<P><FONT face=黑体 size=5><STRONG>花旗：中国国航一季度业绩预期增长强劲 04.17</STRONG></FONT></P>
<P><FONT face=黑体 size=5><STRONG>17 April 2007 | 7 pages</STRONG></FONT></P>
<P><FONT face=黑体 size=5><STRONG>Air China (0753.HK) Buy: Expect Strong 1Q07 Results and Share Performance</STRONG></FONT></P>

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<P> Bright 1Q in a strong year — Air China's 18% passenger traffic growth and 3ppt<BR>lift in passenger load factors in 1Q07 are ahead of our full-year estimates. We<BR>expect a strong upswing in passenger yields and bright 1Q07 results, which are<BR>due on Apr 28 at Shanghai Exchange. Re-iterate our Buy/Low Risk rating and<BR>HK$8.00 target price, which is based on 7.3x 08E EV/EBITDAR.<BR> Robust passenger traffic and load factors in 1Q07— Air China reported 18%<BR>passenger traffic growth for the first three months in 2007, with passenger load<BR>factors adding 2.9ppts to 74.7%. March passenger load factors were 77.7%.<BR>The biggest driver for this quality growth was the international segment: 36%<BR>traffic growth and 7.9ppt lift in passenger load factors to 77.6% in March.<BR> Expecting a strong passenger yield upswing as per guidance — In a recent<BR>roadshow, management was upbeat on the 6% yoy jump in passenger yields in<BR>the first two months. We think this is achievable considering the consolidation in<BR>international network and distribution, synergy with Cathay, a better pricing<BR>environment in the domestic market, and the help of surcharges.</P>