay. In connection with this proposed acquisition,
Cathay has agreed to increase its shareholding in Air China to 20%
and Air China has agreed to acquired approximately 10% equity
interest in Cathay. Cathay and Air China also entered into an
agreement to enhance cooperation between them in a number of
operational area, including operating all the passenger services of
Cathay and Air China between Hong Kong and mainland China as joint
venture routes under code-share and revenue and cost pooling
arrangements. Cathay&#146;s proposed acquisition of Dragon Air and
enhanced cooperation with Air China may further intensify the
competition on the routes between Hong Kong and mainland China and
imposed a greater competition pressure on the other airline companies
operating on these routes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At present, our Hong Kong routes benefit from traffic between Hong Kong and mainland China
ultimately originating in Taiwan. During the Lunar Chinese New Year peak travel season in 2003,
from late-January to mid-February, the Chinese government allowed special chartered flights between
Shanghai and Taiwan for the first time. During the Lunar Chinese New Year peak travel seasons in
2005 and 2006, from late-January to mid-February, airlines from both mainland China and Taiwan
(including our company) operated 48 and 72, respectively, non-stop direct chartered flights between
selected cities of mainland China and Taiwan. Although regular direct flights between Taiwan and
mainland China are still not permitted, our results of operation on Hong Kong routes could be
materially and adversely affected if direct flights between Taiwan and mainland China are permitted
in the future. We cannot assure you that our company can obtain sufficient Taiwan-mainland China
routes or that the yields on these routes would be adequate to offset any material adverse effect
on our revenues derived from operation on our Hong Kong routes. Our company also faces competition
from Dragon Air in our Hong Kong cargo operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1995, China National Aviation Corporation, or CNAC, which is controlled by Air China,
acquired an interest in Air Macau. Air Macau started to operate routes in 1996 between Macau and
mainland China, including routes to cities in mainland China such as Beijing, Shanghai, Xiamen and
Wuhan. Air Macau also operates routes between Macau and Taiwan, including flights which allow
passengers to travel between mainland China and Taiwan through Macau without changing planes in
Macau. Air Macau&#146;s routes provide an alternative to our Hong Kong routes for passengers traveling
between Taiwan and mainland China. The airfare on some of Air Macau&#146;s routes is significantly lower
than airfare on our company&#146;s comparable routes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>International. </I>We compete with Air China, China Southern, United Airlines and many other
well-established foreign carriers on our international routes. Most of our international
competitors are very well known international carriers and are substantially larger and have
substantially greater financial resources than us. Many of our international competitors also have
significantly longer operating history and greater name recognition than our company. Some
international passengers, who may perceive these airlines to be safer than Chinese airlines in
general, may prefer to travel on these airlines. In addition, many of our international competitors
have more extensive sales networks and participate in reservation systems that are more convenient
than those of ours, or engage in promotional activities, such as frequent flyer programs, that may
be more popular than those of ours and effectively enhance their ability to attract international
passengers. We also face significant competition in our international cargo operations. For
instance, we compete with All Nippon Airways and Japan Airlines System in cargo operations on our
Japan routes. Moreover, China and the United States entered into an air service agreement on July
24, 2004. Pursuant to this agreement, five additional airlines from each country are allowed to
serve the China-U.S. market over the next few years. It is expected that there will be a
significant increase in China-U.S. air services over the next few years due to this agreement,
which would further intensify competition in this market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Air China operates the largest number of international routes among all Chinese airlines.
Beijing, the hub of Air China&#146;s operations, is the destination for most international flights to
China. We compete with Air China, All Nippon Airways, Japan Airlines System and Northwest Airlines,
Inc. on our passenger routes to Japan. Our primary competition on our flights to southeast Asia
comes from Thai Airways International, Singapore Airlines and China Southern. On our passenger
flights to the United States, our principal
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">competitors include Northwest Airlines, Inc., United Airlines, Air China and China Southern.
On our European routes, our competitors include Air China, the Air France-KLM Group, and Lufthansa
German Airlines. We compete with Air China and Qantas Airways Ltd. on our Australian routes. In
September&nbsp;1997, Shanghai Airlines was awarded limited international route rights by the CAAC. Our
company competes in the international market on the basis of price, service quality, frequency of
scheduled flights and convenient sales arrangements. To improve our competitive position in
international markets, we have established additional dedicated overseas sales offices, launched
our own frequent flyer program, participated in the &#147;Asia Miles&#148; frequent flyer program which is
popular in Asia, and entered into code-sharing arrangements with a number of foreign airlines. We
have also improved our online reservation and payment system.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Maintenance and Safety</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The rapid increase in air traffic volume in China in recent years has put pressure on many
components of the Chinese airline industry, including air traffic control systems, the availability
of qualified flight personnel and airport facilities. In recent years, the CAAC has placed
increasing emphasis on the safety of Chinese airline operations and has implemented a number of
measures aimed at improving the safety record of the airlines. Our company&#146;s ability to provide
safe air transportation in the future depends on the availability of qualified and experienced
pilots in China and the improvement of maintenance services, national air traffic control and
navigational systems and ground control operations at Chinese airports. Our company has a good
safety record and regards the safety of our flights as the most important component of our
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Maintenance Capability. </I>We currently perform regular repair and maintenance checks for all of
our aircraft. We are able to perform D1 checks on our Boeing 737 aircraft and C check on MD-82,
Airbus A320, A340-300 and A300-600 aircraft. We also perform certain maintenance services for other
Chinese airlines. Our primary aircraft maintenance base is at Hong Qiao International Airport. We
have additional maintenance bases at Pudong International Airport and each of our provincial hubs.
Our maintenance staff in Shanghai supervises the operation of our regional maintenance facilities.
Our company currently employs approximately 4,480 workers as maintenance and engineering personnel.
Some of our aircraft maintenance personnel participated in the manufacturer training and support
programs sponsored by Airbus Industries G.I.E., or Airbus, and Boeing Corporation, or Boeing. In
order to enhance our maintenance capabilities and to reduce our maintenance costs, we have, over
the past few years, acquired additional maintenance equipment, tools and fixtures and other assets,
such as airborne testing and aircraft data recovery and analysis equipment. Our company&#146;s avionics
electronic equipment is primarily maintained and repaired at our electronic maintenance equipment
center located in Shanghai, which was set up in cooperation with Honeywell, Inc. and is one of the
largest and most advanced avionic electronic facilities in China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;1996, we established a joint venture with Allied Signal Inc. in Shanghai for the
purpose of performing maintenance and repairs on aircraft wheel assemblies and brakes. In 1997, our
company entered into an agreement with Singapore Aviation Services Company, or SASCO, for the
provision of additional maintenance services by SASCO to our company. In October&nbsp;1997, we completed
the construction of a maintenance hangar at Hong Qiao International Airport which has the capacity
to house two widebody aircraft. In September&nbsp;2002, our company and Rockwell Collins International
Inc. of the United States entered into a joint venture agreement to establish Collins Aviation
Maintenance Service Shanghai Limited, a joint venture that is primarily engaged in the provision of
repair and maintenance services for avionics and aircraft entertaining facilities in China. Our
company and Rockwell Collins International Inc. hold 35% and 65% of the equity interests in the
joint venture, respectively. Moreover, in November&nbsp;2002, our company, jointly with China Aircraft
Services Limited, established Shanghai Eastern Aircraft Maintenance Limited, in which our company
holds 60% of the equity interests, to provide supplemental avionics and other maintenance services
to our company. STAC, a joint venture company that was established in 2004 between our company and
Singapore Technologies Aerospace Ltd, also provides us with aircraft maintenance, repair and
overhaul services.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The enhancement of our maintenance capabilities allows our company to perform various
maintenance operations in-house and continue to maintain lower spare parts inventory levels.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Safety. </I>The provision of safe and reliable air services for all of our customers is one of our
primary operational objectives. Our company implements uniform safety standards and safety-related
training programs in all operations. Our flight safety management division monitors and supervises
our company&#146;s flight safety. We have had a flight safety committee since the commencement of our
business, comprised of members of our senior management, to formulate policies and implement
routine safety checks at our Shanghai headquarters and all provincial hubs. The flight safety
committee meets monthly to review our overall operation safety record during the most recent
quarter and to adopt measures to improve flight safety based upon these reviews. We have also
implemented an employee incentive program, using a system of monetary rewards and discipline, to
encourage compliance with the CAAC safety standards and our safety procedures. We periodically
evaluate the skills, experience and safety records of our pilots in order to maintain strict
control over the quality of our pilot crews.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The management of each of our provincial hub operations is responsible for the flight safety
operations at that hub under the supervision of our flight safety management division. We prepare
monthly safety bulletins detailing recent developments in safety practices and procedures and
distribute them to each of our flight crew, the maintenance department and the flight safety
management department. The CAAC also requires our company to prepare and submit semi-annual and
annual flight safety reports.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our jet passenger aircraft pilots participated in the manufacturer training and support
programs sponsored by Airbus and Boeing and are required to undergo recurrent flight simulator
training and to participate in a flight theory course periodically. Our company maintains an MD-82
flight simulator at our training facility located at the Pudong district in Shanghai, which is used
for both initial and recurrent training of all of our MD-82 aircraft pilots. We also use other
flight simulators (including A300-600R flight simulator, A320 flight simulator and A340 flight
simulator) for training of our pilots for the corresponding types of aircraft. At present, we send
all other jet passenger aircraft pilots to the training center of the CAAC or abroad for flight
simulator training.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Fuel Supplies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fuel costs represented approximately 32.1% of our operating expenses in 2005. We currently
purchase a significant portion of the aviation fuel for our domestic routes from regional branches
of the CAOSC. Fuel costs in China are affected by costs at domestic refineries and limitations in
the transportation infrastructure, as well as by insufficient storage facilities for aviation fuel
in certain regions of China. We purchase a portion of the aviation fuel for our international
routes from foreign fuel suppliers located at the destinations of these routes, generally at
international market prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, our fuel expenses increased 63.7% as a result of increased weighted average domestic
and international fuel prices and the expansion of our fleet. In particular, in 2005, the weighted
average domestic and international fuel prices paid by our company increased by approximately 24.5%
and 39.8%, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Ground Facilities and Services</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The center of our operations is Shanghai, one of China&#146;s principal air transportation hubs.
Our Shanghai operations are based at Hong Qiao International Airport and Pudong International
Airport. We currently also operate from various other airports in China, including Yaoqiang Airport
in Jinan, Lukou Airport in Nanjing, Liuting Airport in Qingdao, Luogang Airport in Hefei, Xiangtang
Airport in Nanchang, Wushu Airport in Taiyuan, Zhengding Airport in Shijiazhuang, Lishe Airport in
Ningbo, Tianhe Airport in Wuhan, Wujiaba Airport in Kunming and Xianyang Airport in Xi&#146;an. We own
hangars, aircraft parking and
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">other airport service facilities at Hong Qiao International Airport and Pudong International
Airport and lease from CEA Holding certain buildings at Hong Qiao International Airport where our
principal executive offices are located.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have our own ground services and other operational services, such as aircraft cleaning and
refueling and the handling of passengers and cargo for our operations at Hong Qiao International
Airport and Pudong International Airport. We also provide ground services for many other airlines
that operate to and from Hong Qiao International Airport and Pudong International Airport. At other
airports served by our company, we generally contract for ground services with these airports or
the principal airlines based at these airports for fees and other charges which are typically based
on passenger or cargo volume or aircraft tonnage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In-flight meals and other catering services for our Shanghai-originated flights are provided
primarily by Shanghai Eastern Air Catering Limited Liability Company, a joint venture company
affiliated with CEA Holding. We generally contract with local catering companies for flights
originating from other airports. We have improved the quality of our in-flight meal service in
recent years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We incur certain airport usage fees and other charges for services performed by the airports
where our company operates, such as air traffic control charges, take-off and landing fees,
aircraft parking fees and fees payable in connection with the use of passenger waiting rooms and
check-in counter space. At domestic airports, such fees are generally charged at rates prescribed
by the CAAC, which are lower than rates generally in effect at airports outside China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Marketing and Sales</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Passenger Operations. </I>Our marketing strategy with respect to passenger operations is primarily
aimed at increasing our market share for all categories of air travelers. With respect to our Hong
Kong and international routes, we are permitted to market our services on the basis of price. We
also have limited flexibility in setting our airfare for domestic routes after the implementation
of the Pricing Reform Plan in April&nbsp;2004, and therefore are able to adjust our airfare in response
to the market demand on our domestic routes. As part of our overall marketing strategy, we
emphasize our commitment to safety and service quality. We believe that emphasis on safety is a
critical component of our ability to compete successfully. In order to improve our customer
services, we participated in joint cabin crew training and exchange programs with foreign airlines,
including Asiana Airlines and Japan Airlines System.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have also adopted customized strategies to market our services to particular travelers. We
seek to establish long-term customer relationships with business entities that have significant air
travel requirements. In order to attract and retain business travelers, we focus on frequency of
flights between major business centers, convenient transit services and extensive sales network. We
launched our &#147;Golden Swallow&#148; frequent flyer program in 1998 and joined the &#147;Asia Miles&#148; frequent
flyer program in April&nbsp;2001 to attract and retain travelers. In August&nbsp;2003, we changed the name of
our frequent flyer program to &#147;Eastern Miles&#148; and introduced a series of new services, including,
among others, instant registration of membership and mileage, online registration of mileage, and
accumulation of mileage on expenses at certain hotels and restaurants that are our strategic
partners. Under our continual effort to carry out the &#147;Eastern Miles&#148; program, the number of
frequent flyers surpassed 5.2&nbsp;million in 2005, with a flight-taking rate of 7.4%, bringing the
influence of our products into full play. The special services hotline &#147;95108&#148; call-centre was
established and came into operation in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2000, we launched the &#147;China Eastern Airlines-Great Wall&#148; co-branded credit card jointly
with the Bank of China, which provides to our customers benefits such as airfare discounts, hotel
room reservation packages and increased baggage allowances. In 2004, working with partner hotels,
we launched our Eastern Holiday product series to attract more leisure travelers. In addition, we
continued to promote our &#147;China Eastern Express&#148; services on our Shanghai&#150;Hong Kong and
Shanghai&#150;Beijing routes and our &#147;China Shuttle&#148;
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">transit services. Our &#147;China Eastern Express&#148; services (including &#147;BTBT&#148; and &#147;Shanghai Beijing
Express&#148;) provide more scheduled flights on some of our heavily traveled routes, such as
Shanghai<FONT style="font-family: Symbol">&#045;</FONT>Hong Kong and Shanghai<FONT style="font-family: Symbol">&#045;</FONT>Beijing, compared with our other routes. Our &#147;China
Shuttle&#148; services provide expedite transit services at Hong Qiao International Airport and Pudong
International Airport for transit travelers on domestic routes and certain international routes,
significantly enhancing our customer service. We streamlined the transfer and connection
procedures, rationally allocated flights, and also introduced different fares for connection
flights to meet the needs of different travelers. In 2005, we launched international routes
originating from Shenyang, Dalian, Shenzhen, Chongqing, Chengdu and Harbin under internal code
sharing arrangements. We also introduced the &#147;Single Check-in for Transit Passengers and Lugguages&#148;
service in 23 cities including Shantou and Xiamen. All these efforts improved our transit services
quality and, as a result, the number of passengers who used our transit services exceeded 300,000
and 850,000 persons/time in 2004 and 2005, respectively. In June&nbsp;2004, we officially introduced our
China Eastern Service Scheme to the public at large. Under this scheme, we will devote efforts to
flight scheduling, assurance and maintenance and enhance our non-regular services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into code-sharing arrangements with American Airlines, Japan Airlines System,
Korean Airlines, Asiana Airlines, Qantas Airways, Air France, Thai Airways and Air Europa. We are
also contemplating more code-sharing arrangements with other airlines and plan to continue to
strengthen our existing cooperation with other international airlines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our advertising, marketing and other promotional activities include the use of radio,
television and print advertisements. We plan to continue to use advertising and promotional
campaigns to increase sales on new routes and competitive routes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2002, we upgraded our online ticket booking and payment system to facilitate customer
purchases of tickets via the Internet. We continue to encourage our customers to book and purchase
tickets via the Internet. We also maintain an extensive domestic network of sales agents and
representatives in order to promote in-person ticket sales and to assist customers. The majority of
our airline tickets are sold by domestic and international sales agents. Our tickets are sold
throughout China through approximately 4,000 sales agents and travel agents who have contractual
relationships with us. Currently, our direct domestic ticket sales are handled primarily through
employees based at our ticket counters located at Hong Qiao International Airport, Pudong
International Airport, in downtown Shanghai and at our provincial hubs in Anhui, Jiangsu, Zhejiang,
Jiangxi, Shandong, Shanxi, Hebei, Hubei, Yunnan and Shannxi provinces, as well as at the airports
in Beijing, Chengdu, Fuzhou, Guangzhou, Hangzhou, Ningbo, Shenzhen, Xiamen and Yantai. Direct sales
are also promoted by the availability of our telephone reservation and confirmation services. In
addition to our domestic sales agents, we maintain overseas representative offices in Chicago, Los
Angeles, Seattle, Madrid, Paris, Sydney, Tokyo, Osaka, Nagasaki, Fukuoka, Nagoya, Okayama,
Singapore, Bangkok, Seoul, Dehli and Hong Kong, which facilitate the sale of international and Hong
Kong air tickets and provide reservation confirmation and other services. The establishment of our
Hong Kong operation division in 2005 will also facilitate our marketing and sales in Hong Kong. In
order to promote international ticket sales, we intend to increase our international sales force by
expanding our overseas network of commissioned independent sales agents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our direct passenger ticket sales are recorded on our computer systems. All Chinese
airlines, including us, are required to use the passenger reservation service system provided by
the CAAC&#146;s computer information management center, which is linked with the computer systems of
approximately 13 domestic airlines. We have also entered into membership agreements with several
international reservation systems, including ABACUS, the largest computer reservation system in
southeast Asia, TOPAS of Korea, SABRE, GALILEO and WORLDSPAN of the United States, AMADEUS of
Europe, and INFINI and AXESS of Japan, which have made it easier for customers and sales agents to
make reservations and purchase tickets for our international flights.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cargo Operations</I>. We maintain a network of cargo sales agents domestically and
internationally. We established domestic cargo sales offices in Dalian, Beijing, Shanghai, Xiamen
and other major transportation hubs in China, and international cargo sales offices in Hong Kong,
Los Angeles, Paris and our other overseas flight destinations. In 2005, we established our northern
China, southern China, southeastern China and overseas sales management centers to improve
coordination among our sales offices. We are also improving our cargo sales on passenger flights
through full utilization of our existing passenger sales network.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Ancillary Airline Activities</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to our airline operations, we also generate commission revenues from tickets sold
on behalf of other airlines. Commission rates for these sales are determined by the CAAC and are
based on the price of the tickets sold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Moreover, we derive revenues from the provision of airport ground services for airlines
operating to or from Hong Qiao International Airport and Pudong International Airport, including
aircraft cleaning, loading, unloading, storage and ground transportation of cargo and passenger
luggage. At present we are the principal provider of these services at Hong Qiao International
Airport and Pudong International Airport. We provide these services to foreign carriers generally
pursuant to one-year renewable contracts. In 2005, we generated
revenues of approximately RMB993
million (approximately US$123&nbsp;million) from our airport ground services and ticket handling
services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Patents and Trademarks</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We own or have obtained licenses to use various domestic and foreign patents, patent
applications and trademarks related to our business. While patents, patent applications and
trademarks are important to our competitive position, no single one is material to us as a whole.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We own various trademarks related to our business. The most important trademark is the service
trademark of China Eastern Airlines Corporation Limited. All of our trademarks are registered in
China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Insurance</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The CAAC purchases fleet insurance from PICC Property and Casualty Company Limited, or PICC,
and China Pacific Property Insurance Company Ltd, on behalf of all Chinese airlines. PICC has
reinsured a substantial portion of its aircraft insurance business through Lloyd&#146;s of London. The
fleet insurance is subject to certain amount of deductibles. The premium payable in connection with
these insurance is allocated among all Chinese airlines based on the aircraft owned or leased by
these airlines. Under the relevant PRC laws, the maximum civil liability of Chinese airlines for
injuries to passengers traveling on domestic flights has been increased to RMB400,000
(approximately US$49,565) per passenger in March&nbsp;2006, for which our company also purchases
insurance. As of July&nbsp;31, 2006, the Convention for the Unification of Certain Rules for
International Carriage by Air of 1999, or Montreal Convention, became effective in China. Under
the Montreal Convention, carriers of international flights are strictly liable for proven damages
up to 100,000 Special Drawing Rights (approximately US$149,809 as of June&nbsp;5, 2006) and beyond that,
carriers are only able to exclude liability if they can prove that the damage was not due to
negligence or other wrongful act of the carrier (and its agents) or if the damage solely arose from
the negligence or other wrongful act of a third party. We believe that we maintain adequate
insurance coverage for the civil liability that can be imposed due to injuries to passengers under
Chinese law, the Montreal Convention and any agreement we are subject to. We also maintain hull all
risk, hull war risk and aircraft legal liability insurance, including third party liability
insurance, of the types and in amounts customary for Chinese airlines. See also &#147;Item&nbsp;3. Key
Information &#151; Risk Factors &#151; Insurance coverage and cost&#148; for more information on our company&#146;s
insurance coverage.
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Description of Property</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Fleet</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, as part of our acquisition of certain assets and liabilities relating to the aviation
businesses of CEA Northwest and CEA Yunnan, we acquired or assumed the ownership of or the leases
for 60 additional aircraft, 50 of which we continued to operate as of December&nbsp;31, 2005. We also
added 27 aircraft to our fleet through other transactions, including the purchase of two Airbus
A321 aircraft and three ERJ145 aircraft, the finance lease of five Airbus A320 aircraft, the
operating lease of four Airbus A320 aircraft, seven B737-700 aircraft and three B737-800 aircraft,
and the wet lease of one Airbus A300F freighter and two B747F freighters. Moreover, in 2005, we
entered into agreements to purchase five A319 aircraft (with engines), five ERJ145 aircraft, 15
A320 series aircraft, two Boeing 747-400 freight aircraft, four Boeing 737 aircraft and 15 Boeing
787 aircraft, respectively. In 2006, we also contracted to purchase 16 Boeing 737 NG series
aircraft (with engines) and 30 Airbus A320 series aircraft (with engines).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of May&nbsp;31, 2006, we had a fleet of 195 aircraft, including 177 jet passenger aircraft that
have more than 100 seats and 9 jet freighters. The following table sets forth the details of our
fleet as of May&nbsp;31, 2006:
</DIV>
<DIV align="center">
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Aircraft under</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total Number</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Aircraft</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Operating</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Aircraft under</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Average age</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">of Aircraft</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Owned</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Lease</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Finance Lease</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Seats</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(in years)<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jet Passenger Aircraft:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Wide-body:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">A340-600</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">A340-300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">A330-300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">A330-200</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">A310-200</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">A300-600</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">B767-300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Narrow-body:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">MD-90</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">A321</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">A320-200</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">A319</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Boeing 737-800</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Boeing 737-700</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Boeing 737-300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">ERJ 145</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">CRJ-200</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Passenger Aircraft:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cargo Aircraft:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">MD-11F</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">A300-B4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">B747-300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total Fleet</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The average aircraft age is weighted by the number of available seats.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, our average daily aircraft utilization rate decreased by 0.3 hours to 9.4 hours
per day, primarily due to a decrease in the aircraft daily utilization rate of certain older
aircraft. The table below sets forth the daily average utilization rates of our jet passenger
aircraft for each of the three years ended December&nbsp;31, 2005.
</DIV>

<P align="center" style="font-size: 10pt">-31-
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11">(in hours)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wide-body:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">A340-600</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">A340-300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">A300-600</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">A310-200</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">B767-300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 6pt">
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Narrow-body:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">MD-90</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">MD-82</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">A321</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">A320</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">A319</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Boeing 737-800</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Boeing 737-700</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Boeing 737-300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">ERJ145</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">CRJ-200</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.1</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of our jet passenger aircraft were manufactured by either Airbus or Boeing. Our
Airbus A340-300 and A340-600 aircraft are primarily used for our routes to the United States,
Europe, Hong Kong, Japan and other international destinations, including Bangkok, Seoul, Singapore
and Sydney, and on major domestic routes to cities such as Beijing and Guangzhou. Our Airbus A330
aircraft are primarily used for the routes of Beijing-Shanghai and Shanghai-Hong Kong and
Singapore, Japan and Korea routes . Our Airbus A320, MD-90 and Boeing B737 aircraft are suitable
for middle and short distance flights and are primarily used for our domestic routes. MD-82
aircraft are primarily used for shorter distance domestic routes on which it is not possible to
achieve high load factors with wide-body aircraft and on routes connecting to certain domestic
airports which cannot accommodate the landing of wide-body aircraft. Our ERJ145 and CRJ-200
aircraft are mainly used on our regional short-distance routes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our MD-11F, A300F and B747F aircraft are used for our cargo operations and carry cargo to
Japan, Europe and the United States. Our general aviation services customers include provincial
authorities in charge of agriculture, forestry and geology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Future Fleet Development</I>. Our aircraft acquisition program focuses on aircraft that will
modernize and rationalize our fleet to better meet the anticipated requirements of our route
structure, taking into account aircraft size and fuel efficiency. Our aircraft acquisition program,
however, is subject to the approval of the CAAC and the National Development and Reform Commission.
The following table summarizes our currently anticipated jet aircraft deliveries from 2006 to 2007
as of December&nbsp;31, 2005:
</DIV>

<P align="center" style="font-size: 10pt">-32-
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Aircraft</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">A330-300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">A330-200</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">A321</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">A320</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">A319</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">B737NG</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">B737-700</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">ERJ145</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">B747F</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The actual acquisition of any of these aircraft or any additional aircraft may depend on
such factors as the general economic conditions, our operating results and other capital
requirements. We believe that our aircraft acquisition plan will help us accomplish our expansion
plans while maintaining an efficient fleet and ensuring alternative sources of supply.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Fleet Financing Arrangements. </I>We generally acquire aircraft through either long-term capital
leases or operating leases. To take advantage of the low interest rate for long-term loans in 2002,
we also purchased certain number of aircraft and financed it by borrowing long-term loans from
banks in China. Under the terms of most capital leases, we generally are obligated to make lease
payments that finance most of the purchase price of the aircraft over the lease term. Upon the
expiration of the lease term, we must either purchase the aircraft at a specified price or pay any
amount by which such price exceeds the proceeds from the disposition of the aircraft to third
parties. Alternatively, some capital leases provide for ownership of the aircraft to pass to us
upon satisfaction of the final lease payment. Under capital leases, aircraft are generally leased
for approximately the whole of their estimated working life, and the leases are either
non-cancelable or cancelable only on a payment of a major penalty by the lessee. As a result, we
bear substantially all of the economic risks and rewards of ownership of the aircraft held under
capital leases. Operating leases, however, are customarily cancelable by the lessee on short notice
and without major penalty. Under operating leases, substantially all the risks and rewards of
ownership of the aircraft remain with the lessor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to increase the use of operating leases to improve the flexibility of our
operations. However, each decision on our financing alternatives will depend on an evaluation of
the following factors:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our aircraft requirements and anticipated future deliveries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>capital structure and cash flow situation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>prevailing interest rates; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>other market conditions in effect at the time of any such acquisition or financing.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our payment obligations under current aircraft leases have been guaranteed by banks in
China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Operating Facilities.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our corporate headquarters, base maintenance center and other primary airport facilities in
Shanghai, occupying an area of approximately 412,422 square meters of land, are located at Hong
Qiao International Airport. We also own office buildings, cargo operating buildings and a
maintenance center at Pudong International Airport. The total gross floor area of all of our
buildings and facilities is approximately 341,000 square meters.
</DIV>

<P align="center" style="font-size: 10pt">-33-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We own all of the buildings and facilities located at Hong Qiao International Airport, with
the exception of the office buildings where our corporate headquarters are located. We lease from
CEA Holding our corporate headquarter office buildings and the land on which our corporate
headquarters are located. We have acquired buildings and ancillary facilities at Pudong
International Airport with a total gross floor area of approximately 158,400 square meters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations in the 11 provincial hubs in Jiangsu, Shandong, Shanxi, Hebei, Anhui, Jiangxi,
Zhejiang, Hubei, Yunnan and Shannxi are located in the airports in Nanjing, Qingdao, Jinan,
Taiyuan, Shijiazhuang, Hefei, Nanchang, Ningbo, Wuhan, Kunming and Xi&#146;an, respectively. In Nanjing,
we lease all the buildings and facilities our company occupies from the airport authority. In
Qingdao, Hefei and Nanchang, we have the right to use such buildings and facilities constructed and
maintained by our company. However, the right to use such buildings and facilities cannot be
transferred or leased to third parties. In
Taiyuan and Shijiazhuang, we own our maintenance facilities and lease office building from CEA
Holding and other facilities from the local airport authorities. In Kunming and Xi&#146;an, we leased
from CEA Holding operating facilities including office buildings, warehouses and workshops.
</DIV>

<DIV align="left">
<A name="130"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4A.
Unresolved Staff Comments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>

<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;5. Operating and Financial Review and Prospects.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should read the following discussion in conjunction with our audited consolidated
financial statements, together with the related notes, included elsewhere in this annual report.
Our consolidated financial statements have been prepared in accordance with IFRS. For a discussion
of certain differences between IFRS and U.S. GAAP as they relate to us, see Note 43 to our audited
consolidated financial statements included in this annual report. The condensed consolidated
financial statements, prepared in accordance with U.S. GAAP, are also presented in this annual
report. We acquired from CEA Holding certain assets and liabilities relating to the aviation
businesses of CEA Yunnan and CEA Northwest in June&nbsp;2005. Our consolidated financial statements as
of and for the year ended December&nbsp;31, 2005 reflect the results of operations of those acquired
assets and liabilities from the effective date of the acquisition, June&nbsp;30, 2005. Under U.S. GAAP,
the acquisitions would have been accounted for as combination of entities under common control
since our company and the aviation businesses of CEA Northwest and CEA Yunnan were under the common
control of CEA Holding. Under this method, the acquired assets and liabilities would have been
accounted for at their historical cost under U.S. GAAP and the consolidated financial statements
for all years presented would have been retroactively restated as if the acquired entities had
always been part of our company. This method is reflected in the significant differences between
IFRS and U.S. GAAP provided in Note 43 to our audited consolidated financial statements included in
this annual report. Our condensed consolidated financial statements prepared and presented in
accordance with U.S. GAAP to reflect the effect of the acquisitions of CEA Northwest and CEA Yunnan
aviation businesses under common control for the relevant periods are also set forth in Note 44 to
our audited consolidated financial statements included in this annual report.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Overview</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary business is the provision of domestic, Hong Kong regional and international
passenger and cargo airline services. Our overall capacity on an available tonne kilometer, or ATK,
basis increase by 23.7%, from 7,071.2&nbsp;million ATKs in 2004 to 8,751.5 ATKs in 2005, and our
passenger capacity on an available seat kilometer, or ASK, basis increase by 26.0%, from 41,599.1
million ASKs in 2004 to 52,427.9&nbsp;million ASKs in 2005. Total traffic on a revenue tonne kilometer,
or RTK, basis increase by 24.3%, from 4,340.7&nbsp;million RTKs in 2004 to 5,395.2 PTKs in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to our acquisition from CEA Holding certain assets and liabilities relating to the
aviation businesses of CEA Yunnan and CEA Northwest in June&nbsp;2005, we increased our equity interest
in CEA Wuhan from 40% to 96% through an acquisition of interest held by other shareholders of CEA
Wuhan early 2006. See the section headed &#147;Item&nbsp;4. Information on the Company&#151;History and
Development of the
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Company&#148; for more details. Those acquisitions have resulted in the expansion of
our operation and increase in our traffic revenue. For example, the operation relating to the
assets and liabilities we acquired relating to the aviation businesses of CEA Yunnan and CEA
Northwest contributed revenues of RMB4,270&nbsp;million to our company in the second half of 2005 and
had a material impact on our overall results of operation for the year ended December&nbsp;31, 2005. See
Note 38 to our audited consolidated financial statements for details. With the integration of
those acquired assets or entity to our existing operations, we expect to achieve improvement of our
service quality and enhancement of our overall strength and market competitiveness by rationalizing
our route network and fleet, centralizing our procurement of aircraft and aircraft components,
integrating our maintenance resources as well as streamlining our sales channels.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As required under IFRS, we applied the acquisition accounting method to account for the
acquisitions of certain assets and liabilities relating to the aviation businesses of CEA Yunnan
and CEA Northwest. Under U.S. GAAP, such transactions are considered
&#147;combinations of entities under common control&#148;
since our company and the aviation businesses of CEA Northwest and CEA Yunnan were under the common
control of CEA Holding. Such transactions are accounted for in a manner similar to
&#147;pooling-of-interests&#148;, retroactively restating all years presented on a combined basis as if the
acquisitions had been in effect since inception, whereby related assets and liabilities of the
aviation businesses would be accounted for at historical cost and the related results of operations
would be included in the consolidated financial statements for the earliest year presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The historical results of operations discussed in this annual report may not be indicative of
our future operating performance. Like those of other airlines, our operations substantially depend
on overall passenger and cargo traffic volume and are subject to seasonal and other variations that
may influence passenger travel demand and cargo volume and may not be under our control, including
unusual political events and other unforeseen events. Our operations will be affected by, among
other things, fluctuation of the aviation fuel price, aircraft acquisition and leasing costs,
maintenance expenses, take-off and landing charges, wages, salaries and benefits, other operating
expenses and the rates of income taxes paid. We expect the aviation fuel price to continue to
remain high and have a material adverse effect on our profitability. We expect depreciation
expenses and operating lease expenses to increase as new aircraft and related flight equipment are
acquired. Maintenance expenses may also increase as a result of acquisitions of new aircraft,
although we expect to benefit from certain maintenance and fuel cost savings as older aircraft are
retired and replaced.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our financial performance is also significantly affected by factors associated with operating
in a highly regulated industry, as well as a number of other external variables, including
political and economic conditions in China, competition, foreign exchange fluctuations and public
perceptions of the safety of air travel with Chinese airlines. Because nearly every aspect of our
airline operations is subject to the regulation of the CAAC, our operating revenues and expenses
are directly affected by the CAAC regulations with respect to, among other things, domestic
airfare, level of commissions paid to sales agents, aviation fuel price, take-off and landing
charges and route allocations. The nature and extent of airline competition and the ability of
Chinese airlines to expand are also significantly affected by various CAAC regulations and
policies. Changes in the CAAC&#146;s regulatory policies, or in the implementation of such policies, are
therefore likely to have a significant impact on our future operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Certain Financial Information by Geographic Region</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth passenger revenues, passenger traffic and passenger yield by
geographic region for the years ended December&nbsp;31, 2003, 2004 and 2005.
</DIV>

<P align="center" style="font-size: 10pt">-35-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Passenger Revenues (millions of RMB)<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,439</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,495</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Japan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,009</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">U.S. and Europe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,412</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,498</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total Passenger Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,853</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Passenger Traffic (millions of passenger-kilometers)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,278</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,284</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,819</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total Passenger Traffic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,381</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Passenger Yield (RMB per passenger-kilometer)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.76</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total Passenger Yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Certain revenues for the years ended December&nbsp;31, 2003 and 2004 have been restated due to
reclassification.</TD>
</TR>

</TABLE>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Operating Results</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Certain incomes and expenses for the years ended December&nbsp;31, 2003 and 2004 have been
reclassified under IFRS. Such reclassifications have no effect on the profit (loss)&nbsp;attributable to
equity holders; Certain expenses have been adjusted for the years ended December&nbsp;31, 2003 and 2004 as
a result of the retrospective application of changes to our accounting policy relating to the costs
of overhaul of owned and finance leased aircraft and engines. Such adjustments resulted in a 15.5%
increase in the loss attributable to equity holders for the year ended December&nbsp;31, 2003 and a 37.5%
decrease in the profit attributable to equity holders for the year ended December&nbsp;31, 2004. See Note
2(a) to our consolidated financial statements included in this annual report.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2005 Compared to 2004</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Revenues</I></B><I>. </I>Our revenues increased 28.4% from RMB21,387&nbsp;million in 2004 to RMB27,454&nbsp;million in
2005 (net of the applicable PRC business tax). This increase was primarily due to an increase in
our capacity resulting from our acquisition of the assets and liabilities relating to the aviation
businesses of CEA Northwest and CEA Yunnan and our acquisitions of other aircraft.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Traffic revenues increased 29.3% from RMB19,962&nbsp;million in 2004 to RMB25,820&nbsp;million in 2005,
primarily due to a 34.2% increase in our passenger revenues. Compared to 2004, the average aircraft
daily utilization rate decreased by 0.3 hours to 9.4 hours in 2005 partially due to a decrease in
the aircraft daily utilization rate of certain older aircraft.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Passenger revenues, which accounted for 80.8% of our total traffic revenues in 2005, increased
34.2% from RMB15,534&nbsp;million in 2004 to RMB20,853&nbsp;million in 2005 primarily due to the expansion of
our operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our domestic passenger revenues (excluding Hong Kong passenger revenues), which accounted for
54.8% of our total passenger revenues in 2005, increased 38.1% from RMB8,284&nbsp;million in 2004 to
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">RMB11,439&nbsp;million in 2005. This increase was primarily due to an increase of our domestic passenger
traffic following increases in our capacity and in our domestic passenger load factor. Compared to
2004, our domestic passenger traffic increased (as measured in revenue passenger-kilometers, or
RPKs) by 39.9% in 2005. As a result of the completion of our acquisition of certain assets and
liabilities relating to the aviation businesses of CEA Northwest and CEA Yunnan in the second half
of 2005 and our acquisition of other aircraft in 2005, the capacity of our domestic routes
increased by 33.1% in 2005. Our domestic passenger load factor increased from 70.3% in 2004 to
73.8% in 2005 primarily due to an increase in market demands. Our domestic passenger yield
decreased from RMB0.57 in 2004 to RMB0.56 in 2005 per passenger-kilometer primarily as a result of
the escalating pricing competition in the domestic traffic market.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Hong Kong passenger revenues, which accounted for 12.0% of our total passenger revenues in
2005, increased 11.4% from RMB2,240&nbsp;million in 2004 to RMB2,495&nbsp;million in 2005. This increase was
primarily due to an increase in our Hong Kong passenger traffic resulting from an increase of our
capacity. We increased the passenger capacity on our Hong Kong routes by 8.9% in 2005. An increase
in the passenger yield on Hong Kong routes also contributed to the increase of our Hong Kong
passenger revenues. Hong Kong passenger traffic (as measured in RPKs) increased by 8.1% in 2005,
compared to 2004. Our Hong Kong passenger yield increased from RMB0.74 in 2004 to RMB0.76 in 2005
per passenger-kilometer, reflecting increases in air fares. Our Hong Kong passenger load factor
decreased from 62.6% in 2004 to 62.1% in 2005 primarily due to intensified competition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;International passenger revenues, which accounted for 33.2% of our total passenger revenues in
2005, increased 38.1% from RMB5,010&nbsp;million in 2004 to RMB6,920&nbsp;million in 2005. This increase was
primarily due to an increase in our international passenger traffic resulting from increases in our
capacity and in our international passenger load factor. An increase of our international passenger
yield also contributed to the increase of our international passenger revenues. Our International
passenger traffic (as measured in RPKs) increased by 27.6% in 2005, compared to 2004. Our
international passenger capacity increased by 22.1% in 2005, compared to 2004. Our international
passenger load factor increased from 62.4% in 2004 to 65.2% in 2005. Our international passenger
yield increased from RMB0.50 in 2004 to RMB0.54 in 2005 per passenger-kilometer, reflecting
increases in air fares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We generate cargo and mail revenues from the transportation of cargo and mail on our
designated cargo aircraft as well as from the carriage of cargo and mail on our passenger aircraft.
Revenues from cargo and mail operations, which accounted for 19.2% of our total traffic revenues in
2005, increased 12.2% from RMB4,428&nbsp;million in 2004 to RMB4,967&nbsp;million in 2005 primarily due to an
increase in our cargo and mail traffic following an increase in our capacity. Our cargo and mail
traffic (as measured in revenue freight tonne-kilometers, or RFTKs) increased 14.8% from 1,875
million RFTKs in 2004 to 2,152&nbsp;million RFTKs in 2005. Our cargo and mail capacity (as measure in
available freight tonne-kilometers, or AFTKs) increased 21.2% from 3,327&nbsp;million AFTKs in 2004 to
4,033&nbsp;million AFTKs in 2005. Cargo yield decreased from RMB2.36 in 2004 to RMB2.31 in 2005 per
cargo tonne-kilometer primarily due to fare decreases resulting from intensified market
competition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our other revenues are primarily generated from airport ground services and ticket handling
services. Airport ground services include loading and unloading of aircraft, aircraft cleaning and
ground transportation of cargo and passenger luggage for airlines flying to or from Hong Qiao
International Airport and Pudong International Airport. We are currently the principal provider of
airport ground services at both Hong Qiao International Airport and Pudong International Airport.
Our other revenues increased 14.7% from RMB1,424&nbsp;million in 2004 to RMB1,634&nbsp;million in 2005
primarily due to the increased revenue from our airport ground services and other services from
RMB692&nbsp;million and RMB95&nbsp;million, respectively, in 2004 to RMB795&nbsp;million, and RMB189&nbsp;million,
respectively, in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Operating Expenses</I></B><I>. </I>Our total operating expenses increased 36.8% from RMB20,239&nbsp;million in
2004 to RMB27,685&nbsp;million in 2005 primarily due to our business expansion and a significant
increase in
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">aviation fuel expenses resulting from increased fuel prices. Our total operating expenses as a
percentage of our revenues increased from 94.6% in 2004 to 100.8% in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aviation fuel expenses increased 63.7% from RMB5,430&nbsp;million in 2004 to RMB8,889&nbsp;million in
2005. This increase was primarily a result of rising fuel prices and our business expansion in
2005. In 2005, we consumed a total of 1,893,700 tonnes of aviation fuel, representing an increase
of 30.2% compared to 2004. Compared to 2004, the weighted average domestic and international fuel
prices paid by our company in 2005 increased by approximately 24.5% and 39.8%, respectively.
Aviation fuel expense accounted for 32.1% of our total operating expenses in 2005, as compared to
26.8% in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aircraft depreciation and operating lease rentals increased 17.6% from RMB4,467&nbsp;million in
2004 to RMB5,255&nbsp;million in 2005 primarily due to an expansion of our fleet size, while partially
offset by the termination of certain operating leases between CEA Northwest and us. The number of
the aircraft operated by us increased from 103 as of December&nbsp;31, 2004 to 180 as of December&nbsp;31,
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other depreciation, amortization and operating lease rentals increased 37.1% from RMB496
million in 2004 to RMB680&nbsp;million in 2005 primarily due to our acquisition of certain assets and
liabilities relating to the aviation businesses of CEA Northwest and CEA Yunnan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Wages, salaries and benefits increased 26.4% from RMB1,866&nbsp;million in 2004 to RMB2,359&nbsp;million
in 2005 primarily due to a significant increase in the number of our employees following our
acquisition of certain assets and liabilities relating to aviation businesses of CEA Northwest and
CEA Yunnan. The total number of our employees increased by 40.8% from 20,817 as of December&nbsp;31,
2004 to 29,301 as of December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Take-off and landing charges, which accounted for 13.4% of our total operating expenses in
2005, increased 23.1% from RMB3,020&nbsp;million in 2004 to RMB3,719&nbsp;million in 2005 primarily due to an
increase in the number of our flights, while partially offset by a decrease in the average take-off
and landing charges resulting from increased deployment of smaller aircraft. The number of our
flights increased from approximately 169 thousand in 2004 to approximately 211 thousand in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aircraft maintenance expenses increased 60.9% from RMB860&nbsp;million in 2004 to RMB1,384&nbsp;million
in 2005 primarily due to an expansion of our fleet size in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commission expenses increased 25.6% from RMB772&nbsp;million in 2004 to RMB970&nbsp;million in 2005
primarily due to an increase in tickets sales by agents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Food and beverage expenses increased 28.9% from RMB758&nbsp;million in 2004 to RMB977&nbsp;million in
2005. This increase was primarily due to a 37.2% increase in the number of passengers carried from
approximately 17.71&nbsp;million in 2004 to approximately 24.29&nbsp;million in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Office, administrative and other expenses increased 30.1% from RMB1,858&nbsp;million in 2004 to
RMB2,430&nbsp;million in 2005 primarily due to our acquisition of certain assets and liabilities
relating to the aviation businesses of CEA Northwest and CEA Yunnan. Particularly, office expenses
and other expenses increased from RMB472&nbsp;million and RMB428&nbsp;million, respectively, in 2004 to
RMB673&nbsp;million and RMB610&nbsp;million, respectively, in 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ticket reservation fees increased 39.0% from RMB210&nbsp;million in 2004 to RMB292&nbsp;million in 2005
primarily due to an increase in the number of passengers we carried.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Civil aviation infrastructure levies payable to the CAAC increased 85.6% from RMB251&nbsp;million
in 2004 to RMB466&nbsp;million in 2005 primarily due to the expansion of our routes network and an
increase in our flights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insurance costs slightly decreased 2.5% from RMB152&nbsp;million in 2004 to RMB149&nbsp;million in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ground services and other charges increased 16.3% from RMB99&nbsp;million in 2004 to RMB116&nbsp;million
in 2005 primarily due to an increase in our flights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Other Operating Income</I></B><I>. </I>Our other operating income was primarily generated from government
subsidies and fair value gains on financial instruments held by us. The net amount of our other
operating income increased from RMB85&nbsp;million in 2004 to RMB245&nbsp;million in 2005 primarily due to an
increase in government subsidies from RMB74&nbsp;million in 2004 to RMB193&nbsp;million in 2005, see Note 6
to our audited consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Finance Costs</I></B><I>. </I>Our finance costs decreased 8.2% from RMB770&nbsp;million in 2004 to RMB707&nbsp;million
primarily due to the recognition of a net exchange gain of RMB415&nbsp;million in 2005, while partially
offset by an increase in interest expenses of RMB251&nbsp;million. In 2004, we received a waiver of
amount due to CEA Northwest in a value of RMB133&nbsp;million under certain aircraft operating leases
between CEA Northwest and us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Net Loss</I></B><I>. </I>As a result of the foregoing operating results, net loss attributable to
equity holders was RMB467&nbsp;million in 2005, as compared to a net profit of RMB321&nbsp;million in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Fixed Assets</I></B><I>. </I>Our company had approximately RMB38,348&nbsp;million of fixed assets as of December
31, 2005, including aircraft, engines and flight equipment with a value of approximately RMB34,740
million. Fixed assets are initially recognized at cost and are subsequently stated at revalued
amount, being its fair value at the date of revaluation less any subsequent accumulated
depreciation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Valuation of fixed assets is affected by market conditions and global economic factors that
are not within our control. The determination of fair value requires significant judgment,
including judgment on valuations by our management and/or by independent professional appraisers.
Our directors have reviewed the carrying value of our fixed assets as of December&nbsp;31, 2005 and are
of the opinion that the carrying amount is not materially different from the fair value of such
fixed assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2004 Compared to 2003</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Revenues. </I></B>Our revenues increased 47.8 % from RMB14,470&nbsp;million in 2003 to RMB21,387&nbsp;million
in 2004. This increase was primarily due to an increase of our passenger and cargo revenues, which
were net of the applicable PRC business tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Traffic revenues increased 47.2% from RMB13,562&nbsp;million in 2003 to RMB19,962&nbsp;million in 2004.
Compared to 2003, the average aircraft daily utilization increased by 1.7 hours to 9.7 hours in
2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Passenger revenues, which accounted for 77.8% of our total traffic revenues in 2004, increased
49.7% from RMB10,375&nbsp;million in 2003 to RMB15,534&nbsp;million in 2004. This increase was primarily due
to the market recovery following the end of severe acute respiratory syndrome (SARS)&nbsp;and the
increase of our transportation capacity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our domestic passenger revenues, which accounted for 53.3% of our total passenger revenues,
increased 48.1% from RMB5,592&nbsp;million in 2003 to RMB8,284&nbsp;million in 2004. This increase was
principally a result of the growing market demand following the end of SARS and the expansion of
our
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">transportation capacity, including the launch of new routes and increase in the number of
flights. Compared to 2003, our domestic passenger traffic increased by 40.8% in 2004, and our
domestic passenger load factor increased from 64.8% in 2003 to 70.3% in 2004. As a result of the
favorable condition in the domestic passenger market since the end of 2003, we increased capacity
on our domestic routes by 29.7% in 2004. Our domestic passenger yield increased from RMB0.54 in
2003 to RMB0.57 in 2004 per passenger-kilometer. This increase was principally a result of the
increased pricing level due to strong demand in the domestic transportation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Hong Kong passenger revenues, which accounted for 14.4% of our total passenger revenues,
increased 34.4% from RMB1,667&nbsp;million in 2003 to RMB2,240&nbsp;million in 2004. This increase was
primarily due to the market recovery following the end of SARS and the increase in the number of
business and leisure travelers. Hong Kong passenger traffic increased by 57.1% in 2004 over that
of 2003. In order to meet market demand, we increased the passenger capacity on our Hong Kong
routes by 31.6% in 2004. Our Hong Kong passenger load factor increased from 52.4% in 2003 to 62.6%
in 2004, and our Hong Kong passenger yield decreased from RMB0.84 in 2003 to RMB0.74 in 2004 per
passenger-kilometer. The decrease in passenger yield on Hong Kong routes was primarily due to (1)
an increase in the number of leisure travelers, (2)&nbsp;various promotions offered by us and (3)
competition from other airlines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;International passenger revenues, which accounted for 32.3% of our total passenger revenues,
increased 60.8% from RMB3,116&nbsp;million in 2003 to RMB5,010&nbsp;million in 2004. This increase was
mainly due to the market recovery following the end of SARS and the increasing demand as a result
of the recovering global economy in 2004. As a result, international passenger traffic increased by
74.1% in 2004 compared to 2003. Our international passenger capacity increased by 58.2% in 2004
compared to 2003. Our international passenger load factor increased from 56.7% in 2003 to 62.4% in
2004. Our international passenger yield decreased from RMB0.53 in 2003 to RMB0.50 in 2004 per
passenger-kilometer. This decrease was primarily due to the increase in the number of leisure
travelers and competition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We generate cargo and mail revenues from the transportation of cargo and mail on our
designated cargo aircraft as well as from the carriage of cargo and mail on passenger aircraft.
Revenues from cargo and mail operations, which accounted for 22.2% of our total transportation
revenues in 2004, increased 39.0% from RMB3,187&nbsp;million in 2003 to RMB4,428&nbsp;million in 2004. This
increase was primarily due to the increasing demand for cargo transportation driven by the
continuing rapid growth of China&#146;s economy following its accession to the World Trade Organization,
the increase of our transportation capacity as well as the increase of our market share. Our cargo
and mail traffic (as measured in revenue freight tonne-kilometers, or RFTKs) increased 44.6% from
1,297&nbsp;million RFTKs in 2003 to 1,875&nbsp;million RFTKs in 2004. This increase was primarily due to a
significant increase in the capacity of our cargo transportation which resulted from the completion
of the remodeling of MD-11 passenger aircraft into freighters, launch of new routes as well as an
increase in the number of passenger flights which also carry cargo. Cargo yield decreased from
RMB2.46 in 2003 to RMB2.36 in 2004 per cargo tonne-kilometer. This decrease was primarily due to
intensified competition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other revenues are primarily generated from airport ground services and ticket handling
services. Airport ground services include loading and unloading, aircraft cleaning, fueling and
ground transportation of cargo and passenger luggage for airlines operating to or from Hong Qiao
International Airport and Pudong International Airport. We were the principal provider of airport
ground services at both Hong Qiao International Airport and Pudong International Airport. Other
revenues increased 56.8% from RMB908&nbsp;million in 2003 to RMB1,424&nbsp;million in 2004, which is higher
than the 39.0% growth rate achieved in 2003. This increase was mainly due to the increase in the
number of flights following the end of SARS and the enhancement of our capability in carriage,
storage and handling of cargo with the establishment of Shanghai Eastern Logistics Co., Ltd.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Operating Expenses. </I></B>Our total operating expenses increased 40.0% from RMB14,454&nbsp;million in
2003 to RMB20,239&nbsp;million in 2004. This increase was primarily due to increases in aviation fuel
expenses, aircraft depreciation and operating lease expenses, take-off and landing charges, food
and beverage expenses, salary costs, commission expenses and other expenses. Our total operating
expenses as a percentage of our revenues decreased from 99.9% in 2003 to 94.6% in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aviation fuel expenses increased 78.3% from RMB3,045&nbsp;million in 2003 to RMB5,430&nbsp;million in
2004. This increase was principally a result of our business expansion in 2004 and the increased
international aviation fuel prices in 2004. In 2004, we consumed a total of 1,454,500 tonnes of
aviation fuel, representing an increase of 42.1% compared to 2003. In 2004, the weighted average
domestic and international fuel prices paid by our company compared to 2003 increased by
approximately 24.4% and 30.6%, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aircraft depreciation and operating lease expenses increased 26.7% from RMB3,525&nbsp;million in
2003 to RMB4,467&nbsp;million in 2004. This increase was primarily due to our fleet expansion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other depreciation, amortization and operating lease expenses slightly increased from RMB495
million in 2003 to RMB496&nbsp;million in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The wages, salaries and benefits increased 28.8% from RMB1,449&nbsp;million in 2003 to RMB1,866
million in 2004. This increase was primarily due to a 26.7% increase in the number of staff
resulting from the expansion of our company and our main operations as well as an increase in
staff&#146;s average salaries with the introduction of an incentive compensation plan that is linked to
profit and various factors. The increase was also partially attributable to the introduction of an
incentive plan for our pilots that links allowances to flying hours.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Take-off and landing charges increased 34.0% from RMB2,254&nbsp;million in 2003 to RMB3,020&nbsp;million
in 2004, which accounted for 14.9% of our total operating expenses in 2004. This increase was
primarily due to the expansion of our business and the increased number of flights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aircraft maintenance expenses were RMB860&nbsp;million in 2004, compared to RMB817&nbsp;million in 2003,
an increase of 5.3%. This increase was mainly due to the increased aircraft maintenance performed
as a result of the increase in the number of our flights in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commission expenses increased 66.0% from RMB465&nbsp;million in 2003 to RMB772&nbsp;million in 2004.
This increase was primarily due to the increase in the revenues of our domestic and international
businesses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Food and beverage expenses increased 39.9% from RMB542&nbsp;million in 2003 to RMB758&nbsp;million in
2004. This increase was primarily due to a 47.1 % increase in the number of passengers which was
partially offset by a 5% decrease of the average cost of food and beverage as a result of our
cost-control initiatives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Office, administrative and other expenses increased 26% from RMB1,473&nbsp;million in 2003 to
RMB1,858&nbsp;million in 2004 primarily due to a 122.6% increase in office expenses from RMB212&nbsp;million
in 2003 to RMB472&nbsp;million in 2004 and a 48.8% increase in pilot and aircrew training expenses from
RMB98&nbsp;million in 2003 to RMB146&nbsp;million in 2004, while partially offset by a 28.5% decrease in
other expenses from RMB550&nbsp;million in 2003 to RMB428&nbsp;million in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ticket reservation fees increased 30.3% from RMB161&nbsp;million in 2003 to RMB210&nbsp;million in 2004
primarily due to a 47.1% increase in the number of passengers we carried.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Civil aviation infrastructure levies payable to the CAAC were RMB251&nbsp;million in 2004, compared
to nil in 2003.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insurance costs slightly decreased 7.6<B><I>% </I></B>from RMB164&nbsp;million in 2003 to RMB152&nbsp;million in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ground services and other charges increased 53.6% from RMB65&nbsp;million in 2003 to RMB99&nbsp;million
in 2004 primarily due to an increase in our flights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Other Operating Income. </I></B>Other operating income was primarily generated from government
subsidies and fair value gains on financial instruments held by us. The net amount of our other
operating income increased from RMB50&nbsp;million in 2003 to RMB85&nbsp;million in 2004 primarily due to a
net fair value gain of RMB11&nbsp;million on currency swaps in 2004, compared to a net fair value loss
of RMB8&nbsp;million in 2003, and an increase in government subsidies from RMB58&nbsp;million in 2003 to
RMB74&nbsp;million in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Non-operating Income. </I></B>Non-operating income was RMB133&nbsp;million in 2004, which was due to the
rescission of certain related party lease arrangements between CEA Northwest and us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Net
Profits. </I></B>As a result of the foregoing, net profit
attributable to equity holders was RMB321
million in 2004 compared to a loss of RMB1, 097&nbsp;million in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Fixed Assets. </I></B>Our company had approximately RMB29,744&nbsp;million of fixed assets as of December
31, 2004, including aircraft and flight equipment with a value of approximately RMB26,692&nbsp;million.
Fixed assets are initially recognized at cost and are subsequently stated at revalued amount, being
its fair value at the date of revaluation less any subsequent accumulated depreciation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Valuation of fixed assets is based on market conditions and global economic factors that we
may not control. The determination of fair value requires significant judgment, including judgment
on valuations by our management and/or by independent professional appraisers. Our directors have
reviewed the carrying value of our fixed assets as of December&nbsp;31, 2004 and are of the opinion that
the carrying amount is not materially different from the fair value of our fixed assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Impact of Differences between IFRS and U.S. GAAP</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the above management discussion and analysis of our results of the operation
under the IFRS between the years ended December&nbsp;31, 2004 and 2003 and between the years ended
December&nbsp;31, 2005 and 2004, in connection with the preparation and reconciliation of
our consolidated financial statements in accordance with U.S. GAAP, we believe the following major
material accounting difference between the IFRS and U.S. GAAP would have a significant impact on
our management discussion and analysis of the results of our operation between the years ended
December&nbsp;31, 2004 and 2003 and between the years ended
December&nbsp;31, 2005 and 2004, under U.S. GAAP. See also Note 43 to the consolidated financial statements for a more detailed
summary of all significant accounting differences between the IFRS and U.S. GAAP that are relevant
to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under IFRS, the acquisitions of certain assets and liabilities relating to the aviation
businesses of CEA Yunnan and CEA Northwest in June&nbsp;2005 have
been accounted for by applying the
acquisition accounting method. Accordingly, the results of the acquired operations were
incorporated into our operating results only from July&nbsp;1, 2005. In contrast, under U.S. GAAP, such
transactions are considered to be &#147;combination of entities under common control&#148;. A combination of
entities under common control is accounted for in a manner similar to a &#147;pooling-of-interests&#148;.
Consequently, the acquired assets and liabilities would be reflected at their U.S. GAAP carrying
values and the U.S. GAAP consolidated financial statements would be restated to include the
acquired assets and liabilities, and their results of operations and cash flows for all years
presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other than the above, there are no major material differences between the IFRS and U.S. GAAP
that would have a significant impact on the discussion and analysis of our results of operations
between the years
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ended December&nbsp;31, 2004 and 2003 and between the years ended December&nbsp;31, 2005 and 2004.
Taking into account the operating results of the acquired businesses, our revenue under U.S. GAAP
increased from RMB19,554&nbsp;million in 2003 to RMB28,208&nbsp;million in 2004, representing an increase of
44.3%, and from RMB28,208&nbsp;million in 2004 to RMB30,895&nbsp;million in 2005, representing an increase
of 9.5%. Our profit (loss)&nbsp;attributable to equity holders under
U.S. GAAP increased from RMB1,391
million in loss in 2003 to RMB459&nbsp;million in profit in 2004, and
decreased from RMB459&nbsp;million in
profit in 2004 to RMB1,383&nbsp;million in loss in 2005.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Liquidity and Capital Resources</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We typically finance our working capital requirements through a combination of funds generated
from operations and short-term bank loans. As a result, our liquidity could be materially and
adversely affected to the extent there is a significant decrease in demand for our services or if
there is any delay in obtaining bank loans. As of December&nbsp;31, 2004 and 2005, we had cash and cash
equivalents of RMB2,114&nbsp;million and RMB1,864&nbsp;million, respectively. In 2004 and 2005, our net cash
inflows generated from operating activities were RMB3,266&nbsp;million and RMB1,952&nbsp;million,
respectively, while our net cash outflows used in investment activities were RMB2,433&nbsp;million and
RMB10,369&nbsp;million, respectively. In the past two years, our primary cash requirements for
investment activities were related to our acquisitions and upgrades of aircraft and flight
equipment, debt repayments and our acquisitions of certain assets and liabilities relating to the
aviation businesses of CEA Northwest and CEA Yunnan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2004 and 2005, payment of advances on aircraft and flight equipment were RMB2,679&nbsp;million
and RMB9,073&nbsp;million, respectively, while additions of aircraft and flight equipment were RMB1,997
million and RMB7,751&nbsp;million, respectively. We financed the additions to our aircraft and flight
equipment primarily through lease arrangements, bank loans and funds generated from operations.
Funds generated from disposal of old aircraft and flight equipment and other fixed assets and
equipment (including by way of exchange) totaled RMB668&nbsp;million and RMB33&nbsp;million in 2004 and 2005,
respectively. Our net cash inflow generated from financing activities was RMB8,186&nbsp;million in 2005,
primarily from proceeds from bank loans and the issue of short-term debentures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to certain of our finance or operating leases, we are required to indemnify the
lessors against any withholding or similar taxes that may be imposed on the lessors by taxing
authorities in China with regard to payments made under such leases. Pursuant to a regulation
issued in 2000 by the State Tax Bureau of China, lease payments made by Chinese airlines to foreign
enterprises in respect of lease arrangements entered into prior to September&nbsp;1, 1999 are exempt
from the payment of any withholding tax. Withholding tax payable in respect of the lease
arrangements entered into on or after September&nbsp;1, 1999 are charged to our income statement as
incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We generally operate with a working capital deficit. As of December&nbsp;31, 2005, our current
liabilities exceeded our current assets by RMB25,598&nbsp;million. In comparison, our current
liabilities exceeded our current assets by RMB12,491&nbsp;million as of December&nbsp;31, 2004. The increase
in our current liabilities in 2005 was primarily due to an increase in borrowings for payment of
advances on aircraft and flight equipment. Short-term loans outstanding totaled RMB6,189&nbsp;million
and RMB13,711&nbsp;million as of December&nbsp;31, 2004 and 2005, respectively. Long-term bank loans
outstanding totaled RMB10,736&nbsp;million and RMB12,659&nbsp;million as of December&nbsp;31, 2004 and 2005,
respectively. Long-term loans payable within two years, from three to five years and beyond five
years were RMB2,663&nbsp;million, RMB5,518&nbsp;million and RMB1,609&nbsp;million, respectively, as of December
31, 2005, as compared to RMB2,387&nbsp;million, RMB3,216&nbsp;million and RMB1,940&nbsp;million, respectively, as
of December&nbsp;31, 2004. The total lease obligations outstanding under our finance leases as of
December&nbsp;31, 2004 and 2005 were RMB8,662&nbsp;million and RMB10,608&nbsp;million, respectively. Our lease
obligations payable within two years, from three to five years and beyond five years were RMB2,570
million, RMB3,014&nbsp;million and RMB2,596&nbsp;million, respectively, as of December&nbsp;31, 2005,
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">as compared to RMB1,700&nbsp;million, RMB3,756&nbsp;million and RMB2,017&nbsp;million, respectively, as of
December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have, and in the future may continue to have, substantial debts. As of December&nbsp;31, 2004
and 2005, our long-term debt to equity ratio was 2.6 and 3.4, respectively. The interest expenses
associated with these debts might impair our future profitability. We expect that cash from
operations and bank borrowings will be sufficient to meet our operating cash flow requirements,
although events that materially and adversely affect our operating results can also have a negative
impact on liquidity. We have entered into credit facility agreements with certain Chinese banks to
meet our future working capital needs. We have arranged, and we believe that we will continue to be
able to arrange, short-term bank loans with domestic and foreign-funded banks in China as necessary
to meet our working capital requirements. However, our ability to obtain financing may be affected
by our financial position and leverage and credit ratings, as well as by prevailing economic
conditions and the cost of financing generally. If we are unable to obtain financing for a
significant portion of our capital requirements, our ability to acquire new aircraft and to expand
our operations may be materially and adversely affected.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Capital Expenditures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our aircraft orders as of December&nbsp;31, 2005 included commitments to acquire 47 aircraft
to be delivered in 2006 and 2007. We expect our capital expenditures for aircraft and related
equipment, including deposits, through 2010 to be in aggregate approximately RMB57,332&nbsp;million,
including RMB19,080&nbsp;million in 2006 and RMB12,704&nbsp;million in 2007, in each case subject to
contractually stipulated increases or any increase relating to inflation. We generally finance our
purchase of aircraft through operating leases and bank loans secured by our assets. As of December
31, 2005, the total value of our mortgaged assets increased by 1.1%, from RMB9,737&nbsp;million as of
December&nbsp;31, 2004 to RMB9,844&nbsp;million as of December&nbsp;31, 2005. Construction of our facilities at
the Pudong International Airport and the purchase of maintenance equipment and other property and
equipment will continue to require additional capital expenditures in 2006. We paid an amount of
RMB418&nbsp;million as the consideration for the increase of our equity interest in CEA Wuhan to 96%
early 2006. We plan to finance our other capital commitments through a combination of funds
generated from operations, existing credit facilities, bank loans, leasing arrangements and other
external financing arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Contractual Obligations and Commercial Commitments</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following tables set forth our outstanding contractual and commercial commitments as of
December&nbsp;31, 2005.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>Payments Due by Period</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Contractual</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>(RMB millions)</B></TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Obligations</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Less Than 1 Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>1-3 Years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>4-5 Years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>After 5 Years</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-Term Debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,869</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,874</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,609</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital Leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,934</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating Leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,019</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unconditional Purchase Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other Long-term Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pension Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Post-retirement Benefit Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">86</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,032</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred Tax Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">30</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">550</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term
Portions of Other Payables
<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term Bank Loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">487</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Under Finance Lease</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">338</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Under Bank Loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">846</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fixed Rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Variable
Rate<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1pt">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">39,317</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">21,226</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8,631</TD>
    <TD nowrap>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1pt">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>



<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Figures of payments due by period are not available.</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>For our variable rate loans, interest rates range from 3&nbsp;months LIBOR &#043; 0.25% to 6&nbsp;months
LIBOR &#043; 0.6%. Interest obligations relating to variable rate loans are calculated based on the
relevant LIBOR rates as of December&nbsp;31, 2005. A 1% increase or decrease in the interest rate
would increase or decrease the interest obligations by RMB278&nbsp;million in total with RMB97
million in year 1, RMB95&nbsp;million in years 2 and 3, RMB55&nbsp;million in years 4 and 5 and RMB31
million for subsequent years.</TD>
</TR>

</TABLE>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="3"><B>Total Amounts</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>Amount of Commitment Expiration Per Period</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Other Commercial</B></TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="3"><B>Committed</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>(RMB millions)</B></TD>
</TR>



<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Commitments</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(RMB millions)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Less Than 1 Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>1-3 Years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>4-5 Years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>After 5 Years</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Line of Credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Standby Letters of
Credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Guarantees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Standby Repurchase
Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other Commercial
Commitments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1pt">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>



<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1pt">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>



<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Critical Accounting Policies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Critical accounting policies are defined as those that are reflective of significant judgments
and uncertainties and potentially result in materially different results under different
assumptions and conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our audited consolidated financial statements have been prepared in accordance with IFRS. Our
principal accounting policies are set forth in Note 2 to our audited consolidated financial
statements. IFRS requires that we adopt the accounting policies and make estimates that our
directors believe are most appropriate in the circumstances for the purposes of giving a true and
fair view of our results and financial
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">condition. However, different policies, estimates and assumptions in critical areas could lead
to materially different results. The critical accounting policies adopted and estimates made in the
preparation of these financial statements are identified as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Estimated
impairment of goodwill &#151; We test annually whether goodwill has been impaired in
accordance with the accounting policy stated in Note 2(l) to our audited consolidated financial
statements. The recoverable amounts of cash generating units have been determined based on
value-in-use calculations. These calculations require the use of estimates (see Note 18 to our
audited consolidated financial statements). In 2005, after reviewing the business environment as
well as our objectives and past performance, management concluded that there was no material
impairment loss for goodwill.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Estimated
impairment of property, plant and equipment &#151;We have made substantial investments in
tangible long-lived assets. We conduct impairment reviews of these assets whenever events or
changes in circumstances indicate that their carrying amounts may not be recoverable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Determining whether an asset is impaired requires significant judgment, including our
estimates of the future cash flows attributable to the asset and the appropriate discount rate. If
different judgments or estimates had been utilized, material differences could have resulted in the
amount and timing of the impairment charge, if any.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property,
plant and equipment &#151; We had approximately RMB38,348&nbsp;million of fixed assets as of
December&nbsp;31, 2005, including aircraft, engines and flight equipment with a value of approximately
RMB34,740&nbsp;million. As discussed in Note 2(j) to our audited consolidated financial statements,
property, plant and equipment are initially recognized at cost and are subsequently stated at
revalued amount less accumulated depreciation. Under U.S. GAAP, our fixed assets are initially
recognized at cost less accumulated depreciation and impairment charges, if any. Independent
valuations are conducted at least every five years or sooner if considered necessary by our
directors. In the intervening years, our directors would review the carrying value of the fixed
assets from time to time and make adjustments if the carrying value is materially different from
the fair value. Their recorded value is impacted by management judgment, including valuations
performed by the management and/or independent professional valuers, estimates of useful lives,
residual value and impairment charges. If different judgments or estimates had been utilized,
material differences could have resulted in the amount of revaluation and related depreciation
charges. We revalued our fixed assets on December&nbsp;31, 2002 based on a market value basis. Our
directors reviewed the carrying value of our company&#146;s fixed assets as of December&nbsp;31, 2005 and are
of the opinion that the carrying amount of the fixed assets is not materially different from the
estimated fair value and no impairment or changes in estimates of useful lives are necessary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair
value estimation &#151; The carrying amounts of our current financial assets, including cash
and cash equivalents, trade receivables, prepayments, other receivables, amounts due from related
companies and current financial liabilities including trade payables and note payables, other
payables and accrued expenses and amounts due to related companies, approximate their fair values
due to their short maturities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue
recognition &#151; As discussed in Note 2(d), passenger, cargo and mail revenues are
recognised as traffic revenues when the transportation services are provided. The value of unused
passenger tickets is included in current liabilities as sales in advance of carriage. Unused
tickets are recognised in traffic revenues based on current estimates. Management periodically
evaluate the balance in sales in advance of carriage and record any adjustments, which can be
material, in the period the evaluation is completed. These adjustments result from differences
between the estimates of certain revenue transactions, the timing of recognising revenue for any
unused air tickets and the related sales price, and are impacted by various factors, including a
complex pricing structure and interline agreements throughout the industry, which affect the timing
of revenue recognition.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maintenance
and overhaul costs &#151; In respect of aircraft and engines under operating leases, we
have the responsibility to fulfill certain return conditions under relevant leases. In order to
fulfill these return conditions, major overhauls are required to be conducted on a regular basis.
Accordingly, the present value of estimated costs of major overhauls for aircraft and engines under
operating leases are provided at each balance sheet date. The provision in each period is estimated
using historical major overhaul costs incurred during each overhaul and the estimated period
between overhauls using the ratios of actual flying hours/cycles and estimated flying hours/cycles
between overhauls. The costs of major overhauls comprise mainly labor and materials. Differences
between the estimated cost and the actual cost of the overhaul are included in the income statement
in the period of overhaul.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In respect of aircraft and engines owned by our company or held under finance leases, costs of
overhaul are capitalized as a component of property, plant and equipment and are depreciated over
the appropriate maintenance cycles. When each overhaul is performed, its cost is recognized in the
carrying amount of the item of property, plant and equipment and is depreciated over the estimated
period between overhauls, on a straight-line basis. Upon completion of an overhaul, any remaining
carrying amount of the cost of the previous overhaul is derecognized and charged to the income
statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retirement
benefits &#151; We participate in defined contribution retirement schemes organized by
the municipal governments of respective provinces. We also operate and maintain defined retirement
benefit plans which provides retirees with benefits including transportation subsidies, social
activity subsidies as well as other welfare. As discussed in Note 2(f) to our audited consolidated
financial statements, the cost of providing the aforementioned benefits in the defined retirement
benefit plan is actuarially determined and recognized over the employees&#146; service period by
utilizing various actuarial assumptions and using the projected unit credit method. These
assumptions include, without limitation, the selection of discount rate, annual rate of increase of
per capita benefit payment and employees&#146; turnover rate. The discount rate is based on management&#146;s
review of local high quality corporate bonds. The annual rate of increase of benefit payment is
based on the general local economic conditions. The employees&#146; turnover rate is based on historical
trends of our company. See Note 33 to our audited consolidated financial statements for additional
information regarding the retirement benefit plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred taxation &#151; While deferred tax liabilities are provided in full on all taxable
temporary differences, deferred tax assets are recognized only to the extent that it is probable
that future taxable profit will be available against which the temporary differences can be
utilized. In assessing the amount of deferred tax assets that need to be recognized, we consider
future taxable income and ongoing prudent and feasible tax planning strategies. In the event that
our estimates of projected future taxable income and benefits from available tax strategies are
changed, or changes in current tax regulations are enacted that would impact the timing or extent
of our ability to utilize the tax benefits of net operating loss carryforwards in the future,
adjustments to the recorded amount of net deferred tax assets and taxation expense would be made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current tax &#151; We make provision for current tax based on the estimated income tax
liabilities. The estimated income tax liabilities are primarily computed based on the tax filings
as prepared by our company and based on management&#146;s interpretation of relevant tax rulings. From
time to time, there may be disagreements with the tax authorities on the tax treatments of certain
items included in the tax computations.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Foreign Currency Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have debts denominated in U.S. dollars, Japanese yen or Euro in addition to our debts
denominated in Renminbi. We generate a significant amount of foreign currency revenues, including
U.S. dollar, Japanese yen, Euro, Korean won, Hong Kong dollar, Singapore dollar, Australian dollar,
and Thailand baht revenues, from ticket sales made in overseas offices. Pursuant to current foreign
exchange regulations in China, we may retain our foreign currency earnings subject to the approval
of SAFE. We have also designated certain personnel to manage the foreign currency risks through
derivative financial products such as forward
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">foreign exchange contracts and interest rate swaps. We use interest rate swaps to reduce risks
related to changes in market interest rates. As of December&nbsp;31, 2005, the notional amount of the
outstanding interest rate swap agreements was approximately US$661&nbsp;million, compared to US$437
million as of December&nbsp;31, 2004. These interest rate swap agreements will expire between 2006 and
2016. In addition, we use currency forward contracts to reduce risks related to changes in currency
exchange rates in respect of ticket sales and expenses denominated in foreign currencies. As of
December&nbsp;31, 2005, the notional amount of the outstanding currency forward contracts was
approximately US$92&nbsp;million, compared to US$226&nbsp;million as of December&nbsp;31, 2004. This decrease in
the notional amount of the outstanding currency forward contracts was primarily due to the
cancellation or early termination of certain currency forward contracts in 2005. These currency
forward contracts will expire between 2007 and 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to IFRS, our monetary assets and liabilities denominated in foreign currencies are
required to be translated into Renminbi at the year end at exchange rates announced by the People&#146;s
Bank of China. The net exchange gains or losses are recognized and reflected in the income
statement for the relevant year. Any fluctuation of the exchange rates between Renminbi and foreign
currencies may materially and adversely affect our financial condition and results of operations.
Primarily due to an appreciation of Renminbi against certain foreign currencies (including U.S.
dollar, Japanese yen and Euro) following the measures introduced by the PRC government in July&nbsp;2005
to reform the Renminbi exchange rate regime, we recognized a net exchange gain of RMB415&nbsp;million in
2005, compared to a net exchange loss of RMB32&nbsp;million in 2004.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Taxation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since we changed our registered address to Pudong district in Shanghai on July&nbsp;1, 2001, we are
subject to income tax at the rate of 15%. Our effective tax rate, however, may be higher than the
rate of 15% because some of our subsidiaries were incorporated in jurisdictions where the
applicable income tax rate is 33% rather than 15%. We had carried forward tax losses of
approximately RMB2,330&nbsp;million and RMB3,011&nbsp;million as of December&nbsp;31, 2004 and 2005, which can be
used to set off against future taxable income and will expire between 2006 and 2010.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Inflation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In recent years, China has not experienced significant inflation. In 2005, inflation did not
have a significant effect on our business. According to the National Bureau of Statistics of China,
China&#146;s overall national inflation rate, as represented by the general consumer price index, was
approximately 3.9% and 1.8% in 2004 and 2005, respectively. Although neither the inflation nor the
deflation in the past had any material adverse impact on our results of operations, we cannot
assure you that the deflation or inflation of the Chinese economy in the future would not
materially and adversely affect our financial condition and results of operations.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>U.S. GAAP Reconciliation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our audited consolidated financial statements are prepared in accordance with IFRS, which
differs in certain material respects from U.S. GAAP. Note 43 to our audited consolidated financial
statements provides a description of the principal differences between IFRS and U.S. GAAP as they
relate to our company, and a reconciliation to U.S. GAAP of profit attributable to equity holders for
the years ended December 31, 2003, 2004 and 2005 and owners&#146; equity as of December&nbsp;31, 2004 and 2005. Our condensed consolidated
financial statements prepared and presented in accordance with U.S. GAAP to reflect the effect of
the acquisitions of the aviation businesses of CEA Northwest and CEA Yunnan under common control
for the relevant periods are set forth in Note 44 to our audited consolidated financial statements
included in this annual report.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>New Pronouncements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>IFRS</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Standards, interpretations and amendments to published standards that are not yet effective</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain new standards, amendments and interpretations to existing standards, which are
relevant to our operations, have been published that are mandatory for our accounting periods
beginning on or after January&nbsp;1, 2006 or later periods, but which we have not early adopted, as
follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#150; IAS 19 (Amendment) introduces the option of an alternative recognition approach for
actuarial gains and losses. It may impose additional recognition requirements for multi-employer
plans where insufficient information is available to apply defined benefit accounting. It also adds
new disclosure requirements. As we do not intend to change the accounting policy adopted for
recognition of actuarial gains and losses and does not participate in any multi-employer plans,
adoption of this amendment will only impact the format and extent of disclosures presented in the
financial statements. We will apply this amendment from 1 January&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#150; IAS 39 (Amendment) changes the definition of financial instruments classified at fair value
through profit or loss and restricts the ability to designate financial instruments as part of this
category. We believe that this amendment should not have a significant impact on the classification
of financial instruments, as we should be able to comply with the amended criteria for the
designation of financial instruments at fair value through profit and loss. We will apply this
amendment from January&nbsp;1, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>U.S. GAAP</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>FAS
123</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
December 2004, the FASB revised Statement No. 123, or FAS 123R. FAS
123R, &#147;Share-Based Payment&#148;, requires all share-based
payments to employees, including grants of employee stock options, to
be recognized in the financial statements based on their fair values.
Pro forma disclosure is no longer an alternative to financial
statement recognition. FAS 123R is effective for fiscal periods
beginning after June 15, 2005. Our company is evaluating the
transition provisions allowed by FAS 123R. Our company does not
expect the adoption of FAS 123R to have a material impact on our
company&#146;s financial position or operational results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>FAS
151</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
November 24, 2004, the FASB issued Statement No. 151, &#147;Inventory
Costs&#148;, an amendment of ARB No. 43, Chapter 4, or FAS 151. FAS
151 requires that abnormal amounts of idle capacity and spoilage
costs be excluded from the cost of inventory and expensed when
incurred. The provisions of FAS 151 are applicable to inventory costs
incurred during fiscal years beginning after June 15, 2005. Our
company does not expect the adoption of FAS 151 to have a material
impact on our company&#146;s financial position or result of
operation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>FAS
153</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
December 15, 2004, the FASB issued Statement No. 153, &#147;Exchanges
of Nonmonetary Assets&#148;, an amendment of APB Option No. 29, FAS
153. FAS 153 requires exchanges of productive assets to be accounted
for at fair value, rather than at carryover basis, unless (1) neither
the asset received nor the asset surrendered has a fair value that is
determinable within reasonable limits or (2) the transactions lack
commercial substance. FAS 153 is effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005.
Our company does not expect the adoption of FAS 153 to have a
material impact on our company&#146;s financial position or results
of operation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>SAB 107</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March 29, 2005, the Securities
and Exchange Commission issued Staff Accounting Bulletin No. 107,
&#147;Share-Based Payment&#148;, or SAB 107. This bulletin provides
guidance related to share-based payment transactions with non-employees, the transition from nonpublic to public entity status,
valuation methods (including assumptions such as expected volatility and expected term), the accounting for certain redeemable
financial instruments issued under share-based payment arrangements, the classification of compensation expense, non-GAAP
financial measures, first-time adoption of FAS 123 R in an interim period, capitalization of compensation cost related to
share-based payment arrangements, the accounting for income tax effects of share-based payment arrangements upon adoption
of FAS 123 R, the modification of employee share options prior to
adoption of FAS 123 R and disclosures in Management&#146;s Discussion and
Analysis subsequent to adoption of FAS 123 R. SAB 107 will be effective when a registrant adopts FAS 123 R. Our company does
not expect the adoption of SAB 107 to have a material impact on our
company&#146;s financial position or operation results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>FAS 154</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
May&nbsp;2005, FASB issued Statement No.&nbsp;154,
&#147;Accounting Changes and Error Corrections&#148;, or FAS 154,
which replaces APB Opinions No. 20 &#147;Accounting Changes&#148;,
and FASB Statement No. 3, &#147;Reporting Accounting changes in
Interim Financial Statements&#148;, and changes the requirements
for the accounting for and reporting of a change in accounting principle. This Statement establishes, unless impracticable,
retrospective application as the required method for reporting a change in accounting principle in the absence of
explicit transition requirements specific to the newly adopted accounting principle. The reporting of a correction of an
error by restating previously issued financial statements is also addressed by this Statement. FAS.&nbsp;154 is effective
for accounting changes and corrections of
errors made in fiscal years beginning after December&nbsp;15, 2005.
Our company does not expect the adoption of FAS 154 to have a
material impact on our&#146;s financial position or operational
results.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;6. Directors, Senior Management and Employees.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>A. Directors and Senior Management</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information concerning our directors, executive
officers and supervisors as of June&nbsp;30, 2006. None of our directors, supervisors or members of our
senior management was selected or chosen as a result of our arrangement or understanding with
customers, suppliers or others. There is no family relationship between any director, supervisor or
executive officer and any other director, supervisor or executive officer of our company.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Age</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Shares Owned</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Position</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Li Fenghua</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">56</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5,000 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board of Directors</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Luo Chaogeng<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">56</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5,000 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and President</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cao Jianxiong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">47</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5,800 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wan Mingwu</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">59</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5,000 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and Vice President</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zhong Xiong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">60</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2,800 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Luo Zhuping</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">53</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5,800 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and Company Secretary</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hu Honggao</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">52</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent Non-executive Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Peter Lok</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">69</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent Non-executive Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wu Baiwang</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">63</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent Non-executive Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zhou Ruijin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">67</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent Non-executive Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Xie Rong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">54</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent Non-executive Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Li Wenxin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">57</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">6,000 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Supervisory Committee</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ba Shengji</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">47</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5,800 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Supervisor</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Yang Xingen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">53</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3,800 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Supervisor</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Yang Jie</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">36</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3,000 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Supervisor</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Liu Jiashun</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">49</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3,000 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Supervisor</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wu Jiuhong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">54</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3,000 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zhou Liguo</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">57</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3,000 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zhang Jianzhong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">51</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5,000 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tong Guozhao</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">47</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5,000 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Li Yangmin<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">43</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3,000 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Luo Weide</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">50</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3,000 A shares</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Luo served as a director of our company as of June&nbsp;30, 2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Li served as a vice president of our company as of October&nbsp;28, 2005.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Directors and Executive Officers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Li Fenghua is the incumbent chairman of our board of director, president and deputy party
secretary of CEA Holding. Mr.&nbsp;Li joined the civil aviation industry in 1968 and was deputy head,
and subsequently became head, of the 26th Fleet of the CAAC from 1987 to 1992. From 1992 to 1996,
Mr.&nbsp;Li served as vice-president, and then became president, of the Hubei branch of China Southern
Airlines (Group).
</DIV>

<P align="center" style="font-size: 10pt">-50-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Since 1996, he became vice-president of China Southern Airlines Company Limited and
vice-president of China Southern Airlines (Group). In 2000, Mr.&nbsp;Li became party secretary and
vice-president of China Southern Airlines Company Limited. From October&nbsp;2002 to September&nbsp;2004, he
served as the President of our company and vice-president of CEA Holding. In September&nbsp;2004, he
became president and deputy party secretary of CEA Holding. Mr.&nbsp;Li graduated from the China Civil
Aviation Senior Aviation School and holds the title of First Class&nbsp;Pilot.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Luo Chaogeng is currently a director, as well as president and deputy party secretary of
our company. Mr.&nbsp;Luo joined the civil aviation industry in 1970. Mr.&nbsp;Luo was a flight mechanic of
the instructing team of the Lanzhou Civil Aviation Administration Bureau from August&nbsp;1970 to August
1972. From August&nbsp;1972 to March&nbsp;1989, he was the flight mechanic of the 8th Civil Aviation Flight
Team. From March&nbsp;1989 to August&nbsp;1994, he was the deputy commissar, commissar and party secretary of
the Xian Flight Team of China Northwest Airlines. From August&nbsp;1994 to October&nbsp;1997, he was the
party secretary of the aircraft maintenance plant of China Northwest Airlines. From October&nbsp;1997 to
March&nbsp;1997, he was the party secretary and deputy general manager of the aircraft maintenance base
of China Northwest Airlines. From March&nbsp;1997 to December&nbsp;2000, he was the deputy director of the
Civil Aviation Administration Bureau of China Northwest Airlines. From December&nbsp;2000 to November
2001, Mr.&nbsp;Luo was the general manager of Yunnan Airlines and the director and deputy party
secretary of Civil Aviation Administration Bureau of Yunan. From November&nbsp;2001 to September&nbsp;2001,
he was the general manager and deputy party secretary of Yunnan Airlines. From September&nbsp;2002 to
September&nbsp;2004, he has also been serving concurrently as the general manager of Yunan Airlines.
From September&nbsp;2004 to the present, he has been the party constitution member and vice president of
China Airlines Group Company, President and deputy party secretary of China Airlines Corporation
Limited. From 1998 to June&nbsp;2001, Mr.&nbsp;Luo has been studying the postgraduate course for incumbent
leading cadres in professional economics and management at the Central Party School of Shaanxi. Mr.
Luo has obtained first class competency in flight mechanics.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Cao Jianxiong is currently a non-executive director of our company. Mr.&nbsp;Cao joined the
civil aviation industry in 1982. From 1992, he served as president of Shanghai Eastern Airlines
Development Company and in 1994 he became president of Eastern Airlines Futures Brokerage Company.
In early 1996 he served as assistant president of our company. From 1997, he served as vice
president and chief financial officer of our company. Since December&nbsp;1999, he has served as vice
president of EA Group. Since October&nbsp;2002, he served as vice president of CEA Holding, and he also
was the party secretary of China Eastern Air Northwest Company from December&nbsp;2002 to September
2004. Mr.&nbsp;Cao graduated from the Civil Aviation Management Institute with a major in labour
economics. Mr.&nbsp;Cao also received a Master&#146;s degree in global economics from Eastern China Normal
University&#146;s Department of International Finance. Mr.&nbsp;Cao holds the title of Economist.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Wan Mingwu is currently an executive director as well as our company&#146;s party secretary and
vice president. Mr.&nbsp;Wan joined the civil aviation industry in 1968. From 1983 to 1990 he was
deputy section chief and section chief of the cadre section of the political department of the CAAC
Shenyang Bureau. From 1990 to 1992 he was section chief of the personnel section of China Northern
Airlines. From 1992 to 1995 he was deputy party secretary of China Northern Airlines and from 1995
to 2000 he was party secretary of China Northern Airlines. Since December&nbsp;2000 he has been party
secretary and vice president of our company. Mr.&nbsp;Wan graduated from Civil Aviation Mechanics
Vocational School. Mr.&nbsp;Wan is a college graduate and holds the title of Senior Political Work
Instructor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Zhong Xiong is currently a non-executive director of our company. Mr.&nbsp;Zhong joined the
civil aviation industry in 1970. From 1986 to 1988, he was vice president of Transportation
Services Company of the CAAC Shanghai Bureau and was president of the sales and transportation
department of China Eastern Airlines from 1988 to 1992. From 1992 to April&nbsp;1995, he was vice
president of our company. From May&nbsp;1995 to April&nbsp;2002, Mr.&nbsp;Zhong has been vice president of our
company, and has become the Chairman of the
</DIV>

