China Southern Airlines Announces 2002 Annual Results

China Southern Airlines Company Limited  together with its subsidiaries has announced the audited consolidated results of the Group for the year ended December 31, 2002.

The Group's net profit increased by 69.2% to RMB576 million; operating revenue increased by 6.7% to RMB18,019 million; operating profit increased  by 44.7% to RMB2,026 million. Basic earnings per share was RMB17 cents in 2002 as compared with RMB10 cents in 2001. The Board of Directors of the Company did not recommend any final dividend for year 2002.

The Group's operating revenue was mainly derived from passenger traffic and cargo and mail traffic. During the Year, the Group's passenger revenue  increased by 4.3% from RMB15,055 million in 2001 to RMB15,696 million in 2002. The total number of passengers carried increased by 12.4% to 21.49 million passengers. Revenue passenger kilometers increased by  15.5% to RMB28,940 million; however, passenger yield decreased by 10.0% to RMB0.54 in 2002, mainly as a result of a fall in average fares resulted from  increased competition.

Cargo and mail revenue increased by 27.0% from RMB1,406 million in 2001  to RMB1,786 million in 2002. The increase was primarily due to the opening of two international cargo routes in 2002.

The Group's total operating expenses in 2002 amounted to RMB15,993 million, representing an increase of 3.3%. Flight operation expenses, which  accounted for 42.1% of total operating expenses, decreased by 2.5% to RMB6,733 million in 2002, mainly due to decrease in fuel costs and operating lease rentals. During the Year, fuel costs decreased by 0.8% to RMB3,519  million; operating lease rentals decreased by 25.9% to RMB1,417 million, primarily due to the termination of wet leases of five Boeing 737-300/37K aircraft from Zhongyuan Airlines in January 2002.

The Company's Chairman Mr. Yan Zhi Qing said, "During the Year, with the PRC Government's continuing measures to maintain the momentum of  economic growth, the PRC aviation market continued to show steady improvement, as evidenced by a rise in passenger load factor of the Group. In 2002, with the help of our hardworking staff, the Company recorded a traffic volume of over 20 million passengers, and is expected to rank among the world's Top 20 passenger airlines. Although passenger yield has  decreased due to intense competition in the domestic airline industry, the Group imposed stringent cost controls and managed to record a significant overall operating profit growth."

Regarding the official establishment of China Southern Air Holding Company by China Southern Airlines' parent company Southern Airlines jointly with China Northern Airlines and  Xinjiang Airlines, Mr. Yan said, "Currently, we are preparing for the injection of the airline businesses of Northern Airlines and Xinjiang Airlines into our listed company to achieve economies of scale and enhance the competitiveness of our core business. We have already entered into revenue sharing agreements with Northern Airlines and Xinjiang Airlines on jointly  operated routes. Since January 1, 2003, the three airlines have also started a code sharing arrangement, whereby the flight code of CZ is used for the three airlines' domestic flights. The arrangement is operating very smoothly  at the moment."

"Looking forward, 2003 will be a year of opportunities and challenges for the PRC aviation industry. The airline assets restructuring of the Group is  expected to provide us with opportunities for network expansion and increase in market shares. Our objectives are to crystallize development vision for an enterprise born from joint restructuring, and to integrate the  vision into a pragmatic and innovative corporate culture for our new China Southern Airlines, and to enhance our overall management quality and to  achieve economies of scale at the same time. This is the goal towards which the Group will strive incessantly." Mr. Yan concluded.

The Group continues to rank first among Chinese airlines in terms of volume of passenger traffic, number of scheduled flights per week, number of hours  flown, number of routes and size of aircraft fleet. As at December 31, 2002, the Group operated 349 routes, of which 286 were domestic routes, 20 were Hong Kong routes, and 43 were international routes. As at December 31,  2002, the Group operated 122 aircraft, of which 102 were Boeing and 20 were Airbus aircraft.