Air China: Management Discussion of July Operating Data

During July 2012, international passenger traffic and the number of passengers carried maintained growth year-over-year, and that number on domestic routes began to rebound after the Lunar New Year holiday for the first time. However, all indicators registered an increase on a month-over-month basis. As for cargo, year-over-year and month-over-month increases continued both in Revenue Freighter Tonne Kilometres (RFTK) and freighter tonnage carried for international, domestic, and regional routes.

Passenger capacity, measured in Available Seat Kilometres (ASK), in July rose 6.8% year-over-year while passenger traffic, measured by Revenue Passenger Kilometres (RPK), increased by 4.1%. Capacity and RPK on domestic routes increased by 5.6% and 2.8% year-over-year respectively. Capacity on international routes grew by 9.6%, with RPK increasing by 7.3%. Capacity on regional routes decreased by 2.5%, while RPK declined by 5.0%. The passenger load factor was 84.4%, a decrease of 2.1 percentage points year-over-year. For domestic routes, international routes and regional routes, the passenger load factor decreased by 2.4, 1.8 and 2.1 percentage points respectively.

Cargo capacity, measured in Available Freighter Tonne Kilometres (AFTK) increased by 10.7% year-over-year in July. Revenue Freighter Tonne Kilometres (RFTK) and freighter tonnage carried climbed by 9.8% and 9.0%, respectively compared with June 2011. The cargo load factor was 59.9%, a decrease of 0.5 percentage point year-over-year.

Air China launched the Hangzhou-Tokyo route (four flights a week) starting 1 July.

During the month, Air China purchased a total of 306,000 tonnes of jet fuel at an average price of RMB6,711 per tonne, a significant year-over-year drop of 12%. The average jet fuel purchase price at international airports was RMB6,044 per tonne, and the average purchase price of jet fuel for international flights at the top six Chinese airports was RMB 6,178 per tonne, a substantial decrease of 12% and 13% year-over-year respectively. The average jet fuel purchase price for domestic flights was RMB7,161 per tonne, a drop of 12% compared with July of last year.

During the month, the Company added five aircraft. Four of which were passenger aircrafts, including one A320, one A330, one B737 and one B777-300ER aircraft, and the remaining one a B747-400F cargo aircraft. As at the end of July, Air China operated a fleet of 318 aircraft.