<P align="center" style="font-size: 10pt">-51-
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">workers&#146; union of CEA Holding since April&nbsp;2002. He graduated in 1970 from the English
Department of Liaoning Teacher&#146;s College and holds the title of Economist.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Luo Zhuping is an executive director of our company, the secretary of our board of
director and the head of the secretariat of our board of director. Mr.&nbsp;Luo joined CEA in 1988. He
was deputy chief and then chief of the enterprise management department of China Eastern Airlines
from 1992 to 1997. He was deputy head of the share system office from 1993 to 1996. In 1997, he
became the secretary of our board of director and the head of the secretariat of our board of
director. He became a director of our company in June&nbsp;2004. Mr.&nbsp;Luo graduated from the Faculty of
Philosophy and the Faculty of Law of Anhui University in 1979 and 1985, respectively. In 1994, Mr.
Luo received a Master&#146;s degree from the Economics Department of Eastern China Normal University,
majoring in global economics. In 1998, he participated in the training programme for senior
managers of large state-owned enterprises organised in the U.S.A. by the State Economic and Trade
Commission and Morgan Stanley.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Hu Honggao is currently an independent non-executive director of our company. He is the
vice-dean and professor of law at Fu Dan University School of Law as well as the head of the Civil
and Commercial Law Research Centre of Fu Dan University, supervising doctoral students majoring in
civil and commercial law at Fu Dan University. He is also a senior lawyer at the Shanghai Shen
Yang Law Office. Mr.&nbsp;Hu is a managing director of China Commercial Law Research Society, a
managing director of China Economic Law Research Society, a member of the Legislative Consultation
Committee of the Shanghai Municipal Government, a member of the Legislative Profession Consultation
Committee of the Shanghai Standing Committee of the People&#146;s Congress, vice-chairman of the
Shanghai Economic Law Research Society and an arbitrator of the Shanghai Arbitration Committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Peter Lok is currently an independent non-executive director of our company. Mr.&nbsp;Lok went
to the College of Air Traffic Control in England for further studies after joining the Hong Kong
Civil Aviation Department in December&nbsp;1956. He studied air transport, air accident investigation
and administration and management of civil aviation in England from 1968 to 1973. In 1982, he
became assistant director of the Hong Kong Civil Aviation Department. From 1985, during his time
in office at the air services division of the Hong Kong Civil Aviation Department, he participated
in negotiations with various countries regarding air traffic rights. He became deputy director in
1988, and subsequently became director in 1990 of the Hong Kong Civil Aviation Department. Mr.&nbsp;Lok
retired in 1996 and has served as a consultant at the Flights Standards Department of the CAAC.
Mr.&nbsp;Lok is the first Chinese director of the Hong Kong Civil Aviation Department and was at one
time an instructor of the College of Air Traffic Control of Hong Kong.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Wu Baiwang is currently an independent non-executive director of our company. Mr.&nbsp;Wu
joined the civil aviation industry in 1959 and was deputy fleet leader and subsequently became
fleet leader of the 12th Fleet of the CAAC from 1976 to 1984. From 1984 to 1992, Mr.&nbsp;Wu was deputy
head and subsequently became head of the CAAC Jilin Bureau. From 1992 to 1995, Mr.&nbsp;Wu was head and
party secretary of the CAAC Northeastern Bureau. From September&nbsp;1995 to 1998, he became president
of China General Aviation Corporation. He was the party secretary and vice-president of Guangzhou
Baiyun International Airport Group Company and the Chairman of the board of directors of Guangzhou
Baiyun International Airport Company Limited from 1998 to September&nbsp;2003. Mr.&nbsp;Wu graduated from
Chinese Civil Aviation School in 1965 and holds the title of First Class&nbsp;Pilot.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Zhou Ruijin is currently an independent non-executive director of our company. Mr.&nbsp;Zhou
was deputy editor-in-chief and the East China regional director of the People&#146;s Daily. From 1988
to 1993 Mr.&nbsp;Zhou was party secretary and deputy editor-in-chief of the Liberation Daily. From
April&nbsp;1993 to 1996 he was deputy editor-in-chief of the People&#146;s Daily and from 1996 to 2000 he was
deputy editor-in-chief and the East China regional director of the People&#146;s Daily. After retired,
he became vice-chairman of the China Productivity Council and Chairman of the Shanghai Productivity
Council. Mr.&nbsp;Zhou graduated from the journalism department of Fudan University in 1962.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Xie Rong is currently an independent director of our company and a certified accountant in
the People&#146;s Republic of China. Mr.&nbsp;Xie is the deputy head of Shanghai National Accounting
Institute. He taught at the faculty of accounting of Shanghai University of Finance and Economics
from December, 1985 to March, 1997, and had been an assistant professor, a professor, a
doctorate-tutor and the deputy dean of the faculty. Mr.&nbsp;Xie was a partner of KPMG Huazhen from
December, 1997 to October, 2002, and has, since October, 2002, been the deputy head of Shanghai
National Accounting Institute. Mr.&nbsp;Xie graduated from Shanghai University of Finance and Economics
and has a doctorate degree in Economics.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Wu Jiuhong is a vice president of our company. Mr.&nbsp;Wu joined the civil aviation industry
in 1971. From 1968 to 1971 he served with the 60th division under the 20th army. From 1971 to
1973 he studied aviation machinery at the Civil Aviation College. From 1973 to 1981 he was with
the 18th Fleet of the CAAC&#146;s 2nd General Fleet. From 1985 to 1988 he served as Communist Youth
League secretary and deputy head of the political department of the CAAC&#146;s Jiangxi Bureau. From
1988 to 1995 he concurrently served as deputy party secretary and disciplinary committee secretary
of the Cabin Service Department of China Eastern Airlines. From 1995 to 1997 he served as head of
our company&#146;s publicity department. From 1997 to 2002, he served as party secretary and executive
vice president of the Company&#146;s Jiangxi branch. He became a vice president of our company in April
2002. He also became the party secretary of CEA Northwest since September&nbsp;2004. Mr.&nbsp;Wu has
completed postgraduate studies and is a qualified senior political work instructor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Zhou Liguo is currently a vice president of our company. He joined the civil aviation
industry in 1981, and attended the Air Force Changchun First Reserve Flight School from 1966 to
1967 and the Harbin First Navigation School from 1967 to 1969. Mr.&nbsp;Zhou performed his military
service with the 34th Division of the Air Force from 1969 to 1981, and served as squadron leader in
the 5th Fleet of the Civil Aviation from 1984 to 1988. Mr.&nbsp;Zhou was deputy fleet leader of China
Eastern Airlines&#146; Shanghai Fleet from 1988 to 1992, and leader of the said fleet from 1992 to 1997.
From 1997 to 2000, he served as general manager and deputy party secretary of our company&#146;s
General Flight Department. In 2000 he became assistant president of our company, and from 2000 to
2003 he served as president and deputy party secretary of China Cargo Airlines Co., Ltd. Mr.&nbsp;Zhou
was our company&#146;s chief economic official from December&nbsp;2003 to April&nbsp;2004. He became a vice
president of our company since April&nbsp;2004. Mr.&nbsp;Zhou received university education and holds the
title of First Class&nbsp;Pilot.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Zhang Jianzhong is a vice president of our company. Mr.&nbsp;Zhang joined the civil aviation
industry in 1982. From April&nbsp;1982 to December&nbsp;1987, he was an assistant of the Shanghai Civil
Aviation Planning Bureau. From December&nbsp;1987 to April&nbsp;1990, he was the deputy director of the
planning department of Shanghai Hongqiao International Airport. From April&nbsp;1990 to January&nbsp;1996, he
was the director of the planning department of China Eastern Airlines. From January&nbsp;1996 to April
1999, he was the manager of the sales and marketing department of our company. From April&nbsp;1999 to
April&nbsp;2003, he was the Assistant to the President of our company. From September&nbsp;2000 to December
2001, he served concurrently as the director of the office of strategic study of our company. From
December&nbsp;2001 to May&nbsp;2003, he served concurrently as the general manager of the computer
information centre of our company. From April&nbsp;2003 to June&nbsp;2004, he was the chief economic official
of our company. From May&nbsp;2003 to June&nbsp;2004, he served concurrently as the general manager of the
sales and marketing department of our company. Since June&nbsp;2004, he has been a vice president of
our company. Mr.&nbsp;Zhang graduated from the Faculty of Mechanical Engineering of Zhejiang University
and Professional Study in Economics and Management at Fudan University, from which he obtained a
master&#146;s degree.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Tong Guozhao is a vice president of our company. Mr.&nbsp;Tong joined the civil aviation
industry in 1980. From January&nbsp;1980 to May&nbsp;1992, Mr.&nbsp;Tong had been the deputy pilot, chief pilot
and captain respectively of the flight team of Urumqi Civil Aviation Bureau. From May&nbsp;1992 to April
1997, he had been the captain, sub-team leader, deputy squadron leader and squadron leader of the
Shanghai Flight Team of China Eastern Airlines. From April&nbsp;1997 to May&nbsp;1998, he was a vice
president of the Shanghai Flight Team of
</DIV>

<P align="center" style="font-size: 10pt">-53-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">our company. From May&nbsp;1998 to March&nbsp;2001, he was the president of the Safety Monitoring
Department of our company. From March&nbsp;2001 to January&nbsp;2004, he was the president of the Anhui
branch company of our company. From January&nbsp;2004 to September&nbsp;2004, he was the president of the
China Cargo Airlines Co., Ltd. and deputy party secretary. From September&nbsp;2004 to April&nbsp;2005, he
was the president of our company cum president of the Operation Control Centre. Since April&nbsp;2005,
he has been a vice president of our company. Mr.&nbsp;Tong graduated from the Civil Aviation School and
Anhui School of Business and Administration. He received a master degree in business
administration and holds the title of Second Class&nbsp;Pilot.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Li Yangmin is a vice president of our company. Mr.&nbsp;Li joined the civil aviation industry
in 1985. From July&nbsp;1985 to October&nbsp;1996, he was the deputy head of the aircraft maintenance
workshop, head of technology office and secretary of the workshop branch of Northwest Company.
From October&nbsp;1996 to June&nbsp;2002, he was the deputy general manager of the aircraft maintenance base
and the manager of air route department of Northwest Company. From June&nbsp;2002 to March&nbsp;2004, he was
the general manager of the aircraft maintenance base of CEA Northwest. From March&nbsp;2004 to October
2005, he was the vice president and a member of the standing committee to the party committee of
CEA Northwest. Since October&nbsp;2005, he has been deputy general manager of our company. Mr.&nbsp;Li
graduated from China Civil Aviation Academy. He is a qualified senior engineer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Luo Weide is our company&#146;s chief financial officer. In 1976 Mr.&nbsp;Luo began his military
service at the Air Force in Liuan Airport. From 1979 to 1991 he successively served as department
head and deputy head of the Putuo branch of the Shanghai Municipal Tax Bureau. From 1991 to 1993
he concurrently served as head of the finance bureau and the state asset bureau of Putuo District,
Shanghai. From 1993 to 1998 he successively served as deputy chief accountant, chief accountant
and executive deputy president of Shanghai Jinqiao (Group) Co., Ltd. From 1998 to 2000, he was
vice president of Shanghai Pudong Development (Group) Co., Ltd. and chairman of the board and
president of Pudong Finance Company. Since 2000 he has been chief financial officer of our
company. Mr.&nbsp;Luo graduated from the Sino-European International Business School in 1999 with a
Master&#146;s degree in business administration. He holds the titles of Senior Accountant and Senior
Economist.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Supervisory Committee</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As required by the PRC Company Law and our articles of association, our company has a
supervisory committee, or the Supervisory Committee, whose primary duty is the supervision of our
senior management, including our board of directors, managers and senior officers. The Supervisory
Committee consists of five supervisors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Li Wenxin is currently Chairman of our company&#146;s supervisory committee. Mr.&nbsp;Li joined the
civil aviation industry in 1970. From 1992 to 1995 he was secretary of the disciplinary committee
of China General Aviation Company. From 1995 to 1996 he was deputy party secretary of China
General Aviation Corporation. From 1996 to 1998 he was deputy president of China General Aviation
Corporation and from February&nbsp;1998 to June&nbsp;2000, he assumed the post of party secretary and
executive deputy president of the Shanxi branch of our company. From June&nbsp;2000 to September&nbsp;2002,
he served as deputy party secretary and secretary of the disciplinary committee of CEA Holding.
Since October&nbsp;2002, he served as party secretary and vice president of CEA Holding. He has been
the Chairman of the supervisory committee of our company since June&nbsp;2000. Mr.&nbsp;Li received
university education and is a qualified Senior Political Work Instructor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Ba Shengji is currently a supervisor. Mr.&nbsp;Ba joined the civil aviation industry in 1978.
From 1980, Mr.&nbsp;Ba was an accountant at the Department of Finance of the CAAC Shanghai Bureau. From
1988, he served as the section head of the Department of Finance of China Eastern Airlines. In
1993, Mr.&nbsp;Ba became the deputy head of the Department of Finance of China Eastern Airlines. In
March&nbsp;1997, Mr.&nbsp;Ba became the chief officer of the auditing office of our company. From December
1997 to September&nbsp;2002, he served as the head of EA Group&#146;s auditing department. Since October
2002, he became the head of CEA Holding&#146;s
</DIV>

<P align="center" style="font-size: 10pt">-54-
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">auditing department. Since January&nbsp;2003, he concurrently served as chief of CEA Holding&#146;s
disciplinary committee&#146;s administrative office. Mr.&nbsp;Ba received university education and is a
qualified auditor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Yang Xingen is currently a supervisor. Mr.&nbsp;Yang was the deputy political committee member
of the 1st flying battalion and political committee member of the 2nd battalion of 105th Regiment,
35th Division from July&nbsp;1980 to July&nbsp;1986. From July&nbsp;1986 to October&nbsp;1997, he was the party branch
secretary and manager of China Eastern Airlines Advertisement Service Company respectively. From
October&nbsp;1997 to April&nbsp;2000, he was the party deputy secretary, secretary for the disciplinary
committee and political director of the Shanghai flying squadron of our company. From April&nbsp;2000
to August&nbsp;2002, he was the deputy secretary for the disciplinary committee cum director of the
office for discipline committee and director of the supervision office. From August&nbsp;2002 to now,
he has been the deputy secretary for the disciplinary committee of our company. Mr.&nbsp;Yang has been
educated to the tertiary level. He was graduated from the faculty of mechanics of the Second
Aviation Mechanics School of the air force.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ms.&nbsp;Yang Jie is currently a supervisor. Ms.&nbsp;Yang joined the civil aviation industry in 1992.
From 1996 to 1998 she was electronic technology supervisor of the technology office and Communist
Youth League secretary of the overhaul department at the aircraft maintenance base of our company.
From 1998 to September&nbsp;2000 she was Communist Youth League deputy secretary of the aircraft
maintenance base of our company. She was the deputy secretary of our company&#146;s Communist Youth
League from September&nbsp;2000 to July&nbsp;2002, and the secretary of our company&#146;s Communist Youth League
from August&nbsp;2002 to January&nbsp;2003. Since January&nbsp;2003, she has been the secretary of the Communist
Youth League of CEA Holding, as well as the secretary of the Communist Youth League of our company.
Ms.&nbsp;Yang graduated with a major in aviation electronics from the China Civil Aviation Academy and
a major in Business Administration from Sunny Management Academy at Donghua University and she
received a master degree in Business Administration. She is also a qualified engineer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Liu Jiashun is currently a supervisor. From 1993 to 1999 Mr.&nbsp;Liu was party secretary,
deputy president and secretary of the disciplinary committee secretary of China Aviation Fuel
Hainan Company, as well as chairman of the board and president of Hainan Nanyang Air Transport Co.,
Ltd. From 1997 to 1999 he was also in charge of fuel supply engineering at Haikou&#146;s Meilan Airport
and served as director of Meilan Airport Co., Ltd. and vice chairman of the board and president of
Meilan Industrial Co., Ltd. From 1999 to 2000 he was deputy party secretary of China Aviation Fuel
East China Company and he is currently deputy party secretary and secretary of the disciplinary
committee of the East China branch of China Aviation Fuel Company. Mr.&nbsp;Liu is a former graduate
student and has qualifications as a political work instructor.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>B. Compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aggregate amount of cash compensation paid by us to our directors, supervisors and the
senior management during 2005 for services performed as directors, supervisors and officers or
employees of our company was approximately RMB2,244,000. In addition, directors and supervisors who
are also officers or employees of our company receive certain other in-kind benefits which are
provided to all of our employees. Our company does not have any bonus or profit sharing plan or any
stock option plan.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>C. Board Practices</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All directors and supervisors serve a term of three years or until such later date as their
successors are elected or appointed. The directors and supervisors may serve consecutive terms. Two
of the supervisors are employee representatives appointed by our employees, and the rest are
appointed by the shareholders. The following table sets forth the number of years our directors,
executive officers and supervisors have held their position and the expiration of their current
term.
</DIV>

<P align="center" style="font-size: 10pt">-55-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="36%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Held Position Since</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Expiration of Term</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->


<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Li Fenghua</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 20, 2003</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Luo Chaogeng</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 30, 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wan Mingwu</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 30, 2001</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cao Jianxiong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 30, 2001</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zhong Xiong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 30, 2001</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Luo Zhuping</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2004</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hu Honggao</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 30, 2001</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Peter Lok</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 30, 2001</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wu Baiwang</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 30, 2001</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zhou Ruijin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 30, 2001</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Xie Rong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 20, 2003</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Li Wenxin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 30, 2001</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ba Shengji</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 30, 2001</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Yang Xingen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2004</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Yang Jie</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 30, 2001</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Liu Jiashun</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 30, 2001</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wu Jiuhong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">April 4, 2002</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zhou Liguo</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">April 5, 2004</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zhang Jianzhong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2004</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tang Guozhao</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">April 1, 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Li Yangmin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">October 28, 2005</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Luo Weide</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 30, 2001</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 18, 2007</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None of our directors, supervisors or members of our senior management has entered into
any agreement or reached any understanding with us requiring our company to pay any benefits as a
result of termination of their services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors established the audit committee in August&nbsp;2000 in accordance with the
listing rules of the Hong Kong Stock Exchange. The audit committee currently consists of Mr.&nbsp;Xie
Rong, an independent non-executive director and the chairman of the audit committee, Mr.&nbsp;Hu
Honggao, an independent non-executive director of our company, and Mr.&nbsp;Wu Baiwang, an independent
non-executive director of our company. The audit committee is authorized to, among other things,
examine our internal control system and review auditing procedures and financial reports with our
auditors. Subject to the approval of the shareholders&#146; meeting, the audit committee of our company
is also directly responsible for the appointment, compensation, retention and oversight of our
outside auditors, including resolving disagreements between management and the auditor regarding
financial reporting. The outside auditors report directly to the audit committee. The audit
committee holds at least four meetings each year. The audit committee has established procedures
for the receipt, retention and treatment of complaints received by our company regarding
accounting, internal accounting controls or auditing matters, and procedures for the confidential,
anonymous submission by employees of concerns regarding questionable accounting or auditing
matters. The audit committee has the authority to engage independent counsel and other advisors, as
it determines necessary to carry out its duties. Our company provides appropriate funding, as
determined by the audit committee, for payment of compensation to the outside auditors, advisors
employed by the audit committee, if any, and ordinary administrative expenses of the audit
committee that are necessary or appropriate in carrying out its duties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our remuneration and review committee, established by our board of directors in April&nbsp;2002,
consists of Mr.&nbsp;Zhou Ruijin, an independent non-executive director and the chairman of the
remuneration and review
</DIV>

<P align="center" style="font-size: 10pt">-56-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">committee, Mr.&nbsp;Hu Hongaao, an independent non-executive director and Mr.&nbsp;Peter Lok, an
independent non-executive director. The remuneration and review committee is authorized to review
the performance of our directors, supervisors and management as well as determine their annual
compensation level. The remuneration and review committee shall submit to our board of directors or
shareholders&#146; meeting for approval compensation plans and oversee the implementation of approved
compensation plans. The remuneration and review committee may consult financial, legal or other
outside professional firms in carrying out its duties. The remuneration and review committee shall
meet once year, within twenty days after the announcement of annual results.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>D. Employees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through arrangements with CEA Holding and others, we provide certain benefits to our
employees, including housing, retirement benefits and hospital, maternity, disability and dependent
medical care benefits. Our company does not have any bonus or profit sharing plan or any stock
option plan. See Notes 33 and 34 to our audited consolidated financial statements. Our employees
are members of a labor association which represents employees with respect to labor disputes and
certain other employee matters. We believe that we maintain good relations with our employees and
with their labor association. The table below sets forth the number of our employees as of December
31, 2003, 2004 and 2005, respectively:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pilots</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,154</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Flight attendants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,752</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Maintenance personal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,480</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales and marketing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,658</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,257</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,301</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>E. Share Ownership</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See Item&nbsp;6.A and Item&nbsp;6.B above.
</DIV>
<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;7. Major Shareholders and Related Party Transactions.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>A. Major Shareholders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information regarding ownership of our capital stock as
of December&nbsp;31, 2005 by all persons who were known to us to be the beneficial owners of 5% or more
of our capital stock:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Percent of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Percent of Total</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Title of Class</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Identity of Person or Group</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Owned</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Class</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Shares</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Domestic Shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CEA Holding</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3,000,000,000</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">90.91%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">61.64%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">H Shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">HKSCC Nominees Limited<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1,487,931,163</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">94.96%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">30.57%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>As custodian of the Depositary for American Depositary Shares representing H Shares.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CEA Holding has held 61.64% of our issued and outstanding capital stock since its
establishment in October&nbsp;2002, and neither it nor HKSCC Nominees Limited has any voting rights
different from those of other shareholders. We are not aware of any arrangement which may at a
subsequent date result in a change of control of our company.
</DIV>

<P align="center" style="font-size: 10pt">-57-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2005 and June&nbsp;30, 2006, there were 1,566,950,000 H shares issued and
outstanding. As of December&nbsp;31, 2005 and June&nbsp;30, 2006,
there were, respectively, 39 and 36
registered holders of American depositary receipts evidencing
1,495,400 and 1,542,960 ADSs. Since
certain of the ADSs are held by nominees, the above number may not be representative of actual
number of U.S. beneficial holders of ADSs or the number of ADSs beneficially held by U.S. persons.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our company is currently a majority-owned subsidiary of CEA Holding. CEA Holding itself is a
wholly state-owned enterprise under the administrative control of China State-owned Assets
Supervisions and Administration Commission, or CSASAC. CEA Holding&#146;s shareholding in our company is
in the form of ordinary domestic shares, through which it, under the supervision of the CSASAC,
enjoys the shareholders&#146; rights and benefits on behalf of the Chinese government.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>B. Related Party Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Relationship with CEA Holding and Associated Companies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We enter into transactions from time to time with CEA Holding and its subsidiaries.
For a description of such transactions, see Note 39 to our audited consolidated financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(A)&nbsp;De-merger Agreement</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EA Group and our company entered into a de-merger agreement on April&nbsp;14, 1995, or the
De-merger Agreement, for the purpose of defining and allocating the assets and liabilities between
EA Group and our company. To give effect to the intent and provisions of the De-merger Agreement,
EA Group and our company have entered into a Supplemental Agreement to the De-merger Agreement,
dated December&nbsp;5, 1996, whereby the parties agreed to indemnify each other in respect of all claims
arising from or in respect of the assets and liabilities which they have respectively assumed
pursuant to the restructuring and by reference to the division of assets and liabilities determined
as of January&nbsp;1, 1994. After the establishment of CEA Holding in October&nbsp;2002, CEA Holding has
assumed the rights and liabilities of EA Group under the De-merger Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(B)&nbsp;Acquisition of Assets from CEA Holding</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have acquired from CEA certain assets and liabilities from CEA Holding relating to the
aviation businesses of CEA Northwest and CEA Yunnan. See the section headed &#147;Item&nbsp;4. Information
on the Company&#151;History and Development of the Company&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(C)&nbsp;Related Business Transactions</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As our company and EA Group and its subsidiaries were a single group prior to the
restructuring in 2002, certain arrangements among us have continued after the restructuring and the
establishment of CEA Holding. Each of these arrangements is non-exclusive, although we do not
currently intend to enter into any equivalent contracts with third parties.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(i)&nbsp;China Eastern Aviation Import and Export Corporation, or CEAIEC, a 55% owned
subsidiary of CEA Holding.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our company and CEAIEC have entered into an import/export agency agreement, dated May&nbsp;12,
2005, to supercede our agreement, dated January&nbsp;7, 1997, regarding the import and export of
aircraft-related accessories, machinery and equipment for a term of three years commencing from
July&nbsp;1, 1999, subject to renewal. For the year ended December&nbsp;31, 2005, the amounts paid by us to
CEAIEC for the import and export of aircraft-related accessories, machinery and equipment were
approximately RMB7,228&nbsp;million,
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">inclusive of handling charges of 0.1% to 2% above the contract prices paid to CEAIEC which were
approximately RMB41&nbsp;million in total.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have certain balances with CEAIEC, which are unsecured, interest-free and have no fixed
term of repayment. See Note 39(b) to our audited consolidated financial statements for more
details.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(ii)&nbsp;Eastern Aviation Advertising Service Co., Ltd., or Eastern Advertising, a 55%
owned subsidiary of CEA Holding.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our company and Eastern Advertising have entered into an advertising service agreement, dated
May&nbsp;12, 2005, to supercede our agreement, dated December&nbsp;30, 1996, regarding the provision of
advertising services for a term of three years commencing from July&nbsp;1, 2005, subject to renewal.
For the year ended December&nbsp;31, 2005, the amounts paid by us to Eastern Advertising for advertising
services were approximately RMB9&nbsp;million.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(iii)&nbsp;China Eastern Air Catering Investment Co. Ltd., or CEA Catering, a 55% subsidiary
of CEA Holding. The remaining 45% is owned by our company.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;12, 2005, our company entered into certain catering service agreements with a number of
subsidiaries of CEA Catering (including Shanghai Eastern Air Catering Co., Ltd) regarding the
provision of in-flight catering services (including the supply of in-flight meals and beverages,
cutlery and tableware) and related storage and complementary services required in our company&#146;s
daily airline operations and civil aviation business. For the year ended December&nbsp;31, 2005, the
amounts paid by us to those subsidiaries of CEA Catering for the supply of in-flight meals and
other services were approximately RMB232&nbsp;million.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(iv)&nbsp;Eastern Air Group Finance Co. Ltd., or Eastern Finance, which is 75% owned and
controlled by CEA Holding and other subsidiaries of CEA Holding.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our company and Eastern Finance have entered into a financial services agreement, dated May
12, 2005, to supercede our agreement with Eastern Finance, dated January&nbsp;8, 1997, regarding the
provision of deposit services, loan and financing services and certain other financial services
such as the provision of trust loans, financial guarantees and credit facilities and credit
references for a term of three years commencing from July&nbsp;1, 2005, subject to renewal. Pursuant to
this agreement, we may place deposits with, and obtain loans from, Eastern Finance. We had
short-term deposits placed with Eastern Finance as of December&nbsp;31, 2005 amounting to RMB475
million, which paid interest at 0.7% per annum. In addition, our company had short-term loans of
RMB214&nbsp;million from Eastern Finance. During the year ended December&nbsp;31, 2005, the weighted average
interest rate on the loan was 4.5% per annum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the financial services agreement, Eastern Finance shall deposit all moneys
deposited by our company under the agreement with commercial bank(s) in China, including, for
example, Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Bank of
Agriculture and Bank of Communications. The Eastern Finance has also undertaken under the financial
services agreement that all outstanding loans it provides to CEA Holding and its subsidiaries
(other than our company) will not at any time and from time to time exceed the aggregate amount of
its equity capital, surplus reserves and deposits received from other parties.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(v)&nbsp;TravelSky Technology Ltd., which is 33% owned by CEA Holding.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We pay ticket reservation service charges to TravelSky, which is 33% owned by CEA Holding, in
connection with our use of its computer reservation system. For the year ended December&nbsp;31, 2005,
we paid ticket reservation service charges to TravelSky of approximately RMB125&nbsp;million.
</DIV>

<P align="center" style="font-size: 10pt">-59-
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(vi)&nbsp;Shanghai Eastern Aviation Equipment Manufacturing Corporation, or SEAEMC, a
wholly-owned subsidiary of CEA Holding.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our company and SEAEMC have entered into an advertising service agreement, dated May&nbsp;12, 2005,
to supercede our agreement dated, December&nbsp;31, 1996, regarding the provision of comprehensive
services in relation to maintenance, repair and overhaul of aircraft and aviation equipment, and
procurement of related equipment and materials required in our company&#146;s daily operations for a
term of three years commencing from July&nbsp;1, 2005, subject to renewal. SEAEMC was established in
1996. SEAEMC&#146;s predecessor was Shanghai Civil Aviation Maintenance and Engineering Company. For the
year ended December&nbsp;31, 2005, the amounts paid by us to SEAEMC for the maintenance and related
services were approximately RMB1&nbsp;million. In addition, we also paid RMB9&nbsp;million and RMB5&nbsp;million
to SEAEMC for the purchase by our company of certain aviation equipment from SEAEMC and the lease
of buildings and equipment, respectively, in 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(vii)&nbsp;Ticket Sales</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;12, 2005, our company entered into certain sales agency services agreements with
several subsidiaries of CEA Holdings regarding the sales of our air tickets by such subsidiaries of
CEA Holding as our sales agents and the provision of complementary services for a term of three
years commencing from July&nbsp;1, 2005, subject to renewal. Under such agreements, the sales agents
charge commissions at rates with reference to those prescribed by the CAAC and the International
Aviation Transportation Association, as determined following arm&#146;s length negotiations. Such
commissions are payable monthly in arrears. The parties will perform an annual review of the then
prevailing commission rate before the 31st of December in each calendar year, and agree on any
required adjustments to such commission rate in respect of the next calendar year. For the year
ended December&nbsp;31, 2005, the aggregate amount of commissions we paid to those sales agents for the
sales agency services was approximately RMB81&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(C)&nbsp;Property Leases</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our company and EA Group had entered into an office lease agreement dated January&nbsp;7, 1997 in
respect of office premises located at 2550 Hong Qiao Road, Shanghai, China. The lease term is one
year and renewable by the parties, subject to mutual agreement with respect to rental terms. The
total rental payment is approximately RMB158,342 per month. In addition, our company and EA Group
had entered into a staff dormitory lease agreement dated December&nbsp;31, 1996, pursuant to which EA
Group had agreed to enter into lease arrangements with our employees for dormitories in Shanghai,
Anhui Province, Shandong Province and Jiangxi Province. The term of the lease and the rental
payments are set in accordance with Chinese regulations and the rate prescribed by the Shanghai
Municipal Government. CEA Holding has assumed EA Group&#146;s rights and liabilities under those lease
agreements after its establishment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;12, 2005, we entered into a property leasing agreement with CEA Holding, CEA Northwest
and CEA Yunnan for a term of three years, subject to renewal of another three years. Pursuant to
this property leasing agreement, we leased from CEA Holding, for our use in daily airlines and
other business operations: (i)&nbsp;a maximum of altogether 33 land properties owned by CEA Holding
through, and registered in the name of, CEA Northwest, covering an aggregate site area of
approximately 692,539 square meters located primarily in Xi&#146;an, Xianyang and Yongdeng, together
with a total of 225 building properties and related construction, infrastructure and facilities
occupying an aggregate floor area of approximately 269,148 square metres; and (ii)&nbsp;a maximum of
altogether seven land properties owned by CEA Holding through, and registered in the name of, CEA
Yunnan, covering an aggregate site area of approximately 420,768 square meters primarily located in
Kunming, together with a total of 81 building properties and related construction, infrastructure
and facilities occupying an aggregate floor area of approximately 457,722 square meters. Under the
property leasing agreement, our company shall pay annual rentals in an aggregate amount of
approximately RMB55&nbsp;million to CEA Holding. The rentals are payable half-yearly in advance, and are
subject to review and adjustments provided that the adjustments shall not exceed the applicable
inflation rates
</DIV>

<P align="center" style="font-size: 10pt">-60-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">published by the relevant local PRC authorities. During 2005, we have paid a rental of RMB 28
million under this property leasing agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(D)&nbsp;Aircraft Leases</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the year ended December&nbsp;31, 2005, our company received from CEA Wuhan RMB41&nbsp;million
under an aircraft operating lease arrangement relating to two B737-300 aircraft.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(E)&nbsp;Guarantee by CEA Holding</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As at December&nbsp;31, 2005, unsecured long-term bank loans of our company with aggregate amount
of RMB2,123&nbsp;million are guaranteed by CEA Holding (see Note 29 to our audited consolidated
financial statements.)
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>C. Interests of Experts &#038; Counsel</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;8. Financial Information.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>A. Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should read &#147;Item&nbsp;18-Financial Statements&#148; for information regarding our audited
consolidated financial statements and other financial information.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>B. Legal Proceedings</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are involved in routine litigation and other proceedings in the ordinary course of our
business. We do not believe that any of these proceedings are likely to be material to our business
operations, financial condition or results of operations. In 2005, family members of certain
victims in the air crash of an aircraft of CEA Yunnan that occurred on November&nbsp;21, 2004 in Baotou,
Neimougu, the PRC, instituted a legal action against us in a court in the United States to seek
unspecified damages. We have engaged legal counsel to vigorously defend the proceedings. The
proceedings are still at an early stage and we believe, based on professional advice, it is
unlikely that there will be any material adverse effect on our financial position. We are not aware
of any other material proceedings currently pending against our company.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>C. Dividends and Dividend Policy</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the fiscal year ended December&nbsp;31, 2003, our board of directors recommended no dividend.
For the fiscal year ended December&nbsp;31, 2004, our shareholder&#146;s meeting approved the payment of a
cash dividend of RMB0.02 per share. For the fiscal year ended December&nbsp;31, 2005, our board of
directors recommended no dividend. The declaration and payment of dividends for years following
2005 will depend upon our financial results, our shareholders&#146; interests, general business
conditions and strategies, our capital requirements, contractual restrictions on the payment of
dividends by us to our shareholders, and other factors our directors may deem relevant. Holders of
our H shares will receive the equivalent amount of cash dividend declared in Renminbi, if any,
based on the foreign exchange conversion rate published by the People&#146;s Bank of China, or PBOC, on
the date of the distribution of the cash dividend.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>D. Significant Post Financial Statements Events</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For information relating to the increase of our equity interest in CEA Wuhan, see section
headed &#147;Item&nbsp;4. Information on the Company &#151; History and Development of the Company&#148;.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, since January&nbsp;1, 2006, we have contracted to purchase 16 Boeing 737 NG series
aircraft (with engines) and 30 Airbus A320 series aircraft(with engines), for delivery over the
next few years.
</DIV>
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9. The Offer and Listing.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The principal trading market for our H shares is the Hong Kong Stock Exchange. The ADSs, each
representing 100 H shares, have been issued by The Bank of New York as the Depositary and are
listed on the New York Stock Exchange under the symbol &#147;CEA&#148;. Prior to our initial public offering
and subsequent listings on the New York Stock Exchange and the Hong Kong Stock Exchange on February
4 and 5, 1997, respectively, there was no market for our H shares or ADSs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below sets forth certain market information relating to our H shares and ADSs in
respect of the period from 2001 to June 30, 2006.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Price per H Share</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Price per ADS</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">(HK$)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">(US$)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">High</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Low</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">High</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Low</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.03</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.74</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.81</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">February&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">April&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">May&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.98</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">June&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.10</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2005 and June&nbsp;30, 2006, there were 1,566,950,000 H shares issued and
outstanding. As of December&nbsp;31, 2005 and June&nbsp;30, 2006,
there were, respectively, 39 and 36
registered holders of American depositary receipts evidencing
1,495,400 and 1,542,960 ADSs. Since
certain of the ADSs are held by nominees, the above number may not be representative of actual
number of U.S. beneficial holders of ADSs or the number of ADSs beneficially held by U.S. persons.
The depositary for the ADSs is The Bank of New York. A total of
3,300,000,000 domestic ordinary shares were
also outstanding as of June&nbsp;30, 2006.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;10. Additional Information.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>A. Share Capital</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>B. Memorandum and Articles of Association</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The section entitled &#147;Description of Capital Stock&#148; contained in our registration statement on
Form F-1 (File No.&nbsp;333-6260) filed with the Securities and Exchange Commission is hereby
incorporated by reference.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>C. Material Contracts</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For a summary of any material contract entered into by our company or any of its consolidated
subsidiaries outside of the ordinary course of business during the last two years, see &#147;Item&nbsp;4.
Information on the Company&#148;, &#147;Item&nbsp;5. Operating and Financial Review and Prospects&#148; and &#147;Item&nbsp;7.
Major shareholders and Related Party Transactions&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we entered into the following agreements to purchase aircraft, which are filed
with this annual report as exhibits:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an aircraft purchase agreement, dated as of October&nbsp;9, 2004, between our
company and Airbus SAS regarding the purchase of 20 Airbus A330-300 aircraft;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an amendment to an aircraft purchase agreement, dated as of April&nbsp;21,
2005, between our company and Airbus SAS regarding the purchase of 15 Airbus A320 series
aircraft;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an aircraft purchase agreement, dated as of August&nbsp;8, 2005, between our
company and The Boeing Company regarding the purchase of 15 Boeing 787 aircraft (with
engines);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an aircraft purchase agreement, dated as of December&nbsp;20, 2005, as amended
by a supplemental agreement dated as of April&nbsp;10, 2006, between our company and The
Boeing Company regarding the purchase of 20 Boeing 737 NG series aircraft (with
engines); and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an amendment to an aircraft purchase agreement, dated as of June&nbsp;26, 2006, between our
company and Airbus SAS regarding the purchase of 30 Airbus A320 aircraft (with engines).</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>D. Exchange Controls</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Renminbi currently is not a freely convertible currency. SAFE, under the authority of PBOC,
controls the conversion of Renminbi into foreign currency. Prior to January&nbsp;1, 1994, Renminbi could
be converted to foreign currency through the Bank of China or other authorized institutions at
official rates fixed daily by SAFE. Renminbi could also be converted at swap centers open to
Chinese enterprises and foreign invested enterprises, or FIEs, subject to SAFE approval of each
foreign currency trade, at exchange rates negotiated by the parties for each transaction. Effective
January&nbsp;1, 1994, a unitary exchange rate system was introduced in China, replacing the dual-rate
system previously in effect. In connection with the creation of a unitary exchange rate, the
Chinese government announced the establishment of an inter-bank foreign exchange market, the China
Foreign Exchange Trading System, or CFETS, and the phasing out of the swap centers. Effective
December&nbsp;1, 1998, the swap centers were abolished by the Chinese government.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;21, 2005, the PRC government changed its decade-old policy of pegging the value of
Renminbi to the U.S. dollar. Under the new policy, Renminbi is permitted to fluctuate within a
narrow and managed band against a basket of certain foreign currencies. This change in policy has
resulted in a significant appreciation of Renminbi against the U.S. dollar. While the
international reaction to Renminbi revaluation has generally been positive, there remains
significant international pressure on the PRC government to adopt an even more flexible currency
policy, which could result in a further and more significant appreciation of Renminbi against the
U.S. dollar.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, under existing foreign exchange regulations, domestic enterprises operating in
China must price and sell their goods and services in China in Renminbi. Any foreign exchange
received by such enterprises must be sold to authorized foreign exchange banks in China. A
significant portion of our revenue and operating expenses are denominated in Renminbi, while a
portion of our revenue, capital expenditures and debts are denominated in U.S. dollars and other
foreign currencies. Renminbi is currently freely convertible under the current account, which
includes dividends, trade and service-related foreign currency transactions, but not under the
capital account, which includes foreign direct investment, unless the prior approval of the SAFE,
is obtained. As a foreign investment enterprise approved by the MOC, we can purchase foreign
currency without the approval of SAFE for settlement of current account transactions, including
payment of dividends, by providing commercial documents evidencing these transactions. We can also
retain foreign exchange in our current accounts, subject to a maximum amount approved by SAFE, to
satisfy foreign currency liabilities or to pay dividends. However, the relevant Chinese government
authorities may limit or eliminate our ability to purchase and retain foreign currencies in the
future. Foreign currency transactions under the capital account are still subject to limitations
and require approvals from SAFE. This may affect our ability to obtain foreign exchange through
debt or equity financing, including by means of loans or capital contributions. We cannot assure
you that we will be able to obtain sufficient foreign exchange to pay dividends or satisfy our
foreign exchange liabilities.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>E. Taxation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The taxation of income and capital gains of holders of H shares or ADSs is subject to the laws
and practices of China and of jurisdictions in which holders of H shares or ADSs are resident or
otherwise subject to tax. The following summary of certain relevant taxation provisions is based on
current law and practice, is subject to change and does not constitute legal or tax advice. The
discussion does not deal with all possible tax consequences relating to an investment in the H
shares or ADSs. In particular, the discussion does not address the tax consequences under state,
local and other laws, such as non-U.S. federal laws. Accordingly, you should consult your own tax
adviser regarding the tax consequences of an investment in the H shares and ADSs. The discussion is
based upon laws and relevant interpretations in effect as of the date of this annual report, all of
which are subject to change.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Taxation &#151; Hong Kong</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The taxation of income and capital gains of holders of ordinary shares or ADSs is subject to
the laws and practices of Hong Kong and of jurisdictions in which holders of ordinary shares or
ADSs are resident or otherwise subject to tax. The following summary of certain relevant taxation
provisions under Hong Kong law is based on current law and practice, is subject to changes therein
and does not constitute legal or tax advice. The discussion does not deal with all possible tax
consequences relating to an investment in the ordinary shares or ADSs. Accordingly, each
prospective investor (particularly those subject to special tax rules, such as banks, dealers,
insurance companies, tax-exempt entities and holders of 10% or more of our voting capital stock)
should consult its own tax advisor regarding the tax consequences of an investment in the ordinary
shares and ADSs. The discussion is based upon laws and relevant interpretations thereof in effect
as of the date of this annual report, all of which are subject to change.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Tax on Dividends</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the current practices of the Hong Kong Inland Revenue Department, no tax is payable in
Hong Kong in respect of dividends received by the recipient.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Profits Tax</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No tax is imposed in Hong Kong in respect of capital gains from the sale of property (such as
the H shares and ADSs). Trading gains from the sale of property by persons carrying on a trade,
profession or business in Hong Kong where such gains are derived from or arise in Hong Kong from
such trade, profession or business will be chargeable to Hong Kong profits tax which is currently
imposed at the rate of 17.5% on corporations and on individuals at a maximum rate of 16.0% with
effect from April&nbsp;1, 2004. Gains from sales of the ordinary shares effected on the Hong Kong Stock
Exchange may be considered to be derived from or arise in Hong Kong. Liability for Hong Kong
profits tax may thus arise in respect of trading gains from sales of ordinary shares or ADSs
realized by persons carrying on a business of trading or dealing in securities in Hong Kong.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Stamp Duty</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Hong Kong stamp duty, currently charged at the rate of HK$1 per HK$1,000 or part thereof on
the higher of the consideration for or the value of the ordinary shares, will be payable by the
purchaser on every purchase and by the seller on every sale of ordinary shares (i.e., a total of
HK$2 per HK$1,000 or part thereof is currently payable on a typical sale and purchase transaction
involving ordinary shares). In addition, a fixed duty of HK$5 is currently payable on any
instrument of transfer of ordinary shares. The withdrawal of ordinary shares upon the surrender of
ADSs, and the issuance of ADSs upon the deposit of ordinary shares, will also attract stamp duty at
the rate described above for sale and purchase transactions unless the withdrawal or deposit does
not result in a change in the beneficial ownership of the ordinary shares under Hong Kong law, in
which case only a fixed duty of HK$5 is payable on the transfer. The issuance of the ADSs upon the
deposit of ordinary shares issued directly to the depositary or for the account of the depositary
does not attract stamp duty. No Hong Kong stamp duty is payable upon the transfer of ADSs outside
Hong Kong.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Estate Duty</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The ordinary shares are Hong Kong property under Hong Kong law, and accordingly such ordinary
shares may be subject to estate duty on the death of the beneficial owner of the ordinary shares
(regardless of the place of the owner&#146;s residence, citizenship or domicile). Hong Kong estate duty
is imposed on a progressive scale from 5% to 15%. The rate of and the threshold for estate duty
has, in the past, been adjusted on a fairly regular basis. No estate duty is payable when the
aggregate value of the dutiable estate does not exceed HK$7.5&nbsp;million, and the maximum rate of duty
of 15% applies when the aggregate value of the dutiable estate exceeds HK$10.5&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Estate duty was abolished effective February&nbsp;11, 2006. Estates of persons who passed away on
or after February&nbsp;11, 2006 are not subject to estate duty. The estate duty chargeable in respect of
deaths occurring between the period from July&nbsp;15, 2005 to February&nbsp;10, 2006 with the taxable estate
value exceeding HK$7.5&nbsp;million is reduced to a nominal duty of HK$100.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Taxation &#151; China</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a general summary of certain Chinese tax consequences of the acquisition,
ownership and disposition of the H Shares and ADSs. This summary does not purport to address all
material tax consequences of the ownership of Shares or ADSs, and does not take into account the
specific circumstances of any particular investors. This summary is based on the tax laws of China
as in effect on the
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">date of this annual report, as well as on the U.S.-China Treaty, all of which are subject to
change (or changes in interpretation), possibly with retroactive effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, and taking into account the earlier assumptions, for Chinese tax purposes, holders
of ADRs evidencing ADSs will be treated as the owners of the H Shares represented by those ADSs,
and exchanges of H Shares for ADSs, and ADSs for H Shares, will not be subject to Chinese tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Taxation of Dividends by China</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Individual Investors</I>. The Provisional Regulations of China Concerning Questions of Taxation on
Enterprises Experimenting with the Share System, or the Provisional Regulations, provide that
dividends from Chinese companies are ordinarily subject to a Chinese withholding tax levied at a
flat rate of 20%. However, the Chinese State Tax Bureau issued, on July&nbsp;21, 1993, a Notice
Concerning the Taxation of Gains on Transfer and Dividends from Shares (Equities) Received by
Foreign Investment Enterprises, Foreign Enterprises and Foreign Individuals, or the Tax Notice,
which provides that dividends from a Chinese company on shares listed on an overseas stock
exchange, or Overseas Shares, such as H Shares (including H Shares represented by ADSs), would not
be subject to Chinese withholding tax. The relevant tax authority has not collected withholding tax
on dividend payments on Overseas Shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendments to the individual Income Tax Law of the PRC, or the Amendments, were promulgated on
October&nbsp;31, 1993 and became effective on January&nbsp;1, 1994. The Amendments provide that any
provisions of prior administrative regulations concerning individual income tax which contradict
the Amendments are superseded by the Amendments. The Amendments and the amended Individual Income
Tax Law can be interpreted to mean that foreign individuals are subject to a withholding tax on
dividends received from a Chinese company at a rate of 20% unless such income is specifically
exempted from individual income tax by the financial authority of the State Council. However, in a
letter dated July&nbsp;26, 1994 to the State Commission for Restructuring the Economic System, the State
Securities Commission and the China Securities Regulatory Commission, the State Tax Bureau
confirmed the temporary tax exemption set forth in the Tax Notice for dividends received from a
Chinese company listed overseas. In the event this letter is withdrawn, a 20% tax may be withheld
on dividends in accordance with the Provisional Regulations, the Amendments, and the Individual
Income Tax law of China. Such withholding tax may be reduced pursuant to an applicable double
taxation treaty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Enterprises</I>. The Provisional Regulations provide that dividends from Chinese companies are
ordinarily subject to a Chinese withholding tax levied at a flat rate of 20%. However, according to
the Tax Notice, a foreign enterprise with no permanent establishment in China receiving dividends
paid on a Chinese company&#146;s Overseas Shares temporarily will not be subject to the 20% withholding
tax. If such withholding tax becomes applicable in the future, the rate could be reduced or
eliminated pursuant to an applicable double taxation treaty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Tax Treaties</I>. Non-Chinese investors resident in countries which have entered into
double-taxation treaties with China may be entitled to a reduction of the withholding tax imposed
on the payment of dividends to non-Chinese investors of our company. China currently has
double-taxation treaties with a number of other countries, including Australia, Canada, France,
Germany, Japan, Malaysia, the Netherlands, Singapore, the United Kingdom and the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the U.S.-China Treaty, China may tax a dividend paid by our company to a U.S. holder of
H shares or ADSs only up to a maximum of 10% of the gross amount of such dividend.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Taxation of Capital Gains by China</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Tax Notice provides that gains realized upon the sale of Overseas Shares are not subject
to taxes on capital gains. Although the Ministry of Finance has been empowered to collect a tax of
20% on gains derived from the sale of equity shares, a joint notice issued in March&nbsp;1996 by the
Ministry of Finance and the State Tax Bureau indicated that no capital gains tax would be imposed
on gains from the sale of shares until the Ministry of Finance and the State Tax Bureau promulgate
new rules. Therefore, during 1996 to 2001, holders of H Shares or ADSs were not subject to taxation
on gains realized upon the sale or disposition of such shares. After 2001, holders of H Shares or
ADSs could become subject to a 20% capital gains tax, unless reduced or eliminated pursuant to an
applicable double taxation treaty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the U.S.-China Treaty, China may only tax gains from the sale or disposition by a U.S.
holder of H shares or ADSs representing an interest in the company of 25% or more.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Chinese Stamp Tax</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chinese stamp tax imposed on the transfer of shares of Chinese publicly traded companies under
the Share System Tax Regulations should not apply to the acquisition or disposition by non-Chinese
investors of H Shares or ADSs outside of China by virtue of the Provisional Regulations of The
People&#146;s Republic of China Concerning Stamp Tax, which provides that Chinese stamp tax is imposed
only on documents executed or received within China or that should be considered as having been
executed or received within China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>United States Federal Income Taxation.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>United States Federal Income Taxation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This section describes the material United States federal income tax consequences of the
ownership and disposition of H shares or ADSs. This section applies to you only if you are a U.S.
holder, as defined below, and you hold your H shares or ADSs as capital assets for United States
federal income tax purposes. This section does not apply to you if you are a member of a special
class of holders subject to special rules, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a dealer in securities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a tax-exempt organization;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a life insurance company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a person liable for alternative minimum tax;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a person that actually or constructively owns 10% or more of our voting stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a person that holds H shares or ADSs as part of a straddle or a hedging
or conversion transaction; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a person whose functional currency is not the U.S. dollar.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This section is based on the Internal Revenue Code of 1986, as amended, its legislative
history, existing and proposed regulations, published rulings and court decisions, all as currently
in effect. These laws
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">are subject to change, possibly on a retroactive basis. In addition, this section is based in
part upon the representations of the Depositary and the assumption that each obligation in the
Deposit Agreement and any related agreement will be performed in accordance with its terms.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You are a U.S. holder if you are a beneficial owner of H shares or ADSs and you are:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a citizen or resident of the United States;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a domestic corporation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an estate whose income is subject to United States federal income tax
regardless of its source; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a trust if a United States court can exercise primary supervision over
the trust&#146;s administration and one or more United States persons are authorized to
control all substantial decisions of the trust.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>You should consult your own tax advisor regarding the United States federal, state and local
and other tax consequences of owning and disposing of H shares or ADSs in your particular
circumstances.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, and taking into account the earlier assumptions, for United States federal income
tax purposes, if you hold ADRs evidencing ADSs, you will be treated as the owner of the H shares
represented by those ADRs. Exchanges of H shares for ADRs, and ADRs for H shares, generally will
not be subject to the United States federal income tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Taxation of Dividends</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the United States federal income tax laws, and subject to the passive foreign investment
company, or PFIC, rules discussed below, if you are a U.S. holder, the gross amount of any
dividend we pay out of our current or accumulated earnings and profits (as determined for United
States federal income tax purposes) is subject to United States federal taxation. If you are a
noncorporate U.S. holder, dividends paid to you in taxable years beginning before January&nbsp;1, 2011
that constitute qualified dividend income will be taxable to you at a maximum tax rate of 15%
provided that you hold the H shares or ADSs for more than 60&nbsp;days during the 121-day period
beginning 60&nbsp;days before the ex-dividend date and meet other holding period requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The dividend is taxable to you when you, in the case of H shares, or the Depositary, in the
case of ADSs, receive the dividend, actually or constructively. The dividend will not be eligible
for the dividends-received deduction generally allowed to United States corporations in respect of
dividends received from other United States corporations. The amount of the dividend distribution
that you must include in your income will be the U.S. dollar value of the Hong Kong dollar payments
made, determined at the spot Hong Kong dollar/U.S. dollar rate on the date the dividend
distribution is includible in your income, regardless of whether the payment is in fact converted
into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations
during the period from the date you include the dividend payment in income to the date you convert
the payment into U.S. dollars will be treated as ordinary income or loss and will not be eligible
for the special tax rate applicable to qualified dividend income. This gain or loss generally will
be from sources within the United States for foreign tax credit limitation purposes. Distributions
in excess of current and accumulated earnings and profits (as determined for United States federal
income tax purposes) will be treated as a non-taxable return of capital to the extent of your basis
in the H shares or ADSs and thereafter as capital gain. Dividends will be income from sources
outside the United States, but dividends paid in taxable years beginning before January&nbsp;1, 2007
generally will be &#147;passive&#148; or &#147;financial services&#148; income, and dividends paid in taxable years
beginning after December&nbsp;31, 2006 will, depending on your
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">circumstances, be &#147;passive&#148; or &#147;general&#148; income which, in either case, is treated separately
from other types of income for purposes of computing the foreign tax credit allowable to you.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Taxation of Capital Gains</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the PFIC rules discussed below, if you are a U.S. holder and you sell or otherwise
dispose of your H shares or ADSs, you will recognize capital gain or loss for United States federal
income tax purposes equal to the difference between the U.S. dollar value of the amount that you
realize and your tax basis, determined in U.S. dollars, in your H shares or ADSs. Capital gain of
a noncorporate U.S. holder that is recognized in taxable years beginning before January&nbsp;1, 2011 is
generally taxed at a maximum rate of 15% where the property is held more than one year. The
deductibility of capital losses is subject to limitations. The gain or loss will generally be from
sources within the United States for foreign tax credit limitation purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>PFIC Rules</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that H shares or ADSs should not be treated as stock of a PFIC for United States
federal income tax purposes, but this conclusion is a factual determination that is made annually
and thus may be subject to change. In general, if you are a U.S. holder, we will be a PFIC with
respect to you if for any taxable year in which you held our H shares or ADSs:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>at least 75% of our gross income for the taxable year is passive income;
or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>at least 50% of the value, determined on the basis of a quarterly
average, of our assets is attributable to assets that produce or are held for the
production of passive income.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Passive income generally includes dividends, interest, royalties, rents (other than certain
rents and royalties derived in the active conduct of a trade or business), annuities and gains from
assets that produce passive income. If a foreign corporation owns at least 25% by value of the
stock of another corporation, the foreign corporation is treated for purposes of the PFIC tests as
owning its proportionate share of the assets of the other corporation, and as receiving directly
its proportionate share of the other corporation&#146;s income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we are treated as a PFIC, and you are a U.S. holder that did not make a mark-to-market
election, as described below, you will be subject to special rules with respect to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any gain you realize on the sale or other disposition of your H shares or
ADSs; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any excess distribution that we make to you (generally, any distributions
to you during a single taxable year that are greater than 125% of the average annual
distributions received by you in respect of the H shares or ADSs during the three
preceding taxable years or, if shorter, your holding period for the H shares or ADSs).</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under these rules:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the gain or excess distribution will be allocated ratably over your
holding period for the H shares or ADSs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the amount allocated to the taxable year in which you realized the gain
or excess distribution will be taxed as ordinary income;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the amount allocated to each prior year, with certain exceptions, will be
taxed at the highest tax rate in effect for that year; and</TD>
</TR>

</TABLE>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the interest charge generally applicable to underpayments of tax will be
imposed in respect of the tax attributable to each such year.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you own H shares or ADSs in a PFIC that are treated as marketable stock, you may make a
mark-to-market election. If you make this election, you will not be subject to the PFIC rules
described above. Instead, in general, you will include as ordinary income each year the excess, if
any, of the fair market value of your H shares or ADSs at the end of the taxable year over your
adjusted basis in your H shares or ADSs. These amounts of ordinary income will not be eligible for
the favorable tax rates applicable to qualified dividend income on long-term capital gains. You
will also be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted
basis of your H shares or ADSs over their fair market value at the end of the taxable year (but
only to the extent of the net amount of previously included income as a result of the
mark-to-market election). Your basis in the H shares or ADSs will be adjusted to reflect any such
income or loss amounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, notwithstanding any election you make with regard to the H shares or ADSs,
dividends that you receive from us will not constitute qualified dividend income to you if we are a
PFIC either in the taxable year of the distribution or the preceding taxable year. Moreover, your
H shares or ADSs will be treated as stock in a PFIC if we were a PFIC at any time during your
holding period in your H shares or ADSs, even if we are not currently a PFIC. For purposes of this
rule, if you make a mark-to-market election with respect to your H shares or ADSs, you will be
treated as having a new holding period in your H shares or ADSs beginning on the first day of the
first taxable year beginning after the last taxable year for which the mark-to-market election
applies. Dividends that you receive that do not constitute qualified dividend income are not
eligible for taxation at the 15% maximum rate applicable to qualified dividend income. Instead,
you must include the gross amount of any such dividend paid by us out of our accumulated earnings
and profits (as determined for Untied States federal income tax purposes) in your gross income, and
it will be subject to tax at rates applicable to ordinary income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you own H shares or ADSs during any year that we are a PFIC, you must file Internal Revenue
Service Form&nbsp;8621.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>F. Dividends and Paying Agents</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>G. Statement by Experts</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>H. Documents on Display</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may read and copy documents referred to in this annual report on Form 20-F that have been
filed with the U.S. Securities and Exchange Commission at the SEC&#146;s public reference room located
at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms and their copy charges. The SEC also maintains a web site
at http://www.sec.gov that contains reports, proxy statements and other information regarding
registrants that file electronically with the SEC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The SEC allows us to &#147;incorporate by reference&#148; the information we file with the SEC. This
means that we can disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered to be part of this
annual report on Form 20-F.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>I. Subsidiary Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;11. Quantitative and Qualitative Disclosures About Market Risk.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Interest Rate Risk</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our debts include both fixed-rate and variable-rate long-term loans and other loans. As a
result, we are subject to the market risk of fluctuation of interest rates which may affect the
estimated fair value of our debt liabilities or result in losses in cash flow. We use interest rate
swaps to reduce risks related to changes in market interest rates. As of December&nbsp;31, 2005, the
notional amount of the outstanding interest rate swap agreements was approximately US$661&nbsp;million.
These interest rate swap agreements will expire between 2006 and 2016. The carrying amounts, the
estimated fair value and the effect as a result of the change of the average interest rate on our
long-term and other loans as of December&nbsp;31, 2005 are set forth as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>RMB&#146;000</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Carrying amounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,611,920</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Estimated fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,044,271</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in the estimated fair value resulting from an increase of the average interest rate by 1%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">295,917</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase in the estimated fair value resulting from a decrease of the average interest rate by 1%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">267,635</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Foreign Currency Exchange Rate Risk</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we derive most of our income from China in Renminbi, our financial lease obligations
as well as certain bank loans are denominated in US dollars, Japanese yen or Euro. Pursuant to
current foreign exchange regulations in China, we may retain our foreign currency earnings
generated from ticket sales made in our overseas offices subject to the approval of SAFE. We use
forward contracts to reduce risks related to changes in currency exchange rates in respect of
ticket sales and expenses denominated in foreign currencies. These currency forward contracts will
expire between 2007 and 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to IFRS, our monetary assets and liabilities denominated in foreign currencies are
required to be translated into Renminbi at the year end at exchange rates announced by PBOC. Any
fluctuation of the exchange rates between Renminbi and foreign currencies may materially and
adversely affect our financial condition and results of operations. Following the measures
introduced by the PRC government in July&nbsp;2005 to reform the
Renminbi exchange rate regime, Renminbi has appreciated significantly against certain foreign currencies, including U.S. dollar,
Japanese yen and Euro. The following table shows the effect on our profit and loss account as a
result of the impact on our non-Renminbi denominated monetary assets and liabilities as of December
31, 2005 as a consequence of a fluctuation in value of the following major foreign currencies.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Profit and Loss Account</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Decrease/increase by</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>RMB&#146;000</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">US dollar appreciates/ (depreciates)&nbsp;by 1%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,552</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japanese yen appreciates/ (depreciates)&nbsp;by 1%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,699</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Euro appreciates/ (depreciates)&nbsp;by 1%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">240</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;12. Description of Securities Other than Equity Securities.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<P align="center" style="font-size: 10pt">-71-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>

<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;13. Defaults, Dividend Arrearages and Delinquencies.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>
<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;14. Material Modifications to the Rights of Security Holders and Use of Proceeds.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Material Modifications to the Rights of Security Holders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our shareholders have approved certain amendments to our articles of association at the annual
general meeting for the year of 2004 held on June&nbsp;30, 2005 in Shanghai, China. Set forth below is
a summary of those amendments that involve modification to the rights of our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendments to Article&nbsp;52. Pursuant to the amendments, a controlling shareholder or an actual
controlling person of our company owes fiduciary duties to our public shareholders. A controlling
shareholder may not: (1)&nbsp;prejudice the legal rights and interests of our public shareholders by
means of, among other things, any connected transaction, distribution of profits, restructuring of
assets, external investment, appropriation of funds or loan guarantee; or (2)&nbsp;otherwise prejudice
the interests and rights of our public shareholders by abusing its controlling position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendments to Article&nbsp;60. Pursuant to the amendments, a proposal for consideration at a
shareholders&#146; general meeting must meet the following requirements: (1)&nbsp;its content does not
contravene the laws, administrative regulations and the articles of association and falls within
the scope of the duties and responsibilities of the shareholders&#146; general meeting; (2)&nbsp;there is
definite topic(s) and specific matter(s) for resolution; and (3)&nbsp;it is submitted or delivered to
the board of directors in writing. The board of directors shall examine each proposal for
consideration at a shareholders&#146; general meeting in the best interests of our company and
shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New Article&nbsp;64(A). This new article provides that the board of directors shall determine the
record date with respect to a shareholder&#146;s general meeting. The shareholders recorded on our
register of shareholders as of the record date are entitled to attend the relevant shareholder&#146;s
general meeting. The shareholders who intend to attend a shareholders&#146; general meeting must
properly register by such date and at such venue as designated in the relevant notice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendments to Article&nbsp;72. Pursuant to the amendments, the shareholders&#146; general meeting shall
take a vote on each of the matters for its consideration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendments to Article&nbsp;73. Pursuant to the amendments, our company shall increase the
attendance of public shareholders at the shareholders&#146; general meetings by various means, including
the use of modern information technologies (for example, online voting facilities), provided that
(1)&nbsp;it is permissible under all applicable laws, rules and administrative regulations and/or is
acceptable to relevant regulatory authorities; and (2)&nbsp;the legality and validity of a shareholders&#146;
general meeting is assured. Moreover, the board of directors, independent directors and qualified
shareholders may solicit proxies from shareholders to vote at a shareholders&#146; general meeting.
Adequate information should be furnished to the shareholders whose proxies are solicited.
Information so furnished must be previously published information which remains accurate and is not
misleading at the time it is quoted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New Article&nbsp;78(A). This new article provides that, for certain matters, an approval by votes
constituting more than 50% of the voting rights held by public shareholders at the shareholders&#146;
general meeting shall be required. Such matters include: (1)&nbsp;any follow-on public offering; (2)
any restructuring of material assets where the total consideration for the assets acquired is equal
to or exceeds 120% of the audited
</DIV>

<P align="center" style="font-size: 10pt">-72-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">book value of such assets; (3)&nbsp;any repayment of debts owed by a shareholder to our company
with our equity shares; (4)&nbsp;any overseas listing of a subsidiary of our company that has a material
effect on our company; and (5)&nbsp;any matters relating to the development of our company that have a
material effect on the interests and rights of the public shareholders. If a shareholders&#146; general
meeting is convened in connection with any of the above matters, our company shall provide the
shareholders with online voting facilities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New Article&nbsp;78(B). This new article provides that, under any of the circumstances enumerated
in Article&nbsp;78(A), after giving a notice of a meeting of shareholders, our company shall publish
such notice within three days after the relevant record date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendments to Article&nbsp;81. Pursuant to the amendments, public announcements shall be made with
respect to the resolutions of the shareholders&#146; general meeting in accordance with relevant
regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New Article&nbsp;97(A). This new article provides that any provision of guarantee by our company
for the benefits of any other person requires, among other things, approval by the shareholders&#146;
general meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New Article&nbsp;106(A). This new article provides that our board of directors must have at least
three independent directors and that independent directors must otherwise represent at least
one-thirds of all directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New Article&nbsp;106(B). This new article provides that shareholder(s) individually or jointly
holding more than 1% of the outstanding shares of our company may nominate candidates for election
at a shareholders&#146; general meeting as independent directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendments to Article&nbsp;108. Pursuant to the amendments, our company shall have a department of
investor relations that is specially responsible for strengthening the communications with
shareholders, especially public shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A copy of the amended articles of association is attached as an exhibit to this annual report.
</DIV>

<P align="center" style="font-size: 10pt">-73-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Use of Proceeds</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;15. Controls and Procedures.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June 2006, in connection with
their audit of our consolidated financial statements as of and for the year ended December 31, 2005, our independent
auditors, PricewaterhouseCoopers, identified to our management and audit committee certain internal control deficiencies in
our internal control over financial reporting that they considered to constitute material weaknesses in our internal
control over financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The internal control deficiencies
that were identified as material weaknesses include: (1) lack of sufficient accounting personnel with sufficient U.S. GAAP
and IFRS technical expertise, including insufficient complement of financial reporting personnel commensurate with the
company&#146;s financial reporting requirements and insufficient formalized and consistent finance and accounting policies and procedures to
detect instances of non-compliance with such existing policies and procedures; and (2) ineffective implementation of certain
procedures for the accounting, approval and disclosure of related party transactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PricewaterhouseCoopers further advised
the audit committee that the internal control deficiencies it
identified did not affect PricewaterhouseCoopers&#146; report on
our consolidated financial statements as of December 31, 2005 and for the year then ended included in this annual report.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management, including our
president and our chief financial officer, acknowledged that our
company&#146;s internal controls suffered from the internal
control deficiencies identified by PricewaterhouseCoopers. Our management are committed to remedy these deficiencies to
our company&#146;s internal controls and has been implementing a series of remedial measures, including, among other things: (1) providing
our accounting personnel with further training on the requirements of U.S. GAAP and IFRS to increase their familiarity with
those standards; and (2) enhancing the implementation of our procedures for the accounting, approval and disclosure of related
party transactions. In addition, our company established (i) a cash flow forecasting system and a cash needs budgeting system,
and (ii) a designated fund management department to monitor the liquidity and financing management. We will also be generally allocating
more human resources to the accounting and finance functions. Our company has engaged a special consultant to provide advice
in respect of U.S. GAAP and IFRS. We will continue to consult with external consultants and our independent auditors for ways
to make further improvements to our company&#146;s internal controls.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management, however, believes
that none of these internal control deficiencies has had a material effect on our financial condition or results of
operations or caused our financial statements as of and for the year ended December 31, 2005 to contain a material
misstatement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As required by Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, our company&#146;s management, including our president and our chief financial officer, is
responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934. As of December 31, 2005, an evaluation was performed under the
supervision and with the participation of management, including our president and our chief financial officer, of the effectiveness
of our company&#146;s disclosure controls and procedures. Based on that evaluation, our president and our chief financial officer concluded
that our company&#146;s disclosure controls and procedures as of December 31, 2005 were effective to ensure that material information
required to be disclosed in this annual report would be made known to
our company&#146;s management, including our president and our chief
financial officer, on a timely basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 404 of the Sarbanes-Oxley Act of 2002
will require us to include a management&#146;s internal control report with our annual report on Form 20-F for the fiscal year ending
December 31, 2006. Since 2004, in preparation for compliance with Section 404 of the Sarbanes-Oxley Act of 2002, and under
the supervision and with the participation of our management, including our president and our chief financial officer, we have
been conducting evaluations of, and designing and implementing processes to improve, our internal controls. We are currently still
reviewing our efforts to improve our internal controls and may in the future identify additional deficiencies to our internal controls. Should we
discover any additional deficiencies, we will take appropriate measures to correct or improve of our internal controls. See the
section headed &#147;Item 3. Key Information &#151; Risk Factors
&#151; Compliance with requirements under Section 404 of the
Sarbanes-Oxley Act of 2002&#148;.
</DIV>

<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16A. Audit Committee Financial Expert.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors has determined that Mr.&nbsp;Xie Rong, the chairman of our audit committee,
is an independent financial expert serving on our audit committee.
</DIV>
<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16B. Code of Ethics</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have adopted a code of ethics that applies to our directors, supervisors, president, chief
financial officer and other senior managers of our company. We have filed this code of ethics as
an exhibit to this annual report by way of incorporation by reference.
</DIV>
<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16C. Principal Accountant Fees and Services</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the aggregate audit fees, audit-related fees and tax fees of
our principal accountants and all other fees billed for products and services provided by our
principal accountants other than the audit fees, audit-related fees and tax fees for each of the
two years ended December&nbsp;31, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="17%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Audit Fees</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Audit-Related Fees</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Tax Fees</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Other Fees</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(RMB)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(RMB)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(RMB)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(RMB)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,093,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,684,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,859,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Before our principal accountants were engaged by our company or our subsidiaries to
render audit or non-audit services, the engagement was approved by our audit committee.
</DIV>
<DIV align="left">
<A name="124"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16D. Exemptions from the Listing Standards for Audit Committees.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="125"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="126"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART III</B>
</DIV>

<DIV align="left">
<A name="127"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;17. Financial Statements.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have elected to provide the financial statements and related information specified in Item
18 in lieu of Item&nbsp;17.
</DIV>
<DIV align="left">
<A name="128"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;18. Financial Statements.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is made to pages F-1 to F-90.
</DIV>

<P align="center" style="font-size: 10pt">-74-
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="129"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;19. Exhibits.</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>See Item&nbsp;18 for a list of the financial statements filed as part of this annual report.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Exhibits to this annual report:</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">-75-
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Exhibit&nbsp;Index</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Exhibits</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles of Association as amended on June&nbsp;30, 2005 (English translation).<SUP style="font-size: 85%; vertical-align: text-top"> </SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Specimen Certificate for the H Shares.<SUP style="font-size: 85%; vertical-align: text-top">(1) </SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Deposit Agreement among the Registrant, The Bank of New York, as depositary,
and Owners and Beneficial Owners from time to time of American Depositary
Receipts.<SUP style="font-size: 85%; vertical-align: text-top">(2) </SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Office Space Lease Agreement between our company and Eastern Air Group Company
(together with English translation).<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employee Housing Lease Agreement between our company and Eastern Air Group Company
(together with English translation).<SUP style="font-size: 85%; vertical-align: text-top">(1) </SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.9
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Aircraft Purchase Agreement, dated as of October&nbsp;9, 2004, between our company and
Airbus SAS.<SUP style="font-size: 85%; vertical-align: text-top"> (3)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.10
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No.&nbsp;9 to the A320 Purchase Agreement, dated as of April&nbsp;21, 2005, between
our company and Airbus SAS.<SUP style="font-size: 85%; vertical-align: text-top"> (3)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assets Transfer Agreement, dated as of May&nbsp;12, 2005, between our company, CEA
Holding, CEA Northwest and CEA Yunnan (English translation).<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Aircraft Purchase Agreement, dated as of August&nbsp;8, 2005, between our company and The
Boeing Company.<SUP style="font-size: 85%; vertical-align: text-top"> (4)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.13
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Aircraft Purchase Agreement, dated as of December&nbsp;20, 2005, as amended by a
supplemental agreement dated as of April&nbsp;10, 2006, between our company and The Boeing
Company.<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.14
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No. 10 to the A320 Purchase Agreement, dated as of June&nbsp;26, 2006, between our company and
Airbus SAS.<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">8.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">List of Subsidiaries (as of
June&nbsp;30, 2006).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Code of Ethics (English translation).<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">12.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of President pursuant to Rule&nbsp;13a-14(a).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">12.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Financial
Officer pursuant to Rule&nbsp;13a-14(a).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">13.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of President pursuant to Rule&nbsp;13a-14(b).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">13.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Financial
Officer pursuant to Rule&nbsp;13a-14(b).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(1) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to our Registration Statement on Form F-1 (File No.&nbsp;333-6260),
filed with the Securities and Exchange Commission on January&nbsp;9, 1997.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">

<TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(2) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to our Registration Statement on Form F-6 (File No.&nbsp;333-6284),
filed with the Securities and Exchange Commission with respect to American Depositary Shares
representing our H shares.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">

<TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to our annual report on Form 20-F (File No.&nbsp;001-14550), filed with
the Securities and Exchange Commission on June&nbsp;24, 2005.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">-76-
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">

<TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Portions of this document have been omitted pursuant to a confidential treatment request, and
the full, unredacted document has been separately submitted to the Securities and Exchange
Commission with a confidential treatment request.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">

<TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to our annual report on Form 20-F (File No.&nbsp;001-14550), filed with
the Securities and Exchange Commission on June&nbsp;28, 2004.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">-77-
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left">
<A name="130"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F
and that it has duly caused and authorized the undersigned to sign this annual report on its
behalf.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" valign="top" align="left">CHINA EASTERN AIRLINES CORPORATION LIMITED</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Li Fenghua</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Name: Li Fenghua
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title: Chairman of the Board of Directors</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Date:
July 7, 2006
</DIV>


<P align="center" style="font-size: 10pt">-78-
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="131"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Exhibit&nbsp;Index</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Exhibits</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles of Association as amended on June&nbsp;30, 2005 (English translation).<SUP style="font-size: 85%; vertical-align: text-top"> </SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Specimen Certificate for the H Shares.<SUP style="font-size: 85%; vertical-align: text-top">(1) </SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Deposit Agreement among the Registrant, The Bank of New York, as depositary,
and Owners and Beneficial Owners from time to time of American Depositary
Receipts.<SUP style="font-size: 85%; vertical-align: text-top">(2) </SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Office Space Lease Agreement between our company and Eastern Air Group Company
(together with English translation).<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employee Housing Lease Agreement between our company and Eastern Air Group Company
(together with English translation).<SUP style="font-size: 85%; vertical-align: text-top">(1) </SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.9
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Aircraft Purchase Agreement, dated as of October&nbsp;9, 2004, between our company and
Airbus SAS.<SUP style="font-size: 85%; vertical-align: text-top"> (3)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.10
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No.&nbsp;9 to the A320 Purchase Agreement, dated as of April&nbsp;21, 2005, between
our company and Airbus SAS.<SUP style="font-size: 85%; vertical-align: text-top"> (3)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assets Transfer Agreement, dated as of May&nbsp;12, 2005, between our company, CEA
Holding, CEA Northwest and CEA Yunnan (English translation).<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Aircraft Purchase Agreement, dated as of August&nbsp;8, 2005, between our company and The
Boeing Company.<SUP style="font-size: 85%; vertical-align: text-top"> (4)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.13
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Aircraft Purchase Agreement, dated as of December&nbsp;20, 2005, as amended by a
supplemental agreement dated as of April&nbsp;10, 2006, between our company and The Boeing
Company.<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.14
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No. 10 to the A320 Purchase Agreement, dated as of June&nbsp;26, 2006, between our company and
Airbus SAS.<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">8.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">List of Subsidiaries (as of
June&nbsp;30, 2006).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">11.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Code of Ethics (English translation).<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">12.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of President pursuant to Rule&nbsp;13a-14(a).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">12.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Financial
Officer pursuant to Rule&nbsp;13a-14(a).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">13.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of President pursuant to Rule&nbsp;13a-14(b).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">13.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Financial
Officer pursuant to Rule&nbsp;13a-14(b).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">

<TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to our Registration Statement on Form F-1 (File No.&nbsp;333-6260),
filed with the Securities and Exchange Commission on January&nbsp;9, 1997.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">

<TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to our Registration Statement on Form F-6 (File No.&nbsp;333-6284),
filed with the Securities and Exchange Commission with respect to American Depositary Shares
representing our H shares.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">

<TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to our annual report on Form 20-F (File No.&nbsp;001-14550), filed with
the Securities and Exchange Commission on June&nbsp;24, 2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">

<TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Portions of this document have been omitted pursuant to a confidential treatment request, and
the full, unredacted document has been separately submitted to the Securities and Exchange
Commission with a confidential treatment request.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">

<TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to our annual report on Form 20-F (File No.&nbsp;001-14550), filed with
the Securities and Exchange Commission on June&nbsp;28, 2004.</TD>
</TR>

</TABLE>




<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: Helvetica,Arial,sans-serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>CONSOLIDATED FINANCIAL STATEMENTS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>FOR THE YEARS ENDED</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>DECEMBER 31, 2003, 2004 AND 2005</B>

</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="94%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3" style="border-bottom: 1px solid #000000">Page</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CONSOLIDATED FINANCIAL STATEMENTS OF CHINA EASTERN AIRLINES CORPORATION LIMITED</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#301">Report of Independent Registered Public Accounting Firm </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#302">Consolidated Statements of Operations for each of the three years in the period ended
December&nbsp;31, 2005 </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#303">Consolidated Balance Sheets as of December&nbsp;31, 2004
and 2005 </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#304">Consolidated
Cash Flows Statements for each of the three years in the period ended
December&nbsp;31, 2005 </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#305">Consolidated Statements of Changes in Equity for each of the three years
in the period ended December&nbsp;31, 2005 </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#306">Notes to the Consolidated Financial Statements </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-8</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">



<DIV align="left">
<A name="301"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>To the Board of Directors and Shareholders of<BR>
China Eastern Airlines Corporation Limited:</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying consolidated balance sheets of China Eastern Airlines Corporation
Limited (the &#147;Company&#148;) and its subsidiaries as of December&nbsp;31, 2004 and 2005, and the related
consolidated statements of operations, changes in owners&#146; equity and cash flows for each of the three
years in the period ended December&nbsp;31, 2005. These financial statements are the responsibility of
the Company&#146;s management. Our responsibility is to express an opinion on these financial
statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audits in accordance with standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of China Eastern Airlines Corporation Limited and its
subsidiaries at December&nbsp;31, 2004 and 2005, and the results of their operations and their cash
flows for each of the three years in the period ended December&nbsp;31, 2005, in conformity with
International Financial Reporting Standards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">International Financial Reporting Standards vary in certain significant respects from accounting
principles generally accepted in the United States of America. Application of generally accepted
accounting principles in the United States of America would have affected the results of the
operations for each of the three years in the period ended December&nbsp;31, 2005 and the determination of
consolidated owners&#146; equity as of December&nbsp;31, 2004 and
2005, to the extent summarized in Notes 43 and 44 to
the consolidated financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>PricewaterhouseCoopers</B><BR>
<I>Certified Public Accountants</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Hong Kong,<BR>
June&nbsp;30, 2006

</DIV>

<P align="center" style="font-size: 10pt">F-1
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>

<DIV align="left">
<A name="302"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>CONSOLIDATED
STATEMENTS OF OPERATIONS</B>

</DIV>

<DIV align="left" style="font-size: 10pt"><B>FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005</B></DIV>



<DIV align="left" style="font-size: 10pt"><B>(Amounts in thousands except for per share data)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">(Note 2a)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Note</TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">USD&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,470,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,386,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,454,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,401,953</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245,279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,392</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(465,147</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(772,219</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(969,587</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(120,144</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Aircraft fuel</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,044,956</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,429,658</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,888,873</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,101,444</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Take-off and landing charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,254,456</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,019,742</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,718,846</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(460,812</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ground services and other charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(64,662</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(99,296</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(115,516</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,314</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Civil aviation infrastructure levies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(251,185</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(466,191</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(57,766</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Food and beverages</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(541,669</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(758,046</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(976,787</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(121,036</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Wages, salaries and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,449,054</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,865,879</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,359,467</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(292,368</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Aircraft maintenance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(816,613</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(860,184</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,383,989</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(171,494</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Aircraft depreciation and operating
lease rentals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,524,883</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,466,523</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,254,716</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(651,126</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other depreciation, amortization
and operating lease rentals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(495,079</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(495,916</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(679,867</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(84,244</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ticket reservation fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(161,198</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(209,995</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(292,412</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36,234</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Insurance costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(163,765</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(152,194</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(148,862</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,446</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Office, administrative and other
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,472,956</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,858,336</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,430,361</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(301,152</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,454,438</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,239,173</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,685,474</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,430,580</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,232,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,765</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147,846</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,948</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finance costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(922,483</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(770,176</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(707,050</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(87,612</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share of results in associates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32,738</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50,524</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,030</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,119</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share of results in jointly controlled
entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,300</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(533</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Loss)/profit before income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(741,302</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(577,432</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71,551</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taxation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11</TD>
    <TD nowrap>(a)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(239,373</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(129,601</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,187</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Loss)/profit for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(980,675</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">456,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(438,728</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(54,364</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Attributable to:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity holders of the Company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,097,161</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(467,307</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(57,905</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,541</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(980,675</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">456,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(438,728</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(54,364</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend payable to equity holders of
the Company attributable to the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Loss)/earnings per share for
(loss)/profit attributable to the
equity holders of the Company during
the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">- basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">RMB(0.23</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">RMB0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">RMB(0.10</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">US$(0.01</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt">F-2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>

<DIV align="left">
<A name="303"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>CONSOLIDATED BALANCE SHEETS</B>

</DIV>

<DIV align="left" style="font-size: 10pt"><B>AS OF DECEMBER 31, 2004 AND 2005</B></DIV>



<DIV align="left" style="font-size: 10pt"><B>(Amounts in thousands)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">(Note 2a)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;&nbsp;&nbsp;&nbsp;Note</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">USD&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,743,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,347,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,751,743</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">240,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,849</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Lease prepayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">828,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">972,771</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,539</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advance payments on acquisition of aircraft</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,678,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,072,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,124,219</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">688,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,290</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investments in associates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">633,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">629,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,034</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investments in jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,456</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Available-for-sale financial assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,802</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,055</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other long-term assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,202,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,705,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">335,252</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">395,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">434,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,882</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Derivative assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,784</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,811,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,304,506</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,605,103</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Flight equipment spare parts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">523,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">978,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,301</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,707,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,918,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">237,715</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amounts due from related companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,490</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepayments, deposits and other receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">611,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">997,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,575</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,114,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,864,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">230,973</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Derivative assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,572</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,078,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,017,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">745,626</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sales in advance of carriage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">719,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">823,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,998</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade payables and notes payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,457,217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,394,898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">420,671</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amounts due to related companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">295,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,558</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other payables and accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,466,024</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,021,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">746,137</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for aircraft overhaul expenses,
current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,798</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,932</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,856</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Obligations under finance leases, current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,189,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,428,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,865</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Borrowings, current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,382,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,554,630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,299,154</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Derivative liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,318</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,569,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,614,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,917,489</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net current liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,490,662</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25,597,566</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,171,863</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total assets less current liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,320,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,706,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,433,240</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt">F-3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>CONSOLIDATED BALANCE SHEETS (CONTINUED)<BR>
AS OF DECEMBER 31, 2004 AND 2005<BR>
(Amounts in thousands)</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Restated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">(Note 2a)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Note</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">USD&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-current liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for aircraft overhaul expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">388,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,128</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Obligations under finance leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,472,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,180,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,013,663</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,542,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,790,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,213,119</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,234</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Post-retirement benefit obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33</TD>
    <TD nowrap>(b)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">618,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,202,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,052</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term portion of staff housing allowances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">34</TD>
    <TD nowrap>(b)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">444,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,042</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">687,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">601,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,514</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Derivative liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,193</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,018,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,788,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,575,945</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,302,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,918,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">857,295</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital and reserves attributable to
the Company&#146;s equity holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Share capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">603,077</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reserves</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,614,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,229,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">152,303</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,481,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,096,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">755,380</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">820,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">822,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,915</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,302,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,918,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">857,295</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>



<P align="center" style="font-size: 10pt">F-4</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>

<DIV align="left">
<A name="304"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>CONSOLIDATED CASH FLOWS STATEMENTS</B>

</DIV>

<DIV align="left" style="font-size: 10pt"><B>FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005<br>
(Amounts in thousands)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" colspan="2">(Note 2a)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Note</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">USD&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from operating activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash generated from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,086,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,242,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,369,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">417,559</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(860,304</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(872,738</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,357,402</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(168,199</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income tax paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62,977</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(104,009</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(59,932</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,426</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net cash inflow from operating activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,163,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,266,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,952,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241,934</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from investing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of aircraft, engines, flight equipment,
buildings, other property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,776,617</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,525,845</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,486,830</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(308,150</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additions of construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(249,737</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(178,065</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(189,220</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23,447</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds on disposals of aircraft, engines,
flight equipment, buildings, other property,
plant
and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">667,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,080</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisition of land use rights</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(31,780</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,938</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisition of available-for-sale financial assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,256</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(156</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisition of financial assets held for trading</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(270,350</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advances payments on acquisitions of aircrafts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,295,656</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,076,990</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,751,197</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(960,471</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repayments of advances payments on
acquisitions of aircrafts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Decrease/(increase) in long-term bank deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(64,255</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51,108</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,550</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">(Increase)/decrease in short-term bank deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(69,246</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(68,730</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,517</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repayment of other payables
(installment payment for acquisition of
aviation business)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,717</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investments in associates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(327,252</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,993</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investments in jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,680</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from maturity of US Treasury zero
coupon bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from disposals of financial assets held
for trading</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">311,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104,243</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,948</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Business acquisitions, net of cash outflow</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(40,704</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,044</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net cash outflow from investing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,304,660</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,432,562</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,369,094</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,284,862</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Notes to consolidated cash flow statements is set out in Note 36.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.

</DIV>

<P align="center" style="font-size: 10pt">F-5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>CONSOLIDATED CASH FLOWS STATEMENTS (CONTINUED)<BR>
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005<BR>
(Amounts in thousands)</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">(Note 2a)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Note</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">USD&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from financing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from drawn down of short-term bank loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,920,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,988,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,307,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,772,858</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repayments of short-term bank loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,815,508</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,431,931</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,872,754</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,099,447</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from drawn down of long-term bank
loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,606,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,155,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,135,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">636,327</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repayments of long-term bank loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(898,022</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,647,930</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,843,483</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(476,256</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Principal repayments of finance lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,400,749</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,617,001</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,157,334</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(143,408</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from issuance of notes payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,254,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,347,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,228,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">524,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repayments of notes payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(908,790</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,265,939</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,376,072</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(418,338</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital injection from minority shareholders of
subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from issuance of debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,951,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241,828</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(97,339</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,062</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends paid to minority shareholders of
subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(60,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,152</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net cash inflow/(outflow) from financing
activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,763,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(312,348</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,186,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,014,350</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net (decrease)/increase in cash and cash
equivalents</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(377,833</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">521,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(230,643</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(28,578</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents at January 1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,944,525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,582,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,114,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">262,007</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exchange adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,088</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,803</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,456</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents at December 31</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,582,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,114,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,864,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">230,973</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Notes to consolidated cash flow statements is set out in Note 36.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.

</DIV>

<P align="center" style="font-size: 10pt">F-6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>

<DIV align="left">
<A name="305"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY</B>

</DIV>

<DIV align="left" style="font-size: 10pt"><B>FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005<br>
(Amounts in thousands)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Attributable to equity</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">holders of the Company</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Minority</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">capital</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Reserves</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">equity</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at January&nbsp;1, 2003 as previously presented</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,512,153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,379,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,379,103</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As previously separately reported as minority
interest (Note 2(a))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">404,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">404,517</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of changes in accounting policy on the
adoption of IAS16 (Note 2(a))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(207,609</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(207,609</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(207,609</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at January&nbsp;1, 2003, as restated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,304,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,171,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">404,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,576,011</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flow hedges, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47,136</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47,136</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47,136</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contributions from minority interest of
subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,764</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(949,816</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(949,816</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(833,329</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,307,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,174,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">526,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,701,310</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at January&nbsp;1, 2004 as previously presented</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,515,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,382,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,382,151</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As previously separately reported as minority
interest (Note 2(a))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">522,713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">522,713</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of changes in accounting policy on the
adoption of IAS16 (Note 2(a))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(207,609</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(207,609</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(203,554</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at January&nbsp;1, 2004, as restated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,307,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,174,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">526,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,701,310</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flow hedges, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,982</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,982</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,982</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contributions from minority interest of
subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218,387</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends paid to minority interest of
subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(60,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(60,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Profit for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">456,371</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,614,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,481,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">820,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,302,086</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at January&nbsp;1, 2005 as previously presented</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,015,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,882,244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,882,244</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As previously separately reported as minority
interest (Note 2(a))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">831,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">831,208</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of changes in accounting policy on the
adoption of IAS16 (Note 2(a))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(400,993</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(400,993</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,373</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(411,366</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at January&nbsp;1, 2005, as restated
before opening adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,614,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,481,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">820,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,302,086</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Opening adjustment on derecognition of negative
goodwill on the adoption of IFRS 3 (Note 2(a))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,873</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at January&nbsp;1, 2005, as restated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,657,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,524,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">820,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,344,959</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flow hedges, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,587</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend relating to 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(97,339</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(97,339</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(97,339</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend paid to minority interest of subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contribution from minority interest of
subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,063</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(467,307</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(467,307</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(438,728</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,229,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,096,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">822,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,918,542</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.

