Air China announced its annual results for the twelve months ended December 31, 2005 and says its performance during the period was satisfactory.

Robust passenger and cargo volumes helped to boost operating revenue by 14.23%, to RMB38,291 million. Operating profit decreased by 18.10% to RMB3,674 million as a result of a substantial rise in the cost of jet fuel due to soaring oil prices.

Net profit attributable to shareholders was RMB2,406 million, up 0.85% compared to 2004.

Basic earnings per share declined from RMB36 cents to RMB25.5 cents in 2005. The drop in basic EPS occurred due to the increase of total shares as a result of the exercise of over-allotment options in 2005 along with the company's initial public offering in late 2004.

During the year, total operating expenses for the airline was RMB34,617 million, 19.22% higher than that of 2004 due to the soaring jet fuel price. The total cost of jet fuel for the company in 2005 was RMB 11,777 million. This was 34.0% of the total operating expenses, which was 5.2 percentage points higher than that of 2004.

2005 was an extremely difficult year for the global aviation industry, said Air China Chairman Li Jiaxiang. As with other carriers, the rising cost of jet fuel was a major challenge for us. Despite this, we remained the most profitable airline among the major carriers in China as we successfully used a number of strategies to improve operations and contain costs. We used forward contracts to hedge costs, implemented the use of computerized flight planning systems to reduce cost overruns, and improved flight route planning to minimize flying distances. As a result of such measures, we were able to substantially mitigate the impact of fuel price increases while we were also able to successfully pass through some of the increased fuel costs in the form of jet fuel surcharges. As a result, we were able to maintain our leading position among our peers in China in terms of profitability.

During the year, the company expanded capacity, increased the number of scheduled flights and connecting flights, and enhanced its dominance in Beijing hub, Chengdu regional hub and Shanghai international gateway.

In 2005, the company carried 16.57 million passengers in the Beijing hub, accounted for 44.5% of the total throughput. For cargo transportation, the company carried 475,500 tons of cargo and mail, giving the company a market share of 50.2%.

In 2005, the company added 12 aircraft to its Beijing hub, bringing the Beijing-based fleet to 104 aircraft. The Company increased flight slots to 2,750 per week. The flight connections increased 23% to 36,400 per week, with the average connections per flight increased to 16.5 from 14.3 in 2004.

The company also increased capacity in Shanghai, which serves as an international gateway and opened services from Shanghai to Guangzhou, Kunming, Xiamen and Wuhan. During the year, the company added 5 aircraft to its Shanghai-based fleet, bringing the total fleet based in Shanghai to 28 aircraft. The company's market share in Shanghai was 12%.