</DIV>

<P align="center" style="font-size: 10pt">F-7
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left">
<A name="306"></A>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>1</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CORPORATE INFORMATION</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>China Eastern Airlines Corporation Limited (the &#147;Company&#148;), a joint stock company limited by
shares was incorporated in the People&#146;s Republic of China (&#147;PRC&#148;) on April&nbsp;14, 1995. The
address of its registered office is 66 Airport Street, Pudong International Airport,
Shanghai, PRC. The Company and its subsidiaries (the &#147;Group&#148;) are principally engaged in the
operation of civil aviation, including the provision of passenger, cargo, and mail delivery
and other extended transportation services.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company is majority owned by China Eastern Air Holding Company (&#147;CEA Holding&#148;), a
state-owned enterprise incorporated in the PRC.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>During the year ended December&nbsp;31, 2005, the Company acquired certain assets and liabilities
relating to the aviation businesses of China Eastern Air Northwest Company (&#147;CEA Northwest&#148;)
and China Eastern Air Yunnan Company (&#147;CEA Yunnan&#148;). Further details of the acquisitions are
set out in Note 38.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The principal accounting policies applied in the preparation of these financial statements
are set out below. These policies have been constantly applied to all the years presented,
unless otherwise stated.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(a)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Basis of Preparation</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The financial statements have been prepared in accordance with International Financial
Reporting Standards (&#147;IFRS&#148;) and the disclosure requirements of the Hong Kong Companies
Ordinance. This basis of accounting differs in certain material respects from that used in
the preparation of the Group&#146;s statutory accounts in the PRC. The statutory accounts of the
Group have been prepared in accordance with the accounting principles and the relevant
regulations applicable to PRC joint stock limited companies (&#147;PRC Accounting Regulations&#148;).
In preparing these financial statements in accordance with IFRS, appropriate adjustments
have been made to the Group&#146;s statutory accounts to conform with IFRS.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>This basis of accounting under IFRS differs from generally accepted accounting
principles in the United States of America (&#147;U.S. GAAP&#148;). Differences between IFRS and U.S.
GAAP and their effect on profit attributable to equity holders for each of the three years
ended December&nbsp;31, 2005, and on owners&#146; equity at December&nbsp;31, 2004 and 2005, are set out in
note 43. The consolidated financial statements incorporate additional disclosures customary
in filings with the Securities and Exchange Commission of the United States of America (the
&#147;SEC&#148;).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The consolidated financial statements have been prepared under the historical cost
convention, as modified by the revaluation of property, plant and equipment and financial
assets.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-8
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(a)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Basis of Preparation (Continued)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The preparation of financial statements in conformity with IFRS requires the use of certain
critical accounting estimates. It also requires management to exercise its judgment in the
process of applying the Company&#146;s accounting policies. The areas involving a higher degree
of judgment or complexity, or areas where assumptions and estimates are significant to the
financial statements, are disclosed in Note 4. These estimates and assumptions affect the
reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the year. Although these estimates are based on management&#146;s best knowledge
of current event and actions, actual results ultimately may differ from those estimates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Standards, interpretations &#038; amendments to published standards effective in 2005</I></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In 2005, the Group adopted the new and revised IFRS as described below, which are
relevant to its operations. The 2004 comparatives have been adjusted as required, in
accordance with the relevant requirements of the new/revised IFRS.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#151;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IAS 1 and 27 (both revised in 2003) have affected the presentation of minority
interest. IAS 1 (revised in 2003) also has affected the presentation of share of profit
of associates and other disclosures.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#151;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IAS 2, 8, 10, 17, 21, 28, 32, 33 (all revised in 2003), 39 (revised in 2004)
and IFRS 2 had no material effect on the Group&#146;s policies.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#151;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IAS 16 (amended 2004) replaces IAS 16 (revised 1998). The Group has adopted the
revised IAS 16 and has amended the accounting policy applied to the costs of overhaul
of owned and finance leased aircraft and engines. Under the Group&#146;s revised policy,
these costs are capitalized as a component of property, plant and equipment, and are
depreciated over the appropriate maintenance cycles. When each overhaul is performed,
its cost is recognized in the carrying amount of the item of property, plant and
equipment and is depreciated over the estimated period between overhauls on a
straight-line basis. Upon completion of an overhaul, any remaining carrying amount of
the cost of the previous overhaul is derecognized and charged to the income statement.
In prior years, the costs of overhauls were expensed in the income statement as
incurred. The adoption of the revised treatment of IAS 16 (amended 2004) has been
accounted for retrospectively.
</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(a)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Basis of Preparation (Continued)</B></TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 7%">The adoption of revised IAS 16 resulted in:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Increase/(decrease)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in aircraft maintenance expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(526,592</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(536,099</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(710,824</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase in aircraft depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">673,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">794,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">820,555</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in taxation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,954</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50,479</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,658</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase/(decrease) in profit for the year
attributable to minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,428</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,271</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in the profit attributable to equity holders
of the Company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(147,345</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(193,384</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(120,344</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in aircraft, engines and flight equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(218,142</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(476,433</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(586,163</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,588</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(65,067</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(84,725</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase/(decrease) in minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,373</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,898</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in beginning retained profits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(60,264</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(207,609</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(400,993</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in basic and diluted earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">RMB(0.03)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">RMB(0.04)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">RMB(0.02)</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
    <TD colspan="13" style="border-bottom: 3px double #000000">&nbsp;</TD>
 </TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#151;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IAS 24 (revised in 2003) has extended the identification and disclosure of related
parties to include state-owned enterprises. Related parties include CEA Holding and its
subsidiaries, Civil Aviation Administration of China (&#147;CAAC&#148;, a regulatory authority of
the civil aviation industry in the PRC) and its affiliates, and other state-controlled
enterprises and their subsidiaries, directly or indirectly controlled by the PRC
government, corporations in which the Company is able to control or exercise
significant influence, and key management personnel of the Company, CEA Holding, CAAC
and other state-controlled enterprises, and their close family members.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#151;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IFRS 3, IAS 36 (revised in 2004) and IAS 38 (revised in 2004) have resulted in
a change in the accounting policy relating to the accounting for goodwill and negative
goodwill. The Group ceased amortization of goodwill and negative goodwill from January
1, 2005. Accumulated amortization as at December&nbsp;31, 2004 has been eliminated with a
corresponding decrease in the costs of goodwill and negative goodwill. From January&nbsp;1,
2005 onwards, positive goodwill arising from all acquisitions is no longer subject to
amortization but is tested annually for impairment, as well as when there are
indications of impairment. The balance of negative goodwill as at January&nbsp;1, 2005 is
derecognized with a corresponding adjustment to the opening balance of retained
profits. Negative goodwill amounted RMB42,873,000 has been derecognized to the opening
balance of retained profits as at January&nbsp;1, 2005. From January&nbsp;1, 2005 onwards, IFRS 3
requires, the Group to recognize immediately in the income statement the excess of the
net fair value of those items acquired over the cost of the acquisition.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-10
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(a)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Basis of Preparation (Continued)</B></TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 7%">The adoption of IFRS 3, IAS 36 and IAS 38 resulted in:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase in intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,873</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase in retained profits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,873</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1pt">
    <TD colspan="4" style="border-bottom: 3px double #000000">&nbsp;</TD>
 </TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#151;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IAS 32 (revised in 2003) has added the requirements to disclose information
about the use of valuation techniques, including the sensitivities of fair value
estimates, to significant valuation assumptions.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#151;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IFRS 5 has resulted in a change in the accounting policy relating to the
recognition of assets held for sale or discontinued operations, which did not have any
material impact on the results and financial positions of the Group as the Group did
not hold material assets in this category during the periods presented.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>Standards, interpretations and amendments to published standards that are not yet effective</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Certain new standards, amendments and interpretations to existing standards, which are
relevant to the Group&#146;s operations, have been published that are mandatory for the
Group&#146;s accounting periods beginning on or after January&nbsp;1, 2006 or later periods, but
the Group has not early adopted are, as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#151;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IAS 19 (Amendment) introduces the option of an alternative recognition approach
for actuarial gains and losses. It may impose additional recognition requirements for
multi-employer plans where insufficient information is available to apply defined
benefit accounting. It also adds new disclosure requirements. As the Group does not
intend to change the accounting policy adopted for recognition of actuarial gains and
losses and does not participate in any multi-employer plans, adoption of this amendment
will only impact the format and extent of disclosures presented in the financial
statements. The Group will apply this amendment from January&nbsp;1, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#151;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IAS 39 (Amendment) changes the definition of financial instruments classified
at fair value through profit or loss and restricts the ability to designate financial
instruments as part of this category. The Group believes that this amendment should not
have a significant impact on the classification of financial instruments, as the Group
should be able to comply with the amended criteria for the designation of financial
instruments at fair value through profit and loss. The Group will apply this amendment
from January&nbsp;1, 2006.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-11
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(a)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Basis of Preparation (Continued)</B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#151;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IFRS 7 introduces new disclosures to improve the information about financial
instruments. It requires the disclosure of qualitative and quantitative information
about exposure to risks arising from financial instruments, including specified minimum
disclosures about credit risk, liquidity risk and market risk, including sensitivity
analysis to market risk. It replaces IAS 30, Disclosures in the Financial Statements of
Banks and Similar Financial Institutions, and disclosure requirements in IAS 32,
Financial Instruments: Disclosure and Presentation. It is applicable to all entities
that report under IFRS. The amendment to IAS 1 introduces disclosures about the level
of an entity&#146;s capital and how it manages capital. The Group assessed the impact of
IFRS 7 and the amendment to IAS 1 and concluded that the main additional disclosures
will be the sensitivity analysis to market risk and the capital disclosures required by
the amendment of IAS 1. The Group will apply IFRS 7 and the amendment to IAS 1 from
January&nbsp;1, 2007.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#151;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IFRIC 4 requires the determination of whether an arrangement is or contains a
lease to be based on the substance of the arrangement. It requires an assessment of
whether: (a)&nbsp;fulfillment of the arrangement is dependent on the use of a specific asset
or assets (the asset); and (b)&nbsp;the arrangement conveys a right to use the asset.
Management is currently assessing the impact of IFRIC 4 on the Group&#146;s operations.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The financial information has been prepared in Renminbi (&#147;RMB&#148;), the national currency of
the PRC. Solely for the convenience of the reader, the December&nbsp;31, 2005 financial
statements have been translated into United States dollars (&#147;US$&#148;) at the rate of US$1.00 =
RMB8.0702, being the noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of New York on
December&nbsp;31, 2005. No representation is made that the RMB amounts could have been, or could
be, converted into United States dollars at that rate or at any other certain rate on
December&nbsp;31, 2005 or at any other certain date.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(b)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Group accounting</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The consolidated financial statements include the financial statements of the Company and
its subsidiaries made up to December&nbsp;31.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>(i)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Subsidiaries</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Subsidiaries are all entities (including special purpose entities) over which the
Group has the power to govern the financial and operating policies generally
accompanying a shareholding of more than one half of the voting rights. The
existence and effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Group controls another entity.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Subsidiaries are fully consolidated from the date on which control is transferred to
the Group. They are de-consolidated from the date that control ceases.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(b)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Group accounting (CONTINUED)</B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>(i)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Subsidiaries (Continued)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair value
of the assets given, equity instruments issued and liabilities incurred or assumed
at the date of exchange, plus costs directly attributable to the acquisition.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at the acquisition
date, irrespective of the extent of any minority interest. The excess of the cost of
acquisition over the fair value of the Group&#146;s share of the identifiable net assets
acquired is recorded as goodwill. If the cost of acquisition is less than the fair
value of the net assets of the subsidiary acquired, the difference is recognized
directly in the income statement (see Note 2(k)).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Inter-company transactions, balances and unrealized gains on transactions between
group companies are eliminated. Unrealized losses are also eliminated but considered
an impairment indicator of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Minority interest represents the interests of outside members in the operating
results and net assets of subsidiaries. The Group applies a policy of treating
transactions with minority interest as transactions with parties external to the
Group. Disposals to minority interest result in gains and losses for the Group that
are recorded in the income statement. Purchases from minority interest result in
goodwill, being the difference between any consideration paid and the relevant share
acquired of the carrying value of net assets of the subsidiary.</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-13
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(b)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Group accounting (CONTINUED)</B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>(i)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Subsidiaries (Continued)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Particulars of the principal subsidiaries, all of which are limited companies
established and operating in the PRC, as of December&nbsp;31, 2005 are as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="24%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Place and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Attributable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>date of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Paid-up</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>equity</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Principal</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #ffffff"><B>Company</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #ffffff"><B>establishment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #ffffff"><B>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #ffffff"><B>interest</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #ffffff"><B>Activities</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #ffffff">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #ffffff">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">China Cargo Airlines
Co., Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC<BR>

July&nbsp;22, 1998
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">500,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">500,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">70</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">70</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of
cargo carriage
services</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Shanghai Eastern
Airlines Logistics
Co., Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC
<BR>
August&nbsp;23, 2004
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">200,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">200,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">70</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">70</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of
cargo logistics
services</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">China Eastern Airlines
Jiangsu Co., Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC
<BR>
May&nbsp;3, 1993
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">803,666</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">880,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">63</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">63</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of
airline services</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Eastern Airlines
Hotel Co., Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC
<BR>
March&nbsp;18,
1998
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">70,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">70,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">86</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">86</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of
hotel services
primarily to crew
Members</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Shanghai Eastern
<BR>
Airlines Investment
Co., Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC
<BR>
May&nbsp;8, 2002
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">412,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">412,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">99</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">99</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Investment Holding</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Shanghai Eastern
Flight Training Co.,
Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC
<BR>
December&nbsp;18,
1995
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">473,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">473,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">95</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">95</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of
flight training
services</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Shanghai Eastern
Maintenance Co.,
Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC
<BR>
November&nbsp;27,
2002
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">25,658</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">25,658</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">60</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">60</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of
aircraft repairment
and maintenance</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">China Eastern Fudart
Transportation
Service
Co., Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC
<BR>
April&nbsp;1, 1993
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">5,714</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">5,714</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">51</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">51</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision
of agency
services for
transportation of
import and
export cargo
by air or sea</TD>
</TR>

<TR valign="bottom" style="font-size: 1pt">
    <TD colspan="21" style="border-bottom: 1px solid #000000">c&nbsp;</TD>
 </TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-14
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(b)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Group accounting (CONTINUED)</B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>(ii)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Associates</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Associates are all entities over which the Group has significant influence but not
control, generally accompanying a shareholding of between 20% and 50% of the voting
rights. Investments in associates are accounted for using the equity method of
accounting and are initially recognized at cost. The Group&#146;s investments in
associates includes goodwill (net of any accumulated impairment loss) identified on
acquisition (see Note 2(k)).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group&#146;s share of its associates&#146; post-acquisition profits or losses is
recognized in the income statement, and its share of post-acquisition movements in
reserves is recognized in reserves. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment. When the Group&#146;s share of
losses in an associate equals or exceeds its interest in the associate, including
any other unsecured receivables, the Group does not recognize further losses, unless
it has incurred obligations or made payments on behalf of the associate.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Unrealized gains on transactions between the Group and its associates are eliminated
to the extent of the Group&#146;s interest in the associates. Unrealized losses are also
eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of associates have been changed where necessary to
ensure consistency with the policies adopted by the Group.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>(iii)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Jointly Controlled Entities</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A jointly controlled entity is an entity in which the Group has joint control over
its economic activity established under a contractual arrangement. The Group&#146;s
investments in jointly controlled entities includes goodwill (net of any accumulated
impairment loss) identified on acquisition (see note 2(k)).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group&#146;s interests in jointly controlled entities are accounted for by the equity
method of accounting based on the audited financial statements or management
accounts of the jointly controlled entities. The Group&#146;s share of its jointly
controlled entities&#146; post-acquisition profits or losses is recognized in the income
statement, and its share of post-acquisition movements is adjusted against the
carrying amount of the investment. When the Group&#146;s share of losses in a jointly
controlled entities&#146; equals or exceeds its interest in the jointly controlled
entities, including any other unsecured receivables, the Group does not recognize
further losses, unless it has incurred obligations or made payments on behalf of the
jointly controlled entities.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Unrealized gains on transactions between the Group and its jointly controlled
entities are eliminated to the extent of the Group&#146;s interest in the jointly
controlled entities. Unrealized losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Accounting policies of
jointly controlled entities have been changed where necessary to ensure consistency
with the policies adopted by the Group.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>(iv)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Common Control Transactions</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group adopts acquisition accounting for common control transactions.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-15
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(c)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Foreign currency translation</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Items included in the financial statements of each of the Group&#146;s entities are measured
using the currency of the primary economic environment in which the entity operates (&#147;the
functional currency&#148;). The financial statements are presented in Chinese Renminbi (&#147;RMB&#148;),
which is the Company&#146;s functional and presentation currency.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognized in the income statement, except when deferred in equity as qualifying cash flow
hedges.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Translation differences on non-monetary financial assets and liabilities are reported as
part of the fair value gain or loss. When a gain or loss on a non-monetary item is
recognized directly in equity, any exchange component of that gain or losses is recognized
directly in equity. Conversely, when a gain or loss on a non-monetary item is recognized in
the income statement, any exchange component of that gain or loss is recognized in the
income statement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(d)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Revenue recognition and sales in advance of carriage</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Passenger, cargo and mail revenues are recognized as traffic revenues when the
transportation services are provided. The value of sold but unused tickets is included in
current liabilities as sales in advance of carriage.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Commission income represents amounts earned from other carriers in respect of sales made by
the Group&#146;s agents on their behalf, and is recognized in the income statement upon ticket
sales. Commission expense represents amounts payable to other carriers in respect of sales
made by the other carriers for the Group, and is recognized in the income statement when the
related revenue is recognized.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Revenues from other operating businesses, including income derived from the provision of
ground services and cargo handling services, are recognized when the services are rendered.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Rental income from subleases of aircraft is recognized on a straight-line basis over the
terms of the respective leases. Rental income from leasing office premises and cargo
warehouses is recognized on a straight-line basis over the lease term.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Interest income is recognized on a time-proportionate basis using the effective interest
method.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Revenues are presented net of business tax.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(e)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Segment reporting</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A business segment is a group of assets and operations engaged in providing products or
services that are subject to risks and returns that are different from those of other
business segments. A geographical segment is engaged in providing products or services
within a particular economic environment that is subject to risks and returns that are
different from those of segments operating in other economic environments.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-16
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(e)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Segment reporting (Continued)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In accordance with the Group&#146;s internal financial reporting, the Group has determined that
business segments be presented as the primary reporting format and geographical as the
secondary reporting format.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In respect of the geographical segment, the analysis of turnover and operating profit by
geographical segment is based on the following criteria:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Traffic revenue from services within the PRC (excluding Hong Kong Special
Administrative Region (&#147;Hong Kong&#148;)) is classified as domestic operation. Traffic
revenue from inbound and outbound services between the PRC and Hong Kong or overseas
markets is classified under Hong Kong or the relevant overseas locations.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Revenues from ticket handling services, airport ground services and other
miscellaneous services are classified on the basis of where the services are performed.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(f)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Retirement benefits</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group participates in defined contribution retirement schemes regarding pension and
medical benefits for employees organized by the municipal governments of the relevant
provinces. The contributions to the schemes are charged to the income statement as and when
incurred.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In addition, the Group provides retirees with post-retirement benefits including
retirement subsidies, transportation subsidies, social function activity subsidies as well
as other welfare. The liability recognized in the balance sheet in respect of defined
benefit pension plans is the present value of the defined benefit obligation at the balance
sheet date less the fair value of plan assets, together with adjustments for unrecognized
actuarial gains or losses and past service costs. The defined benefit obligation is
calculated annually using the projected unit credit method. The present value of the defined
benefit obligation is determined by discounting the estimated future cash outflows using
interest rates of government bonds that are denominated in the currency in which the
benefits will be paid, and that have terms to maturity approximating to the terms of the
related pension liability. Actuarial gains and losses arising from experience adjustments
and changes in actuarial assumptions in excess of the greater of 10% of the value of plan
assets or 10% of the defined benefit obligation are charged or credited to income over the
employees&#146; expected average remaining working lives.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Past-service costs are recognized immediately in income, unless the changes to the
pension plan are conditional on the employees remaining in service for a specified period of
time (the vesting period). In this case, the past-service costs are amortized on a
straight-line basis over the vesting period.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-17
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(g)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Maintenance and overhaul costs</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In respect of aircraft and engines under operating leases, the Group has the responsibility
to fulfill certain return conditions under relevant leases. In order to fulfill these return
conditions, major overhauls are required to be conducted on a regular basis. Accordingly,
the present value of estimated costs of major overhauls for aircraft and engines under
operating leases are provided at each balance sheet date. The provision in each period is
estimated using historical major overhaul costs incurred during each overhaul and the
estimated period between overhauls using the ratios of actual flying hours/cycles and
estimated flying hours/cycles between overhauls. The costs of major overhauls comprise
mainly labor and materials. Differences between the estimated cost and the actual cost of
the overhaul are included in the income statement in the period of overhaul.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In respect of aircraft and engines owned by the Group or held under finance leases, costs of
overhaul are capitalized as a component of property, plant and equipment and are depreciated
over the appropriate maintenance cycles. When each overhaul is performed, its cost is
recognized in the carrying amount of the item of property, plant and equipment and is
depreciated over the estimated period between overhauls, on a straight-line basis. Upon
completion of an overhaul, any remaining carrying amount of the cost of the previous
overhaul is derecognized and charged to the income statement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All other routine repairs and maintenance costs incurred in restoring such assets to their
normal working condition are charged to the income statement as and when incurred.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Improvements are capitalized and depreciated over their expected useful lives to the Group.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(h)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Government grant</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Grants from the government are recognized at their fair value where there is a reasonable
assurance that the grant will be received and the Group will comply with all attached
conditions.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Government grants relating to costs are deducted from the related cost in the income
statement as a reduction of the related cost.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Government grants relating to the property, plant and equipment are recognized as a
reduction of carrying amount of the asset. The grant is recognized as income over the life
of a depreciable asset by way of a reduced depreciation charge.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(i)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Taxation</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group provides for income tax based on the results for the year as adjusted for items
which are not assessable or deductible for income tax purposes. Taxation of the Group is
determined in accordance with the relevant tax rules and regulations applicable in the
jurisdictions where the group companies operate.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Deferred income tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their carrying
amounts in the financial statements. However, deferred income tax is not accounted for if it
arises from initial recognition of an asset or liability in a transaction other than a
business combination. Deferred tax is measured using tax rates enacted, or substantively
enacted at the balance sheet date.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-18
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(i)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Taxation (Continued)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Deferred tax assets are recognized to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilized.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Deferred income tax is provided on temporary differences arising on investments in
subsidiaries, associates and jointly controlled entities, except where the timing of the
reversal of the temporary difference is controlled by the Group and it is probable that the
temporary difference will not reverse in the foreseeable future.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(j)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Property, plant and equipment</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Property, plant and equipment are recognized initially at cost which comprises purchase
price, costs transferred from construction in progress and advance payments on acquisition,
and any directly attributable costs of bringing the assets to the condition for their
intended use.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Subsequent to the initial recognition, property, plant and equipment are stated at revalued
amount less accumulated depreciation and accumulated impairment losses, if any. Independent
valuations are performed at least once every five years, or sooner if considered necessary
by the directors. In the intervening years, the directors review the carrying values of the
property, plant and equipment and adjustment is made where they are materially different
from fair value. Increases in the carrying amount arising on revaluation are credited to the
revaluation reserve. Decreases in valuation of property, plant and equipment are first
offset against increases from earlier valuations of the same asset and are thereafter
charged to the income statement. All other decreases in valuation are charged to the income
statement. Any subsequent increases are credited to the income statement up to the amount
previously charged. Any accumulated depreciation at the date of revaluation is eliminated
against the gross carrying amount of the asset, and the net amount is restated to the
revalued amount of the asset.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Costs of overhaul for aircraft and engines owned by the Group or held under finance leases
are capitalized as a component of property, plant and equipment when incurred (see Note
2(g)).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Depreciation of property, plant and equipment is calculated on a straight-line basis to
write off the cost or revalued amount of each asset to their residual value over their
estimated useful lives. The estimated useful lives used for the calculation of annual
depreciation charges are as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="68%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="19%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Aircraft, engines and flight equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">- Components related to overhaul costs
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">2 to 8&nbsp;years</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">- Others
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">20 years</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Buildings
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top"><FONT style="white-space: nowrap">15 to 35&nbsp;years</FONT></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Other property, plant and equipment
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">5 to 20&nbsp;years</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The residual values and useful lives of each property, plant and equipment are reviewed, and
adjusted if appropriate at each balance sheet date.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>An asset&#146;s carrying amount is written down immediately to its recoverable amount if the
asset&#146;s carrying amount is greater than its estimated revalued amount (Note 2(l)).</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-19
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(j)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Property, plant and equipment (Continued)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Gains and losses on disposals are determined by comparing proceeds with carrying amounts and
are included in operating profit. When revalued assets are sold, the relevant amounts
included in the revaluation reserve are transferred from revaluation reserve to retained
profits.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(k)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Intangible assets</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Goodwill represents the excess of the cost of an acquisition over the fair value of the
Group&#146;s share of the net identifiable assets of the acquired subsidiary, associate, jointly
controlled entity or business at the date of acquisition. Goodwill on acquisition of
subsidiaries and businesses is included in &#145;intangible assets&#146;. Goodwill on acquisition of
associates and jointly controlled entities is included in &#145;investments in associates&#146; and
&#145;investments in jointly controlled entities&#146;. Recognized goodwill is tested annually for
impairment and carried at cost less accumulated impairment losses, if any. Impairment losses
on goodwill are not reversed. Gains and losses on the disposals of an entity include the
carrying amount of goodwill relating to the entity sold.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Goodwill is allocated to cash-generating units for the purpose of impairment testing. The
allocation is made to those cash-generating units or groups of cash-generating units that
are expected to benefit from the business combination in which the goodwill arose.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(l)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Impairment of non-financial assets</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Assets that have an indefinite useful life are not subject to amortization and are tested
annually for impairment. Assets that are subject to amortization are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized for the amount by which the asset&#146;s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset&#146;s
fair value less costs to sell and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which there are separately identifiable cash
flows (cash-generating units).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Non-financial assets other than goodwill that suffered impairment are reviewed for possible
reversal of the impairment at each reporting date.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(m)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Construction in progress</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Construction in progress represents buildings under construction
and plant and equipment pending installation. This includes the
costs of construction and acquisition and interest capitalized
(Note 2(p)). No depreciation is provided on construction in
progress until the asset is completed and ready to use.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(n)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Lease prepayments</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Lease prepayments represent acquisition costs of land use rights less accumulated
amortization. Amortization is provided over the lease period of land use rights on a
straight-line basis.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(o)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Advanced payments on acquisition of aircraft</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Advanced payments on acquisition of aircraft represents payments to aircraft manufacturers
to secure deliveries of aircraft in future years and the related interest capitalized (Note
2(p)). The balance is transferred to property, plant and equipment upon delivery of the
aircraft.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(p)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Borrowing costs</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Interest attributable to loans for advance payments used to finance the acquisition of
aircraft and other qualifying assets is capitalized as an additional cost of the related
asset. Interest is capitalized at the Group&#146;s weighted average interest rate on borrowings
or, where applicable, the interest rate related to specific borrowings during the period of
time that is required to complete and prepare the asset for its intended use.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All other borrowing costs are charged to the income statement in the period in which they
are incurred.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(q)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Long-term bank deposits</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Long-term bank deposits placed to secure future lease obligations are classified as
held-to-maturity financial assets. Held-to-maturity financial assets are initially
recognized in the balance sheet at fair value plus transaction costs. Subsequently, they are
stated in the balance sheet at amortized cost less impairment losses.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(r)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Flight equipment spare parts</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Flight equipment spare parts are stated at the lower of cost and net realizable value. Cost
is determined using the weighted average method. The cost of flight equipment spare parts
comprises the purchase price (net of discounts), freight charges, duty and value added tax
and other miscellaneous charges. The net realizable value is the estimated replacement cost
of the flight equipment spare parts.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(s)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Trade receivables</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Trade receivables are recognized initially at fair value and subsequently measured at
amortized cost using the effective interest method, less provision for impairment. A
provision for impairment of trade receivables is established when there is objective
evidence that the Group will not be able to collect all amounts due according to the
original terms of receivables. Significant financial difficulties of the debtor, probability
that the debtor will enter bankruptcy or financial reorganization, and default or
delinquency in payments are considered indicators that the trade receivable is impaired. The
amount of the provision is the difference between the asset&#146;s carrying amount and the
present value of estimated future cash flows, discounted at the effective interest rate. The
amount of the provision is recognized in the income statement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(t)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Cash and cash equivalents</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Cash and cash equivalents includes cash in hand, deposits held at call with banks and other
short-term highly liquid investments with original maturities of three months or less.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(u)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Borrowings</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Borrowings are recognized initially at fair value, net of transaction costs incurred.
Borrowings are subsequently stated at amortized cost; any differences between the proceeds
(net of transaction costs) and the redemption value is recognized in the income statement
over the period of the borrowings using the effective interest method.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Borrowings are classified as current liabilities unless the Group has an unconditional right
to defer settlement of the liability for at least 12&nbsp;months after the balance sheet date.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-21
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(v)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Provisions</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Provisions are recognized when the Group has a present legal or constructive obligation as a
result of past events, it is more likely than not that an outflow of resources will be
required to settle the obligation, and the amount can be reliably estimated. Where the Group
expects a provision to be reimbursed, for example under an insurance contract, the
reimbursement is recognized as a separate asset but only when the reimbursement is virtually
certain.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Where there are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as a whole. A
provision is recognized even if the likelihood of an outflow with respect to any one item
included in the same class of obligations may be small.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Provisions are measured at the present value of the expenditures expected to be required to
settle the obligation using a pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the obligation. The increase in the provision
due to passage of time is recognized as interest expense.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(w)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Leases</B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A Group company is the lessee</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Leases of assets where the Group has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are capitalized at the
inception of the lease at the lower of the fair value of the leased asset or the
present value of the minimum lease payments. Each lease payment is allocated between
the liability and finance charges so as to achieve a constant rate on the finance
balance outstanding. The interest element of the finance cost is charged to the income
statement over the lease period so as to produce a constant periodic rate of interest
on the remaining balance of the liability for each period. Leased assets are
depreciated using a straight-line basis over their expected useful lives to residual
values.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Leases of assets under which a significant portion of the lease risks and rewards of
ownership are retained by the lessor are classified as operating leases. Lease
payments made under operating leases are charged to the income statement on a
straight-line basis over the period of the lease.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A Group company is the lessor</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>When assets are leased out under a finance lease, the present value of the lease
payments is recognized as a receivable. The difference between the gross receivable
and the present value of the receivable is recognized as unearned finance income.
Lease income is recognized over the term of the lease using the net investment method,
which reflects a constant periodic rate of return.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Assets leased out under operating leases are included in property, plant and equipment
in the balance sheet. They are depreciated over their expected useful lives on a basis
consistent with similar property, plant and equipment. Rental income is recognized on
a straight-line basis over the lease term.</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-22
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(x)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Derivative financial instruments</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Derivative financial instruments are initially recognized in the balance sheet at fair value
and are subsequently remeasured at their fair value. The accounting for subsequent changes
in fair value depends on whether the derivative is designated as a hedging instrument, and
if so, the nature of the item being hedged.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group documents at the inception of the transaction the relationship between hedging
instruments and hedged items, as well as its risk management objectives and strategy for
undertaking various hedge transactions. The Group also documents its assessment, both at
hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in fair values or cash flows of
hedged items.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Derivative financial instrument that does not qualify for hedge accounting are accounted for
as trading instruments and any unrealized gains or losses, being changes in fair value of
the derivative, are recognized in the income statement immediately.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Changes in the fair value of derivatives that are designated and qualify as fair value
hedges and that are highly effective, are recorded in the income statement, along with any
changes in the fair value of the hedged assets or liabilities that are attributable to the
hedged risk.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Derivative financial instrument that qualifies for hedge accounting and is designated as a
specific hedge of the variability in cashflows of a highly probable forecast transaction, is
accounted for as follows:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the effective portions of any change in fair value on the derivative financial
instrument is recognized directly in equity. Where the forecasted transaction or firm
commitment results in the recognition of an asset or a liability, the gains and losses
previously deferred in equity are included in the initial measurement of the cost of
the asset or liability. Otherwise, the cumulative gain or loss on the derivative
financial instrument is removed from equity and recognized in the income statement in
the same period during which the hedged forecast transaction affects net profit or
loss.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the ineffective portions of any change in fair value is recognized in the
income statement immediately.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria
for hedge accounting, any cumulative gain or loss existing in equity at that time remains in
equity and is recognized in the income statement when the committed or forecasted
transaction ultimately occurs. When a committed or forecasted transaction is no longer
expected to occur, the cumulative gain or loss that was recorded in equity is immediately
transferred to the income statement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(y)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Dividend</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Dividend distribution to the Company&#146;s shareholders is recognized as a liability in the
financial statements in the period in which the dividends are approved by the Company&#146;s
equity holders.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-23
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PRINCIPAL ACCOUNTING POLICIES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(z)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Available-for-sale financial assets</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Investments in securities other than subsidiaries, associates and jointly controlled
entities, being held for non-trading purposes, are classified as available-for-sale
financial assets and are initially recognized at fair value plus transaction costs. At each
balance sheet date, the fair value is remeasured, with any resulting gain or loss being
recognized directly in equity in the fair value reserve, except for impairment losses. When
these investments are derecognized, the cumulative gain or loss previously recognized
directly in equity is recognized in the income statement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group assesses at each balance sheet date whether there is objective evidence that a
financial asset is impaired. In the case of equity securities classified as available for
sale, a significant or prolonged decline in the fair value of the securities below its cost
is considered an indicator that the securities are impaired. If any such evidence exists for
available-for-sale financial assets, the cumulative loss, measured as the difference between
the acquisition cost and the current fair value less any impairment loss on that financial
asset previously recognized in the income statement, is removed from equity and recognized
in the income statement. Impairment losses recognized in the income statement on equity
instruments are not reversed through the income statement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(aa)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Comparatives</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Where necessary, prior year amounts have been reclassified to conform with changes in
presentation in the current year. The major reclassifications for the 2004 comparative
figures include reclassification of certain items from &#147;other payables and accrued expenses&#148;
to &#147;trade and notes payables&#148;, and certain items from &#147;prepayments, deposits and other
receivables&#148; to &#147;trade receivables&#148;.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>FINANCIAL RISK MANAGEMENT</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(a)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Financial risk factors</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Financial assets of the Group mainly includes bank deposits and balances, amounts due from
related companies, trade receivables, long-term receivables, short-term investments and
derivative assets. Financial liabilities of the Group include bank and other loans,
obligations under finance leases, amounts due to related companies, trade payables, notes
payables, derivative liabilities and other payables.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Business risk</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The operations of the air transportation industry are substantially influenced by
global political and economic development. Accidents, wars, natural disasters, etc.
may have material impact on the Group&#146;s operations or the industry as a whole. In
addition, the Group conducts its principal operations in the PRC and accordingly is
subject to special considerations and significant risks not typically associated with
companies in &#145;Western&#146; countries. These include risks associated with, among others,
the political, economic and legal environment, competition and the influence of CAAC
in the PRC civil aviation industry.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-24
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>FINANCIAL RISK MANAGEMENT (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(a)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Financial risk factors (Continued)</I></B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Price risk</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group&#146;s results of operations may be significantly affected by the fluctuation in
fuel prices which is a significant expense for the Group. While the international fuel
prices are determined by worldwide market demand and supply, domestic fuel prices are
regulated by CAAC. The Group has entered into certain financial derivatives to hedge
against the fuel prices risk (Note 35(c)).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Interest rate risk</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group has significant bank borrowings at floating variable rates and is exposed to
risk arising from changes in market interest rates. To hedge against the variability
in the cashflow arising from a change in market interest rates, the Group has entered
into certain interest rate swaps to swap variable rates into fixed rates. The interest
rates and terms of repayment of borrowings made to the Group are disclosed in Note 29.
Details of interest rate swaps are disclosed in Note 35(a).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iv)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Credit risk</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group has no significant concentrations of credit risk. The Group has policies in
place to ensure that blank tickets are made to sales agents with an appropriate credit
history. A major portion of sales are conducted through sales agents and the majority
of these agents are connected to various settlement plans and/or clearing systems
which have tight requirements on the credit standing of these agents.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Transactions in relation to derivative financial instruments are only carried out with
financial institutions of high reputation. The Group has policies that limit the
amount of credit exposure to any one financial institution.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(v)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Liquidity risk</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group&#146;s primary cash requirements have been for additions of and upgrades to
aircraft, engines and flight equipment and payments on related borrowings/debts. The
Group finances its working capital requirements through a combination of funds
generated from operations and short-term bank loans. The Group generally acquires
aircraft through long-term finance leases and long-term loans.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group operates with a working capital deficit. As at December&nbsp;31, 2005, the
Group&#146;s net current liabilities amounted to RMB25,598&nbsp;million (2004: RMB12,491
million). For the year ended December&nbsp;31, 2005, the Group recorded a net cash inflow
from operating activities of RMB1,952&nbsp;million (2004: RMB3,266&nbsp;million), a net cash
outflow from investing activities and financing activities of RMB2,183&nbsp;million (2004:
RMB2,745&nbsp;million), and an decrease in cash and cash equivalents of RMB231&nbsp;million
(2004: increase of RMB521&nbsp;million).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The directors of Company believe that cash from operations and short-term bank
borrowings will be sufficient to meet the Group&#146;s operating cashflow. Due to the
dynamic nature of the underlying businesses, the Group&#146;s treasury policy aims at
maintaining flexibility in funding by keeping credit lines available. The directors of
the Company believe that the Group has obtained sufficient general credit facilities
from PRC banks for financing future capital commitments and for working capital
purposes.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-25
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>FINANCIAL RISK MANAGEMENT (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(a)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Financial risk factors (Continued)</I></B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(vi)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Foreign currency risk</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group&#146;s finance lease obligation as well as certain bank and other loans are
denominated in US dollars, Japanese Yen and Euro, and certain expenses of the Group
are denominated in currencies other than RMB. The Group generates foreign currency
revenues from ticket sales made in overseas offices and would normally generate
sufficient foreign currencies after payment of foreign currency expenses, to meet its
foreign currency liabilities repayable within one year. The Group also enters into
certain foreign currency forward contracts to hedge against foreign currency risk
(Note&nbsp;&nbsp;35(b)).</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(b)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Fair value estimation</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of financial instruments traded in active markets (such as publicly traded
derivatives, and trading and available-for-sale securities) is based on quoted market prices
at the balance sheet date. The quoted market price used for financial assets held by the
Group is the current bid price; the appropriate quoted market price for financial
liabilities is the current ask price.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of financial instruments that are not traded in an active market is
determined by using valuation techniques. The Group uses a variety of methods and makes
assumptions that are based on market conditions existing at each balance sheet date. Quoted
market prices or dealer quotes for similar instruments are used for long-term debt. Other
techniques, such as estimated discounted cash flows, are used to determine fair value for
the remaining financial instruments. The fair value of interest-rate swaps is calculated as
the present value of the estimated future cash flows. The fair value of forward foreign
exchange contracts is determined using forward exchange market rates at the balance sheet
date. The fair value of fuel option contracts is determined using quoted market values.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The nominal value less impairment provision of trade receivables and payables are assumed to
approximate their fair values. The fair values of other long-term receivables are based on
cash flow discounted using a rate based on the borrowing rate. The fair value of financial
liabilities for disclosure purpose is estimated by discounting the future contractual cash
flows at the current market interest rate that is available to the Group for similar
financial instruments.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-26
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Estimates and judgements used in preparing the financial statements are continually
evaluated and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances. The resulting
accounting estimates will, by definition, seldom equal the related actual results. The
estimates and assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year are discussed
below.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(a)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Estimated impairment of goodwill</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group tests annually whether goodwill has been impaired in accordance with the
accounting policy stated in Note 2(l). The recoverable amounts of cash generating units
have been determined based on value-in-use calculations. These calculations require the use
of estimates (see Note 18). In 2005, after reviewing the business environment as well as
the Group&#146;s objectives and past performance, management concluded that there was no material
impairment loss for goodwill.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(b)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Estimated impairment of property, plant and equipment</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group has made substantial investments in tangible long-lived assets. The Group conducts
impairment reviews of these assets whenever events or changes in circumstances indicate that
their carrying amounts may not be recoverable.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Determining whether an asset is impaired requires significant judgment, including the
Group&#146;s estimates of the future cash flows attributable to the asset and the appropriate
discount rate. If different judgments or estimates had been utilized, material differences
could have resulted in the amount and timing of the impairment charge, if any.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(c)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Property, plant and equipment</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group had approximately RMB38,000&nbsp;million of property, plant and equipment as at
December&nbsp;31, 2005, including aircraft, engines and flight equipment with a value of
approximately RMB34,740&nbsp;million. As discussed in Note 2(j), property, plant and equipment
are initially recognized at cost and are subsequently stated at revalued amount less
accumulated depreciation. Their recorded value is impacted by management judgment, including
valuations performed by the management and/or independent professional valuers, estimates of
useful lives, residual value and impairment charges. If different judgements or estimates
had been utilized, material differences could have resulted in the amount of revaluation and
related depreciation charges.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Management reviewed the carrying value of the Group&#146;s property, plant and equipment as at
December&nbsp;31, 2005 and are of the opinion that the carrying amount of the property, plant and
equipment is not materially different from the estimated fair value and no impairment or
changes in estimates of useful lives are necessary.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(d)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Fair value estimation</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The carrying amounts of the Group&#146;s current financial assets, including cash and cash
equivalents, trade receivables, prepayments, other receivables, amounts due from related
companies and current financial liabilities including trade payables and note payables,
other payables and accrued expenses and amounts due to related companies, approximate their
fair values due to their short maturities.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-27
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(e)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Revenue recognition</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As discussed in Note 2(d), passenger, cargo and mail revenues are recognized as traffic
revenues when the transportation services are provided. The value of unused passenger
tickets is included in current liabilities as sales in advance of carriage. Unused tickets
are recognized in traffic revenues based on current estimates. Management periodically
evaluate the balance in sales in advance of carriage and record any adjustments, which can
be material, in the period the evaluation is completed. These adjustments result from
differences between the estimates of certain revenue transactions, the timing of recognizing
revenue for any unused air tickets and the related sales price, and are impacted by various
factors, including a complex pricing structure and interline agreements throughout the
industry, which affect the timing of revenue recognition.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(f)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Overhaul costs</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The amount of overhaul costs charged/amortized to operating profits is impacted by
management&#146;s estimates of the expected flying hours/cycles and overhaul costs, which are
largely based on past experience of overhauls of the same or similar models of aircraft and
engines. Different judgements or estimates could significantly affect the estimated overhaul
provision and materially impact the results of operations.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(g)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Retirement benefits</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group operates and maintains defined retirement benefit plans which provides retirees
with benefits including transportation subsidies, social activity subsidies as well as other
welfare. As discussed in Note 2(f), the cost of providing the aforementioned benefits in the
defined retirement benefit plan is actuarially determined and recognized over the employees&#146;
service period by utilizing various actuarial assumptions and using the projected unit
credit method. These assumptions include, without limitation, the selection of discount
rate, annual rate of increase of per capita benefit payment and employees&#146; turnover rate.
The discount rate is based on management&#146;s review of local high quality corporate bonds. The
annual rate of increase of benefit payments is based on the general local economic
conditions. The employees&#146; turnover rate is based on historical trends of the Group.
Additional information regarding the retirement benefit plans is discussed in Note 33.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(h)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Deferred taxation</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>While deferred tax liabilities are provided in full on all taxable temporary differences,
deferred tax assets are recognized only to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilized.
In assessing the amount of deferred tax assets that need to be recognized, the Group
considers future taxable income and ongoing prudent and feasible tax planning strategies.
In the event that the Group&#146;s estimates of projected future taxable income and benefits from
available tax strategies are changed, or changes in current tax regulations are enacted that
would impact the timing or extent of the Group&#146;s ability to utilize the tax benefits of net
operating loss carry forwards in the future, adjustments to the recorded amount of net
deferred tax assets and taxation expense would be made.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(i)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Current tax</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group makes provision for current tax based on the estimated income tax liabilities.
The estimated income tax liabilities are primarily computed based on the tax filings as
prepared by the Group and based on management&#146;s interpretation of relevant tax rulings.
From time to time, there may be disagreements with the tax authorities on the tax treatments
of certain items included in the tax computations.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-28
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>5</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>REVENUES</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group is principally engaged in the operation of civil aviation, including the provision
of passenger, cargo, mail delivery and other extended transportation services.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Traffic revenues (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Passenger</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,389,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,925,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,367,747</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Cargo and mail</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,226,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,540,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,087,244</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commission income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157,784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">292,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185,827</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ground service income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">471,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">695,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">806,755</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cargo handling income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">292,488</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rental income from operating
subleases of aircraft</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,260</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198,175</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,638,848</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,914,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,121,496</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Business tax (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(168,639</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(528,168</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(667,053</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,470,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,386,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,454,443</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Notes:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Since the terrorist attacks on the World Trade Centre in New York in September&nbsp;2001, many
airlines introduced insurance and security surcharges on passenger air tickets (collectively
the &#147;Surcharges&#148;). Such Surcharges are generally recognized as revenue, together with the
other components of the ticket price, when the transportation services are provided.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For tickets that are issued by the Group but where the transportation services are provided
by another carrier, there was (i)&nbsp;industry guidance which permitted the billing of such
Surcharges on a negotiated basis and (ii)&nbsp;diversity in practice among the carriers on the
billing of the Surcharges. Accordingly, the Company deferred recognition of the Surcharges
as revenue. Management believes such Surcharges will no longer be payable based on general
industry acceptance of non billing and industry guidance issued by the Accounting Centre of
China Aviation, the sole agent for interline billing of PRC airlines, in December&nbsp;2005.
Accordingly, the Surcharges related to tickets uplifted between 2002 and 2004 in the amount
of RMB131,023,000 were released from other payables and recognized as revenue in 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>From January&nbsp;1, 2005, the above insurance and security surcharges together with other
surcharges are recognized as revenue once the transportation services are provided, or once
the ticket price has been billed through interline billing in the case where transportation
services are provided by another carrier.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Except for traffic revenues derived from inbound international and regional flights, which
are not subject to PRC business tax, the Group&#146;s traffic revenues, commission income, ground
service income, cargo handling income and other revenues are subject to PRC business tax
levied at rates ranging from 3% to 5%, pursuant to PRC business tax rules and regulations.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-29
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>6</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>OTHER OPERATING INCOME</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Government subsidies (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,506</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193,069</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net fair value gains on financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; forward foreign exchange contract</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,146</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,002</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; fuel hedging income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,208</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245,279</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Note:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The government subsidies represent:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>subsidies granted by the local government to the Company from 2002 to 2005 in
consideration of the relocation of the Company&#146;s international flights and related
facilities from Shanghai Hongqiao Airport to Pudong International Airport; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>subsidies granted by various local municipalities to encourage the Group to
operate certain routes to the places where these municipalities are located.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>7</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>SEGMENT INFORMATION</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B><I>(a)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Primary reporting format by business segment</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group principally operates in one business segment, which is the operation of civil
aviation, including the provision of passenger, cargo, mail delivery and other extended
transportation services.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B><I>(b)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Secondary reporting format by geographical segment</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group&#146;s revenues (net of business tax) and results by geographical segment are analyzed
as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Domestic<SUP style="font-size: 85%; vertical-align: text-top">#</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Hong Kong</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Japan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">countries*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Traffic revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Passenger</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,438,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,494,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,009,137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,910,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,853,272</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Cargo and mail</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">346,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">641,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">623,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,354,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,966,790</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,785,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,136,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,632,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,265,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,820,062</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commission income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185,647</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ground service income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">794,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">794,814</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cargo handling income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">281,901</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">281,901</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rental income from
operating
sublease of aircraft</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,260</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other operating revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188,759</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,357,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,150,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,644,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,301,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,454,443</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245,279</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Segment results
(operating profit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(658,153</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(451,742</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">939,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-30
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>7</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>SEGMENT INFORMATION (CONTINUED)</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Domestic<SUP style="font-size: 85%; vertical-align: text-top">#</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Hong Kong</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Japan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">countries*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Traffic revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Passenger</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,283,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,239,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,502,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,508,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,534,099</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Cargo and mail</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">298,846</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">592,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">647,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,890,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,428,360</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,582,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,831,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,149,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,398,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,962,459</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commission income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201,146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">290,743</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ground service income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">692,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">692,178</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cargo handling income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">224,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">224,356</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rental income from
operating
sublease of aircraft</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,480</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other operating revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,337</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,917,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,854,273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,166,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,448,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,386,553</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Segment results
(operating profit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">354,754</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">445,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,232,384</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Domestic<SUP style="font-size: 85%; vertical-align: text-top">#</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Hong Kong</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Japan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">countries*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Traffic revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Passenger</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,591,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,667,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,001,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,114,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,375,240</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Cargo and mail</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">390,088</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">588,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,929,532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,186,984</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,870,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,057,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,589,905</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,044,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,562,224</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commission income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157,784</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ground service income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">471,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">471,338</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cargo handling income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163,450</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rental income from
operating
sublease of aircraft</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,209</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other operating revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,204</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,738,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,067,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,598,243</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,065,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,470,209</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,302</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Segment results
(operating profit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(524,488</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198,406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,073</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><I>#:</I></TD>
    <TD>&nbsp;</TD>
    <TD><I>The People&#146;s Republic of China, excluding the Hong Kong Special Administrative
Region.</I></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><I>*:</I></TD>
    <TD>&nbsp;</TD>
    <TD><I>include the United States of America, Europe and Asian countries other than
Japan.</I></TD>
</TR>

</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The major revenue-earning assets of the Group are its aircraft, all of which are registered
in the PRC. Since the Group&#146;s aircraft is deployed flexibly across its route network, there
is no suitable basis of allocating such assets and the related liabilities to geographical
segments and hence segment assets and capital expenditure by segment have not been
presented.
</DIV>

<P align="center" style="font-size: 10pt">F-31
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>8</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>WAGES, SALARIES AND BENEFITS</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wages, salaries, bonus and allowances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">892,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,549,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,774,292</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee welfare and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,267</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Staff housing allowance (Note 34(b))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,231</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Defined contribution retirement
schemes (Note 33(a))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">280,218</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Post-retirement benefits (Note 33(b))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,459</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,449,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,865,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,359,467</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>9</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>FINANCE COSTS</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest relating to obligations under
finance leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; wholly repayable within five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195,764</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; not wholly repayable within five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,869</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">490,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339,276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324,633</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest on loans from bank and financial
institutions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; wholly repayable within five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">410,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">729,698</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; not wholly repayable within five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243,433</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">446,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">555,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">973,131</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest relating to note payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,639</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of the discount on zero
coupon debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,944</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest relating to a long-term payable
(Note 29)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,999</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">952,708</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">925,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,380,346</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Less: amounts capitalized into advance
payments on acquisition of aircraft
(Note 17)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(97,414</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(57,120</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(279,989</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">855,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">868,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,100,357</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net foreign exchange (gains)/losses (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(414,640</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Waiver of amounts due to related
companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(133,029</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fair value losses on financial instruments
&#151; transfer from equity in respect of
interests rate swap qualified as
cash flow hedges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,333</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">922,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">770,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">707,050</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>The exchange gain for the year ended December&nbsp;31, 2005 primarily relates to revaluation of
the Group&#146;s foreign currency denominated borrowings and obligations under finance leases.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-32
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>10</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>(LOSS)/PROFIT BEFORE INCOME TAX</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(Loss)/profit before income tax is stated after:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charging:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation of property, plant
and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,956,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,076,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,911,722</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating lease rentals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; aircraft</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,238,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,720,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,785,615</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; land and buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">212,027</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of lease prepayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,219</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on disposals of property,
plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consumption of flight equipment
spare parts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239,134</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowances for obsolescence of
flight equipment spare parts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for impairment of trade
and other receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,325</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Auditors&#146; remuneration</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">and crediting:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of negative goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reversal of allowances for
obsolescence of flight equipment
spare parts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,930</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on disposals of property,
plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,073</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on disposals of financial
asset held for trading</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-33
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>11</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>TAXATION</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Taxation (credited)/charged to the consolidated statements of
operations is as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for PRC income tax, net of reversal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">160,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(81,734</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred taxation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,901</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(56,970</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(138,704</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company is subject to PRC income tax at a reduced rate of 15%, pursuant to the Circular
Hu Shui Er Cai (2001)&nbsp;No.&nbsp;104 issued by the Shanghai Municipal State Tax Bureau. Two of the
major subsidiaries of the Group, namely China Cargo Airlines Co. Ltd., and Shanghai Eastern
Flight Training Co., Ltd , are subject to PRC income tax at a reduced rate of 15%, pursuant
to the preferential tax policy in Pudong, Shanghai. Shanghai Eastern Logistics Co., Ltd. is
exempted from PRC income tax in 2005 pursuant to the circular Hu Di Shui Er Shui (2004)
No.68 issued by Shanghai Municipal State Tax Bureau. Other subsidiaries of the Group are
subject to PRC corporate income tax at the standard rate of 33%.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The tax on the Group&#146;s consolidated statements of
operations differs from the theoretical amount
that would arise using the taxation rate of the home country of the Company as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Loss)/profit before taxation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(741,302</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(577,432</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjusted:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share of result of associates and jointly
controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,330</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(708,564</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">591,228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(564,102</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax calculated at enacted tax rate of 15%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(88,684</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,615</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect attributable to subsidiaries charged
at tax rate of 33%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,539</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,578</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,334</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect attributable to subsidiaries with
income tax exemption</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,852</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income not subject to taxation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,462</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expenses not deductible for tax purposes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(74,273</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,673</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,642</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reversal of income tax provision made in
prior years as a result of tax clearance
with local tax bureau</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,807</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrecognized tax losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(258,515</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(86,074</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Utilization of previously unrecognized
tax losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,331</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,061</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,350</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax (charge)/benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(239,373</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(129,601</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138,704</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-34
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>11</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>TAXATION (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group operates international flights to overseas destinations. There was no material
overseas taxation for the years ended December&nbsp;31, 2005 and 2004, as there are double tax
treaties between the PRC and the corresponding jurisdictions (including Hong Kong) relating to
aviation business.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Deferred income tax assets and liabilities are offset when there is a legally
enforceable right of offset and when the deferred income taxes relate to the same authority.
The following amounts, determined after appropriate offsetting, are shown in the balance
sheets:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Deferred tax asset to be utilized
after 12&nbsp;months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">286,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">286,764</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Deferred tax asset to be utilized
within 12&nbsp;months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148,075</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">395,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">434,839</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Deferred tax liability to be realized
after 12&nbsp;months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(687,850</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(601,340</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Deferred tax liability to be realized
within 12&nbsp;months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(687,850</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(601,340</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(292,385</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(166,501</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Movements in net deferred taxation liability is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At January&nbsp;1, as restated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">292,385</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions through business acquisitions (Note 38)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(93,017</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Credited to income statement (Note 11(a))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,901</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(56,970</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charged/(credited) to equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; gain/(losses) on cashflow hedges (Note 31)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,467</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,103</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December 31</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">292,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,501</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-35
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>11</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>TAXATION (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The deferred tax assets and liabilities (prior to offsetting of balances within the same tax
jurisdiction) were made up of taxation effects of the followings:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax losses carried forward</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">349,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">451,659</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for obsolete flight equipment spare parts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,192</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repair cost on flight equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,454</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for post-retirement benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185,102</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other accrued expenses and
derivative financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139,949</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">738,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">874,356</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less: unrecognized assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(252,120</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(338,194</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">486,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">536,162</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for aircraft overhauls</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(106,128</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(143,517</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(672,708</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(559,146</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(778,836</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(702,663</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(292,385</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(166,501</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Movements of net deferred tax liabilities of the Group for the year ended December&nbsp;31, 2004:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">At</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">(Charged)/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">At</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">December</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">credited</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">(Charged)/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">December</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">to income</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">credited</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">statement</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">to equity</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax losses carried forward</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,442</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for obsolete flight
equipment spare parts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,014</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repair cost on flight equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">160,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(41,502</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,039</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for post-retirement benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,252</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other accrued expenses and
derivative financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,025</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,704</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">468,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">486,451</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for aircraft overhauls</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(103,853</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,275</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(106,128</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(690,797</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(672,708</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(794,650</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(778,836</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Movement of deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(325,753</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,901</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(292,385</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-36
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>11</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>TAXATION (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Movements of net deferred tax liabilities of the Group for the year ended December&nbsp;31, 2005:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Additions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">At</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">(Charged)/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">through</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">At</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">December</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">credited</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">(Charged)/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">business</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">December</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">to income</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">credited</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">acquisitions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">statement</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">to equity</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">(Note 38)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax losses carried forward</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,465</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for obsolete flight
equipment spare parts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,628</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(194</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,192</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repair cost on flight
equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(54,585</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,454</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for post-retirement
benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185,102</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other accrued expenses and
derivative financial
instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24,103</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139,949</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">486,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,043</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24,103</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">536,162</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for aircraft
overhauls</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(106,128</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42,574</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(143,517</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(672,708</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(559,146</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(778,836</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(702,663</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(292,385</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24,103</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(166,501</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In accordance with the PRC tax law, tax losses can be carried forward to off set against
future taxable income for a period of five years. As of December&nbsp;31, 2004 and 2005, the
Group had tax losses carried forward of approximately RMB2,330,000,000 and RMB3,011,000,000
respectively which will expire between 2006 and 2010, available to off set against the
Group&#146;s future taxable income. As of December&nbsp;31, 2004 and 2005, the Group did not
recognize RMB252,120,000 and RMB338,194,000 of deferred tax assets arising from the tax
losses available as management did not consider it probable that such tax losses would be
realized before they expire.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>12</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>DIVIDENDS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Dividend of RMB97,339,000 (RMB0.02 per share) in respect of the year ended December&nbsp;31, 2004
were paid in 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Board of Directors of the Company has recommended not to pay any dividend in respect of
the year ended December&nbsp;31, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>13</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>(LOSS)/EARNINGS PER SHARE</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The calculation of basic (loss)/earnings per share is based on the loss attributable to
equity holders of RMB1,097,161,000, profit of RMB 320,691,000 and loss of RMB467,307,000 for the
year ended December&nbsp;31, 2003, 2004 and 2005, respectively and 4,866,950,000 weighted
average number of shares in issue during the years ended December&nbsp;31, 2003, 2004 and 2005.
The Company has no potential dilutive ordinary shares.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-37
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>14</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PROPERTY, PLANT AND EQUIPMENT</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Aircraft, engines and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">flight equipment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Held</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">under</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">property,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">finance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">plant and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Owned</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">leases</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Buildings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">equipment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At January&nbsp;1, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,142,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,452,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,254,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,321,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,170,708</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfers from
construction
in progress (Note 15)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,567</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfers from advance
payments on acquisition
of aircraft (Note 17)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">445,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,191,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,637,116</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions through business
acquisitions (Note 38)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,781,327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,155,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">293,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,302,833</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,952,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">991,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">463,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,478,470</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Disposals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67,354</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,281</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(125,299</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(198,934</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,254,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,791,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,424,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,069,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,540,760</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At January&nbsp;1, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,638,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,264,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">392,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,131,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,426,822</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charge for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,307,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,161,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">355,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,911,722</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Disposals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(66,030</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(159</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(79,111</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(145,300</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,880,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,426,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">479,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,407,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,193,244</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net book amount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,374,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,365,309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,945,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,661,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,347,516</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At January&nbsp;1, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,504,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,188,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,861,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,189,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,743,886</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In January&nbsp;2004, the Company exercised its right to terminate a finance lease arrangement and
purchased an aircraft at a consideration equal to the present value of the remaining minimum
lease payments on the date of the purchase. In this connection, the Company was entitled to a
rebate of RMB98,921,000, as it had met certain conditions as defined in the original lease
arrangement. Such a rebate was recognized as a reduction is the cost of the aircraft.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group&#146;s property, plant and equipment is stated at fair value. The latest independent
valuation was performed on June&nbsp;30, 2001.</TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Had the property, plant and equipment of the Group and the Company been stated at cost less
accumulated depreciation and impairment losses, the carrying amounts of property, plant and
equipment would have been as follows:</TD>
</TR>
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,262,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,943,085</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As at December&nbsp;31, 2005, aircraft owned by the Group with an aggregate net book amount of
approximately RMB9,843,773,000 (2004: RMB9,737,032,000) were pledged as collateral under
certain loan arrangements (see Note 29).</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>
</DIV>


<P align="center" style="font-size: 10pt">F-38
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>



<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>15</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONSTRUCTION IN PROGRESS</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>At January&nbsp;1,</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">219,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188,654</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions through business acquisitions (Note 38)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,577</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189,220</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfer to property, plant and equipment (Note 14)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(209,199</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(150,567</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>At December&nbsp;31,</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">240,884</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Representing:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,418</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137,466</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">240,884</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>16</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>LEASE PREPAYMENTS</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cost</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At January&nbsp;1,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">965,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">965,462</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions through business acquisitions (Note 38)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,339</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,843</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">965,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,134,644</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Accumulated amortization</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At January&nbsp;1,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,654</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization charge</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,219</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161,873</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net book amount</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">828,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">972,771</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Lease prepayments represent unamortized prepayments for land use rights.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group&#146;s land use rights are located in the PRC and the majority of these land use rights
have terms of 50&nbsp;years from the date of grant. As at December&nbsp;31, 2005, the majority of
these land use rights had remaining terms ranging from 41 to 49&nbsp;years (2004: from 42 to 48
years).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certificates of certain land use rights owned by the Group, with nil carrying value, are
currently registered under the name of CEA Holding and held by CEA Holding on behalf of the
Group. The Group is entitled to lawfully and validly occupy and use these lands for its
daily operations. The procedures to change the registration of the land use rights
certificates with the relevant municipal land bureaus are currently being addressed by CEA
Holding. Until the completion of these transfer procedures, the Group is unable to assign
or pledge these land use rights. The Company&#146;s directors do not believe the lack
of certificates of certain land use rights has any material impact on the financial position
of the Group.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The directors do not believe the lack of certificates of certain land use rights has any
material impact on the financial position of the Group</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-39

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>



<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>17</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>ADVANCE PAYMENTS ON ACQUISITION OF AIRCRAFT</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At January&nbsp;1,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,239,893</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,678,603</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,996,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,751,197</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest capitalized (Note 9)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279,989</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfers to property, plant and
equipment (Note 14)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,615,400</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,637,116</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,678,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,072,673</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Included in balance at December&nbsp;31, 2004 and 2005 is accumulated interest capitalized of RMB
160,016,000 and RMB409,530,000, at an average interest rate of 4.0% and 4.0% respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>18</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>INTANGIBLE ASSETS</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Negative</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Net</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Goodwill</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">goodwill</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Balance</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended December&nbsp;31, 2004
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net book amount, at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(46,325</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,505</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization (charge)/credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,654</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,202</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net book amount, at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42,873</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,303</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(55,245</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,860</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated amortization and impairment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(33,929</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,557</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net book amount, at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42,873</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,303</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net book amount, at beginning of year
as previously presented</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42,873</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,303</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Opening adjustment on derecognition
of negative goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,873</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,176</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions through business
acquisitions (Note 38)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">609,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">609,135</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net book amount, at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>688,311</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>688,311</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The amortization of goodwill of RMB5,654,000 and negative goodwill of RMB3,452,000 for the
year ended December&nbsp;31, 2004 is included in &#147;other depreciation, amortization and operating
lease&#148; in the consolidated statements of
operations.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-40

</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>18</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>INTANGIBLE ASSETS (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Impairment tests for goodwill</I></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company operates in one cash-generating unit (&#147;CGU&#148;) which is the carriage of passenger,
cargo and mail over various routes.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The recoverable amount of a CGU is determined based on value-in-use calculations. These
calculations use cash flow projections based on financial budgets approved by management
covering a five-year period. Cash flows beyond the five-year period are extrapolated using
the estimated growth rates stated below. The growth rate does not exceed the long-term
average growth rate for the aviation business in which the CGU operates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Key assumptions used for value-in-use calculations are:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Gross margin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Growth rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Discount rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Management determined budgeted gross margin based on past performance and its expectations
for market development. The weighted average growth rate used is consistent with the
forecasts included in industry reports. The discount rate used is pre-tax and reflects
specific risks relating to the Company&#146;s business.</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-41

</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>19</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>INVESTMENTS IN ASSOCIATES</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unlisted investments, at cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">757,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">763,240</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,060</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share of post acquisition results/(reserves)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(171,524</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(180,554</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">633,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">629,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Movement of investments in associates is as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At January&nbsp;1,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">656,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">633,212</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of additional investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,564</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share of results</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(44,318</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,030</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,206</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">633,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">629,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Particulars of the principal associates, all of which are limited liability companies
established and operating in the PRC, are as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="24%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Place and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Attributable</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">date of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Paid-up</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">equity</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Principal</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000">Company</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 0px solid #000000">establishment</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">capital</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000">interest</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 0px solid #000000">activities</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China Eastern Airlines</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">40%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">40%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of air</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Wuhan Co., Ltd. (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">August 16, 2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">transportation services</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">(&#147;CEA Wuhan&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Eastern Air Group</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">25%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">25%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of financial</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Finance Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">December 6, 1995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">services to group</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">(&#147;EAGF&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">companies of CEA</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Holding</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Eastern Aviation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">45%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">45%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of aviation</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advertising Services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">March 4, 1986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">advertising agency</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">services</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China Eastern Air</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">350,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">45%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">45%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of air</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Catering Investment
Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">November 17, 2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">catering services</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Eastern Aviation Import</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">45%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">45%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of aviation</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#038; Export Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June 9, 1993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">equipment, spare</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">(&#147;EAIEC&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">parts and tools</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">trading</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shanghai Dongmei</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">45%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">45%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of travelling</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Aviation Travel Co.,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">October 17, 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">and accommodation</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ltd. (&#147;SDATC&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">agency services</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-42

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>19</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>INVESTMENTS IN ASSOCIATES (CONTINUED)</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="24%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Place and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Attributable</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">date of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Paid-up</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">equity</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"> Principal</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000">Company</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 0px solid #000000">establishment</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">capital</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000">interest</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 0px solid #000000">activities</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Qingdao Liuting</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">450,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">25%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">25%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of airport</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">December 1, 2000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">operation services</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Airport Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Collins Aviation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">35%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">35%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of airline</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Maintenance
Service</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 27, 2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">electronics products</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Shanghai Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">maintenance services</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shanghai Hongpu</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">30%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">30%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of cable and</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Civil Airport</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">October 18, 2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">wireless</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Communication</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">communication</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">services</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China Eastern
Airlines</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">40%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">40%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of ticket</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Development (HK)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">May 20, 1995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">sales and goods</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">logistics</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jiangsu Huayu
General</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">27%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">27%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of aviation</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Aviation Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">December 1, 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">supporting services</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">Notes:</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>Subsequent to December&nbsp;31, 2005, the Company completed acquisitions amounting in aggregate to
an additional 56% interest in China Eastern Airlines Wuhan Co., Ltd.
(Note 42).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>The Group&#146;s aggregated share of the revenues, results, assets and liabilities of its
associates are as follows:</TD>
</TR>

</TABLE>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Assets</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Liabilities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Revenues</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Loss</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,098,974</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,465,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">915,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(44,318</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,807,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,177,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">887,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,030</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-43

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>20</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>INVESTMENTS IN JOINTLY CONTROLLED ENTITIES</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unlisted investments, at cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,552</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share of post-acquisition results/(reserves)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,968</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,520</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group&#146;s aggregated share of the revenues, results, assets and liabilities of its
jointly controlled entities is as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" colspan="2">(Loss)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Assets</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Liabilities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Revenues</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">/profit</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,268</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,300</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Movement of investments in jointly controlled entities is as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At January&nbsp;1,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,948</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of additional investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,872</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share of results</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,300</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,520</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Particulars of the principal jointly controlled entities, all of which are limited liability
companies established and operating in the PRC are as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Place and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Attributable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>date of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Paid-up</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>equity</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Principal</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><B>Company</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><B>establishment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>interest</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><B>activities</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shanghai
Technologies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">51%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Aerospace Co.,
Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 28, 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">repair and</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">(&#147;STA&#148;) (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">maintenance</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shanghai Eastern</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">40%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">40%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of spare parts</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Union Aviation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">December 28, 1995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">repair and</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Wheels &#038; Brakes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">maintenance</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-0px">Overhual
Engineering
Co., Ltd
(&#147;Wheels &#038; Brakes&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Eastern China Kaiya</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">41%</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">41%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Provision of computer</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">System Integration</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">May 21, 1999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">systems development</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">Notes</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>Under a Joint Venture Agreement dated March&nbsp;10, 2003, the Company has agreed to
share control over the economic activities of STA. Any strategic financial and operating
decisions relating to the activities of STA require the unanimous consent of the Company
and the other joint venture partner.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">F-44

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>21</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>OTHER LONG-TERM ASSETS</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term bank deposits (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,908,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,026,220</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deposits relating to aircraft under
operating leases (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">446,323</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid customs duty and value added tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,756</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rental and renovation deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,777</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid staff benefits (c)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,096</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other long-term receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,386</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,202,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,705,558</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 0px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>The long-term bank deposits are pledged as collateral under certain finance lease
arrangements (see Note 28). As at December&nbsp;31, 2004 and 2005, the effective interest rate on
the long-term bank deposits was 5.0% and 3.6% per annum respectively. The deposits have
average maturities of 4.4&nbsp;years. The fair value of long-term bank deposit of the Group is
RMB1,991&nbsp;million and RMB2,114&nbsp;million as at December&nbsp;31, 2004 and 2005 respectively, which are
determined using the expected future payments discounted at market interest rates prevailing
at the year end of 2.5% to 6.5% (2004: 2.5% to 7.0%).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>The fair value of deposits relating to aircraft under operating leases of the Group is RMB133
million and RMB446&nbsp;million as at December&nbsp;31,2004 and 2005 respectively, which are determined
using the expected future payments discounted at market interest rates prevailing at the year
end of 4.4% (2004: 2.4%).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(c)</TD>
    <TD>&nbsp;</TD>
    <TD>This represents subsidies to certain employees as an encouragement to purchase motor
vehicles. The employees are required to serve the Group for six years from the date of
receipt of the subsidies in order not to be required to repay the Group for the subsidy. If
the employee leaves before the end of the six-year period, a refund by the employee is
required calculated on a pro-rata basis. These subsidies are amortized over six years on the
straight-line basis.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">F-45

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>22</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>TRADE RECEIVABLES</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The credit terms given to trade customers are determined on an individual basis, with the
credit periods generally ranging from half a month to three months.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The aging analysis of trade receivables is as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less than 31&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,223,059</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,580,082</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">31 to 60&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">259,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134,095</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">61 to 90&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,377</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">91 to 180&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,097</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">181 to 365&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,302</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Over 365&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,466</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,785,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,011,419</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: provision for impairment of receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(77,973</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(93,010</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade receivables, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,707,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,918,409</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>23</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid aircraft operating lease rentals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,279</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepayment for acquisition of flight equipments
and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,206</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deposits with banks and a financial institution with
original maturity over three months but less than a
year (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175,332</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Custom duties and value added tax recoverable (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,781</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rebate receivable on aircraft acquisitions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,582</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rental deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,303</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">354,788</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">611,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">997,271</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 0px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>As at December&nbsp;31, 2004 and 2005, the effective interest rate on deposits with banks and a
financial institution is 0.7 and 0.7% respectively.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>Pursuant to the Caiguanshui &#091;2004&#093; No.&nbsp;63 issued by the Ministry of Finance on December&nbsp;29,
2004, PRC airlines (including the Company, China Cargo Airlines Co., Ltd. and China Eastern
Airlines Jiangsu Co., Ltd.) are subject to reduced custom duties and value added tax on
imported flight equipment and overseas repair costs in relation to those aircraft flying on
international and regional routes with effect from January&nbsp;1, 2005. During the year ended
December&nbsp;31, 2005, the Group paid the related custom duties and value added tax at the
standard rates and hence is entitled to a refund of over payment. As at December&nbsp;31, 2005, the
Group has aggregated recoverable balances of RMB114,781,000.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">F-46

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>24</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CASH AND CASH EQUIVALENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The carrying amounts of the cash and cash equivalents are denominated in the following
currencies:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Renminbi</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,821,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,281,206</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">US Dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">333,099</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japanese Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,591</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Euro</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,420</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pound Sterling</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,979</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Australian Dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,969</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Singapore Dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,943</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canadian Dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,187</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,607</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,114,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,864,001</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>25</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>TRADE PAYABLES AND NOTES PAYABLES</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The aging analysis of trade payables and notes payables is as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less than 31&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">923,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,697,293</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">31 to 60&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">397,187</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">61 to 90&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195,869</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">91 to 180&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">369,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">846,775</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">181 to 365&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">212,025</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Over 365&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,749</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,457,217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,394,898</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As at December&nbsp;31, 2005, all notes payables totaling RMB 1,775,048,000 were unsecured.
Discount rates ranged from 2.9% to 3.2% (2004: 3.8% to 4.1%) and all notes are repayable
within six months.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-47

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>26</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>OTHER PAYABLES AND ACCRUED EXPENSES</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued fuel cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,239,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,415,797</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued take-off and landing charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">724,164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">810,226</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued aircraft overhaul expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">461,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">745,627</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued salaries, wages and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">271,963</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other accrued operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">492,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">739,415</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Duties and levies payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">431,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">755,373</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current portion of provision for staff
housing allowances (Note 34 (b))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,270</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current portion of other long-term
liabilities (Note 32)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,029</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current portion of post-retirement benefit
obligations (Note 33(b))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,825</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Staff housing fund payable (Note 34(a))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,510</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deposit received from ticketing agents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215,335</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">353,805</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current portion of operating lease payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,268</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Staff welfare payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,433</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585,940</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,466,024</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,021,481</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>27</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PROVISION FOR AIRCRAFT OVERHAUL EXPENSES</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At January&nbsp;1,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">266,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">254,009</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions through business acquisitions (Note 38)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196,122</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional provisions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reversal resulting from change in estimate (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,814</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(58,577</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Utilization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67,167</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(52,255</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">254,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">403,999</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(52,798</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,589</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">388,410</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Provision of aircraft overhaul expenses represents the present value of estimated costs of
major overhauls for aircraft and engines under operating leases as the Group has the
responsibility to fulfill certain return conditions under relevant leases.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Prior to 2005, the overhauls for Company&#146;s certain aircraft models under operating leases
were performed by overseas service providers. In 2005, the Company identified domestic
facilities to carry out overhauls for certain aircraft models. The cost of the overhauls
carried out domestically was lower than that in overseas. Accordingly, the Company changed
its estimate for provision for aircraft overhauls as related those aircraft models.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-48

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>28</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>OBLIGATIONS UNDER FINANCE LEASES</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At December&nbsp;31, 2004 and 2005, Group had 22 and 26 aircraft, respectively under finance
leases. Under the terms of the leases, Group has the option to purchase, at or near the end
of the lease terms, certain aircraft at fair market value and others at either fair market
value or a percentage of the respective lessors&#146; defined costs of the aircraft. The
obligations under finance leases are principally denominated in US Dollars.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The future minimum lease payments (including interests), and the present value of the
minimum lease payments under finance leases are as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000">December 31, 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000">December 31, 2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Present</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Present</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">value of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">value of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Minimum</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Minimum</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Minimum</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">minimum</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">lease</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Lease</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">lease</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">lease</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">payments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Payments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">payments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">payments</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Within one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,526,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">337,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,189,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,885,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">457,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,428,037</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">In the second year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,962,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">262,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,699,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,870,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,570,056</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">In the third to fifth year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,924,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,756,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,487,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">472,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,014,196</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">After the fifth year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,401,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">385,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,016,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,934,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">337,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,596,208</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,815,367</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,153,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,662,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,176,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,567,822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,608,497</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: amount repayable
within one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,526,981</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(337,333</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,189,648</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,885,047</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(457,010</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,428,037</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,288,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">815,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,472,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,291,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,110,812</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,180,460</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of obligations under finance leases is RMB8,382 and RMB10,432&nbsp;million as at
December&nbsp;31,2004 and 2005 respectively, which is determined using the expected future
payments discounted at market interest rates prevailing at the year end of 2.5% to 7.0%
(2004: 2.5% to 7.0%).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At December&nbsp;31, 2004 and 2005, the Group had long-term bank deposits totaling RMB
1,908,398,000 and RMB2,026,220,000 respectively pledged as collateral under certain finance
lease arrangements (Note 21). In addition, the finance lease obligations are secured by the
related aircraft, assignments of all benefits of the relevant insurance policies relating to
the aircraft together with guarantees provided by certain banks in the PRC.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-49

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>29</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>BORROWINGS</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&#151; secured</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,987,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,809,678</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&#151; unsecured</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,554,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,980,438</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,542,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,790,116</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&#151; secured</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,925,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,555,313</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&#151; unsecured</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">268,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,313,917</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&#151; secured</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&#151; unsecured</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,188,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,677,856</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,974,544</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,382,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,554,630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,925,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,344,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">The borrowings are repayable as follows:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Within one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,382,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,554,630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">In the second year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,386,862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,663,434</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">In the third to fifth year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,216,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,517,473</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">After the fifth year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,939,785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,609,209</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,925,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,344,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The fair value of long-term borrowings of the Group is RMB9,909&nbsp;million and RMB12,044
million respectively, which is determined using the expected future payments discounted at
market interest rates prevailing at the year end of 4.5% (2004: 7.6%).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The terms of the long-term bank loans are summarized as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="21%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 0px solid #000000"><B>Interest rate and final maturities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="3" valign="top" align="left">RMB denominated bank loans:</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Loans for
working
capital
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fixed interest rates ranging
from 4.94% to 5.76%
per annum as at December&nbsp;31,
2005; 3-year loans with final
maturity through to 2008.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">1,710,100</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">3,253,500</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Loans for the
purchases of
aircraft
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fixed interest rates of 5.18%
per annum as at December&nbsp;31,
2005; 2 to 8-year loans with final
maturity through to 2012
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">880,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">1,455,000</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Loans for
construction
projects
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fixed interest rates of 5.76% per
annum as at December&nbsp;31,
2005; 7 to 10-year loans with
final maturities through to 2007
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">412,500</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">200,000</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-50
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>29</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>BORROWINGS (CONTINUED)</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="22%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>

</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 0px solid #000000"><B>Interest rate and final maturities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>

</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="3" valign="top" align="left">U.S. dollar denominated bank loans:</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Loans for the
purchases of
aircraft
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fixed interest rates ranging
from 4.01% to 6.86% per annum
2 to 10-year loans with final maturities
through to 2013
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">296,120</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Loans for the
purchases of
aircraft
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Floating interest rates ranging from
3&nbsp;months LIBOR&#043;0.25% to 6&nbsp;months
LIBOR&#043;0.75% as at December&nbsp;31, 2005;
2 to 10-year loans with final maturities
through to 2015
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">7,703,037</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">7,295,480</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Loan for the
purchase of
an aircraft
simulator
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Floating interest rates of 6
months LIBOR &#043;0.6% as at
December&nbsp;31, 2005; 3-year
loans with final maturity in 2007
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">30,623</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">111,820</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Loan for finance*
leases of
aircraft
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fixed interest rates ranging from 6.46%
to 8.62% per annum, repayable
by instalments up to 2008
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">47,426</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="10" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">Total long-term bank loans</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">10,736,260</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">12,659,346</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="10" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>These loans are secured by the related aircraft.</TD>
</TR>

</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Short-term borrowings of the Group and the Company are repayable within one year with
interest charged at the prevailing market rates based on the rates quoted by the People&#146;s
Bank of China. As at December&nbsp;31, 2005, the interest rates relating to such borrowings were
ranging from 2.22% to 5.04% per annum (2004: 2.06% to 5.04% per annum). During the year
ended December&nbsp;31, 2005, the weighted average interest rate on short-term bank loans was
4.62% per annum (2004: 3.34% per annum).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On August&nbsp;5, 2005, the Company issued debentures with a face value of RMB1,000,000,000 at an
issue price of RMB971,600,000, being 97.16% of the face value, and repayable on August&nbsp;4,
2006. On August&nbsp;23, 2005, the Company issued additional debentures with face value of
RMB1,000,000,000 at an issue price of RMB980,000,000, being 98% of the face value, and
repayable on May&nbsp;22, 2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The zero coupon debentures are accounted for in the balance sheets of the Group and the
Company as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nominal value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Unamortized discount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25,456</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,974,544</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-51
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>29</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>BORROWINGS (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The carrying amounts of the borrowings are denominated in the following currencies:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Renminbi</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,295,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,112,485</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">US Dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,430,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,232,261</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japanese Yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,925,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,344,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As at December&nbsp;31, 2004 and 2005, the secured bank borrowings of the Group for the purchases
of aircraft was secured by the related aircraft with an aggregate net book amount of
RMB9,737,032,000 and RMB9,843,773,000 respectively (Note 14). Certain secured bank
borrowings with aggregate amount of RMB1,162,186,000 and RMB2,899,386,000 were also
guaranteed by Export-Import Bank of the United States, China Industrial and Commercial Bank
and China Construction Bank as at December&nbsp;31,2004 and 2005 respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certain unsecured bank borrowings of the Group totalling of RMB2,122,600,000 and
RMB2,122,600,000 were guaranteed by CEA Holding as at December&nbsp;31,2004 and 2005
respectively (Note 39)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>30</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>SHARE CAPITAL</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
   <TD colspan="2" align="right">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"  style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Registered, issued and fully paid of RMB1.00 each
Unlisted shares held by CEA Holding and employees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">A shares listed on The Shanghai Stock Exchange</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"  style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">H shares listed on The Stock Exchange of Hong
Kong Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,566,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,566,950</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866,950</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Pursuant to articles 49 and 50 of the Company&#146;s Articles of Association, each of the
unlisted shares, the listed A shares and the listed H shares are all registered ordinary
 shares and carry the same rights.
</DIV>

<P align="center" style="font-size: 10pt">F-52
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>31</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RESERVES</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>(Amounts in thousands)</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Statutory</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>discretionary</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Hedging</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Share</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>reserves</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Revaluation</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>reserve</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>reserve</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Retained</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000"><B>premium</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>(Note (a))</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000"><B>reserve</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>(Note (b))</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>(Note 35)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000"><B>profits</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At January&nbsp;1, 2004,
as previously
presented</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,006,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">314,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">490,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(720,057</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(77,879</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">501,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,515,201</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of changes
in accounting
policy on the
adoption of IAS16</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(207,609</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(207,609</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At January&nbsp;1, 2004,
restated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,006,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">314,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">490,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(720,057</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(77,879</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">294,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,307,592</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Unrealized losses
on <BR>
cashflow hedges
(Note 35)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; gross</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,610</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,610</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,141</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Realized gains on
cashflow hedges
(Note 35)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; gross</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,839</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,839</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,326</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Profit attributable
to equity holders
of the Company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320,691</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfer from
retained profits to
reserves (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67,136</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,006,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">381,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">490,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(720,057</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(91,861</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">547,905</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,614,301</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-53
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>31</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RESERVES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>(Amounts in thousands)</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Statutory</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>discretionary</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Hedging</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Share</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>reserves</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Revaluation</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>reserve</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>reserve</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Retained</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000"><B>premium</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>(Note (a))</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000"><B>reserve</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>(Note (b))</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>(Note 35)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom:0px solid #000000"><B>profits</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At January&nbsp;1, 2005,
as previously
presented</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,006,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">381,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">490,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(720,057</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(91,861</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">948,898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,015,294</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of changes
in accounting
policy on the
adoption of IAS
16</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(400,993</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(400,993</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At January&nbsp;1, 2005,
restated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,006,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">381,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">490,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(720,057</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(91,861</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">547,905</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,614,301</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recognition of
negative goodwill
in retained
profits on the
adoption of IFRS
3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,873</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,006,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">381,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">490,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(720,057</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(91,861</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">590,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,657,174</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Unrealized gains on
<BR>
cashflow hedges
(Note 35)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; gross</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">181,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">181,449</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,217</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,217</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Realized gains on
cashflow hedges
(Note 35)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; gross</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,759</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,759</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,114</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend relating
to 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(97,339</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(97,339</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss attributable
to equity holders
of the company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(467,307</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(467,307</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfer from
retained profits to
reserves (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26,671</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,006,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">490,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(720,057</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(539</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,229,115</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(a)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Statutory and Discretionary Reserves</I></B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory common reserve fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory common welfare fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,107</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Discretionary common reserve fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,989</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">381,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407,842</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px Double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Pursuant to the PRC regulations and the Group companies&#146; Articles of Association, each of
the Group companies is required to transfer 10% of its profit for the year, as determined
under the PRC Accounting Regulations, to a statutory common reserve fund until the fund
balance exceeds 50% of the Group&#146;s company&#146;s registered capital. The statutory common
reserve fund can be used to make good previous years&#146; losses, if
any, and to issue new shares to shareholders in proportion to their existing shareholdings or to increase the par
value of the shares currently held by them, provided that the balance after such issue is
not less than 25% of the registered capital.
</DIV>

<P align="center" style="font-size: 10pt">F-54
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>31</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RESERVES (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Pursuant to the PRC regulations and the Group companies&#146; Articles of Association, each of
the companies is required to transfer 5% to 10% of its profit for the year, as determined
under the PRC Accounting Regulations, to the statutory common welfare fund. This fund can
only be used to provide staff welfare facilities and other collective benefits to the Group
companies employees. This fund is non-distributable other than in liquidation.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Each of the Group company is allowed to transfer 5% of its profit for the year as determined
under the PRC Accounting Regulations, to a discretionary common reserve fund. The transfer
to this reserve is subject to approval at shareholders&#146; meetings.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For the year ended December&nbsp;31, 2005, under the PRC Accounting Regulations, the Company
recorded a loss for the year. Accordingly, no profit appropriation of the Company to reserves
has been made for the year ended December&nbsp;31, 2005 (2004: nil). The transfer from retained
profits to reserves for the year represents the profit appropriation to reserves of certain
subsidiaries of the Company.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(b)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Capital reserve</I></B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Capital reserve represents the difference between the fair value of the net assets injected
and the nominal amount of the Company&#146;s share capital issued in respect of a group
restructuring in June&nbsp;1996.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>32</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>OTHER LONG-TERM LIABILITIES</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred credit on aircraft operating lease rental (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,645</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred credit on government grants (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,410</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other long-term payable (c)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,203</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221,258</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Current portion (Note 26)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(66,029</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Long-term portion</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155,229</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Deferred credit on aircraft operating lease rental represents the unamortized portion of
lease incentives from lessors.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Deferred credit on government grants represents government grants received for construction
and acquisition of safety and security facilities. As at December&nbsp;31, 2005, the related
facilities have not been constructed or purchased.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The balance is unsecured, bearing interest at an effective rate of 6.21% per annum and is
repayable by annual instalments of RMB30,000,000 (before taking into account of time value) up
to year 2009.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-55
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>33</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RETIREMENT BENEFIT PLANS AND POST-RETIREMENT BENEFITS</B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent" nowrap align="left"><B><I>(a)</I></B></TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Defined contribution retirement schemes</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Pension</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group companies participate in defined contribution retirement schemes organized
by municipal governments of the various provinces in which the Group companies
operate, and substantially all of the Group&#146;s PRC employees are eligible to
participate in the Group companies&#146; retirement schemes. The Group companies are
required to make annual contributions to the schemes at rates ranging from 20% to 22%
on the employees&#146; prior year salary and allowances. Employees are required to
contribute to the schemes at rates ranging from 7% to 8% of their basic salaries. The
Group has no other material obligation for the payment of retirement benefits beyond
the annual contributions under these schemes. For the year ended
December&nbsp;31, 2003 ,2004 and 2005, the Group&#146;s pension cost charged to the consolidated income statements
amounted to RMB 121,200,000, RMB146,500,000 and RMB228,264,000 respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Medical insurance</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The majority of the Group&#146;s PRC employees participate in the medical insurance schemes
organized by the municipal governments, under which the Group and its employees are
required to contribute to the scheme approximately 12% and 2%, respectively, of the
employee&#146;s basic salaries. For those employees who participate in these schemes, the
Group has no other obligation for the payment of medical expense beyond the annual
contributions. For the year ended December&nbsp;31, 2003, 2004 and 2005, the Group&#146;s
medical insurance contribution charged to the statements of operations
amounted to RMB36,424,000,
RMB47,700,000 and RMB51,954,000 respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent" nowrap align="left"><B><I>(b)</I></B></TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Post-retirement benefits</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In addition to the above retirement schemes, the Group provides retirees with other
post-retirement benefits including transportation subsidies, social function
activities subsidies and others. The expected cost of providing these post-retirement
benefits is actuarially determined and recognized by using the projected unit credit
method, which involves a number of assumptions and estimates, including inflation
rate, discount rate and employees&#146; turnover ratio.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The post-retirement benefit obligations recognized in the balance sheets are as
follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Present value of unfunded post-retirement
benefit obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">731,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,970,292</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrecognized actuarial gain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(85,345</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(731,590</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Post-retirement benefit obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">645,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,238,702</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: current portion (Note 26)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,500</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35,825</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">618,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,202,877</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-56
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>33</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RETIREMENT BENEFIT PLANS AND POST-RETIREMENT BENEFITS (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The costs of post-retirement benefits are recognized under wages, salaries and benefits in
the statements of operations as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,436</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Actuarial losses recognized</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">823</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total (Note 8)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,459</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Principal actuarial assumptions at the balance sheet date are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Discount rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Annual rate of increase of per capita benefit
payment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employees turnover rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>34</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>STAFF HOUSING BENEFITS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(a)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Staff housing fund</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In accordance with the PRC housing reform regulations, the Group is required to contribute
to the State-sponsored housing fund at rates ranging from 1% to 15% (2004: 1% to 15%) of the
specified salary amount of its PRC employees. At the same time, the employees are required
to contribute an amount equal to the Group&#146;s contribution. The employees are entitled to
claim the entire sum of the fund contributed under certain specified withdrawal
circumstances. For the year ended December&nbsp;31, 2003, 2004 and 2005, the Group&#146;s
contributions to the housing funds amounted to RMB 65,300,000, RMB94,200,000 and
RMB102,472,000 respectively which has been charged to the statements
of operations. The staff
housing fund payable as at December&nbsp;31, 2004 and 2005 amounted to RMB75,364,000 and
RMB136,510,000 respectively (Note 26). The Group has no legal or constructive obligations
to pay further contributions if the fund does not hold sufficient assets to pay all
employees the benefits relating to employee service in the current and prior periods.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(b)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Staff housing allowances</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group also provides staff housing allowances to eligible employees who joined in the
Group prior to 1998 according to the Group&#146;s staff housing allowance policy introduced in
October&nbsp;2003 (the &#147;Staff Housing Allowance Policy&#148;).</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-57
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>34</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>STAFF HOUSING BENEFITS (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(b)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Staff housing allowances (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under the Staff Housing Allowance Policy, employees who have not been allocated with any
housing quarters or who have not been allocated with a quarter above the minimum area as set
out in the Staff Housing Allowance Policy, are entitled to a cash allowance based on the
area of quarter entitled and the unit price as set out in the Staff Housing Allowance
Policy. The total entitlement is principally vested over a period of 20&nbsp;years. Upon an
employee&#146;s resignation, his or her entitlement will cease and any unpaid entitlement related
to past service up to the date of resignation will be paid. Upon the establishment of the
Staff Housing Allowance Policy, employees are entitled to a portion of the total entitlement
already accrued based on his or her past service period. Such entitlement would be paid over
a period of 4 to 5&nbsp;years. As at December&nbsp;31, 2005, the present obligation of the provision
for the employee&#146;s staff housing entitlement is RMB457,466,000 (2004: RMB369,675,000), of
which RMB13,270,000 (2004: RMB93,427,000) is classified as current portion in &#145;other
payables and accrued expenses&#146;.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For the year ended December&nbsp;31, 2004 and 2005, the staff housing benefit provided under the
Staff Housing Allowance Policy amounted to RMB29,253,000 and RMB36,231,000 respectively
which has been charged to the statements
of operations.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>35</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>DERIVATIVE FINANCIAL INSTRUMENTS</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>Assets</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>Liabilities</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest rate swaps (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,821</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forward foreign exchange contracts (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,808</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fuel option contracts (c)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,985</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,614</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: non-current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest rate swaps</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,571</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(70,292</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,447</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,731</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forward foreign exchange contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(594</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100,196</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,380</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fuel option contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,659</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,571</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(70,886</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(119,643</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25,770</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,844</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(a)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Interest rate swaps</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group uses interest rate swaps to reduce the risk of changes in market interest rates
(Note 3(a)(iii)). The interest rate swaps entered into by the Group are generally for
swapping variable rates, usually reference to LIBOR, into fixed rates. The Group&#146;s interest
rate swaps qualify for hedge accounting and are accounted for as cashflow hedge. As at
December&nbsp;31, 2004 and 2005, the notional amount of the outstanding interest rate swap
agreements was approximately US$437&nbsp;million and US$661&nbsp;million respectively: These
agreements will expire between 2006 and 2016. For the year ended December&nbsp;31, 2004 and
2005, a net gain of RMB29,700,000 and RMB78,546,000 respectively arising from changes in the
fair value of the interest rate swaps subsequent to initial recognition was recognized
directly in the hedging reserve (Note 31).</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-58
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD nowrap><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
<BR>35 DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(b)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Forward foreign exchange contracts</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group uses currency forward contracts to reduce risk of changes in currency exchange
rates in respect of ticket sales and expenses denominated in foreign currencies (Note
3(a)(vi)). These contracts are generally for selling of Japanese Yen and purchasing of U.S.
dollars at fixed exchange rates. On July&nbsp;21, 2005, the People&#146;s Bank of China revalued the
RMB with reference to an undisclosed basket of currencies. Prior to the revaluation, the
Group&#146;s currency forward contracts qualified for hedge accounting and were accounted for as
cashflow hedge of firm commitments. After the revaluation, the Group discontinued the hedge
relationship and did not apply hedge accounting on forward foreign exchange contracts from
July&nbsp;1, 2005. As at December&nbsp;31, 2004 and 2005, the notional amount of the outstanding
currency forward contracts was approximately US$226&nbsp;million and US$92&nbsp;million respectively,
which will expire between 2006 and 2010. For the years ended December&nbsp;31, 2003, 2004 and
2005, a net loss of 58,102,000, a net loss of RMB 46,149,000 and a net gain of RMB82,144,000
respectively arising from changes in the fair value of these foreign currency forwards
between the initial recognition up to June&nbsp;30, 2005 was recognized directly in the hedging
reserve (Note&nbsp;&nbsp;31). The change in the fair value between July&nbsp;1, 2005 and December&nbsp;31, 2005 of
RMB13,299,000 was recognized in the statements
of operations.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(c)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Fuel option contracts</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group uses fuel option contracts to reduce the risk of changes in market oil/petroleum
prices in connection with aircraft fuel costs. As at December&nbsp;31, 2005, the Group had
outstanding fuel option contracts to buy approximately 2,600,000 barrels of crude oil at
prices which ranging from US$ 41 to US$ 70 per barrel and sell approximately 6,840,000
barrels of crude oil at prices which ranging from US$ 33.5 to US$ 87.25 per barrel, all of
which will expire between 2006 and 2007. Management did not designate these fuel option
contracts for hedge accounting and changes in fair values have been recognized directly in
the statements
of operations.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-59
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>36</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO CONSOLIDATED CASH FLOW STATEMENT</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(a)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Cash generated from operations</I></B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">(Note 2a)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">USD&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Loss)/Profit before income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(741,302</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(577,432</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71,551</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments for:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,956,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,076,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,911,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">484,712</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gains on disposals of property, plant and
equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47,819</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,073</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Share of results in associates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,119</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Share of results in jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(45,268</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">533</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization of lease prepayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,125</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization of goodwill and negative
goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net foreign exchange (gains)/loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(414,640</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51,379</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gains on disposals of financial assets held
for trading</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,920</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,235</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fair value gains on financial assets at fair
value through profit or loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,839</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,877</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,826</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Consumption of flight equipment spare parts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,632</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance for obsolescence of flight equipment
spare parts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,930</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,726</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for impairment of trade and other
receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,138</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for post-retirement benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,696</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for staff housing allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,489</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for aircraft overhaul expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,017</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(147,846</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(129,020</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(128,700</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,948</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">860,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">868,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,100,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,348</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating profit before working capital changes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,594,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,792,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,344,825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">538,379</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 10px">
    <TD colspan="17" align="left">&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Changes in working capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Flight equipment spare parts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(128,713</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(110,725</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(294,969</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36,550</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(360,451</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(136,995</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(112,027</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,882</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amount due from related companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(122,253</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(83,459</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,342</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepayments, deposits and other
receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">197,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(361,345</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(306,283</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(37,952</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sales in advance of carriage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(206,496</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,576</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade payables and notes payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">348,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">509,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">821,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,760</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amount due to related companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">432,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,338</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other payables and accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(202,937</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(120,900</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">(1,030,806</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(127,730</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67,764</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,397</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for aircraft overhaul expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,457</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(91,321</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(110,832</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,733</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Post-retirement benefit obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,455</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,093</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,370</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,639</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Staff housing allowances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,253</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,306</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,269</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">491,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(549,431</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(975,042</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(120,820</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash generated from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,086,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,242,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,369,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">417,559</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 10px">
    <TD colspan="17" align="left">&nbsp;</TD>
</TR>


<TR style="font-size: 10px">
    <TD colspan="17" align="left"><FONT size="2"><B><I>(b)&nbsp;&nbsp;&nbsp;Non-cash transaction</I></B></FONT></TD>
</TR>

<TR style="font-size: 10px">
    <TD colspan="17" align="left">&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investing activities not affecting cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Injection of land use right from
minority shareholder of a subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,814</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital contribution to a jointly
controlled entity in form of property,
plant and
equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,428</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Utilization of rebates from aircraft
acquisition for purchases of flight
equipment spare parts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Financing activities not affecting cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Finance lease obligations incurred for
acquisition of aircraft</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,163,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,525,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">991,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,877</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-60
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>37</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>COMMITMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(a)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Capital commitments</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group has the following capital commitments:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Authorized and contracted for:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Aircraft, engines and flight equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,791,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,259,446</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Other property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,827</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Acquisition of a subsidiary (Note 42)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">308,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">390,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,229,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,746,273</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Authorized but not contracted for:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Aircraft, engines and flight equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,533,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">723,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Others property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,381,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,424,055</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,914,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,147,055</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,143,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,893,328</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Contracted expenditures for the above aircraft and flight equipment, including deposits
prior to delivery, subject to future inflation increases built in the contracts and any
discounts available upon delivery of the aircraft, if any, are expected to be paid as
follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,006,906</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,703,578</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,523,589</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,256,592</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,768,781</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,259,446</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(b)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Operating lease commitments</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group has commitments under operating leases to pay future minimum lease rentals as
follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Aircraft, engines and flight equipment</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Within one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,024,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,633,301</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">In the second year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,095,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,550,209</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">In the third to fifth year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,094,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,075,691</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">After the fifth year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">550,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,015,670</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,765,454</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,274,871</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Land and buildings</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Within one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,739</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">In the second year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,874</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,330</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">In the third to fifth year inclusive</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,951</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">After the fifth year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,846</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176,866</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,847,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,451,737</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-61
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>38</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>BUSINESS ACQUISITIONS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On June&nbsp;30, 2005, pursuant to an acquisition agreement entered into between the Company, CEA
Holding, China Eastern Air Northwest Company (&#147;CEA Northwest&#148;; a wholly owned subsidiary of
CEA Holding) and China Eastern Air Yunnan Company (&#147;CEA Yunnan&#148;; a wholly owned subsidiary
of CEA Holding), and upon approval by the Company&#146;s shareholders in a General Meeting, the
Company acquired certain assets and liabilities relating to the aviation businesses of CEA
Northwest and CEA Yunnan. The aggregate acquisition price paid and payable by the Company is
RMB639,749,000.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The goodwill is attributable to an increase in the Company&#146;s competitiveness as a result of
its increased size and the extension of the business scope geographically to the
north-western and southern-western regions of the PRC.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The acquired businesses contributed revenues of RMB4,269,745,000 and profit after taxation
of RMB23,552,000 to the Group for the period from July&nbsp;1, 2005 to December&nbsp;31, 2005. If the
acquisition had occurred on January&nbsp;1, 2005, the acquired businesses would have contributed
revenues of RMB7,740,744,000, and net loss of RMB510,870,000 to the Group for the year ended
December&nbsp;31, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Details of net assets acquired and related goodwill are as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase consideration:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">639,749</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Direct costs relating to the acquisition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,968</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total purchase consideration</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">669,717</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fair value of net assets acquired &#151; shown as below</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(60,582</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill (Note 18)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">609,135</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-62
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>38</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>BUSINESS ACQUISITIONS (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The assets and liabilities arising from the acquisition are as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Fair value of net assets acquired</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,302,833</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,577</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Lease prepayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,339</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investments in associates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,564</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other long-term assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">777,644</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,017</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Flight equipment spare parts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">385,971</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,645</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepayment, deposits and other receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,993</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">629,013</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade payables and notes payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(263,748</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales in advance of carriage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,702</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other payables and accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,600,738</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Borrowings, current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,163,898</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Borrowings, long-term portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(814,220</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taxation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26,319</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Derivative Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,151</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Obligations under finance leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,515,423</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for aircraft overhaul expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(196,122</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Post retirement benefit obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(519,881</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Staff housing allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(150,023</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(152,789</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net assets acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,582</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase consideration settled in cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">669,717</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents in businesses acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(629,013</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash outflow on business acquisition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,704</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>See Note 42 for details regarding a business acquisition completed after the balance sheet
but before the approval of these consolidated financial statements.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-63
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>39</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RELATED PARTY TRANSACTIONS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group is controlled by CEA Holding, which owns
approximately 61.64% of the Company&#146;s shares as at December&nbsp;31, 2005. The aviation industry in the PRC is administrated by the
CAAC. CEA Holding and the Group is ultimately controlled by the PRC government, which also
controls a significant portion of the productive assets and entities in the PRC
(collectively referred as &#147;the state-controlled enterprises&#148;).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>

<TD><B><I>(a)</I></B>&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Related party transactions</I></B><BR>
The Group sells air tickets through sales agents and is therefore likely to have extensive
transactions with other state-controlled enterprises, and the employees of state-controlled
enterprises while such employees are on corporate business as well as their close family
members. These transactions are carried out on normal commercial terms that are consistently
applied to all of the Group&#146;s customers. Due to the large volume and the pervasiveness of
these transactions, the management is unable to determine the aggregate amount of the
transactions for disclosure. Therefore, retail transactions with these related parties are
not disclosed herein. Management believes that meaningful related party disclosures on these
retail transactions have been adequately made.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The other related party transactions are:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Income/</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000">(expenses or payments)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Nature of transaction</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">Related party</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">With CEA Holding or companies
directly
or indirectly held by CEA Holding:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income on deposits at an average rate
of 0.72% per annum
in 2003, 2004 and 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">EAGF**</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,341</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense on loans at rates of 4.54% per annum in 2003, 4.5% per annum in 2004 and 4.50% per annum
in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">EAGF**</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,396</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,150</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,855</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commission income on carriage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">CEA Northwest*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,247</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">service provided by other airlines</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">CEA Yunnan*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,817</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top">
    <TD><DIV style="margin-left:30px; text-indent:-15px">with air tickets sold by the Group, at rates
ranging from 3% to 9% of the
value of tickets sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">CEA Wuhan ***</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,412</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commission expense on air tickets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">CEA Northwest*</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,776</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,181</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,374</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">sold on behalf of the Group, at</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="left">CEA Yunnan*</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,743</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,494</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,238</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">rates ranging from 3% to 9% of</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="left">CEA Wuhan***</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,547</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32,396</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,550</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">the value of tickets sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="left">SDATC**</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24,940</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,228</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,402</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">China Eastern Air</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(34,225</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Development (HK) Co., Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Shanghai Tourism</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,046</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,201</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,815</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">(HK) Co., Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-64
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>39</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RELATED PARTY TRANSACTIONS (CONTINUED)</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Income/</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000">(expenses or payments)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Nature of transaction</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">Related party</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">With CEA Holding or companies
directly
or indirectly held by CEA Holding:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Handling charges of 0.1% to 2% for purchase of aircraft, flight
equipment,
flight equipment spare parts,
other property, plant and
equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">EAIEC**</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,393</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(34,270</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(40,590</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ticket reservation service charges for utilization of computer reservation system</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Travel Sky Technology Limited</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71,884</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(86,311</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(124,677</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repairs and maintenance expense for ground service facilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">CEA Northwest *</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,535</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repairs and maintenance expense
for aircraft and engines</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Wheels &#038; Brakes</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25,361</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25,445</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(63,972</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="left">STA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(104,853</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="left">EAIEC**</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,969</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Lease rental income from operating lease of aircraft</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">CEA Wuhan Airlines***</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,327</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD valign="top" nowrap><DIV style="margin-left:15px; text-indent:-15px">Lease rental charges for operating lease of aircraft</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">CEA Northwest*</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(92,466</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(199,188</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #cceeff">

<TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">CEA Yunnan*</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(27,726</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(86,341</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>



<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Supply of food and beverages</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Eastern Air (Shantou)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Economic <BR>
Development Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36,413</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(57,623</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(61,701</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">CEACI</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(188,406</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(231,759</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="left">Shanghai Eastern Air Catering Co., Ltd</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(96,984</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(165,643</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(184,306</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Qingdao Eastern Air</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Catering Investment Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(14,291</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,055</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Xian Eastern Air</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Catering Investment Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,079</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Yunnan Eastern Air</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Catering Investment Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(244</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,451</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="TOP" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advertising expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Eastern Aviation Advertising Service
Co., Ltd. (&#147;EAASC&#148;)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,676</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,629</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,611</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Purchase of aviation equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Shanghai Eastern Aviation Equipment Manufacturing Corporation</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,149</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,850</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,987</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Rental expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Shanghai Eastern Aviation Equipment Manufacturing Corporation</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,945</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,582</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,909</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px; background: #cceeff">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-65
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>39</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RELATED PARTY TRANSACTIONS (CONTINUED)</B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">*</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group acquired the aviation business of CEA Northwest and CEA Yunnan with
effect from June&nbsp;30, 2005. Transactions with CEA Northwest and CEA Yunnan up to June
30, 2005 are regarded as related party transactions.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">**</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>EAGF is also a 25% owned associate of the Group; SDATC and EAIEC are both a 45%
owned associates of the Group.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">***</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CEA Wuhan was a 40% owned associate of the Group for the year ended December
31, 2005. On December&nbsp;8, 2005, the Company entered into agreement to acquire an
additional 56% equity interest in CEA Wuhan and the acquisitions were completed after
December&nbsp;31, 2005.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="54%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">Income/</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(expenses or payments)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Nature of transaction</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2"><B>Related party</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>With CAAC and its affiliates:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Civil aviation infrastructure levies paid to CAAC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">CAAC</TD>
    <TD>&nbsp;</TD>
<TD align="right">(129,646</TD>
<TD>)</TD>
<TD></TD>
    <TD>&nbsp;</TD>
    <TD align="right">(251,185</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(466,191</TD>
    <TD>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD></TD>
<TD></TD>
<TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Aircraft insurance premium paid through CAAC who entered
into the insurance policy on
behalf of the Group</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">CAAC</TD>
    <TD>&nbsp;</TD>
<TD align="right">(157,278</TD>
<TD align="left">)</TD>
<TD></TD>
    <TD>&nbsp;</TD>
    <TD align="right">(154,086</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(201,653</TD>
    <TD>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD></TD>
<TD></TD>
<TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>With other state-controlled
enterprises:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD></TD>
<TD></TD>
<TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Take-off and landing fees charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" nowrap>State-controlled airports</TD>
    <TD>&nbsp;</TD>
<TD align="right">(1,372,896</TD>
<TD align="left">)</TD>
<TD></TD>
    <TD>&nbsp;</TD>
    <TD align="right">(1,579,115</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(2,461,858</TD>
    <TD>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD></TD>
<TD></TD>
<TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Purchase of aircraft fuel</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" nowrap>State-controlled fuel suppliers</TD>
    <TD>&nbsp;</TD>
<TD align="right">(2,128,628</TD>
<TD align="left">)</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(3,447,336</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(4,571,155</TD>
    <TD>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top" style="padding-top: 0em; background: #cceeff">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Interest income on deposits at an average
rates of 0.72% per annum (2004: 0.72% per annum)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">State-controlled banks</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,012</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,948</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Interest expense on loans at an average rate of
4.54% per annum (2004: 4.54% per annum)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">State-controlled banks</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(976,760</TD>
<TD>)</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(588,842</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(790,478</TD>
    <TD>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top" style="padding-top: 0em; background: #cceeff">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Commission expense on air tickets sold on behalf of the Group at
rates ranging from 3% to 9% of
the value of tickets sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">Other PRC airlines</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(41,284</TD>
<TD>)</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(78,232</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(153,528</TD>
    <TD>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Supply of food and beverages</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Other state-control enterprises</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(146,141</TD>
<TD>)</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(236,102</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(368,120</TD>
    <TD>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-66
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>39</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RELATED PARTY TRANSACTIONS (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B><I>(b)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Balances with related companies</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(i)&nbsp;&nbsp;&nbsp;Amounts due from related companies</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Company</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China Eastern Air Development (HK)&nbsp;Co., Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,457</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CEA Holding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,773</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SDATC**</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,223</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shanghai Tourism (HK)&nbsp;Co., Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,177</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CEA Wuhan ***</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,541</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EAIEC**</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,956</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">STA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,927</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CEA Yunnan*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other related companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,658</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,712</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 0px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>The Group acquired the aviation business of CEA Northwest and CEA Yunnan with
effect from June&nbsp;30, 2005. Transactions with CEA Northwest and CEA Yunnan up to June
30, 2005 are regarded as related party transactions.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>EAGF is a 25% owned associate of the Group; SDATC is a 45% owned associate of
the Group; EAIEC is a 45% owned associate of the Group.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">***</TD>
    <TD>&nbsp;</TD>
    <TD>CEA Wuhan was a 40% owned associate of the Group for the year ended December
31, 2005. On December&nbsp;8, 2005, the Company entered into agreement to acquire an
additional 56% equity interest in CEA Wuhan and the acquisitions were completed after
December&nbsp;31, 2005.</TD>
</TR>

</TABLE>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Except for amount due from CEA Holding, which is reimbursement in nature, all other amounts
due from related companies are trade in nature, interest free and payable within normal
credit terms given to trade customers.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-67
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>39</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RELATED PARTY TRANSACTIONS (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(ii)&nbsp;&nbsp;&nbsp;Amounts due to related companies</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Company</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EAIEC**</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47,093</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90,123</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EAGF**</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,328</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CEA Wuhan ***</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,063</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(80,407</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">STA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,491</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CEA Holding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(94,216</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CEA Northwest*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(69,380</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other related companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,432</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,465</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 6pt">
    <TD>&nbsp;</TD>
</TR>


<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(138,968</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(295,030</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 0px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>The Group acquired the aviation business of CEA Northwest and CEA Yunnan with
effect from June&nbsp;30, 2005. Transactions with CEA Northwest and CEA Yunnan up to June
30, 2005 are regarded as related party transactions.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>EAGF is a 25% owned associate of the Group; SDATC is a 45% owned associate of
the Group; EAIEC is a 45% owned associate of the Group.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">***</TD>
    <TD>&nbsp;</TD>
    <TD>CEA Wuhan was a 40% owned associate of the Group for the year ended December
31, 2005. On December&nbsp;8, 2005, the Company entered into agreement to acquire an
additional 56% equity interest in CEA Wuhan and the acquisitions were completed after
December&nbsp;31, 2005</TD>
</TR>

</TABLE>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">


    <TD>Except for amounts due to EAGF and CEA Holding, which is reimbursement in nature, all other
amounts due to related companies are trade in nature, interest free and payable within
normal credit terms given by trade creditors.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">


    <TD>(iii)&nbsp;&nbsp;&nbsp;Short-term deposits and short-term loans with an associate</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Average interest rate</B></TD>


    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="13" align="left"><B>Short-term deposits (included in Prepayments, Deposits and other Receivables)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#147;EAGF&#148;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">413,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">475,078</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="9" align="left"><B>Short-term loans (included in Borrowings)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#147;EAGF&#148;*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213,702</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">*</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>EAGF is a 25% owned associate of the Group.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-68
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>39</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RELATED PARTY TRANSACTIONS (CONTINUED)</B></TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">(iv)&nbsp;State-controlled banks and other financial institutions
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>Average interest rate</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">(included in cash and cash equivalents)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,814,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,196,963</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,736,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,438,483</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%"><B><I>(c)&nbsp;Guarantees by holding company</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">At December&nbsp;31, 2005, long-term bank loans of the Group with an aggregate amount of
RMB2,122,600,000 (2004: RMB2,122,600,000) were guaranteed by CEA Holding (Note 29).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%"><B><I>(d)&nbsp;Key management compensation</I></B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Salaries, bonus, allowances and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,825</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>40</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>ULTIMATE HOLDING COMPANY</B></TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The directors regard CEA Holding, a company established in the PRC, as
being the ultimate holding company.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>41</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONTINGENT LIABILITIES</B></TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In 2005, the Company received a legal claim in the United States of America for unspecified
damages by family members of certain victims in the air crash of an aircraft of CEA Yunnan
that occurred on November&nbsp;21, 2004 in Baotou, Neimonggol, the PRC.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Management has engaged legal representatives to vigorously contest the proceedings. The
proceedings is still in an early stage and in the opinion of the Directors, based on
professional advice, it is unlikely that there will be any significant adverse effect to the
financial position of the Group.
</DIV>

<P align="center" style="font-size: 10pt">F-69

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>42</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>POST BALANCE SHEET EVENT</B></TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">On December&nbsp;8, 2005, the Company entered into agreements with each of Wuhan Municipality
State-owned Assets Supervision and Administration Commission (&#147;Wuhan SASAC&#148;) and Shanghai
Junyao Aviation Investment Company Limited (&#147;Shanghai Junyao&#148;) to acquire (i)&nbsp;a 38% equity
interest in CEA Wuhan from Wuhan SASAC for a consideration of RMB278,000,000, and (ii)&nbsp;a 18%
equity interest in CEA Wuhan from Shanghai Junyao for a consideration of RMB140,000,000,
respectively, totaling RMB418,000,000,. Based on an independent valuation conducted on
December&nbsp;31, 2005, a 56% share of the fair value of the net assets acquired amounted to
approximately RMB214,159,000. The acquisitions were conditional upon approvals of the
agreements from relevant governmental and regulatory authorities. On
January 4, 2006, all the
necessary approvals were obtained and the acquisitions were completed.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Pursuant to the acquisition agreement between the Company and Wuhan SASAC, after receipt of
the purchase consideration from the Company, Wuhan SASAC would settle RMB 152,000,000 for an
amount it owed to CEA Wuhan. On March&nbsp;23, 2006, Wuhan SASAC paid the aforesaid amount to CEA
Wuhan.
</DIV>

<P align="center" style="font-size: 10pt">F-70

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>43</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>SIGNIFICANT DIFFERENCES BETWEEN IFRS AND U.S. GAAP</B></TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Differences between IFRS and U.S. GAAP which have significant effects
on the consolidated profit (loss)&nbsp;attributable to equity holders and
consolidated net assets of the Group are summarised as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Note</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">

<TD><DIV style="margin-left:15px; text-indent:-15px"><B>Consolidated
profit (loss) attributable to the Company&#146;s equity
holders</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As stated
under IFRS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(980,675</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">456,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(438,728</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less:
Minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(g)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(116,486</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(135,680</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(28,579</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,097,161</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(467,307</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. GAAP adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income (loss)&nbsp;attributable to airline operations
of CEA Northwest and CEA Yunnan before June&nbsp;30, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(a)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(493,075</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24,424</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(575,326</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reversal of
difference in depreciation charges and profit (loss) on disposals of
fixed assets arising from revaluation of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,812</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,667</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,664</TD>
    <TD nowrap>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rescission of related party lease arrangements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(c)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(133,029</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reversal of
the retroactive effect of the new overhaul
accounting policy adopted in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(d)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(471,756</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Change in
accounting policy on the recognition of negative
goodwill under IFRS 3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(e)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,452</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(f)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,518</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,172</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred tax effect on the U.S. GAAP adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(h)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35,103</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(43,598</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,122</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As stated under U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,391,320</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">459,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,383,323</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and
fully diluted earnings (loss) per share under U.S.
GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">(RMB 0.286</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">RMB 0.094</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">(RMB 0.284</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and
fully diluted earnings (loss) per American
Depository Share (&#147;ADS&#148;) under U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">(RMB 28.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">RMB 9.43</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">(RMB 28.42</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Note</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Consolidated net assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As stated under IFRS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,701,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,302,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,918,542</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(g)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(526,768</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(820,835</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(822,477</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,174,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,481,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,096,065</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. GAAP adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Shareholders&#146; equity attributable to
airline operations of CEA Northwest and CEA Yunnan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(a)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,357,699</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,426,741</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">413,841</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reversal of
net revaluation surplus and difference in depreciation charges, the
related accumulated depreciation and profit (loss) on disposals arising from
the revaluation of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(b)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(544,677</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(480,010</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(405,346</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reversal of
the retroactive effect of the new overhaul
accounting policy adopted in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(d)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">244,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">471,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Change in
accounting policy on the recognition of negative
goodwill under IFRS 3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(e)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39,421</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(f)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,281</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred tax effect on the U.S. GAAP adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">(h)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,395</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(52,993</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">7,129</TD>
    <TD nowrap>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">

    <TD><DIV style="margin-left:15px; text-indent:-15px">As stated under U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,542,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,027,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,099,549</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-71

</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>43</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>SIGNIFICANT DIFFERENCES BETWEEN IFRS AND U.S. GAAP (CONTINUED)</B></TD>
</TR>
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES:</B>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>(a)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CEA Northwest and CEA Yunnan Acquisitions</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As disclosed in Note 38, the Group acquired certain assets and liabilities of the aviation
businesses of CEA Northwest and CEA Yunnan effective June&nbsp;30, 2005. Under IFRS, acquisition accounting was applied to these business combinations such that the businesses are
consolidated by the Group from June&nbsp;30, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, these transactions are considered to be
combinations of businesses under
common control which are accounted for in a manner similar to &#147;pooling-of-interests&#148;.
Consequently, the acquired assets and liabilities of CEA Northwest and CEA Yunnan and their results of operations and cash flows
have been included in the condensed consolidated financial statements of the Group at their U.S. GAAP carrying values for all
years presented.</TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our condensed consolidated financial statements prepared and
presented in accordance with U.S. GAAP to reflect the effect of the
acquisitions of CEA Northwest&#146;s and CEA Yunnan&#146;s aviation businesses
under common control for the relevant periods are set forth in
Note&nbsp;&nbsp;44 to our audited consolidated financial statements
included in this annual report.</td>
</tR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>(b)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Revaluation of fixed assets</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under IFRS, the Group&#146;s fixed assets are initially recorded at cost and are subsequently
restated at revalued amounts less accumulated depreciation. The excess
depreciation charge arising from the revaluation surplus was
approximately RMB63,895,000, RMB57,568,000 and RMB73,803,000 for the
year ended December&nbsp;31, 2003, 2004 and 2005, respectively. The
additional gain (loss) arising from the revaluation surplus on
disposals of revalued fixed assets was approximately loss of
RMB10,083,000, gain of RMB7,099,000 and RMB861,000 for the years ended December&nbsp;31, 2003, 2004 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, fixed assets are stated at cost less
accumulated depreciation. Accordingly,
the revaluation surplus, the related differences in depreciation
charges and gain (loss)&nbsp;on
disposals are reversed.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>(c)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Rescission of related party lease arrangements</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company entered into certain lease arrangements with CEA Northwest and its subsidiary to lease three A310 aircraft and three Bae146 aircraft in 2004 that were subsequently
terminated and retroactively rescinded. The impact of the retroactive rescission of the
lease arrangements with CEA Northwest was an aggregate settlement by CEA Northwest in the
amount of RMB133&nbsp;million (the &#147;Settlement Amount&#148;), which represented the operating losses
incurred on the operation of the CEA Northwest leased aircraft during 2004, to the Group
through the reduction of the Group&#146;s inter-company payable accounts with CEA Northwest.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under IFRS, the Settlement Amount was recognised as non-operating income for the year ended
December&nbsp;31, 2004 and was in effect an extinguishment of a financial liability through a
reduction of the Group&#146;s inter-company payable accounts with CEA Northwest.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, the Settlement Amount, through reduction of the Group&#146;s intercompany
payable account of CEA Holding&#146;s wholly owned subsidiary, was deemed as the principal
shareholder incurring costs on behalf of the Company and was recognised as a capital
contribution in accordance with Staff Accounting Bulletin Topic 5-T (&#147;SAB Topic 5-T&#148;). Any
cost incurred by the principal shareholder on behalf of its subsidiary are required to be
reflected in the subsidiary&#146;s financial statements as an expense and a corresponding capital
contribution unless the principal shareholders actions are completely unrelated to its position as a
shareholder under SAB Topic 5-T.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-72

</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>43</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>SIGNIFICANT DIFFERENCES BETWEEN IFRS AND U.S. GAAP (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>(d)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Retroactive application of the new overhaul accounting policy adopted in 2005</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Prior to the adoption of the revised IAS 16 (Note 2), the Group expensed overhaul costs on
owned and finance leased aircraft as incurred. Upon the adoption of the revised IAS 16
effective January&nbsp;1, 2005, the Group capitalized overhaul costs as a separate component of
the fixed assets carrying value to be depreciated over the estimated period between
overhauls on a straight line basis. Upon the completion of an overhaul, any remaining balance
of the previous overhaul will be derecognised and charged to the
consolidated statements of operations. The adoption of the revised IAS 16 has been applied retrospectively to all years
presented.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, the capitalization of overhaul costs incurred as a separate component of
fixed assets is an acceptable alternative. Therefore, the Group also changed its accounting
policy on overhaul costs for owned and financed lease aircrafts in the U.S. GAAP condensed
consolidated financial statements as such policy was considered to be preferable. Under
U.S. GAAP, the effect of a change in accounting policy is recognized in the period of the
change by including the cumulative effect of the change to the new accounting policy.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>(e)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Recognition of negative goodwill</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, in a business combination in which the fair value of the identifiable net
assets acquired exceeds the cost of the acquired business, the excess over cost should
reduce, on a pro rata basis, amounts assigned to all of the acquired assets, including
purchased research and development assets required to be written off, with the exception of
financial assets (other than investments accounted for by the equity method), assets to be
disposed of by sale, deferred tax assets, prepaid assets related to pension or other
post-retirement benefit plans, and any other current assets. Any remaining negative goodwill
is recognised as an extraordinary gain.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As the result of the adoption of IFRS 3, the Group&#146;s negative goodwill balance of RMB42,873,000 at January&nbsp;1,
2005 is derecognized with a corresponding adjustment to the opening balance of retained
earnings. From January&nbsp;1, 2005 onwards, IFRS 3 requires the
Group to recognize immediately in the statements of operations the excess of the net fair
value of those items acquired over the cost of the acquisition.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>(f)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Other U.S. GAAP adjustments</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The application of U.S. GAAP differs in certain other respects from IFRS. Under U.S. GAAP:
i) recognition of gain on sale and leaseback transactions is deferred and amortized, ii)
transitional obligations for post retirement benefits are amortized over the average
remaining service period of active plan participants, and iii) amortization of goodwill
ceased on December&nbsp;31, 2003.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>(g)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Minority interest</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under IFRS, minority interest is classified in the equity section of the consolidated
balance sheets and included in the consolidated statements of changes
in owners&#146; equity. Profit (loss) attributable to the minority
interest is presented as a component of the Group&#146;s total profit
(loss) for the year. U.S. GAAP does not classify minority interest in
the equity section of the consolidated balance sheets, and consequently does not include
minority interest in the consolidated statement of changes in
owners&#146; equity. Under U.S. GAAP, profit (loss) attributable to
minority interest is presented as a separate item before net income
(loss).</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-73

</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>43</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>SIGNIFICANT DIFFERENCES BETWEEN IFRS AND U.S. GAAP (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>(h)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Deferred tax effect</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>These represent the corresponding deferred tax effect as a result of the adjustments stated
in (b) to (f)&nbsp;above.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under IFRS, deferred tax assets are recognised to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilised.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, a valuation allowance is provided to reduce the amount of deferred tax
assets if it is considered more likely than not that some portion of, or, all of, the
deferred tax assets will not be realised. &#147;More likely than not&#148; is defined as a likelihood
of more than 50%. In determining whether a valuation allowance is necessary, a company may
not generally consider future anticipated income in measuring the valuation allowance if
that company has a history of losses. However, as confirmed by the IASB as part of the
convergence project with FAS 109, the Group believes that &#147;more likely than not&#148; under U.S.
GAAP and &#147;probable&#148; under IFRS have the same meaning for the application of IAS 12 and SFAS
109. Therefore this difference in the wording of U.S. GAAP and IFRS does not have any
impact on the Group&#146;s net assets or net income (loss), and the Group has therefore not
included a reconciling item for this difference.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>(i)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Consolidation based on variable interest model</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>IFRS focuses on the concept of control to determine whether an entity should be
consolidated. Under U.S. GAAP, a dual consolidation decision model exists. Under this
model, consolidation decisions are evaluated first based on the variable interest model then
the traditional consolidation model. Therefore, under U.S. GAAP, an entity will consolidate
a variable interest entity (&#147;VIE&#148;) which it does not control but absorbs the majority of the
VIE&#146;s expected losses or returns. FIN 46, &#147;Consolidation of Variable Interest Entities&#148;
requires certain VIEs to be consolidated by the primary beneficiary of the entity if the
equity investors in the entity do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. The primary
beneficiary has a variable interest in the entity that will cause it to absorb a majority of
the VIE&#146;s expected losses, receive a majority of the VIE&#146;s expected residual returns, or
both.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group completed its FIN 46 assessment, including the review of arrangements with
associates as part of the preparation of its consolidated financial statements and concluded
that there were no variable interest entities for which the Group absorbs the majority of
losses or returns that would have any material impact on its financial position or results
of operations.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-74

</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>43</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>SIGNIFICANT DIFFERENCES BETWEEN IFRS AND U.S. GAAP (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>(j)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CEA Yunnan air crash</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In November&nbsp;2004, an aircraft of CEA Yunnan crashed in
Baotau, Neimonggol, China. As
the result of this air crash, CEA Yunnan was subject to exposures including the loss of
aircraft, claims filed by the families of the deceased passengers and crew, other third
party liabilities including damage to park facilities, injuries and auxiliary costs.
When the Company acquired CEA Yunnan in May&nbsp;2005, the air crash
related exposures were not
transferred with other assets and liabilities of the aviation
businesses.
Rather, such exposures were transferred to CEA Holding.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under IFRS, insurance recovery is not recognized until virtually certain and the air crash has
no impact on the Group&#146;s consolidated financial statements as acquisition accounting was applied
(Note 38). However, under U.S. GAAP, outstanding claims are accrued net of insurance recovery that
are equally probable and determinable. In addition, any costs to be incurred by CEA Holding for
claims in excess of insurance recovery will be deemed as the principal shareholder incurring costs
on behalf of the Company and will be recognized as expenses and a capital contribution in
accordance with SAB Topic 5-T. There are no such capital contribution recorded to date.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>(k)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>New accounting pronouncements</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In December&nbsp;2004, the FASB revised Statement No.&nbsp;123 (FAS 123 R). FAS 123 R, &#147;Share-Based
Payment&#148;, requires all share-based payments to employees, including grants of employee stock
options, to be recognized in the financial statements based on their fair values. Pro forma
disclosure is no longer an alternative to financial statement recognition. FAS 123 R is
effective for fiscal periods beginning after June&nbsp;15, 2005. The Group is evaluating the
transition provisions allowed by FAS 123 R. The Group does not expect the adoption of FAS
123 R to have a material impact on the Group&#146;s financial position or operational results.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On November&nbsp;24, 2004, the FASB issued Statement No.&nbsp;151, &#147;Inventory Costs&#148;, an amendment of
ARB No.&nbsp;43, Chapter&nbsp;4 (FAS 151). FAS 151 requires that abnormal amounts of idle capacity and
spoilage costs be excluded from the cost of inventory and expensed when incurred. The
provisions of FAS 151 are applicable to inventory costs incurred during fiscal years
beginning after June&nbsp;15, 2005. The Group does not expect the adoption of FAS 151 to have a
material impact on the Group&#146;s financial position or results of operation.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On December&nbsp;15, 2004, the FASB issued Statement No.&nbsp;153, &#147;Exchanges of Nonmonetary Assets&#148;,
an amendment of APB Opinion No.&nbsp;29 (FAS 153). FAS 153 requires exchanges of productive
assets to be accounted for at fair value, rather than at carryover basis, unless (1)&nbsp;neither
the asset received nor the asset surrendered has a fair value that is determinable within
reasonable limits or (2)&nbsp;the transactions lack commercial substance. FAS 153 is effective
for nonmonetary asset exchanges occurring in fiscal periods beginning after June&nbsp;15, 2005.
The Group does not expect the adoption of FAS 153 to have a material impact on the Group&#146;s
financial position or results of operation.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-75

</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>43</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>SIGNIFICANT DIFFERENCES BETWEEN IFRS AND U.S. GAAP (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>(k)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>New accounting pronouncements (Continued)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On March&nbsp;29, 2005, the U.S. Securities and Exchange Commission (SEC)&nbsp;issued Staff Accounting
Bulletin No.&nbsp;107, &#147;Share-Based Payment&#148; (SAB 107). This bulletin provides guidance related
to share-based payment transactions with non-employees, the transition from nonpublic to
public entity status, valuation methods (including assumptions such as expected volatility
and expected term), the accounting for certain redeemable financial instruments issued under
share-based payment arrangements, the classification of compensation expense, non-GAAP
financial measures, first-time adoption of FAS 123 R in an interim period, capitalization of
compensation cost related to share-based payment arrangements, the accounting for income tax
effects of share-based payment arrangements upon adoption of FAS 123 R, the modification of
employee share options prior to adoption of FAS 123 R and disclosures in Management&#146;s
Discussion and Analysis subsequent to adoption of FAS 123 R. SAB 107 will be effective when
a registrant adopts FAS 123 R. The Group does not expect the adoption of SAB 107 to have a
material impact on the Group&#146;s financial position or operation results.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In May&nbsp;2005, the FASB issued Statement No.154, &#147;Accounting Changes and Error Corrections&#148;
(FAS 154), which replaces APB Opinions No.&nbsp;20 &#147;Accounting Changes&#148;, and FASB Statement No.
3, &#147;Reporting Accounting changes in Interim Financial Statements&#148;, and changes the
requirements for the accounting for and reporting of a change in accounting principle. This
Statement establishes, unless impracticable, retrospective application as the required
method for reporting a change in accounting principle in the absence of explicit transition
requirements specific to the newly adopted accounting principle. The reporting of a
correction of an error by restating previously issued financial statements is also addressed
by this Statement. FAS 154 is effective for accounting changes and corrections of errors
made in fiscal years beginning after December&nbsp;15, 2005. The Group does not expect the
adoption of FAS 154 to have a material impact on the Group&#146;s financial position or
operational results.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-76

</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">





<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>44</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The
condensed consolidated financial statements prepared in accordance U.S. GAAP for all years presented
have been retroactively restated as if CEA Northwest and CEA Yunnan had always been part of the
Group.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Condensed
consolidated statements of operations</I></B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="59%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>Note</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues</DIV></TD>
    <TD>(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,553,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,208,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,894,678</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other operating income</DIV></TD>
    <TD>(b)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245,279</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,603,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,483,527</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,139,957</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(526,429</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(809,972</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(990,745</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Aircraft fuel</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,222,762</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,079,632</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,934,425</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Take-off and landing charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,066,210</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,964,703</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,201,851</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ground service and other charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(64,662</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(99,296</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(115,516</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Civil aviation and infrastructure levies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(358,667</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(538,320</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Food and beverages</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(711,159</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(934,795</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,081,023</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Wages, salaries and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,066,749</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,750,242</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,833,663</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Aircraft maintenance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,024,768</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,413,910</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,236,093</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Aircraft depreciation and operating leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,687,806</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,296,767</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,249,590</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other depreciation, amortisation and operating leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(608,242</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(618,807</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(688,139</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ticket reservation fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(235,735</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(290,994</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(325,924</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Insurance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(249,631</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(216,850</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(172,554</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Office, administrative and other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,986,317</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,709,201</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,755,350</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,450,470</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26,543,836</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32,123,193</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating profit (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153,389</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,939,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(983,236</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">181,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,441</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finance costs, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,414,969</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,279,106</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(808,554</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share of
results of associates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(31,759</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(49,007</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,030</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share of results of jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,300</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Loss) profit before income taxes and minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,111,403</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">823,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,690,679</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax
(expense) benefit</DIV></TD>
    <TD>(c)</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(166,283</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(205,965</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344,220</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Loss) profit after taxation before minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,277,686</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">617,221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,346,459</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(113,634</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(158,074</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36,864</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Loss) profit attributable to shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,391,320</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">459,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,383,323</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend payable to equity holders of the Company
attributable to the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earning (loss) per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.29</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.28</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-77

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>44</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Condensed consolidated balance sheets</I></B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>Note</TD>
    <TD nowrap align="right" colspan="2">RMB</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 0px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,038,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,864,001</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Trade receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,827,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,918,409</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amounts due from related companies</DIV></TD>
    <TD>(e)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">422,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,712</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Flight equipment spare parts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">698,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,034,641</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepayments, deposits and other receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">776,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">997,271</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Derivative assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,036</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,763,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,073,070</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Property, plant and equipment</DIV></TD>
    <TD>(d)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,869,590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,811,836</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">240,884</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Lease prepayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">828,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">972,771</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Investments in associates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">639,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">629,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Investments in jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,520</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Available-for-sale financial assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,802</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Advance payments on acquisition of aircraft</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,728,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,072,673</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other long-term assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,965,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,705,558</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">395,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">499,544</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42,873</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Derivative assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,886</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,487,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,218,290</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND OWNERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Trade payables and notes payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,997,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,394,898</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Sales in advance of carriage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">734,389</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">823,149</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amounts due to related companies</DIV></TD>
    <TD>(e)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,098,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">295,030</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Provision for aircraft overhaul expenses, current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,589</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other payables and accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,437,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,986,578</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Tax payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,259</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Obligations under finance leases, current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,603,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,428,037</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Borrowings, current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,424,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,554,630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Derivative liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,844</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,619,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,580,014</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Obligation under finance leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,793,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,180,460</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Provision for aircraft overhaul expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">334,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">388,410</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Post-retirement benefit obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">999,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,103,492</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,318,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,790,116</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other long term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">704,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">599,425</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">738,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">618,204</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Derivative liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,770</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,628,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,285,891</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-78

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>44</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 0px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commitment and contingencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">831,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">832,850</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,866,950</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reserves</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">160,766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,232,599</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Owners&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,027,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,099,549</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities and owners&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,487,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,218,290</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Condensed cashflow statements</I></B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash
inflow (outflow) from</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,052,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,371,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,008,155</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,435,568</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,659,099</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,369,094</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,282,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,216,175</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,186,002</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase (decrease) in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(101,045</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">496,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,174,937</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,643,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,542,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,038,938</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,542,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,038,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,864,001</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-79

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>44</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Condensed consolidated statements of changes in equity</I></B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at January&nbsp;1, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,993,667</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flow hedges, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(49,654</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Distribution to owner</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,705</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,391,320</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,542,988</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at
January&nbsp;1, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,542,988</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flow hedges, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,982</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rescission of related party lease arrangement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133,029</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contribution from owner</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(93,466</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Profit for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">459,147</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at
December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,027,716</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at
January&nbsp;1, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,027,716</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net
liabilities assumed by CEA Holding (note i)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,379,048</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recognition
of deferred tax asset (note ii)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,860</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flow hedges, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,587</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend relating to 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(97,339</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,383,323</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at
December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,099,549</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">Notes:</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(i)</TD>
    <TD>&nbsp;</TD>
    <TD>In connection with the aforementioned CEA
Northwest and the CEA Yunnan Acquisitions as
described in Note&nbsp;43(a), certain assets and liabilities of CEA
Northwest and CEA Yunnan not acquired by the Group were transferred to
CEA Holding. Also, as a result of the CEA
Northwest and the CEA Yunnan Acquisitions,
the tax losses attributable to the aviation
operations of CEA Northwest and CEA Yunnan
are no longer available for utilization
against future taxable income of such
operations. Accordingly, the net assets not
acquired and the deferred tax assets arising
from such tax losses and related valuation
allowance was eliminated as a reduction
against equity.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(ii)</TD>
    <TD>&nbsp;</TD>
    <TD>In connection with the CEA Northwest and the CEA Yunnan
Acquisitions, the property, plant and equipment of CEA
Northwest and CEA Yunnan were revalued as of December&nbsp;31,
2004 according to the relevant PRC rules and regulations. The
revalued amount serves as the tax base for future years. Such
revaluations are not recorded under U.S. GAAP. However, a
deferred tax asset is recognized for the tax deductibility of
the resulting net revaluation surplus with a corresponding
credit to equity under U.S. GAAP.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">F-80
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">








<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>44</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The
following key financial statement disclosures are presented on a U.S.
GAAP basis.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><I>(a)</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Revenues</I></TD>
</TR>
</TABLE>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Traffic revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&#151; Passenger</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,342,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,692,368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,780,599</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&#151; Cargo and mail</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,558,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,879,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,246,779</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total traffic revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,901,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,571,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,027,378</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Commission income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126,194</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ground service income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">504,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">717,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">831,143</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cargo handling income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">298,488</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rental income from operating subleases of aircraft</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,260</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201,345</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,855,617</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,956,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,667,808</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Business tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(302,060</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(748,380</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(773,130</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,553,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,208,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,894,678</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><I>(b)</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Other operating income</I></TD>
</TR>
</TABLE>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Government subsidies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,506</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193,069</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Insurance compensation on crash of aircraft</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net fair
value (losses) gains on financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,146</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,210</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245,279</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><I>(c)</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Income tax</I></TD>
</TR>
</TABLE>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The aviation business of CEA Northwest and CEA Yunnan were subject to PRC income tax at 33% during
2003, 2004 and up to June&nbsp;30, 2005. Subsequent to the
acquisitions of the aviation businesses of CEA Northwest and CEA Yunnan
by the Group on June&nbsp;30, 2005, the aviation businesses of CEA
Northwest and CEA Yunnan became divisions of the Group and are subject to PRC income tax at the rate of 15%.
</DIV>




<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Income tax benefit (expense)&nbsp;consisted of:</TD>
</TR>
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PRC income tax:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Company and subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(131,207</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(244,406</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,734</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Current year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35,076</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137,529</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Adjustment for change in applicable tax rate for airline
operations of CEA Northwest and CEA Yunnan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,957</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(166,283</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(205,965</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344,220</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional income taxes were allocated as follows:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Owners&#146; equity, for deferred tax asset recognized in
connection with the tax deductibility resulting from net
revaluation surplus</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,860</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-81
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>44</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><I>(c)</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Income tax (Continued)</I></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Profit (loss) before taxation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,111,403</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">790,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,690,679</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjusted:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share of
results of associates and jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,330</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,079,644</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">793,754</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,677,349</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax calculated at enacted tax rate of 15%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161,947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(119,063</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">251,602</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect attributable to airline operations of CEA Northwest and
CEA Yunnan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32,012</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">17,259</TD>
    <TD nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of change in the income tax rate applicable to the aviation
operations of CEA Northwest and CEA Yunnan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,957</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect attributable to subsidiaries charged at tax rate of 33%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,117</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,578</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,334</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect attributable to subsidiaries with income tax exemption</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,852</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income not subject to taxation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,462</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expenses not deductible for tax purposes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(77,013</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(41,891</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(109,329</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reversal of income tax provision made in prior years as a
result of tax clearance with local tax bureau</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,807</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrecognised tax losses of the Company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(258,515</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(86,074</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Utilisation of previously unrecognised tax losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,061</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,350</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax
benefit (charge)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(166,283</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(205,965</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344,220</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-82
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>44</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><I>(c)</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Income tax (Continued)</I></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The net deferred tax assets (liabilities)&nbsp;as of December&nbsp;31, 2004 and 2005 were made up of the
following taxation effects:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax losses carried forward</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">349,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">451,659</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for obsolete flight equipment spare parts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,192</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repair cost on flight equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,454</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for post-retirement benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185,102</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other accrued expenses and derivative financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139,949</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">738,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">874,356</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(252,120</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(338,194</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">486,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">536,162</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for aircraft overhauls</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(106,128</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(143,517</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(723,527</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(511,305</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(829,655</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(654,822</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(343,204</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(118,660</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Representing:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets &#151; current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets &#151; non-current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">395,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">499,544</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax liabilities &#151; current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax liabilities &#151; non-current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(738,669</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(618,204</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(343,204</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(118,660</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with the PRC tax law, tax losses can be carried forward to offset against future
taxable income for a period of five years. As of December&nbsp;31, 2004 and 2005 the Group had tax
losses carried forward of approximately RMB 2.3&nbsp;billion and RMB3.0&nbsp;billion, respectively, which
will expire between 2006 and 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In assessing the realizability of net deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable
profits during the periods in which those temporary differences become deductible and tax losses
utilized. Management considers the scheduled reversal of deferred tax liabilities and projected
future taxable profits in making this assessment. Based upon the projections for future taxable
profits over the periods in which the deferred tax assets are deductible, management believes it is
more likely than not that the Group will realized the benefits of these deductible differences and
tax losses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the
years ended December 31, 2004 and 2005, the valuation allowance
(decreased) increased by RMB(6,395,000) and RMB86,074,000,
respectively.
</DIV>


<P align="center" style="font-size: 10pt">F-83
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>44</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(d)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Property, plant and equipment</I></B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Aircraft and flight equipment
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; owned</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,307,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,748,323</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; held under finance leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,475,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,884,972</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,718,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,445,683</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,894,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,454,344</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,396,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,533,322</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Accumulated depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,527,310</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32,721,486</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,869,590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,811,836</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Finance leases</I></B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group is obligated under finance leases covering certain aircraft that expire at various
dates during the next 12 years. At December&nbsp;31, 2004 and 2005, the gross amount of aircraft and
related accumulated amortization recorded under finance leases were as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,475,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,884,972</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Accumulated depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,404,935</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,524,421</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,070,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,360,551</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-84
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">








<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>44</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>(e)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Related party transactions</I></B></TD>
</TR>

</TABLE>
</DIV>
<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="2%"><b><I>(i)</i></b></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><b><I>Related party transactions</i></b></td>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As a result of the aforementioned CEA Northwest and CEA
Yunnan acquisitions, transactions with CEA Northwest and CEA Yunnan
are excluded from the following list, and the related party
transactions of CEA Northwest and CEA Yunnan are included in the following list for all of the periods presented.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>Income/</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>(expenses or payments)</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Nature of transaction</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Related party</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>With CEA Holding or companies directly
or indirectly held by CEA Holding:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income on deposits
at an average rate
of 0.72% per annum
(2004 &#038; 2003: 0.72% per annum)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">EAGF*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">10,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">6,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">5,341</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense on loans at rate of
4.50% per annum
(2004 &#038; 2003: 4.54% per annum)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">EAGF*</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(14,692</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(15,744</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(14,855</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commission income on carriage
service provided by other airlines
with air tickets sold
by the Group, at rates
ranging from 3% to 9% of the
value of tickets sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CEA Wuhan **</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">28,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">32,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">46,412</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Commission expense on air tickets sold on behalf</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CEA Wuhan**</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(8,547</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(32,396</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(9,550</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:30px; text-indent:-15px">of the Group, at rates ranging from 3%
to 9% of </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SDATC*</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(24,940</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(8,228</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(7,402</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">the value of tickets sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">China Eastern Air</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(34,225</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Development (HK) Co., Ltd</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shanghai Tourism (HK) Co., Ltd</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(6,046</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(13,201</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(21,815</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Handling charges of 0.1% to 2% for
purchase of aircraft, flight equipment,
flight equipment spare parts,
other property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">EAIEC*</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(21,393</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(34,270</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(40,590</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ticket reservation service charges for
utilisation of computer
reservation system</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Travel Sky Technology Limited</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(71,884</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(86,311</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(124,677</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-85
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>44</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(e)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Related party transactions (Continued)</I></B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>Income/</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>(expenses or payments)</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Nature of transaction</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Related party</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Repairs and maintenance expense for aircraft and </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wheels &#038; Brakes</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(25,361</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(25,445</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(63,972</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">engines</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(104,853</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">EAIEC*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(6,969</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Lease rental income from operating lease of aircraft</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CEA Wuhan Airlines**</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">31,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">38,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">41,327</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top"><DIV style="margin-left:15px; text-indent:-15px">Supply of food and beverages</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="margin-left:15px; text-indent:-15px">Eastern Air (Shantou) Economic Development Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(36,413</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(57,623</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(61,701</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CEACI</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(188,406</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(231,759</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="margin-left:15px; text-indent:-15px">Shanghai Eastern Air Catering Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(112,104</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(185,575</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(184,306</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="top"><DIV style="margin-left:15px; text-indent:-15px">Qingdao Eastern Air Catering Investment Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(2,518</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(14,291</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(15,055</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="top"><DIV style="margin-left:15px; text-indent:-15px">Xian Eastern Air Catering Investment Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(7,416</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(15,947</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(15,079</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="top"><DIV style="margin-left:15px; text-indent:-15px">Yunnan Eastern Air Catering Investment Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(32,062</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(36,552</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(17,451</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advertising expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CAASC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(2,676</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(5,629</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(8,611</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top"><DIV style="margin-left:15px; text-indent:-15px">Purchase of aviation equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="margin-left:15px; text-indent:-15px">Shanghai Eastern Aviation Equipment Manufacturing Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(5,309</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(19,276</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(8,987</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><DIV style="margin-left:15px; text-indent:-15px">Rental expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="margin-left:15px; text-indent:-15px">Shanghai Eastern Aviation Equipment Manufacturing Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(5,945</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(5,582</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(4,909</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>EAGF is also a 25% owned associate of the Group; SDATC and EAIEC are both a 45% owned
associates of the Group.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>CEA Wuhan was a 40% owned associate of the Group for the year ended December&nbsp;31, 2005.
On December&nbsp;8, 2005, the Company entered into agreement to acquire an additional 56% equity
interest in CEA Wuhan and the acquisitions were completed after December&nbsp;31, 2005.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">F-86
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">








<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>44</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(e)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Related party transactions (Continued)</I></B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>Income/</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>(expenses or payments)</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>

</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Nature of transaction</B></TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="left"><B>Related party</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>RMB&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>RMB&#146;000</B></TD>

</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>With CAAC and its affiliates:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Civil aviation infrastructure levies paid to CAAC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CAAC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(210,651</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(358,667</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(466,191</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Aircraft insurance premium paid through CAAC who entered
into the insurance policy on
behalf of the Group</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CAAC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(217,653</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(208,098</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(201,653</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">With other state-controlled enterprises:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Take-off and landing fees charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">State-controlled airports</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(2,017,543</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(2,365,872</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(2,461,858</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of aircraft fuel</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="margin-left:15px; text-indent:-15px">State-controlled fuel suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(3,188,283</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(4,240,133</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(4,571,155</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income on deposits at an average rates of 0.72% per annum
(2004 &#038; 2003: 0.72% per annum)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">State-controlled banks</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">49,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">19,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">30,948</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest
expense on loans at an average rate of
4.54% per annum
(2004 &#038; 2003: 4.54% per annum)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">State-controlled banks</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(1,383,274</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(833,910</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(790,478</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commission expense on air tickets sold on behalf of the Group at
rates ranging from 3% to 9% of
the value of tickets sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Other PRC airlines</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(66,443</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(124,565</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(153,528</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR>
     <TD colspan="15">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supply of
food and beverages<br>&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Other state-control enterprises</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(280,522</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(322,726</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right" valign="top">(368,120</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-87
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>44</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B><I>(e)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Related party transactions (Continued)</I></B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(ii)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Balances with related companies</I></B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amounts due from related companies</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Company</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China Eastern Air Development (HK)&nbsp;Co., Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,457</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CEA Holding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,773</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SDATC*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,223</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shanghai Tourism (HK)&nbsp;Co., Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,177</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CEA Wuhan **</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,541</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EAIEC*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,956</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">STA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,927</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other related companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">354,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,658</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">422,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,712</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="97%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">EAGF is a 25% owned associate of the Group; SDATC is a 45% owned associate of
the Group; EAIEC is a 45% owned associate of the Group.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">**
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CEA Wuhan was a 40% owned associate of the Group for the year ended December
31, 2005. On December&nbsp;8, 2005, the Company entered into agreement to acquire an
additional 56% equity interest in CEA Wuhan and the acquisitions were completed after
December&nbsp;31, 2005.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Except for amount due from CEA Holding, which is reimbursement in nature, all other amounts
due from related companies are trade in nature, interest free and payable within normal
credit terms given to trade customers.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-88
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>44</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE U.S. GAAP (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B><I>(e)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Related party transactions (Continued)</I></B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(ii)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Balances with related companies (Continued)</I></B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amounts due to related companies</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Company</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EAIEC*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(57,148</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90,123</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EAGF*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(175,500</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,328</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CEA Wuhan **</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,063</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(80,407</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">STA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,491</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CEA Holding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,705,929</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(94,216</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other related companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(140,602</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,465</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,098,242</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(295,030</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="97%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">EAGF is a 25% owned associate of the Group; SDATC is a 45% owned associate of
the Group; EAIEC is a 45% owned associate of the Group.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">**
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CEA Wuhan was a 40% owned associate of the Group for the year ended December
31, 2005. On December&nbsp;8, 2005, the Company entered into agreement to acquire an
additional 56% equity interest in CEA Wuhan and the acquisitions were completed after
December&nbsp;31, 2005.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Except for amounts due to EAGF and CEA Holding, which is reimbursement in nature, all other
amounts due to related companies are trade in nature, interest free and payable within
normal credit terms given by trade creditors.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Short-term deposits and short-term loans with an associate</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6"><B>Average interest rate</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="17" align="left"><B>Short-term deposits (included in
Prepayments, deposits and other receivables)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#147;EAGF&#148;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">503,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">475,078</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="17" align="left"><B>Short-term loans (included in Borrowings)</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#147;EAGF&#148;*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">315,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213,702</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="97%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">EAGF is a 25% owned associate of the Group.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-89
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CHINA EASTERN AIRLINES CORPORATION LIMITED</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>44</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B><I>(e)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Related party transactions (Continued)</I></B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(ii)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Balances with related companies (Continued)</I></B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>State-controlled banks and other financial institutions</TD>
</TR>

</TABLE>
</DIV>
<DIV align="right">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="96%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6"><B>Average interest rate</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank deposits
(included in cash and cash equivalents)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,407,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,196,963</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,774,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,438,483</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B><I>(iii)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Guarantees by holding company</I></B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The long-term bank loans of the Group guaranteed by CEA Holding are RMB2,122,600,000 as at
December&nbsp;31, 2004 and 2005.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-90
</DIV>

</BODY>
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CHINA EASTERN AIRLINES
Table of Contents
As
filed with Securities and Exchange Commission on July 7, 2006
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 20-F
o
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2005
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
o
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-14550
(Exact Name of Registrant as Specified in Its Charter)
China Eastern Airlines Corporation Limited
The People's Republic of China
(Translation of Registrant's Name Into English)
(Jurisdiction of Incorporation or Organization)
2550 Hong Qiao Road
Hong Qiao International Airport
Shanghai 200335
The People's Republic of China
(8621) 6268-6268
(Address and Telephone Number of Principal Executive Offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class
on Which Registered
American Depositary Shares
The New York Stock Exchange
Ordinary H Shares, par value RMB1.00 per share
The New York Stock Exchange*
* Not for trading, but only in connection with the registration of American Depositary Shares. The
Ordinary H
Shares are also listed and traded on The Stock Exchange of Hong Kong Limited.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of capital or common
stock as of the close
of the period covered by the annual report.
As of December 31, 2005, 3,300,000,000 Ordinary Domestic Shares, par value RMB1.00 per
share, were issued and outstanding, and 1,566,950,000 Ordinary H Shares par value RMB1.00 per
share, were issued and outstanding. H Shares are Ordinary Shares of the Company listed on The Stock
Exchange of Hong Kong Limited.
Indicate by check mark if the registrant is a well-known seasoned issuers, as defined in Rule
405 of the Securities Act. Yes
o
No
þ
If this report is an annual or transition report, indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934. Yes
o
No
þ
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated
filer" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
o
Accelerated Filer
þ
Non-Accelerated Filer
o
Indicate by check mark which financial statement item the registrant has elected to follow.
Item 17
o
Item 18
þ
If this is an annual report, indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes
o
No
þ
TABLE OF CONTENTS
China Eastern Airlines Corporation Limited
Page
SUPPLEMENTAL INFORMATION AND EXCHANGE RATES
1
CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS
1
GLOSSARY OF TECHNICAL TERMS
3
PART I
Item 1. Identity of Directors, Senior Management and Advisers
4
Item 2. Offer Statistics and Expected Timetable
4
Item 3. Key Information
4
Item 4. Information on the Company
12
Item 4A.
Unresolved Staff Comments
34
Item 5. Operating and Financial Review and Prospects
34
Item 6. Directors, Senior Management and Employees
50
Item 7. Major Shareholders and Related Party Transactions
57
Item 8. Financial Information
61
Item 9. The Offer and Listing
62
Item 10. Additional Information
63
Item 11. Quantitative and Qualitative Disclosures About Market Risk
71
Item 12. Description of Securities Other than Equity Securities
71
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
72
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
72
Item 15. Controls and Procedures
74
Item 16A. Audit Committee Financial Expert
74
Item 16B. Code of Ethics
74
Item 16C. Principal Accountant Fees and Services
74
Item 16D. Exemptions from the Listing Standards for Audit Committees
74
Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers
74
PART III
Item 17. Financial Statements
74
Item 18. Financial Statements
74
Item 19. Exhibits
75
EX-1.1 ARTICLES OF ASSOCIATION
EX-4.12 AIRCRAFT PURCHASE AGREEMENT
EX-4.13 AIRCRAFT PURCHASE AGREEMENT
EX-4.14 AIRCRAFT PURCHASE AGREEMENT
EX-8.1 LIST OF SUBSIDIARY OF CEA
EX-12.1 CEO CERTIFICATION
EX-12.2 CFO CERTIFICATION
EX-13.1 CEO CERTIFICATION
EX-13.2 CFO CERTIFICATION
Table of Contents
SUPPLEMENTAL INFORMATION AND EXCHANGE RATES
In this annual report, unless otherwise specified, the term "dollars", "U.S. dollars" or 'US$"
refers to United States dollars, the legal tender currency of the United States of America, or the
United States or the U.S.; the term "Renminbi" or "RMB" refers to Renminbi, the legal tender
currency of The People's Republic of China, or China or the PRC; and the term "Hong Kong dollars"
or "HK$" refers to Hong Kong dollars, the legal tender currency of the Hong Kong Special
Administrative Region of China, or Hong Kong.
In this annual report, the term "we", "us", "our", "our company" or "China Eastern" refers to
China Eastern Airlines Corporation Limited, a joint stock limited company incorporated under the
laws of the PRC on April 14, 1995, and, unless the context otherwise requires, its subsidiaries,
or, in respect of references to any time prior to the incorporation of China Eastern Airlines
Corporation Limited, the core airline business carried on by its predecessor, China Eastern
Airlines, which was assumed by China Eastern Airlines Corporation Limited pursuant to the
restructuring described in this annual report. The term "CEA Holding" refers our parent, China
Eastern Air Holding Company, which was established on October 11, 2002 as a result of the merger of
our former controlling shareholder, Eastern Air Group Company, or EA Group, with China Northwest
Airlines Company and Yunnan Airlines Company.
For purpose of this annual report, references to The People's Republic of China, China and the
PRC do not include Hong Kong, the Macau Special Administrative Region of China, or Macau, or
Taiwan.
CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS
This annual report contains certain forward-looking statements that are, by their nature,
subject to significant risks and uncertainties. These forward-looking statements include, without
limitation, statements relating to:
•
our fleet development plans, including, without limitation, related
financing, schedule, intended use and planned disposition;
•
the planned expansion of our cargo operations;
•
the impact of changes in the policies of the Civil Aviation
Administration of China, or the CAAC, regarding route rights;
•
the impact of the CAAC policies regarding the restructuring of the
airline industry in China;
•
our expansion plans, including acquisition of other airlines;
•
our marketing plans, including the establishment of additional sales offices;
•
our plan to add new pilots; and
•
the impact of unusual events on our business and operations.
The words "anticipate", "plan", "believe", "estimate", "expect", "intend" and similar
expressions, as they relate to our company or its management, are intended to identify some of
these forward-looking statements. These forward-looking statements reflect our current view with
respect to future events. Actual events or results may differ materially from information contained
in these forward-looking statements as a result of a number of factors, including, without
limitation:
•
any changes in regulatory policies of the CAAC;
Table of Contents
•
the effects of competition on the demand for and price of our services;
•
the availability of qualified flight personnel and airport facilities;
•
any significant depreciation of Renminbi or Hong Kong dollars against
U.S. dollars, Japanese yen or Euro, the currencies in which the majority of our
borrowings are denominated;
•
the availability and cost of the aviation fuel;
•
changes in political, economic, legal and social conditions in China;
•
the fluctuation of interest rates;
•
our ability to obtain adequate financing, including any required external
debt and acceptable bank guarantees; and
•
general economic conditions in markets where our company operates.
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Table of Contents
GLOSSARY OF TECHNICAL TERMS
Capacity measurements
ATK (available tonne kilometers)
the number of tonnes of capacity available for the carriage of
revenue load (passengers and cargo) multiplied by the distance
flown
ASK (available seat kilometers)
the number of seats made available for sale multiplied by the
distance flown
AFTK (available freight tonne-kilometers)
the number of tonnes of capacity available for the carriage of
cargo and mail multiplied by the distance flown
Traffic measurements
revenue passenger-kilometers or RPK
the number of passengers carried multiplied by the distance flown
revenue freight tonne-kilometers or RFTK
cargo and mail load in tonnes multiplied by the distance flown
revenue passenger tonne-kilometers or RPTK
passenger load in tonnes multiplied by the distance flown
revenue tonne-kilometers or RTK
load (passenger and cargo) in tonnes multiplied by the distance
flown
Load factors
overall load factor
tonne-kilometers expressed as a percentage of ATK
passenger load factor
passenger-kilometers expressed as a percentage of ASK
break-even load factor
the load factor required to equate traffic revenue with our
operating costs assuming that our total operating surplus is
attributable to scheduled traffic operations
Yield and cost measurements
passenger yield (revenue per
passenger-kilometer)
revenue from passenger operations divided by passenger-kilometers
cargo yield (revenue per
cargo tonne-kilometer)
revenue from cargo operations divided by cargo tonne-kilometers
average yield (revenue per
total tonne-kilometer)
revenue from airline operations divided by tonne-kilometers
unit cost
operating expenses divided by ATK
tonne
a metric ton, equivalent to 2,204.6 lbs
-3-
Table of Contents
PART I
Item 1. Identity of Directors, Senior Management and Advisers.
Not applicable.
Item 2. Offer Statistics and Expected Timetable.
Not applicable.
Item 3. Key Information.
A. Selected Financial Data
The selected financial data of the consolidated statements of operations for the years ended
December 31, 2001, 2002, 2003, 2004 and 2005 and the selected financial data of the balance sheets
as of December 31, 2001, 2002, 2003, 2004 and 2005 have been derived from our audited consolidated
financial statements, which have been prepared in accordance with the International Financial
Reporting Standards, or IFRS, and audited by PricewaterhouseCoopers, an independent registered
public accounting firm in Hong Kong. PricewaterhouseCoopers' reports in respect of the consolidated
statements of operations for the years ended December 31, 2003, 2004 and 2005 and the consolidated
balance sheets as of December 31, 2004 and 2005 and the related footnotes are included in this annual
report. PricewaterhouseCoopers' reports in respect of the consolidated statements of operations for the
years ended December 31, 2001 and 2002 and the consolidated
balance sheets as of December 31, 2001,
2002 and 2003 and the related footnotes are not included in this annual report.
As required under IFRS, the acquisition accounting method was applied to account for our
acquisitions of certain assets and liabilities relating to the aviation businesses of CEA Northwest
(as defined below) and CEA Yunnan (as defined below) in 2005, as described in "Item 4. Information
on the Company — The History and Development of the
Company", such that as, of June 30, 2005, only
the acquired assets and liabilities were included in the consolidated financial statements. The
results of the acquired operations and their related cash flows were included in the consolidated
financial statements of the Company beginning July 1, 2005. In contrast, under the generally
accepted accounting principles in the United States, or U.S. GAAP, such transactions are considered
to be "combination of entities under common control" since we and the aviation businesses of CEA
Northwest and CEA Yunnan were under the common control of CEA Holding. Such transactions were
accounted for in a manner similar to "pooling-of-interests", retroactively restating all years
presented on a combined basis as if the acquisitions had been in effect since inception, whereby
related assets and liabilities of the acquired aviation businesses would be accounted for at
historical cost and the related results of operations would be included in the consolidated
financial statements from the earliest year presented. For a summary of significant differences
between IFRS and U.S. GAAP as they relate to us and the effects of such differences on net profit
(loss) attributable to equity holders and net assets for all years presented, see Note 43 to our
audited consolidated financial statements included in this annual report. Our condensed
consolidated financial statements prepared and presented in accordance with U.S. GAAP to reflect
the effect of the acquisitions of CEA Northwest's and CEA Yunnan's aviation businesses under common
control for the relevant periods are set forth in Note 44 to our audited consolidated financial
statements included in this annual report.
We omitted the selected U.S. GAAP selected financial data as of, and for the year ended
December 31, 2001 because no reliable financial information as of, and for the year ended December
31, 2001 with respect to the acquired aviation businesses of CEA Yunnan and CEA Northwest can be
produced without unreasonable expenses or efforts.
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Table of Contents
The following information should be read in conjunction with, and is qualified in its entirety
by our audited consolidated financial statements included in this annual report.
Year Ended December 31,
(Restated except for the year ended December 31, 2005)
2001
2002
2003
2004
2005
2005
RMB
RMB
RMB
RMB
RMB
US$
(in millions, except per share or per ADS data)
Income Statement Data:
IFRS
:
(1)(2)
Revenues
12,301
13,332
14,470
21,386
27,454
3,402
Other operating income
55
63
50
85
245
30
Operating expenses
(11,341
)
(12,350
)
(14,454
)
(20,239
)
(27,685
)
(3,431
)
Operating profit
1,015
1,045
66
1,232
14
2
Finance costs, net
(688
)
(777
)
(775
)
(641
)
(578
)
(72
)
Profit (loss) before income tax
330
235
(741
)
586
(577
)
(72
)
Profit (loss) for the year
attributable to equity holders
of the Company
557
64
(1,097
)
321
(467
)
(58
)
Basic and fully diluted
earnings (loss) per
share
(3)
0.11
0.01
(0.23
)
0.07
(0.10
)
(0.01
)
Basic and fully diluted
earnings (loss) per ADS
11.50
1.31
(22.54
)
6.59
(9.60
)
(1.19
)
U.S. GAAP:
(4)
Profit (loss) attributable to
equity holders
—
(365
)
(1,391
)
459
(1,383
)
(171
)
Basic and fully diluted
earnings (loss) per
share
(3)
—
(0.08
)
(0.29
)
0.09
(0.28
)
(0.04
)
Basic and fully diluted
earnings (loss) per ADS
—
(7.51
)
(28.59
)
9.43
(28.42
)
(3.52
)
As of December 31,
(Restated except for data as of December 31, 2005)
2001
2002
2003
2004
2005
2005
RMB
RMB
RMB
RMB
RMB
US$
(in millions)
Balance Sheet Data:
IFRS
:
(5)
Cash and cash equivalents
1,331
1,945
1,583
2,114
1,864
231
Net current liabilities
(3,232
)
(7,504
)
(9,982
)
(12,491
)
(25,598
)
(3,172
)
Non-current assets
25,299
28,147
33,039
36,812
53,305
6,605
Long term borrowing, including
current portion
5,301
6,495
11,223
10,736
12,659
1,569
Obligations under finance
lease, including current
portion
9,871
8,184
7,101
8,662
10,608
1,314
Total share capital and reserves
7,282
7,319
6,175
6,481
6,096
755
U.S. GAAP
:
(4)
Total assets
—
45,462
50,598
53,487
59,218
7,338
Owner's equity
—
5,934
4,543
5,028
6,100
750
(1)
Certain incomes and expenses for the years ended December 31, 2001, 2002, 2003 and 2004 have
been reclassified under the IFRS. Such reclassifications have no effect on the profit (loss)
attributable to equity holders for each of those affected years.
(2)
Certain expenses for the years ended December 31, 2001, 2002, 2003 and 2004 have been
restated as a result of the retrospective application of changes to our accounting policy
relating to the costs of overhaul of owned and finance leased aircraft and engines. Such
adjustments resulted in a 2.8% increase in the profit attributable to equity holders for the
year ended December 31, 2001, a 25.6% decrease in the profit attributable to equity holders for
the year ended December 31, 2002, a 15.5% increase in the loss attributable to equity holders
for the year ended December 31, 2003 and a 37.5% decrease in the profit attributable to
equity holders for the year ended December 31, 2004 . See Note 2(a) to our audited consolidated
financial statements included in this annual report.
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Table of Contents
(3)
The calculation of earnings (loss) per share is based on the consolidated profit (loss)
attributable to equity holders and 4,866,950,000 shares in issue.
(4)
Selected U.S. GAAP financial data for the years ended December 31, 2002, 2003 and 2004 have
been restated to reflect our acquisitions of the assets and liabilities relating to the
aviation businesses of CEA Northwest and CEA Yunnan in 2005. See
Note 44 to our audited
consolidated financial statements included in this annual report.
(5)
Selected balance sheet data for the years ended December 31, 2001, 2002, 2003 and 2004 have
been restated as a result of the retrospective application of changes to our accounting
policy relating to the costs of overhaul of owned and finance leased aircraft and engines. See
Note 2(a) to our audited consolidated financial statements included in this annual report.
Exchange Rate Information
This annual report contains translations of certain amounts into U.S. dollars solely for your
convenience. Except where otherwise specified, translations of amounts from Renminbi to U.S.
dollars have been made at the noon buying rate, or the Noon Buying Rate, in New York City for cable
transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of
New York on December 31, 2005 of US$1.00 = RMB8.0702. You should not construe the translations as
representations that the Renminbi amounts could have been, or could be, converted into U.S. dollars
at that rate or at any other rate.
The noon buying rate in New York City for cable transfers as certified for customs purposes by
the Federal Reserve Bank of New York was RMB7.9943 = US$1.00, on
June 30, 2006. The following
tables set forth certain information concerning exchange rates between Renminbi and U.S. dollars
for the periods indicated:
Average
(1)
Noon Buying
Rate
(2)
(RMB per US$)
Noon Buying Rate (RMB per US$)
Period
Period
High
Low
2005
8.1826
January 2006
8.0596
8.0702
2004
8.2768
February 2006
8.0616
8.0415
2003
8.2771
March 2006
8.0505
8.0167
2002
8.2772
April 2006
8.0248
8.0040
2001
8.2772
May 2006
8.0300
8.0005
June 2006
8.0225
7.9943
(1)
Determined by averaging the rates on the last business day of each month during the relevant
period.
(2)
Noon Buying Rate in New York City for cable transfers payable in foreign currencies as
certified for customs purpose by the Federal Reserve Bank of New York.
Selected Operating Data
The following table sets forth certain operating data of our company for the five years ended
December 31, 2005, which have been derived from financial information prepared in accordance with
IFRS and other data provided by us and are not audited. All references in this annual report to our
cargo operations, cargo statistics or cargo revenues include figures for cargo and mail.
Year Ended December 31,
2001
2002
2003
2004
2005
Selected Airline Operating Data:
Capacity:
ATK (millions)
4,188.2
4,366.6
4,774.5
7,071.2
8,751.5
ASK (millions)
25,813.5
27,962.5
29,780.0
41,599.1
52,427.9
AFTK (millions)
1,865.0
1,850.0
2,094.3
3,327.3
4,033.0
Traffic:
Revenue passenger-kilometers (millions)
15,911.4
18,206.4
18,002.7
27,580.8
36,380.6
Revenue tonne-kilometers (millions)
2,373.2
2,652.2
2,907.7
4,340.7
5,395.2
Revenue passenger tonne-kilometers (millions)
1,423.4
1,629.2
1,611.1
2,466.0
3,273.7
Revenue freight tonne-kilometers (millions)
949.8
1,023.0
1,296.6
1,874.7
2,151.5
Kilometers flown (millions)
147.2
158.8
176.5
242.8
287.7
Hours flown (thousands)
220.4
234.6
259.4
360.4
467.8
Number of passengers carried (thousands)
10,371.4
11,533.1
12,040.2
17,711.0
24,290.5
Weight of cargo carried (millions of kilograms)
302.0
344.7
459.8
663.6
775.5
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Year Ended December 31,
2001
2002
2003
2004
2005
Average distance flown (kilometers per passenger)
1,534.2
1,578.6
1,495.2
1,557.3
1,497.7
Load Factor:
Overall load factor (%)
56.7
60.7
60.9
61.4
61.7
Passenger load factor (%)
61.6
65.1
60.5
66.3
69.4
Break-even load factor (based on ATK) (%)
54.7
59.9
63.6
62.2
66.0
Yield and Cost Statistics (RMB):
Passenger yield (passenger revenue/passenger-kilometers)
0.60
0.55
0.57
0.56
0.57
Cargo yield (cargo revenue/cargo tonne-kilometers)
2.20
2.39
2.46
2.36
2.31
Average yield (passenger and cargo revenue/
tonne-kilometers)
4.92
4.71
4.62
4.60
4.79
Unit cost (operating expenses/ATK)
2.69
2.87
2.94
2.86
3.16
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
An investment in our company involves a number of risks, some of which may be special or
significantly different from risks that are normally associated with an investment in a U.S.
company. You should carefully consider the following information about the risks in investing in
our company, along with the other information presented in this annual report.
Fuel
supply and costs
The
availability and costs of the aviation fuel has a significant impact
on our financial condition and results of operations. In the past,
jet fuel shortages have occurred in China and, on limited occasions,
required us to delay or cancel flights. Although jet fuel shortages
have not occurred since the end of 1993, we cannot assure you that
jet fuel shortages will not occur in the future. Fuel prices continue
to be susceptible to, among other factors, political unrest in
various parts of the world, Organization of Petroleum Exporting
Countries policy, the rapid growth of economies in China and India,
the levels of inventory carried by industries, the amounts of
reserves built by governments, disruptions to production and refining
facilities and weather. These and other factors that impact the
global supply and demand for aircraft fuel may affect our financial
performance due to its sensitivity to fuel prices. Our financial
performance may be especially susceptible to recent trends of
escalating fuel prices worldwide. Between May 31, 2005 and May 31,
2006, the official domestic fuel price in China increased by 19.9%.
This increase is consistent with other incidents of rising fuel
prices that we have seen during the past few years, and there can be
no assurance that fuel prices will remain constant or decline in the
future.
Fuel
costs constitute a significant portion of our operating costs and, in
2005, accounted for approximately 32.1% of our operating expenses.
Between 2004 and 2005, our expenses for fuel rose by 63.7%, partially
as a result of increased weighted average domestic adn international
fuel prices, and partially as a result of the expansion of our fleet.
Between 2004 and 2005, the weighted average domestic and
international fuel prices that we paid increased by approximately
24.5% and 39.8%, respectively. Due to the highly competitive nature
of the airline industry and government regulation on airfare pricing,
we may be unable to fully or effectively pass on to our customers any
increased fuel costs we may encounter in the future. Any jet fuel
shortages or any increase in domestic or international jet fuel price
may materially and adversely affect our financial condition and
results of operations. From time to time, we may hedge some of our
future fuel purchases to protect against potential spikes in price.
However, these hedging strategies may not always be effective and can
result in losses depending on price changes.
Competition
We
face intense competition in each of the domestic, Hong Kong regional
and international markets that we serve. In our domestic markets, we
compete against smaller domestic airline companies that operate with
costs that are lower than ours. We also increasingly face competition
from entrants to our domestic markets, as new investments into
China's civil aviation industry are made following the
CAAC's relaxation of certain private-sector investment rules in
July 2005. See the section headed "Item 4. Information on the
Company — Business Overview — Competition" for more
details. In our Hong Kong regional and international markets, we
compete against international airline companies that have
significantly longer operating history, greater name recognition,
more resources or larger sales networks than our company, or
participate in reservation systems that are more convenient that
ours. The public's perception of the safety records of Chinese
airlines also materially and adversely affects our ability to compete
against our international competitors. In response to competition,
we have, from time to time in the past, lowered our airfares for
certain of our routes, and we may be required to do the same in the
future. Increased competition and pricing pressures from compeition
may have a material adverse effect on our financial condition and
results of operations.
Government regulation
The Chinese civil aviation industry is subject to a high degree of regulation by the CAAC.
Regulatory policies issued or implemented by the CAAC encompass virtually every aspect of airline
operations, including, among other things:
•
route allocation;
•
pricing of domestic airfare;
•
the administration of air traffic control systems and certain airports; and
•
aircraft registration and aircraft airworthiness certification.
As a result, we may face significant constraints on our flexibility and ability to expand our
business operations or to maximize our profitability.
Government ownership and control of our company
Most of the major airline companies in China are currently majority owned either by the
central government of China or by provincial or municipal governments in China. CEA Holding
currently holds approximately 61.64% of our company's equity interests on behalf of the Chinese
government. As a result, CEA Holding will be able to elect our entire board of directors and
otherwise be able to control us. CEA Holding will also have sufficient voting control to effect
transactions without the concurrence of our minority shareholders. The interests of the Chinese
government as the ultimate controlling person of our company and most of other major Chinese
airlines could conflict with the interests of our minority shareholders. Although
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the CAAC currently has a policy of equal treatment for all Chinese airlines, we cannot assure
you that the CAAC will not favor other Chinese airlines over our company.
Insurance coverage and cost
As a result of the events of September 11, 2001, aviation insurers have significantly reduced
the maximum amount of insurance coverage available to commercial air carriers for liability to
persons other than employees or passengers for claims resulting from acts of terrorism, war or
similar events, or war-risk coverage. At the same time, they have significantly increased the
premiums for such coverage, as well as for aviation insurance in general. Also, Our company has
further extended our insurance coverage purchased prior to the September 11 events to November 30,
2006. However, if the insurance carriers reduce further the amount of insurance coverage available
or increase the premium for such coverage when we renew our insurance coverage, our financial
condition and results of operations may be materially and adversely affected.
Direct air link between China's mainland and Taiwan
Currently, our operations on the Hong Kong regional routes benefit from traffic between Hong
Kong and mainland China ultimately originating in Taiwan. During the Lunar Chinese New Year peak
travel season in 2003, from late-January to mid-February, the Chinese government allowed special
chartered flights between Shanghai and Taiwan for the first time. During the Lunar Chinese New
Year peak travel seasons in 2005 and 2006, from late-January to mid-February, airlines from both
mainland China and Taiwan (including our company) operated 48 and 72, respectively, non-stop direct
chartered flights between selected cities of mainland China and Taiwan. Although regular direct
flights between Taiwan and mainland China are still not permitted, our Hong Kong regional routes
may be materially and adversely affected if such regular direct flights are permitted in the
future. We cannot assure you that we will obtain sufficient Taiwan-mainland China routes, or that
the yields on these routes will be adequate, to offset any material adverse effect on our revenues
derived from our Hong Kong regional routes.
Chinese aviation infrastructure limitations and safety
The rapid increase in air traffic volume in China in recent years has put pressure on many
components of the Chinese airline industry, including air traffic control systems, the availability
of qualified flight personnel and airport facilities. Our ability to provide safe air
transportation depends on the availability of qualified and experienced pilots in China and the
improvement of maintenance services, national air traffic
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control and navigational systems and ground control operations at Chinese airports. If any of
these is not available or is inadequate, our ability to provide safe air transportation will be
compromised and our financial condition and results of operations may be materially and adversely
affected.
Operating leverage
The airline industry is characterized by a high degree of operating leverage. Due to high
fixed costs, including payments made in connection with aircraft leases, the expenses relating to
the operation of any given flight do not vary proportionately with the number of passengers
carried, while revenues generated from a particular flight are directly related to the number of
passengers carried and the fare structure of the flight. Accordingly, a decrease in revenues may
result in a proportionately higher decrease in profits.
Liquidity
We have substantial debts, and will continue to have substantial debts in the future. In
addition, we have recently entered into contractual commitments to acquire a number of new aircraft
for delivery over the next few years. See the section headed "Item 4. Information on the
Company—Description of Property—Fleet". As of December 31, 2005, our total outstanding debt was
RMB52,403 million, and our long-term debt to equity ratio was 3.4. As of the same date, our current
liabilities exceeded our current assets by RMB25,598 million. Short-term bank loans outstanding
totaled RMB13,711 million as of December 31, 2005.
We largely rely on cash flow generated from our operations and external financing (including
short-term bank loans) to meet our debt repayment obligations and working capital requirements. If
our
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operating cash flow is materially and adversely affected by factors such as increased
competition, significant decrease in demand for our services, or significant increase in jet fuel
price, our liquidity would be materially and adversely affected. We have arranged financing with
domestic and foreign-funded banks in China as necessary to meet our working capital requirements.
We have also tried to ensure our liquidity by structuring a substantial portion of our short-term
bank loans to be rolled over upon maturity. These efforts, however, may ultimately prove
insufficient. Our ability to obtain financing may be affected by our financial position and
leverage and our credit rating, as well as by prevailing economic conditions and the cost of
financing in general. If we are unable to obtain adequate financing for our capital requirements,
our liquidity and operations would be materially and adversely affected.
Future financing requirements
We require significant amounts of external financing to meet our capital commitments for
adding and upgrading aircraft and flight equipment and for other business expansion needs. In the
past, we have obtained, sometimes with the assistance of the CAAC, guarantees from Bank of China
and other Chinese banks in respect of payments under our foreign loan and capital lease
obligations. However, we cannot assure you that we will be able to continue to obtain bank
guarantees in the future. The unavailability of guarantees from Bank of China or other acceptable
banks or the increased cost of such guarantees may materially and adversely affect our ability to
borrow internationally or enter into international aircraft lease financings on acceptable terms.
The ability of our company to obtain financing may also be affected by our financial position and
leverage and our credit rating as well as by prevailing economic conditions and the cost of
financing generally. If we were unable to obtain financing for a significant portion of our capital
requirements, our ability to acquire new aircraft or expand our operations may be impaired. We have
and in the future will likely continue to have substantial debts. As a result, the interest cost
associated with these debts might impair our future profitability and cause our earnings to be
subject to a higher degree of volatility.
Related party transactions; conflict of interests
We have engaged in, from time to time, and may continue to engage in, in the future, a variety
of transactions with CEA Holding and its various members, from whom we receive a number of
important services, including support for in-flight catering and assistance with importation of
aircraft, flight equipment and spare parts. Our transactions with CEA Holding and its members are
conducted through a series of arm's length contracts, which we have entered into with CEA Holding
and its members in the ordinary course of business. However, because we are controlled by CEA
Holding and CEA Holding may have interests that are different from our interests, we cannot assure
you that CEA Holding will not take actions that will serve its interests or the interests of its
members over our interests.
Acquisitions
We may expand our business through acquisition of airline companies or airline-related
businesses. Such acquisitions involve uncertainties and risks, including the following:
•
difficulty with integrating the assets and operations of the acquired
airline companies or airline-related businesses, including their employees, corporate
cultures, managerial systems, processes and procedures and management information
systems and services;
•
failure to achieve the anticipated synergies, cost savings or
revenue-enhancing opportunities resulting from the acquisition of such airline
companies or airline-related businesses;
•
difficulty with exercising control and supervision over the newly
acquired operations; and
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•
increased financial pressure resulting from the assumption of recorded
and unrecorded liabilities of the acquired airline companies or airline-related
businesses.
If we are unable to manage or integrate the newly acquired airlines or airline-related
businesses successfully without substantial expense, delay or other operational or financial
problems, we may be unable to achieve the objectives or anticipated synergies of such acquisitions
and such acquisitions may adversely impact the operations and financial results of our existing
businesses.
Limitation on foreign ownership
The current CAAC policies limit foreign ownership in Chinese airlines. Under these limits,
non-Chinese residents and Hong Kong, Macau or Taiwan residents cannot hold majority equity interest
in a Chinese airline company. At present, approximately 32.2% of our total outstanding shares are
held by non-Chinese residents and Hong Kong, Macau or Taiwan residents (excluding the qualified
foreign institutional investors that are approved to invest in the A-share market of the PRC). As
a result, our access to international equity capital markets may be limited. This restriction may
also limit the opportunities available to our company to obtain funding or other benefits through
the creation of equity-based strategic alliances with foreign carriers. We cannot assure you that
the CAAC will increase these limits in the near future or at all.
Adverse public health epidemics or pandemics
Adverse public health epidemics or pandemics could disrupt businesses and the national economy
of China and other countries where we do business. From December 2002 to June 2003, China and
other countries experienced an outbreak of a new and highly contagious form of atypical pneumonia
now known as severe acute respiratory syndrome, or SARS. On July 5, 2003, the World Health
Organization declared that the SARS outbreak had been contained. However, a number of isolated new
cases of SARS were subsequently reported, most recently in central China in April 2004. During May
and June of 2003, many businesses in China were closed by the PRC government to prevent
transmission of SARS. Moreover, some Asian countries, including China, have recently encountered
incidents of the H5N1 strain of bird flu, or avian flu. We are unable to predict the effect, if
any, that avian flu may have on our business. Any future outbreak of SARS, avian flu or similar
adverse public health developments may, among other things, severely restrict the level of economic
activity in the affected areas, which may in turn significantly reduce demand for our services and
have a material adverse effect on our financial condition and results of operations.
Changes in the economic policies of the Chinese government
Since the late 1970s, the Chinese government has been reforming the Chinese economic system.
These reforms have resulted in significant economic growth and social progress. These policies and
measures, however, may from time to time be modified or revised. Adverse changes in economic and
social conditions in China, in the policies of the Chinese government or in the laws and
regulations in China, if any, may have a material adverse effect on the overall economic growth of
China and investments in the airline industry in China. These developments, in turn, may have
material adverse effects on our business operations and may also materially and adversely affect
our financial condition and results of operations.
Convertibility of Renminbi
A significant portion of our revenue and operating expenses are denominated in Renminbi, while
a portion of our revenue, capital expenditures and debts are denominated in U.S. dollars and other
foreign currencies. Renminbi is currently freely convertible under the current account, which
includes dividends, trade and service-related foreign currency transactions, but not under the
capital account, which includes foreign direct investment, unless the prior approval of the State
Administration of Foreign Exchange, or
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SAFE, is obtained. As a foreign invested enterprise approved by the PRC Ministry of Commerce,
or MOC, we can purchase foreign currency without the approval of SAFE for settlement of current
account transactions, including payment of dividends, by providing commercial documents evidencing
these transactions. We can also retain foreign exchange in our current accounts, subject to a
maximum amount approved by SAFE, to satisfy foreign currency liabilities or to pay dividends.
However, the relevant Chinese government authorities may limit or eliminate our ability to purchase
and retain foreign currencies in the future. Foreign currency transactions under the capital
account are still subject to limitations and require approvals from SAFE. This may affect our
ability to obtain foreign exchange through debt or equity financing, including by means of loans or
capital contributions. We cannot assure you that we will be able to obtain sufficient foreign
exchange to pay dividends or satisfy our foreign exchange liabilities.
Fluctuations in exchange rates
The value of Renminbi fluctuates and is subject to significant changes in China's political
and economic conditions. Any revaluation of Renminbi may materially and adversely affect the value
of dividends, if any, payable on our H shares in foreign currency terms. We use currency forward
contracts to reduce risks of changes in currency exchange rates in respect of ticket sales and
expenses denominated in foreign currencies. These currency forward contracts will expire between
2007 and 2010. Since we may not be able to fully hedge against Renminbi devaluations, future
movements in the exchange rate of Renminbi and other currencies may have a material adverse effect
on our financial condition and results of operations
.
Uncertainties embodied in the Chinese legal system
The Chinese legal system is a civil law system based on written statutes. Unlike common law
systems, it is a system in which decided legal cases have little precedential value. In 1979, the
Chinese government began to promulgate a comprehensive system of laws and regulations governing
economic matters in general. Legislation over the past 20 years has significantly enhanced the
protection afforded to foreign investment in China. However, the interpretation and enforcement of
some of these laws, regulations and other legal requirements involve uncertainties that may limit
the legal protection available to you.
Compliance with requirements under Section 404 of the Sarbanes-Oxley Act of 2002
Our
company will become subject to Section 404 of the Sarbanes-Oxley Act
of 2002 in the fiscal year ending December 31, 2006, and will need to
evaluate and test our abilities to comply with the statute as well as
take such remedial actions that may be necessary to ensure our
compliance. We cannot be certain that evaluations, tests and remedial
actions will all be timely completed. We also do not know how
compliance with Section 404 of the Sarbanes-Oxley Act of 2002 will
affect our operations.
Our
efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002
may present us with significant challenges. In connection with their
audit of our consolidated financial statements as of and for the
year ended December 31, 2005, our independent auditors,
PricewaterhouseCoopers, identified to our management and audit
committee certain internal control deficiencies in our internal
control over financial reporting that they considered to constitute
material weakness in our internal control over financial reporting.
See the section headed "Item 15 — Controls and
Procedures". If during the fiscal year ending December 31, 2006,
we are unable to effectively implement the measures necessary for our
compliance with Section 404 of the Sarbanes-Oxley Act of 2002,
including any remedial actions that are required to address any
internal control weakness already detected by our independent auditors, our independent
auditors may not be able to provide us with a written attestation
regarding the effectiveness of our internal control over financial
reporting, which we will need for the filling of our annual report
next year. Even if our management concludes that our internal control
over financial reporting is effective, our independent auditors may
disagree. In addition, if our independent auditors are not satisfied
with our internal control over financial reporting or the level at
which our controls are documented, designed, operated, reviewed or
evaluated, or if our independent auditors interpret the relevant
requirements, rules or regulations differently from us, then they may
decline to attest to our management's assessment or may issue an
adverse opinion.
Any
of these possible outcomes may result in an adverse reaction in the
financial marketplace and/or a loss of investor confidence in the
reliability of our consolidated financial statements. We could also
become subject to regulatory investigations and sanctions by
regulators such as the Securities and Exchange Commission. We may
also be required to incur greater than expected costs to improve our
internal control processes. All of these factors could materially and
adversely affect the market prices of our shares and ADSs.
Item 4. Information on the Company.
History and Development of the Company
Our
registered office is located at 66 Airport Street, Pudong International Airport, Shanghai, China,
201202. Our principal executive office is located at 2550 Hong Qiao Road, Hong Qiao International
Airport, Shanghai, China, 200335. The telephone number of our principal executive office is (86-21)
6268-6268. We currently do not have an agent for service of process
in the United States.
Our company was established on April 14, 1995
under the laws of China as a company limited by shares in connection
with the restructuring of our predecessor and our initial public
offering. Our
predecessor was one of the six original airlines established in 1988 as part of the
decentralization of the airline industry in China undertaken in connection with China's overall
economic reform efforts. Prior to 1988, the CAAC was responsible for all aspects of civil aviation
in China, including the regulation and operation of China's airlines and airports. In connection
with our initial public offering, our predecessor was restructured into two separate legal
entities, our company and EA Group. According to the restructuring arrangement, by operation of
law, our company succeeded to substantially all of the assets and liabilities relating to the
airline business of our predecessor. EA Group succeeded to our predecessor's assets and liabilities
that do not directly relate to the airline operations and do not compete with our businesses.
Assets transferred to EA Group included our predecessor's equity interests
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in companies engaged in import and export, real estate, advertising, in-flight catering,
tourism and certain other businesses. In connection with the restructuring, we entered into various
agreements with EA Group and its subsidiaries for the provision of certain services to our company.
CEA Holding assumed the rights and liabilities of EA Group under these agreements after it was
formed by merging EA Group, Yunnan Airlines Company and China Northwest Airlines Company in October
2002. See "Item 7. Major Shareholders and Related Party Transactions" for more details. In 2005,
our company's total revenue accounted for approximately 87.8 % of CEA Holding's total revenue. The
following chart sets forth the organizational structure of our company and our significant
subsidiaries, all of which were incorporated in China, as of
June 30, 2006.
China Eastern Airlines Corporation Limited
99%
63%
95%
86%
70%
Shanghai
Eastern Airlines Investment
Co., Ltd.
China Eastern
Airlines Jiangsu
Co., Ltd.
Shanghai Eastern
Flight Training
Co., Ltd.
Eastern Airlines
Hotel
Co., Ltd.
China Cargo Airlines Co., Ltd.
Shanghai Eastern Logistics Co., Ltd.
70%
China Eastern Airlines Wuhan Limited
96%
Shanghai Eastern Maintenance Co., Ltd.
China Eastern Fudart Transportation Service Co., Ltd.
60%
51%
In February 1997, we completed our initial public offering of 1,566,950,000 ordinary H
shares, par value RMB1.00 per share, and listed our ordinary H shares on The Stock Exchange of Hong
Kong Limited, or the Hong Kong Stock Exchange, and American Depositary Shares, or ADSs,
representing our H shares, on the New York Stock Exchange. Prior to our initial public offering,
all of the issued and outstanding shares of our capital stock, consisting of 3,000,000,000 ordinary
domestic shares, par value RMB1.00 per share, were owned by EA Group, which exercises, on behalf of
the Chinese government and under the supervision and direction of the CAAC, the shareholder rights
in our company. In October 1997, we completed a public offering of 300,000,000 new ordinary
domestic shares in the form of A shares to public shareholders in China and listed such new shares
on the Shanghai Stock Exchange. Following the A share offering, EA Group continued to own
3,000,000,000 ordinary domestic shares, which represent 90.91% of our total ordinary domestic
shares and 61.64% of our issued and outstanding share capital as of December 31, 2005. H shares
are our ordinary shares listed on the Hong Kong Stock Exchange, and A shares are our ordinary
shares listed on the Shanghai Stock Exchange. Our H shares and A shares are identical in respect of
all rights and preferences, except that the listed A shares may only be held by Chinese domestic
investors and certain qualified foreign institutional investors. In addition, dividends on the A
shares are payable in Renminbi.
Since our initial public offering, we have expanded our operations through acquisitions and
joint ventures. In July 1998, our company and China Ocean Shipping (Group) Company jointly
established China Cargo Airlines Co., Ltd., which specializes in the air freight business. Our
total investment in this joint venture was approximately RMB350 million, representing 70% of the
equity interest of China Cargo Airlines Co., Ltd. In addition, we purchased from EA Group the
assets and liabilities relating to airline operations of China General Aviation Company, for
approximately RMB88 million in November 1999. China General
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Aviation Company was based in Shanxi Province in China and served primarily the northern
region of China. Moreover, we completed our acquisition of Air Great Wall in June 2001 and
established our Ningbo Branch following the acquisition. Air Great Wall was based in Ningbo,
Zhejiang Province in China and served primarily the southeastern region of China.
In May 2002, our company, jointly with Shanghai Civil Aviation Eastern China Kaiya System
Integration Co., Ltd., established Shanghai Eastern Airlines Investment Co., Ltd., or SEAI. We hold
a 99% equity interest in SEAI. The joint venture serves as one of the investment vehicles of our
company for our investments in other industrial projects and provides consulting services. In
August 2002, our company, jointly with Wuhan Municipal State-owned Assets Management Committee
Office and two other independent third parties, established China Eastern Airlines Wuhan Limited,
or CEA Wuhan, in which our company held a 40% equity interest. In March, 2006, we completed our
acquisition of a 38% equity interest and a 18% equity interest in CEA Wuhan from Wuhan Municipal
State-owned Assets Supervision and Administration Committee and Shanghai Junyao Aviation Investment
Company Limited, respectively, for an aggregate consideration of approximately RMB418 million. As a
result, our equity interest in CEA Wuhan has increased to 96%. CEA Wuhan serves primarily the
market in Hubei Province. We also entered into an agreement with Rockwell Collins International
Inc. of the United States to establish a joint venture avionics maintenance service company in
China in September 2002. Moreover, in November 2002, our company, jointly with China Aircraft
Services Limited, established Shanghai Eastern Aircraft Maintenance Limited, in which our company
holds a 60% equity interest. In order to expand our company's operations in Jiangsu Province of
China, we increased our investment in China Eastern Airlines Jiangsu Co., Ltd., or Eastern Jiangsu,
in December 2002, together with other shareholders of Eastern Jiangsu. In 2004, our company
contributed additional capital of approximately RMB408 million to Eastern Jiangsu. As a result, our
equity interest in Eastern Jiangsu increased from 55% to 63%.
In April 2003, we entered into a share transfer agreement with CEA Holding, pursuant to which
we have acquired from CEA Holding a 45% equity interest in China Eastern Aviation Import and Export
Company, or CEAIEC, for a consideration of approximately RMB44 million. CEAIEC was a wholly-owned
subsidiary of CEA Holding prior to the transaction. Under the share transfer agreement, our company
and CEA Holding each undertakes to the other party that it will not establish any other entity
engaging in any business similar in nature or scope to the business conducted by CEAIEC. We believe
that the acquisition of 45% equity interest in CEAIEC could reduce our company's cost of importing
aviation raw materials and enhance our company's profitability.
In December 2003, we also entered into a joint venture agreement with CEA Holding to establish
China Eastern Air Catering Investment Company Ltd., or CEA Catering. The registered capital of CEA
Catering is RMB350 million. Pursuant to the joint venture agreement, CEA Holding and our company
made capital contributions of approximately RMB192.5 million and RMB157.5 million, respectively. As
a result, CEA Holding and our company hold a 55% and a 45% equity interest in CEA Catering,
respectively. CEA Catering is primarily engaged in the business of providing air and ground
catering services, food and beverage supplies and other related services. Our board believes that
our investment in CEA Catering is beneficial to our company and its shareholders, and expects it to
reduce the cost incurred by our company in providing catering services and to enhance our
profitability and competitiveness in the domestic aviation industry.
In addition, also in December 2003, we entered into an equity transfer and capital increase
agreement with CEA Holding and Shanghai Eastern Development Corporation Limited, or SEDC, pursuant
to which our company acquired 10% of SEDC's then equity interest and 35% of CEA Holding's then
equity interest in Shanghai Dong Mei Aviation Travel Corporation Limited, a company that is
primarily engaged in the business of selling air tickets, hotel reservation, travel agency and
other related services. After the transaction, our company holds a 45% equity interest in Shanghai
Dong Mei. Our aggregate investment in Shanghai Dong Mei was approximately RMB14.9 million.
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On February 18, 2004, we entered into a joint venture agreement with CEA Holding to establish
China Eastern Real Estate Investment Co. Ltd., or CEA Real Estate, a limited liability company
established under the laws of the PRC. The registered capital of CEA Real Estate is RMB100 million.
Pursuant to the joint venture agreement, our company has made its capital contribution of RMB5
million in cash. As a result, our company owns a 5% equity interest in CEA Real Estate. CEA Real
Estate is primarily engaged in the real estate business, including the development and sales of
commercial premises and property leasing in Shanghai, China.
On March 10, 2003, we entered into a joint venture agreement with Singapore Technologies
Aerospace Ltd. to establish Shanghai Technologies Aerospace Company Limited, or STAC, a
Sino-foreign joint venture limited liability company established under the laws of the PRC. The
registered capital of STAC is US$73 million with a total investment of US$98 million. Pursuant to
the joint venture agreement, our company shall make an in-kind capital contribution of US$37.23
million (which includes but not limited to flight equipment and land use right) in installments to
STAC. Our company owns a 51% equity interest in STAC. STAC is primarily engaged in the provision of
commercial aircraft maintenance, repair and overhaul services. STAC started operation in late 2004.
On August 18, 2004, we entered into a joint venture agreement with China Ocean Shipping
(Group) Company and China Cargo Airlines Co., Ltd. to establish Shanghai Eastern Logistics Co.,
Ltd., or Eastern Logistics, a limited liability company established under the laws of the PRC. The
registered capital of Eastern Logistics is RMB200 million. Pursuant to the joint venture agreement,
our company has made its capital contribution of RMB138.6 million in cash to Eastern Logistica. Our
company, directly and indirectly, owns a 70% equity interest in Eastern Logistics. Eastern
Logistics is primarily engaged in the provision of cargo logistics services. Eastern Logistics
started operation after it obtained its business license from the relevant government authority on
August 23, 2004.
On March 2, 2005, we entered into an agreement with United Technologies Far East Limited, or
UTFEL, to establish Hamilton Sundstrand (Shanghai) Aerospace Technology Limited, or HSSATL, a
jointly controlled entity which will be principally engaged in the provision of repair and
maintenance services for auxiliary power units of aircraft in the PRC. The registered capital of
HSSATL is US$8.9 million, which is to be contributed by us and UTFEL in proportion of 51% and 49%,
respectively.
Pursuant to the CAAC's airline industry restructuring plan, EA Group merged with Yunnan
Airlines Company and China Northwest Airlines Company and formed CEA Holding in October 2002.
Yunnan Airlines Company and China Northwest Airlines Company were restructured as wholly-owned
subsidiaries of CEA Holding after the merger and renamed as China Eastern Air Yunnan Company, or
CEA Yunnan, and China Eastern Air Northwest Company, or CEA Northwest, respectively. CEA Northwest
is based in Xi'an, Shannxi Province in China with approximately 30 jet aircraft and serves
primarily the western region of China. CEA Yunnan is based in Kunming, Yunnan Province in China
with approximately 26 jet aircraft and serves primarily the southwestern region of China. The
airline operations conducted by CEA Yunnan and CEA Northwest previously competed with our company,
in particular, on the Shanghai-Wenzhou route, Shanghai-Harbin route, Shanghai-Qingdao route,
Shanghai-Changsha route, Changchun-Kunming route, Changsha-Ningbo route, Changsha-Kunming route and
Changsha-Nanjing route.
In order to further expand our business and enhance our market competitiveness, we acquired
from CEA Holding certain assets and liabilities relating to the aviation businesses of CEA Yunnan
and CEA Northwest pursuant to a conditional assets transfer agreement, or Acquisition Agreement,
entered into by our company, CEA Holding, CEA Yunnan and CEA Northwest on May 12, 2005. The assets
acquired by our company included aircraft, engines and aviation equipment and facilities, certain
employees and operating contracts, and other fixed and current assets (whether owned or leased
assets). We also assumed aggregate debts of RMB9,421 million. Following the completion of the
acquisitions of these assets and liabilities in June 2005, our company assumed and took over the
aviation operations and businesses previously carried out
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by CEA Yunnan and CEA Northwest in accordance with the Acquisition Agreement. The air routes
of CEA Yunnan and CEA Northewest were also injected into our company with such assets and
liabilities. The total consideration paid by our company under the Acquisition Agreement was
approximately RMB640 million in cash.
Under the Acquisition Agreement, each of CEA Holding, CEA Northwest and CEA Yunnan has
undertaken that at any time after completion of the Acquisition Agreement, it will not, and will
procure its respective subsidiaries and associated companies (including members of CEA Holding) not
to, carry out, engage in or otherwise become involved or interested in any business which competes
or may compete, either directly or indirectly, with our company's aviation business. The
undertaking is not made for any definite period.
As part of our continuing effort to upgrade our fleet, we disposed old aircraft and added new
aircraft to our fleet. Our aircraft dispositions have reduced the average age of our fleet. All of
our aircraft are registered with the CAAC. The table below sets forth our significant aircraft
dispositions and additions since December 31, 2002 (including the 60 aircraft for which we acquired
ownership in or lease as part of our acquisition of the aviation businesses of CEA Yunnan and CEA
Northwest in 2005):
2002
2003
2004
2005
2006
Additions (Finance
Leases and
Purchases)
4 Boeing 737-700
aircraft
10 Airbus 320
aircraft
3 Airbus 340-600
aircraft
2 Airbus 340-600
aircraft
2 Airbus 321
aircraft
5 Airbus 320
aircraft
2 Airbus 321
aircraft
12 Airbus 320
aircraft
3 Airbus 310-200
aircraft
3 Airbus 300-600
aircraft
3 ERJ145 aircraft
10 Boeing 737-300
aircraft
4 Boeing 737-700
aircraft
3 Boeing 767-300
aircraft
5 CRJ-200
7 BAE146-300
aircraft
3 BAE146-100
5 Airbus A330-300
aircraft
(1)
2 Airbus A321
aircraft
3 Airbus A319
aircraft
7 Boeing 737-700
aircraft
4 ERJ145 aircraft
1 Boeing 747F
aircraft
Additions
(Operating Leases
and Wet Leases)
2 Airbus 319
aircraft
2 Boeing 737-700
aircraft
5 Boeing 737-700
aircraft
1 Airbus 300F
aircraft
16 Airbus A320
aircraft
7 Boeing 737-700
aircraft
3 Boeing 737-800
aircraft
3 Boeing 737-300
aircraft
1 Airbus A300F
freighter
2 Boeing 747F
freighter
3 Airbus A330-200
aircraft
2 Airbus A330-300
aircraft
Dispositions
2 Airbus 310
aircraft
3 Boeing 737-200
aircraft
0
1 BAE 146-100
2 Boeing 737-300
(1)
It is to be determined if these five Airbus A330-300 aircraft will be acquired by purchase,
finance lease or operating lease.
Business Overview
Our company is one of the three largest air carriers in China in terms of tonne-kilometers and
number of passengers carried in 2005, and is the primary air carrier serving Shanghai, China's
eastern gateway. We
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accounted for approximately 21.7% of the total commercial air traffic (as measured in
tonne-kilometers) handled by Chinese airlines in 2005. We operate primarily from Shanghai's Hong
Qiao International Airport and Pudong International Airport. In 2005, we accounted for 41.0% and
32.5% of all the flight traffic at Hong Qiao International Airport and Pudong International
Airport, respectively. In 2005, we accounted for approximately 34.6% of the total passenger traffic
volume and 22.1% of the total freight volume on routes to and from Shanghai. We have been
consistently ranked as one of the best Chinese airlines in terms of service quality in each of the
past six years according to a poll conducted by the China Civil Aviation Association.
Compared to 2004, our traffic volume increased by approximately 24.3% in 2005. Our passenger
traffic volume increase from 27,580.8 million passenger-kilometers in 2004 to 36,380.6 million
passenger-kilometers in 2005, or 31.9%. Our cargo and mail traffic volume increase by 14.8% from
1,874.7 million tonne-kilometers in 2004 to 2,151.5 million tone-kilometers in 2005. In 2005, our
average on-time performance rate was approximately 82.9%, which was slightly higher than the
industry average rate of 80.0% in China.
Airline Operations and Route Network
The following table sets forth our traffic revenues by activity for each of the five years
ended December 31, 2005:
2001
2002
2003
2004
2005
2005
(millions of
RMB)
(millions of
RMB)
(millions of
RMB)
(millions of
RMB)
(millions of
RMB)
(millions of
US$)
Traffic Revenues
Passengers
9,586
10,038
10,375
15,534
20,853
2,584
Cargo and mail
2,092
2,445
3,187
4,428
4,967
615
Total Traffic Revenues
11,678
12,483
13,562
19,962
25,820
3,199
Passenger Operations
The following table sets forth certain passenger operating statistics of our company by
geographic region for each of the five years ended December 31, 2005:
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2001
2002
2003
2004
2005
Passenger Traffic (millions of passenger kilometers)
15,911
18,206
18,003
27,581
36,381
Domestic
7,512
8,516
10,302
14,500
20,276
Hong Kong
2,028
2,234
1,934
3,038
3,284
International
6,371
7,457
5,767
10,043
12,819
ASK (millions)
25,814
27,963
29,780
41,599
52,428
Domestic
12,928
13,494
15,909
20,635
27,468
Hong Kong
3,609
3,650
3,692
4,857
5,288
International
9,277
10,819
10,178
16,107
19,672
Passenger Yield (passenger revenues/passenger kilometers,
in RMB)
0.60
0.55
0.57
0.56
0.57
Domestic
0.63
0.55
0.54
0.57
0.56
Hong Kong
0.95
0.86
0.84
0.74
0.76
International
0.48
0.46
0.53
0.50
0.54
Passenger Load Factor (%)
61.64
65.11
60.45
66.30
69.39
Domestic
58.10
63.11
64.75
70.27
73.82
Hong Kong
56.20
61.21
52.37
62.55
62.10
International
68.68
68.93
56.66
62.35
65.16
The primary focus of our business is the provision of domestic, Hong Kong regional and
international passenger airline services. In 2005, our passenger operations generated revenues of
approximately RMB20,853 million (approximately US$2,584 million), or approximately 76.0% of our
revenues. We operated approximately 4,860 scheduled flights per week (excluding charter flights),
serving a route network that covers 118 cities within China and abroad. In 2005, we operated
approximately 380 routes.
In 2005, we operated approximately 3,749 domestic flights per week on 257 routes. Our domestic
routes generated approximately 54.9% of our passenger revenues. Our most heavily traveled domestic
routes generally link Shanghai to the large commercial and business centers of China, such as
Beijing, Guangzhou and Shenzhen.
In 2005, we also operated approximately 670 flights per week on 16 routes to and from Hong
Kong, originating from Shanghai and 15 other major cities in eastern, northern and western China.
Our Hong Kong regional routes accounted for approximately 12.0% of our passenger revenues in 2005.
In 2005, we operated approximately 441 international flights per week on 107 routes, serving
41 cities in 18 countries, primarily linking Shanghai to major cities in Asian and Southeast Asian
countries (such as Japan, Korea, India, Singapore, Thailand and Bangladesh) and certain strategic
locations in Europe, the United States and Australia. In 2005, we successfully introduced three new
international routes including Shanghai-Bombay, Shanghai-Moscow and Shanghai-Dhaka to further
enhance the function of Shanghai as our passenger hub. In addition, we plan to launched new
international routes of Shanghai-Frankfurt and Shanghai-New York in 2006. Revenues derived from our
operations on international routes accounted for approximately 33.2% of our passenger revenues.
Revenues derived from our operations on our 21 routes to and from Japan accounted for approximately
9.6% of our passenger revenues and approximately 29.0% of our international passenger revenues in
2005.
Most of our international and Hong Kong regional flights and a substantial portion of our
domestic flights either originate or terminate in Shanghai, the central hub of our route network.
Our operations in Shanghai are conducted primarily at Hong Qiao International Airport and Pudong
International Airport. All of our international flights to or from Shanghai originate or terminate
at Pudong International Airport. Pudong
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International Airport is a newly constructed airport and is relatively further away from the
central business district of Shanghai.
In addition to our core Shanghai-based operations, we currently also have 11 provincial hubs
in eastern, northern and western China, each of which primarily serves, and is located in a
principal commercial center of, one of the following provinces: Anhui, Jiangsu, Jiangxi, Shandong,
Shanxi, Hebei, Zhejiang, Hubei, Shannxi and Yunnan. Jiangsu, Zhejiang and Shandong are among the
most economically developed provinces in China. We believe that we will benefit from the level of
development and growth opportunities in eastern, northern and western China as a whole by providing
direct services between various cities in those regions and between those regions and other major
cities in China. The provincial hubs also enable us to provide convenient connections for
passengers on certain flights to and from Shanghai. Aircraft used for regional operations are
mainly maintained by us on site at the hubs, and our sales offices are also based at each
provincial hub. We are also in the process of developing our operations in Beijing and Guangzhou as
our principal bases for northern China and southern China, respectively.
Cargo and Mail Operations
The following table sets forth certain cargo and mail operating statistics of our company by
geographic region for each of the five years ended December 31, 2005:
Year Ended December 31,
2001
2002
2003
2004
2005
Cargo and Mail Tonne-Kilometers (millions)
950
1,023
1,297
1,875
2,152
Domestic
176
206
258
328
410
Hong Kong
48
53
81
124
135
International
726
764
958
1,423
1,607
Weight of Cargo and Mail Carried (millions of kilograms)
302
345
460
664
776
Domestic
146
170
205
262
316
Hong Kong
33
39
57
85
92
International
116
136
198
317
348
Cargo and Mail Yield (cargo and mail revenues/cargo and
mail tonne-kilometers, in RMB)
2.20
2.39
2.46
2.36
2.31
Our cargo and mail business generated revenues of approximately RMB4,967 million
(approximately US$615 million) in 2005, representing approximately 19.2% of our traffic revenues
for the year.
We must obtain from the CAAC the right to carry passengers or cargo on any domestic or
international route. Our cargo and mail business generally utilizes the same route network used by
our passenger airline business. China Cargo Airlines Co., Ltd. also maintains 14 cargo routes. We
carry cargo and mail on our freight aircraft as well as in available cargo space on our passenger
aircraft. Our most significant cargo and mail routes are international routes. Revenues derived
from our operations on international cargo and mail routes accounted for approximately 80.1% of our
total cargo and mail revenues in 2005. Revenues derived from our operations on routes to and from
Japan accounted for approximately 12.6% of our international cargo and mail revenues in 2005.
The development of cargo operations is an important part of our company's growth strategy. We
have six MD-11 freight aircraft for cargo and mail operations, three of which were converted from
passenger aircraft after the establishment of China Cargo Airlines Co., Ltd. We also wet-leased two
Airbus A300F and two Boeing 747F freighters on a short-term for our cargo operations in 2005.
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Regulation
The PRC Civil Aviation Law provides the framework for regulation of many important aspects of
civil aviation activities in China, including:
•
the administration of airports and air traffic control systems;
•
aircraft registration and aircraft airworthiness certification;
•
operational safety standards; and
•
the liabilities of carriers.
The Chinese airline industry is also subject to a high degree of regulation by the CAAC.
Regulations issued or implemented by the CAAC encompass virtually every aspect of airline
operations, including route allocation, domestic airfare, licensing of pilots, operational safety
standards, aircraft acquisition, aircraft airworthiness certification, fuel prices, standards for
aircraft maintenance and air traffic control and standards for airport operations. Although China's
airlines operate under the supervision and regulation of the CAAC, they are accorded a significant
degree of operational autonomy. These areas of operational autonomy include:
•
whether to apply for any route;
•
the allocation of aircraft among routes;
•
the airfare pricing for the international and Hong Kong passenger routes;
•
the airfare pricing within the limit provided by the CAAC for the
domestic passenger routes;
•
the training and supervision of personnel; and
•
many other areas of day-to-day operations.
Although we have generally been allocated adequate routes in the past to accommodate our
expansion plans and other changes in our operations, those routes are subject to allocation and
re-allocation in response to changes in governmental policies or otherwise at the discretion of the
CAAC. Consequently, we cannot assure you that our route structure will be adequate to satisfy our
expansion plans.
The CAAC has established regulatory policies intended to promote controlled growth of the
Chinese airline industry. We believe those policies would be beneficial to the development of and
prospects for the Chinese airline industry as a whole. Nevertheless, those regulatory policies
could limit our flexibility to respond to changes in market conditions, competition or our cost
structure. Moreover, while our company generally benefits from regulatory policies that are
beneficial to the airline industry in China as a whole, the implementation of specific regulatory
policies may from time to time materially and adversely affect our business operations.
Because our company provides services on international routes, we are also subject to a
variety of bilateral civil air transport agreements between China and other countries. In addition,
China is a contracting state as well as a permanent member of the International Civil Aviation
Organization, an agency of the United Nations established in 1947 to assist in the planning and
development of the international air transportation. International Civil Aviation Organization
establishes technical standards for the international airline industry. China is also a party to a
number of other international aviation conventions. The business operations of our company are
subject to those international aviation conventions as well.
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Domestic Route Rights
. Chinese airlines must obtain from the CAAC the right to carry
passengers or cargo on any domestic route. The CAAC's policy on domestic route rights is to assign
routes to the airline or airlines suitable for a particular route. The CAAC will take into account
whether an applicant for a route is based at the point of origin or termination of a particular
route. This policy benefits airlines, such as our company, that have a hub located at each of the
active air traffic centers in China. The CAAC also considers other factors that will make a
particular airline suitable for an additional route, including the applicant's safety record,
previous on-time performance and level of service and availability of aircraft and pilots. The CAAC
will consider the market conditions applicable to any given route before such route is allocated to
one or more airlines. Generally, the CAAC will permit additional airlines to service a route that
is already being serviced only when there is strong demand for a particular route relative to the
available supply. The CAAC's current general policy is to require the passenger load factor of one
or two airlines on a particular route to reach a certain level before another carrier is permitted
to commence operations on such route.
Hong Kong Route Rights.
Hong Kong routes and the corresponding landing rights were formerly
derived from the Sino-British air services agreement. In February 2000, the Chinese central
government, acting through the CAAC, and Hong Kong signed the Air Transportation Arrangement
between mainland China and Hong Kong. The Air Transportation Arrangement provides for equal
opportunity for airlines based in Hong Kong and mainland China. Competition from airlines based in
Hong Kong increased after the execution of the Air Transportation Arrangement. The CAAC allocates
route and landing rights among the 8 Chinese airlines currently permitted to fly to Hong Kong. The
CAAC normally will not allocate an international route or a Hong Kong route to more than one
domestic airline unless certain criteria, including minimum load factors on existing flights, are
met. There are more than one Chinese airline company on certain of our Hong Kong routes.
The
CAAC and the Economic Development and Labor Bureau of Hong Kong
recently announced that they have reached an agreement to further
expand the Air Transaction Arrangement. This agreement will increase
the routes between Hong Kong and mainland China to expand coverage to
most major cities in mainland China. The capacity limits for
passenger and/or cargo services on most routes will also be gradually
lifted. Starting from the winter in 2007, each side can designate
three airline companies to operate passenger and/or cargo flights and
another airline company to operate all-cargo flights on the majority
of the routes between Hong Kong and mainland China.
International Route Rights.
International route rights, along with the corresponding landing
rights, are derived from air services agreements negotiated between the Chinese central government,
acting through the CAAC, and the government of the relevant foreign country. Each government grants
to the other the right to designate one or more domestic airlines to operate scheduled services
between certain points within each country. Upon entering into an air services agreement, the CAAC
seeks applications from the eight Chinese airlines currently approved to fly international
passenger routes. The CAAC awards the relevant route to an airline based on various criteria, including:
•
availability of appropriate aircraft and flight personnel;
•
safety record;
•
on-time performance; and
•
hub location.
Although hub location is an important criterion, an airline may be awarded a route which does
not originate from an airport where it has a hub. The route rights awarded do not have a fixed
expiry date and can be terminated at the discretion of the CAAC.
Airfare Pricing Policy.
The PRC Civil Aviation Law provides that airfare for domestic routes
are determined jointly by the CAAC and the agency of the State Council responsible for price
control, primarily based upon average airline operating costs and market conditions. From February
1999 to March 2001, all domestic airlines were required to adhere to unified domestic airfare
published by the CAAC from time to time and discounted sales were prohibited. In 2001, the CAAC
gradually relaxed its control over domestic airfare pricing and, effective March 1, 2001, domestic
airlines were permitted to offer discounts on several major domestic routes.
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On March 17, 2004, China's State Council approved the Pricing Reform Plan for the Domestic
Civil Aviation Industry, or the Pricing Reform Plan, effective April 20, 2004. Pursuant to the
Pricing Reform Plan, the governmental authorities responsible for price control no longer directly
set the airfare for domestic routes, but indirectly control the airfare for domestic routes by
setting basic airfare levels and permitted ranges within which the actual airfare of Chinese
airlines can deviate from such basic airfare levels. Chinese airlines are able to set their own
airfare for their domestic routes within the permitted ranges and adopt more flexible sales
policies to promote their services.
The CAAC and the National Development and Reform Commission jointly publish the pricing
guidelines from time to time, which set forth the basic airfare levels and permitted ranges.
Pursuant to the current pricing guidelines, the basic airfares for domestic routes are the
published airfares implemented by Chinese airlines immediately prior to the approval of the Pricing
Reform Plan (the average basic airfare for domestic routes is RMB0.75 per passenger-kilometer).
Except for certain domestic routes, the actual airfare set by each Chinese airline for its domestic
routes cannot be 25% higher and 45% lower than the basic airfare. Domestic routes that are not
subject to the deviation range restrictions include short-haul routes between cities in the same
province or autonomous region, or between a municipality and adjacent provinces, autonomous regions
or another municipality. Certain tourist routes and routes served by only one Chinese airline are
not subject to the bottom range restriction. The CAAC and the National Development and Reform
Commission will announce the routes that are not subject to the deviation range restrictions
through the airfare information system known as Airtis.net. Chinese airlines may apply to the CAAC
and the National Development and Reform Commission for exemption from the bottom range restriction
for a particular route. Chinese airlines are also required to file the actual airfare they set for
their domestic routes within the ranges through Airtis.net 30 days prior to its implementation.
The CAAC and the National Development and Reform Commission will regularly review the average
operating costs of Chinese airlines, and may adjust the basic airfare for particular domestic
routes which, in their view, is not at a reasonable level. We expect that, as reforms continue in
2006, we will have more flexibility in operating our aviation business in the future. The promotion
by Chinese regulators of a regulated and orderly market and a fair and positive competition
mechanism will also provide a favorable environment for the growth of our business.
Under the PRC Civil Aviation Law, maximum airfare on Hong Kong and international routes is set
in accordance with the terms of the air services agreements pursuant to which these routes are
operated. In the absence of an air services agreement, the airfare is set by the airlines
themselves or by the CAAC with reference to comparable market prices, taking into account the
international airfare standards established through the coordination of the International Air
Transport Association, which organizes periodic air traffic conferences for the purpose of
coordinating international airfare. Discount is permitted on Hong Kong and international routes.
For the airline industry in China as a whole, airfare per kilometer is substantially higher for
Hong Kong and international routes than for domestic routes.
Acquisition of Aircraft and Spare Parts.
Most Chinese airlines are required to purchase their
aircraft, aircraft spare parts and other aviation equipment through the China Aviation Supplies
Corporation, or the CASC, an entity controlled by the CAAC. However, our company is permitted to
import aircraft, aircraft spare parts and other equipment for our own use from manufacturers
through CEAIEC
,
which is 55% owned by CEA Holding and 45% owned by our company. This gives us
freedom in rationalizing our maintenance practices by allowing us to maintain a relatively lower
overall inventory level of aircraft parts and equipment than we otherwise would have to maintain.
We are still required to obtain an approval from the National Development and Reform Commission for
any import of aircraft. We generally pay a commission to CEAIEC in connection with these imports.
Domestic Fuel Supply and Pricing.
The Civil Aviation Oil Supply Company, or CAOSC, which is
controlled by the CAAC, is currently the dominant civil aviation fuel supply company in China. We
currently
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purchase a significant portion of our domestic fuel supply from CAOSC. The Chinese government
determines the fuel price at which the CAOSC acquires fuel from domestic suppliers and the CAAC
issues guidance price and the retail price at which the CAOSC resells fuel to airline customers
will be set within a specified range of such guidance price.
Safety.
The CAAC has made the improvement of air traffic safety in China a high priority. The
CAAC is responsible for the establishment of operational safety, maintenance and training standards
for all Chinese airlines, which have been formulated based on international standards. Each Chinese
airline is required to provide flight safety reports to the CAAC, including reports of flight
incidents or accidents involving its aircraft occurred during the relevant reporting period and
other safety related problems. The CAAC conducts safety inspections on each airline periodically.
The CAAC oversees the training of most Chinese airline pilots through its operation of the
pilot training college. The CAAC implements a unified pilot certification process applicable to all
Chinese airline pilots and is responsible for the issuance, renewal, suspension and cancellation of
pilot licenses. Each pilot is required to pass the CAAC-administered examinations before obtaining
a pilot license and is subject to an annual examination in order to have such certification
renewed.
All aircraft operated by Chinese airlines, other than a limited number of leased aircraft
registered in foreign countries, are required to be registered with the CAAC. All of our aircraft
are registered with the CAAC. All aircraft operated by Chinese airlines must have a valid
certificate of airworthiness issued and annually renewed by the CAAC. In addition, maintenance
permits are issued to a Chinese airline only after the maintenance capabilities of that Chinese
airline have been examined and assessed by the CAAC. These maintenance permits are renewed
annually. All aircraft operated by Chinese airlines may be maintained and repaired only by the CAAC
certified maintenance facilities, whether located within or outside China. Aircraft maintenance
personnel must be certified by the CAAC before assuming aircraft maintenance posts.
Security.
The CAAC establishes and oversees the implementation of security standards and
regulations based on the PRC laws and standards established by international civil aviation
organizations. Each airline is required to submit to the CAAC an aviation security handbook
describing specific security procedures established by the airline for the day-to-day operations of
the civil aviation and security training for staff of such airline. Such security procedures must
be formulated based on the relevant CAAC regulations. Chinese airlines that operate international
routes must also adopt security measures in accordance with the requirements of the relevant
international agreements. We believe that our company is in compliance with all applicable security
regulations.
Noise and Environmental Regulation.
All airlines and airports in China are required to comply
with noise and environmental regulations of the State Environmental Protection Agency that are
modeled after international standards. The CAAC regulations allow Chinese airports to refuse
take-off and landing rights to any aircraft that does not comply with state noise regulations. We
believe that our company is in compliance with all applicable noise and environmental regulations.
Chinese Airport Policy.
Prior to September 2003, all civilian airports in China were operated
directly by the CAAC or by provincial or municipal governments. In September 2003, as part of the
restructuring of the aviation industry in China, the CAAC handed over 93 civilian airports to
provincial or municipal governments. The CAAC retained the authority to determine the take-off and
landing charges, as well as charges on airlines for the use of airports and airport services. Prior
to 2004, Chinese airlines were generally required to collect from their passengers on behalf of the
CAAC a levy for contribution to the civil aviation infrastructure fund, which was used for
improving China's civilian airport facilities. Our revenue for the previous years is shown net of
this levy. In 2003, the levy was 5% of domestic airfare for domestic routes and 2% of international
airfare for international routes. The levy was waived by the CAAC from May 1, 2003 to December 31,
2003. We were officially notified by the CAAC that effective from January 1, 2004, the CAAC
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no longer charges such levy. However, we cannot be sure that the CAAC will not charge other
similar levies in the future.
Limitation on Foreign Ownership.
The CAAC's present policies limit foreign ownership in
Chinese airlines. Under these limits, non-Chinese residents and Hong Kong, Macau or Taiwan
residents cannot hold a majority of our total outstanding shares. Currently, approximately 32.2% of
our total outstanding shares are held by non-Chinese residents and Hong Kong, Macau or Taiwan
residents (excluding the qualified foreign institutional investors that are approved to invest in
the A-share market of the PRC).
Competition
Domestic.
Domestic competition from other Chinese airlines has been increasing recently as our
competitors have increased capacity and expanded operations by adding new routes or additional
flights to existing routes and acquiring other airlines. We expect that competition in the future
from other Chinese airlines on our routes will further increase as the CAAC promotes controlled
competition in order to advance the growth of the domestic airline industry as a whole. Our company
competes against our domestic competitors primarily on the basis of safety, quality of service and
frequency of scheduled flights. With the combination of our dominant position in Shanghai, our
route network and our continued commitment to safety and service quality, we believe that our
company is well-positioned to compete against our domestic competitors in the growing airline
industry in China.
There are currently approximately 14 Chinese passenger airlines operating in China, and our
company competes with many of them on various domestic routes. All of these airlines operate under
the regulatory supervision of the CAAC. In July 2005, the CAAC introduced new rules to further open
the civil aviation industry to domestic investors, including private-sector investors, which may
result in the establishment of more new Chinese airlines and create more competition. Our company,
Air China Limited, or Air China, which is based in Beijing and listed on the Hong Kong Stock
Exchange and the London Stock Exchange, and China Southern Airlines Company Limited, or China
Southern, which is based in Guangzhou and listed on the Hong Kong Stock Exchange and the New York
Stock Exchange, are the three leading air carriers in China, both in terms of revenue
tonne-kilometers and size of operations. Each of these three airlines operates at least 100 routes
and has a fleet of at least 60 jet aircraft. As of December 31, 2005, our company, Air China and
China Southern accounted for approximately 72.2% of the total commercial air traffic (as measured
in tonne-kilometers) handled by Chinese airlines.
Each of the domestic airlines competes against other airlines operating the same routes or
flying indirect routes to the same destinations. Our principal competitors in the domestic market
are China Southern and Air China, which provide transportation services on some of our routes as
well, principally routes originating from the major air transportation hubs in China, such as
Shanghai, Guangzhou and Beijing. Some of these routes are among our most heavily traveled routes.
Since most of the major domestic airlines operate routes from their respective hubs to Shanghai,
our company also competes against virtually all of the major domestic airlines on these routes. The
number of airlines operating flights to and from Shanghai has increased significantly in recent
years. We also face domestic competition from Shanghai Airlines, an airline based in Shanghai which
is smaller than our company. Competition between Shanghai Airlines and us has increased as Shanghai
Airlines expands its long-haul capacity and operates routes to more cities served by our company.
Hong Kong.
Our high yielding Hong Kong routes are highly competitive. The primary competitor
on our Hong Kong routes is Hong Kong Dragon Airlines Limited, or Dragon Air. We currently operate
approximately 670 flights per week on routes between 16 Chinese cities and Hong Kong. Dragon Air
competes with us on several of these routes. Moreover, in April 2003, Cathay Pacific Airways
Limited, or Cathay, obtained the licenses to fly to Beijing, Shanghai and Xiamen in China. Cathay
commenced its services on the routes of Hong Kong-Beijing, Hong Kong-Shanghai and Hong Kong-Xiamen
in December 2003, January 2005 and February 2005, respectively. With Cathay commencing its
operations on
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the Hong Kong
-
Shanghai route, we face more intensified competition on our Hong
Kong
-
Shanghai route. In addition to the frequency and convenience of our flights and the
number of routes offered, our company's competitive strategy for the Hong Kong routes also stresses
safety and service quality. The new Air Transportation Arrangement signed between the Chinese
central government and the administrative government of Hong Kong in February 2000 provides for
equal opportunity for airlines based in Hong Kong and mainland China. As a result, Dragon Air has
increased the frequency of its flights on several of our Hong Kong routes and intensified the
competition.
On June 8, 2006, Cathay, which owns approximately 17.79% of Dragon Air, offered to
acquire from all other shareholders of Dragon Air their ownership interests in Dragon Air with a
view to converting Dragon Air into a wholly-owned operating
subsidiary of Cathay. In connection with this proposed acquisition,
Cathay has agreed to increase its shareholding in Air China to 20%
and Air China has agreed to acquired approximately 10% equity
interest in Cathay. Cathay and Air China also entered into an
agreement to enhance cooperation between them in a number of
operational area, including operating all the passenger services of
Cathay and Air China between Hong Kong and mainland China as joint
venture routes under code-share and revenue and cost pooling
arrangements. Cathay's proposed acquisition of Dragon Air and
enhanced cooperation with Air China may further intensify the
competition on the routes between Hong Kong and mainland China and
imposed a greater competition pressure on the other airline companies
operating on these routes.
At present, our Hong Kong routes benefit from traffic between Hong Kong and mainland China
ultimately originating in Taiwan. During the Lunar Chinese New Year peak travel season in 2003,
from late-January to mid-February, the Chinese government allowed special chartered flights between
Shanghai and Taiwan for the first time. During the Lunar Chinese New Year peak travel seasons in
2005 and 2006, from late-January to mid-February, airlines from both mainland China and Taiwan
(including our company) operated 48 and 72, respectively, non-stop direct chartered flights between
selected cities of mainland China and Taiwan. Although regular direct flights between Taiwan and
mainland China are still not permitted, our results of operation on Hong Kong routes could be
materially and adversely affected if direct flights between Taiwan and mainland China are permitted
in the future. We cannot assure you that our company can obtain sufficient Taiwan-mainland China
routes or that the yields on these routes would be adequate to offset any material adverse effect
on our revenues derived from operation on our Hong Kong routes. Our company also faces competition
from Dragon Air in our Hong Kong cargo operations.
In 1995, China National Aviation Corporation, or CNAC, which is controlled by Air China,
acquired an interest in Air Macau. Air Macau started to operate routes in 1996 between Macau and
mainland China, including routes to cities in mainland China such as Beijing, Shanghai, Xiamen and
Wuhan. Air Macau also operates routes between Macau and Taiwan, including flights which allow
passengers to travel between mainland China and Taiwan through Macau without changing planes in
Macau. Air Macau's routes provide an alternative to our Hong Kong routes for passengers traveling
between Taiwan and mainland China. The airfare on some of Air Macau's routes is significantly lower
than airfare on our company's comparable routes.
International.
We compete with Air China, China Southern, United Airlines and many other
well-established foreign carriers on our international routes. Most of our international
competitors are very well known international carriers and are substantially larger and have
substantially greater financial resources than us. Many of our international competitors also have
significantly longer operating history and greater name recognition than our company. Some
international passengers, who may perceive these airlines to be safer than Chinese airlines in
general, may prefer to travel on these airlines. In addition, many of our international competitors
have more extensive sales networks and participate in reservation systems that are more convenient
than those of ours, or engage in promotional activities, such as frequent flyer programs, that may
be more popular than those of ours and effectively enhance their ability to attract international
passengers. We also face significant competition in our international cargo operations. For
instance, we compete with All Nippon Airways and Japan Airlines System in cargo operations on our
Japan routes. Moreover, China and the United States entered into an air service agreement on July
24, 2004. Pursuant to this agreement, five additional airlines from each country are allowed to
serve the China-U.S. market over the next few years. It is expected that there will be a
significant increase in China-U.S. air services over the next few years due to this agreement,
which would further intensify competition in this market.
Air China operates the largest number of international routes among all Chinese airlines.
Beijing, the hub of Air China's operations, is the destination for most international flights to
China. We compete with Air China, All Nippon Airways, Japan Airlines System and Northwest Airlines,
Inc. on our passenger routes to Japan. Our primary competition on our flights to southeast Asia
comes from Thai Airways International, Singapore Airlines and China Southern. On our passenger
flights to the United States, our principal
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competitors include Northwest Airlines, Inc., United Airlines, Air China and China Southern.
On our European routes, our competitors include Air China, the Air France-KLM Group, and Lufthansa
German Airlines. We compete with Air China and Qantas Airways Ltd. on our Australian routes. In
September 1997, Shanghai Airlines was awarded limited international route rights by the CAAC. Our
company competes in the international market on the basis of price, service quality, frequency of
scheduled flights and convenient sales arrangements. To improve our competitive position in
international markets, we have established additional dedicated overseas sales offices, launched
our own frequent flyer program, participated in the "Asia Miles" frequent flyer program which is
popular in Asia, and entered into code-sharing arrangements with a number of foreign airlines. We
have also improved our online reservation and payment system.
Maintenance and Safety
The rapid increase in air traffic volume in China in recent years has put pressure on many
components of the Chinese airline industry, including air traffic control systems, the availability
of qualified flight personnel and airport facilities. In recent years, the CAAC has placed
increasing emphasis on the safety of Chinese airline operations and has implemented a number of
measures aimed at improving the safety record of the airlines. Our company's ability to provide
safe air transportation in the future depends on the availability of qualified and experienced
pilots in China and the improvement of maintenance services, national air traffic control and
navigational systems and ground control operations at Chinese airports. Our company has a good
safety record and regards the safety of our flights as the most important component of our
operations.
Maintenance Capability.
We currently perform regular repair and maintenance checks for all of
our aircraft. We are able to perform D1 checks on our Boeing 737 aircraft and C check on MD-82,
Airbus A320, A340-300 and A300-600 aircraft. We also perform certain maintenance services for other
Chinese airlines. Our primary aircraft maintenance base is at Hong Qiao International Airport. We
have additional maintenance bases at Pudong International Airport and each of our provincial hubs.
Our maintenance staff in Shanghai supervises the operation of our regional maintenance facilities.
Our company currently employs approximately 4,480 workers as maintenance and engineering personnel.
Some of our aircraft maintenance personnel participated in the manufacturer training and support
programs sponsored by Airbus Industries G.I.E., or Airbus, and Boeing Corporation, or Boeing. In
order to enhance our maintenance capabilities and to reduce our maintenance costs, we have, over
the past few years, acquired additional maintenance equipment, tools and fixtures and other assets,
such as airborne testing and aircraft data recovery and analysis equipment. Our company's avionics
electronic equipment is primarily maintained and repaired at our electronic maintenance equipment
center located in Shanghai, which was set up in cooperation with Honeywell, Inc. and is one of the
largest and most advanced avionic electronic facilities in China.
In July 1996, we established a joint venture with Allied Signal Inc. in Shanghai for the
purpose of performing maintenance and repairs on aircraft wheel assemblies and brakes. In 1997, our
company entered into an agreement with Singapore Aviation Services Company, or SASCO, for the
provision of additional maintenance services by SASCO to our company. In October 1997, we completed
the construction of a maintenance hangar at Hong Qiao International Airport which has the capacity
to house two widebody aircraft. In September 2002, our company and Rockwell Collins International
Inc. of the United States entered into a joint venture agreement to establish Collins Aviation
Maintenance Service Shanghai Limited, a joint venture that is primarily engaged in the provision of
repair and maintenance services for avionics and aircraft entertaining facilities in China. Our
company and Rockwell Collins International Inc. hold 35% and 65% of the equity interests in the
joint venture, respectively. Moreover, in November 2002, our company, jointly with China Aircraft
Services Limited, established Shanghai Eastern Aircraft Maintenance Limited, in which our company
holds 60% of the equity interests, to provide supplemental avionics and other maintenance services
to our company. STAC, a joint venture company that was established in 2004 between our company and
Singapore Technologies Aerospace Ltd, also provides us with aircraft maintenance, repair and
overhaul services.
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The enhancement of our maintenance capabilities allows our company to perform various
maintenance operations in-house and continue to maintain lower spare parts inventory levels.
Safety.
The provision of safe and reliable air services for all of our customers is one of our
primary operational objectives. Our company implements uniform safety standards and safety-related
training programs in all operations. Our flight safety management division monitors and supervises
our company's flight safety. We have had a flight safety committee since the commencement of our
business, comprised of members of our senior management, to formulate policies and implement
routine safety checks at our Shanghai headquarters and all provincial hubs. The flight safety
committee meets monthly to review our overall operation safety record during the most recent
quarter and to adopt measures to improve flight safety based upon these reviews. We have also
implemented an employee incentive program, using a system of monetary rewards and discipline, to
encourage compliance with the CAAC safety standards and our safety procedures. We periodically
evaluate the skills, experience and safety records of our pilots in order to maintain strict
control over the quality of our pilot crews.
The management of each of our provincial hub operations is responsible for the flight safety
operations at that hub under the supervision of our flight safety management division. We prepare
monthly safety bulletins detailing recent developments in safety practices and procedures and
distribute them to each of our flight crew, the maintenance department and the flight safety
management department. The CAAC also requires our company to prepare and submit semi-annual and
annual flight safety reports.
All of our jet passenger aircraft pilots participated in the manufacturer training and support
programs sponsored by Airbus and Boeing and are required to undergo recurrent flight simulator
training and to participate in a flight theory course periodically. Our company maintains an MD-82
flight simulator at our training facility located at the Pudong district in Shanghai, which is used
for both initial and recurrent training of all of our MD-82 aircraft pilots. We also use other
flight simulators (including A300-600R flight simulator, A320 flight simulator and A340 flight
simulator) for training of our pilots for the corresponding types of aircraft. At present, we send
all other jet passenger aircraft pilots to the training center of the CAAC or abroad for flight
simulator training.
Fuel Supplies
Fuel costs represented approximately 32.1% of our operating expenses in 2005. We currently
purchase a significant portion of the aviation fuel for our domestic routes from regional branches
of the CAOSC. Fuel costs in China are affected by costs at domestic refineries and limitations in
the transportation infrastructure, as well as by insufficient storage facilities for aviation fuel
in certain regions of China. We purchase a portion of the aviation fuel for our international
routes from foreign fuel suppliers located at the destinations of these routes, generally at
international market prices.
In 2005, our fuel expenses increased 63.7% as a result of increased weighted average domestic
and international fuel prices and the expansion of our fleet. In particular, in 2005, the weighted
average domestic and international fuel prices paid by our company increased by approximately 24.5%
and 39.8%, respectively.
Ground Facilities and Services
The center of our operations is Shanghai, one of China's principal air transportation hubs.
Our Shanghai operations are based at Hong Qiao International Airport and Pudong International
Airport. We currently also operate from various other airports in China, including Yaoqiang Airport
in Jinan, Lukou Airport in Nanjing, Liuting Airport in Qingdao, Luogang Airport in Hefei, Xiangtang
Airport in Nanchang, Wushu Airport in Taiyuan, Zhengding Airport in Shijiazhuang, Lishe Airport in
Ningbo, Tianhe Airport in Wuhan, Wujiaba Airport in Kunming and Xianyang Airport in Xi'an. We own
hangars, aircraft parking and
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other airport service facilities at Hong Qiao International Airport and Pudong International
Airport and lease from CEA Holding certain buildings at Hong Qiao International Airport where our
principal executive offices are located.
We have our own ground services and other operational services, such as aircraft cleaning and
refueling and the handling of passengers and cargo for our operations at Hong Qiao International
Airport and Pudong International Airport. We also provide ground services for many other airlines
that operate to and from Hong Qiao International Airport and Pudong International Airport. At other
airports served by our company, we generally contract for ground services with these airports or
the principal airlines based at these airports for fees and other charges which are typically based
on passenger or cargo volume or aircraft tonnage.
In-flight meals and other catering services for our Shanghai-originated flights are provided
primarily by Shanghai Eastern Air Catering Limited Liability Company, a joint venture company
affiliated with CEA Holding. We generally contract with local catering companies for flights
originating from other airports. We have improved the quality of our in-flight meal service in
recent years.
We incur certain airport usage fees and other charges for services performed by the airports
where our company operates, such as air traffic control charges, take-off and landing fees,
aircraft parking fees and fees payable in connection with the use of passenger waiting rooms and
check-in counter space. At domestic airports, such fees are generally charged at rates prescribed
by the CAAC, which are lower than rates generally in effect at airports outside China.
Marketing and Sales
Passenger Operations.
Our marketing strategy with respect to passenger operations is primarily
aimed at increasing our market share for all categories of air travelers. With respect to our Hong
Kong and international routes, we are permitted to market our services on the basis of price. We
also have limited flexibility in setting our airfare for domestic routes after the implementation
of the Pricing Reform Plan in April 2004, and therefore are able to adjust our airfare in response
to the market demand on our domestic routes. As part of our overall marketing strategy, we
emphasize our commitment to safety and service quality. We believe that emphasis on safety is a
critical component of our ability to compete successfully. In order to improve our customer
services, we participated in joint cabin crew training and exchange programs with foreign airlines,
including Asiana Airlines and Japan Airlines System.
We have also adopted customized strategies to market our services to particular travelers. We
seek to establish long-term customer relationships with business entities that have significant air
travel requirements. In order to attract and retain business travelers, we focus on frequency of
flights between major business centers, convenient transit services and extensive sales network. We
launched our "Golden Swallow" frequent flyer program in 1998 and joined the "Asia Miles" frequent
flyer program in April 2001 to attract and retain travelers. In August 2003, we changed the name of
our frequent flyer program to "Eastern Miles" and introduced a series of new services, including,
among others, instant registration of membership and mileage, online registration of mileage, and
accumulation of mileage on expenses at certain hotels and restaurants that are our strategic
partners. Under our continual effort to carry out the "Eastern Miles" program, the number of
frequent flyers surpassed 5.2 million in 2005, with a flight-taking rate of 7.4%, bringing the
influence of our products into full play. The special services hotline "95108" call-centre was
established and came into operation in 2004.
In 2000, we launched the "China Eastern Airlines-Great Wall" co-branded credit card jointly
with the Bank of China, which provides to our customers benefits such as airfare discounts, hotel
room reservation packages and increased baggage allowances. In 2004, working with partner hotels,
we launched our Eastern Holiday product series to attract more leisure travelers. In addition, we
continued to promote our "China Eastern Express" services on our Shanghai–Hong Kong and
Shanghai–Beijing routes and our "China Shuttle"
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transit services. Our "China Eastern Express" services (including "BTBT" and "Shanghai Beijing
Express") provide more scheduled flights on some of our heavily traveled routes, such as
Shanghai
-
Hong Kong and Shanghai
-
Beijing, compared with our other routes. Our "China
Shuttle" services provide expedite transit services at Hong Qiao International Airport and Pudong
International Airport for transit travelers on domestic routes and certain international routes,
significantly enhancing our customer service. We streamlined the transfer and connection
procedures, rationally allocated flights, and also introduced different fares for connection
flights to meet the needs of different travelers. In 2005, we launched international routes
originating from Shenyang, Dalian, Shenzhen, Chongqing, Chengdu and Harbin under internal code
sharing arrangements. We also introduced the "Single Check-in for Transit Passengers and Lugguages"
service in 23 cities including Shantou and Xiamen. All these efforts improved our transit services
quality and, as a result, the number of passengers who used our transit services exceeded 300,000
and 850,000 persons/time in 2004 and 2005, respectively. In June 2004, we officially introduced our
China Eastern Service Scheme to the public at large. Under this scheme, we will devote efforts to
flight scheduling, assurance and maintenance and enhance our non-regular services.
We have entered into code-sharing arrangements with American Airlines, Japan Airlines System,
Korean Airlines, Asiana Airlines, Qantas Airways, Air France, Thai Airways and Air Europa. We are
also contemplating more code-sharing arrangements with other airlines and plan to continue to
strengthen our existing cooperation with other international airlines.
Our advertising, marketing and other promotional activities include the use of radio,
television and print advertisements. We plan to continue to use advertising and promotional
campaigns to increase sales on new routes and competitive routes.
In 2002, we upgraded our online ticket booking and payment system to facilitate customer
purchases of tickets via the Internet. We continue to encourage our customers to book and purchase
tickets via the Internet. We also maintain an extensive domestic network of sales agents and
representatives in order to promote in-person ticket sales and to assist customers. The majority of
our airline tickets are sold by domestic and international sales agents. Our tickets are sold
throughout China through approximately 4,000 sales agents and travel agents who have contractual
relationships with us. Currently, our direct domestic ticket sales are handled primarily through
employees based at our ticket counters located at Hong Qiao International Airport, Pudong
International Airport, in downtown Shanghai and at our provincial hubs in Anhui, Jiangsu, Zhejiang,
Jiangxi, Shandong, Shanxi, Hebei, Hubei, Yunnan and Shannxi provinces, as well as at the airports
in Beijing, Chengdu, Fuzhou, Guangzhou, Hangzhou, Ningbo, Shenzhen, Xiamen and Yantai. Direct sales
are also promoted by the availability of our telephone reservation and confirmation services. In
addition to our domestic sales agents, we maintain overseas representative offices in Chicago, Los
Angeles, Seattle, Madrid, Paris, Sydney, Tokyo, Osaka, Nagasaki, Fukuoka, Nagoya, Okayama,
Singapore, Bangkok, Seoul, Dehli and Hong Kong, which facilitate the sale of international and Hong
Kong air tickets and provide reservation confirmation and other services. The establishment of our
Hong Kong operation division in 2005 will also facilitate our marketing and sales in Hong Kong. In
order to promote international ticket sales, we intend to increase our international sales force by
expanding our overseas network of commissioned independent sales agents.
All of our direct passenger ticket sales are recorded on our computer systems. All Chinese
airlines, including us, are required to use the passenger reservation service system provided by
the CAAC's computer information management center, which is linked with the computer systems of
approximately 13 domestic airlines. We have also entered into membership agreements with several
international reservation systems, including ABACUS, the largest computer reservation system in
southeast Asia, TOPAS of Korea, SABRE, GALILEO and WORLDSPAN of the United States, AMADEUS of
Europe, and INFINI and AXESS of Japan, which have made it easier for customers and sales agents to
make reservations and purchase tickets for our international flights.
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Cargo Operations
. We maintain a network of cargo sales agents domestically and
internationally. We established domestic cargo sales offices in Dalian, Beijing, Shanghai, Xiamen
and other major transportation hubs in China, and international cargo sales offices in Hong Kong,
Los Angeles, Paris and our other overseas flight destinations. In 2005, we established our northern
China, southern China, southeastern China and overseas sales management centers to improve
coordination among our sales offices. We are also improving our cargo sales on passenger flights
through full utilization of our existing passenger sales network.
Ancillary Airline Activities
In addition to our airline operations, we also generate commission revenues from tickets sold
on behalf of other airlines. Commission rates for these sales are determined by the CAAC and are
based on the price of the tickets sold.
Moreover, we derive revenues from the provision of airport ground services for airlines
operating to or from Hong Qiao International Airport and Pudong International Airport, including
aircraft cleaning, loading, unloading, storage and ground transportation of cargo and passenger
luggage. At present we are the principal provider of these services at Hong Qiao International
Airport and Pudong International Airport. We provide these services to foreign carriers generally
pursuant to one-year renewable contracts. In 2005, we generated
revenues of approximately RMB993
million (approximately US$123 million) from our airport ground services and ticket handling
services.
Patents and Trademarks
We own or have obtained licenses to use various domestic and foreign patents, patent
applications and trademarks related to our business. While patents, patent applications and
trademarks are important to our competitive position, no single one is material to us as a whole.
We own various trademarks related to our business. The most important trademark is the service
trademark of China Eastern Airlines Corporation Limited. All of our trademarks are registered in
China.
Insurance
The CAAC purchases fleet insurance from PICC Property and Casualty Company Limited, or PICC,
and China Pacific Property Insurance Company Ltd, on behalf of all Chinese airlines. PICC has
reinsured a substantial portion of its aircraft insurance business through Lloyd's of London. The
fleet insurance is subject to certain amount of deductibles. The premium payable in connection with
these insurance is allocated among all Chinese airlines based on the aircraft owned or leased by
these airlines. Under the relevant PRC laws, the maximum civil liability of Chinese airlines for
injuries to passengers traveling on domestic flights has been increased to RMB400,000
(approximately US$49,565) per passenger in March 2006, for which our company also purchases
insurance. As of July 31, 2006, the Convention for the Unification of Certain Rules for
International Carriage by Air of 1999, or Montreal Convention, became effective in China. Under
the Montreal Convention, carriers of international flights are strictly liable for proven damages
up to 100,000 Special Drawing Rights (approximately US$149,809 as of June 5, 2006) and beyond that,
carriers are only able to exclude liability if they can prove that the damage was not due to
negligence or other wrongful act of the carrier (and its agents) or if the damage solely arose from
the negligence or other wrongful act of a third party. We believe that we maintain adequate
insurance coverage for the civil liability that can be imposed due to injuries to passengers under
Chinese law, the Montreal Convention and any agreement we are subject to. We also maintain hull all
risk, hull war risk and aircraft legal liability insurance, including third party liability
insurance, of the types and in amounts customary for Chinese airlines. See also "Item 3. Key
Information — Risk Factors — Insurance coverage and cost" for more information on our company's
insurance coverage.
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Description of Property
Fleet
In 2005, as part of our acquisition of certain assets and liabilities relating to the aviation
businesses of CEA Northwest and CEA Yunnan, we acquired or assumed the ownership of or the leases
for 60 additional aircraft, 50 of which we continued to operate as of December 31, 2005. We also
added 27 aircraft to our fleet through other transactions, including the purchase of two Airbus
A321 aircraft and three ERJ145 aircraft, the finance lease of five Airbus A320 aircraft, the
operating lease of four Airbus A320 aircraft, seven B737-700 aircraft and three B737-800 aircraft,
and the wet lease of one Airbus A300F freighter and two B747F freighters. Moreover, in 2005, we
entered into agreements to purchase five A319 aircraft (with engines), five ERJ145 aircraft, 15
A320 series aircraft, two Boeing 747-400 freight aircraft, four Boeing 737 aircraft and 15 Boeing
787 aircraft, respectively. In 2006, we also contracted to purchase 16 Boeing 737 NG series
aircraft (with engines) and 30 Airbus A320 series aircraft (with engines).
As of May 31, 2006, we had a fleet of 195 aircraft, including 177 jet passenger aircraft that
have more than 100 seats and 9 jet freighters. The following table sets forth the details of our
fleet as of May 31, 2006:
Number of
Number of
Aircraft under
Number of
Average
Total Number
Aircraft
Operating
Aircraft under
Number of
Average age
of Aircraft
Owned
Lease
Finance Lease
Seats
(in years)
(1)
Jet Passenger Aircraft:
Wide-body:
A340-600
5
3
2
—
322
2.4
A340-300
5
5
—
—
289
9.6
A330-300
2
—
—
2
300
0.3
A330-200
3
—
—
3
264
0.3
A310-200
3
—
—
3
220
20.7
A300-600
13
4
6
3
269
12.6
B767-300
3
—
—
3
263
9.6
Narrow-body:
MD-90
9
2
7
0
157
7.9
A321
4
4
—
—
185
1.2
A320-200
63
16
24
23
158
4.5
A319
12
—
2
10
122
4.1
Boeing 737-800
7
—
—
7
158
2.3
Boeing 737-700
25
8
2
15
142
3.0
Boeing 737-300
23
4
11
8
138
10.1
ERJ 145
4
4
—
—
50
0.5
CRJ-200
5
5
—
—
50
4.2
Total Passenger Aircraft:
186
55
54
77
—
—
Cargo Aircraft:
MD-11F
6
6
—
—
—
13.5
A300-B4
2
—
2
—
—
—
B747-300
1
—
1
—
—
—
Total Fleet
195
61
57
77
—
—
(1)
The average aircraft age is weighted by the number of available seats.
In 2005, our average daily aircraft utilization rate decreased by 0.3 hours to 9.4 hours
per day, primarily due to a decrease in the aircraft daily utilization rate of certain older
aircraft. The table below sets forth the daily average utilization rates of our jet passenger
aircraft for each of the three years ended December 31, 2005.
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2003
2004
2005
(in hours)
Wide-body:
A340-600
9.9
12.6
13.8
A340-300
11.9
13.8
12.8
A300-600
6.3
8.8
8.9
A310-200
—
—
7.2
B767-300
—
—
9.2
Narrow-body:
MD-90
6.9
8.5
8.0
MD-82
5.4
7.8
6.2
A321
—
6.4
8.3
A320
7.8
9.4
9.2
A319
8.4
9.5
9.5
Boeing 737-800
—
—
9.9
Boeing 737-700
9.0
9.9
9.9
Boeing 737-300
8.6
10.0
9.0
ERJ145
—
—
7.7
CRJ-200
—
—
5.1
Most of our jet passenger aircraft were manufactured by either Airbus or Boeing. Our
Airbus A340-300 and A340-600 aircraft are primarily used for our routes to the United States,
Europe, Hong Kong, Japan and other international destinations, including Bangkok, Seoul, Singapore
and Sydney, and on major domestic routes to cities such as Beijing and Guangzhou. Our Airbus A330
aircraft are primarily used for the routes of Beijing-Shanghai and Shanghai-Hong Kong and
Singapore, Japan and Korea routes . Our Airbus A320, MD-90 and Boeing B737 aircraft are suitable
for middle and short distance flights and are primarily used for our domestic routes. MD-82
aircraft are primarily used for shorter distance domestic routes on which it is not possible to
achieve high load factors with wide-body aircraft and on routes connecting to certain domestic
airports which cannot accommodate the landing of wide-body aircraft. Our ERJ145 and CRJ-200
aircraft are mainly used on our regional short-distance routes.
Our MD-11F, A300F and B747F aircraft are used for our cargo operations and carry cargo to
Japan, Europe and the United States. Our general aviation services customers include provincial
authorities in charge of agriculture, forestry and geology.
Future Fleet Development
. Our aircraft acquisition program focuses on aircraft that will
modernize and rationalize our fleet to better meet the anticipated requirements of our route
structure, taking into account aircraft size and fuel efficiency. Our aircraft acquisition program,
however, is subject to the approval of the CAAC and the National Development and Reform Commission.
The following table summarizes our currently anticipated jet aircraft deliveries from 2006 to 2007
as of December 31, 2005:
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2006
2007
Total
Aircraft
A330-300
7
5
12
A330-200
3
1
4
A321
2
4
6
A320
0
2
2
A319
3
2
5
B737NG
0
2
2
B737-700
7
0
7
ERJ145
4
3
7
B747F
1
1
2
Total
27
20
47
The actual acquisition of any of these aircraft or any additional aircraft may depend on
such factors as the general economic conditions, our operating results and other capital
requirements. We believe that our aircraft acquisition plan will help us accomplish our expansion
plans while maintaining an efficient fleet and ensuring alternative sources of supply.
Fleet Financing Arrangements.
We generally acquire aircraft through either long-term capital
leases or operating leases. To take advantage of the low interest rate for long-term loans in 2002,
we also purchased certain number of aircraft and financed it by borrowing long-term loans from
banks in China. Under the terms of most capital leases, we generally are obligated to make lease
payments that finance most of the purchase price of the aircraft over the lease term. Upon the
expiration of the lease term, we must either purchase the aircraft at a specified price or pay any
amount by which such price exceeds the proceeds from the disposition of the aircraft to third
parties. Alternatively, some capital leases provide for ownership of the aircraft to pass to us
upon satisfaction of the final lease payment. Under capital leases, aircraft are generally leased
for approximately the whole of their estimated working life, and the leases are either
non-cancelable or cancelable only on a payment of a major penalty by the lessee. As a result, we
bear substantially all of the economic risks and rewards of ownership of the aircraft held under
capital leases. Operating leases, however, are customarily cancelable by the lessee on short notice
and without major penalty. Under operating leases, substantially all the risks and rewards of
ownership of the aircraft remain with the lessor.
We intend to increase the use of operating leases to improve the flexibility of our
operations. However, each decision on our financing alternatives will depend on an evaluation of
the following factors:
•
our aircraft requirements and anticipated future deliveries;
•
capital structure and cash flow situation;
•
prevailing interest rates; and
•
other market conditions in effect at the time of any such acquisition or financing.
All of our payment obligations under current aircraft leases have been guaranteed by banks in
China.
Operating Facilities.
Our corporate headquarters, base maintenance center and other primary airport facilities in
Shanghai, occupying an area of approximately 412,422 square meters of land, are located at Hong
Qiao International Airport. We also own office buildings, cargo operating buildings and a
maintenance center at Pudong International Airport. The total gross floor area of all of our
buildings and facilities is approximately 341,000 square meters.
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We own all of the buildings and facilities located at Hong Qiao International Airport, with
the exception of the office buildings where our corporate headquarters are located. We lease from
CEA Holding our corporate headquarter office buildings and the land on which our corporate
headquarters are located. We have acquired buildings and ancillary facilities at Pudong
International Airport with a total gross floor area of approximately 158,400 square meters.
Our operations in the 11 provincial hubs in Jiangsu, Shandong, Shanxi, Hebei, Anhui, Jiangxi,
Zhejiang, Hubei, Yunnan and Shannxi are located in the airports in Nanjing, Qingdao, Jinan,
Taiyuan, Shijiazhuang, Hefei, Nanchang, Ningbo, Wuhan, Kunming and Xi'an, respectively. In Nanjing,
we lease all the buildings and facilities our company occupies from the airport authority. In
Qingdao, Hefei and Nanchang, we have the right to use such buildings and facilities constructed and
maintained by our company. However, the right to use such buildings and facilities cannot be
transferred or leased to third parties. In
Taiyuan and Shijiazhuang, we own our maintenance facilities and lease office building from CEA
Holding and other facilities from the local airport authorities. In Kunming and Xi'an, we leased
from CEA Holding operating facilities including office buildings, warehouses and workshops.
Item 4A.
Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and Prospects.
You should read the following discussion in conjunction with our audited consolidated
financial statements, together with the related notes, included elsewhere in this annual report.
Our consolidated financial statements have been prepared in accordance with IFRS. For a discussion
of certain differences between IFRS and U.S. GAAP as they relate to us, see Note 43 to our audited
consolidated financial statements included in this annual report. The condensed consolidated
financial statements, prepared in accordance with U.S. GAAP, are also presented in this annual
report. We acquired from CEA Holding certain assets and liabilities relating to the aviation
businesses of CEA Yunnan and CEA Northwest in June 2005. Our consolidated financial statements as
of and for the year ended December 31, 2005 reflect the results of operations of those acquired
assets and liabilities from the effective date of the acquisition, June 30, 2005. Under U.S. GAAP,
the acquisitions would have been accounted for as combination of entities under common control
since our company and the aviation businesses of CEA Northwest and CEA Yunnan were under the common
control of CEA Holding. Under this method, the acquired assets and liabilities would have been
accounted for at their historical cost under U.S. GAAP and the consolidated financial statements
for all years presented would have been retroactively restated as if the acquired entities had
always been part of our company. This method is reflected in the significant differences between
IFRS and U.S. GAAP provided in Note 43 to our audited consolidated financial statements included in
this annual report. Our condensed consolidated financial statements prepared and presented in
accordance with U.S. GAAP to reflect the effect of the acquisitions of CEA Northwest and CEA Yunnan
aviation businesses under common control for the relevant periods are also set forth in Note 44 to
our audited consolidated financial statements included in this annual report.
Overview
Our primary business is the provision of domestic, Hong Kong regional and international
passenger and cargo airline services. Our overall capacity on an available tonne kilometer, or ATK,
basis increase by 23.7%, from 7,071.2 million ATKs in 2004 to 8,751.5 ATKs in 2005, and our
passenger capacity on an available seat kilometer, or ASK, basis increase by 26.0%, from 41,599.1
million ASKs in 2004 to 52,427.9 million ASKs in 2005. Total traffic on a revenue tonne kilometer,
or RTK, basis increase by 24.3%, from 4,340.7 million RTKs in 2004 to 5,395.2 PTKs in 2005.
In addition to our acquisition from CEA Holding certain assets and liabilities relating to the
aviation businesses of CEA Yunnan and CEA Northwest in June 2005, we increased our equity interest
in CEA Wuhan from 40% to 96% through an acquisition of interest held by other shareholders of CEA
Wuhan early 2006. See the section headed "Item 4. Information on the Company—History and
Development of the
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Company" for more details. Those acquisitions have resulted in the expansion of
our operation and increase in our traffic revenue. For example, the operation relating to the
assets and liabilities we acquired relating to the aviation businesses of CEA Yunnan and CEA
Northwest contributed revenues of RMB4,270 million to our company in the second half of 2005 and
had a material impact on our overall results of operation for the year ended December 31, 2005. See
Note 38 to our audited consolidated financial statements for details. With the integration of
those acquired assets or entity to our existing operations, we expect to achieve improvement of our
service quality and enhancement of our overall strength and market competitiveness by rationalizing
our route network and fleet, centralizing our procurement of aircraft and aircraft components,
integrating our maintenance resources as well as streamlining our sales channels.
As required under IFRS, we applied the acquisition accounting method to account for the
acquisitions of certain assets and liabilities relating to the aviation businesses of CEA Yunnan
and CEA Northwest. Under U.S. GAAP, such transactions are considered
"combinations of entities under common control"
since our company and the aviation businesses of CEA Northwest and CEA Yunnan were under the common
control of CEA Holding. Such transactions are accounted for in a manner similar to
"pooling-of-interests", retroactively restating all years presented on a combined basis as if the
acquisitions had been in effect since inception, whereby related assets and liabilities of the
aviation businesses would be accounted for at historical cost and the related results of operations
would be included in the consolidated financial statements for the earliest year presented.
The historical results of operations discussed in this annual report may not be indicative of
our future operating performance. Like those of other airlines, our operations substantially depend
on overall passenger and cargo traffic volume and are subject to seasonal and other variations that
may influence passenger travel demand and cargo volume and may not be under our control, including
unusual political events and other unforeseen events. Our operations will be affected by, among
other things, fluctuation of the aviation fuel price, aircraft acquisition and leasing costs,
maintenance expenses, take-off and landing charges, wages, salaries and benefits, other operating
expenses and the rates of income taxes paid. We expect the aviation fuel price to continue to
remain high and have a material adverse effect on our profitability. We expect depreciation
expenses and operating lease expenses to increase as new aircraft and related flight equipment are
acquired. Maintenance expenses may also increase as a result of acquisitions of new aircraft,
although we expect to benefit from certain maintenance and fuel cost savings as older aircraft are
retired and replaced.
Our financial performance is also significantly affected by factors associated with operating
in a highly regulated industry, as well as a number of other external variables, including
political and economic conditions in China, competition, foreign exchange fluctuations and public
perceptions of the safety of air travel with Chinese airlines. Because nearly every aspect of our
airline operations is subject to the regulation of the CAAC, our operating revenues and expenses
are directly affected by the CAAC regulations with respect to, among other things, domestic
airfare, level of commissions paid to sales agents, aviation fuel price, take-off and landing
charges and route allocations. The nature and extent of airline competition and the ability of
Chinese airlines to expand are also significantly affected by various CAAC regulations and
policies. Changes in the CAAC's regulatory policies, or in the implementation of such policies, are
therefore likely to have a significant impact on our future operations.
Certain Financial Information by Geographic Region
The following table sets forth passenger revenues, passenger traffic and passenger yield by
geographic region for the years ended December 31, 2003, 2004 and 2005.
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Year Ended December 31,
2003
2004
2005
Passenger Revenues (millions of RMB)
(1)
Domestic
5,592
8,284
11,439
Hong Kong
1,667
2,240
2,495
International
Japan
1,002
1,502
2,009
U.S. and Europe
804
1,264
1,412
Other
1,310
2,244
3,498
Total Passenger Revenues
10,375
15,534
20,853
Passenger Traffic (millions of passenger-kilometers)
Domestic
10,302
14,500
20,278
Hong Kong
1,934
3,038
3,284
International
5,767
10,043
12,819
Total Passenger Traffic
18,003
27,581
36,381
Passenger Yield (RMB per passenger-kilometer)
Domestic
0.54
0.57
0.56
Hong Kong
0.84
0.74
0.76
International
0.53
0.50
0.54
Total Passenger Yield
0.57
0.56
0.57
(1)
Certain revenues for the years ended December 31, 2003 and 2004 have been restated due to
reclassification.
Operating Results
Certain incomes and expenses for the years ended December 31, 2003 and 2004 have been
reclassified under IFRS. Such reclassifications have no effect on the profit (loss) attributable to
equity holders; Certain expenses have been adjusted for the years ended December 31, 2003 and 2004 as
a result of the retrospective application of changes to our accounting policy relating to the costs
of overhaul of owned and finance leased aircraft and engines. Such adjustments resulted in a 15.5%
increase in the loss attributable to equity holders for the year ended December 31, 2003 and a 37.5%
decrease in the profit attributable to equity holders for the year ended December 31, 2004. See Note
2(a) to our consolidated financial statements included in this annual report.
2005 Compared to 2004
Revenues
.
Our revenues increased 28.4% from RMB21,387 million in 2004 to RMB27,454 million in
2005 (net of the applicable PRC business tax). This increase was primarily due to an increase in
our capacity resulting from our acquisition of the assets and liabilities relating to the aviation
businesses of CEA Northwest and CEA Yunnan and our acquisitions of other aircraft.
Traffic revenues increased 29.3% from RMB19,962 million in 2004 to RMB25,820 million in 2005,
primarily due to a 34.2% increase in our passenger revenues. Compared to 2004, the average aircraft
daily utilization rate decreased by 0.3 hours to 9.4 hours in 2005 partially due to a decrease in
the aircraft daily utilization rate of certain older aircraft.
Passenger revenues, which accounted for 80.8% of our total traffic revenues in 2005, increased
34.2% from RMB15,534 million in 2004 to RMB20,853 million in 2005 primarily due to the expansion of
our operations.
Our domestic passenger revenues (excluding Hong Kong passenger revenues), which accounted for
54.8% of our total passenger revenues in 2005, increased 38.1% from RMB8,284 million in 2004 to
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RMB11,439 million in 2005. This increase was primarily due to an increase of our domestic passenger
traffic following increases in our capacity and in our domestic passenger load factor. Compared to
2004, our domestic passenger traffic increased (as measured in revenue passenger-kilometers, or
RPKs) by 39.9% in 2005. As a result of the completion of our acquisition of certain assets and
liabilities relating to the aviation businesses of CEA Northwest and CEA Yunnan in the second half
of 2005 and our acquisition of other aircraft in 2005, the capacity of our domestic routes
increased by 33.1% in 2005. Our domestic passenger load factor increased from 70.3% in 2004 to
73.8% in 2005 primarily due to an increase in market demands. Our domestic passenger yield
decreased from RMB0.57 in 2004 to RMB0.56 in 2005 per passenger-kilometer primarily as a result of
the escalating pricing competition in the domestic traffic market.
Hong Kong passenger revenues, which accounted for 12.0% of our total passenger revenues in
2005, increased 11.4% from RMB2,240 million in 2004 to RMB2,495 million in 2005. This increase was
primarily due to an increase in our Hong Kong passenger traffic resulting from an increase of our
capacity. We increased the passenger capacity on our Hong Kong routes by 8.9% in 2005. An increase
in the passenger yield on Hong Kong routes also contributed to the increase of our Hong Kong
passenger revenues. Hong Kong passenger traffic (as measured in RPKs) increased by 8.1% in 2005,
compared to 2004. Our Hong Kong passenger yield increased from RMB0.74 in 2004 to RMB0.76 in 2005
per passenger-kilometer, reflecting increases in air fares. Our Hong Kong passenger load factor
decreased from 62.6% in 2004 to 62.1% in 2005 primarily due to intensified competition.
International passenger revenues, which accounted for 33.2% of our total passenger revenues in
2005, increased 38.1% from RMB5,010 million in 2004 to RMB6,920 million in 2005. This increase was
primarily due to an increase in our international passenger traffic resulting from increases in our
capacity and in our international passenger load factor. An increase of our international passenger
yield also contributed to the increase of our international passenger revenues. Our International
passenger traffic (as measured in RPKs) increased by 27.6% in 2005, compared to 2004. Our
international passenger capacity increased by 22.1% in 2005, compared to 2004. Our international
passenger load factor increased from 62.4% in 2004 to 65.2% in 2005. Our international passenger
yield increased from RMB0.50 in 2004 to RMB0.54 in 2005 per passenger-kilometer, reflecting
increases in air fares.
We generate cargo and mail revenues from the transportation of cargo and mail on our
designated cargo aircraft as well as from the carriage of cargo and mail on our passenger aircraft.
Revenues from cargo and mail operations, which accounted for 19.2% of our total traffic revenues in
2005, increased 12.2% from RMB4,428 million in 2004 to RMB4,967 million in 2005 primarily due to an
increase in our cargo and mail traffic following an increase in our capacity. Our cargo and mail
traffic (as measured in revenue freight tonne-kilometers, or RFTKs) increased 14.8% from 1,875
million RFTKs in 2004 to 2,152 million RFTKs in 2005. Our cargo and mail capacity (as measure in
available freight tonne-kilometers, or AFTKs) increased 21.2% from 3,327 million AFTKs in 2004 to
4,033 million AFTKs in 2005. Cargo yield decreased from RMB2.36 in 2004 to RMB2.31 in 2005 per
cargo tonne-kilometer primarily due to fare decreases resulting from intensified market
competition.
Our other revenues are primarily generated from airport ground services and ticket handling
services. Airport ground services include loading and unloading of aircraft, aircraft cleaning and
ground transportation of cargo and passenger luggage for airlines flying to or from Hong Qiao
International Airport and Pudong International Airport. We are currently the principal provider of
airport ground services at both Hong Qiao International Airport and Pudong International Airport.
Our other revenues increased 14.7% from RMB1,424 million in 2004 to RMB1,634 million in 2005
primarily due to the increased revenue from our airport ground services and other services from
RMB692 million and RMB95 million, respectively, in 2004 to RMB795 million, and RMB189 million,
respectively, in 2005.
Operating Expenses
.
Our total operating expenses increased 36.8% from RMB20,239 million in
2004 to RMB27,685 million in 2005 primarily due to our business expansion and a significant
increase in
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aviation fuel expenses resulting from increased fuel prices. Our total operating expenses as a
percentage of our revenues increased from 94.6% in 2004 to 100.8% in 2005.
Aviation fuel expenses increased 63.7% from RMB5,430 million in 2004 to RMB8,889 million in
2005. This increase was primarily a result of rising fuel prices and our business expansion in
2005. In 2005, we consumed a total of 1,893,700 tonnes of aviation fuel, representing an increase
of 30.2% compared to 2004. Compared to 2004, the weighted average domestic and international fuel
prices paid by our company in 2005 increased by approximately 24.5% and 39.8%, respectively.
Aviation fuel expense accounted for 32.1% of our total operating expenses in 2005, as compared to
26.8% in 2004.
Aircraft depreciation and operating lease rentals increased 17.6% from RMB4,467 million in
2004 to RMB5,255 million in 2005 primarily due to an expansion of our fleet size, while partially
offset by the termination of certain operating leases between CEA Northwest and us. The number of
the aircraft operated by us increased from 103 as of December 31, 2004 to 180 as of December 31,
2005.
Other depreciation, amortization and operating lease rentals increased 37.1% from RMB496
million in 2004 to RMB680 million in 2005 primarily due to our acquisition of certain assets and
liabilities relating to the aviation businesses of CEA Northwest and CEA Yunnan.
Wages, salaries and benefits increased 26.4% from RMB1,866 million in 2004 to RMB2,359 million
in 2005 primarily due to a significant increase in the number of our employees following our
acquisition of certain assets and liabilities relating to aviation businesses of CEA Northwest and
CEA Yunnan. The total number of our employees increased by 40.8% from 20,817 as of December 31,
2004 to 29,301 as of December 31, 2005.
Take-off and landing charges, which accounted for 13.4% of our total operating expenses in
2005, increased 23.1% from RMB3,020 million in 2004 to RMB3,719 million in 2005 primarily due to an
increase in the number of our flights, while partially offset by a decrease in the average take-off
and landing charges resulting from increased deployment of smaller aircraft. The number of our
flights increased from approximately 169 thousand in 2004 to approximately 211 thousand in 2005.
Aircraft maintenance expenses increased 60.9% from RMB860 million in 2004 to RMB1,384 million
in 2005 primarily due to an expansion of our fleet size in 2005.
Commission expenses increased 25.6% from RMB772 million in 2004 to RMB970 million in 2005
primarily due to an increase in tickets sales by agents.
Food and beverage expenses increased 28.9% from RMB758 million in 2004 to RMB977 million in
2005. This increase was primarily due to a 37.2% increase in the number of passengers carried from
approximately 17.71 million in 2004 to approximately 24.29 million in 2005.
Office, administrative and other expenses increased 30.1% from RMB1,858 million in 2004 to
RMB2,430 million in 2005 primarily due to our acquisition of certain assets and liabilities
relating to the aviation businesses of CEA Northwest and CEA Yunnan. Particularly, office expenses
and other expenses increased from RMB472 million and RMB428 million, respectively, in 2004 to
RMB673 million and RMB610 million, respectively, in 2005
Ticket reservation fees increased 39.0% from RMB210 million in 2004 to RMB292 million in 2005
primarily due to an increase in the number of passengers we carried.
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Civil aviation infrastructure levies payable to the CAAC increased 85.6% from RMB251 million
in 2004 to RMB466 million in 2005 primarily due to the expansion of our routes network and an
increase in our flights.
Insurance costs slightly decreased 2.5% from RMB152 million in 2004 to RMB149 million in 2005.
Ground services and other charges increased 16.3% from RMB99 million in 2004 to RMB116 million
in 2005 primarily due to an increase in our flights.
Other Operating Income
.
Our other operating income was primarily generated from government
subsidies and fair value gains on financial instruments held by us. The net amount of our other
operating income increased from RMB85 million in 2004 to RMB245 million in 2005 primarily due to an
increase in government subsidies from RMB74 million in 2004 to RMB193 million in 2005, see Note 6
to our audited consolidated financial statements.
Finance Costs
.
Our finance costs decreased 8.2% from RMB770 million in 2004 to RMB707 million
primarily due to the recognition of a net exchange gain of RMB415 million in 2005, while partially
offset by an increase in interest expenses of RMB251 million. In 2004, we received a waiver of
amount due to CEA Northwest in a value of RMB133 million under certain aircraft operating leases
between CEA Northwest and us.
Net Loss
.
As a result of the foregoing operating results, net loss attributable to
equity holders was RMB467 million in 2005, as compared to a net profit of RMB321 million in 2004.
Fixed Assets
.
Our company had approximately RMB38,348 million of fixed assets as of December
31, 2005, including aircraft, engines and flight equipment with a value of approximately RMB34,740
million. Fixed assets are initially recognized at cost and are subsequently stated at revalued
amount, being its fair value at the date of revaluation less any subsequent accumulated
depreciation.
Valuation of fixed assets is affected by market conditions and global economic factors that
are not within our control. The determination of fair value requires significant judgment,
including judgment on valuations by our management and/or by independent professional appraisers.
Our directors have reviewed the carrying value of our fixed assets as of December 31, 2005 and are
of the opinion that the carrying amount is not materially different from the fair value of such
fixed assets.
2004 Compared to 2003
Revenues.
Our revenues increased 47.8 % from RMB14,470 million in 2003 to RMB21,387 million
in 2004. This increase was primarily due to an increase of our passenger and cargo revenues, which
were net of the applicable PRC business tax.
Traffic revenues increased 47.2% from RMB13,562 million in 2003 to RMB19,962 million in 2004.
Compared to 2003, the average aircraft daily utilization increased by 1.7 hours to 9.7 hours in
2004.
Passenger revenues, which accounted for 77.8% of our total traffic revenues in 2004, increased
49.7% from RMB10,375 million in 2003 to RMB15,534 million in 2004. This increase was primarily due
to the market recovery following the end of severe acute respiratory syndrome (SARS) and the
increase of our transportation capacity.
Our domestic passenger revenues, which accounted for 53.3% of our total passenger revenues,
increased 48.1% from RMB5,592 million in 2003 to RMB8,284 million in 2004. This increase was
principally a result of the growing market demand following the end of SARS and the expansion of
our
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transportation capacity, including the launch of new routes and increase in the number of
flights. Compared to 2003, our domestic passenger traffic increased by 40.8% in 2004, and our
domestic passenger load factor increased from 64.8% in 2003 to 70.3% in 2004. As a result of the
favorable condition in the domestic passenger market since the end of 2003, we increased capacity
on our domestic routes by 29.7% in 2004. Our domestic passenger yield increased from RMB0.54 in
2003 to RMB0.57 in 2004 per passenger-kilometer. This increase was principally a result of the
increased pricing level due to strong demand in the domestic transportation.
Hong Kong passenger revenues, which accounted for 14.4% of our total passenger revenues,
increased 34.4% from RMB1,667 million in 2003 to RMB2,240 million in 2004. This increase was
primarily due to the market recovery following the end of SARS and the increase in the number of
business and leisure travelers. Hong Kong passenger traffic increased by 57.1% in 2004 over that
of 2003. In order to meet market demand, we increased the passenger capacity on our Hong Kong
routes by 31.6% in 2004. Our Hong Kong passenger load factor increased from 52.4% in 2003 to 62.6%
in 2004, and our Hong Kong passenger yield decreased from RMB0.84 in 2003 to RMB0.74 in 2004 per
passenger-kilometer. The decrease in passenger yield on Hong Kong routes was primarily due to (1)
an increase in the number of leisure travelers, (2) various promotions offered by us and (3)
competition from other airlines.
International passenger revenues, which accounted for 32.3% of our total passenger revenues,
increased 60.8% from RMB3,116 million in 2003 to RMB5,010 million in 2004. This increase was
mainly due to the market recovery following the end of SARS and the increasing demand as a result
of the recovering global economy in 2004. As a result, international passenger traffic increased by
74.1% in 2004 compared to 2003. Our international passenger capacity increased by 58.2% in 2004
compared to 2003. Our international passenger load factor increased from 56.7% in 2003 to 62.4% in
2004. Our international passenger yield decreased from RMB0.53 in 2003 to RMB0.50 in 2004 per
passenger-kilometer. This decrease was primarily due to the increase in the number of leisure
travelers and competition.
We generate cargo and mail revenues from the transportation of cargo and mail on our
designated cargo aircraft as well as from the carriage of cargo and mail on passenger aircraft.
Revenues from cargo and mail operations, which accounted for 22.2% of our total transportation
revenues in 2004, increased 39.0% from RMB3,187 million in 2003 to RMB4,428 million in 2004. This
increase was primarily due to the increasing demand for cargo transportation driven by the
continuing rapid growth of China's economy following its accession to the World Trade Organization,
the increase of our transportation capacity as well as the increase of our market share. Our cargo
and mail traffic (as measured in revenue freight tonne-kilometers, or RFTKs) increased 44.6% from
1,297 million RFTKs in 2003 to 1,875 million RFTKs in 2004. This increase was primarily due to a
significant increase in the capacity of our cargo transportation which resulted from the completion
of the remodeling of MD-11 passenger aircraft into freighters, launch of new routes as well as an
increase in the number of passenger flights which also carry cargo. Cargo yield decreased from
RMB2.46 in 2003 to RMB2.36 in 2004 per cargo tonne-kilometer. This decrease was primarily due to
intensified competition.
Other revenues are primarily generated from airport ground services and ticket handling
services. Airport ground services include loading and unloading, aircraft cleaning, fueling and
ground transportation of cargo and passenger luggage for airlines operating to or from Hong Qiao
International Airport and Pudong International Airport. We were the principal provider of airport
ground services at both Hong Qiao International Airport and Pudong International Airport. Other
revenues increased 56.8% from RMB908 million in 2003 to RMB1,424 million in 2004, which is higher
than the 39.0% growth rate achieved in 2003. This increase was mainly due to the increase in the
number of flights following the end of SARS and the enhancement of our capability in carriage,
storage and handling of cargo with the establishment of Shanghai Eastern Logistics Co., Ltd.
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Operating Expenses.
Our total operating expenses increased 40.0% from RMB14,454 million in
2003 to RMB20,239 million in 2004. This increase was primarily due to increases in aviation fuel
expenses, aircraft depreciation and operating lease expenses, take-off and landing charges, food
and beverage expenses, salary costs, commission expenses and other expenses. Our total operating
expenses as a percentage of our revenues decreased from 99.9% in 2003 to 94.6% in 2004.
Aviation fuel expenses increased 78.3% from RMB3,045 million in 2003 to RMB5,430 million in
2004. This increase was principally a result of our business expansion in 2004 and the increased
international aviation fuel prices in 2004. In 2004, we consumed a total of 1,454,500 tonnes of
aviation fuel, representing an increase of 42.1% compared to 2003. In 2004, the weighted average
domestic and international fuel prices paid by our company compared to 2003 increased by
approximately 24.4% and 30.6%, respectively.
Aircraft depreciation and operating lease expenses increased 26.7% from RMB3,525 million in
2003 to RMB4,467 million in 2004. This increase was primarily due to our fleet expansion.
Other depreciation, amortization and operating lease expenses slightly increased from RMB495
million in 2003 to RMB496 million in 2004.
The wages, salaries and benefits increased 28.8% from RMB1,449 million in 2003 to RMB1,866
million in 2004. This increase was primarily due to a 26.7% increase in the number of staff
resulting from the expansion of our company and our main operations as well as an increase in
staff's average salaries with the introduction of an incentive compensation plan that is linked to
profit and various factors. The increase was also partially attributable to the introduction of an
incentive plan for our pilots that links allowances to flying hours.
Take-off and landing charges increased 34.0% from RMB2,254 million in 2003 to RMB3,020 million
in 2004, which accounted for 14.9% of our total operating expenses in 2004. This increase was
primarily due to the expansion of our business and the increased number of flights.
Aircraft maintenance expenses were RMB860 million in 2004, compared to RMB817 million in 2003,
an increase of 5.3%. This increase was mainly due to the increased aircraft maintenance performed
as a result of the increase in the number of our flights in 2004.
Commission expenses increased 66.0% from RMB465 million in 2003 to RMB772 million in 2004.
This increase was primarily due to the increase in the revenues of our domestic and international
businesses.
Food and beverage expenses increased 39.9% from RMB542 million in 2003 to RMB758 million in
2004. This increase was primarily due to a 47.1 % increase in the number of passengers which was
partially offset by a 5% decrease of the average cost of food and beverage as a result of our
cost-control initiatives.
Office, administrative and other expenses increased 26% from RMB1,473 million in 2003 to
RMB1,858 million in 2004 primarily due to a 122.6% increase in office expenses from RMB212 million
in 2003 to RMB472 million in 2004 and a 48.8% increase in pilot and aircrew training expenses from
RMB98 million in 2003 to RMB146 million in 2004, while partially offset by a 28.5% decrease in
other expenses from RMB550 million in 2003 to RMB428 million in 2004.
Ticket reservation fees increased 30.3% from RMB161 million in 2003 to RMB210 million in 2004
primarily due to a 47.1% increase in the number of passengers we carried.
Civil aviation infrastructure levies payable to the CAAC were RMB251 million in 2004, compared
to nil in 2003.
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Insurance costs slightly decreased 7.6
%
from RMB164 million in 2003 to RMB152 million in 2004.
Ground services and other charges increased 53.6% from RMB65 million in 2003 to RMB99 million
in 2004 primarily due to an increase in our flights.
Other Operating Income.
Other operating income was primarily generated from government
subsidies and fair value gains on financial instruments held by us. The net amount of our other
operating income increased from RMB50 million in 2003 to RMB85 million in 2004 primarily due to a
net fair value gain of RMB11 million on currency swaps in 2004, compared to a net fair value loss
of RMB8 million in 2003, and an increase in government subsidies from RMB58 million in 2003 to
RMB74 million in 2004.
Non-operating Income.
Non-operating income was RMB133 million in 2004, which was due to the
rescission of certain related party lease arrangements between CEA Northwest and us.
Net
Profits.
As a result of the foregoing, net profit
attributable to equity holders was RMB321
million in 2004 compared to a loss of RMB1, 097 million in 2003.
Fixed Assets.
Our company had approximately RMB29,744 million of fixed assets as of December
31, 2004, including aircraft and flight equipment with a value of approximately RMB26,692 million.
Fixed assets are initially recognized at cost and are subsequently stated at revalued amount, being
its fair value at the date of revaluation less any subsequent accumulated depreciation.
Valuation of fixed assets is based on market conditions and global economic factors that we
may not control. The determination of fair value requires significant judgment, including judgment
on valuations by our management and/or by independent professional appraisers. Our directors have
reviewed the carrying value of our fixed assets as of December 31, 2004 and are of the opinion that
the carrying amount is not materially different from the fair value of our fixed assets.
Impact of Differences between IFRS and U.S. GAAP
In addition to the above management discussion and analysis of our results of the operation
under the IFRS between the years ended December 31, 2004 and 2003 and between the years ended
December 31, 2005 and 2004, in connection with the preparation and reconciliation of
our consolidated financial statements in accordance with U.S. GAAP, we believe the following major
material accounting difference between the IFRS and U.S. GAAP would have a significant impact on
our management discussion and analysis of the results of our operation between the years ended
December 31, 2004 and 2003 and between the years ended
December 31, 2005 and 2004, under U.S. GAAP. See also Note 43 to the consolidated financial statements for a more detailed
summary of all significant accounting differences between the IFRS and U.S. GAAP that are relevant
to us.
Under IFRS, the acquisitions of certain assets and liabilities relating to the aviation
businesses of CEA Yunnan and CEA Northwest in June 2005 have
been accounted for by applying the
acquisition accounting method. Accordingly, the results of the acquired operations were
incorporated into our operating results only from July 1, 2005. In contrast, under U.S. GAAP, such
transactions are considered to be "combination of entities under common control". A combination of
entities under common control is accounted for in a manner similar to a "pooling-of-interests".
Consequently, the acquired assets and liabilities would be reflected at their U.S. GAAP carrying
values and the U.S. GAAP consolidated financial statements would be restated to include the
acquired assets and liabilities, and their results of operations and cash flows for all years
presented.
Other than the above, there are no major material differences between the IFRS and U.S. GAAP
that would have a significant impact on the discussion and analysis of our results of operations
between the years
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ended December 31, 2004 and 2003 and between the years ended December 31, 2005 and 2004.
Taking into account the operating results of the acquired businesses, our revenue under U.S. GAAP
increased from RMB19,554 million in 2003 to RMB28,208 million in 2004, representing an increase of
44.3%, and from RMB28,208 million in 2004 to RMB30,895 million in 2005, representing an increase
of 9.5%. Our profit (loss) attributable to equity holders under
U.S. GAAP increased from RMB1,391
million in loss in 2003 to RMB459 million in profit in 2004, and
decreased from RMB459 million in
profit in 2004 to RMB1,383 million in loss in 2005.
Liquidity and Capital Resources
We typically finance our working capital requirements through a combination of funds generated
from operations and short-term bank loans. As a result, our liquidity could be materially and
adversely affected to the extent there is a significant decrease in demand for our services or if
there is any delay in obtaining bank loans. As of December 31, 2004 and 2005, we had cash and cash
equivalents of RMB2,114 million and RMB1,864 million, respectively. In 2004 and 2005, our net cash
inflows generated from operating activities were RMB3,266 million and RMB1,952 million,
respectively, while our net cash outflows used in investment activities were RMB2,433 million and
RMB10,369 million, respectively. In the past two years, our primary cash requirements for
investment activities were related to our acquisitions and upgrades of aircraft and flight
equipment, debt repayments and our acquisitions of certain assets and liabilities relating to the
aviation businesses of CEA Northwest and CEA Yunnan.
In 2004 and 2005, payment of advances on aircraft and flight equipment were RMB2,679 million
and RMB9,073 million, respectively, while additions of aircraft and flight equipment were RMB1,997
million and RMB7,751 million, respectively. We financed the additions to our aircraft and flight
equipment primarily through lease arrangements, bank loans and funds generated from operations.
Funds generated from disposal of old aircraft and flight equipment and other fixed assets and
equipment (including by way of exchange) totaled RMB668 million and RMB33 million in 2004 and 2005,
respectively. Our net cash inflow generated from financing activities was RMB8,186 million in 2005,
primarily from proceeds from bank loans and the issue of short-term debentures.
Pursuant to certain of our finance or operating leases, we are required to indemnify the
lessors against any withholding or similar taxes that may be imposed on the lessors by taxing
authorities in China with regard to payments made under such leases. Pursuant to a regulation
issued in 2000 by the State Tax Bureau of China, lease payments made by Chinese airlines to foreign
enterprises in respect of lease arrangements entered into prior to September 1, 1999 are exempt
from the payment of any withholding tax. Withholding tax payable in respect of the lease
arrangements entered into on or after September 1, 1999 are charged to our income statement as
incurred.
We generally operate with a working capital deficit. As of December 31, 2005, our current
liabilities exceeded our current assets by RMB25,598 million. In comparison, our current
liabilities exceeded our current assets by RMB12,491 million as of December 31, 2004. The increase
in our current liabilities in 2005 was primarily due to an increase in borrowings for payment of
advances on aircraft and flight equipment. Short-term loans outstanding totaled RMB6,189 million
and RMB13,711 million as of December 31, 2004 and 2005, respectively. Long-term bank loans
outstanding totaled RMB10,736 million and RMB12,659 million as of December 31, 2004 and 2005,
respectively. Long-term loans payable within two years, from three to five years and beyond five
years were RMB2,663 million, RMB5,518 million and RMB1,609 million, respectively, as of December
31, 2005, as compared to RMB2,387 million, RMB3,216 million and RMB1,940 million, respectively, as
of December 31, 2004. The total lease obligations outstanding under our finance leases as of
December 31, 2004 and 2005 were RMB8,662 million and RMB10,608 million, respectively. Our lease
obligations payable within two years, from three to five years and beyond five years were RMB2,570
million, RMB3,014 million and RMB2,596 million, respectively, as of December 31, 2005,
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as compared to RMB1,700 million, RMB3,756 million and RMB2,017 million, respectively, as of
December 31, 2004.
We have, and in the future may continue to have, substantial debts. As of December 31, 2004
and 2005, our long-term debt to equity ratio was 2.6 and 3.4, respectively. The interest expenses
associated with these debts might impair our future profitability. We expect that cash from
operations and bank borrowings will be sufficient to meet our operating cash flow requirements,
although events that materially and adversely affect our operating results can also have a negative
impact on liquidity. We have entered into credit facility agreements with certain Chinese banks to
meet our future working capital needs. We have arranged, and we believe that we will continue to be
able to arrange, short-term bank loans with domestic and foreign-funded banks in China as necessary
to meet our working capital requirements. However, our ability to obtain financing may be affected
by our financial position and leverage and credit ratings, as well as by prevailing economic
conditions and the cost of financing generally. If we are unable to obtain financing for a
significant portion of our capital requirements, our ability to acquire new aircraft and to expand
our operations may be materially and adversely affected.
Capital Expenditures
Our aircraft orders as of December 31, 2005 included commitments to acquire 47 aircraft
to be delivered in 2006 and 2007. We expect our capital expenditures for aircraft and related
equipment, including deposits, through 2010 to be in aggregate approximately RMB57,332 million,
including RMB19,080 million in 2006 and RMB12,704 million in 2007, in each case subject to
contractually stipulated increases or any increase relating to inflation. We generally finance our
purchase of aircraft through operating leases and bank loans secured by our assets. As of December
31, 2005, the total value of our mortgaged assets increased by 1.1%, from RMB9,737 million as of
December 31, 2004 to RMB9,844 million as of December 31, 2005. Construction of our facilities at
the Pudong International Airport and the purchase of maintenance equipment and other property and
equipment will continue to require additional capital expenditures in 2006. We paid an amount of
RMB418 million as the consideration for the increase of our equity interest in CEA Wuhan to 96%
early 2006. We plan to finance our other capital commitments through a combination of funds
generated from operations, existing credit facilities, bank loans, leasing arrangements and other
external financing arrangements.
Contractual Obligations and Commercial Commitments
The following tables set forth our outstanding contractual and commercial commitments as of
December 31, 2005.
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Payments Due by Period
Contractual
(RMB millions)
Obligations
Total
Less Than 1 Year
1-3 Years
4-5 Years
After 5 Years
Long-Term Debt
12,659
2,869
3,874
4,307
1,609
Capital Leases
12,176
2,885
4,756
1,601
2,934
Operating Leases
9,452
1,702
3,102
2,629
2,019
Unconditional Purchase Obligations
47,746
9,494
26,227
12,025
—
Other Long-term Obligations
82
30
52
—
—
Pension Liabilities
—
—
—
—
—
Post-retirement Benefit Obligations
1,239
36
86
85
1,032
Deferred Tax Liabilities
601
—
30
21
550
Long-term
Portions of Other Payables
(1)
155
—
—
—
—
Short-term Bank Loans
13,711
13,711
—
—
—
Interest Obligations
3,538
1,303
1,190
558
487
Under Finance Lease
1,568
457
505
268
338
Under Bank Loans
1,970
846
685
290
149
Fixed Rate
828
442
298
69
19
Variable
Rate
(2)
1,142
404
387
221
130
Total
101,359
32,030
39,317
21,226
8,631
(1)
Figures of payments due by period are not available.
(2)
For our variable rate loans, interest rates range from 3 months LIBOR + 0.25% to 6 months
LIBOR + 0.6%. Interest obligations relating to variable rate loans are calculated based on the
relevant LIBOR rates as of December 31, 2005. A 1% increase or decrease in the interest rate
would increase or decrease the interest obligations by RMB278 million in total with RMB97
million in year 1, RMB95 million in years 2 and 3, RMB55 million in years 4 and 5 and RMB31
million for subsequent years.
Total Amounts
Amount of Commitment Expiration Per Period
Other Commercial
Committed
(RMB millions)
Commitments
(RMB millions)
Less Than 1 Year
1-3 Years
4-5 Years
After 5 Years
Line of Credit
65,500
25,500
40,000
—
—
Standby Letters of
Credit
—
—
—
—
—
Guarantees
—
—
—
—
—
Standby Repurchase
Obligations
—
—
—
—
—
Other Commercial
Commitments
—
—
—
—
—
Total
65,500
25,500
40,000
—
—
Critical Accounting Policies
Critical accounting policies are defined as those that are reflective of significant judgments
and uncertainties and potentially result in materially different results under different
assumptions and conditions.
Our audited consolidated financial statements have been prepared in accordance with IFRS. Our
principal accounting policies are set forth in Note 2 to our audited consolidated financial
statements. IFRS requires that we adopt the accounting policies and make estimates that our
directors believe are most appropriate in the circumstances for the purposes of giving a true and
fair view of our results and financial
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condition. However, different policies, estimates and assumptions in critical areas could lead
to materially different results. The critical accounting policies adopted and estimates made in the
preparation of these financial statements are identified as follows:
Estimated
impairment of goodwill — We test annually whether goodwill has been impaired in
accordance with the accounting policy stated in Note 2(l) to our audited consolidated financial
statements. The recoverable amounts of cash generating units have been determined based on
value-in-use calculations. These calculations require the use of estimates (see Note 18 to our
audited consolidated financial statements). In 2005, after reviewing the business environment as
well as our objectives and past performance, management concluded that there was no material
impairment loss for goodwill.
Estimated
impairment of property, plant and equipment —We have made substantial investments in
tangible long-lived assets. We conduct impairment reviews of these assets whenever events or
changes in circumstances indicate that their carrying amounts may not be recoverable.
Determining whether an asset is impaired requires significant judgment, including our
estimates of the future cash flows attributable to the asset and the appropriate discount rate. If
different judgments or estimates had been utilized, material differences could have resulted in the
amount and timing of the impairment charge, if any.
Property,
plant and equipment — We had approximately RMB38,348 million of fixed assets as of
December 31, 2005, including aircraft, engines and flight equipment with a value of approximately
RMB34,740 million. As discussed in Note 2(j) to our audited consolidated financial statements,
property, plant and equipment are initially recognized at cost and are subsequently stated at
revalued amount less accumulated depreciation. Under U.S. GAAP, our fixed assets are initially
recognized at cost less accumulated depreciation and impairment charges, if any. Independent
valuations are conducted at least every five years or sooner if considered necessary by our
directors. In the intervening years, our directors would review the carrying value of the fixed
assets from time to time and make adjustments if the carrying value is materially different from
the fair value. Their recorded value is impacted by management judgment, including valuations
performed by the management and/or independent professional valuers, estimates of useful lives,
residual value and impairment charges. If different judgments or estimates had been utilized,
material differences could have resulted in the amount of revaluation and related depreciation
charges. We revalued our fixed assets on December 31, 2002 based on a market value basis. Our
directors reviewed the carrying value of our company's fixed assets as of December 31, 2005 and are
of the opinion that the carrying amount of the fixed assets is not materially different from the
estimated fair value and no impairment or changes in estimates of useful lives are necessary.
Fair
value estimation — The carrying amounts of our current financial assets, including cash
and cash equivalents, trade receivables, prepayments, other receivables, amounts due from related
companies and current financial liabilities including trade payables and note payables, other
payables and accrued expenses and amounts due to related companies, approximate their fair values
due to their short maturities.
Revenue
recognition — As discussed in Note 2(d), passenger, cargo and mail revenues are
recognised as traffic revenues when the transportation services are provided. The value of unused
passenger tickets is included in current liabilities as sales in advance of carriage. Unused
tickets are recognised in traffic revenues based on current estimates. Management periodically
evaluate the balance in sales in advance of carriage and record any adjustments, which can be
material, in the period the evaluation is completed. These adjustments result from differences
between the estimates of certain revenue transactions, the timing of recognising revenue for any
unused air tickets and the related sales price, and are impacted by various factors, including a
complex pricing structure and interline agreements throughout the industry, which affect the timing
of revenue recognition.
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Maintenance
and overhaul costs — In respect of aircraft and engines under operating leases, we
have the responsibility to fulfill certain return conditions under relevant leases. In order to
fulfill these return conditions, major overhauls are required to be conducted on a regular basis.
Accordingly, the present value of estimated costs of major overhauls for aircraft and engines under
operating leases are provided at each balance sheet date. The provision in each period is estimated
using historical major overhaul costs incurred during each overhaul and the estimated period
between overhauls using the ratios of actual flying hours/cycles and estimated flying hours/cycles
between overhauls. The costs of major overhauls comprise mainly labor and materials. Differences
between the estimated cost and the actual cost of the overhaul are included in the income statement
in the period of overhaul.
In respect of aircraft and engines owned by our company or held under finance leases, costs of
overhaul are capitalized as a component of property, plant and equipment and are depreciated over
the appropriate maintenance cycles. When each overhaul is performed, its cost is recognized in the
carrying amount of the item of property, plant and equipment and is depreciated over the estimated
period between overhauls, on a straight-line basis. Upon completion of an overhaul, any remaining
carrying amount of the cost of the previous overhaul is derecognized and charged to the income
statement.
Retirement
benefits — We participate in defined contribution retirement schemes organized by
the municipal governments of respective provinces. We also operate and maintain defined retirement
benefit plans which provides retirees with benefits including transportation subsidies, social
activity subsidies as well as other welfare. As discussed in Note 2(f) to our audited consolidated
financial statements, the cost of providing the aforementioned benefits in the defined retirement
benefit plan is actuarially determined and recognized over the employees' service period by
utilizing various actuarial assumptions and using the projected unit credit method. These
assumptions include, without limitation, the selection of discount rate, annual rate of increase of
per capita benefit payment and employees' turnover rate. The discount rate is based on management's
review of local high quality corporate bonds. The annual rate of increase of benefit payment is
based on the general local economic conditions. The employees' turnover rate is based on historical
trends of our company. See Note 33 to our audited consolidated financial statements for additional
information regarding the retirement benefit plans.
Deferred taxation — While deferred tax liabilities are provided in full on all taxable
temporary differences, deferred tax assets are recognized only to the extent that it is probable
that future taxable profit will be available against which the temporary differences can be
utilized. In assessing the amount of deferred tax assets that need to be recognized, we consider
future taxable income and ongoing prudent and feasible tax planning strategies. In the event that
our estimates of projected future taxable income and benefits from available tax strategies are
changed, or changes in current tax regulations are enacted that would impact the timing or extent
of our ability to utilize the tax benefits of net operating loss carryforwards in the future,
adjustments to the recorded amount of net deferred tax assets and taxation expense would be made.
Current tax — We make provision for current tax based on the estimated income tax
liabilities. The estimated income tax liabilities are primarily computed based on the tax filings
as prepared by our company and based on management's interpretation of relevant tax rulings. From
time to time, there may be disagreements with the tax authorities on the tax treatments of certain
items included in the tax computations.
Foreign Currency Transactions
We have debts denominated in U.S. dollars, Japanese yen or Euro in addition to our debts
denominated in Renminbi. We generate a significant amount of foreign currency revenues, including
U.S. dollar, Japanese yen, Euro, Korean won, Hong Kong dollar, Singapore dollar, Australian dollar,
and Thailand baht revenues, from ticket sales made in overseas offices. Pursuant to current foreign
exchange regulations in China, we may retain our foreign currency earnings subject to the approval
of SAFE. We have also designated certain personnel to manage the foreign currency risks through
derivative financial products such as forward
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foreign exchange contracts and interest rate swaps. We use interest rate swaps to reduce risks
related to changes in market interest rates. As of December 31, 2005, the notional amount of the
outstanding interest rate swap agreements was approximately US$661 million, compared to US$437
million as of December 31, 2004. These interest rate swap agreements will expire between 2006 and
2016. In addition, we use currency forward contracts to reduce risks related to changes in currency
exchange rates in respect of ticket sales and expenses denominated in foreign currencies. As of
December 31, 2005, the notional amount of the outstanding currency forward contracts was
approximately US$92 million, compared to US$226 million as of December 31, 2004. This decrease in
the notional amount of the outstanding currency forward contracts was primarily due to the
cancellation or early termination of certain currency forward contracts in 2005. These currency
forward contracts will expire between 2007 and 2010.
Pursuant to IFRS, our monetary assets and liabilities denominated in foreign currencies are
required to be translated into Renminbi at the year end at exchange rates announced by the People's
Bank of China. The net exchange gains or losses are recognized and reflected in the income
statement for the relevant year. Any fluctuation of the exchange rates between Renminbi and foreign
currencies may materially and adversely affect our financial condition and results of operations.
Primarily due to an appreciation of Renminbi against certain foreign currencies (including U.S.
dollar, Japanese yen and Euro) following the measures introduced by the PRC government in July 2005
to reform the Renminbi exchange rate regime, we recognized a net exchange gain of RMB415 million in
2005, compared to a net exchange loss of RMB32 million in 2004.
Taxation
Since we changed our registered address to Pudong district in Shanghai on July 1, 2001, we are
subject to income tax at the rate of 15%. Our effective tax rate, however, may be higher than the
rate of 15% because some of our subsidiaries were incorporated in jurisdictions where the
applicable income tax rate is 33% rather than 15%. We had carried forward tax losses of
approximately RMB2,330 million and RMB3,011 million as of December 31, 2004 and 2005, which can be
used to set off against future taxable income and will expire between 2006 and 2010.
Inflation
In recent years, China has not experienced significant inflation. In 2005, inflation did not
have a significant effect on our business. According to the National Bureau of Statistics of China,
China's overall national inflation rate, as represented by the general consumer price index, was
approximately 3.9% and 1.8% in 2004 and 2005, respectively. Although neither the inflation nor the
deflation in the past had any material adverse impact on our results of operations, we cannot
assure you that the deflation or inflation of the Chinese economy in the future would not
materially and adversely affect our financial condition and results of operations.
U.S. GAAP Reconciliation
Our audited consolidated financial statements are prepared in accordance with IFRS, which
differs in certain material respects from U.S. GAAP. Note 43 to our audited consolidated financial
statements provides a description of the principal differences between IFRS and U.S. GAAP as they
relate to our company, and a reconciliation to U.S. GAAP of profit attributable to equity holders for
the years ended December 31, 2003, 2004 and 2005 and owners' equity as of December 31, 2004 and 2005. Our condensed consolidated
financial statements prepared and presented in accordance with U.S. GAAP to reflect the effect of
the acquisitions of the aviation businesses of CEA Northwest and CEA Yunnan under common control
for the relevant periods are set forth in Note 44 to our audited consolidated financial statements
included in this annual report.
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New Pronouncements
IFRS
Standards, interpretations and amendments to published standards that are not yet effective
Certain new standards, amendments and interpretations to existing standards, which are
relevant to our operations, have been published that are mandatory for our accounting periods
beginning on or after January 1, 2006 or later periods, but which we have not early adopted, as
follows:
– IAS 19 (Amendment) introduces the option of an alternative recognition approach for
actuarial gains and losses. It may impose additional recognition requirements for multi-employer
plans where insufficient information is available to apply defined benefit accounting. It also adds
new disclosure requirements. As we do not intend to change the accounting policy adopted for
recognition of actuarial gains and losses and does not participate in any multi-employer plans,
adoption of this amendment will only impact the format and extent of disclosures presented in the
financial statements. We will apply this amendment from 1 January 2006.
– IAS 39 (Amendment) changes the definition of financial instruments classified at fair value
through profit or loss and restricts the ability to designate financial instruments as part of this
category. We believe that this amendment should not have a significant impact on the classification
of financial instruments, as we should be able to comply with the amended criteria for the
designation of financial instruments at fair value through profit and loss. We will apply this
amendment from January 1, 2006.
U.S. GAAP
FAS
123
In
December 2004, the FASB revised Statement No. 123, or FAS 123R. FAS
123R, "Share-Based Payment", requires all share-based
payments to employees, including grants of employee stock options, to
be recognized in the financial statements based on their fair values.
Pro forma disclosure is no longer an alternative to financial
statement recognition. FAS 123R is effective for fiscal periods
beginning after June 15, 2005. Our company is evaluating the
transition provisions allowed by FAS 123R. Our company does not
expect the adoption of FAS 123R to have a material impact on our
company's financial position or operational results.
FAS
151
On
November 24, 2004, the FASB issued Statement No. 151, "Inventory
Costs", an amendment of ARB No. 43, Chapter 4, or FAS 151. FAS
151 requires that abnormal amounts of idle capacity and spoilage
costs be excluded from the cost of inventory and expensed when
incurred. The provisions of FAS 151 are applicable to inventory costs
incurred during fiscal years beginning after June 15, 2005. Our
company does not expect the adoption of FAS 151 to have a material
impact on our company's financial position or result of
operation.
FAS
153
On
December 15, 2004, the FASB issued Statement No. 153, "Exchanges
of Nonmonetary Assets", an amendment of APB Option No. 29, FAS
153. FAS 153 requires exchanges of productive assets to be accounted
for at fair value, rather than at carryover basis, unless (1) neither
the asset received nor the asset surrendered has a fair value that is
determinable within reasonable limits or (2) the transactions lack
commercial substance. FAS 153 is effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005.
Our company does not expect the adoption of FAS 153 to have a
material impact on our company's financial position or results
of operation.
SAB 107
On March 29, 2005, the Securities
and Exchange Commission issued Staff Accounting Bulletin No. 107,
"Share-Based Payment", or SAB 107. This bulletin provides
guidance related to share-based payment transactions with non-employees, the transition from nonpublic to public entity status,
valuation methods (including assumptions such as expected volatility and expected term), the accounting for certain redeemable
financial instruments issued under share-based payment arrangements, the classification of compensation expense, non-GAAP
financial measures, first-time adoption of FAS 123 R in an interim period, capitalization of compensation cost related to
share-based payment arrangements, the accounting for income tax effects of share-based payment arrangements upon adoption
of FAS 123 R, the modification of employee share options prior to
adoption of FAS 123 R and disclosures in Management's Discussion and
Analysis subsequent to adoption of FAS 123 R. SAB 107 will be effective when a registrant adopts FAS 123 R. Our company does
not expect the adoption of SAB 107 to have a material impact on our
company's financial position or operation results.
FAS 154
In
May 2005, FASB issued Statement No. 154,
"Accounting Changes and Error Corrections", or FAS 154,
which replaces APB Opinions No. 20 "Accounting Changes",
and FASB Statement No. 3, "Reporting Accounting changes in
Interim Financial Statements", and changes the requirements
for the accounting for and reporting of a change in accounting principle. This Statement establishes, unless impracticable,
retrospective application as the required method for reporting a change in accounting principle in the absence of
explicit transition requirements specific to the newly adopted accounting principle. The reporting of a correction of an
error by restating previously issued financial statements is also addressed by this Statement. FAS. 154 is effective
for accounting changes and corrections of
errors made in fiscal years beginning after December 15, 2005.
Our company does not expect the adoption of FAS 154 to have a
material impact on our's financial position or operational
results.
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Item 6. Directors, Senior Management and Employees.
A. Directors and Senior Management
The following table sets forth certain information concerning our directors, executive
officers and supervisors as of June 30, 2006. None of our directors, supervisors or members of our
senior management was selected or chosen as a result of our arrangement or understanding with
customers, suppliers or others. There is no family relationship between any director, supervisor or
executive officer and any other director, supervisor or executive officer of our company.
Name
Age
Shares Owned
Position
Li Fenghua
56
5,000 A shares
Chairman of the Board of Directors
Luo Chaogeng
(1)
56
5,000 A shares
Director and President
Cao Jianxiong
47
5,800 A shares
Director
Wan Mingwu
59
5,000 A shares
Director and Vice President
Zhong Xiong
60
2,800 A shares
Director
Luo Zhuping
53
5,800 A shares
Director and Company Secretary
Hu Honggao
52
0
Independent Non-executive Director
Peter Lok
69
0
Independent Non-executive Director
Wu Baiwang
63
0
Independent Non-executive Director
Zhou Ruijin
67
0
Independent Non-executive Director
Xie Rong
54
0
Independent Non-executive Director
Li Wenxin
57
6,000 A shares
Chairman of the Supervisory Committee
Ba Shengji
47
5,800 A shares
Supervisor
Yang Xingen
53
3,800 A shares
Supervisor
Yang Jie
36
3,000 A shares
Supervisor
Liu Jiashun
49
3,000 A shares
Supervisor
Wu Jiuhong
54
3,000 A shares
Vice President
Zhou Liguo
57
3,000 A shares
Vice President
Zhang Jianzhong
51
5,000 A shares
Vice President
Tong Guozhao
47
5,000 A shares
Vice President
Li Yangmin
(2)
43
3,000 A shares
Vice President
Luo Weide
50
3,000 A shares
Chief Financial Officer
(1)
Mr. Luo served as a director of our company as of June 30, 2005.
(2)
Mr. Li served as a vice president of our company as of October 28, 2005.
Directors and Executive Officers
Mr. Li Fenghua is the incumbent chairman of our board of director, president and deputy party
secretary of CEA Holding. Mr. Li joined the civil aviation industry in 1968 and was deputy head,
and subsequently became head, of the 26th Fleet of the CAAC from 1987 to 1992. From 1992 to 1996,
Mr. Li served as vice-president, and then became president, of the Hubei branch of China Southern
Airlines (Group).
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Since 1996, he became vice-president of China Southern Airlines Company Limited and
vice-president of China Southern Airlines (Group). In 2000, Mr. Li became party secretary and
vice-president of China Southern Airlines Company Limited. From October 2002 to September 2004, he
served as the President of our company and vice-president of CEA Holding. In September 2004, he
became president and deputy party secretary of CEA Holding. Mr. Li graduated from the China Civil
Aviation Senior Aviation School and holds the title of First Class Pilot.
Mr. Luo Chaogeng is currently a director, as well as president and deputy party secretary of
our company. Mr. Luo joined the civil aviation industry in 1970. Mr. Luo was a flight mechanic of
the instructing team of the Lanzhou Civil Aviation Administration Bureau from August 1970 to August
1972. From August 1972 to March 1989, he was the flight mechanic of the 8th Civil Aviation Flight
Team. From March 1989 to August 1994, he was the deputy commissar, commissar and party secretary of
the Xian Flight Team of China Northwest Airlines. From August 1994 to October 1997, he was the
party secretary of the aircraft maintenance plant of China Northwest Airlines. From October 1997 to
March 1997, he was the party secretary and deputy general manager of the aircraft maintenance base
of China Northwest Airlines. From March 1997 to December 2000, he was the deputy director of the
Civil Aviation Administration Bureau of China Northwest Airlines. From December 2000 to November
2001, Mr. Luo was the general manager of Yunnan Airlines and the director and deputy party
secretary of Civil Aviation Administration Bureau of Yunan. From November 2001 to September 2001,
he was the general manager and deputy party secretary of Yunnan Airlines. From September 2002 to
September 2004, he has also been serving concurrently as the general manager of Yunan Airlines.
From September 2004 to the present, he has been the party constitution member and vice president of
China Airlines Group Company, President and deputy party secretary of China Airlines Corporation
Limited. From 1998 to June 2001, Mr. Luo has been studying the postgraduate course for incumbent
leading cadres in professional economics and management at the Central Party School of Shaanxi. Mr.
Luo has obtained first class competency in flight mechanics.
Mr. Cao Jianxiong is currently a non-executive director of our company. Mr. Cao joined the
civil aviation industry in 1982. From 1992, he served as president of Shanghai Eastern Airlines
Development Company and in 1994 he became president of Eastern Airlines Futures Brokerage Company.
In early 1996 he served as assistant president of our company. From 1997, he served as vice
president and chief financial officer of our company. Since December 1999, he has served as vice
president of EA Group. Since October 2002, he served as vice president of CEA Holding, and he also
was the party secretary of China Eastern Air Northwest Company from December 2002 to September
2004. Mr. Cao graduated from the Civil Aviation Management Institute with a major in labour
economics. Mr. Cao also received a Master's degree in global economics from Eastern China Normal
University's Department of International Finance. Mr. Cao holds the title of Economist.
Mr. Wan Mingwu is currently an executive director as well as our company's party secretary and
vice president. Mr. Wan joined the civil aviation industry in 1968. From 1983 to 1990 he was
deputy section chief and section chief of the cadre section of the political department of the CAAC
Shenyang Bureau. From 1990 to 1992 he was section chief of the personnel section of China Northern
Airlines. From 1992 to 1995 he was deputy party secretary of China Northern Airlines and from 1995
to 2000 he was party secretary of China Northern Airlines. Since December 2000 he has been party
secretary and vice president of our company. Mr. Wan graduated from Civil Aviation Mechanics
Vocational School. Mr. Wan is a college graduate and holds the title of Senior Political Work
Instructor.
Mr. Zhong Xiong is currently a non-executive director of our company. Mr. Zhong joined the
civil aviation industry in 1970. From 1986 to 1988, he was vice president of Transportation
Services Company of the CAAC Shanghai Bureau and was president of the sales and transportation
department of China Eastern Airlines from 1988 to 1992. From 1992 to April 1995, he was vice
president of our company. From May 1995 to April 2002, Mr. Zhong has been vice president of our
company, and has become the Chairman of the
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workers' union of CEA Holding since April 2002. He graduated in 1970 from the English
Department of Liaoning Teacher's College and holds the title of Economist.
Mr. Luo Zhuping is an executive director of our company, the secretary of our board of
director and the head of the secretariat of our board of director. Mr. Luo joined CEA in 1988. He
was deputy chief and then chief of the enterprise management department of China Eastern Airlines
from 1992 to 1997. He was deputy head of the share system office from 1993 to 1996. In 1997, he
became the secretary of our board of director and the head of the secretariat of our board of
director. He became a director of our company in June 2004. Mr. Luo graduated from the Faculty of
Philosophy and the Faculty of Law of Anhui University in 1979 and 1985, respectively. In 1994, Mr.
Luo received a Master's degree from the Economics Department of Eastern China Normal University,
majoring in global economics. In 1998, he participated in the training programme for senior
managers of large state-owned enterprises organised in the U.S.A. by the State Economic and Trade
Commission and Morgan Stanley.
Mr. Hu Honggao is currently an independent non-executive director of our company. He is the
vice-dean and professor of law at Fu Dan University School of Law as well as the head of the Civil
and Commercial Law Research Centre of Fu Dan University, supervising doctoral students majoring in
civil and commercial law at Fu Dan University. He is also a senior lawyer at the Shanghai Shen
Yang Law Office. Mr. Hu is a managing director of China Commercial Law Research Society, a
managing director of China Economic Law Research Society, a member of the Legislative Consultation
Committee of the Shanghai Municipal Government, a member of the Legislative Profession Consultation
Committee of the Shanghai Standing Committee of the People's Congress, vice-chairman of the
Shanghai Economic Law Research Society and an arbitrator of the Shanghai Arbitration Committee.
Mr. Peter Lok is currently an independent non-executive director of our company. Mr. Lok went
to the College of Air Traffic Control in England for further studies after joining the Hong Kong
Civil Aviation Department in December 1956. He studied air transport, air accident investigation
and administration and management of civil aviation in England from 1968 to 1973. In 1982, he
became assistant director of the Hong Kong Civil Aviation Department. From 1985, during his time
in office at the air services division of the Hong Kong Civil Aviation Department, he participated
in negotiations with various countries regarding air traffic rights. He became deputy director in
1988, and subsequently became director in 1990 of the Hong Kong Civil Aviation Department. Mr. Lok
retired in 1996 and has served as a consultant at the Flights Standards Department of the CAAC.
Mr. Lok is the first Chinese director of the Hong Kong Civil Aviation Department and was at one
time an instructor of the College of Air Traffic Control of Hong Kong.
Mr. Wu Baiwang is currently an independent non-executive director of our company. Mr. Wu
joined the civil aviation industry in 1959 and was deputy fleet leader and subsequently became
fleet leader of the 12th Fleet of the CAAC from 1976 to 1984. From 1984 to 1992, Mr. Wu was deputy
head and subsequently became head of the CAAC Jilin Bureau. From 1992 to 1995, Mr. Wu was head and
party secretary of the CAAC Northeastern Bureau. From September 1995 to 1998, he became president
of China General Aviation Corporation. He was the party secretary and vice-president of Guangzhou
Baiyun International Airport Group Company and the Chairman of the board of directors of Guangzhou
Baiyun International Airport Company Limited from 1998 to September 2003. Mr. Wu graduated from
Chinese Civil Aviation School in 1965 and holds the title of First Class Pilot.
Mr. Zhou Ruijin is currently an independent non-executive director of our company. Mr. Zhou
was deputy editor-in-chief and the East China regional director of the People's Daily. From 1988
to 1993 Mr. Zhou was party secretary and deputy editor-in-chief of the Liberation Daily. From
April 1993 to 1996 he was deputy editor-in-chief of the People's Daily and from 1996 to 2000 he was
deputy editor-in-chief and the East China regional director of the People's Daily. After retired,
he became vice-chairman of the China Productivity Council and Chairman of the Shanghai Productivity
Council. Mr. Zhou graduated from the journalism department of Fudan University in 1962.
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Mr. Xie Rong is currently an independent director of our company and a certified accountant in
the People's Republic of China. Mr. Xie is the deputy head of Shanghai National Accounting
Institute. He taught at the faculty of accounting of Shanghai University of Finance and Economics
from December, 1985 to March, 1997, and had been an assistant professor, a professor, a
doctorate-tutor and the deputy dean of the faculty. Mr. Xie was a partner of KPMG Huazhen from
December, 1997 to October, 2002, and has, since October, 2002, been the deputy head of Shanghai
National Accounting Institute. Mr. Xie graduated from Shanghai University of Finance and Economics
and has a doctorate degree in Economics.
Mr. Wu Jiuhong is a vice president of our company. Mr. Wu joined the civil aviation industry
in 1971. From 1968 to 1971 he served with the 60th division under the 20th army. From 1971 to
1973 he studied aviation machinery at the Civil Aviation College. From 1973 to 1981 he was with
the 18th Fleet of the CAAC's 2nd General Fleet. From 1985 to 1988 he served as Communist Youth
League secretary and deputy head of the political department of the CAAC's Jiangxi Bureau. From
1988 to 1995 he concurrently served as deputy party secretary and disciplinary committee secretary
of the Cabin Service Department of China Eastern Airlines. From 1995 to 1997 he served as head of
our company's publicity department. From 1997 to 2002, he served as party secretary and executive
vice president of the Company's Jiangxi branch. He became a vice president of our company in April
2002. He also became the party secretary of CEA Northwest since September 2004. Mr. Wu has
completed postgraduate studies and is a qualified senior political work instructor.
Mr. Zhou Liguo is currently a vice president of our company. He joined the civil aviation
industry in 1981, and attended the Air Force Changchun First Reserve Flight School from 1966 to
1967 and the Harbin First Navigation School from 1967 to 1969. Mr. Zhou performed his military
service with the 34th Division of the Air Force from 1969 to 1981, and served as squadron leader in
the 5th Fleet of the Civil Aviation from 1984 to 1988. Mr. Zhou was deputy fleet leader of China
Eastern Airlines' Shanghai Fleet from 1988 to 1992, and leader of the said fleet from 1992 to 1997.
From 1997 to 2000, he served as general manager and deputy party secretary of our company's
General Flight Department. In 2000 he became assistant president of our company, and from 2000 to
2003 he served as president and deputy party secretary of China Cargo Airlines Co., Ltd. Mr. Zhou
was our company's chief economic official from December 2003 to April 2004. He became a vice
president of our company since April 2004. Mr. Zhou received university education and holds the
title of First Class Pilot.
Mr. Zhang Jianzhong is a vice president of our company. Mr. Zhang joined the civil aviation
industry in 1982. From April 1982 to December 1987, he was an assistant of the Shanghai Civil
Aviation Planning Bureau. From December 1987 to April 1990, he was the deputy director of the
planning department of Shanghai Hongqiao International Airport. From April 1990 to January 1996, he
was the director of the planning department of China Eastern Airlines. From January 1996 to April
1999, he was the manager of the sales and marketing department of our company. From April 1999 to
April 2003, he was the Assistant to the President of our company. From September 2000 to December
2001, he served concurrently as the director of the office of strategic study of our company. From
December 2001 to May 2003, he served concurrently as the general manager of the computer
information centre of our company. From April 2003 to June 2004, he was the chief economic official
of our company. From May 2003 to June 2004, he served concurrently as the general manager of the
sales and marketing department of our company. Since June 2004, he has been a vice president of
our company. Mr. Zhang graduated from the Faculty of Mechanical Engineering of Zhejiang University
and Professional Study in Economics and Management at Fudan University, from which he obtained a
master's degree.
Mr. Tong Guozhao is a vice president of our company. Mr. Tong joined the civil aviation
industry in 1980. From January 1980 to May 1992, Mr. Tong had been the deputy pilot, chief pilot
and captain respectively of the flight team of Urumqi Civil Aviation Bureau. From May 1992 to April
1997, he had been the captain, sub-team leader, deputy squadron leader and squadron leader of the
Shanghai Flight Team of China Eastern Airlines. From April 1997 to May 1998, he was a vice
president of the Shanghai Flight Team of
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our company. From May 1998 to March 2001, he was the president of the Safety Monitoring
Department of our company. From March 2001 to January 2004, he was the president of the Anhui
branch company of our company. From January 2004 to September 2004, he was the president of the
China Cargo Airlines Co., Ltd. and deputy party secretary. From September 2004 to April 2005, he
was the president of our company cum president of the Operation Control Centre. Since April 2005,
he has been a vice president of our company. Mr. Tong graduated from the Civil Aviation School and
Anhui School of Business and Administration. He received a master degree in business
administration and holds the title of Second Class Pilot.
Mr. Li Yangmin is a vice president of our company. Mr. Li joined the civil aviation industry
in 1985. From July 1985 to October 1996, he was the deputy head of the aircraft maintenance
workshop, head of technology office and secretary of the workshop branch of Northwest Company.
From October 1996 to June 2002, he was the deputy general manager of the aircraft maintenance base
and the manager of air route department of Northwest Company. From June 2002 to March 2004, he was
the general manager of the aircraft maintenance base of CEA Northwest. From March 2004 to October
2005, he was the vice president and a member of the standing committee to the party committee of
CEA Northwest. Since October 2005, he has been deputy general manager of our company. Mr. Li
graduated from China Civil Aviation Academy. He is a qualified senior engineer.
Mr. Luo Weide is our company's chief financial officer. In 1976 Mr. Luo began his military
service at the Air Force in Liuan Airport. From 1979 to 1991 he successively served as department
head and deputy head of the Putuo branch of the Shanghai Municipal Tax Bureau. From 1991 to 1993
he concurrently served as head of the finance bureau and the state asset bureau of Putuo District,
Shanghai. From 1993 to 1998 he successively served as deputy chief accountant, chief accountant
and executive deputy president of Shanghai Jinqiao (Group) Co., Ltd. From 1998 to 2000, he was
vice president of Shanghai Pudong Development (Group) Co., Ltd. and chairman of the board and
president of Pudong Finance Company. Since 2000 he has been chief financial officer of our
company. Mr. Luo graduated from the Sino-European International Business School in 1999 with a
Master's degree in business administration. He holds the titles of Senior Accountant and Senior
Economist.
Supervisory Committee
As required by the PRC Company Law and our articles of association, our company has a
supervisory committee, or the Supervisory Committee, whose primary duty is the supervision of our
senior management, including our board of directors, managers and senior officers. The Supervisory
Committee consists of five supervisors.
Mr. Li Wenxin is currently Chairman of our company's supervisory committee. Mr. Li joined the
civil aviation industry in 1970. From 1992 to 1995 he was secretary of the disciplinary committee
of China General Aviation Company. From 1995 to 1996 he was deputy party secretary of China
General Aviation Corporation. From 1996 to 1998 he was deputy president of China General Aviation
Corporation and from February 1998 to June 2000, he assumed the post of party secretary and
executive deputy president of the Shanxi branch of our company. From June 2000 to September 2002,
he served as deputy party secretary and secretary of the disciplinary committee of CEA Holding.
Since October 2002, he served as party secretary and vice president of CEA Holding. He has been
the Chairman of the supervisory committee of our company since June 2000. Mr. Li received
university education and is a qualified Senior Political Work Instructor.
Mr. Ba Shengji is currently a supervisor. Mr. Ba joined the civil aviation industry in 1978.
From 1980, Mr. Ba was an accountant at the Department of Finance of the CAAC Shanghai Bureau. From
1988, he served as the section head of the Department of Finance of China Eastern Airlines. In
1993, Mr. Ba became the deputy head of the Department of Finance of China Eastern Airlines. In
March 1997, Mr. Ba became the chief officer of the auditing office of our company. From December
1997 to September 2002, he served as the head of EA Group's auditing department. Since October
2002, he became the head of CEA Holding's
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auditing department. Since January 2003, he concurrently served as chief of CEA Holding's
disciplinary committee's administrative office. Mr. Ba received university education and is a
qualified auditor.
Mr. Yang Xingen is currently a supervisor. Mr. Yang was the deputy political committee member
of the 1st flying battalion and political committee member of the 2nd battalion of 105th Regiment,
35th Division from July 1980 to July 1986. From July 1986 to October 1997, he was the party branch
secretary and manager of China Eastern Airlines Advertisement Service Company respectively. From
October 1997 to April 2000, he was the party deputy secretary, secretary for the disciplinary
committee and political director of the Shanghai flying squadron of our company. From April 2000
to August 2002, he was the deputy secretary for the disciplinary committee cum director of the
office for discipline committee and director of the supervision office. From August 2002 to now,
he has been the deputy secretary for the disciplinary committee of our company. Mr. Yang has been
educated to the tertiary level. He was graduated from the faculty of mechanics of the Second
Aviation Mechanics School of the air force.
Ms. Yang Jie is currently a supervisor. Ms. Yang joined the civil aviation industry in 1992.
From 1996 to 1998 she was electronic technology supervisor of the technology office and Communist
Youth League secretary of the overhaul department at the aircraft maintenance base of our company.
From 1998 to September 2000 she was Communist Youth League deputy secretary of the aircraft
maintenance base of our company. She was the deputy secretary of our company's Communist Youth
League from September 2000 to July 2002, and the secretary of our company's Communist Youth League
from August 2002 to January 2003. Since January 2003, she has been the secretary of the Communist
Youth League of CEA Holding, as well as the secretary of the Communist Youth League of our company.
Ms. Yang graduated with a major in aviation electronics from the China Civil Aviation Academy and
a major in Business Administration from Sunny Management Academy at Donghua University and she
received a master degree in Business Administration. She is also a qualified engineer.
Mr. Liu Jiashun is currently a supervisor. From 1993 to 1999 Mr. Liu was party secretary,
deputy president and secretary of the disciplinary committee secretary of China Aviation Fuel
Hainan Company, as well as chairman of the board and president of Hainan Nanyang Air Transport Co.,
Ltd. From 1997 to 1999 he was also in charge of fuel supply engineering at Haikou's Meilan Airport
and served as director of Meilan Airport Co., Ltd. and vice chairman of the board and president of
Meilan Industrial Co., Ltd. From 1999 to 2000 he was deputy party secretary of China Aviation Fuel
East China Company and he is currently deputy party secretary and secretary of the disciplinary
committee of the East China branch of China Aviation Fuel Company. Mr. Liu is a former graduate
student and has qualifications as a political work instructor.
B. Compensation
The aggregate amount of cash compensation paid by us to our directors, supervisors and the
senior management during 2005 for services performed as directors, supervisors and officers or
employees of our company was approximately RMB2,244,000. In addition, directors and supervisors who
are also officers or employees of our company receive certain other in-kind benefits which are
provided to all of our employees. Our company does not have any bonus or profit sharing plan or any
stock option plan.
C. Board Practices
All directors and supervisors serve a term of three years or until such later date as their
successors are elected or appointed. The directors and supervisors may serve consecutive terms. Two
of the supervisors are employee representatives appointed by our employees, and the rest are
appointed by the shareholders. The following table sets forth the number of years our directors,
executive officers and supervisors have held their position and the expiration of their current
term.
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Name
Held Position Since
Expiration of Term
Li Fenghua
June 20, 2003
June 18, 2007
Luo Chaogeng
June 30, 2005
June 18, 2007
Wan Mingwu
June 30, 2001
June 18, 2007
Cao Jianxiong
June 30, 2001
June 18, 2007
Zhong Xiong
June 30, 2001
June 18, 2007
Luo Zhuping
June 18, 2004
June 18, 2007
Hu Honggao
June 30, 2001
June 18, 2007
Peter Lok
June 30, 2001
June 18, 2007
Wu Baiwang
June 30, 2001
June 18, 2007
Zhou Ruijin
June 30, 2001
June 18, 2007
Xie Rong
June 20, 2003
June 18, 2007
Li Wenxin
June 30, 2001
June 18, 2007
Ba Shengji
June 30, 2001
June 18, 2007
Yang Xingen
June 18, 2004
June 18, 2007
Yang Jie
June 30, 2001
June 18, 2007
Liu Jiashun
June 30, 2001
June 18, 2007
Wu Jiuhong
April 4, 2002
June 18, 2007
Zhou Liguo
April 5, 2004
June 18, 2007
Zhang Jianzhong
June 18, 2004
June 18, 2007
Tang Guozhao
April 1, 2005
June 18, 2007
Li Yangmin
October 28, 2005
June 18, 2007
Luo Weide
June 30, 2001
June 18, 2007
None of our directors, supervisors or members of our senior management has entered into
any agreement or reached any understanding with us requiring our company to pay any benefits as a
result of termination of their services.
Our board of directors established the audit committee in August 2000 in accordance with the
listing rules of the Hong Kong Stock Exchange. The audit committee currently consists of Mr. Xie
Rong, an independent non-executive director and the chairman of the audit committee, Mr. Hu
Honggao, an independent non-executive director of our company, and Mr. Wu Baiwang, an independent
non-executive director of our company. The audit committee is authorized to, among other things,
examine our internal control system and review auditing procedures and financial reports with our
auditors. Subject to the approval of the shareholders' meeting, the audit committee of our company
is also directly responsible for the appointment, compensation, retention and oversight of our
outside auditors, including resolving disagreements between management and the auditor regarding
financial reporting. The outside auditors report directly to the audit committee. The audit
committee holds at least four meetings each year. The audit committee has established procedures
for the receipt, retention and treatment of complaints received by our company regarding
accounting, internal accounting controls or auditing matters, and procedures for the confidential,
anonymous submission by employees of concerns regarding questionable accounting or auditing
matters. The audit committee has the authority to engage independent counsel and other advisors, as
it determines necessary to carry out its duties. Our company provides appropriate funding, as
determined by the audit committee, for payment of compensation to the outside auditors, advisors
employed by the audit committee, if any, and ordinary administrative expenses of the audit
committee that are necessary or appropriate in carrying out its duties.
Our remuneration and review committee, established by our board of directors in April 2002,
consists of Mr. Zhou Ruijin, an independent non-executive director and the chairman of the
remuneration and review
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committee, Mr. Hu Hongaao, an independent non-executive director and Mr. Peter Lok, an
independent non-executive director. The remuneration and review committee is authorized to review
the performance of our directors, supervisors and management as well as determine their annual
compensation level. The remuneration and review committee shall submit to our board of directors or
shareholders' meeting for approval compensation plans and oversee the implementation of approved
compensation plans. The remuneration and review committee may consult financial, legal or other
outside professional firms in carrying out its duties. The remuneration and review committee shall
meet once year, within twenty days after the announcement of annual results.
D. Employees
Through arrangements with CEA Holding and others, we provide certain benefits to our
employees, including housing, retirement benefits and hospital, maternity, disability and dependent
medical care benefits. Our company does not have any bonus or profit sharing plan or any stock
option plan. See Notes 33 and 34 to our audited consolidated financial statements. Our employees
are members of a labor association which represents employees with respect to labor disputes and
certain other employee matters. We believe that we maintain good relations with our employees and
with their labor association. The table below sets forth the number of our employees as of December
31, 2003, 2004 and 2005, respectively:
As of December 31,
2003
2004
2005
Pilots
1,516
1,699
2,154
Flight attendants
1,817
2,732
3,752
Maintenance personal
2,696
3,283
4,480
Sales and marketing
2,172
2,546
3,658
Other
8,234
10,557
15,257
Total
16,435
20,817
29,301
E. Share Ownership
See Item 6.A and Item 6.B above.
Item 7. Major Shareholders and Related Party Transactions.
A. Major Shareholders
The following table sets forth certain information regarding ownership of our capital stock as
of December 31, 2005 by all persons who were known to us to be the beneficial owners of 5% or more
of our capital stock:
Amount
Percent of
Percent of Total
Title of Class
Identity of Person or Group
Owned
Class
Shares
Domestic Shares
CEA Holding
3,000,000,000
90.91%
61.64%
H Shares
HKSCC Nominees Limited
(1)
1,487,931,163
94.96%
30.57%
(1)
As custodian of the Depositary for American Depositary Shares representing H Shares.
CEA Holding has held 61.64% of our issued and outstanding capital stock since its
establishment in October 2002, and neither it nor HKSCC Nominees Limited has any voting rights
different from those of other shareholders. We are not aware of any arrangement which may at a
subsequent date result in a change of control of our company.
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As
of December 31, 2005 and June 30, 2006, there were 1,566,950,000 H shares issued and
outstanding. As of December 31, 2005 and June 30, 2006,
there were, respectively, 39 and 36
registered holders of American depositary receipts evidencing
1,495,400 and 1,542,960 ADSs. Since
certain of the ADSs are held by nominees, the above number may not be representative of actual
number of U.S. beneficial holders of ADSs or the number of ADSs beneficially held by U.S. persons.
Our company is currently a majority-owned subsidiary of CEA Holding. CEA Holding itself is a
wholly state-owned enterprise under the administrative control of China State-owned Assets
Supervisions and Administration Commission, or CSASAC. CEA Holding's shareholding in our company is
in the form of ordinary domestic shares, through which it, under the supervision of the CSASAC,
enjoys the shareholders' rights and benefits on behalf of the Chinese government.
B. Related Party Transactions
Relationship with CEA Holding and Associated Companies
We enter into transactions from time to time with CEA Holding and its subsidiaries.
For a description of such transactions, see Note 39 to our audited consolidated financial
statements.
(A) De-merger Agreement
EA Group and our company entered into a de-merger agreement on April 14, 1995, or the
De-merger Agreement, for the purpose of defining and allocating the assets and liabilities between
EA Group and our company. To give effect to the intent and provisions of the De-merger Agreement,
EA Group and our company have entered into a Supplemental Agreement to the De-merger Agreement,
dated December 5, 1996, whereby the parties agreed to indemnify each other in respect of all claims
arising from or in respect of the assets and liabilities which they have respectively assumed
pursuant to the restructuring and by reference to the division of assets and liabilities determined
as of January 1, 1994. After the establishment of CEA Holding in October 2002, CEA Holding has
assumed the rights and liabilities of EA Group under the De-merger Agreement.
(B) Acquisition of Assets from CEA Holding
We have acquired from CEA certain assets and liabilities from CEA Holding relating to the
aviation businesses of CEA Northwest and CEA Yunnan. See the section headed "Item 4. Information
on the Company—History and Development of the Company".
(C) Related Business Transactions
As our company and EA Group and its subsidiaries were a single group prior to the
restructuring in 2002, certain arrangements among us have continued after the restructuring and the
establishment of CEA Holding. Each of these arrangements is non-exclusive, although we do not
currently intend to enter into any equivalent contracts with third parties.
(i) China Eastern Aviation Import and Export Corporation, or CEAIEC, a 55% owned
subsidiary of CEA Holding.
Our company and CEAIEC have entered into an import/export agency agreement, dated May 12,
2005, to supercede our agreement, dated January 7, 1997, regarding the import and export of
aircraft-related accessories, machinery and equipment for a term of three years commencing from
July 1, 1999, subject to renewal. For the year ended December 31, 2005, the amounts paid by us to
CEAIEC for the import and export of aircraft-related accessories, machinery and equipment were
approximately RMB7,228 million,
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inclusive of handling charges of 0.1% to 2% above the contract prices paid to CEAIEC which were
approximately RMB41 million in total.
We have certain balances with CEAIEC, which are unsecured, interest-free and have no fixed
term of repayment. See Note 39(b) to our audited consolidated financial statements for more
details.
(ii) Eastern Aviation Advertising Service Co., Ltd., or Eastern Advertising, a 55%
owned subsidiary of CEA Holding.
Our company and Eastern Advertising have entered into an advertising service agreement, dated
May 12, 2005, to supercede our agreement, dated December 30, 1996, regarding the provision of
advertising services for a term of three years commencing from July 1, 2005, subject to renewal.
For the year ended December 31, 2005, the amounts paid by us to Eastern Advertising for advertising
services were approximately RMB9 million.
(iii) China Eastern Air Catering Investment Co. Ltd., or CEA Catering, a 55% subsidiary
of CEA Holding. The remaining 45% is owned by our company.
On May 12, 2005, our company entered into certain catering service agreements with a number of
subsidiaries of CEA Catering (including Shanghai Eastern Air Catering Co., Ltd) regarding the
provision of in-flight catering services (including the supply of in-flight meals and beverages,
cutlery and tableware) and related storage and complementary services required in our company's
daily airline operations and civil aviation business. For the year ended December 31, 2005, the
amounts paid by us to those subsidiaries of CEA Catering for the supply of in-flight meals and
other services were approximately RMB232 million.
(iv) Eastern Air Group Finance Co. Ltd., or Eastern Finance, which is 75% owned and
controlled by CEA Holding and other subsidiaries of CEA Holding.
Our company and Eastern Finance have entered into a financial services agreement, dated May
12, 2005, to supercede our agreement with Eastern Finance, dated January 8, 1997, regarding the
provision of deposit services, loan and financing services and certain other financial services
such as the provision of trust loans, financial guarantees and credit facilities and credit
references for a term of three years commencing from July 1, 2005, subject to renewal. Pursuant to
this agreement, we may place deposits with, and obtain loans from, Eastern Finance. We had
short-term deposits placed with Eastern Finance as of December 31, 2005 amounting to RMB475
million, which paid interest at 0.7% per annum. In addition, our company had short-term loans of
RMB214 million from Eastern Finance. During the year ended December 31, 2005, the weighted average
interest rate on the loan was 4.5% per annum.
Pursuant to the financial services agreement, Eastern Finance shall deposit all moneys
deposited by our company under the agreement with commercial bank(s) in China, including, for
example, Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Bank of
Agriculture and Bank of Communications. The Eastern Finance has also undertaken under the financial
services agreement that all outstanding loans it provides to CEA Holding and its subsidiaries
(other than our company) will not at any time and from time to time exceed the aggregate amount of
its equity capital, surplus reserves and deposits received from other parties.
(v) TravelSky Technology Ltd., which is 33% owned by CEA Holding.
We pay ticket reservation service charges to TravelSky, which is 33% owned by CEA Holding, in
connection with our use of its computer reservation system. For the year ended December 31, 2005,
we paid ticket reservation service charges to TravelSky of approximately RMB125 million.
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(vi) Shanghai Eastern Aviation Equipment Manufacturing Corporation, or SEAEMC, a
wholly-owned subsidiary of CEA Holding.
Our company and SEAEMC have entered into an advertising service agreement, dated May 12, 2005,
to supercede our agreement dated, December 31, 1996, regarding the provision of comprehensive
services in relation to maintenance, repair and overhaul of aircraft and aviation equipment, and
procurement of related equipment and materials required in our company's daily operations for a
term of three years commencing from July 1, 2005, subject to renewal. SEAEMC was established in
1996. SEAEMC's predecessor was Shanghai Civil Aviation Maintenance and Engineering Company. For the
year ended December 31, 2005, the amounts paid by us to SEAEMC for the maintenance and related
services were approximately RMB1 million. In addition, we also paid RMB9 million and RMB5 million
to SEAEMC for the purchase by our company of certain aviation equipment from SEAEMC and the lease
of buildings and equipment, respectively, in 2005.
(vii) Ticket Sales
On May 12, 2005, our company entered into certain sales agency services agreements with
several subsidiaries of CEA Holdings regarding the sales of our air tickets by such subsidiaries of
CEA Holding as our sales agents and the provision of complementary services for a term of three
years commencing from July 1, 2005, subject to renewal. Under such agreements, the sales agents
charge commissions at rates with reference to those prescribed by the CAAC and the International
Aviation Transportation Association, as determined following arm's length negotiations. Such
commissions are payable monthly in arrears. The parties will perform an annual review of the then
prevailing commission rate before the 31st of December in each calendar year, and agree on any
required adjustments to such commission rate in respect of the next calendar year. For the year
ended December 31, 2005, the aggregate amount of commissions we paid to those sales agents for the
sales agency services was approximately RMB81 million.
(C) Property Leases
Our company and EA Group had entered into an office lease agreement dated January 7, 1997 in
respect of office premises located at 2550 Hong Qiao Road, Shanghai, China. The lease term is one
year and renewable by the parties, subject to mutual agreement with respect to rental terms. The
total rental payment is approximately RMB158,342 per month. In addition, our company and EA Group
had entered into a staff dormitory lease agreement dated December 31, 1996, pursuant to which EA
Group had agreed to enter into lease arrangements with our employees for dormitories in Shanghai,
Anhui Province, Shandong Province and Jiangxi Province. The term of the lease and the rental
payments are set in accordance with Chinese regulations and the rate prescribed by the Shanghai
Municipal Government. CEA Holding has assumed EA Group's rights and liabilities under those lease
agreements after its establishment.
On May 12, 2005, we entered into a property leasing agreement with CEA Holding, CEA Northwest
and CEA Yunnan for a term of three years, subject to renewal of another three years. Pursuant to
this property leasing agreement, we leased from CEA Holding, for our use in daily airlines and
other business operations: (i) a maximum of altogether 33 land properties owned by CEA Holding
through, and registered in the name of, CEA Northwest, covering an aggregate site area of
approximately 692,539 square meters located primarily in Xi'an, Xianyang and Yongdeng, together
with a total of 225 building properties and related construction, infrastructure and facilities
occupying an aggregate floor area of approximately 269,148 square metres; and (ii) a maximum of
altogether seven land properties owned by CEA Holding through, and registered in the name of, CEA
Yunnan, covering an aggregate site area of approximately 420,768 square meters primarily located in
Kunming, together with a total of 81 building properties and related construction, infrastructure
and facilities occupying an aggregate floor area of approximately 457,722 square meters. Under the
property leasing agreement, our company shall pay annual rentals in an aggregate amount of
approximately RMB55 million to CEA Holding. The rentals are payable half-yearly in advance, and are
subject to review and adjustments provided that the adjustments shall not exceed the applicable
inflation rates
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published by the relevant local PRC authorities. During 2005, we have paid a rental of RMB 28
million under this property leasing agreement.
(D) Aircraft Leases
During the year ended December 31, 2005, our company received from CEA Wuhan RMB41 million
under an aircraft operating lease arrangement relating to two B737-300 aircraft.
(E) Guarantee by CEA Holding
As at December 31, 2005, unsecured long-term bank loans of our company with aggregate amount
of RMB2,123 million are guaranteed by CEA Holding (see Note 29 to our audited consolidated
financial statements.)
C. Interests of Experts & Counsel
Not applicable.
Item 8. Financial Information.
A. Financial Statements
You should read "Item 18-Financial Statements" for information regarding our audited
consolidated financial statements and other financial information.
B. Legal Proceedings
We are involved in routine litigation and other proceedings in the ordinary course of our
business. We do not believe that any of these proceedings are likely to be material to our business
operations, financial condition or results of operations. In 2005, family members of certain
victims in the air crash of an aircraft of CEA Yunnan that occurred on November 21, 2004 in Baotou,
Neimougu, the PRC, instituted a legal action against us in a court in the United States to seek
unspecified damages. We have engaged legal counsel to vigorously defend the proceedings. The
proceedings are still at an early stage and we believe, based on professional advice, it is
unlikely that there will be any material adverse effect on our financial position. We are not aware
of any other material proceedings currently pending against our company.
C. Dividends and Dividend Policy
For the fiscal year ended December 31, 2003, our board of directors recommended no dividend.
For the fiscal year ended December 31, 2004, our shareholder's meeting approved the payment of a
cash dividend of RMB0.02 per share. For the fiscal year ended December 31, 2005, our board of
directors recommended no dividend. The declaration and payment of dividends for years following
2005 will depend upon our financial results, our shareholders' interests, general business
conditions and strategies, our capital requirements, contractual restrictions on the payment of
dividends by us to our shareholders, and other factors our directors may deem relevant. Holders of
our H shares will receive the equivalent amount of cash dividend declared in Renminbi, if any,
based on the foreign exchange conversion rate published by the People's Bank of China, or PBOC, on
the date of the distribution of the cash dividend.
D. Significant Post Financial Statements Events
For information relating to the increase of our equity interest in CEA Wuhan, see section
headed "Item 4. Information on the Company — History and Development of the Company".
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In addition, since January 1, 2006, we have contracted to purchase 16 Boeing 737 NG series
aircraft (with engines) and 30 Airbus A320 series aircraft(with engines), for delivery over the
next few years.
Item 9. The Offer and Listing.
The principal trading market for our H shares is the Hong Kong Stock Exchange. The ADSs, each
representing 100 H shares, have been issued by The Bank of New York as the Depositary and are
listed on the New York Stock Exchange under the symbol "CEA". Prior to our initial public offering
and subsequent listings on the New York Stock Exchange and the Hong Kong Stock Exchange on February
4 and 5, 1997, respectively, there was no market for our H shares or ADSs.
The table below sets forth certain market information relating to our H shares and ADSs in
respect of the period from 2001 to June 30, 2006.
Price per H Share
Price per ADS
(HK$)
(US$)
High
Low
High
Low
2001
1.41
0.66
17.75
8.75
2002
1.48
0.80
18.50
11.00
2003
1.39
0.88
18.33
9.6
First Quarter 2004
1.84
1.28
23.22
17.03
Second Quarter 2004
1.64
1.28
21.27
16.74
Third Quarter 2004
1.65
1.49
20.90
18.81
Fourth Quarter 2004
1.79
1.40
23.30
18.20
2004
1.85
1.28
23.70
16.60
First Quarter 2005
1.70
1.34
22.48
17.23
Second Quarter 2005
1.51
1.28
19.30
16.56
Third Quarter 2005
1.42
1.18
18.65
15.14
Fourth Quarter 2005
1.30
0.95
16.45
12.52
December 2005
1.30
1.21
16.45
15.61
January 2006
1.33
1.19
16.96
15.50
February 2006
1.38
1.20
17.18
15.64
March 2006
1.44
1.24
18.24
16.00
April 2006
1.29
1.12
16.88
14.80
May 2006
1.18
1.08
15.15
13.98
June 2006
1.16
1.04
14.68
13.10
As
of December 31, 2005 and June 30, 2006, there were 1,566,950,000 H shares issued and
outstanding. As of December 31, 2005 and June 30, 2006,
there were, respectively, 39 and 36
registered holders of American depositary receipts evidencing
1,495,400 and 1,542,960 ADSs. Since
certain of the ADSs are held by nominees, the above number may not be representative of actual
number of U.S. beneficial holders of ADSs or the number of ADSs beneficially held by U.S. persons.
The depositary for the ADSs is The Bank of New York. A total of
3,300,000,000 domestic ordinary shares were
also outstanding as of June 30, 2006.
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Item 10. Additional Information.
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
The section entitled "Description of Capital Stock" contained in our registration statement on
Form F-1 (File No. 333-6260) filed with the Securities and Exchange Commission is hereby
incorporated by reference.
C. Material Contracts
For a summary of any material contract entered into by our company or any of its consolidated
subsidiaries outside of the ordinary course of business during the last two years, see "Item 4.
Information on the Company", "Item 5. Operating and Financial Review and Prospects" and "Item 7.
Major shareholders and Related Party Transactions".
In addition, we entered into the following agreements to purchase aircraft, which are filed
with this annual report as exhibits:
•
an aircraft purchase agreement, dated as of October 9, 2004, between our
company and Airbus SAS regarding the purchase of 20 Airbus A330-300 aircraft;
•
an amendment to an aircraft purchase agreement, dated as of April 21,
2005, between our company and Airbus SAS regarding the purchase of 15 Airbus A320 series
aircraft;
•
an aircraft purchase agreement, dated as of August 8, 2005, between our
company and The Boeing Company regarding the purchase of 15 Boeing 787 aircraft (with
engines);
•
an aircraft purchase agreement, dated as of December 20, 2005, as amended
by a supplemental agreement dated as of April 10, 2006, between our company and The
Boeing Company regarding the purchase of 20 Boeing 737 NG series aircraft (with
engines); and
•
an amendment to an aircraft purchase agreement, dated as of June 26, 2006, between our
company and Airbus SAS regarding the purchase of 30 Airbus A320 aircraft (with engines).
D. Exchange Controls
Renminbi currently is not a freely convertible currency. SAFE, under the authority of PBOC,
controls the conversion of Renminbi into foreign currency. Prior to January 1, 1994, Renminbi could
be converted to foreign currency through the Bank of China or other authorized institutions at
official rates fixed daily by SAFE. Renminbi could also be converted at swap centers open to
Chinese enterprises and foreign invested enterprises, or FIEs, subject to SAFE approval of each
foreign currency trade, at exchange rates negotiated by the parties for each transaction. Effective
January 1, 1994, a unitary exchange rate system was introduced in China, replacing the dual-rate
system previously in effect. In connection with the creation of a unitary exchange rate, the
Chinese government announced the establishment of an inter-bank foreign exchange market, the China
Foreign Exchange Trading System, or CFETS, and the phasing out of the swap centers. Effective
December 1, 1998, the swap centers were abolished by the Chinese government.
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On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of
Renminbi to the U.S. dollar. Under the new policy, Renminbi is permitted to fluctuate within a
narrow and managed band against a basket of certain foreign currencies. This change in policy has
resulted in a significant appreciation of Renminbi against the U.S. dollar. While the
international reaction to Renminbi revaluation has generally been positive, there remains
significant international pressure on the PRC government to adopt an even more flexible currency
policy, which could result in a further and more significant appreciation of Renminbi against the
U.S. dollar.
In general, under existing foreign exchange regulations, domestic enterprises operating in
China must price and sell their goods and services in China in Renminbi. Any foreign exchange
received by such enterprises must be sold to authorized foreign exchange banks in China. A
significant portion of our revenue and operating expenses are denominated in Renminbi, while a
portion of our revenue, capital expenditures and debts are denominated in U.S. dollars and other
foreign currencies. Renminbi is currently freely convertible under the current account, which
includes dividends, trade and service-related foreign currency transactions, but not under the
capital account, which includes foreign direct investment, unless the prior approval of the SAFE,
is obtained. As a foreign investment enterprise approved by the MOC, we can purchase foreign
currency without the approval of SAFE for settlement of current account transactions, including
payment of dividends, by providing commercial documents evidencing these transactions. We can also
retain foreign exchange in our current accounts, subject to a maximum amount approved by SAFE, to
satisfy foreign currency liabilities or to pay dividends. However, the relevant Chinese government
authorities may limit or eliminate our ability to purchase and retain foreign currencies in the
future. Foreign currency transactions under the capital account are still subject to limitations
and require approvals from SAFE. This may affect our ability to obtain foreign exchange through
debt or equity financing, including by means of loans or capital contributions. We cannot assure
you that we will be able to obtain sufficient foreign exchange to pay dividends or satisfy our
foreign exchange liabilities.
E. Taxation
The taxation of income and capital gains of holders of H shares or ADSs is subject to the laws
and practices of China and of jurisdictions in which holders of H shares or ADSs are resident or
otherwise subject to tax. The following summary of certain relevant taxation provisions is based on
current law and practice, is subject to change and does not constitute legal or tax advice. The
discussion does not deal with all possible tax consequences relating to an investment in the H
shares or ADSs. In particular, the discussion does not address the tax consequences under state,
local and other laws, such as non-U.S. federal laws. Accordingly, you should consult your own tax
adviser regarding the tax consequences of an investment in the H shares and ADSs. The discussion is
based upon laws and relevant interpretations in effect as of the date of this annual report, all of
which are subject to change.
Taxation — Hong Kong
The taxation of income and capital gains of holders of ordinary shares or ADSs is subject to
the laws and practices of Hong Kong and of jurisdictions in which holders of ordinary shares or
ADSs are resident or otherwise subject to tax. The following summary of certain relevant taxation
provisions under Hong Kong law is based on current law and practice, is subject to changes therein
and does not constitute legal or tax advice. The discussion does not deal with all possible tax
consequences relating to an investment in the ordinary shares or ADSs. Accordingly, each
prospective investor (particularly those subject to special tax rules, such as banks, dealers,
insurance companies, tax-exempt entities and holders of 10% or more of our voting capital stock)
should consult its own tax advisor regarding the tax consequences of an investment in the ordinary
shares and ADSs. The discussion is based upon laws and relevant interpretations thereof in effect
as of the date of this annual report, all of which are subject to change.
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Tax on Dividends
Under the current practices of the Hong Kong Inland Revenue Department, no tax is payable in
Hong Kong in respect of dividends received by the recipient.
Profits Tax
No tax is imposed in Hong Kong in respect of capital gains from the sale of property (such as
the H shares and ADSs). Trading gains from the sale of property by persons carrying on a trade,
profession or business in Hong Kong where such gains are derived from or arise in Hong Kong from
such trade, profession or business will be chargeable to Hong Kong profits tax which is currently
imposed at the rate of 17.5% on corporations and on individuals at a maximum rate of 16.0% with
effect from April 1, 2004. Gains from sales of the ordinary shares effected on the Hong Kong Stock
Exchange may be considered to be derived from or arise in Hong Kong. Liability for Hong Kong
profits tax may thus arise in respect of trading gains from sales of ordinary shares or ADSs
realized by persons carrying on a business of trading or dealing in securities in Hong Kong.
Stamp Duty
Hong Kong stamp duty, currently charged at the rate of HK$1 per HK$1,000 or part thereof on
the higher of the consideration for or the value of the ordinary shares, will be payable by the
purchaser on every purchase and by the seller on every sale of ordinary shares (i.e., a total of
HK$2 per HK$1,000 or part thereof is currently payable on a typical sale and purchase transaction
involving ordinary shares). In addition, a fixed duty of HK$5 is currently payable on any
instrument of transfer of ordinary shares. The withdrawal of ordinary shares upon the surrender of
ADSs, and the issuance of ADSs upon the deposit of ordinary shares, will also attract stamp duty at
the rate described above for sale and purchase transactions unless the withdrawal or deposit does
not result in a change in the beneficial ownership of the ordinary shares under Hong Kong law, in
which case only a fixed duty of HK$5 is payable on the transfer. The issuance of the ADSs upon the
deposit of ordinary shares issued directly to the depositary or for the account of the depositary
does not attract stamp duty. No Hong Kong stamp duty is payable upon the transfer of ADSs outside
Hong Kong.
Estate Duty
The ordinary shares are Hong Kong property under Hong Kong law, and accordingly such ordinary
shares may be subject to estate duty on the death of the beneficial owner of the ordinary shares
(regardless of the place of the owner's residence, citizenship or domicile). Hong Kong estate duty
is imposed on a progressive scale from 5% to 15%. The rate of and the threshold for estate duty
has, in the past, been adjusted on a fairly regular basis. No estate duty is payable when the
aggregate value of the dutiable estate does not exceed HK$7.5 million, and the maximum rate of duty
of 15% applies when the aggregate value of the dutiable estate exceeds HK$10.5 million.
Estate duty was abolished effective February 11, 2006. Estates of persons who passed away on
or after February 11, 2006 are not subject to estate duty. The estate duty chargeable in respect of
deaths occurring between the period from July 15, 2005 to February 10, 2006 with the taxable estate
value exceeding HK$7.5 million is reduced to a nominal duty of HK$100.
Taxation — China
The following is a general summary of certain Chinese tax consequences of the acquisition,
ownership and disposition of the H Shares and ADSs. This summary does not purport to address all
material tax consequences of the ownership of Shares or ADSs, and does not take into account the
specific circumstances of any particular investors. This summary is based on the tax laws of China
as in effect on the
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date of this annual report, as well as on the U.S.-China Treaty, all of which are subject to
change (or changes in interpretation), possibly with retroactive effect.
In general, and taking into account the earlier assumptions, for Chinese tax purposes, holders
of ADRs evidencing ADSs will be treated as the owners of the H Shares represented by those ADSs,
and exchanges of H Shares for ADSs, and ADSs for H Shares, will not be subject to Chinese tax.
Taxation of Dividends by China
Individual Investors
. The Provisional Regulations of China Concerning Questions of Taxation on
Enterprises Experimenting with the Share System, or the Provisional Regulations, provide that
dividends from Chinese companies are ordinarily subject to a Chinese withholding tax levied at a
flat rate of 20%. However, the Chinese State Tax Bureau issued, on July 21, 1993, a Notice
Concerning the Taxation of Gains on Transfer and Dividends from Shares (Equities) Received by
Foreign Investment Enterprises, Foreign Enterprises and Foreign Individuals, or the Tax Notice,
which provides that dividends from a Chinese company on shares listed on an overseas stock
exchange, or Overseas Shares, such as H Shares (including H Shares represented by ADSs), would not
be subject to Chinese withholding tax. The relevant tax authority has not collected withholding tax
on dividend payments on Overseas Shares.
Amendments to the individual Income Tax Law of the PRC, or the Amendments, were promulgated on
October 31, 1993 and became effective on January 1, 1994. The Amendments provide that any
provisions of prior administrative regulations concerning individual income tax which contradict
the Amendments are superseded by the Amendments. The Amendments and the amended Individual Income
Tax Law can be interpreted to mean that foreign individuals are subject to a withholding tax on
dividends received from a Chinese company at a rate of 20% unless such income is specifically
exempted from individual income tax by the financial authority of the State Council. However, in a
letter dated July 26, 1994 to the State Commission for Restructuring the Economic System, the State
Securities Commission and the China Securities Regulatory Commission, the State Tax Bureau
confirmed the temporary tax exemption set forth in the Tax Notice for dividends received from a
Chinese company listed overseas. In the event this letter is withdrawn, a 20% tax may be withheld
on dividends in accordance with the Provisional Regulations, the Amendments, and the Individual
Income Tax law of China. Such withholding tax may be reduced pursuant to an applicable double
taxation treaty.
Enterprises
. The Provisional Regulations provide that dividends from Chinese companies are
ordinarily subject to a Chinese withholding tax levied at a flat rate of 20%. However, according to
the Tax Notice, a foreign enterprise with no permanent establishment in China receiving dividends
paid on a Chinese company's Overseas Shares temporarily will not be subject to the 20% withholding
tax. If such withholding tax becomes applicable in the future, the rate could be reduced or
eliminated pursuant to an applicable double taxation treaty.
Tax Treaties
. Non-Chinese investors resident in countries which have entered into
double-taxation treaties with China may be entitled to a reduction of the withholding tax imposed
on the payment of dividends to non-Chinese investors of our company. China currently has
double-taxation treaties with a number of other countries, including Australia, Canada, France,
Germany, Japan, Malaysia, the Netherlands, Singapore, the United Kingdom and the United States.
Under the U.S.-China Treaty, China may tax a dividend paid by our company to a U.S. holder of
H shares or ADSs only up to a maximum of 10% of the gross amount of such dividend.
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Taxation of Capital Gains by China
The Tax Notice provides that gains realized upon the sale of Overseas Shares are not subject
to taxes on capital gains. Although the Ministry of Finance has been empowered to collect a tax of
20% on gains derived from the sale of equity shares, a joint notice issued in March 1996 by the
Ministry of Finance and the State Tax Bureau indicated that no capital gains tax would be imposed
on gains from the sale of shares until the Ministry of Finance and the State Tax Bureau promulgate
new rules. Therefore, during 1996 to 2001, holders of H Shares or ADSs were not subject to taxation
on gains realized upon the sale or disposition of such shares. After 2001, holders of H Shares or
ADSs could become subject to a 20% capital gains tax, unless reduced or eliminated pursuant to an
applicable double taxation treaty.
Under the U.S.-China Treaty, China may only tax gains from the sale or disposition by a U.S.
holder of H shares or ADSs representing an interest in the company of 25% or more.
Chinese Stamp Tax
Chinese stamp tax imposed on the transfer of shares of Chinese publicly traded companies under
the Share System Tax Regulations should not apply to the acquisition or disposition by non-Chinese
investors of H Shares or ADSs outside of China by virtue of the Provisional Regulations of The
People's Republic of China Concerning Stamp Tax, which provides that Chinese stamp tax is imposed
only on documents executed or received within China or that should be considered as having been
executed or received within China.
United States Federal Income Taxation.
United States Federal Income Taxation
This section describes the material United States federal income tax consequences of the
ownership and disposition of H shares or ADSs. This section applies to you only if you are a U.S.
holder, as defined below, and you hold your H shares or ADSs as capital assets for United States
federal income tax purposes. This section does not apply to you if you are a member of a special
class of holders subject to special rules, including:
•
a dealer in securities;
•
a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings;
•
a tax-exempt organization;
•
a life insurance company;
•
a person liable for alternative minimum tax;
•
a person that actually or constructively owns 10% or more of our voting stock;
•
a person that holds H shares or ADSs as part of a straddle or a hedging
or conversion transaction; or
•
a person whose functional currency is not the U.S. dollar.
This section is based on the Internal Revenue Code of 1986, as amended, its legislative
history, existing and proposed regulations, published rulings and court decisions, all as currently
in effect. These laws
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are subject to change, possibly on a retroactive basis. In addition, this section is based in
part upon the representations of the Depositary and the assumption that each obligation in the
Deposit Agreement and any related agreement will be performed in accordance with its terms.
You are a U.S. holder if you are a beneficial owner of H shares or ADSs and you are:
•
a citizen or resident of the United States;
•
a domestic corporation;
•
an estate whose income is subject to United States federal income tax
regardless of its source; or
•
a trust if a United States court can exercise primary supervision over
the trust's administration and one or more United States persons are authorized to
control all substantial decisions of the trust.
You should consult your own tax advisor regarding the United States federal, state and local
and other tax consequences of owning and disposing of H shares or ADSs in your particular
circumstances.
In general, and taking into account the earlier assumptions, for United States federal income
tax purposes, if you hold ADRs evidencing ADSs, you will be treated as the owner of the H shares
represented by those ADRs. Exchanges of H shares for ADRs, and ADRs for H shares, generally will
not be subject to the United States federal income tax.
Taxation of Dividends
Under the United States federal income tax laws, and subject to the passive foreign investment
company, or PFIC, rules discussed below, if you are a U.S. holder, the gross amount of any
dividend we pay out of our current or accumulated earnings and profits (as determined for United
States federal income tax purposes) is subject to United States federal taxation. If you are a
noncorporate U.S. holder, dividends paid to you in taxable years beginning before January 1, 2011
that constitute qualified dividend income will be taxable to you at a maximum tax rate of 15%
provided that you hold the H shares or ADSs for more than 60 days during the 121-day period
beginning 60 days before the ex-dividend date and meet other holding period requirements.
The dividend is taxable to you when you, in the case of H shares, or the Depositary, in the
case of ADSs, receive the dividend, actually or constructively. The dividend will not be eligible
for the dividends-received deduction generally allowed to United States corporations in respect of
dividends received from other United States corporations. The amount of the dividend distribution
that you must include in your income will be the U.S. dollar value of the Hong Kong dollar payments
made, determined at the spot Hong Kong dollar/U.S. dollar rate on the date the dividend
distribution is includible in your income, regardless of whether the payment is in fact converted
into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations
during the period from the date you include the dividend payment in income to the date you convert
the payment into U.S. dollars will be treated as ordinary income or loss and will not be eligible
for the special tax rate applicable to qualified dividend income. This gain or loss generally will
be from sources within the United States for foreign tax credit limitation purposes. Distributions
in excess of current and accumulated earnings and profits (as determined for United States federal
income tax purposes) will be treated as a non-taxable return of capital to the extent of your basis
in the H shares or ADSs and thereafter as capital gain. Dividends will be income from sources
outside the United States, but dividends paid in taxable years beginning before January 1, 2007
generally will be "passive" or "financial services" income, and dividends paid in taxable years
beginning after December 31, 2006 will, depending on your
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circumstances, be "passive" or "general" income which, in either case, is treated separately
from other types of income for purposes of computing the foreign tax credit allowable to you.
Taxation of Capital Gains
Subject to the PFIC rules discussed below, if you are a U.S. holder and you sell or otherwise
dispose of your H shares or ADSs, you will recognize capital gain or loss for United States federal
income tax purposes equal to the difference between the U.S. dollar value of the amount that you
realize and your tax basis, determined in U.S. dollars, in your H shares or ADSs. Capital gain of
a noncorporate U.S. holder that is recognized in taxable years beginning before January 1, 2011 is
generally taxed at a maximum rate of 15% where the property is held more than one year. The
deductibility of capital losses is subject to limitations. The gain or loss will generally be from
sources within the United States for foreign tax credit limitation purposes.
PFIC Rules
We believe that H shares or ADSs should not be treated as stock of a PFIC for United States
federal income tax purposes, but this conclusion is a factual determination that is made annually
and thus may be subject to change. In general, if you are a U.S. holder, we will be a PFIC with
respect to you if for any taxable year in which you held our H shares or ADSs:
•
at least 75% of our gross income for the taxable year is passive income;
or
•
at least 50% of the value, determined on the basis of a quarterly
average, of our assets is attributable to assets that produce or are held for the
production of passive income.
Passive income generally includes dividends, interest, royalties, rents (other than certain
rents and royalties derived in the active conduct of a trade or business), annuities and gains from
assets that produce passive income. If a foreign corporation owns at least 25% by value of the
stock of another corporation, the foreign corporation is treated for purposes of the PFIC tests as
owning its proportionate share of the assets of the other corporation, and as receiving directly
its proportionate share of the other corporation's income.
If we are treated as a PFIC, and you are a U.S. holder that did not make a mark-to-market
election, as described below, you will be subject to special rules with respect to:
•
any gain you realize on the sale or other disposition of your H shares or
ADSs; and
•
any excess distribution that we make to you (generally, any distributions
to you during a single taxable year that are greater than 125% of the average annual
distributions received by you in respect of the H shares or ADSs during the three
preceding taxable years or, if shorter, your holding period for the H shares or ADSs).
Under these rules:
•
the gain or excess distribution will be allocated ratably over your
holding period for the H shares or ADSs;
•
the amount allocated to the taxable year in which you realized the gain
or excess distribution will be taxed as ordinary income;
•
the amount allocated to each prior year, with certain exceptions, will be
taxed at the highest tax rate in effect for that year; and
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•
the interest charge generally applicable to underpayments of tax will be
imposed in respect of the tax attributable to each such year.
If you own H shares or ADSs in a PFIC that are treated as marketable stock, you may make a
mark-to-market election. If you make this election, you will not be subject to the PFIC rules
described above. Instead, in general, you will include as ordinary income each year the excess, if
any, of the fair market value of your H shares or ADSs at the end of the taxable year over your
adjusted basis in your H shares or ADSs. These amounts of ordinary income will not be eligible for
the favorable tax rates applicable to qualified dividend income on long-term capital gains. You
will also be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted
basis of your H shares or ADSs over their fair market value at the end of the taxable year (but
only to the extent of the net amount of previously included income as a result of the
mark-to-market election). Your basis in the H shares or ADSs will be adjusted to reflect any such
income or loss amounts.
In addition, notwithstanding any election you make with regard to the H shares or ADSs,
dividends that you receive from us will not constitute qualified dividend income to you if we are a
PFIC either in the taxable year of the distribution or the preceding taxable year. Moreover, your
H shares or ADSs will be treated as stock in a PFIC if we were a PFIC at any time during your
holding period in your H shares or ADSs, even if we are not currently a PFIC. For purposes of this
rule, if you make a mark-to-market election with respect to your H shares or ADSs, you will be
treated as having a new holding period in your H shares or ADSs beginning on the first day of the
first taxable year beginning after the last taxable year for which the mark-to-market election
applies. Dividends that you receive that do not constitute qualified dividend income are not
eligible for taxation at the 15% maximum rate applicable to qualified dividend income. Instead,
you must include the gross amount of any such dividend paid by us out of our accumulated earnings
and profits (as determined for Untied States federal income tax purposes) in your gross income, and
it will be subject to tax at rates applicable to ordinary income.
If you own H shares or ADSs during any year that we are a PFIC, you must file Internal Revenue
Service Form 8621.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
You may read and copy documents referred to in this annual report on Form 20-F that have been
filed with the U.S. Securities and Exchange Commission at the SEC's public reference room located
at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms and their copy charges. The SEC also maintains a web site
at http://www.sec.gov that contains reports, proxy statements and other information regarding
registrants that file electronically with the SEC.
The SEC allows us to "incorporate by reference" the information we file with the SEC. This
means that we can disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered to be part of this
annual report on Form 20-F.
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I. Subsidiary Information
Not applicable.
Item 11. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
Our debts include both fixed-rate and variable-rate long-term loans and other loans. As a
result, we are subject to the market risk of fluctuation of interest rates which may affect the
estimated fair value of our debt liabilities or result in losses in cash flow. We use interest rate
swaps to reduce risks related to changes in market interest rates. As of December 31, 2005, the
notional amount of the outstanding interest rate swap agreements was approximately US$661 million.
These interest rate swap agreements will expire between 2006 and 2016. The carrying amounts, the
estimated fair value and the effect as a result of the change of the average interest rate on our
long-term and other loans as of December 31, 2005 are set forth as follows:
RMB'000
Carrying amounts
12,611,920
Estimated fair value
12,044,271
Decrease in the estimated fair value resulting from an increase of the average interest rate by 1%
295,917
Increase in the estimated fair value resulting from a decrease of the average interest rate by 1%
267,635
Foreign Currency Exchange Rate Risk
Although we derive most of our income from China in Renminbi, our financial lease obligations
as well as certain bank loans are denominated in US dollars, Japanese yen or Euro. Pursuant to
current foreign exchange regulations in China, we may retain our foreign currency earnings
generated from ticket sales made in our overseas offices subject to the approval of SAFE. We use
forward contracts to reduce risks related to changes in currency exchange rates in respect of
ticket sales and expenses denominated in foreign currencies. These currency forward contracts will
expire between 2007 and 2010.
Pursuant to IFRS, our monetary assets and liabilities denominated in foreign currencies are
required to be translated into Renminbi at the year end at exchange rates announced by PBOC. Any
fluctuation of the exchange rates between Renminbi and foreign currencies may materially and
adversely affect our financial condition and results of operations. Following the measures
introduced by the PRC government in July 2005 to reform the
Renminbi exchange rate regime, Renminbi has appreciated significantly against certain foreign currencies, including U.S. dollar,
Japanese yen and Euro. The following table shows the effect on our profit and loss account as a
result of the impact on our non-Renminbi denominated monetary assets and liabilities as of December
31, 2005 as a consequence of a fluctuation in value of the following major foreign currencies.
Profit and Loss Account
Decrease/increase by
RMB'000
US dollar appreciates/ (depreciates) by 1%
21,552
Japanese yen appreciates/ (depreciates) by 1%
6,699
Euro appreciates/ (depreciates) by 1%
240
Item 12. Description of Securities Other than Equity Securities.
Not applicable.
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PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies.
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
Material Modifications to the Rights of Security Holders
Our shareholders have approved certain amendments to our articles of association at the annual
general meeting for the year of 2004 held on June 30, 2005 in Shanghai, China. Set forth below is
a summary of those amendments that involve modification to the rights of our shareholders.
Amendments to Article 52. Pursuant to the amendments, a controlling shareholder or an actual
controlling person of our company owes fiduciary duties to our public shareholders. A controlling
shareholder may not: (1) prejudice the legal rights and interests of our public shareholders by
means of, among other things, any connected transaction, distribution of profits, restructuring of
assets, external investment, appropriation of funds or loan guarantee; or (2) otherwise prejudice
the interests and rights of our public shareholders by abusing its controlling position.
Amendments to Article 60. Pursuant to the amendments, a proposal for consideration at a
shareholders' general meeting must meet the following requirements: (1) its content does not
contravene the laws, administrative regulations and the articles of association and falls within
the scope of the duties and responsibilities of the shareholders' general meeting; (2) there is
definite topic(s) and specific matter(s) for resolution; and (3) it is submitted or delivered to
the board of directors in writing. The board of directors shall examine each proposal for
consideration at a shareholders' general meeting in the best interests of our company and
shareholders.
New Article 64(A). This new article provides that the board of directors shall determine the
record date with respect to a shareholder's general meeting. The shareholders recorded on our
register of shareholders as of the record date are entitled to attend the relevant shareholder's
general meeting. The shareholders who intend to attend a shareholders' general meeting must
properly register by such date and at such venue as designated in the relevant notice.
Amendments to Article 72. Pursuant to the amendments, the shareholders' general meeting shall
take a vote on each of the matters for its consideration.
Amendments to Article 73. Pursuant to the amendments, our company shall increase the
attendance of public shareholders at the shareholders' general meetings by various means, including
the use of modern information technologies (for example, online voting facilities), provided that
(1) it is permissible under all applicable laws, rules and administrative regulations and/or is
acceptable to relevant regulatory authorities; and (2) the legality and validity of a shareholders'
general meeting is assured. Moreover, the board of directors, independent directors and qualified
shareholders may solicit proxies from shareholders to vote at a shareholders' general meeting.
Adequate information should be furnished to the shareholders whose proxies are solicited.
Information so furnished must be previously published information which remains accurate and is not
misleading at the time it is quoted.
New Article 78(A). This new article provides that, for certain matters, an approval by votes
constituting more than 50% of the voting rights held by public shareholders at the shareholders'
general meeting shall be required. Such matters include: (1) any follow-on public offering; (2)
any restructuring of material assets where the total consideration for the assets acquired is equal
to or exceeds 120% of the audited
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book value of such assets; (3) any repayment of debts owed by a shareholder to our company
with our equity shares; (4) any overseas listing of a subsidiary of our company that has a material
effect on our company; and (5) any matters relating to the development of our company that have a
material effect on the interests and rights of the public shareholders. If a shareholders' general
meeting is convened in connection with any of the above matters, our company shall provide the
shareholders with online voting facilities.
New Article 78(B). This new article provides that, under any of the circumstances enumerated
in Article 78(A), after giving a notice of a meeting of shareholders, our company shall publish
such notice within three days after the relevant record date.
Amendments to Article 81. Pursuant to the amendments, public announcements shall be made with
respect to the resolutions of the shareholders' general meeting in accordance with relevant
regulations.
New Article 97(A). This new article provides that any provision of guarantee by our company
for the benefits of any other person requires, among other things, approval by the shareholders'
general meeting.
New Article 106(A). This new article provides that our board of directors must have at least
three independent directors and that independent directors must otherwise represent at least
one-thirds of all directors.
New Article 106(B). This new article provides that shareholder(s) individually or jointly
holding more than 1% of the outstanding shares of our company may nominate candidates for election
at a shareholders' general meeting as independent directors.
Amendments to Article 108. Pursuant to the amendments, our company shall have a department of
investor relations that is specially responsible for strengthening the communications with
shareholders, especially public shareholders.
A copy of the amended articles of association is attached as an exhibit to this annual report.
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Use of Proceeds
Not applicable.
Item 15. Controls and Procedures.
In June 2006, in connection with
their audit of our consolidated financial statements as of and for the year ended December 31, 2005, our independent
auditors, PricewaterhouseCoopers, identified to our management and audit committee certain internal control deficiencies in
our internal control over financial reporting that they considered to constitute material weaknesses in our internal
control over financial reporting.
The internal control deficiencies
that were identified as material weaknesses include: (1) lack of sufficient accounting personnel with sufficient U.S. GAAP
and IFRS technical expertise, including insufficient complement of financial reporting personnel commensurate with the
company's financial reporting requirements and insufficient formalized and consistent finance and accounting policies and procedures to
detect instances of non-compliance with such existing policies and procedures; and (2) ineffective implementation of certain
procedures for the accounting, approval and disclosure of related party transactions.
PricewaterhouseCoopers further advised
the audit committee that the internal control deficiencies it
identified did not affect PricewaterhouseCoopers' report on
our consolidated financial statements as of December 31, 2005 and for the year then ended included in this annual report.
Our management, including our
president and our chief financial officer, acknowledged that our
company's internal controls suffered from the internal
control deficiencies identified by PricewaterhouseCoopers. Our management are committed to remedy these deficiencies to
our company's internal controls and has been implementing a series of remedial measures, including, among other things: (1) providing
our accounting personnel with further training on the requirements of U.S. GAAP and IFRS to increase their familiarity with
those standards; and (2) enhancing the implementation of our procedures for the accounting, approval and disclosure of related
party transactions. In addition, our company established (i) a cash flow forecasting system and a cash needs budgeting system,
and (ii) a designated fund management department to monitor the liquidity and financing management. We will also be generally allocating
more human resources to the accounting and finance functions. Our company has engaged a special consultant to provide advice
in respect of U.S. GAAP and IFRS. We will continue to consult with external consultants and our independent auditors for ways
to make further improvements to our company's internal controls.
Our management, however, believes
that none of these internal control deficiencies has had a material effect on our financial condition or results of
operations or caused our financial statements as of and for the year ended December 31, 2005 to contain a material
misstatement.
As required by Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, our company's management, including our president and our chief financial officer, is
responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934. As of December 31, 2005, an evaluation was performed under the
supervision and with the participation of management, including our president and our chief financial officer, of the effectiveness
of our company's disclosure controls and procedures. Based on that evaluation, our president and our chief financial officer concluded
that our company's disclosure controls and procedures as of December 31, 2005 were effective to ensure that material information
required to be disclosed in this annual report would be made known to
our company's management, including our president and our chief
financial officer, on a timely basis.
Section 404 of the Sarbanes-Oxley Act of 2002
will require us to include a management's internal control report with our annual report on Form 20-F for the fiscal year ending
December 31, 2006. Since 2004, in preparation for compliance with Section 404 of the Sarbanes-Oxley Act of 2002, and under
the supervision and with the participation of our management, including our president and our chief financial officer, we have
been conducting evaluations of, and designing and implementing processes to improve, our internal controls. We are currently still
reviewing our efforts to improve our internal controls and may in the future identify additional deficiencies to our internal controls. Should we
discover any additional deficiencies, we will take appropriate measures to correct or improve of our internal controls. See the
section headed "Item 3. Key Information — Risk Factors
— Compliance with requirements under Section 404 of the
Sarbanes-Oxley Act of 2002".
Item 16A. Audit Committee Financial Expert.
Our board of directors has determined that Mr. Xie Rong, the chairman of our audit committee,
is an independent financial expert serving on our audit committee.
Item 16B. Code of Ethics
We have adopted a code of ethics that applies to our directors, supervisors, president, chief
financial officer and other senior managers of our company. We have filed this code of ethics as
an exhibit to this annual report by way of incorporation by reference.
Item 16C. Principal Accountant Fees and Services
The following table sets forth the aggregate audit fees, audit-related fees and tax fees of
our principal accountants and all other fees billed for products and services provided by our
principal accountants other than the audit fees, audit-related fees and tax fees for each of the
two years ended December 31, 2005:
Audit Fees
Audit-Related Fees
Tax Fees
Other Fees
(RMB)
(RMB)
(RMB)
(RMB)
2004
6,093,550
1,000,000
0
0
2005
9,684,240
5,859,670
0
0
Before our principal accountants were engaged by our company or our subsidiaries to
render audit or non-audit services, the engagement was approved by our audit committee.
Item 16D. Exemptions from the Listing Standards for Audit Committees.
Not applicable.
Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers.
Not applicable.
PART III
Item 17. Financial Statements.
We have elected to provide the financial statements and related information specified in Item
18 in lieu of Item 17.
Item 18. Financial Statements.
Reference is made to pages F-1 to F-90.
-74-
Table of Contents
Item 19. Exhibits.
(a)
See Item 18 for a list of the financial statements filed as part of this annual report.
(b)
Exhibits to this annual report:
-75-
Table of Contents
Exhibit Index
Exhibits
Description
1.1
Articles of Association as amended on June 30, 2005 (English translation).
2.1
Specimen Certificate for the H Shares.
(1)
2.2
Form of Deposit Agreement among the Registrant, The Bank of New York, as depositary,
and Owners and Beneficial Owners from time to time of American Depositary
Receipts.
(2)
4.1
Office Space Lease Agreement between our company and Eastern Air Group Company
(together with English translation).
(1)
4.8
Employee Housing Lease Agreement between our company and Eastern Air Group Company
(together with English translation).
(1)
4.9
Aircraft Purchase Agreement, dated as of October 9, 2004, between our company and
Airbus SAS.
(3)
4.10
Amendment No. 9 to the A320 Purchase Agreement, dated as of April 21, 2005, between
our company and Airbus SAS.
(3)
4.11
Assets Transfer Agreement, dated as of May 12, 2005, between our company, CEA
Holding, CEA Northwest and CEA Yunnan (English translation).
(3)
4.12
Aircraft Purchase Agreement, dated as of August 8, 2005, between our company and The
Boeing Company.
(4)
4.13
Aircraft Purchase Agreement, dated as of December 20, 2005, as amended by a
supplemental agreement dated as of April 10, 2006, between our company and The Boeing
Company.
(4)
4.14
Amendment No. 10 to the A320 Purchase Agreement, dated as of June 26, 2006, between our company and
Airbus SAS.
(4)
8.1
List of Subsidiaries (as of
June 30, 2006).
11.1
Code of Ethics (English translation).
(5)
12.1
Certification of President pursuant to Rule 13a-14(a).
12.2
Certification of Chief Financial
Officer pursuant to Rule 13a-14(a).
13.1
Certification of President pursuant to Rule 13a-14(b).
13.2
Certification of Chief Financial
Officer pursuant to Rule 13a-14(b).
(1)
Incorporated by reference to our Registration Statement on Form F-1 (File No. 333-6260),
filed with the Securities and Exchange Commission on January 9, 1997.
(2)
Incorporated by reference to our Registration Statement on Form F-6 (File No. 333-6284),
filed with the Securities and Exchange Commission with respect to American Depositary Shares
representing our H shares.
(3)
Incorporated by reference to our annual report on Form 20-F (File No. 001-14550), filed with
the Securities and Exchange Commission on June 24, 2005.
-76-
Table of Contents
(4)
Portions of this document have been omitted pursuant to a confidential treatment request, and
the full, unredacted document has been separately submitted to the Securities and Exchange
Commission with a confidential treatment request.
(5)
Incorporated by reference to our annual report on Form 20-F (File No. 001-14550), filed with
the Securities and Exchange Commission on June 28, 2004.
-77-
Table of Contents
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F
and that it has duly caused and authorized the undersigned to sign this annual report on its
behalf.
CHINA EASTERN AIRLINES CORPORATION LIMITED
By:
/s/ Li Fenghua
Name: Li Fenghua
Title: Chairman of the Board of Directors
Date:
July 7, 2006
-78-
Table of Contents
Exhibit Index
Exhibits
Description
1.1
Articles of Association as amended on June 30, 2005 (English translation).
2.1
Specimen Certificate for the H Shares.
(1)
2.2
Form of Deposit Agreement among the Registrant, The Bank of New York, as depositary,
and Owners and Beneficial Owners from time to time of American Depositary
Receipts.
(2)
4.1
Office Space Lease Agreement between our company and Eastern Air Group Company
(together with English translation).
(1)
4.8
Employee Housing Lease Agreement between our company and Eastern Air Group Company
(together with English translation).
(1)
4.9
Aircraft Purchase Agreement, dated as of October 9, 2004, between our company and
Airbus SAS.
(3)
4.10
Amendment No. 9 to the A320 Purchase Agreement, dated as of April 21, 2005, between
our company and Airbus SAS.
(3)
4.11
Assets Transfer Agreement, dated as of May 12, 2005, between our company, CEA
Holding, CEA Northwest and CEA Yunnan (English translation).
(3)
4.12
Aircraft Purchase Agreement, dated as of August 8, 2005, between our company and The
Boeing Company.
(4)
4.13
Aircraft Purchase Agreement, dated as of December 20, 2005, as amended by a
supplemental agreement dated as of April 10, 2006, between our company and The Boeing
Company.
(4)
4.14
Amendment No. 10 to the A320 Purchase Agreement, dated as of June 26, 2006, between our company and
Airbus SAS.
(4)
8.1
List of Subsidiaries (as of
June 30, 2006).
11.1
Code of Ethics (English translation).
(5)
12.1
Certification of President pursuant to Rule 13a-14(a).
12.2
Certification of Chief Financial
Officer pursuant to Rule 13a-14(a).
13.1
Certification of President pursuant to Rule 13a-14(b).
13.2
Certification of Chief Financial
Officer pursuant to Rule 13a-14(b).
(1)
Incorporated by reference to our Registration Statement on Form F-1 (File No. 333-6260),
filed with the Securities and Exchange Commission on January 9, 1997.
(2)
Incorporated by reference to our Registration Statement on Form F-6 (File No. 333-6284),
filed with the Securities and Exchange Commission with respect to American Depositary Shares
representing our H shares.
(3)
Incorporated by reference to our annual report on Form 20-F (File No. 001-14550), filed with
the Securities and Exchange Commission on June 24, 2005.
(4)
Portions of this document have been omitted pursuant to a confidential treatment request, and
the full, unredacted document has been separately submitted to the Securities and Exchange
Commission with a confidential treatment request.
(5)
Incorporated by reference to our annual report on Form 20-F (File No. 001-14550), filed with
the Securities and Exchange Commission on June 28, 2004.
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2003, 2004 AND 2005
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
CONSOLIDATED FINANCIAL STATEMENTS OF CHINA EASTERN AIRLINES CORPORATION LIMITED
Report of Independent Registered Public Accounting Firm
F-1
Consolidated Statements of Operations for each of the three years in the period ended
December 31, 2005
F-2
Consolidated Balance Sheets as of December 31, 2004
and 2005
F-3
Consolidated
Cash Flows Statements for each of the three years in the period ended
December 31, 2005
F-5
Consolidated Statements of Changes in Equity for each of the three years
in the period ended December 31, 2005
F-7
Notes to the Consolidated Financial Statements
F-8
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
China Eastern Airlines Corporation Limited:
We have audited the accompanying consolidated balance sheets of China Eastern Airlines Corporation
Limited (the "Company") and its subsidiaries as of December 31, 2004 and 2005, and the related
consolidated statements of operations, changes in owners' equity and cash flows for each of the three
years in the period ended December 31, 2005. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of China Eastern Airlines Corporation Limited and its
subsidiaries at December 31, 2004 and 2005, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2005, in conformity with
International Financial Reporting Standards.
International Financial Reporting Standards vary in certain significant respects from accounting
principles generally accepted in the United States of America. Application of generally accepted
accounting principles in the United States of America would have affected the results of the
operations for each of the three years in the period ended December 31, 2005 and the determination of
consolidated owners' equity as of December 31, 2004 and
2005, to the extent summarized in Notes 43 and 44 to
the consolidated financial statements.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong,
June 30, 2006
F-1
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
(Amounts in thousands except for per share data)
Year ended December 31,
Restated
Restated
(Note 2a)
2003
2004
2005
2005
Note
RMB'000
RMB'000
RMB'000
USD'000
Revenues
5
14,470,209
21,386,553
27,454,443
3,401,953
Other operating income
6
50,302
85,004
245,279
30,392
Operating expenses
Commissions
(465,147
)
(772,219
)
(969,587
)
(120,144
)
Aircraft fuel
(3,044,956
)
(5,429,658
)
(8,888,873
)
(1,101,444
)
Take-off and landing charges
(2,254,456
)
(3,019,742
)
(3,718,846
)
(460,812
)
Ground services and other charges
(64,662
)
(99,296
)
(115,516
)
(14,314
)
Civil aviation infrastructure levies
—
(251,185
)
(466,191
)
(57,766
)
Food and beverages
(541,669
)
(758,046
)
(976,787
)
(121,036
)
Wages, salaries and benefits
8
(1,449,054
)
(1,865,879
)
(2,359,467
)
(292,368
)
Aircraft maintenance
(816,613
)
(860,184
)
(1,383,989
)
(171,494
)
Aircraft depreciation and operating
lease rentals
(3,524,883
)
(4,466,523
)
(5,254,716
)
(651,126
)
Other depreciation, amortization
and operating lease rentals
(495,079
)
(495,916
)
(679,867
)
(84,244
)
Ticket reservation fee
(161,198
)
(209,995
)
(292,412
)
(36,234
)
Insurance costs
(163,765
)
(152,194
)
(148,862
)
(18,446
)
Office, administrative and other
expenses
(1,472,956
)
(1,858,336
)
(2,430,361
)
(301,152
)
Total operating expenses
(14,454,438
)
(20,239,173
)
(27,685,474
)
(3,430,580
)
Operating profit
66,073
1,232,384
14,248
1,765
Interest income
147,846
129,020
128,700
15,948
Finance costs
9
(922,483
)
(770,176
)
(707,050
)
(87,612
)
Share of results in associates
19
(32,738
)
(50,524
)
(9,030
)
(1,119
)
Share of results in jointly controlled
entities
20
—
45,268
(4,300
)
(533
)
(Loss)/profit before income tax
(741,302
)
585,972
(577,432
)
(71,551
)
Taxation
11
(a)
(239,373
)
(129,601
)
138,704
17,187
(Loss)/profit for the year
(980,675
)
456,371
(438,728
)
(54,364
)
Attributable to:
Equity holders of the Company
(1,097,161
)
320,691
(467,307
)
(57,905
)
Minority interest
116,486
135,680
28,579
3,541
(980,675
)
456,371
(438,728
)
(54,364
)
Dividend payable to equity holders of
the Company attributable to the year
12
—
97,339
—
—
(Loss)/earnings per share for
(loss)/profit attributable to the
equity holders of the Company during
the year
- basic and diluted
13
RMB(0.23
)
RMB0.07
RMB(0.10
)
US$(0.01
)
The accompanying notes are an integral part of these consolidated financial statements.
F-2
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2004 AND 2005
(Amounts in thousands)
December 31,
Restated
(Note 2a)
2004
2005
2005
Note
RMB'000
RMB'000
USD'000
Non-current assets
Property, plant and equipment
14
29,743,886
38,347,516
4,751,743
Construction in progress
15
188,654
240,884
29,849
Lease prepayments
16
828,808
972,771
120,539
Advance payments on acquisition of aircraft
17
2,678,603
9,072,673
1,124,219
Intangible assets
18
36,303
688,311
85,290
Investments in associates
19
633,212
629,746
78,034
Investments in jointly controlled entities
20
52,948
100,520
12,456
Available-for-sale financial assets
39,546
40,802
5,055
Other long-term assets
21
2,202,606
2,705,558
335,252
Deferred tax assets
11
395,465
434,839
53,882
Derivative assets
35
11,571
70,886
8,784
36,811,602
53,304,506
6,605,103
Current assets
Flight equipment spare parts
523,186
978,922
121,301
Trade receivables
22
1,707,062
1,918,409
237,715
Amounts due from related companies
39
122,253
205,712
25,490
Prepayments, deposits and other receivables
23
611,959
997,271
123,575
Cash and cash equivalents
24
2,114,447
1,864,001
230,973
Derivative assets
35
—
53,036
6,572
5,078,907
6,017,351
745,626
Current liabilities
Sales in advance of carriage
719,957
823,149
101,998
Trade payables and notes payables
25
1,457,217
3,394,898
420,671
Amounts due to related companies
39
138,968
295,030
36,558
Other payables and accrued expenses
26
4,466,024
6,021,481
746,137
Provision for aircraft overhaul expenses,
current portion
27
52,798
15,589
1,932
Tax payable
162,606
47,259
5,856
Obligations under finance leases, current portion
28
1,189,648
2,428,037
300,865
Borrowings, current portion
29
9,382,351
18,554,630
2,299,154
Derivative liabilities
35
—
34,844
4,318
17,569,569
31,614,917
3,917,489
Net current liabilities
(12,490,662
)
(25,597,566
)
(3,171,863
)
Total assets less current liabilities
24,320,940
27,706,940
3,433,240
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS OF DECEMBER 31, 2004 AND 2005
(Amounts in thousands)
December 31,
Restated
(Note 2a)
2004
2005
2005
Note
RMB'000
RMB'000
USD'000
Non-current liabilities
Provision for aircraft overhaul expenses
27
201,211
388,410
48,128
Obligations under finance leases
28
7,472,638
8,180,460
1,013,663
Borrowings
29
7,542,828
9,790,116
1,213,119
Other long-term liabilities
32
100,204
155,229
19,234
Post-retirement benefit obligations
33
(b)
618,232
1,202,877
149,052
Long-term portion of staff housing allowances
34
(b)
276,248
444,196
55,042
Deferred tax liabilities
11
687,850
601,340
74,514
Derivative liabilities
35
119,643
25,770
3,193
17,018,854
20,788,398
2,575,945
Net assets
7,302,086
6,918,542
857,295
Equity
Capital and reserves attributable to
the Company's equity holders
Share capital
30
4,866,950
4,866,950
603,077
Reserves
31
1,614,301
1,229,115
152,303
6,481,251
6,096,065
755,380
Minority interest
820,835
822,477
101,915
Total equity
7,302,086
6,918,542
857,295
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
CONSOLIDATED CASH FLOWS STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
(Amounts in thousands)
Year ended December 31,
(Note 2a)
2003
2004
2005
2005
Note
RMB'000
RMB'000
RMB'000
USD'000
Cash flows from operating activities
Cash generated from operations
36
4,086,358
4,242,852
3,369,783
417,559
Interest paid
(860,304
)
(872,738
)
(1,357,402
)
(168,199
)
Income tax paid
(62,977
)
(104,009
)
(59,932
)
(7,426
)
Net cash inflow from operating activities
3,163,077
3,266,105
1,952,449
241,934
Cash flows from investing activities
Purchase of aircraft, engines, flight equipment,
buildings, other property, plant and equipment
(5,776,617
)
(1,525,845
)
(2,486,830
)
(308,150
)
Additions of construction in progress
(249,737
)
(178,065
)
(189,220
)
(23,447
)
Proceeds on disposals of aircraft, engines,
flight equipment, buildings, other property,
plant
and equipment
91,940
667,824
32,923
4,080
Acquisition of land use rights
—
—
(31,780
)
(3,938
)
Acquisition of available-for-sale financial assets
—
—
(1,256
)
(156
)
Acquisition of financial assets held for trading
—
(270,350
)
—
—
Advances payments on acquisitions of aircrafts
(1,295,656
)
(2,076,990
)
(7,751,197
)
(960,471
)
Repayments of advances payments on
acquisitions of aircrafts
—
80,000
—
—
Decrease/(increase) in long-term bank deposits
(64,255
)
(51,108
)
69,000
8,550
(Increase)/decrease in short-term bank deposits
(69,246
)
31,424
(68,730
)
(8,517
)
Repayment of other payables
(installment payment for acquisition of
aviation business)
(30,000
)
(30,000
)
(30,000
)
(3,717
)
Investments in associates
(327,252
)
(4,993
)
—
—
Investments in jointly controlled entities
—
(7,680
)
—
—
Proceeds from maturity of US Treasury zero
coupon bonds
—
585,736
—
—
Proceeds from disposals of financial assets held
for trading
311,920
275,585
—
—
Interest received
104,243
71,900
128,700
15,948
Business acquisitions, net of cash outflow
38
—
—
(40,704
)
(5,044
)
Net cash outflow from investing activities
(7,304,660
)
(2,432,562
)
(10,369,094
)
(1,284,862
)
Notes to consolidated cash flow statements is set out in Note 36.
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
CONSOLIDATED CASH FLOWS STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
(Amounts in thousands)
Year ended December 31,
(Note 2a)
2003
2004
2005
2005
Note
RMB'000
RMB'000
RMB'000
USD'000
Cash flows from financing activities
Proceeds from drawn down of short-term bank loans
10,920,917
8,988,970
14,307,315
(1,772,858
)
Repayments of short-term bank loans
(10,815,508
)
(7,431,931
)
(8,872,754
)
(1,099,447
)
Proceeds from drawn down of long-term bank
loans
5,606,107
2,155,310
5,135,286
636,327
Repayments of long-term bank loans
(898,022
)
(2,647,930
)
(3,843,483
)
(476,256
)
Principal repayments of finance lease obligations
(1,400,749
)
(1,617,001
)
(1,157,334
)
(143,408
)
Proceeds from issuance of notes payables
1,254,030
1,347,786
4,228,783
524,000
Repayments of notes payables
(908,790
)
(1,265,939
)
(3,376,072
)
(418,338
)
Capital injection from minority shareholders of
subsidiaries
5,765
218,387
—
—
Proceeds from issuance of debentures
—
—
1,951,600
241,828
Dividends paid
—
—
(97,339
)
(12,062
)
Dividends paid to minority shareholders of
subsidiaries
—
(60,000
)
(90,000
)
(11,152
)
Net cash inflow/(outflow) from financing
activities
3,763,750
(312,348
)
8,186,002
1,014,350
Net (decrease)/increase in cash and cash
equivalents
(377,833
)
521,195
(230,643
)
(28,578
)
Cash and cash equivalents at January 1
1,944,525
1,582,780
2,114,447
262,007
Exchange adjustment
16,088
10,472
(19,803
)
(2,456
)
Cash and cash equivalents at December 31
1,582,780
2,114,447
1,864,001
230,973
Notes to consolidated cash flow statements is set out in Note 36.
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
(Amounts in thousands)
Attributable to equity
holders of the Company
Share
Minority
Total
capital
Reserves
Total
interest
equity
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
Balance at January 1, 2003 as previously presented
4,866,950
2,512,153
7,379,103
—
7,379,103
As previously separately reported as minority
interest (Note 2(a))
—
—
—
404,517
404,517
Effect of changes in accounting policy on the
adoption of IAS16 (Note 2(a))
—
(207,609
)
(207,609
)
—
(207,609
)
Balance at January 1, 2003, as restated
4,866,950
2,304,544
7,171,494
404,517
7,576,011
Cash flow hedges, net of tax
—
(47,136
)
(47,136
)
—
(47,136
)
Contributions from minority interest of
subsidiaries
—
—
—
5,764
5,764
Loss for the year
—
(949,816
)
(949,816
)
116,487
(833,329
)
Balance at December 31, 2003
4,866,950
1,307,592
6,174,542
526,768
6,701,310
Balance at January 1, 2004 as previously presented
4,866,950
1,515,201
6,382,151
—
6,382,151
As previously separately reported as minority
interest (Note 2(a))
—
—
—
522,713
522,713
Effect of changes in accounting policy on the
adoption of IAS16 (Note 2(a))
—
(207,609
)
(207,609
)
4,055
(203,554
)
Balance at January 1, 2004, as restated
4,866,950
1,307,592
6,174,542
526,768
6,701,310
Cash flow hedges, net of tax
—
(13,982
)
(13,982
)
—
(13,982
)
Contributions from minority interest of
subsidiaries
—
—
—
218,387
218,387
Dividends paid to minority interest of
subsidiaries
—
—
—
(60,000
)
(60,000
)
Profit for the year
—
320,691
320,691
135,680
456,371
Balance at December 31, 2004
4,866,950
1,614,301
6,481,251
820,835
7,302,086
Balance at January 1, 2005 as previously presented
4,866,950
2,015,294
6,882,244
—
6,882,244
As previously separately reported as minority
interest (Note 2(a))
—
—
—
831,208
831,208
Effect of changes in accounting policy on the
adoption of IAS16 (Note 2(a))
—
(400,993
)
(400,993
)
(10,373
)
(411,366
)
Balance at January 1, 2005, as restated
before opening adjustment
4,866,950
1,614,301
6,481,251
820,835
7,302,086
Opening adjustment on derecognition of negative
goodwill on the adoption of IFRS 3 (Note 2(a))
—
42,873
42,873
—
42,873
Balance at January 1, 2005, as restated
4,866,950
1,657,174
6,524,124
820,835
7,344,959
Cash flow hedges, net of tax
—
136,587
136,587
—
136,587
Dividend relating to 2004
—
(97,339
)
(97,339
)
—
(97,339
)
Dividend paid to minority interest of subsidiaries
—
—
—
(90,000
)
(90,000
)
Contribution from minority interest of
subsidiaries
—
—
—
63,063
63,063
Loss for the year
—
(467,307
)
(467,307
)
28,579
(438,728
)
Balance at December 31, 2005
4,866,950
1,229,115
6,096,065
822,477
6,918,542
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1
CORPORATE INFORMATION
China Eastern Airlines Corporation Limited (the "Company"), a joint stock company limited by
shares was incorporated in the People's Republic of China ("PRC") on April 14, 1995. The
address of its registered office is 66 Airport Street, Pudong International Airport,
Shanghai, PRC. The Company and its subsidiaries (the "Group") are principally engaged in the
operation of civil aviation, including the provision of passenger, cargo, and mail delivery
and other extended transportation services.
The Company is majority owned by China Eastern Air Holding Company ("CEA Holding"), a
state-owned enterprise incorporated in the PRC.
During the year ended December 31, 2005, the Company acquired certain assets and liabilities
relating to the aviation businesses of China Eastern Air Northwest Company ("CEA Northwest")
and China Eastern Air Yunnan Company ("CEA Yunnan"). Further details of the acquisitions are
set out in Note 38.
2
PRINCIPAL ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements
are set out below. These policies have been constantly applied to all the years presented,
unless otherwise stated.
(a)
Basis of Preparation
The financial statements have been prepared in accordance with International Financial
Reporting Standards ("IFRS") and the disclosure requirements of the Hong Kong Companies
Ordinance. This basis of accounting differs in certain material respects from that used in
the preparation of the Group's statutory accounts in the PRC. The statutory accounts of the
Group have been prepared in accordance with the accounting principles and the relevant
regulations applicable to PRC joint stock limited companies ("PRC Accounting Regulations").
In preparing these financial statements in accordance with IFRS, appropriate adjustments
have been made to the Group's statutory accounts to conform with IFRS.
This basis of accounting under IFRS differs from generally accepted accounting
principles in the United States of America ("U.S. GAAP"). Differences between IFRS and U.S.
GAAP and their effect on profit attributable to equity holders for each of the three years
ended December 31, 2005, and on owners' equity at December 31, 2004 and 2005, are set out in
note 43. The consolidated financial statements incorporate additional disclosures customary
in filings with the Securities and Exchange Commission of the United States of America (the
"SEC").
The consolidated financial statements have been prepared under the historical cost
convention, as modified by the revaluation of property, plant and equipment and financial
assets.
F-8
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(a)
Basis of Preparation (Continued)
The preparation of financial statements in conformity with IFRS requires the use of certain
critical accounting estimates. It also requires management to exercise its judgment in the
process of applying the Company's accounting policies. The areas involving a higher degree
of judgment or complexity, or areas where assumptions and estimates are significant to the
financial statements, are disclosed in Note 4. These estimates and assumptions affect the
reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the year. Although these estimates are based on management's best knowledge
of current event and actions, actual results ultimately may differ from those estimates.
Standards, interpretations & amendments to published standards effective in 2005
In 2005, the Group adopted the new and revised IFRS as described below, which are
relevant to its operations. The 2004 comparatives have been adjusted as required, in
accordance with the relevant requirements of the new/revised IFRS.
—
IAS 1 and 27 (both revised in 2003) have affected the presentation of minority
interest. IAS 1 (revised in 2003) also has affected the presentation of share of profit
of associates and other disclosures.
—
IAS 2, 8, 10, 17, 21, 28, 32, 33 (all revised in 2003), 39 (revised in 2004)
and IFRS 2 had no material effect on the Group's policies.
—
IAS 16 (amended 2004) replaces IAS 16 (revised 1998). The Group has adopted the
revised IAS 16 and has amended the accounting policy applied to the costs of overhaul
of owned and finance leased aircraft and engines. Under the Group's revised policy,
these costs are capitalized as a component of property, plant and equipment, and are
depreciated over the appropriate maintenance cycles. When each overhaul is performed,
its cost is recognized in the carrying amount of the item of property, plant and
equipment and is depreciated over the estimated period between overhauls on a
straight-line basis. Upon completion of an overhaul, any remaining carrying amount of
the cost of the previous overhaul is derecognized and charged to the income statement.
In prior years, the costs of overhauls were expensed in the income statement as
incurred. The adoption of the revised treatment of IAS 16 (amended 2004) has been
accounted for retrospectively.
F-9
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(a)
Basis of Preparation (Continued)
The adoption of revised IAS 16 resulted in:
2003
2004
2005
Increase/(decrease)
RMB'000
RMB'000
RMB'000
Decrease in aircraft maintenance expenses
(526,592
)
(536,099
)
(710,824
)
Increase in aircraft depreciation
673,836
794,390
820,555
Decrease in taxation
(3,954
)
(50,479
)
(19,658
)
Increase/(decrease) in profit for the year
attributable to minority interest
4,055
(14,428
)
30,271
Decrease in the profit attributable to equity holders
of the Company
(147,345
)
(193,384
)
(120,344
)
Decrease in aircraft, engines and flight equipment
(218,142
)
(476,433
)
(586,163
)
Decrease in deferred tax liabilities
(14,588
)
(65,067
)
(84,725
)
Increase/(decrease) in minority interest
4,055
(10,373
)
19,898
Decrease in beginning retained profits
(60,264
)
(207,609
)
(400,993
)
Decrease in basic and diluted earnings per share
RMB(0.03)
RMB(0.04)
RMB(0.02)
—
IAS 24 (revised in 2003) has extended the identification and disclosure of related
parties to include state-owned enterprises. Related parties include CEA Holding and its
subsidiaries, Civil Aviation Administration of China ("CAAC", a regulatory authority of
the civil aviation industry in the PRC) and its affiliates, and other state-controlled
enterprises and their subsidiaries, directly or indirectly controlled by the PRC
government, corporations in which the Company is able to control or exercise
significant influence, and key management personnel of the Company, CEA Holding, CAAC
and other state-controlled enterprises, and their close family members.
—
IFRS 3, IAS 36 (revised in 2004) and IAS 38 (revised in 2004) have resulted in
a change in the accounting policy relating to the accounting for goodwill and negative
goodwill. The Group ceased amortization of goodwill and negative goodwill from January
1, 2005. Accumulated amortization as at December 31, 2004 has been eliminated with a
corresponding decrease in the costs of goodwill and negative goodwill. From January 1,
2005 onwards, positive goodwill arising from all acquisitions is no longer subject to
amortization but is tested annually for impairment, as well as when there are
indications of impairment. The balance of negative goodwill as at January 1, 2005 is
derecognized with a corresponding adjustment to the opening balance of retained
profits. Negative goodwill amounted RMB42,873,000 has been derecognized to the opening
balance of retained profits as at January 1, 2005. From January 1, 2005 onwards, IFRS 3
requires, the Group to recognize immediately in the income statement the excess of the
net fair value of those items acquired over the cost of the acquisition.
F-10
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(a)
Basis of Preparation (Continued)
The adoption of IFRS 3, IAS 36 and IAS 38 resulted in:
2005
RMB'000
Increase in intangible assets
42,873
Increase in retained profits
42,873
—
IAS 32 (revised in 2003) has added the requirements to disclose information
about the use of valuation techniques, including the sensitivities of fair value
estimates, to significant valuation assumptions.
—
IFRS 5 has resulted in a change in the accounting policy relating to the
recognition of assets held for sale or discontinued operations, which did not have any
material impact on the results and financial positions of the Group as the Group did
not hold material assets in this category during the periods presented.
Standards, interpretations and amendments to published standards that are not yet effective
Certain new standards, amendments and interpretations to existing standards, which are
relevant to the Group's operations, have been published that are mandatory for the
Group's accounting periods beginning on or after January 1, 2006 or later periods, but
the Group has not early adopted are, as follows:
—
IAS 19 (Amendment) introduces the option of an alternative recognition approach
for actuarial gains and losses. It may impose additional recognition requirements for
multi-employer plans where insufficient information is available to apply defined
benefit accounting. It also adds new disclosure requirements. As the Group does not
intend to change the accounting policy adopted for recognition of actuarial gains and
losses and does not participate in any multi-employer plans, adoption of this amendment
will only impact the format and extent of disclosures presented in the financial
statements. The Group will apply this amendment from January 1, 2006.
—
IAS 39 (Amendment) changes the definition of financial instruments classified
at fair value through profit or loss and restricts the ability to designate financial
instruments as part of this category. The Group believes that this amendment should not
have a significant impact on the classification of financial instruments, as the Group
should be able to comply with the amended criteria for the designation of financial
instruments at fair value through profit and loss. The Group will apply this amendment
from January 1, 2006.
F-11
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(a)
Basis of Preparation (Continued)
—
IFRS 7 introduces new disclosures to improve the information about financial
instruments. It requires the disclosure of qualitative and quantitative information
about exposure to risks arising from financial instruments, including specified minimum
disclosures about credit risk, liquidity risk and market risk, including sensitivity
analysis to market risk. It replaces IAS 30, Disclosures in the Financial Statements of
Banks and Similar Financial Institutions, and disclosure requirements in IAS 32,
Financial Instruments: Disclosure and Presentation. It is applicable to all entities
that report under IFRS. The amendment to IAS 1 introduces disclosures about the level
of an entity's capital and how it manages capital. The Group assessed the impact of
IFRS 7 and the amendment to IAS 1 and concluded that the main additional disclosures
will be the sensitivity analysis to market risk and the capital disclosures required by
the amendment of IAS 1. The Group will apply IFRS 7 and the amendment to IAS 1 from
January 1, 2007.
—
IFRIC 4 requires the determination of whether an arrangement is or contains a
lease to be based on the substance of the arrangement. It requires an assessment of
whether: (a) fulfillment of the arrangement is dependent on the use of a specific asset
or assets (the asset); and (b) the arrangement conveys a right to use the asset.
Management is currently assessing the impact of IFRIC 4 on the Group's operations.
The financial information has been prepared in Renminbi ("RMB"), the national currency of
the PRC. Solely for the convenience of the reader, the December 31, 2005 financial
statements have been translated into United States dollars ("US$") at the rate of US$1.00 =
RMB8.0702, being the noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of New York on
December 31, 2005. No representation is made that the RMB amounts could have been, or could
be, converted into United States dollars at that rate or at any other certain rate on
December 31, 2005 or at any other certain date.
(b)
Group accounting
The consolidated financial statements include the financial statements of the Company and
its subsidiaries made up to December 31.
(i)
Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the
Group has the power to govern the financial and operating policies generally
accompanying a shareholding of more than one half of the voting rights. The
existence and effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to
the Group. They are de-consolidated from the date that control ceases.
F-12
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(b)
Group accounting (CONTINUED)
(i)
Subsidiaries (Continued)
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair value
of the assets given, equity instruments issued and liabilities incurred or assumed
at the date of exchange, plus costs directly attributable to the acquisition.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at the acquisition
date, irrespective of the extent of any minority interest. The excess of the cost of
acquisition over the fair value of the Group's share of the identifiable net assets
acquired is recorded as goodwill. If the cost of acquisition is less than the fair
value of the net assets of the subsidiary acquired, the difference is recognized
directly in the income statement (see Note 2(k)).
Inter-company transactions, balances and unrealized gains on transactions between
group companies are eliminated. Unrealized losses are also eliminated but considered
an impairment indicator of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.
Minority interest represents the interests of outside members in the operating
results and net assets of subsidiaries. The Group applies a policy of treating
transactions with minority interest as transactions with parties external to the
Group. Disposals to minority interest result in gains and losses for the Group that
are recorded in the income statement. Purchases from minority interest result in
goodwill, being the difference between any consideration paid and the relevant share
acquired of the carrying value of net assets of the subsidiary.
F-13
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(b)
Group accounting (CONTINUED)
(i)
Subsidiaries (Continued)
Particulars of the principal subsidiaries, all of which are limited companies
established and operating in the PRC, as of December 31, 2005 are as follows:
Place and
Attributable
date of
Paid-up
equity
Principal
Company
establishment
capital
interest
Activities
2004
2005
2004
2005
RMB'000
RMB'000
China Cargo Airlines
Co., Ltd.
PRC
July 22, 1998
500,000
500,000
70
%
70
%
Provision of
cargo carriage
services
Shanghai Eastern
Airlines Logistics
Co., Ltd.
PRC
August 23, 2004
200,000
200,000
70
%
70
%
Provision of
cargo logistics
services
China Eastern Airlines
Jiangsu Co., Ltd.
PRC
May 3, 1993
803,666
880,000
63
%
63
%
Provision of
airline services
Eastern Airlines
Hotel Co., Ltd.
PRC
March 18,
1998
70,000
70,000
86
%
86
%
Provision of
hotel services
primarily to crew
Members
Shanghai Eastern
Airlines Investment
Co., Ltd.
PRC
May 8, 2002
412,500
412,500
99
%
99
%
Investment Holding
Shanghai Eastern
Flight Training Co.,
Ltd.
PRC
December 18,
1995
473,000
473,000
95
%
95
%
Provision of
flight training
services
Shanghai Eastern
Maintenance Co.,
Ltd.
PRC
November 27,
2002
25,658
25,658
60
%
60
%
Provision of
aircraft repairment
and maintenance
China Eastern Fudart
Transportation
Service
Co., Ltd.
PRC
April 1, 1993
5,714
5,714
51
%
51
%
Provision
of agency
services for
transportation of
import and
export cargo
by air or sea
c
F-14
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(b)
Group accounting (CONTINUED)
(ii)
Associates
Associates are all entities over which the Group has significant influence but not
control, generally accompanying a shareholding of between 20% and 50% of the voting
rights. Investments in associates are accounted for using the equity method of
accounting and are initially recognized at cost. The Group's investments in
associates includes goodwill (net of any accumulated impairment loss) identified on
acquisition (see Note 2(k)).
The Group's share of its associates' post-acquisition profits or losses is
recognized in the income statement, and its share of post-acquisition movements in
reserves is recognized in reserves. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment. When the Group's share of
losses in an associate equals or exceeds its interest in the associate, including
any other unsecured receivables, the Group does not recognize further losses, unless
it has incurred obligations or made payments on behalf of the associate.
Unrealized gains on transactions between the Group and its associates are eliminated
to the extent of the Group's interest in the associates. Unrealized losses are also
eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of associates have been changed where necessary to
ensure consistency with the policies adopted by the Group.
(iii)
Jointly Controlled Entities
A jointly controlled entity is an entity in which the Group has joint control over
its economic activity established under a contractual arrangement. The Group's
investments in jointly controlled entities includes goodwill (net of any accumulated
impairment loss) identified on acquisition (see note 2(k)).
The Group's interests in jointly controlled entities are accounted for by the equity
method of accounting based on the audited financial statements or management
accounts of the jointly controlled entities. The Group's share of its jointly
controlled entities' post-acquisition profits or losses is recognized in the income
statement, and its share of post-acquisition movements is adjusted against the
carrying amount of the investment. When the Group's share of losses in a jointly
controlled entities' equals or exceeds its interest in the jointly controlled
entities, including any other unsecured receivables, the Group does not recognize
further losses, unless it has incurred obligations or made payments on behalf of the
jointly controlled entities.
Unrealized gains on transactions between the Group and its jointly controlled
entities are eliminated to the extent of the Group's interest in the jointly
controlled entities. Unrealized losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Accounting policies of
jointly controlled entities have been changed where necessary to ensure consistency
with the policies adopted by the Group.
(iv)
Common Control Transactions
The Group adopts acquisition accounting for common control transactions.
F-15
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(c)
Foreign currency translation
Items included in the financial statements of each of the Group's entities are measured
using the currency of the primary economic environment in which the entity operates ("the
functional currency"). The financial statements are presented in Chinese Renminbi ("RMB"),
which is the Company's functional and presentation currency.
Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognized in the income statement, except when deferred in equity as qualifying cash flow
hedges.
Translation differences on non-monetary financial assets and liabilities are reported as
part of the fair value gain or loss. When a gain or loss on a non-monetary item is
recognized directly in equity, any exchange component of that gain or losses is recognized
directly in equity. Conversely, when a gain or loss on a non-monetary item is recognized in
the income statement, any exchange component of that gain or loss is recognized in the
income statement.
(d)
Revenue recognition and sales in advance of carriage
Passenger, cargo and mail revenues are recognized as traffic revenues when the
transportation services are provided. The value of sold but unused tickets is included in
current liabilities as sales in advance of carriage.
Commission income represents amounts earned from other carriers in respect of sales made by
the Group's agents on their behalf, and is recognized in the income statement upon ticket
sales. Commission expense represents amounts payable to other carriers in respect of sales
made by the other carriers for the Group, and is recognized in the income statement when the
related revenue is recognized.
Revenues from other operating businesses, including income derived from the provision of
ground services and cargo handling services, are recognized when the services are rendered.
Rental income from subleases of aircraft is recognized on a straight-line basis over the
terms of the respective leases. Rental income from leasing office premises and cargo
warehouses is recognized on a straight-line basis over the lease term.
Interest income is recognized on a time-proportionate basis using the effective interest
method.
Revenues are presented net of business tax.
(e)
Segment reporting
A business segment is a group of assets and operations engaged in providing products or
services that are subject to risks and returns that are different from those of other
business segments. A geographical segment is engaged in providing products or services
within a particular economic environment that is subject to risks and returns that are
different from those of segments operating in other economic environments.
F-16
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(e)
Segment reporting (Continued)
In accordance with the Group's internal financial reporting, the Group has determined that
business segments be presented as the primary reporting format and geographical as the
secondary reporting format.
In respect of the geographical segment, the analysis of turnover and operating profit by
geographical segment is based on the following criteria:
(i)
Traffic revenue from services within the PRC (excluding Hong Kong Special
Administrative Region ("Hong Kong")) is classified as domestic operation. Traffic
revenue from inbound and outbound services between the PRC and Hong Kong or overseas
markets is classified under Hong Kong or the relevant overseas locations.
(ii)
Revenues from ticket handling services, airport ground services and other
miscellaneous services are classified on the basis of where the services are performed.
(f)
Retirement benefits
The Group participates in defined contribution retirement schemes regarding pension and
medical benefits for employees organized by the municipal governments of the relevant
provinces. The contributions to the schemes are charged to the income statement as and when
incurred.
In addition, the Group provides retirees with post-retirement benefits including
retirement subsidies, transportation subsidies, social function activity subsidies as well
as other welfare. The liability recognized in the balance sheet in respect of defined
benefit pension plans is the present value of the defined benefit obligation at the balance
sheet date less the fair value of plan assets, together with adjustments for unrecognized
actuarial gains or losses and past service costs. The defined benefit obligation is
calculated annually using the projected unit credit method. The present value of the defined
benefit obligation is determined by discounting the estimated future cash outflows using
interest rates of government bonds that are denominated in the currency in which the
benefits will be paid, and that have terms to maturity approximating to the terms of the
related pension liability. Actuarial gains and losses arising from experience adjustments
and changes in actuarial assumptions in excess of the greater of 10% of the value of plan
assets or 10% of the defined benefit obligation are charged or credited to income over the
employees' expected average remaining working lives.
Past-service costs are recognized immediately in income, unless the changes to the
pension plan are conditional on the employees remaining in service for a specified period of
time (the vesting period). In this case, the past-service costs are amortized on a
straight-line basis over the vesting period.
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(g)
Maintenance and overhaul costs
In respect of aircraft and engines under operating leases, the Group has the responsibility
to fulfill certain return conditions under relevant leases. In order to fulfill these return
conditions, major overhauls are required to be conducted on a regular basis. Accordingly,
the present value of estimated costs of major overhauls for aircraft and engines under
operating leases are provided at each balance sheet date. The provision in each period is
estimated using historical major overhaul costs incurred during each overhaul and the
estimated period between overhauls using the ratios of actual flying hours/cycles and
estimated flying hours/cycles between overhauls. The costs of major overhauls comprise
mainly labor and materials. Differences between the estimated cost and the actual cost of
the overhaul are included in the income statement in the period of overhaul.
In respect of aircraft and engines owned by the Group or held under finance leases, costs of
overhaul are capitalized as a component of property, plant and equipment and are depreciated
over the appropriate maintenance cycles. When each overhaul is performed, its cost is
recognized in the carrying amount of the item of property, plant and equipment and is
depreciated over the estimated period between overhauls, on a straight-line basis. Upon
completion of an overhaul, any remaining carrying amount of the cost of the previous
overhaul is derecognized and charged to the income statement.
All other routine repairs and maintenance costs incurred in restoring such assets to their
normal working condition are charged to the income statement as and when incurred.
Improvements are capitalized and depreciated over their expected useful lives to the Group.
(h)
Government grant
Grants from the government are recognized at their fair value where there is a reasonable
assurance that the grant will be received and the Group will comply with all attached
conditions.
Government grants relating to costs are deducted from the related cost in the income
statement as a reduction of the related cost.
Government grants relating to the property, plant and equipment are recognized as a
reduction of carrying amount of the asset. The grant is recognized as income over the life
of a depreciable asset by way of a reduced depreciation charge.
(i)
Taxation
The Group provides for income tax based on the results for the year as adjusted for items
which are not assessable or deductible for income tax purposes. Taxation of the Group is
determined in accordance with the relevant tax rules and regulations applicable in the
jurisdictions where the group companies operate.
Deferred income tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their carrying
amounts in the financial statements. However, deferred income tax is not accounted for if it
arises from initial recognition of an asset or liability in a transaction other than a
business combination. Deferred tax is measured using tax rates enacted, or substantively
enacted at the balance sheet date.
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(i)
Taxation (Continued)
Deferred tax assets are recognized to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilized.
Deferred income tax is provided on temporary differences arising on investments in
subsidiaries, associates and jointly controlled entities, except where the timing of the
reversal of the temporary difference is controlled by the Group and it is probable that the
temporary difference will not reverse in the foreseeable future.
(j)
Property, plant and equipment
Property, plant and equipment are recognized initially at cost which comprises purchase
price, costs transferred from construction in progress and advance payments on acquisition,
and any directly attributable costs of bringing the assets to the condition for their
intended use.
Subsequent to the initial recognition, property, plant and equipment are stated at revalued
amount less accumulated depreciation and accumulated impairment losses, if any. Independent
valuations are performed at least once every five years, or sooner if considered necessary
by the directors. In the intervening years, the directors review the carrying values of the
property, plant and equipment and adjustment is made where they are materially different
from fair value. Increases in the carrying amount arising on revaluation are credited to the
revaluation reserve. Decreases in valuation of property, plant and equipment are first
offset against increases from earlier valuations of the same asset and are thereafter
charged to the income statement. All other decreases in valuation are charged to the income
statement. Any subsequent increases are credited to the income statement up to the amount
previously charged. Any accumulated depreciation at the date of revaluation is eliminated
against the gross carrying amount of the asset, and the net amount is restated to the
revalued amount of the asset.
Costs of overhaul for aircraft and engines owned by the Group or held under finance leases
are capitalized as a component of property, plant and equipment when incurred (see Note
2(g)).
Depreciation of property, plant and equipment is calculated on a straight-line basis to
write off the cost or revalued amount of each asset to their residual value over their
estimated useful lives. The estimated useful lives used for the calculation of annual
depreciation charges are as follows:
Aircraft, engines and flight equipment
- Components related to overhaul costs
—
2 to 8 years
- Others
—
20 years
Buildings
—
15 to 35 years
Other property, plant and equipment
—
5 to 20 years
The residual values and useful lives of each property, plant and equipment are reviewed, and
adjusted if appropriate at each balance sheet date.
An asset's carrying amount is written down immediately to its recoverable amount if the
asset's carrying amount is greater than its estimated revalued amount (Note 2(l)).
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(j)
Property, plant and equipment (Continued)
Gains and losses on disposals are determined by comparing proceeds with carrying amounts and
are included in operating profit. When revalued assets are sold, the relevant amounts
included in the revaluation reserve are transferred from revaluation reserve to retained
profits.
(k)
Intangible assets
Goodwill represents the excess of the cost of an acquisition over the fair value of the
Group's share of the net identifiable assets of the acquired subsidiary, associate, jointly
controlled entity or business at the date of acquisition. Goodwill on acquisition of
subsidiaries and businesses is included in 'intangible assets'. Goodwill on acquisition of
associates and jointly controlled entities is included in 'investments in associates' and
'investments in jointly controlled entities'. Recognized goodwill is tested annually for
impairment and carried at cost less accumulated impairment losses, if any. Impairment losses
on goodwill are not reversed. Gains and losses on the disposals of an entity include the
carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The
allocation is made to those cash-generating units or groups of cash-generating units that
are expected to benefit from the business combination in which the goodwill arose.
(l)
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortization and are tested
annually for impairment. Assets that are subject to amortization are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's
fair value less costs to sell and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which there are separately identifiable cash
flows (cash-generating units).
Non-financial assets other than goodwill that suffered impairment are reviewed for possible
reversal of the impairment at each reporting date.
(m)
Construction in progress
Construction in progress represents buildings under construction
and plant and equipment pending installation. This includes the
costs of construction and acquisition and interest capitalized
(Note 2(p)). No depreciation is provided on construction in
progress until the asset is completed and ready to use.
(n)
Lease prepayments
Lease prepayments represent acquisition costs of land use rights less accumulated
amortization. Amortization is provided over the lease period of land use rights on a
straight-line basis.
(o)
Advanced payments on acquisition of aircraft
Advanced payments on acquisition of aircraft represents payments to aircraft manufacturers
to secure deliveries of aircraft in future years and the related interest capitalized (Note
2(p)). The balance is transferred to property, plant and equipment upon delivery of the
aircraft.
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(p)
Borrowing costs
Interest attributable to loans for advance payments used to finance the acquisition of
aircraft and other qualifying assets is capitalized as an additional cost of the related
asset. Interest is capitalized at the Group's weighted average interest rate on borrowings
or, where applicable, the interest rate related to specific borrowings during the period of
time that is required to complete and prepare the asset for its intended use.
All other borrowing costs are charged to the income statement in the period in which they
are incurred.
(q)
Long-term bank deposits
Long-term bank deposits placed to secure future lease obligations are classified as
held-to-maturity financial assets. Held-to-maturity financial assets are initially
recognized in the balance sheet at fair value plus transaction costs. Subsequently, they are
stated in the balance sheet at amortized cost less impairment losses.
(r)
Flight equipment spare parts
Flight equipment spare parts are stated at the lower of cost and net realizable value. Cost
is determined using the weighted average method. The cost of flight equipment spare parts
comprises the purchase price (net of discounts), freight charges, duty and value added tax
and other miscellaneous charges. The net realizable value is the estimated replacement cost
of the flight equipment spare parts.
(s)
Trade receivables
Trade receivables are recognized initially at fair value and subsequently measured at
amortized cost using the effective interest method, less provision for impairment. A
provision for impairment of trade receivables is established when there is objective
evidence that the Group will not be able to collect all amounts due according to the
original terms of receivables. Significant financial difficulties of the debtor, probability
that the debtor will enter bankruptcy or financial reorganization, and default or
delinquency in payments are considered indicators that the trade receivable is impaired. The
amount of the provision is the difference between the asset's carrying amount and the
present value of estimated future cash flows, discounted at the effective interest rate. The
amount of the provision is recognized in the income statement.
(t)
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other
short-term highly liquid investments with original maturities of three months or less.
(u)
Borrowings
Borrowings are recognized initially at fair value, net of transaction costs incurred.
Borrowings are subsequently stated at amortized cost; any differences between the proceeds
(net of transaction costs) and the redemption value is recognized in the income statement
over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right
to defer settlement of the liability for at least 12 months after the balance sheet date.
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(v)
Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a
result of past events, it is more likely than not that an outflow of resources will be
required to settle the obligation, and the amount can be reliably estimated. Where the Group
expects a provision to be reimbursed, for example under an insurance contract, the
reimbursement is recognized as a separate asset but only when the reimbursement is virtually
certain.
Where there are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as a whole. A
provision is recognized even if the likelihood of an outflow with respect to any one item
included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to
settle the obligation using a pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the obligation. The increase in the provision
due to passage of time is recognized as interest expense.
(w)
Leases
(i)
A Group company is the lessee
Leases of assets where the Group has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are capitalized at the
inception of the lease at the lower of the fair value of the leased asset or the
present value of the minimum lease payments. Each lease payment is allocated between
the liability and finance charges so as to achieve a constant rate on the finance
balance outstanding. The interest element of the finance cost is charged to the income
statement over the lease period so as to produce a constant periodic rate of interest
on the remaining balance of the liability for each period. Leased assets are
depreciated using a straight-line basis over their expected useful lives to residual
values.
Leases of assets under which a significant portion of the lease risks and rewards of
ownership are retained by the lessor are classified as operating leases. Lease
payments made under operating leases are charged to the income statement on a
straight-line basis over the period of the lease.
(ii)
A Group company is the lessor
When assets are leased out under a finance lease, the present value of the lease
payments is recognized as a receivable. The difference between the gross receivable
and the present value of the receivable is recognized as unearned finance income.
Lease income is recognized over the term of the lease using the net investment method,
which reflects a constant periodic rate of return.
Assets leased out under operating leases are included in property, plant and equipment
in the balance sheet. They are depreciated over their expected useful lives on a basis
consistent with similar property, plant and equipment. Rental income is recognized on
a straight-line basis over the lease term.
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(x)
Derivative financial instruments
Derivative financial instruments are initially recognized in the balance sheet at fair value
and are subsequently remeasured at their fair value. The accounting for subsequent changes
in fair value depends on whether the derivative is designated as a hedging instrument, and
if so, the nature of the item being hedged.
The Group documents at the inception of the transaction the relationship between hedging
instruments and hedged items, as well as its risk management objectives and strategy for
undertaking various hedge transactions. The Group also documents its assessment, both at
hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in fair values or cash flows of
hedged items.
Derivative financial instrument that does not qualify for hedge accounting are accounted for
as trading instruments and any unrealized gains or losses, being changes in fair value of
the derivative, are recognized in the income statement immediately.
Changes in the fair value of derivatives that are designated and qualify as fair value
hedges and that are highly effective, are recorded in the income statement, along with any
changes in the fair value of the hedged assets or liabilities that are attributable to the
hedged risk.
Derivative financial instrument that qualifies for hedge accounting and is designated as a
specific hedge of the variability in cashflows of a highly probable forecast transaction, is
accounted for as follows:
(i)
the effective portions of any change in fair value on the derivative financial
instrument is recognized directly in equity. Where the forecasted transaction or firm
commitment results in the recognition of an asset or a liability, the gains and losses
previously deferred in equity are included in the initial measurement of the cost of
the asset or liability. Otherwise, the cumulative gain or loss on the derivative
financial instrument is removed from equity and recognized in the income statement in
the same period during which the hedged forecast transaction affects net profit or
loss.
(ii)
the ineffective portions of any change in fair value is recognized in the
income statement immediately.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria
for hedge accounting, any cumulative gain or loss existing in equity at that time remains in
equity and is recognized in the income statement when the committed or forecasted
transaction ultimately occurs. When a committed or forecasted transaction is no longer
expected to occur, the cumulative gain or loss that was recorded in equity is immediately
transferred to the income statement.
(y)
Dividend
Dividend distribution to the Company's shareholders is recognized as a liability in the
financial statements in the period in which the dividends are approved by the Company's
equity holders.
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(z)
Available-for-sale financial assets
Investments in securities other than subsidiaries, associates and jointly controlled
entities, being held for non-trading purposes, are classified as available-for-sale
financial assets and are initially recognized at fair value plus transaction costs. At each
balance sheet date, the fair value is remeasured, with any resulting gain or loss being
recognized directly in equity in the fair value reserve, except for impairment losses. When
these investments are derecognized, the cumulative gain or loss previously recognized
directly in equity is recognized in the income statement.
The Group assesses at each balance sheet date whether there is objective evidence that a
financial asset is impaired. In the case of equity securities classified as available for
sale, a significant or prolonged decline in the fair value of the securities below its cost
is considered an indicator that the securities are impaired. If any such evidence exists for
available-for-sale financial assets, the cumulative loss, measured as the difference between
the acquisition cost and the current fair value less any impairment loss on that financial
asset previously recognized in the income statement, is removed from equity and recognized
in the income statement. Impairment losses recognized in the income statement on equity
instruments are not reversed through the income statement.
(aa)
Comparatives
Where necessary, prior year amounts have been reclassified to conform with changes in
presentation in the current year. The major reclassifications for the 2004 comparative
figures include reclassification of certain items from "other payables and accrued expenses"
to "trade and notes payables", and certain items from "prepayments, deposits and other
receivables" to "trade receivables".
3.
FINANCIAL RISK MANAGEMENT
(a)
Financial risk factors
Financial assets of the Group mainly includes bank deposits and balances, amounts due from
related companies, trade receivables, long-term receivables, short-term investments and
derivative assets. Financial liabilities of the Group include bank and other loans,
obligations under finance leases, amounts due to related companies, trade payables, notes
payables, derivative liabilities and other payables.
(i)
Business risk
The operations of the air transportation industry are substantially influenced by
global political and economic development. Accidents, wars, natural disasters, etc.
may have material impact on the Group's operations or the industry as a whole. In
addition, the Group conducts its principal operations in the PRC and accordingly is
subject to special considerations and significant risks not typically associated with
companies in 'Western' countries. These include risks associated with, among others,
the political, economic and legal environment, competition and the influence of CAAC
in the PRC civil aviation industry.
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
FINANCIAL RISK MANAGEMENT (CONTINUED)
(a)
Financial risk factors (Continued)
(ii)
Price risk
The Group's results of operations may be significantly affected by the fluctuation in
fuel prices which is a significant expense for the Group. While the international fuel
prices are determined by worldwide market demand and supply, domestic fuel prices are
regulated by CAAC. The Group has entered into certain financial derivatives to hedge
against the fuel prices risk (Note 35(c)).
(iii)
Interest rate risk
The Group has significant bank borrowings at floating variable rates and is exposed to
risk arising from changes in market interest rates. To hedge against the variability
in the cashflow arising from a change in market interest rates, the Group has entered
into certain interest rate swaps to swap variable rates into fixed rates. The interest
rates and terms of repayment of borrowings made to the Group are disclosed in Note 29.
Details of interest rate swaps are disclosed in Note 35(a).
(iv)
Credit risk
The Group has no significant concentrations of credit risk. The Group has policies in
place to ensure that blank tickets are made to sales agents with an appropriate credit
history. A major portion of sales are conducted through sales agents and the majority
of these agents are connected to various settlement plans and/or clearing systems
which have tight requirements on the credit standing of these agents.
Transactions in relation to derivative financial instruments are only carried out with
financial institutions of high reputation. The Group has policies that limit the
amount of credit exposure to any one financial institution.
(v)
Liquidity risk
The Group's primary cash requirements have been for additions of and upgrades to
aircraft, engines and flight equipment and payments on related borrowings/debts. The
Group finances its working capital requirements through a combination of funds
generated from operations and short-term bank loans. The Group generally acquires
aircraft through long-term finance leases and long-term loans.
The Group operates with a working capital deficit. As at December 31, 2005, the
Group's net current liabilities amounted to RMB25,598 million (2004: RMB12,491
million). For the year ended December 31, 2005, the Group recorded a net cash inflow
from operating activities of RMB1,952 million (2004: RMB3,266 million), a net cash
outflow from investing activities and financing activities of RMB2,183 million (2004:
RMB2,745 million), and an decrease in cash and cash equivalents of RMB231 million
(2004: increase of RMB521 million).
The directors of Company believe that cash from operations and short-term bank
borrowings will be sufficient to meet the Group's operating cashflow. Due to the
dynamic nature of the underlying businesses, the Group's treasury policy aims at
maintaining flexibility in funding by keeping credit lines available. The directors of
the Company believe that the Group has obtained sufficient general credit facilities
from PRC banks for financing future capital commitments and for working capital
purposes.
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
FINANCIAL RISK MANAGEMENT (CONTINUED)
(a)
Financial risk factors (Continued)
(vi)
Foreign currency risk
The Group's finance lease obligation as well as certain bank and other loans are
denominated in US dollars, Japanese Yen and Euro, and certain expenses of the Group
are denominated in currencies other than RMB. The Group generates foreign currency
revenues from ticket sales made in overseas offices and would normally generate
sufficient foreign currencies after payment of foreign currency expenses, to meet its
foreign currency liabilities repayable within one year. The Group also enters into
certain foreign currency forward contracts to hedge against foreign currency risk
(Note  35(b)).
(b)
Fair value estimation
The fair value of financial instruments traded in active markets (such as publicly traded
derivatives, and trading and available-for-sale securities) is based on quoted market prices
at the balance sheet date. The quoted market price used for financial assets held by the
Group is the current bid price; the appropriate quoted market price for financial
liabilities is the current ask price.
The fair value of financial instruments that are not traded in an active market is
determined by using valuation techniques. The Group uses a variety of methods and makes
assumptions that are based on market conditions existing at each balance sheet date. Quoted
market prices or dealer quotes for similar instruments are used for long-term debt. Other
techniques, such as estimated discounted cash flows, are used to determine fair value for
the remaining financial instruments. The fair value of interest-rate swaps is calculated as
the present value of the estimated future cash flows. The fair value of forward foreign
exchange contracts is determined using forward exchange market rates at the balance sheet
date. The fair value of fuel option contracts is determined using quoted market values.
The nominal value less impairment provision of trade receivables and payables are assumed to
approximate their fair values. The fair values of other long-term receivables are based on
cash flow discounted using a rate based on the borrowing rate. The fair value of financial
liabilities for disclosure purpose is estimated by discounting the future contractual cash
flows at the current market interest rate that is available to the Group for similar
financial instruments.
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements used in preparing the financial statements are continually
evaluated and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances. The resulting
accounting estimates will, by definition, seldom equal the related actual results. The
estimates and assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year are discussed
below.
(a)
Estimated impairment of goodwill
The Group tests annually whether goodwill has been impaired in accordance with the
accounting policy stated in Note 2(l). The recoverable amounts of cash generating units
have been determined based on value-in-use calculations. These calculations require the use
of estimates (see Note 18). In 2005, after reviewing the business environment as well as
the Group's objectives and past performance, management concluded that there was no material
impairment loss for goodwill.
(b)
Estimated impairment of property, plant and equipment
The Group has made substantial investments in tangible long-lived assets. The Group conducts
impairment reviews of these assets whenever events or changes in circumstances indicate that
their carrying amounts may not be recoverable.
Determining whether an asset is impaired requires significant judgment, including the
Group's estimates of the future cash flows attributable to the asset and the appropriate
discount rate. If different judgments or estimates had been utilized, material differences
could have resulted in the amount and timing of the impairment charge, if any.
(c)
Property, plant and equipment
The Group had approximately RMB38,000 million of property, plant and equipment as at
December 31, 2005, including aircraft, engines and flight equipment with a value of
approximately RMB34,740 million. As discussed in Note 2(j), property, plant and equipment
are initially recognized at cost and are subsequently stated at revalued amount less
accumulated depreciation. Their recorded value is impacted by management judgment, including
valuations performed by the management and/or independent professional valuers, estimates of
useful lives, residual value and impairment charges. If different judgements or estimates
had been utilized, material differences could have resulted in the amount of revaluation and
related depreciation charges.
Management reviewed the carrying value of the Group's property, plant and equipment as at
December 31, 2005 and are of the opinion that the carrying amount of the property, plant and
equipment is not materially different from the estimated fair value and no impairment or
changes in estimates of useful lives are necessary.
(d)
Fair value estimation
The carrying amounts of the Group's current financial assets, including cash and cash
equivalents, trade receivables, prepayments, other receivables, amounts due from related
companies and current financial liabilities including trade payables and note payables,
other payables and accrued expenses and amounts due to related companies, approximate their
fair values due to their short maturities.
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
(e)
Revenue recognition
As discussed in Note 2(d), passenger, cargo and mail revenues are recognized as traffic
revenues when the transportation services are provided. The value of unused passenger
tickets is included in current liabilities as sales in advance of carriage. Unused tickets
are recognized in traffic revenues based on current estimates. Management periodically
evaluate the balance in sales in advance of carriage and record any adjustments, which can
be material, in the period the evaluation is completed. These adjustments result from
differences between the estimates of certain revenue transactions, the timing of recognizing
revenue for any unused air tickets and the related sales price, and are impacted by various
factors, including a complex pricing structure and interline agreements throughout the
industry, which affect the timing of revenue recognition.
(f)
Overhaul costs
The amount of overhaul costs charged/amortized to operating profits is impacted by
management's estimates of the expected flying hours/cycles and overhaul costs, which are
largely based on past experience of overhauls of the same or similar models of aircraft and
engines. Different judgements or estimates could significantly affect the estimated overhaul
provision and materially impact the results of operations.
(g)
Retirement benefits
The Group operates and maintains defined retirement benefit plans which provides retirees
with benefits including transportation subsidies, social activity subsidies as well as other
welfare. As discussed in Note 2(f), the cost of providing the aforementioned benefits in the
defined retirement benefit plan is actuarially determined and recognized over the employees'
service period by utilizing various actuarial assumptions and using the projected unit
credit method. These assumptions include, without limitation, the selection of discount
rate, annual rate of increase of per capita benefit payment and employees' turnover rate.
The discount rate is based on management's review of local high quality corporate bonds. The
annual rate of increase of benefit payments is based on the general local economic
conditions. The employees' turnover rate is based on historical trends of the Group.
Additional information regarding the retirement benefit plans is discussed in Note 33.
(h)
Deferred taxation
While deferred tax liabilities are provided in full on all taxable temporary differences,
deferred tax assets are recognized only to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilized.
In assessing the amount of deferred tax assets that need to be recognized, the Group
considers future taxable income and ongoing prudent and feasible tax planning strategies.
In the event that the Group's estimates of projected future taxable income and benefits from
available tax strategies are changed, or changes in current tax regulations are enacted that
would impact the timing or extent of the Group's ability to utilize the tax benefits of net
operating loss carry forwards in the future, adjustments to the recorded amount of net
deferred tax assets and taxation expense would be made.
(i)
Current tax
The Group makes provision for current tax based on the estimated income tax liabilities.
The estimated income tax liabilities are primarily computed based on the tax filings as
prepared by the Group and based on management's interpretation of relevant tax rulings.
From time to time, there may be disagreements with the tax authorities on the tax treatments
of certain items included in the tax computations.
F-28
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5
REVENUES
The Group is principally engaged in the operation of civil aviation, including the provision
of passenger, cargo, mail delivery and other extended transportation services.
Year ended December 31,
2003
2004
2005
RMB'000
RMB'000
RMB'000
Revenues
Traffic revenues (a)
— Passenger
10,389,701
15,925,933
21,367,747
— Cargo and mail
3,226,949
4,540,463
5,087,244
Commission income
157,784
292,991
185,827
Ground service income
471,338
695,433
806,755
Cargo handling income
163,450
227,806
292,488
Rental income from operating
subleases of aircraft
31,209
121,480
183,260
Others
198,417
110,615
198,175
14,638,848
21,914,721
28,121,496
Less: Business tax (b)
(168,639
)
(528,168
)
(667,053
)
14,470,209
21,386,553
27,454,443
Notes:
(a)
Since the terrorist attacks on the World Trade Centre in New York in September 2001, many
airlines introduced insurance and security surcharges on passenger air tickets (collectively
the "Surcharges"). Such Surcharges are generally recognized as revenue, together with the
other components of the ticket price, when the transportation services are provided.
For tickets that are issued by the Group but where the transportation services are provided
by another carrier, there was (i) industry guidance which permitted the billing of such
Surcharges on a negotiated basis and (ii) diversity in practice among the carriers on the
billing of the Surcharges. Accordingly, the Company deferred recognition of the Surcharges
as revenue. Management believes such Surcharges will no longer be payable based on general
industry acceptance of non billing and industry guidance issued by the Accounting Centre of
China Aviation, the sole agent for interline billing of PRC airlines, in December 2005.
Accordingly, the Surcharges related to tickets uplifted between 2002 and 2004 in the amount
of RMB131,023,000 were released from other payables and recognized as revenue in 2005.
From January 1, 2005, the above insurance and security surcharges together with other
surcharges are recognized as revenue once the transportation services are provided, or once
the ticket price has been billed through interline billing in the case where transportation
services are provided by another carrier.
(b)
Except for traffic revenues derived from inbound international and regional flights, which
are not subject to PRC business tax, the Group's traffic revenues, commission income, ground
service income, cargo handling income and other revenues are subject to PRC business tax
levied at rates ranging from 3% to 5%, pursuant to PRC business tax rules and regulations.
F-29
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6
OTHER OPERATING INCOME
Year ended December 31,
2003
2004
2005
RMB'000
RMB'000
RMB'000
Government subsidies (a)
58,448
73,506
193,069
Net fair value gains on financial instruments
— forward foreign exchange contract
(8,146
)
11,498
25,002
— fuel hedging income
—
—
27,208
50,302
85,004
245,279
Note:
(a)
The government subsidies represent:
(i)
subsidies granted by the local government to the Company from 2002 to 2005 in
consideration of the relocation of the Company's international flights and related
facilities from Shanghai Hongqiao Airport to Pudong International Airport; and
(ii)
subsidies granted by various local municipalities to encourage the Group to
operate certain routes to the places where these municipalities are located.
7
SEGMENT INFORMATION
(a)
Primary reporting format by business segment
The Group principally operates in one business segment, which is the operation of civil
aviation, including the provision of passenger, cargo, mail delivery and other extended
transportation services.
(b)
Secondary reporting format by geographical segment
The Group's revenues (net of business tax) and results by geographical segment are analyzed
as follows:
Other
Domestic
#
Hong Kong
Japan
countries*
Total
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
2005
Traffic revenues
— Passenger
11,438,773
2,494,669
2,009,137
4,910,693
20,853,272
— Cargo and mail
346,428
641,686
623,678
3,354,998
4,966,790
11,785,201
3,136,355
2,632,815
8,265,691
25,820,062
Commission income
124,037
13,768
11,557
36,285
185,647
Ground service income
794,814
—
—
—
794,814
Cargo handling income
281,901
—
—
—
281,901
Rental income from
operating
sublease of aircraft
183,260
—
—
—
183,260
Other operating revenues
188,759
—
—
—
188,759
13,357,972
3,150,123
2,644,372
8,301,976
27,454,443
Other operating income
214,277
6,000
25,002
—
245,279
Segment results
(operating profit)
(658,153
)
184,578
(451,742
)
939,565
14,248
F-30
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7
SEGMENT INFORMATION (CONTINUED)
Other
Domestic
#
Hong Kong
Japan
countries*
Total
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
2004
Traffic revenues
— Passenger
8,283,700
2,239,968
1,502,326
3,508,105
15,534,099
— Cargo and mail
298,846
592,008
647,181
2,890,325
4,428,360
8,582,546
2,831,976
2,149,507
6,398,430
19,962,459
Commission income
201,146
22,297
16,924
50,376
290,743
Ground service income
692,178
—
—
—
692,178
Cargo handling income
224,356
—
—
—
224,356
Rental income from
operating
sublease of aircraft
121,480
—
—
—
121,480
Other operating revenues
95,337
—
—
—
95,337
9,917,043
2,854,273
2,166,431
6,448,806
21,386,553
Other operating income
83,004
2,000
—
—
85,004
Segment results
(operating profit)
188,645
354,754
243,979
445,006
1,232,384
Other
Domestic
#
Hong Kong
Japan
countries*
Total
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
2003
Traffic revenues
— Passenger
5,591,640
1,667,123
1,001,544
2,114,933
10,375,240
— Cargo and mail
279,003
390,088
588,361
1,929,532
3,186,984
5,870,643
2,057,211
1,589,905
4,044,465
13,562,224
Commission income
117,448
10,788
8,338
21,210
157,784
Ground service income
471,338
—
—
—
471,338
Cargo handling income
163,450
—
—
—
163,450
Rental income from
operating
sublease of aircraft
31,209
—
—
—
31,209
Other operating revenues
84,204
—
—
—
84,204
6,738,292
2,067,999
1,598,243
4,065,675
14,470,209
Other operating income
50,302
—
—
—
50,302
Segment results
(operating profit)
(524,488
)
198,406
166,545
225,610
66,073
#:
The People's Republic of China, excluding the Hong Kong Special Administrative
Region.
*:
include the United States of America, Europe and Asian countries other than
Japan.
The major revenue-earning assets of the Group are its aircraft, all of which are registered
in the PRC. Since the Group's aircraft is deployed flexibly across its route network, there
is no suitable basis of allocating such assets and the related liabilities to geographical
segments and hence segment assets and capital expenditure by segment have not been
presented.
F-31
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8
WAGES, SALARIES AND BENEFITS
Year ended December 31,
2003
2004
2005
RMB'000
RMB'000
RMB'000
Wages, salaries, bonus and allowances
892,012
1,549,339
1,774,292
Employee welfare and benefits
135,080
41,383
166,267
Staff housing allowance (Note 34(b))
260,463
29,253
36,231
Defined contribution retirement
schemes (Note 33(a))
121,200
194,200
280,218
Post-retirement benefits (Note 33(b))
40,299
51,704
102,459
1,449,054
1,865,879
2,359,467
9
FINANCE COSTS
Year ended December 31,
2003
2004
2005
RMB'000
RMB'000
RMB'000
Interest relating to obligations under
finance leases
— wholly repayable within five years
324,184
265,949
195,764
— not wholly repayable within five years
166,272
73,327
128,869
490,456
339,276
324,633
Interest on loans from bank and financial
institutions
— wholly repayable within five years
265,955
410,998
729,698
— not wholly repayable within five years
180,291
144,693
243,433
446,246
555,691
973,131
Interest relating to note payables
6,396
22,148
52,639
Amortization of the discount on zero
coupon debentures
—
—
22,944
Interest relating to a long-term payable
(Note 29)
9,610
8,344
6,999
952,708
925,459
1,380,346
Less: amounts capitalized into advance
payments on acquisition of aircraft
(Note 17)
(97,414
)
(57,120
)
(279,989
)
855,294
868,339
1,100,357
Net foreign exchange (gains)/losses (a)
62,179
32,207
(414,640
)
Waiver of amounts due to related
companies
—
(133,029
)
—
Fair value losses on financial instruments
— transfer from equity in respect of
interests rate swap qualified as
cash flow hedges
5,010
2,659
21,333
922,483
770,176
707,050
(a)
The exchange gain for the year ended December 31, 2005 primarily relates to revaluation of
the Group's foreign currency denominated borrowings and obligations under finance leases.
F-32
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10
(LOSS)/PROFIT BEFORE INCOME TAX
(Loss)/profit before income tax is stated after:
Year ended December 31,
2003
2004
2005
RMB'000
RMB'000
RMB'000
Charging:
Depreciation of property, plant
and equipment
2,956,031
3,076,585
3,911,722
Operating lease rentals
— aircraft
1,238,012
1,720,736
1,785,615
— land and buildings
116,279
146,704
212,027
Amortization of lease prepayments
20,049
18,414
25,219
Amortization of goodwill
5,654
5,654
—
Loss on disposals of property,
plant and equipment
33,578
—
—
Consumption of flight equipment
spare parts
86,009
139,711
239,134
Allowances for obsolescence of
flight equipment spare parts
53,336
73,406
—
Provision for impairment of trade
and other receivables
19,229
24,250
25,325
Auditors' remuneration
7,380
7,380
10,000
and crediting:
Amortization of negative goodwill
3,452
3,452
—
Reversal of allowances for
obsolescence of flight equipment
spare parts
—
—
13,930
Gain on disposals of property,
plant and equipment
—
47,819
8,073
Gain on disposals of financial
asset held for trading
21,920
5,235
—
F-33
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11
TAXATION
(a)
Taxation (credited)/charged to the consolidated statements of
operations is as follows:
Year ended December 31,
2003
2004
2005
RMB'000
RMB'000
RMB'000
Provision for PRC income tax, net of reversal
124,530
160,502
(81,734
)
Deferred taxation
114,843
(30,901
)
(56,970
)
239,373
129,601
(138,704
)
The Company is subject to PRC income tax at a reduced rate of 15%, pursuant to the Circular
Hu Shui Er Cai (2001) No. 104 issued by the Shanghai Municipal State Tax Bureau. Two of the
major subsidiaries of the Group, namely China Cargo Airlines Co. Ltd., and Shanghai Eastern
Flight Training Co., Ltd , are subject to PRC income tax at a reduced rate of 15%, pursuant
to the preferential tax policy in Pudong, Shanghai. Shanghai Eastern Logistics Co., Ltd. is
exempted from PRC income tax in 2005 pursuant to the circular Hu Di Shui Er Shui (2004)
No.68 issued by Shanghai Municipal State Tax Bureau. Other subsidiaries of the Group are
subject to PRC corporate income tax at the standard rate of 33%.
The tax on the Group's consolidated statements of
operations differs from the theoretical amount
that would arise using the taxation rate of the home country of the Company as follows:
Year ended December 31,
2003
2004
2005
RMB'000
RMB'000
RMB'000
(Loss)/profit before taxation
(741,302
)
585,972
(577,432
)
Adjusted:
Share of result of associates and jointly
controlled entities
32,738
5,256
13,330
(708,564
)
591,228
(564,102
)
Tax calculated at enacted tax rate of 15%
106,285
(88,684
)
84,615
Effect attributable to subsidiaries charged
at tax rate of 33%
(10,539
)
(17,578
)
18,334
Effect attributable to subsidiaries with
income tax exemption
—
—
33,852
Income not subject to taxation
—
—
4,462
Expenses not deductible for tax purposes
(74,273
)
(27,673
)
(5,642
)
Reversal of income tax provision made in
prior years as a result of tax clearance
with local tax bureau
—
—
81,807
Unrecognized tax losses
(258,515
)
—
(86,074
)
Utilization of previously unrecognized
tax losses
—
6,395
—
Others
(2,331
)
(2,061
)
7,350
Tax (charge)/benefit
(239,373
)
(129,601
)
138,704
F-34
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11
TAXATION (CONTINUED)
(b)
The Group operates international flights to overseas destinations. There was no material
overseas taxation for the years ended December 31, 2005 and 2004, as there are double tax
treaties between the PRC and the corresponding jurisdictions (including Hong Kong) relating to
aviation business.
(c)
Deferred income tax assets and liabilities are offset when there is a legally
enforceable right of offset and when the deferred income taxes relate to the same authority.
The following amounts, determined after appropriate offsetting, are shown in the balance
sheets:
December 31,
2004
2005
RMB'000
RMB'000
Deferred tax assets
— Deferred tax asset to be utilized
after 12 months
286,780
286,764
— Deferred tax asset to be utilized
within 12 months
108,685
148,075
395,465
434,839
Deferred tax liabilities
— Deferred tax liability to be realized
after 12 months
(687,850
)
(601,340
)
— Deferred tax liability to be realized
within 12 months
—
—
(687,850
)
(601,340
)
Deferred tax liabilities, net
(292,385
)
(166,501
)
Movements in net deferred taxation liability is as follows:
December 31,
2004
2005
RMB'000
RMB'000
At January 1, as restated
325,753
292,385
Additions through business acquisitions (Note 38)
—
(93,017
)
Credited to income statement (Note 11(a))
(30,901
)
(56,970
)
Charged/(credited) to equity:
— gain/(losses) on cashflow hedges (Note 31)
(2,467
)
24,103
At December 31
292,385
166,501
F-35
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11
TAXATION (CONTINUED)
The deferred tax assets and liabilities (prior to offsetting of balances within the same tax
jurisdiction) were made up of taxation effects of the followings:
December 31,
2004
2005
RMB'000
RMB'000
Deferred tax assets:
Tax losses carried forward
349,562
451,659
Provision for obsolete flight equipment spare parts
54,014
33,192
Repair cost on flight equipment
119,039
64,454
Provision for post-retirement benefits
95,252
185,102
Other accrued expenses and
derivative financial instruments
120,704
139,949
738,571
874,356
Less: unrecognized assets
(252,120
)
(338,194
)
486,451
536,162
Deferred tax liabilities:
Provision for aircraft overhauls
(106,128
)
(143,517
)
Depreciation and amortization
(672,708
)
(559,146
)
(778,836
)
(702,663
)
Net deferred tax liabilities
(292,385
)
(166,501
)
Movements of net deferred tax liabilities of the Group for the year ended December 31, 2004:
At
(Charged)/
At
December
credited
(Charged)/
December
31,
to income
credited
31,
2003
statement
to equity
2004
RMB'000
RMB'000
RMB'000
RMB'000
Tax losses carried forward
54,401
43,041
—
97,442
Provision for obsolete flight
equipment spare parts
41,960
12,054
—
54,014
Repair cost on flight equipment
160,541
(41,502
)
—
119,039
Provision for post-retirement benefits
89,733
5,519
—
95,252
Other accrued expenses and
derivative financial instruments
122,262
(4,025
)
2,467
120,704
468,897
15,087
2,467
486,451
Provision for aircraft overhauls
(103,853
)
(2,275
)
—
(106,128
)
Depreciation and amortization
(690,797
)
18,089
—
(672,708
)
(794,650
)
15,814
—
(778,836
)
Movement of deferred tax liabilities
(325,753
)
30,901
2,467
(292,385
)
F-36
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11
TAXATION (CONTINUED)
Movements of net deferred tax liabilities of the Group for the year ended December 31, 2005:
Additions
At
(Charged)/
through
At
December
credited
(Charged)/
business
December
31,
to income
credited
acquisitions
31,
2004
statement
to equity
(Note 38)
2005
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
Tax losses carried forward
97,442
16,023
—
—
113,465
Provision for obsolete flight
equipment spare parts
54,014
(20,628
)
—
(194
)
33,192
Repair cost on flight
equipment
119,039
(54,585
)
—
—
64,454
Provision for post-retirement
benefits
95,252
12,066
—
77,784
185,102
Other accrued expenses and
derivative financial
instruments
120,704
35,081
(24,103
)
8,267
139,949
486,451
(12,043
)
(24,103
)
85,857
536,162
Provision for aircraft
overhauls
(106,128
)
5,185
—
(42,574
)
(143,517
)
Depreciation and amortization
(672,708
)
63,828
—
49,734
(559,146
)
(778,836
)
69,013
—
7,160
(702,663
)
Net deferred tax liabilities
(292,385
)
56,970
(24,103
)
93,017
(166,501
)
In accordance with the PRC tax law, tax losses can be carried forward to off set against
future taxable income for a period of five years. As of December 31, 2004 and 2005, the
Group had tax losses carried forward of approximately RMB2,330,000,000 and RMB3,011,000,000
respectively which will expire between 2006 and 2010, available to off set against the
Group's future taxable income. As of December 31, 2004 and 2005, the Group did not
recognize RMB252,120,000 and RMB338,194,000 of deferred tax assets arising from the tax
losses available as management did not consider it probable that such tax losses would be
realized before they expire.
12
DIVIDENDS
Dividend of RMB97,339,000 (RMB0.02 per share) in respect of the year ended December 31, 2004
were paid in 2005.
The Board of Directors of the Company has recommended not to pay any dividend in respect of
the year ended December 31, 2005.
13
(LOSS)/EARNINGS PER SHARE
The calculation of basic (loss)/earnings per share is based on the loss attributable to
equity holders of RMB1,097,161,000, profit of RMB 320,691,000 and loss of RMB467,307,000 for the
year ended December 31, 2003, 2004 and 2005, respectively and 4,866,950,000 weighted
average number of shares in issue during the years ended December 31, 2003, 2004 and 2005.
The Company has no potential dilutive ordinary shares.
F-37
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14
PROPERTY, PLANT AND EQUIPMENT
Aircraft, engines and
flight equipment
Held
Other
under
property,
finance
plant and
Owned
leases
Buildings
equipment
Total
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
Valuation
At January 1, 2005
26,142,685
13,452,651
2,254,015
2,321,357
44,170,708
Transfers from
construction
in progress (Note 15)
—
—
33,582
116,985
150,567
Transfers from advance
payments on acquisition
of aircraft (Note 17)
445,949
1,191,167
—
—
1,637,116
Additions through business
acquisitions (Note 38)
4,781,327
2,155,855
72,222
293,429
7,302,833
Other additions
1,952,356
991,640
71,451
463,023
3,478,470
Disposals
(67,354
)
—
(6,281
)
(125,299
)
(198,934
)
At December 31, 2005
33,254,963
17,791,313
2,424,989
3,069,495
56,540,760
Accumulated depreciation
At January 1, 2005
9,638,471
3,264,609
392,209
1,131,533
14,426,822
Charge for the year
2,307,706
1,161,395
87,284
355,337
3,911,722
Disposals
(66,030
)
—
(159
)
(79,111
)
(145,300
)
At December 31, 2005
11,880,147
4,426,004
479,334
1,407,759
18,193,244
Net book amount
At December 31, 2005
21,374,816
13,365,309
1,945,655
1,661,736
38,347,516
At January 1, 2005
16,504,214
10,188,042
1,861,806
1,189,824
29,743,886
(a)
In January 2004, the Company exercised its right to terminate a finance lease arrangement and
purchased an aircraft at a consideration equal to the present value of the remaining minimum
lease payments on the date of the purchase. In this connection, the Company was entitled to a
rebate of RMB98,921,000, as it had met certain conditions as defined in the original lease
arrangement. Such a rebate was recognized as a reduction is the cost of the aircraft.
(b)
The Group's property, plant and equipment is stated at fair value. The latest independent
valuation was performed on June 30, 2001.
Had the property, plant and equipment of the Group and the Company been stated at cost less
accumulated depreciation and impairment losses, the carrying amounts of property, plant and
equipment would have been as follows:
2004
2005
RMB'000
RMB'000
At December 31,
29,262,326
37,943,085
(c)
As at December 31, 2005, aircraft owned by the Group with an aggregate net book amount of
approximately RMB9,843,773,000 (2004: RMB9,737,032,000) were pledged as collateral under
certain loan arrangements (see Note 29).
F-38
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15
CONSTRUCTION IN PROGRESS
December 31,
2004
2005
RMB'000
RMB'000
At January 1,
219,788
188,654
Additions through business acquisitions (Note 38)
—
13,577
Other additions
178,065
189,220
Transfer to property, plant and equipment (Note 14)
(209,199
)
(150,567
)
At December 31,
188,654
240,884
Representing:
Buildings
81,599
103,418
Other property, plant and equipment
107,055
137,466
188,654
240,884
16
LEASE PREPAYMENTS
December 31,
2004
2005
RMB'000
RMB'000
Cost
At January 1,
965,462
965,462
Additions through business acquisitions (Note 38)
—
74,339
Other additions
—
94,843
At December 31,
965,462
1,134,644
Accumulated amortization
At January 1,
118,240
136,654
Amortization charge
18,414
25,219
At December 31,
136,654
161,873
Net book amount
At December 31,
828,808
972,771
Lease prepayments represent unamortized prepayments for land use rights.
The Group's land use rights are located in the PRC and the majority of these land use rights
have terms of 50 years from the date of grant. As at December 31, 2005, the majority of
these land use rights had remaining terms ranging from 41 to 49 years (2004: from 42 to 48
years).
Certificates of certain land use rights owned by the Group, with nil carrying value, are
currently registered under the name of CEA Holding and held by CEA Holding on behalf of the
Group. The Group is entitled to lawfully and validly occupy and use these lands for its
daily operations. The procedures to change the registration of the land use rights
certificates with the relevant municipal land bureaus are currently being addressed by CEA
Holding. Until the completion of these transfer procedures, the Group is unable to assign
or pledge these land use rights. The Company's directors do not believe the lack
of certificates of certain land use rights has any material impact on the financial position
of the Group.
The directors do not believe the lack of certificates of certain land use rights has any
material impact on the financial position of the Group
F-39
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17
ADVANCE PAYMENTS ON ACQUISITION OF AIRCRAFT
December 31,
2004
2005
RMB'000
RMB'000
At January 1,
2,239,893
2,678,603
Additions
1,996,990
7,751,197
Interest capitalized (Note 9)
57,120
279,989
Transfers to property, plant and
equipment (Note 14)
(1,615,400
)
(1,637,116
)
At December 31,
2,678,603
9,072,673
Included in balance at December 31, 2004 and 2005 is accumulated interest capitalized of RMB
160,016,000 and RMB409,530,000, at an average interest rate of 4.0% and 4.0% respectively.
18
INTANGIBLE ASSETS
December 31,
Negative
Net
Goodwill
goodwill
Balance
RMB'000
RMB'000
RMB'000
Year ended December 31, 2004
Net book amount, at beginning of year
84,830
(46,325
)
38,505
Amortization (charge)/credit
(5,654
)
3,452
(2,202
)
Net book amount, at end of year
79,176
(42,873
)
36,303
At December 31, 2004
Cost
113,105
(55,245
)
57,860
Accumulated amortization and impairment
(33,929
)
12,372
(21,557
)
Net book amount, at end of year
79,176
(42,873
)
36,303
Year ended December 31, 2005
Net book amount, at beginning of year
as previously presented
79,176
(42,873
)
36,303
Opening adjustment on derecognition
of negative goodwill
—
42,873
42,873
79,176
—
79,176
Additions through business
acquisitions (Note 38)
609,135
—
609,135
Net book amount, at end of year
688,311
—
688,311
The amortization of goodwill of RMB5,654,000 and negative goodwill of RMB3,452,000 for the
year ended December 31, 2004 is included in "other depreciation, amortization and operating
lease" in the consolidated statements of
operations.
F-40
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18
INTANGIBLE ASSETS (CONTINUED)
Impairment tests for goodwill
The Company operates in one cash-generating unit ("CGU") which is the carriage of passenger,
cargo and mail over various routes.
The recoverable amount of a CGU is determined based on value-in-use calculations. These
calculations use cash flow projections based on financial budgets approved by management
covering a five-year period. Cash flows beyond the five-year period are extrapolated using
the estimated growth rates stated below. The growth rate does not exceed the long-term
average growth rate for the aviation business in which the CGU operates.
Key assumptions used for value-in-use calculations are:
— Gross margin
20
%
— Growth rate
10
%
— Discount rate
5
%
Management determined budgeted gross margin based on past performance and its expectations
for market development. The weighted average growth rate used is consistent with the
forecasts included in industry reports. The discount rate used is pre-tax and reflects
specific risks relating to the Company's business.
F-41
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19
INVESTMENTS IN ASSOCIATES
December 31,
2004
2005
RMB'000
RMB'000
Unlisted investments, at cost
757,676
763,240
Goodwill
47,060
47,060
Share of post acquisition results/(reserves)
(171,524
)
(180,554
)
633,212
629,746
Movement of investments in associates is as follows:
2004
2005
RMB'000
RMB'000
At January 1,
656,054
633,212
Cost of additional investment
27,682
5,564
Share of results
(44,318
)
(9,030
)
Amortization of goodwill
(6,206
)
—
At December 31,
633,212
629,746
Particulars of the principal associates, all of which are limited liability companies
established and operating in the PRC, are as follows:
Place and
Attributable
date of
Paid-up
equity
Principal
Company
establishment
capital
interest
activities
RMB'000
2004
2005
China Eastern Airlines
PRC
600,000
40%
40%
Provision of air
Wuhan Co., Ltd. (a)
August 16, 2002
transportation services
("CEA Wuhan")
Eastern Air Group
PRC
400,000
25%
25%
Provision of financial
Finance Co., Ltd.
December 6, 1995
services to group
("EAGF")
companies of CEA
Holding
Eastern Aviation
PRC
10,000
45%
45%
Provision of aviation
Advertising Services
March 4, 1986
advertising agency
Co., Ltd.
services
China Eastern Air
PRC
350,000
45%
45%
Provision of air
Catering Investment
Co., Ltd.
November 17, 2003
catering services
Eastern Aviation Import
PRC
80,000
45%
45%
Provision of aviation
& Export Co., Ltd.
June 9, 1993
equipment, spare
("EAIEC")
parts and tools
trading
Shanghai Dongmei
PRC
31,000
45%
45%
Provision of travelling
Aviation Travel Co.,
October 17, 2004
and accommodation
Ltd. ("SDATC")
agency services
F-42
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19
INVESTMENTS IN ASSOCIATES (CONTINUED)
Place and
Attributable
date of
Paid-up
equity
Principal
Company
establishment
capital
interest
activities
RMB'000
2004
2005
Qingdao Liuting
PRC
450,000
25%
25%
Provision of airport
International
December 1, 2000
operation services
Airport Co., Ltd.
Collins Aviation
PRC
57,980
35%
35%
Provision of airline
Maintenance
Service
September 27, 2002
electronics products
Shanghai Ltd.
maintenance services
Shanghai Hongpu
PRC
25,000
30%
30%
Provision of cable and
Civil Airport
October 18, 2002
wireless
Communication
communication
Co., Ltd.
services
China Eastern
Airlines
PRC
10,162
40%
40%
Provision of ticket
Development (HK)
May 20, 1995
sales and goods
Co., Ltd.
logistics
Jiangsu Huayu
General
PRC
110,000
27%
27%
Provision of aviation
Aviation Co., Ltd.
December 1, 2004
supporting services
Notes:
(a)
Subsequent to December 31, 2005, the Company completed acquisitions amounting in aggregate to
an additional 56% interest in China Eastern Airlines Wuhan Co., Ltd.
(Note 42).
(b)
The Group's aggregated share of the revenues, results, assets and liabilities of its
associates are as follows:
Assets
Liabilities
Revenues
Loss
RMB'000
RMB'000
RMB'000
RMB'000
2004
2,098,974
1,465,762
915,174
(44,318
)
2005
1,807,387
1,177,641
887,928
(9,030
)
F-43
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20
INVESTMENTS IN JOINTLY CONTROLLED ENTITIES
December 31,
2004
2005
RMB'000
RMB'000
Unlisted investments, at cost
7,680
59,552
Share of post-acquisition results/(reserves)
45,268
40,968
52,948
100,520
The Group's aggregated share of the revenues, results, assets and liabilities of its
jointly controlled entities is as follows:
(Loss)
Assets
Liabilities
Revenues
/profit
RMB'000
RMB'000
RMB'000
RMB'000
2004
65,813
12,865
102,587
45,268
2005
142,667
42,147
133,570
(4,300
)
Movement of investments in jointly controlled entities is as follows:
2004
2005
RMB'000
RMB'000
At January 1,
—
52,948
Cost of additional investment
7,680
51,872
Share of results
45,268
(4,300
)
At December 31,
52,948
100,520
Particulars of the principal jointly controlled entities, all of which are limited liability
companies established and operating in the PRC are as follows:
Place and
Attributable
date of
Paid-up
equity
Principal
Company
establishment
capital
interest
activities
RMB'000
2004
2005
Shanghai
Technologies
PRC
113,843
—
51%
Provision of
Aerospace Co.,
Ltd.
September 28, 2004
repair and
("STA") (a)
maintenance
Shanghai Eastern
PRC
17,484
40%
40%
Provision of spare parts
Union Aviation
December 28, 1995
repair and
Wheels & Brakes
maintenance
Overhual
Engineering
Co., Ltd
("Wheels & Brakes")
Eastern China Kaiya
PRC
10,000
41%
41%
Provision of computer
System Integration
May 21, 1999
systems development
Co., Ltd.
Notes
(a)
Under a Joint Venture Agreement dated March 10, 2003, the Company has agreed to
share control over the economic activities of STA. Any strategic financial and operating
decisions relating to the activities of STA require the unanimous consent of the Company
and the other joint venture partner.
F-44
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21
OTHER LONG-TERM ASSETS
December 31,
2004
2005
RMB'000
RMB'000
Long-term bank deposits (a)
1,908,398
2,026,220
Deposits relating to aircraft under
operating leases (b)
133,159
446,323
Prepaid customs duty and value added tax
21,083
4,756
Rental and renovation deposits
18,558
34,777
Prepaid staff benefits (c)
28,439
62,096
Other long-term receivables
92,969
131,386
2,202,606
2,705,558
(a)
The long-term bank deposits are pledged as collateral under certain finance lease
arrangements (see Note 28). As at December 31, 2004 and 2005, the effective interest rate on
the long-term bank deposits was 5.0% and 3.6% per annum respectively. The deposits have
average maturities of 4.4 years. The fair value of long-term bank deposit of the Group is
RMB1,991 million and RMB2,114 million as at December 31, 2004 and 2005 respectively, which are
determined using the expected future payments discounted at market interest rates prevailing
at the year end of 2.5% to 6.5% (2004: 2.5% to 7.0%).
(b)
The fair value of deposits relating to aircraft under operating leases of the Group is RMB133
million and RMB446 million as at December 31,2004 and 2005 respectively, which are determined
using the expected future payments discounted at market interest rates prevailing at the year
end of 4.4% (2004: 2.4%).
(c)
This represents subsidies to certain employees as an encouragement to purchase motor
vehicles. The employees are required to serve the Group for six years from the date of
receipt of the subsidies in order not to be required to repay the Group for the subsidy. If
the employee leaves before the end of the six-year period, a refund by the employee is
required calculated on a pro-rata basis. These subsidies are amortized over six years on the
straight-line basis.
F-45
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22
TRADE RECEIVABLES
The credit terms given to trade customers are determined on an individual basis, with the
credit periods generally ranging from half a month to three months.
The aging analysis of trade receivables is as follows:
December 31,
2004
2005
RMB'000
RMB'000
Less than 31 days
1,223,059
1,580,082
31 to 60 days
259,086
134,095
61 to 90 days
116,048
122,377
91 to 180 days
93,587
34,097
181 to 365 days
4,047
13,302
Over 365 days
89,208
127,466
1,785,035
2,011,419
Less: provision for impairment of receivables
(77,973
)
(93,010
)
Trade receivables, net
1,707,062
1,918,409
23
PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
December 31,
2004
2005
RMB'000
RMB'000
Prepaid aircraft operating lease rentals
19,373
21,279
Prepayment for acquisition of flight equipments
and other assets
126,645
179,206
Deposits with banks and a financial institution with
original maturity over three months but less than a
year (a)
77,446
175,332
Custom duties and value added tax recoverable (b)
—
114,781
Rebate receivable on aircraft acquisitions
31,136
102,582
Rental deposits
43,674
49,303
Others
313,685
354,788
611,959
997,271
(a)
As at December 31, 2004 and 2005, the effective interest rate on deposits with banks and a
financial institution is 0.7 and 0.7% respectively.
(b)
Pursuant to the Caiguanshui [2004] No. 63 issued by the Ministry of Finance on December 29,
2004, PRC airlines (including the Company, China Cargo Airlines Co., Ltd. and China Eastern
Airlines Jiangsu Co., Ltd.) are subject to reduced custom duties and value added tax on
imported flight equipment and overseas repair costs in relation to those aircraft flying on
international and regional routes with effect from January 1, 2005. During the year ended
December 31, 2005, the Group paid the related custom duties and value added tax at the
standard rates and hence is entitled to a refund of over payment. As at December 31, 2005, the
Group has aggregated recoverable balances of RMB114,781,000.
F-46
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24
CASH AND CASH EQUIVALENTS
The carrying amounts of the cash and cash equivalents are denominated in the following
currencies:
2004
2005
RMB'000
RMB'000
Renminbi
1,821,638
1,281,206
US Dollars
105,448
333,099
Japanese Yen
55,203
76,591
Euro
27,760
37,420
Pound Sterling
17,534
22,979
Australian Dollars
13,601
18,969
Singapore Dollars
15,063
15,943
Canadian Dollars
4,977
14,187
Others
53,223
63,607
2,114,447
1,864,001
25
TRADE PAYABLES AND NOTES PAYABLES
The aging analysis of trade payables and notes payables is as follows:
December 31,
2004
2005
RMB'000
RMB'000
Less than 31 days
923,041
1,697,293
31 to 60 days
69,163
397,187
61 to 90 days
74,533
195,869
91 to 180 days
369,478
846,775
181 to 365 days
—
212,025
Over 365 days
21,002
45,749
1,457,217
3,394,898
As at December 31, 2005, all notes payables totaling RMB 1,775,048,000 were unsecured.
Discount rates ranged from 2.9% to 3.2% (2004: 3.8% to 4.1%) and all notes are repayable
within six months.
F-47
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26
OTHER PAYABLES AND ACCRUED EXPENSES
December 31,
2004
2005
RMB'000
RMB'000
Accrued fuel cost
1,239,930
1,415,797
Accrued take-off and landing charges
724,164
810,226
Accrued aircraft overhaul expenses
461,200
745,627
Accrued salaries, wages and benefits
242,195
271,963
Other accrued operating expenses
492,109
739,415
Duties and levies payable
431,922
755,373
Current portion of provision for staff
housing allowances (Note 34 (b))
93,427
13,270
Current portion of other long-term
liabilities (Note 32)
30,000
66,029
Current portion of post-retirement benefit
obligations (Note 33(b))
27,500
35,825
Staff housing fund payable (Note 34(a))
75,364
136,510
Deposit received from ticketing agents
215,335
353,805
Current portion of operating lease payable
—
52,268
Staff welfare payable
25,666
39,433
Others
407,212
585,940
4,466,024
6,021,481
27
PROVISION FOR AIRCRAFT OVERHAUL EXPENSES
December 31,
2004
2005
RMB'000
RMB'000
At January 1,
266,093
254,009
Additions through business acquisitions (Note 38)
—
196,122
Additional provisions
75,897
64,700
Reversal resulting from change in estimate (a)
(20,814
)
(58,577
)
Utilization
(67,167
)
(52,255
)
At December 31,
254,009
403,999
Less: current portion
(52,798
)
(15,589
)
Long-term portion
201,211
388,410
Provision of aircraft overhaul expenses represents the present value of estimated costs of
major overhauls for aircraft and engines under operating leases as the Group has the
responsibility to fulfill certain return conditions under relevant leases.
(a)
Prior to 2005, the overhauls for Company's certain aircraft models under operating leases
were performed by overseas service providers. In 2005, the Company identified domestic
facilities to carry out overhauls for certain aircraft models. The cost of the overhauls
carried out domestically was lower than that in overseas. Accordingly, the Company changed
its estimate for provision for aircraft overhauls as related those aircraft models.
F-48
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28
OBLIGATIONS UNDER FINANCE LEASES
At December 31, 2004 and 2005, Group had 22 and 26 aircraft, respectively under finance
leases. Under the terms of the leases, Group has the option to purchase, at or near the end
of the lease terms, certain aircraft at fair market value and others at either fair market
value or a percentage of the respective lessors' defined costs of the aircraft. The
obligations under finance leases are principally denominated in US Dollars.
The future minimum lease payments (including interests), and the present value of the
minimum lease payments under finance leases are as follows:
December 31, 2004
December 31, 2005
Present
Present
value of
value of
Minimum
Minimum
Minimum
minimum
lease
Lease
lease
lease
payments
Interest
Payments
payments
Interest
payments
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
Within one year
1,526,981
337,333
1,189,648
2,885,047
457,010
2,428,037
In the second year
1,962,208
262,372
1,699,836
2,870,162
300,106
2,570,056
In the third to fifth year
3,924,600
168,346
3,756,254
3,487,110
472,914
3,014,196
After the fifth year
2,401,578
385,030
2,016,548
2,934,000
337,792
2,596,208
Total
9,815,367
1,153,081
8,662,286
12,176,319
1,567,822
10,608,497
Less: amount repayable
within one year
(1,526,981
)
(337,333
)
(1,189,648
)
(2,885,047
)
(457,010
)
(2,428,037
)
Long-term portion
8,288,386
815,748
7,472,638
9,291,272
1,110,812
8,180,460
The fair value of obligations under finance leases is RMB8,382 and RMB10,432 million as at
December 31,2004 and 2005 respectively, which is determined using the expected future
payments discounted at market interest rates prevailing at the year end of 2.5% to 7.0%
(2004: 2.5% to 7.0%).
At December 31, 2004 and 2005, the Group had long-term bank deposits totaling RMB
1,908,398,000 and RMB2,026,220,000 respectively pledged as collateral under certain finance
lease arrangements (Note 21). In addition, the finance lease obligations are secured by the
related aircraft, assignments of all benefits of the relevant insurance policies relating to
the aircraft together with guarantees provided by certain banks in the PRC.
F-49
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29
BORROWINGS
December 31,
2004
2005
RMB'000
RMB'000
Non-current
Long-term bank borrowings
— secured
2,987,920
5,809,678
— unsecured
4,554,908
3,980,438
7,542,828
9,790,116
Current
Long-term bank borrowings
— secured
2,925,038
1,555,313
— unsecured
268,394
1,313,917
Short-term bank borrowings
— secured
—
33,000
— unsecured
6,188,919
13,677,856
Debentures
—
1,974,544
9,382,351
18,554,630
Total borrowings
16,925,179
28,344,746
The borrowings are repayable as follows:
Within one year
9,382,351
18,554,630
In the second year
2,386,862
2,663,434
In the third to fifth year
3,216,181
5,517,473
After the fifth year
1,939,785
1,609,209
16,925,179
28,344,746
The fair value of long-term borrowings of the Group is RMB9,909 million and RMB12,044
million respectively, which is determined using the expected future payments discounted at
market interest rates prevailing at the year end of 4.5% (2004: 7.6%).
The terms of the long-term bank loans are summarized as follows:
2004
2005
Interest rate and final maturities
RMB'000
RMB'000
RMB denominated bank loans:
Loans for
working
capital
Fixed interest rates ranging
from 4.94% to 5.76%
per annum as at December 31,
2005; 3-year loans with final
maturity through to 2008.
1,710,100
3,253,500
Loans for the
purchases of
aircraft
Fixed interest rates of 5.18%
per annum as at December 31,
2005; 2 to 8-year loans with final
maturity through to 2012
880,000
1,455,000
Loans for
construction
projects
Fixed interest rates of 5.76% per
annum as at December 31,
2005; 7 to 10-year loans with
final maturities through to 2007
412,500
200,000
F-50
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29
BORROWINGS (CONTINUED)
2004
2005
Interest rate and final maturities
RMB'000
RMB'000
U.S. dollar denominated bank loans:
Loans for the
purchases of
aircraft
Fixed interest rates ranging
from 4.01% to 6.86% per annum
2 to 10-year loans with final maturities
through to 2013
—
296,120
Loans for the
purchases of
aircraft
Floating interest rates ranging from
3 months LIBOR+0.25% to 6 months
LIBOR+0.75% as at December 31, 2005;
2 to 10-year loans with final maturities
through to 2015
7,703,037
7,295,480
Loan for the
purchase of
an aircraft
simulator
Floating interest rates of 6
months LIBOR +0.6% as at
December 31, 2005; 3-year
loans with final maturity in 2007
30,623
111,820
Loan for finance*
leases of
aircraft
Fixed interest rates ranging from 6.46%
to 8.62% per annum, repayable
by instalments up to 2008
—
47,426
Total long-term bank loans
10,736,260
12,659,346
*
These loans are secured by the related aircraft.
Short-term borrowings of the Group and the Company are repayable within one year with
interest charged at the prevailing market rates based on the rates quoted by the People's
Bank of China. As at December 31, 2005, the interest rates relating to such borrowings were
ranging from 2.22% to 5.04% per annum (2004: 2.06% to 5.04% per annum). During the year
ended December 31, 2005, the weighted average interest rate on short-term bank loans was
4.62% per annum (2004: 3.34% per annum).
On August 5, 2005, the Company issued debentures with a face value of RMB1,000,000,000 at an
issue price of RMB971,600,000, being 97.16% of the face value, and repayable on August 4,
2006. On August 23, 2005, the Company issued additional debentures with face value of
RMB1,000,000,000 at an issue price of RMB980,000,000, being 98% of the face value, and
repayable on May 22, 2006.
The zero coupon debentures are accounted for in the balance sheets of the Group and the
Company as follows:
2005
RMB'000
Nominal value
2,000,000
Less: Unamortized discount
(25,456
)
1,974,544
F-51
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29
BORROWINGS (CONTINUED)
The carrying amounts of the borrowings are denominated in the following currencies:
2004
2005
RMB'000
RMB'000
Renminbi
7,295,601
13,112,485
US Dollars
9,430,325
15,232,261
Japanese Yen
199,253
—
16,925,179
28,344,746
As at December 31, 2004 and 2005, the secured bank borrowings of the Group for the purchases
of aircraft was secured by the related aircraft with an aggregate net book amount of
RMB9,737,032,000 and RMB9,843,773,000 respectively (Note 14). Certain secured bank
borrowings with aggregate amount of RMB1,162,186,000 and RMB2,899,386,000 were also
guaranteed by Export-Import Bank of the United States, China Industrial and Commercial Bank
and China Construction Bank as at December 31,2004 and 2005 respectively.
Certain unsecured bank borrowings of the Group totalling of RMB2,122,600,000 and
RMB2,122,600,000 were guaranteed by CEA Holding as at December 31,2004 and 2005
respectively (Note 39)
30
SHARE CAPITAL
December 31,
2004
2005
RMB'000
RMB'000
Registered, issued and fully paid of RMB1.00 each
Unlisted shares held by CEA Holding and employees
3,000,000
3,000,000
A shares listed on The Shanghai Stock Exchange
300,000
300,000
H shares listed on The Stock Exchange of Hong
Kong Limited
1,566,950
1,566,950
4,866,950
4,866,950
Pursuant to articles 49 and 50 of the Company's Articles of Association, each of the
unlisted shares, the listed A shares and the listed H shares are all registered ordinary
 shares and carry the same rights.
F-52
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31
RESERVES
(Amounts in thousands)
Statutory
and
discretionary
Capital
Hedging
Share
reserves
Revaluation
reserve
reserve
Retained
premium
(Note (a))
reserve
(Note (b))
(Note 35)
profits
Total
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
At January 1, 2004,
as previously
presented
1,006,455
314,035
490,688
(720,057
)
(77,879
)
501,959
1,515,201
Effect of changes
in accounting
policy on the
adoption of IAS16
—
—
—
—
—
(207,609
)
(207,609
)
At January 1, 2004,
restated
1,006,455
314,035
490,688
(720,057
)
(77,879
)
294,350
1,307,592
Unrealized losses
on
cashflow hedges
(Note 35)
— gross
—
—
—
—
(7,610
)
—
(7,610
)
— tax
—
—
—
—
1,141
—
1,141
Realized gains on
cashflow hedges
(Note 35)
— gross
—
—
—
—
(8,839
)
—
(8,839
)
— tax
—
—
—
—
1,326
—
1,326
Profit attributable
to equity holders
of the Company
—
—
—
—
—
320,691
320,691
Transfer from
retained profits to
reserves (a)
—
67,136
—
—
—
(67,136
)
—
At December 31, 2004
1,006,455
381,171
490,688
(720,057
)
(91,861
)
547,905
1,614,301
F-53
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31
RESERVES (CONTINUED)
(Amounts in thousands)
Statutory
and
discretionary
Capital
Hedging
Share
reserves
Revaluation
reserve
reserve
Retained
premium
(Note (a))
reserve
(Note (b))
(Note 35)
profits
Total
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
At January 1, 2005,
as previously
presented
1,006,455
381,171
490,688
(720,057
)
(91,861
)
948,898
2,015,294
Effect of changes
in accounting
policy on the
adoption of IAS
16
—
—
—
—
—
(400,993
)
(400,993
)
At January 1, 2005,
restated
1,006,455
381,171
490,688
(720,057
)
(91,861
)
547,905
1,614,301
Recognition of
negative goodwill
in retained
profits on the
adoption of IFRS
3
—
—
—
—
—
42,873
42,873
1,006,455
381,171
490,688
(720,057
)
(91,861
)
590,778
1,657,174
Unrealized gains on
cashflow hedges
(Note 35)
— gross
—
—
—
—
181,449
—
181,449
— tax
—
—
—
—
(27,217
)
—
(27,217
)
Realized gains on
cashflow hedges
(Note 35)
— gross
—
—
—
—
(20,759
)
—
(20,759
)
— tax
—
—
—
—
3,114
—
3,114
Dividend relating
to 2004
—
—
—
—
—
(97,339
)
(97,339
)
Loss attributable
to equity holders
of the company
—
—
—
—
—
(467,307
)
(467,307
)
Transfer from
retained profits to
reserves (a)
—
26,671
—
—
—
(26,671
)
—
At December 31, 2005
1,006,455
407,842
490,688
(720,057
)
44,726
(539
)
1,229,115
(a)
Statutory and Discretionary Reserves
December 31,
2004
2005
RMB'000
RMB'000
Statutory common reserve fund
178,797
196,746
Statutory common welfare fund
174,385
183,107
Discretionary common reserve fund
27,989
27,989
381,171
407,842
Pursuant to the PRC regulations and the Group companies' Articles of Association, each of
the Group companies is required to transfer 10% of its profit for the year, as determined
under the PRC Accounting Regulations, to a statutory common reserve fund until the fund
balance exceeds 50% of the Group's company's registered capital. The statutory common
reserve fund can be used to make good previous years' losses, if
any, and to issue new shares to shareholders in proportion to their existing shareholdings or to increase the par
value of the shares currently held by them, provided that the balance after such issue is
not less than 25% of the registered capital.
F-54
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31
RESERVES (CONTINUED)
Pursuant to the PRC regulations and the Group companies' Articles of Association, each of
the companies is required to transfer 5% to 10% of its profit for the year, as determined
under the PRC Accounting Regulations, to the statutory common welfare fund. This fund can
only be used to provide staff welfare facilities and other collective benefits to the Group
companies employees. This fund is non-distributable other than in liquidation.
Each of the Group company is allowed to transfer 5% of its profit for the year as determined
under the PRC Accounting Regulations, to a discretionary common reserve fund. The transfer
to this reserve is subject to approval at shareholders' meetings.
For the year ended December 31, 2005, under the PRC Accounting Regulations, the Company
recorded a loss for the year. Accordingly, no profit appropriation of the Company to reserves
has been made for the year ended December 31, 2005 (2004: nil). The transfer from retained
profits to reserves for the year represents the profit appropriation to reserves of certain
subsidiaries of the Company.
(b)
Capital reserve
Capital reserve represents the difference between the fair value of the net assets injected
and the nominal amount of the Company's share capital issued in respect of a group
restructuring in June 1996.
32
OTHER LONG-TERM LIABILITIES
December 31,
2004
2005
RMB'000
RMB'000
Deferred credit on aircraft operating lease rental (a)
—
43,645
Deferred credit on government grants (b)
—
70,410
Other long-term payable (c)
130,204
107,203
130,204
221,258
Less: Current portion (Note 26)
(30,000
)
(66,029
)
Long-term portion
100,204
155,229
(a)
Deferred credit on aircraft operating lease rental represents the unamortized portion of
lease incentives from lessors.
(b)
Deferred credit on government grants represents government grants received for construction
and acquisition of safety and security facilities. As at December 31, 2005, the related
facilities have not been constructed or purchased.
(c)
The balance is unsecured, bearing interest at an effective rate of 6.21% per annum and is
repayable by annual instalments of RMB30,000,000 (before taking into account of time value) up
to year 2009.
F-55
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
33
RETIREMENT BENEFIT PLANS AND POST-RETIREMENT BENEFITS
(a)
Defined contribution retirement schemes
(i)
Pension
The Group companies participate in defined contribution retirement schemes organized
by municipal governments of the various provinces in which the Group companies
operate, and substantially all of the Group's PRC employees are eligible to
participate in the Group companies' retirement schemes. The Group companies are
required to make annual contributions to the schemes at rates ranging from 20% to 22%
on the employees' prior year salary and allowances. Employees are required to
contribute to the schemes at rates ranging from 7% to 8% of their basic salaries. The
Group has no other material obligation for the payment of retirement benefits beyond
the annual contributions under these schemes. For the year ended
December 31, 2003 ,2004 and 2005, the Group's pension cost charged to the consolidated income statements
amounted to RMB 121,200,000, RMB146,500,000 and RMB228,264,000 respectively.
(ii)
Medical insurance
The majority of the Group's PRC employees participate in the medical insurance schemes
organized by the municipal governments, under which the Group and its employees are
required to contribute to the scheme approximately 12% and 2%, respectively, of the
employee's basic salaries. For those employees who participate in these schemes, the
Group has no other obligation for the payment of medical expense beyond the annual
contributions. For the year ended December 31, 2003, 2004 and 2005, the Group's
medical insurance contribution charged to the statements of operations
amounted to RMB36,424,000,
RMB47,700,000 and RMB51,954,000 respectively.
(b)
Post-retirement benefits
In addition to the above retirement schemes, the Group provides retirees with other
post-retirement benefits including transportation subsidies, social function
activities subsidies and others. The expected cost of providing these post-retirement
benefits is actuarially determined and recognized by using the projected unit credit
method, which involves a number of assumptions and estimates, including inflation
rate, discount rate and employees' turnover ratio.
The post-retirement benefit obligations recognized in the balance sheets are as
follows:
2004
2005
RMB'000
RMB'000
Present value of unfunded post-retirement
benefit obligations
731,077
1,970,292
Unrecognized actuarial gain
(85,345
)
(731,590
)
Post-retirement benefit obligations
645,732
1,238,702
Less: current portion (Note 26)
(27,500
)
(35,825
)
Long-term portion
618,232
1,202,877
F-56
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
33
RETIREMENT BENEFIT PLANS AND POST-RETIREMENT BENEFITS (CONTINUED)
The costs of post-retirement benefits are recognized under wages, salaries and benefits in
the statements of operations as follows:
2003
2004
2005
RMB'000
RMB'000
RMB'000
Current service cost
13,064
20,849
56,436
Interest cost
27,235
29,857
45,200
Actuarial losses recognized
—
998
823
Total (Note 8)
40,299
51,704
102,459
Principal actuarial assumptions at the balance sheet date are as follows:
2003
2004
2005
Discount rate
5.0
%
5.0
%
3.5
%
Annual rate of increase of per capita benefit
payment
1.5
%
1.5
%
1.5
%
Employees turnover rate
3.0
%
3.0
%
3.0
%
34
STAFF HOUSING BENEFITS
(a)
Staff housing fund
In accordance with the PRC housing reform regulations, the Group is required to contribute
to the State-sponsored housing fund at rates ranging from 1% to 15% (2004: 1% to 15%) of the
specified salary amount of its PRC employees. At the same time, the employees are required
to contribute an amount equal to the Group's contribution. The employees are entitled to
claim the entire sum of the fund contributed under certain specified withdrawal
circumstances. For the year ended December 31, 2003, 2004 and 2005, the Group's
contributions to the housing funds amounted to RMB 65,300,000, RMB94,200,000 and
RMB102,472,000 respectively which has been charged to the statements
of operations. The staff
housing fund payable as at December 31, 2004 and 2005 amounted to RMB75,364,000 and
RMB136,510,000 respectively (Note 26). The Group has no legal or constructive obligations
to pay further contributions if the fund does not hold sufficient assets to pay all
employees the benefits relating to employee service in the current and prior periods.
(b)
Staff housing allowances
The Group also provides staff housing allowances to eligible employees who joined in the
Group prior to 1998 according to the Group's staff housing allowance policy introduced in
October 2003 (the "Staff Housing Allowance Policy").
F-57
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
34
STAFF HOUSING BENEFITS (CONTINUED)
(b)
Staff housing allowances (CONTINUED)
Under the Staff Housing Allowance Policy, employees who have not been allocated with any
housing quarters or who have not been allocated with a quarter above the minimum area as set
out in the Staff Housing Allowance Policy, are entitled to a cash allowance based on the
area of quarter entitled and the unit price as set out in the Staff Housing Allowance
Policy. The total entitlement is principally vested over a period of 20 years. Upon an
employee's resignation, his or her entitlement will cease and any unpaid entitlement related
to past service up to the date of resignation will be paid. Upon the establishment of the
Staff Housing Allowance Policy, employees are entitled to a portion of the total entitlement
already accrued based on his or her past service period. Such entitlement would be paid over
a period of 4 to 5 years. As at December 31, 2005, the present obligation of the provision
for the employee's staff housing entitlement is RMB457,466,000 (2004: RMB369,675,000), of
which RMB13,270,000 (2004: RMB93,427,000) is classified as current portion in 'other
payables and accrued expenses'.
For the year ended December 31, 2004 and 2005, the staff housing benefit provided under the
Staff Housing Allowance Policy amounted to RMB29,253,000 and RMB36,231,000 respectively
which has been charged to the statements
of operations.
35
DERIVATIVE FINANCIAL INSTRUMENTS
Assets
Liabilities
2004
2005
2004
2005
RMB'000
RMB'000
RMB'000
RMB'000
At December 31,
Interest rate swaps (a)
11,571
71,260
19,447
19,821
Forward foreign exchange contracts (b)
—
2,469
100,196
17,808
Fuel option contracts (c)
—
50,193
—
22,985
Total
11,571
123,922
119,643
60,614
Less: non-current portion
Interest rate swaps
(11,571
)
(70,292
)
(19,447
)
(2,731
)
Forward foreign exchange contracts
—
(594
)
(100,196
)
(10,380
)
Fuel option contracts
—
—
—
(12,659
)
(11,571
)
(70,886
)
(119,643
)
(25,770
)
Current portion
—
53,036
—
34,844
(a)
Interest rate swaps
The Group uses interest rate swaps to reduce the risk of changes in market interest rates
(Note 3(a)(iii)). The interest rate swaps entered into by the Group are generally for
swapping variable rates, usually reference to LIBOR, into fixed rates. The Group's interest
rate swaps qualify for hedge accounting and are accounted for as cashflow hedge. As at
December 31, 2004 and 2005, the notional amount of the outstanding interest rate swap
agreements was approximately US$437 million and US$661 million respectively: These
agreements will expire between 2006 and 2016. For the year ended December 31, 2004 and
2005, a net gain of RMB29,700,000 and RMB78,546,000 respectively arising from changes in the
fair value of the interest rate swaps subsequent to initial recognition was recognized
directly in the hedging reserve (Note 31).
F-58
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
35 DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
(b)
Forward foreign exchange contracts
The Group uses currency forward contracts to reduce risk of changes in currency exchange
rates in respect of ticket sales and expenses denominated in foreign currencies (Note
3(a)(vi)). These contracts are generally for selling of Japanese Yen and purchasing of U.S.
dollars at fixed exchange rates. On July 21, 2005, the People's Bank of China revalued the
RMB with reference to an undisclosed basket of currencies. Prior to the revaluation, the
Group's currency forward contracts qualified for hedge accounting and were accounted for as
cashflow hedge of firm commitments. After the revaluation, the Group discontinued the hedge
relationship and did not apply hedge accounting on forward foreign exchange contracts from
July 1, 2005. As at December 31, 2004 and 2005, the notional amount of the outstanding
currency forward contracts was approximately US$226 million and US$92 million respectively,
which will expire between 2006 and 2010. For the years ended December 31, 2003, 2004 and
2005, a net loss of 58,102,000, a net loss of RMB 46,149,000 and a net gain of RMB82,144,000
respectively arising from changes in the fair value of these foreign currency forwards
between the initial recognition up to June 30, 2005 was recognized directly in the hedging
reserve (Note  31). The change in the fair value between July 1, 2005 and December 31, 2005 of
RMB13,299,000 was recognized in the statements
of operations.
(c)
Fuel option contracts
The Group uses fuel option contracts to reduce the risk of changes in market oil/petroleum
prices in connection with aircraft fuel costs. As at December 31, 2005, the Group had
outstanding fuel option contracts to buy approximately 2,600,000 barrels of crude oil at
prices which ranging from US$ 41 to US$ 70 per barrel and sell approximately 6,840,000
barrels of crude oil at prices which ranging from US$ 33.5 to US$ 87.25 per barrel, all of
which will expire between 2006 and 2007. Management did not designate these fuel option
contracts for hedge accounting and changes in fair values have been recognized directly in
the statements
of operations.
F-59
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
36
NOTES TO CONSOLIDATED CASH FLOW STATEMENT
(a)
Cash generated from operations
Year ended December 31,
(Note 2a)
2003
2004
2005
2005
RMB'000
RMB'000
RMB'000
USD'000
(Loss)/Profit before income tax
(741,302
)
585,972
(577,432
)
(71,551
)
Adjustments for:
Depreciation of property, plant and equipment
2,956,031
3,076,585
3,911,722
484,712
Gains on disposals of property, plant and
equipment
33,578
(47,819
)
(8,073
)
(1,000
)
Share of results in associates
32,738
50,524
9,030
1,119
Share of results in jointly controlled entities
—
(45,268
)
4,300
533
Amortization of lease prepayments
20,049
18,414
25,219
3,125
Amortization of goodwill and negative
goodwill
2,202
2,202
—
—
Net foreign exchange (gains)/loss
77,850
32,207
(414,640
)
(51,379
)
Gains on disposals of financial assets held
for trading
(21,920
)
(5,235
)
—
—
Fair value gains on financial assets at fair
value through profit or loss
—
(8,839
)
(30,877
)
(3,826
)
Consumption of flight equipment spare parts
86,009
139,711
239,134
29,632
Allowance for obsolescence of flight equipment
spare parts
53,336
73,406
(13,930
)
(1,726
)
Provision for impairment of trade and other
receivables
19,229
24,250
25,325
3,138
Provision for post-retirement benefits
40,299
51,704
102,459
12,696
Provision for staff housing allowance
260,463
29,253
36,231
4,489
Provision for aircraft overhaul expenses
63,757
75,897
64,700
8,017
Interest income
(147,846
)
(129,020
)
(128,700
)
(15,948
)
Interest expense
860,304
868,339
1,100,357
136,348
Operating profit before working capital changes
3,594,777
4,792,283
4,344,825
538,379
Changes in working capital
Flight equipment spare parts
(128,713
)
(110,725
)
(294,969
)
(36,550
)
Trade receivables
(360,451
)
(136,995
)
(112,027
)
(13,882
)
Amount due from related companies
770
(122,253
)
(83,459
)
(10,342
)
Prepayments, deposits and other
receivables
197,006
(361,345
)
(306,283
)
(37,952
)
Sales in advance of carriage
225,739
(206,496
)
101,490
12,576
Trade payables and notes payables
348,959
509,638
821,222
101,760
Amount due to related companies
432,510
138,968
156,062
19,338
Other payables and accrued expenses
(202,937
)
(120,900
)
(1,030,806
)
(127,730
)
Other long-term liabilities
9,610
8,344
(67,764
)
(8,397
)
Provision for aircraft overhaul expenses
(11,457
)
(91,321
)
(110,832
)
(13,733
)
Post-retirement benefit obligations
(19,455
)
(27,093
)
(29,370
)
(3,639
)
Staff housing allowances
—
(29,253
)
(18,306
)
(2,269
)
491,581
(549,431
)
(975,042
)
(120,820
)
Cash generated from operations
4,086,358
4,242,852
3,369,783
417,559
(b)   Non-cash transaction
Investing activities not affecting cash
Injection of land use right from
minority shareholder of a subsidiary
—
—
63,063
7,814
Capital contribution to a jointly
controlled entity in form of property,
plant and
equipment
—
—
51,872
6,428
Utilization of rebates from aircraft
acquisition for purchases of flight
equipment spare parts
—
98,921
—
—
Financing activities not affecting cash
Finance lease obligations incurred for
acquisition of aircraft
1,163,979
3,525,570
991,640
122,877
F-60
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
37
COMMITMENTS
(a)
Capital commitments
The Group has the following capital commitments:
2004
2005
RMB'000
RMB'000
Authorized and contracted for:
— Aircraft, engines and flight equipment
8,791,472
47,259,446
— Other property, plant and equipment
129,440
96,827
— Acquisition of a subsidiary (Note 42)
308,134
390,000
9,229,046
47,746,273
Authorized but not contracted for:
— Aircraft, engines and flight equipment
3,533,000
723,000
— Others property, plant and equipment
2,381,710
13,424,055
5,914,710
14,147,055
Total
15,143,756
61,893,328
Contracted expenditures for the above aircraft and flight equipment, including deposits
prior to delivery, subject to future inflation increases built in the contracts and any
discounts available upon delivery of the aircraft, if any, are expected to be paid as
follows:
2005
RMB'000
2006
9,006,906
2007
12,703,578
2008
13,523,589
2009
6,256,592
2010
5,768,781
Total
47,259,446
(b)
Operating lease commitments
The Group has commitments under operating leases to pay future minimum lease rentals as
follows:
2004
2005
RMB'000
RMB'000
Aircraft, engines and flight equipment
Within one year
1,024,857
1,633,301
In the second year
1,095,792
1,550,209
In the third to fifth year
3,094,495
4,075,691
After the fifth year
550,310
2,015,670
5,765,454
9,274,871
Land and buildings
Within one year
19,287
68,739
In the second year
14,874
60,330
In the third to fifth year inclusive
25,401
44,951
After the fifth year
22,139
2,846
81,701
176,866
Total
5,847,155
9,451,737
F-61
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
38
BUSINESS ACQUISITIONS
On June 30, 2005, pursuant to an acquisition agreement entered into between the Company, CEA
Holding, China Eastern Air Northwest Company ("CEA Northwest"; a wholly owned subsidiary of
CEA Holding) and China Eastern Air Yunnan Company ("CEA Yunnan"; a wholly owned subsidiary
of CEA Holding), and upon approval by the Company's shareholders in a General Meeting, the
Company acquired certain assets and liabilities relating to the aviation businesses of CEA
Northwest and CEA Yunnan. The aggregate acquisition price paid and payable by the Company is
RMB639,749,000.
The goodwill is attributable to an increase in the Company's competitiveness as a result of
its increased size and the extension of the business scope geographically to the
north-western and southern-western regions of the PRC.
The acquired businesses contributed revenues of RMB4,269,745,000 and profit after taxation
of RMB23,552,000 to the Group for the period from July 1, 2005 to December 31, 2005. If the
acquisition had occurred on January 1, 2005, the acquired businesses would have contributed
revenues of RMB7,740,744,000, and net loss of RMB510,870,000 to the Group for the year ended
December 31, 2005.
Details of net assets acquired and related goodwill are as follows:
RMB'000
Purchase consideration:
— Cash
639,749
— Direct costs relating to the acquisition
29,968
Total purchase consideration
669,717
Fair value of net assets acquired — shown as below
(60,582
)
Goodwill (Note 18)
609,135
F-62
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
38
BUSINESS ACQUISITIONS (CONTINUED)
The assets and liabilities arising from the acquisition are as follows:
Fair value of net assets acquired
RMB'000
Property, plant and equipment
7,302,833
Construction in progress
13,577
Lease prepayments
74,339
Investments in associates
5,564
Other long-term assets
777,644
Deferred tax assets
93,017
Flight equipment spare parts
385,971
Trade receivables
124,645
Prepayment, deposits and other receivables
74,993
Cash and cash equivalents
629,013
Trade payables and notes payables
(263,748
)
Sales in advance of carriage
(1,702
)
Other payables and accrued expenses
(2,600,738
)
Borrowings, current portion
(2,163,898
)
Borrowings, long-term portion
(814,220
)
Taxation
(26,319
)
Derivative Liabilities
(16,151
)
Obligations under finance leases
(2,515,423
)
Provision for aircraft overhaul expenses
(196,122
)
Post retirement benefit obligations
(519,881
)
Staff housing allowance
(150,023
)
Other long-term liabilities
(152,789
)
Net assets acquired
60,582
Purchase consideration settled in cash
669,717
Cash and cash equivalents in businesses acquired
(629,013
)
Cash outflow on business acquisition
40,704
See Note 42 for details regarding a business acquisition completed after the balance sheet
but before the approval of these consolidated financial statements.
F-63
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
39
RELATED PARTY TRANSACTIONS
The Group is controlled by CEA Holding, which owns
approximately 61.64% of the Company's shares as at December 31, 2005. The aviation industry in the PRC is administrated by the
CAAC. CEA Holding and the Group is ultimately controlled by the PRC government, which also
controls a significant portion of the productive assets and entities in the PRC
(collectively referred as "the state-controlled enterprises").
(a)
Related party transactions
The Group sells air tickets through sales agents and is therefore likely to have extensive
transactions with other state-controlled enterprises, and the employees of state-controlled
enterprises while such employees are on corporate business as well as their close family
members. These transactions are carried out on normal commercial terms that are consistently
applied to all of the Group's customers. Due to the large volume and the pervasiveness of
these transactions, the management is unable to determine the aggregate amount of the
transactions for disclosure. Therefore, retail transactions with these related parties are
not disclosed herein. Management believes that meaningful related party disclosures on these
retail transactions have been adequately made.
The other related party transactions are:
Income/
(expenses or payments)
2003
2004
2005
Nature of transaction
Related party
RMB'000
RMB'000
RMB'000
With CEA Holding or companies
directly
or indirectly held by CEA Holding:
Interest income on deposits at an average rate
of 0.72% per annum
in 2003, 2004 and 2005
EAGF**
4,096
4,897
5,341
Interest expense on loans at rates of 4.54% per annum in 2003, 4.5% per annum in 2004 and 4.50% per annum
in 2005
EAGF**
(6,396
)
(1,150
)
(14,855
)
Commission income on carriage
CEA Northwest*
51,667
93,062
39,247
service provided by other airlines
CEA Yunnan*
50,442
81,517
38,817
with air tickets sold by the Group, at rates
ranging from 3% to 9% of the
value of tickets sold
CEA Wuhan ***
28,964
32,396
46,412
Commission expense on air tickets
CEA Northwest*
(17,776
)
(14,181
)
(2,374
)
sold on behalf of the Group, at
CEA Yunnan*
(10,743
)
(22,494
)
(6,238
)
rates ranging from 3% to 9% of
CEA Wuhan***
(8,547
)
(32,396
)
(9,550
)
the value of tickets sold
SDATC**
(24,940
)
(8,228
)
(7,402
)
China Eastern Air
—
—
(34,225
)
Development (HK) Co., Ltd
Shanghai Tourism
(6,046
)
(13,201
)
(21,815
)
(HK) Co., Ltd
F-64
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
39
RELATED PARTY TRANSACTIONS (CONTINUED)
Income/
(expenses or payments)
2003
2004
2005
Nature of transaction
Related party
RMB'000
RMB'000
RMB'000
With CEA Holding or companies
directly
or indirectly held by CEA Holding:
Handling charges of 0.1% to 2% for purchase of aircraft, flight
equipment,
flight equipment spare parts,
other property, plant and
equipment
EAIEC**
(21,393
)
(34,270
)
(40,590
)
Ticket reservation service charges for utilization of computer reservation system
Travel Sky Technology Limited
(71,884
)
(86,311
)
(124,677
)
Repairs and maintenance expense for ground service facilities
CEA Northwest *
—
(9,535
)
—
Repairs and maintenance expense
for aircraft and engines
Wheels & Brakes
(25,361
)
(25,445
)
(63,972
)
STA
—
(104,853
)
EAIEC**
—
(6,969
)
Lease rental income from operating lease of aircraft
CEA Wuhan Airlines***
31,209
38,239
41,327
Lease rental charges for operating lease of aircraft
CEA Northwest*
(92,466
)
(199,188
)
—
CEA Yunnan*
(27,726
)
(86,341
)
—
Supply of food and beverages
Eastern Air (Shantou)
Economic
Development Co., Ltd.
(36,413
)
(57,623
)
(61,701
)
CEACI
—
(188,406
)
(231,759
)
Shanghai Eastern Air Catering Co., Ltd
(96,984
)
(165,643
)
(184,306
)
Qingdao Eastern Air
Catering Investment Co., Ltd.
—
(14,291
)
(15,055
)
Xian Eastern Air
Catering Investment Co., Ltd.
—
(50
)
(15,079
)
Yunnan Eastern Air
Catering Investment Co., Ltd.
—
(244
)
(17,451
)
Advertising expense
Eastern Aviation Advertising Service
Co., Ltd. ("EAASC")
(2,676
)
(5,629
)
(8,611
)
Purchase of aviation equipment
Shanghai Eastern Aviation Equipment Manufacturing Corporation
(3,149
)
(14,850
)
(8,987
)
Rental expenses
Shanghai Eastern Aviation Equipment Manufacturing Corporation
(5,945
)
(5,582
)
(4,909
)
F-65
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
39
RELATED PARTY TRANSACTIONS (CONTINUED)
*
The Group acquired the aviation business of CEA Northwest and CEA Yunnan with
effect from June 30, 2005. Transactions with CEA Northwest and CEA Yunnan up to June
30, 2005 are regarded as related party transactions.
**
EAGF is also a 25% owned associate of the Group; SDATC and EAIEC are both a 45%
owned associates of the Group.
***
CEA Wuhan was a 40% owned associate of the Group for the year ended December
31, 2005. On December 8, 2005, the Company entered into agreement to acquire an
additional 56% equity interest in CEA Wuhan and the acquisitions were completed after
December 31, 2005.
Income/
(expenses or payments)
2003
2004
2005
Nature of transaction
Related party
RMB'000
RMB'000
RMB'000
With CAAC and its affiliates:
Civil aviation infrastructure levies paid to CAAC
CAAC
(129,646
)
(251,185
)
(466,191
)
Aircraft insurance premium paid through CAAC who entered
into the insurance policy on
behalf of the Group
CAAC
(157,278
)
(154,086
)
(201,653
)
With other state-controlled
enterprises:
Take-off and landing fees charges
State-controlled airports
(1,372,896
)
(1,579,115
)
(2,461,858
)
Purchase of aircraft fuel
State-controlled fuel suppliers
(2,128,628
)
(3,447,336
)
(4,571,155
)
Interest income on deposits at an average
rates of 0.72% per annum (2004: 0.72% per annum)
State-controlled banks
38,012
15,025
30,948
Interest expense on loans at an average rate of
4.54% per annum (2004: 4.54% per annum)
State-controlled banks
(976,760
)
(588,842
)
(790,478
)
Commission expense on air tickets sold on behalf of the Group at
rates ranging from 3% to 9% of
the value of tickets sold
Other PRC airlines
(41,284
)
(78,232
)
(153,528
)
Supply of food and beverages
Other state-control enterprises
(146,141
)
(236,102
)
(368,120
)
F-66
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
39
RELATED PARTY TRANSACTIONS (CONTINUED)
(b)
Balances with related companies
(i)   Amounts due from related companies
2004
2005
Company
RMB'000
RMB'000
China Eastern Air Development (HK) Co., Ltd
—
66,457
CEA Holding
23,835
57,773
SDATC**
39,485
43,223
Shanghai Tourism (HK) Co., Ltd
—
23,177
CEA Wuhan ***
—
3,541
EAIEC**
—
4,956
STA
—
4,927
CEA Yunnan*
52,161
—
Other related companies
6,772
1,658
Total
122,253
205,712
*
The Group acquired the aviation business of CEA Northwest and CEA Yunnan with
effect from June 30, 2005. Transactions with CEA Northwest and CEA Yunnan up to June
30, 2005 are regarded as related party transactions.
**
EAGF is a 25% owned associate of the Group; SDATC is a 45% owned associate of
the Group; EAIEC is a 45% owned associate of the Group.
***
CEA Wuhan was a 40% owned associate of the Group for the year ended December
31, 2005. On December 8, 2005, the Company entered into agreement to acquire an
additional 56% equity interest in CEA Wuhan and the acquisitions were completed after
December 31, 2005.
Except for amount due from CEA Holding, which is reimbursement in nature, all other amounts
due from related companies are trade in nature, interest free and payable within normal
credit terms given to trade customers.
F-67
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
39
RELATED PARTY TRANSACTIONS (CONTINUED)
(ii)   Amounts due to related companies
2004
2005
Company
RMB'000
RMB'000
EAIEC**
(47,093
)
(90,123
)
EAGF**
—
(4,328
)
CEA Wuhan ***
(19,063
)
(80,407
)
STA
—
(8,491
)
CEA Holding
—
(94,216
)
CEA Northwest*
(69,380
)
—
Other related companies
(3,432
)
(17,465
)
Total
(138,968
)
(295,030
)
*
The Group acquired the aviation business of CEA Northwest and CEA Yunnan with
effect from June 30, 2005. Transactions with CEA Northwest and CEA Yunnan up to June
30, 2005 are regarded as related party transactions.
**
EAGF is a 25% owned associate of the Group; SDATC is a 45% owned associate of
the Group; EAIEC is a 45% owned associate of the Group.
***
CEA Wuhan was a 40% owned associate of the Group for the year ended December
31, 2005. On December 8, 2005, the Company entered into agreement to acquire an
additional 56% equity interest in CEA Wuhan and the acquisitions were completed after
December 31, 2005
Except for amounts due to EAGF and CEA Holding, which is reimbursement in nature, all other
amounts due to related companies are trade in nature, interest free and payable within
normal credit terms given by trade creditors.
(iii)   Short-term deposits and short-term loans with an associate
Average interest rate
2004
2005
2004
2005
RMB'000
RMB'000
Short-term deposits (included in Prepayments, Deposits and other Receivables)
"EAGF"
0.7
%
0.7
%
413,870
475,078
Short-term loans (included in Borrowings)
"EAGF"*
4.5
%
4.5
%
140,765
213,702
*
EAGF is a 25% owned associate of the Group.
F-68
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
39
RELATED PARTY TRANSACTIONS (CONTINUED)
(iv) State-controlled banks and other financial institutions
Average interest rate
2004
2005
2004
2005
RMB'000
RMB'000
Bank deposits
(included in cash and cash equivalents)
0.7
%
0.7
%
1,814,207
1,196,963
Long-term bank borrowings
3.2
%
4.6
%
10,736,260
10,438,483
(c) Guarantees by holding company
At December 31, 2005, long-term bank loans of the Group with an aggregate amount of
RMB2,122,600,000 (2004: RMB2,122,600,000) were guaranteed by CEA Holding (Note 29).
(d) Key management compensation
2004
2005
RMB'000
RMB'000
Salaries, bonus, allowances and benefits
1,813
1,825
40
ULTIMATE HOLDING COMPANY
The directors regard CEA Holding, a company established in the PRC, as
being the ultimate holding company.
41
CONTINGENT LIABILITIES
In 2005, the Company received a legal claim in the United States of America for unspecified
damages by family members of certain victims in the air crash of an aircraft of CEA Yunnan
that occurred on November 21, 2004 in Baotou, Neimonggol, the PRC.
Management has engaged legal representatives to vigorously contest the proceedings. The
proceedings is still in an early stage and in the opinion of the Directors, based on
professional advice, it is unlikely that there will be any significant adverse effect to the
financial position of the Group.
F-69
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
42
POST BALANCE SHEET EVENT
On December 8, 2005, the Company entered into agreements with each of Wuhan Municipality
State-owned Assets Supervision and Administration Commission ("Wuhan SASAC") and Shanghai
Junyao Aviation Investment Company Limited ("Shanghai Junyao") to acquire (i) a 38% equity
interest in CEA Wuhan from Wuhan SASAC for a consideration of RMB278,000,000, and (ii) a 18%
equity interest in CEA Wuhan from Shanghai Junyao for a consideration of RMB140,000,000,
respectively, totaling RMB418,000,000,. Based on an independent valuation conducted on
December 31, 2005, a 56% share of the fair value of the net assets acquired amounted to
approximately RMB214,159,000. The acquisitions were conditional upon approvals of the
agreements from relevant governmental and regulatory authorities. On
January 4, 2006, all the
necessary approvals were obtained and the acquisitions were completed.
Pursuant to the acquisition agreement between the Company and Wuhan SASAC, after receipt of
the purchase consideration from the Company, Wuhan SASAC would settle RMB 152,000,000 for an
amount it owed to CEA Wuhan. On March 23, 2006, Wuhan SASAC paid the aforesaid amount to CEA
Wuhan.
F-70
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
43
SIGNIFICANT DIFFERENCES BETWEEN IFRS AND U.S. GAAP
Differences between IFRS and U.S. GAAP which have significant effects
on the consolidated profit (loss) attributable to equity holders and
consolidated net assets of the Group are summarised as follows:
2003
2004
2005
Note
RMB'000
RMB'000
RMB'000
Consolidated
profit (loss) attributable to the Company's equity
holders
As stated
under IFRS
(980,675
)
456,371
(438,728
)
Less:
Minority interests
(g)
(116,486
)
(135,680
)
(28,579
)
(1,097,161
)
320,691
(467,307
)
U.S. GAAP adjustments:
Net income (loss) attributable to airline operations
of CEA Northwest and CEA Yunnan before June 30, 2005
(a)
(493,075
)
24,424
(575,326
)
Reversal of
difference in depreciation charges and profit (loss) on disposals of
fixed assets arising from revaluation of fixed assets
(b)
53,812
64,667
74,664
Rescission of related party lease arrangements
(c)
—
(133,029
)
—
Reversal of
the retroactive effect of the new overhaul
accounting policy adopted in 2005
(d)
173,347
227,510
(471,756
)
Change in
accounting policy on the recognition of negative
goodwill under IFRS 3
(e)
—
—
3,452
Others
(f)
6,860
(1,518
)
(7,172
)
Deferred tax effect on the U.S. GAAP adjustments
(h)
(35,103
)
(43,598
)
60,122
As stated under U.S. GAAP
(1,391,320
)
459,147
(1,383,323
)
Basic and
fully diluted earnings (loss) per share under U.S.
GAAP
(RMB 0.286
)
RMB 0.094
(RMB 0.284
)
Basic and
fully diluted earnings (loss) per American
Depository Share ("ADS") under U.S. GAAP
(RMB 28.59
)
RMB 9.43
(RMB 28.42
)
2003
2004
2005
Note
RMB'000
RMB'000
RMB'000
Consolidated net assets
As stated under IFRS
6,701,310
7,302,086
6,918,542
Less: Minority interests
(g)
(526,768
)
(820,835
)
(822,477
)
6,174,542
6,481,251
6,096,065
U.S. GAAP adjustments:
Shareholders' equity attributable to
airline operations of CEA Northwest and CEA Yunnan
(a)
(1,357,699
)
(1,426,741
)
413,841
Reversal of
net revaluation surplus and difference in depreciation charges, the
related accumulated depreciation and profit (loss) on disposals arising from
the revaluation of fixed assets
(b)
(544,677
)
(480,010
)
(405,346
)
Reversal of
the retroactive effect of the new overhaul
accounting policy adopted in 2005
(d)
244,246
471,756
—
Change in
accounting policy on the recognition of negative
goodwill under IFRS 3
(e)
—
—
(39,421
)
Others
(f)
35,971
34,453
27,281
Deferred tax effect on the U.S. GAAP adjustments
(h)
(9,395
)
(52,993
)
7,129
As stated under U.S. GAAP
4,542,988
5,027,716
6,099,549
F-71
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
43
SIGNIFICANT DIFFERENCES BETWEEN IFRS AND U.S. GAAP (CONTINUED)
NOTES:
(a)
CEA Northwest and CEA Yunnan Acquisitions
As disclosed in Note 38, the Group acquired certain assets and liabilities of the aviation
businesses of CEA Northwest and CEA Yunnan effective June 30, 2005. Under IFRS, acquisition accounting was applied to these business combinations such that the businesses are
consolidated by the Group from June 30, 2005.
Under U.S. GAAP, these transactions are considered to be
combinations of businesses under
common control which are accounted for in a manner similar to "pooling-of-interests".
Consequently, the acquired assets and liabilities of CEA Northwest and CEA Yunnan and their results of operations and cash flows
have been included in the condensed consolidated financial statements of the Group at their U.S. GAAP carrying values for all
years presented.
Our condensed consolidated financial statements prepared and
presented in accordance with U.S. GAAP to reflect the effect of the
acquisitions of CEA Northwest's and CEA Yunnan's aviation businesses
under common control for the relevant periods are set forth in
Note  44 to our audited consolidated financial statements
included in this annual report.
(b)
Revaluation of fixed assets
Under IFRS, the Group's fixed assets are initially recorded at cost and are subsequently
restated at revalued amounts less accumulated depreciation. The excess
depreciation charge arising from the revaluation surplus was
approximately RMB63,895,000, RMB57,568,000 and RMB73,803,000 for the
year ended December 31, 2003, 2004 and 2005, respectively. The
additional gain (loss) arising from the revaluation surplus on
disposals of revalued fixed assets was approximately loss of
RMB10,083,000, gain of RMB7,099,000 and RMB861,000 for the years ended December 31, 2003, 2004 and 2005, respectively.
Under U.S. GAAP, fixed assets are stated at cost less
accumulated depreciation. Accordingly,
the revaluation surplus, the related differences in depreciation
charges and gain (loss) on
disposals are reversed.
(c)
Rescission of related party lease arrangements
The Company entered into certain lease arrangements with CEA Northwest and its subsidiary to lease three A310 aircraft and three Bae146 aircraft in 2004 that were subsequently
terminated and retroactively rescinded. The impact of the retroactive rescission of the
lease arrangements with CEA Northwest was an aggregate settlement by CEA Northwest in the
amount of RMB133 million (the "Settlement Amount"), which represented the operating losses
incurred on the operation of the CEA Northwest leased aircraft during 2004, to the Group
through the reduction of the Group's inter-company payable accounts with CEA Northwest.
Under IFRS, the Settlement Amount was recognised as non-operating income for the year ended
December 31, 2004 and was in effect an extinguishment of a financial liability through a
reduction of the Group's inter-company payable accounts with CEA Northwest.
Under U.S. GAAP, the Settlement Amount, through reduction of the Group's intercompany
payable account of CEA Holding's wholly owned subsidiary, was deemed as the principal
shareholder incurring costs on behalf of the Company and was recognised as a capital
contribution in accordance with Staff Accounting Bulletin Topic 5-T ("SAB Topic 5-T"). Any
cost incurred by the principal shareholder on behalf of its subsidiary are required to be
reflected in the subsidiary's financial statements as an expense and a corresponding capital
contribution unless the principal shareholders actions are completely unrelated to its position as a
shareholder under SAB Topic 5-T.
F-72
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
43
SIGNIFICANT DIFFERENCES BETWEEN IFRS AND U.S. GAAP (CONTINUED)
(d)
Retroactive application of the new overhaul accounting policy adopted in 2005
Prior to the adoption of the revised IAS 16 (Note 2), the Group expensed overhaul costs on
owned and finance leased aircraft as incurred. Upon the adoption of the revised IAS 16
effective January 1, 2005, the Group capitalized overhaul costs as a separate component of
the fixed assets carrying value to be depreciated over the estimated period between
overhauls on a straight line basis. Upon the completion of an overhaul, any remaining balance
of the previous overhaul will be derecognised and charged to the
consolidated statements of operations. The adoption of the revised IAS 16 has been applied retrospectively to all years
presented.
Under U.S. GAAP, the capitalization of overhaul costs incurred as a separate component of
fixed assets is an acceptable alternative. Therefore, the Group also changed its accounting
policy on overhaul costs for owned and financed lease aircrafts in the U.S. GAAP condensed
consolidated financial statements as such policy was considered to be preferable. Under
U.S. GAAP, the effect of a change in accounting policy is recognized in the period of the
change by including the cumulative effect of the change to the new accounting policy.
(e)
Recognition of negative goodwill
Under U.S. GAAP, in a business combination in which the fair value of the identifiable net
assets acquired exceeds the cost of the acquired business, the excess over cost should
reduce, on a pro rata basis, amounts assigned to all of the acquired assets, including
purchased research and development assets required to be written off, with the exception of
financial assets (other than investments accounted for by the equity method), assets to be
disposed of by sale, deferred tax assets, prepaid assets related to pension or other
post-retirement benefit plans, and any other current assets. Any remaining negative goodwill
is recognised as an extraordinary gain.
As the result of the adoption of IFRS 3, the Group's negative goodwill balance of RMB42,873,000 at January 1,
2005 is derecognized with a corresponding adjustment to the opening balance of retained
earnings. From January 1, 2005 onwards, IFRS 3 requires the
Group to recognize immediately in the statements of operations the excess of the net fair
value of those items acquired over the cost of the acquisition.
(f)
Other U.S. GAAP adjustments
The application of U.S. GAAP differs in certain other respects from IFRS. Under U.S. GAAP:
i) recognition of gain on sale and leaseback transactions is deferred and amortized, ii)
transitional obligations for post retirement benefits are amortized over the average
remaining service period of active plan participants, and iii) amortization of goodwill
ceased on December 31, 2003.
(g)
Minority interest
Under IFRS, minority interest is classified in the equity section of the consolidated
balance sheets and included in the consolidated statements of changes
in owners' equity. Profit (loss) attributable to the minority
interest is presented as a component of the Group's total profit
(loss) for the year. U.S. GAAP does not classify minority interest in
the equity section of the consolidated balance sheets, and consequently does not include
minority interest in the consolidated statement of changes in
owners' equity. Under U.S. GAAP, profit (loss) attributable to
minority interest is presented as a separate item before net income
(loss).
F-73
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
43
SIGNIFICANT DIFFERENCES BETWEEN IFRS AND U.S. GAAP (CONTINUED)
(h)
Deferred tax effect
These represent the corresponding deferred tax effect as a result of the adjustments stated
in (b) to (f) above.
Under IFRS, deferred tax assets are recognised to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilised.
Under U.S. GAAP, a valuation allowance is provided to reduce the amount of deferred tax
assets if it is considered more likely than not that some portion of, or, all of, the
deferred tax assets will not be realised. "More likely than not" is defined as a likelihood
of more than 50%. In determining whether a valuation allowance is necessary, a company may
not generally consider future anticipated income in measuring the valuation allowance if
that company has a history of losses. However, as confirmed by the IASB as part of the
convergence project with FAS 109, the Group believes that "more likely than not" under U.S.
GAAP and "probable" under IFRS have the same meaning for the application of IAS 12 and SFAS
109. Therefore this difference in the wording of U.S. GAAP and IFRS does not have any
impact on the Group's net assets or net income (loss), and the Group has therefore not
included a reconciling item for this difference.
(i)
Consolidation based on variable interest model
IFRS focuses on the concept of control to determine whether an entity should be
consolidated. Under U.S. GAAP, a dual consolidation decision model exists. Under this
model, consolidation decisions are evaluated first based on the variable interest model then
the traditional consolidation model. Therefore, under U.S. GAAP, an entity will consolidate
a variable interest entity ("VIE") which it does not control but absorbs the majority of the
VIE's expected losses or returns. FIN 46, "Consolidation of Variable Interest Entities"
requires certain VIEs to be consolidated by the primary beneficiary of the entity if the
equity investors in the entity do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. The primary
beneficiary has a variable interest in the entity that will cause it to absorb a majority of
the VIE's expected losses, receive a majority of the VIE's expected residual returns, or
both.
The Group completed its FIN 46 assessment, including the review of arrangements with
associates as part of the preparation of its consolidated financial statements and concluded
that there were no variable interest entities for which the Group absorbs the majority of
losses or returns that would have any material impact on its financial position or results
of operations.
F-74
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CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
43
SIGNIFICANT DIFFERENCES BETWEEN IFRS AND U.S. GAAP (CONTINUED)
(j)
CEA Yunnan air crash
In November 2004, an aircraft of CEA Yunnan crashed in
Baotau, Neimonggol, China. As
the result of this air crash, CEA Yunnan was subject to exposures including the loss of
aircraft, claims filed by the families of the deceased passengers and crew, other third
party liabilities including damage to park facilities, injuries and auxiliary costs.
When the Company acquired CEA Yunnan in May 2005, the air crash
related exposures were not
transferred with other assets and liabilities of the aviation
businesses.
Rather, such exposures were transferred to CEA Holding.
Under IFRS, insurance recovery is not recognized until virtually certain and the air crash has
no impact on the Group's consolidated financial statements as acquisition accounting was applied
(Note 38). However, under U.S. GAAP, outstanding claims are accrued net of insurance recovery that
are equally probable and determinable. In addition, any costs to be incurred by CEA Holding for
claims in excess of insurance recovery will be deemed as the principal shareholder incurring costs
on behalf of the Company and will be recognized as expenses and a capital contribution in
accordance with SAB Topic 5-T. There are no such capital contribution recorded to date.
(k)
New accounting pronouncements
In December 2004, the FASB revised Statement No. 123 (FAS 123 R). FAS 123 R, "Share-Based
Payment", requires all share-based payments to employees, including grants of employee stock
options, to be recognized in the financial statements based on their fair values. Pro forma
disclosure is no longer an alternative to financial statement recognition. FAS 123 R is
effective for fiscal periods beginning after June 15, 2005. The Group is evaluating the
transition provisions allowed by FAS 123 R. The Group does not expect the adoption of FAS
123 R to have a material impact on the Group's financial position or operational results.
On November 24, 2004, the FASB issued Statement No. 151, "Inventory Costs", an amendment of
ARB No. 43, Chapter 4 (FAS 151). FAS 151 requires that abnormal amounts of idle capacity and
spoilage costs be excluded from the cost of inventory and expensed when incurred. The
provisions of FAS 151 are applicable to inventory costs incurred during fiscal years
beginning after June 15, 2005. The Group does not expect the adoption of FAS 151 to have a
material impact on the Group's financial position or results of operation.
On December 15, 2004, the FASB issued Statement No. 153, "Exchanges of Nonmonetary Assets",
an amendment of APB Opinion No. 29 (FAS 153). FAS 153 requires exchanges of productive
assets to be accounted for at fair value, rather than at carryover basis, unless (1) neither
the asset received nor the asset surrendered has a fair value that is determinable within
reasonable limits or (2) the transactions lack commercial substance. FAS 153 is effective
for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005.
The Group does not expect the adoption of FAS 153 to have a material impact on the Group's
financial position or results of operation.
F-75
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
43
SIGNIFICANT DIFFERENCES BETWEEN IFRS AND U.S. GAAP (CONTINUED)
(k)
New accounting pronouncements (Continued)
On March 29, 2005, the U.S. Securities and Exchange Commission (SEC) issued Staff Accounting
Bulletin No. 107, "Share-Based Payment" (SAB 107). This bulletin provides guidance related
to share-based payment transactions with non-employees, the transition from nonpublic to
public entity status, valuation methods (including assumptions such as expected volatility
and expected term), the accounting for certain redeemable financial instruments issued under
share-based payment arrangements, the classification of compensation expense, non-GAAP
financial measures, first-time adoption of FAS 123 R in an interim period, capitalization of
compensation cost related to share-based payment arrangements, the accounting for income tax
effects of share-based payment arrangements upon adoption of FAS 123 R, the modification of
employee share options prior to adoption of FAS 123 R and disclosures in Management's
Discussion and Analysis subsequent to adoption of FAS 123 R. SAB 107 will be effective when
a registrant adopts FAS 123 R. The Group does not expect the adoption of SAB 107 to have a
material impact on the Group's financial position or operation results.
In May 2005, the FASB issued Statement No.154, "Accounting Changes and Error Corrections"
(FAS 154), which replaces APB Opinions No. 20 "Accounting Changes", and FASB Statement No.
3, "Reporting Accounting changes in Interim Financial Statements", and changes the
requirements for the accounting for and reporting of a change in accounting principle. This
Statement establishes, unless impracticable, retrospective application as the required
method for reporting a change in accounting principle in the absence of explicit transition
requirements specific to the newly adopted accounting principle. The reporting of a
correction of an error by restating previously issued financial statements is also addressed
by this Statement. FAS 154 is effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005. The Group does not expect the
adoption of FAS 154 to have a material impact on the Group's financial position or
operational results.
F-76
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP
The
condensed consolidated financial statements prepared in accordance U.S. GAAP for all years presented
have been retroactively restated as if CEA Northwest and CEA Yunnan had always been part of the
Group.
Condensed
consolidated statements of operations
2003
2004
2005
Note
RMB'000
RMB'000
RMB'000
Revenues
(a)
19,553,557
28,208,342
30,894,678
Other operating income
(b)
50,302
275,185
245,279
19,603,859
28,483,527
31,139,957
Operating expenses
Commissions
(526,429
)
(809,972
)
(990,745
)
Aircraft fuel
(4,222,762
)
(7,079,632
)
(9,934,425
)
Take-off and landing charges
(3,066,210
)
(3,964,703
)
(4,201,851
)
Ground service and other charges
(64,662
)
(99,296
)
(115,516
)
Civil aviation and infrastructure levies
—
(358,667
)
(538,320
)
Food and beverages
(711,159
)
(934,795
)
(1,081,023
)
Wages, salaries and benefits
(2,066,749
)
(2,750,242
)
(2,833,663
)
Aircraft maintenance
(2,024,768
)
(2,413,910
)
(1,236,093
)
Aircraft depreciation and operating leases
(3,687,806
)
(4,296,767
)
(7,249,590
)
Other depreciation, amortisation and operating leases
(608,242
)
(618,807
)
(688,139
)
Ticket reservation fee
(235,735
)
(290,994
)
(325,924
)
Insurance
(249,631
)
(216,850
)
(172,554
)
Office, administrative and other expenses
(1,986,317
)
(2,709,201
)
(2,755,350
)
Total operating expenses
(19,450,470
)
(26,543,836
)
(32,123,193
)
Operating profit (loss)
153,389
1,939,691
(983,236
)
Interest income
181,936
166,340
114,441
Finance costs, net
(1,414,969
)
(1,279,106
)
(808,554
)
Share of
results of associates
(31,759
)
(49,007
)
(9,030
)
Share of results of jointly controlled entities
—
45,268
(4,300
)
(Loss) profit before income taxes and minority interest
(1,111,403
)
823,186
(1,690,679
)
Income tax
(expense) benefit
(c)
(166,283
)
(205,965
)
344,220
(Loss) profit after taxation before minority interest
(1,277,686
)
617,221
(1,346,459
)
Minority interests
(113,634
)
(158,074
)
(36,864
)
(Loss) profit attributable to shareholders
(1,391,320
)
459,147
(1,383,323
)
Dividend payable to equity holders of the Company
attributable to the year
—
97,339
—
Earning (loss) per share
— basic and diluted
(0.29
)
0.09
(0.28
)
F-77
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)
Condensed consolidated balance sheets
2004
2005
Note
RMB
RMB
ASSETS
Current assets
Cash and cash equivalents
3,038,938
1,864,001
Trade receivables
1,827,464
1,918,409
Amounts due from related companies
(e)
422,503
205,712
Flight equipment spare parts
698,242
1,034,641
Prepayments, deposits and other receivables
776,216
997,271
Derivative assets
—
53,036
Total current assets
6,763,363
6,073,070
Non-current assets
Property, plant and equipment
(d)
38,869,590
38,811,836
Construction in progress
236,585
240,884
Lease prepayments
828,808
972,771
Investments in associates
639,015
629,746
Investments in jointly controlled entities
52,948
100,520
Available-for-sale financial assets
39,546
40,802
Advance payments on acquisition of aircraft
2,728,262
9,072,673
Other long-term assets
2,965,003
2,705,558
Deferred tax assets
395,465
499,544
Intangible assets
(42,873
)
—
Derivative assets
11,571
70,886
Total assets
53,487,283
59,218,290
LIABILITIES AND OWNERS' EQUITY
Current liabilities
Trade payables and notes payables
1,997,318
3,394,898
Sales in advance of carriage
734,389
823,149
Amounts due to related companies
(e)
4,098,242
295,030
Provision for aircraft overhaul expenses, current portion
82,643
15,589
Other payables and accrued expenses
6,437,048
5,986,578
Tax payable
241,710
47,259
Obligations under finance leases, current portion
1,603,429
2,428,037
Borrowings, current portion
11,424,246
18,554,630
Derivative liabilities
—
34,844
Total current liabilities
26,619,025
31,580,014
Non-current liabilities
Obligation under finance leases
9,793,187
8,180,460
Provision for aircraft overhaul expenses
334,298
388,410
Post-retirement benefit obligations
999,481
1,103,492
Borrowings
8,318,918
9,790,116
Other long term liabilities
704,397
599,425
Deferred tax liabilities
738,669
618,204
Derivative liabilities
120,384
25,770
Total liabilities
47,628,359
52,285,891
F-78
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)
2004
2005
RMB
RMB
Commitment and contingencies
Minority interests
831,208
832,850
Share capital
4,866,950
4,866,950
Reserves
160,766
1,232,599
Owners' equity
5,027,716
6,099,549
Total liabilities and owners' equity
53,487,283
59,218,290
Condensed cashflow statements
2003
2004
2005
RMB'000
RMB'000
RMB'000
Net cash
inflow (outflow) from
Operating activities
3,052,326
5,371,326
1,008,155
Investing activities
(7,435,568
)
(2,659,099
)
(10,369,094
)
Financing activities
4,282,197
(2,216,175
)
8,186,002
Increase (decrease) in cash and cash equivalents
(101,045
)
496,052
(1,174,937
)
Cash and cash equivalents at beginning of year
2,643,931
2,542,886
3,038,938
Cash and cash equivalents at end of year
2,542,886
3,038,938
1,864,001
F-79
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)
Condensed consolidated statements of changes in equity
Total
RMB'000
Balance at January 1, 2003
5,993,667
Cash flow hedges, net of tax
(49,654
)
Distribution to owner
(9,705
)
Loss for the year
(1,391,320
)
Balance at December 31, 2003
4,542,988
Balance at
January 1, 2004
4,542,988
Cash flow hedges, net of tax
(13,982
)
Rescission of related party lease arrangement
133,029
Contribution from owner
(93,466
)
Profit for the year
459,147
Balance at
December 31, 2004
5,027,716
Balance at
January 1, 2005
5,027,716
Net
liabilities assumed by CEA Holding (note i)
2,379,048
Recognition
of deferred tax asset (note ii)
36,860
Cash flow hedges, net of tax
136,587
Dividend relating to 2004
(97,339
)
Loss for the year
(1,383,323
)
Balance at
December 31, 2005
6,099,549
Notes:
(i)
In connection with the aforementioned CEA
Northwest and the CEA Yunnan Acquisitions as
described in Note 43(a), certain assets and liabilities of CEA
Northwest and CEA Yunnan not acquired by the Group were transferred to
CEA Holding. Also, as a result of the CEA
Northwest and the CEA Yunnan Acquisitions,
the tax losses attributable to the aviation
operations of CEA Northwest and CEA Yunnan
are no longer available for utilization
against future taxable income of such
operations. Accordingly, the net assets not
acquired and the deferred tax assets arising
from such tax losses and related valuation
allowance was eliminated as a reduction
against equity.
(ii)
In connection with the CEA Northwest and the CEA Yunnan
Acquisitions, the property, plant and equipment of CEA
Northwest and CEA Yunnan were revalued as of December 31,
2004 according to the relevant PRC rules and regulations. The
revalued amount serves as the tax base for future years. Such
revaluations are not recorded under U.S. GAAP. However, a
deferred tax asset is recognized for the tax deductibility of
the resulting net revaluation surplus with a corresponding
credit to equity under U.S. GAAP.
F-80
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)
The
following key financial statement disclosures are presented on a U.S.
GAAP basis.
(a)
Revenues
Year ended December 31,
2003
2004
2005
RMB'000
RMB'000
RMB'000
Revenues
Traffic revenues
— Passenger
15,342,490
22,692,368
24,780,599
— Cargo and mail
3,558,610
4,879,136
5,246,779
Total traffic revenues
18,901,100
27,571,504
30,027,378
Commission income
68,095
123,281
126,194
Ground service income
504,670
717,573
831,143
Cargo handling income
164,850
227,806
298,488
Rental income from operating subleases of aircraft
31,209
204,721
183,260
Others
185,693
111,837
201,345
19,855,617
28,956,722
31,667,808
Less: Business tax
(302,060
)
(748,380
)
(773,130
)
19,553,557
28,208,342
30,894,678
(b)
Other operating income
Year ended December 31,
2003
2004
2005
RMB'000
RMB'000
RMB'000
Other operating income
Government subsidies
58,448
73,506
193,069
Insurance compensation on crash of aircraft
—
190,181
—
Net fair
value (losses) gains on financial instruments
(8,146
)
11,498
52,210
50,302
275,185
245,279
(c)
Income tax
The aviation business of CEA Northwest and CEA Yunnan were subject to PRC income tax at 33% during
2003, 2004 and up to June 30, 2005. Subsequent to the
acquisitions of the aviation businesses of CEA Northwest and CEA Yunnan
by the Group on June 30, 2005, the aviation businesses of CEA
Northwest and CEA Yunnan became divisions of the Group and are subject to PRC income tax at the rate of 15%.
Income tax benefit (expense) consisted of:
Year ended December 31,
2003
2004
2005
RMB'000
RMB'000
RMB'000
PRC income tax:
Company and subsidiaries
(131,207
)
(244,406
)
81,734
Deferred tax
— Current year
(35,076
)
38,441
137,529
— Adjustment for change in applicable tax rate for airline
operations of CEA Northwest and CEA Yunnan
—
—
124,957
(166,283
)
(205,965
)
344,220
Additional income taxes were allocated as follows:
Owners' equity, for deferred tax asset recognized in
connection with the tax deductibility resulting from net
revaluation surplus
—
—
36,860
F-81
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)
(c)
Income tax (Continued)
Year ended December 31,
2003
2004
2005
RMB'000
RMB'000
RMB'000
Profit (loss) before taxation
(1,111,403
)
790,015
(1,690,679
)
Adjusted:
Share of
results of associates and jointly controlled entities
31,759
3,739
13,330
(1,079,644
)
793,754
(1,677,349
)
Tax calculated at enacted tax rate of 15%
161,947
(119,063
)
251,602
Effect attributable to airline operations of CEA Northwest and
CEA Yunnan
7,327
(32,012
)
17,259
Effect of change in the income tax rate applicable to the aviation
operations of CEA Northwest and CEA Yunnan
—
—
124,957
Effect attributable to subsidiaries charged at tax rate of 33%
(4,117
)
(17,578
)
18,334
Effect attributable to subsidiaries with income tax exemption
—
—
33,852
Income not subject to taxation
243
245
4,462
Expenses not deductible for tax purposes
(77,013
)
(41,891
)
(109,329
)
Reversal of income tax provision made in prior years as a
result of tax clearance with local tax bureau
—
—
81,807
Unrecognised tax losses of the Company
(258,515
)
—
(86,074
)
Utilisation of previously unrecognised tax losses
—
6,395
—
Others
3,845
(2,061
)
7,350
Tax
benefit (charge)
(166,283
)
(205,965
)
344,220
F-82
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)
(c)
Income tax (Continued)
The net deferred tax assets (liabilities) as of December 31, 2004 and 2005 were made up of the
following taxation effects:
December 31,
2004
2005
RMB'000
RMB'000
Deferred tax assets:
Tax losses carried forward
349,562
451,659
Provision for obsolete flight equipment spare parts
54,014
33,192
Repair cost on flight equipment
119,039
64,454
Provision for post-retirement benefits
95,252
185,102
Other accrued expenses and derivative financial instruments
120,704
139,949
738,571
874,356
Less: Valuation allowance
(252,120
)
(338,194
)
Total deferred tax assets
486,451
536,162
Deferred tax liabilities:
Provision for aircraft overhauls
(106,128
)
(143,517
)
Depreciation and amortization
(723,527
)
(511,305
)
Total deferred tax liabilities
(829,655
)
(654,822
)
Net deferred tax liabilities
(343,204
)
(118,660
)
Representing:
Net deferred tax assets — current portion
—
—
Net deferred tax assets — non-current portion
395,465
499,544
Net deferred tax liabilities — current portion
—
—
Net deferred tax liabilities — non-current portion
(738,669
)
(618,204
)
(343,204
)
(118,660
)
In accordance with the PRC tax law, tax losses can be carried forward to offset against future
taxable income for a period of five years. As of December 31, 2004 and 2005 the Group had tax
losses carried forward of approximately RMB 2.3 billion and RMB3.0 billion, respectively, which
will expire between 2006 and 2010.
In assessing the realizability of net deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable
profits during the periods in which those temporary differences become deductible and tax losses
utilized. Management considers the scheduled reversal of deferred tax liabilities and projected
future taxable profits in making this assessment. Based upon the projections for future taxable
profits over the periods in which the deferred tax assets are deductible, management believes it is
more likely than not that the Group will realized the benefits of these deductible differences and
tax losses.
During the
years ended December 31, 2004 and 2005, the valuation allowance
(decreased) increased by RMB(6,395,000) and RMB86,074,000,
respectively.
F-83
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)
(d)
Property, plant and equipment
December 31,
2004
2005
RMB'000
RMB'000
Aircraft and flight equipment
— owned
33,307,896
42,748,323
— held under finance leases
18,475,692
22,884,972
Buildings
2,718,911
2,445,683
Other property, plant and equipment
2,894,401
3,454,344
57,396,900
71,533,322
Less: Accumulated depreciation and amortization
(18,527,310
)
(32,721,486
)
38,869,590
38,811,836
Finance leases
The Group is obligated under finance leases covering certain aircraft that expire at various
dates during the next 12 years. At December 31, 2004 and 2005, the gross amount of aircraft and
related accumulated amortization recorded under finance leases were as follows:
December 31,
2004
2005
RMB'000
RMB'000
Cost
18,475,692
22,884,972
Less: Accumulated depreciation and amortization
(5,404,935
)
(9,524,421
)
13,070,757
13,360,551
F-84
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)
(e)
Related party transactions
(i)
Related party transactions
As a result of the aforementioned CEA Northwest and CEA
Yunnan acquisitions, transactions with CEA Northwest and CEA Yunnan
are excluded from the following list, and the related party
transactions of CEA Northwest and CEA Yunnan are included in the following list for all of the periods presented.
Income/
(expenses or payments)
2003
2004
2005
Nature of transaction
Related party
RMB'000
RMB'000
RMB'000
With CEA Holding or companies directly
or indirectly held by CEA Holding:
Interest income on deposits
at an average rate
of 0.72% per annum
(2004 & 2003: 0.72% per annum)
EAGF*
10,507
6,233
5,341
Interest expense on loans at rate of
4.50% per annum
(2004 & 2003: 4.54% per annum)
EAGF*
(14,692
)
(15,744
)
(14,855
)
Commission income on carriage
service provided by other airlines
with air tickets sold
by the Group, at rates
ranging from 3% to 9% of the
value of tickets sold
CEA Wuhan **
28,964
32,396
46,412
Commission expense on air tickets sold on behalf
CEA Wuhan**
(8,547
)
(32,396
)
(9,550
)
of the Group, at rates ranging from 3%
to 9% of
SDATC*
(24,940
)
(8,228
)
(7,402
)
the value of tickets sold
China Eastern Air
—
—
(34,225
)
Development (HK) Co., Ltd
Shanghai Tourism (HK) Co., Ltd
(6,046
)
(13,201
)
(21,815
)
Handling charges of 0.1% to 2% for
purchase of aircraft, flight equipment,
flight equipment spare parts,
other property, plant and equipment
EAIEC*
(21,393
)
(34,270
)
(40,590
)
Ticket reservation service charges for
utilisation of computer
reservation system
Travel Sky Technology Limited
(71,884
)
(86,311
)
(124,677
)
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Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)
(e)
Related party transactions (Continued)
Income/
(expenses or payments)
2003
2004
2005
Nature of transaction
Related party
RMB'000
RMB'000
RMB'000
Repairs and maintenance expense for aircraft and
Wheels & Brakes
(25,361
)
(25,445
)
(63,972
)
engines
STA
—
—
(104,853
)
EAIEC*
—
—
(6,969
)
Lease rental income from operating lease of aircraft
CEA Wuhan Airlines**
31,209
38,239
41,327
Supply of food and beverages
Eastern Air (Shantou) Economic Development Co., Ltd.
(36,413
)
(57,623
)
(61,701
)
CEACI
—
(188,406
)
(231,759
)
Shanghai Eastern Air Catering Co., Ltd.
(112,104
)
(185,575
)
(184,306
)
Qingdao Eastern Air Catering Investment Co., Ltd.
(2,518
)
(14,291
)
(15,055
)
Xian Eastern Air Catering Investment Co., Ltd.
(7,416
)
(15,947
)
(15,079
)
Yunnan Eastern Air Catering Investment Co., Ltd.
(32,062
)
(36,552
)
(17,451
)
Advertising expense
CAASC
(2,676
)
(5,629
)
(8,611
)
Purchase of aviation equipment
Shanghai Eastern Aviation Equipment Manufacturing Corporation
(5,309
)
(19,276
)
(8,987
)
Rental expenses
Shanghai Eastern Aviation Equipment Manufacturing Corporation
(5,945
)
(5,582
)
(4,909
)
*
EAGF is also a 25% owned associate of the Group; SDATC and EAIEC are both a 45% owned
associates of the Group.
**
CEA Wuhan was a 40% owned associate of the Group for the year ended December 31, 2005.
On December 8, 2005, the Company entered into agreement to acquire an additional 56% equity
interest in CEA Wuhan and the acquisitions were completed after December 31, 2005.
F-86
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)
(e)
Related party transactions (Continued)
Income/
(expenses or payments)
2003
2004
2005
Nature of transaction
Related party
RMB'000
RMB'000
RMB'000
With CAAC and its affiliates:
Civil aviation infrastructure levies paid to CAAC
CAAC
(210,651
)
(358,667
)
(466,191
)
Aircraft insurance premium paid through CAAC who entered
into the insurance policy on
behalf of the Group
CAAC
(217,653
)
(208,098
)
(201,653
)
With other state-controlled enterprises:
Take-off and landing fees charges
State-controlled airports
(2,017,543
)
(2,365,872
)
(2,461,858
)
Purchase of aircraft fuel
State-controlled fuel suppliers
(3,188,283
)
(4,240,133
)
(4,571,155
)
Interest income on deposits at an average rates of 0.72% per annum
(2004 & 2003: 0.72% per annum)
State-controlled banks
49,123
19,371
30,948
Interest
expense on loans at an average rate of
4.54% per annum
(2004 & 2003: 4.54% per annum)
State-controlled banks
(1,383,274
)
(833,910
)
(790,478
)
Commission expense on air tickets sold on behalf of the Group at
rates ranging from 3% to 9% of
the value of tickets sold
Other PRC airlines
(66,443
)
(124,565
)
(153,528
)
Supply of
food and beverages
Other state-control enterprises
(280,522
)
(322,726
)
(368,120
)
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Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)
(e)
Related party transactions (Continued)
(ii)
Balances with related companies
(a)
Amounts due from related companies
2004
2005
Company
RMB'000
RMB'000
China Eastern Air Development (HK) Co., Ltd
4,928
66,457
CEA Holding
23,835
57,773
SDATC*
39,485
43,223
Shanghai Tourism (HK) Co., Ltd
—
23,177
CEA Wuhan **
—
3,541
EAIEC*
—
4,956
STA
—
4,927
Other related companies
354,255
1,658
Total
422,503
205,712
*
EAGF is a 25% owned associate of the Group; SDATC is a 45% owned associate of
the Group; EAIEC is a 45% owned associate of the Group.
**
CEA Wuhan was a 40% owned associate of the Group for the year ended December
31, 2005. On December 8, 2005, the Company entered into agreement to acquire an
additional 56% equity interest in CEA Wuhan and the acquisitions were completed after
December 31, 2005.
Except for amount due from CEA Holding, which is reimbursement in nature, all other amounts
due from related companies are trade in nature, interest free and payable within normal
credit terms given to trade customers.
F-88
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE U.S. GAAP (CONTINUED)
(e)
Related party transactions (Continued)
(ii)
Balances with related companies (Continued)
(b)
Amounts due to related companies
2004
2005
Company
RMB'000
RMB'000
EAIEC*
(57,148
)
(90,123
)
EAGF*
(175,500
)
(4,328
)
CEA Wuhan **
(19,063
)
(80,407
)
STA
—
(8,491
)
CEA Holding
(3,705,929
)
(94,216
)
Other related companies
(140,602
)
(17,465
)
Total
(4,098,242
)
(295,030
)
*
EAGF is a 25% owned associate of the Group; SDATC is a 45% owned associate of
the Group; EAIEC is a 45% owned associate of the Group.
**
CEA Wuhan was a 40% owned associate of the Group for the year ended December
31, 2005. On December 8, 2005, the Company entered into agreement to acquire an
additional 56% equity interest in CEA Wuhan and the acquisitions were completed after
December 31, 2005.
Except for amounts due to EAGF and CEA Holding, which is reimbursement in nature, all other
amounts due to related companies are trade in nature, interest free and payable within
normal credit terms given by trade creditors.
(c)
Short-term deposits and short-term loans with an associate
Average interest rate
2004
2005
2004
2005
RMB'000
RMB'000
Short-term deposits (included in
Prepayments, deposits and other receivables)
"EAGF"
0.7
%
0.7
%
503,884
475,078
Short-term loans (included in Borrowings)
"EAGF"*
4.5
%
4.5
%
315,265
213,702
*
EAGF is a 25% owned associate of the Group.
F-89
Table of Contents
CHINA EASTERN AIRLINES CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
44
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE U.S. GAAP (CONTINUED)
(e)
Related party transactions (Continued)
(ii)
Balances with related companies (Continued)
(d)
State-controlled banks and other financial institutions
Average interest rate
2004
2005
2004
2005
RMB'000
RMB'000
Bank deposits
(included in cash and cash equivalents)
0.7
%
0.7
%
2,407,866
1,196,963
Long-term bank borrowings
3.2
%
4.6
%
11,774,396
10,438,483
(iii)
Guarantees by holding company
The long-term bank loans of the Group guaranteed by CEA Holding are RMB2,122,600,000 as at
December 31, 2004 and 2005.
F-90